After Recording Return to:
OFFICIAL RECORDS OF
Paul E. Gilbert, Esq. MARICOPA COUNTY RECORDER
BEUS, GILBERT & MORRILL, P.L.L.C. HELEN PURCELL
1000 Great American Tower
3200 North Central Avenue 97-0616640 09/05/97 04:36
Phoenix, AZ 85012
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DEVELOPMENT AGREEMENT
This Development Agreement ("Agreement") is made as of the 29 day of
August, 1997 by and between the City of Chandler, Arizona, an Arizona municipal
corporation (which together with any successor public body or officer hereafter
designated by or pursuant to law, is hereafter called "City"), and Microchip
Technology Inc., a Delaware corporation (which together with its successors and
assigns, is hereafter called "Developer").
RECITALS:
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A. The parties hereto acknowledge that this Agreement is intended to be
and constitutes a "Development Agreement" as authorized pursuant to Arizona
Revised Statutes, ss. 9-500.05, and that, in accordance therewith, a copy of
this Development Agreement shall be recorded with the Maricopa County Recorder
no later than ten (10) days after entering into this Agreement to give notice to
all persons of its existence and of the parties' intent that the burdens of this
Agreement are binding on, and the benefits of this Agreement shall inure to, the
City and Developer and their respective successors-in-interest and assigns.
B. Developer is the owner of approximately 80 acres of real property
depicted on Exhibit A-1 attached hereto and more particularly described on
Exhibit A-2 attached hereto (the "Property"), including and adjacent to
Developer's corporate headquarters facility at 2355 W. Chandler Boulevard.
C. In furtherance of the City's goal of continued development of the
Property as provided for in the General Plan, Developer intends to further
develop the Property as an electronics manufacturing facility by adding two
additional fabrication buildings, an administrative building, and ancillary
structures and equipment (collectively the "Facility").
D. City desires to obtain those public benefits which will accrue from
the further development of the Property in accordance with City's General Plan,
including, but not limited to creation of jobs, stimulation of economic
development in City, construction of infrastructure improvements within the
public right-of-way adjacent to the Property, and generation of additional tax
revenues to City.
E. Pursuant to Arizona Revised Statutes ss. 9-500.11, City is
authorized and empowered to make economic development expenditures of the type
expressly provided for in this Agreement.
NOW, THEREFORE, in consideration of the mutual agreements set forth
herein, it is understood and agreed by the parties hereto as follows:
1. RECITALS. The recitals set forth above are acknowledged by the
parties to be true and correct and are incorporated herein by this reference.
2. ON-SITE IMPROVEMENTS BY DEVELOPER.
2.1. The Facility. Developer shall construct and equip the
Facility in general conformity with the preliminary site plans previously
submitted to the City and in accordance with final site plans to be approved by
the City in general conformity with the approved preliminary site plans,
including buildings, parking lots, landscaping, signs, and all on-site utilities
including but not limited to the on-site roads built to present city standards
for private roads. Developer shall also construct at its expense water and sewer
mains within the Property boundaries which are necessary to serve the Property,
as approved by the City Engineer. The Facility will include construction of:
"Fab 3," an approximate 115,000 square foot manufacturing facility, containing
approximately 50,000 square feet of clean room, equipment for 8-inch wafer
manufacturing, and ancillary space for manufacturing support systems;
construction of a four story, approximately 200,000 square foot office building;
and, at the sole option of Developer, conversion of one existing building into a
wafer testing facility.
2.2. Fees and Taxes. Developer shall pay all required fees for
plan check, building permit, engineering review, recording, impact/system
development, and all local sales taxes applicable to construction of the on-site
improvements described in Section 2.1.
2.3. Presently Anticipated Timing of Construction. Developer
shall Commence Construction of: (a) the Fab 3 building on or before the later of
June 15, 1999, or the date Developer is granted foreign trade subzone status as
required in section 7 and (b) the office building on or before July 1, 1998, or,
in either case, such later date as business conditions may reasonably require.
Once construction has begun on any such facility, Developer shall use
reasonable, good faith efforts to complete such construction in a continuous
manner. For purposes of this Agreement, "Commence Construction" or "Commencement
of Construction" shall be the date of commencement of work on foundation for the
applicable improvements while securing all permits required under the City's
Construction Code from the City's Building Department, as evidenced by the
City's first inspection and approval for foundation work. Developer presently
intends for construction of Fab 3 to be completed by within twenty-five (25)
months of the date of the Commencement of Construction, but no commitment to
that effect is given.
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2.4. Presently Anticipated Cost and Employment. The Facility
will be constructed at a total cost of approximately $450 million and, at full
capacity, will employ approximately 1,000 workers at an expected average wage of
approximately $49,000 per year.
3. TRAFFIC STUDY. Developer has prepared and submitted to the City a
traffic impact analysis to determine improvements needed to maintain acceptable
levels of service through the year 2010 at level of service "D." City
acknowledges that the traffic study provided by Developer is acceptable to it
and will form the basis for the traffic improvements provided for herein,
subject to the current proposal for construction of only one Fab unit.
4. DEDICATION OF CERTAIN PROPERTY BY DEVELOPER. Developer shall at no
cost to the City cause the following described parcels to be dedicated and
conveyed to the City by assignment, special warranty deed, or other instrument
legally sufficient to convey and dedicate to the City all right, title and
interest of Developer in and to such parcels, free and clear of all liens,
encumbrances, covenants, conditions and restrictions:
4.1. Traffic Right of Way. Right-of-way no more extensive than
necessary to permit the construction of required street and off-site
improvements specified in the traffic impact analysis referred to in Section 3.
4.2. Well and Storage Facilities. If City chooses to drill
wells or locate a storage facility on the Property in order to satisfy its
obligations under Section 6.4, Developer shall dedicate up to five (5) acres of
the Property for water well and/or storage facilities. The exact size, and
location, of such dedication shall be as mutually agreed by City and Developer,
and shall be configured so as to minimize the land requirement to the extent
reasonably possible and to accommodate construction of the Facilities as
planned. Developer shall make the land described herein available to City within
sixty (60) days after the Developer provides City with the notice that it is
proceeding with Fab 3. Developer shall provide up to five (5) acres if City
needs the land for both the well and storage. If City needs the land for a well
only, one (1) acre shall be provided.
