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4.2. SR 04-06-1998'ity of River MEMORANDUM Item #~.2. TO: FROM: DATE: SUBJECT: Mayor & City Council Paul T. Steinman, Director of Economic Development April 6, 1998 Hold a Public Hearing Regarding Establishment of Tax Increment Financing District No. 18 and Adopt Resolution 98- Approving Tax Increment Plan for Tax Increment Financing District No. 18 Issue The issue before the Council at this time is to take the final step to formally adopt and approve the Tax Increment Financing Plan for District No. 18 (Morrell project). This final action consists of holding a public hearing to allow an opportunity for public input and comment, and to consider resolution No. 98- approving the Tax Increment Plan for the District. Background Several discussions and numerous meetings have been held by staff and the EDA to examine the Morrell's request for $300,000 in tax increment assistance which was made in the fall of 1997. As explained in the application, the $300,000 assistance package is to provide a source of funds to complete soil corrections and site work which is necessary to allow for the construction of an approximately 40-45,000 square foot trucking facility. This project would occur off of 171st Avenue and Highway 10 in east Elk River. There have been a number of discussions held regarding this request over the past six months: · Prior to formal apphcation, MorreHs verbally requested 100 percent of the tax increment generated (approximately $680,000), and for 13065 Orono Parkway · P.O. Box 490 · Elk River, MN 55330 · TDD & Phone: (612) 441-7420 · Fax: (612) 441-7425 Final Steps in Process It is important for the Council to be aware of the following issues with regard to this TIF District No. 18: The City Council is only being asked to approve the Tax Increment Plan at this time. Such Plan as attached to this report, details the budget for this TIF District which includes a line item amount for the Morrell request. The TIF Plan DOES NOT lay out the mechanics of providing the assistance or EVEN GUARANTEE THAT SUCH ASSISTANCE WILL BE PROVIDED to the Morrells. This is accomplished within the Development Agreement. The primary purpose of the TIF Plan is to establish the District which will then allow the EDA the "option" of providing tax increment assistance to the business. For the purposes of this public hearing the Council is taking public input and passing a resolution making certain findings of fact that are required by state statute to identify and establish a tax increment district. · The EDA will consider a Development Agreement with the Morrells at either its April or May meeting. This Development Agreement establishes the mechanics of providing assistance to the project. The City Council always has the option of denying approval of the TIF Plan if they are not in agreement with how the tax increment assistance is to be provided. This may not be necessary however, since 4 of 5 Councilmembers are represented on the EDA. In this case the major issue is not so much the amount of assistance, as it is how much is to be provided up front versus over time. The draft Development Agreement between the Morrells and the Economic Development Authority currently has included the details of the final offer which was made and approved by the EDA at one of its past meetings late last year. This "final offer" is for the provision of $300,000 of tax increment assistance, $150,000 of this amount up front and the other $150,000 over time. In addition, the Development Agreement details that the current Morrell site at the corner of Jackson and School Street will be cleared of all buildings (demolished) and prepared for new development by June 2000. These are the two major issues that are laid out within the Development Agreement. · One final significant issue which will be included in the Development Agreement relates to the estimated final market value of the new Morrell project. The Morrell's latest discussion with the building department has been that they are attempting to significantly reduce the cost of construction of the facility. Should this occur, it is appropriate for the level of assistance to be reduced to an amount which is 15 percent of the new estimated final market value. For example, ffthe new estimated final market value is $1.5 million, 15 percent of that amount is equal to $225,000. St~Wis proposing that the mechanics of this adjustment to the TIF subsidy be laid out specifically within the Development Agreement such that at the time the EDA verifies that the final market value has been reduced to less than $2 million, the level of tax increment assistance also be adjusted accordingly. Staff proposes that the same concept would be appropriate of providing half the assistance up front and half over time, whatever the amount of assistance. Recommendation St~ff recommends the Council approve Resolution 98-__ Modifying Municipal Development District No. i and Adopting the Development Program Therefor; and Establishing Within Municipal Development District No. 1, Tax Increment Financing District No. 18 and Adopting the Related Tax Increment Financing Plan Therefor. Attachments · Resolution 98- · Tax Increment Financing Plan for Tax Increment Financing District No. 18 · TIF Application · Draft Development Agreement · Public Hearing Notice RESOLUTION 98 - CITY OF ELK RIVER COUNTY OF SHERBURNE STATE OF MINNESOTA RESOLUTION MODIFYING DEVELOPMENT DISTRICT NO. 1 AND ADOPTING THE DEVELOPMENT PROGRAM THEREFOR; AND ESTABLISHING WITHIN DEVELOPMENT DISTRICT NO. 1, TAX INCREMENT FINANCING DISTRICT NO. 18, AND ADOPTING THE RELATED TAX INCREMENT FINANCING PLAN THEREFOR. BE IT RESOLVED by the City Council (the "Council") of the City of Elk River, Minnesota (the "City") as follows: Section 1. - Recitals. 1.01. The EDA has heretofore established Municipal Development District No. i and adopted the Development Program therefor. It has been proposed that the City modify Development District No. i and adopt the Development Program therefor and establish within Development District No. 1, Tax Increment Financing District No. 18 ("District No. 18"), and adopt the related Tax Increment Financing Plan therefor (collectively, the "Program" and "Plan"); all pursuant to and in conformity with existing law, including Minnesota Statutes, Sections 469.090 through 469.1081 and 469.174 through 469.179, inclusive, as amended, all as reflected in the Program and Plan and presented for the Council's consideration. 1.02. The Council has investigated the facts relating to the Program and Plan. 1.03. The City has performed, or will perform, all actions required by law to be performed prior to the adoption of the Program and Plan by the City, including, but not limited to, notification of Sherburne County and School District No. 728 having taxing jurisdiction over the property included in District No. 18, a request for review of and written comment on the Program and Plan by the City Planning Commission, and a request that the Council schedule a public hearing on the Program and Plan upon published notice as required by law. 1.04 Certain written reports (the "Reports") relating to the Program and Plan and to the activities contemplated therein have heretofore been prepared by staff and submitted to the Council and/or made a part of the City files and proceedings on the Program and Plan. The Reports include data, information and/or substantiation constituting or relating to (1) the "studies and analyses" on why the new District No. 18 meets the so-called '%ut for" test; and (2) the basis for the other findings and determinations made in this resolution. The Council hereby confirms, ratifies, and adopts the Reports, which are hereby incorporated into and made as fully a part of this resolution to the same extent as if set forth in full herein. Section 2. - Findings for the Adoption and Approval of the Program and Plan. 2.01. The Council hereby finds that the Program and Plan, are intended and, in the judgment of this Council, the effect of such actions will be, to provide an impetus for development in the public purpose and accomplish certain objectives as specified in the Program and Plan, which are hereby incorporated herein. Section 3. - Approval and Adoption of the Program and Plan. 3.01. The Council hereby finds that Tax Increment Financing District No. 18 is in the public interest and is an "economic development district" under Minnesota Statutes, Section 469.174, sub d. 12. 3.02. The Council further finds that the proposed development would not occur solely through private investment within the reasonably foreseeable future and that the increased market value on the site that could reasonably be expected to occur without the use of tax increment financing would be less than the increase in the market value estimated to result from the proposed development after subtracting the present value of the projected tax increments for the maximum duration of District No. 18 permitted by the Tax Increment Financing Plan, that the Program and Plan conform to the general plan for the development or redevelopment of the City as a whole; and that the Program and Plan will afford maximum opportunity consistent with the sound needs of the City as a whole, for the development of District No. 18 by private enterprise. 3.03. The City elects to make a qualifying local contribution in accordance with Minnesota Statutes, Section 273.1399, subd. 6(d), in order to qualify District No. 18 for exemption from state aid losses set forth in Section 273.1399 subd. (c). 3.04. The Council further finds, declares, and determines that the City made the above findings stated in this Section and has set forth the reasons and supporting facts for each determination in writing, attached hereto as Exhibit A. Section 4. Approval and Adoption of the Program and Plan 4.01. The Program and Plan, as presented to the Council on this date, including without limitation the findings and statement of objectives contained therein, are hereby approved, ratified, established, and adopted and shall be placed on file in the office of the EDA Executive Director. 4.02. The staffofthe City, the City's advisors and legal counsel are authorized and directed to proceed with the implementation of the Program and Plan and to negotiate, draft, and prepare and present to this Council for its consideration all further plans, resolutions, documents, and contracts necessary for this purpose. 