The URL can be used to link to this page

Home My WebLink AboutItem 08� e r Septemberl8, 2015 Item No. RESOLUTION APPROVING A CONTRACT FOR PRIVATE DEVELOPMENT /BUSINESS SUBSIDY AGREEMENT WITH SSB MANUFACTURING COMPANY AND SCANNELL PROPERTIES #247 LLC September 21, 2015 City Council Meeting Proposed Action Staff recommends adoption of the following motion: Move to adopt a resolution approving the Contract for Private Development with SSB Manufacturing Company and Scannell Properties #247 LLC. Passage of this motion will result in providing Tax Increment Financing (TIF) assistance to facilitate the development of a manufacturing and warehouse facility for SSB Manufacturing Company. Overview SSB Manufacturing Company manufactures Serta and Simmons mattresses and is realigning the location of their manufacturing facilities across the Country. The company has submitted a request for tax increment financing to assist in over $7.7million in eligible acquisition and site development costs associated with the project. The total development cost for the project is estimated to be $15.7 million with an additional $10 million in machinery and equipment for a total project cost of $25.7 million. This will be SSB's first manufacturing facility in Minnesota. In addition to the proposed TIF assistance to be provided by the City, the State of MN is proposing to provide over $2 million in assistance through the Job Creation Fund and Minnesota Investment Fund programs. The contract provides for the City to provide "pay-as-you-go reimbursements consisting of 95% of the captured tax increments for a period of nine years beginning with taxes payable in 2017 with a not -to - exceed amount of $1,607,350. This assistance in contingent on Scannell Properties constructing a 240,000 square foot manufacturing and warehouse facility on a 23 acre site. SSB is required to create at least 200 jobs over the next two years, and will maintain their operation in Lakeville for at least five years. The City Council has approved the proposed modification of the Redevelopment Plan and the creation of TIF District No. 21. The EDC recommended approval of this proposed TIF project at their August 25, 2015 meeting. Primary Issues to Consider • Is this request for Tax Increment Financing assistance consistent with the City's policies? The request is consistent with the City's TIF and Business Subsidy Policies. Supporting Information • Resolution and Contract for Private Development / Business Subsidy Agreement David L. Olson, Community and Economic Development Director c: Ronald Richmond - SSB Manufactuirng, Dan Salzer - Scannell Properties, Chris Schastock, CBRE Financial Impact: $ 1,607,350 Budgeted:Y/N N Source: Captured Tax Increments Envision Lakeville Community Values: Diversified Economic Development CITY OF LAKEVILLE DAKOTA COUNTY, MINNESOTA RESOLUTION NO. RESOLUTION APPROVING THE CONTRACT FOR PRIVATE DEVELOPMENT BY AND BETWEEN THE CITY OF LAKEVILLE AND SSB MANUFACTURING COMPANY. AND SCANNELL PROPOERTIES #247 LLC WHEREAS, by Resolution No. 15-- dated September 21, 2015, the Lakeville Housing and Redevelopment Authority ("Authority") authorized the City to undertake, on the Authority's behalf, all of the public development activities in connection with the development of the SSB Manufacturing Company and Scannell Properties #247 LLC ("Developer") development proposal, including the administration of tax increment as accounted for in the City's financial statements; and WHEREAS, the City of Lakeville has held a public hearing regarding the establishment of Tax Increment Financing District No. 21 as an Economic Development District and has adopted the Tax Increment Financing Plan therefor; and WHEREAS, the Developer has requested a business subsidy in amount not to exceed $1,67,350 for its development through reimbursement of certain development costs using tax increment on a pay -as -you go basis and Developer is proposing to meet certain wage and job goals as a condition of the grant of the subsidy as further detailed in the proposed Contract for Private Development between the City of Lakeville and SSB Manufacturing Company and Manufacturing Inc. and Scannell Properties #247 LLC ("Contract"); WHEREAS, City of Lakeville has, on the date hereof, held a public hearing on the proposed Contract, tax increment financing and business subsidy; NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Lakeville, that the Contract for Private Development by and between the City of Lakeville and SSB Manufacturing Company and Scannell Properties #247 LLC including the business subsidy agreement, is approved and the Mayor and City Clerk are authorized to execute the Contract. ADOPTED this day of , 2015, by the City Council of the City of Lakeville. CITY OF LAKEVILLE BY: Matt Little, Mayor ATTEST: Charlene Friedges, City Clerk 175848v1 L�. '..T- �.�'-� 1. _ ..�.. `y`'�'v4�'tw ��*�,�I'i "`Y ;, a; I CONTRACT FOR PRIVATE DEVELOPMENT By and Between and Among the CITY OF LAKEVILLE and SCANNELL PROPERTIES #247, LLC and SSB MANUFACTURING COMPANY THIS DOCUMENT WAS DRAFTED BY: CAMPBELL KNUTSON Professional Association Grand Oak Office Center I 860 Blue Gentian Road, Suite 290 Eagan, Minnesota 55121 Telephone: (651) 452-5000 183247v10 TABLE OF CONTENTS Page PREAMBLE.............................................................................................................................................. 5 ARTICLE I DEFINITIONS SECTION 1.1 DEFINITIONS.................................................................................................................. 7 ARTICLE II REPRESENTATIONS AND WARRANTIES SECTION 2.1 REPRESENTATIONS AND WARRANTIES BY THE CITY ........................................ 9 SECTION 2.2 REPRESENTATIONS AND WARRANTIES OF THE DEVELOPER ........................ 10 SECTION 2.3 REPRESENTATIONS AND WARRANTIES OF SSB..................................................11 ARTICLE III CONSTRUCTION OF MINIMUM IMPROVEMENTS SECTION 3.1 CONSTRUCTION OF MINIMUM IMPROVEMENTS ................................................ 12 SECTION 3.2 CONSTRUCTION PLANS............................................................................................. 12 SECTION 3.3 COMMENCEMENT AND COMPLETION OF CONSTRUCTION ............................12 SECTION 3.4 CERTIFICATE OF COMPLETION............................................................................... 13 ARTICLE IV INSURANCE SECTION 4.1 INSURANCE.................................................................................................................. 14 ARTICLE V TAX INCREMENT SECTION 5.1 REAL PROPERTY TAXES........................................................................................... 16 SECTION 5.2 MINIMUM IMPROVEMENTS...................................................................................... 17 SECTION 5.3 REIMBURSEMENT: TAX INCREMENT REVENUE NOTE ..................................... 17 SECTION 5.4 DURATION OF TAX INCREMENT DISTRICT.......................................................... 18 SECTION 5.5 TAX INCREMENT REIMBURSEMENT SCHEDULE ................................................ 18 SECTION 5.6 USE OF TAX INCREMENT.......................................................................................... 18 ARTICLE VI BUSINESS SUBSIDY SECTION 6.1 TAX INCREMENT FINANCING ..............................................., ............ . 18 SECTION 6.2 WAGE AND JOB GOALS....................................................................... 18 SECTION 6.3 REPORTING....................................................................................... 19 SECTION 6.4 CONTINUING OBLIGATION............................................................... 19 2 18324700 SECTION 6.5 REQUIREMENTS ............ ................................................................ 19 SECTION 6.6 DEFAULT DEFINED........................................................................ 20 SECTION 6.7 REMEDIES ON DEFAULT................................................................. 20 SECTION 6.8 COSTS OF ENFORCEMENT.............................................................. 20 ARTICLE VII FINANCING: ASSIGNMENT AND TRANSFER SECTION 7.1 SUBORDINATION FOR THE BENEFIT OF MORTGAGE ........................ 21 SECTION 7.2 SUBORDINATION FOR THE BENEFIT OF MORTGAGEE(S) AFTER THE ISSUANCE OF A CERTIFICATE OF COMPLETION FOR ALL OF THE MINIMUM IMPROVEMENTS............................................................................................... 21 SECTION 7.3 PROHIBITION AGAINST TRANSFER OF PROPERTY AND ASSIGNMENT OF AGREEMENT.................................. ................................................................. 21 SECTION 7.4 RIGHT OF ASSIGNMENT................................................................ 21 ARTICLE VIII EVENTS OF DEFAULT SECTION 8.1 EVENTS OF DEFAULT DEFINED........................................................ 22 SECTION 8.2 REMEDIES ON DEFAULT.................................................................. 23 SECTION 8.3 NO REMEDY EXCLUSIVE................................................................... 24 SECTION 8.4 NO IMPLIED WAIVER....................................................................... 24 SECTION 8.5 AGREEMENT TO PAY ATTORNEY'S FEES AND EXPENSES ..................... 24 SECTION 8.6 INDEMNIFICATION OF CITY AND AUTHORITY; TERMINATION ............ 24 ARTICLE IX ADDITIONAL PROVISIONS SECTION 9.1 REPRESENTATIVES NOT INDIVIDUALLY LIABLE ................................ 25 SECTION 9.2 RESTRICTIONS ON USE................................................................... 25 SECTION 9.3 TITLES OF ARTICLES AND SECTIONS ................................................ 26 SECTION 9.4 DISCLAIMER OF RELATIONSHIPS...................................................... 26 SECTION 9.5 MODIFICATIONS............................................................................. 26 SECTION 9.6 COUNTERPARTS............................................................................. 26 SECTION 9.7 JUDICIAL INTERPRETATION............................................................. 26 SECTION 9.8 TERMINATION OF AGREEMENT......................................................... 27 SECTION 9.9 CONFLICTS OF INTEREST .............. ......... 27 ........................................... SECTION 9.10 NOTICES AND DEMANDS................................................................ 27 SECTION 9.11 LAW GOVERNING.......................................................................... 28 TESTIMONIUM................................................................................................... 28 SIGNATURES............................................................................................. 29, 30, 31 3 183247v10 SCHEDULES SCHEDULE A - DESCRIPTION OF PROPERTY......................................................... 33 ......................... SCHEDULE B - TAX INCREMENT REVENUE NOTE ................................................. 34 SCHEDULE C - DESCRIPTION OF ELIGIBLE SITE MINIMUM IMPROVEMENTS............ 