5. CITY APPROVAL PROCESSES.
5.1. Scope of Development. Developer's Facility plans set
forth a conceptual land use and density on the Property. Developer and City
shall work together using best efforts throughout the legally required planning
process to obtain expedited approvals.
5.2. Facility Approval. The approval by City of this Agreement
constitutes affirmative representation by City, on which Developer is entitled
to rely, that Developer, notwithstanding subsequent changes of the zoning or
land use controls applicable to the Property after the date of this Agreement,
or after the date of any amendments to this Agreement, or zoning on this
Property are approved, (1) shall be authorized to implement the uses, density
and intensity, set forth for the Facility, and (2) will be accorded through the
legally required planning process the approvals reasonably necessary to permit
Developer to proceed with and implement the proposed improvements, including any
amendments thereto, subject to City's customary
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standards for review and approval of site plans and architectural plans,
including expedited design review pursuant to Sections 5.3 through 5.7.
Developer and City shall work together using best efforts throughout the
planning stages to resolve any City comments regarding the proposed development,
provided, however, that if Developer believes at any stage that it has reached
an impasse regarding any issue with City's staff, such dispute shall be resolved
in accordance with the dispute resolution provisions of Section 5.8.
5.3. Diligence in Review and Process. In connection with the
proposed development and the issuance of building permits, construction
inspections, and the issuance of the Certificates of Occupancy, City agrees to
accelerate all approvals, inspections and permitting processes to the greatest
extent possible. City will not impose any unusual or extraordinary plan or
design review requirements. The fast-tracking and priority scheduling program
will take into account, among other things, the magnitude and scope of the
Facility, mixed use and phasing consideration, construction document review,
permitting, inspection, and City approval matters.
5.4. Appointment of Representative. In order to expedite
decisions by City, City agrees to designate a representative of City to act as a
liaison between City and Developer, and between City's various departments and
Developer. City's representative shall be available at all reasonable times to
serve as such liaison in order to ensure expedited review and approval of all
permits, plans, specifications, plats, and/or any other development submittals,
project drawing revisions, or approvals for the Property and the Facility, it
being the intention of this paragraph to provide Developer with one individual
utilized consistently as City's principal representative. Developer shall also
designate a Developer representative who shall serve as a liaison between the
Developer and City. The initial City representative shall be the Planning &
Development Director and the initial Developer representatives shall be Robert
J. Lloyd, or other persons designated by Developer.
5.5. Expedited Building Permit Process with on-site Inspector.
City will provide at its sole expense an expedited building permit process with
plan review, inspection, and approval conducted at the Property by an on-site
inspector empowered by City to make decisions without further review processes
to meet the need of Developer's expansion. The on-site review process shall be
provided for a maximum of twenty-five (25) months from commencement of
construction on Fab 3. If Developer wishes the building permit process to be
expedited further than it is expedited by one on-site inspector, Developer will
pay the cost of additional on-site personnel.
5.6. Certificates of Occupancy. City agrees that promptly upon
completion of each building of the Facility and at such time as a building is in
compliance with applicable City Codes and ordinances, City will provide
Developer (or the owner of such building) with a Certificate of Occupancy for
such building. Upon substantial compliance with applicable City codes and
ordinances, City will provide Developer with a temporary certificate of
occupancy for the limited purpose of testing equipment within the building. If
City fails or refuses to provide a Certificate of Occupancy for any portion of
the Facility when requested, City shall, within four (4) business days after
written request from Developer, provide Developer a written statement indicating
in adequate detail how they failed to satisfy the conditions for issuance of the
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Certificate of Occupancy and what measures or acts City requires before City
will issue the Certificate of Occupancy. City shall not withhold approval
without good and substantial reason.
5.7. Subdivision Requirements. The parties acknowledge and
agree that in connection with the development of the Property, developer will
need to combine some of the parcels which currently comprise the Property. City
and Developer agree to mutually cooperate with each other to effectuate this
combining of parcels which will most likely result in a two lot subdivision.
City agrees that it will expedite any and all such approvals and further agrees
that it will approve any subdivision request reasonably required in conjunction
with the development of the Property, subject only to the Property as
subdivided, complying with applicable zoning, health and safety ordinances.
5.8. Resolution of Disputes. City and Developer agree
Developer must be able to proceed rapidly with the proposed development.
Accordingly, an expedited City review process is essential. Accordingly, the
parties agree that if at any time Developer believes that an impasse has been
reached with City or an unreasonable delay affecting the proposed development or
issuance of a certificate of occupancy, Developer shall have the right to
immediately appeal to the City representative for an expedited decision pursuant
to this paragraph. If the issue on which an impasse or delay has been reached is
an issue on which a final decision can be reached by City staff, the City
representative shall give Developer a final decision within two (2) business
days after the request for an expedited decision is made. If the issue on which
an impasse or delay has been reached is one where a decision requires City
Council action, the City representative shall be responsible for scheduling a
City Council hearing on the issue which hearing shall be held within two (2)
weeks after the request for an expedited decision is made by Developer. If an
impasse or delay still exists thirty (30) calendar days after Developer's
request for an expedited decision, Developer shall proceed under Article 15 and
may immediately cease all activities in connection with construction of the
Facility. Developer acknowledges City may not be able to comply with this
schedule requiring City Council hearings during the months of December and
August. City will, however, use its best efforts in complying as completely as
possible during these months.
6. CITY PROVISION OF TRANSPORTATION AND TRAFFIC IMPROVEMENTS; WATER,
AND SEWER.
6.1. Transportation Improvements. Upon Developer's giving of
the notice specified in Section 6.6, City shall design and construct four (4)
enumerated street improvement projects identified on Exhibit "B" hereto.
Developer shall be responsible for no more than $238,275 (based on present
estimates) of the cost of constructing these transportation improvements. The
City shall be responsible for all costs of the transportation improvements
beyond $238,275 (based on present estimates). The foregoing figures shall be
adjusted proportionately based on the final construction costs using a ratio of
$238,275 (Developer) to $696,000 total. Such construction shall include at a
minimum the following items: subgrade preparation and pregrading; paving; curb
and gutter on all permanent edges of the streets; driveways; bus bay(s); parkway
grading; adjustment of manholes; adjustment of water valves;
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survey monuments; catch basins; storm sewer laterals; street lights, street
light trenching; and landscaping and irrigation systems.
