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033-18 - Resolution - Purchase and Sale Agreement with Waterman Investment Partners, LLC for 640 Bay StreetRESOLUTION NO. 033-18 A RESOLUTION OF THE CITY OF PORT ORCHARD, WASHINGTON, AUTHORIZING THE MAYOR TO EXECUTE A PURCHASE AND SALE AGREEMENT BETWEEN THE CITY AND WATERMAN INVESTMENT PARTNERS, LLC FOR THE PROPERTY KNOWN AS 640 BAY STREET. WHEREAS, on November 14, 2017, the City Council voted to approve Resolution 061-17 declaring 640 Bay Street as Surplus to the needs of the City and authorized its sale; and WHEREAS, on November 17, 2017 the City issued a Request for Proposals (RFP) for the sale and redevelopment of the 640 Bay Street property; and WHEREAS, this RFP was advertised in several newspapers and on the City's website; and WHEREAS, one proposal for the purchase and redevelopment of the 640 Bay Street property was received by the January 12, 2018 submittal deadline; and WHEREAS, on February 13, 2018, the City Council passed Resolution 006-18 declaring the Waterman Investment Partners LLC proposal to be the winning proposal in response to the RFP; and WHEREAS, the City obtained a broker's price opinion indicating the Value of 640 Bay Street to be $219,534, and WHEREAS, the attached purchase and sale agreement provides valuable consideration consisting of a cash payment to the city and voluntary public improvements totaling $342,885, now, therefore; THE CITY COUNCIL OF THE CITY OF PORT ORCHARD, WASHINGTON, HEREBY RESOLVES AS FOLLOWS: 1. Recitals. The recitals set forth above are hereby incorporated by reference as if set forth fully herein. 2. Authorization. The City Council hereby authorizes the Mayor to execute the purchase and sale agreement between the City and Waterman Investment Partners, LLC as attached hereto for the purchase of the property known as 640 Bay Street. 3. Effective Date. This Resolution shall take effect immediately upon its passage. Resolution No. 033-18 Page 2 of 2 PASSED by the City Council of the City of Port Orchard, SIGNED by the Mayor and attested by the City Clerk in authentication of such passage this 10th day of July 2018. ATTEST: Brandy Rinearson, MMC, City Clerk Robert Putaansuu, Mayor �� p0RT pRC.,,,� Fo c SEAL REAL ESTATE PURCHASE AND SALE AGREEMENT This REAL ESTATE PURCHASE AND SALE AGREEMENT ("Agreement") is entered into by and between Waterman Investment Partners, LLC, a Washington limited liability company, its successors or assigns ("Buyer") and the City of Port Orchard, a Washington municipal corporation, its successors or assigns ("Seller"), as of the date appearing in the last paragraph of this Agreement ("Effective Date"). Buyer and Seller may hereafter be known individually as "Party" and collectively as "Parties." RECITALS A. Seller owns certain real property in Port Orchard, Kitsap County, Washington, more particularly described in Exhibit A and depicted in Exhibit B attached hereto (the "Property"). B. Seller advertised a Request for Proposals ("RFP") for the purchase and redevelopment of the Property. C. Buyer submitted the winning proposal ("Proposal") for the purchase and redevelopment of the Property, which is located in downtown Port Orchard. D. The parties agree that the acquisition of the Property is the first step in the redevelopment of the Property and that Buyer shall be required to undertake a Mixed - Use Pilot Program ("MUPP") redevelopment project, substantially as set forth in the Buyer's Proposal. E. Seller desires to sell the Property (as defined herein) to Buyer, and Buyer desires to purchase the Property from Seller on the terms and conditions set forth in this Agreement. F. The parties agree that the purchase price for the Property shall be a combination of U.S. funds and other valuable consideration conferred on the City as a direct result of the development of the Property. NOW, THEREFORE, intending to be legally bound, for good and valuable consideration, including the mutual covenants and promises of the Parties, the adequacy and receipt of which is hereby acknowledged, the Parties agree as follows: 1. Property. Seller agrees to sell and convey to Buyer and Buyer agrees to purchase from Seller, subject to the terms and conditions set forth in this Agreement, the following: 1.1 Land. That certain parcel of real property located in the City of Port Orchard, Kitsap County, Washington, more particularly described in Exhibit A attached to this Agreement, together with all mineral, oil, gas, hydrocarbon substances, development rights, air rights, water rights, and water stock owned by Seller relating to the real property; all easements and rights of way owned by Seller that are appurtenant to the real property or any improvements on the Page 1 of 19 real property, and any appurtenance, or the operation, use or enjoyment of any of the foregoing, all rights of Seller in and to streets, sidewalks, alleys, driveways, parking areas, and areas adjacent thereto or used in connection therewith and any land lying in the bed of any existing or proposed street adjacent to such land (collectively the "Land"); 1.2 Improvements. Any and all fixtures, structures, landscaping, and other improvements located upon the Land (the "Improvements"); 1.3 Plans, Permits and Contracts. All surveys of, and environmental reports with respect to, the Real Property; all plans, specifications, engineering drawings, and prints relating either to the construction of the Improvements or to future development and expansion of existing Improvements (the "Plans"); all licenses and permits pertaining to the Property, to the extent assignable, (the "Permits"); and all warranties upon the Improvements and Personal Property; all service, maintenance, management and operating agreements affecting the Property (to the extent Buyer elects to assume such) (the "Contracts"). The Land and Improvements that constitute real property are collectively referred to in this Agreement as the "Real Property." All of the property described in this Section 1, both real and personal, is collectively referred to in this Agreement as the "Property." 2. Deposit; Purchase Price. 