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HomeMy WebLinkAbout2009-8-7599ORDINANCE NO. 2009-8-7599 AN ORDINANCE OF THE CITY OF PADUCAH, KENTUCKY, APPROVING A MEMORANDUM OF UNDERSTANDING BETWEEN THE CITY OF PADUCAH, KENTUCKY, MINDSPRING DEVELOPMENT, LLC, CIVIL DESIGN GROUP, INC., MichAL HOLDINGS, LLC, PATRICK H. JOHNSON, ALAN CLAY ROBINSON, AND M. TODD McBEE AS GUARANTORS, WITH RESPECT TO A PRIVATE PROJECT AND AUTHORIZING THE EXECUTION OF VARIOUS DOCUMENTS RELATED TO SUCH MEMORANDUM OF UNDERSTANDING WHEREAS, Mindspring Development, LLC, (Owner) presently owns certain real estate located at 133 South 2nd Street (Property), Paducah, Kentucky 42001; and WHEREAS, Mindspring has the specific intent and purpose to renovate the building and all other related improvements located upon the Property to develop two residential units upstairs and office space on the ground floor; and WHEREAS, such renovation and use of the Property will have a positive impact on the local community by stimulating the local economy, expanding the tax base, and promoting the redevelopment of downtown Paducah; and WHEREAS, in order to induce the renovation, installation, redevelopment, and equipping of the Property by the developer and owner, the City is agreeable to providing certain economic incentives to the Owner for purposes of defraying the costs of renovating, installing and equipping the Property; and WHEREAS, it is deemed necessary and advisable that this Memorandum of Understanding be entered into by the parties setting forth their agreement with respect to the renovation, redevelopment, installation and equipping of the Property, and the economic incentives to be provided to defray the costs of said renovation, redevelopment, installation, and equipping of the Property by the Owner. NOW THEREFORE, BE IT ORDAINED BY THE CITY COMMISSION OF THE CITY OF PADUCAH, KENTUCKY, AS FOLLOWS: SECTION 1. Recitals and Authorization. The City hereby approves the Memorandum of Understanding between the City, Mindspring Development, LLC, Civil Design Group, Inc., MichAl Holdings, LLC, Patrick H. Johnson, Alan Clay Robinson, and M. Todd McBee as Guarantors (the "MOU") in substantially the form attached hereto as Exhibit A and made part hereof. It is further determined that it is necessary and desirable and in the best interests of the City to enter into the MOU for the purposes therein specified, and the execution and delivery of the MOU is hereby authorized and approved. The Mayor of the City is hereby authorized to execute the MOU, together with such other agreements, instruments or certifications which may be necessary to accomplish the transaction contemplated by the MOU with such changes in the MOU not inconsistent with this Ordinance and not substantially adverse to the City as may be approved by the official executing the same on behalf of the City. The approval of such changes by said official, and that such are not substantially adverse to the City, shall be conclusively evidenced by the execution of such MOU by such official. SECTION 2. Severability. If any section, paragraph or provision of this Ordinance shall be held to be invalid or unenforceable for any reason, the invalidity or unenforceability of such section, paragraph or provision shall not affect any of the remaining provisions of this Ordinance. SECTION 3. Compliance With Open Meetings Laws. The City Commission hereby finds and determines that all formal actions relative to the adoption of this Ordinance were taken in an open meeting of this City Commission, and that all deliberations of this City Commission and of its committees, if any, which resulted in formal action, were in meetings open to the public, in full compliance with applicable legal requirements. SECTION 4. Conflicts. All ordinances, resolutions, orders or parts thereof in conflict with the provisions of this Ordinance are, to the extent of such conflict, hereby repealed and the provisions of this Ordinance shall prevail and be given effect. SECTION 5. Effective Date. This Ordinance shall be read on two separate days and will become effective upon summary publication pursuant to KRS 424. ATTEST: Jaln��� S. 6itx,-L Tammara S. Brock, City Clerk Introduced by the Board of Commissioners, August 4, 2009 Adopted by the Board of Commissioners, August 11, 2009 Recorded by Tammara S. Brock, City Clerk, August 11, 2009 Published by The Paducah Sun, August 17, 2009 \ord\downtown dev\incentives-MOU-133 S 2nd St MEMORANDUM OF UNDERSTANDING