Concurrently with, or as soon as possible following
Developer's notice under Section 6.6, City shall provide Developer with a
projected time line for solicitation of bids for such improvements, awarding of
contracts and commencement of construction, provided that subject to the City
having received notice 25 months prior to the estimated completion date, such
time line shall in no event extend the estimated completion dates set forth in
Section 2.3, inasmuch as such improvements are necessary for the timely
completion and commencement of operation of Fab 3 and its related improvements
and Developer will be materially adversely affected by any delay in completion
of such improvements. City shall periodically, and in no event less frequently
than every 60 days, provide Developer with a progress report in respect of such
improvements as well as current information concerning the expected costs of
constructing the same.
City shall use its best efforts to obtain Economic
Strength Fund grants from the State of Arizona in the approximate amount of
$696,000 to cover the cost of off-site improvements described in this Article,
and Developer shall cooperate with City is seeking those grants. Developer shall
provide $25,113 toward the match funds required for the Economic Strength Funds
and City shall provide all the balance of required match funds. If such grants
are not received, the City shall still be obligated to construct, subject to
Developer contribution pursuant to paragraph 6.1, the improvements referred to
in this Article 6. If such grants are received, they shall all be used by the
City to construct the transportation improvements described in section 6.1, and
the traffic improvements described in section 6.2. The first $238,279 received
shall be credit against, and shall be deemed to satisfy, Developer's obligation
to bear a portion of the cost of the transportation improvements described in
this section.
6.2. Construction Water Supply. The City shall provide access
to an existing fire hydrant adjacent to the Property along Chandler Boulevard,
Ellis Street or Frye Road on or before the date Developer commences grading and
devegetation activities at the Property, for Fab 3. Developer shall establish a
construction water account with the City Development Services Department,
install the requisite fire hydrant meter, and pay all charges for water used
during construction in accordance with City Code.
6.3. Operations Water Supply. City shall provide Developer
with a one (1) million gallon per day additional groundwater supply of
Acceptable Quality (the "Additional Water Supply") through one well to which the
Facility shall have priority use to the full extent of the Additional Water
Supply, and, when the Additional Water Supply well is temporarily down or
otherwise inoperable, through additional well(s) (the "Backup Water Supply").
Ground water shall be of Acceptable Quality only if the following standards are
met: (1) total organic carbon ("TOC") content shall be less than or equal to
three (3) parts per million; and (2) the ground water shall meet the City's
presently existing primary drinking water standard.
6.4. Additional Water Supply. The Additional Water Supply
shall be made available to Developer prior to its completion of Fab 3. The City
will buy wells from a third
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party or drill on the Property any new wells required to fulfill the City's
obligation under this Section 6.4. If the City chooses to purchase an existing
well from a third party, the City shall construct at its sole expense all lines,
pumps, and other facilities required to deliver the Additional Water Supply to
the Property lines, including but not limited to any water mains or other lines
in the public right of way of groundwater of acceptable quality. In all events,
City shall reserve in its water supply system at all times after commencement of
construction of Fab 3, the amount of capacity required to deliver the Additional
Water Supply described in this Section 6. The Additional Water Supply shall be
at the City's sole expense except: (a) the buy-in fees provided in Section 6.7;
and (b) the payments for water actually delivered as hereinafter provided.
Developer will be responsible for on-site water main construction. Developer
will pay for water delivered by the City to the Property at rates not less
favorable than the rates then being charged by the City to any other industrial
user. No take or pay agreement will be required from Developer. In all events,
City shall reserve in its water supply one and one-half (1-1/2) million gallons
per day of groundwater either through the Additional Water Supply or the Backup
Water Supply hereinafter described.
6.4.1. Backup Water Supply. The City shall make the
Backup Water Supply through ground water of Acceptable Quality available to
Developer prior to its completion of Fab 3. The City's provision of the Backup
Water Supply shall be on the following additional terms and conditions. The City
shall use its best efforts to locate, drill, and equip, an additional backup
dedicated well on the Property, and shall consult fully with Developer on a
regular basis and fully inform Developer on the feasibility of drilling the
Backup well on the Property and any and all other options that are available for
location of the Backup well. Developer shall have the highest priority to use of
the groundwater from said well to the extent necessary for the Backup Water
Supply. If the well is so located on the Property by the City, the Backup Water
Supply shall be at the City's sole expense except: (a) the buy-in fees provided
in section 6.7; and (b) the payments for water actually delivered as hereinafter
provided; and (c) Developer's connection costs.
6.4.2. Off-Property Backup Water Supply. If,
notwithstanding its best efforts under Section 6.4.1, the City is unable to
locate the Backup Water Supply on the Property, then the City shall purchase an
existing well located off the Property from a third party or drill a new well
located off the Property. The City shall consult fully with Developer on a
regular basis and fully inform Developer of all options that are possible for
location of the Backup well off-Property. The City shall use its best efforts to
locate the off-property Backup well so that the actual cost of construction of
transmission lines and delivery facilities to the Property does not exceed
$1,000,000. If, after consultation, City and Developer mutually agree that the
Backup well cannot be located so that the total cost of the transmission lines
and delivery system to the Property does not exceed $1,000,000, then Developer
shall notify the City either: (1) that the Developer will agree to increase the
reimbursement amount provided below to the full amount of the cost of
transmission lines and delivery facilities; or (2) that the Developer will waive
the requirement for a Backup well and will accept for the Backup Water Supply
only, water from the City's public water system which meets the City's present
primary drinking water standard. City agrees to proceed on the basis of
whichever of the two elections Developer makes. Developer shall have the highest
priority to use of the groundwater from said well to
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the extent necessary for the Backup Water Supply. In the case of any such well
located off the Property, the City shall construct at its sole expense all
lines, pumps, and other facilities required to deliver the Backup Water Supply
to the Property line, including but not limited to any water mains or other
lines in the public right of way. If it is necessary for the City to proceed
under this Section 6.4.2, then Developer and City shall work together to arrive
at a mutually agreeable arrangement under which Developer shall reimburse the
City for the actual cost of construction of such transmission lines and delivery
facilities, but not to exceed $1,000,000 (unless pursuant to an election by
Developer as set forth above), either in a lump sum cash reimbursement or a
surcharge on the Developer's price for delivered water over a period of time, as
the parties may determine by mutual agreement.
