6.1.A. SR 05-16-2011El REQUEST FOR ACTION
.....
River
TO ITEM NUMBER
Ci Council 6.1.A.
AGENDA SECTION MEETING DATE PREPARED BY
Community Development May 16, 2011 Catherine Mehelich, Director of
Economic Develo ment
ITEM DESCRIPTION REVIEWED By
Consider Loan Agreement for Elk River Pizza Ranch Project Tim Simon, Finance Director
REVIEWED BY
ACTION REQUESTED
The City Council is asked to approve the business subsidy provision of the attached Loan Agreement for
the Elk River Pizza Ranch project. This is in accordance with the MN Business Subsidy Law, in which the
elected body has final approval of any business subsidies.
BACKGROUND/DISCUSSION
Attached are the Apri14, 2011 and May 2, 2011 HRA memos which provide background on the request.
At its May meeting, the HRA approved a resolution authorizing the HRA interfund loan and providing
up to $90,000 loan to the project with the conditions outlined in the attached loan agreement.
Business Subsidy Provision
The Spending Plan adopted by the City requires the assistance is subject to the "Business Subsidy Law"
and that the recipient create or retain at least 1 full-time equivalent job (including construction jobs) for
every $25,000 of assistance provided.
The applicant is proposing to create 4 full time jobs ($25,000-$70,000 salary) in addition to approximately
70 part-time jobs at wages $7-$11 /hr. The Section 6 Business Subsidies Act of the attached Loan
Agreement requires the creation of 4 full-time jobs at a minimum of $12 per hour wage within 2 years of
occupancy. The original loan agreement that went to the HRA was amended to reflect the commercial-
service nature of the jobs and wages, from $15/hour wage.
In addition, the Loan Agreement requires that construction commence before July 1, 2011 as required by
the Spending Plan and statute authorizing use of the TIF funds.
FINANCIAL IMPACT
Statutory deadline for commencement of construction and use of funds is June 30, 2011 unless otherwise
extended this legislative session. If no requests axe approved prior to the deadline, the HRA would be
required to use the TIF 16 funds to reimburse the HRA $39,671.78 balance due, decertify the TIF
district, and distribute the balance and future taxes to the city, county and school district.
RECOMMENDATION
The HRA is recommending the City Council's approval of the business subsidy provision of the Loan
Agreement. The addition of the restaurant is anticipated to boost the economic activity of the
Freeport Street and Highway 169 retail area, which may not otherwise occur without the assistance.
N:\Public Bodies\Ciry Council\Council RCA\Agenda Packet\OS-16-2011\5.16.11 CC T'IF16 Action Requested.doc
ATTACHMENTS
^ HRA Staff Reports -May 2, 2011 and Apri14, 2011
^ Loan Agreement between the GRM of Minnesota, LLC and the HRA of Elk River
Action Motion by Second by Vote
Follow Up
N:\Public Bodies\City Council\Council RCA\Agenda Packet\05-16-2011\5.16.11 CC TIF16 Action Requested.doc
.''~ ~/
Elk REQUEST FOR ACTION
River
TO ITEM NUMBER
Housin & Redevelo ment Authori
AGENDA SECTION MEETING DATE PREPARED BY
April 4, 2011 Catherine Mehelich, Director of
Economic Develo ment
ITEM DESCRIPTION REVIEWED B)/
Consider TIF 16 Fund Request -Elk River Pizza Ranch
REVIEWED BY
ACTION REQUESTED
Consider TIF 16 Fund Request from Applicant Robert McDonald, Elk River Pizza Ranch.
If approved, a Development Agreement will be formalized between the developer and HRA to describe
the project and specify the assistance to be provided and conditions, including job and wage goals. If the
amount and structure of the assistance meets statutory business subsidy thresholds, the City Council may
be required to approve the agreement.
BACKGROUND/DISCUSSION
In June 2010 the HRA and City Council amended the HRA's TIF District No. 16 (King & Main) and
adopted a Spending Plan, under new legislation that allowed the temporary utilization of existing TIF
revenues in order to stimulate construction or substantial rehabilitation of private development and
stimulate job creation. The attached Spending Plan adopted by the City Council identifies the statutory
requirements as well as the City's criteria for use of the funds.
Proposed Project Investment and Funding Request
The Spending Plan authorizes the HRA to consider funding requests to assist the new construction or
substantial rehabilitation for the following desired uses: 1) outpatient medical clinics; 2) Class I
restaurants; 3) green manufacturing or other renewable energy facilities, and 4) general light industrial or
manufacturing.
Staff recently received a request for funds from Elk River Pizza Ranch which is proposing acquisition and
rehabilitation of the former Movie Gallery building located 19141 Freeport St. NW, Elk River. The
proposed project is considered a Class I restaurant in which food is served to the customer at a table.
Total estimated investment in the proposed project is $1,590,850. Proposed construction costs are
estimated at $559,150. The applicant has requested HRA funds in the amount of $90,000 to be provided
as a grant to pay for $72,000 WAC/SAC and purchase of adjacent land necessary for parking.
Proposed Job Creation
The Spending Plan requires the assistance is subject to the "Business Subsidy Law" and that the recipient
create or retain at least 1 full-time equivalent job (including construction jobs) for every $25,000 of
assistance provided.
