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07-14-16 EDA Mtg Agenda CITY OF SHOREWOOD 5755 COUNTRY CLUB ROAD ECONOMIC DEVELOPMENT AUTHORITY MEETING COUNCIL CHAMBERS THURSDAY, JULY 14, 2016 6:30 PM AGENDA 1. CONVENE ECONOMIC DEVELOPMENT AUTHORITY MEETING A. Roll Call President Zerby _____ Labadie _____ Siakel _____ Sundberg _____ Woodruff _____ B. Review Agenda 2. APPROVAL OF MINUTES A. EDA Minutes of December 14, 2015 (Att.- Minutes) 3. CONSENT A. Treasurer’s Report (Att.- Treasurer’s report) 4. NEW BUSINESS A. Selection of Officers (Att.- Executive Director’s memorandum) B. Tax Increment Financing - Oppidan (Att. - Springsted memo) 5. ADJOURN #2A CITY OF SHOREWOOD 5755 COUNTRY CLUB ROAD ECONOMIC DEVELOPMENT AUTHORITY MEETING COUNCIL CHAMBERS MONDAY, DECEMBER 14, 2015 7:30 P.M. or Immediately following Regular City Council Meeting MINUTES 1. CONVENE ECONOMIC DEVELOPMENT AUTHORITY MEETING President Zerby called the meeting to order at 9:23 P.M. A. Roll Call Present. President Zerby; Boardmembers Labadie, Siakel, and Woodruff; Executive Director/Secretary Joynes; Assistant Treasurer DeJong; Assistant Executive Director Nielsen; and Attorney Keane Absent: Boardmember Sundberg B. Review Agenda Labadie moved, Siakel seconded, approving the agenda as presented. Motion passed 4/0. 2. APPROVAL OF MINUTES A. EDA Minutes of October 26, 2015 Woodruff moved, Siakel seconded, approving the EDA Meeting Minutes of October 26. 2015, as presented. Motion passed 4/0. 3. NEW BUSINESS A. Ratify Public Safety Facilities Refunding Bond Sale Assistant Treasurer DeJong noted a lot of paperwork has been required for the public safety facilities refunding bond sale. The meeting packet contains information about the ratification of the bond sale and the call on the outstanding bonds. He stated Martha Ingram with Kennedy & Graven, the Shorewood Economic Development Authority’s (EDA’s) bond counsel, prepared the paperwork. He then stated that in the resolution for the Series 2016B bonds “fire facility” needs to be replaced with “police facility”. President Zerby stated the Shorewood Council and the Shorewood EDA Board has discussed the refunding a number of times and had been provided with a great deal of detail. He appreciated all of the work that has gone into preparing for the sale by staff and the financial advisors. Zerby moved, Siakel seconded, Adopting RESOLUTION NO. 15-002, “A Resolution Ratifying the Sale of Public Safety Fire Facility Lease Revenue Refunding Bonds, Series 2016A (City of Shorewood, Minnesota Lease Obligations) and Providing for the Redemption of Bonds Refunded Thereby”; Adopting RESOLUTION NO. 15-003, “A Resolution Ratifying the Sale of Public Safety Police Facility Lease Revenue Refunding Bonds, Series 2016B (City of Shorewood, Minnesota Lease CITY OF SHOREWOOD ECONOMIC DEVELOPMENT AUTHORITY MEETING December 14, 2015 Page 2 of 2 Obligations) and Providing for the Redemption of Bonds Refunded Thereby”; and, Adopting RESOLUTION NO. 15-004 “A Resolution Ratifying the Sale of Public Safety Fire Facility Lease Revenue Refunding Bonds, Series 2016C (City of Shorewood, Minnesota Lease Obligations) and Providing for the Redemption of Bonds Refunded Thereby.” Boardmember Woodruff stated from his vantage point it would have been helpful to have been provided with a flowchart that showed which bonds were replacing other bonds. He noted that the documents appear to be in order. Assistant Treasurer DeJong stated that Ms. Ingram had provided him with a flowchart like that. Motion passed 4/0. 4. ADJOURN Labadie moved, Siakel seconded, Adjourning the Shorewood Economic Development Authority Meeting of December 14, 2015, at 9:26 P.M. Motion passed 4/0. RESPECTFULLY SUBMITTED, Christine Freeman, Recorder Scott Zerby, President ATTEST: William S. Joynes, Executive Director #3A MEETING TYPE Special Meeting City of Shorewood Economic Development Authority Title / Subject: Treasurer’s Report Meeting Date: July 14, 2016 Prepared by: Bruce DeJong Reviewed by: Bill Joynes The Economic Development Authority bylaws require a Treasurer’s report at the annual meeting. This report is presented to fulfill that requirement. The EDA is listed as a component unit of the City of Shorewood in the annual financial report. The activities of the EDA were limited to receipt of lease revenues and payment of bond debt service. The Economic Development Authority (EDA) of the City was created in 2001 to carry out economic and industrial development and redevelopment consistent with policies established by the Council. Its board is comprised of members of the City Council. The EDA activities are blended with the city’s annual financial report and separate financial statements are not issued for this component unit. Revenue bonds outstanding at December 31, 2015 were as follows: Outstanding Issue Maturity Balance__ Public Safety Fire Facility, 2007A 02/01/23 $ 2,685,000 Public Safety Police Facility, 2007B 02/01/23 2,785,000 Public Safety Fire Facility, 2007C 02/01/22 950,000 Public Project Bonds, 2008A 12/01/28 980,000 Total Lease Revenue Bonds $ 7,400,000 These bonds have been refunded in 2016. The EDA has no separate assets at this time and all moneys in the bond funds are reserved for future debt service. There is one parcel of property at 24620 Smithtown Road, purchased by the City of Shorewood, which is held for resale in the name of the Shorewood EDA for future redevelopment purposes in conjunction with Smithtown Crossing plans. This property can be found in the financial records for Fund 450 – Community Infrastructure Fund. Mission Statement: The City of Shorewood is committed to providing residents quality public services, a healthy environment, a variety of attractive amenities, a sustainable tax base, and sound financial management through effective, efficient, and visionary leadership. #4A SHOREWOOD ECONOMIC DEVELOPMENT AUTHORITY 5755 Country Club Road Shorewood, MN 55331-8926 952-960-7900 FAX: 952-474-0128 MEMORANDUM MEETING DATE: July 14, 2016 TO: EDA Board of Commissioners FROM: William S. Joynes, Executive Director Brad Nielsen, Assistant Executive Director RE: Selection of Officers The Selection of Officers was made at the EDA’s meeting on July 27, 2015. The EDA By-Laws state the positions of Vice President and Treasurer shall be members of the Board and shall be elected at the annual meeting. The By-Laws further state that no commissioner may serve as President and Vice President at the same time. The Officers appointed at the July 27, 2015, meeting included: Vice-President – Richard Woodruff (Presides in the absence of the President). The Board may determine who shall serve as Vice-President. President Pro-Tem – Kristine Sundberg. ( Appointed to serve in the absence of both the President and Vice-President). The Board may determine who shall serve as President Pro-Tem. Treasurer – Debbie Siakel - The Treasurer shall receive and be responsible for Authority money, etc. (The Board may determine who shall serve as Treasurer). The Bylaws state the following shall serve as Officers: President – Scott Zerby (The President shall be the Mayor of the City of Shorewood). Assistant Treasurer – Bruce DeJong (The Assistant Treasurer shall be the Director of Finance). Secretary – William Joynes (The Secretary shall be the City Administrator). Executive Director – William Joynes (The Executive Director shall be the City Administrator). Assistant Executive Director – Brad Nielsen (The Assistant Executive Director shall be the Director of Planning). Action Needed: The Board will need to determine who shall be appointed to serve as Vice-President, President Pro- Tem, and Treasurer. y' Springsted MEMORANDUM TO: Bill Joynes, City Administrator Bruce DeJong, Finance Director FROM: Mikaela Huot, Vice President/Consultant DATE: July 14, 2016 SUBJECT: Oppidan Senior Housing Project: Redevelopment TIF District Springsted Incorporated 380 Jackson Street, Suite 300 Saint Paul, MN 55101 -2887 Tel: 651 - 223 -3000 Fax: 651 - 223 -3002 www.springsted.com The City of Shorewood received an application for financial assistance through Tax Increment Financing (TIF) with financing a portion of the extraordinary development costs related to the redevelopment of certain properties in the City and subsequent construction of a new development comprising of an approximate 105 unit senior housing apartment project. The developer, Oppidan, is proposing the construction of a senior housing project with a mix of independent living, assisted living and memory care units. The purpose of this memorandum is to provide a summary of Springsted's review of the project as proposed. The developer submitted a request for TIF assistance with the purpose of using tax increment to finance extraordinary costs associated with construction of the project. The developer has proposed construction of an approximate 105 unit market rate senior housing project. The project is a 3 -story building with an underground parking level and is comprised of 131,962 SF on approximately 4 acres. Assistance has been requested for financing a portion of the extraordinary costs associated with construction of the project. The developer has proposed the $27.15 million project will be funded by an estimated $5.4 million of equity and $21.7 million of private financing with a TIF request of $2.5 million to finance extraordinary project costs. The City's preference would be to provide any financial assistance to the developer through pay -as -you- financing as reimbursement for extraordinary development costs. The developer has indicated the receipt of City financial assistance is necessary for the project to proceed and meet debt coverage and value assumptions. The developer's request for assistance ($2.5 million) is equal to approximately 9% of total project costs. See complete sources and uses (current information as presented to Springsted by the developer) below from the application: Sources Amount Uses Amount Equity $5,430,143 Acquisition $1,415,000 Debt $19,716,219 Site Improvements $1,587,343 City of Shorewood, Minnesota Summary Analysis of Oppidan Senior Housing July 14, 2016 Page 2 TIF $2,004,354 City water Extension $918,100 Hazard waste abatement $27,500 Building Construction $15,823,500 Storm Sewer $87,412 Soft Costs 7,406,774 Total $1,876,164 Total $27,150,717 Total $27,150,717 Following initial conversations with the developer, the amount of project costs eligible for reimbursement to the developer for tax increment has adjusted to be the following: Developer Uses Amount Soil correction $808,718 Hazard waste abatement $27,500 Additional Site Work $802,534 Storm Sewer $87,412 Bury Power Line $150,000 Total $1,876,164 Reimbursement to the developer for the above - listed costs