6.4.3. On-Site Construction. Developer will be
responsible for all on-site water main construction.
6.4.4. Payment. Developer will pay for water delivered
by the City to the Property at rates not less favorable than the rates then
being charged by the City to any other industrial user, except as may otherwise
be agreed pursuant to the last sentence of Section 6.4.2. No take or pay
agreement will be required from Developer.
6.4.5. Total Water Supply 1.5 Million Gallons Per Day.
City acknowledges that Developer plans to continue the operation of its current
original facility for five or more years and that the water requirements set
forth in this paragraph 6 reference an additional water commitment for the
Facility. Therefore, while Developer operates both the existing facility and the
Facility, it will require a total combined water commitment of 1.5 million
gallons per day. City agrees to provide Developer with a total water capacity of
1.5 million gallons per day from groundwater of Acceptable Quality at such time
and while both the current facility and the Facility are operating.
6.5. Sewer. City shall provide Developer with an 800,000
gallons per day additional sewer capacity for Fab 3. City shall reserve in its
sewer disposal system at all times after completion of construction of Fab 3 the
amount of capacity required to deliver the additional sewer capacity described
in the first sentence of this Section 6.5. Trunk line facilities are currently
in place and appear to be adequate, but City shall be obligated to augment such
facilities if they prove to be inadequate, by constructing at its sole expense
all mains, lines, and other facilities necessary to accept or accommodate the
additional 800,000 gallons per day sewer flow or effluent from Fab 3 and related
improvements. No up-front or other additional fees or costs shall be imposed on
Developer with respect to the additional sewer capacity provided for herein
except the buy-in fees set forth in section 6.7. Developer will be responsible
for on-site sewer main construction and connection to the city line. The City
shall be responsible for all costs necessary to bring the sewer line adjacent to
the portion of the Property where the first construction will take place.
Developer shall be responsible for connection to the sewer line in Ellis Street
and for all on-site construction costs. The additional sewer capacity shall be
at the City's sole expense except the payments for normal sewer usage fees as
hereinafter provided. Developer will pay for ongoing sewage service to the
Property at rates not less favorable than
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the rates then being charged by the City to any other industrial user. No take
or pay agreement will be required from Developer.
6.6. Construction Timing. Developer shall give City written
notice at least thirty (30) days before commencement of construction of Fab 3 of
Developer's intention to commence construction and of the Developer's best
estimate of when such construction will be completed. City shall cause all
improvements described in this Article 6 required for Phase One of the Facility
to be constructed at least two months prior to the projected completion of
construction of Fab 3. City shall not commence construction of any of the
improvements described in this Article 6 necessary for Fab 3 until after
Developer has given the notice specified in this section 6.6. Concurrently with,
or as soon as possible following Developer's notice under this Section 6.6, City
shall provide Developer with a projected time line for solicitation of bids for
all improvements required under Sections 6.1, 6.3, 6.4, and 6.5, awarding of
contracts therefor, and commencement of construction, provided that subject to
the City having received notice 25 months prior to the estimated completion
date, such time line shall in no event extend the estimated completion dates set
forth in Section 2.3, inasmuch as such improvements are necessary for the timely
completion and commencement of operation of Fab 3 and its related improvements
and Developer will be materially adversely affected by any delay in completion
of such improvements. City shall periodically, and in no event less frequently
than every 60 days, provide Developer with a progress report in respect of such
improvements as well as current information concerning the expected costs of
constructing the same.
6.7. Buy-in and Development Fees. Developer agrees to pay
water and sewer buy-in fees and development fees for the Facility. Based upon
the preliminary plans submitted to the City, and projected number and size of
meters shown on Exhibit C, it is estimated that these Fab 3 charges will total
$255,146. When the final plans for this project are submitted to the City, these
fees might be adjusted; but they shall not materially exceed the estimate set
forth above unless the project area increases or the number or size of requested
meters change. Developer acknowledges that there is the potential for yearly
increases in fees for all users of an applicable size meter and any such
increase for all users shall not be considered a material increase.
7. FOREIGN TRADE ZONE TAXATION
7.1. Foreign-Trade Subzone Application. The City shall use its
best efforts to cause City of Phoenix to sponsor an application to the
Foreign-Trade Zones Board of the U.S. Commerce Department ("Board") for issuance
of a grant of authority for a special purpose foreign-trade subzone ("Subzone")
to be operated by Developer within the Property pursuant to the following
procedure:
7.1.1. Application. Developer shall prepare a Subzone
application ("Application") at its sole cost and expense.
7.1.2. Subzone Operations Agreement. Prior to
requesting activation of the Subzone, the City of Phoenix and Developer shall
execute a Foreign-Trade Subzone
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Operations Agreement (the "Operations Agreement") permitting Developer to
utilize the Subzone as a foreign-trade subzone, subject to the terms and
conditions of the Operations Agreement, for an initial period equal to the
maximum period allowed by law, thereafter to be automatically extended from year
to year unless terminated by the terms thereof. The Operations Agreement shall
acknowledge the provisions of Section 7.1.3. The Operations Agreement shall
require Developer to remain in compliance with the property tax classification
limitations set forth in Section 7.3. It is specifically understood that in the
event Federal Trade Subzone status is not achieved as provided in Sections 9 and
12.5, Developer shall have an absolute right to unilaterally cancel this
Agreement and in such event there shall be no further obligation or liability to
City under this Agreement other than payment of City's costs as provided in
Section 13.1.
7.1.3. City Standing. Developer acknowledges that
breach of its property tax class limitations set forth in this Article 7 would
be detrimental to the public interest and that Chandler would be a party
"directly affected" (as that term is used in 15 CFR Part 400). Developer will
not object to the City's standing before the Foreign Trade Zones Board or any
other administrative body or court, in the event the City seeks to show that
Developer's use of the subzone is not in the public interest and, as a
consequence thereof, seeks to terminate the grant of the subzone, or otherwise
limit or terminate Developer's use of the subzone.