THIS MEMORANDUM OF UNDERSTANDING made and entered into as of this day of August, Zoog, by and among the CITY OF PADUCAH, KENTUCKY ("City"), a municipal corporation of the second class with offices located at 300 South 5th Street, Paducah, Kentucky 42003, MINDSPRING DEVELOPMENT, LLC, ("Mindspring") a Kentucky limited liability company with its principal place of business located at no South Third Street, Paducah, Kentucky 42001; CIVIL DESIGN GROUP, INC. ("CDG"), a Kentucky corporation with its principal place of business located at 115 Carlisle Court, Paducah, KentuckY42001, M1cbAL HOLDINGS, LLC ("MichAL"), a Kentucky limited liability company located at 115 Carlisle Court, Paducah, Kentucky 420o1, and PATRICK H. JOHNSON, ALAN CLAY ROBINSON and M. TODD McBEE ("Guarantors"). WHEREAS, Mindspring is the owner of certain real property located at 133 South 2nd Street, Paducah, Kentucky 42001 (the "Property"); WHEREAS, Mindspring has the specific intent and purpose to renovate the building and all other related improvements located upon the Property (the "Renovation Project") and to use the Property for mixed use as residential property and office space; WHEREAS, MichAL has agreed to purchase a portion of the Property from Mindspring and lease the same to CDG for use by the latter as its business office (the "CDG Office") and to make certain improvements to the same, subject to the receipt of the incentives provided hereby; WHEREAS, such renovation and use of the Property will have a positive impact on the local community by stimulating the local economy, expanding the tax base, and promoting the redevelopment of downtown Paducah; WHEREAS, in order to induce the renovation, installation, redevelopment, and equipping of the Property by Mindspring, MichAL and CDG, the City is agreeable to providing to Mindspring, MichAL and CDG certain economic incentives for purposes of defraying the costs of renovating, installing and equipping the Property, provided the parties fully satisfy and accomplish such intent and purpose and further fully complywith and satisfy the conditions of this Memorandum of Understanding; and WHEREAS, it is deemed necessary and advisable that this Memorandum of Understanding be entered into by the parties setting forth their agreement with respect to the acquisition, renovation, redevelopment, installation and equipping of the Property, and the economic incentives to be provided to defray the costs of said acquisition, renovation, redevelopment, installation, and equipping of the Property by Mindspring, MichAL and CDG. Pagel of g NOW, THEREFORE, in consideration of the foregoing promises, and for other valuable consideration, the legal adequacy and sufficiency of which is hereby acknowledged by all parties hereto, the parties do covenant and agree as follows: 1. Compliance with renovations requirements. Mindspring, MichAL and CDG shall renovate, redevelop, install and equip the Property in accordance with all incorporated documents and terms, which shall specifically include the following: A. Mindspring, MichAL and CDG shall present to the City an overall design of the Renovation Project, together with detailed plans and specifications which particularize the specifics of the renovations to be made to the Property, which shall include detailed illustrations of floor plans and use of space; front, side, and rear elevations of exterior facades, including any significant architectural detail; the exterior appearance of the renovations; and other pertinent aspects of the Renovation Project, all of which shall be described and presented in a large, clear, and sufficiently detailed manner and must be reviewed and approved for Building Code compliance by the City Inspection Department. Plans shall also be reviewed and approved by the Paducah Renaissance Alliance Design Committee. These documents maybe provided to the City over the course of the Renovation Project, but must be provided to the City before substantial completion of the Project. B. Mindspring, MichAL and CDG shall present to the City a certification as to their respective intended use of the Property, and commitment to comply with such intended use following the receipt of economic incentives from the City. C. Mindspring, MichAL and CDG shall present to the City an estimate prepared by a professional engineer or architect which provides a reasonable and detailed estimate of the entire cost of the Renovation Project, including a specific itemization of a cost estimate