2.1 Deposit. Within five (5) business days after the date on which the last party executes this Agreement (the "Effective Date"), Buyer shall execute and deliver to Land Title Company of Kitsap in Port Orchard, Washington ("Title Company"), as escrow agent for the closing of this transaction, a promissory note (the "Earnest Money Note") in the amount of Fifteen Thousand Dollars ($15,000.00). The Earnest Money Note will be converted to cash upon the expiration of the Due Diligence Period (as defined in Section 5.1) (the "Deposit") and will be paid or delivered as earnest money (the "Earnest Money") in part payment for the purchase price of the Property. The Deposit will be held by Title Company for the benefit of the parties pursuant to the terms of this Agreement. Interest will accrue on the Deposit for the benefit of Buyer; provided, however, if Buyer forfeits the Deposit to Seller pursuant to the terms of this Agreement, then all interest accrued on the Deposit will be paid to Seller. 2.2 Purchase price. The purchase price for the Property (the "Purchase Price") includes a One Hundred Fifty Thousand Dollar ($150,000.00) cash payment, of which the Earnest Money is a part, plus other valuable consideration in the form of economic, public and other benefits as agreed to between the parties in a separate development agreement, for valuable consideration totaling Three Hundred Forty Two Thousand Eight Hundred Eighty Five Dollars ($342,885.00). The One Hundred Fifty Thousand Dollar ($150,000.00) cash payment, including the Earnest Money, will be paid by the Buyer to the Seller in cash through escrow at closing. 3. Title to Real Property. 3.1 Conveyance. At closing, Seller shall convey to Buyer fee simple title to the Real Property by duly executed and acknowledged statutory warranty deed (the "Deed"), free Page 2of19 and clear of all defects and encumbrances and subject only to those exceptions that Buyer approves pursuant to Section 3.2 below (the "Permitted Exceptions"). 3.2 Preliminary commitment. Buyer shall order a preliminary commitment for an owner's standard coverage policy of title insurance (or, at Buyer's election, an owner's extended coverage policy of title insurance) in the amount of the Purchase Price to be issued by Title Company and accompanied by copies of all documents referred to in the commitment (the "Preliminary Commitment"). Buyer shall advise Seller by written notice what exceptions to title, if any, are disapproved by Buyer ("Disapproved Exceptions") within fifteen (15) days of receipt of the Preliminary Commitment and legible copies of all exceptions to title shown in the Preliminary Commitment. All monetary encumbrances other than non -delinquent ad valorem property taxes will be deemed to be disapproved. Seller will have ten (10) days after receipt of Buyer's notice to give Buyer notice that (i) Seller will remove Disapproved Exceptions or (ii) Seller elects not to remove Disapproved Exceptions. If Seller fails to give Buyer notice before the expiration of the ten (10) day period, Seller will be deemed to have elected not to remove Disapproved Exceptions. Notwithstanding anything to the contrary in this Agreement, Seller shall remove from title on or before the Closing Date all monetary encumbrances other than those approved by Buyer. If Seller elects not to remove any nonmonetary Disapproved Exemptions, Buyer will have until the expiration of the Due Diligence Period to notify Seller of Buyer's election either to proceed with the purchase and take the Property subject to those exceptions, or to terminate this Agreement. If Seller gives notice that it will cause one or more nonmonetary exceptions to be removed but fails to remove any of them from title on or before the Closing Date, Buyer will have the right to either (i) elect to terminate this Agreement by written notice to Seller or (ii) proceed with the purchase, with an abatement of the Purchase Price equal to the actual cost of removing from title those exceptions not approved by Buyer, and to take the Property subject to those exceptions. If the Title Company issues a supplement to the Preliminary Commitment, the procedure set forth in this Section 3.2 will apply to such supplement, except that Buyer will have seven (7) days to notify Seller of its disapproval of any new exceptions, and Seller will have five (5) days to give Buyer notice that Seller will either remove or not remove any new Disapproved Exceptions. If Buyer elects to terminate this Agreement under this Section 3.2, the escrow will be terminated, the Deposit must be returned immediately to Buyer, all documents and other funds will be returned to the Party who deposited them, and neither party will have any further rights or obligations under this Agreement except as otherwise provided in this Agreement. If this Agreement is terminated through no fault of Seller, then Seller and Buyer shall share equally any costs of terminating the escrow and any cancellation fee for the Preliminary Commitment. 3.3 Title policy. Seller shall cause Title Company to issue to Buyer at closing an extended coverage owner's policy of title insurance (or, at Buyer's election, an owner's standard coverage policy of insurance) insuring Buyer's title to the Real Property in the full amount of the Purchase Price subject only to the Permitted Exceptions (the "Title Policy"). The Title Policy must be dated as of the Closing Date. Page 3 of 19 4. Conditions to Closing. 4.1 Development Agreement. The parties agree that closing may take place only upon the execution of a development agreement ("Development Agreement") between the parties for the development of the Property. The Development Agreement must demonstrate the One Hundred Ninety Two Thousand Eight Hundred Eighty Five Dollars ($192,885.00) (excluding the $150,000.00 cash payment pursuant to section 2.2 of this Agreement) in valuable consideration as set forth in Section 5.5, below, contemplated in the Purchase Price for the Property. If the Development Agreement fails to demonstrate this entire amount, Buyer shall pay to Seller the difference in cash at closing. 