7.1.4. City Concurrence. The City will execute a letter
of concurrence prior to activation of the Subzone by the U.S. Customs Service
upon receipt of a written request therefor from Developer (which request may
occur before commencement of construction or before completion of construction
of the Facility), and shall use all reasonable efforts to assist in achieving
the Foreign Trade Subzone status and the Operations Agreement with the City of
Phoenix, provided that no Developer Performance Default shall have occurred and
be continuing.
7.2. Tax Classifications. Arizona Revised Statutes ss.
42-162(A)(8)(b) provides that all real and personal property within the
boundaries of a Foreign Trade Zone or subzone shall be classified as Class 8
property for taxation ("Class 8"); provided, however, such classification
applies only to the area that is activated for Foreign Trade Zone use by the
Port Director of the U.S. Customs Service, pursuant to 19 C.F.R. 146.6, A.R.S.
ss. 42-162.01, and the procedures of the Maricopa County Assessor (the
"Assessor") require that the owner notify the Assessor that a reclassification
of property to Class 8 should be made.
7.3. Developer Limitation. Notwithstanding that the entire
Property and Facility shall receive Foreign Trade Zone status, Developer agrees
that only the following portions of the Property and Facility shall receive
Class 8 property tax classification: (a) The Fab 3 Building, all land underlying
that building and the parking and landscaped areas associated with that
building, and all personal property used in connection with that building; and
(b) the presently existing building if and when it is converted into a wafer
testing facility, all land underlying it and the parking and landscaped areas
associated with it, and all personal property used in connection with it.
Exhibit D hereto designates the approximate locations of the Class 8 land and
buildings within the Property.
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7.4. Minimum Property Tax Amounts.
7.4.1. From and after Year 1. Developer has projected
that the value of all real and personal property comprising the Property and the
Facility will be far in excess of normal industrial property. Therefore,
Developer agrees that if in the following years, the total City property taxes
on all real and personal property comprising the Property and the Facility is
less than the minimum amount indicated, Developer will pay the shortfall amount
to the City.
Year Minimum City Property Tax Amount
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Year 1: No guaranteed minimum.
Years 2-6: $225,000
Years 7-8: $200,000
Years 9-11: $150,000
For purposes of this Section 7.4, "Year 1" shall mean the first full calendar
year that Fab 3 is fabricating products. In any year in which there is a fifteen
percent (15%) reduction to Developer's segment of the electronics manufacturing
market, Developer may provide reasonable evidence of such to the City Council
and Developer shall be relieved of the requirements of this section 7.4.
7.4.2. Prior to Year 1. Because activation of the
Foreign Trade Subzone may occur prior to commencement or completion of
construction of the Facility, Developer agrees that if, solely as a result of
activation of the Foreign Trade Subzone, the City property taxes due for any tax
year prior to Year 1 on all real and personal property comprising the Property
and the Facility are less than what the City property taxes on all real and
personal property comprising the Property and the Facility would have been but
for early activation of the Foreign Trade Subzone, Developer shall pay to City
the shortfall amount.
7.5. Foreign Trade Zone Costs. Developer shall pay all costs
charged by the City of Phoenix for the formation and oversight of the special
purpose foreign trade subzone of the Phoenix Foreign-Trade Zone No. 75 discussed
later in the Agreement. Developer's written approval shall be required for City
to enter into an agreement with City of Phoenix regarding any such costs.
8. STATE FUNDING. Developer and City may be eligible for state funding
for various aspects of the Facility and its operations. Developer and City shall
use their best efforts to cooperate in identifying all possible sources of state
funding, including but not limited to training grants and economic strength
grants, and in applying for and obtaining the benefit of such state funding for
the Facility and its operations.
9. CONDITIONS TO DEVELOPER'S OBLIGATIONS. Developer's obligations under
this Agreement are subject to satisfaction of all of the following conditions
precedent:
11
9.1. Zoning. The City represents and warrants that the
Property has been properly classified for I-1 zoning pursuant to the City of
Chandler zoning ordinance. City agrees that no other action is necessary in
order to place the I-1 zoning on the Property. City further agrees that it will
take no action to remove or change the I-1 zoning within five (5) years and that
any action to remove or change the zoning after that period will only be done
for valid, reasonable land use reasons. City further agrees that upon Developer
starting construction of Fab 3, the I-1 zoning on the Property shall be vested.
9.2. Foreign Trade Zone Status. The United States Department
of Commerce shall, no later than December 31, 1999, have issued a grant of
authority for a special purpose foreign-trade subzone ("Subzone") to be operated
by Developer within the Property pursuant to procedure set forth in Section 7.1.
9.3. Approval of Plans and Specifications. The City shall have
given Developer all necessary permits and approvals for the construction of the
Facility.
9.4. Property Tax Classification. Developer shall have
received an unqualified written acknowledgment from the Maricopa County
Assessor's office that all those portions of the Property, the Facility, and all
personal property used on the Property specified in Section 7.3 have been and
will continue to be classified as Class 8 property.
10. CONDITIONS TO CITY'S OBLIGATIONS. City's obligations under this
Agreement are subject to the conditions precedent that the United States
Department of Commerce shall, in a timely fashion, have issued a grant of
authority for a special purpose foreign-trade subzone ("Subzone") to be operated
by Developer within the Site pursuant to procedure set forth in Section 7.1.
11. REPRESENTATIONS
11.1. Developer Representations. Developer represents and
warrants that (a) it is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, (b) its execution,
delivery and performance of this Agreement is duly authorized, (c) that
Developer shall execute all documents and take all action necessary to implement
and enforce this Development Agreement, (d) that the representations made by
Developer in this Development Agreement are truthful to the best of its
knowledge and belief, and (e) Developer shall vigorously defend any action
brought to contest the validity of this Development Agreement and shall not seek
from the City any payments, contributions, costs or attorneys' fees incurred in
such defense.