4.03. The Auditor of Sherburne County is requested to certify the original net tax capacity of District No. 18, as described in the Program and Plan, and to certify in each year thereafter the amount by which the original net tax capacity has increased or decreased; and the City of Elk River is authorized and directed to forthwith transmit this request to the County Auditor in such form and content as the Auditor may specify, together with a list of all properties within District No. 18, for which building permits have been issued during the 18 months immediately preceding the adoption of this resolution. The motion for the adoption of the foregoing resolution made by Councilmember and was duly seconded by Councilmember and upon a vote being taken thereon, the following voted in favor thereof: and the following voted against the same: Dated: April 6, 1998 ATTEST: Henry A. Duitsman, Mayor Sandra A. Thackeray, City Clerk EXHIBIT A RESOLUTION NO. 98 - The reasons and facts supporting the findings for the adoption of the Tax Increment Financing Plan for Tax Increment Financing District No. 18 ("District No. 18") as required pursuant to Minnesota Statutes, Section 469.175, Subdivision 3 are as follows: Finding that the District No. 18 is an "economic development district"as defined in Minnesota Statutes, Section 469.174, Subdivision 1~'. District No. 18 consists of two parcels of property. The District is in the public interest because it will discourage business from moving their operations to another state or municipality; it will result in increased employment in the state, and it will result in preservation and enhancement of the tax base of the state. Finding that the proposed development, in the opinion of the Council, would not reasonably be expected to occur solely through private investment within the reasonably foreseeable future and that the increased market value of the site that could reasonably be expected to occur without the use of tax increment financing would be less than the increase in the market value estimated to result from the proposed development after subtracting the present value of the projected tax increments for the maximum duration of the district permitted by the plan. Due to the high cost of site development on the parcel and the cost of financing the proposed improvements, this project is feasible only through assistance, in part, from tax increment financing. A comparative analysis of estimated market values both with and without establishment of Tax Increment Financing District No. 18 and the use of tax increment has been performed as described above. If all development which is proposed to be assisted with tax increment were to occur in District No. 18, the total increased market value would be up to $2,000,250. It is the Council's finding that no development with a market value of greater than $1,282,054 would occur without tax increment assistance in this district within 9 years. This finding is based upon evidence from general past experience with the high cost of site improvements in the area of District No. 18. Finding that the Tax Increment Financing Plan for District No. 18 conforms to the general plan for the development or redevelopment of the municipality as a whole. The site is appropriately zoned. The Tax Increment Financing Plan for District No. 18 has been reviewed by the Planning Commission on February 24, 1998, and been found to conform to the Comprehensive Plan and general development plan of the City. Finding that the Tax Increment Financing Plan for District No. 18 will afford maximum opportunity, consistent with the sound needs of the City as a whole, for the development of Municipal Development District No. 1 by private enterprise. The development to be assisted by District No. 18 will result in increased employment in the City and the State of Minnesota, increased tax base of the State and add a high quality development to the City. APPLICATION FOR TAX INCREMENT FINANCING CITY OF ELK RIVER, MINNESOTA APPLICANT Business Name: YtORRELL T. gAN~FER INC. [ Address:_ --80.9 JACKSON AVE. ELK RIVER. Telephone: 441-2011 441-9151 MORRELL & MORRELL INC._ 55330 # Officers: Larry V. Morrell Arlyce Morrell Contact Person: Title: MGR. Terry Morrell Corporation Business Form (Corporation, Partnership, E~.): Years In Operation: 35 + Years SalesfRevenues: $ 6i5million + Brief Deacription of B. usiness, Principal Products, etc: · l'ranspor ration Has applicant ever fded for bankruptcy? Yes __ If yes, provide details on separate page(s). No X Has applicant ever defaulted on a~y bond or mortgage commitmeht? Yes No If yes, provide details on separate page(s). Does applicant have commitments for conventional financing for the project? Yes .. x No__ Please list three financing references: (Name/Address/Contact/Phone) Bank of Elk River 630 Main St. Elk River, MN. 55330 1ST National Bank 723 Main ST. Elk River, MN. 55330 Twin City Mack 2195 W. County Rd C St Paul, MN. 55164 Name and Address of applicant's legal counsel and accountant: ~ & Ce 6800 France ~3~e $. Minneapo!!~. ~ PROPOSED PROJECT Desc~be Project:. Transportation facility Office, Maintance, Distribution center Location: 171st Ave. Elk River, MN. Site Plan Attached: Yes x No , ~Typ, e of Project: Commercial x New Construction Industrial x Expansion Residential Rehab ,JOB CREATION Current Number of Employees: lO8 Current Payroll: 130,272.23 bi weekly Number of Jobs Created: 157o Number of Jobs Retained: all Revised Payroll: 18% increase PROJECT COSTS Land Acquisition: $ Site Development: $ Construction: $ Machinery & Equipment: $ Architectural and Engineering Fees $, Legal Fees $ Interest During Const. $ Debt Service Reserve $ Contingencies $ TOTAL $. SOURCE OF FINANCING Conventional Loan $ Equity $ SBA Loan $ Revenue Bond $ Tax Increment Financing $ Grant(s) $ Other $ TOTAL $. CONSTRUCTION AND DESIGN Name and address of architect, engineer and contractor for project: C, hristi~n / Kinghorn 21000 ~ogers Dr. Rogers~ MN. 55374 Start of Construction: March '98 Construction Completed:July '98 Finished Market Value of Project: $, 2.5 million STATEMENT OF PUBLIC PURPOSE Describe why the proposed development or redevelopment would not reasonably be expected to occuz solely through private investment within the foreseeable future and therefore the use of Tax Increment Financing is deemed necessary: See attached letter The undersigned, (a) (the) of applicant, hereby represents and warrants to the City that (he) (she) has carefully reviewed this application, and that the statements and information contained herein and s,u, bmitted herewith are accurate and cpgnplete to the best of the undersigned s knowledge and~ / / · , ~ Applicant~---'' By Its The City reserves the right to require additional information and supporting data from the applicant' after the fiHug of this Apphcation. PLEASE ATTACH: 1. Site Plan ~~t with Submittal Requirements of the Building and Zoning 2. Audited Financial Statements or Tax Returns from the Past Two Years. 3. Current Financial Statement 4. 3-Year Pro Forma Analysis 5. Other Information Related to the Project 6. Application Fee s:\finance\taxpolcy CONTRACT FOR PRIVATE DEVELOPMENT By and Between THE ECONOMIC DEVELOPMENT AUTHORITY IN AND FOR THE CITY OF ELK RIVER and Morrell & Morrell, Inc. Dated: This document was drafted by: CITY OF ELK RIVER 13065 Orono Parkway Elk River, MN 55330 Telephone: (612) 441-7420 With final review by: DOHERTY, RUMBLE & BUTLER 3500 Fifth Street towers 150 South Fifth Street Minneapolis, MN 55402-4235 BeckP 548664.1 ARTICLE VI. Taxes; Tax Increment Section 6.1 Section 6.2 Real Property Taxes ....................................... 12 Tax Increment ............................................ 12 ARTICLE VII. Mortgage Financing Section 7.1 Section 7.2 Mortgage Financing ....................................... 13 Limitation Upon Encumbrance of Property ...................... 13 ARTICLE VIH. Prohibitions Against Assignment and Transfer, Indemnification Section 8.1 Prohibition Against Transfer of Property and Assignment of Agreement Section 8.2 Approvals ............................................... 14 Section 8.3 Release and Indemnification Covenants ......................... 14 ARTICLE IX. Events of Default Section 9.1 Section 9.2 Section 9.3 Section 9.4 Events of Default Defined ................................... 15 Authority's Remedies on Default .............................. 15 No Remedy Exclusive ...................................... 16 No Additional Waiver Implied by One Waiver .................... 16 ARTICLE X. Additional Provisions Section 10.1 Section 10.2 Section 10.3 Section 10.4 Section 10.5 Section 10.6 Representatives Not Individually Liable ......................... 16 Equal Employment Opportunity .............................. 16 Restrictions on Use ........................................ 16 Titles of Articles and Sections ................................ 16 Notices and Demands ...................................... 17 Disclaimer of Relationships .................................. 17 BeckP 548664.1 ii Section 10.7 Section 10.8 Section 10.9 Modifications ............................................ 17 Counterparts ............................................. 17 Judicial Interpretation ...................................... 