7.1. SR 09-03-2013 City of
Elk - Request for Action
River
TO ITEM NUMBER
Mayor and City Council 7.1
AGENDA SECTION MEETING DATE PREPARED BY
Public Hearings September 3, 2013 Clay Wilfahrt,Assistant Director of Economic
Development
ITEM DESCRIPTION REVIEWED By
Tax Increment Finance: Preferred Powder LLC. Brain Beeman,EDA Director and Jeremy
Barnhart, CODD Deputy Director
REVIEWED BY
Cal Portner, City Administrator
Action Requested
1) Open a Public Hearing to consider Tax Increment Financing District Number 23 (TIF 23) in the City
of Elk River as requested by Preferred Powder Coating,LLC.
2) Approve by motion the following:
• Interfund Loan Resolution
• Resolution Approving TIF
• Forgivable Loan Agreement
• Forgivable Loan Mortgage
• Forgivable Loan Security Agreement
• Wetland Credit Purchase Agreement
• TIF Agreement
• Land Purchase Agreement
• Development Agreement
Background/Discussion
Preferred Powder,LLC submitted an application for TIF for$1,153,878 for the construction of a
100,000 sq. ft. manufacturing facility in the city-owned Nature's Edge Business Center. At its August 19
meeting,the Council called for a public hearing for tonight's meeting. Both the school district and the
county waived the 30-day comment period so the city could consider approval at an earlier date.
Preferred Powder requested TIF of$1,153,878 over 9 years. With a 1.5%interest rate,the city amount of
TIF would be $404,082, the school district portion would be $401,556, and the county would be
$436,547.
Staff has evaluated Preferred Powder's application and has scored it as a 36 out of a possible 45 points,
which qualifies it as a "moderately desirable"project based on the city's project priorities. The Planning
Commission has reviewed the site plan as part of a variance application. The Commission determined
that the plan is consistent with the city's comprehensive plan.
A Business Subsidy Agreement is required by statute because the proposed assistance exceeds $150,000. The
agreement will require the applicant to create a minimum of 8 jobs and retain their existing 24 jobs. They
P O w E R E U a r
NaA f RE]
must retain the jobs for a minimum of one year and they must pay wages greater than$12.19 per hour.
Preferred Powder stated they intend to pay an average wage of$15 per hour.
Financial Impact
In accordance with the city's Tax Increment Finance Policy, Springsted Inc., completed a but for analysis and
financial projection for the tax increment project. Springsted analyzed the sources and uses of funds for
the applicant,and used input from the developer,banker, and city staff to form its opinion. They
determined that the request for $1,153,878 is reasonable and that the project would not occur butfor the
amount requested. A representative of Springsted will be at the meeting to address any questions.
Staff can support the TIF application for a number of reasons,including:
1) Springsted's independent but for analysis supports the applicant's tax increment request.
2) Without support,the project will not go forward,based on statements of the applicant.
3) Upon construction,there will be a large,industrial building in the new development.
4) As the first such project, Preferred Powder should generate interest,momentum,and additional
investment toward the eventual build out of the area.
5) Changes to the economy and banking rules have limited access to bank financing
The developer and the banker financing the deal has expressed that the TIF is needed as up-front
assistance. The city will use the land write down of$680,895 as up-front, and provide the remaining
$472,983 through an interfund loan from the city's development fund. This will cover the site
development costs and will be reimbursed upon actual costs incurred.
The property tax dollars generated by the city, county, and school district from this property will be used
to repay first the development fund,and then the land both with a 1.5%interest rate. Springsted stated
that 24%interest is standard. At 1.5%interest, staff anticipates this project will take 9 years to pay back.
The construction project will cost an estimated $6,192,695. Public financing will include:
• TIF Financing $1,153,878
• FDA Microloan (equipment) $ 100,000
• FDA Forgivable Loan (construction) $ 200,000
Total public financing $1,453,878 (23% of project cost)
Pending approvals, staff expects to close on the TIF, other city financing, and the land sale in early
September. Preferred Powder plans to begin construction in September.
Attachments
• TIF Plan
• Interfund Loan Resolution
• Resolution Approving TIF
• Forgivable Loan Documents
• Wetland Credit Documents
• TIF Agreement
• Purchase Agreement
• Development Agreement
i
City of Elk River, Minnesota
Modification to the Development Program
for Development District No. 1
and the
Tax Increment Financing Plan
for Tax Increment Financing (Economic Development)
District No. 23
(Preferred Powder Coating Project)
Draft Dated: August 16, 2013
Public Hearing Date (Anticipated): September 3, 2013 or alternatively,
September 16, 2013
Approved:
Prepared by:
SPRINGSTED INCORPORATED
380 Jackson Street, Suite 300
St. Paul, MN 55101-2887
(651) 223-3000
WWW.SPRINGSTED.COM
TABLE OF CONTENTS
SECTION I—MODIFICATION TO THE DEVELOPMENT PROGRAM
FOR DEVELOPMENT DISTRICT NO. 1
Foreword............................................................................................................................................................ 1
SECTION 11—TAX INCREMENT FINANCING PLAN
FOR TAX INCREMENT FINANCING (ECONOMIC DEVELOPMENT) DISTRICT NO. 23
A. Definitions.................................................................................................................................................. 2
B. Statutory Authorization.............................................................................................................................. 2
C. Statement of Need and Public Purpose..................................................................................................... 2
D. Statement of Objectives ............................................................................................................................ 2
E. Designation of Tax Increment Financing District as an
Economic Development District................................................................................................................ 2
F. Duration of TIF District........................................................................................................... 3
G. Property to be Included in the TIF District.................................................................................................. 3
H. Property to be Acquired in the TIF District................................................................................................. 4
I. Specific Development Expected to Occur Within the TIF District.............................................................. 4
J. Findings and Need for Tax Increment Financing....................................................................................... 4
K. Estimated Public Costs.............................................................................................................................. 6
L. Estimated Sources of Revenue................................................................................................................. 6
M. Estimated Amount of Bonded Indebtedness.............................................................................................. 7
N. Original Net Tax Capacity.......................................................................................................................... 7
0. Original Tax Capacity Rate........................................................................................................................ 7
P. Projected Retained Captured Net Tax Capacity and Projected Tax Increment......................................... 8
Q. Use of Tax Increment................................................................................................................................ 8
R. Excess Tax Increment............................................................................................................................... 9
S. Tax Increment Pooling and the Five Year Rule......................................................................................... 9
T. Limitation on Administrative Expenses...................................................................................................... 10
U. Limitation on Property Not Subject to Improvements- Four Year Rule..................................................... 10
V. Estimated Impact on Other Taxing Jurisdictions........................................................................................ 11
W. Prior Planned Improvements..................................................................................................................... 11
X. Development Agreements......................................................................................................................... 12
Y. Assessment Agreements........................................................................................................................... 12
Z. Modifications of the Tax Increment Financing Plan ................................................................................... 12
AA. Administration of the Tax Increment Financing Plan.................................................................................. 12
AB. Financial Reporting and Disclosure Requirements.................................................................................... 13
Map of the Tax Increment Financing District....................................................................................... EXHIBIT I
Map of the Development District......................................................................................................... EXHIBIT I
AssumptionsReport ........................................................................................................................... EXHIBIT 11
Projected Tax Increment Report......................................................................................................... EXHIBIT III
Estimated Impact on Other Taxing Jurisdictions Report...................................................................... EXHIBIT IV
Market Value Analysis Report............................................................................................................. EXHIBIT V
City of Elk River, Minnesota
SECTION I-MODIFICATION TO THE DEVELOPMENT PROGRAM
FOR DEVELOPMENT DISTRICT NO.1
Foreword
The following text represents a Modification to the Development Program for Development District No. 1. This
modification represents a continuation of the goals and objectives set forth in the Development Program for
Development District No. 1. The changes generally include the establishment of Tax Increment Financing (Economic
Development) District No. 23.
For further information, a review of the Development Program for Development District No. 1 is recommended. It is
available from the City Administrator at the City of Elk River. Other relevant information is contained in the Tax
Increment Financing Plans for the Tax Increment Financing Districts located within Development District No. 1.
SPRINGSTED Pagel
City of Elk River, Minnesota
SECTION II-TAX INCREMENT FINANCING PLAN
FOR TAX INCREMENT FINANCING(ECONOMIC DEVELOPMENT) DISTRICT NO. 23
Section A Definitions
The terms defined in this section have the meanings given herein, unless the context in which they are used indicates
a different meaning:
"City„means the City of Elk River, Minnesota; also referred to as a "Municipality".
"Council"means the City Council of the City; also referred to as the "Governing Body".
"County„means Sherburne County, Minnesota.
"Development District" means Development District No. 1 in the City, which is described in the corresponding
Development Program.
"Development Program"means the Development Program for the Development District
"EDA"means the Elk River Economic Development Authority.
"Project Area" means the geographic area of the Development District.
"School District"means Independent School District No. 728, Minnesota.
"State"means the State of Minnesota.
"TIF Act"means Minnesota Statutes, Sections 469.174 through 469.1794, both inclusive.
"TIF District"means Tax Increment Financing (Economic Development) District No. 23.
"TIF Plan"means the tax increment financing plan for the TIF District(this document).
Section B Statutory Authorization
See the Development Program for the Development District.
Section C Statement of Need and Public Purpose
See the Development Program for the Development District.
Section D Statement of Objectives
See the Development Program for the Development District.
Section E Designation of Tax Increment Financing District as an
Economic Development District
Economic development districts are a type of tax increment financing district which consist of any project, or portions
of a project,which the City finds to be in the public interest because:
SPRINGSTED Page 2
City of Elk River, Minnesota
(1) it will discourage commerce, industry, or manufacturing from moving their operations to
another state or municipality;
(2) it will result in increased employment in the state; or
(3) it will result in preservation and enhancement of the tax base of the state.
The TIF District qualifies as an economic development district in that the proposed development described in this TIF
Plan (see Section I) meets the criteria listed above in (2) and (3). Without establishment of the TIF District, the
proposed development would not occur within the City. The proposed development will also result in increased
employment and enhancement of the tax base in both the City and the State.