11.2. City Representations. City represents and warrants (a)
that its execution, delivery and performance of this Development Agreement has
been duly authorized and entered into in compliance with all the ordinances and
codes of City, (b) that subject to a court's equitable powers, this Development
Agreement is enforceable in accordance with its terms, (c) that City shall
execute all documents and take all action necessary to implement and enforce
this Development Agreement, (d) that the representations made by City to
Developer in this
12
Development Agreement are truthful to the best of its knowledge and belief, and
(e) that City shall vigorously defend any action brought to contest the validity
of this Development Agreement and shall not seek from Developer, any
contributions, payments, costs, or attorneys fees incurred in such defense.
12. CANCELLATION OF THE FACILITY.
12.1. For Business Reasons. Developer reserves the right in
its sole discretion to cancel, delay, or abandon construction of all or any part
of the Facility for business reasons as determined by Developer. In the event
Developer exercises its rights under this Section 12.1 to delay construction of
all or part of the Facility, Developer agrees to reimburse City for City Costs
as provided in Article 13.
12.2. Due to Impasse or Delay in Approval Process. Developer
reserves the right in its sole discretion to cancel, delay, or abandon
construction of all or any part of the Facility if an impasse or unacceptable
delay is reached on any matter relating to a City approval under Section 5.8
hereof. In the event Developer exercises its rights under this Section 12.2,
Developer shall reimburse City for City Costs as provided in Article 13.
12.3. Failure to Approve Final Site Development Plans.
Developer reserves the right to cancel, delay, or abandon construction of all or
any part of the Facility if City fails to provide reasonable approval of final
plans and specifications by the dates necessary to permit commencement of
construction at the times specified in Section 2.3, or any action by City which
would otherwise preclude Developer from realizing the land use or intensities
specified for the Facility; provided, however, that nothing herein shall
preclude City from the reasonable exercise of its normal review and approval
processes as agreed to be modified herein; and provided further that City shall
not act in an arbitrary or capricious manner. In the event Developer exercises
its rights under this Section 12.3, Developer shall have no further liability to
City under this Agreement, including but not limited to any obligation to
reimburse City Costs as provided in Article 13.
12.4. For City's Performance Default. Developer reserves the
right to cancel, delay, or abandon construction of all or any part of the
Facility if a City Performance Default (as hereinafter defined) occurs. In the
event Developer exercises its rights under this Section 12.4, Developer shall
have no further liability to City under this Agreement, including but not
limited to any obligation to reimburse City Costs as provided in Article 13.
12.5. For Loss of Class 8 Property Classification. Developer
reserves the right to cancel, delay, or abandon construction of all or any part
of the facility at any time if any court decision determines Class 8 to be
unconstitutional or invalid in any respect, if a legal challenge to Class 8 is
filed and not resolved to Developer's satisfaction, or if any legislative action
repeals or adversely modifies the Class 8 assessment ratio. In the event
Developer exercises its rights under this Section 12.5, Developer shall have no
further liability to City under this Agreement, except its liability for City
Costs under Section 13.1.
13
13. DEVELOPER PAYMENT OF CITY'S COSTS IN CERTAIN EVENTS.
13.1. City Costs. Developer acknowledges that the City will
incur certain costs in discharging its obligations under this Agreement. City
shall provide Developer with a quarterly report of costs City expects to incur
in the next calendar quarter. City agrees to negotiate with Developer in good
faith over the timing and amounts of costs proposed to be incurred by the City
during the next quarter, in light of then existing business conditions. In the
event these negotiations result in actual delays in the City performing its
obligations in this Agreement, City shall be given an additional amount of time
equal to the delay to perform its obligations herein. Developer agrees to refund
the City Costs in the event Developer cancels this Agreement for reasons other
than set forth in Section 12.2, 12.3 or 12.4. The amounts required to be
reimbursed ("City Costs") shall be determined in accordance with the following
rules:
13.1.1. City Costs shall include the actual,
out-of-pocket costs to the City in planning, designing, and constructing the
infrastructure for the Developer's expansion described in this Agreement and
shall include all reasonable out-of-pocket costs of planning and design
professionals, and all reasonable costs of labor and materials actually used in
constructing the infrastructure required under this Agreement.
13.1.2. City Costs shall not include: (a) any costs for
work done or services performed by City employees which were not specifically
hired by the City for work limited to this Facility; or (b) the value of any
time spent by full-time City employees or the cost of their salaries, wages, or
benefits.
13.2. Accounting. On a periodic basis, but no less than once
every month, City shall provide Developer with a written itemization of all
costs incurred from the inception of the Facility to date. In addition, at any
time Developer may request from City a written itemization of such costs, City
shall provide such itemization within six working days. In the event Developer
disagrees with any cost entry or entries on any itemization, it may provide
written objection to City within ten days of receipt, at which time City shall
review and respond to the objection within ten working days. If Developer still
disagrees with the cost entry being charged to it, the party shall first attempt
to resolve the dispute through negotiations up to the level of City Manager and
the Developer's Project Manager as provided in Section 5.8.
13.3. Mitigation. Notwithstanding any obligation of Developer
to reimburse City Costs, any amount owed by Developer for City Costs shall be
reduced or mitigated to the extent City can use such construction either at the
time Developer notifies City of cancellation, delay, or abandonment of all or
any part of the Facility or within seven (7) years after such notice. If City
cannot use such construction within one year, then Developer shall pay City
annually, within sixty (60) days of Developer's receipt of an invoice with
supporting documentation and calculations, an amount equal to the City's average
cost of borrowed funds until such time as City can use such construction, up to
a maximum of seven (7) years. In the event that neither party can use any of the
constructed items, the parties shall use good faith efforts to arrive at an
equitable resolution of the issue.
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14. DEFAULTS AND REMEDIES.
14.1. Events Constituting Developer Default. Developer shall
be deemed to be in default under this Agreement (a "Developer Performance
Default") if (a) Developer commits a material breach of any obligation required
to be performed by Developer herein, and (b) such breach continues for a period
of one hundred twenty (120) days after written notice thereof by City, Developer
fails to commence the cure of such breach and, thereafter, to diligently pursue
the same to completion.
14.2. Remedies to City. In the event of a Developer
Performance Default, which default is not cured within any applicable cure
period, City shall have the right to seek and obtain all legal and equitable
remedies otherwise available to it.
