The URL can be used to link to this page

Home My WebLink About9. Open Systems Application for Business Subsidy-EDA Res. No. 2005-4, EDA Res. No. 2005-5 and Res. No. 6251 EDA-6. CC.- 9.A. CITY OF SHAKOPEE Economic Development Authority To: Shakopee EDA Mayor and City Council From: Mark McNeill, City Administrator Kris Wilson, Asst. to the City Administrator/EDA Subject: Open Systems Application for Business Subsidy Date: June 1,2005 INTRODUCTION Open Systems, Inc. an existing business located at 1157 Valley Park Drive, Suite 105 has filed an application for Business Subsidy with the City of Shakopee. In the application, Open Systems, Inc. is requesting that the City take the necessary steps to put in place a Tax Increment Financing District. Staff's recommendation is to implement a Tax Increment Financing package of an estimated $170,478 of future value, based on the financial analysis completed by the City's financial consultant, Springsted Inc. NOTE: See attached TIF analysis. COMPANY BACKGROUND Open Systems, Inc. is an existing software company, founded in 1976, providing open architecture accounting software for small and midsized businesses. The product they manufacture, distribute, sell and support is known as Open Systems Accounting Software. Not only does Open Systems, Inc. sell software, they also provide consulting services for custom software development and modification/enhancements. Presently, Open Systems, Inc. is leasing space in the building at the above address. It is the company's decision not to renew the existing lease, and instead to purchase or build their own new business headquarters. Presently, Open Systems, Inc. is in discussions with other communities in the west and southwest metro area. One of the construction options that Open Systems, Inc. is considering is a building/construction proposal from Ryan Co. in the Dean Lakes Development. The proposed 25,000 sq ft facility would be located near the western end of the industrial area along the southern edge of Hwy 169 North. The one-story facility would have approximately 22,000 sq ft dedicated for office/manufacturing and 3,000 sq ft for warehouse space. The estimated market value of $2.4 million dollars for this 25.000 sq ft facility meets and exceeds the minimum requirements outlined in the policies set by the City of Shakopee for business subsidies. It is possible that the construction value may increase, and as such, the TIF benefit would be increased proportionately. Presently, Open Systems, Inc. has 58 positions working at its present location. The new facility would provide enough room for the company to grow and employ approximately 120 people. This new facility gives Open Systems, Inc. the ability to double in size and increase its ability to increase training and education. Open Systems, Inc. offers fairly high wage and benefit packages to their employees do to the required talent and educational needs of its employees in this very competitive industry. The pay and benefit packages of Open Systems, Inc. meets and exceeds the minimum requirements outlined in the policies set by the City of Shakopee for business subsidies. DISCUSSION Rationale for Public Financial Assistance The rationale behind the Open Systems, Inc. request for public financing assistance is based on four separate requirements that are unique to building within the Dean Lakes Development and not required at any of the other options that Open Systems, Inc is considering. The four separate items along with their costs are as follows: 1 - Street/Road Improvement/Utility Costs - related to the improvement of County Roads 83 & 16, and to the construction of the roadways and public utilities throughout the Dean Lakes Development. The proposed building site has a total of $125,000 or $1 per square foot ofland. 2 - Site Balancing/Grading Costs - Do to the need to bring in and grade large amounts of soil to balance and drain the Dean Lakes Development properly, per the approved "Conservation-Oriented Storm Water Plan". The additional cost associated with this work is $108,000 or $0.88 per square foot ofland. 3 - Landscaping Costs - With the unique landscaping requirements resulting from the "Conservation-Oriented" nature of the development requiring mostly native Minnesota plant palette, Open Systems, Inc. is limited on its' options for overall landscaping design. The estimated additional cost related to this unique landscaping requirement is $10,000 or $0.08 per foot of land. 4 - Power line Easement Costs - Because of the high voltage transmission lines and their easements, running through and across the Dean Lakes Development, Open Systems, Inc. is required to purchase an additional .3 acres of land for an additional $65,000. The $65,000 does not include any of the additional assessments and property taxes that Open Systems, Inc. will have to pay for years to come. Financial Analvsis The City of Shakopee authorized their financial consultant to develop and run a financial analysis for Tax Increment Financing and Tax Abatement to determine if the project could generate any financial assistance that would meet the City of Shakopee's Business Subsidy Policies. Of the two scenarios that were developed and run, the Tax Increment Financing scenario seemed to generate the amount of dollars desired by Open Systems, Inc, making the Dean Lakes Development option or proposal acceptable for them. The Tax Increment Financing option generates an estimated $170,478 over a TIF capture of 7 years. Note that the statutory maximum for a TIF of this classification is 9 years, which provides for 8 years' of additional increment from the time of capture of the first increment (which is primarily the increase in market value after January 1, 2004). An eighth year of increment would generate an added $24,254 The reason for the 7 year duration, vs. 8 years, is that the 7 years is closer to the 6 year tax abatement economic assistance that has been the practice for Shakopee (and Scott County) in recent years. While the EDA has the ability to increase this by the additional year, it should keep in mind that the economic assistance which is provided here will likely be seen as a precedent for future economic development applications in the Dean Lakes area. It should also be noted that as an "Individual Developer" within the Dean Lakes Business Park, Open Systems would also receive abatement assistance under the terms of the master development agreement the city entered into with Ryan Companies. The dollar amount of this abatement would be calculated annually based on the terms of the master development agreement, and is likely to change from year to year based on the level of commercial development within the Dean Lakes Business Park. Project Time Schedule Open Systems, Inc has indicated the need to be able to pull a building permit on or before June 15, 2005 in order to meet their time schedule for completing the construction and occupation of their new facility. Open Systems, Inc. has made the decision not to renew their lease at their present location. Recommendation by EDAC At the April 12, 2005 EDAC meeting, the committee listened to a presentation by Mark Schoening from Ryan Co. regarding the Business Subsidy Application submitted by Open Systems, Inc. In the application, Open Systems, Inc. is asking for assistance in the amount estimated under the tax increment-financing scenario. By a unanimous vote, the EDAC voted to recommend approval ofthe Open Systems business subsidy application. Planning Commission The Planning Commission unanimously adopted the attached resolution at their May 19 meeting, finding the expansion of the project area and proposed plan for TIF District 13 consistent with the general plan for development of the City. RECOMMENDATION: Staffs recommendation is to approve the establishment of a Tax Increment District of 7 years' duration, totaling a future value of $170,478, to benefit the Open Systems, Inc. proposal. ACTION REQUIRED: If the EDA concurs, it should, by motion: Offer RESOLUTION 2005-4; APPROVING TAX INCREMENT FINANCING PLAN FOR TAX INCREMENT FINANCING DISTRICT NO. 13 AND A MODIFIED REDEVELOPMENT PLAN FOR THE MINNESOTA RIVER V ALLEY HOUSING AND REDEVELOPMENT PROJECT NO. I, and move its adoption. Offer RESOLUTION 2005-5; APPROVING CONTRACT FOR PRIVATE DEVELOPMENT WITH OPEN SYSTEMS, INC. AND AWARDING THE SALE OF, AND PROVIDING THE FORM, TERMS, COVENANTS AND DIRECTIONS FOR THE ISSUANCE OF ITS $125,200 TAX INCREMENT REVENUE NOTE, SERIES 2005, and move its adoption. If the City Council concurs with a positive recommendation from the EDA, it should, by motion: Offer RESOLUTION 6251; APPROVING TAX INCREMENT FINANCING PLAN FOR TAX INCREMENT FINANCING DISTRICT NO. 13 AND A MODIFIED REDEVELOPMENT PLAN FOR THE MINNESOTA RIVER VALLEY HOUSING AND REDEVELOPMENT PROJECT NO. I; AND APPROVING CONTRACT FOR PRIVATE DEVELOPMENT BETWEEN THE CITY, THE ECONOMIC DEVELOPMENT AUTHORITY FOR THE CITY OF SHAKOPEE, OPEN SYSTEMS, INC., AND OS INVESTMENTS, LLC, WHICH INCLUDES A BUSINESS SUBSIDY AGREEMENT, and move its adoption. Mark McNeill City Administrator Assumptions Report - TIF I City of Shakopee, Minnesota Tax Increment Financing (Economic Development) District No. Open Systems Project Scenario B - $2.4M EMV - Update May 2005 Projections - 7 Years Type of Tax Increment Financing District Economic Development Maximum Duration of TIF District 8 years from 1 st increment Projected Certification Request Date 06/30/05 Decertification Date 12/31/13 (7 Years of Increment: 2004/2005 Base Estimated Market Value* $182,155 Original Net Tax Capacity $2,893 Assessment/Collection Year 2005/2006 2006/2007 2007/2008 2008/2009 Base Estimated Market Value $182,155 $182,155 $182,155 $182,155 Increase in Estimated Market Value 0 2,217,845 2,217,845 2,217,845 Total Estimated Market Value 182,155 2,400,000 2,400,000 2,400,000 Total Net Tax Capacity $2,893 $47,250 $47,250 $47,250 City of Shakopee 32.433% Scott County 36.635% ISO #720 21.517% Other 5.197% Local Tax Capacity Rate 95.782% 2003/2004 Fiscal Disparities Contribution From TIF District 36,0773% Administrative Retainage Percent (maximum = 10% 10.00% Pooling Percent 0.00% Bonds Note (Pay-As-You-Go) Bonds Dated NA Note Dated 06/30/05 Bond Issue @ 2.74% (NIC: NA Note Rate 6.00% Eligible Project Costs NA Note Amount $125,200 Present Value Date & Rate 06/30/05 5.00% Notes * For estimation purposes, assume base value to be $182, 15t Calculations do not account for potential future changes to market values, class rates or tax capacity rates; a are using 2004 tax capacity rates Prepared by: Springsted Incorporated (printed on 5/3/2005 at 2:44 PM) Shakopee TIF $2.4mil 7yrs.xlsAssumptions Projected Pax-Go Note Report - TIF I City of Shakopee, Minnesota Tax Increment Financing (Economic Development) District No. Open Systems Project Scenario B - $2.4M EMV - Update May 2005 Projections. 7 Years Note Date: 06/30/05 Note Rate: 6.00% Amount: $125,200 Semi-Annual Loan Net Capitalized Balance Date Principal Interest P& I Revenue Interest Outstanding (1 ) (2) (3) (4) (5) (6) (7) 125,200.00 02/01/06 0.00 0.00 0.00 0.00 4,402.87 129,602.87 08/01/06 0.00 0.00 0.00 0.00 3,888.09 133,490.96 02/01/07 0.00 0.00 0.00 0.00 4,004.73 137,495.69 08/01/07 8,052.13 4,124,87 12,177.00 12,177.00 0.00 129,443.56 02/01/08 8,293.69 3,883.31 12,177.00 12,177.00 0.00 121,149.87 08/01/08 8,542.50 3,634.50 12,177.00 12,177.00 0.00 112,607.37 02/01/09 8,798.78 3,378.22 12,177.00 12,177.00 0.00 103,808.59 08/01/09 9,062.74 3,114.26 12,177.00 12,177.00 0.00 94,745.85 02/01/10 9,334.62 2,842.38 12,177.00 12,177.00 0.00 85,411.23 08/01/10 9,614.66 2,562.34 12,177.00 12,177.00 0.00 75,796.57 02/01/11 9,903.10 2,273.90 12,177.00 12,177.00 0.00 65,893.47 08/01/11 10,200.20 1,976.80 12,177.00 12,177.00 0.00 55,693.27 02/01/12 10,506.20 1,670.80 12,177.00 12,177.00 0.00 45,187.07 08/01/12 10,821.39 1,355.61 12,177.00 12,177.00 0.00 34,365.68 02/01/13 11,146.03 1,030.97 12,177.00 12,177.00 0.00 23,219,65 08/01/13 11,480.41 696.59 12,177.00 12,177.00 0.00 11,739.24 02/01/14 11,739.24 352.18 12,091.42 12,091.42 0.00 0.00 08/01/14 0.00 0.00 0.00 0.00 0.00 0.00 02/01/15 0.00 0.00 0.00 0.00 0.00 0,00 08/01/15 0.00 0.00 0.00 0.00 0.00 0.00 02/01/16 0.00 0.00 0.00 0.00 0.00 0.00 08/01/16 0.00 0.00 0.00 0.00 0.00 0.00 02/01/17 0.00 0.00 0.00 0.00 0.00 0.00 08/01/17 0.00 0.00 0.00 0.00 0.00 0.00 02/01/18 0.00 0.00 0.00 0.00 0.00 0.00 08/01/18 0.00 0.00 0.00 0.00 0.00 0.00 02/01/19 0.00 0.00 0.00 0.00 0.00 0.00 08/01/19 0.00 0.00 0.00 0.00 0.00 0.00 02/01/20 0.00 0.00 0.00 0.00 0.00 0.00 08/01/20 0.00 0.00 0.00 0.00 0.00 0.00 02/01/21 0.00 0.00 0.00 0.00 0.00 0.00 08/01/21 0.00 0.00 0.00 0.00 0.00 0.00 02/01/22 0.00 0.00 0.00 0.00 0.00 0.00 08/01/22 0.00 0.00 0.00 0.00 0.00 0.00 02/01/23 0.00 0.00 0.00 0.00 0.00 0.00 08/01/23 0.00 0.00 0.00 0.00 0.00 0.00 02/01/24 0.00 0.00 0.00 0.00 0.00 0.00 $137,496 $32,896.73 $170,392.42 $170,392.42 $12,295.69 Surplus Tax Increment 85.58 Total Net Revenue $170,478.00 Prepared by: Springsted Incorporated (printed on 5/3/2005 at 2:44 PM)Shakopee TIF $2.4mil 7yrs.xls Assumptions Report - TIF I City of Shakopee, Minnesota Tax Increment Financing (Economic Development) District No. Open Systems Project Scenario B - $2.4M EMV - Update May 2005 Projections - 7 Years Type of Tax Increment Financing District Economic Development Maximum Duration of TIF District 8 years from 1 st increment Projected Certification Request Date 06/30/05 Decertification Date 12/31/13 (7 Years of Increment: 2004/2005 Base Estimated Market Value' $182,155 Original Net Tax Capacity $2,893 Assessment Collection Year 2005/2006 2006/2007 2007/2008 2008/2009 Base Estimated Market Value $182,155 $182,155 $182,155 $182,155 Increase in Estimated Market Value 0 2,217,845 2,217,845 2,217,845 Total Estimated Market Value 182,155 2,400,000 2,400,000 2,400,000 Total Net Tax Capacity $2,893 $47,250 $47,250 $47,250 City of Shakopee 32.433% Scott County 36.635% ISD #720 21.517% Other 5.197% Local Tax Capacity Rate 95.782% 2003/2004 Fiscal Disparities Contribution From TIF District 36,0773% Administrative Retainage Percent (maximum = 10% 10.00% Pooling Percent 0.00% Bonds Note (Pay-As-You-Go) Bonds Dated NA Note Dated 06/30/05 Bond Issue @ 2.74% (NIC: NA Note Rate 6.00% Eligible Project Costs NA Note Amount $125,200 Present Value Date & Rate 06/30/05 5.00% Notes * For estimation purposes, assume base value to be $182, 155 Calculations do not account for potential future changes to market values, class rates or tax capacity rates; a are using 2004 tax capacity rates Prepared by: Springsted Incorporated (printed on 5/3/2005 at 2:44 PM)Shakopee TIF $2.4mil 7yrs.xlsAssumptions Projected Tax Increment Report I City of Shakopee, Minnesota Tax Increment Financing (Economic Development) District No. Open Systems Project Scenario B - $2.4M EMV - Update May 2005 Projections - 7 Years Less: Less: Retained Times: Less: Less: Less Annual Total Original Fiscal Captured Tax Annual State Aud. Admin. Annual Period Net Tax Net Tax Disp.@ Net Tax Capacity Gross Tax Deduction Retainage Net Ending Capacity Capacity 36.0773% Capacity Rate Increment 0.360% 10.00% Revenue 1 2 3 4 5 6 7 8 9 10 12/31/05 2,893 2,893 0 0 95.782% 0 0 0 0 12/31/06 2,893 2,893 0 0 95.782% 0 0 0 0 12/31/07 47,250 2,893 16,003 28,354 95.782% 27,158 98 2,706 24,354 12/31/08 47,250 2,893 16,003 28,354 95.782% 27,158 98 2,706 24,354 12/31/09 47,250 2,893 16,003 28,354 95.782% 27,158 98 2,706 24,354 12/31/10 47,250 2,893 16,003 28,354 95.782% 27,1 58 98 2,706 24,354 12/31/11 47,250 2,893 16,003 28,354 95.782% 27,158 98 2,706 24,354 12/31/12 47,250 2,893 16,003 28,354 95.782% 27,158 98 2,706 24,354 12/31/13 47,250 2,893 16,003 28,354 95.782% 27,158 98 2,706 24,354 12/31/14 0 0 0 0 95.782% 0 0 0 0 12/31/15 0 0 0 0 95.782% 0 0 0 0 12/31/16 0 0 0 0 95.782% 0 0 0 0 12/31/17 0 0 0 0 95.782% 0 0 0 0 12/31/18 0 0 0 0 95.782% 0 0 0 0 12/31/19 0 0 0 0 95.782% 0 0 0 0 12/31/20 0 0 0 0 95.782% 0 0 0 0 12/31/21 0 0 0 0 95.782% 0 0 0 0 $190,106 $686 $18,942 $170,478 Prepared by: Springsted Incorporated (printed on 5/3/2005 at 2:44 PM)Shakopee TIF $2.4mil 7yrs.xls TIF DISTRICT #13 Projected Tax Increment Report I City of Shakopee, Minnesota Tax Increment Financing (Economic Development) District No. Open Systems Project Scenario B - $2.4M EMV - Update May 2005 Projections -7 Years Less: Less: Retained Times: Less: Less: Annual Total Original Fiscal Captured Tax Annual State Aud. Admin, Annual Period Net Tax Net Tax Disp.@ Net Tax Capacity Gross Tax Deduction Retainage Net Ending Capacity Capacity 36.0773% Capacity Rate Increment 0.360% 10,00% Revenue 1 2 3 4 5 6 7 8 9 10 12/31/05 2,893 2,893 0 0 95.782% 0 0 0 0 12/31/06 2,893 2,893 0 0 95.782% 0 0 0 0 12/31/07 47,250 2,893 16,003 28,354 95.782% 27,158 98 2,706 24,354 12/31/08 47,250 2,893 16,003 28,354 95.782% 27,158 98 2,706 24,354 12/31/09 47,250 2,893 16,003 28,354 95.782% 27,158 98 2,706 24,354 12/31/10 47,250 2,893 16,003 28,354 95.782% 27,158 98 2,706 24,354 12/31/11 47,250 2,893 16,003 28,354 95.782% 27,158 98 2,706 24,354 12/31/12 47,250 2,893 16,003 28,354 95.782% 27,158 98 2,706 24,354 12/31/13 47,250 2,893 16,003 28,354 95.782% 27,1 58 98 2,706 24,354 12/31/14 0 0 0 0 95.782% 0 0 0 0 12/31/15 0 0 0 0 95.782% 0 0 0 0 12/31/16 0 0 0 0 95.782% 0 0 0 0 12/31/17 0 0 0 0 95.782% 0 0 0 0 12/31/18 0 0 0 0 95.782% 0 0 0 0 12/31/19 0 0 0 0 95.782% 0 0 0 0 12/31/20 0 0 0 0 95.782% 0 0 0 0 12/31/21 0 0 0 0 95.782% 0 0 0 0 $190,106 $686 $18,942 $170,478 Prepared by: Springsted Incorporated (printed on 5/3/2005 at 2:44 PM)Shakopee TIF $2.4mil 7yrs.xls CITY OF SHAKOPEE TIF PROJECT AREA CITY OF SHAKOPEE PLANNING COMMISSION RESOLUTION NO. PC-05-062 RESOLUTION FINDING THE MODIFICATION OF HOUSING AND REDEVELOPMENT PLAN FOR MINNESOTA RIVER VALLEY HOUSING AND REDEVELOPMENT PROJECT NO.1 AND TAX INCREMENT FINANCING PLAN FOR TAX INCREMENT FINANCING DISTRICT NO. 13 CONSISTENT WITH THE GENERAL PLAN FOR DEVELOPMENT OF THE CITY OF SHAKOPEE WHEREAS, the City Council of the City of Shakopee has authorized preparation of a Modified Redevelopment Plan for the Minnesota River Valley Housing and Redevelopment Project No. I ("Project") and the Tax Increment Financing Plan ("TIF Plan") for Tax Increment Financing District No. 13, within the Project, and the Modified Redevelopment Plan and TIF Plan have been submitted to the Planning Commission for comment; and WHEREAS, the Planning Commission has reviewed the Modified Redevelopment Plan and TIF Plan and has compared them with the general plan for development of the City as a whole. NOW, THEREFORE, BE IT RESOLVED By the Planning Commission of the City of Shakopee, Minnesota as follows: 1. The Modified Redevelopment Plan for the Project and TIF Plan for TIF District No. 13 are found to conform to the general plan for the development of the City of Shakopee as a whole. 2. City staff are authorized and directed to provide a copy of this resolution to the City Council and the Board of Commissioners of the Economic Development Authority for the City of Shakopee as the Planning Commission's written comment regarding the proposed plan modifications. Approved this 19th day of May, 2005, by the Planning Commission of the City of Shakopee, Minnesota. ATTEST: Chairperson Community Development Director 262597(JAE) SH155-162 TIF DISTRICT #13 OPEN SYSTEMS INC. TRAVERSE Accounting Business Software for Windows OPEN SYSTEMS Accounting Software May 31, 2005 Mr. Mark McNeill City Administrator City of Shakopee 129 South Holmes Street Shakopee, MN 55379 Dear Mark, On behalf of Open Systems, Inc., I would like to thank you and all of the other individuals associated with the City of Shakopee who have considered and approved our request for a business subsidy (subject to the public hearing scheduled for June 7th). As we have indicated from our earliest conversations, and in the Subsidy Application itself, the tax increment aid is vital to us because it helps to offset some of the unusual development costs associated with the Dean Lakes site that we have selected as our only Shakopee option. During the next month, leading up to June 7th, we will be conducting a final analysis of the choice we have to make. Because we are committed to owning a facility that would serve as a long-term platform for corporate growth, renewing our lease at Park 2000 (which expires in November of this year) is not an option. None of the other options that we are considering lie within the City of Shakopee. If the City is unable to provide the business subsidy, we will continue to look at these other options. Thank you and the City, once again, for your careful consideration during the past several months. We have a difficult but important business decision to make within the next thirty days, and we appreciate your willingness to make our only Shakopee option as competitive as possible. We look forward to the public hearing on 7th, and sincerely hope that afterwards, we will be in a position to make economic sense of remaining in Shakopee to grow our business and add to the City's job and tax base. Sincerely, Michael Bertini, CEO 1157 Valley Park Drive, Suite 105, Shakopee, MN 55379 Phone: 952-403-5700 . Fax: 952-496-2495 . www.osas.com ECONOMIC DEVELOPMENT AUTHORITY FOR THE CITY OF SHAKO PEE RESOLUTION NO. 2005-4 RESOLUTION APPROVING TAX INCREMENT FINANCING PLAN FOR TAX INCREMENT FINANCING DISTRICT NO. 13 AND A MODIFIED REDEVELOPMENT PLAN FOR THE MINNESOTA RIVER VALLEY HOUSING AND REDEVELOPMENT PROJECT NO. I WHEREAS, the City of Shakopee ("City") has previously established its Minnesota River Valley Housing and Redevelopment Project No. I (the "Project") pursuant to Minnesota Statutes, Sections 469.001 to 469.047 ("HRA Act"); and WHEREAS, within the Project the City has created certain tax increment financing districts pursuant to Minnesota Statutes, Sections 469.174 to 469.179 (collectively, the "TIF Act"). WHEREAS, the Project is now administered by the Economic Development Authority for the City of Shakopee (the "Authority"); and WHEREAS, the Authority has determined to modify the redevelopment plan ("Project Plan") for the Project and approve a new tax increment financing plan ("TIF Plans") for TIF District No. 13 (the "TIF District"), all as described in a plan document presented to this Board on this date; and WHEREAS, by Resolution No. approved by the City Planning Commission on May 19, 2005, the City Planning Commission found that the modified Project Plan and TIF Plan conform to the general plan for the development of the City as a whole; and WHEREAS, this Board has reviewed the contents of the modified Project Plan and TIF Plan and this date conducted a duly noticed public hearing thereon, at which the views of all interested parties were heard. NOW, THEREFORE, BE IT RESOLVED by the Board of Commissioners ("Board") of the Economic Development Authority for the City of Shakopee that: 1. The modified Project Plan and the TIP Plan for TIP District No. 13 are hereby approved and adopted. 2. The Board hereby makes all the findings set forth in the Project Plan and the TIP Plan, which documents are incorporated by reference herein. 3. The Board hereby transmits the modified Project Plan and TIP Plans to the Council SH235-17(JAE) 263232 and recommends that the Council adopt the modified Project Plan and TIF Plan. 4. Upon approval of the modified Project Plan and TIF Plans by the Council, Authority staff and consultants are authorized to take all actions necessary to implement those plans. Approved by the Board of Commissioners of the Economic Development Authority for the City of Shako pee this 7th day of June, 2005. President Attest: Executive Director SH235-17(JAE) 263232 ECONOMIC DEVELOPMENT AUTHORITY FOR THE CITY OF SHAKOPEE RESOLUTION NO. 2005-5 RESOLUTION APPROVING CONTRACT FOR PRIVATE DEVELOPMENT WITH OPEN SYSTEMS, INC. AND AWARDING THE SALE OF, AND PROVIDING THE FORM, TERMS, COVENANTS AND DIRECTIONS FOR THE ISSUANCE OF ITS $125,200 TAX INCREMENT REVENUE NOTE, SERIES 2005 BE IT RESOLVED BY the Board of Commissioners (the "Board") of the Economic Development Authority for the City of Shakopee, Minnesota (the "Authority") as follows: Section I. Authorization; Award of Sale. 1.01. Authorization. The Authority and the City of Shakopee (the "City") have heretofore approved the establishment of its Tax Increment Financing District No. 13 (the "TIP District") within its Minnesota River Valley Housing and Redevelopment Project No.1 (the "Project"), and have adopted a tax increment financing plan for the purpose of financing certain improvements within the Project. Pursuant to Minnesota Statutes, Section 469.178, the Authority is authorized to issue and sell its bonds for the purpose of financing a portion of the public development costs of the Project. Such bonds are payable from all or any portion of revenues derived from the TIP District and pledged to the payment of the bonds. The Authority hereby finds and determines that it is in the best interests of the Authority that it issue and sell its $125,200 Tax Increment Revenue Note, Series 2005 (the "Note") for the purpose of financing certain public costs ofthe Project. 1.02. Agreement Approved; Issuance. Sale. and Terms of the Note. The Authority hereby approves the Contract for Private Development between the City, the Authority, Open Systems, Inc., and OS Investments, LLC (the "Agreement"), and authorizes the President and Executive Director to execute such Agreement in substantially the form on file with the City, subject to modifications that do not alter the substance of the transaction and are approved by such officials, provided that execution of the Agreement by such officials is conclusive evidence of their approval. The Authority hereby delegates to the Executive Director the determination of the date on which the Note is to be delivered, in accordance with Section 3.4 ofthe Agreement. The Note shall be sold to Open Systems, Inc. (the "Owner"). The Note shall be dated the date of delivery thereof, and shall bear interest at the rate of 6.00% per annum to the earlier of maturity or prepayment. The Authority shall receive in exchange for the sale of the Note the agreement of the Owner to pay the cost ofland acquisition as defined in the Agreement. Section 2. Form of Note. The Note shall be in substantially the following form, with the blanks to be properly filled in and the principal amount and payment schedule adjusted as of the date of issue: 1 UNITED STATE OF AMERICA STATE OF MINNESOTA COUNTY OF SCOTT ECONOMIC DEVELOPMENT AUTHORITY FOR THE CITY OF SHAKOPEE No. R-1 $125,200 TAX INCREMENT REVENUE NOTE SERIES 2005 Date Rate of Original Issue 6.00% The Economic Development Authority for the City of Shakopee ("Authority") for value received, certifies that it is indebted and hereby promises to pay to Open Systems, Inc. (the "Owner"), the principal sum of $125,200 and to pay interest thereon at the rate of 6.0% per annum, as and to the extent set forth herein. 1. Payments. Principal and interest ("Payments") shall be paid on August 1, 2007 and each February I and August I thereafter to and including February 1, 2014 ("Payment Dates") in the amounts and from the sources set forth in Section 3 herein. Payments shall be applied first to accrued interest, and then to unpaid principal. Interest accruing from the date of issue through and including February 1,2007 shall be compounded semiannually on February 1 and August I of each year and added to principal. Payments are payable by mail to the address of the Owner or such other address as the Owner may designate upon 30 days written notice to the Authority. Payments on this Note are payable in any coin or currency of the United States of America which, on the Payment Date, is legal tender for the payment of public and private debts. 2. Interest. Interest at the rate stated herein shall accrue on the unpaid principal, commencing on the date of original issue. Interest shall be computed on the basis of a year of 360 days and charged for actual days principal is unpaid. 3. Available Tax Increment. Payments on this Note are payable on each Payment Date solely from and in the amount of "Available Tax Increment," which shall mean, on each Payment Date, 90% of the Tax Increment attributable to the Development Property and paid to the Authority by Scott County in the six months preceding the Payment Date, all as such terms are defined in the Contract for Private Development between the City, the Authority, Open Systems, Inc., and OS Investments, LLC (with Open Systems, Inc., the "Developer") dated as of June _, 2005 (the "Agreement"). 2 The Authority shall have no obligation to pay principal of and interest on 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 or 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 shall have no obligation to pay unpaid balance of principal or accrued interest that may remain after the final Payment on February 1, 2014. 4. Default. If on any Payment Date there has occurred and is continuing any Event of Default under the Agreement, the Authority may withhold from payments hereunder under all Available Tax Increment. If the Event of Default is thereafter cured in accordance with the Agreement, the Available Tax Increment withheld under this Section shall be deferred and paid, without interest thereon, on the next Payment Date after the Event of Default is cured. If the Event of Default is not timely cured, the Authority may terminate this Note by written notice to the Owner in accordance with the Agreement. 5. Optional Prepayment. 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 shall affect the amount or timing of any other regular payment otherwise required to be made under this Note. 6. Nature of Obligation. This Note is one of an issue in the total principal amount of $125,200, issued to aid in financing certain public development costs and administrative costs of a Project undertaken by the Authority pursuant to Minnesota Statutes, Sections 469.001 through 469.047, and is issued pursuant to an authorizing resolution (the "Resolution") duly adopted by the Authority on June 7,2005, and pursuant to and in full conformity with the Constitution and laws of the State of Minnesota, including Minnesota Statutes, Sections 469.174 to 469.179. 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 shall 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 shall 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. 7. Registration and Transfer. 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 City Finance Director, by the Owner hereof in person or by such Owner's attorney duly authorized in writing, upon surrender of this Note together with a written instrument of transfer satisfactory to the Authority, duly executed by the Owner. 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 with respect to such transfer or exchange, there will be issued in the name of the transferee a new Note of the same aggregate principal amount, bearing interest at the same rate and maturing on the same dates. 3 This Note shall not be transferred to any person other than an affiliate, or other related entity, of the Owner, unless the Authority has been provided with an opinion of counselor a certificate of the transferor, in a form satisfactory to the Authority, that such transfer is exempt from registration and prospectus delivery requirements of federal and applicable state securities laws. 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 exist, to happen, and to be performed in order to make this Note a valid and binding limited obligation of the Authority according to its terms, have been done, do exist, have happened, and have been performed in due form, time and manner as so required. IN WITNESS WHEREOF, the Board of Commissioners of the Economic Development Authority for the City of Shakopee have caused this Note to be executed with the manual signatures of its President and Executive Director, all as of the Date of Original Issue specified above. ECONOMIC DEVELOPMENT AUTHORITY FOR THE CITY OF SHAKOPEE Executive Director President REGISTRATION PROVISIONS The ownership of the unpaid balance of the within Note is registered in the bond register of the City Finance Director, in the name of the person last listed below. Date of Signature of Registration Registered Owner City Finance Director Open Systems, Inc. Federal Tax J.D. No. Section 3. Terms, Execution and Delivery. 3.01. Denomination, Payment. The Note shall be issued as a single typewritten note numbered R -I. The Note shall be issuable only in fully registered form. Principal of and interest on the Note shall be payable by check or draft issued by the Registrar described herein. 3.02. Dates: Interest Payment Dates. Principal of and interest on the Note shall be payable by mail to the owner of record thereof as of the close of business on the fifteenth day ofthe month preceding the Payment Date, whether or not such day is a business day. 3.03. Registration. The Authority hereby appoints the City Finance Director to perform the functions of registrar, transfer agent and paying agent (the "Registrar"). The effect of registration and the rights and duties of the Authority and the Registrar with respect thereto shall be as follows: (a) Register. The Registrar shall keep at its office a bond register in which the Registrar shall provide for the registration of ownership of the Note and the registration of transfers and exchanges ofthe Note. (b) Transfer of Note. Upon surrender for transfer of the Note duly endorsed by the registered owner thereof or accompanied by a written instrument of transfer, in form reasonably satisfactory to the Registrar, duly executed by the registered owner thereof or by an attorney duly authorized by the registered owner in writing, the Registrar shall authenticate and deliver, in the name of the designated transferee or transferees, a new Note of a like aggregate principal amount and maturity, as requested by the transferor. Notwithstanding the foregoing, the Note shall not be transferred to any person other than an affiliate, or other related entity, of the Owner unless the Authority has been provided with an opinion of counsel or a certificate of the transferor, in a form satisfactory to the Authority, that such transfer is exempt from registration and prospectus delivery requirements of federal and applicable state securities laws. The Registrar may close the books for registration of any transfer after the fifteenth day of the month preceding each Payment Date and until such Payment Date. S (c) Cancellation. The Note surrendered upon any transfer shall be promptly cancelled by the Registrar and thereafter disposed of as directed by the Authority. (d) Improper or Unauthorized Transfer. When the Note is presented to the Registrar for transfer, the Registrar may refuse to transfer the same until it is satisfied that the endorsement on such Note or separate instrument of transfer is legally authorized. The Registrar shall incur no liability for its refusal, in good faith, to make transfers which it, in its judgment, deems improper or unauthorized. (e) Persons Deemed Owners. The Authority and the Registrar may treat the person in whose name the Note is at any time registered in the bond register as the absolute owner of the Note, whether the Note shall be overdue or not, for the purpose of receiving payment of, or on account of, the principal of and interest on such Note and for all other purposes, and all such payments so made to any such registered owner or upon the owner's order shall be valid and effectual to satisfy and discharge the liability of the Authority upon such Note to the extent of the sum or sums so paid. (f) Taxes, Fees and Charges. For every transfer or exchange of the Note, the Registrar may impose a charge upon the owner thereof sufficient to reimburse the Registrar for any tax, fee, or other governmental charge required to be paid with respect to such transfer or exchange. (g) Mutilated, Lost, Stolen or Destroyed Note. In case any Note shall become mutilated or be lost, stolen, or destroyed, the Registrar shall deliver a new Note of like amount, maturity dates and tenor in exchange and substitution for and upon cancellation of such mutilated Note or in lieu of and in substitution for such Note lost, stolen, or destroyed, upon the payment of the reasonable expenses and charges of the Registrar in connection therewith; and, in the case the Note lost, stolen, or destroyed, upon filing with the Registrar of evidence satisfactory to it that such Note was lost, stolen, or destroyed, and of the ownership thereof, and upon furnishing to the Registrar of an appropriate bond or indemnity in form, substance, and amount satisfactory to it, in which both the Authority and the Registrar shall be named as obligees. The Note so surrendered to the Registrar shall be cancelled by it and evidence of such cancellation shall be given to the Authority. If the mutilated, lost, stolen, or destroyed Note has already matured or been called for redemption in accordance with its terms, it shall not be necessary to issue a new Note prior to payment. 3.04. Preparation and Delivery. The Note shall be prepared under the direction of the Executive Director and shall be executed on behalf of the Authority by the signatures of its President and Executive Director. In case any officer whose signature shall appear on the Note shall cease to be such officer before the delivery of the Note, such signature shall nevertheless be valid and sufficient for all purposes, the same as if such officer had remained in office until delivery. When the Note has been so executed, it shall be delivered by the Executive Director to the Owner thereof in accordance with the Agreement. 6 Section 4. Security Provisions. 4.0l. Pledge. The Authority hereby pledges to the payment of the principal of and interest on the Note all Available Tax Increment as defined in the Note. Available Tax Increment shall be applied to payment of the principal of and interest on the Note in accordance with the terms ofthe form of Note set forth in Section 2 of this resolution. 4.02. Bond Fund. Until the date the Note is no longer outstanding and no principal thereof or interest thereon (to the extent required to be paid pursuant to this resolution) remains unpaid, the Authority shall maintain a separate and special "Bond Fund" to be used for no purpose other than the payment of the principal of and interest on the Note. The Authority irrevocably agrees to appropriate to the Bond Fund in each year Available Tax Increment. Any Available Tax Increment remaining in the Bond Fund shall be transferred to the Authority's account for the TIF District upon the payment of all principal and interest to be paid with respect to the Note. Section 5. Certification of Proceedings. 5.01. Certification of Proceedings. The officers of the Authority are hereby authorized and directed to prepare and furnish to the Owner of the Note certified copies of all proceedings and records of the Authority, and such other affidavits, certificates, and information as may be required to show the facts relating to the legality and marketability of the Note as the same appear from the books and records under their custody and control or as otherwise known to them, and all such certified copies, certificates, and affidavits, including any heretofore furnished, shall be deemed representations of the Authority as to the facts recited therein. Section 6. Effective Date. This resolution shall be effective upon full execution of the Agreement. Adopted this _ day of June, 2005. President Executive Director 8 CITY OF SHAKOPEE Resolution No. 6251 RESOLUTION APPROVING TAX INCREMENT FINANCING PLAN FOR TAX INCREMENT FINANCING DISTRICT NO. 13 AND A MODIFIED REDEVELOPMENT PLAN FOR THE MINNESOTA RIVER VALLEY HOUSING AND REDEVELOPMENT PROJECT NO. I; AND APPROVING CONTRACT FOR PRIVATE DEVELOPMENT BETWEEN THE CITY, THE ECONOMIC DEVELOPMENT AUTHORITY FOR THE CITY OF SHAKOPEE, OPEN SYSTEMS, INC., AND OS INVESTMENTS, LLC, WHICH INCLUDES A BUSINESS SUBSIDY AGREEMENT WHEREAS, the City of Shakopee ("City") has previously established its Minnesota River Valley Housing and Redevelopment Project No. I (the "Project") pursuant to Minnesota Statutes, Section 469.001 to 469.047 ("HRA Act"); and WHEREAS, within the Project the City has created certain tax increment financing districts pursuant to Minnesota Statutes, Sections 469.174 to 469.1799 (collectively, the "TIF Act"); and WHEREAS, the Project is now administered by the Economic Development Authority for the City of Shakopee (the "Authority"); and WHEREAS, the Authority and City have determined to modify the redevelopment plan ("Project Plan") for the Project and approve a new tax increment financing plan ("TIF Plan") for TIF District No. 13 (the "TIF District"), all as described in a plan document presented to the Council on this date; and WHEREAS, the modified Project Plan and TIF Plan were, in accordance with the HRA Act and TIF Act, referred to the City Planning Commission and by Resolution No. approved by the City Planning Commission on May 19, 2005, the City Planning Commission found that the modified Project Plan and TIF Plan conform to the general plan for the development of the City as a whole; and WHEREAS, pursuant to Minnesota Statutes, Section 469.175, subd. 2, the proposed TIF Plan and the estimates of the fiscal and economic implications of the TIF Plan were presented to the School Board of Independent School District No. 720 and to the County Board of Commissioners of Scott County on or about May 6,2005; and WHEREAS, during a joint meeting of the Board of Commissioners of the Authority and City Council of the City and by resolution dated June 7, 2005, the Authority approved the modified SH235-17(JAE) 263230 Project Plan and TIF Plan and referred them to the Council for public hearing and consideration; and WHEREAS, this Council has reviewed the contents of the modified Project Plan and TIF Plan and this date conducted a duly noticed public hearing thereon, at which the views of all interested parties were heard; and WHEREAS, this Council has also reviewed a Contract for Private Development ("Contract") between the City, the Authority, Open Systems, Inc., and OS Investments, LLC (with Open Systems, Inc., the "Developer") which agreement includes a "business subsidy agreement" as defined in Minnesota Statutes, Section 166J.993 to I 16J.995. NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Shakopee, that: Section 1. Findings; Proiect 1.01. It is hereby found and determined that within the Project as modified there exist conditions of economic obsolescence, underutilization, and inappropriate uses of land constituting blight within the meaning of the HRA Act. The findings stated in the modified Project Plan are incorporated herein by reference. 1.02. It is further specifically found and determined that: a) the land within the Project as modified would not be made available for redevelopment without the public intervention and financial assistance described in the Project Plan; b) the Project Plan as modified will afford maximum opportunity, consistent with the sound needs of the City as a whole, for the redevelopment of the Project by private enterprise; and c) the Project Plan as modified conforms to the general plan for development of the City as set forth in the comprehensive municipal plan. 2. Findings; TIF District No. 13 2.01. It is found and determined that it is necessary and desirable for the sound and orderly development of the Project, and for the protection and preservation of the public health, safety, and general welfare, that the authority of the TIF Act be exercised by the City to provide public financial assistance to the TIF District and the Project. SH235-17(JAE) 263230 2.02. It is further found and determined, and it is the reasoned opinion of the City, that the development proposed in the TIP Plan could not reasonably be expected to occur solely through private investment within the reasonably foreseeable future and 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 TIP Plan. 2.03. The proposed public improvements to be financed in part through tax increment financing are necessary to permit the City to realize the full potential of the TIF District and the Project in terms of development intensity, employment opportunities, and tax base. 2.04. The TIP Plan conforms to the general plan for development of the City as a whole. 2.05. The TIP Plan will afford maximum opportunity, consistent with the sound needs of the City as a whole, for the development ofthe TIF District and the Project by private enterprise. 2.06. TIP District No. 13 is an economic development district under Minnesota Statutes, Section 469.174, Subd. 12 ofthe TIP Act. 2.07. Reasons and facts supporting all the above findings are set forth in the TIP Plan and are incorporated herein by reference. The Council has also relied upon the reports and recommendations of its staff and consultants, as well as the personal knowledge of members of the City Council, in reaching its conclusions regarding the TIF Plan. Section 3. Public Purpose 3.01. The adoption of the Plans conforms in all respects to the requirements of the Act. The Plans will help facilitate development that will create new commercial uses, provide employment opportunities, and improve the tax base. The City expressly finds that any private benefit to be received by the Developer is incidental, as the tax increment assistance is provided solely to make the redevelopment financially feasible and thus produce the public benefits described. Therefore, the City finds that the public benefits of the Plans exceed any private benefits. Section 4. Approvals: Further Proceedings 4.01. The modified Project Plan and the TIP Plan for TIP District No. 13 are hereby approved and adopted in substantially the forms on file at City Hall. 4.02. The Authority is authorized and directed to file a request for certification of the TIP District with the Scott County Auditor and to file a copy of the modified Project Plan and TIP Plan with the Minnesota Commissioner of Revenue as required by the TIP Act. SH235-17(JAE) 263230 4.03. The Council approves the Contract, including the business subsidy agreement contained therein, in substantially the form on file in City Hall. The Mayor and City Administrator are hereby authorized and directed to execute and deliver the Contract. All of the provisions of Contract, when executed and delivered as authorized herein, shall be deemed to be a part of this resolution as fully and to the same extent as if incorporated verbatim herein and shall be in full force and effect from the date of execution and delivery thereof. The Contract shall be substantially in the form on file with the City which are hereby approved, with such omissions and insertions as do not materially change the substance thereof, or as the Mayor and the City Administrator, in their discretion, shall determine, and the execution thereof by the Mayor and the City Administrator shall be conclusive evidence of such determination. Approved by the City Council of the City of Shakopee this 7th day of June, 2005. Mayor ATTEST: City Clerk SH235- I 7(JAE) 263230 Third Draft June 3, 2005 CONTRACT FOR PRIVATE DEVELOPMENT Among THE CITY OF SHAKOPEE, MINNESOTA and ECONOMIC DEVELOPMENT AUTHORITY FOR THE CITY OF SHAKOPEE, MINNESOTA and OPEN SYSTEMS, INC. and OS INVESTMENTS, LLC Dated as of: June -' 2005 This document was drafted by: KENNEDY & GRAVEN, Chartered 470 U.S. Bank Plaza Minneapolis, Minnesota 55402 (612) 337-9300 http://www.kennedy-graven.com SH235-17(JAE) 263108v.3 TABLE OF CONTENTS Page PREAMBLE ............................................................................................ ........... .................1 ARTICLE I Definitions Section 1.1. Definitions...................................... ............ .............. ......................................2 ARTICLE II Representations and Warranties Section 2.1. Representations by the Authority............................................. ........ .............7 Section 2.2. Representations by the City.. ................ ........................................................ 7 Section 2.3. Representations and Warranties by the Developer .....................................7 ARTICLE III Abatement and Tax Increment Financing Assistance Section 3.1. Status of Development Property....................... ....................... ......... ............9 Section 3.2. Environmental Conditions.................................................. .......... .................. 9 Section 3.3. Abatement for Infrastructure ................................................... .......... ......... ... 9 Section 3.4. Issuance of TIP Note..................... ................... ..............................................11 Section 3.5. Business Subsidy Agreement... ................. .................................................. 13 Section 3.6. Payment of Authority and City Costs..............................................................15 ARTICLE IV Construction of Minimum Improvements Section 4.1. Construction of Improvements........................................... .......... .............. ...16 Section 4.2. Construction Plans ................................................................. ............ ......... ..16 Section 4.3. Commencement and Completion of Construction....................................... 17 Section 4.4. Certificate of Completion ........................................................ ........... ......... .17 Section 4.5. Records................................................................................... ....................... ..18 ARTICLE V Insurance Section 5.1. Insurance.......................................................... ........ .......................... ........... .19 Section 5.2. Subordination................................................................................................... 20 ARTICLE VI Tax Increment; Taxes Section 6.1. Right to Collect Delinquent Taxes ............. ....................................................21 Section 6.2. Review of Taxes...................................... ....................................................... .21 Section 6.3. Covenant Not to Petition ............................. .............. .....................................21 SH235-17(JAE) 263108v.3 1 ARTICLE VII Other Financing Section 7.1. Generally................................................ ............... ........................ ............... .22 Section 7.2. Authority's Option to Cure Default on Mortgage...........................................22 Section 7.3. Modification; Subordination....................................... .......... .........................22 ARTICLE VIII Prohibitions Against Assignment and Transfer: Indemnification Section 8.1. Representation as to Development.............................. ................... .............23 Section 8.2. Prohibition Against Developer's Transfer of Property and Assignment of Agreement............................................................... .............. .23 Section 8.3. Release and Indemnification Covenants ......... .............................................24 ARTICLE IX Events of Default Section 9.1. Events of Default Defined. ............. ............. ........ ...... ............ ......................26 Section 9.2. Remedies on Default.......... ............. ............. ..... ....... ........... .......................26 Section 9.3. No Remedy Exclusive .. ...... ........... ............. ...... ...... ............ .......................27 Section 9.4. No Additional Waiver hnplied by One Waiver ...............................................27 Section 9.5. Attorney Fees.................................................................................................... 27 ARTICLE X Additional Provisions Section 10.1. Conflict of Interests; Representatives Not Individually Liable.......................28 Section 10.2. Equal Employment Opportunity...................................................................... 28 Section 10.3. Restrictions on Use .......... .............................................................................. 28 Section 10.4. Joint and Several Liability ......................................................... ........ ............28 Section 10.5. Titles of Articles and Sections ................................................... ............ .......28 Section 10.6. Notices and Demands ................................................................................... 28 Section 10.7. Counterparts ............................................. ......... ........................................... 29 Section 10.8. Recording.... ............................................... ....... .............. ..............................29 Section 10.9. Amendment......................................................................................................29 Section 10.10. Authority and City Approvals .......................................................................29 TESTIMONIUM .....................................................................................................................26 SIGNATURES ........................................................................................................................26 SCHEDULE A Development Property SCHEDULE B Assessed Property SCHEDULE C Authorizing Resolution SCHEDULE D Certificate of Completion SCHEDULE E Form of Subordination Agreement SH235-17(JAE) 2631 08v.3 11 CONTRACT FOR PRIVATE DEVELOPMENT THIS AGREEMENT, made as of the _ day of June, 2005, among the City of Shakopee (the "City"), a statutory city organized and existing under the laws of the State of Minnesota, the Economic Development Authority for the City of Shakopee, Minnesota (the "Authority"), a public body corporate and politic under the laws of Minnesota, Open Systems, Inc., a Minnesota corporation, and OS Investments, LLC, a Minnesota limited liability corporation (together with Open Systems, Inc., the "Developer"). WITNESSETH: WHEREAS, the Authority was created pursuant to Minnesota Statutes Sections 469.090 to 469.1081, as amended (the "Act") and was authorized to transact business and exercise its powers by a resolution of the City Council of the City; and WHEREAS, the Authority has undertaken a program to promote economic development and job opportunities and to promote the development and redevelopment of land which is underutilized within the City of Shakopee, Minnesota (the "City"), and in this connection created the Minnesota River Valley Housing and Redevelopment Project No.1 (hereinafter referred to as the "Project") in an area (hereinafter referred to as the "Project Area") located in the City pursuant to Minnesota Statutes, Sections 469.001 to 469.047 (the "HRA Act"); and WHEREAS, by resolution dated April 4, 1995, the City Council of the City transferred control, authority, and operation of the Project to the Authority, which currently administers the Project, exercising the powers of a housing and redevelopment authority under the Act, in accordance with Minnesota Statutes, Sections 469.090 to 469.1081 (the "EDA Act"); and WHEREAS, pursuant to the Act, the Authority is authorized to undertake certain activities to prepare such real property for development and redevelopment by private enterprise; and WHEREAS, the Developer has acquired certain property (as hereinafter defined, the "Development Property") in the Project Area to develop a new manufacturing, office, and storage facility to be constructed in the Project (as hereinafter defined, the "Minimum Improvements"); and WHEREAS, the Authority has established the Tax Increment Financing District No. 13 ("TIP District") pursuant to Minnesota Statutes, Sections 469.174 to 469.179, made up ofthe area to be developed by the Developer; and WHEREAS, the Authority and the City believe that the development of the Development Property pursuant to and in general fulfillment of this Agreement, are 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 has been undertaken and is being assisted. SH235-17(JAE) 263108v.3 I 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: [Remainder of this page intentionally left blank.] SH235-17(JAE) 263108v.3 2 ARTICLE I Definitions Section 1.1. Definitions. In this Agreement, unless a different meaning clearly appears from the context: "Abatement" means the real property taxes (i) generated in any tax-payable year by extending the City's local tax rate against the tax capacity of the Commercial Improvements on each Parcel of the Commercial Property (excluding land and excluding any portion of the tax capacity attributable to the area-wide tax under Minnesota Statutes, Chapter 473F) as of January 2 in the prior year, and (ii) paid to the City by the County. "Abatement Act" means Minnesota Statutes, Section 469.1812 to 469.1815. "Abatement Capacity" means the maximum amount of property taxes that may be abated in any year by the City under Section 469.1813, subd. 8 of the Act, as amended. As of the date of this Agreement, the Abatement Capacity is the greater of 10 % of the City's current levy or $200,000. "Abatement Resolution" means Resolution No. 5981 approved by the City Council of the City on December 9, 2003, regarding the Abatement of property taxes on the Commercial Property. "Act" means Minnesota Statutes Sections 469.090 to 469.1081, as amended. "Agreement" means this Agreement, as the same may be from time to time modified, amended, or supplemented. "Assessed Property" means the Commercial Property, the Business Park Property, and the Residential Property, as described in Schedule B attached hereto. "Authority" means the Economic Development Authority for the City of Shakopee, Minnesota. "Authority Representative" means the Executive Director of the Authority, or any person designated by the Executive Director to act as the Authority Representative for the purposes of this Agreement. "Authorizing Resolution" means the resolution of the Authority, substantially in the form of attached Schedule C, adopted by the Authority on June 7, 2005, approving this Agreement and authorizing the issuance of the Note. "Available Tax Increment" has the meaning provided in the Authorizing Resolution. SH235-17(JAE) 263108v.3 "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. "Business Park Property" means the property so described in Schedule B attached hereto. "Business Subsidy Act" means Minnesota Statutes, Section 116J.993 to 116J.995, as amended. "Certainteed Abatement" means the abatements payable by the City under the Contract for Private Development between the City and Certainteed, Inc., dated April 2, 2002. "Certificate of Completion" means the Certificate, in substantially the form attached as Schedule D, provided to the Developer, or the purchaser of any part, parcel, or unit of the Development Property, pursuant to Section 4.4 of this Agreement. "City" means the City of Shakopee, Minnesota. "City Representative" means the City Administrator of the City, or any person designated by the Executive Director to act as the Authority Representative for the purposes of this Agreement. "Commercial Improvements" means any improvements constructed upon a parcel within the Commercial Property. "Commercial Property" means the property so described in Schedule B attached hereto. "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; (2) foundation plan; (3) basement plans; (4) floor plan for each floor; (5) cross sections of each (length and width); (6) elevations (all sides); (7) landscape plan; and (8) such other plans or supplements to the foregoing plans as the Authority may reasonably request to allow it to ascertain the nature and quality of the proposed construction work. "County" means the Scott County, Minnesota. "Developer" means Open Systems, Inc., a Minnesota corporation, or its permitted successors and assigns and OS Investments, LLC, a Minnesota limited liability corporation, or its permitted successors and assigns. "Development Property" means the real property described in Schedule A of this Agreement. "EDA Act" means Minnesota Statutes, Sections 469.090 to 469.1081 SH235-17(JAE) 263108v.3 "Event of Default" means an action by the Developer listed in Article IX of this Agreement. "Existing Assessments" means existing assessments against the Development Property, as described in Section 3 .4(b) hereof. "Holder" means the owner of a Mortgage. "HRA Act" means Minnesota Statutes, Sections 469.001 to 469.047, as amended. "Master Development Agreement" means the Master Development Agreement, dated December 9, 2003, between the City and Ryan Companies US, Inc., as the same may be from time to time modified, amended, or supplemented. "Maturity Date" means the date that the Note has been paid in full or terminated in accordance with its terms, whichever is earlier. "Minimum hnprovements" means the construction on the Development Property of an approximately 25,000 square foot manufacturing, office, and warehouse facility. "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. "New Assessments" means the new assessments against the Development Property, as described in Section 3.3(c) hereof. "Note" means a Tax Increment Revenue Note, substantially in the form contained in the Authorizing Resolution, to be delivered by the Authority to the Developer in accordance with Section 3.3 hereof. "Project" means the Minnesota River Valley Housing and Redevelopment Project No. I. "Project Area" means the property within the Project, as described in the Project Plan. "Redevelopment Plan" means the Redevelopment Plan for the Project. "Residential Property" means the property so described in Schedule B attached hereto. "Site Improvements" means those improvements described in Section 3.3(b) hereof. "State" means the state of Minnesota. "Tax Increment" means that portion of the real property taxes that is paid with respect to the Development Property and that is remitted to the Authority as tax increment pursuant to the Tax Increment Act. SH235-17(JAE) 263108v.3 "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 District No. 13, an economic development tax increment financing district created by the City and the Authority. "Tax Increment Plan" or "TIF Plan" means the Tax Increment Financing Plan for the TIF District approved by the City Council on June 7, 2005, 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 ofthe State, or the State Supreme Court. "Transfer" has the meaning set forth in Section 8.2(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, litigation commenced by third parties which, by injunction or other similar judicial action, directly results in delays, or acts of any federal, state or local governmental unit (other than the Authority or City in exercising their 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 4.3 of this Agreement, so long as the Construction Plans have been approved in accordance with Section 4.2 hereof [Remainder ofthis page intentionally left blank.] SH235-17(JAE) 263108v.3 ARTICLE II Representations and Warranties Section 2.1. Representations by the Authority. (a) The Authority is an economic development authority duly organized and existing under the laws of the State. Under the provisions of the Act and the HRA Act, the Authority has the power to enter into this Agreement and carry out its obligations hereunder. (b) The Authority will use its best efforts to facilitate development of the Minimum Improvements, including but not limited to cooperating with the Developer in obtaining necessary administrative and land use approvals and construction financing pursuant to Section 7.1 hereof. (c) The Authority will issue the Note, subject to all the terms and conditions of this Agreement. (d) The activities of the Authority are undertaken for the purpose of fostering the development of certain real property in an environmentally sensitive manner, which will create new tax base in the City and retain well paying jobs in the City. Section 2.2. Representations and Warranties by the City. (a) The City is a statutory city organized and existing under the Constitution and the laws of the State. Under the provisions of the Abatement Act, the City has the power to enter into this Agreement and carry out its obligations hereunder. (b) The City will provide the Abatement assistance described in Section 3.3, subject to all the terms and conditions of this Agreement. (c) The activities of the City are undertaken for the purpose of fostering the development of certain real property in an environmentally sensitive manner, which will create new tax base in the City and retain well paying jobs in the City. Section 2.3. Representations and Warranties by the Developer. The Developer represents and warrants that: (a) The Developer is made up of a corporation and a limited liability company, each of which is duly organized and in good standing under the laws of the State; the Developer is not in violation of any provisions of its articles of incorporation or its certificate of organization (as applicable) or its bylaws or operating agreement (as applicable); the Developer, 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 respective officers, directors, managers, governors or members (as applicable). OS Investments, LLC will purchase the Development Property and construct, or cause Open Systems, Inc. to construct, the SH235-17(JAE) 263108v.3 Minimum Improvements on the Development Property. Open Systems, Inc. will lease the Minimum Improvements from OS Investments, LLC. (b) If the conditions precedent to construction occur, the Developer will construct the Minimum Improvements in material compliance with the terms of this Agreement, the Redevelopment Plan and all local, state, and federal laws and regulations (including, but not limited to, energy conservation, environmental, zoning, building code, and public health laws and regulations). (c) The Developer will use reasonable efforts to secure all permits, licenses, and approvals necessary for construction of the Minimum Improvements. (d) The Developer 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 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) 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. (f) The proposed development by the Developer hereunder would not occur but for the tax increment financing assistance being provided by the Authority hereunder. [Remainder of this page intentionally left blank.] SH235-17(JAE) 263108 v.3 ARTICLE III Abatement and Tax Increment Financing Assistance Section 3.1. Status of Development Property. As of the date of this Agreement, OS Investments, LLC has entered into a purchase agreement to acquire the Development Property (the "Purchase Agreement"). Upon closing of its purchase of the property and construction of the Project, OS Investments, LLC, as owner of the Development Property, will enter into a rental agreement with Open Systems, Inc. to lease the Development Property. Neither the Authority nor the City has any obligation to acquire the Development Property. Section 3.2. Environmental Conditions. (a) The Developer acknowledges that neither the Authority nor the City make any 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 Minimum Improvements 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 or the City for any contamination of the Development Property nor imposes any obligation on such parties to participate in any cleanup of the Development Property. (b) Without limiting its obligations under Section 8.3 of this Agreement the Developer further agrees that it will indemnify, defend, and hold harmless the Authority, the City, and their governing body members, officers, and employees, from any claims or actions arising out of the presence, if any, of hazardous wastes or pollutants existing on or in the Development Property, unless and to the extent that such hazardous wastes or pollutants are present as a result of the actions or omissions of the indemnitees. Nothing in this section will be construed to limit or affect any limitations on liability of the City or Authority under State or federal law, including without limitation Minnesota Statutes Sections 466.04 and 604.02. Section 3.3. Abatement for Infrastructure. (a) Generally. Pursuant to the Master Development Agreement executed by the City and Ryan Companies US, Inc., the prior owner of the Development Property, the City agreed to provide assistance pursuant to the Abatement Act to individual developers that purchase and develop parcels within the Business Park Property, depending on certain conditions precedent delineated in the Master Development Agreement. The Development Property is located within the Business Park Property. The Development Property is currently encumbered, and may be additionally encumbered, with special assessments for various infrastructure improvements. The City has determined that, in order to facilitate development of the Development Property, the City will retain Abatements from the Commercial Property pursuant to the Abatement Act, and will apply those Abatements to pay a portion of assessments for infrastructure levied or to be levied against the Development Property, all as described in more detail in the Master Development Agreement and in the Abatement Resolution. The Developer is eligible to receive Abatement assistance pursuant to the criteria delineated in Section 4.4 of the Master Development Agreement: (i) the Development Property will be used for manufacturing, warehouse, and office use; (ii) the estimated market value of the Minimum Improvements for property tax purposes is at least $65 per square foot (which is more than $25 per square foot adjusted by the percentage increase in SH235-17(JAE) 263108v.3 aggregate commercial property values in the City from January 2,2003 to January 2,2004); and (iii) the Developer has covenanted to retain 58 jobs at the Minimum Improvements at wages that are at least 275% ofthe federal minimum wage. (b) Existing Assessments. Prior to the date of the Master Development Agreement, the City levied special assessments against the Assessed Property to finance improvements to County Roads 83 and 16 adjacent to the Assessed Property (the "Existing Assessments"). The Existing Assessments levied against the Development Property are in the aggregate principal amount of $ and are payable in annual installments through 2012. (c) New Assessments. In connection with the development described in the Master Development Agreement, the City is constructing additional infrastructure improvements within the Assessed Property, including roads, sanitary sewer, water and storm water improvements (referred to as the "Plan B Improvements" in the Master Development Agreement). The City has assessed the cost of the Plan B Improvements against the Development Property in accordance with the Master Development Agreement and City ordinances and procedures. The New Assessments levied against the Development Property are in the aggregate principal amount of $ and are payable in annual installments over 20 years with interest determined by the City in accordance with its usual and customary procedures and policies, beginning with taxes payable in 2005. (d) Terms of Abatement. The City will retain Abatements from each parcel of the Commercial Property in accordance with Article V of the Master Development Agreement and the Abatement Resolution. The term of the Abatement for each parcel is 15 years, commencing with the first tax-payable year after substantial completion of commercial improvements on that parcel. The Abatements for each parcel terminate on the earlier of (i) the date all Existing Assessments and New Assessments against the entire Business Park Property have been paid in full, or (ii) after the 15th year of collection of Abatements from that Parcel. (e) Application of Abatements. The City will receive Abatements semi-annually from the County along with the property tax settlement, and will apply such amounts as follows: First, to pay the next installment of principal and interest on the Existing Assessments against the Development Property; and Second, to pay the next installment of principal and interest on the New Assessments against the Development Property. Abatements will be applied pro rata to the outstanding Existing Assessments or New Assessments (as the case may be) against each parcel of the Business Park Property, including the Development Property. As soon as reasonably practicable after each semi-annual tax settlement date, the City will calculate the total Abatements from all parcels of the Commercial Property, and will allocate the amount to be applied toward Existing Assessments or New Assessments against the Development Property. The City will pay the Abatements to the County on or before the next property tax payment date (May IS or October 15, as the case may be), and will specify to the County the amounts allocated toward the assessments against the SH235-17(JAE) 263108v.3 10 Development Property. At least 30 days before such property tax payment date, the City will send the Developer a written notice specifying the Abatement amounts to be paid by the City for the Development Property and the balance to be paid by the Developer. Notwithstanding such notice requirement, the Developer and its successors or assigns remains obligated to pay the full installment of Existing Assessments and New Assessments due on any tax payment date unless and until the Developer receives actual notice of the portion paid by the City under this Section. (f) Limitations. The maximum Abatement applied toward Existing Assessments or New Assessments in any calendar year will not exceed the lesser of (i) 25% of the amount equal to the City's Abatement Capacity for that year less the Certainteed Abatement for that year, or (ii) the aggregate installment of Existing Assessments and New Assessments against the entire Business Park Property due in that year. If the Abatement Act is amended to increase the City's Abatement Capacity, the percentage of Abatement Capacity in clause (i) will be reduced proportionately, and if the Abatement Act is amended to reduce the City's Abatement Capacity, the percentage of Abatement Capacity in clause (i) will be increased proportionately. The City's obligation under this section is payable solely from and to the extent of the Abatements, and nothing herein shall be construed to obligate the City to make payments from any other funds. The City makes no warranties or representations as to the amount of the Abatements, or that amounts payable under this Section will be sufficient to pay all or any portion of the Existing Assessments or New Assessments against the Development Property. Any estimates of Abatement amounts prepared by the City's financial consultants are for reference only, and the Developer is not entitled to rely on such estimates. The City represents that there are no outstanding abatement agreements or resolutions granted by the City under the Abatement Act as of the date of this Agreement except the Certainteed Abatement and the abatements granted under the Master Development Agreement, which will be provided to all individual developers on a pro rata basis. The City may grant any other abatements permitted under the Act, provided that to the extent the total abatements in any year exceed the maximum annual Abatement under the Master Development Agreement, the allocation of City Abatement Capacity to such other abatements is subordinate to the Abatements under the Master Development Agreement. Section 3.4. Issuance of TIP Note. (a) Generally. The City and the Authority acknowledge, based on a review of the Developer's pro forma letter submitted to the City prior to the City's approval of this Agreement, that the Abatement assistance pursuant to Section 3.3 will be insufficient to stimulate development of the Development Property. The Authority has determined to provide additional assistance to the Developer in the form of tax increment financing because (i) the unique characteristics of the Development Property require additional expenditures related to the property, including large soils and grading costs related to the balancing and drainage requirements contained in the "Conservation-Oriented Storm Water Plan" approved by the City and the conservation oriented landscaping requirements of the "Conservation-Oriented Storm Water Plan"; (ii) the proximity of the building site to the electrical towers at Dean Lakes creates additional costs since Developer must buy additional land (and pay the property taxes associated with the additional land) in order to build the proposed building around the substantial powerline easement that crosses the southwest portion of the property; and (iii) the Minimum Improvements will retain 58 well payingjobs in the City. SH235-17(JAE) 263108v.3 11 (b) Terms. In order to reimburse the Developer for a portion of the costs of site grading and landscaping (the "Site Improvements") related to constructing the Minimum Improvements on the Development Property, the Authority shall issue and Developer shall purchase the Note in the maximum principal amount of $125,200. The Authority and the Developer agree that the Note is issued in consideration of the Developer paying the costs ofthe Site Improvements. Before delivery of the Note the Developer shall have: (i) delivered to the Authority written evidence in a form satisfactory to the Authority that the Developer has paid the cost of Site Improvements in at least the principal amount of the Note; (ii) submitted the Construction Plans to the Authority and obtained approval for the Construction Plans from the Authority; (iii) submitted and obtained Authority approval of financing in accordance with Section 7.1; and (iv) delivered to the Authority an investment letter in a form reasonably satisfactory to the Authority. The terms of the Note will be substantially those set forth in the form of the Note shown in Schedule C. (c) Termination of right to Note. Notwithstanding anything to the contrary in this Agreement, if the conditions for delivery of the Note are not met by December 31, 2005, the Authority may terminate the Note and this Agreement by ten days written notice to the Developer. Thereafter neither party shall have any obligations or liability to the other hereunder, except that any obligations ofthe Developer under Sections 3.5 and 8.3 survive such termination. (d) Qualifications. 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 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. If the Site Improvement Costs exceed the principal amount of the Note, such excess is the sole responsibility of Developer. Section 3.5. Business Subsidy Agreement. The provisions of this Section constitute the "business subsidy agreement" in connection with the business subsidy provided by the Authority and the City for the purposes of the Business Subsidy Act. (a) General Terms. The parties agree and represent to each other as follows: (i) (A) A portion of the subsidy provided to the Developer consists of reimbursements of a portion of the costs of the Site Improvements related to the construction of the Minimum Improvements on the Development Property through the SH235-17(JAE) 263108v3 12 issuance of the Note in the maximum aggregate principal amount of$125,200. The Note is secured solely by the Tax Increment generated from the TIF District, which is an economic development district. (B) A portion of the subsidy provided under this Agreement consists of the City's payment of Abatements toward special assessments against the Development Property under Section 3.3, which payments represent a forgivable loan that is repayable in accordance with this Section. This portion of the business subsidy is not tax increment financing. (ii) The public purposes of the subsidy are to increase the tax base of the City and retain well paying jobs in the City. (iii) The goals for the subsidy are: to secure development of the Development Property; to maintain the Development Property as a manufacturing, warehouse, and related office facility as described in clause (vi) below; and to retain the jobs and wage levels in accordance with Section 3.5(b) hereof. (iv) If the goals described in clause (iii) are not met, the Developer must make the payments to the City described in Section 3.5( c). (v) The subsidy is needed to induce the Developer to develop the Development Property in an environmentally sensitive manner and to maintain its operations in the City, thus increasing tax base in the City and preserving well paying jobs in the City, County, and the State as a whole. The Developer currently operates its business in a leased facility in the City which is no longer sufficient for its planned corporate growth. The Developer plans to terminate and not renew its current lease upon its expiration and to purchase and build its own facility. Absent the subsidy provided in this Agreement, the Developer would likely move to another City. (vi) The Developer must continue operation of the Minimum Improvements as a manufacturing, warehouse, and related office facility through the Maturity Date, or for at least five years after the date of issuance ofthe Certificate of Completion, whichever is later. (vii) The parent company of Open Systems, Inc. is Open Systems Holdings Corp. OS Investments, LLC is a single member limited liability corporation and Michael Bertini is the sole member. (viii) The Developer has not received and does not expect to receive financial assistance from any other grantor as defined in the Business Subsidy Act in connection with the Development Property or the construction of the Minimum Improvements other than the tax increment financing described in Section 3.4 hereof and the abatement assistance described in Section 3.3 hereof, the Developer does not expect to receive any addition SH235-17(JAE) 263108v.3 13 (ix) The fair market value of the tax increment financing subsidy provided to the Developer is $125,200, the principal amount of the Note. The fair market value of the abatement subsidy provided to the Developer will depend on the total abatements from the Commercial Property applied as a credit against the Existing Assessments and New Assessments in accordance with Section 3.3, but in any event will not exceed $ (the total principal amount of the assessments). (b) Job and Wage Goals. Within two years after the Benefit Date, the Developer shall cause to be retained at least 58 full-time equivalent jobs on the Development Property. In addition, within two years after the Benefit Date, the Developer shall cause the wages for at least 26 of the full-time equivalent jobs to be no less than $14.16 per hour, exclusive of benefits and shall cause the wages of at least 32 full-time equivalent jobs to be no less than $24.00 per hour, exclusive of benefits. The "Benefit Date" is the earliest of: (i) the date of issuance of the Certificate of Completion for the Minimum Improvements, or (ii) the date the Developer occupies the Minimum Improvements. Notwithstanding anything to the contrary herein, if the wage and job goals described in this paragraph are met within two years after the Benefit Date, those goals are deemed satisfied despite the Developer's continuing obligations under Sections 3.5(a)(vi) and 3.5(d). The Authority and the City may, after public hearings held by the City Council and the Board of Commissioners of the Economic Development Authority and approval by both bodies, extend the date for compliance with these job and wage covenants by up to one year, provided that nothing in this section will be construed to limit the Authority's or the City's legislative discretion regarding this matter. (c) Remedies. If the Developer fails to meet or maintain the goals described in Section 3.5(a)(iii), the Note and this Agreement will be deemed terminated, and the Developer shall repay to the Authority upon written demand from the Authority a "pro rata share" of prior payments under the Note, if any, and shall repay to the City upon written demand from the City a "pro rata share" of assessment payments made by the City pursuant to Section 3.3 hereof, if any, together with interest on such amounts at the implicit price deflator as defined in Section 116J.994, Subd. 6 of the Business Subsidy Act, accrued from the date of issuance of the Certificate of Completion to the date of payment. The term "pro rata share" means percentages calculated as follows: (i) if the failure relates to the number of jobs, the jobs required less the jobs maintained, divided by the jobs required; (ii) if the failure relates to wages, the number of jobs required less the number of jobs that meet the required wages, divided by the number of jobs required; (iii) if the failure relates to maintenance of the facility in accordance with Section 3 .5( a)(vi), 60 less the number of months of operation as a qualifying facility (where any month in which the facility is in operation for at least 15 days constitutes a month of operation), commencing on the date of the certificate of completion and ending with the date the facility ceases operation as determined by the Authority, divided by 60; and SH235-17(JAE) 263108v.3 14 (iv) if more than one of the clauses (i) through (iii) apply, the sum of the applicable percentages, not to exceed 100%. Nothing in this Section shall be construed to limit the Authority's and the City's remedies under Article IX hereof In addition to the remedy described in this Section and any other remedy available to the Authority or the City for failure to meet the goals stated in Section 3.5(a)(iii), the Developer agrees and understands that it may not receive a business subsidy from the Authority, the City, or any other grantor (as defined in the Business Subsidy Act) for a period of five years from the date of the failure or until the Developer satisfies its repayment obligation under this Section, whichever occurs first. (d) Reports. The Developer must submit to the Authority, with a copy to the City, a written report regarding business subsidy goals and results by no later than March 1 of each year, commencing March I, 2006 and continuing until the later of (i) the date the goals stated in Section 3.5 (a)(iii) are met; (ii) 30 days after expiration of the five-year period described in Section 3.5(a)(vi); or (iii) if the goals are not met, the date the subsidy is repaid in accordance with Section 3.5(c). The report must comply with Section 116J.994, subdivision 7 of the Business Subsidy Act. The Authority will provide information to the Developer regarding the required forms. If the Developer fails to timely file any report required under this Section, the Authority will mail the Developer a warning within one week after the required filing date. If, after 14 days of the postmarked date of the warning, the Developer fails to provide a report, the Developer must pay to the Authority a penalty of $1 00 for each subsequent day until the report is filed. The maximum aggregate penalty payable under this Section is $1,000. Section 3.6. Payment of Authority and City Costs. The Developer agrees that it will pay, within 15 days after written notice from the Authority, the reasonable costs of consultants and attorneys retained by the Authority or the City in connection with the creation of the TIF District and the negotiation in preparation of this Agreement and other incidental agreements and documents related to the development contemplated hereunder. Any amount deposited by the Developer, upon application for assistance from the City or Authority, will be credited to the Developer's obligation under this Section. Upon termination of this Agreement in accordance with its terms, the Developer remains obligated under this section for costs incurred through the effective date of termination. [Remainder ofthis page intentionally left blank.] SH235-17(JAE) 263108v.3 15 ARTICLE IV Construction of Minimum Improvements Section 4.1. Construction of Improvements. The Developer agrees that it will construct or cause construction of the Minimum Improvements on the Development Property in accordance with the approved Construction Plans and that it will, during any period while the Developer retains ownership of any portion of the Minimum Improvements, and prior to the Maturity Date, 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. Section 4.2. Construction Plans. (a) Before commencing construction of the Minimum Improvements, 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 this Agreement, the Redevelopment Plan and all applicable State and local laws and regulations. The Authority will approve the Construction Plans in writing if (i) the Construction Plans conform to all terms and conditions of this Agreement; (ii) the Construction Plans 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 Minimum Improvements; (v) the Construction Plans do not provide for expenditures in excess of the funds available to the Developer for construction of the Minimum Improvements; and (vi) no Event of Default has occurred. No approval by the Authority shall relieve the Developer of the obligation to comply with the terms of this Agreement, applicable federal, state and local laws, ordinances, rules and regulations, or to construct the Minimum Improvements in accordance therewith. No approval by the Authority 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, in whole or in part. Such rejections shall set forth in detail the reasons therefore, and shall be made within 20 days after the date of receipt of final plans from the Developer. If the Authority rejects any Construction Plans in whole or in part, the Developer shall submit new or corrected Construction Plans within 20 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 Authority. The Authority's approval shall not be unreasonably withheld. 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. The Developer hereby waives any and all claims and causes of action whatsoever resulting from the review of the Construction Plans by the Authority and/or any changes in the Construction Plans requested by the Authority. Neither the Authority, the Authority, nor any employee or official of the Authority or City shall be responsible in any manner whatsoever for any defect in the Construction Plans or in any work done pursuant to the Construction Plans, including changes requested by the Authority. SH235-17(JAE) 263108vJ 16 (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 for its approval. For the purpose of this section, the term "material" means net changes that increase or decrease construction costs by $100,000 or more. 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 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. Such rejection shall be made 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. Section 4.3. Commencement and Completion of Construction. Subject to Unavoidable Delays, the Developer shall commence construction of the Minimum Improvements within 90 days after closing on Developer's acquisition of the Development Property. Subject to Unavoidable Delays, the Developer shall complete the construction of the Minimum Improvements by December 31, 2005. 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 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 such 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. After the date of this Agreement and until construction of the Minimum Improvements 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 4.4. Certificate of Completion. (a) Promptly after completion of the Minimum Improvements in accordance with those provisions of the Agreement relating solely to the obligations of the Developer to construct the Minimum Improvements (including the dates for beginning and completion thereof), the Authority Representative will furnish the Developer with a Certificate shown as Schedule D. (b) If the Authority Representative shall refuse or fail to provide any certification in accordance with the provisions of this Section 4.4 hereof, 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 Minimum Improvements 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. , SH235-17(JAE) 263108v.3 17 (c) The construction the Minimum Improvements shall be deemed to be complete upon a determination by the Authority Representative that all Minimum Improvements on the Development Property have been substantially completed III accordance with approved Construction Plans. Section 4.5. Records. The Authority and the City 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 Minimum Improvements. Developer shall also use best efforts to cause the contractor or contractors, all sub-contractors and their agents, and lenders to make their books and records relating to the Project to the Authority and City, upon reasonable notice, for inspection, examination and audit. Such records shall be kept and maintained by Developer through the Maturity Date. [Remainder ofthis page intentionally left blank.] SH235-17(JAE) 263108v.3 18 ARTICLE V Insurance Section 5.1. Insurance. (a) The Developer will provide and maintain at all times during the process of constructing the Minimum Improvements an All Risk Broad Form Basis Insurance Policy and, from time to time during that period, at the request of the Authority or the City, furnish the Authority or the City 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 principal amount of the Bonds, and with coverage available in nonreporting form on the so-called "all risk" form of policy. The interest of the Authority and the City shall be protected in accordance with a clause in form and content satisfactory to the Authority and the City; (ii) Comprehensive 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 and the City shall be listed as additional insureds 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 Minimum Improvements 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 Minimum Improvements under a policy or policies covering such risks as are ordinarily insured against by similar businesses. (ii) Comprehensive general public 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 City and Authority as additional insureds. (iii) Such other insurance, including workers' 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 workers' compensation. SH235-17(JAE) 263108v.3 19 (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 policies evidencing all such insurance, or a certificate or certificates or binders of the respective insurers stating that such insurance is in force and effect. 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, the City, 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 Minimum Improvements. (d) The Developer agrees to notifY the Authority and the City immediately in the case of damage exceeding $100,000 in amount to, or destruction of, the Minimum Improvements or any portion thereof resulting from fire or other casualty. In such event the Developer will forthwith repair, reconstruct, and restore the Minimum Improvements 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 Minimum Improvements, 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) In lieu of its obligation to reconstruct the Minimum Improvements as set forth in this Section, the Developer shall have the option of: (i) paying to the Authority an amount that, in the opinion of the Authority and its fiscal consultant, is sufficient to payor redeem the outstanding principal and accrued interest on the Note, or (ii) so long as the Developer is the owner of the Note, waiving its right to receive subsequent payments under the Note and its rights to receive the benefit of Abatements under Section 3.3 hereof. (f) The Developer, the City, 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 5.2. Subordination. Notwithstanding anything to the contrary herein, the rights of the Authority and the City 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. [Remainder oftms page intentionally left blank.] SH235-17(JAE) 263108v.3 20 ARTICLE VI Tax Increment: Taxes Section 6.1. Right to Collect Delinquent Taxes. The Developer acknowledges that the Authority is providing substantial aid and assistance in furtherance of the development through reimbursement of Site Improvement costs. The Developer understands that the Tax Increments pledged to payment on the Note are 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, its successors and assigns, 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 Minimum Improvements. The Developer acknowledges that this obligation creates a contractual right on behalf of the Authority to sue the Developer or its successors and assigns 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 shall also be entitled to recover its costs, expenses and reasonable attorney fees. Section 6.2. Review of Taxes. The Developer agrees that prior to the Maturity Date it will not cause a reduction in the real property taxes paid in respect of the Development Property through: (A) willful destruction of the Development Property or any part thereof; or (B) willful refusal to reconstruct damaged or destroyed property pursuant to Section 5.1 of this Agreement, except as provided in Section 5.1 (e). The Developer also agrees that it will not, prior to the Maturity 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 (other than any portion thereof dedicated or conveyed to the City in accordance with platting of the Development Property), or apply for a deferral of property tax on the Development Property pursuant to any law. Section 6.3. Covenant Not to Petition. Prior to the Maturity Date, the Developer agrees not to file any petition or claim with any Tax Official, seeking to reduce the market value of the Development Property and the Minimum Improvements for ad valorem tax purposes below a minimum value of $2,400,000. Nothing in this section is intended to constitute a minimum assessment agreement within the meaning of Section 469.177, Subdivision 8 of the TIF Act. However, failure by the Developer to comply with this Section is an Event of Default under this Agreement, entitling the Authority to the remedies described in Article IX hereof. [Remainder of this page intentionally left blank.] SH235-17(JAE) 263108v.3 21 ARTICLE VII Other Financin2 Section 7.1. Generally. Before issuance of the Note, the Developer shall submit to the Authority or provide access thereto for review by Authority staff, consultants, and agents, evidence reasonably satisfactory to the Authority that Developer has available funds, or commitments to obtain funds, whether in the nature of mortgage financing, equity, grants, loans, or other sources sufficient for paying the cost of the developing the Minimum Improvements, provided that any lender or grantor commitments shall be subject only to such conditions as are normal and customary in the commercial lending industry. Section 7.2. Authority's Option to Cure Default on Mortgage. In the event that any portion of the Developer's funds is provided through mortgage financing, and there occurs a default under any Mortgage authorized pursuant to Article VII of this Agreement, the Developer shall cause the Authority to receive copies of any notice of default received by the Developer from the holder of such Mortgage. Thereafter, the Authority shall have 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. Section 7.3. Modification: Subordination. If Developer requires mortgage financing for the development of the Minimum Improvements, the Authority agrees to subordinate its rights under this Agreement to the Holder of any Mortgage securing construction or permanent financing and the City agrees to consent to such subordination, in accordance with the terms of a subordination agreement substantially in the form attached as Schedule E, or such other form as the Authority approves. [Remainder ofthis page intentionally left blank.] SH235-17(JAE) 263108v.3 22 ARTICLE VIII Prohibitions A2ainst Assi2llment and Transfer: Indemnification Section 8.l. Representation as to Development. The Developer represents and agrees that its purchase of the Development Property, and its other 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 8.2. Prohibition Against Developer's Transfer of Property and Assignment of Agreement. The Developer represents and agrees that prior to issuance of a Certificate of Completion for all ofthe Minimum Improvements: (a) Except only by way of security for, and only 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 undertaking the development contemplated under this Agreement, and any other purpose authorized by this Agreement, the Developer 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 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 and the City (whose approval will not be unreasonably withheld, subject to the standards described in paragraph (b) of this Section) unless the Developer remains liable and bound by this Agreement in which event the Authority's approval and the City's approval are not required. Any such Transfer shall be subject to the provisions of this Agreement. For the purposes of this Agreement, the term Transfer does not include acquisition of a controlling interest in Developer by another entity or merger of Developer with another entity. (b) In the event the Developer, upon Transfer of the Development Property or any portion thereof either before or after issuance of the final Certificate of Completion, seeks to be released from its obligations under this Agreement as to the portions of the Development Property that is transferred, the Authority and the City shall be entitled to require, except as otherwise provided in the Agreement, as conditions to any such release that: (i) Any proposed transferee shall have the qualifications and financial responsibility, in the reasonable judgment of the Authority and the City, 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 the City shall, for itself and its successors and assigns, and expressly for the benefit of the Authority and the City, 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 SH235-17(JAE) 263108v.3 23 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 and the City) deprive the Authority or the City of any rights or remedies or controls with respect to the Development Property, the Minimum Improvements or any part thereof or the construction of the Minimum Improvements; 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 or the City 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 or the City would have had, had there been no such transfer or change. In the absence of specific written agreement by the Authority and the City to the contrary, no such transfer or approval by the Authority and the City 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 Development Property, from any of its obligations with respect thereto. (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 and the City. In the event 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. Section 8.3. Release and Indemnification Covenants. (a) 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 Developer releases from and covenants and agrees that the Authority, the City, and the governing body members, officers, agents, servants, and employees thereof (the "Indemnified Parties") shall not be liable for and agrees to indemnifY and hold harmless the Indemnified Parties 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 Development Property or the Minimum Improvements. (b) 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 SH235-17(JAE) 263108v.3 24 acquisition, construction, installation, ownership, maintenance, and operation of the Development Property. (c) 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 Minimum Improvements. (d) All covenants, stipulations, promises, agreements, and obligations of the Authority and the City 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. [Remainder ofthis page intentionally left blank.] SH235-17(JAE) 263108v.3 25 ARTICLE IX Events of Default Section 9.1. 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, anyone 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: (a) Failure by the Developer, the City, 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 Minimum Improvements, 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 a bankrupt or insolvent. Section 9.2. Remedies on Default. Whenever any Event of Default referred to in Section 9.1 of this Agreement occurs, the Authority or the City may: (a) 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 a default by the Developer, the Authority may terminate the Note and this Agreement. (c) Upon a default by the Developer, the City may terminate the Abatement assistance provided pursuant to Section 3.3 hereof and this Agreement. (d) 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. SH235-17(JAE) 263108v.3 26 Section 9.3. 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, 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 and the City 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. Section 9.5. Attorney Fees. Whenever any Event of Default occurs and ifthe Authority or the City 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, the Developer agrees that it shall, within lO days of written demand by the Authority or the City, pay to the Authority or the City the reasonable fees of such attorneys and such other expenses so incurred by the Authority or the City. [Remainder of this page intentionally left blank.] SH235-17(JAE) 263108v.3 27 ARTICLE X Additional Provisions Section 10.1. Conflict of Interests: Representatives Not Individually Liable. The City, the Authority, and the Developer, to the best of their respective knowledge, represent and agree that no member, official, or employee of the City or 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 City or Authority shall be personally liable to the Developer, or any successor in interest, in the event of any default or breach by the City or 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 10.2. 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 that until the Maturity Date, the Developer, and such successors and assigns, shall devote the Development Property to the operation of the Minimum Improvements as a manufacturing, warehouse, and related office facility within the meaning of Section 469.176, subd. 4c, clauses (1), (2) and (7) of the TIF Act, 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 erected or to be erected thereon, or any part thereof. Section 10.4. Joint and Several Liability. OS Investments, LLC. and Open Systems, Inc. shall be jointly and severally liable for the Developer's responsibilities under this Agreement. Section 10.5. 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 10.6. 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): To Developer: Open Systems, Inc. Attn: Craig Faulds 1157 Valley Park Drive, Suite 105 Shakopee, Minnesota 55379 SH235-17(JAE) 263108v.3 28 To City: City of Shakopee Attn: City Administrator 129 Holmes Street South Shakopee, Minnesota 55379 To Authority: Shakopee EDA Attn: Executive Director 129 Holmes Street South Shakopee, Minnesota 55379 Section 10.7. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall constitute one and the same instrument. Section 10.8. Recording. The Authority may record this Agreement and any amendments thereto with the Scott County recorder. The Developer shall pay all costs for recording. The Developer's obligations under this Agreement are covenants running with the land for the term of this Agreement, enforceable by the Authority against the Developer, its successor and assigns, and every successor in interest to the Development Property, or any part thereof or any interest therein. Section 10.9 Amendment. This Agreement may be amended only by written agreement approved by the City, the Authority, and the Developer. Section 10.10. Authority and City Approvals. Unless otherwise specified, any approval required by the Authority under this Agreement may be given by the Authority Representative and any approval required by the City under this Agreement may be given by the City Representative, except that final approval of issuance of the Note shall be made by the Authority's Board of Commissioners. [Remainder of this page intentionally left blank.] SH235-17(JAE) 263108v.3 29 IN WITNESS WHEREOF, the City, the Authority and the Developer have caused this Agreement to be duly executed by their duly authorized representatives as of the date first above written. THE CITY OF SHAKOPEE By Its Mayor By Its City Administrator By Its City Clerk STATE OF MINNESOTA ) ) SS. COUNTY OF SCOTT ) The foregoing instrument was acknowledged before me this _ day of June, 2005 by John J. Schmitt, Mark McNeill, and Judith S. Cox, the Mayor, City Administrator, and City Clerk of the City of Shakopee, on behalf of the City. Notary Public SH235-17(JAE) 263108v.3 S-l ECONOMIC DEVELOPMENT AUTHORITY FOR THE CITY OF SHAKOPEE By Its President By Its Executive Director STATE OF MINNESOTA ) ) SS. COUNTY OF SCOTT ) The foregoing instrument was acknowledged before me this _ day of June, 2005 by and the President and Executive Director of the Economic Development Authority for the City of Shakopee, on behalf of the Authority. Notary Public SH235-17(JAE) 263108v.3 S-2 OPEN SYSTEMS, INC. By Its STATE OF MINNESOTA ) ) SS. COUNTY OF SCOTT ) The foregoing instrument was acknowledged before me this _ day of June, 2005, by , the of Open Systems, Inc., a Minnesota corporation, on behalf of the corporation. Notary Public SH235-17(JAE) 263108v.3 S-3 OS INVESTMENTS, LLC By Its STATE OF MINNESOTA ) ) SS. COUNTY OF SCOTT ) The foregoing instrument was acknowledged before me this _ day of June, 2005, by , the of OS Investments, LLC, a Minnesota limited liability corporation, on behalf of the corporation. Notary Public SH235-17(JAE) 263108v.3 S-4 SCHEDULE A DEVELOPMENT PROPERTY That part of Lot 1, Block 3, DEAN LAKES SECOND ADDITION, according to the recorded plat thereof, Scott County, Minnesota, lying westerly of a line 298.34 feet easterly of, and parallel with the westerly line of said Lot 1. * * The subdivision of Lot 1, Block 3, DEAN LAKES SECOND ADDITION is currently being considered by the City of Shakopee and Scott County. In addition, a final plat of DEAN LAKES FOURTH ADDITION is also being considered by the City of Shakopee and Scott County. If the subdivision and plat are approved, the legal description of TIF District No. 13 is anticipated to change to Lot 1, Block 1, DEAN LAKES FOURTH ADDITION. This change is anticipated to occur in late June, 2005. SH235-17(JAE) 263108v.3 A-I SCHEDULE B ASSESSED PROPERTY The Assessed Property is the aggregate ofthe following areas: Commercial Property Lots 1 through 6, Block 2 Dean Lakes Second Addition; Outlot N; Lots 1 and 2, Block I, Dean Lakes Second Addition, according to the recorded plat thereof, Scott County, Minnesota. Business Park Property Lot 1, Block 3, and Outlot A, Dean Lakes 2nd Addition, according to the recorded plat thereof, Scott County, Minnesota. Residential Property Outlot H and all of Blocks 1, 2, 3, 4, 5, 6, 7 and 8, Dean Lakes First Addition, according to the recorded plat thereof, Scott County, Minnesota. SH235-17(JAE) 263108v.3 B-1 SCHEDULE C AUTHORIZING RESOLUTION Authorizin2 Resolution ECONOMIC DEVELOPMENT AUTHORITY FOR THE CITY OF SHAKOPEE RESOLUTION NO. RESOLUTION APPROVING CONTRACT FOR PRIVATE DEVELOPMENT WITH OPEN SYSTEMS, INe. AND AWARDING THE SALE OF, AND PROVIDING THE FORM, TERMS, COVENANTS AND DIRECTIONS FOR THE ISSUANCE OF ITS $125,200 TAX INCREMENT REVENUE NOTE, SERIES 2005 BE IT RESOLVED BY the Board of Commissioners (the "Board") of the Economic Development Authority for the City of Shakopee, Minnesota (the "Authority") as follows: Section 1. Authorization: A ward of Sale. 1.01. Authorization. The Authority and the City of Shako pee (the "City") have heretofore approved the establishment of its Tax Increment Financing District No. 13 (the "TIF District") within its Minnesota River Valley Housing and Redevelopment Project No.1 (the "Project"), and have adopted a tax increment financing plan for the purpose of financing certain improvements within the Project. Pursuant to Minnesota Statutes, Section 469.178, the Authority is authorized to issue and sell its bonds for the purpose of financing a portion of the public development costs of the Project. Such bonds are payable from all or any portion of revenues derived from the TIF District and pledged to the payment of the bonds. The Authority hereby finds and determines that it is in the best interests of the Authority that it issue and sell its $125,200 Tax Increment Revenue Note, Series 2005 (the "Note") for the purpose of financing certain public costs of the Project. 1.02 Agreement Approved: Issuance. Sale. and Terms of the Note. The Authority hereby approves the Contract for Private Development between the City, the Authority, Open Systems, Inc., and OS Investments, LLC (the "Agreement"), and authorizes the President and Executive Director to execute such Agreement in substantially the form on file with the City, subject to modifications that do not alter the substance of the transaction and are approved by such officials, provided that execution of the Agreement by such officials is conclusive evidence of their approval. The Authority hereby delegates to the Executive Director the determination of the date on which the Note is to be delivered, in accordance with Section 3.4 ofthe Agreement. The Note shall be sold to Open Systems, Inc. (the "Owner"). The Note shall be dated the date of delivery thereof, and shall bear interest at the rate of 6.00% per annum to the earlier of maturity or SH235-17(JAE) 263108v.3 C-1 prepayment. The Authority shall receive in exchange for the sale of the Note the agreement of the Owner to pay the cost of land acquisition as defined in the Agreement. Section 2. Form of Note. The Note shall be in substantially the following form, with the blanks to be properly filled in and the principal amount and payment schedule adjusted as of the date of issue: UNITED STATE OF AMERICA STATE OF MINNESOTA COUNTY OF SCOTT ECONOMIC DEVELOPMENT AUTHORITY FOR THE CITY OF SHAKOPEE No. R-1 $125,200 TAX INCREMENT REVENUE NOTE SERIES 2005 Date Rate of Original Issue 6.00% The Economic Development Authority for the City of Shakopee ("Authority") for value received, certifies that it is indebted and hereby promises to pay to Open Systems, Inc. (the "Owner"), the principal sum of $125,200 and to pay interest thereon at the rate of 6.0% per annum, as and to the extent set forth herein. 1. Payments. Principal and interest ("Payments") shall be paid on August 1,2007 and each February 1 and August I thereafter to and including February 1, 2014 ("Payment Dates") in the amounts and from the sources set forth in Section 3 herein. Payments shall be applied first to accrued interest, and then to unpaid principal. Interest accruing from the date of issue through and including February 1,2007 shall be compounded semiannually on February 1 and August 1 of each year and added to principal. Payments are payable by mail to the address of the Owner or such other address as the Owner may designate upon 30 days written notice to the Authority. Payments on this Note are payable in any coin or currency of the United States of America which, on the Payment Date, is legal tender for the payment of public and private debts. 2. Interest. Interest at the rate stated herein shall accrue on the unpaid principal, commencing on the date of original issue. Interest shall be computed on the basis of a year of 360 days and charged for actual days principal is unpaid. 3. Available Tax Increment. Payments on this Note are payable on each Payment Date solely from and in the amount of "Available Tax Increment," which shall mean, on each Payment SH235-17(JAE) 263108v.3 C-2 Date, 90% of the Tax Increment attributable to the Development Property and paid to the Authority by Scott County in the six months preceding the Payment Date, all as such terms are defined in the Contract for Private Development between the City, the Authority, Open Systems, Inc., and OS Investments, LLC (with Open Systems, Inc., the "Developer") dated as of June _, 2005 (the "Agreement"). The Authority shall have no obligation to pay principal of and interest on 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 or 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 shall have no obligation to pay unpaid balance of principal or accrued interest that may remain after the final Payment on February 1, 2014. 4. Default. If on any Payment Date there has occurred and is continuing any Event of Default under the Agreement, the Authority may withhold from payments hereunder under all Available Tax Increment. If the Event of Default is thereafter cured in accordance with the Agreement, the Available Tax Increment withheld under this Section shall be deferred and paid, without interest thereon, on the next Payment Date after the Event of Default is cured. If the Event of Default is not timely cured, the Authority may terminate this Note by written notice to the Owner in accordance with the Agreement. 5. Optional Prepayment. 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 shall affect the amount or timing of any other regular payment otherwise required to be made under this Note. 6. Nature of Obligation. This Note is the sole note of an issue in the total principal amount of$125,200, issued to aid in financing certain public development costs and administrative costs of a Project undertaken by the Authority pursuant to Minnesota Statutes, Sections 469.001 through 469.047, and is issued pursuant to an authorizing resolution (the "Resolution") duly adopted by the Authority on June 7,2005, and pursuant to and in full conformity with the Constitution and laws of the State of Minnesota, including Minnesota Statutes, Sections 469.174 to 469.179. 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 shall 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 shall 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. 7. Registration and Transfer. 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 ofthe Authority kept for that purpose at the principal office of the City Finance Director, by the Owner hereof in person or by such Owner's attorney duly authorized in writing, upon surrender of this Note together with a written instrument of transfer SH235-17(JAE) 263108v.3 C-3 satisfactory to the Authority, duly executed by the Owner. 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 with respect to such transfer or exchange, there will be issued in the name of the transferee a new Note of the same aggregate principal amount, bearing interest at the same rate and maturing on the same dates. This Note shall not be transferred to any person other than an affiliate, or other related entity, of the Owner, unless the Authority has been provided with an opinion of counsel or a certificate of the transferor, in a form satisfactory to the Authority, that such transfer is exempt from registration and prospectus delivery requirements of federal and applicable state securities laws. 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 exist, to happen, and to be performed in order to make this Note a valid and binding limited obligation of the Authority according to its terms, have been done, do exist, have happened, and have been performed in due form, time and manner as so required. IN WITNESS WHEREOF, the Board of Commissioners of the Economic Development Authority for the City of Shako pee have caused this Note to be executed with the manual signatures of its President and Executive Director, all as of the Date of Original Issue specified above. ECONOMIC DEVELOPMENT AUTHORITY FOR THE CITY OF SHAKOPEE Executive Director President SH235-17(JAE) 263108v.3 C-4 REGISTRATION PROVISIONS The ownership ofthe unpaid balance of the within Note is registered in the bond register of the City Finance Director, in the name of the person last listed below. Date of Signature of Registration Registered Owner City Finance Director Open Systems, Inc. Federal Tax LD. No. 41-1688659 Section 3. Terms. Execution and Delivery. 3.01. Denomination. Payment. The Note shall be issued as a single typewritten note numbered R -I. The Note shall be issuable only in fully registered form. Principal of and interest on the Note shall be payable by check or draft issued by the Registrar described herein. 3.02. Dates: Interest Payment Dates. Principal of and interest on the Note shall be payable by mail to the owner of record thereof as of the close of business on the fifteenth day of the month preceding the Payment Date, whether or not such day is a business day. 3.03. Registration. The Authority hereby appoints the City Finance Director to perform the functions of registrar, transfer agent and paying agent (the "Registrar"). The effect of registration and the rights and duties of the Authority and the Registrar with respect thereto shall be as follows: (a) Register. The Registrar shall keep at its office a bond register in which the Registrar shall provide for the registration of ownership of the Note and the registration of transfers and exchanges of the Note. (b) Transfer of Note. Upon surrender for transfer of the Note duly endorsed by the registered owner thereof or accompanied by a written instrument of transfer, in form reasonably satisfactory to the Registrar, duly executed by the registered owner thereof or by an attorney duly authorized by the registered owner in writing, the Registrar shall authenticate and deliver, in the name of the designated transferee or transferees, a new Note of a like aggregate principal amount and maturity, as requested by the transferor. Notwithstanding the foregoing, the Note shall not be transferred to any person other than an affiliate, or other related entity, of the Owner unless the Authority has been provided with an opinion of counsel or a certificate of the transferor, in a form satisfactory to the Authority, that such transfer is exempt from registration and prospectus delivery requirements of federal and applicable state securities laws. The Registrar may close the books for registration of any transfer after the fifteenth day of the month preceding each Payment Date and until such Payment Date. SH235-17(JAE) 263108v.3 C-5 (c) Cancellation. The Note surrendered upon any transfer shall be promptly cancelled by the Registrar and thereafter disposed of as directed by the Authority. (d) Improper or Unauthorized Transfer. When the Note is presented to the Registrar for transfer, the Registrar may refuse to transfer the same until it is satisfied that the endorsement on such Note or separate instrument of transfer is legally authorized. The Registrar shall incur no liability for its refusal, in good faith, to make transfers which it, in its judgment, deems improper or unauthorized. (e) Persons Deemed Owners. The Authority and the Registrar may treat the person in whose name the Note is at any time registered in the bond register as the absolute owner of the Note, whether the Note shall be overdue or not, for the purpose of receiving payment of, or on account of, the principal of and interest on such Note and for all other purposes, and all such payments so made to any such registered owner or upon the owner's order shall be valid and effectual to satisfY and discharge the liability of the Authority upon such Note to the extent of the sum or sums so paid. (f) Taxes, Fees and Charges. For every transfer or exchange of the Note, the Registrar may impose a charge upon the owner thereof sufficient to reimburse the Registrar for any tax, fee, or other governmental charge required to be paid with respect to such transfer or exchange. (g) Mutilated, Lost, Stolen or Destroyed Note. In case any Note shall become mutilated or be lost, stolen, or destroyed, the Registrar shall deliver a new Note oflike amount, maturity dates and tenor in exchange and substitution for and upon cancellation of such mutilated Note or in lieu of and in substitution for such Note lost, stolen, or destroyed, upon the payment of the reasonable expenses and charges of the Registrar in connection therewith; and, in the case the Note lost, stolen, or destroyed, upon filing with the Registrar of evidence satisfactory to it that such Note was lost, stolen, or destroyed, and of the ownership thereof, and upon furnishing to the Registrar of an appropriate bond or indemnity in form, substance, and amount satisfactory to it, in which both the Authority and the Registrar shall be named as obligees. The Note so surrendered to the Registrar shall be cancelled by it and evidence of such cancellation shall be given to the Authority. If the mutilated, lost, stolen, or destroyed Note has already matured or been called for redemption in accordance with its terms, it shall not be necessary to issue a new Note prior to payment. 3.04. Preparation and Delivery. The Note shall be prepared under the direction of the Executive Director and shall be executed on behalf of the Authority by the signatures of its President and Executive Director. In case any officer whose signature shall appear on the Note shall cease to be such officer before the delivery of the Note, such signature shall nevertheless be valid and sufficient for all purposes, the same as if such officer had remained in office until delivery. When the Note has been so executed, it shall be delivered by the Executive Director to the Owner thereof in accordance with the Agreement. SH235-17(JAE) 263108v.3 C-6 Section 4. Security Provisions. 4.01. Pledge. The Authority hereby pledges to the payment of the principal of and interest on the Note all Available Tax Increment as defined in the Note. Available Tax Increment shall be applied to payment of the principal of and interest on the Note in accordance with the terms of the form of Note set forth in Section 2 of this resolution. 4.02. Bond Fund. Until the date the Note is no longer outstanding and no principal thereof or interest thereon (to the extent required to be paid pursuant to this resolution) remains unpaid, the Authority shall maintain a separate and special "Bond Fund" to be used for no purpose other than the payment of the principal of and interest on the Note. The Authority irrevocably agrees to appropriate to the Bond Fund in each year Available Tax Increment. Any Available Tax Increment remaining in the Bond Fund shall be transferred to the Authority's account for the TIF District upon the payment of all principal and interest to be paid with respect to the Note. Section 5. Certification of Proceedings. 5.01. Certification of Proceedings. The officers ofthe Authority are hereby authorized and directed to prepare and furnish to the Owner of the Note certified copies of all proceedings and records of the Authority, and such other affidavits, certificates, and information as may be required to show the facts relating to the legality and marketability of the Note as the same appear from the books and records under their custody and control or as otherwise known to them, and all such certified copies, certificates, and affidavits, including any heretofore furnished, shall be deemed representations of the Authority as to the facts recited therein. Section 6. Effective Date. This resolution shall be effective upon full execution of the Agreement. SH235-17(JAE) 263108v.3 C-7 Adopted this _ day of June, 2005. President Executive Director SH235-17(JAE) 263108v.3 C-8 SCHEDULE D CERTIFICATE OF COMPLETION WHEREAS, the City of Shakopee (the "City"), the Economic Development Authority for the City of Shakopee (the "Authority"), Open Systems, Inc., and OS Investments, LLC (with Open Systems, Inc., the "Developer") entered into a certain Contract for Private Development dated June -' 2005 ("Contract"); and WHEREAS, the Contract contains certain covenants and restrictions set forth in Articles III and IV thereof related to completing certain Minimum Improvements; 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 and recording of this certification; NOW, THEREFORE, this is to certify that all construction and other physical improvements related to the Minimum Improvements 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 Minimum Improvements, but any other covenants in the Contract shall remain in full force and effect. Dated: ,20_ ECONOMIC DEVELOPMENT AUTHORITY FOR THE CITY OF SHAKOPEE By Authority Representative SH235-17(JAE) 263108v.3 D-1 STATE OF MINNESOTA ) ) SS. COUNTY OF SCOTT ) The foregoing instrument was acknowledged before me this _ day of ,20_ by ,the of the Economic Development Authority for the City of Shakopee, on behalf of the Authority. Notary Public This document drafted by: Kennedy & Graven, Chartered 470 U.S. Bank Plaza Minneapolis, MN 55402 SH235-17(JAE) 263108v.3 D-2 SCHEDULE E Form of Subordination A2reement THIS SUBORDINATION AGREEMENT (this "Agreement") is made as of this _ day of , 2005, between ("Lender"), whose address is at , and the ECONOMIC DEVELOPMENT AUTHORITY FOR THE CITY OF SHAKOPEE, a public body corporate and politic ("Authority"). RECITALS A. , a Minnesota corporation ("Developer"), is the owner of certain real property situated in Scott County, Minnesota and legally described in Exhibit A attached hereto and incorporated herein (the "Property"). B. Lender has made a mortgage loan to Developer in the original principal amount of $ (the "Loan"). The Loan is the evidenced and secured by the following documents: (i) a certain promissory note (the "Note") made by Developer dated , 2005, in the amount of $ ; and (ii) a certain mortgage, security agreement and fixture financing statement (the "Mortgage") made by Developer dated , 2005, filed ,2005, as Scott County Recorder/Registrar of Titles Doc. No. encumbering the Property; and (iii) a certain assignment of leases and rents (the "Assignment") made by Developer dated , 2005, filed , 2005, as Scott County Recorder/Registrar of Titles Doc. No. encumbering the Property. The Note, the Mortgage, the Assignment, and all other documents and instruments evidencing, securing and executed in connection with the Loan, are hereinafter collectively referred to as the "Loan Documents." C. Authority is the owner and holder of certain rights under a certain unrecorded Contract for Private Development (the "Contract") among the City of Shakopee (the "City"), the Authority, and the Developer, dated June _, 2005. D. Developer is entitled under the Contract to acquire a certain Tax Increment Tax Revenue Note, Series 2005 in the original principal amount of$125,200 (the "TIF Note"). NOW, THEREFORE, in consideration of the foregoing and as an inducement to Lender to make the Loan, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto represent, warrant and agree as follows: SH235-17(JAE) 263108v.3 E-1 1. Consent. The Authority acknowledges that the Lender is making the Loan to the Developer and consents to the same. The Authority also consents to and approves the assignment of the Contract and TIF Note (when and if issued) by the Developer to the Lender as collateral for the Loan; provided, however, that this consent shall not deprive the Authority of or otherwise limit any of the Authority's rights or remedies under the Contract and TIF Note and shall not relieve the Developer of any of its obligations under the Contract and TIF Note; provided further, however, the limitations to the Authority's consent contained in this Paragraph I are subject to the provisions of Paragraph 2 below. 2. Subordination. The Authority hereby agrees that the rights of the Authority with respect to the Development Property under the Contract are and shall remain subordinate and subject to liens, rights and security interests created by the Loan Documents and to any and all amendments, modifications, extensions, replacements or renewals of the Loan Documents; provided, however, that nothing herein shall be construed as subordinating the requirement contained in the Contract that the Property be used in accordance with the provisions of Section 10.3 of the Contract, or as subordinating the Authority's rights under the TIF Note to suspend payments in accordance with the TIF Note. 3. Notice to Authority. Lender agrees to use commercially reasonable efforts to notifY Authority of the occurrence of any Event of Default given to Developer under the Loan Documents, in accordance with Section 7.2 of the Contract. The Lender shall not be bound by the other requirements in Section 7.2 of the Contract. 4. Statutory Exception. Nothing in this Agreement shall alter, remove or affect Lender's obligation under Minnesota Statutes, ~ 469.029 to use the Property in conformance with Section 10.3 ofthe Contract. 5. No Assumption. The Authority acknowledges that the Lender is not a party to the Contract and by executing this Agreement does not become a party to the Contract, and specifically does not assume and shall not be bound by any obligations of the Developer to the Authority under the Contract, and that the Lender shall incur no obligations whatsoever to the Authority except as expressly provided herein. 6. Notice from Authority. So long as the Contract remains in effect, the Authority agrees to give to the Lender copies of notices of any Event of Default given to Developer under the Contract. 7. Governing Law. This Agreement is made in and shall be construed in accordance with the laws of the State of Minnesota. 8. Successors. This Agreement and each and every covenant, agreement and other provision hereof shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, including any person who acquires title to the Property through the Lender of a foreclosure of the Mortgage. 9. Severability. The unenforceability or invalidity of any provision hereof shall not render any other provision or provisions herein contained unenforceable or invalid. SH235-17(JAE) 263108v.3 E-2 10. Notice. Any notices and other communications permitted or required by the provisions ofthis Agreement shall be in writing and shall be deemed to have been properly given or served by depositing the same with the United States Postal Service, or any official successor thereto, designated as registered or certified mail, return receipt requested, bearing adequate postage, or delivery by reputable private carrier and addresses as set forth above. II. Transfer of Title to Lender. The Authority agrees that in the event the Lender, a transferee of Lender, or a purchaser at foreclosure sale, acquires title to the Property pursuant to a foreclosure, or a deed in lieu thereof, the Lender, transferee, or purchaser shall not be bound by the terms and conditions of the Contract except as expressly herein provided. Further the Authority agrees that in the event the Lender, a transferee of Lender, or a purchaser at foreclosure sale acquires title to the Property pursuant to a foreclosure sale or a deed in lieu thereof, then the Lender, transferee, or purchaser shall be entitled to all rights conferred upon the Developer under the Contract, provided that no condition of default exists and remains uncured beyond applicable cure periods in the obligations of the Developer under the Contract. 12. Estoppel. The Authority hereby represents and warrants to Lender, for the purpose of inducing Lender to make advances to Developer under the Loan Documents that: (a) No default or event of default by Developer exists under the terms of the Contract on the date hereof; (b) The Contract has not been amended or modified in any respect, nor has any material provision thereof been waived by either the Authority or the Developer, and the Contract is in full force and effect; (c) Such other reasonable certifications as the Lender may request. 13. Amendments. The Authority hereby represents and warrants to Lender for the purpose of inducing Lender to make advances to Developer under the Loan Documents that Authority will not agree to any amendment or modification to the Contract or any TIF Note issued under the Contract that materially affects the collection of Available Tax Increment (as defined in the Contract) in any way affects the Property without the Lender's written consent. SH235-] 7(JAE) 263108v.3 E-3 IN WITNESS WHEREOF, this Agreement has been executed and delivered as of the day and year first written above. ECONOMIC DEVELOPMENT AUTHORITY FOR THE CITY OF SHAKOPEE By: Its President By: Its Executive Director STATE OF MINNESOTA ) )ss COUNTY OF SCOTT) The foregoing instrument was acknowledged before me this _ day of , by and , the President and Executive Director, respectively, of the Economic Development Authority for the City of Shakopee, a public body corporate and politic, on behalf of such public body. Notary Public SH235-17(JAE) 263108v.3 E-4 [LENDER] By: Its Consented to by the City of Shakopee: THE CITY OF SHAKOPEE By Its Mayor By Its City Administrator By Its City Clerk SH235-17(JAE) 2631 08v.3 E-5