Tax increments from an economic development district must be used to provide improvements, loans, subsidies,
grants, interest rate subsidies, or other assistance in which at least 85% of the square footage of the facilities to be
constructed are used for any of the following purposes:
(1) manufacturing or production of tangible personal property, including processing, resulting in the
change of the condition of the property;
(2) warehousing, storage and distribution of tangible personal property, excluding retail sales;
(3) research and development related to the activities listed in (1)or(2)above;
(4) telemarketing if that activity is the exclusive use of the property;
(5) tourism facilities(see M.S. Section 469.174, Subd. 22);
(6) qualified border retail facilities(see M.S. Section 469.176, Subd. 4c);or
(7) space necessary for and related to the activities listed in (1)through(6)above.
Tax increments from the TIF District will be used to provide financial assistance to the proposed development (see
Section I), in which over 85% of the square footage of the facilities to be constructed will be used for manufacturing,
warehousing, or research or other purposes as listed in (1), (2), &(3)above.
Section F Duration of the TIF District
Economic development districts may remain in existence 8 years from the date of receipt by the City of the first tax
increment. The City anticipates that the TIF District will remain in existence the maximum duration allowed by law
(projected to be through the year 2023). Modifications of this plan (see Section AA)shall not extend these limitations.
All tax increments from taxes payable in the year the TIF District is decertified shall be paid to the City.
Section G Property to be Included in the TIF District
The TIF District is an approximately 10.36-acre area of land located within the Project Area. A map showing the
location of the TIF District is shown in Exhibit I. The boundaries and area encompassed by the TIF District are
described below:
Parcel ID Number Legal Description
75-820-0305 Lot 1, Blk 3
The area encompassed by the TIF District shall also include all street or utility right-of-ways located upon or adjacent
to the property described above.
SPRINGSTED Page 3
City of Elk River, Minnesota
Section H Property to be Acquired in the TIF District
The City may acquire and sell any or all of the property located within the TIF District; however, the City does not
anticipate acquiring any such property at this time. The EDA intends to sell the property within the TIF District to the
developer upon commencement of the project.
Section I Specific Development Expected to Occur Within the TIF District
The proposed development is expected to consist of an approximately 100,224 square foot facility for Preferred
Powder Coating, a metal powder coating company that works with aeronautics, athletic equipment, automotive, die
casting, medical equipment, OEM, recreational, retail and sheet metal. At least 85% of the facility will be used for
manufacturing, distribution, or research, with less than 15% available for office space. The development will result in
increased employment within the City, in compliance with statutory requirements. The company currently employs 24
employees that will be new to the City with the company relocation, and anticipates creating 8-10 new jobs over the
next two years. It is anticipated tax increment will be used to finance a portion of the extraordinary site improvement
and infrastructure costs necessary for development of the project site. In addition, the City anticipates using available
tax increment for related administrative expenses and any other eligible expenditures associated with development of
the site.
The facility is expected to be fully constructed in 2013 and be 100% assessed and on the tax rolls as of January 2,
2014 for taxes payable in 2015.
At the time this document was prepared there were no signed construction contracts with regards to the above
described development.
Section J Findings and Need for Tax Increment Financing
In establishing the TIF District, the City makes the following findings:
(1) The TIF District qualifies as an economic development district;
See Section E of this document for the reasons and facts supporting this finding.
(2) The proposed development, in the opinion of the City,would not reasonably be expected to occur solely
through private investment within the reasonably foreseeable future, and the increased market value of
the site that could reasonably be expected to occur without the use of tax increment would be less than
the increase in market value estimated to result from the proposed development after subtracting the
present value of the projected tax increments for the maximum duration of the TIF District permitted by
the TIF Plan.
Factual basis:
Proposed development not expected to occur.,
The proposed development consists of an approximately 100,224 square foot manufacturing facility. The
developer of the site has submitted information to the City demonstrating that the development of this site is
not financially feasible without the assistance provided in this TIF Plan.
The City has determined the proposed development would not occur but-for the financial assistance
provided in this TIF Plan because of high costs related to the acquisition and development of the site. There
are extraordinary site improvement costs associated with development of the site and the developer has
SPRINGSTED Page 4
City of Elk River, Minnesota
indicated that the development would not occur without the financial assistance provided by the City, as it
would not be economically feasible. The developer's lender has indicated approval of financing for the
project is contingent on City financial assistance for financing of a portion of the extraordinary site
improvement and acquisition costs. Therefore it has been determined the project is not feasible and would
be unlikely to occur, but-for the use of tax increment to finance a portion of the extraordinary costs related to
site improvements and infrastructure costs. The City finds the use of tax increment necessary to finance
these site improvement and infrastructure costs which currently do not allow development on the property.
The City anticipates providing financial assistance through the use of an interfund loan, which will be repaid
through the collection of tax increment.
No Higher market value expected.,
The proposed development, in the opinion of the City, would not reasonably be expected to occur solely
through private investment within the reasonably foreseeable future, and the increased market value of the
site that could reasonably be expected to occur without the use of tax increment would be less than the
increase in market value estimated to result from the proposed development after subtracting the present
value of the projected tax increments for the maximum duration of the TIF District permitted by the TIF Plan;
The desired development project shall consist of an approximately 100,224 square foot manufacturing
facility. The proposed development will require substantial costs including site improvements and
infrastructure costs, due to wetlands and a gas line running through the property, and additional costs
compared to other development sites the company has considered. The increased market value of the site
that could reasonably be expected to occur without the use of tax increment financing would be less than the
increase in market value estimated to result from the proposed development after subtracting the present
value of the projected tax increments for the maximum duration of the TIF District permitted by the TIF Plan.
Without improvements the City has no reason to expect that significant development would occur without
assistance similar to that provided in this plan. For the same reasons that the desired development
described above is not feasible without tax increment assistance, the City believes that no alternative
development is likely to occur without similar assistance. Almost any other development of the site would
require the same substantial site improvements and infrastructure costs. Finally, the City believes that the
desired project represents the maximum development density available to the project site. Therefore, the
City concludes as follows: The proposed development, in the opinion of the City, would not reasonably be
expected to occur solely through private investment within the reasonably foreseeable future.
To summarize the basis for the City's findings regarding alternative market value, in accordance with
Minnesota Statutes, Section 469.175, Subd. 3(d), the City makes the following determinations:
a. The City's estimate of the amount by which the market value of the site will increase
without the use of tax increment financing is $0 (for the reasons described above), except some
unknown amount of appreciation.
b. If the proposed development to be assisted with tax increment occurs in the District, the
total increase in market value would be approximately $5,101,056 including the value of the
building (See Exhibit V).
C. The present value of tax increments from the District for the maximum duration of the
district permitted by the TIF Plan is estimated to be$1,071,403(See Exhibit V).
d. Even if some development other than the proposed development were to occur, the City
finds that no alternative would occur that would produce a market value increase greater than
$4,029,653 (the amount in clause b less the amount in clause c)without tax increment assistance.
(3) The TIF Plan would afford maximum opportunity, consistent with the sound needs of the City as a
whole,for development of the Project Area by private enterprise.
SPRINGSTED Page 5
City of Elk River, Minnesota
Factual basis: The proposed development is the construction of a manufacturing facility to be constructed
in the Development District that is expected to create approximately 8-10 new jobs in the City and State, plus
create substantial new tax base for the City and the State. The development clearly meets the City's
economic development goals in terms of land use,job retention, and wage levels.
(4) The TIF Plan conforms to general plans for development of the City as a whole.
Factual basis: The City Planning Commission has determined that the development proposed in the TIF
Plan conforms to the City comprehensive plan.
Section K Estimated Public Costs
The estimated public costs of the TIF District are listed below. Such costs are eligible for reimbursement from tax
increments of the TIF District.
Land/building acquisition $680,695
Site improvements/infrastructure costs $473,183
Installation of public utilities $0
Bond principal payments 0
Bond interest payments 0
Loan interest payments $113,113
Administrative expenses $12,798
Total $1,279,789
The City anticipates using tax increment to the extent available to finance acquisition costs, site
improvements/infrastructure costs, installation of public utilities, related administrative expenses, and other TIF-
eligible expenditures.
The City reserves the right to administratively adjust the amount of any of the items listed above or to incorporate
additional eligible items, so long as the total estimated public cost is not increased.
Section L Estimated Sources of Revenue
Tax increment revenue $1,279,789
Interest on invested funds 0
Bond proceeds 0
Loan proceeds 0
Special assessments 0
Rent/lease revenue 0
Grants 0
Total $1,279,789
The City anticipates providing financial assistance for acquisition, site improvements and infrastructure to the
proposed development through the use of an interfund loan. As tax increments are collected from the TIF District in
future years, a portion of these taxes will be used by the City to reimburse itself for public costs financed by the
interfund loan (see Section K).
SPRINGSTED Page 6
City of Elk River, Minnesota
The City reserves the right to finance any or all public costs of the TIF District using pay-as-you-go assistance,
internal funding, general obligation or revenue debt (referred to together as "TIF Bonds"), or any other financing
mechanism authorized by law. The City also reserves the right to use other sources of revenue legally applicable to
the Project Area to pay for such costs including, but not limited to, special assessments, utility revenues, federal or
state funds, and investment income.
Section M Estimated Amount of Bonded Indebtedness
The maximum principal amount of bonds (as defined in the TIF Act)secured in whole or part with tax increment from
the TIF District is$1,279,789. The City currently plan to finance the improvements in the form of an interfund loan and
reserves the right to issue bonds in any form, including without limitation any interfund loan with interest not to exceed
the maximum permitted under Section 469.178, subd. 7 of the TIF Act.
Section N Original Net Tax Capacity
The County Auditor shall certify the original net tax capacity of the TIF District. This value will be equal to the total net
tax capacity of all property in the TIF District as certified by the State Commissioner of Revenue. For districts certified
between January 1 and June 30, inclusive, this value is based on the previous assessment year. For districts
certified between July 1 and December 31, inclusive, this value is based on the current assessment year.
The Estimated Market Value of all property within the TIF District as of January 2, 2013,for taxes payable in 2014, is
$815,900 and the estimated tax capacity has been assumed to be$15,568,following reclassification from tax-exempt
(EDA and City-owned to Commercial-Industrial) which is estimated to be the original net tax capacity of the TIF
District.
Each year the County Auditor shall certify the amount that the original net tax capacity has increased or decreased as
a result of:
(1) changes in the tax-exempt status of property;
(2) reductions or enlargements of the geographic area of the TIF District;
(3) changes due to stipulation agreements or abatements; or
(4) changes in property classification rates.