is proposed to be based on 75% of the annual tax increment revenues with 5.5% interest. There are also extraordinary costs the City anticipates financing through an interfund loan whereby the City will advance funds from a certain fund (Water Fund) and collect a portion of the future increment revenues to repay that fund. Based on this structure, the City would retain 25% of the annual revenues to pay both administrative costs and repayment of the interfund loan. The estimated maximum amount of the interfund loan for project costs financed by the City would be $1,015,044 as included in the table below. City Uses Amount Watermain extension $809,730 Sanitary sewer $17,145 Street restoration $526,169 Traffic improvements $62,000 Less Oppidan Contribution $ 400,000 Total $1,015,044 Tax Increment Analysis In order to estimate the amount of TIF revenues generated by the proposed project, certain assumptions were made based on the value of the project, construction schedule, and anticipated financing terms. ® Total project area (3 parcels) o 34- 117 -23 -43 -0034 (EMV of $296,000) City of Shorewood, Minnesota Summary Analysis of Oppidan Senior Housing July 14, 2016 Page 3 • 34- 117 -23 -43 -0002 (EMV of $311,000) • 34- 117 -23 -43 -0033 (EMV of $378,000) • Total estimated value of existing properties $985,000 • Estimated total market value upon completion a 105 units at $165,000 /unit o Total estimated completed value: $17,160, 000 • Maximum term of redevelopment district (26 total years) • Increment based on difference between existing land /building values and new land /building value • Construction commences in late 2016 and is completed in 2017 0 20% assessed in January of 2017 for taxes payable in 2018 0 100% assessed in January of 2018 for taxes payable in 2019 • Present value (discount) rate of 5.5% • Tax rates, class rates and future market values remain constant o Tax rates • City. 30.227% • County: 45.356% • ISD 276 22.887% • Other 11.254% • Total 109.724% o Class rates • Property reclassified from residential owner - occupied and commercial - industrial to residential rental • 1.25% for residential rental 0 1 % annual market value inflator • Developer PayGO 0 75% pledged to developer 0 25% retained by Authority Tax Increment Revenue Estimates The tax increment revenue estimates are based on collection of revenues for the full term of the district. Based on the assumptions outlined above, the projected tax increment revenues to be generated from the project are shown in the chart on the following page. TIF District Total Gross Tax Increment (26 years) $6,587,934 Authority Retainage (25 %) $1,646,988 Net Amount Available for Developer (75 %) $4,940,946 City of Shorewood, Minnesota Summary Analysis of Oppidan Senior Housing July 14, 2016 Page 4 Developer Principal (19 years) 1,876,164 Developer Interest at 5.5% Interest Rate 1,524,368 Developer Total 3,400,532 City Principal (19 years) 1,015,044 City Interest at 1 % Interest Rate 128,366 City Total 1,143,410 Estimated Surplus (7 years) 1,912,233 Proiect Qualifications Redevelopment TIF District Redevelopment districts are a type of tax increment financing district in which one or more of the following conditions exists and is reasonably distributed throughout the district: ® parcels comprising at least 70% of the area of the district are occupied by buildings, streets, utilities, paved or gravel parking lots, or other similar structures and more than 50% of the buildings, not including outbuildings, are structurally substandard requiring substantial renovation or clearance. A parcel is deemed "occupied" if at least 15% of the area of the parcel contains buildings, streets, utilities, paved or gravel parking lots; or other similar structures. ® the property consists of vacant, unused, underused, inappropriately used, or infrequently used railyards, rail storage facilities, or excessive or vacated railroad right -of -ways; or 0 tank facilities, or property whose immediately previous use was for tank facilities, as defined in section 115C.02, subdivision 15, if the tank facilities: o have or had a capacity of more than 1,000,000 gallons; • are located adjacent to rail facilities; and • have been removed or are unused, underused, inappropriately used, or infrequently used. For districts consisting of two more noncontiguous areas, each area must individually qualify under the provisions listed above, as well as the entire area must also qualify as a whole. "Structurally substandard" is defined as buildings containing defects or deficiencies in structural elements, essential utilities and facilities, light and ventilation, fire protection (including egress), layout and condition of interior partitions, or similar factors. Generally, a building is not structurally substandard if it is in compliance with the building code applicable to a new building, or could be modified to satisfy the existing code at a cost of less than 15% of the cost of constructing a new structure of the same size and type. A city may not find that a building is structurally substandard without an interior inspection, unless it cannot gain access to the property and there exists evidence which supports the structurally substandard finding. Such evidence City of Shorewood, Minnesota Summary Analysis of Oppidan Senior Housing July 14, 2016 Page 5 includes recent fire or police inspections, on -site property tax appraisals or housing inspections, exterior evidence of deterioration, or other similar reliable evidence. Written documentation of the findings and reasons why an interior inspection was not conducted must be made and retained. A parcel is deemed to be occupied by a structurally substandard building if the following conditions are met: • the parcel was occupied by a substandard building within three years of the filing of the request for certification of the parcel as part of the district; • the demolition or removal of the substandard building was performed or financed by the Authority, or was performed by a developer under a development agreement with the Authority, • the Authority found by resolution before such demolition or removal occurred that the building was structurally substandard and that the Authority intended to include the parcel in the TIF district, and • the Authority notifies the county auditor that the original tax capacity of the parcel must be adjusted upon filing the request for certification of the tax capacity of the parcel as part of a district. In the case of (4) above, the County Auditor shall certify the original net tax capacity of the parcel to be the greater of (a) the current tax capacity of the parcel, or (b) a computed tax capacity of the parcel using the estimated market value of the parcel for the year in which the demolition or removal occurred, and the appropriate classification rate(s) for the current year. At least 90 percent of the tax increment from a redevelopment district must be used to finance the cost of correcting conditions that allow designation as a redevelopment district. These costs include, but are not limited to, acquiring properties containing structurally substandard buildings or improvements or hazardous substances, pollution, or contaminants, acquiring adjacent parcels necessary to provide a site of sufficient size to permit development, demolition and rehabilitation of structures, clearing of land, removal of hazardous substances or remediation necessary to develop the land, and installation of utilities, roads, sidewalks, and parking facilities for the site. The allocated administrative expenses of the Authority may be included in the qualifying costs. Thank you for the opportunity to assist the City of Shorewood. Please let me know if you have any questions or would like to discuss the provided information, CONTRACT FOR PRIVATE DEVELOPMENT by and between SHOREWOOD ECONOMIC DEVELOPMENT AUTHORITY IN AND FOR THE CITY OF SHOREWOOD, MINNESOTA , as the Authority and KTJ 285, LLC , as the Developer Dated as of July ___, 2016 4847-2274-1044.2 Table of Contents Page ARTICLE I DEFINITIONS .......................................................................................................................... 2 ARTICLE II REPRESENTATIONS AND WARRANTIES Section 2.01. Representations by the Authority ...................................................................5 Section 2.02. Representations and Warranties by the Developer .........................................5 ARTICLE III PUBLIC REDEVELOPMENT COSTS Section 3.01. Status of Redevelopment Property .................................................................6 Section 3.02. Environmental Conditions .............................................................................7 Section 3.03. Public Redevelopment Costs .........................................................................7 Section 3.04. Issuance of Note ............................................................................................7 Section 3.05. Payment of Administrative Costs ..................................................................8 Section 3.06. Records .........................................................................................................8 Section 3.07. Purpose of Assistance ...................................................................................8 ARTICLE IV CONSTRUCTION OF MINIMUM IMPROVEMENTS Section 4.01. Construction of Improvements ......................................................................8 Section 4.02. Construction Plans ........................................................................................9 Section 4.03. Commencement and Completion of Construction ........................................ 10 Section 4.04. Certificate of Completion ............................................................................ 10 Section 4.05. Records ....................................................................................................... 10 ARTICLE V INSURANCE Section 5.01. Insurance ..................................................................................................... 11 Section 5.02. Subordination .............................................................................................. 12 ARTICLE VI TAX INCREMENT; TAXES 4847-2274-1044.2 Table of Contents (continued) Page Section 6.01. Right To Collect Delinquent Taxes.............................................................. 13 Section 6.02. Reduction of Taxes...................................................................................... 13 Section 6.03. Use of Tax Increment .................................................................................. 