The applicant is proposing to create 4 full time jobs ($25,000-$70,000 salary) in addition to approximately
70 part-time jobs at wages $7-$11 /hr.
N:\Departments\Community Development\Economic Development\TIF\TIF16\Amendment\4.4.11 I IRA TIF16 Action Requested.doc
Proposed Timeline
The Spending Plan requires that construction or substantial rehabilitation must commence before July 1,
2011 and would not have commenced by such date without the assistance.
Following HRA action on the funding request, the applicant proposes to proceed with purchase
agreement, construction plans and Planning and Council approvals for construction to start end of May
2011 and a project opening Fall 2011. The applicant has submitted a letter from its lender indicating
approved financing for up to a $1,500,000 project. The applicant's proposed project cost is in the
amount of $1,590,850.
FINANCIAL IMPACT
The TIF 16 Fund has a current cash balance of $43,994 and is expected to receive $60,503 in tax revenues
generated from the TIF 16 King & Main project by the end of 2011.
RECOMMENDATION
The request meets the minimum requirements as established by statute, the HRA and City Council in the
attached Spending Plan. Staff recommends the HRA consider the following options regarding the
request:
• Approve the request - $90,000 grant to assist SAC/WAC and adjacent land costs. The City's finance
advisor, Mark Ruff at Ehlers & Associates has reviewed the application and advised that there appears
to be sufficient cash flow to support a loan to the project rather than need for a grant.
Authorize Staff to negotiate aloes-interest loan to the project tied to the actual SAC/WAC fees. This
option would ensure the HRA would not be providing a "competitive advantage" to the restaurant as
compared to recently assisted similar projects (e.g. Pompeii Pizza EDA Micro Loan of $75,000). In
addition the Micro Loan program is not available to commercial businesses located outside the
downtown, therefore the applicant is still receiving benefit that would otherwise not be available but
for this TIF 16 Spending Plan.
Deny the request if it does not meet the City's intentions for the funds. The HRA is not under
obligation to approve any and/or all requests). Statutory deadline fox commencement of
construction and use of funds is June 30, 2011 unless otherwise extended this legislative session. If
no requests axe approved prior to the deadline, the HRA would be required to use the TIF 16 funds
to reimburse the HRA $39,671.78 balance due, decertify the TIF district, and distribute the balance
and future taxes to the city, county and school district.
ATTACHMENTS
^ Ciry of Elk River Adopted Spending Plan fox TIF District No. 16
^ Proposal Request and Business Plan -Elk River Pizza Ranch, Robert McDonald
Action Motion by Second by Vote
Follow Up
N:\Depaxtments\Community Development\Economic Development\TIF\TIF16\Amendment\4.4.11 HRA TIF16 Action Requested.doc
REQUEST FOR ACTION
ver
TO ITEM NUMBER
Housin & Redevelo went Authori 5.
AGENDA SECTION MEETING DATE PREPARED BY
May 2, 2011 Catherine Mehelich, Director of
Economic Develo ment
ITEM DESCRIPTION REVIEWED By
Consider HRA Resolution Authorizing an Interfund Loan fox Tim Simon, Finance Director
Advance of Certain Costs in Connection with TIF 16 Spending REVIEWED BY
Plan and Authorizing a Loan to Elk River Pizza Ranch Project
ACTION REQUESTED
The HRA is asked to consider approval of the attached Resolution Authorizing an Interfund Loan for
Advance of Certain Costs in Connection with TIF 16 Spending Plan and Authorizing a Loan to Elk River
Pizza Ranch Project. The resolution provides for the authorization of an interfund loan between the
HRA general fund and the TIF 16 fund in order to provide the $90,000 loan to the project. In addition
the resolution authorizes the HRA President, Vice President and Executive Director to execute the Loan
Agreement in substantially the form attached.
Following the HRA's approval, the City Council will consider approval of the final Loan Agreement as
required under the MN Business Subsidy Law at its May 9, 2011 meeting.
BACKGROUND/DISCUSSION
In June 2010 the HRA and City Council amended the HRA's TIF District No. 16 (King & Main) and
adopted a Spending Plan, under new legislation that allowed the temporary utilization of existing TIF
revenues in order to stimulate construction or substantial rehabilitation of private development and
stimulate job creation. The Spending Plan adopted by the City Council identified the statutory
requirements as well as the City's criteria for use of the funds.
At its April 2011 meeting the HRA considered an application request from Robert McDonald, Elk River
Pizza Ranch. The project includes the acquisition and substantial rehabilitation of the former Movie
Gallery building located at 19141 Freeport St. NW, Elk River. The proposed project is considered a Class
I restaurant in which food is served to the customer at a table. Total estimated private investment in the
proposed project is $1,500,000. Proposed construction rehabilitation costs are estimated at $559,150.
The application was found to meet the minimum requirements as established by statute, the HRA and
City Council in the Spending Plan. The HRA directed staff to work with the applicant on aloes-interest
loan from the TIF 16 Fund to assist the project.
Loan Agreement
The Loan Agreement and Promissory Note describes the project and specifies the assistance to be
provided and conditions, including job and wage goals under the business subsidy requirements.
