FUNDING AGREEMENT

DRAFT

FUNDING AGREEMENT

This Funding Agreement (“Agreement”) is entered into this _______ of ________________, by City of Lawrence, Kansas, a municipal corporation (“City”), and Free State Group, LLC (“Developer”).

RECITALS

WHEREAS, the City is a political subdivision organized and existing under the laws of the State of Kansas, with its principal office located at 6 East 6 Street, Lawrence, Kansas 66044; and

WHEREAS, the Developer is a Kansas limited liability company engaged in the business of development with its principal office located in the City at the address described in Section 8 of this Agreement. The City has been requested by the Developer to create a transportation development district within the City, in accordance with the Transportation Development District Act, K.S.A. 2007 Supp. 12-17,140 et seq. (the “Act”) (the “Request”) and if such Request is approved by the City, the City may be requested to provide such other services and assistance as may be required to implement and administer the Request through its completion; and

WHEREAS, the City does not have a source of funds to finance costs incurred for additional legal, financial and planning consultants or for direct out-of-pocket expenses and other costs resulting from services rendered to the Developer to review, evaluate, process and consider the Request for creation of a transportation development district in accordance with the Act; and

WHEREAS, the parties desire to enter into this Agreement to provide for the funding of consultants used by the City to evaluate the Request.

AGREEMENT

1. Services to be Performed by the City. The City shall:

A. Prepare or consult with the Developer on the preparation of and consider the Request in accordance with the provisions of the Act, give all notices; make all publications and hold hearings as required by the Act;

B. Provide necessary staff, legal, financial, and planning assistance to prepare and present the Request to the City and to prepare and present required ordinances to the City Commission of the City, including the use of outside counsel and consultants;

C. If the City approves the Request, provide the necessary staff and legal, financial and planning assistance to prepare and negotiate a definitive agreement between the Developer and the City for implementation of the Request; and

D. If a redevelopment agreement is entered into between the City and the Developer, provide the necessary staff, legal, financial and planning assistance to administer such agreement.

2. Initial Deposit. The City acknowledges receipt of Ten Thousand Dollars ($10,000.) (the “Deposit”) from the Developer. The City shall disburse the Deposit as set forth in Section 4 and shall bill the Developer pursuant to Section 3 to re-establish the Deposit so that there is always a minimum cash balance of Ten Thousand Dollars ($10,000.00) available, from which additional disbursements may be made as required. Both parties agree to a pre-authorized budget of $25,000 (the "Expense Cap"). If City determines that the City expenses will exceed the Expense Cap, the City will provide the Developer with advance written notice, prior to incurring any expenses in excess of the Expense Cap, and justification for additional expense items and deposits that may be required to obtain the Developer’s approval for said additional expenses. If Developer determines that it is unwilling to fund amounts in excess of the Expense Cap, it will so notify City, and City and Developer will meet and negotiate in good faith to determine if the City's consideration of the Development Proposal can continue without incurring expenses in excess of the Expense Cap. If the City determines that it is not reasonably able to complete review and consideration of the Development Proposal without incurring expenses in excess of the Expense Cap, it will notify Developer, and Developer shall either (a) agree to pay such expenses in excess of the Expense Cap, or (b) notify City of its election not to pay expenses in excess of the Expense Cap, in which case Developer shall have no obligation to pay expenses in excess of the Expense Cap, and City shall have no further obligation to complete the review and consideration of the Development Proposal.

3. Additional Funding.

A. The City shall submit an itemized statement for administrative expenses and actual out of-pocket expenses necessary to perform its obligations hereunder or for any additional obligations or expenditures incurred by the City. Such statements shall be submitted on a regular periodic basis, but no more often than monthly. The Developer shall pay the City the amounts set forth on such statements (the “Additional Funds”) within thirty (30) days of receipt thereof. If such funds are not so received, the unpaid balance shall be subject to a penalty of two percent (2%) per month until paid, but in no event shall such penalty exceed twenty-four percent (24%) per annum, and City shall be relieved of any and all obligations hereunder until paid or may terminate this Agreement pursuant to Section 6.A. Developer shall supply the Additional Funds in a timely manner so that City activities may continue without interruption.