13 ARTICLE VII FINANCING Section 7.01. Developer Financing ................................................................................... 13 ARTICLE VIII PROHIBITIONS AGAINST ASSIGNMENT AND TRANSFER; INDEMNIFICATION Section 8.01. Representation As to Development .............................................................. 14 Section 8.02. Prohibition Against Developer’s Transfer of Property and Assignment of Agreement .............................................................................................. 14 Section 8.03. Release and Indemnification Covenants ...................................................... 15 ARTICLE IX EVENTS OF DEFAULT Section 9.01. Events of Default Defined ........................................................................... 16 Section 9.02. Remedies on Default ................................................................................... 17 Section 9.03. No Remedy Exclusive ................................................................................. 17 Section 9.04. No Additional Waiver Implied by One Waiver ............................................ 18 ARTICLE X ADDITIONAL PROVISIONS Section 10.01. Conflict of Interests; Authority Representatives Not Individually Liable .......................................................................................................... 18 Section 10.02. Equal Employment Opportunity .................................................................. 18 Section 10.03. Restrictions on Use ..................................................................................... 18 Section 10.04. Titles of Articles and Sections ..................................................................... 18 Section 10.05. Notices and Demands .................................................................................. 18 Section 10.06. Counterparts ................................................................................................ 19 Section 10.07. Amendment ................................................................................................. 19 Section 10.08. Minnesota Law ............................................................................................ 19 Section 10.09. Authority Approvals .................................................................................... 19 Section 10.10. Term of This Agreement ............................................................................. 19 Section 10.11. Effect of Termination or Assignment ........................................................... 20 ii 4847-2274-1044.2 Table of Contents (continued) Page SCHEDULE A DEVELOPMENT PROPERTY SCHEDULE B FORM OF NOTE SCHEDULE C FORM OF CERTIFICATE OF COMPLETION SCHEDULE D FORM OF MINIMUM ASSESSMENT AGREEMENT iii 4847-2274-1044.2 CONTRACT FOR PRIVATE DEVELOPMENT THIS CONTRACT FOR PRIVATE DEVELOPMENT (“Agreement”), made as of ECONOMIC DEVELOPMENT the ___th day of July, 2016, by and between the AUTHORITY IN AND FOR THE CITY OF SHOREWOOD, MINNESOTA (the KTJ 285, “Authority”), a public body corporate and politic under the laws of Minnesota, and LLC (the “Developer”), a Minnesota corporation. RECITALS : 1. The Authority was created pursuant to Minnesota Statutes, Sections 469.090 to 469.1082 (the “EDA Act”) and was authorized to transact business and exercise its powers by a resolution of the City Council of the City of Shorewood (the “City”). 2. The Authority and the City have undertaken a program to promote economic development and job opportunities, promote the development and redevelopment of land which is underutilized within the City, and in this connection created a redevelopment district known as Redevelopment Project Area No. 2 (hereinafter referred to as the “Project Area”) in the City, pursuant to Minnesota Statutes, Sections 469.001 to 469.047 (the “HRA Act”). 3. The Authority and the City have established within the Project Area the tax increment financing district known as the Tax Increment Financing (Redevelopment) District No. 2 (the “TIF District”) and adopted a financing plan (the “TIF Plan”) for the TIF District in order to facilitate redevelopment of certain property in the Project Area, all pursuant to Minnesota Statutes, Sections 469.174 to 469.1799, as amended (the “TIF Act”). 4. The Developer has proposed the redevelopment of certain property within the Project Area which the Authority believes will promote and carry out the objectives for which redevelopment is undertaken, will be in the best interests of the City, will promote the health, safety, morals and welfare of its residents and will be in accord with the public purposes and provisions of the applicable state and local laws and requirements under which activities in the Project Area have been undertaken and are being assisted. 5. The Developer has acquired certain property described in Schedule A (the “Development Property”) located in the TIF District, and proposes to construct an approximately 105 unit senior housing facility that will provide independent living, assisted living and memory care units for resident of the community and surrounding area (“Developer Project”) in accordance with this Agreement. 6. In order to make the Developer Project economically feasible for the Developer to construct, the Authority is prepared to reimburse the Developer for a portion of the public site improvement and preparation costs related to the Developer Project. 7. The City and the Authority believe that the development of the TIF District pursuant to this Agreement, and fulfillment generally of this Agreement, is in the vital and best interests of the City, will promote the health, safety, morals, and welfare of its residents, and will be in accord with the public purposes and provisions of the applicable State and local laws and requirements under which the Project Area has been undertaken and is being assisted. 4847-2274-1044.2 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 In this Agreement, unless a different meaning clearly appears from the context: “Administrative Costs” means the costs described in Section 3.5 hereof. “Agreement” means this Development Agreement, as the same may be from time to time modified, amended, or supplemented. “Assessment Agreement” means the Minimum Assessment Agreement regarding the Minimum Market Value of the Property and Developer Project in the general form attached hereto as Schedule D. “Assessor” means the assessor for the Hennepin County, Minnesota or any other assessor legally responsible for assessment of the Development Property and Developer Project for real estate purposes. “Available Tax Increment” means, on any Payment Date under the Note, 75 percent of the Tax Increment attributable to the Development Property and received by the City from the County pursuant to the TIF Act in the six-month period before such payment date. The term Available Tax Increment does not include any amounts retained by or payable to the State auditor under Section 469.177, subd. 11 of the TIF Act, or any amounts described in Section 469.174, subd. 25, clauses (2) through (4) of the TIF Act. “Authority” means the Economic Development Authority in and for the City of Shorewood, Minnesota. “Authority Representative” means the Executive Director of the Authority. “Authorizing Resolution” means the resolution of the Authority to authorize the issuance of the Notes. “Business Day” means any day except a Saturday, Sunday, legal holiday, a day on which the City is closed for business, or a day on which banking institutions in the City are authorized by law or executive order to close. “Certificate of Completion” means the certifications provided to the Developer, or the purchaser of any part, parcel, or unit of the Development Property, pursuant to Section 4.04 of this Agreement. “City” means the City of Shorewood, Minnesota. 2 4847-2274-1044.2 “City Representative” means the Administrator of the City, or any person designated by the Administrator to act as the City Representative for the purposes of this Agreement. “Construction Plans” means the plans, specifications, drawings and related documents on the construction work to be performed by the Developer on the Development Property which (a) shall be as detailed as the plans, specifications, drawings and related documents which are submitted to the appropriate building officials of the City; and (b) shall include at least the following for each building: (i) site plan, (ii) foundation plan, (iii) basement plans, (iv) floor plan for each floor, (v) cross sections of each (length and width), (vi) elevations (all sides), (vii) landscape plan, and (viii) such other plans or supplements to the foregoing plans as the City may reasonably request to allow it to ascertain the nature and quality of the proposed construction work. “County” means the County of Hennepin, Minnesota. “Developer” means KTJ 285, LLC, a Minnesota limited liability company, or its permitted successors and assigns. “Developer Project” means the construction of an approximately 105 unit senior housing facility that will provide independent living, assisted living and memory care units. “Development District” means the Redevelopment District No. 2 “Development District Area” means the geographic area within the boundaries of the Project Area. “Development Program” means the Development Program for the Development District. “Development Property” means the real property described in Exhibit A hereto. “EDA Act” means Minnesota Statutes, Sections 469.090 to 469.1082, as amended. “Event of Default” means an action by the Developer listed in Article IX of this Agreement. “Holder” means the owner of a Mortgage. “Maturity Date” means the earliest of February 1, 2045, or the date that any Note has been paid in full or terminated in accordance with its terms, whichever is earlier. “Mortgage” means any mortgage made by the Developer that is secured, in whole or in part, with the Development Property and that is a permitted encumbrance pursuant to the provisions of Article VIII of this Agreement. “Note” means the Tax Increment Revenue Note, substantially in the form attached in Schedule B hereto, to be delivered by the Authority to the Developer in accordance with Section 3.04 hereof. 