3/18/16 - A, 11-1:- AMENDMENT TO . BASKETBALL PLAYING AGREEMENT THIS SECOND AMENDMENT is made this 23rd day of March 2016 between the Minnesota Timberwolves Basketball Limited Partnership, a Minnesota limited partnership (?Taylor Partnership 1n which Taylor Sports Group, Inc. a Minnesota corporation controlled by Glen A. Taylor, is generalp'artner, and the City of Minneapolis, a Minnesota municipal corporation (each a ?Party? and collectively, the ?Parties?). RECITALS A. - City, as assignee of the Minneapolis Community Development Agency, and Taylor Partnership are parties to that certain BaSketball Playing Agreement dated as of MarCh 1, 1995, as supplemented by that certain Supplement No. 1 to Basketball Playing Agreement dated as of June 15, 2000 and that certain Amendment to Basketball Playing Agreement dated as of November 22, 2013 (collectively, the ?Basketball Playing. Agreement?) regarding the arena portion of a multipurpose entertainment and professional sports complex known as the Target Center (the ?Arena?). B. City, Taylor Partnership and AEG Management TWN, LLC or i?Operator?) are Parties to that certain Renovation Agreement dated as of June 15,2015 (the ?Renovation Agreement?) regarding a project for the design, ?nancing and construction of renovations to the Arena (the ?Proj ect?). - C. City, Taylor Partnership and AEG are prepared to execute a ?Go Ahead Letter? under - Section 6. 5(b) of the Renovation Agreement. .To satisfy a condition precedent to the issuance of bonds or commitment of other sources" of funds for the City 5 share of the Project funding, City and Taylor Partnership desire to concurrently amend the Basketball Playing Agreement to re?ect the revisions set forth 1n Section 7. 4(a) of the Renovation Agreement. E. I I Capitalized terms used in this Second Amendment but not otherwise de?ned herein will have the meaning ascribed. to such terms in the Basketbali Playing Agreement. NOW, THEREFORE, the Parties agree as follows: 1. Extended Term. The Basketball Playing Agreement IS amended to extend the term, de?ned 1n Article I of the Basketball Playing Agreement as the ?Term of the Team Use,? to the later Of (1) June 30, 2035; or (ii) the end of the NBA professional basketball season commencing in 2034 and ending in 2035 and also the end of the 2035 Women?s National Basketball Association professional basketball season (including, in 'eachcase, play-off periods in which the Team or Minnesota 1s a participant). All references 1n the Basketball Playing Agreement to the ?Term of the Team Use? will hereafter mean the term as extended by this Second Amendment. Leased Premises. Section 4.01 and Exhibit of the Basketball Playing Agreement are deleted. The intent of this amendment is to remove the administration of?ce space previously assigned to the Team from the Team?s Leased Premises. The space will be renovated?for other uses as part of the Project. The City acknowledges the return of such administrative of?ce space and'accepts the administrative of?ce space in an AS IS condition withOut any representations or warranties by the Taylor Partnership Damages for Breach. Section 7.03 of the Basketball Playing Agreement IS deleted 1n its entirety and replaced with the followings Section 7.03 Remedies of City. The Taylor Partnership acknowledges that the Team, as property, 'is extraordinary and unique and that under the- organization of major league professional basketball by and through the NBA, - City cannot replace the Team, and that the determination of damages caused by a breach of sections 7. 01 and 7 02 and. suffered by the State of Minnesota, the City and the citizenry of the State of Minnesota is uncertain, speculative and not possible of accurate ascertainment. Therefore, the Taylor Partnership acknowledges and agrees that there exists no adequate and complete remedy at lawto enforce the provisions of Sections 7.01 and 7.02, and-the City?s Team purchase Options in Sections 7.04.1, 7.04.3 and 7.04.4 of this Agreement. and that - equitable relief by way of injunction or speci?cperformance is an appropriate remedy for the enforcement of the covenants in Sections 7.01 and 7.02, and the City?s Team purchase options in Sections'7.04.l, 7.04.3 and 7.04.4, . notwithstanding and Without regard to the provisions for liquidated damages - provided elsewhere in_ this Article VII. Further, the Taylor Partnership acknowledges and agrees that, if upon a breach of Sections7.01 and 7.02 of this Agreement, for any reason, equitable relief fashioned to require the Team to play - its Team Games in the Arena is not granted by a court, the payment of liquidated. damages is an appropriate remedy. Therefore, in the event of a breach of the . Taylor Partnership?s covenants in Sections 7.01 and 7.02 and-the failure of any court to grant the equitable relief described herein, the Taylor Partnership shall pay liquidated damages equal to Fifty Million Dollars throughout the remainder of the Term of the Team Use.