A loan up to $90,000 from TIF 16 is proposed to be provided at a fixed interest rate of 2%, with a ~0-
year amortization and 5-year balloon payment. These terms are consistent with the EDA's Micro Loan
Fund. The loan is secured by a Mortgage and Personal Guarantee of the owners.
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Requested.doc
The Spending Plan adopted by the City requires the assistance is subject to the "Business Subsidy Law"
and that the recipient create or retain at least 1 full-time equivalent job (including construction jobs) for
every $25,000 of assistance provided. The applicant has proposed to create 4 full time jobs in addition to
approximately 70 part-time jobs. The Loan Agreement requires the creation of a minimum of 4 full-time
equivalent positions at $15 per hour wage within 2-years of project completion.
The Loan Agreement requires that construction commence before July 1, 2011 as required by the
Spending Plan and statute authorizing use of the TIF funds.
TIF 16 Interfund Loan
The TIF 16 Fund has a current cash balance of $44,053 and is expected to receive $60,503 in tax revenues
generated from the TIF 16 King & Main project by the end of 2011. Therefore in order to fund the
proposed $90,000 loan to the project at this tune, the HRA will need to fund the loan from its current
cash balance and establish an Interfund Loan that provides for the HRA's reimbursement from the
anticipated TIF 16 proceeds by the end of 2011.
FINANCIAL IMPACT
Statutory deadline for commencement of construction and use of funds is June 30, 2011 unless otherwise
extended this legislative session. If no requests are approved prior to the deadline, the HRA would be
required to use the TIF 16 funds to reimburse the HRA $39,671.78 balance due (from the original TIF 16
Interfund Loan), decertify the TIF district, and distribute the balance and future taxes to the city, county
and school district.
Loan repayments will be first directed to reimburse the HRA Interfund Loans and then upon
decertification of the TIF District (anticipated in 2012) to the county for redistribution to the respective
taxing jurisdictions through the life of the loan.
RECOMMENDATION
Staff recommends approval of the HRA Resolution.
ATTACHMENTS
^ Resolution Authorizing an Interfund Loan for Advance of Certain Costs in Connection with
TIF 16 Spending Plan and Authorizing a Loan to Elk River Pizza Ranch Project
^ Loan Agreement DRAFT dated Apri128, 2011
^ Promissory Note DRAFT dated April. 28, 2011
ACtlOtl Motion by Second by Vote
FOllow Up
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Requested.doc
Apri128, 2011 Draft
LOAN AGREEMENT
THIS LOAN AGREEMENT ("Agreement") is made effective as of May _,
2011, by and between GRM OF MINNESOTA, LLC, a Minnesota limited liability
company, ("Borrower") and the HOUSING AND REDEVELOPMENT AUTHORITY
OF THE CITY OF ELK RIVER, MINNESOTA, a public body corporate and politic of
the State of Minnesota ("Lender").
RECITALS
A. Borrower has applied to Lender for a construction and term mortgage loan
on the Loan Property (as hereinafter defined) in the principal amount of $90,000.00.
B. Lender is willing to make such mortgage loan to Borrower in the principal
amount of $90,000.00, subject to all of the terms and conditions of this Agreement.
C. Contemporaneously with the execution hereof, Borrower is executing and
delivering to Lender the following security documents:
(i) A Promissory Note ("Note") effective as of the date herewith made
by Borrower and payable to the order of Lender, in the original principal amount
of $90,000.00.
(ii) A Mortgage and Assignment of Rents and Security Agreement and
Fixture Financing Statement securing the Note ("Mortgage"). The Mortgage is of
even date herewith, is executed by Borrower and Robert McDonald, as
mortgagor, in favor of Lender, as mortgagee, and covers property therein
described situated in Sherburne County, Minnesota (the "Loan Property").
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
contained, it is hereby agreed as follows:
1. Amount and Purpose of Loan. Borrower agrees to take and Lender agrees
to make a mortgage loan in the principal amount of $90,000.00 (the "Loan") to be
advanced in a single disbursement as hereinafter provided, the Loan to be evidenced by
the Note and secured by the Mortgage and any other security document required under
this Agreement. The sole source of the Loan is available tax increments generated within
the Lender's Tax Increment Financing District No. 16 (A Redevelopment District) and
authorized to be spent in accordance with the spending plan adopted by the Lender on
June 7, 2010 and the City Council of the City of Elk River, Minnesota (the "City") on
June 21, 2010 (the "Spending Plan"), pursuant to Minnesota Statutes, Section 469.176
Subd. 4m (the "Temporary Authority").
385593v3 JSB EL185-12
2. Construction of Improvements. For the purposes of this Agreement, the
term "Loan Property" means the real estate described in the Mortgage together with all
improvements now located or hereafter placed thereon.