17 Schedule A Schedule B Schedule C Schedule D Description of Development Property Note Job Performance Agreement Description of Uses by Tenant BeckP 548664.1 iii CONTRACT FOR PRIVATE DEVELOPMENT THIS AGREEMENT, made on or as of the __ day of , 1998, by and between the Economic Development Authority in and for the City of Elk River, a public body corporate and politic (hereinafter referred to as the "Authority"), established pursuant to Minnesota Statutes, Sections 469.090 to 469.108, and having its principal office at 13065 Orono Parkway, Elk River, Minnesota 55330 and Morrell & Morrell, Inc. (collectively hereinafter referred to as the "Developer"), having their principal office at 809 Jackson Avenue NW, Elk River, Minnesota 55330. WITNESSETH: WHEREAS, the Authority, vas created and authorized to transact business and exercise its powers by Resolution 87-63 of the City Council of the City of Elk River; and WHEREAS, in furtherance of the objectives of Resolution 87-63, the City has undertaken a program to finance public improvements and facilities necessary for the City to attract commercial and industrial development and increase employment opportunities in the City, and in this connection is engaged in carrying out a development program (hereinafter referred to as the "Project") within Development District No. 1 of the City of Elk River (hereinafter referred to as the "Project Area"); and WHEREAS, as of the date of this Agreement there has been prepared and approved by the Authority and the City Council of the City a development program for the Project (which is hereinafter referred to as the "Development Program"); and WHEREAS, the Authority has created within the Project Area its Economic Development Tax Increment Financing District No. 18 (the "Tax Increment District") pursuant to Minnesota Statutes, Sections 469.174 to 469.179, in order to create a funding source to finance the public development costs of the Project; and WHEREAS, the Developer will relocate its business operations (trucking facility) from its current location (which current location is referred to herein as the "Current Site") to certain real property located within the Project Area (which real property is referred to herein as the "Development Property"); and WHEREAS, there is present on the Current Site certain site conditions that must be remedied prior to the Authority's provision of tax increment to reimburse the Developer for certain costs of preparing the Development Property for development, and prior to the development of the Current Site for other uses; and WHEREAS, the Developer has presented to the Authority a proposal for development of the Development Property through the construction of an at least 45,000 square foot office/warehouse/trucking facility, which proposal involves the Authority's use of tax increment BeckP 548664.1 1 pursuant to this Agreement to reimburse the Developer for certain costs of preparing the Development Property for development; and WHEREAS, the Authority believes that the development of the Development Property pursuant to the Developer's proposal, and the fulfillment generally of this Agreement, are in the vital and best interests of the City and the health, safety, morals, and welfare of its residents, and in accord with the public purposes and provisions of the applicable State and local laws and requirements under which the Project has been undertaken and is, therefor, willing to provide the financial assistance outlined herein. NOW, THEREFORE, ir consideration of the premises and the mutual obligations of the parties hereto, each of them does hereby covenant and agree with the other as follows: ARTICLE I. Definitions Section 1.1 the context: Definitions. In this Agreement, unless a different meaning clearly appears from "Agreement" means this Agreement, as the same may be from time to time modified, amended, or supplemented. "Authority" means the Economic Development Authority In and For the City of Elk River, or any successor or assign. "City" means the City of Elk River. "Construction Plans" means the plans, specifications, drawings and related documents for the construction work to be performed by the Developer on the Development Property which shall be as detailed as the documents to be submitted to the City in connection with conditional use permit approval for the development of the Minimum Improvements. "County" means the County of Sherburne. "Current Site" means the real property containing the location of Redevelopers business operations as of the date of this agreement (809 Jackson Avenue, Elk River, Minnesota 55330) as described in Schedule A of this Agreement. "Developer" means Morrell & Morrell, Inc., or its successors, executors, representatives or assigns, or any future owners of the Development Property. "Development Program" means the City's Development Program for the Project, as amended as of the date of this Agreement. BeckP 548664.1 2 "Development Property" means the real property described in Schedule A of this Agreement on which Developer will construct the Minimum Improvements. "Event of Default" means an action by the Developer listed in Article IX of this Agreement. "Holder" means the owner of a Mortgage. "Job Performance Agreement" means the agreement in the form of Schedule C attached hereto to be entered into between the Authority and the Developer pursuant to Section 4.1 (b) of this Agreement. "Maturity Date" means the date on which the Authority's payment obligations under the Note terminate. "Minimum Improvements" means the construction by Developer of an office, warehouse, trucking facility of at least 45,000 square feet in size, in accordance with the Construction Plans. "Mortgage" means any mortgage obtained by the Developer which is secured, in whole or in part, by the Development Property and which is a permitted encumbrance pursuant to the provisions of Article VIII of this Agreement. "Net Proceeds" means any proceeds paid by an insurer to the Developer under a policy or policies of insurance required to be provided and maintained by the Developer pursuant to Article V of this Agreement and remaining after deducting all expenses (including fees and disbursements of counsel) incurred in the collection of such proceeds. "Note" means the Authority's limited revenue tax increment note to be issued by the Authority to the Developer pursuant to Article III of this Agreement to reimburse the Developer for its payment of Public Development Costs. "Project" means the activities of the Authority and the Developer within the Project Area within Development District No. 1. "Project Area" means the real property located within the boundaries of Development District No. 1. "Public Development Costs" means the costs to be paid by the Authority, through the issuance of the Note, pursuant to Article III of this Agreement. "State" means the State of Minnesota. "Tax Increment" means that portion of the real property taxes paid with respect to the Development Property and Minimum Improvements which is remitted to the Authority as tax increment pursuant to the Tax Increment Act. Bec'kP548664.1 3 "Tax Increment Act" means Minnesota Statutes, Section 469.174-469.179, as the same may be amended from time to time. "Tax Increment District" means the Authority's Tax Increment District No. __ Project. within the "Tax Official" means any City or county assessor, County auditor, City, County or State board of equalization, the commissioner of revenue of the State, or any State or federal district court, the tax court of the State, or the State Supreme Court. "Unavoidable Delays" means delays which are the result of acts of God, adverse weather conditions, strikes, other labor troubles, delays in obtaining construction materials, machinery and/or equipment, fire or other casualty to the Minimum Improvements, litigation commenced by third parties which, by injunction or other similar judicial action, results in delays, or acts of any federal, state or local governmental unit (other than the Authority in enforcing its rights under this Agreement) which result in delays. Delays in obtaining financing and delays caused by general market conditions shall not constitute Unavoidable Delays. Upon the occurrence of an Unavoidable Delay, the party seeking to be excused as a result thereof shall be excused for the period of the delay if such party gives the other party written notice of the cause of the delay or interruption within thirty (30) days after its occurrence. ARTICLE II. Representations Section 2.1 Representations by the Authority. The Authority makes the following representations as the basis for the undertaking on its part herein contained: (a) The Authority is an economic development authority organized and existing under the Laws of Minnesota. Under the laws of the State, the Authority has the power to enter into this Agreement and to perform its obligations hereunder. (b) The Project is a "Development District" and was created, adopted and approved in accordance with the laws of the State. (c) The Development Property is in a "tax increment financing district", which was created, adopted, certified and approved pursuant to the Tax Increment Act. (d) The Authority will, at no cost to the Authority, cooperate with the Developer with respect to any litigation commenced with respect to the Development Program, Project, or Minimum Improvements. (e) The Authority has received no notice or communication from any local, state or federal official that the activities of the Developer or the Authority in the Project Area may be or will BeckP 548664.1 4 be in violation of any environmental law or regulation or any other local, state or federal laws or regulations. The Authority is aware of no facts the existence of which would cause it to be in violation of any local, state or federal environmental law, regulation or review procedure. Section 2.2 Representations by the Developer. The Developer represents that: (a) The Developer consists of Morrell & Morrell, Inc., which has the legal capacity to enter into this Agreement and perform the obligations set forth herein. (b) The Developer will construct the Minimum Improvements in accordance with the terms of this Agreement and all local, state and federal laws and regulations (including, but not limited to, environmental, zoning, building code and public health laws and regulations), except for variances necessary to construct the improvements contemplated in the Construction Plans approved by the Authority. (c) The Developer his received no notice or communication from any local, state or federal official that the activities of the Developer or the Authority in the Project Area may be or will be in violation of any environmental law or regulation. The Developer, to the best of its knowledge, is aware of no facts the existence of which would cause it to be in violation of any local, state or federal environmental law, regulation or review procedure. (d) The Developer will, at no cost to Developer, cooperate with the Authority with respect to any litigation commenced with respect to the Development Program, Project, or Minimum Improvements. (e) Whenever any Event of Default occurs and the Authority shall employ attorneys or incur other expenses for the collection of payments due or to become due or for the enforcement of performance or observance of any obligation or agreement on the part of the Developer under this Agreement and the Authority prevails in such action or effort, the Developer agrees that it shall, within thirty (30) days of written demand by the Authority, pay to the Authority the reasonable fees of such attorneys and such other expenses so incurred by the Authority. ARTICLE III. Status of Property; Public Development Costs Section 3.1 Status of Property. The Development Property is owned by Larry and Arlyce Morrell and Morrell & Morrell, Inc., respectively. The Developer and Authority have entered into this agreement in order to encourage the timely improvement of the marketability of the Current Site, and to assist the Developer's development of the Development Property, by issuing the Note to the Developer, and by reimbursing the Developer for certain costs of preparing the Development Property for