38 183247v10 CONTRACT FOR PRIVATE DEVELOPMENT THIS AGREEMENT, made as of the day of , 2015, by and between and among the CITY OF LAKEVILLE, a Minnesota municipal corporation (the "City"), SCANNELL PROPERTIES #247, LLC, an Indiana limited liability company ("Scannell" or "Developer"), and SSB MANUFACTURING COMPANY, a Delaware corporation ("SSB"). WITNESSETH: WHEREAS, the Housing and Redevelopment Authority In and For the City of Lakeville (the "Authority") was created pursuant to Minnesota Statutes, Sections 469.001-.047 (the "Act") and was authorized to transact business and exercise its powers by a resolution of the City Council of the City pursuant to Section 469.003 of the Act; and WHEREAS, in furtherance of the objectives of the Act, the Authority has undertaken a program (the "Redevelopment Plan") to provide impetus for private development, maintain and increase employment, and to increase tax base for the taxing jurisdiction within the City's corporate limits and by affording existing businesses in the City the opportunity to expand and in this connection is engaged in carrying out a development project known as the Airlake Redevelopment Project No. 1 in an area (hereinafter referred to as the "Project Area") located in the City; and WHEREAS, in order to finance, in part, the public development costs of the Project, as herein defined, located in the Project Area, the City and Authority have created Tax Increment District No. 21 (the "Tax Increment District") pursuant to an approved Tax Increment Financing Plan pursuant to the TIF Act, as herein defined (the "TIF Plan") for the Tax Increment District; and WHEREAS, Scannell has agreed to acquire certain real property within the City of Lakeville (the "Property"), as hereinafter defined, and construct a build to suit facility on the Property to be leased to SSB; WHEREAS, SSB desires to lease the facility to be located on the Property from Scannell to accommodate SSB's new warehouse facility; WHEREAS, there has been presented by Scannell and SSB to the City and the Authority for their consideration a proposal for the development of an approximately 240,000 square foot manufacturing/warehouse facility with 15,000 square feet of main office on the Property located within the Tax Increment District to be acquired by Scannell and leased to SSB; WHEREAS, Scannell and SSB will enter into a lease agreement (the "Lease") whereby Scannell will agree to construct the improvements contemplated under this Agreement and SSB will agree to lease such improvements after they are completed by Scannell. Scannell and SSB anticipate the Lease to be executed approximately no later than October 31, 2015; 5 183247v10 WHEREAS, the City and the Authority have reviewed the Developer's and SSB's development proposal and have determined that such proposal if completed would serve to accomplish the goals and objectives for which the Project and the Tax Increment District were created; and WHEREAS, pursuant to Minnesota Statutes, Sections 116J.993 to 116J. 995, as amended (the "Business Subsidy Act") the City is authorized to grant business subsidies to facilitate development in the City and the State of Minnesota; and WHEREAS, by Resolution No. dated , 2015, the Authority authorized the City to undertake, on the Authority's behalf, all of the public development activities in connection with the development of the Developer's and SSB's proposal, including the execution and performance of this Agreement; and WHEREAS, in order to assist Scannell in the development of the Property for the construction of the SSB manufacturing/warehouse facility, the City is prepared to reimburse Scannell using tax increment on a pay-as-you-go basis for certain costs of development; and WHEREAS, by , the City will request Dakota County to certify the current net tax capacity of the City of the Tax Increment District pursuant to section 469.177, subdivision 1 of the Tax Increment Act; and WHEREAS, the City believes that the development of the proposal and Project Area and the construction of the Project, and fulfillment of this Agreement are vital and are in the best interests of the Authority and the health, safety, morals and welfare of residents of the City and in accordance with the public purpose and provisions of the applicable state and local laws and requirements under which the Project has been undertaken and is being assisted; and WHEREAS, the requirements of the Business Subsidy Law, Minnesota Statutes, Section 116J.993 through I I6J.995 apply to this Agreement; and WHEREAS, the Authority has adopted criteria for awarding business subsidies that comply with the Business Subsidy Law, after a public hearing for which notice was published; and WHEREAS, pursuant to the Business Subsidy Law, the City has designated this Agreement as a subsidy agreement in connection with the subsidy provided under this Agreement. NOW, THEREFORE, in consideration of the premises and the mutual obligations of the parties hereto, each of them does hereby covenant and agree with the other as follows: [The remainder of this page is intentionally left blank) 6 183247v10 ARTICLE I DEFINITIONS Section 1.1. Definitions. All capitalized terms used and not otherwise defined herein shall have the following meanings unless a different meaning clearly appears from the context: Act means Minnesota Statutes, Sections 469.001-469.047, as amended. Aureement means this Agreement, as the same may be from time to time modified, amended or supplemented. Authority means the Housing and Redevelopment Authority in and for the City of Lakeville, or its successors or assigns. Available Tax Increment means on each Payment Date, ninety-five percent (95%) of the Tax Increment attributable to the Property and paid to the City by Dakota County in the six (6) months immediately preceding the Payment Date. Available Tax Increment shall not include any Tax Increment if, as of any Payment Date, there is an uncured Event of Default caused by the Developer under this Agreement. Benefit Date means the date of this Agreement. Business Day means any day except a Saturday, Sunday or a legal holiday or a day on which banking institutions in the City are authorized by law or executive order to close. Business Subsidy Act means Minnesota Statutes, Sections 116.993 to 116J.995, as amended. City means the City of Lakeville, Minnesota. Construction Plans means the plans, specifications, drawing and related documents for the construction work to be performed on the Property which have been submitted to and approved by the City Council of the City, as the same may be changed, modified, or adjusted pursuant to Section 3.2 hereof; provided, however, that, pursuant to the terms of said Section 3.2 hereof, any nonmaterial modifications or adjustments thereto may be made by the Developer without the City's consent. Coun means Dakota County, Minnesota. Developer or Scannell means Scannell Properties #247, LLC, an Indiana limited liability company, its permitted successors and assigns. Development Property or Prope means the development property described in Schedule A of this Agreement. Event of Default means any of the events described in Section 8.1. 183247v10 Minimum Improvements mean an approximately 240,000 square foot industrial/warehouse building, together with related and incidental improvements to be constructed on the Property by Developer in accordance with the Construction Plans. Market Value means the market value of real property as determined by the County Assessor of the County for real estate tax purposes. Mortgage means any mortgage made by the Developer, or its permitted successors or assigns as the owner of the Property, which is secured in whole or in part, by the Property. Net Proceeds means, in the case of an insurance award, the proceeds paid by an insurer to the Developer or SSB under a policy or policies of insurance required to be provided and maintained by the Developer or SSB pursuant to Article IV of this Agreement and remaining after deducting all expenses (including reasonable attorney fees) incurred in the collection of such proceeds. Note or Tax Increment Note means the City's Tax Increment Revenue Note substantially in the form attached hereto as Schedule B to be issued to Scannell pursuant to Section 5.3 of this Agreement. Payment Dates means "Payment Dates" as set forth in the Tax Increment Note. Project means construction of the Minimum Improvements on the Development Property. Public Development Costs means the costs of preparing the Property for development to be incurred by the Developer and to be reimbursed by the City through the issuance and payment of the Note as described in Section 5.3 of this Agreement. SSB means SSB Manufacturing Company, a Delaware corporation, or its permitted successors and assigns. State means the State of Minnesota. Tax Increment means the tax increments derived from the TIF District which have been received and retained by the City in accordance with the provisions of Minnesota Statutes, Section 469.177, or otherwise pursuant to the Tax Increment Act, to the extent not otherwise pledged to other obligations within the TIF District. Tax Increment Act or TIF Act means the Tax Increment Financing Act, Minnesota Statutes, Sections 469.174 through 469.1794, as amended. Tax Increment District or TIF District means Tax Increment Financing (Economic Development) District No. 21 and qualified as an economic development district under the Tax Increment Act. 18324700 Tax Official means any City or County Assessor; County Auditor; City, County or State Board of Equalization, the Commissioner of Revenue of the State, or any State or Federal District Court, the Tax Court of the State, or the State Supreme Court. Termination Date means the earlier of (a) nine (9) years after the receipt by the City of the first certification by the Dakota County Auditor, State of Minnesota, of the captured net tax capacity, as defined in Minn. Stat. Section 469.174, subd. 4, with respect to the Tax Increment; (b) the date the Note has been paid or prepaid in full, defeased or terminated in accordance with its terms; or (c) the date of termination of the Note and this Agreement by the City due to an Event of Default by Developer or SSB as set forth in Section 8.1 hereof; or (d) as otherwise provided under Section 9.8 hereof. Unavoidable Delays means delays beyond the reasonable control of the party seeking to be excused as a result thereof which are the direct result of war, terrorism, strikes, other labor troubles, fire, inclement weather, earthquakes, tornados, flooding, acts of God, or other casualty to the Minimum Improvements, litigation commenced by third parties which, by injunction or other similar judicial action, directly results in delays, or acts of any federal state or local governmental unit (other than the City in exercising its rights under this Agreement) which directly result in delays. Unavoidable Delays shall not include delays caused by the Developer's and/or SSB's failure to exercise reasonable efforts to obtain permits or governmental approvals necessary to enable construction of the Minimum Improvements by the date such construction is required under Section 3.3 of this Agreement, unless (a) Developer and/or Property Owner has timely filed any application and materials required by the City for such permit or approvals and (b) the delay is beyond the reasonable control of the Developer and/or Property Owner. ARTICLE II REPRESENTATIONS AND WARRANTIES Section 2.1. Representations and Warranties by the City. The City makes the following representations, warranties and covenants: (a) The City is a Minnesota municipal corporation duly organized and existing under the laws of the State. Under the provisions of the Act and Resolution No. , dated , 2015 of the Authority, the City has all due powers and authorities to enter into this Agreement and to perform its obligations hereunder. The City and Authority have created Tax Increment District pursuant to the TIF Plan in compliance with the TIF Act for the Tax Increment District. (b) The Project is a "redevelopment project" within the meaning of and satisfying all requirements under Section 469.002 of the Act and located within a redevelopment project area within the meaning of the Act and was duly created, adopted and approved in accordance with the terms of the Act. (c) The Redevelopment Plan was duly created, adopted and approved in accordance with the terms of the Act and the redevelopment contemplated by this Agreement is in conformance with the redevelopment objectives set forth in the Redevelopment Plan. 183247v10 (d) Tax Increment District is an "economic development district" within the meaning of Minnesota Statutes, Section 469.174, Subdivision 12 and was created, adopted and approved in accordance with the terms of the Tax Increment Act. (e) The TIF Plan was duly created, adopted and approved in accordance with the terms of the TIF Act, including, without limitation, all requirements under Section 469.175 of the TIF Act. (f) The Project contemplated by this Agreement is in conformance with the development objectives set forth in TIF Plan. (g) To finance the costs of the activities to be undertaken by the City, the City shall reimburse the Developer for the eligible site improvement costs from the Tax Increments as further provided in this Agreement. Section 2.2. Representations and Warranties of the Developer. The Developer makes the following representations, warranties and covenants: (a) The Developer is a limited liability company duly organized and in good standing under the laws of the State of Indiana, is authorized to transact business in the State of Minnesota, and has full power and authority to enter into this Agreement and carry out the covenants contained herein and has duly authorized the execution, delivery and performance of this Agreement by proper action of its managers, members or officers. (b) The Developer will construct the Minimum Improvements, in accordance with the terms of this Agreement and all applicable local, state and federal laws and regulations (including, but not limited to, environmental, zoning, building code and public health laws and regulations) subject to Developer's right to contest the same pursuant to applicable law. (c) The Developer will use commercially reasonable efforts to obtain or cause to be obtained, in a timely manner, all required and applicable permits, licenses and approvals, and will meet or cause to be satisfied, in a timely manner, all requirements of all applicable local, state, and federal laws and regulations which must be obtained or met before the Minimum Improvements may be lawfully constructed, subject to Unavoidable Delays. (d) The construction of the Minimum Improvements would not be undertaken by the Developer, and in the opinion of Developer the construction of the Minimum Improvements pursuant to the Lease would not be economically feasible to Tenant and Developer within the reasonably foreseeable future, but for the assistance and benefit to the Developer provided for in this Agreement. (e) Neither the execution and delivery of this Agreement, the consummation of the transactions contemplated hereby, nor the fulfillment of or compliance with the terms and conditions of this Agreement is prevented, limited by or conflicts with or results in a breach of, the terms, conditions or provisions of any evidences of indebtedness, agreement or instrument of 10 183247v10 whatever nature to which the Developer is now a party or by which the Developer is bound, or constitutes a default under any of the foregoing. (g) The Developer will cooperate fully with the City and the Authority with respect to any litigation commenced by any third party with respect to the Project. (h) The Developer agrees to pay the total amount of any costs, charges, expenses and attorneys' fees reasonably incurred and paid at any time by City because of any Event of Default by the Developer as to any stipulation, agreement, and covenant of this Agreement, resulting in any suit or proceeding at law or in equity to which the City shall become a party in reference to the Developer's interest in the Development Property or the Project and in which the City prevails. Section 2.3. Representations and Warranties of SSB. SSB makes the following representations, warranties and covenants: (a) SSB is a corporation, duly organized and in good standing under the laws of Delaware, is not in violation of any provisions of its articles of incorporation and bylaws, is duly authorized to transact business within the State, has power to enter into this Agreement and has duly authorized the execution, delivery and performance of this Agreement by proper action of its officers. (b) SSB will operate and maintain the Minimum Improvements in accordance with the terms of this Agreement and all applicable local, state and federal laws and regulations (including, but not limited to, environmental, zoning, building code and public health laws and regulations) subject to SSB's right to contest the same pursuant to applicable law. (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 of any corporate restriction or any evidences of indebtedness, agreement or instrument of whatever nature to which SSB is now a party or by which it is bound, or constitutes a default under any of the foregoing, which default or breach might prevent SSB from performing its obligations under this Agreement. (d) SSB agrees to pay the total amount of any costs, charges, expenses and attorneys' fees reasonably incurred and paid at any time by City because of any Event of Default by the SSB as to any stipulation, agreement, and covenant of this Agreement, resulting in any suit or proceeding at law or in equity to which the City shall become a party and in which the City prevails. 11 183247v10 ARTICLE III CONSTRUCTION OF MINIMUM IMPROVEMENTS Section 3.1. Construction of Minimum Improvements. The Developer agrees that it will construct or cause construction of the Minimum Improvements on the Property in substantial compliance with the Construction Plans. Developer and SSB agree, subject to Section 6.4 herein, that at all times through the Termination Date they will operate, maintain, preserve and keep the respective components of the Minimum Improvements or cause such components to be operated, maintained, preserved and kept with the appurtenances and every part and parcel thereof, in good repair and condition, subject to ordinary wear and tear and damage by casualty. Section 3.2. Construction Plans. (a) The Developer has submitted and the City has approved Construction Plans for the Minimum Improvements. Nothing in this Agreement shall be deemed to limit in any way the Developer's obligation to comply with the City's normal building construction permitting process. (b) If the Developer or SSB, as the case may be, desires to make any material change in the Construction Plans or any component thereof after their approval by the City, the Developer shall submit the proposed change to the City for approval. For purposes of this Agreement, a "material" change in the Construction Plans shall be any change that reduces the value of the Minimum Improvements by more than ten percent (10%), changes the exterior appearance of the Minimum Improvements (except painting or any other cosmetic, decorative, or miscellaneous changes), or changes the general nature or use of the Minimum Improvements. Any requested change in the Construction Plans shall, in any event, be deemed approved by the City unless rejected, in whole or in part, by written notice by the City to the Developer, setting forth in detail the reasons therefor. Such rejection shall be made within ten (10) business days after receipt by the City of a written request for the change, which request shall include the proposed change in the Construction Plans and a written narrative explaining the purpose and details of the change. The City's approval shall not be unreasonably withheld, conditioned or delayed and the City will not act in an arbitrary and capricious manner with respect to the approval thereof. Said approval shall constitute a conclusive determination that the Construction Plans (and the Minimum Improvements, constructed in accordance with said plans) comply to the City's satisfaction with the provisions of this Agreement relating thereto. Notwithstanding the foregoing, in the event the City rejects any Construction Plans or any changes, modifications, or adjustments thereto, the Developer may, in its sole discretion, elect to terminate this Agreement by a written notice to the City and SSB, in which event the parties shall be relieved of their obligations under the terms of this Agreement. No approval of a change by the City under this subsection shall relieve the Developer of its obligation to obtain the approval of the City if such approval is necessary. Section 3.3. Commencement and Completion of Construction. (a) Subject to Unavoidable Delays, the Developer shall commence construction, or cause commencement of construction, of the Minimum Improvements on or before 12 183247v10 2015, or on such other date as the parties shall agree. Construction is considered to be commenced upon the beginning of physical improvement to the Property, including grading, excavation or other physical site preparation work. (b) Subject to Unavoidable Delays, the Minimum Improvements must be substantially completed by December 31, 2016 or on such other date as the parties shall agree. (c) All work with respect to the Minimum Improvements to be constructed or provided by the Developer on the Property shall be in substantial compliance with the Construction Plans. (d) Until construction of the Minimum Improvements has been substantially completed, the Developer or SSB shall make construction progress reports, at such times and in such detail as may reasonably be requested by the City, but not more than once a month, as to the actual progress of the Developer with respect to such construction. Section 3.4. Certificate of Completion. (a) Promptly after substantial completion of the Minimum Improvements in accordance with those provisions of the Agreement relating solely to the obligations of the Developer to construct the Minimum Improvements, and upon request by the Developer, the City will furnish the Developer with a certificate of completion for the Minimum Improvements in a form acceptable for recording in the County Recorder's Office or the Office of the Registrar of Titles. The certificate of completion shall be furnished to the Developer within ten (10) business days after request by the Developer, and shall conclusively satisfy and terminate the agreements and covenants in the Agreement of the Developer, and its successors and assigns, to construct the Minimum Improvements and the dates for the beginning and completion thereof. (b) If the City shall refuse or fail to provide a certificate of completion in accordance with the provisions of this Section 3.4 of this Agreement, the City shall, within ten (10) business days after written request by the Developer for the certificate of completion, provide the Developer with a written statement, indicating in adequate detail in what respects the Developer has failed to complete the Minimum Improvements in accordance with the provisions of the Agreement, or is otherwise in default, and what measures or acts will be necessary, in the reasonable opinion of the City, for the Developer to take or perform in order to comply with the obligations under this Agreement with respect to the completion of the Minimum Improvements in order to obtain the certificate of completion. (c) The construction of the Minimum Improvements shall be deemed to be completed when the City has issued a certificate of occupancy or temporary certificate of occupancy for the Minimum Improvements and when all conditions imposed in connection with approval of the Developer's development of the Property, including the establishment of any completion escrow applicable to the Minimum Improvements pursuant to the terms of this Agreement and a development contract for the Property to which the Developer is a party, if any, have been satisfied. The City will assist in the timely issuance of the certificate of occupancy or temporary 13 183247v10 certificate of occupancy for the Minimum Improvements in accordance with the provisions of the State Building Code and City ordinances. ARTICLE IV INSURANCE Section 4.1. Insurance. (a) The Developer will provide and maintain or cause to be provided and maintained at all times during the process of constructing the Minimum Improvements an All Risk Broad Form Basis Insurance Policy and, from time to time during that period, at the request of the City, furnish the City with proof of payment of premiums on policies covering the following: (i) Builder's risk or hazard insurance, written on the so-called "Builder's Risk -- Completed Value Basis," in an amount equal to one hundred percent (100%) of the insurable value of the Minimum Improvements at the date of completion (excluding footers, foundations and other subsurface improvements and also excluding paved areas, sidewalks, curbs, aprons, mass grading and other site work), and with coverage available in nonreporting form on the so called "all risk" form of policy. The interest of the City shall be protected in accordance with a clause in form and content satisfactory to the City; (ii) Commercial general liability insurance (including operations, contingent liability, operations of subcontractors, completed operations, Broadening Endorsement including contractual liability insurance) together with an Owner's Contractor's Policy with limits against bodily injury and property damage of not less than $2,000,000.00 for each occurrence and shall be endorsed to show the City as an additional insured (to accomplish the above -required limits, an umbrella excess liability policy may be used). (iii) Worker's compensation insurance, with statutory coverage and employer's liability protection. (b) Upon completion of construction of the Minimum Improvements and prior to the Termination Date, SSB (or Developer where applicable) shall maintain, or cause to be maintained, at its cost and expense, and from time to time at the request of the City shall provide insurance certificates evidencing the following insurance as follows: (i) Insurance against loss and/or damage to the Minimum Improvements under a policy or policies covering such risk as are ordinarily insured against by similar businesses, including (without limiting the generality of the foregoing) fire, extended coverage, all risk vandalism and malicious mischief, boiler explosion, if applicable, and water damage, in an amount not less than the full insurable replacement value of the Minimum Improvements (provided that SSB and Developer may agree in the Lease that Developer will insure the Minimum Improvements and SSB will insure its personal property, fixtures, equipment and 14 18324700 other personal items and other improvements made by SSB). The term "full insurable replacement value" shall mean the actual replacement cost of the Minimum Improvements (excluding foundation and excavating costs and costs of underground flues, pipes, drains and other uninsurable items) and equipment, and shall be determined from time to time at the request of the City, 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 City. (ii) Commercial general liability insurance, including personal injury liability (with employee exclusion deleted), and automobile insurance, including company owned, and company -leased automobiles, against liability for injuries to persons and/or property, in the minimum amount for each occurrence and for each year of $2,000,000.00, for general liability and shall be endorsed to show the City as additional insured. (iii) Such other insurance, including worker's compensation insurance as required by applicable laws, in such amount as is customarily carried by like organizations engaged in like activities of comparable size and liability exposure. (c) All insurance required under this Article shall be taken out and maintained in responsible insurance companies selected by the Developer or SSB which are authorized under the laws of the State to assume the risk covered thereby. Upon request, the Developer or SSB will deposit annually with the City a certificate or certificates of the respective insurers stating that such insurance is in force and effect. The Developer or SSB shall give written notice to the City at least thirty (30) days before the effective date of any cancellation or modification which reduces the coverage provided below the amounts required herein. In lieu of separate policies, the Developer or SSB may maintain a single policy, blanket or umbrella policies, or a combination thereof, having the coverage required herein, in which event the Developer or SSB shall deposit with the City a certificate or certificates of the respective insurers as to the amount of coverage in force upon the Minimum Improvements. (d) The Developer or SSB agrees to notify the City with reasonable promptness in the case of damage exceeding $500,000 in amount to, or destruction of, the Minimum Improvements or any portion thereof resulting from fire or other casualty. In the event of any such damage or destruction, the Developer or SSB will, within a reasonable time and with due diligence repair, reconstruct and restore, or cause the repair, reconstruct or restoration of the Minimum Improvements to substantially the same or an improved condition or value as existed prior to the event causing such damage and, to the extent necessary to accomplish such repair, reconstruction and restoration, the Developer or SSB will apply the Net Proceeds of any insurance relating to such damage received by the Developer or SSB to either (i) the payment or reimbursement of the costs thereof, (ii) at the election made by the Developer in its sole discretion, repay the amount that Developer actually received under Section 5.3 hereof and under the Note prior to the event causing such damage, or (iii) at the agreement of Developer and SSB, as otherwise set forth in the Lease. 15 183247v10 Any Net Proceeds remaining after completion of such repairs, construction and restoration shall be remitted to the Developer or to SSB, as applicable. (e) The Developer, SSB and City agree that all the insurance provisions set forth in this Article IV shall terminate upon termination of this Agreement. (f) Notwithstanding anything contained in this Article IV to the contrary, the rights of the City with respect to the receipt and application of any Net Proceeds shall, in all respects, be subject and subordinate to the rights of any lender or holder under a Mortgage. ARTICLE V TAX INCREMENT Section 5.1. Real Property Taxes. (a) Prior to completion of the Minimum Improvements, Developer shall pay all real property taxes for the Property in a timely manner and prior to imposition of penalty. After completion of the Minimum Improvements, Developer and SSB shall pay or cause to be paid all real property taxes for the Property pursuant to the Lease in a timely manner and prior to imposition of penalty. The City shall have the right to institute a legal action to collect such taxes in the event that Developer or SSB, as the case may be, fails to pay the same when due, all pursuant to the applicable laws and regulations. (b) Each of the Developer and SSB agrees that prior to the Termination Date it will not take any of the following actions to the extent that it would reduce the annual taxes generated from the Property: (1) it will not seek administrative review or judicial review of the applicability of any tax statute determined by any Tax Official to be applicable to the Project or the Developer 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 review or judicial review of the constitutionality of any tax statute determined by any Tax Official to be applicable to the Project or the Developer or raise the unconstitutionality of any such tax statute as a defense in any proceedings, including delinquent tax proceedings; (3) it will not cause a reduction in the Market Value of the Property or Minimum Improvements through: (A) willful destruction of the Property, or any part thereof, (B) willful refusal to reconstruct damaged or destroyed property pursuant to Section 4.1 of this Agreement; (C) a request to the City Assessor of the City or the County Assessor of the County to reduce the Market Value of all or any portion of the Property; (D) a petition to the Board of Equalization of the City or the Board of Equalization of the County to reduce the Market Value of all or any portion of the Property; (E) a petition to the Board of Equalization of the State or the Commissioner of Revenue of the State to reduce the Market Value of all or any portion of the Property; (F) an action in a District Court of the State or the Tax Court of the State pursuant to Minnesota Statutes, Chapter 278, seeking a reduction in the Market Value of the Property; (G) an application to the Commissioner of Revenue of the State requesting an abatement of real property taxes pursuant to Minnesota Statutes Chapter 270; and (H) any other proceedings, whether administrative, legal or equitable, with any administrative body within the City, the County, or the State or with any court of the State or the federal 16 183247v10 government. The Developer and SSB shall not, prior to the Termination Date, apply for a deferral of property tax on the Property pursuant to Minnesota Statutes, Section 469.181. Section 5.2. Minimum Improvements. The parties agree that the acquisition of the Property and completion of construction of Minimum Improvements on the Property by the Developer is essential to the successful completion of the Project. The estimated cost of land acquisition and construction of the Minimum Improvements is estimated to be at least $15,700,000.00. The Developer shall pay or finance the cost of acquisition and construction of the Minimum Improvements. The City shall reimburse the Developer, for a portion of the cost of the Minimum Improvements, as provided in Section 5.3 hereof. Section 5.3. Reimbursement: Tax Increment Revenue Note. The City shall reimburse the payments made by the Developer under Section 5.2 for construction of the eligible site improvements for the Project identified in Schedule C attached hereto up to the amount specified in the Note, which Note is in substantially the form attached to this Agreement as Schedule B, and subject to the following conditions: (a) The Note shall be dated, issued and delivered when the Developer shall have demonstrated in writing to the reasonable satisfaction of the City that the construction of the Project has been substantially completed, that the Developer has incurred and paid the cost of the Minimum Improvements, as described in and limited by Section 5.2, and that the Developer has otherwise complied with the terms and conditions of this Agreement and all conditions imposed in connection with approval of the Developer's development of the Property, including the establishment of any completion escrow applicable to the Minimum Improvements pursuant to the terms of this Agreement and a development contract for the Property to which the Developer is a party, if any, have been satisfied. (b) The Note shall have as its maximum stated amount $1,607,350.00. (c) The amount evidenced by the Note shall be due and payable by the City to the Developer as determined pursuant to the formula set forth in the Note, and shall be payable solely from the Available Tax Increments. (d) The amount evidenced by the Note shall be paid on the applicable Payment Dates. On each Payment Date and subject to the provisions of the Note, the City shall pay the Available Tax Increments generated by the Project and received by the City during the immediately preceding six (6) months. (e) The Note shall be a special and limited obligation of the City and not a general obligation of the City and only Net Tax Increments shall be used to pay on the Note. The payment amounts due thereon shall be payable solely from Tax Increments from the Tax Increment District which are paid to the City and which the City is entitled to retain pursuant to the Tax Increment Act. (f) The City's obligation to make payments on the Note on any Payment Date or any date thereafter shall be conditioned upon the requirement that (i) there shall not at that time be an 17 183247v]0 Event of Default by the Developer or SSB that has occurred and is continuing under this Agreement, (ii) this Agreement shall not have been rescinded by the Developer or otherwise terminated by any party pursuant to its terms, and (iii) the Developer or SSB, as the case may be, has paid its property taxes and the City has received from the County the Tax Increments generated by the Project. (g) The Note shall be governed by and payable pursuant to the additional terms thereof, as set forth in Schedule B attached hereto. In the event of any conflict between the terms of the Note and the terms of this Section 5.3, the terms of the Note shall govern. The issuance of the Note pursuant and subject to the terms of this Agreement, and the taking by the City of such additional actions as counsel for the City may require in connection therewith, are hereby authorized and approved by the City. Section 5.4. Duration of Tax Increment District. The Tax Increment District shall exist no longer than nine (9) years after the receipt by the City of the first certification by the Dakota County Auditor, State of Minnesota, of the captured net tax capacity, as defined in Minn. Stat. Section 469.174, subd. 4, or as otherwise terminated pursuant to Minnesota Statutes chapter 469. The City may choose to decertify the Tax Increment District at an earlier date if an Event of Default by the Developer or SSB causes the City to terminate this Agreement as permitted herein. Section 5.5. Tax Increment Reimbursement Schedule. The Developer has proposed to construct the Minimum Improvements and in order to receive the substantial benefit of the Tax Increment District has requested that the City establish a schedule for the reimbursement of the Tax Increments. The City agrees to establish an approximately nine year reimbursement schedule in substantially the form set forth in the Note. Section 5.6 Use of Tax Increment. The Developer acknowledges that the City has made no warranties or representations to the Developer as to the amounts of Tax Increment that will be generated or that the "Available Tax Increment," as defined in the Note, will be sufficient to pay the Note in whole or in part. Nor is the City warranting that it will have throughout the term of this Agreement and the Note the continuing legal ability under State law to apply Tax Increment to the payment of the Note, which continued legal ability is a condition precedent to the City's obligations under the Note. ARTICLE VI BUSINESS SUBSIDY Section 6.1. Tax Increment Financing. The Tax Increment financing provided by the City under this Agreement is made pursuant to the TIF Plan and pursuant to a Business Subsidy under the Minnesota Statutes, Sections I I6J.993 to 116J.995 (the "Business Subsidy Act"). Sections 6.2. Wage and Job Goals. Developer acknowledges and agrees that the amount of the business subsidy granted to the Developer under this Agreement is an amount not to exceed $1,607,350.00 and that this business subsidy is needed because the acquisition of a portion of the Property and construction of the Minimum Improvements pursuant to the Lease would not be 18 183247v10 economically feasible to Tenant and Developer within the reasonably foreseeable future. The public purpose of the business subsidy is to create new full-time jobs in the City of Lakeville and to enhance the tax base. SSB agrees that it will meet the following goals (the "Goals"): (i) SSB agrees it will provide a net increase of two hundred (200) new full-time equivalent jobs in the City within twenty-four (24) months of the Benefit Date (the "Compliance Date") at an annual wage of at least $15.20 per hour, excluding health, welfare and other fringe benefits. Once SSB has achieved the Goals, the Goals must be maintained for a period of at least one year. The City may extend the Compliance Date by up to one year. Section 6.3. Reporting. SSB agrees to (i) report SSB's progress on achieving the Goals to the City until the Goals are met, or the business subsidy is repaid, whichever occurs earlier, in accordance with Minn. Stat. Section I I6J.994, subd. 7; (ii) include in the report the information required on forms developed by the Minnesota Department of Employment and Economic Development; and (iii) send the completed reports to the City. SSB agrees to file these reports no later than March 1 of each year and within thirty (30) days after the deadline for meeting the Goals. The City agrees that if it does not receive the reports, it will mail the Developer and SSB a warning within one week of the required filing date. If within fourteen (14) days of the post marked date of the warning letter the reports are not made, SSB agrees to pay to the City a penalty of One Hundred Dollars ($100.00) for each subsequent day until the report is filed up to a maximum of One Thousand Dollars ($1,000.00), pursuant to Minn. Stat. Section 116J.994, subd. 7(d). Section 6.4. Continuing Obligation. SSB agrees that it will continuously operate or cause to be operated the Minimum Improvements for the purposes described in the Contract for a period of at least five (5) years from the Benefit Date. Section 6.5. Requirements. The following requirements are required by the Business Subsidy Act: (a) The business subsidy is being provided for the public purposes of increasing employment within the City and developing property that is currently vacant and underutilized. The subsidy is necessary to offset the high costs associated with costs associated with preparing the Property for development. Also, absent the subsidy, the proposed development would not occur. (b) The subsidy is being financed with tax increment generated from the City's Tax Increment District No. 21, an economic development tax increment district. (c) SSB is receiving additional financial assistance from the following state and local government agencies: (i) A forgiveable loan from the Minnesota Investment Fund administered by the Minnesota Department of Employment and Economic Development (DEED) in the amount of $1,000,000.00; and 19 183247v10 (ii) A job creation award and capital investment rebate from the Job Creation Fund administered by DEED in the amount of $1,094,522.00. Section 6.6. Default Defined. It shall be a default under this Agreement if, after written notice to the Developer and SSB of the default, either the Developer or SSB fail to comply with the terms or provisions of this Article, and fail to cure such failure to the reasonable satisfaction of the City within thirty (3 0) days after written notice to the Developer and SSB of the default, or other reasonable period of time approved by the City, but only if the default has not been cured within thirty (30) days or other time period provided by the City. Section 6.7. Remedies on Default. The parties agree that the subsidy is a forgivable loan, repayable only if the Developer and SSB fail to fulfill the obligations under Section 6.2 of this Agreement. Upon the occurrence of a failure to create jobs as required by Section 6.2 hereof or a failure to continue operations as required by Section 6.4 hereof, SSB shall pay to the City upon written demand from the City a "pro rata share" of the subsidy and interest on the subsidy at the implicit price deflator as defined in Minnesota Statutes, Section 275.70, subd. 2, accrued from the Benefit Date. The term "pro rata share" means percentages calculated as follows: (a) if the failure relates to the number of jobs, the number of jobs created or maintained shall be determined based on the annual monthly average of full time equivalent jobs maintained during the twelve month period beginning on the Compliance Date, and the "pro rata share" herein shall be a percentage equal to the number of jobs required less the annual monthly average number of jobs so calculated, divided by the jobs required; (b) If the failure relates to the wage rate requirements, the hourly wage paid shall be determined based on the differential between the monthly average hourly wage rate paid and the required hourly wage, during the twelve month period beginning on the Compliance Date, and the "pro rata share" herein shall be a percentage equal to the required wage rate less the annual monthly average wage rate divided by the required wage rate; (c) if the failure relates to a failure to continue operations of the Minimum Improvements for the purposes described in this Agreement in accordance with Section 6.4 hereof, sixty (60) less the number of months of operation (where any month in which the Minimum Improvements are in operation for at least fifteen (15) days constitutes a month of operation), commencing on the Benefit Date and ending with the date operation is ceased, as reasonably determined by the City, divided by sixty (60); and (d) if more than one of clauses (a) through (c) apply, the average of the applicable percentages, not to exceed one hundred percent (100%). Section 6.8. Costs of Enforcement. Whenever any default occurs under this Agreement and the City shall employ attorneys or incur other expenses for the collection of payments due or for the enforcement of performance or observance of any obligation or agreement on the part of the Developer and SSB under this Agreement, the Developer and SSB shall be liable to the City for the reasonable fees of such attorneys and such other expenses so incurred by the City; provided, 20 18324700 that the Developer and SSB shall only be obligated to make such reimbursement if the City prevails in such collection or enforcement action. 21 183247v10 ARTICLE VII FINANCING; ASSIGNMENT AND TRANSFER Section 7.1. Subordination for the Benefit of Mortgagee. In order to facilitate the Developer obtaining financing to acquire the Property and construct the Minimum Improvements according to the Construction Plans, the City agrees to subordinate its rights under this Agreement to any Mortgage in connection therewith. The City shall also permit and consent to the collateral assignment of the Developer's rights, benefits, title, interest and obligations under this Agreement and the Note to any holder as security for such financing (the "Holder"). In the event that there occurs a default under any Mortgage, the Developer shall cause the City to receive copies of any notice of default received by the Developer from the Holder of such Mortgage. Thereafter, the City shall have the right, but not the obligation, to cure any such default on behalf of the Developer within such cure periods as are available to the Developer under the Mortgage documents. In the event there is an Event of Default under this Agreement, the City will transmit to the Holder of any Mortgage a copy of any notice of default given by the City pursuant this Agreement. Section 7.2. Subordination for the Benefit of Mortgagees) after the issuance of a Certificate of Completion for all of the Minimum Improvements. In order to facilitate a sale of the Property by Developer or to facilitate any permanent financing secured by the Property, the City agrees, after the issuance of a certificate of completion and certificate of occupancy (or temporary certificate of occupancy) for the Minimum Improvements, to subordinate its rights under this Agreement to any holder of a Mortgage in connection with such acquisition and/or permanent financing. The City shall also permit and consent to the collateral assignment of Developer's (or any successor in interest to Developer's) rights, benefits, title, interest and obligations under this Agreement to any holder as security for such financing. Notwithstanding anything contained in this Section 7.2, any sale of the Property shall remain subject to the terms and provisions of Section 7.3 and 7.4 of this Agreement. Section 7.3. Prohibition Against Transfer of Property and Assignment of Agreement. Except as otherwise provided in Section 7.4 hereof, no transfer or approval by the City thereof shall be deemed to relieve the Developer, or any other party bound in any way by this Agreement, from any of its obligations with respect thereto, nor shall Developer or any other party bound by this Agreement be released from any obligations hereunder without the written release by the City. Section 7.4. Right of Assignment. Notwithstanding any other term or condition to the contrary contained in this Agreement, the Developer shall have a right, but not an obligation, to assign this Agreement and to otherwise sell, convey, and transfer the Property, together with any and all of its rights, benefits, interests, duties, and obligations herein or hereunder, to any person, entity or organization and be released from any and all duties, responsibilities, obligations, and liabilities hereunder if. (a) such assignment is made as a part of or in conjunction with the Developer's sale, conveyance, transfer, or any other disposition of its right or interest in or to the Property or the Minimum Improvements other than through a foreclosure or deed in lieu thereof, (b) the Minimum Improvements have been completed as required by this Agreement; and (c) the 22 183247v]0 Lease with SSB is in full force and effect and neither Developer nor SSB are in default thereunder. ARTICLE VIII EVENTS OF DEFAULT Section 8.1. Events of Default Defined. The following shall be "Events of Default" under this Agreement and the term "Event of Default" shall mean whenever it is used in this Agreement any one or more of the following events that remains uncured by such party beyond any applicable notice, cure and/or graced period set forth in Section 8.2 below or elsewhere herein: (a) Failure by the Developer or SSB, as the case may be, to pay timely any ad valorem real property taxes or special assessments assessed with respect to the Property. (b) Failure by the Developer to cause the construction of the Minimum Improvements to be completed pursuant to the terms, conditions and limitations of this Agreement. (c) The holder of any mortgage on the Property or any improvements thereon, or any portion thereof, commences foreclosure proceedings as a result of any default under the applicable mortgage documents. (d) Failure by the Developer or SSB to substantially observe or perform any other material covenant, condition, obligation or agreement on its part to be observed or performed under this Agreement. (e) If the Developer shall (i) file any petition in bankruptcy or for any reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under the United States Bankruptcy Act of 1978, as amended or under any similar federal or state law; or (ii) make an assignment for the benefit of its creditors; or (iii) admit in writing its inability to pay its debts generally as they become due; or (iv) be adjudicated a bankrupt or insolvent; or if a petition or answer proposing the adjudication of the Developer, as a bankrupt or its reorganization under any present or future federal bankruptcy act or any similar federal or state law shall be filed in any court and such petition or answer shall not be discharged or denied within ninety (90) days after the filing thereof, or a receiver, trustee or liquidator of the Developer, or of the Project, or part thereof, shall be appointed in any proceeding brought against the Developer, and shall not be discharged within ninety (90) days after such appointment, or if the Developer, shall consent to or acquiesce in such appointment. 23 183247v10 (f) Any representation or warranty made by the Developer under Section 2.2 of this Agreement shall prove to have been incorrect in any material respect when made. (g) Any representation or warranty made by SSB under Section 2.3 of this Agreement shall prove to have been incorrect in any material respect when made. (h) Failure by the City to make payments on the Note pursuant to the terms and conditions thereof. (i) Failure by the City to substantially observe or perform any covenant, condition, obligation or agreement on its part to be observed or performed under this Agreement or the Note. 0) Any representation or warranty made by the City under Section 2.1 of this Agreement shall prove to have been incorrect in any material respect when made. Section 8.2. Remedies on Default. Whenever any Event of Default referred to in Section 8.1 occurs and is continuing, the non -defaulting party, as specified below, may take any one or more of the following actions after providing thirty (30) days' written notice to the defaulting parry (and any other party to this Agreement), but only if the Event of Default has not been cured within said thirty (30) days, or if said Event of Default cannot reasonably be cured within the time, the defaulting party fails to give assurances reasonably satisfactory to the non -defaulting party that the Event of Default will be cured within a period of time reasonably acceptable to the non -defaulting party, but in any event not to exceed ninety (90) days. (a) If an Event of Default is caused by the Developer or SSB, the City may suspend its performance under this Agreement until it receives assurances from the Developer or SSB, deemed adequate by the City, that the Developer or SSB will cure the default and continue its performance under this Agreement. (b) If an Event of Default is caused by the Developer or SSB, the City may terminate this Agreement, except that no termination may be effective at any time that the Developer or SSB is proceeding in good faith to cure the defect and/or gives reasonable assurances to the City as required in (a) above, or if there exists a good faith dispute with the City as to an event of default as defined above, and the Developer or SSB posts a bond or other security as reasonably adequate to cure the alleged default. (c) If an Event of Default is caused by the Developer or SSB, the City may take any action, including legal or administrative action, which may appear necessary or desirable to enforce performance and observance of any obligation, agreement, or covenant of the Developer or SSB under this Agreement. (d) If an Event of Default is caused by the City, the Developer may seek specific performance of the City's obligations hereunder and pursuant to the Note and may exercise any and all other rights and remedies that it may be entitled under the Note, any other provision of this Agreement, or applicable laws or in equity. 24 183247v10 Notwithstanding any other terin or condition to the contrary contained herein or otherwise, in no event shall the Developer or the Tenant be obligated or responsible for or on account of any Event of Default by the Developer or the Tenant in excess of any amount equal to a sum of the amounts that Developer actually received under Section 5.3 hereof and under the Note prior to the date of such Event of Default, except as otherwise provided under Sections 6.7, 6.8 or 8.5 of this Agreement or as otherwise mandated by state or federal law. Upon payment of such amount, this Agreement shall automatically terminate without action on the part of any party hereto and shall be null and void thereafter without any further force or effect as against any party hereto and the Tax Increment District shall terminate and cease to exist and the Property and the Minimum Improvements shall no longer be subject to the Tax Increment District or TIF Plan. Section 8.3. No Remedy Exclusive. No remedy herein conferred upon or reserved to the City, Developer or SSB is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Agreement or now or hereafter existing at law or in equity or by statute. No delay or omission to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver thereof, but any such right and power may be exercised from time to time and as often as may be deemed expedient. Section 8.4. No Implied Waiver. In the event any agreement contained in this Agreement should be breached by any party and thereafter waived by any other party, such waiver shall be limited to the particular breach so waived and shall not be deemed to waive any other concurrent, previous or subsequent breach hereunder. Section 8.5. Agreement to Pay Attorney's Fees and Expenses. Whenever any Event of Default occurs and the City, Developer or SSB shall employ attorneys or incur other expenses for the collection of payments due or to become due or for the enforcement of performance or observance of any obligation or agreement on the part of the other herein contained, the defaulting party agrees that it shall, on demand therefor, pay to the other the reasonable fees of such attorneys and such other reasonable expenses so incurred by it. Section 8.6. Indemnification of City and Authority; Termination. (a) The Developer and SSB release from and covenant and agree that the City and Authority, and their governing body members, officers, agents, and employees (hereinafter, for purposes of this Section, collectively the "Indemnified Parties") shall not be liable for and Developer and SSB agree to indemnify and hold harmless the Indemnified Parties against any loss or damage to property or any injury to or death of any person occurring at or about or resulting from the negligence or willful acts of Developer or SSB, provided that the foregoing indemnification shall not be effective for any actions of the Indemnified Parties that are not contemplated by this Agreement or for any damage, loss, claims, actions, judgments or liabilities arising from or relating to the negligence or willful acts of any of the Indemnified Parties, and shall not relate to any event or occurrence that is a breach of the explicit representations or warranties of the City pursuant to this Agreement. 25 183247v10 (b) Except for any willful misrepresentation or any willful or wanton misconduct or negligence of any of the Indemnified Parties, the Developer and SSB agree to protect and defend the Indemnified. Parties, and hold the aforesaid harmless from any claim, demand, suit, action or other proceeding whatsoever by any person or entity whatsoever arising from the construction, installation, ownership, and operation of the Project; provided, that this indemnification shall not apply to the warranties made or obligations undertaken by the City in this Agreement or to any actions undertaken by the City which are not contemplated by this Agreement but shall, in any event and without regard to any fault on the part of the City, apply to any pecuniary loss or damages (including interest thereon from the date the loss is incurred or damages are paid by the City at a rate equal to the "Prime Rate" as set forth from time to time in The Wall Street Journal) as a result of the Project causing the Tax Increment District to not qualify or cease to qualify as an "economic development district" under section 469.174, subdivision 12 of the Act or to violate limitations as to the use of Tax Increments as set forth in section 469.176, subdivision 4 due to Developer's or SSB's actions or inactions. (c) All covenants, stipulations, promises, agreements and obligations of the City contained herein shall be deemed to be the covenants, stipulations, promises, agreements and obligations of the City and not of any governing body member, officer, agent, servant or employee of the City, as the case may be. (d) On the Termination Date, this Agreement shall automatically terminate without any action on the part of any party hereto and shall be null and void thereafter without any further force or effect as against any party hereto and the Tax Increment District shall terminate and cease to exist and the Property and the Minimum hnprovements shall no longer be subject to the Tax Increment District or TIF Plan. ARTICLE IX ADDITIONAL PROVISIONS Section 9.1. Representatives Not Individually Liable. (a) No member, official, or employee of the City shall be personally liable to the Developer or SSB, or any successor in interest, in the event of any default or breach or for any amount which may become due to the Developer or SSB or their successor or on any obligations under the terms of the Agreement. (b) No partner, official, or employee of the Developer or SSB shall be personally liable to the City, or any successor in interest, in the event of any default or breach or for any amount which may become due to the City or successor or on any obligations under the terms of the Agreement. Section 9.2. Restrictions on Use. (a) The Developer agrees for itself, and its successors and assigns, and every successor in interest to the Property, or any part thereof, that the Developer, and such successors and assigns, shall devote the Property to, and only to and in accordance with, the uses specified 26 183247v10 in this Agreement and shall use such property solely for (or cause the Property to be used for) the uses specified in this Agreement until the Termination Date. (b) The Tax Increment District was created as an economic development tax increment financing district as defined in Section 469.174, subd. 12 of the Tax Increment Act. The Developer and SSB agree to restrict the use of the Property and Minimum Improvements so as to comply with the restrictions on use that must be satisfied in the Tax Increment Act to allow the Tax Increment District to continue to comply with the Tax Increment Act. Specifically, and without limiting the foregoing, the Developer and SSB agree that SSB will comply with the use restrictions contained in Section 469.176, subd. 4c, of the Tax Increment Act and Section 469.176, subd. 7, relating to qualified manufacturing and distribution facilities. The Developer understands that its failure to comply with such statutory requirements may invalidate the Tax Increment District and may impair the City's ability receive Tax Increment that they otherwise would have received. If an Event of Default is caused by the Developer by its failure to comply with the restrictions contained in the Tax Increment Act that results in liability on the part of the City for repayment of Tax Increment or penalties or results in losses of Tax Increment that would otherwise have been received by the City, the Developer shall be liable to and upon demand by the City shall pay to the City the amount of such liability, penalties or Tax Increment losses. The Developer will furnish to the City from time to time at the request of the City documentation required under the Tax Increment Act showing the Developer's compliance with the applicable provisions of the Tax Increment Act. Section 9.3. Titles of Articles and Sections. Any titles of the several parts, Articles, and Sections of the Agreement are inserted for convenience of reference only and shall be disregarded in construing or interpreting any of its provisions. Section 9.4. Disclaimer of Relationships. The Developer acknowledges that nothing contained in this Agreement nor any act by the City or the Developer shall be deemed or construed by the Developer or by any third person to create any relationship of third -party beneficiary, principal and agent, limited or general partner, or joint venture between the City, the Developer and/or any third party. Section 9.5. Modifications. This Agreement may be modified solely through written amendments hereto executed by the Developer, SSB and the City. Section 9.6. Counterparts. This Agreement is executed in any number of counterparts, each of which shall constitute one and the same instrument. Section 9.7. Judicial Interpretation. Should any provision of this Agreement require judicial interpretation, the court interpreting or construing the same shall not apply a presumption that the terms hereof shall be more strictly construed against one party by reason of the rule of construction that a document is to be construed more strictly against the party who itself or through its agent or attorney prepared the same, it being agreed that the agents and attorneys of both parties have participated in the preparation hereof. 27 18324700 Section 9.8. Termination of Agreement. Unless terminated earlier pursuant to specific provision of this Agreement, this Agreement and the obligations of the Developer, SSB and the City shall terminate on the Termination Date; provided, however, that any claims or causes of actions the basis for which arose prior to the Termination shall survive such termination and nothing herein shall be deemed as intended to limit the exercise by either party of its remedies in connection therewith except any relevant statute of limitations. On or after the Termination Date each party shall be entitled to receive from any other party an instrument, in recordable form evidencing such termination. In the event Developer and SSB have failed to execute the Lease by December 31, 2015, this Agreement shall terminate. Section 9.9. Conflicts of Interest. No member of the governing body or other official of the City shall participate in any decision relating to the Agreement, which affects his or her personal interests or the interests of any corporation, partnership, or association in which he or she is directly or indirectly interested. No member, official or employee of the City shall be personally liable to the City in the event of any default or breach by the Developer or successor or on any obligations under the terms of this Agreement. Section 9.10. Notices and Demands. Except as otherwise expressly provided in this Agreement, a notice, demand or other communication under this Agreement by any party to any other shall be sufficiently given or delivered if it is dispatched by (a) in the case of the Developer is addressed to or delivered personally to Developer at: Scannell Properties #247, LLC, 800 East 96th Street, Suite 175 Indianapolis, Indiana 46240 Attn: Marc D. Pfleging (b) in the case of SSB is addressed to or delivered personally to SSB at: SSB MANUFACTURING COMPANY c/o: Serta Simmons Bedding, LLC 3560 Lenox Road Suite 1100 Atlanta, GA 30326 Attn: General Counsel With a copy to: Serta Simmons Bedding, LLC 3560 Lenox Road Suite 1100 Atlanta, GA 30326 Attn: Vice President Tax M -e1 11 28 183247v10 With a copy to: Sheley, Hall & Williams, P.C. 303 Peachtree St., N.E. Suite 4440 Atlanta, GA 30308 Attn: Laura C. Hall (c) in the case of the City is addressed to or delivered personally to the City at: City of Lakeville 20195 Holyoke Avenue Lakeville, Minnesota 55044 Attn: City Administrator 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. Section 9.11. Law Governing. This Agreement will be governed and construed in accordance with the laws of the State of Minnesota. IN WITNESS WHEREOF, the City and Developer have caused this Agreement to be duly executed on or as of the date first above written. [remainder of page intentionally left blank] 29 183247v10 CITY OF LAKEVILLE Matt Little, Mayor Charlene Friedges, City Clerk STATE OF MINNESOTA ) (ss. COUNTY OF DAKOTA ) The foregoing instrument was acknowledged before me this day of , 2015, by Matt Little and Charlene Friedges, respectively the Mayor and City Clerk of the City of Lakeville, a Minnesota municipal corporation, on behalf of the City. Notary Public 30 183247v10 SCANNELL PROPERTIES #247, LLC James C. Carlino, its Manager STATE OF INDIANA ) (ss. COUNTY OF HAMILTON) The foregoing instrument was acknowledged before me this day of , 2015, by James C. Carlino, the Manager of the Scannell Properties #247, LLC, an Indiana limited liability company, on behalf of the company. Notary Public 31 183247v10 SSB MANUFACTURING COMPANY LM STATE OF MINNESOTA ) (ss. COUNTY OF ) Its: The foregoing instrument was acknowledged before me this day of 2015, by ) the of SSB Manufacturing Company a Delaware corporation, on behalf of the corporation. Notary Public 32 183247v10 MORTGAGE HOLDER CONSENT TO CONTRACT FOR PRIVATE DEVELOPMENT , a 'which holds a mortgage on the subject property, the development of which is governed by the foregoing Contract for Private Development, agrees that the Contract for Private Development shall remain in full force and effect even if it forecloses on its mortgage. Dated this day of , 2015. Its: STATE OF ) )ss. COUNTY OF The foregoing instrument was acknowledged before me this day of 2015, by the of a corporation. Notary Public DRAFTED BY: CAMPBELL, KNUTSON Professional Association Grand Oak Office Center I 860 Blue Gentian Road, Suite 290 Eagan, MN 55121 Telephone: 651-452-5000 AMP:cjh 33 183247v10 on behalf of said SCHEDULE A Description of Property Lot 1, Block 1, Interstate South Logistics Park, according to the recorded plat thereof, Dakota County, Minnesota. 34 183247v10 SCHEDULE B UNITED STATES OF AMERICA STATE OF MINNESOTA COUNTY OF DAKOTA CITY OF LAKEVILLE TAX INCREMENT REVENUE NOTE (Scannell Properties #247, LLC) The City of Lakeville, Minnesota, (the "City"), hereby acknowledges itself to be indebted and, for value received, hereby promises to pay the amounts hereinafter described (the "Payment Amounts") to Scannell Properties #247, LLC (the "Developer") or its registered successors or assigns pursuant to the certification of registration attached hereto delivered to the City (the "Registered Owner"), but only in the manner, at the times, from the sources of revenue, and to the extent hereinafter provided. The principal amount of this Note shall be the lesser of (1) $1,607,350.00 or (2) the actual amounts incurred by the Developer as described in Schedule C attached to the Development Agreement, as herein defined, and provided with sufficient evidence to the City, as reduced to the extent that such principal installments shall have been paid in whole or in part pursuant to the terms hereof, provided that the sum of the principal amount listed above shall in no event exceed $1,607,350.00, as provided in that certain Development Agreement, dated as of , 2015, as the same may be amended from time to time (the "Development Agreement"), by and between the City, the Developer and SSB Manufacturing Company. The amounts due under this Note shall be payable during an approximately nine (9) year period on a semiannual payment basis, by eighteen (IS) installment payments, commencing on the first day of a month designated by the Developer or the Registered Owner immediately following receipt by the City of the first certification by the Dakota County Auditor, State of Minnesota, of the captured net tax capacity, as defined in Minn. Stat. Section 469.174, subd. 4, with respect to the Tax Increment (as defined in the Development Agreement) and continuing on each and every first day of the sixth successive month thereafter. In the event the Developer or the Registered Owner fails to designate the first month of such payment, the first month of such payment shall be August 1, 2017, in which event such payments shall continue on each February 1 and August 1 thereafter to and including February 1, 2026 (the "Payment Dates"). If any of the preceding payment dates should not be a Business Day (as defined in the Development Agreement) payment shall be made on the next succeeding Business Day. However, in no event shall the City be obligated to make a payment to the Developer if an Event of Default (as defined in the Development Agreement), other than an Event of Default by the City, has occurred and is continuing under the Development Agreement. On each Payment Date, the City shall pay by check or draft mailed to the Developer or the Registered Owner ninety-five percent (95%) of the Tax Increments attributable to the Property (as defined in the Development Agreement) and paid to the City by Dakota County in the six (6) months immediately preceding such Payment Date. All payments made by the City under this Note shall be applied to principal reduction hereof. The Payment Amounts due hereon shall be payable solely from tax increments (the "Tax Increments") from Tax Increment Financing District No. 21 which are paid to the City and which the City is entitled to retain pursuant to the provisions of Minnesota Statutes, Sections 469.174 through 469.1794, as the same may be 35 183247v10 amended or supplemented from time to time (the "Tax Increment Act"). This Note shall terminate and be of no further force and effect following the last Payment Date defined above, on any date upon which the Development Agreement is terminated pursuant to the terms and conditions thereof, or on the date that all payment amounts payable hereunder shall have been paid in full, whichever occurs earliest. The City makes no representation or covenant, express or implied that the Tax Increments will be sufficient to pay, in whole or in part, the amounts, which are or may become due and payable hereunder. The City's payment obligations hereunder shall be further conditioned on the fact that no Event of Default, other than an Event of Default by the City, under the Development Agreement shall have occurred and be continuing at the time payment is otherwise due hereunder, but such unpaid amounts shall become payable, without interest accruing thereon in the meantime, if said Event of Default shall thereafter have been cured pursuant to the Development Agreement; and, further, if pursuant to the occurrence of an Event of Default, other than an Event of Default by the City, under the Development Agreement the City elects to terminate the Development Agreement pursuant to the terms and conditions thereof, the City shall have no further debt or obligation under this Note whatsoever. Reference is hereby made to all of the provisions of the Development Agreement, including without limitation Section 5.3 thereof, for a fuller statement of the rights and obligations of the City to pay the payment amount of this Note, and said provisions are hereby incorporated into this Note as though set out in full herein. THIS NOTE IS A SPECIAL, LIMITED REVENUE OBLIGATION AND NOT A GENERAL OBLIGATION OF THE CITY AND IS PAYABLE BY THE CITY ONLY FROM THE AVAILABLE TAX INCREMENT AND SUBJECT TO THE QUALIFICATIONS STATED OR REFERENCED HEREIN. THIS NOTE IS NOT A GENERAL OBLIGATION OF THE CITY, AND NEITHER THE FULL FAITH AND CREDIT NOR THE TAXING POWERS OF THE CITY OF LAKEVILLE ARE PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF THIS NOTE AND NO PROPERTY OR OTHER ASSET OF THE CITY, SAVE AND EXCEPT THE ABOVE -REFERENCED TAX INCREMENTS, IS OR SHALL BE A SOURCE OF PAYMENT OF THE CITY'S OBLIGATIONS HEREUNDER This Note is issued by the City in aid of financing a Project (as defined in the Development Agreement) pursuant to and in full conformity with the Constitution and laws of the State of Minnesota, including the Tax Increment Act. Except when the Development Agreement may be assigned pursuant to Section 7.4 thereof, this Note may be assigned only with the consent of the City. In order to assign the Note, the assignee shall surrender the same to the City either in exchange for a new fully registered note or for transfer of this Note on the registration records for the Note maintained by the City. Each permitted assignee shall take this Note subject to the foregoing conditions and subject to all provisions stated or referenced herein. IT IS HEREBY CERTIFIED AND RECITED that all acts, conditions, and things required by the Constitution and laws of the State of Minnesota to be done, to have happened, and to be performed pursuant to and in the issuance of this Note have been done, have happened, and have been performed in regular and due form, time, and manner as required by law; and that this Note, together with all other indebtedness of the City outstanding on the date hereof and on the date of its actual issuance and delivery, does not cause the indebtedness of the City to exceed any constitutional, statutory or charter limitation thereon. 36 183247v10 IN WITNESS WHEREOF, the City of Lakeville has caused this Note to be executed by the manual signatures of its Mayor and City Clerk of the City and has caused this Note to be issued dated 2015. Matt Little, Mayor 37 18324700 Charlene Friedges, City Clerk CERTIFICATION OF REGISTRATION It is hereby certified that the foregoing Note, as originally issued on , 2015 was on said date registered in the name of Scannell Properties, LLC, a Minnesota Limited Liability Company, and that at the request of the Registered Owner of this Note, the undersigned has this day registered the Note in the name of such Registered Owner, as indicated in the registration blank below, on the books kept by the undersigned for such purposes. NAME AND ADDRESS OF DATE OF REGISTERED OWNER REGISTRATION Scannell Properties #247, LLC 800E. 96"' Street, Ste. 175 Indianapolis, IN 46240 , 2015 38 183247v10 SIGNATURE OF CITY ADMINISTRATOR SCHEDULE C DESCRIPTION OF ELIGIBLE SITE MINIMUM IMPROVEMENTS PLEASE PROVIDE LIST OF ELIGIBLE PROJECT COSTS And any other expenditure eligible to be reimbursed with tax increment revenues and approved by the City 39 183247v10