Borrower agrees to improve as a part of the Loan Property a project ("Project")
consisting generally of substantial renovations to and equipping of the building located at
19141 Freeport St NW, Elk River, Minnesota, in accordance with plans and
specifications which have been provided to and approved by City building department
(the "Plans and Specifications") to be operated by the Borrower as Class I restaurant of
approximately 220 seats. The improvements to and equipping of the Loan Property
contemplated by the Plans and Specifications, as the same may be changed with the
approval of Lender, are herein referred to as the "Improvements." Borrower covenants
that when completed, the Improvements shall comply with all applicable restrictions,
conditions, codes, ordinances, regulations and laws of the City of Elk River, Minnesota
("City") and all other governmental bodies having jurisdiction over the Loan Property,
including, without limitation, the Americans with Disabilities Act and those related to
environmental protection. Borrower shall commence construction of the Improvements
not later than July 1, 2011. For purposes of this Agreement, the term "commence" means
the making of visible improvements, including without limitation [demolition of interior
walls, paving for parking, and subsurface excavation but excluding mere surface
grading]. Borrower represents he would not construct the Improvements on the Loan
Property but for the financial assistance being provided by the Lender hereunder, and
more specifically, would not commence such construction by July 1, 2011 without the
assistance provided under this Agreement and the Spending Plan. Borrower agrees to
carry on continuously, diligently and with reasonable dispatch the construction of the
Improvements to full and final completion.
3. Title Insurance. Commercial Partners Title, LLC ("Title"), is designated
as the title insurer with respect to this Agreement. Title will insure Lender against loss or
damage on account of mechanic's liens upon or unmarketability of the title to the Loan
Property, and will insure that the Mortgage constitutes a second lien upon Borrower's
interest in the Loan Property as contemplated by this Agreement, subject only to a
mortgage made or granted by way of security for, and only for, the purpose of obtaining
construction, interim or permanent financing necessary to enable Borrower to construct
the Improvements or any component thereof. Borrower agrees to promptly and fully
observe and comply with the reasonable requirements of Title and Lender with respect to
the title, the Mortgage, disbursements of funds and such other reasonable requirements as
Title may make.
4. Documents to be Delivered. Borrower covenants and agrees to
immediately cause the compliance with the following conditions:
(a) Note. Deliver to Lender the Note.
(b) Mort~a~e. Deliver to Lender the Mortgage, together with evidence
that the Mortgage has been or will be duly filed for record.
385593v3 JSB EL185-12
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(c) Title Insurance Policy. Deliver to Lender a mortgagee's title
insurance policy ("Title Policy"), from Title issued to Lender in the amount of
$90,000.00 with respect to the Mortgage and insuring that the Mortgage is a
second lien on the Loan Property, subject only to a mortgage made or granted by
way of security for, and only for, the purpose of obtaining construction, interim or
permanent financing necessary to enable Borrower to construct the Improvements
or any component thereof, free and clear of mechanic's liens, materialmen's liens,
taxes, special assessments, rights of parties in possession, other than the rights of
tenants as tenants only under existing leases, and questions of survey and subject
only to exceptions approved in writing by Lender.
(d) Organizational Documents and Resolutions. Deliver to Lender
copies of the (i) articles of organization for Borrower certified by the Minnesota
Secretary of State, (ii) operating agreement and member control agreement for
Borrower, (iii) a certificate of good standing for Borrower issued by the
Minnesota Secretary of State; and (iv) a certified copy of resolutions of Borrower
authorizing the execution and delivery of this Agreement, the Note, the Mortgage,
and any other document to be executed by Borrower pursuant to this Agreement.
(e) Insurance. Deliver to Lender (i) a certificate or policy for all
insurance required, under the terms hereof or of the Mortgage, to be maintained
by Borrower, and (ii) evidence that no part of the Loan Property is located in an
area designated as being a flood plain or flood hazard area as defined by the Flood
Hazard Boundary Map published by the Federal Insurance Administration.
(f) Compliance With Laws, Etc. Deliver to Lender such evidence as
Lender may require as to the compliance of the Loan Property and the
Improvements with (i) all applicable laws, codes, rules, regulations and
ordinances, including, without limitation, those relative to environmental
protection, protection of wetlands, building and zoning matters and the Americans
with Disabilities Act, and (ii) the requirements of any restrictive covenants,
conditions and restrictions; conditional use permit and/or planned unit
development applicable to the Loan Property.
(g) Hazardous Substances. Deliver to Lender evidence acceptable to
Lender, that (i) the Loan Property has not been used as a hazardous waste storage
facility or burial site, (ii) the soil is free from hazardous waste, hazardous
substances, pollutants and contaminants, and (iii) no hazardous waste, hazardous
substance, pollutant or contaminant has been used in the construction or use of
any building or other improvement on the Loan Property. For purposes of this
subparagraph, the terms "hazardous waste," "hazardous substances," "pollutants"
and "contaminants" shall include, but not be limited to, polychlorinated biphenyls
(PCBs), asbestos, petroleum products and any other chemical or substance
determined to be a hazard to human health or the environment.
385593v3 JSB EL185-12
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(h) Indemnity. Deliver to Title any indemnity agreement in favor of
Title in the form required by Title in order for Title to issue the title insurance
policies referred to above.
(i) Project Cost and Total Equity Contribution Certificates. Deliver to
Lender a sworn project cost certificate ("Project Cost Certificate"), in a form
acceptable to Lender, verified on oath by the [sole member of] Borrower,
showing the itemized breakdown of the total cost of the Improvements, including,
without limitation, the cost of constructing the Improvements, special
assessments, soft costs and all other costs and charges to be paid from the Loan or
necessary to complete the .Improvements, and a Certificate of Total Equity
Contribution showing the portion of all such costs and charges paid to the date of
the Project Cost Certificate. Borrower shall deliver to Lender lien waivers,
receipts for payment and other evidence of payment acceptable to Lender with
respect to any such portion of costs and charges incurred to the date of the Project
Cost Certificate.