for each major component of the Renovation Project. D. Mindspring, MichAL and CDG shall present to the City an estimated timetable which shall set forth a schedule of the completion dates of the various major components of the Renovation Project, and the final completion date of construction. E. Mindspring, MichAL and CDG shall present to the City any and all other documents and records which the City may request which assist the City in evaluating the Renovation Project. Page 2 of 9 F. Mindspring, MichAL and CDG agree that they shall commence the Renovation Project within a period of six (6) months following the date of execution of this Memorandum of Understanding ("Commencement Date"), in compliance with the above-described renovation requirements. G. Mindspring, MichAL and CDG agree that all renovations must be substantially completed within a period of twenty-four (24) months following the Commencement Date ("Completion Date"), in compliance with the above-described renovation requirements. Substantial completion shall mean that the Executive Director has issued a certificate of compliance with the terms of this Memorandum of Understanding and the Chief Building Inspector for the City of Paducah has issued a certificate of occupancy for the Property. Mindspring, MichAL and CDG shall be entitled to one 3o -day extension of the Completion Date in the event there is ninety percent (go%) completion as of the proposed Completion Date. Saidextension shall only be granted upon the written request of Mindspring, MichAL and CDG made on or before the expiration of the Completion Date. The Completion Date shallbe further extended by the written approval of City in the event of a natural disaster, catastrophe occurrence, or other circumstance beyond the parties' control. 2. Closing. Sale and purchase contemplated by this Memorandum of Understanding shall be consummated in Paducah, Kentucky, on or before August , 2009. 3. The City's Economic Incentives: A. Renovation Loan. The City agrees to provide the following loan, which shall be used by MichAL for renovation, redevelopment, installation and/or equipping of the CDG Office and shall be secured by a Mortgage upon the Property: i. Property Rehabilitation Inducement Loan. The City agrees to provide a Property Rehabilitation Inducement Loan to MichAL of Fifty Thousand and oo/ioo Dollars ($50,000.00) with interest thereon at the rate of zero percent (o%) per annum for a period of five (5) years, which shall be used by MichAL for renovation, redevelopment, installation and/or equipping of the CDG Office and shall be secured by a Mortgage upon the same. The Loan shall be evidenced by a Note in the form of Exhibit 3(A)(i) attached hereto. The maturity date of this loan shall be the first to occur of (i) the date title to the Property, which shall secure this loan obligation, is transferred, whetherby deed, inheritance, or otherwise; or (ii) an event of default, including but not limited to MicbAL and CDG's failure to perform or continue to perform any of its obligations Page 3 of 9 enumerated herein, or its seeking protection under federal bankruptcylaw; or (iii) five years from the date of execution of the Mortgage and Promissory Note memorializing the terms of this Memorandum of Understanding. On each anniversary date of the Mortgage and PromissoryNote referenced above, until and including the fifth anniversary date, one fifth (1/5) of the original principal amount of the loan shall be forgiven provided an event of default has not occurred and is continuing. 3. Conditions upon the City's Economic Incentives: A. CDG's Investments and Employees. In consideration for its entitlement to and receipt of the Renovation Loan of Paragraph 3.B, CDG and MichAL agree, as a material condition to those loans, to: 1. Within 2 weeks of substantial completion of the Renovation Project, CDG shall have its engineering design firm fully operational and open to the public at the Property ("Opening Date"); 2. CDG shall employ at least ten (10) full-time equivalents at the firm following the Opening Date; 3. Invest not less than Five Hundred Thousand Dollars ($500,000.00) in fixtures and equipment to be utilized in the CDG Office (it being agreed that CDG may utilize existing fixtures and equipment toward satisfaction of this investment obligation); and 4. Cause the firm to be open to the public, at minimum, from 8: o 0 a.m. to 5:00 p.m., Monday through Friday, following the Opening Date. 5. Mindspring will