4.2 Due diligence materials. Seller shall provide to Buyer, or make available to Buyer for inspection, as soon as possible (but in any event no later than thirty (30) days after the Effective Date) all materials specified in this Section 4.2 that exist and that are in Seller's actual possession or that Seller knows exist and to which Seller has access (collectively, the "Due Diligence Materials"). If Seller thereafter discovers any additional items that should have been included among the Due Diligence Materials, Seller shall promptly deliver them to Buyer. Due Diligence Materials will include: (a) copies of any existing and proposed easements, covenants, restrictions, agreements or other documents that, to Seller's knowledge, affect title to the Real Property and that are not disclosed by the Preliminary Commitment; (b) all surveys, plats or plans relating to the Real Property; (c) all warranties and guarantees affecting any portion of the Property; (d) notice of any existing or threatened litigation affecting or relating to the Property and copies of any pleadings with respect to that litigation; (e) all issued Permits that the seller possesses; and (f) (i) all environmental assessment reports with respect to the Real Property that were performed or are being performed by or for Seller, (ii) any raw data that relates to the environmental condition of the Real Property, (iii) any governmental correspondence, orders, requests for information or action and other legal documents that relate to the presence of Hazardous Material (as defined in Section 10.1.2) on, in or under the Real Property, and (iv) any other information material to the environmental condition or potential contamination of the Real Property. 5. Due Diligence. 5.1 Due diligence period. On or before November 30, 2018 (the "Due Diligence Period"), Buyer shall conduct a review with respect to the Property and satisfy itself with respect to the condition of and other matters related to the Property and its suitability for Buyer's intended use (the "Due Diligence"). Page 4 of 19 The Due Diligence may include all inspections and studies Buyer deems necessary or desirable, in its sole discretion. Buyer and Buyer's agents, representatives, consultants, architects and engineers will have the right, from time to time, from and after the date of this Agreement to enter onto the Real Property and make borings, drive test piles and conduct any other tests and studies that may be necessary or desirable to ascertain the condition and suitability of the Real Property for Buyer's intended use. Buyer shall protect, defend and indemnify Seller from and against any construction or other liens or encumbrances arising out of or in connection with its exercise of this right of entry and shall cause any such liens or encumbrances to be promptly released. Buyer shall provide 48 hours notice of any proposed onsite exploration, including geotechnical exploration. All exploration shall be at buyers expense and shall include restoration of any onsite disturbance. 5.2 Termination of Agreement. Buyer will have the right to terminate this Agreement if, in Buyer's good faith judgment, the Real Property is not suitable for Buyer's intended use or does not meet Buyer's intended investment objectives. Buyer's right to terminate must be exercised by delivering written notice of its election to Seller on or before the expiration of the Due Diligence Period. In the event Buyer does not complete the purchase, Buyer shall return the Real Property as near as is practicable to its original condition. If Buyer terminates this Agreement pursuant to this Section 5.2, the Deposit will be returned to Buyer, this Agreement will terminate, and Seller and Buyer will be released from all further obligation or liability hereunder, except as otherwise specified by this Agreement. 5.3 Buyer's contingencies. Buyer's obligation to purchase the Property is expressly contingent upon the following: 5.3.1. Due Diligence. Buyer's approval, prior to expiration of the Due Diligence Period, of the suitability of the Property as a result of the Due Diligence; 5.3.2. Appraisal. Buyer's review and approval, prior to expiration of the Due Diligence Period, of the appraisal of the Property to support the purchase price; 5.3.3. Environmental condition. Buyer's approval, prior to expiration of the Due Diligence Period, of the environmental condition of the Real Property pursuant to Section 10.4; 5.3.4. Title Policy. Buyer's receipt of Title Company's firm commitment to issue, upon closing, the Title Policy as described in Section 3; 5.3.5. Representations and warranties. All of Seller's representations and warranties contained in or made pursuant to this Agreement being true and correct when made, and as of the Closing Date; 5.3.6. Seller's compliance. Seller's timely performance of all of its obligations under this Agreement; provided, however, that Seller will be given notice of any failure on its part to perform obligations pursuant to Seller's warranties made in Section 9.1 and those obligations required of it during the Due Diligence Period, and will have a period of time that is reasonable under the circumstance to cure its nonperformance; and Page 5 of 19 The foregoing conditions are collectively referred to in this Agreement as "Buyer's Contingencies." 5.4. Satisfaction/waiver of buyer's contingencies. Buyer's Contingencies are solely for the benefit of Buyer. If any of Buyer's Contingencies are not timely satisfied, Buyer will have the right at its sole election either to waive any of them in writing and proceed with the purchase or to terminate this Agreement. If Buyer elects to terminate this Agreement, the escrow will be terminated, the Deposit must immediately be returned to Buyer, all documents and other funds will be returned to the parry who deposited them, and neither party will have any further rights or obligations under this Agreement, except as otherwise provided in this Agreement, and except that each party shall pay one-half (1/2) of the cost of terminating the escrow. 5.5. Seller's contingency. The Seller's obligation to sell the Property to the Buyer is expressly contingent upon the Buyer's entry into the Development Agreement with the Seller for the redevelopment of the Property as part of the City of Port Orchard's MUPP, to include substantially the terms set forth in the Buyer's Proposal submitted in response to the Seller's RFP. The Development Agreement will document the additional consideration to be conveyed by the Buyer to the Seller in the form of economic, public and other benefits, which is an essential element of the purchase price of the Property. 