14.3. Events of Default by City. City shall be deemed to be in
default under this Agreement (a "City Performance Default") if (a) City commits
a material breach of any obligation required to be performed by City herein,
including, without limitation, (i) the failure to issue a Certificate of
Occupancy where Developer has complied with its obligations for issuance of such
Certificate; or (ii) the failure to provide other approvals as required herein,
and such breach continues for a period of thirty (30) days after written notice
by Developer.
14.4. Remedies of Developer. In the event City is in default
herein, Developer shall have all legal and equitable remedies available to it.
15. FORCE MAJEURE. In addition to specific provisions of this
Agreement, performance by Developer hereunder shall not be deemed to be a
default where delays or inability to perform are due to war, insurrection,
strikes, lockouts, riots, floods, earthquake, fires, casualties, acts of God,
acts of the public enemy, epidemics, quarantine restriction, freight embargoes,
lack of transportation, governmental restrictions or priority, litigation,
unusually severe weather, inability (when the party which is unable to perform
is substantially without fault) of any contractor, subcontractor or supplier to
perform acts of the other party, or acts or the failure to act, of any utility,
public or governmental agent or entity, litigation relating to the Facility
initiated by a party other than Developer beyond the control or without the
fault of Developer. In the event that Developer is unable to perform due to an
event constituting force majeure as provided for above, and such excused delay
is the proximate cause of City being unable to perform in accordance with the
terms of this Agreement, then the time for performance of City shall be extended
for a period of time equal to the period of the delay. An extension of time for
any such cause shall only be for the period of the enforced delay, which period
shall commence to run from the time City is notified by Developer in writing of
the commencement of the cause. If such force majeure adversely impacts the
economic viability of the Facility (in Developer's sole discretion), Developer
shall have the right, if applicable, to stop or delay construction. In such
event, Developer shall reimburse City for City Costs as provided in Article 13.
15
16. MISCELLANEOUS
16.1. Notices. Unless otherwise specifically provided herein,
all notices, demands or other communication is given hereunder shall be in
writing and shall be deemed to have been duly delivered upon personal delivery
or confirmed facsimile transmission, or as of the second business day after
mailing by United States mail, postage prepaid, by certified mail, returns
receipt requested, addressed as follows:
To Developer: Microchip Technology Inc.
Attn: Steve Sanghi
Robert J. Lloyd
Mary Simmons-Mothershed
2355 W. Chandler Blvd.
Chandler, Arizona 85226
Facsimile No. (602) 917-4163
Copy to:
Paul E. Gilbert, Esq.
BEUS, GILBERT & MORRILL, P.L.L.C.
3200 North Central Avenue
1000 Great American Tower
Phoenix, AZ 85012-2417
Facsimile No. (602) 234-5983
To City: City Manager
City of Chandler
25 S. Arizona Place, #301
Chandler, Arizona 85225
Facsimile No. (602) 786-2209
Copy to:
City Attorney
City of Chandler
25 S. Arizona Place, #304
Chandler, Arizona 85225
Facsimile No. (602) 786-2240
Notice of address may be changed by either party by giving written notice to the
other party as provided herein.
16.2. Amendments. This Agreement may be amended only by a
written agreement fully executed by the parties hereto.
16
16.3. Governing Law. This Agreement shall be governed by and
construed under the laws of the State of Arizona. This Agreement shall be deemed
made and entered into in Maricopa County.
16.4. Waiver. No waiver by either party of a breach of any of
the terms, covenants or conditions of this Agreement shall be construed or held
to be a waiver of any succeeding or preceding breach of the same or any other
term, covenant or condition herein contained.
16.5. Severability. In the event that any phrase, clause,
sentence, paragraph, section, article or other portion of this Agreement shall
become illegal, null or void or against public policy, for any reason, or shall
be held by any court of competent jurisdiction to be illegal, null or void or
against public policy, the remaining portions of this Agreement shall not be
affected thereby and shall remain in force and effect to the fullest extent
permissible by law, provided that the fundamental purposes of this Development
Agreement are not defeated by such severability. For the Developer, the
fundamental purposes of this Development Agreement include, but are not limited
to, obtaining Class 8 property tax treatment as presently in effect, as provided
in Section 7.2 and all provisions of Articles 5, 6, and 7 hereof.
16.6. Exhibits. All exhibits attached hereto are incorporated
herein by reference as though fully set forth herein. The exhibits are as
follows:
Exhibit "A-1" Preliminary Site Plan of the Property
Exhibit "A-2" Legal Description of the Property
Exhibit "B" Street Improvement Projects
Exhibit "C" Projected Number and Size of Water Meters
Exhibit "D" Approximate Locations of Class 8 Land and Buildings
16.7. Entire Agreement. This Agreement and the exhibits hereto
constitute the entire agreement between the parties hereto pertaining to the
subject matter hereof and all prior and contemporaneous agreements,
representations, negotiations and understandings of the parties hereto, oral or
written, are hereby superseded and merged herein.
16.8. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall constitute one and the same instrument.
16.9. Consents and Approvals. City and Developer shall at all
times act reasonably and in good faith with respect to any and all matters which
require either party to review, consent or approve any act or matter hereunder.
16.10. Mutual Benefits. The City and Developer agree that in
making the promises contained in this Development Agreement that certain
benefits and advantages will accrue to both parties as a result of the
performance of this Agreement, and that therefore this Agreement is being
entered into in reliance upon the actual benefits afforded each of the parties.
17
16.11. Conflict of Interest. No member, official or employee
of the City may have any direct or indirect interest in this Development
Agreement, nor participate in any decision relating to the Development Agreement
which is prohibited by law. All parties hereto acknowledged that this Agreement
is subject to cancellation pursuant to the provisions of Arizona Revised Statute
ss. 38-511.
16.12. Warranty Against Payment of Consideration for
Agreement. Developer warrants that it has not paid or given, and will not pay or
give, any third person any money or other consideration for obtaining this
Development Agreement, other than normal costs of conducting business and costs
of professional services such as architects, consultants, engineers and
attorneys.
16.13. Enforcement by Either Party. This Agreement shall be
enforceable by any party hereto notwithstanding any change hereafter in any
applicable General Plan, specific plan, zoning ordinance, subdivision ordinance
or building ordinance adopted by City which substantially changes, alters or
amends the applicability of said plans or ordinances to the development of the
Facility or the Property.