(j) Sworn Construction Statement. Deliver to Lender a Sworn
Construction Statement acceptable to Lender completed and executed by
Borrower and Borrower's general contractor which identifies all subcontractors
and suppliers having a contract with the Borrower or Borrower's contractor and
the amount of the contract between Borrower or Borrower's contractor and each
subcontractor or supplier with respect to the construction of the Improvements.
(k) Personal Guaranty. Deliver to Lender the Personal Guaranty,
executed by Robert G. McDonald, Denise A. McDonald and Gerald H. McDonald
(the "Guarantors") guaranteeing the obligations of the Borrower under the Note.
(1) Project Financing. Deliver to Lender evidence the Borrower has
closed on the construction loan or loans providing financing for the construction
of the Improvements in an amount sufficient, together with equity contributed by
the Borrower as shown in the Project Cost Certificate, to pay all costs shown in
the Sworn Construction Statement.
(m) Expend Funds; Lien Waivers. Deliver evidence acceptable to
Lender that Borrower has completed the Improvements not later than December
31, 2011 and paid all costs referred to in the Project Cost Certificate, and provide
an original written lien waiver from each contractor, subcontractor and supplier
who performed work or supplied materials which were paid for out of Borrower's
Total Equity Contribution.
Lender may waive any of the above requirements in its sole discretion.
5. Disbursement of Loan. Upon (a) receipt by Lender of the items required
pursuant to paragraph 4(a) - (1) above, (b) issuance by the City of a building permit for
the Improvements, (c) receipt by Lender of a signed settlement statement in connection
385593v3 JSB EL185-12
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with closing on the acquisition of the Loan Property, including the land necessary for all
required parking, and (d) determination by Lender that construction of the Improvements
has commenced, Lender agrees to disburse the Loan to Borrower, provided no event of
default exists under this Agreement or the Mortgage.
6. Business Subsidies Act.
(a) In order to satisfy the provisions of Minnesota Statutes, Sections
116J.993 to 116J.995 (the "Business Subsidies Act"), Borrower acknowledges
and agrees that the amount of the "Business Subsidy" granted to the Borrower
under this Agreement is the amount of the Loan, and that the Business Subsidy is
needed because the cost of the Improvements is prohibitive for the Borrower to
undertake without the Business Subsidy. The public purpose of the Business
Subsidy is to develop new jobs within the City and better utilize an existing
property in the City. The Borrower agrees that it will meet the following goals
(the "Goals"): it will create 4 new full time equivalent positions at the Loan
Property at a wage of at least $12.00 per hour within two years of the date which
is the earlier of (i) the date the Borrower completes the Improvements in
accordance with the Plans and Specifications, or (ii) the date the Borrower
receives a certificate of occupancy for the Loan Property and the Improvements
(the "Benefit Date").
(b) If the Goals are not met, the Borrower agrees to immediately repay
all or a part of the Business Subsidy to the Lender on a pro rata basis, plus interest
("Interest") set at the greater of 2% or the implicit price deflator defined in
Minnesota Statutes, Section 275.70, Subdivision 2, accruing from and after the
Benefit Date, compounded semiannually. If the Goals are met in part, the
Borrower will repay a portion of the Business Subsidy (plus Interest) determined
by multiplying the Business Subsidy by a fraction, the numerator of which is the
number of jobs in the Goals which were not created at the wage level set forth
above and the denominator of which is 4 (i.e. number of jobs set forth in the
Goals).
(c) To the extent required by the Minnesota Department of
Employment and Economic Development, the Borrower agrees to (i) report its
progress on achieving the Goals to the Lender until the later of the date the Goals
are met or two years from the Benefit Date, or, if the Goals are not met, until the
date the Business Subsidy is repaid, (ii) include in the report the information
required in Section 116J.994, Subdivision 7 of the Business Subsidies Act on
forms developed by the Minnesota Department of Employment and Economic
Development, and (iii) send completed reports to the Lender. The Lender shall
have the right to inspect the Borrower's books and records to verify compliance
with the requirements of this Section 6. The Borrower agrees to file these reports
no later than March 1 of each year commencing March 1, 2012, and within 30
days after the deadline for meeting the Goals. The Lender agrees that if it does
not receive the reports, it will mail the Borrower a warning within one week of the
385593v3 JSB EL185-12
-5-
required filing date. If within 14 days of the post marked date of the warning the
reports are not made, the Borrower agrees to pay to the Lender a penalty of $100
for each subsequent day until the report is filed up to a maximum of $1,000.
(d) The Borrower agrees to continue operations of its Class I
restaurant facility in the City for at least five (5) years after the Benefit Date.
(e) The Borrower does not expect to receive any financial assistance in
connection with its activities at the facility located on the Loan Property from any
other state or local government entity.
(f) There is no parent corporation of the Borrower.
(g) The Borrower certifies that it does not appear on the Minnesota
Department of Employment and Economic Development's list of recipients that
have failed to meet the terms of a business subsidy agreement.