5.5.1 The Development Agreement must include an agreement by Buyer to, at a minimum: 5.5.1.1 Submit a building permit application to develop a mixed use building pursuant to the MUPP, which the Seller will authorize the Buyer to do on behalf of the "owner" of the Property before closing; and 5.5.1.2 Begin construction on the MUPP redevelopment project within thirty (30) months of the execution of this Purchase and Sale Agreement; and 5.5.1.3 Develop a mixed -use building containing a minimum of 8,000 square feet of commercial/library space and 30 dwelling units, which is in compliance with MUPP requirements and the City of Port Orchard Design Standards; and 5.5.1.4 Reconstruct all sidewalks along the 640 Bay Street property frontages; and 5.5.1.5 Reconstruct any sidewalks or sidewalk ramps required to provide continuous 6 foot wide sidewalks and crosswalks meeting ADA access standards between the 640 Bay Street property and either the Port Orchard foot ferry dock or the Bay Street Pedestrian Path; and 5.5.1.6 Construct the following improvements at a minimum cost to the Buyer as follows: Page 6of19 Item Description Cost 1 Frederick Hill Climb (Construct a plaza/staircase in $101,900.00 the Frederick ROW between Bay Street and Prospect Street 2 Water Main Replacement within the Frederick and 35,905.00 Prospect ROW (Continuous weld HDPE minimum 200 feet in length connecting mains/utility crossings in Bay Street and Prospect Street 3 Sidewalk (ADA accessibility) improvements between 38,230.00 640 Bay Street and the Bay Street Pedestrian Pathway 4 Public Plaza Prospect minimum 400 square feet $16,850.00 Totals $192,885.00 5.5.2 The Development Agreement shall additionally stipulate the following: 5.5.2.1 The City shall grant no impact fee credits (School, fire, transportation, or parks) related to the previous use or building at 640 Bay Street. 5.5.2.2 The City shall recognize the value of the previous water and sewer utility connections providing water and sewer service to the previous building located at this site. 5.5.3 The Development Agreement may allow for the expansion of the project onto contiguous properties. 5.6. Satisfaction/waiver of Seller's contingency. This Seller's contingency is solely for the benefit of the Seller. If this contingency is not timely satisfied, or if the Port Orchard City Council fails to approve the Development Agreement, Seller will have the right at its sole election either to waive the contingency in writing and proceed with the purchase or to terminate this Agreement. If Seller elects to terminate this Agreement, the escrow will be terminated, the Deposit must immediately be returned to Buyer, all documents and other funds will be returned to the party who deposited them, and neither party will have any further rights or obligations under this Agreement, except as otherwise provided in this Agreement, and except that each party shall pay one-half (1/2) of the cost of terminating the escrow. 6. Closing. 6.1 Closing date. This transaction will be closed in escrow by Title Company acting as escrow agent ("Escrow Agent"). The closing will be held at the offices of Title Company on or before that date which is thirty (30) days after the execution of the Development Agreement and the expiration of any applicable appeal period related thereto, but in any event no later than December 31, 2018 (the "Closing Date"). If closing does not occur on or before the Closing Date, or any later date mutually agreed to in writing by Seller and Buyer, Escrow Agent will immediately terminate the escrow, forward the Deposit to the party entitled to receive it as provided in this Agreement and return all documents to the party that deposited them. Page 7of19 6.2 Closing. 6.2.1 Seller's escrow deposits. On or before the Closing Date, Seller shall deposit into escrow the following: (a) the duly executed and acknowledged Deed; (b) a duly executed and completed Real Estate Excise Tax Affidavit; (c) a non -foreign affidavit pursuant to Section 1445 of the Internal Revenue Code; (d) any other documents, instruments, records, correspondence and agreements called for hereunder that have not previously been delivered; and (e) a certificate reaffirming as of the Closing Date that all of Seller's representations and warranties under this Agreement are true and correct. 6.2.2 Buyer's escrow deposits. On or before the Closing Date, Buyer shall deposit into escrow the following: (a) cash or immediately available funds in an amount sufficient to pay the One Hundred Fifty Thousand Dollars ($150,000.00) cash payment portion of the Purchase Price, plus Buyer's share of closing costs; (b) a duly executed Development Agreement, per Section 5.5 above; (c) a duly executed and completed Real Estate Excise Tax Affidavit; (d) any other documents or instruments Buyer is obligated to provide pursuant to this Agreement (if any) in order to close this transaction; and (e) a certificate reaffirming as of the Closing Date that all of Buyer's representations and warranties under this Agreement are true and accurate. 6.2.3 Additional instruments and documentation. Seller and Buyer shall each deposit any other instruments and documents that are reasonably required by Escrow Agent or otherwise required to close the escrow and consummate the purchase and sale of the Property in accordance with this Agreement. 6.3 Closing costs. 6.3.1 Seller's costs. Seller shall pay the premium for a standard coverage owner's policy of title insurance in the full amount of the Purchase Price, State of Washington real estate excise taxes applicable to the sale, and one-half of Title Company's escrow fee. Page 8 of 19 6.3.2 Buyer's costs. Buyer shall pay the additional premium, if any, attributable to the extended coverage owner's policy of title insurance (if elected by Buyer) and any endorsements required by Buyer, the cost of recording the Deed and one-half of Title Company's escrow fee. 6.4 Foreign Investment in Real Property Tax Act. The parties agree to comply in all respects with Section 1445 of the Internal Revenue Code and the regulations issued thereunder (the "Regulations"). If Seller is not a "foreign person" (as defined in the Regulations), Seller shall deliver to Buyer through escrow a nonforeign certificate as prescribed by the Regulations, properly executed and in form and content satisfactory to Buyer. If Seller is a "foreign person" or fails or refuses to deliver the nonforeign certificate, or if Buyer receives notice, or has actual knowledge, that the non -foreign certificate is false, a tax equal to 10% of the Purchase Price will be withheld through escrow and paid by Escrow Agent to the Internal Revenue Service in the manner prescribed by the Regulations, unless withholding is reduced or excused in the manner prescribed by the Regulations. In the event of any withholding, Seller's obligations to deliver title and close this transaction will not be excused or otherwise affected. 