development of the Minimum Improvements, all as is more specifically provided in this Agreement. BeckP 548664.1 5 Section 3.2 Public Development Costs. The Authority agrees that it will, through the issuance and payment of the Note, reimburse the Developer for the costs of soil correction and site preparation and other building costs related to the soil conditions on site improvements on the Development Property (the "Public Development Costs"), incurred by the Development Property for development of the Minimum Improvements. The Authority agrees it will reimburse the Developer for its payment of the Public Development Costs in the principal amount of up to $300,000.00, pursuant to the terms of the Note, which shall be in the form attached hereto as Schedule B. (a) The Developer shall be solely responsible for all construction included in the Public Development Costs, and for the initial payment of the cost thereof. The Authority agrees that it will issue the Note at such time as the Developer presents to the Authority evidence in such form as the Authority may reasonably require, demonstrating that the construction portions of the Public Development Costs have been completed, that the Developer has paid the costs thereof, and that the total costs paid by the Developer toward the Public Redevelopment Costs equals or exceeds $300,000.00. If the total amount of the Public Development Costs is less than $300,000.00, the principal amount of the Note shall be adjusted accordingly. The Authority shall have no obligation to increase its assistance, it being agreed that the maximum amount that the Authority is obligated to provide, through the issuance of the Note, is $300,000.00. Section 3.3 Issuance of Note. The Authority's reimbursement of the Developer for its payment of the Public Development Costs shall be through the issuance of the Note, which shall occur at the time stated in Section 3.2 of this Agreement. The Note shall be in the form of the Note attached to this Agreement as Schedule B, with all blanks properly filled in and with the payment schedule attached thereto adjusted to take into account the actual date of issuance. The Note shall be dated as of Section 3.4 Conditions Precedent to Issuance of Note. The Authority's obligation to issue the Note shall be subject to satisfaction of all of the following conditions precedent: (a) No Event of Default shall have occurred and be continuing under this Agreement; (b) The Developer shall have obtained all governmental approvals that must be obtained in order to permit the construction and operation of the Minimum Improvements; (c) The Developer shall have closed on financing sufficient for construction of the Minimum Improvements; (d) The Developer shall have provided to the Authority evidence that it has paid the Public Redevelopment Costs as described in Section 3.2 of this Agreement; (e) The Developer shall provide to the Authority evidence that it has complied with Minnesota Statutes, Section 469.176 Subdivision 4c(a), as defined below: Subd 4c. Economic development districts. (a) Revenue derived from tax increment from an economic develoi~ment district may not be used to larovide imIarovement& BeckP 548664.1 6 loans, subsidies, grants, interest rate subsidies, or assistance in any form to developments consisting of buildings and ancillary facilities, if more than 15 percent of the buildings and facilities (determined on the basis of square footage) are used for a purpose other than: The manufacturing or production of tangible personal property, including processing resulting in the change in condition of the property; warehousing, storage, and distribution of tangible personal property, excluding retail sales; research and development related to the activities listed in clause (1) or (2); telemarketing if that activity is the exclusive use of the property; tourism facilities; or space necessary.for and related to the activities listed m clause (1) to (5). In the event that all of the above conditions precedent have not been satisfied, or waived in writing by the Authority, by December 31, 1998, either party hereto may terminate this Agreement upon the giving of 10 days written notice to the other party of its intention to do. Upon such termination, neither the Authority nor the Developer shall have any obligation or liability to the other hereunder; provided, that the Authority and the Developer shall execute a recordable instrument canceling this Agreement. Section 3.5 Conditions Precedent to Reimbursement Under the Note. The Authority's obligation to reimburse the Developer under the Note for its payment of the Public Development Costs described in Section 3.2 shall be subject to satisfaction of all of the following conditions precedent: (a) (b) (c) (d) Issue Complete demolition and removal of existing buildings on Current Site Discontinuation of all activities associated with trucking on the Current Site Discontinuation of all secondary business uses on the Current Site, i.e. wood sales, recycling activities, etc. Minnesota Pollution Control Agency to issue a letter of compliance indicating their satisfaction as to the environmental state of the Current Site Date of Completion of Activity BeckP 548664.1 7 (e) Trucking related uses, or other uses which do not conform to existing zoning guidelines are to be completely and fully removed from the Current Site (f) (g) (h) Storage of trucks, trailers, containers, or any other trucking related storage is to be completely eliminated from occurring on the Current Site Minimum Improvements are to be completed in accordance with the construction plans as submitted and approved by the city Development Property will be inspected annually prior to a Scheduled Payment being made under the Note, to assure Development Property is in a condition acceptable to current zoning and landscaping standards and that construction of the Minimum Improvements have been maintained in a manner acceptable to City Engineer and Building Official In the event that all of the above conditions precedent have not been satisfied by the Date of Completion of Activity, either party hereto may terminate this Agreement upon the giving of 10 days written notice to the other party of its intention to do so. Upon such termination, neither the Authority nor the Developer shall have any obligation or liability to the other hereunder; provided, that the Authority and the Developer shall execute a recordable instrument canceling this Agreement. ARTICLE IV. Construction of Minimum Improvements Section 4.1 Construction and Operation of Minimum Improvements. (a) The Developer agrees that it will construct the Minimum Improvements on the Development Property in accordance with the approved Construction Plans, together with any changes approved by the Authority and any changes not requiring the Authority's approval, and at all times prior to the Maturity Date will operate and maintain, preserve and keep the Minimum Improvements or cause the Minimum Improvements to be maintained, preserved and kept with the appurtenances and every part and parcel thereof, in good repair and condition. BeckP 548664.1 8 (b) At the time of execution of this Agreement, the Developer and the Authority have entered into a Job Performance Agreement, as required pursuant to Minnesota Statutes, section 116J.991, the terms of which are incorporated herein and made a part hereof by reference. Section 4.2 Construction Plans. (a) The Developer has obtained approval relative to the development of the Minimum Improvements. Within ninety (90) days from the date hereof, the Developer shall submit to the Authority Construction Plans for the Minimum Improvements. The Construction Plans shall provide for the construction of the Minimum Improvements, and shall be in conformity with the Development Program, this Agreement, and all applicable state and local laws and regulations. (b) If the Developer desires to make any material change in any Construction Plans after their approval, the Developer shall submit the proposed change to Authority for its approval. If the Construction Plans, as modified by the proposed change, conform to the requirements of this Section 4.2 of this Agreement with respect to previously approved Construction Plans, the City and Authority shall approve the proposed change and notify the Developer in writing of its approval. Any requested change in the Construction Plans shall, in any event, be deemed approved unless rejected, in whole or in part, by written notice by the Authority to the Developer, setting forth in detail the reasons therefor. Such rejection shall be made within ten (10) days after receipt of the notice of such change. (c) Nothing in this Agreement shall be deemed to modify the City's normal construction permitting process as it applies to the Developer's plans for development, and the Developer shall in all respects be required to comply with such process. Section 4.3 Commencement and Completion of Construction Subject to Unavoidable Delays, Developer shall commence construction of the Minimum Improvements within sixty (60) days after approval of a building permit by the City. Subject to Unavoidable Delays, Developer shall complete the construction of the Minimum Improvements within five (5) months after commencement of construction. All work with respect to the Minimum Improvements to be constructed or provided by the Developer on the Development Property shall be in conformity with the Construction Plans, together with any changes approved by the Authority and any changes not requiring the Authority's approval, as submitted by the Developer and approved by the Authority. The Developer agrees for itself, its successors and assigns, and every successor in interest to the Development Property, or any part thereof, that the Developer, and its successors and assigns, shall promptly begin and diligently prosecute to completion the development of the Development Property through the construction of the Minimum Improvements thereon, and that such construction shall in any event be commenced and completed within the period specified in this Section 4.3 of this Agreement, subject to Unavoidable Delays and/or mutual agreement of the parties hereto. Until construction of the Minimum Improvements has been completed, the Developer shall make construction progress reports, at such times as may reasonably be requested by the Authority, but not more than once a month, as to the actual progress of the Developer with respect to such construction. Upon substantial completion of the Minimum Improvements and upon request by the Developer, the BeckP 548664.1 9 Authority shall provide to the Developer