7. Access to Loan Property. Lender and its respective representatives shall
have at all reasonable times the right to enter and have free access to the Loan Property
and the right to inspect all work done, labor performed and material furnished in
connection therewith.
8. Books and Records. Borrower agrees to maintain accurate and complete
books, accounts and records in regard to the Loan Property in a manner reasonably
acceptable to Lender. Lender and its representatives shall have the right to inspect,
examine and copy all such books and records of Borrower and Borrower shall, at
Lender's request, furnish such information as Lender may reasonably demand.
9. Encumbrances and Transfer. Other than a mortgage made or granted by
way of security for, and only for, the purpose of obtaining construction, interim or
permanent financing necessary to enable Borrower to construct the Improvements or any
component thereof, Borrower agrees not to sell, transfer, lease or convey the Loan
Property or any part thereof, or any interest therein, or encumber the Loan Property or
any part thereof, in any manner, without the prior written consent of Lender which
consent may be granted or withheld in the sole discretion of Lender. This requirement
shall apply to each and every sale, transfer, lease or conveyance, whether voluntary or
involuntary and whether or not Lender has consented to any prior sale, transfer lease or
conveyance. The Loan shall be immediately due and payable upon any sale, transfer,
lease, conveyance, or encumbrance of the Loan Property or any part thereof, or any
interest therein, in any manner, without the prior written consent of Lender.
10. Time of Essence. Time is of the essence in the performance of this
Agreement. If Borrower fails to commence construction of the Improvements prior to
July 1, 2011 or to submit the items required by Section 5 prior to December 31, 2011, no
Loan proceeds will be disbursed.
385593v3 JSB EL185-12
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11. Assi ng_ability. Borrower shall not assign this Agreement or all or any part
of any Advances to be made hereunder without written consent of Lender.
12. Miscellaneous Covenants of Borrower. Borrower covenants and agrees
with Lender that, without costs to Lender, Borrower will:
(a) Performance of Conditions. Promptly keep, perform and comply with all
of the terms, covenants and conditions to be kept and performed by
Borrower, as required by the City and any other governmental body
having jurisdiction over the Loan Property as a condition of platting,
rezoning or developing the Loan Property; keep unimpaired the rights of
Borrower under any permit or agreement issued or made by the City or
other governmental body having jurisdiction over the Loan Property and
the Construction Contracts and any other contracts obtained or held by
Borrower in connection with the construction or operation of the
Improvements; and to enforce the prompt performance of all of the terms,
covenants and conditions to be kept and performed by the City or other
governmental body having jurisdiction over the Loan Property,
respectively, under any permits or agreements issued or made by the City
or such other governmental bodies, or by the architect or other design
professional, the general contractor and any other contractors under all
contracts obtained or held by Borrower in connection with construction or
operation of the Improvements.
(b) Amendment. Etc. of Documents. Not amend, cancel, terminate,
supplement or waive any of the material terms, covenants and conditions
of any permit or agreement issued or made by the City or any other
governmental body having jurisdiction over the Loan Property, or any
other contracts obtained or held by Borrower in connection with the
construction of the Improvements or operation of the Loan Property or any
contracts, documents or agreements referred to herein without the prior
written approval of Lender. Borrower will provide to Lender complete
documentation concerning any change made to the Improvements.
(c) Performance of Note, Mortgage, Etc. Without limiting the foregoing,
keep and perform all of the terms, covenants, conditions and requirements
of the Note, the Mortgage, and this Agreement.
(d) Insurance. During the term of the Mortgage, Borrower shall procure and
maintain or cause to be procured and maintained at its sole expense
builder's risk insurance, casualty insurance, public liability insurance and
such other types of insurance as are reasonably required by Lender from
time to time, including, without limitation, the coverages expressly
required by the Mortgage, insuring Lender and Borrower with coverages,
in amounts and with companies satisfactory to Lender. The policy or
385593v3 JSB EL185-12
-7-
policies or duly executed certificate or certificates for such insurance and
renewals or replacements thereof shall be deposited with Lender.
(e) Pay Charges. Immediately pay all loan charges including, but not limited
to, title insurance fees, mortgage registration taxes and filing fees of the
Mortgage and any other instruments required under this Agreement,
except to the extent otherwise payable by Lender.
(f) Pay Certain Costs. Immediately after written demand from Lender and
without regard to whether or not any of the Loan proceeds have been
advanced under this Agreement, pay or cause to be paid from time to time
if requested by Lender, costs referred to in the Project Cost Certificate in
an amount equal to the costs referred to therein in excess of the Loan
proceeds remaining available to be advanced to pay such costs, and
furnish to Lender proof of payment thereof satisfactory to Lender and
Title.
(g) Codes of Plans, Contracts, etc. Furnish Lender from time to time as
reasonably requested by Lender, copies of the Plans and Specifications,
contracts and any other specifications and contracts relating to the
Improvements together with estimated costs of such Improvements.
13. Warranties. Borrower represents and warrants to Lender the following:
(a) The Borrower is a limited liability company duly formed, validly
existing and in good standing under the laws of the State of Minnesota.
(b) The making and performance of this Agreement and the execution
and delivery of the Note, the Mortgage and any other instrument required
hereunder are within the powers of the Borrower and have been duly
authorized by all necessary action of the governing body of the Borrower.
