Agenda - Council Work Session - 01/21/2014

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B R I G G S AND M O R G A N Kurt Ulrich January 10, 2014 Page 2 If the HRA enters into a listing agreement with CBRE or another broker and the broker is successful in procuring a purchaser who enters into a contract with the HRA prior to June 30, 2014, the HRA would still be required to compensate Landform under the Purchase of Services Agreement, and most likely would be required to compensate the new broker in accordance with the terms of the listing agreement the HRA enters into with the new broker. The HRA also needs to be aware that, like any contract, the Purchase of Services Agreement is deemed, by operation of law, to obligate the parties to the contract to act in good faith. The HRA has been acting in good faith by continuing to market the property since the March 31, 2013 termination date of the Purchase of Services Agreement. The HRA should be aware, however, that if the HRA, either as a result of marketing efforts undertaken by CBRE pursuant to a new listing agreement or otherwise, identifies prospective purchasers for all or portions of the Property and enters into negotiations with those purchasers Landform could, and likely would, assert that the HRA is breaching the implied covenant of good faith if the HRA intentionally manipulates the timing of the HRA's execution of a purchase agreement or other contract with the prospective purchaser so that the execution occurs after the June 30, 2014 expiration date of the compensation carryover period. In other words, if the HRA is going to "step up" its marketing efforts by engaging CBRE to list the property, the HRA needs to be aware that if those marketing efforts are successful in attracting prospective purchasers prior to June 30, 2014 the HRA may not manipulate the timing of its negotiations with those prospective purchasers in an attempt to avoid the obligation to pay incentive compensation to Landform, and if those negotiations produce a signed agreement prior to June 30, 2014, the HRA will likely owe both incentive compensation payments to Landform and a standard commission to CBRE. This is not to suggest that the HRA should discontinue its attempts to market and sell the property until the June 30, 2014 expiration of the compensation carryover. Landform would likely argue that any such discontinuation of marketing activities is also a breach of the implied covenant of good faith. I do not, however, believe that Landform could successfully argue that the HRA has an obligation to "step up" its marketing efforts by engaging a broker to list and actively market the property on behalf of the HRA, so the HRA does need to be aware that by electing to "step up" its marketing efforts it may be creating a situation where the HRA would owe payments both to Landform under the Purchase of Services Agreement and to its newly engaged broker, CBRE. 5914258v1