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TAX INCREMENT PLEDGE AGREEMENT • This Tax Increment Pledge Agreement (the "Agreement") is dated as of July 1, 1999; is by and between the City of Elk River, Minnesota (the "City") , and the Elk River Economic Development Authority (the "EDA") ; and provides as follows: WHEREAS, at the request of the EDA, the City Council has adopted or is expected to adopt a resolution (the "Bond Resolution") awarding the sale of the City' s $5, 725, 000 General Obligation Bonds, Series 1999A, dated July 1, 1999 (the "Bonds") , $630, 000 of the principal amount of which (as defined in the Bond Resolution, the "TIF Bonds") are to assist in financing certain public development costs within Development District No. 1 (the "Project") of the EDA; and WHEREAS, to provide funds sufficient for the timely payment of the debt service on the TIF Bonds, it is necessary for the EDA and the City to enter into this Agreement; and WHEREAS, each capitalized term which is used but not otherwise defined in this Agreement shall have the meaning given to that term in the Bond Resolution: NOW, THEREFORE, in consideration of the covenants and • agreements hereof between the City and the EDA, and pursuant to Minnesota Statutes, Section 469 . 178, Subdivision 2, the City and the EDA hereby agree as follows: 1. In order to pay the principal of and interest on the TIF Bonds, when due, the EDA hereby pledges to the City, for deposit in the Debt Service Account established by the Bond Resolution for the payment of the TIF Bonds, and the EDA shall pay to the City, Available Tax Increments (hereinafter defined) ; provided that the amounts thereof payable hereunder shall not in any year exceed amounts necessary, together with other funds available for such purposes in said Debt Service Account, to pay the principal of and interest on the TIF Bonds, when due. As used in this Agreement, "Available Tax Increments" means tax increments that are derived by the EDA from Tax Increment Financing District No. 19 within the Project. The foregoing pledges and descriptions of Available Tax Increments are further made subject and junior in lien to all unpaid pledges or other outstanding commitments heretofore made for such tax increments. In discharging its obligations under this Agreement, the EDA expressly reserves the rights (1) to pledge or otherwise dedicate the Available Tax Increments to purposes other than the discharge of the obligations described above upon a finding by the EDA that the estimated Available Tax Increments then remaining will be sufficient from year to year • 1059219.1