- I In determining the amount of the liquidated damages provided for in this Section 7.03 and Sections 7. _.04 2 and 7. 04. 3 the parties acknowledge and mutually - represent to the other party that they have exercised great care to make a reasonable forecast of direct and c0nsequential damages allowable by law that may arise from the breach, taking into consideration, loss of Arena revenues and taxes attributable to Team operations, the extraordinary involvement, covenants. and expense of the public in facilitating the retention of the Team to play its Team Games at the Arena, the consequent reduction 1n value of the Arena arising frOm the absence of Team operations, the substantial economic bene?t conferred on the Team by the favorable ?nancial arrangements allowed for its use of the Arena - intended to assure its continued playing of Team Games in the Arena for the full I Term of the Team Use, the detrimental effects of a breach on the downtown . Minneapolis warehouse area, the-loss 0f Obs and public. sector and other revenues as re?ected in the Economic Impact Report, and the City?s substantial additional . investment in renovation of the Arena. Each of the parties also acknowledge and represent to the other party that the structuring of the liquidated damages occasioned by the breach of Taylor Partnership?s obligations in Sections 701 and 7.02, at various periods during the Term of the?Team Use, reasonably and appropriately determines the damages that may be suffered over the remainder of the Term of the Team Use and that the amount of the liquidated damages is a reasonable forecast of just'compensation for harm caused by'the breach. Upon - breach of the covenants in Sections 7.01 or 7.02, and if injunctive relief or speci?c performance as provided in this Section 7.03 is net granted to City, liquidated damages shall be paid by the Taylor Partnership in immediately available funds in a lump sum and not later than ninety'(90) days from the date of the breach of the covenants in Sections 7.01 or 7.02. If not timely paid, interest at the Prime Rate shall accrue and be payable .on the amount of liquidated damages due for the period from the date of the breach until ?illy paid by the Taylor Partnership. Previded, however, if the breach 13 only of clause of Section 7. 01 and the Taylor Partnership causes the Team to continue to play NBA sanctioned Team Games at the Arena as provided in clause of Section 7. 01, or a replacement venue as provided 1n Section 7.02, without interruption, the Taylor Partnership shall and diligently cause the cure of said breach and liquidated damages shall not: then be payable unless the Taylor Partnership fails to play one NBA-sanctioned Team Game at the Arena other than as provided in Section'7.01, or a replacement venue as provided'in Section 7.02. 4. Capital Imp-revements. Article of theBasketball Playing Agreement, entitled - ?Capital Improvements,? is deleted in its entirety and replaced with the following: ARTICLE CAPITAL IMPROVEMENTS EXPENDITURES Section 10.1 City Responsibilities. - In addition to the Proj ect Costs contemplated by the Renovation Agreement, the City agrees to expend not. less than $20 Million to make Capital as de?ned herein, that are necessary to extend the Arena? useful life for it's intended purposes throughout the Term of the Team Use (the ?Capital Improvements Expenditures?). The Parties intend, subject to the annual appropriation of funds through the City budget process, that Capital Itnpr'overnents Expenditures will be made during the Term of the Team Use as follows: . . 5 Million will be available for expenditure during the ?ve year period beginning on January 1,2015 (the ?Start Date?), $7.5 Million Will be available for expenditure tduring the period commencing ?ve (5) years from the Start Date and ending on the 10h anniversary of the Start Date, - - - (10) $7.5 Million will be available for expenditure during the period between the 10 and 15th anniversaries of the Start Date; and The remaining 5 Mill-ion will be available for expenditure during the fmal years of the Term of the Team Use. Notwithstanding the foregoing, the Parties acknowledge that the actual. timing of Capital Itnprovements Expenditures may vary. If any appropriated funds are unspent during any ?ve year period, such funds will carry- over and be available for expenditure 1n any subsequent period. - - Section 10.2 Implementation Process - Permitted Expenditures. During the Term of the Team Use, the - City shall manage, in coordination with the Design Group initially established under the Renovation Agreement and further de?ned below, the Short and long?term capital improvements program for the Arena 1n accordance with the following principles established by the City, Operator and Taylor Partnership: None of the Capital Improvements Expenditures shall be used for any routine maintenance and repairs to the Arena, the cost of which shall remain Operator 8 sole responsibility, as provided for in Section 4. 