7. Adjustments and Prorations. The following adjustments and prorations will be made as of 12:01 a.m. on the Closing Date (with Buyer either responsible for or entitled to a credit for, as the case may be, the actual Closing Date). 7.1. Property taxes. All property taxes payable in the year of closing and assessments approved by Buyer, if any, will be prorated as of the Closing Date. 7.2. Utilities. All gas, electric and other utility charges will be prorated as of the Closing Date. 7.3. Accounts payable. Except as may be otherwise agreed by Seller and Buyer in writing, all sums due for accounts payable that were owing or incurred in the maintenance or operation of the Property prior to the Closing Date will be paid by Seller on or prior to the Closing Date or adequate provisions reasonably satisfactory to Buyer will be made in respect to such payment. Seller agrees to indemnify and hold Buyer harmless with respect to all such obligations. Buyer shall furnish to Seller for payment promptly following receipt any bills to be paid by Seller. Except as may otherwise be agreed to by Seller and Buyer in writing, all accounts payable incurred on or after the Closing Date with respect to the Property will be paid by Buyer and Buyer agrees to indemnify Seller with respect thereto. 8. Seller's Covenants. 8.1 Covenant to operate and maintain. Prior to the Closing Date, Seller shall maintain, repair, manage and operate the Property in a businesslike manner in accordance with Seller's prior practices and Seller shall not dissipate any portion of the Property. Seller shall keep the Property insured in accordance with Seller's prior practices up to the Closing Date. Page 9 of 19 9. Representations and Warranties. 9.1 Seller's representations and warranties. Seller represents and warrants to Buyer as follows: (a) Seller has full power and authority to convey the Property to Buyer. (b) To the best of Seller's knowledge, the Property is now, or will be as of the Closing Date, in compliance in all material respects with all applicable zoning, land - use, building, construction, subdivision and other local, state and federal laws, ordinances and regulations and with all existing covenants, conditions, restrictions and easements. (c) To the best of Seller's knowledge, all Due Diligence Materials and other instruments and documents delivered to Buyer pursuant to this Agreement (the "Warranted Materials") are complete and accurate originals or copies, and Seller shall advise Buyer in writing of any inaccuracies in the Warranted Materials as Seller becomes aware of them. With respect to all other instruments and documents delivered or required to be delivered to Buyer by Seller pursuant to this Agreement, Seller has not purposefully altered or withheld any of them. (d) Seller has not received notice of any special assessment or condemnation proceedings affecting the Property. (e) To the best of Seller's knowledge, there is no litigation pending or threatened against Seller (or any basis for any claim) that arises out of the ownership of the Property and that might materially and detrimentally affect (i) the use or operation of the Property for Buyer's intended use, or (ii) the ability of Seller to perform its obligations under this Agreement, or (iii) the value of the Property. (f) Seller is a Washington municipal corporation. This Agreement and all documents executed by Seller that are to be delivered to Buyer at closing are, or at the time of closing will be, (i) duly authorized, executed and delivered by Seller, (ii) legal, valid and binding obligations of Seller, (iii) sufficient to convey title (if they purport to do so), and (iv) in compliance with all provisions of all agreements and judicial orders to which Seller is a party or to which Seller or all or any portion of the Property is subject. (g) Other than the Property, there are no items, tangible or intangible, real or personal, owned by Seller or any affiliate of Seller, now or at any time used in conjunction with the Property or any portion thereof. (h) Seller has received no notice of any failure of Seller to comply with any applicable governmental -requirements in respect of the use, occupation and construction of the Property, including, but not limited to, environmental, fire, health, safety, zoning, subdivision and other land use requirements that have not been corrected to the satisfaction of the appropriate governmental authority, and Seller has received no notice of, and has no knowledge of, any violations or investigation relating to any such governmental requirement. Page 10 of 19 (i) Seller has received no notice of any default or breach by Seller under any covenants, conditions, restrictions, rights of way or easements that may affect Seller in respect to the Property or may affect the Property or any portion thereof and no such default or breach now exists. (j) No building or other improvement encroaches on the real property, nor does any building or improvement that is a part of the real property encroach on lands of others or any public or private road or right of way. (k) There are no leases affecting any part of the Property and there are no written or oral promises, understandings or agreements between Seller and any tenant or occupant of the Property that have not been disclosed by Seller as part of the materials provided by Buyer. (1) To Seller's knowledge there are no permits, licenses or consents required by any governmental authority in connection with the use and occupancy of the Property except those previously obtained by Seller and delivered to Buyer, and Seller knows of no local improvement districts proposed which will affect the Property. (m) Except as disclosed in writing by Seller to Buyer, the Property is not affected by any statute or governmental regulation of any kind that limits the right to increase rents, requires the renewal of leases or grants a right to purchase to any tenant. (n) All public utilities required for the operation of the Property either enter the Property through adjoining public streets or, if they pass through adjoining private lands, do so in accordance with valid public easements or private easements that will inure to the benefit of Buyer on the Closing Date. (o) Capacity within the water and sewer systems beyond that which was associated with the previous building and use may be reserved by applying for water and sewer concurrency pursuant to POMC 20.180. (p) Seller is not a foreign person as defined in Section 1445 of the Internal Revenue Code. (q) All of the representations, warranties and covenants of Seller contained in this Agreement are true and correct as of the Effective Date and as of the Closing Date and will survive the closing of the transaction contemplated by this Agreement. 