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FROM :LAWOFFICES FAX NO. :6514290817 Jul. 25 2001 05:15PM P2 EDWARD L. PARDEE, P.A. PARDHELAW@NETSCAPE.NET (651) 429 -2063 FAX 429 -0817 ATTORNEY AT LAW July 25, 2001 Joel Hanson City of Little Canada 515 Little Canada Road Little Canada, MN 55117 RE: DEVELOPMENT AGREEMENT WITH RAH, LLC Dear Mr. Hanson: 4856 BANNING AVENUE WHIM BEAR LAKE, MN 55110 VIA FAx &MAIL (651) 484-4538 After reviewing the terms of the revisions of the Development Agreement with Mr. Biagini, he has come to the conclusion that he does not intend to execute it as revised. I know that we have spent significant time reviewing and revising, but in Mr. Biagini's view, the changes you propose are a deal kilter. First, he does not feel that the City is acting reasonably in providing for a forfeiture of all of the money owed to him relative to Phase I in the event that the building is not completed by December 31 ", but was completed shortly thereafter with no loss to the city. Secondly, he feels that the City is overreaching in requiring an escrow on Phase I which may exceed the annual'TIF and tax responsibility by as much as $20,000.00 per year. As you know, this building is fully leased for ten years and initially this provision was negotiated to protect cash flow, because of lack of a tenant in Phase II. The letter of credit and a strong guaranty now protects Phase II. Mr. Biagini understands that your numbers are based upon a pro - forma, but he feels that the provision digs too deeply into his pockets when weighted against the small risk the City faces. He has brought a very strong partner into the picture and he does have the ability to build the building in a very short time frame, but he feels that the City is now overreaching. Mr. Biagini does not feel that the City has any interest in changing their position with respect to the above noted provisions once this agreement is signed.