9 of the Operating Agreement, throughout the term of the Operating Agreement. (ii) $10 million of the Capital Improvements Expenditures will be used to fund the costs of Capital Improvements to major systems, building exterior, roof and other structural components of the Arena (collectively, ?Building Improvements?). I $10 million of the Capital Improvements Expenditures will be used to fund the costs of Capital Improvements of the type identi?ed in "Exhibit A-l, including the cost of other Capital Improvements in the . categories listed in Item 1.0 of Exhibit A?l, which are from time to time recommendedby the Design Group and cannot now be identi?ed but are consistent with'amenities generally available in public facilities at the time such recommendations are made (collectively, ?Multi-Use and Basketball Improvements?). In no event will the Capital ImprOVementS-Expenditures be uSed?for Multi-Use and Basketball Improvements that solely bene?t the Team 3 Leased Premises; provided that it' is understood and agreed that Building Improvements may be made to the Team? Leased Premises, such as HVAC, electrical or plumbing upgrades. - Approval for Multi-Use and Basketball Improvements. Any 5 . proposed Expenditures for Multi-Use and Basketball Improvements shall require a recommendation from the Design Group and such recommendation will be submitted to the City and Operator for approVal, which-approval will not be unreasonably withheld, conditioned or delayed; In? making such decisions, it is reasonable for the City and Operator to consider material net increases in maintenance costs, allocation of responsibility for maintenance, repair, or replacement costs and expected useful life, among other things, in determining whether to approve a . recommended Capital Improvements Expenditures. Approval for Building Improvements. The City may undertake I Capital Improvements Expenditures for Building ImprOvements that the City determines in its sole discretion are necessary or desirable, provided that, without the prior written consent of the Taylor Partnership or Operator, the City will not make Building Improvements which (i)'materially increase the operating eXpen'se of the Arena to the material detriment of the Taylor Partnership or Operator; or (ii) otherwise materially impair the Taylor Partnership?s rights or materially increase the Taylor Partnership?s obligations under the Basketball Playing Agreement or materially impair Operator? 3- rights or materially 1ncrease Operator? obligations under the Operating Agreement, - without offsetting bene?t to the Taylor Partnership or Operator, respectively. Before undertaking a Capital Improvements Expenditure for Building Improvements, the City . ?shall consult with the Design Group concerning the proposed improvements and the need for, purpose, cost, schedule and operating impacts thereof. Notwithstanding the . foregoing, the City may prOceed with any Building Improvements without consultation if such improvements are of an emergency nature or cost in the aggregate less than Three Hundred Fifty Thousand Dollars ($350, 000), which amount will in?ate annually at 2 percent. Citv- Appointed Administrator. The Executive Director of the City?s Convention Center 1s hereby designated as the City?s ?Contract Administrator? and will oversee the process for approving and implementing Capital Improvements Expenditures. The City may frOm time to time Change such designation by advance written notice to the Taylor Partnership. - Performance. The City shall cause work related to the approved Capital Improvements Expenditures to be completed 111 a good workmanlike and prOmpt manner. After Capital Improvements Expenditures of $10 million have been made by the City fer Multi- Use and Basketball Improvements, either the City or the Taylor Partnership may, but neither 1s obligated to, make at its own expense additiOnal Multi- . Use and Basketball Improvements, subject, in the case of the Taylor Partnership, to. obtaining the prior written consent of the City and OperatOr. . section 10.3 Capital Needs Assessment At least once every- ?ve (5) years following the Start Date and up to a maximum of three (3) times, the City?s Contract Administrator, in. Consultation with the