Section 0 Original Tax Capacity Rate
The County Auditor shall also certify the original tax capacity rate of the TIF District. This rate shall be the sum of all
local tax rates that apply to property in the TIF District. This rate shall be for the same taxes payable year as the
original net tax capacity.
In future years, the amount of tax increment generated by the TIF District will be calculated using the lesser of(a)the
sum of the current local tax rates at that time or(b)the original tax capacity rate of the TIF District.
At the time this document was prepared, the final sum of all local tax rates that apply to property in the TIF District,for
taxes levied in 2013 and payable in 2014, was not yet available. When this total becomes available, the County
Auditor shall certify this amount as the original tax capacity rate of the TIF District. For purposes of estimating the tax
increment generated by the TIF District, we have utilized the sum of the local tax rates for taxes levied in 2012 and
payable in 2013, of 160.115%as shown below.
SPRINGSTED Page 7
City of Elk River, Minnesota
2012/2013
Taxing Jurisdiction Local Tax Rate
City of Elk River 50.373%
Sherburne County 54.420%
ISD#728 50.058%
Other 5.264%
Total 160.115%
Section P Projected Retained Captured Net Tax Capacity and
Projected Tax Increment
The City anticipates that the project will be completed by December 31, 2013, creating a total tax capacity for the TIF
District of$92,668 as of January 2, 2014. The captured tax capacity as of that date is estimated to be $77,100 and
the first full year of tax increment is estimated to be$123,449 payable in 2015. A complete schedule of estimated tax
increment from the TIF District is shown in Exhibit III.
The estimates shown in this TIF plan assume that commercial class rates remain at 1.5% of the estimated market
value up to $150,000 and 2.0% of the estimated market value over$150,000, and assume a 3% annual increase in
market values.
Each year the County Auditor shall determine the current net tax capacity of all property in the TIF District. To the
extent that this total exceeds the original net tax capacity, the difference shall be known as the captured net tax
capacity of the TIF District.
The County Auditor shall certify to the City the amount of captured net tax capacity each year. The City may choose
to retain any or all of this amount. It is the City's intention to retain 100% of the captured net tax capacity of the TIF
District. Such amount shall be known as the retained captured net tax capacity of the TIF District.
Exhibit II gives a listing of the various information and assumptions used in preparing a number of the exhibits
contained in this TIF Plan, including Exhibit III which shows the projected tax increment generated over the
anticipated life of the TIF District.
Section Q Use of Tax Increment
Each year the County Treasurer shall deduct 0.36%of the annual tax increment generated by the TIF District and pay
such amount to the State's General Fund. Such amounts will be appropriated to the State Auditor for the cost of
financial reporting and auditing of tax increment financing information throughout the state. Exhibit III shows the
projected deduction for this purpose over the anticipated life of the TIF District.
The City has determined that it will use 100% of the remaining tax increment generated by the TIF District for any of
the following purposes:
(1) pay for the estimated public costs of the TIF District (see Section K) and County administrative
costs associated with the TIF District(see Section T);
(2) pay principal and interest on tax increment bonds or other bonds issued to finance the estimated
public costs of the TIF District;
(3) accumulate a reserve securing the payment of tax increment bonds or other bonds issued to
finance the estimated public costs of the TIF District;
SPRINGSTED Page 8
City of Elk River, Minnesota
(4) pay all or a portion of the county road costs as may be required by the County Board under M.S.
Section 469.175, Subdivision 1a;or
(5) return excess tax increments to the County Auditor for redistribution to the City, County and School
District.
Tax increments from property located in one county must be expended for the direct and primary benefit of a project
located within that county, unless both county boards involved waive this requirement. Tax increments shall not be
used to circumvent levy limitations applicable to the City.
Tax increment shall not be used to finance the acquisition, construction, renovation, operation, or maintenance of a
building to be used primarily and regularly for conducting the business of a municipality, county, school district, or any
other local unit of government or the State or federal government, or for a commons area used as a public park, or a
facility used for social, recreational, or conference purposes. This prohibition does not apply to the construction or
renovation of a parking structure or of a privately owned facility for conference purposes.
If there exists any type of agreement or arrangement providing for the developer, or other beneficiary of assistance,to
repay all or a portion of the assistance that was paid or financed with tax increments, such payments shall be subject
to all of the restrictions imposed on the use of tax increments. Assistance includes sale of property at less than the
cost of acquisition or fair market value, grants, ground or other leases at less then fair market rent, interest rate
subsidies, utility service connections, roads, or other similar assistance that would otherwise be paid for by the
developer or beneficiary.
Section R Excess Tax Increment
In any year in which the tax increments from the TIF District exceed the amount necessary to pay the estimated
public costs authorized by the TIF Plan, the City shall use the excess tax increments to:
(1) prepay any outstanding tax increment bonds;
(2) discharge the pledge of tax increments thereof;
(3) pay amounts into an escrow account dedicated to the payment of the tax increment bonds; or
(4) return excess tax increments to the County Auditor for redistribution to the City, County and School
District. The County Auditor must report to the Commissioner of Education the amount of any
excess tax increment redistributed to the School District within 30 days of such redistribution.
Section S Tax Increment Pooling and the Five Year Rule
At least 80%of the tax increments from the TIF District must be expended on activities within the district or to pay for
bonds used to finance the estimated public costs of the TIF District (see Section E for additional restrictions). No
more than 20% of the tax increments may be spent on costs outside of the TIF District but within the boundaries of
the Project Area, except to pay debt service on credit enhanced bonds. All administrative expenses are considered to
have been spent outside of the TIF District. Tax increments are considered to have been spent within the TIF District
if such amounts are:
(1) actually paid to a third party for activities performed within the TIF District within five years after
certification of the district;
SPRINGSTED Page 9
City of Elk River, Minnesota
(2) used to pay bonds that were issued and sold to a third party, the proceeds of which are reasonably
expected on the date of issuance to be spent within the later of the five-year period or a reasonable
temporary period or are deposited in a reasonably required reserve or replacement fund.
(3) used to make payments or reimbursements to a third party under binding contracts for activities
performed within the TIF District, which were entered into within five years after certification of the
district; or
(4) used to reimburse a party for payment of eligible costs (including interest)incurred within five years
from certification of the district.
Beginning with the sixth year following certification of the TIF District,at least 80%of the tax increments must be used
to pay outstanding bonds or make contractual payments obligated within the first five years. When outstanding bonds
have been defeased and sufficient money has been set aside to pay for such contractual obligations, the TIF District
must be decertified.
The City does not expect that allowable pooling expenditures will be made outside of the TIF District but within the
Project Area (along with allowable administrative expenses), but such expenditures are expressly authorized in this
TIF Plan.
Section T Limitation on Administrative Expenses
Administrative expenses are defined as all costs of the City other than:
(1) amounts paid for the purchase of land;
(2) amounts paid for materials and services, including architectural and engineering services directly
connected with the physical development of the real property in the project;
(3) relocation benefits paid to, or services provided for, persons residing or businesses located in the
project;
(4) amounts used to pay principal or interest on, fund a reserve for, or sell at a discount bonds issued
pursuant to section 469.178; or
(5) amounts used to pay other financial obligations to the extent those obligations were used to finance
costs described in clause (1)to(3).
Administrative expenses include amounts paid for services provided by bond counsel, fiscal consultants, planning or
economic development consultants, and actual costs incurred by the County in administering the TIF District. Tax
increments may be used to pay administrative expenses of the TIF District up to the lesser of (a) 10% of the total
estimated public costs authorized by the TIF Plan or(b) 10%of the total tax increment expenditures for the project.
Section U Limitation on Property Not Subject to Improvements- Four Year Rule
If after four years from certification of the TIF District no demolition, rehabilitation, renovation, or qualified
improvement of an adjacent street has commenced on a parcel located within the TIF District, then that parcel shall
be excluded from the TIF District and the original net tax capacity shall be adjusted accordingly. Qualified
improvements of a street are limited to construction or opening of a new street, relocation of a street, or substantial
reconstruction or rebuilding of an existing street. The City must submit to the County Auditor, by February 1 of the
fifth year, evidence that the required activity has taken place for each parcel in the TIF District.
SPRINGSTED Page 10
City of Elk River, Minnesota
If a parcel is excluded from the TIF District and the City or owner of the parcel subsequently commences any of the
above activities, the City shall certify to the County Auditor that such activity has commenced and the parcel shall
once again be included in the TIF District. The County Auditor shall certify the net tax capacity of the parcel, as most
recently certified by the Commissioner of Revenue, and add such amount to the original net tax capacity of the TIF
District.
Section V Estimated Impact on Other Taxing Jurisdictions
Exhibit IV shows the estimated impact on other taxing jurisdictions if the maximum projected retained captured net tax
capacity of the TIF District was hypothetically available to the other taxing jurisdictions. The City believes that there
will be no adverse impact on other taxing jurisdictions during the life of the TIF District, since the proposed
development would not have occurred without the establishment of the TIF District and the provision of public
assistance. A positive impact on other taxing jurisdictions will occur when the TIF District is decertified and the
development therein becomes part of the general tax base.
The fiscal and economic implications of the proposed tax increment financing district, as pursuant to Minnesota
Statutes, Section 469.175, Subdivision 2, are listed below.
1. The total amount of tax increment that will be generated over the life of the district is estimated to be
$1,284,412.
2. To the extent the manufacturing facility in the proposed TIF District generates any public cost impacts on
city-provided services such as police and fire protection, public infrastructure, and borrowing costs
attributable to the district, such costs will be levied upon the taxable net tax capacity of the City, excluding
that portion captured by the District. The City does not anticipate issuing general obligation bonds to finance
the proposed project costs of the District; but does anticipate utilizing internal financing. The City reserves
the right to exercise the authority of certain financing mechanisms as allowed under current statute.
3. The amount of tax increments over the life of the district that would be attributable to school district levies,
assuming the school district's share of the total local tax rate for all taxing jurisdictions remained the same, is
estimated to be$401,556.
4. The amount of tax increments over the life of the district that would be attributable to county levies,
assuming the county's share of the total local tax rate for all taxing jurisdictions remained the same is
estimated to be$436,547.
5. No additional information has been requested by the county or school district that would enable it to
determine additional costs that will accrue to it due to the development proposed for the district.
Section W Prior Planned Improvements
The City shall accompany its request for certification to the County Auditor (or notice of district enlargement), with a
listing of all properties within the TIF District for which building permits have been issued during the 18 months
immediately preceding approval of the TIF Plan. The County Auditor shall increase the original net tax capacity of the
TIF District by the net tax capacity of each improvement for which a building permit was issued.