9.2 Buyer's representations and warranties. Buyer represents and warrants to Seller as follows: (a) Buyer is a Washington limited liability company, duly organized and validly existing under the laws of the state of Washington; this Agreement and all documents executed by Buyer that are to be delivered to Seller at closing are, or at the time of closing will be (i) duly authorized, executed and delivered by Buyer, (ii) legal, valid and binding obligations of Buyer, and (iii) in compliance with all provisions of all agreements and judicial orders to which Buyer is a party or to which Buyer is subject. Page 11 of 19 (b) In connection with its Due Diligence, Buyer will inspect those aspects of the Property, including, without limitation, its physical condition, that Buyer deems necessary in order to make a determination whether to purchase the Property. (c) As of the date of this Agreement, Buyer is not aware of any default by Seller of any representation or warranty set forth in this Agreement. 10. Hazardous Materials. 10.1 Definitions. 10.1.1 Definition of "Environmental Laws". "Environmental Laws" means any federal, state or local laws, ordinances, permits or regulations, or any common law, regarding health, safety, radioactive materials or the environment, each as amended, and any regulations promulgated thereunder, guidance and directives issued with respect thereto, or policies adopted by the applicable authorities thereunder. 10.1.2 Definition of "Hazardous Materials". "Hazardous Materials" means: (i) any radioactive materials; (ii) any substance or material the transportation, storage, treatment, handling, use, removal or release of which is subject to any Environmental Law; or (iii) any substance or material for which standards of conduct are imposed under any Environmental Law. Without limiting the generality of the foregoing, "Hazardous Materials" includes: asbestos and asbestos -containing materials (whether or not friable); urea -formaldehyde in any of its forms; polychlorinated biphenyls; oil, used oil; petroleum products and their by- products; lead -based paint; radon; and any substances defined as "hazardous waste," "hazardous substances," "pollutants or contaminants," "toxic substances," "hazardous chemicals," "hazardous pollutants," or "toxic chemicals "under any law, statute, ordinance or regulation governing environmental matters or hazardous materials. 10.2 Compliance with Environmental Laws. Seller represents and warrants that: (a) Seller has no actual knowledge of the release or presence of any Hazardous Material on, in, from or onto the Real Property; (b) Seller hasnot generated, manufactured, refined, transported, stored, handled, disposed of or released any Hazardous Materials on the Property, nor has Seller permitted the foregoing; (c) To the best of Seller's actual knowledge, Seller has obtained all approvals and caused all notifications to be made as required by Envirommental Laws; (d) To the best of Seller's actual knowledge, Seller has not received any notice of any violation of any Environmental Laws; (e) To the best of Seller's actual knowledge, no action has been commenced or threatened regarding Seller's compliance with any Environmental Laws; Page 12 of 19 (f) To the best of Seller's actual knowledge, no tanks used for the storage of any Hazardous Materials above or below ground are present or were at any time present on or about the Real Property; and (g) To the best of Seller's actual knowledge, no action has been commenced or threatened regarding the presence of any Hazardous Materials on or about the Real Property. 10.3 No waiver of liability. Seller has not released or waived and will not release or waive the liability of any previous owner, lessee or operator of the Real Property or any party who may be potentially responsible for the presence or removal of Hazardous Materials on or about the Real Property. Seller has made no promises of indemnification regarding Hazardous Materials to any party. 10.4 Environmental inspection. A Phase I Environmental Assessment was prepared by the Seller and is available to the Buyer upon request. During the Due Diligence Period, Buyer will have the right to take soil and water samples (including groundwater samples) from the Real Property, and to test and analyze those samples to determine the extent of any contamination of the soils and water (including groundwater) on or about the Real Property. If, based on the results of those inspections and/or tests, Buyer determines that the condition of the Real Property is unsatisfactory or if Buyer believes that its ownership of the Real Property would expose Buyer to undue risks of government intervention or third -party liability, Buyer may, without liability, cancel the purchase of the Property and terminate this Agreement. 11. Casualty Loss. Following the occurrence of any event prior to the Closing Date, causing damage to or destruction of the Property or any portion of the Property, Seller shall promptly notify Buyer of such occurrence. Under any such circumstances the provisions of this Section 11 will apply. 11.1 Minor casualty loss. If the amount of any casualty loss referred to above in this Section 11 is not more than Five Hundred Dollars ($500.00), the obligation of each party under this Agreement will continue, notwithstanding any such casualty, the rights to all insurance proceeds collectively by reason of such loss and not collected prior to closing will at closing be assigned to Buyer, and the Purchase Price will be paid without reduction by reason of such loss. Buyer and Seller will under such circumstances cooperate in settlement of such claims and any proceeds collected prior to closing will, consistent with the circumstances, be applied to any reconstruction or be offset against the portion of the Purchase Price paid at closing. 