Design Group, will cause a quali?ed ?rm or firms to conduct a facility needs assessment for .Arena capital repairs and impr0vements. The Design Group, with respect to Multi-Use and Basketball Improvements, and the City, with reSpect to Building Improvements, will consider the feasibility and desirability of the recommendations set forth In such assessment 1n making its recommendations or decisions for Capital Improvements Expenditures. The cost of, any such facility needs assessment shall be deemed to be a Capital Improvements Expenditure, with 50% of the cost allocated toBuilding Improvements and. 50% of the cost allocated to Multi-Use and Basketball Improvements. Section 10.4 Design Group. The 6-member Design Group established by the City and Taylor Partnership under the Renovation Agreement shall retain the composition provided 1:1-the Renovation Agreement and also function for the purposes set forth in this Article X. One of the members of the Design Group appointed by .the City will be an Operator representative designated by the Operator. Any approval, recommendation or other decision of the Design Group as provided for or otherwise contemplated 1n this Agreement shall mean that such action has received the affirmative VOte of at least 4/6ths of the members of the Design Group. Section 10.5 Liquidated Damages. The City recognizes that the agreement of the City to make the Capital Improvement Expenditures set forth 1n this Article is a material inducement to the Taylor Partnership to proceed with the transactions and agreements contemplated by the RenOvation Agreement and that failure of the City to make .the Capital Improvements Expenditures pursuant to the terms hereof for any reason, including but not limited to the failure of the City to make the necessary annual appropriation of funds through the City budget process to pay for the Capital Improvements Expenditures, will cause irreparable harm to the Taylor Partnership and the damages to the Taylor Partnership will be dif?cult to compute. Accordingly. On the 5th, 10th and 15th anniversary dates of the Start Date (each, a - ?Measurement Date?), .the Parties will determine the cumulative amount of Capital Improvements Expenditures for Multi-Use and Basketball Improvements that have been recommended by the Design Group and approved by Operator and the City consistent I With section 10. 2(b) during such ?ve -year period (the ?Approved Multi-Use and Basketball Improvements Expenditures Amount?); and (ii) the cumulative amount of . funds that have been appropriated by the City Council for such purpose during such ?ve? year period (the ?Aggregate Multi?Use and Basketball Improvements Appropriations Amount?). - If, on any Measurement Date, the Aggregate Multi- Use and - Basketball Appropriations Amount does not equal at least sixty percent of the Approved Multi-Use and Basketball Expenditures Amount, the difference between the Aggregate Multi-Use and Basketball Appropriations Amount and sixty percent of the Approved Multi-Use and Basketball Expenditures Amount will constitute a ?Multi- Use and Basketball Appropriation Shortfall?. The Taylor PartnerShip may declare that a Multi-Use and Basketball ApprOpriation Shortfall exists by written notice to the City (a ?Shortfall Notice?) if there 1s a Multi-Use and Basketball Appropriation Shortfall. The City will have one (1) year after receipt of a Shortfall Notice to cure the shortfall to' which the - Shortfall Notice relates. If the City fails to cure any shortfall within the one -year cure . period, the Taylor Partnership will receive a rent credit against the next amounts payable to the City under this Agreement equal to the aggregate amount of the shortfall(s) that have not been cured that were the subject of the Shortfall Notwithstanding the foregoing, no Multi- Use and Basketball Appropriation Shortfall Will be deemed to exist and the Taylor Partnership will not be entitled to a rent credit if the aggregate amount of - City Capital Impr0vements Expenditures on Multi-Use and Basketball Improvements equal at least 25 million by the ?rst Measurement Date, $5.0 million by the second 'Measurement Date and 75 million by the third Measurement Date In the event that by the end of the Term of the Team Use the City has not made at least $10 million 1n Capital Improvements Expenditures for Multi-Use - and Basketball Improvements, the City will pay the Taylor Partnership a rent rebate 1n the amount 0f such deficiency within fifteen (15) days after the end of the Term of the - Team Use. Any rent credits provided to the Taylor Partnership pilrsuant to subsection above will be credited against any payment that the City 1s required to pay the Taylor Partnership under this subsection In addition, in the event that by the end of the . Term of the Team Use the City has not made at least $10 million 1n Capital Improvements Expenditures for Building Improvements, the City will pay the Taylor Partnership a rent rebate 1n the amOunt of such de?ciency within ?fteen (15) days after the end of the Term of the Team Use. 5. NBA Rules. The Parties acknow1edge and agree that the Taylor Partnership 1s a constituent member of the NBA, and, as Such, is subject to the NBA rules and regulations "which are applicable to all NBA?franchised teams Rules?). Under . NBA Rules, the Basketball Playing Agreement must include the following, which is added as Section 23.16 thereto: -?This Agreement is subject to the Constitution'and By-laws and all rules, regulations and agreements of the NBA as they presently exist. or as they'may, from time to. time, be'entered into, amended or adopted.? The-Taylor Partnership represents that its compliance with the NBA Rules will not impose additional costs onthe City or Operator (other than improvements meltided in the Arena Construction Plansto meet NBA Rules), grant additional termination rights to the Taylor Partnership, interfere with contractual arrangements of the City or . Operator with any third party or other-uses 0f the Arena, or be contrary to law. The Taylor Partnership 1s responsible for seeking the requisite approvals from the NBA with respect to this Second Amendment, and this Second Amendment shall not be effective unless and until such approval 1s obtained. 6. Miscellaneous. Except as speci?cally set forth herein, the Basketball Playing Agreement shall remain in ?ill force and effect, With no other modification or waiver. This Amendment shall be governed by, and construed 1n accordance with the laws. of the State of Minnesota. This Second. Amendment may be executed 1n two or more counterparts, each of Which shall be deemed 'an original, but all of which taken together shall constitute one and the same agreement. (Signature - . IN WITNESS WI-IEREOF, the parties have caused the execution of th1s Second Amendment by their duly authorized of?cers as of the date of th1s Second Amendment. MINNESOTA TIMBERWOLVES BASKETBALL LIMITED PARTNERSHIP By Taylor Sports Group, Inc., General Partner STATE OF MINNESOTA . 'ss. COUNTY OF HENNEPIN . CW1 . The foregoing instrument was acknowledged before me this day of March 2016 by,and - the ,of Taylor Sports Group, Inc. a Minnesota corporation the General Partner of Minnesota Timberwolves Basketball Limited Partnership, a MinneSOta limited partnership, on behalf of the limited partnership. . Notary Public :1 -. NOTARY PUBLIC 11111111550191 My Commission Expires January 31 2020 Signature Page to the Second Amendment to Basketball Playing Agreement, dated as of March 23, 2016. CITY OF Interim Finance Of?cer Enterprise Contract Administrator . City Purchasing Agent . .r . - . 2451s sistant City Attorney- STATE OF MINNESOTA ss. COUNTY OF. HENNEPIN The foregoing instrument was acknowledged before me this {2512 day of March 2016 by Sandra Christensen the Interim Finance Of?cer City-Purchas-i-ng-Agen-t (circle or strike), of the City of Minneapolis a Minnesota municipal corporation, on behalf of the Corporation. Signature Page to the Second Amendment to Basketball Playing Agreement dated as of March 2016 EXHIBIT A?l PERMITTED CAPITAL IMPROVEMENTS _Multi-Use and Basketball Improvements: $10 million 111 Capital Improvements Expenditures shall be for items associated With the categories listed below; 1.. 10. Seating systems?fixed seats; retractable seating platforms; portable Seating platforms and folding chairs?none of Which shall be replaced more than once during the remaining useful life of the Arena.- - Scoreboard?to be replaced not more than once during the remaining useful life of the Arena in additiOn to the Scoreboard included in the Renovation Plan, Fan space renovation/additions. Basketball ?oor. Video Board, Message Board and Advertising Panel/Signage Systems,- CommuniCations system,-including Wi-Fi and cell service Security systemmcameras, access Control and alarm monitoring system including changes required by any governmental authority or the NBA, so long as NBA-required changes uniformly apply to all facilities occupied. by NBA teams. Sound system'?mixing cOnsole and amplifier control systems; power ampli?ers, speakers and rigging; hearing assistance system; intercom system. Broadcast Equipment and Television and Radio Systems, including cameras and cabling. - Other technology and communiCations improvements not yet identi?ed or currently available but, When recommended by the Design Group, are consistent with amenities then generally available 1n public multi-use facilities occupied by NBA teams. -