a certificate in recordable form stating that the obligations of the Developer with respect to the construction of the Minimum Improvements under this Agreement have been satisfied. The Minimum Improvements shall be deemed to be completed when a certificate of occupancy has been issued by that City for the Minimum Improvements and the Developer has provided security or other assurances reasonably satisfactory to the Authority assuring that any remaining items, including, without limitation, landscaping, will be completed. ARTICLE V. Insurance and Condemnation Section 5.1 Insurance. (a) The Developer will provide and maintain at all times during the process of constructing the Minimum Improvements and, from time to time at the request of the Authority, furnish the Authority with proof of payment of premiums on: (i) Builder's risk insurance, written on the so-called "Builder's Risk -- Completed Value Basis," in an amount equal to one hundred percent (100%) of the insurable value of the Minimum Improvements at the date of completion, and with coverage available in nonreporting form on the so called "all risk" form of policy. The interest of the Authority shall be protected in accordance with a clause in form and content satisfactory to the Authority; (ii) Comprehensive general liability insurance (including operations, contingent liability, operations of subcontractors, completed operations, Broadening Endorsement including contractual liability insurance) together with an Owner's Contractor's Policy with limits against bodily injury and property damage of not less than $1,000,000.00 for each occurrence (to accomplish the above-required limits, an umbrella excess liability policy may be used); and (iii) Worker's compensation insurance, with statutory coverage and employer's liability protection. The policies of insurance required pursuant to clauses (i) and (ii) above shall be in form and content reasonably satisfactory to the Authority and shall be placed with financially sound and reputable insurers licensed to transact business in the State, the liability insurer to be rated A or better in Best's. Insurance Guide. The policy of insurance delivered pursuant to clause (i) above shall contain an agreement of the insurer to give not less than thirty (30) days' advance written notice to the Authority in the event of cancellation of such policy or change affecting the coverage thereunder. (b) Upon completion of construction of the Minimum Improvements and prior to the Maturity Date, the Developer shall maintain, or cause to be maintained, at its cost and expense, and BeckP 548664.1 1 0 from time to time at the request of the Authority shall furnish proof of the payment of premiums on, insurance as follows: (i) Insurance against loss and/or damage to the Minimum Improvements under a policy or policies covering such risks as are ordinarily insured against by similar businesses, including (without limiting the generality of the foregoing) fire, extended coverage, all risk vandalism and malicious mischief, boiler explosion, water damage, demolition cost, debris removal, and collapse in an amount not less than the full insurable replacement value of the Minimum Improvements, but any such policy may have a deductible amount of not more than $25,000.00. No policy of insurance shall be so written that the proceeds thereof will produce less than the minimum coverage required by the preceding sentence, by reason of co- insurance provisions or otherwise, without the prior consent thereto in writing by the Authority. The term "full insurable replacement value" shall mean the actual replacement cost of the Minimum Improvements (excluding foundation and excavation costs and costs of underground flues, pipes, drains and other uninsurable items) and equipment, and shall be determined from time to time at the request of the Authority, but not more frequently than once every three years, by an insurance consultant or insurer, selected and paid for by the Developer and approved by the Authority. (ii) Comprehensive general public liability insurance, including personal injury liability (with employee exclusion deleted), and automobile insurance, including owned, non- owned and hired automobiles, against liability for injuries to persons and/or property, in the minimum amount for each occurrence and for each year of $1,000,000.00. (iii) Such other insurance, including worker's compensation insurance respecting all employees of the Developer, in such amount as is customarily carried by like organizations engaged in like activities of comparable size and liability exposure; provided that the Developer may be self-insured with respect to all or any part of its liability for worker's compensation. (c) All insurance required in Article V of this Agreement shall be taken out and maintained in responsible insurance companies selected by the Developer which are authorized under the laws of the State to assume the risks covered thereby. (d) The Developer agrees to notify the Authority immediately in the case of damage exceeding $25,000 in amount to, or destruction of, the Minimum Improvements or any portion thereof resulting from fire or other casualty. In the event of any such damage, the Developer will forthwith repair, reconstruct and restore the Minimum Improvements to substantially the same or an improved condition or value as existed prior to the event causing such damage and, to the extent necessary to accomplish such repair, reconstruction and restoration, the Developer will apply the Net Proceeds of any insurance relating to such damage received by the Developer to the payment or reimbursement of the costs thereof. The Developer shall complete the repair, reconstruction and restoration of the Minimum Improvements, whether or not the Net Proceeds of insurance received by the Developer for such BeckP 548664.1 11 purposes are sufficient to pay for the same. Any Net Proceeds remaining after completion of such repairs, construction and restoration shall be remitted to the Developer. In the event of substantial or total destruction of the Minimum Improvements, the Developer may elect to not repair or reconstruct the Minimum Improvements, in which case the Authority may, as its sole remedy, terminate its obligations under the Note. (e) The Authority agrees that its rights under this Section relative to the application of Net Proceeds of insurance provided under Section 5.1(a)(i) and (b)(i), and as provided in Section 5.1 (d),m shall be subordinate to the rights of a Holder of a Mortgage approved by the Authority; provided that the Authority's right to terminate the Note for a violation of the Developer's obligations under this Section shall not be subordinated to the rights of a Holder. Section 5.2 Condemnation. In the event that title to and possession of the Minimum Improvements or any material part thereof shall be taken in condemnation or by the exercise of the power of eminent domain by any governmental body or other person (except the Authority) prior to the Maturity Date, the Developer shall, with reasonable promptness after such taking, notify the Authority as to the nature and extent of such taking. Upon receipt of any Condemnation Award, the Developer shall elect to either: (a) use the entire Condemnation Award to reconstruct the Minimum Improvements (or, in the event only a part of Minimum Improvements have been taken, then to reconstruct such part) within the Project Area; or (b) retain the Condemnation Award in the event that a substantial portion of the Redevelopment Property and Minimum Improvements have been taken. In that event, the Authority's obligations under this Agreement and the Note shall terminate as of the date of the taking. ARTICLE VI. Taxes; Tax Increment Section 6.1 Real Property Taxes. The Developer shall pay or cause to be paid when due and prior to the imposition of penalty, all real property taxes and installments of special assessments payable with respect to the Development Property. Section 6.2 Tax Increment. Subject to the limitations contained in the Note, the Authority hereby pledges to the payment of the Note a portion of the Tax Increment generated from the Development Property and the completed Minimum Improvements. The Developer acknowledges that the Authority has made no warranties or representations to the Developer as to the amounts of Tax Increment that will be generated, or that the "Available Tax Increment" as defined in the Note will be sufficient to pay the Note in whole or in part. Nor is the Authority warranting that it will have throughout the term of this Agreement and the Note the continuing legal ability under State law to apply Tax Increment to the payment of the Note, which continued legal ability is a condition precedent to the Authority's obligations under the Note. To the extent that in any year or years the Authority receives Tax Increment in excess of the amounts necessary to pay amounts due under the Note, the Authority shall be free to use such excess Tax Increment for any purpose for which such BeckP 548664.1 12 Tax Increment may used under the Tax Increment Act. Likewise, amounts deducted from Tax Increment in determining "Available Tax Increment" under the Note shall be the Authority's property, and the Authority shall be free to use such funds for any purpose it determines. ARTICLE VH. Mort~aee Financin~ Section 7.1 Mortgage Financing. Before the Developer commences construction of the Minimum Improvements, the Developer shall submit to the Authority evidence of a commitment for financing sufficient for construction of the Minimum Improvements. If the Authority finds that the financing is sufficiently committed, adequate in an amount to provide for the construction of the Minimum Improvements, and subject only to such conditions as the Authority approves, then the Authority shall notify the Developer in writing of its approval. Such approval shall not be unreasonably withheld, and either approval or rejection shall be given within ten (10) days from the date when the Authority is provided the evidence of financing, or the financing shall be deemed approved. If the Authority rejects the evidence of financing as inadequate, it shall do so in writing specifying the basis for the rejection. In any event the Developer shall submit adequate evidence of financing within thirty (30) days after such rejection. Section 7.2 Limitation Upon Encumbrance of Property. Prior to the completion of the Minimum Improvements, as certified by the Authority, neither the Developer nor any successor in interest to the Development Property, or any part thereof, shall engage in any financing or any other transaction creating any mortgage or other encumbrance or lien upon the Development Property, whether by express agreement or operation of law, or suffer any encumbrances or lien to be made on or attach to the Development Property, except: (a) for the purposes of obtaining funds only to the extent necessary for constructing the Minimum Improvements (including, but not limited to, land and building acquisition, including the purchase price paid, labor and materials, professional fees, real estate taxes, construction interest, organizational and other indirect costs of development, costs of constructing the Minimum Improvements, and an allowance for contingencies); and (b) only upon the prior written approval of the Authority, which approval shall not be unreasonably withheld or delayed. For the purposes of such mortgage financing as may be made pursuant to the Agreement, the Development Property may, at the option of the Developer (or successor in interest), be divided into several parts or parcels, provided that such subdivision, in the reasonable opinion of the Authority, is not inconsistent with the purposes of this Agreement and is approved in writing by the Authority. ARTICLE VIII. Prohibitions Against Assignment and Transfer, Indemnification Section 8.1 Prohibition Against Transfer of Property and Assignment of Agreement. The Developer represents and agrees that, prior to the Maturity Date: Bec'kP548664.1 13 Except by way of security for the purpose of obtaining financing necessary to enable the Developer, or any successor in interest to the Development Property or any part thereof, to perform its obligations with respect to making the Minimum Improvements under the Agreement, and any other purpose authorized by the Agreement, the Developer (except as so authorized) has not made or created, and will not make or create, or suffer to be made or created, any total or partial sale, assignment, conveyance, or lease, or any trust or power, or transfer in any other mode or form of or with respect to this Agreement or the Development Property, or any part thereof or any interest herein or therein, or any contract or agreement to do any of the same, without the prior written approval of the Authority, which approval shall not be unreasonably withheld or delayed. The Developer shall, however, be entitled to transfer the Development Property and assign its rights and obligations under this Agreement to a third party or entity affiliated with the Developer if such third party or entity assumes the obligations of the Developer and the Job Performance Agreement under transfer documents reasonably acceptable to the Authority and if the proposed use of the Development Property and employment levels to be maintained are substantially similar to those contemplated with respect to the Developer's use of the Development Property. For purposes of this Agreement, a party or entity shall be deemed affiliated with the Developer if such party or entity is owned or controlled by the Developer. In no event shall a transfer occur that results in the Note being owned by an entity different than the owner of the Development Property and Minimum Improvements, without the Authority's prior written approval. Without limiting the Authority's right to disapprove a transfer of the Note, no transfer shall be permitted unless the Developer provides to the Authority evidence, satisfactory to the Authority, that all security registration laws have been complied with in connection with such transfer. No such transfer, or approval by the Authority thereof, shall be deemed to relieve the Developer, or any other party bound in any way by this Agreement or otherwise with respect to the construction of the Minimum Improvements, from any of its obligations with respect thereto, nor shall Developer or any other party bound by this Agreement be released from any obligations hereunder without the written release by the Authority. Notwithstanding the foregoing, the Authority's participation in the Developer's development hereunder is predicated upon the new employment that the development will make possible, and its understanding that the Minimum Improvements will be occupied for a term of not less than the term of the Note, for use as an office, warehouse, trucking facility, as set forth on Schedule D to this Agreement. Section 8.2 Approvals. Any approval required to be given by the Authority under this Article VIII of this Agreement may be denied only in the event that the Authority reasonably determines that the ability of the Developer to perform its obligations under this Agreement will be materially impaired by the action for which approval is sought. Section 8.3 Release and Indemnification Covenants. (a) The Developer releases from and covenants and agrees that the Authority and the governing body members, officers, agents, servants and employees thereof shall not be liable for, and agrees to indemnify and hold harmless the Authority and the governing body members, officers, BeckP 548664.1 1 4 agents, servants and employees thereof, against any loss or damage to property or any injury to or death of any person occurring at or about or resulting from any defect in the Minimum Improvements, other than caused by the willful misconduct or negligence of the Authority or its governing body members, officers, agents, servants and employees. (b) Except for any willful misrepresentation, any willful or wanton misconduct, or any negligent actions of the following named parties, the Developer agrees to protect and defend the Authority and the governing body members, officers, agents, servants and employees thereof, now or forever, and further agrees to hold the aforesaid harmless from any claim, demand, suit, action or other proceeding whatsoever by any person or entity whatsoever arising or purportedly arising from this Agreement, or the transactions contemplated hereby, or the acquisition, construction, installation, ownership, and operation of the Minimum Improvements. (c) The Authority, and the governing body members, officers, agents, servants and employees thereof, shall not be liable for any damage or injury to the persons or property of the company, or its officers, agents, servants or employees, or any other person who may be about the Development Property or Minimum Improvements due to any act of negligence of any person other than the Authority or its governing body members, officers, agents, servants and employees. (d) All covenants, stipulations, promises, agreements and obligations of the Authority contained herein shall be deemed to be the covenants, stipulations, promises, agreements and obligations of the Authority, and not of any governing body member, officer, agent, servant or employee of the Authority in the individual capacity thereof. ARTICLE IX. Events of Default Section 9.1 Events of Default Defined. The term "Event of Default" shall mean, whenever it is used in this Agreement (unless the context otherwise provides), subject to Unavoidable Delays, any failure by Developer to substantially observe or perform any covenant, condition, obligation or agreement on its part to be observed or performed hereunder or under the Job Performance Agreement. Section 9.2 Authority's Remedies on Default. Whenever any Event of Default by Developer referred to in Section 9.1 of this Agreement occurs, the Authority may suspend its performance under the Agreement and the Note until it receives assurances from the Developer, deemed reasonably adequate by the Authority, that the Developer will cure its default and continue its performance under the Agreement and the Job Performance Agreement, and may take any one or more of the following actions after providing thirty (30) days written notice to the Developer of the Event of Default, but only if the Event of Default has not been cured within said thirty (30) days: (a) Terminate the Agreement and/or the Note. BeckP 548664.1 1 5 (b) Take whatever action, including legal, equitable or administrative action, which may appear necessary or desirable to the Authority to collect any payments due under this Agreement or the Job Performance Agreement, or to enforce performance and observance of any obligation, agreement, or covenant of the Developer under this Agreement or the Job Performance Agreement. Section 9.3 No Remedy Exclusive. No remedy herein conferred upon or reserved to the Authority or Developer is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Agreement or now or hereafter existing at law or in equity or by statute. No delay or omission to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver thereof, but any such right and power may be exercised from time to time and as of'ten as may be deemed expedient. In order to entitle the Authority or the Developer to exercise any remedy reserved to it, it shall not be necessary to give notice, other than such notice as may be required in this Article IX. Section 9.4 No Additional Waiver Implied by One Waiver. In the event any agreement contained in this Agreement should be breached by either party and thereafter waived by the other party, such waiver shall be limited to the particular breach so waived and shall not be deemed to waive any other concurrent, previous or subsequent breach hereunder. ARTICLE X. Additional Provisions Section 10.1 Representatives Not Individually Liable. No member, official, or employee of the Authority shall be personally liable to the Developer, or any successor in interest, in the event of any default or breach, or for any amount which may become due to the Developer or successor on account of any obligations under the terms of the Agreement. Section 10.2 Equal Employment Opportunity. The Developer, for itself and its successors and assigns, agrees that during the construction of the Minimum Improvements provided for in the Agreement it will comply with all applicable federal, state and local equal employment and non- discrimination laws and regulations. Section 10.3 Restrictions on Use. The Developer agrees, for itself and its successors and assigns, and every successor in interest to the Development Property or any part thereof, that the Developer, and such successors and assigns, shall, until the Maturity Date, devote the Development Property to, and only to and in accordance with, the uses specified in the Development Program and this Agreement. Section 10.4 Titles of Articles and Sections. Any titles of the several parts, Articles, and Sections of the Agreement are inserted for convenience of reference only and shall be disregarded in construing or interpreting any of its provisions. BeckP 548664.1 1 6 Section 10.5 Notices and Demands. Except as otherwise expressly provided in this Agreement, a notice, demand, or other communication under the Agreement by either party to the other shall be sufficiently given or delivered if it is dispatched by registered or certified mail, postage prepaid, return receipt requested, or delivered personally; and (a) in the case of the Developer, is addressed to or delivered personally to the Developer at Morrell & Morrell, Inc., 809 Jackson Ave. N.W., Elk River, Minnesota 55330; and (b) in the case of the Authority, is addressed to or delivered personally to the Authority at 13065 Orono Parkway, Elk River, Minnesota 55330, or at such other address with respect to either such party as that party may, from time to time, designate in writing and forward to the other as provided in this Section. Section 10.6 Disclaimer of Relationships. The Developer acknowledges that nothing contained in this Agreement nor any act by the Authority or the Developer shall be deemed or construed by the Developer or by any third person to create any relationship of third-party beneficiary, principal and agent, limited or general partner, or joint venture between the Authority and the Developer or any third party. Section 10.7 Modifications. This Agreement may be modified solely through written amendments hereto executed by the Developer and the Authority. Section 10.8 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall constitute one and the same instrument. Section 10.9 Judicial Interpretation. Should any provision of this Agreement require judicial interpretation, the court interpreting or construing the same shall not apply a presumption that the terms hereof shall be more strictly construed against one party by reason of the rule of construction that a document is to be construed more strictly against the party who itself or through its agent or attorney prepared the same, it being agreed that the agents and attorneys of both parties have participated in the preparation hereof. BeckP 548664.1 1 7 IN WITNESS WHEREOF, the Authority has caused this Agreement to be duly executed in its name and behalf, and the developer has caused this Agreement to be duly executed in its name and behalf, on or as of the date first above written. ECONOMIC DEVELOPMENT AUTHORITY IN AND FOR THE CITY OF ELK RIVER By:¸ Henry A. Duitsman, President By: Patrick Dwyer, Vice President DEVELOPER MORRELL & MORRELL, INC. By: Its: By: Its: BeckP 548664.1 1 8 STATE OF MINNESOTA ) ) COUNTY OF SHERBURNE ) SS. The foregoing instrument was acknowledged before me this __ day of , 1998, by and the and of the Economic Development Authority In and For the City of Elk River, a public body politic and corporate under the laws of the state of Minnesota. Notary Public STATE OF MINNESOTA ) ) COUNTY OF ) SS. The foregoing instrument was acknowledged before me this 1998, by and __ day of Notary Public BeckP 548664.1 1 9 SCHEDULE A Description of Development Property and Current Site Development Property Current Site BeckP 548664.1 ' A- 1 SCHEDULEB $160,000 UNITED STATES OF AMERICA STATE OF MINNESOTA COUNTY OF SHERBURNE ECONOMIC DEVELOPMENT AUTHORITY IN AND FOR THE CITY OF ELK RIVER LIMITED REVENUE TAX INCREMENT NOTE The Economic Development Authority In and For the City of Elk River, Minnesota (the"Authority"), hereby acknowledges itself to be indebted and, for value received, promises to pay to the order of Morrell & Morrell, Inc., or their permitted assigns (collectively, the "Owner"), solely from the source, to the extent and in the manner hereinafter provided, the principal amount of this Note, being Three Hundred Thousand Dollars ($300,000) (the "Principal Amount"), on the dates (the "Scheduled Payment Dates") and in the amounts (the "Scheduled Payment") set forth as "Developer Payment" on the payment schedule attached hereto as Exhibit B. Each payment on this Note is payable in any coin or currency of the United States of America which on the date of such payment is legal tender for public and private debts and shall be made by check or draft made payable to the Owner and mailed to the Owner at its postal address within the United States which shall be designated from time to time by the Owner. The Note is a special and limited obligation and not a general obligation of the Authority, which has been issued by the Authority pursuant to and in full conformity with the Constitution and laws of the State of Minnesota, including Minnesota Statutes, Section 469.178, subdivision 4, to aid in financing a "project", as therein defined, of the Authority consisting generally of defraying certain public development costs incurred and to be incurred by the Authority within and for the benefit of its Development District No. 1 (the "Project"). THIS NOTE IS NOT A DEBT OF THE CITY OF ELK RIVER OR THE STATE OF MINNESOTA (THE "STATE"), AND NEITHER THE CITY, THE STATE NOR ANY POLITICAL SUBDMSION THEREOF SHALL BE LIABLE ON THE NOTE, NOR SHALL THIS NOTE BE PAYABLE OUT OF ANY FUNDS OR PROPERTIES OTHER THAN AVAILABLE TAX INCREMENT, AS DEFINED BELOW. The Scheduled Payment of this Note due on any Scheduled Payment Date is payable solely from and only to the extent that the Authority shall have received in the calendar year preceding such Scheduled Payment Date "Available Tax Increment". For purposes of this Note, Available Tax Increment with respect to any Scheduled Payment Date is defined as the Tax Increment, as defined in that certain Contract for Private Development between the Authority and the Owner dated as of ., (the "Contract"), generated in the six (6) month period immediately preceding the Scheduled Payment with respect to that certain real property described on the attached Exhibit A (hereinafter referred to as the "Development Property"), after deducting ten percent (10%) of the Tax Increment generated in each year, and after further deducting from the remainder the amount BeckP 548664.1 B-2 shown for such year as "City Payment" on the payment schedule attached hereto. The Authority shall not be in default under this Note for failure to make a Scheduled Payment using Available Tax Increment, and no interest shall accrue with respect to a Scheduled Payment not made; provided, that the Authority shall endeavor to make Scheduled Payments when due. The Authority shall pay to the Owner on each Scheduled Payment Date the lesser of (i) the Available Tax Increment received by the Authority in the six (6) month period preceding such Scheduled Payment Date; or (ii) the amount of the Scheduled Payment due on the Scheduled Payment Date. To the extent that on any Scheduled Payment Date under this Note, the Authority has not received sufficient Available Tax Increment to make the full Scheduled Payment, the Authority shall make so much of the Scheduled Payment as it is able using Available Tax Increment, the remainder of the Scheduled Payment shall be added to the next years Scheduled Payment, and for purposes of calculating the remaining amounts due under this Note, the total of all Scheduled Payments made under this Note shall never exceed the Principal Amount. The Authority's obligations herein are subject to the terms and conditions of the Contract and specifically to Section 3.4. & 3.5. of the Contract. Subject to Section 9.2 of the Contract, the Authority's payment obligations hereunder shall be suspended and this Note may be terminated by the Authority upon the occurrence of an Event of Default as provided in Section 9.1 of the Contract, which Contract is incorporated herein and made a part hereof by reference. Upon such termination, the Authority's obligations to make further payments hereunder shall be discharged. Such termination may be accomplished by the Authority's giving of written notice to the then registered owner of this Note, as shown on the books of the Authority. This Note shall not be payable from or constitute a charge upon any funds of the Authority, and the Authority shall not be subject to any liability hereon or be deemed to have obligated itself to pay hereon from any funds except Available Tax Increment, and then only to the extent and in the manner herein specified. The Owner shall never have or be deemed to have the right to compel any exercise of any taxing power of the Authority or of any other public body, and neither the Authority nor any director, commissioner, council member, board member, officer, employee or agent of the Authority, nor any person executing or registering this Note shall be liable personally hereon by reason of the issuance or registration hereof or otherwise. This Note shall not be transferable or assignable, in whole or in part, by the Owner without the prior written consent of the Authority. This Note is issued pursuant to Resolution of the Authority and is entitled to the benefits thereof, which resolution is incorporated herein by reference. IT IS HEREBY CERTIFIED AND RECITED that all acts, conditions, and things required by the Constitution and laws of the State of Minnesota to be done, to have happened, and to be performed precedent to and in the issuance of this Note have been done, have happened, and have been performed in regular and due form, time, and manner as required by law; and that this Note, BeckP 548664.1 B-3 together with all other indebtedness of the Authority outstanding on the date hereof and on the date of its actual issuance and delivery, does not cause the indebtedness of the Authority to exceed any constitutional or statutory limitation thereon. 