B. The City and the Developer agree that the Developer shall reimburse the City for its administrative expenses and actual out-of-pocket expenses necessary to perform the City’s obligations hereunder using Gilmore & Bell, P.C. for special legal counsel. The City shall advise the Developer in writing if it intends to utilize the services of any other consultant to perform its obligations under the terms of this Agreement. Such written notice shall include the name of the consultant, the service to be performed and an estimate of the cost expected. If the Developer, in writing, within five (5) business days from receipt of the City’s notice objects to either the consultant named or the service to be performed, the City and Developer shall negotiate in good faith to resolve the Developer’s objections. If the City and Developer cannot agree on the consultant to be used or the service to be performed, the City shall have no obligation to perform that service under the terms of this Agreement and the Developer shall have no obligation to pay for such service under the terms of this Agreement.

4. Disbursement of Funds. The City shall disburse the Deposit and Additional Funds for reimbursement of costs to the City on or before the thirtieth (30th) day of each month, and for consulting fees and the payment of all out-of-pocket expenses incurred by the City in connection with the performance of its obligations under this Agreement as payment for such expenses become due. Upon reasonable notice, the City shall make its records available for inspection by Developer with respect to such disbursements.

5. Reimbursement of Funds. Notwithstanding anything in this Agreement to the contrary, City and Developer acknowledge and agree that all funds disbursed to the City in accordance with this Agreement shall constitute reimbursable “costs” as defined in the Act, and shall be eligible for reimbursement from any bonds issued under the Act pursuant to a redevelopment project plan approved by the City in accordance with the Act, regardless of whether the funds were paid or disbursed before the formation of the transportation development district under the Act. If a transportation development district is approved by the City but no bonds are issued under the Act, then the Developer may seek reimbursement of such funds disbursed under this Agreement by utilizing the “direct reimbursement method.”

6. Termination.

A. In the event the Developer fails to perform any of its obligations herein, the City may terminate this Agreement, and any other agreement between the parties, at its sole discretion if the Developer fails to cure the default within ten (10) days after written notice to the Developer of the default, Termination by the City shall also terminate any duties and obligations of the City with respect to this Agreement, including, but not limited to, the City’s processing of Developer’s Request. Upon such termination, the City shall retain the Deposit and Additional Funds, if any, necessary to reimburse the City for all expenses incurred under this Agreement to the date of termination and any monies due and owing to the City pursuant to any other agreement.

B. The parties hereto acknowledge that the Developer may determine to abandon the Request. Upon notice of abandonment by the Developer, this Agreement shall terminate and the City may terminate any other agreement between the parties and shall retain the Deposit and Additional Funds, if any, necessary to reimburse the City for all expenses incurred under this Agreement to the date of termination and any monies due and owing to the City pursuant to any other agreement.

C. In the event the Deposit and Additional Funds are insufficient to reimburse the City for the outstanding expenses of the City payable hereunder, the Developer shall reimburse the City as set forth in Section 3. Any amounts remaining from the Deposit and the Additional Funds after all amounts have either been paid as directed by, or reimbursed to, the City shall be returned to the Developer.

7. Notice Any notice, approval, request or consent required by or asked to be given under this Agreement shall be deemed to be given if in writing and mailed by United States mail, postage prepaid, or delivered by hand, and addressed as follows:

To the City:

City Manager

City of Lawrence, Kansas

6 East 6 Street

Lawrence, Kansas 66044

With a copy to:

Gary A. Anderson

Gilmore & Bell P.C.

2405 Grand Blvd., Suite 1100

Kansas City, Missouri 64108

To the Developer:

Free State Group, LLC

110 McDonald Drive, Suite 192

Lawrence, Kansas 66044

With a copy to:

James W. Grice

Spencer Fane Britt & Browne LLP

100 Walnut Street, Suite 1400

Kansas City, Missouri 64106

Each party may specify that notice be addressed to any other person or address by giving to the other party ten (10) days prior written notice thereof.

The parties hereto have caused this Agreement to be executed by their duly authorized representatives the day and year first above written.

CITY OF LAWRENCE, KANSAS

By:

City Manager

Attest:

By:

City Clerk

Approved as to form:

Director of Legal Services

FREE STATE GROUP, LLC

By:

Name:

Title: