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Home My WebLink About2012-05-16 PACKET 08.B.COUNCIL ACTION REQUEST 1. Consider authorizing approval of the development agreement with Stonehenge USA contingent upon Council adoption of planning authorizations. 2. Consider adopting a resolution approving modification of the minimum assessment agreement with Home Depot from 2002 to reflect the increase in minimum market value both of which are necessary in order to provide the opportunity for redevelopment of the current Home Depot parcel at 7210 East Point Douglas Road. STAFF RECOMMENDATION 1. Authorize approval of the development agreement. 2. Adopt the resolution. SUPPORTING DOCUMENTS ® MEMO /LETTER: Memo from Ryan Schroeder. ❑ RESOLUTION: ❑ ORDINANCE: ❑ ENGINEERING RECOMMENDATION: ❑ LEGAL RECOMMENDATION: ® OTHER: Attachments. ADMINISTRATORS COMMENTS fj r 1 Administrator Date * * * * * * * * * * * * * * * * * * * W * * * * * * * * * * * * * * * * W * * W W * W W W * W * COUNCIL ACTION TAKEN: ❑ APPROVED ❑ DENIED ❑ OTHER Documentl w City Of Cottacie Grove To: Mayor and City Council From: Ryan R. Schroeder, City Administrator Date: May 11, 2012 Subject: Stonehenge USA Development Agreement In 2002 the City entered redevelopment agreements with Grove Rainbow and Home Depot resulting in demolition of a portion of the Grove Plaza Shopping Center, construction of the Home Depot store and a face lift to the small tenant spaces in Grove Plaza. The EDA also entered minimum assessment agreements with both Home Depot and Grove Rainbow which set a floor to the taxable market values of these two properties. City participation in those projects was limited to a $500,000 grant to Grove Rainbow (which was paid through generated tax increments from the project) and approximately $350,000 in construction of a storm water retention facility. Construction of the Home Depot commenced with a permit issued June 24, 2002. In 2008 the Home Depot closed and was placed on the market for $6.5 million. Subsequently the property, along with 13 others across the country, was placed on auction with the highest bid offered at $2.8 million. That bid was rejected by Home Depot. In 2010 the State Legislature adopted a jobs bill allowing for pooling of tax increments for a job creating redevelopment of the nature currently proposed for the Home Depot property. In 2011 that jobs bill was extended to allow for pooling through 12/31/12. The current tax bill just vetoed by the Governor provides an extension to 1/1/14. However, we have been working under the premise that a redevelopment needs to occur under the provisions of the 2011 jobs bill in spite of the likelihood that a portion of the bill may yet be considered this year. Again, it is only this legislation that allows the City of Cottage Grove to work with the development community toward repurposing the Home Depot property. Absent this specific authorization the City would not have an ability to bridge the financing gap between what is required to complete repurposing and available fiscal capacity of the development pro- forma. Stonehenge USA has been endeavoring to put together a redevelopment project on the Home Depot site for about a year. For your consideration is a redevelopment plan that may allow for completion of that proposed redevelopment project. It should be noted that even with EDA and Council approval of this plan certainty in the redevelopment project is not a given. However, with an approval the City can take comfort that it has provided the opportunity for a redevelopment to occur. If it does not ultimately occur it will be due to reasons outside of the control of the City and to some extent perhaps outside of the control of any particular party within the proposed transaction. Proposed is that Stonehenge would close on a purchase agreement with Home Depot, complete leases with LA Fitness and two or more additional retail uses (in total 67,844 square feet), and to receive releases from all parties in interest to allow for the proposed end uses. It is proposed that acquisition and build -out activities would total $8,893,897 in costs with financing, soft and development costs of $1,986,380 (total development costs of $10,880,277). Construction would be proposed to start on or before June 30, 2012 with substantial completion by April 1, 2013. The minimum market value for the Home Depot property is estimated to improve from $5,775,000 to $7,250,000. There is not a taxable market value impact assumed for the Grove Rainbow property. The development agreement proposed by the City includes a write down of the development purchase, infrastructure and facility improvements in the amount of $1.5 million. Further, that the City would enter an equity participation note with an investment of $300,000 that also allows for recovery of that $300,000 should proceeds of resale of the property exceed developer expectations at an 8.125 cap rate which would be a sale exceeding $9,750,000. Developer equity of $2,050,277 and developer financing of $7,030,000 completes the investment for the Home Depot parcel portion of the project. The City would also pledge up to $100,000 to Grove Rainbow toward tenant improvements and associated costs of three bay spaces currently available for lease at Grove Plaza. That pledge is contingent upon Stonehenge closing on their financing and initiating construction of the Home Depot parcel within the June 30 deadline and upon Grove Rainbow providing sworn construction statements itemizing their Tenant improvement expenditures. The allocation would flow to the property owner who in turn would conduct the tenant improvements. The incentive would be at a maximum contribution of $12 /Square foot. The entire City investment is from pooled tax increments from TIF Districts 1 -1, 1 -3, 1 -8 and 1- 12. As noted above, absent a project such as contemplated here and absent the current jobs legislation the City could not access these pooled tax increment dollars. There is not a general fund investment into this project which has been a high priority for the City since the building went dark. It should be noted that the City had been in negotiations with the YMCA to provide a fitness facility within the community. That project would have required a general fund investment significantly greater than is proposed here. At their meeting of May 7, 2012 the EDA unanimously approved the structure of the development agreement with its major deal points (one member absent). That approval was contingent upon City Attorney and City Council review and approval given that the development agreement drafting had not yet been completed. City Attorney Ron Batty was present at the meeting to respond to questions regarding the development agreement. The development agreement proposes leases to be entered of 67,844 square feet or greater. Contemplated is LA Fitness (34,589 SF), Goodwill (20,600 SF), PETCO (12,655). Not yet leased is an 8,957 square foot bay along with 9,876 square feet of storage space. If the project proceeds, projections are that 45 construction jobs would be created. Further, there would be 105 total employees within the three facilities currently projected within the redeveloped facility. The average hourly wage for the retail employment is $13.54 per hour before benefits and excluding any incentive payment programs. The state required business subsidies agreement references the construction component of these jobs given that the proposed property owner does not have control over development of retail employment. It should be noted that the planning request for this project will be at the May 21, 2012 Planning Commission and the June 6, 2012 meeting of Council. Development agreement approval is being sought at this time, contingent upon planning recommendations, in order to attempt to meet a very tight timeframe to complete all of the project components. Alternative Uses for Tax Increment Council should be apprised that there are limited alternative uses for the tax increment being proposed here. The restrictions include: 1. Project must start construction by June 30, 2012 (we do not have ANY other tax increment eligible projects able to meet this restriction) 2. Projects within TIF districts, absent this "one time" legislative change must be started within five years of creation of the district (for District 1 -12 we have exceeded the five year time frame and therefore we cannot create other projects within these districts post June 30 once this current authorization expires which is $1.3 million of the total project contribution). Districts 1 -1 and 1 -3 are pre 1990 districts which do not have the same 5- year knock down rule. 3. Tax Increments cannot be allocated to non - eligible activities (in other words these dollars cannot be allocated toward the PSCH or similar project or to pay for other general fund, enterprise fund or any other non -tax increment fund expense) 4. Pooled TIF must be for construction projects (we cannot use these dollars to buy property for a future development or to allocate toward a future project elsewhere unless that project can begin construction by June 30, 2012. We cannot use these dollars for other public construction projects) 5. TIF Law must be followed (we need to be confident that "but for" the use of tax increments the project would not proceed; the pro -forma numbers for this project prove that to be the case here; for any other project which could be conceived we would have to do the same; that is not likely to occur within seven weeks) Council Action: By motion 1) authorize approval of the development agreement with Stonehenge USA contingent upon Council adoption of planning authorizations, and 2) by resolution adopt a modification of the minimum assessment agreement with Home Depot from 2002 to reflect the increase in minimum market value both of which are necessary in order to provide the opportunity for redevelopment of the current Home Depot parcel at 7210 East Point Douglas Road. Enclosed: Tenant build out Development Agreement a� a o :- 'o 00 Z �m mn m= City of Cottage Grove Resolution No. A Resolution Approving Modified Assessment Agreement WHEREAS, the Cottage Grove Economic Development Authority (the "Authority") and Home Depot USA, Inc. previously entered into an Assessment Agreement dated , filed as document no. in the Office of the , Washington County, Minnesota (the "2002 Assessment Agreement "), regarding the property legally described on Exhibit A attached hereto (the "Property"); and WHEREAS, Home Depot USA, Inc. intends to convey its interest in the Property to Stonehenge Development, LLC, a Minnesota limited liability company, doing business as Stonehenge -USA (the "Developer "); and WHEREAS, the Developer has requested and the Authority has agreed to amend the 2002 Assessment Agreement to reflect the revised value of the Property; and WHEREAS, at its meeting on May 8, 2012, the Authority authorized the execution of the Amended Assessment Agreement, which document the parties intend to execute and place of record with Washington County; and WHEREAS, state law requires that the Amended Assessment Agreement be approved by the governing body of the municipality prior to becoming effective. NOW THEREFORE, BE IT RESOLVED by the City Council of the City of Cottage Grove as follows: 1. Pursuant to Minnesota Statutes, section 469.177, subd. 8, the Amended Assessment Agreement by and between the Authority and the Developer is hereby approved. 2. A copy of this resolution shall be filed of record with the Amended Assessment Agreement. 3. City staff and consultants are authorized and directed to take any and all actions necessary or convenient to record the Amended Assessment Agreement and to carry out the intent of this resolution. 403677 RHB CT165 -45 I Dated: 2012. Myron Bailey, Mayor ATTEST: Caron Stransky, City Clerk 403677 RIfB C1165 45 EXHIBIT A Legal Descriptions of the Property Lot 2, Block 1, Grove Plaza 2 " Addition, Washington County, Minnesota 403677 RI-IB CTI6545 A_1 CONTRACT We PRIVATE DEVELOPMENT By and Between COTTAGE GROVE ECONOMIC DEVELOPMENT AUTHORITY and STONEHENGE DEVELOPMENT, LLC, DOING BUSINESS AS STONEHENGE -USA This document drafted by: KENNEDY & CRAVEN, CHARTERED 470 U.S. Bank Plaza 200 South Sixth Street Minneapolis, MN 55402 (612) 337 -9300 390176 RHB CT165.45 TABLE OF CONTENTS .. C PAGE I ARTICLE I Definitions Section LL Definitions .................. Section 1.2. Exhibits ...................... Section 1.3. Rules of Interpretation ............................................... ............................... 2 ............................................... ............................... 4 ............................................... ............................... 4 ARTICLE 11 Representations and Warranties Section 2.1. Representations by the Authority ................................................. ............................... 5 Section 2.2. Representations and Warranties by the Developer ....................... ............................... 5 ARTICLE III Development Property, Public Assistance Section 3.1. Development Property .................................................................. ............................... 6 Section 3.2. Financial Assistance; Qualified Costs .......................................... ............................... 6 Section 3.3. Equity Participation; Recapture of Excess Sales Proceeds ....... ............................... 8 Section 3.4. Spending Plan Increment Only Source of Assistance .................. ............................... 8 ARTICLE IV Construction of Minimum Improvements Section 4.1. Description of Minimum Improvements ...................................... ............................... 8 Section 4.2. Construction of Minimum hnprovements .................................... ............................... 8 Section 4.3. Rehabilitation Plans ...................................................................... ............................... 9 Section 4.4. Commencement and Completion of Construction ....................... ............................... 9 Section 4.5. Certificate of Completion .............................................................. .............................10 Section 4.6. Reconstruction of Improvements ................................................ ............................... 10 ARTICLE V Business Subsidy Act Requirements Section 5.1. Compliance with Business Subsidy Provisions .......................... ............................... 10 Section 5.2. Job and Wage Goals .................................................................... ............................... 11 Section5.3. Remedies ..................................................................................... ............................... 11 Section5.4. The Reports ................................................................................. ............................... 12 390176 RHB CT16545 ARTICLE VI Insurance Section 6.1. Required Insurance ..................................................................... ............................... 13 Section 6.2. Evidence of Insurance ................................................................. ............................... 14 ARTICLE VII Collection of Taxes; Assessment Agreements Section7.1. Taxes ........................................................................................... ............................... 14 Section 7.2. Assessment Agreement ............................................................... ............................... 15 Section 7.3. Right to Collect Delinquent Taxes .............................................. ............................... 16 Section 7.4. Use of Spending Plan Increments ............................................... ............................... 16 ARTICLE VIII Prohibition Against Sale; Transfer Section 8.1. Prohibition Against Sale of Minimum Improvements ............... ............................... 17 Section 8.2. Transfer or Assignment ............................................................... ............................... 17 ARTICLE IX Events of Default Section 9.1. Events of Default Defined .......................................................... ............................... 19 Section 9.2. Remedies on Default ................................................................... ............................... 20 Section 9.3. No Remedy Exclusive ................................................................. ............................... 20 Section 9.4. No Additional Waiver Implied by One Waiver ......................... ............................... 21 ARTICLE X Additional Provisions Section 10.1. Conflict of Interests; Representatives Not Individually Liable .. ............................... 21 Section 10.2. Equal Employment Opportunity ................................................. ............................... 21 Section 10.3. Restrictions on Use ..................................................................... ............................... 21 Section 10.4. Notices and Demands ................................................................. ............................... 21 Section10.5. Counterparts ................................................................................ ............................... 22 Section 10.6. Disclaimer of Relationships .......................................................... .............................22 Section10.7. Amendment ................................................................................. ............................... 22 TESTIMONIUM................................................................................................. ............................... 23 SIGNATURES................................................................................................ ............................... 23 -24 390176 RRB CT165 -45 ii EXHIBIT A LEGAL DESCRIPTION OF DEVELOPMENT PROPERTY EXHIBIT B SITE PLAN OF DEVELOPMENT PROPERTY EXHIBIT C FORM OF CERTIFICATE OF COMPLETION EXHIBIT D LIST OF PRELIMINARY PLANS EXHIBIT E FORM OF ASSESSMENT AGREEMENT EXHIBIT F FORM OF DISBURSEMENT AGREEMENT 390176 RHB CT165 -45 111 CONTRACT FOR PRIVATE DEVELOPMENT THIS AGREEMENT, made this _ day of 2012, by and between the Cottage Grove Economic Development Authority, a public body corporate and politic under the laws of Minnesota, having its principal office at 7516 80' Street South, Cottage Grove, Minnesota 55016-3195 (the "Authority") and Stonehenge Development, LLC, a Minnesota limited liability company, doing business as Stonehenge -USA, having its principal office at 6007 Culligan Way, Minnetonka, Minnesota 55345 (the "Developer "). WITNESSETH: WHEREAS, the Authority created Development District No. 1 (the "Development District ") and adopted a program (the "Program ") for it, all in conformance with the City Development Districts Act, as hereinafter defined; and WHEREAS, the Authority established Tax Increment Financing District No. 1 -12 ( "TIF District No. 1 -12 "), a redevelopment tax increment financing district, and adopted a tax increment financing plan (the "TIF Plan ") related thereto; and WHEREAS, Minnesota Statutes, sections 469.174 through 469.179 (the "TIF Act ") was amended in 2010 to allow the use of available tax increments from tax increment districts within a community to offer assistance in any form to private development consisting of the construction or substantial rehabilitation of buildings and ancillary facilities if doing so will create or retain jobs in the state, which temporary authority currently expires on December 31, 2012; and WHEREAS, the Authority has previously established other tax increment financing districts within the community which have tax increment available for use pursuant to section 469.176, subd. 4m of the TIE Act; and WHEREAS, the Authority is prepared to offer assistance to the Developer for the Qualified Costs, as hereinafter defined, in order to bring about the substantial rehabilitation of the former Home Depot store on the Development Property and the creation or retention of jobs in the state; and WHEREAS, the Authority believes that the substantial rehabilitation of the Development Property pursuant to this Agreement and the fulfillment generally of this Agreement are in the vital and best interests of Cottage Grove and the health, safety, morals, and welfare of its residents, and in accord with the public purposes and provisions of the applicable state and local laws and requirements. NOW, THEREFORE, in consideration of the covenants and the mutual obligations contained herein, the Authority and the Developer hereby covenant and agree with the other as follows: 390176 RHB CT16545 I ARTICLE I Definitions Section 1.1. Definitions In this Agreement the following terms shall have the meanings given unless a different meaning clearly appears from the context: "Act" means the City Development Districts Act, Minnesota Statutes, sections 469.124 through 469.134, as amended. "Agreement" means this Agreement, as the same may be from time to time modified, amended, or supplemented. "Assessment Agreement" means the amended agreement regarding the Minimum Market Value of the Development Property in the form contained in Exhibit E attached hereto. "Assessor" means the assessor for Washington County, Minnesota. "Authority" means the Cottage Grove Economic Development Authority, a public body corporate and politic under the laws of Minnesota "Benefit Date" means the date the Developer first receives any Spending Plan Increment pursuant to this Agreement. "Business Subsidy Act" means Minnesota Statutes, sections 1167.993 through 1167.995, as amended. "Certificate of Completion" means the certificate, in the form contained in Exhibit C attached hereto, which will be provided to the Developer pursuant to Article IV of this Agreement. "City" means the city of Cottage Grove, a municipal corporation under the laws of Minnesota "County" means Washington County, Minnesota. "Developer" means Stonehenge Development, LLC, a Minnesota limited liability company, doing business as Stonehenge -USA, it successors or assigns. "Development Property" means the real property which is legally described in Exhibit A attached hereto and depicted on Exhibit B. "Disbursement Agreement" means the agreement in the form attached hereto as Exhibit F to be entered into by the Developer and the Authority regarding funding of construction of the Minimum Improvements. 390176 RHn CT16545 2 "EDA Act" or "Economic Development Authority Act" means Minnesota Statutes, sections 469.090 through 469.1081, as amended. "Equity Participation Assistance" means the $300,000 of Spending Plan Increment to be offered by the Authority to the Developer pursuant to section 3.3 of this Agreement. "Event of Default" means an action by the Developer or the Authority listed in Article IX of this Agreement. "Minimum Improvements" means the substantial rehabilitation of the former Home Depot store and accessory improvements on the Development Property, as more fully described in Section 4.1 of this Agreement. After completion of the Minimum Improvements on the Development Property, the term shall mean the Development Property as improved by the Minimum Improvements. "Minimum Market Value" means a market value for real estate tax purposes of at least $7,275,000 with respect to the Development Property and Minimum Improvements as of January 2, 2013 for taxes payable beginning in 2014. "Preliminary Plans" means the preliminary plans which have been submitted by the Developer to the Authority regarding the substantial rehabilitation of the former Home Depot store and which are listed in Exhibit D attached hereto. "Qualified Costs" mean the actual costs, not to exceed $1,500,000, incurred by the Developer to acquire the Development Property and to construct the Minimum Improvements on the Development Property. "Rehabilitation Plans" means the plans to be submitted by the Developer to the Authority which are consistent with the Preliminary Plans and which detail its work to substantially rehabilitate the former Home Depot store and accessory improvements into the Minimum Improvements. "Sale" means any sale, conveyance, lease, exchange, forfeiture other transfer of the Developer's interest in the Minimum Improvements or the Development Property, whether voluntary or involuntary, except as permitted under sections 8.1(a) or 8.1(c) of this Agreement. "Satisfactory Progress" means the Developer having completed at least the Minimum Improvements specified in section 3.2(e) of this Agreement by December 20, 2012. "Spending Plan" means the written spending plan adopted by the City on May 2, 2012, pursuant to section 469.176, subd. 4m of the TIF Act regarding the use of the Spending Plan Increment. "Spending Plan Increment" means available tax increment from the Authority's TIF Districts 1 -1, 1 -3, 1 -8 and 1 -12 in an amount not to exceed $1,500,000 which may be utilized by 390176 RHB CT165.45 3 the Authority to assist the Developer with the Qualified Costs under the Spending Plan adopted by the City pursuant to section 469.176, subd. 4m of the TIE Act. "State" means the state of Minnesota. "Tax Increment" has the meaning given to it pursuant to Minnesota Statutes, section 469.174, subd. 25. "Tax Increment Financing Act" or "TIF Act" means Minnesota Statutes, sections 469.174 through 469.179, as amended. "Tax Increment Financing District" or "TIF District" means the Authority's TIF District No. 1 -12, a redevelopment tax increment financing district. "Tax Increment Financing Plan" or "TIF Plan" means the tax increment plan for TIF District No. 1 -12. "Tax Official" means the Assessor, County auditor, County or State board of equalization, the commissioner of revenue of the State, or any State or federal district court, the tax court of the State, or the State supreme court. "Termination Date" means the date the TIF District terminates or December 31, 2023, whichever occurs first. Section 1.2. Exhibits The following exhibits are attached to and by reference made a part of this Agreement: Exhibit A. Legal description of the Development Property Exhibit B. Site Plan of Development Property Exhibit C. Form of Certificate of Completion Exhibit D. List of Preliminary Plans Exhibit E. Form of Assessment Agreement Exhibit F. Form of Disbursement Agreement Section 1.3. Rules of Interpretation (a) This Agreement shall be interpreted in accordance with and governed by the laws of Minnesota. (b) The words "herein" and "hereof' and words of similar import, without reference to any particular section or subdivision, refer to this Agreement as a whole rather than any particular section or subdivision hereof. (e) References herein to any particular section or subdivision hereof are to the section or subdivision of this Agreement as originally executed. 390176 RHB CT165 45 4 (d) Any titles of the several parts, articles and sections of this Agreement are inserted for convenience and reference only and shall be disregarded in construing or interpreting any of its provisions. ARTICLE I1 Representations and Warranties Section 2.1. Representations by the Authority The Authority makes the following representations as the basis for the undertakings on its part herein contained: (a) The Authority is a public body corporate and politic under the laws of Minnesota. The Authority has the power to enter into this Agreement and carry out its obligations hereunder. (b) The persons executing this Agreement and related agreements and documents on behalf of the Authority have the authority to do so and to bind the Authority by their actions. (c) The Development District is a development district within the meaning of the Act and was created, adopted and approved in accordance with the terms of the Act. (d) TIF District No. 1 -12 is a redevelopment tax increment financing district within the meaning of the TIF Act and was established pursuant to the provisions of section 469.174, subd. 4 of the TIF Act. (e) The activities contemplated under this Agreement and the financial assistance which may be offered under the Spending Plan are for the purpose of assisting private development consisting of the substantial rehabilitation of buildings and ancillary facilities and are for the purpose of creating and retaining jobs within the state, including construction jobs. Section 2.2. Representations and Warranties by the Developer Subject to its acquisition of the Development Property, the Developer makes the following representations as the basis for the undertakings on its part herein contained: (a) The Developer is a Minnesota limited liability company. The Developer is not in violation of any provisions of its organizational documents. The Developer has the power to enter into this Agreement and carry out its obligations hereunder. The persons executing this Agreement and related agreements and documents on behalf of the Developer have the authority to do so and to bind the Developer by their actions. (b) The Developer will construct the Minimum Improvements on the Development Property in substantial accordance with the terms of this Agreement and all local, State and federal laws and regulations, including, but not limited to, environmental, zoning, building code and public health laws and regulations. 390176 RHB CT165 -45 5 (c) 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 or any restriction or any evidence 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. (d) The Developer would not be willing to construct the Minimum Improvements but for the commitment by the Authority to grant the financial assistance outlined in this Agreement and the use of Spending Plan Increment for such assistance is essential to the Developer's ability to carry out its obligations under this Agreement. (e) The Developer has analyzed the economics of acquisition of the Development Property and construction of the Minimum Improvements and concluded that, absent the financial assistance to be offered under this Agreement, it would not have commenced construction of the Minimum Improvements before July 1, 2012. ARTICLE III Development Property; Public Assistance Section 3.1. Development Property The Developer agrees to acquire the Development Property by no later than . Subject to satisfaction of the conditions precedent in section 3.2(c) of this Agreement, the Authority will provide the financial assistance outlined in this Agreement to the Developer in connection with acquisition of the Development Property and construction of the Minimum Improvements but makes no representations to the Developer regarding the suitability of the Development Property for the use and purpose intended by the Developer. Section 3.2. Financial Assistance: Qualified Costs (a) The Developer has represented to the Authority that the cost of acquiring the Development Property and of substantially rehabilitating the former Home Depot store and accessory improvements into the Minimum Improvements exceeds available private financing and has requested assistance from the Authority for the Qualified Costs. The Authority agrees to offer financial assistance to the Developer for the Qualified Costs in an amount not to exceed $1,500,000 in accordance with this section 3.2. (b) The Authority agrees to use Spending Plan Increment in an amount not to exceed $1,500,000 pursuant to the temporary authority granted under section 469.176, subd. 4m of the TIF Act. The payment of Spending Plan Increment shall be made pursuant to the Disbursement Agreement and shall begin after satisfaction of all the conditions precedent outlined in section 3.2(c) of this Agreement. The Developer agrees to maintain such plans, specifications, documents and other records as to enable it to demonstrate with specificity to the Authority its actual expenses associated with the Qualified Costs. Notwithstanding anything herein to the contrary, the Authority's legal authority to spend Spending Plan Increment terminates on 390176 R14B Cr165 -45 6 December 31, 2012 and the Authority shall have no obligation thereafter to pay any Spending Plan Increment to the Developer for the Qualified Costs or any other purpose unless, prior to said date, the Authority's legal authorization to do is extended by state law. (c) Notwithstanding anything herein to the contrary, the Authority shall have no obligation to offer financial assistance to the Developer for any Qualified Cost under this section 3.2 or under section 3.3 of this Agreement until and unless all of the following conditions precedent have been satisfied: (1) The Developer has acquired the Development Property in fee; (2) The Developer has demonstrated to the Authority's satisfaction that all private covenants and restrictions limiting the uses allowed on the Development Property have been waived or removed; (3) The Developer has demonstrated to the Authority's satisfaction that necessary approvals or consents have been obtained from all third parties having an interest in the Development Property or adjacent land; (4) The Developer has demonstrated to the Authority's satisfaction that it has entered into all construction contracts necessary to complete the Minimum Improvements; (5) The Developer has demonstrated to the Authority's satisfaction that it has secured leases with L.A. Fitness and additional tenants totaling not less than 67,844 square feet for the respective tenant spaces designated on Exhibit B; (6) The Developer has commenced construction of the Minimum Improvements as defined in section 4.4 of this Agreement before July 1, 2012; (7) The Developer is not disqualified from receiving a business subsidy under the Business Subsidy Act; and (8) There has been no default under this Agreement on the part of the Developer. (d) Prior to the Authority being obligated to make payments under the Disbursement Agreement, the Developer shall provide the Authority with evidence, including a sworn construction statement and lien waivers, of its prior payment of invoices and other expenses incurred in connection with its substantial rehabilitation of the structure on the Development Property. (e) Notwithstanding anything herein or in the Disbursement Agreement to the contrary, the Authority shall not be obligated to make any additional payments of any financial assistance offered to the Developer under this Agreement unless by no later than December 20, 2012, the Developer shall have completed at least the following portion of the Minimum Improvements: 390176 RHB CT16545 7 [to be completed] Section 3.3. Equity Participation; Recapture of Excess Sales Proceeds (a) In addition to the Spending Plan Increment assistance of up to $1,500,000 authorized under section 3.2 of this Agreement, the Authority agrees to assist the Developer with the Equity Participation Assistance. The Equity Participation Assistance is for the purpose of assisting the Developer with the Qualified Costs and is subject to recapture, in whole or in part, in accordance with this section 3.3. (b) The Developer has represented to the Authority that it intends to engage in a Sale of the Development Property following completion of the Minimum Improvements. If the Developer's net proceeds from a Sale of the Development Property or Minimum Improvements exceed $9,750,000, the first $300,000 of such net proceeds shall be repaid to the Authority as reimbursement of the Equity Participation Assistance. For the purposes of this Agreement, net proceeds of a Sale shall mean the sale price of the Development Property or Minimum Improvements received by the Developer after deduction of the normal and customary expenses involved in such Sale. Section 3.4. Spending Plan Increment Only Source of Assistance All of the Authority's financial commitments under this Agreement will be paid by the Authority only out of Spending Plan Increment and from no other source. The parties acknowledge that the Spending Plan Increment will not be sufficient to pay the Developer for all the costs it incurs in connection with the acquisition of the Development Property and construction of the Minimum Improvements and that the Authority has made no commitment to offer any financial assistance to the Developer other than as specified in this Agreement. ARTICLE IV Construction of Minimum Improvements Section 4.1. Description of Minimum Improvements The Minimum Improvements consist of substantial rehabilitation of the former Home Depot buildings into retail space containing a minimum of 67,844 square feet to be leased by L.A. Fitness and additional retail uses. The leases shall be for a minimum of 10 years. Section 4.2. Construction of Minimum Improvements The Developer agrees that it will complete the Minimum Improvements in accordance with the Rehabilitation Plans and at all times prior to the Termination Date will maintain, preserve and keep the Minimum Improvements on the Development Property or cause the Minimum Improvements on the Development Property to be maintained, preserved and kept in good repair and condition, reasonable wear and tear excepted. The Developer recognizes that it is because the Developer has agreed to construct the Minimum Improvements on the Development Property that the Authority is willing to offer the assistance outlined in this Agreement. The Developer acknowledges that, in addition to the requirements of this Agreement, construction of the Minimum Improvements on the Development Property will necessitate compliance with other 390176 RHB CT16545 8 reviews and approvals by the Authority, the City and possibly other governmental agencies and agrees to submit all applications for and pursue to their conclusion all other approvals needed prior to constructing the Minimum Improvements on the Development Property. Section 4.3. Rehabilitation Plans (a) At least 15 days prior to commencing the substantial rehabilitation work on the Development Property, the Developer shall submit dated Rehabilitation Plans to the Authority. The Rehabilitation Plans shall provide for the substantial rehabilitation of the existing, Home Depot store and accessory improvements on the Development Property into retail space of at least 67,844 square feet to be leased to L.A. Fitness and additional retail uses. The Authority will approve the Rehabilitation Plans if they (1) are consistent with the Preliminary Plans; (2) conform to all applicable federal, State and local laws, ordinances, rules and regulations; (3) are adequate to provide for completion of the Minimum Improvements; (4) conform to the State building code; and (5) if there has occurred no uncured Event of Default on the part of the Developer under this Agreement. The Rehabilitation Plans shall be deemed to be approved if not rejected by the Authority, in whole or in part, by written notice from the Authority to the Developer setting forth in detail the reasons for the rejection within 10 days of the Authority's receipt thereof, time being of the essence. No approval by the Authority shall relieve the Developer of the obligation to comply with the terms of this Agreement or the terns of any applicable federal, State and local laws, ordinances, rules and regulations in connection with the Rehabilitation Plans. No approval by the Authority shall constitute a waiver of an Event of Default. (b) If the Developer desires to make any change in the Rehabilitation Plans after their approval by the Authority with regard to the design, exterior materials, site plan or square footage or any other change which would also require review or reapproval under any applicable code, ordinance or regulation, the Developer shall submit the proposed change to the Authority for its approval. If the proposed change conforms to the requirements of this section 4.3 with respect to the original Rehabilitation Plans or is otherwise acceptable to the Authority, the Authority shall approve the proposed change. Such change in the Rehabilitation Plans shall 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 written notice of such change from the Developer, time being of the essence. Section 4.4. Commencement and Completion of Construction Work on the Minimum Improvements shall commence before July 1, 2012 and shall be substantially completed before April 1, 2013. Commencement of work on the Minimum Improvements means, at a minimum, issuance of a building permit by the City, the Developer having entered into construction contracts necessary to complete the Minimum Improvements and physical initiation of the work on the Development Property. Substantial completion means, at a minimum, that construction of the Minimum Improvements is sufficiently complete as to warrant issuance of a Certificate of Occupancy by the City except for "punch list" items and work that cannot reasonably be completed due to normal seasonal weather conditions. All work by the Developer on the Development Property shall be in conformity with the Rehabilitation Plans. The Developer shall make such reports to the Authority regarding construction of the Minimum Improvements on the 390176 RHB CT16545 9 Development Property as the Authority deems reasonably necessary or helpful in order to monitor progress of construction of the Minimum Improvements. Section 4.5. Certificate of Completion After substantial completion of the Minimum Improvements in accordance with the Rehabilitation Plans and all terms of this Agreement, the Authority will furnish the Developer with a Certificate of Completion for the Development Property in the form of Exhibit C attached hereto. Such certification by the Authority shall be a conclusive determination of satisfaction and termination of the agreements and covenants in this Agreement with respect to the obligations of the Developer to construct the Minimum Improvements on the Development Property. The Certificate of Completion with respect to the Development Property shall only be issued after issuance of a certificate of occupancy by the City with respect to the substantial rehabilitation of the Home Depot store and accessory improvements in accordance with the Rehabilitation Plans. The Certificate of Completion provided for in this section 4.5 shall be in such form as will enable it to be recorded in the proper County office for the recordation of deeds and other instruments pertaining to the Development Property. Section 4.6. Reconstruction of Improvements If the Minimum Improvements on the Development Property are damaged or destroyed before or after completion thereof and issuance of a Certificate of Completion, but before the Termination Date, the Developer agrees, for itself and its successors and assigns, to reconstruct the Minimum Improvements on the Development Property within one year of the date of the damage or destruction if adequate financing can be obtained under commercially reasonable terms. However, no delay or failure by the Developer or any successor or assign to reconstruct the Minimum Improvements on the Development Property, regardless of the reason, shall alter or limit the Minimum Market Value or the terms of the Assessment Agreement with respect to the Development Property, which shall remain in full force and effect until the Termination Date. The Minimum Improvements shall be reconstructed in accordance with the approved Rehabilitation Plans, or such modifications thereto as may be requested by the Developer and approved by the Authority in accordance with Section 4.3 of this Agreement. The Developer's obligation to reconstruct the Minimum Improvements on the Development Property pursuant to this Section 4.6 shall end on the Termination Date. ARTICLE V Business Subsidy Act Requirements Section 5.1. Compliance with Business Subsidy Provisions The parties agree and represent to each other as follows: (a) The business subsidy provided by the Authority to the Developer pursuant to this Agreement includes providing financial assistance to the Developer of up to $1,800,000. This subsidy represents a forgivable loan that is repayable by the Developer in accordance with this Article V. 390176 RHB CT165-45 10 (b) The public purposes of the subsidy are to promote the acquisition of the Development Property and the substantial rehabilitation of the former Home Depot store and accessory improvements to a retail facility containing a minimum of 67,844 square feet and to be leased to L.A. Fitness and additional retail uses, generate spin -off development at a key location in the community, increase net jobs in the City and the State, including construction jobs, and increase the tax base of the City and the State. (c) The goals for the subsidy are to acquire the Development Property and secure construction of the Minimum Improvements on the Development Property; to maintain the Minimum Improvements as retail and related uses for at least five years as described in clause (f) below; and to create the jobs and wage levels in accordance with section 5.2 of this Agreement. (d) If the goals described in clause (c) above are not met, the Developer must make the payments to the Authority described in section 5.3. (e) The subsidy is needed because the cost of the acquisition of the Development Property plus the cost of the substantial rehabilitation involved in constructing the Minimum Improvements makes the acquisition and redevelopment of the existing Home Depot store and accessory improvements financially infeasible without public assistance. (f) The Developer must continue operation of the Minimum Improvements on the Development Property as retail and related uses for at least five years after the date of issuance of the Certificate of Completion, unless, prior thereto, the Development Property or any substantial part thereof, is acquired by a public entity through eminent domain and such acquisition, in the reasonable judgment of the Developer, or its successors or assigns, unreasonably impairs the use of the Development Property as retail and related uses. (g) The Developer has no parent corporation. (h) 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 acquisition of the Development Property or construction of the Minimum Improvements on the Development Property. Section 5.2. Job and Wage Goals Within two years after the Benefit Date, the Developer shall cause to be created at least 10 new full -time equivalent construction jobs on the Development Property and shall cause the wages paid for the 10 jobs to be no less than $_ per hour, exclusive of benefits. Notwithstanding anything to the contrary herein, if the wage and job goals described in this section 5.2 are met within two years after the Benefit Date, those goals are deemed satisfied despite the Developer's continuing obligations under Sections 5.1(f) and 5.4. Section 5.3. Remedies If the Developer fails to meet the goals described in Section 5.1(c), the Developer shall repay to the Authority upon written demand from the Authority a pro rata share of the amount of the subsidy, not to exceed $1,800,000, paid to the Developer by the Authority as a business subsidy under this Agreement, plus interest on said amount at the implicit price deflator as defined in Minnesota Statutes, Section 275.50, subd. 2, accrued from 390176 RHB CT165 -45 I I the Benefit Date to the date of payment. This repayment obligation is and shall remain a personal obligation of the Developer unless, at the time of a Sale of the Development Property or Minimum Improvements, the purchaser assumes such obligation in accordance with Article VIII of this Agreement, whereupon the Authority shall release the Developer. 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 created, 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 the operation of the Minimum Improvements on the Development Property as retail and related uses in accordance with Section 5.1(f), 60 less the number of months of operation as retail and related uses (where any month in which the retail and related uses are in operation for at least 15 days constitutes a month of operation) commencing on the date of the issuance of Certificate of Completion for the Development Property and ending with the date the retail and related uses cease operation as determined by the Authority, divided by 60; and (iv) if more than one of clauses (i) through (iii) apply, the sum of the applicable percentages, not to exceed 100 %. Nothing in this Section 5.3 shall be construed to limit the Authority's remedies under Article IX of this Agreement. In addition to the remedy described in this Section 5.3 and any other remedy available to the Authority for failure to meet the goals stated in Section 5.1(c), the Developer agrees and understands that it may not a receive a business subsidy from the Authority or any 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 5.3, whichever occurs first. Section 5.4. The Reports The Developer must submit to the Authority a written report regarding business subsidy goals and results by no later than March 1 of each year, commencing March 1, 2013, and continuing until the later of (i) the date the goals stated Section 5.1(c) are met; (ii) 30 days after expiration of the five -year period described in Section 5.1(f); or (iii) if the goals are not met, the date the subsidy is repaid in accordance with Section 5.3. The report must comply with Section 116J.994, subdivision 7 of the Business Subsidy Act and be on the forms prepared or approved by the Minnesota Department of Employment and Economic Development. If the Developer fails to timely file any report required under this Section 5.4, 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 $100 for each subsequent day until the report is filed. The maximum aggregate penalty payable under this Section 5.4 is $1,000. 390176 RHB CT16545 12 ARTICLE VI Insurance Section 6.1. Required Insurance (a) The Developer agrees to provide and maintain at all times during the process of constructing the Minimum Improvements on the Development Property and, from time to time at the request of the Authority, furnish the Authority with proof of payment of premiums on: (i) Builder's risk insurance, written on the so- called `Builder's Risk -- Completed Value Basis," in an amount equal to one hundred percent (100 %) of the insurable value of the Minimum Improvements on the Development Property at the date of completion, and with coverage available in nonreporting form on the so called "all risk" form of policy; (ii) Comprehensive general liability insurance (including operations, contingent liability, operations of subcontractors, completed operations and contractual liability insurance) together with an Owner's Contractor's Policy with limits against bodily injury and property damage of not less than $1,000,000 for each occurrence (to accomplish the above required limits, an umbrella excess liability policy may be used) ; and (iii) Workers' compensation insurance with statutory coverage for all employees, if any, of the Developer. The policies of insurance required pursuant to clauses (i) and (ii) above shall be in form and content reasonably satisfactory to the Authority and shall be placed with financially sound and reputable insurers licensed to transact business in Minnesota.. The policy of insurance delivered pursuant to clause (i) above shall contain an agreement of the insurer to give not less than thirty (30) days' advance written notice to the Authority in the event of cancellation of such policy or change affecting the coverage thereunder. (b) Upon completion of construction of the Minimum Improvements on the Development Property, and prior to the Termination Date, the Developer agrees, for itself and its successors and assigns, to maintain, or cause to be maintained, at its cost and expense, and from time to time at the request of the Authority shall furnish proof of the payment of premiums on, insurance as follows: (i) Insurance against loss and /or damage to the Minimum Improvements on the Development Property under a policy or policies covering such risks as are ordinarily insured against by similar businesses, including (without limiting the generality of the foregoing) fire, extended coverage, vandalism and malicious mischief, heating system explosion, water damage, demolition cost, debris removal, collapse and flood, in an amount not less than the full insurable replacement value of the Minimum Improvements on the Development Property, subject to a deductible of no greater than $25,000. No policy of insurance shall be so written that the proceeds thereof will produce less than the 390176 Ron CT165 -45 13 minimum coverage required by the preceding sentence, by reason of coinsurance provisions or otherwise, without the prior consent thereto in writing by the Authority. The term "full insurable replacement value" shall mean the actual replacement cost of the Minimum Improvements on the Development Property and shall be determined from time to time at the request of the Authority, but not more frequently than once every three years, by an insurance consultant or insurer, selected and paid for by the Developer and approved by the Authority, which approval shall not be unreasonably withheld, conditioned or delayed; and (ii) Such other insurance, including worker's compensation insurance respecting all employees, if any, of the Developer, in such amount as is customarily carried by like organizations engaged in like activities of comparable size and liability exposure; provided that the Developer may be self - insured with respect to all or any part of its liability for worker's compensation. Section 6.2. Evidence of Insurance All insurance required in this Article VI shall be taken out and maintained in responsible insurance companies which are authorized under the laws of Minnesota to assume the risks covered thereby. The Developer agrees, for itself and its successors and assigns, to deposit annually with the Authority copies of 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 VI, each policy shall contain a provision that the insurer shall not cancel nor materially modify it without giving written notice to the Developer and the Authority at least 30 days before the cancellation or modification becomes effective. Not less than 15 days prior to the expiration of any policy, the Developer shall furnish the Authority evidence satisfactory to the Authority that the policy has been renewed or replaced by another policy conforming to the provisions of this Article VI, or that there is no necessity therefor under the terms of this Agreement. 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 on the Development Property. ARTICLE VII Collection of Taxes; Assessment Agreement Section 7.1. Taxes The Developer agrees that prior to the Tennination Date: (1) it will not seek administrative or judicial review of the applicability of any tax statute determined by any Tax Official to be applicable to the Minimum Improvements or the Development Property or raise the inapplicability of any such tax statute as a defense in any proceedings, including delinquent tax proceedings; (2) it will not seek administrative or judicial review of the constitutionality of any tax statute determined by any Tax Official to be applicable to the Minimum Improvements or the Development Property or raise the unconstitutionality of any such tax statute as a defense in any proceedings, including delinquent tax proceedings; and (3) it will not cause a reduction in the Minimum Market Value assessed in respect of the Minimum 390176 R14B CT165 -45 14 Improvements or the Development Property below the Minimum Market Value described in section 7.2(a) of this Agreement through: (a) willful destruction of the Minimum Improvements or any part thereof; (b) failure to reconstruct damaged or destroyed property pursuant to section 4.6 of this Agreement; (e) a request to the County assessor to reduce the Minimum Market Value of all or any portion of the Minimum Improvements or the Development Property; (d) a petition to the board of equalization of the County to reduce the Minimum Market Value of all or any portion of the Minimum Improvements or the Development Property; (e) a petition to the board of equalization of the State or the commissioner of revenue of the State to reduce the Minimum Market Value of all or any portion of the Minimum Improvements or the Development Property; (f) an action in a district court of the State or the tax court of the State seeking a reduction in the Minimum Market Value of the Minimum Improvements or the Development Property; (g) an application to the commissioner of revenue of the State or to any local taxing jurisdiction requesting an abatement or deferral of real property taxes on the Minimum Improvements or the Development Property; (h) a transfer of the Minimum Improvements or the Development Property, or any part thereof, to an entity exempt from the payment of real property taxes under State law; or (i) any other proceedings, whether administrative, legal or equitable, with any administrative body within the County or the State or with any court of the State or the federal government. Section 7.2. Assessment Agreement (a) At the time of execution of this Agreement, the Authority and the Developer shall execute an amended Assessment Agreement for the Development Property. The amended Assessment Agreement shall specify a Minimum Market Value of $7,275,000 as of January 2, 2013 for taxes payable beginning in 2014 through the Termination Date, notwithstanding any failure to complete the Minimum Improvements on the Development Property by said date or any failure to reconstruct the Minimum Improvements after damage or destruction before the Termination Date. (b) The Assessment Agreement shall be substantially in the form attached hereto as Exhibit D. Nothing in the Assessment Agreement shall limit the discretion of the Assessor to assign a market value to the Minimum Improvements or the Development Property in excess of the Assessor's Minimum Market Value nor prohibit the Developer from seeking through the exercise of legal or administrative remedies a reduction in any increase in the market value 390176 RHB CT165 -45 15 established pursuant to Section 7.2(a) of this Agreement; provided, however, that the Developer shall not seek a reduction of such market value below the Assessor's Minimum Market Value for the Minimum Improvements or the Development Property set forth in the Assessment Agreement in any year so long as such Assessment Agreement shall remain in effect. The Assessment Agreement for the Minimum Improvements and the Development Property shall remain in effect until the Termination Date; provided that if at any time before the Termination Date the Assessment Agreement for the Minimum Improvements or the Development Property is found to be terminated or unenforceable by any Tax Official or court of competent jurisdiction, the Minimum Market Value of the Development Property described in this Section 7.2 shall remain an obligation of the Developer or its successors and assigns (whether or not such value is binding on the Assessor) , it being the intent of the parties that the obligation of the Developer to maintain, and not seek reduction of, the Minimum Market Values specified in this Section 7.2 for the Minimum Improvements or the Development Property is an obligation under this Agreement as well as under the Assessment Agreement, and is enforceable by the Authority against the Developer, its successors and assigns, in accordance with the terms of this Agreement and the Assessment Agreement. Notwithstanding anything contained in this Agreement to the contrary, the Developer shall not be precluded from contesting the Minimum Market Value of the Minimum Improvements and the Development Property if the Minimum Improvements or the Development Property, or any substantial portion thereof, is acquired by a public entity through eminent domain prior to the Termination Date. (c) In the future, the Developer may request and the City may approve a subdivision of the Development Property into two lots, one containing the L.A. Fitness facility and the other containing the remainder of the Minimum Improvements. If the Development Property is subdivided, the Authority and the Developer agree to negotiate amended Assessment Agreements allocating the Minimum Market Value of $7,275,000 between the parcels to reflect the relative values of the parcels or in such other manner as the parties and the Assessor may agree upon. Section 7.3. Right to Collect Delinquent Taxes The Developer acknowledges that the Authority is providing substantial aid and assistance to the Developer through the use of Spending Plan Increment under this Agreement. The Developer understands that the real estate taxes on the Development Property and the Minimum Improvements on the Development Property 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 the Developer is also obligated at all times prior to the Termination Date by reason of this Agreement to pay before delinquency all real estate taxes assessed against the Development Property and the Minimum Improvements on the Development Property. The Developer acknowledges that at all times prior to the Termination Date 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 in which the Authority prevails, the Authority shall also be entitled to recover its reasonable out -of- pocket costs, expenses and attorney fees. Section 7.4. Use of Spending Plan Increments The Authority shall be free to use any Spending Plan Increment for any purpose for which such increment may lawfully be used under 390176 RHB CT165 -45 16 the Spending Plan approved by the City pursuant to section 469.176, subd. 4m of the TIF Act, and the Authority shall have no obligations to the Developer with respect to the use of such increment except as provided for in this Agreement. ARTICLE VIII Prohibition Against Sale, Transfer Section 8.1. Prohibition Against Sale of Minimum Improvements The Developer represents and agrees that its use of the Development Property and its other undertakings pursuant to this Agreement, are, and will be, for the purpose of substantial rehabilitation of the existing improvements on the Development Property and not for speculation in land holding. The Developer further recognizes that in view of the importance of the construction of the Minimum Improvements on the Development Property to the general welfare of Cottage Grove and the substantial assistance that has been made available by the Authority for the purpose of making such substantial rehabilitation, the fact that any act or transaction involving or resulting in a significant change in the identity of the Developer is of particular concern to the Authority. The Developer further recognizes that it is because of such qualifications and identity that the Authority is entering into this Agreement with the Developer, and, in so doing, is further willing to accept and rely on the obligations of the Developer for the faithful performance of all undertakings and covenants hereby by it to be performed. For the foregoing reasons, the Developer represents and agrees that, prior to the issuance of the Certificate of Completion for the Minimum Improvements on the Development Property, there shall be no Sale of the Development Property or the Minimum Improvements by the Developer nor shall the Developer suffer any such Sale to be made, without the prior written approval of the Authority. Section 8.2. Transfer or Assignment (a) In the event the Developer, upon transfer or assignment of the Development Property or the Minimum Improvements on the Development Property prior to issuance of the Certificate of Completion, seeks to be released from its obligations under this Agreement as to the portions of the Development Property or Minimum Improvements that is transferred or assigned, the Authority shall be entitled to require, 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, necessary and adequate to fulfill the obligations undertaken in this Agreement by the Developer as to the portion of the Development Property or Minimum Improvements to be transferred; (ii) Any proposed transferee, by instrument in writing reasonably satisfactory to the Authority and in form recordable among the land records, shall, for itself and its successors and assigns, and expressly for the benefit of the Authority, have expressly assumed all of the obligations of the Developer under this Agreement, including compliance with the Business Subsidy Act, and the Assessment Agreement thereafter arising as to the portion of the Development Property or Minimum Improvements to be transferred and agreed to be subject to all the conditions and restrictions to which the 390176 RHB CT165 -45 17 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 Minimum Improvements, shall not, for whatever reason, have assumed such obligations or so agreed, shall not (unless and only to the extent otherwise specifically provided in this Agreement or agreed to in writing by the Authority) deprive the Authority of any rights or remedies or controls with respect to the Development Property 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 Minimum Improvements, or any interest therein, however consummated or occurring, and whether voluntary or involuntary, shall operate, legally or practically, to deprive or limit the Authority of or with respect to any rights or remedies on controls provided in or resulting from this Agreement or the Assessment Agreement with respect to the Development Property and the Minimum Improvements that the Authority would have had, had there been no such transfer or change; and (iii) Any and all instruments and other legal documents involved in effecting the transfer of any interest in this Agreement, the Assessment Agreement, the Development Property or the Minimum Improvements governed by this Article VIII, shall be in a form reasonably satisfactory to the Authority. In the event the foregoing conditions are satisfied, the Developer shall be released from its obligations under this Agreement and the Assessment Agreement, as to the portion of the Development Property or the Minimum Improvements on the Development Property that is transferred, assigned or otherwise conveyed, which release shall not be unreasonably conditioned, delayed or withheld except as provided for herein. In the event the foregoing conditions are not satisfied and in the absence of specific written agreement by the Authority to the contrary, no such transfer or approval by the Authority thereof shall be deemed to relieve the Developer, or any other party bound in any way by this Agreement or otherwise with respect to the construction of the Minimum Improvements on the Development Property, from any of its obligations with respect thereto. (b) The Developer may transfer or assign any portion of the Development Property or the Minimum Improvements or the Developer's interest in this Agreement without the consent of the Authority (i) at any time with respect to a transfer or assignment to any person or entity that is affiliated with the Developer, its partners (limited or general) or any officers, director or shareholders of any of its partners or (ii) after issuance of the Certificate of Completion for the Minimum Improvements on the Development Property with respect to a transfer or assignment to any other person or entity provided that the transferee or assignee is bound by all the Developer's obligations remaining under this Agreement, including compliance with the Business Subsidy Act, and under the Assessment Agreement. The Developer shall submit to the Authority written evidence of any such transfer or assignment, including the transferee or assignee's express assumption of the Developer's obligations under this Agreement and the Assessment Agreement. If the Developer fails to provide such evidence of transfer and 390176 RHB CT165 -45 is assumption, the Developer shall remain bound by all of its obligations under this Agreement and the Assessment Agreement. Notwithstanding anything contained herein to the contrary, the Developer may transfer or assign all or any portion of the Development Property, the Minimum Improvements and /or the Developer's interest in this Agreement (or grant a security interest in all or any portions of the Development Property, the Minimum Improvements and/or the Developer's interest in this Agreement) to the holder of any mortgage, deed of trust, security agreement or other document given for the purpose of mortgaging or granting a security interest in the Development Property, or any part thereof (a "Mortgagee ") without the consent of the Authority. Additionally, without the consent of the Authority, any Mortgagee may transfer or assign the Development Property (or any part thereof), the Minimum Improvements and /or the Developer's interest in this Agreement to any purchaser at a foreclosure sale or assignment in lieu of foreclosure. ARTICLE IX Events of Default Section 9.1. Events of Default Defined Each and every one of the following shall be an Event of Default under this Agreement: (a) Failure by the Developer to satisfy all the conditions precedent specified in section 3.2(c) of this Agreement; (b) Failure of the Developer to commence and complete construction of the Minimum Improvements on the Development Property pursuant to the terms, conditions and limitations of Article IV of this Agreement, specifically including but not limited to the timing thereof, (c) Failure by the Developer to pay real estate taxes or special assessments on the Development Property and Minimum Improvements as they become due; (d) Appeal or challenge by the Developer or its successors or assigns of the Minimum Market Value of the Development Property and Minimum Improvements under this Agremeent or the Assessment Agreement, except as otherwise provided in Article VII of this Agreement, prior to the Termination Date; (e) Sale of the Development Property or the Minimum Improvements or any part thereof by the Developer in violation of Article VIII of this Agreement; (f) If the Developer shall file a petition in bankruptcy, or shall make an assignment for the benefit of its creditors or shall consent to the appointment of a receiver and such petition, assignment or appointment is not dismissed within 90 days; (g) Failure by the Developer to comply with the requirements of Article V of this Agreement regarding the Business Subsidy Act; or 390176 RHB CT165 -45 19 (h) Failure by either party to observe or perform any material covenant, condition, obligation or agreement on its part to be observed or performed under this Agreement or the Assessment Agreement for the Development Property. Section 9.2. Remedies on Default Whenever any Event of Default referred to in section 9.1 of this Agreement occurs, the non - defaulting party may take any one or more of the following actions after providing 30 days written notice to the defaulting party of the Event of Default, but only if the Event of Default has not been cured within said 30 days or, if the Event of Default is by its nature incurable within 30 days, the defaulting party does not provide assurances to the non - defaulting party reasonably satisfactory to the non - defaulting party that the Event of Default will be cured and will be cured as soon as reasonably possible: (a) Suspend its performance under this Agreement until it receives assurances from the defaulting party, deemed adequate by the non - defaulting party, that the defaulting party will cure such default and continue its performance under this Agreement; (b) Terminate or 'rescind this Agreement; (c) If the default occurs prior to completion of the Minimum Improvements on the Development Property, the Authority may withhold the Certificate of Completion for the Minimum Improvements; (d) Enforce the Assessment Agreement; (e) Enforce the provisions of this Agreement relating to the Business Subsidy Act provided in Section 5.3 of this Agreement, if the Developer breaches the terms of Article V of this Agreement; and (f) Take whatever action, including legal or administrative action, which may appear necessary or desirable to the non - defaulting party to collect any payments due under this Agreement, or to enforce performance and observance of any obligation, agreement, or covenant of the defaulting party under this Agreement or the Assessment Agreement. Notwithstanding anything herein to the contrary, the Authority shall have no obligation to expend any Spending Plan Increment on assistance to the Developer after December 31, 2012 unless, prior to said date, the Authority's legal authorization to do so is extended by state law. Section 9.3. No Remedy Exclusive No remedy herein conferred upon or reserved to the parties 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 Event of 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. In order to entitle the 390176 RHB CT165 -45 20 Authority or the Developer to exercise any remedy reserved to it, it shall not be necessary to give notice, other than such notice as may be required in Article X of this Agreement. Section 9.4. No Additional Waiver Implied by One Waiver In the event any covenant or agreement contained in this Agreement should be breached by either party and thereafter waived by the other party, such waiver shall be limited to the particular breach so waived and shall not be deemed to waive any other concurrent, previous or subsequent breach hereunder. ARTICLE X Additional Provisions Section 10.1. Conflict of Interests: Representatives Not Individually Liable No officer, official, or employee of the Authority shall have any personal financial interest, direct or indirect, in this Agreement, nor shall any such officer, official, or employee participate in any decision relating to this Agreement which affects his or her personal financial interests, directly or indirectly. No officer, official, or employee of the Authority shall be personally liable to the Developer, or any successor in interest, in the event of any Event of Default or breach or for any amount which may become due or on any obligation under the terms of this Agreement. No officer, official or employee of the Developer or its successors or assigns shall be personally liable to the Authority or the City or any successor in interest in the event of any Event of Default or breach or for any amount which may become due or on any obligation under the terms of this 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 on the Development Property provided for in this Agreement, it will comply with all applicable equal employment and nondiscrimination laws and regulations. Section 10.3. Restrictions on Use The Developer, for itself and its successors and assigns, agrees to devote the Development Property and Minimum Improvements only to such land use or uses as are specified in this Agreement. Section 10.4. Notices and Demands Except as otherwise expressly provided in this Agreement, any notice, demand, or other communication under this Agreement or any related document by either party to the other shall be sufficiently given or delivered two business days after it is dispatched by registered or certified United States mail, postage prepaid, return receipt requested, or upon receipt if delivered personally to: (a) in the case of the Authority: 7516 80' Street South Cottage Grove MN 55016 Attn: EDA Executive Director 390176 RHB CT165 -45 21 (b) in the case of the Developer: Stonehenge -USA 6007 Culligan Way Minnetonka, MN 55345 Attn: Dave Carland or at such other address with respect to any such party as that party may, from time to time, designate in writing and forward to the other as provided in this section 10.4. Section 10.5. Counterparts This Agreement may be executed in any number of counterparts, each of which shall constitute one and the same instrument. Section 10.6. Disclaimer of Relationships The Developer and the Authority acknowledge that nothing contained in this Agreement nor any act by the Developer or the Authority shall be deemed or construed by the Developer or the Authority or by any third person to create any relationship of third -party beneficiary, principal and agent, limited or general partner, or joint venture between the Developer and the Authority. Section 10.7. Amendment This Agreement may be amended only by the written agreement of the parties. 390176 RH6 CT165 -45 22 IN WITNESS WHEREOF, the Authority and the Developer have caused this Agreement to be duly executed in their names and behalves on or as of the date first above written. STATE OF MINNESOTA ) ) SS COUNTY OF ) COTTAGE GROVE ECONOMIC DEVELOPMENT AUTHORITY By Its President By Its Executive Director The foregoing instrument as acknowledged before me this day of 2012, by and president and executive director, respectively, of the Cottage Grove Economic Development Authority, a public body corporate and politic under the laws of Minnesota, on behalf of the Economic Development Authority. Notary Public 390176 RHB Cr165 -45 23 STONEHENGE DEVELOPMENT, LLC, A MINNESOTA LIMITED LIABILITY COMPANY, DOING BUSINESS AS STONEHENGE -USA Im STATE OF ) ss COUNTY OF ) The foregoing instrument was executed this ' the Minnesota limited liability company, doing 'business as liability company. Its: of day 2012, by of Stonehenge Development, LLC, a Stonehenge -USA, on behalf of the limited Notary Public 390176 RHB CT16545 24 EXHIBIT A LEGAL DESCRIPTION OF DEVELOPMENT PROPERTY The Development Property is located in Washington County, Minnesota and is legally described as follows: Lot 2, Block 1, Grove Plaza 2 nd Addition 390176 RHB CT16545 A -1 EXHIBIT B SITE PLAN OF DEVELOPMENT PROPERTY [to be completed] 390176 RHB CT165 -45 B -1 EXHIBIT C FORM OF CERTIFICATE OF COMPLETION WHEREAS, the Cottage Grove Economic Development Authority, a public body corporate and politic under the laws of Minnesota (the "Authority "), and Stonehenge Development, LLC, a Minnesota limited liability company, doing business as Stonehenge -USA (the "Developer "), have entered into a certain Contract for Private Development (the "Contract") dated the day of 2012, and recorded in the office of the County Recorder in Washington County, Minnesota, as Document No. , which Contract contained certain covenants and restrictions regarding completion of the Minimum Improvements, as defined in the Contract; and WHEREAS, the Developer has performed said covenants and conditions 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 of the Minimum Improvements specified to be done and made by the Developer has been completed and the covenants and conditions in the Contract have been performed by the Developer, and the County Recorder in Washington County, Minnesota, is hereby authorized to accept for recording and to record the filing of this instrument, to be a conclusive determination of the satisfactory termination of the covenants and conditions relating to completion of the Minimum Improvements. Dated: STATE OF MINNESOTA COUNTY OF ss. COTTAGE GROVE ECONOMIC DEVELOPMENT AUTHORITY By Its President By Its Executive Director The foregoing instrument as acknowledged before me this day of , 20_, by and , the president and executive director, respectively, of the Cottage Grove Economic Development Authority, a public body corporate and politic, under the laws of Minnesota, on behalf of the Economic Development Authority. Notary Public 390176 RHB CT165 -45 C -1 EXHIBIT D LIST OF PRELIMINARY PLANS [to be completed] 390176 RHB CTI65-45 D -I EXHIBIT E FORM OF ASSESSMENT AGREEMENT AMENDED ASSESSMENT AGREEMENT and ASSESSOR'S CERTIFICATION By and among THE COTTAGE GROVE ECONOMIC DEVELOPMENT AUTHORITY and STONEHENGE DEVELOPMENT, LLC, A MINNESOTA LIMITED LIABILITY COMPANY, DOING BUSINESS AS STONEHENGE -USA and ASSESSOR FOR WASHINGTON COUNTY, MINNESOTA This Document was drafted by: KENNEDY & GRAVEN, Chartered 470 US Bank Plaza 200 South Sixth Street Minneapolis, Minnesota 55402 (612) 337 -9300 390176 RAB CT16545 E -1 THIS AMENDED ASSESSMENT AGREEMENT, dated as of this _ day of , 2012, by and between the Cottage Grove Economic Development Authority, a public body corporate and politic under the laws of Minnesota (the "Authority") and Stonehenge Development, LLC, a Minnesota limited liability company, doing business as Stonehenge -USA (the "Developer "). WITNESSETH: WHEREAS, on 2002, the Authority and Grove Plaza L.P., a Minnesota limited partnership, a predecessor in interest of the Developer, entered into a Contract for Private Development pursuant to which the Developer agreed to construct certain improvements on the land legally described in Exhibit A attached hereto (the "Development Property "); and WHEREAS, the Development Property was subsequently conveyed to Home Depot USA, Inc., a Delaware corporation ( "Home Depot'); and WHEREAS, Home Depot has now conveyed all of its interest in the Development Property to the Developer; and WHEREAS, the Authority and the Developer have now entered into a Contract for Private Development (the "Development Agreement') whereby the Developer has agreed to substantially rehabilitate the former Home Depot store and accessory improvements located on the Development Property (the "Minimum Improvements "); and WHEREAS, the Authority and the Assessor for Washington County, Minnesota reviewed the plans and specifications for the Minimum Improvements which the Developer agreed to construct or cause to be constructed on the Development Property pursuant to the Development Agreement; and WHEREAS, the Authority and Home Depot previously established a minimum market value for the Development Property and the Minimum Improvements to be constructed thereon and executed an assessment agreement (the "2002 Assessment Agreement "), pursuant to Minnesota Statutes section 469.177, Subd. 8; and WHEREAS, the Authority and the Developer wish to modify the 2002 Assessment Agreement. NOW, THEREFORE, the Authority and the Developer, in consideration of the promises, covenants and agreements made in the Development Agreement, agree to amend the 2002 Assessment Agreement as follows: 1. The Minimum Market Value for the Development Property and the Minimum Improvements shall be $7,275,000 as of January 2, 2013 for taxes payable beginning in 2014, notwithstanding any failure to complete construction of such Minimum Improvements by that date. 390176 RHB CT16545 E -2 2. The Termination Date shall mean the date the Authority's Tax Increment Financing District No. 1 -12 tenninates or December 31, 2023, whichever occurs first. 3. Except as explicitly modified by this Amended Assessment Agreement, all terms and conditions of the 2002 Assessment Agreement shall remain in full force and effect. COTTAGE GROVE ECONOMIC DEVELOPMENT AUTHORITY By: Its President By: Its Executive Director STATE OF MINNESOTA ) ) SS COUNTY OF WASHINGTON ) The foregoing instrument as acknowledged before me this day of 2012, by and , president and executive director, respectively, of the Cottage Grove Economic Development Authority, a public body corporate and politic under the laws of Minnesota, on behalf of the Economic Development Authority. Notary Public 390176 Run CT165 -45 E -3 STONEHENGE DEVELOPMENT, LLC, A MINNESOTA LIMITED LIABILITY COMPANY, DOING BUSINESS AS STONEHENGE -USA Its: STATE OF ) ss COUNTY OF 1 The foregoing instrument was executed this of day 2012, by ' the of Stonehenge Development, LLC, a Minnesota limited liability company, doing business as Stonehenge -USA, on behalf of the limited liability company. Notary Public 390176 RHB CT165 -45 E -4 CERTIFICATION BY ASSESSOR The undersigned, having reviewed the plans and specifications for the improvements to be constructed and the market value assigned to the land upon which the improvements are to be constructed, and being of the opinion that the minimum market value contained in the foregoing Assessment Agreement appears reasonable, hereby certifies as follows: The undersigned Assessor, being legally responsible for the assessment of the described property as Washington County Assessor, hereby certifies that the market value assigned to such land and improvements on January 2, 2013, for taxes payable beginning in 2014 through the Termination Date, shall be not less than $7,275,000 until termination of this Agreement. Assessor for Washington County, Minnesota STATE OF MINNESOTA ) ) ss. COUNTY OF WASHINGTON } The foregoing instrument was acknowledged before me this day of , 2012, by Bruce Munneke, the Assessor for Washington County, Minnesota. Notary Public 390176 RHB CT165 -45 E -5 EXHIBIT A TO ASSESSMENT AGREEMENT LEGAL DESCRIPTION The Development Property is located in Washington County, Minnesota, and is legally described as follows: Lot 2, Block 1, Grove Plaza 2 " Addition 390176 RAB CT16545 E -A -I EXHIBIT B TO ASSESSMENT AGREEMENT Section 469.177, subd. 8. Assessment Agreements. An authority may enter into a written assessment agreement with any person establishing a minimum market value of land, existing improvements, or improvements to be constructed in a district, if the property is owned or will be owned by the person. The minimum market value established by an assessment agreement may be fixed, or increase or decrease in later years from the initial minimum market value. If an agreement is fully executed before July 1 of an assessment year, the market value as provided under the agreement must be used by the county or local assessor as the taxable market value of the property for that assessment. Agreements executed on or after July 1 of an assessment year become effective for assessment purposes in the following assessment year. An assessment agreement terminates on the earliest of the date on which conditions in the assessment agreement for termination are satisfied, the termination date specified in the agreement, or the date when tax increment is no longer paid to the authority under section 469.176, subdivision 1. The assessment agreement shall be presented to the county assessor, or city assessor having the powers of the county assessor, of the jurisdiction in which the tax increment financing district and the property that is the subject of the agreement is located. The assessor shall review the plans and specifications for the improvements to be constructed, review the market value previously assigned to the land upon which the improvements are to be constructed and, so long as the minimum market value contained in the assessment agreement appears, in the judgment of the assessor, to be a reasonable estimate, shall execute the following certification upon the agreement: The undersigned assessor, being legally responsible for the assessment of the above described property, certifies that the market values assigned to the land and improvements are reasonable. The assessment agreement shall be filed for record and recorded in the office of the county recorder or the registrar of titles of each county where the real estate or any part thereof is situated. After the agreement becomes effective for assessment purposes, the assessor shall value the property under section 273.11, except that the market value assigned shall not be less than the minimum market value established by the assessment agreement. The assessor may assign a market value to the property in excess of the minimum market value established by the assessment agreement. The owner of the property may seek, through the exercise of administrative and legal remedies, a reduction in market value for property tax purposes, but no city assessor, county assessor, county auditor, board of review, board of equalization, commissioner of revenue, or court of this state shall grant a reduction of the market value below the minimum market value established by the assessment agreement during the term of the agreement filed of record regardless of actual market values which may result from incomplete construction of improvements, destruction, or diminution by any cause, insured or uninsured, except in the case of acquisition or reacquisition of the property by a public entity. Recording an assessment agreement constitutes notice of the agreement to anyone who acquires any interest in the land or improvements that is subject to the assessment agreement, and the agreement is binding upon them. 390176 RHB CT165.45 E-B-1 EXHIBIT F FORM OF DISBURSEMENT AGREEMENT [to be completed] 390176 RHB CT165 -45 F -I