initiate construction of the residential space within six (6) months following the commencement date and initiate construction on the second upstairs unit as either residential or commercial space within twelve (12) months of the commencement date. On the one year anniversary of the Opening Date and each year thereafter until the loan obligations of Paragraph 3.B have been forgiven or has matured, the City and CDG shall conduct a joint review of CDG's hours and number of full-time equivalents required by this Memorandum of Understanding. If the City and CDG agree to alter the store hours and/or the number of full-time equivalents required of CDG by this Memorandum of Understanding, said alteration shall be memorialized in writing and signed by both parties. Page 4 of g B. Mindspring's Renovations. In consideration of the loan to MichAL providedby this Memorandum of Understanding, which Mindspring acknowledges is material to the decision of MichAL to purchase the CDG Office from Mindspring, Mindspring agrees that it shall complete the approved renovation of the entire Project. C. Membership in Paducah Renaissance Alliance. In consideration for its entitlement to and receipt of the Economic Incentives of Paragraph 3, Mindspring and CDG agree to become and remain a member of Paducah Renaissance Alliance for the term of the inducement and loans described in Paragraph 3, and as a material condition to those inducement and loans. 5. Payment of Economic Incentives: A. Renovation Loans. 1. The Property Rehabilitation Inducement Loan of Paragraph 3.A.i shall be payable by the City to MichAL at the Closing contemplated above. 6. Reimbursement of Grant and Loan Monies: A. If Mindspring, MichAL and CDG fail to satisfy their commitments hereunder, MichAL shall fully and promptly reimburse the City for each of the Renovation Loans set forth in Paragraph 3.11 of this Memorandum of Understanding. The aforesaid reimbursement shall include interest at accrue interest at a rate equal to the Wall Street Journal Prime Rate as published each business dayof the month on the Wall StreetJournal "Prime Rate Page" effective on the date first set forth hereinabove. B. If Mindspring, MichAL and CDG fail to satisfy their commitments hereunder, CDG, MichAL and Mindspring, jointly and severally, shall fully and promptly reimburse the City for all costs and expenses incurred by the City in connection with enforcement of the City's rights under this Memorandum of Understanding, including, without limitation, the reasonable fees and expenses of counsel. 7. Guaranty. In consideration for the benefits provided to Mindspring hereunder, the principals of CDG, MichAL and Mindspring, Alan Clay Robinson, M. Todd McBee and Patrick H. Johnson, additionally commit to: A. Jointly and severally, unconditionally and absolutely guarantee the punctual and faithful performance and observance by Mindspring, MichAL and CDG of all payments, obligations and undertakings to be performed and observed pursuant to this Memorandum of Understanding. Page 5 of g - __.: ___ .- _ - is-.:: L __ 1 _ . B. Promptly perform or observe or cause to be performed or observed any payment, obligation, undertaking or condition in the Memorandum of Understanding or any associated documents, including but not limited to the mortgage and note, to be performed or observed by CDG, MichAL and/or Mindspring that CDG, MichAL and/or Mindspring fail to observe or perform for any reason. C. Upon demand by the City, pay to the City the costs and expenses incurred by the City in connection with enforcement of the City's rights under this Memorandum of Understanding, including, without limitation, the reasonable fees and expenses of counsel. D. Undertake these obligations without regard to any setoff or counterclaim which Mindspring, MichAL or CDG may have to assert, and regardless of whether the City or anyone on behalf of the City shall have instituted any suit, action or proceeding or exhausted its remedies or taken any steps to enforce any rights against the CDG, MichAL or Mindspring, and regardless of any other condition or contingency. E. Guarantors' obligations hereunder shall terminate 5 years from the date of Closing, if Mindspring, MichAL and CDG have not already completed in full its payments, obligations and undertakings pursuant to this Memorandum of Understanding. However, Guarantors shall remain liable on this Guaranty for all obligations incurred prior to that date plus costs and fees incurred thereafter as