3 4847-2274-1044.2 “Parcel” means any parcel of the Development Property. “Project Area” means the real property located within the boundaries of the Development Project. “Public Redevelopment Costs” has the meaning provided in Section 3.03. “Redevelopment Plan” means the Redevelopment Plan for the Project Area approved and adopted by the Authority and the City Council of the City. “State” means the State of Minnesota. “Tax Increment” means that portion of the real property taxes that is paid with respect to the TIF District and that is remitted to the City as tax increment pursuant to the Tax Increment Act. “Tax Increment Act” or “TIF Act” means the Tax Increment Financing Act, Minnesota Statutes Sections 469.174 to 469.1799, as amended. “Tax Increment District” or “TIF District” means Tax Increment Financing (Redevelopment) District No. 2 created by the Authority. “Tax Increment Plan” or “TIF Plan” means the Tax Increment Financing Plan for the TIF District approved by the City Council on July 14, 2016, and as it may be amended. “Tax Official” means any County assessor, County auditor, 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. “Termination Date” has the meaning provided in Section 10.10 hereof. “Transfer” has the meaning provided in Section 8.02(a) hereof. “Unavoidable Delays” means delays beyond the reasonable control of the party seeking to be excused as a result thereof which are the direct result of strikes, other labor troubles, prolonged adverse weather or acts of God, fire or other casualty to the Minimum Improvements, acts of terrorism, litigation commenced by third parties which, by injunction or other similar judicial action, directly results in delays, wrongful holdover of parties in possession, or acts of any federal, state or local governmental unit (other than the City in exercising its rights under this Agreement), including without limitation condemnation or threat of condemnation of any portion of the Development Property, which directly result in delays. Unavoidable Delays shall not include delays experienced by the Developer in obtaining permits or governmental approvals necessary to enable construction of the Minimum Improvements by the dates such construction is required under Section 4.03 of this Agreement, so long as the Construction Plans have been approved in accordance with Section 4.02 hereof. 4 4847-2274-1044.2 ARTICLE II REPRESENTATIONS AND WARRANTIES Section 2.01. Representations by the Authority . (a)The Authority is an Economic Development Authority organized and existing under the laws of the State. Under the provisions of the EDA Act and HRA Act, the Authority has the power to enter into this Agreement and carry out its obligations hereunder, and execution of this Agreement has been duly, properly and validly authorized by the Authority. (b)The Authority proposes to assist in financing of certain site improvement costs necessary to facilitate the construction of the Project Area in accordance with the terms of this Agreement to further the objectives of the Redevelopment Plan. (c)The Authority finds that the Project Area is necessary to alleviate a shortage of, and maintain existing supplies of, decent, safe, and sanitary housing for seniors. (d)The activities of the Authority are undertaken to foster the redevelopment of certain real property which for a variety of reasons is presently underutilized, to eliminate current blighting factors and prevent the emergence of further blight at a critical location in the City, to create increased tax base in the City, to increase senior housing opportunities in the City, and to stimulate further development of the TIF District and Project Area as a whole. (e)The execution, delivery and performance of this Agreement and of any other documents or instruments required pursuant to this Agreement by the Authority, and consummation of the transactions contemplated therein and the fulfillment of the terms thereof, do not and will not conflict with or constitute a breach of or default under any existing (i) indenture, mortgage, deed of trust or other agreement or instrument to which the Authority is a party or by which the Authority or any of its property is or may be bound; or (ii) legislative act, constitution or other proceedings establishing or relating to the establishment of the Authority or its officers or its resolutions. (f)There are no pending or threatened legal proceedings, of which the Authority has notice, to restrain or enjoin the execution or delivery of this Agreement, or in any way contesting the validity of this Agreement, or contesting the authority of the Authority to execute, deliver and perform this Agreement. Section 2.02. Representations and Warranties by the Developer . The Developer represents and warrants that: (a)The Developer is a Minnesota corporation duly incorporated and in good standing under the laws of the State, is not in violation of any provisions of its articles of organization, is duly authorized to transact business within the State, has power to enter into this Agreement and has duly authorized the execution, delivery, and performance of this Agreement by proper action of its members. 5 4847-2274-1044.2 (b)The Developer will construct the Developer Project in accordance with the terms of this Agreement, the Redevelopment Plan and all applicable local, state and federal laws and regulations (including, but not limited to, environmental, zoning, building code and public health laws and regulations). (c) The Developer will obtain, in a timely manner, all required permits, licenses and approvals, and will meet, in a timely manner, all requirements of all applicable local, state and federal laws and regulations which must be obtained or met before the Developer Project may be lawfully constructed. (d) The Developer has received no notice or communication from any local, state or federal official that the activities of the Developer, Authority, or the City in the Project Area may be or will be in violation of any environmental law or regulation (other than those notices or communications of which the Authority is aware). The Developer is aware of no facts the existence of which would cause it to be in violation of or give any person a valid claim under any local, state or federal environmental law, regulation or review procedure. (e) The Developer shall promptly advise the Authority in writing of all litigation or claims affecting any part of the Developer Project and all written complaints and charges made by any governmental authority materially affecting the Developer Project or materially affecting Developer or its business which may delay or require changes in construction of the Developer Project. (f) The Developer agrees to enter into a Minimum Assessment Agreement (the “Assessment Agreement”), as set forth in Minnesota Statutes Section 469.177 Subd. 8., with respect to the Project Area and the Development Project fixing the minimum actual valuation for the Development Project at $17,160,000 as of January 2, 2018. (h) Neither the execution and delivery of this Agreement, the consummation of the transactions contemplated hereby, nor the fulfillment of or compliance with the terms and conditions of this Agreement is prevented, limited by or conflicts with or results in a breach of, the terms, conditions or provisions of any corporate restriction or any evidences of indebtedness, agreement or instrument of whatever nature to which the Developer is now a party or by which it is bound, or constitutes a default under any of the foregoing. (i) The proposed development by the Developer hereunder would not occur but for the tax increment financing assistance being provided by the Authority hereunder. ARTICLE III PUBLIC REDEVELOPMENT COSTS Section 3.01. Status of Redevelopment Property . The Developer warrants and represents that it acquired fee title to the Development Property prior to the date of this Agreement, in anticipation of the redevelopment described herein. The Authority has no obligation to acquire the Development Property or any portion thereof. 6 4847-2274-1044.2 Section 3.02. Environmental Conditions . (a)The Developer acknowledges that the Authority makes no representations or warranties as to the condition of the soils on the Development Property or the fitness of the Development Property for construction of the Development Project or any other purpose for which the Developer may make use of such property, and that the assistance provided to the Developer under this Agreement neither implies any responsibility by the Authority for any contamination of the Development Property or poor soil conditions nor imposes any obligation on such parties to participate in any cleanup of the Development Property or correction of any soil problems. (b)Without limiting its obligations under Section 8.03 of this Agreement the Developer further agrees that it will indemnify, defend, and hold harmless the Authority and the City and its governing body members, officers, and employees, from any claims or actions arising out of the presence, if any, of hazardous wastes or pollutants on the Development Property, unless and to the extent (i) such hazardous wastes or pollutants are present as a result of the actions or omissions of the indemnities, or (ii) the claim or action arises out of an act or omission of the Authority or the City in exercise of its regulatory powers regarding the Development Property prior and unrelated to the financial assistance provided under this Agreement. Nothing in this section will be construed to limit or affect any limitations on liability of the City under State or federal law, including without limitation Minnesota Statutes Sections 466.04 and 604.02. Section 3.03. Public Development Costs; Authority Reimbursement . In order to make the construction of the Developer Project financially feasible, the Authority will reimburse the Developer for a portion of the Public Development Costs incurred by the Developer that allowed designation of the TIF District as a redevelopment district under Section 469.174 of the TIF Act and to construct the Developer Project (such activities are collectively referred to as the “Public Redevelopment Costs”). Public Redevelopment Costs include site preparation costs, including demolition, costs of soil correction and infrastructure improvements on the Development Property or any other costs eligible to be reimbursed with tax increment. The Developer will reimburse the Authority in accordance with this Agreement and the Minimum Assessment Agreement to be entered in between the Authority and the Developer. Section 3.04. Issuance of Pay-As-You-Go Note . Terms (a). In order to reimburse the Developer for a portion of the Public Redevelopment Costs incurred by Developer, the Authority shall issue and the Developer will purchase the Note in the principal amount of $1,876,164 in substantially the form set forth in the Schedule B hereto. The Authority and the Developer agree that the consideration from the Developer for the purchase of the Note will consist of the Developer’s payment of Public Development Costs incurred by the Developer in at least the principal amount of the Note. The Note will be secured by the Available Tax Increment from the Development Property and the Developer Project constructed thereon. The Note will be supported by a Minimum Assessment Agreement to be entered into by the Developer and the Authority. The terms of each Note, including maturity and payment dates, will be substantially those set forth in the form of the Note shown in Schedule B. The Authority will deliver the Note upon delivery by the Developer 7 4847-2274-1044.2 of an investment letter reasonably acceptable to the Authority. The Note will be dated as of its date of delivery. (b)The Developer understands and acknowledges that the Authority makes no representations or warranties regarding the amount of Available Tax Increment, or that revenues pledged to the Note will be sufficient to pay the principal of and interest on the Note. Any estimates of Tax Increment prepared by the Authority or its financial advisors in connection with the TIF District or this Agreement are for the benefit of the Authority, and are not intended as representations on which the Developer may rely. Assignment of Notes (c). The Developer acknowledges no assignment; transfer or sale of the Note will be permitted without the prior written consent of the Authority and conditioned upon the receipt of an investment letter in a form acceptable to the Authority. Qualifications (d). The Authority understands and acknowledges that the Developer makes no representations or warranties regarding the amount of Available Tax Increment, or that revenues pledged to the Note will be sufficient to pay the principal of any Note. Authority expressly acknowledges that amounts of Available Tax Increment will be determined, in part, by the estimated market value of the completed Developer Project, and that if the market value assigned by the County is less than Authority and Developer anticipated at the time this Agreement was negotiated, Available Tax Increment may be insufficient to pay all principal of the Notes. If the Public Development Costs exceed the principal amount of the Note, such excess is the sole responsibility of Developer Section 3.05. Payment of Administrative Costs . The Developer will pay the reasonable costs of consultants and attorneys retained by the Authority and the City in connection with the negotiation in preparation of this Agreement and other incidental agreements and documents related to the development contemplated hereunder (collectively, the “Administrative Costs”). Section 3.06.Records. The Authority and its representatives will have the right at all reasonable times after reasonable notice to inspect, examine and copy all books and records of Developer relating to the Developer Project and the costs for which the Developer has been reimbursed with Tax Increment. Section 3.07.Purpose of Assistance . The parties agree and understand that the purpose of the Authority’s financial assistance to the Developer is to facilitate development and is not a “business subsidy” within the meaning of Minnesota Statutes, Sections 116J.993 to 116J.995. ARTICLE IV CONSTRUCTION OF MINIMUM IMPROVEMENTS Section 4.01. Construction of Improvements . The Developer agrees that it will construct or cause construction of the Developer Project on the Development Property in accordance with the approved Construction Plans and the Redevelopment Plan and that it will, subject and pursuant to the terms of this Agreement, at all times prior to the Maturity Date maintain, preserve and keep the Developer Project or cause the Developer Project to be 8 4847-2274-1044.2 maintained, preserved and kept with the appurtenances and every part and parcel thereof, in good repair and condition, reasonable wear and tear excluded. The Authority will have no obligation to operate or maintain the Developer Project. Section 4.02. Construction Plans . Construction Plans (a). Before commencement of construction of any phase of the Developer Project, the Developer shall submit to the Authority and the City Construction Plans. The Construction Plans shall provide for the construction of the relevant improvements and shall be in material conformity with the Redevelopment Plan, this Agreement, and all applicable State and local laws and regulations. The Authority Representative will approve the Construction Plans in writing if: (i) the Construction Plans materially conform to the terms and conditions of this Agreement; (ii) the Construction Plans materially conform to the goals and objectives of the Redevelopment Plan; (iii) the Construction Plans conform to all applicable federal, state and local laws, ordinances, rules and regulations; (iv) the Construction Plans are adequate to provide for construction of the relevant improvements; and (v) no Event of Default has occurred. Approval may be based upon a review by the City’s Building Official of the Construction Plans and shall be conclusive evidence that Developer has satisfied its obligations under this Section. No approval by the Authority Representative shall relieve the Developer of the obligation to comply with the terms of this Agreement or of the Redevelopment Plan, applicable federal, state and local laws, ordinances, rules and regulations, or to construct the Developer Project in accordance therewith. No approval by the Authority Representative shall constitute a waiver of an Event of Default. If approval of the Construction Plans is requested by the Developer in writing at the time of submission, such Construction Plans shall be deemed approved unless rejected in writing by the Authority Representative, in whole or in part. Such rejections shall set forth in detail the reasons therefor, and shall be made within 30 days after the date of their receipt by the Authority. If the Authority Representative rejects any Construction Plans in whole or in part, the Developer shall submit new or corrected Construction Plans within 30 days after written notification to the Developer of the rejection. The provisions of this Section relating to approval, rejection and resubmission of corrected Construction Plans shall continue to apply until the Construction Plans have been approved by the City. The Authority Representative’s approval shall not be unreasonably withheld, delayed or conditioned. Said approval shall constitute a conclusive determination that the Construction Plans (and the Minimum Improvements constructed in accordance with said plans) comply to the Authority’s satisfaction with the provisions of this Agreement relating thereto. (b)If the Developer desires to make any material change in the Construction Plans or any component thereof after their approval by the Authority, the Developer shall submit the proposed change to the Authority and the City for its approval. If the Construction Plans, as modified by the proposed change, conform to the requirements of this Section 4.02 of this Agreement with respect to such previously approved Construction Plans, the Authority shall approve the proposed change and notify the Developer in writing of its approval. Such change in the Construction Plans shall, in any event, be deemed approved by the Authority unless rejected, in whole or in part, by written notice by the Authority to the Developer, setting forth in detail the reasons therefor within 10 days after receipt of the notice of such change. The Authority’s approval of any such change in the Construction Plans will not be unreasonably withheld. 9 4847-2274-1044.2 Section 4.03. Commencement and Completion of Construction . Subject to Unavoidable Delays, the Developer shall commence construction of the Developer Project by October 1, 2016 and will substantially complete the Developer Project by December 31, 2017. Construction is considered to be commenced upon the beginning of physical improvements beyond grading. All work with respect to the Developer Project to be constructed or provided by the Developer on the Development Property shall be in substantial conformity with the Construction Plans as submitted by the Developer, and approved by the Authority and the City. 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 such successors and assigns, shall promptly begin and diligently proceed to completion with the development of the Development Property through the construction of the Developer Project thereon, and that such construction shall in any event be commenced and completed within the period specified in this Section 4.03 of this Agreement. After the date of this Agreement and until construction of the Developer Project has been completed, the Developer shall make reports, in such detail and at such times as may reasonably be requested by the Authority, but no more than monthly, as to the actual progress of the Developer with respect to such construction. Section 4.04. Certificate of Completion . (a)Promptly after completion of the Developer Project in accordance with those provisions of the Agreement relating solely to the obligations of the Developer to construct the Developer Project, and after the Developer delivers sworn construction statements with verification by the City engineer of the work performed in accordance with the plans and specifications, the Authority will furnish the Developer with a Certificate of Completion in substantially the form attached hereto as Schedule C. (b)If the Authority Representative shall refuse or fail to provide any certification in accordance with the provisions of this Section 4.04 of this Agreement, the Authority Representative shall, within 30 days after written request by the Developer, provide the Developer with a written statement, indicating in adequate detail in what respects the Developer has failed to complete the Developer Project in accordance with the provisions of the Agreement, or is otherwise in default, and what measures or acts it will be necessary, in the opinion of the Authority, for the Developer to take or perform in order to obtain such certification. (c)The construction of the Developer Project shall be deemed to be complete upon issuance of a certificate of occupancy by the Authority. Section 4.05. Records . The Authority through any authorized representatives, shall have the right at all reasonable times after reasonable notice to inspect, examine and copy all books and records of Developer relating to the Developer Project. Such records shall be kept and maintained by Developer through the Termination Date. 10 4847-2274-1044.2 ARTICLE V INSURANCE Section 5.01. Insurance . (a)The Developer will provide and maintain, or cause its contractor to provide and maintain, at all times during the process of constructing the Developer Project an All Risk Broad Form Basis Insurance Policy and, from time to time during that period, at the request of the Authority, furnish the Authority with proof of payment of premiums on policies covering