This Agreement and the Note, the Mortgage and any other instruments
required hereunder have been duly executed and delivered and are the legal,
valid and binding obligations of the Borrower enforceable in accordance
with their respective terms.
(c) No litigation, tax claims or governmental proceedings are pending
or threatened against the Borrower or the Loan Property, and no judgment or
order of any court or administrative agency is outstanding against the
Borrower or the Loan Property which would have a materially adverse effect
on Borrower or the Loan Property.
(d) Borrower has filed all tax returns (federal and state) required to be
filed for all prior years and paid all taxes shown thereon to be due, including
interest and penalties. Borrower will file all such returns and pay all such
taxes for the current and future years.
385593v3 JSB EL185-12
-g-
(e) All information, financial or other, which has been submitted by
Borrower and Guarantors in connection with the Loan is true, accurate and
complete in all material respects.
14. Indemnification. Borrower agrees to indemnify Lender and save it
harmless against all loss, liability, expense, or damages including but not limited to
attorneys fees, which may arise by reason of the assertion of any lien against the Loan
Property.
15. Defaults. Each of the following shall constitute an Event of Default:
(a) Borrower abandons the Loan Property, work on construction of the
Improvements is halted or the Improvements are not constructed in accordance
with this Agreement.
(b) Bankruptcy, reorganization, assignment, insolvency or liquidation
proceedings, or other proceedings for relief under any applicable bankruptcy law
or other law for relief of debtors are instituted by or against Borrower or
Guarantors and, if such proceedings are instituted against Borrower or
Guarantors, an order, judgment or decree, without the consent of Borrower or
Guarantors appointing a trustee or receiver for Borrower or any part of its or their
property or approving a petition under the bankruptcy laws of the United States or
any similar laws of any state or other competent jurisdiction, shall have remained
in force undischarged or unstayed for a period of 30 days.
(c) Any judgment, attachment, garnishment or other similar process is
entered against Borrower or against any property or assets of Borrower and is not
released, satisfied or discharged or bonded to Lender's satisfaction within 30 days
of entry.
(d) Borrower fails to commence or complete construction of the
Improvements within the time designated in this Agreement or Borrower fails to
submit the items required by Section 5 prior to December 31, 2011.
(e) Any of the terms, covenants or conditions of any permit or other
agreement issued or made by the City or other governmental body having
jurisdiction over the Loan Property, including, but not limited to, those relating to
the cost of or time for installation of the Improvements, are not complied with
within the time required thereby or are terminated or modified by the City or such
other governmental body and Borrower has not taken the necessary steps to
correct or cure the same within 30 days after written notice is given by Lender.
(f) Any mechanic's or material supplier's lien is filed, against the
Loan Property and is not released, satisfied or discharged or bonded to Lender's
385593v3 JSB EL185-12
-9-
satisfaction, subject, however, to Borrower's right to contest the same in
accordance with the provisions of the Mortgage.
(g) A transfer which violates by Section 9 hereof occurs.
(h) Borrower (i) fails to pay any amount due under this Agreement, the
Note or the Mortgage when due; or (ii) fails to perform any other obligation to be
performed under this Agreement, the Note, the Mortgage or any other document
executed by Borrower pursuant to this Agreement and such failure continues
beyond any applicable cure period.
(i) Any representation or warranty by Borrower contained herein or in
the Note, the Mortgage or any other instrument required hereunder is false or
untrue in any material respect when made.
(j) Borrower defaults in the payment or performance of anything by it
to be paid or performed under any note, mortgage or other agreement now or
hereafter made by Borrower in favor of or with Lender or otherwise now or
hereafter held by Lender and as to defaults other than in the payment of a sum
when due, the continuance thereof beyond any notice and/or cure period
contained therein.
Upon the occurrence of an Event of Default, Lender, at its option, shall, in addition to any
other remedies which it might be entitled to by law, have the right to:
(1) To refrain from making advances under this Agreement;
(2) To enter into possession of the Loan Property and perform any and all
work and labor necessary to complete the Improvements substantially as
required under this Agreement and to do all things necessary or incidental
thereto;
(3) To perform such other acts or deeds which reasonably maybe necessary to
cure any default existing under this Agreement, and to this end, it is
hereby agreed as follows:
(i) All sums expended by Lender in effectuating its rights under
Subparagraphs (2) and (3) of this Paragraph shall be deemed to
have been advanced under this Agreement and to be secured by the
Mortgage and any other security document required under this
Agreement as security for the Loan.