There have been no building permits issued in the last 18 months in conjunction with any of the properties within the
TIF District.
SPRINGSTED Page 11
City of Elk River, Minnesota
Section X Development Agreements
If within a project containing an economic development district, more than 10% of the acreage of the property to be
acquired by the City is purchased with tax increment bonds proceeds (to which tax increment from the property is
pledged), then prior to such acquisition, the City must enter into an agreement for the development of the property.
Such agreement must provide recourse for the City should the development not be completed.
The City anticipates entering into an agreement for development.
Section Y Assessment Agreements
The City may, upon entering into a development agreement, also enter into an assessment agreement with the
developer, which establishes a minimum market value of the land and improvements for each year during the life of
the TIF District.
The assessment agreement shall be presented to the County or City Assessor who shall review the plans and
specifications for the improvements to be constructed, review the market value previously assigned to the land, and
so long as the minimum market value contained in the assessment agreement appears to be an accurate estimate,
shall certify the assessment agreement as reasonable. The assessment agreement shall be filed for record in the
office of the County Recorder of each county where the property is located. Any modification or premature
termination of this agreement must first be approved by the City, County and School District.
The City anticipates entering into a minimum assessment agreement.
Section Z Modifications of the Tax Increment Financing Plan
Any reduction or enlargement in the geographic area of the Project Area or the TIF District; increase in the amount of
bonded indebtedness to be incurred; increase in the amount of capitalized interest; increase in that portion of the
captured net tax capacity to be retained by the City; increase in the total estimated public costs; or designation of
additional property to be acquired by the City shall be approved only after satisfying all the necessary requirements
for approval of the original TIF Plan. This paragraph does not apply if:
(1) the only modification is elimination of parcels from the TIF District; and
(2) the current net tax capacity of the parcels eliminated equals or exceeds the net tax capacity of
those parcels in the TIF District's original net tax capacity, or the City agrees that the TIF District's
original net tax capacity will be reduced by no more than the current net tax capacity of the parcels
eliminated.
The City must notify the County Auditor of any modification that reduces or enlarges the geographic area of the TIF
District. The geographic area of the TIF District may be reduced but not enlarged after five years following the date of
certification.
Section AA Administration of the Tax Increment Financing Plan
Upon adoption of the TIF Plan, the City shall submit a copy of such plan to the Commissioner of Revenue and the
Office of the State Auditor. The City shall also request that the County Auditor certify the original net tax capacity and
net tax capacity rate of the TIF District. To assist the County Auditor in this process, the City shall submit copies of
the TIF Plan, the resolution establishing the TIF District and adopting the TIF Plan, and a listing of any prior planned
improvements. The City shall also send the County Assessor any assessment agreement establishing the minimum
market value of land and improvements in the TIF District, and shall request that the County Assessor review and
certify this assessment agreement as reasonable.
SPRINGSTED Page 12
City of Elk River, Minnesota
The County shall distribute to the City the amount of tax increment as it becomes available. The amount of tax
increment in any year represents the applicable property taxes generated by the retained captured net tax capacity of
the TIF District. The amount of tax increment may change due to development anticipated by the TIF Plan, other
development, inflation of property values, or changes in property classification rates or formulas. In administering and
implementing the TIF Plan, the following actions should occur on an annual basis:
(1) prior to July 1, the City shall notify the County Assessor of any new development that has occurred
in the TIF District during the past year to insure that the new value will be recorded in a timely
manner.
(2) if the County Auditor receives the request for certification of a new TIF District, or for modification of
an existing TIF District, before July 1, the request shall be recognized in determining local tax rates
for the current and subsequent levy years. Requests received on or after July 1 shall be used to
determine local tax rates in subsequent years.
(3) each year the County Auditor shall certify the amount of the original net tax capacity of the TIF
District. The amount certified shall reflect any changes that occur as a result of the following:
(a) the value of property that changes from tax-exempt to taxable shall be added to the
original net tax capacity of the TIF District. The reverse shall also apply;
(b) the original net tax capacity may be modified by any approved enlargement or reduction of
the TIF District;
(c) if laws governing the classification of real property cause changes to the percentage of
estimated market value to be applied for property tax purposes, then the resulting increase
or decrease in net tax capacity shall be applied proportionately to the original net tax
capacity and the retained captured net tax capacity of the TIF District.
The County Auditor shall notify the City of all changes made to the original net tax capacity of the TIF District.
Section AB Filing TIF Plan, Financial Reporting and Disclosure Requirements
The City will file the TIF Plan, and any subsequent amendments thereto,with the Commissioner of Revenue and the
Office of the State Auditor pursuant to Minnesota Statutes, Section 469.175, subdivision 4a. The City will comply with
all reporting requirements for the TIF District under Minnesota Statutes, Section 469.175, subdivisions 5 and 6.
SPRINGSTED Page 13
Exhibit 1
Map of Tax Increment Financing(Economic Development) District No. 23
zL
IRS- u
-t.
s
SPRINGSTED Page 14
•
•� � i� wr
�.
■ it �'� W
1 yl _ ■
�.:� ,III � �'" ■�
.■r''::.
Zv
MI
��.�1�
own
11 rlf ",f�l 1I� :k ON=-
On!�rrnRY 1� W remne:
YrrN r�!�■lrid SJ�—s �� n�.d L`d�"��L,K;.�rYwIr�±� �L
a vRrJ.IlN�lI■aI����
; = k-
= .`� _ ;:'-;�_:: ._..�1-:•urir.���,yl Ira==��:":f:.d�.:•
__ ice" "rill _ Sfg
?I_ia--11 =� ��1 4:.... .■ iii~
ilk. �•• I{F +1.1 J':.-ry }
'al .1.1 .+!b....NN �. 1l may` aN,
.riS" _ t-,y'llAllli' ':Mi:`�il•-lA1ti\t
RI s ;tiii iu�.r• ...-;---;,:_:,.��� V 11�r, ,.• I +� Ike
i�it F'l
- f..1 � __•7�_.�r'.-�°yi� ��.1 rte! S ��_;'E:�.a�a _ ���
g'� udi
men
As
'"pr" III ui`: _ ��,..• f; MIMPNIF
,
Mv At.wit
�''a IwrL��!�■1J
=i+r
=Ms
. mss
1 RICO
Y� VIII. I
m
r
BOUNDARY
DEWMI"WIDIT DISTRICT /
LO MS)ELK RrVEK NZ4NBSOTA . s
Exhibit 11
Assumptions Report
City of Elk River, Minnesota
Tax Increment Financing (Economic Development)District No.23
Proposed Preferred Powder Coating Project
EMV$4,670,900 (Land: $815,900 and Building: $3,855,000)with 3% Annual MV Inflator
Type of Tax Increment Financing District Economic Development
Maximum Duration of TIF District 8 years from 1st increment
Projected Certification Request Date 10/01/13
Decertification Date 12/31/23 (9 Years of Increment)
2013/2014
Base Estimated Market Value $815,900
Parcel ID: 75-820-0305
Original Net Tax Capacity $15,568
Assess ment/Collection Year
2013/2014 2014/2015 2015/2016 2016/2017
Base Estimated Market Value $815,900 $815,900 $815,900 $815,900
Increase in Estimated Market Value 0 3,855,000 3,995,127 4,139,458
Total Estimated Market Value 815,900 4,670,900 4,811,027 4,955,358
Total Net Tax Capacity $15,568 $92,668 $95,471 $98,357
City of Elk River 50.3730%
Sherburne County 54.4200%
ISD#728 50.0580%
Other 5.264%
Local Tax Capacity Rate 160.115%
Fiscal Disparities Contribution From TIF District NA
Administrative Retainage Percent(maximum = 10%) 1.00%
Pooling Percent 0.00%
Bonds Note(Pay-As-You-Go)
Bonds Dated NA Note Dated 10/01/13
Bond Issue @ 0.00%(NIC) NA Note Rate 3.00%
Eligible Project Costs NA Note Amount $1,153,878
Present Value Date&Rate 10/01/13 3.00%
Notes
Assumes no changes to future class rates or tax rates
Assumes construction starts and completes in 2013,with full value assessed 1/2/2014 and pay 2015
Assumes estimated market value of$4,670,900(land$815,900 and building $3,855,000)
with 1%annual market value inflator
SPRINGSTED Page 16
00 ONO p� V N N O r-
(6 �° r- V W V I� (`") 0) W
7 °O (fl
O ~
� Q � O � r
W ca
00 (f) O O (o (h (!) (o (f)
I- O 0 N 0 r- O d) (h d)
O) I- N � V N N V (o � d)
-Fu 7
Z ; N O 2 � V V lo (fl N
O)
00
o O�� d) N� N 00 r- r- l � N 00
O) N N M� V (O I�
N E ,� O O
N (6 O ER
0 00 U) U) V o N V) 'T M 0)
O r- 00 N V N (o (0 00
N V (: V o W 0) N I- [-�
Q a Z Q VT
N
0
00 I- V N O 00 00 (h
0 O V V V V l!) l N N N (NO C)
tl) Q U O Q)
7 (0 00 O
J Q O N
53
(0
(0
00 0) (o 00 00 N N V N N O_
X C V 0) (N m N N V W � V
(6 N (h r- C\[r- C\[r- N r- m V L6 'co
C tl) N W N ,O
i Q O M N U
R O U N
C o 0 0 0 0 0 0 0 0 0 0 +2. •�
T* N N N j N N N N N N N N
a
m � 0 cE 0 0 0 0 0 0 0 0 0 0
m (o (o (o (o (o (o (o (o � w
_ (o (o a m
i
� m o
N Q � Ea
o O O O (h d) N N d) W V z: E 0
o O o 00 (o N I- N r- N a o
++ N M '6 '6 x 0) I� � W 0) N (f) O z: U U
CU
O Z N (gyp � m 0) O �_
a 0 � UZU L6 Q, O
i O co N t
L 00 00 00 00 00 00 00 00 00 00 00 O (n
to
to
r 00 l l l l 7 7 7 7 7 l!7 p
C M fli io a) Z3
N Cu► :rn~ M v > co U
.,, JOz C a >
d 3 w a U a)a U
c
> m
0) 3 00 00 00 I- O M 1- 0 N 0 y � O
L D d m (D (D (D N n 0 V d) V 00 •� �0.