permitted by applicable law. 8. Miscellaneous Provisions. The following miscellaneous provisions shall apply: A. Assignment. This Memorandum of Understanding shall be binding upon and shall inure to the benefit of the parties hereto, and their respective legal representatives, heirs, successors and permitted assigns. Neither Mindspring, MichAL, CDG nor Guarantors shall assign their rights and obligations hereunder, in whole or in part, without the prior written consent of the City, which shall not be unreasonably withheld; but in no event, shall any assignment hereunder release or relieve Mindspring, MichAL, CDG and/or Guarantors from any obligations of this Memorandum of Understanding for which Mindspring, MichAL, CDG and/or Guarantors shall remain fully bound to the City. B. Title Examination and Deed Preparation. The City shall, for the benefit of MichAL, cause to be completed a title examination of the Property and cause to be prepared a Deed which shall convey good, fee simple and marketable title to the CDG Office together with all the improvements thereon and appurtenance thereunto belonging, from Mindspring, subject to all existing zoning ordinances, rights-of-way, covenants, Page 6 of 9 restrictions and easements appearing of record and only such encumbrances as MichAL may approve in writing. The City hereby assigns to MichAL any and all rights, including, but not limited to, any causes or choses in action, whether currently known or unknown, the City presently has or may have against the title examiner and/or deed preparer resulting from any error in the title examination or deed preparation. C. Merger Clause. It is agreed and understood between the parties that this Memorandum of Understanding represents the entire and exclusive agreement between the parties, and that all prior representations, covenants, warranties, understandings and agreements are merged herein. D. Construction. This Memorandum of Understanding shall be governed and construed under the laws of the Commonwealth of Kentucky irrespective of any conflicts of laws provisions thereof. E. FurtherAssurances. The City, CDG, MichAL and Mindspring agree to execute such further documents and instruments as shall be necessary to fully carry out the terms of this Memorandum of Understanding. F. Limitation of Liability. The parties understand and agree that no officer, director, employee, agent or shareholder of any of the parties shall have any personal liability, directly or indirectly, under or in connection with this Memorandum of Understanding or any agreement made or entered into under or in connection with this Memorandum of Understanding, except as set forth in Paragraph 7 above. G. Amendments. This Memorandum of Understanding may only be modified in writing executed by all parties hereto. H. Execution and Delivery. This Memorandum of Understanding shall be of no force or effect unless and until it shall have been executed and delivered by all parties hereto. I. Notice. All notices to the City, Mindspring, and Guarantors hereunder shall be given by certified or registered mail, addressed: To the City at: City of Paducah, Kentucky ATTENTION: Mr. William F. Paxton, III, Mayor 300 South 5th Street Paducah, Kentucky 42003 copy to: J. Duncan Pitchford Whitlow, Roberts, Houston & Straub, PLLC 30o Broadway Paducah, Kentucky 42001 Page 7 of g To Mindspring at: Mindspring Development, LLC Attn: Pat Johnson 110 South 3rd Street Paducah, Kentucky 42001 To CDG at: Civil Design Group Attn: Clay Robinson 115 Carlisle Court Paducah, Kentucky 42001 To MichAL at: MichAL Holdings, LLC Attn: Clay Robinson 115 Carlisle Court Paducah, Kentucky 42001 To Guarantors at: Patrick H. Johnson 6755 Stonepoint Court Paducah, Kentucky 42003 Alan Clay Robinson 2o1 Hunting Creek Paducah, Kentucky 42003 M. Todd McBee 35 Mitchell Drive Mayfield, KentuckY42o66 J. Counterparts. This instrument may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument, provided, however, each appears in its original typewritten form without deletions, strike-throughs or modifications of any type. Page 8 of 9 IN WITNESS HEREOF, the parties have caused this Memorandum of Understanding to be executed as of the date first set forth hereinabove. CITY CITY OF PADUCAH By: William F. Paxton, III, Mayor CDG CIVIL DESIGN GROUP, INC. By: Alan Clay Robinson, President 356735.1 MINDSPRING MINDSPRING DEVELOPMENT, LLC Bv: Patrick H. Johnson, Member GUARANTORS Patrick H. Johnson Alan Clay Robinson M. Todd McBee Page 9 of 9