1N WITNESS WHEREOF, the Economic Development Authority In and For the City of Elk River, by its Commissioners, has caused this Note to be executed by the manual signatures of the President and the Vice President of the Authority and has caused this Note to be dated ., 1998. Henry A. Duitsman, President Patrick Dwyer, Vice President BeckP 548664.1 B-4 EXHIBIT A TO NOTE Description of Development Property BeckP 548664.1 B-5 EXHIBIT B TO NOTE Payment Schedule BeckP 548664.1 B-6 SCHEDULE C ,lOB PERFORMANCE AGREEMENT By and Between THE ECONOMIC DEVELOPMENT AUTHORITY IN AND FOR THE CITY OF ELK RIVER and MORRELL & MORRELL, INC. Dated: This document was drafted by: CITY OF ELK RIVER 13065 Orono Parkway Elk River, MN 55330 Telephone: (612) 441-7420 With final review by: DOHERTY, RUMBLE & BUTLER 3500 Fifth Street Towers 150 South Fifth Street Minneapolis, MN 55402-4235 BeckP 548664.1 C- 1 JOB PERFORMANCE AGREEMENT THIS AGREEMENT, made on or as of the __ day of ,199__, by and between the Economic Development Authority In and For the City of Elk River, a public body corporate and politic (hereinafter referred to as the "Authority"), established pursuant to Minnesota Statutes, Sections 469.090 to 469.108, and having its principal office at 13065 Orono Parkway, Elk River, Minnesota 55330, and Morrell & Morrell, Inc., (hereinafter collectively referred to as the "Developer"), having its principal office at 809 Jackson Ave. N.W., Elk River, Minnesota 55330. WITNESSETH: WHEREAS, the Developer and the Authority have entered into a Contract for Private Redevelopment dated as of ., 199___, (the "Contract") pursuant to which the Developer has agreed to construct an office/warehouse/trucking facility of at least 45,000 square feet within the City of Elk River, Minnesota; and WHEREAS, in order to induce the Developer to undertake such development, the Authority has agreed in the Contract to provide certain financial assistance to the Developer through its payment of certain costs of site development and preparation of the property on which the development will occur; and WFIEREAS, Minnesota Statutes, section 116J.991, provides that a government agency that provides financial assistance for economic development job growth purposes must establish job and wage goals to be met by the businesses receiving the assistance; and WHEREAS, the Authority and the Developer agreed in the Contract that they would enter into a Job Performance Agreement to document their understandings as to the job and wage goals to be met by the Developer with respect to its development; and WHEREAS, the Authority, and the Developer desire that this Agreement serve as the agreement referenced in the Contract. NOW, THEREFORE, in consideration of the premises and the mutual obligations of the parties hereto, each of them does hereby covenant and agree with the other as follows: ARTICLE I Definitions Section 1.1. Definitions. In this Agreement, unless a different meaning clearly appears from the context: "Act" means Minnesota Statutes, Sections 116J.991. BeckP 548664.1 C-2 "Agreement" means this Agreement, as the same may be from time to time modified, amended, or supplemented, "Authority" means the Economic Development Authority In and For the City of Elk River, or any successor or assign. "City" means the City of Elk River. "Contract" means the Contract for Private Development between the Authority and the Developer dated as of "Developer" means, collectively, Morrell & Morrell, Inc., or its successors, representatives, executors or assigns, or any future owners of the Development Property. "Development Property" means the real property described as such in the Contract "Improvements" means the construction by the Developer of an office/warehouse/trucking facility of at least 45,000 square feet, pursuant to the Contract. "Permanent Full-Time Employment Position" means the employment of a person who is eligible to receive any health, pension or other benefits provided according to the personnel or employment policies of the his/her employer, or through a collective bargaining agreement with the Developer or its tenants, and whose wages as the term is defined are based upon the employee working approximately thirty (30) hours a week. "State" means the State of Minnesota. ARTICLE 11 Job and Wage Goals Section 2.1. Employment Requirements. The Developer agrees that it will employ at least persons in Permanent Full-Time Employment Positions in the Improvements, and that it will cause to be created by itself or its tenants with respect to the Development Property and the Improvements at least Permanent Full-Time Employment Positions. Such new positions shall be created, through the actual employment of individuals, no later than two (2) years after the substantial completion of the Improvements pursuant to the terms of the Contract. Section 2.2. Wage Requirements. The new Permanent Full-Time Employment Positions required to be created pursuant to Section 2.1 shall be paid an average wage of no less than $ per hour. BeckP548664.1 C-3 Section 2.3. Monitoring. The Developer agrees that it will provide, upon request by the Authority, documentation reasonably required by the Authority to document Developer's compliance with the provisions of this Agreement. Section 2.4. Continuing Obligation. The Developer's obligations under this Agreement shall be continuing, and the Developer shall cause the employment and wage levels to be maintained for a period of at least one (1) year from the date that the Developer is first obligated to achieve the employment and wage levels. ARTICLE III Default Section 3.1. Defaults Defined. It shall be a default under this Agreement if the Developer fails to comply with any term or provision of this Agreement, and fails to cure such failure within sixty (60) days of written notice to the Developer of the default, but only if the default has not been cured within said sixty (60) days, or the Developer does not provide to the Authority assurances, satisfactory to the Authority in its reasonable discretion, that the default will be cured and will be cured as soon as reasonably possible. Section 3.2. Remedies in Default. Upon the occurrence of a default under this Agreement the Authority may declare immediately due and payable the entire amount of principal and interest paid by the Authority under the Note, as defined in the Contract, together with interest on such amount at the rate of eight and one-half percent (8.5%) from the date that the Authority makes such declaration. Within ten (10) days after the date that the Authority makes such declaration, the Developer shall be liable for and shall repay the amount of the assistance plus interest. Section 3.3. Costs of Enforcement. Whenever any default occurs under this Agreement and the Authority shall employ attorneys or incur other expenses for the collection of payments due or for the enforcement of performance or observance of any obligation or agreement on the part of the Developer under this Agreement, the Developer shall be liable to the Authority for the reasonable fees of such attorneys and such other expenses so incurred by the Authority; provided, that the Developer shall only be obligated to make such reimbursement if Authority prevails in such collection or enforcement action. Section 3.4. Force Majeure. In the event that the Developer's compliance with the terms of this Agreement is delayed or interrupted due to strikes, acts of God or acts of any federal, state of local governmental unit, the Developer's non-compliance shall be excused for the period of delay or interruption if the Developer gives the Authority written notice of the cause of the delay or interruption within thirty (30) days after its occurrence. General economic or market conditions shall not constitute cause for excusing Developer's performance. BeckP 548664.1 C-4 ARTICLE IV Miscellaneous Section 4.1. Provisions of Agreement Not Affected. With the exception of the provisions of the Contract relative to the Developer's employment and wage requirements, this Agreement is not intended to modify or limit in any way the terms of the Contract. Section 4.2. Titles of Articles and Sections. Any titles of the several parts, Articles, and Sections of the Agreement are inserted for convenience of reference only and shall be disregarded in construing or interpreting any of its provisions. Section 4.3. Modification. This Agreement may be modified solely through written amendments hereto executed by the Developer and the Authority. Section 4.4. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall Constitute one and the same instrument. Section 4.5. Judicial Interpretation. Should any provision of this Agreement require judicial interpretation, the court interpreting or construing the same shall not apply a presumption that the terms hereof shall be more strictly construed against one party by reason of the rule of construction that a document is to be construed more strictly against the party who itself or through its agent or attorney prepared the same, it being agreed that the agents and attorneys of both parties have participated in the preparation hereof. IN WITNESS WHEREOF, the Authority has caused this Agreement to be duly executed in its name and behalf,, and the Developer has caused this Agreement to be duly executed in its name and behalf, on or as of the date first above written. ECONOMIC DEVELOPMENT AUTHORITY IN AND FOR THE CITY OF ELK RIVER By. Henry A. Duitsman, President By. Patrick Dwyer, Vice President BeckP 548664. i C-5 DEVELOPER MORRELL & MORRELL, INC. By: Its: STATE OF MINNESOTA ) ) COUNTY OF SHERBURNE ) SS. The foregoing instrument was acknowledged before me this __ day of , 1998, by and , the and of the Economic Development Authority In and For the City of Elk River, a public body politic and corporate under the laws of the state of Minnesota. Notary Public STATE OF MINNESOTA ) ) COUNTY OF ) SS. The foregoing instrument was acknowledged before me this __ 1998, by and day of Notary Public BeckP 548664.1 C-6 SCHEDULE D Description of Uses by Tenant BeckP 548664.1 D-1 NOTICE OF PUBLIC HEARING CITY OF ELK RIVER COUNTY OF SHERBURNE STATE OF MINNESOTA Notice is hereby given that the City Council of the City of Elk River, County of Sherburne, State of Minnesota, will hold a public hearing on Monday, April 6, 1998, at approximately 6 p.m. in the Elk River City Council Chambers at the Elk River City Hall, Elk River, Minnesota, relating to the proposed Modification to the Development Program for Development District No. 1 and the Tax Increment Financing Plan for Tax Increment Financing District No. 18 (an Economic Development Tax Increment Financing District), and the adoption of such Modification relating thereto, pursuant to Minnesota Statutes, Sections 469.090 through 469.1081 and Sections 469.174 through 469.179, all inclusive, as amended. Copies of the Modification and Plan are on file and available for public inspection at the office of the City Administrator, Elk River City Hall, 13065 Orono Parkway, Elk River, Minnesota. This public hearing is required to be held prior to creation of Tax Increment Financing District No. 18 in the City of Elk River. Tax Increment District No. 18 will provide a financing mechanism to correct soil conditions to allow for development of an office/warehouse/trucking facility on East Highway 10 and 171~t Avenue in Elk River, Minnesota. A map of Tax Increment Financing District No. 18, within Development District No. 1, is set forth below. Subject to certain limitations, tax increment from Tax Increment Financing District No. 18 may be spent on eligible uses within the boundaries of Development District No. 1. All interested persons may appear at the hearing and present their views orally or prior to the meeting in writing. BY ORDER OF THE CITY COUNCIL OF THE CITY OF ELK RIVER, MINNESOTA, Patrick D. Klaers, City Administrator