(ii) Borrower hereby constitutes and appoints Lender its true and
lawful attorney-in-fact with full power of substitution either in the
name of Lender or in the name of Borrower or in the name of both,
for the following purposes: (a) to complete the Improvements or
385593v3 JSB EL185-12
-1~-
cause the same to be completed; to use the plans and
specifications; to make such additions, changes and corrections in
the plans and specifications as Lender reasonably shall deem
necessary or desirable; to collect and use any funds of Borrower; to
use any funds which may remain unadvanced under this
Agreement; to employ such contractors, subcontractors, agents,
design professionals and inspectors and enter into such contracts
and arrangements as Lender reasonably deems necessary for such
purposes; to pay, settle or compromise all existing bills and claims
which may be liens against the Loan Property or as may be
necessary or reasonably desirable for the completion of the
Improvements or clearance of title; to execute all applications and
certificates in the name of Borrower; to prosecute and defend all
actions or proceedings in connection with the construction of the
Improvements on, or any other matter relating to, the Loan
Property and do any and every act which Borrower might do in its
own behalf; (b) to enforce by any means that Lender then
reasonably deems necessary or advisable, all of the terms,
covenants and conditions of any permit or agreement issued by the
City or any other governmental body having jurisdiction over the
Loan Property or the construction contracts or any other contracts
obtained or held by Borrower in connection with the construction
of and any other contracts; (c) to perform each of the terms,
covenants and conditions to be kept and performed by Borrower
under any permit or authorization issued by the City or any other
governmental body having jurisdiction over the Loan Property or
the construction contracts or any other contracts and/or leases
obtained or held by Borrower in connection with the construction
or operation of the Improvements, and any other contracts; (d)
without limiting the foregoing to perform each of the terms,
covenants and conditions to be kept or performed by Borrower
under this Agreement, the Mortgage and any other instrument
required under this Agreement; and (e) to do all things that Lender
reasonably deems necessary or advisable for the purpose of
carrying out the powers enumerated in (a), (b), (c) and (d) of this
Subparagraph (ii);
(iii) The powers herein granted Lender shall be deemed to be powers
coupled with an interest and the same are irrevocable;
(4) cancel this Agreement;
(5) bring appropriate action to enforce such performance and the
correction of such Event of Default;
385593v3 JSB EL185-12
-11-
(6) declare the entire unpaid principal of the Note and all accrued
interest thereon immediately due and payable without notice;
(7) foreclose the Mortgage and any other security instrument referred
to in this Agreement and/or exercise any other rights or remedies it may have
under the Mortgage and such other security instrument.
16. Default under Note and Mort~a~e. The failure by Borrower to keep or
perform any of the terms, covenants and conditions to be kept or performed by it under
this Agreement shall constitute a default under the Note, the Mortgage and any other
security instrument held by Lender in connection with the Loan.
17. Notices. Any notices given hereunder shall be in writing and shall be
deemed to have been given when delivered personally or three (3) days after deposited in
the United States mail, registered, postage prepaid, addressed as follows:
If to Borrower:
GRM of Minnesota, LLC
19141 Freeport St NW
Elk River, Minnesota 55330
If to Lender:
Housing and Redevelopment Authority of the City of Elk River
13065 Orono Parkway
Elk River, Minnesota 55330
or addressed to any such party at such other address as such party shall hereafter furnish
by notice to the other party. Any notice delivered personally to Borrower shall be
delivered to an officer of Borrower, and any notice delivered personally to Lender shall
be delivered to an officer of Lender at the address for Lender for the mailing of notices.
Either party may change its address for the giving of notices by giving the other party at
least ten (10) days' notice in the manner provided above.
18. Headings. The headings used in this Agreement are for convenience only
and do not define, limit or construe the contents of this Agreement.
19. Bindings on Successors and Assigns. Subject to the limitations on transfer
contained in this Agreement, this Agreement shall be binding upon and inure to the
benefit of the successors and assigns of the parties hereto.
20. Assignability. Borrower shall not assign this Agreement or all or any part
of any advances to be made hereunder without written consent of Lender which consent
maybe granted or withheld in the sole discretion of Lender.
385593v3 JSB EL185-12
-12-
21. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of Minnesota, without giving effect to any choice or conflict of
law provision or rule.
22. Counterparts. This Agreement may be executed in two (2) or more
counterparts, each of which shall be an original and all of which shall constitute the same
agreement.
23. Entire Agreement. This Agreement, the Note, the Mortgage and the other
documents executed by Borrower and/or Lender pursuant to this Agreement contain the
entire agreement between the parties with respect to the subject matter hereof and
supersede all prior understandings and agreements, both oral and written. This
Agreement maybe amended only in a writing signed by the parties hereto.
24. Fees and Expenses. Borrower agrees to pay to Lender immediately upon
demand all costs and expenses, including, without limitation, all attorneys fees, incurred
by Lender in connection with the enforcement of the Lender's rights and/or the
collection of any amounts which become due to Lender under this Agreement, the Note,
the Mortgage or the other documents executed in connection herewith; and the
prosecution or defense of any action in any way related to this Agreement, the Note, the
Mortgage or the other documents executed in connection herewith.
(Signature Pages follow]
[Remainder of page intentionally left blank.]
385593v3JSB EL185-12
-13-
Signature Page to Loan Agreement
IN TESTIMONY WHEREOF, each of the parties hereto has caused these
presents to be effective as of the day and year first above written.
GRM OF MINNESOTA, LLC
By: _
Name:
Its:
385593v3JSB EL185-12
S-1
Signature Page to Loan Agreement
IN TESTIMONY WHEREOF, each of the parties hereto has caused these
presents to be effective as of the day and year first above written.
HOUSING AND REDEVELOPMENT
AUTHORITY OF THE CITY OF ELK
RIVER, MINNESOTA
By:
Name:
Its:
And By:
Name:
Its:
385593v3 JSB EL185-12
S-2