the following: (i)builder’s risk insurance, written on the so-called “Builder’s Risk - Completed Value Basis,” in an amount equal to 100% of the insurable value of the Developer Project at the date of completion, and with coverage available in non-reporting form on the so-called “all risk” form of policy; (ii)commercial general liability insurance (including operations, contingent liability, operations of subcontractors, completed operations, and contractual liability insurance) together with an Owner’s Protective Liability Policy with limits against bodily injury and property damage of not less than $1,000,000 for each occurrence (to accomplish the above-required limits, an umbrella excess liability policy may be used). The Authority shall be listed as an additional insured on the policy; and (iii)workers’ compensation insurance, with statutory coverage; provided that the Developer may be self-insured with respect to all or any part of its liability for workers’ compensation. (b)Upon completion of construction of the Developer Project and prior to the Maturity Date, the Developer shall maintain, or cause to be maintained, at its cost and expense, and from time to time at the request of the Authority or the City shall furnish proof of the payment of premiums on, insurance as follows: (i)insurance against loss and/or damage to the Developer Project under a policy or policies covering such risks as are ordinarily insured against by similar businesses; (ii)commercial general liability insurance, including personal injury liability (with employee exclusion deleted), against liability for injuries to persons and/or property, in the minimum amount for each occurrence and for each year of $1,000,000, and shall be endorsed to show the Authority as an additional insured; and (iii)such other insurance, including workers’ compensation insurance respecting all employees of the Developer located at the Developer Project, 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 any and all of the insurance required herein. 11 4847-2274-1044.2 (c)All insurance required in Article V of this Agreement shall be taken out and maintained in responsible insurance companies selected by the Developer that are authorized under the laws of the State to assume the risks covered thereby. Upon request, the Developer will deposit annually with the Authority a certificate or certificates or binders of the respective insurers stating that such insurance is in force and effect, or if applicable, a statement of self- insurance, or the web address where such insurance information is contained. Unless otherwise provided in this Article V of this Agreement each policy shall contain a provision that the insurer shall not cancel nor modify it in such a way as to reduce the coverage provided below the amounts required herein without giving written notice to the Developer and the Authority at least 30 days before the cancellation or modification becomes effective. In lieu of separate policies, the Developer may maintain a single policy, blanket or umbrella policies, or a combination thereof, having the coverage required herein, in which event the Developer shall deposit with the Authority a certificate or certificates of the respective insurers as to the amount of coverage in force upon the Developer Project. All insurance required under this Section 5.01 may be provided under (i) an individual policy covering the Developer Project; (ii) a blanket policy or policies that includes other liabilities, properties and locations of the Developer; provided, however, that if such blanket commercial general liability insurance policy or policies contain a general policy aggregate of less than $1,000,000, then Developer shall also maintain excess liability coverage necessary to establish a total liability insurance limit of $1,000,000; or (iii) a combination of any of the foregoing insurance programs. (d)The Developer agrees to notify the Authority immediately in the case of damage exceeding $100,000 in amount to, or destruction of, the Developer Project or any portion thereof resulting from fire or other casualty. In such event the Developer will forthwith repair, reconstruct, and restore the Developer Project to substantially the same or an improved condition or value as it 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 Developer Project, regardless of whether the net proceeds of insurance received by the Developer for such purposes are sufficient to pay for the same. Any net proceeds remaining after completion of such repairs, construction, and restoration shall be the property of the Developer. (e)The Developer and the Authority agree that all of the insurance provisions set forth in this Article V shall terminate upon the termination of this Agreement. Section 5.02. Subordination . Notwithstanding anything to the contrary herein, the rights of the Authority with respect to the receipt and application of any insurance proceeds shall, in all respects, be subordinate and subject to the rights of any Holder under a Mortgage allowed pursuant to Article VII of this Agreement. 12 4847-2274-1044.2 ARTICLE VI TAX INCREMENT; TAXES Section 6.01. Right To Collect Delinquent Taxes . The Developer acknowledges that the Authority is providing substantial aid and assistance in furtherance of the development through the issuance of the Note. The Developer understands that the Available Tax Increment pledged to payment on the Note is derived from real estate taxes on the Development Property, which taxes must be promptly and timely paid. To that end, the Developer agrees for itself, in addition to the obligation pursuant to statute to pay real estate taxes that it is also obligated by reason of this Agreement to pay before delinquency all real estate taxes assessed against the Development Property and the Developer Project. The Developer acknowledges that this obligation creates a contractual right on behalf of the Authority and the City to sue the Developer to collect delinquent real estate taxes and any penalty or interest thereon and to pay over the same as a tax payment to the county auditor. In any such suit, the Authority and the City shall also be entitled to recover its costs, expenses and reasonable attorney fees. Section 6.02. Reduction of Taxes . The Developer agrees that prior to the Termination Date it will not cause a reduction in the real property taxes paid in respect of the Development Property through willful destruction of the Development Property or any part thereof. The Developer also agrees that it will not, prior to the Termination Date, seek exemption from property tax for the Development Property or any portion thereof or transfer or permit the transfer of the Development Property to any entity that is exempt from real property taxes and state law, or apply for a deferral of property tax on the Development Property pursuant to any law. The Developer also agrees it will not seek through petition or other means to have the estimated market value for the Developer Property and Developer Project reduced. The Developer will execute a Minimum Assessment Agreement with the Authority. Section 6.03. Use of Tax Increment . The Developer acknowledges that the Available Tax Increment may exceed the total principal payments on the Note, and that the Authority or the City will use such excess Available Tax Increment in accordance with the TIF Act. The Developer further acknowledges that it has no interest in Available Tax Increment except as expressly provided in the Note and the Authorizing Resolution. ARTICLE VII FINANCING Section 7.01. Developer Financing . (a)Before commencement of construction of the Developer Project, Developer shall submit to the Authority and the City evidence of one or more commitments for financing which, together with committed equity, is sufficient for the acquisition of the Development Property and construction of the Developer Project. Such commitments may be submitted as short-term financing, long-term mortgage financing, a bridge loan with a long-term takeout financing commitment, or any combination of the foregoing. 13 4847-2274-1044.2 (b)If the Authority finds that the financing is sufficiently committed and adequate in amount to provide for the undertakings described in Section 7.01(a), 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 10 days from the date when the Authority is provided the evidence of financing. A failure by the Authority to respond to such evidence of financing shall be deemed to constitute an approval hereunder. 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 10 days after such rejection. (c)In the event that there occurs a default under any Mortgage, the Developer shall cause the Authority to receive copies of any notice of default received by the Developer from the holder of such Mortgage. Developer will include in any Mortgage documents a provision giving the Authority the right, but not the obligation, to cure any such default on behalf of the Developer within such cure periods as are available to the Developer under the Mortgage documents. In the event there is an event of default under this Agreement, the Authority will transmit to the Holder of any Mortgage a copy of any notice of default given by the Authority pursuant to Article IX of this Agreement. ARTICLE VIII PROHIBITIONS AGAINST ASSIGNMENT AND TRANSFER; INDEMNIFICATION Section 8.01. Representation As to Development . The Developer represents and agrees that its purchase of the Development Property, and its undertakings pursuant to the Agreement, are, and will be used, for the purpose of development of the Development Property and not for speculation in land holding. Section 8.02. Prohibition Against Developer’s Transfer of Property and Assignment of Agreement . The Developer represents and agrees that prior to issuance of the Certificate of Completion: (a)Except only by way of security for, and only for, the purpose of obtaining construction, interim or permanent 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 undertaking the Developer Project, and any other purpose authorized by this Agreement, the Developer has not made or created and, prior to issuance of the Certificate of Completion, 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 therein, or any contract or agreement to do any of the same, to any person or entity whether or not related in any way to the Developer (collectively, a “Transfer”), without the prior written approval of the Authority (whose approval will not be unreasonably withheld, subject to the standards described in Section 8.02(b) below). 14 4847-2274-1044.2 (b)If the Developer seeks to effect a Transfer prior to issuance of the Certificate of Completion, the Authority shall be entitled to require as conditions to such Transfer that: (i)any proposed transferee shall have the qualifications and financial responsibility, in the reasonable judgment of the Authority, necessary and adequate to fulfill the obligations undertaken in this Agreement by the Developer as to the portion of the Development Property to be transferred; (ii)any proposed transferee, by instrument in writing satisfactory to the Authority and in form recordable in the public land records of Hennepin County, Minnesota, shall, for itself and its successors and assigns, and expressly for the benefit of the Authority, have expressly assumed all of the obligations of the Developer under this Agreement as to the portion of the Development Property to be transferred and agreed to be subject to all the conditions and restrictions to which the Developer is subject as to such portion; provided, however, that the fact that any transferee of, or any other successor in interest whatsoever to, the Development Property, or any part thereof, shall not, for whatever reason, have assumed such obligations or so agreed, and shall not (unless and only to the extent otherwise specifically provided in this Agreement or agreed to in writing by the Authority) deprive the Authority of any rights or remedies or controls with respect to the Development Property, the Developer Project or any part thereof or the construction of the Developer Project; it being the intent of the parties as expressed in this Agreement that (to the fullest extent permitted at law and in equity and excepting only in the manner and to the extent specifically provided otherwise in this Agreement) no transfer of, or change with respect to, ownership in the Development Property or any part thereof, or any interest therein, however consummated or occurring, and whether voluntary or involuntary, shall operate, legally, or practically, to deprive or limit the Authority of or with respect to any rights or remedies on controls provided in or resulting from this Agreement with respect to the Development Property that the Authority would have had, had there been no such transfer or change. In the absence of specific written agreement by the Authority to the contrary, 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 Redevelopment Property, from any of its obligations with respect thereto; and (iii)any and all instruments and other legal documents involved in effecting the transfer of any interest in this Agreement or the Development Property governed by this Article VIII, shall be in a form reasonably satisfactory to the Authority. If the foregoing conditions are satisfied then the Developer shall be released from its obligation under this Agreement, as to the portion of the Development Property that is transferred, assigned, or otherwise conveyed. 15 4847-2274-1044.2 Section 8.03. Release and Indemnification Covenants . (a)The Developer releases from and covenants and agrees that the Authority and the City 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 City and the governing body members, officers, 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 Developer Project. (b)Except for any willful misrepresentation or any willful or wanton misconduct or negligence of the Indemnified Parties as hereinafter defined, and except for any breach by any of the Indemnified Parties of their obligations under this Agreement, the Indemnified Parties shall not be liable for any damage or injury to the persons or property of the Developer or its officers, agents, servants, or employees or any other person who may be about the Development Property or Developer Project. For the purposes of this Section, the term “Indemnified Parties” means the Authority, the City, and the governing body members, officers, agents, servants, and employees thereof. (c)Except for any willful misrepresentation or any willful or wanton misconduct or negligence of the Indemnified Parties, and except for any breach by any of the Indemnified Parties of their obligations under this Agreement, the Developer agrees to protect and defend the Indemnified Parties, now and 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 Developer’s acquisition, construction, installation, ownership, maintenance, and operation of the Development Property. (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 such entity and not of any governing body member, officer, agent, servant, or employee of such entities in the individual capacity thereof. ARTICLE IX EVENTS OF DEFAULT Section 9.01. Events of Default Defined . The following shall be “Events of Default” under this Agreement and the term “Event of Default” shall mean, whenever it is used in this Agreement, any one or more of the following events, after the non-defaulting party provides 30 days’ written notice to the defaulting party of the event, but only if the event has not been cured within said 30 days or, if the event is by its nature incurable within 30 days, the defaulting party does not, within such 30-day period, provide assurances reasonably satisfactory to the party providing notice of default that the event will be cured and will be cured as soon as reasonably possible: 16 4847-2274-1044.2 (a)failure by the Developer or Authority to observe or perform any covenant, condition, obligation, or agreement on its part to be observed or performed under this Agreement; (b)if, before issuance of the Certificate of Completion for all the Developer Project, the Developer shall: (i)file any petition in bankruptcy or for any reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under the United States Bankruptcy Act or under any similar federal or State law; or (ii)make an assignment for benefit of its creditors; or (iii)admit in writing its inability to pay its debts generally as they become due; or (iv)be adjudicated as bankrupt or insolvent. Section 9.02. Remedies on Default . Whenever any Event of Default referred to in Section 9.01 of this Agreement occurs, the Authority or Developer may take the following actions: (a)The Authority or Developer may suspend its performance under the Agreement until it receives assurances that the defaulting party will cure its default and continue its performance under the Agreement. (b)Upon an Event of Default by the Developer, the Authority may withhold payments under any Note in accordance with its terms pending cure of the Event of Default, or may terminate such Note and this Agreement. (c)Except as otherwise expressly stated in this Agreement, the Authority or Developer may take whatever action, including legal, equitable, or administrative action, which may appear necessary or desirable to collect any payments due under this Agreement, or to enforce performance and observance of any obligation, agreement, or covenant under this Agreement. (d) Cancel or rescind or terminate the Agreement. Section 9.03.No Remedy Exclusive. No remedy herein conferred upon or reserved to any party is intended to be exclusive of any other available remedy or remedies (except as provided herein), 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 often as may be deemed expedient. To entitle the Authority 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. 17 4847-2274-1044.2 Section 9.04. 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 10.01. Conflict of Interests; Authority Representatives Not Individually Liable . The Authority and the Developer, to the best of their respective knowledge, represent and agree that no member, official, or employee of the Authority shall have any personal interest, direct or indirect, in the Agreement, nor shall any such member, official, or employee participate in any decision relating to the Agreement that affects his personal interests or the interests of any corporation, partnership, or association in which he, directly or indirectly, is interested. 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 by the Authority or for any amount that may become due to the Developer or successor or on any obligations under the terms of the Agreement. Section 10.02. Equal Employment Opportunity . The Developer, for itself and its successors and assigns, agrees that during the construction of the Developer Project provided for in the Agreement it will comply with all applicable federal and state equal employment and non- discrimination laws and regulations. Section 10.03. Restrictions on Use . (a)The Developer agrees that it must continue operation of the Developer Project as defined in Section 1.01 hereof through the Maturity Date, and shall not discriminate upon the basis of race, color, creed, sex, or national origin in the sale, lease, or rental or in the use or occupancy of the Development Property or any improvements constructed or to be constructed thereon, or any part thereof. (b)The Developer further agrees that until the Maturity Date, the Developer, and such successors and assigns, shall maintain the Developer Project as described in Section 4.01 hereof. Section 10.04. 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 10.05. 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, to the following addresses (or to such other addresses as either party may notify the other): 18 4847-2274-1044.2 to Developer: KTJ 285, LLC ____________________ ______________________ Telephone: (___) ___-____ Facsimile: (___) ___-____ E-mail: ________________ Attention: _____________ to Authority: Shorewood Economic Development Authority 5755 County Club Road Shorewood, MN 55331 Telephone: (___) ___-____ Facsimile: (___) ___-____ Attention: _______________ to City: City of Shorewood 5755 County Club Road Shorewood, MN 55331 Telephone: (___) ___-____ Facsimile: (___) ___-____ Attention: City Administrator Section 10.06. Counterparts . This Agreement may be executed in any number of counterparts, each of which shall constitute one and the same instrument. Section 10.07. Amendment . This Agreement may be modified only by written amendments hereto approved by the Authority and the Developer. Section 10.08. Minnesota Law . This Agreement will be construed in accordance with the laws of the State, and any claim arising from this Agreement will be adjudicated in the State. Section 10.09. Authority Approvals . Unless otherwise specified, any approval required by the Authority under this Agreement may be given by the Authority Representative, except that final approval of issuance of the Note shall be made by the City Council of the City and the Board of the Authority. Section 10.10. Term of This Agreement . The term of this Agreement shall commence on the day and year first above written and continue until the Termination Date. The Termination Date shall be the earlier of: (a)the date on which this Agreement is cancelled or terminated in accordance with the provisions of Article IX or any other provision of this Agreement providing for termination; (b)the date on which this Agreement is cancelled or rescinded by mutual written agreement of the Authority and Developer; or 19 4847-2274-1044.2 (c)the Maturity Date. Section 10.11. Effect of Termination or Assignment . Upon termination of this Agreement all rights and obligations of the Authority, the City and Developer shall terminate, except as follows: (a) any amounts due from Developer for charges incurred prior to termination shall continue to be the obligation of the Developer; and (b) any event that occurs prior to termination that results in the obligation of the Developer to indemnify and defend shall survive termination. [Remainder of page intentionally left blank] 20 4847-2274-1044.2 IN WITNESS WHEREOF, the Authority and Developer have caused this Agreement to be duly executed by their duly authorized representatives as of the date first above written. SHOREWOOD ECONOMIC DEVELOPMENT AUTHORITY, as the City By ___________________, STATE OF MINNESOTA ) ) ss. COUNTY OF HENNEPIN ) The foregoing instrument was acknowledged before me this _____ day of _________, 2016, by __________ and ___________, the ________________, respectively, of the Shorewood Economic Development Authority, on behalf of the Authority. Notary Public My Commission Expires: [SEAL] 4847-2274-1044.2 IN WITNESS WHEREOF, the Authority and Developer have caused this Agreement to be duly executed by their duly authorized representatives as of the date first above written. KTJ 285, LLC, as the Developer By ___________________, ________________ STATE OF MINNESOTA ) ) ss. COUNTY OF HENNEPIN ) The foregoing instrument was acknowledged before me this _____ day of _________, 2016, by _________________, the ________________ of KTJ 285, LLC, a Minnesota limited liability company, on behalf of the corporation. Notary Public My Commission Expires: [SEAL] 4847-2274-1044.2 IN WITNESS WHEREOF, the City acknowledges this Agreement as of the date first above written. CITY OF SHOREWOOD, MINNESOTA, as the City By ___________________, Mayor By ___________________, City Administrator STATE OF MINNESOTA ) ) ss. COUNTY OF HENNEPIN ) The foregoing instrument was acknowledged before me this _____ day of _________, 2016, by __________ and ___________, the Mayor and City Administrator, respectively, of the City of Shorewood, a Minnesota municipal corporation, on behalf of the City. Notary Public My Commission Expires: [SEAL] 4847-2274-1044.2 SCHEDULE A DEVELOPMENT PROPERTY 4847-2274-1044.2 SCHEDULE B FORM OF NOTE UNITED STATES OF AMERICA STATE OF MINNESOTA TAX INCREMENT REVENUE NOTE SERIES 2016 No. R-1$1,876,164 Interest Rate Maturity Date Original Issue Date 5.50% February 1, 2045 July ___, 2016 The Economic Development Authority in and for the City of Shorewood, Minnesota (the “Authority”), for value received, certifies that it is indebted and hereby promises to pay to KTJ 285, LLC (the “Holder”), the principal sum of $1,876,164, and to pay interest thereon at the rate of 5.50% per annum, but solely from the sources and to the extent set forth herein. All capitalized terms not defined herein shall have the meaning given to such terms as defined in the Contract for Private Development dated July __, 2016 (the “Agreement”), by and between Authority, the City and Developer. Payments 1. . Principal and interest (the “Payments”) shall be paid on February 1 and August 1 (each a “Payment Date”) thereafter to and including, the sooner of February 1, 2045 or the date the principal sum is paid in full (the “Payment Dates”) in the amounts and from the sources set forth in Section 3 herein. Payments will commence on the Payment Date on which the City has Available Tax Increment, after the Certificate of Completion has been delivered to KTJ 285, LLC. Interest 2. . Interest at the rate stated herein will accrue on the unpaid principal, commencing on the date of original issue. Interest will be computed on the basis of a year of 360 days and charged for actual days principal is unpaid. Interest on this Note shall not be compounded. Available Tax Increment 3. . Payments on this Note are payable on each Payment Date in the amount of and solely payable from Available Tax Increment, which means, on any Payment Date, 75% of the Tax Increment attributable to the Development Property and Developer Project thereon and received by the City from the County pursuant to the TIF Act in the six-month period before such Payment Date. Available Tax Increment will not include any Tax Increment if, as of any Payment Date, there is an uncured Event of Default under the Agreement. 4847-2274-1044.2 The Authority shall have no obligation to pay principal of this Note on each Payment Date from any source other than Available Tax Increment, and the failure of the Authority to pay the entire amount of principal and interest on this Note on any Payment Date shall not constitute a default hereunder as long as the Authority pays principal and interest hereon to the extent of Available Tax Increment. The Authority will have no obligation to pay the unpaid balance of principal or accrued interest that may remain after the final Payment on February 1, 2045. Optional Prepayment 4. . The principal sum and all accrued interest payable under this Note is prepayable in whole or in part at any time by the Authority without premium or penalty. No partial prepayment will affect the amount or timing of any other regular payment otherwise required to be made under this Note. Default 5. . At the Authority’s option, this Note will terminate and the Authority’s obligation to make any payments under this Note will be discharged upon the occurrence of an Event of Default on the part of the Developer as defined in Section 9.1 of the Agreement, but only if the Event of Default has not been cured in accordance with Section 9.2 of the Agreement. Nature of Obligation 6. . This Note is one of an issue in the total principal amount of $1,876,164, issued in exchange for aid in financing certain public redevelopment costs of a Development District undertaken by the Authority pursuant to Minnesota Statutes, Sections 469.0001 through 469.047, as amended, and is issued pursuant to an authorizing resolution (the “Resolution”) duly adopted by the Authority on July ___, 2016, and pursuant to and in full conformity with the Constitution and laws of the State of Minnesota, including Minnesota Statutes, Sections 469.174 to 469.1794, as amended. This Note is a limited obligation of the Authority which is payable solely from Available Tax Increment pledged to the payment hereof under the Resolution. This Note and the interest hereon will not be deemed to constitute a general obligation of the State of Minnesota or any political subdivision thereof, including, without limitation, the Authority. Neither the State of Minnesota, nor any political subdivision thereof will be obligated to pay the principal of or interest on this Note or other costs incident hereto except out of Available Tax Increment, and neither the full faith and credit nor the taxing power of the State of Minnesota or any political subdivision thereof is pledged to the payment of the principal of or interest on this Note or other costs incident hereto. Estimated Tax Increment Payments 7. . Any estimates of Tax Increment prepared by the Authority or its financial advisors in connection with the TIF District or the Agreement are for the benefit of the Authority, and are not intended as representations on which the Note Holder may rely. Registration and Transfer 8. . This Note is issuable only as a fully registered note without coupons. As provided in the Resolution, and subject to certain limitations set forth therein, this Note is transferable upon the books of the Authority kept for that purpose at the principal office of the ______________, by the Authority or the City, upon surrender of this Note together with a written instrument of transfer satisfactory to the Authority, duly executed by the Holder and satisfaction of any other requirements or consents in accordance with the Agreement. Upon such transfer or exchange and the payment by the Owner of any tax, fee, or governmental charge required to be paid by the Authority or the City with respect to such B-2 4847-2274-1044.2 transfer or exchange, there will be issued in the name of the transferee a new Note of the same aggregate principal amount, maturing on the same date. IN WITNESS WHEREOF, the Board of Commissioners of the Economic Development Authority in and for the City of Shorewood, Minnesota, has caused this Note to be executed with the manual signatures of its ______________, all as of the Date of Original Issue specified above. ECONOMIC DEVELOPMENT AUTHORITY IN AND FOR THE CITY OF SHOREWOOD, MINNESOTA _____________________________________ By: __________________________________ Title: _________________________________ B-3 4847-2274-1044.2 SCHEDULE C FORM OF CERTIFICATE OF COMPLETION RECITALS: WHEREAS, the Shorewood Economic Development Authority (the “Authority”), the City of KTJ 285, LLC Shorewood (the “City”) and (“Developer”) entered into a certain Contract for Private Development dated July ___, 2016 (“Contract”); and WHEREAS, the Contract contains certain covenants and restrictions set forth in Articles III and IV thereof related to completing certain Developer Project; and WHEREAS, the Developer has performed said covenants and conditions insofar as it is able in a manner deemed sufficient by the Authority to permit the execution of this certification; NOW, THEREFORE, this is to certify that all construction and other physical improvements related to the Developer Project specified to be done and made by the Developer have been completed and the agreements and covenants in Articles III and IV of the Contract have been performed by the Developer, and this Certificate is intended to be a conclusive determination of the satisfactory termination of the covenants and conditions of Articles III and IV of the Contract related to completion of the Developer Project, but any other covenants in the Contract shall remain in full force and effect. Dated: _____________, 20___ SHOREWOOD ECONOMIC DEVELOPMENT AUTHORITY By ___________________, _______________ STATE OF MINNESOTA ) ) ss. COUNTY OF HENNEPIN ) The foregoing instrument was acknowledged before me this _____ day of _________, 20__, by _________________, the ________________ of the Shorewood economic Development Authority, on behalf of the Authority. ___________________________ Notary Public My Commission Expires: [SEAL] C-1 4847-2274-1044.2 SCHEDULE D FORM OF MINIMUM ASSESSMENT AGREEMENT D-1 4847-2274-1044.2