Q v c c m rn rn rn o o o v a 'k
co
w m
p
c H Z m m o
o U E m
0 Um Nam
N W W - o CU U
E p X00 aoaoo � aornrnchrnaom c a k
L y o 0 0 0 N N N 0 N
0) o .. N * N N 0) O (h W N
0)
C tl d6 Y N L2 l!) O 7( l!) O l!) I- V fn N
J N
C C � O (`p N (0 00 0) N `°O_ U
�
x L m U
LL C ; ~ N A
C [�
.a 0) d V (o 00 d) O N m
O
N Y C O r 1M
0 O C
.O O x Q> Q d W O •� /�
L L /1
CL U H a w
M (O O 00
N N '� L LO O
X +L U Ln LO LO cu
W CO (D w m C a
_ x U Z
H > o
0 0 0 0 0
Cl) N rn Nt — ca x +J
U o Lo r-- co O
N UO N O O O O N U
o x
o o x m °�
>, o x O N — c
= 0 ~ N ~ O U +�+
a ++
0 0 0 0 0 +O+ N N N
+ o o 0 0 o fn L ate-+
M N > "a N O N O
Q
O � U N O O LO O >+ a N L O N
D = o Lo LO Nt LO N (�j U N N N
LL H =
CL Q H >
U O N
o n (n o = o
U Nt M >+ _ -0 O Qj Qj
N N x I� (O N , N N +J
O U N N N N U
O N N O 00 I� N O ++ y •i U x
d Z X N ca M O (O V N •Q
+= H Z N rl- LO L m x N D N
O L .L N +�
x LL O
w 0 �v O N O ~ C N
O N O
x O O O 0 -a
> O O O
7
O O O O N C O O ox
L
CL
d U U O N N +`� Q U M
+ N p L fn m L >>
Q o a�i 0 U m o
L o M rn co Lo M-0 xp - m ( c
N x (D N U 5 N
Q N N H O O x O N N N N
t N Z5 O co (O 0/ 6 0 - Z
z O m Z Q' O (O I� �� C �� o "a -O N
N V N V N Lo z o Q Z O
E2 U a� LL (1)
O_ to c a� m o m C n H +J
CL 0 W) o 0 0 0 0 E S N U x U
+' M N Cl) N LLo o N > N 0 x N -
M U O N Cl) Id- C) N U N °� '� c N N
.L E aL,, N UO LO LO LO (0 O N +�+ �' N U
Q r+ Im L J N '� C O O Z N O
O U �_ ++ 0 N H �� O U O Q �- O LL N — 7 >+-O O U N
.O �_ O U Q C
LO O co O N •C M C O U N
.� o a) co N 5 " U CL '- cxa o
E o N m � °O coo � o � o a) P
L O O d N x N m N ao Ln n x +-+ c
O O H Z N N � LLo N �' U U •L
O L) 6'1 N U N L O N �_ O O
O V W r 0)
N6,)- r N N Go
O d O
v � � M a cc
CL
x
iii d0 o
O U
dac � •L > o * c Q W
Y � � � U m E
tOn w c x .
co o U
E O r- 0Q 6 o rlyy- (n � � z
L T�•
N = cxa D 0 a
W U H a w 0 CO CO 0 =�
W a
L
O
CM o CO M M O M M O CO N O CO 't cc) 00 M
O LO O LO LO O 00 I— LO C) 't O (D 't O
C) 't O O M O ti ti M 0) LO
O M - O O CO I� ti 00 0 0 0 0
\ O ti N N — — — — — — I—
O L I-e I y N 0
Ef} Ef} Ef} N 7 O H)
O > M
M
N
M
O
z V r O O 00 00 N N N —
N
4- cM LO — N I,— I,— CM LO
V O W CM N N E 00 M ll*
X — M I— N ti N ti N ti M 4-
�+ O cB C N N M M LO LO O 00
H! C cB N — — — — — — — — — N
7
W C O N H)
M V
O O O
N O
� +� LL i LO CO I� 00 O O — N M
cB — — — — — N N N N
m N 0 0 0 0 0 0 0 0 0
V N N N N N N N N N N
0
E U >
O O O c
O O U � ~ c
CL 0
S u L cu N _r_
H
AS W 0 > cn W
N N O O C� N CO CO I— ao O
_ L
.N z CU cn
N > w 4— cu
J O C cB C N N
Q' U > U U
Q LL y o to N d cu C
N `� O E N cB . . p . .
O i C> to N
a 0 y d d V cn y
Y Q J U) J
9 Q
0 U) �
.1 O O O
Q
cc 2 G 6 Lu A
C7
z
x
a
00 In O O M M LO (O LO N
I- O M 0 0 I- O O) M O) x
I� N � V N N V (O � (3) M
N C N OM m � LO L M N N
7 N N 00
Z > O
Q a) N
c
O
U
N
00 O In 00 � I- O) M 00 00 0
M r- N M M r- N O) d
O N N M M V V U7 U7 (O I�
a) N N
m e
NN 0 0 69 w
J < M
Q � N
LL
H
C
00 In LO V O_ N LO V M (3)
N O O V O W
a)
00 � O) N rl-
Q
M (0 r- N O) O
�2 �2 7� (° N
7 N N >
C > N O O N
Q � zo e» °
U
a c
o 7 0
0
O O V I- V N O 0) 00 00 M U
V (O I- 0) M V (O 00 N W
c V V V V U7 U7 U7 U7 U7 (O
7 .0 e V N
N Q U 0 fR >
O N 7 M W 2'
J O Y_
M Q W
00 (3) (O 00 00 N N V N N_
V (`") LO N I- r- M lf')
x V O) U7 (M N N V 00 M V
E N
C co i)
Q 2 U (�
0 0 0 0 0 0 0 0 0 0 0 O
N N O M 0 0 0 0 0 0 0 0 0 0 0 W
L
O
w
N
C �
>
00 O O 00 0 N r- ONO I- N >
O) I- r- 00 O) N U7 O
I- r- 00 00 00 O) 0) 0) O
N OL
c zU 3
m
c
C M e
c N `" a
00 00 00 00 00 00 00 00 00 00 00
O }' (0 (0 (0 (0 (0 (0 (0 (0 (O (O (O p M
Z •� .*k U7 U7 U7 U7 U7 U7 U7 U7 U7 U7 L p)
V O m V V V V V V V V V V � 00
O (6
CL y c J .m M M
OZU ° o
c °
a�i > 00
E E 00 00 00 I- O M 1- M N 0 a C
Q iT (O (O (O 0 M 0 V 0 V 00 O
l) l) (O V lf lf
m �
' 0 m
C
m N
(L
v a) z U °
c c a
CL
G) O M O m O
DUrn 00 00 E &
V L U7 U7 O M N O 00 (O O) �
0)
CLO LO O - LO V I- V I- V (O
E V) iT ER O Y 7 N (O 00 0 N V V) � O) O N
~ m ; V V 1 0 U7 0 U7 U7 L O)
V C C co
v N 02
M
(� N +• w 0 M V lf') (O 00 O) O N N N
C L Q) N N Q
W i N 0 Ic o n
m
v v y v �
N p c a� Qaw a
>
U a w
CL ~
Projected Interfund Loan Report
City of Elk River, Minnesota
Tax Increment Financing(Economic Development)District No.23
Proposed Preferred Powder Coating Project
EMV$4,670,900(Land:$815,900 and Building:$3,855,000)with 3%Annual MV Inflato
Note Date: 10/01/13
Note Rate: 1.50%
Amount: $1,153,878
Cumulative Unpaid Semi-Annual Loan
Interest Accrued Net Balance
Date Principal Interest P&I Due Interest Revenue Outstanding
(1) (2) (3) (4) (5) (6) (7) (8)
1,153,878.00
02/01/14 0.00 0.00 0.00 5,769.39 5,769.39 0.00 1,153,878.00
08/01/14 0.00 0.00 0.00 14,423.48 14,423.48 0.00 1,153,878.00
02/01/15 0.00 0.00 0.00 23,077.57 23,077.57 0.00 1,153,878.00
08/01/15 29,155.84 31,731.66 60,887.50 31,731.66 0.00 60,887.50 1,124,722.16
02/01/16 52,452.08 8,435.42 60,887.50 8,435.42 0.00 60,887.50 1,072,270.08
08/01/16 55,057.97 8,042.03 63,100.00 8,042.03 0.00 63,100.00 1,017,212.11
02/01/17 55,470.91 7,629.09 63,100.00 7,629.09 0.00 63,100.00 961,741.20
08/01/17 58,166.94 7,213.06 65,380.00 7,213.06 0.00 65,380.00 903,574.26
02/01/18 58,603.19 6,776.81 65,380.00 6,776.81 0.00 65,380.00 844,971.07
08/01/18 61,390.72 6,337.28 67,728.00 6,337.28 0.00 67,728.00 783,580.35
02/01/19 61,851.15 5,876.85 67,728.00 5,876.85 0.00 67,728.00 721,729.20
08/01/19 64,733.53 5,412.97 70,146.50 5,412.97 0.00 70,146.50 656,995.67
02/01/20 65,219.03 4,927.47 70,146.50 4,927.47 0.00 70,146.50 591,776.64
08/01/20 68,199.18 4,438.32 72,637.50 4,438.32 0.00 72,637.50 523,577.46
02/01/21 68,710.67 3,926.83 72,637.50 3,926.83 0.00 72,637.50 454,866.79
08/01/21 71,791.50 3,411.50 75,203.00 3,411.50 0.00 75,203.00 383,075.29
02/01/22 72,329.94 2,873.06 75,203.00 2,873.06 0.00 75,203.00 310,745.35
08/01/22 75,514.91 2,330.59 77,845.50 2,330.59 0.00 77,845.50 235,230.44
02/01/23 76,081.27 1,764.23 77,845.50 1,764.23 0.00 77,845.50 159,149.17
08/01/23 79,373.88 1,193.62 80,567.50 1,193.62 0.00 80,567.50 79,775.29
02/01/24 79,775.29 598.31 80,373.60 598.31 0.00 80,373.60 0.00
08/01/24 0.00 0.00 0.00 0.00 0.00 0.00 0.00
02/01/25 0.00 0.00 0.00 0.00 0.00 0.00 0.00
$1,153,878 $112,919.10 $1,266,797.10 $43,270.44 $1,266,797.10
Surplus Tax Increment 193.90
Total Net Revenue $1,266,991.00
Prepared by:Springsted Incorporated(printed on 8/27/2013 at 8:37 AM) Elk River(Economic Development)TIF 23 Final Projections 082713.xls
RESOLUTION NO.