11.2 Substantial casualty loss. If the amount of any casualty loss is more than Five Hundred Dollars ($500.00), Buyer and Seller will each have the right to terminate this Agreement in the manner specified by this Section 11.2. Such election may be exercised only by the parry so electing to terminate giving written notice of termination to the other party within thirty (30) days after receipt of actual notice of such casualty loss. Such notice of casualty will be effective to commence the running of this termination period only if such notice specifically provides that it is being given pursuant to this Section 11.2. Upon effective exercise of such termination election by either party, this Agreement will terminate, and the Earnest Money will be returned to Buyer. If, in the event of any such casualty, neither party affirmatively exercises Page 13 of 19 the right to terminate provided for by this Section 11.2, such right will lapse, and the provisions of Section 11.1 above will apply. 11.3 Eminent domain. If at any time after the Effective Date, Seller receives any notice of any condemnation proceedings, or other proceedings in the nature of eminent domain, it will promptly send a copy of such notice to Buyer. If all or any part of the Property is taken by condemnation or eminent domain and the value of the portion of the Property so taken exceeds Five Hundred Dollars ($500.00), Buyer may, upon written notice to Seller, elect to terminate this Agreement, and in such event all monies theretofore paid on account must be returned to Buyer, and neither party will have any further liability or obligation under this Agreement. If all or any portion of the Property has been or is hereafter condemned or taken by eminent domain and this Agreement is not canceled, Seller's right, title and interest in and to any awards in condemnation or eminent domain, or damages of any kind, to which Seller may have become entitled or may thereafter be entitled by reason of any exercise of the power of condemnation or eminent domain with respect to the Property or any portion thereof. 12. Possession. Seller shall deliver possession of the Property to Buyer on the Closing Date. 13. Events of Default. 13.1 By Seller. If there is an event of default under this Agreement by Seller (including a breach of any representation, warranty or covenant), Buyer will be entitled (a) in addition to all other remedies available at law or in equity, to seek specific performance of Seller's obligations under this Agreement or (b) to terminate this Agreement by written notice to Seller and Escrow Agent. If Buyer terminates this Agreement, the escrow will be terminated, the entire Deposit must immediately be returned to Buyer, all documents will be immediately returned to the party who deposited them, and neither party will have any further rights or obligations under this Agreement, except as otherwise provided in this Agreement except that Seller shall pay any costs of terminating the escrow and any cancellation fee for the Preliminary Commitment. 13.2 By Buyer. IN THE EVENT BUYER FAILS, WITHOUT LEGAL EXCUSE, TO COMPLETE THE PURCHASE OF THE PROPERTY, THE EARNEST MONEY DEPOSIT MADE BY BUYER WILL BE FORFEITED TO SELLER AS THE SOLE AND EXCLUSIVE REMEDY AVAILABLE TO SELLER FOR SUCH FAILURE. M Seller's Initials Bu nitials 14. Notices. Any notice under this Agreement must be in writing and be personally delivered, delivered by recognized overnight courier service or given by mail or via facsimile. Any notice given by mail must be sent, postage prepaid, by certified or registered mail, return receipt requested. All notices must be addressed to the parties at the following addresses or at such other addresses as the parties may from time to time direct in writing: Seller: City of Port Orchard ATTN: Mayor Robert Putaansuu 216 Prospect Street Page 14 of 19 Port Orchard, WA 98366 with a copy to: Office of the City Attorney Sharon Cates Lighthouse Law Group PLLC 600 Stewart Street, Suite 400 Seattle, WA 98101 Buyer: Waterman Investment Partners, LLC P.O. Box 376 Burley, WA 98322 with a copy to: Ron Templeton Templeton Horton Weibel 3212 NW Byron Street, #104 Silverdale, WA 98383 Any notice will be deemed to have been given, if personally delivered, when delivered, and if delivered by courier service, one business day after deposit with the courier service, and if mailed, two business days after deposit at any post office in the United States of America, and if delivered via facsimile or electronic mail, the same day as verified, provided that any verification that occurs after 5:00 p.m. on a business day, or at any time on a Saturday, Sunday or holiday, will be deemed to have occurred as of 9:00 a.m. on the following business day. 15. Brokers and Finders. Neither party has had any contact or dealings regarding the Property, or any communication in connection with the subject matter of this transaction, through any licensed real estate broker or other person who can claim a right to a commission or finder's fee as a procuring cause of the purchase and sale contemplated by this Agreement. If any broker or finder perfects a claim for a commission or finder's fee based upon any other contract, dealings or communication, the party through whom the broker or finder makes his or her claim will be responsible for that commission or fee and shall indemnify, defend and hold harmless the other party from and against any liability, cost or damages (including attorneys' fees and costs) arising out of that claim. 16. Amendments. This Agreement may be amended or modified only by a written instrument executed by Seller and Buyer. 17. Continuation and Survival of Representations and Warranties. All representations and warranties by the respective parties contained in this Agreement or made in writing pursuant to this Agreement are intended to and will remain true and correct as of the time of Closing, will be deemed to be material and will survive the execution and delivery of this Agreement and the delivery of the Deed and transfer of title for a period of twelve (12) months. Such representations and warranties, however, are not assignable and do not run with the land, except as may be expressly provided herein or contained in a written instrument signed by the party to be charged. Page 15 of 19 18. Governing Law. This Agreement will be governed by and construed in accordance with the laws of the state of Washington. 