16.14. Cumulative Remedies. Except as otherwise expressly
stated in this Agreement, the rights and remedies of the parties are cumulative,
and the exercise by any party of one or more of such rights or remedies will not
preclude the exercise by it, at the same time or different times, of any other
rights or remedies for the same default or any other default by such defaulting
party. The provision of this Section 16.14 are not intended to modify Article 14
or any other provisions of this Agreement and are not intended to provide
additional remedies not otherwise permitted by law.
16.15. Attorneys' Fees. In any arbitration, quasi judicial or
administrative proceedings or any other action in any court of competent
jurisdiction, brought by either party to enforce any covenant or any of such
party's rights or remedies under this Agreement, including any action for
declaratory or equitable relief, the prevailing party shall be entitled to
reasonable attorneys' fees and all reasonable costs, expenses and disbursements
in connection with such action.
16.16. Successors. This Agreement shall be binding upon, and
shall inure to the benefit of the parties hereto and their successors and
assigns.
16.17. No Third Party Beneficiaries. This Agreement is made
and entered into for the sole protection and benefit of the parties. No person
other than the parties shall have any right of action based upon any provision
of this Agreement.
16.18. Recordation. Simultaneously with the execution of this
Development Agreement, Developer and City will record a copy of this Development
Agreement in the records of the Maricopa County Recorder. Any written amendment
hereto shall be similarly recorded within ten days after execution by the
parties.
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IN WITNESS WHEREOF, City has caused this Agreement to be duly executed
in its name and behalf by its Mayor and its seal to be hereunto duly affixed and
attested by its City Clerk, and Developer has signed and sealed the same, on or
as of the day and year first above written.
CITY OF CHANDLER, ARIZONA, an
Arizona municipal corporation
ATTEST:
By:/s/ Carolyn Dixon 7/2/97 /s/ Jay Tibshraeny
---------------------------- ---------------------------------
CITY CLERK MAYOR
[SEAL]
CITY OF CHANDLER
ARIZONA
CORPORATED
APPROVED AS TO FORM:
/s/ Dennis M. O'Neill
- ------------------------------
CHANDLER CITY ATTORNEY
MICROCHIP TECHNOLOGY INC., a
Delaware corporation
By: /s/ Steve Sanghi
------------------------------
Its: PRESIDENT, CEO and
-----------------------
Chairman of the Board
19
STATE OF ARIZONA )
)
County of Maricopa )
The foregoing Development Agreement was acknowledged before me this 29
day of August, 1997, by Mayor Jay Tibshraeny, May of the City of Chandler,
Arizona, an Arizona municipal corporation, on behalf of the corporation.
My Commission Expires:
Sept. 30, 1998 /s/ Jacquelin A. Rensel
- --------------------- -----------------------------------
Notary Public
OFFICIAL SEAL
JACQUELIN A. RENSEL
Notary Republic - State of Arizona
MARICOPA COUNTY
My Commission Expires Sept. 30, 1998
STATE OF ARIZONA )
)
County of Maricopa )
The foregoing Development Agreement was acknowledged before me this 30
day of September, 1997, by Steve Sanghi, the President & CEO of Microchip
Technology Inc., a Delaware corporation, on behalf of the corporation.
My Commission Expires:
"OFFICIAL SEAL" /s/ Dianne Iverson
Dianne Iverson ----------------------------------
Notary Public - Arizona Notary Public
Maricopa County
My Commission Expires 4/25/98
20
[PRELIMINARY SITE PLAN OF THE PROPERTY]
EXHIBIT A-1
[LOGO] BRADY * AULERICH & ASSOCIATIONS, INC. Dennis H. Brady, P.L.S.
Civil Engineering * Land Surveying C.E. Aulerich, P.L.S.
Construction Staking Robert N. Hermon, P.E./P.L.S.
LEGAL DESCRIPTION: MICROCHIP PROPERTY - 2355 WEST CHANDLER BLVD.
CHANDLER, ARIZONA
The West half of the Northeast quarter of Section 31, Township 1 South, Range 5
East of the Gila and Salt River Base and Meridian, Maricopa County, Arizona;
EXCEPT dedicated public road rights-of-way along the North, South, East and West
sides thereof, as specified in records of Maricopa County, Arizona.
Described property being in and forming a part of the City of Chandler, Maricopa
County, Arizona and comprising an area of 80 acres more or less (inclusive of
said rights-of-way).
/s/ Robert N. Hermon
REGISTERED LAND SURVEYOR
ARIZONA, U.S.A.
CERTIFICATE NO.
16836
ROBERT N. HERMON
Date signed 8/26/97
EXHIBIT A-2
- --------------------------------------------------------------------------------------------------------
MICROCHIP TECHNOLOGY, INC. - CHANDLER FACILITY
Mitigation of Site Development Impacts on Arterial Streets
- --------------------------------------------------------------------------------------------------------
Microchip Microchip
Location Description of Improvements Cost Proportion Share
- --------------------------------------------------------------------------------------------------------
Chandler Boulevard/Ellis Street Install traffic signal $100,000 0.38 $ 37,844
- --------------------------------------------------------------------------------------------------------
Construct right turn $ 42,000 0.58 $ 24,203
Chandler Boulevard/Ellis Street on eastbound approach
- --------------------------------------------------------------------------------------------------------
Provide dual left turn $388,000 0.20 $ 77,665
on eastbound and westbound
Chandler Boulevard/Dobson Road approaches
- --------------------------------------------------------------------------------------------------------
Construct right turn $166,000 0.59 $ 98,563
Dobson Road/Frye Road on southbound approach
- --------------------------------------------------------------------------------------------------------
Totals $696,000 $238.275
- --------------------------------------------------------------------------------------------------------
Exhibit B
EXHIBIT "C"
PROJECTED NUMBER AND SIZE OF WATER METERS
Based on an additional 1,000,000 gallon per day requirement, the
following is needed:
1 -- 6" turbine meter
[APPROXIMATE LOCATIONS OF CLASS 8 LAND AND BUILDINGS]
Exhibit D