AUTHORIZING AN INTERFUND LOAN FOR ADVANCE OF CERTAIN COSTS
IN CONNECTION WITH TAX INCREMENT FINANCING DISTRICT NO. 23
BE IT RESOLVED By the City Council of the City of Elk River, Minnesota(the "City") as
follows:
Section 1. Background.
1.01. The City is proposing to establish Tax Increment Financing District No. 23 (the
"TIF District") within Municipal Development District No. 1 (the "Development District")
pursuant to Minnesota Statutes, Sections 469.174 to 469.1799, as amended (the "TIF Act").
1.02. The City may incur certain costs related to the TIF District which may be
financed on a temporary basis from available City funds.
1.03. Under Section 469.178, Subdivision 7 of the TIF Act, the City is authorized to
advance or loan money from any fund from which such advances may be legally made in order
to finance expenditures that are eligible to be paid with tax increments under the TIF Act.
1.04. The City has determined that it may pay for administrative costs associated with
the establishment of the TIF District and certain other costs incurred in connection with the
proposed development of the TIF District, including but not limited to land and site improvement
costs in the amount of$1,153,878 (the "Costs Advances") on a temporary basis from the General
Fund or any other fund from which such advances, from time to time, may be legally made (the
"Fund") as an interfund loan pursuant to Minnesota Statutes, Section 469.178, Subd. 7.
1.05. The City hereby designates the Costs Advances as an interfund loan in accordance
with the terms of this resolution and the TIF Act.
Section 2. Repayment of Interfund Loan.
2.01. The City will reimburse itself for the Costs Advances in an amount not to exceed
the adopted and, if applicable, amended Tax Increment Financing Plan budget for the TIF
District (the "Interfund Loan"), together with interest at the rate prescribed by the statute
(Minnesota Statutes, Section 469.178, Subdivision 7), which is the greater of the rates specified
under Sections 270.75 or 549.09 at the time a Interfund Loan, or any part of it, is first made,
subject to the right of the City Administrator to specify a lower rate.
2.02. Principal and interest ("Payments") on the Interfund Loan shall be paid semi-
annually on each February 1 and August 1 (each a "Payment Date"), commencing on the first
Payment Date on which the City has Available Tax Increment (defined below), or on any other
dates determined by the City Administrator, through the date of last receipt of tax increment
from the TIF District.
1
2.03. Payments on the Interfund Loan will be made solely from the tax increment from
the TIF District received by the City from Sherburne County in the six-month period before any
Payment Date, net of the amount paid under any agreement with a private developer or otherwise
pledge to the payment of any obligation (the "Available Tax Increment"). Payments shall be
applied first to accrued interest, and then to unpaid principal, unless otherwise specified by the
City Administrator. Interest accruing from the Loan Date will be compounded semiannually on
February 1 and August 1 of each year and added to principal, unless otherwise specified by the
City Administrator. Payments on this Interfund Loan may be subordinated to any outstanding or
future bonds, notes, or contracts secured in whole or in part with available tax increment, and are
on a parity with any other outstanding or future interfund loans secured in whole or in part with
available tax increment.
2.04. The principal sum and all accrued interest payable under this resolution is pre-
payable in whole or in part at any time by the City without premium or penalty.
2.05. This resolution is evidence of an internal borrowing by the City in accordance
with Section 469.178, subdivision 7 of the TIF Act, and is a limited obligation payable solely
from Available Tax Increment pledged to the payment hereof under this resolution. The
Interfund Loan shall not be deemed to constitute a general obligation of the State of Minnesota
or any political subdivision thereof, including, without limitation, the City. Neither the State of
Minnesota, nor any political subdivision thereof shall be obligated to pay the principal of or
interest on the Interfund Loan or other costs incident hereto except out of Available Tax
Increment. The City shall have no obligation to pay any principal amount of the Interfund Loan
or accrued interest thereon, which may remain unpaid after the final Payment Date.
2.06. The City may at any time make a determination to forgive the outstanding
principal amount and accrued interest on the Interfund Loan, in whole or in part, on any date
from time to time, to the extent permissible under law.
2.07. The City may from time to time amend the terms of this Resolution to the extent
permitted by law, including without limitation amendment to the payment schedule and the
interest rate; provided that the interest rate may not be increased above the maximum specified in
Section 469.178. subd. 7 of the TIF Act.
Section 3. Effective Date. This resolution is effective upon execution in full of the
Contract.
Adopted this 3rd day of September, 2013.
John J. Dietz, Mayor
ATTEST:
Tina Allard, City Clerk
2
CITY OF ELK RIVER
COUNTY OF SHERBURNE
STATE OF MINNESOTA
RESOLUTION NO.
RESOLUTION APPROVING THE MODIFICATION OF THE DEVELOPMENT PROGRAM
FOR A DEVELOPMENT DISTRICT NO. 1,
ESTABLISHING A TAX INCREMENT FINANCING DISTRICT,
APPROVING A TAX INCREMENT FINANCING PLAN THEREFOR
AND AUTHORIZING THE EXECUTION OF A DEVELOPMENT AGREEMENT
BE IT RESOLVED by the City Council (the "Council") of the City of Elk River,
Minnesota(the "City"), as follows:
Section 1. Recitals.
1.01. It has been proposed that the City modify the Development Program (the
"Program Modification") for Development District No. 1 (the "Development District"), establish
Tax Increment Financing District No. 23 within the Development District (the "TIF District")
and adopt the related Tax Increment Financing Plan therefor (the "TIF Plan") all pursuant to and
in conformity with applicable law, including Minnesota Statutes, Sections 469.124 through
469.133 and Sections 469.174 through 469.1794, as amended (the "TIF Act"), all as reflected in
that certain document entitled "Modification to the Development Program for Development
District No. 1 and the Tax Increment Financing Plan for Tax Increment Financing (Economic
Development) District No. 23 (Preferred Powder Coating Project)", and presented for the
Council's consideration.
1.02. The City has performed all actions required by law to be performed prior to the
modification and approval of the Program Modification and the TIF Plan, delivery of the
Program Modification and the TIF Plan to the Board of Sherburne County (the "County") and
the Board of Independent School District No. 728 (the "School District"), and the holding of a
public hearing by the City thereon following notice thereof published in the City's official
newspaper at least 10 but not more than 30 days prior to the public hearing.
1.03. The Council has investigated the facts relating to the Program Modification and
the TIF Plan; at the public hearing the City Council heard testimony from all interested parties on
the TIF Plan; the City Council has considered the documentation submitted in support of the TIF
District and TIF Plan, including data, information and/or substantiation constituting or relating to
why the TIF District meets the requirements to be an economic development tax increment
financing district and why the assistance satisfies the "but for" test; and the City Council has
taken into account the information and knowledge gained in hearings upon and during
consideration of other matters relating to the proposed Development.
1.04. The City has caused to be prepared a Development Agreement, among the City,
and Preferred Real Estate Holdings, LLC (the "Developer") and Preferred Powder Coating, LLC
(the "Company"), a form of which is on file with the City, pursuant to which the Developer
430951v2 JSB EL185-22
agrees to construct the Development described below and the City agrees to provide tax
increment assistance for the costs of the Development (the "Development Agreement") and an
Agreement of Purchase and Sale, between the City and the Developer, a form of which is on file
with the City, pursuant to which the City agrees to sell to the Developer approximately 10.36
acres of real property on which the Development will be constructed (the "Purchase
Agreement").
Section 2. Findings for the Adoption and Approval of the Program Modification and
TIF Plan.
2.01. The City Council hereby finds that the TIF District is in the public interest and is
an "economic development district" within the meaning of Minnesota Statutes, Section 469.174,
Subd. 12, because it will result in increased employment in the state and it will result in
preservation and enhancement of the tax base of the state. In addition, the TIF District will
facilitate the increase in manufacturing in the City by the construction of an approximately
100,224 square foot manufacturing facility for the Company, a metal powder coating company
(the "Development"), and at least 85% of the facility will be used for manufacturing,
warehousing, distribution, or research, with less than 15% available for office or other space not
related to such functions. Based on representations by the Developer and the Company, the City
finds that the Development will be fully constructed in 2013. The City finds that jobs will be
created and maintained in this state, including construction jobs.
2.02. The City Council hereby makes the following additional findings in connection
with the Tax Increment District:
(a) The City Council further finds that the proposed Development, in the
opinion of the City Council, would not occur solely through private investment within the
reasonably foreseeable future and, therefore, the use of tax increment financing is deemed
necessary. The specific basis for such finding being:
The property on which the Development will occur would not be
developed in the reasonably foreseeable future due to the high costs
related to construction of manufacturing facilities and the acquisition and
development of the site, including extraordinary site improvement costs
associated with wetlands remediation and development of the site. The
Developer and the Company have represented that they could not proceed
with the development without tax increment assistance.
(b) The City Council further finds that the TIF Plan conforms to the general
plan for the development or redevelopment of the City as a whole. The specific basis for
such finding being:
The TIF Plan will generally compliment and serve to implement policies
adopted in the City's comprehensive plan. The Development
contemplated is in accordance with the existing zoning for the property
and the City's Planning Commission has determined that the Development
is consistent with the comprehensive plan.
2
430951v2 JSB EL185-22
(c) The City Council further finds that the TIF Plan will afford maximum
opportunity consistent with the sound needs of the City as a whole for the development of
the TIF District by private enterprise. The specific basis for such finding being:
The proposed assistance will help finance public costs related to the
Development. The Development will increase the taxable market
valuation of the City, and increase manufacturing facilities in the City.
(d) For purposes of compliance with Minnesota Statutes, Section 469.175,
Subdivision 3(d), the City Council hereby finds that the increased market value of the
property to be developed within the TIF District that could reasonably be expected to
occur without the use of tax increment financing is $0, which is less than $4,029,653,
which is the increased market value estimated to result from the proposed development
(i.e., $5,101,056) less the present value of the projected tax increments for the maximum
duration of the TIF District (i.e., approximately ($1,071,403). In making these findings,
the City Council has noted that the property has not been developed for many years and
would likely remain undeveloped if tax increment financing were not available. Thus,
the use of tax increment financing will be a positive net gain to the City, the School
District, and the County, and the tax increment assistance does not exceed the benefit
which will be derived therefrom.