19. Entire Agreement. This Agreement and the exhibits to it constitute the entire agreement between the parties with respect to the purchase and sale of the Property, and supersede all prior agreements and understandings between the parties relating to the subject matter of this Agreement. 20. Attorney's Fees. If either party fails to perform any of its obligations under this Agreement or if a dispute arises concerning the meaning or interpretation of any provision of this Agreement, the defaulting party or the party not prevailing in the dispute, as the case may be, shall pay any and all costs and expenses incurred by the other party in enforcing or establishing its rights under this Agreement, including, without limitation, court costs and reasonable attorney fees incurred in connection with any federal, state or bankruptcy court proceeding. 21. Time of the Essence. Time is of the essence of this Agreement. 22. Exclusivity. Seller shall not market the Property actively until after the expiration of the Due Diligence Period and then only if Buyer elects not to proceed with the purchase of the Property. 23. Waiver. Neither Seller's nor Buyer's waiver of the breach of any covenant under this Agreement will be construed as a waiver of the breach of any other covenants or as a waiver of a subsequent breach of the same covenant. 24. Nonmerger. The terms and provisions of this Agreement, including, without limitation, all indemnification obligations, will not merge in, but will survive, the closing of the transaction contemplated under this Agreement. 25. Assignment. Buyer shall not assign this Agreement without Seller's prior written consent, which consent may not be unreasonably withheld or delayed. Seller shall consent to an assignment of this Agreement to (i) the parent of Buyer, or to a wholly -owned subsidiary of Buyer or of such parent, or (ii) to any corporation or other entity with which Buyer may be merged or consolidated, provided that the net worth of the resulting corporation is at least equal to the net worth of Buyer as of the Effective Date. 26. Negotiation and Construction. This Agreement and each of its terms and provisions are deemed to have been explicitly negotiated between the parties, and the language in all parts of this Agreement will, in all cases, be construed according to its fair meaning and not strictly for or against either party. 27. Calculation of Time Periods. Unless otherwise specified, in computing any period of time described in this Agreement, the day of the act or event after which the designated period of time begins to run is not to be included and the last day of the period so computed is to be included, unless such last day is a Saturday, Sunday or legal holiday. The final day of any such period will be deemed to end at 5 p.m., Pacific Time. Page 16 of 19 28. Section 1031 Exchange. Each party agrees to cooperate with the other and/or the other's principals in effectuating a like -kind exchange under Section 1031 of the Internal Revenue Code. Each party shall execute such documents as may be necessary or appropriate to assist with a contemporaneous or deferred exchange arrangement requested by the other on the conditions that the non -requesting party will have no liability whatsoever in connection with such exchange, the non -requesting party will not be required to incur any expense in connection therewith and that the requesting party indemnifies and holds the non -requesting party harmless from any such liability or expense, including all of the non -requesting party's costs and attorney fees related thereto. 29. Recitals and exhibits. The Recitals and Exhibits are incorporated into this Agreement by this reference. 30. Counterparts. This agreement may be signed in counterparts, any of which shall be deemed an original. 31. Date. This Agreement is made this I O'h day of July 2018. SELLER: City of Port Orchard, a municipal corporation of the State of Washington )A-11� Robert Putaansuu, Mayor ATTEST/AUTHENTICATE: Bra dy 'neaZr�M�M� son, C City Clerk APPROVED AS TO FORM: S o Cates, City Attorney' BUYER: Waterman Investment Partners, LLC Steve Sego; ole ember Page 17 of 19 STATE OF WASHINGTON ) ss COUNTY OF KITSAP On this , r � day of , 2018, before me, the undersigned, a Notary Public in and for the State of Washington, d ly commissioned and sworn, personally appeared Robert Putaansuu, to me known to be the Mayor of the City of Port Orchard, the Washington municipal corporation that executed the within and foregoing instrument, and acknowledged the said instrument to be the free and voluntary act and deed of said corporation for the uses and purposes therein mentioned, and on oath stated that he is authorized to execute the said instrument. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the day and year first above written. in and for aid -state, residing at 110- Y U ML1 f2 My commission expires: Print Name:. )P n i n , STATE OF WASHINGTON ) ss COUNTY OF !( f - 'k A%ion01 pTAR Y PUBOG ' _: OF'WAS�;� \\�� On this /q*day of ui , 2018, I certify that I know or have satisfactory evidence that Steve Sego is the person who appeared before me, and said person acknowledged that he signed this instrument, on oath stated that he was authorized to execute the instrument on behalf of Waterman Investment Partners, LLC, referenced herein, and acknowledged it to be his free and voluntary act for the uses and purposes mentioned in the instrument. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the day and year first above written. KiMBERLY A HANSEN Not �.�yycPublic for said state, residing NOTARY PUBLIC at f'S eotT rl STATE OF WASHINGTON My commissio�ny xpires: / �,Zr?-� COMMISSION EXPIRES Print Name: Ki4ldOCTOBER 29, 2021 Page 18 of 19 EXHIBIT A Legal Description EXHIBIT B — Property Depiction EXHIBIT LIST Page 19 of 19 Exhibit A RESULTANT PARCEL 1 OF BOUNDARY LINE ADJUSTMENT RECORDED UNDER AUDITOR'S FILE NO. 201510130176, AND AS DEPICTED ON SURVEY RECORDED UNDER AUDITOR'S FILE NO. 201510130175, IN VOLUME 81 OF SURVEYS, PAGE 145, RECORDS OF KITSAP COUNTY, WASHINGTON, DESCRIBED AS FOLLOWS: THE SOUTHEASTERLY HALF OF LOT 6, BLOCK 9, S.M. STEVENS' TOWN PLAT OF SIDNEY, ACCORDING TO PLAT RECORDED IN VOLUME 1 OF PLATS, PAGES 1 AND 2, IN KITSAP COUNTY, WASHINGTON; EXCEPT THE SOUTHWESTERLY 3 FEET THEREOF; ALSO EXCEPT THE NORTHWESTERLY 5 FEET THEREOF; TOGETHER WITH ALL OF LOT 7, BLOCK 9, S.M. STEVENS' TOWN PLAT OF SIDNEY, ACCORDING TO PLAT RECORDED IN VOLUME 1 OF PLATS, PAGES 1 AND 2, IN KITSAP COUNTY, WASHINGTON. i-ool 1-004 0 005-00 05"00 )01.03 Exhibit B 001-00 001-00