The provisions of this Section 2.02 are hereby incorporated by reference into and made a
part of the TIF Plan.
2.03. The Council further finds that the Program Modification and the TIF Plan are
intended and in the judgment of the Council their effect will be to promote the public purposes
and accomplish the objectives specified in the TIF Plan for the TIF District and the Development
Program for the Development District.
Section 3. Approval of Development Agreement.
3.01. The Development Agreement and the Purchase Agreement as presented to the
City Council is hereby in all respects approved, in substantially the forms submitted, together
with any related documents necessary in connection therewith (collectively, the "Documents")
and the Mayor and the City Administrator are hereby authorized and directed to execute the
Documents on behalf of the City and to carry out, on behalf of the City, the City's obligations
thereunder.
3.02. The approval hereby given to the Documents includes approval of such additional
details therein as may be necessary and appropriate and such modifications thereof, deletions
therefrom and additions thereto as may be necessary and appropriate and approved by legal
counsel to the City and by the officers authorized herein to execute said documents prior to their
execution; and said officers are hereby authorized to approve said changes on behalf of the City.
The execution of any instrument by the appropriate officers of the City herein authorized shall be
conclusive evidence of the approval of such document in accordance with the terms hereof. In
the event of absence or disability of the officers, any of the Documents authorized by this
Resolution to be executed may be executed without further act or authorization of the City
3
430951v2 JSB EL185-22
Council by any duly designated acting official, or by such other officer or officers of the City
Council as, in the opinion of the City Attorney, may act in their behalf.
Section 4. Effective Date. This resolution is effective upon execution in full of the
Contract.
Adopted this 3rd day of September, 2013.
Mayor
ATTEST:
City Clerk
4
430951v2 JSB EL185-22
FORGIVABLE LOAN PROGRAM
LOAN AGREEMENT
THIS LOAN AGREEMENT ("Agreement") is made effective as of August ,
2013 (the "Closing Date"), by and between PREFERRED POWDER COATING, LLC, a
Minnesota limited liability company ("Borrower"), and the ECONOMIC
DEVELOPMENT AUTHORITY OF THE CITY OF ELK RIVER, a public body
corporate and politic of the State of Minnesota ("Lender").
RECITALS
A. Borrower has applied to Lender for a term loan on the Loan Property (as
hereinafter defined) under Lender's "Forgivable Loan Program" in the principal amount
of Two Hundred Thousand and No/100s Dollars ($200,000.00) (the "Loan").
B. Lender is willing to make the Loan to Borrower, 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$200,000.00;
(ii) A Security Agreement securing the Note ("Security Agreement").
The Security Agreement is of even date herewith, is executed by Borrower, as
debtor, in favor of Lender, as secured party, and provides a security interest in
certain equipment to be purchased using the proceeds of the Loan (the
"Equipment");
(iii) The personal guaranties of Dan Bosshart, Vice President of
Borrower and Lloyd Peterson, President of Borrower (collectively, the "Personal
Guaranties");
(iv) An entity guaranty (the "Entity Guaranty") of Preferred Real
Estate Holdings, LLC (the "Entity Guarantor"); and
(v) A Mortgage and Assignment of Rents and Security Agreement and
Fixture Financing Statement securing the Entity Guaranty ("Mortgage"). The
Mortgage is of even date herewith, is executed by Borrower, as mortgagor, in
favor of Lender, as mortgagee, and covers property therein described situated in
Sherburne County, Minnesota(the "Loan Property") as well as a security interest
in the Equipment.
D. Contemporaneously with the execution hereof, Borrower is entering into a
loan facility (the `Bank Loan") with the Bank of Elk River (the `Bank"); two (2) loan
facilities (respectively, the "City Loan" and the "County Loan") with the City of Elk
River (the "City"); and a separate Microloan Loan facility (the "Microloan") with
Lender.
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 loan in the principal amount of $200,000.00 to be advanced in a single
disbursement as hereinafter provided, the Loan to be evidenced by the Note and secured
by the Security Agreement, the Personal Guaranties, the Entity Guaranty, the Mortgage
and any other security document required under this Agreement. The Loan proceeds will
be used only to pay for the costs materials, labor and soft Nlpurp ructing the
Improvements (as defined below).
2. The Project.
(a) Construction` of Improve eats. For s of this
Agreemen t, 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 constructing a new industrial building,
substantially in accordance with plans and specifications which have been
provided to Lender. 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." Entity
Guarantor has not commenced construction of the Improvements. Borrower shall
14 cause Entity Guarantor to commence construction of the Improvements promptly
after the date of this Agreement and to carry on continuously, diligently and with
reasonable dispatch the construction of the Improvements to full and final
completion. Failure to complete the Improvements on or before December 31,
2013, shall be a default hereunder.
(b) Purchase of Equipment and Security Interest. Borrower has
provided Lender a preliminary list of the Equipment that it intends to purchase for
use in its business from the Project, attached hereto as Exhibit A. Borrower will
complete the purchase of the Equipment and take delivery of the same on or
before the date that the Certificate of Occupancy for the Loan Property is issued.
If Borrower wishes to purchase other or different Equipment, Borrower shall
provide Lender an updated Exhibit A for its review and approval, which approval
will not be unreasonably withheld, so long as the replacement equipment is
substantially similar to the replaced Equipment in function and value. Borrower
will provide Lender a final list of Equipment purchased within fifteen (15) days
after the Certificate of Occupancy for the Loan Property is issued. The Security
-2-
Agreement will provide Lender with a 1St priority security interest in the
Equipment. Borrower agrees to promptly and fully observe and comply with the
reasonable requirements of Lender with respect to the Security Agreement,
disbursements of funds and such other reasonable requirements as Lender may
make.
3. Title Insurance. Sherburne County Abstract and Title Company ("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 first priority lien
upon Borrower's interest in the Loan Property as contemplated by this Agreement,
subject only to the lien of the mortgages set forth as Items 1, 2, 3 and 4 on Exhibit B to
the Mortgage (the `Bank Mortgage," the "City Mortgage," the "County Mortgage" and
the "Microloan Mortgage,"respectively). 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) Security Agreement. Deliver to Lender the Security Agreement,
together with evidence that a UCC-1_Financing Statement has been or will be
duly filed for record.
(c) Personal Guaranties. Deliver to Lender the Personal Guaranties.
( ntit Guarant Deliver to Lender the Entity Guaranty.
(e) Mortgage. Deliver to Lender the Mortgage, together with evidence
the�I e Mortgage has been or will be duly filed for record.
(f) Title Insurance Policy. Deliver to Lender a Mortgagee's title
insurance policy ("Title Policy"), from Title issued to Lender in the amount of
$200,000.00 with respect to the Mortgage and insuring that the Mortgage is a
fourth lien on the Loan Property free and clear of mechanic's liens, materialmen's
liens, taxes, special assessments, rights of parties in possession, other than: (i) the
Bank Mortgage; (ii) the City Mortgage; (iii) the County Mortgage; (iv) the
Microloan Mortgage; and (v) the rights of tenants as tenants only under existing
leases, and questions of title and survey approved in writing by Lender.
(g) Bank Loan Documents. Deliver to Lender copies of all of the
documents relating to the Bank Mortgage (the `Bank Loan Documents").
-3-
(h) Organizational Documents and Resolutions. Deliver to Lender
copies of Borrower's: (i) articles of organization, certified by the Minnesota
Secretary of State, (ii) a certificate of good standing issued by the Minnesota
Secretary of State; (iii) member control agreement and bylaws; and (iv)
resolutions certified to Lender authorizing the execution and delivery of this
Agreement, the Note, the Security Agreement, and any other document to be
executed by Borrower pursuant to this Agreement.
(i) Organizational Documents and Resolutions. Deliver to Lender
copies of the (i) articles of organization for Borrower certified by the Minnesota
Secretary of State, (ii) a certificate of good standing for Borrower issued by the
Minnesota Secretary of State; (iii) a copy of Borrower's member control
agreement and bylaws; and (iv) a certified copy of resolutions of Borrower
authorizing the execution and delivery of this Agreement, the Note, the Security
Agreement, and any other document.to be executed by Borrower pursuant to this
Agreement. r,
0) Project Cost and Source of Funds Certificate. Deliver to Lender a
sworn certificate detailing costs and sources of funds to be utilized for the
purchase, delivery and installation of the Equipment ("Project Cost Certificate"),
in a form acceptable to Lender, verified on oath by a manager of Borrower
showing an itemized breakdown o£ (i) the source and amount of all Project funds
relating to the purchase, delivery and installation of the Equipment; and (ii) of the
total cost of the Equipment and the delivery and installation thereof. Not less than
fifty percent (50%) of the Project funds must come from a source other than the
Loan proceeds. 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.
(k) h ranc eliver to Lender: (i) a certificate or policy for all
insurance required, under the terms hereof 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.
(1) 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. Borrower represents and warrants
that it is in the process of obtaining a variance for its intended use of the Loan
Property. Borrower shall obtain such variance and provide a copy of the same to
-4-
Lender on or before the issuance of the Certificate of Occupancy for the Loan
Property is issued.
(m) 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.
(n) Indemnity. Deliver tc —itle any indemnity agreement in favor of
Title in the form required by Tit rder for Title to issue the title insurance
policies referred to above.
(o) Expend Funds; Lien Waivers; Property Documents. t later than
fifteen (15) days after the issuance of the Certificate of Occupancyor the Loan
Property, Borrower shall deliver to Lender: (i) a copy of the Certificate of
Occupancy for the Loan Property; (ii) a final Equipment List executed by an
officer of Borrower(which, upon acceptance by Lender, will be attached hereto as
Exhibit A-1); (iii) a final Project Cost Certificate; and (iv) evidence acceptable to
Lender that Borrower h, s paid all ac sition, delivery and installation costs for
the Equipment.
(p) Consent. Deliver to Lender an original signed and notarized form
of consent to the Mortgage from each of Bank and the City, in the form and
content reasonably acceptable to Lender.
(q) Zoning Matters. Deliver to Lender evidence that Borrower has
obtained municipal and zoning approval necessary to complete the Improvements,
including, without limitation, compliance with any signage ordinances.
(r) Escrow and Disbursement Agreement. Deliver the Escrow and
Disbursement Agreement executed by Borrower and Title, to Lender.
(s) Lease. Deliver to Lender a copy of the Lease for the use of the
Loan Property, executed no later than the date of this Agreement, by and between
Entity Guarantor, as landlord, and Borrower, as Tenant.
(t) Program Fee. Deliver to Lender the program fee of $ .00.
[CLAY—what$$ amount should I insert?]
Lender may waive any of the above requirements in its sole discretion.
-5-
5. Disbursement of Loan. Upon receipt by Lender of all of the items
required pursuant to Section 4 above in the form and condition required therein and
confirmation from Title that Title is prepared to issue the mortgagee's title insurance
policy as required herein, Lender agrees to disburse the Loan proceeds into the escrow
account set up pursuant to the Escrow and Disbursement Agreement by and among
Lender, Borrower and Title.
6. Forgivable Loan Requirements and Covenants.
(a) Loan Forgiveness Program. This Loan is made pursuant to the
Lender's Forgivable Loan Program. From and after the Closing Date through and
until the Conversion Date (as defined below), Borrower shall not be required to
make any payments of principal or interest, though interest shall accrue at the
interest rate set forth in the Note.
(b) Reporting. On each anniversary of the Closing Date, Borrower
shall provide an annual report in a form acceptable to Lender, certified by an
officer of Borrower, reporting: (i) the number of jobs created by Borrower; (ii)
the hourly wage paid to each position; (iii) average weekly hours worked by each
employee; and (iv) the location of the business, and each annual reports shall have
the pay stubs for each employee attached.
(c) Guidelines. The Loan will be forgiven as set forth below if
Borrower meets all of the following requirements:
(i) Location/Existence. Borrower's business in now, and since the
execution of this Agreement has at all times been, located in Elk River and
has been open for business as a going concern.
(ii) Job Creation/Maintenance. Preferred Powder Coating, LLC has
created not less than eight (8) new jobs from and after the earlier of (a)
the date the Certificate of Occupancy for the Loan Property is issued; and
(ii) January 1, 2014 (the "Commencement Date"). For the created jobs:
(A) the salary/wage of each position must be $15.00/hour or greater; (B) at
least five (5) of the created jobs must be filled by a person who meets
State of Minnesota's most current low to moderate income guidelines;
(C) the employee filling such job must have worked for at least 1,750
hours in any twelve (12) month period; provided that the 12-month period
shall commence no later than the two (2) year anniversary of the
Commencement Date. If the employee initially hired to any created
position leaves or is terminated prior to completing the required time of
employment, Lender may allow a replacement employee hired to fill the
position to complete the requirements of this section, in the sole discretion
of Lender as to: (X) whether to allow such "tacking"; and (Y) the terms
and conditions of such completion.
-6-
(iii) No Defaults. As of the Determination Date, there are no defaults
under this Agreement or any other agreement between Lender and
Borrower which is beyond any notice and cure period.
(d) Completion. Within a reasonable time after: (i) the 3rd
Anniversary of the Commencement Date; or (ii) such earlier date as Borrower
requests Lender's review, Lender will determine, in its sole and absolute
discretion, whether Borrower has fully and timely complied with the requirements
of this Section 6. Borrower will promptly provide all such documentation as
Lender reasonably requests in Lender's effort to determine whether Borrower has
timely complied with the requirements of this Section 6. The date upon which
Lender gives Borrower written notice of its determination of Borrower's
compliance with the requirements of this Section 6 is the "Determination Date".
If Borrower has timely and completely complied with all of the requirements of
this Section 6, as strictly interpreted, Lender will forgive all outstanding principal
and interest due and owing pursuant to the Loan as of the Determination Date.
Within a reasonable time thereafter, Lender will return the Note and Guaranty to
Borrower and will provide a satisfaction and release of the Mortgage and a
termination of its financing statement. If, however, Lender determines that
Borrower has not fully or timely complied with the requirements of this Section 6
or at any time after the 2nd Anniversary of the Commencement Date reasonably
determines that Borrower cannot comply with the requirements of this Section 6,
then: (i) all interest accrued to date shall be capitalized as of the next occurring
first of a calendar month (the "Conversion Date"); (ii) the term of the Loan shall
be seven (7) years, commencing upon the Conversion Date; (iii) Lender will
calculate the monthly payments due and owing from Borrower, based upon a
seven (7) year amortization; (iv) the first payment will be due and payable on the
Conversion Date; and (v) the terms and conditions of this Loan Agreement and
any other related loan document and the Borrower's obligations thereunder shall
14,
continue until the Loan and all accrued interest is repaid in full.
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 therew"
8. Books ecords. Borrower agrees to maintain accurate and complete
books, accounts and records in regard to the Loan Property and the Equipment 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. Borrower agrees not to sell, transfer, lease or
convey the Loan Property, the Equipment or any part thereof, or any interest therein, or
encumber the Loan Property, the Equipment or any part of thereof, in any manner,
-7-
without 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 such prior sale, transfer lease or conveyance.
10. Time of Essence. Time is of the essence in the performance of this
Agreement.
11. 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
may be granted or withheld in the sole discretion 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 and/or Entity Guarantor, 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 and/or Entity Guarantor under any
permit or agreement issued or made by the City or other governmental
body having jurisdiction over the Loan Property and any contracts
obtained or held by Borrower and/or Entity Guarantor 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,
and any contractors under all contracts obtained or held by Borrower
and/or Entity Guarantor in connection with construction or operation of
the Improvements or Borrower's business.
(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 and/or Entity Guarantor in
connection with the construction or operation of the Improvements 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 Project.
(c) Performance of Note, Security Agreement, Etc. Without limiting the
foregoing, keep and perform all of the terms, covenants, conditions and
requirements of the Note, the Security Agreement, this Agreement, the
-8-
Bank Loan Documents, the City Loan documents (the "City Loan
Documents"), the County Loan documents (the "County Loan
Documents") and the Microloan loan documents (the "Microloan
Documents").
(d) Insurance. During the term of the this Agreement, Borrower shall procure
and maintain or cause to be procured and maintained at its sole expense,
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 of Entity
Guarantor by the Mortgage, insuring Lender and Borrower with
coverages, in amounts and with companies satisfactory to Lender. The
policy or 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: (i) One percent (1%) processing fee (if
not already paid); (ii) all of Lender's attorneys' fees; and (iii) all loan
charges including, but not limited to, recording fees and Mortgage
Registration Taxes for the Mortgage and any other instruments required
under this Agreement, except to the extent otherwise payable by Lender.
(f) Continual Operation. At all times while any portion of the Loan remains
outstanding, Borrower will: (i) maintain its status as a for profit entity;
(ii) maintain a positive net worth; and (iii) will operate its business from
the Loan Property in a first class manner (from and after issuance of the
Certificate of Occupancy for the Loan Property).
(h) Default Notices. Provide Lender with a copy of any default notice
received pursuant to the Bank Loan Documents, the City Loan
Documents, the County Loan Documents and the Microloan Loan
Documents (to the extent that such notice is send by a party other than
Lender) or any governmental authority, promptly after receipt of the same.
(i) Title to Equipment. Borrower owns or will own all of the Equipment "free
and clear," that Lender will have a "first priority" lien in the Equipment
pursuant to the Security Agreement and that no other party has any right,
title or interest in the Equipment, other than any subordinate security interest
in the Equipment that might be granted pursuant to the Bank Loan
Documents,the City Loan Documents, the County Loan Documents.
(j) Positive Net Worth. On the Commencement Date and each anniversary
thereof, Borrower shall provide interim financial statements (to date) of
Borrower consisting of at least statements of income, cash flow, and a
balance sheet such year to date, setting forth in each case in comparative
form corresponding figures from the previous fiscal year, which
-9-
statements shall be certified by Borrower as true, correct and complete. In
each such interim financial statement, Borrower must show a positive net
worth.
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 Security Agreement and any other instrument
required hereunder are within the powers of the Borrower and have been
duly authorized by all necessary company action on the part of the
Borrower. This Agreement and the Note, the Security Areement 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 Equipment which would have a material adverse effect on
Borrower or the Equipment.
(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.
e) All information, financial or other, which has been submitted by Borrower
and Guarantors in connection with the Loan is true, accurate and complete
I
n all material respects.
(f) tity Guarantor is a [wholly owned subsidiary of Borrower].
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 any default by Borrower under this
Agreement, the Note, the Security Agreement, the Subsidy Agreement or any other
document supporting this Loan.
15. Defaults. Each of the following shall constitute an Event of Default:
(a) I£ (i) Entity Guarantor fails to commence construction of the
Improvements within thirty (30) days after the date of this Agreement; (ii) work
on construction of the Improvements is halted for more than five (5) consecutive
-10-
business days; (iii) construction of the Improvements is not completed by
December 31, 2013; (iv) the Improvements are not constructed in accordance with
this Agreement; or(v) Borrower or Entity Guarantor abandons the Loan Property.
(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 and, if such
proceedings are instituted against Borrower, an order, judgment or decree,
without the consent of Borrower appointing a trustee or receiver for Borrower or
any part of its 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 thirty (30)
days.
(c) 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 thirty (30) days after written notice is given by
Lender.
(d) 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
satisfaction, subject, however, to Borrower's right to contest the same in
accordance with the provisions of the Security Agreement.
Y.,
Clea Any judgment, attachment, garnishment or other similar process is
ainst Borrower or against any property or assets of Borrower and is not
satisfied or discharged or bonded to Lender's satisfaction within thirty
of entry.
(f) Borrower fails to timely: (i) purchase the Equipment; (ii) take
delivery of the Equipment; (iii) complete the Improvements (which will be
deemed timely if completed by December 31, 2013; or (iv) provide Lender any
information necessary for Lender to perfect its security interest.
(g) A transfer which violates by Paragraph 9 hereof, Encumbrances
and Transfer, occurs.
(h) Borrower: (i) fails to pay any amount due under this Agreement,
the Note, the Security Agreement, the Bank Loan Documents, the City Loan
Documents, County Loan Documents or the Microloan Documents when due; (ii)
fails to perform any other obligation to be performed under this Agreement, the
Note, the Security Agreement, the Bank Loan Documents, the City Loan
-11-
Documents, County Loan Documents or the Microloan Documents or any other
document executed by Borrower pursuant to this Agreement; or (iii) fails to pay
any amount or perform any obligation under any other 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, City or Bank, and such failure
continues beyond any applicable cure period.
(i) Any representation or warranty by Borrower contained herein or in
the Note, the Security Agreement, the Bank Loan Documents, the City Loan
Documents, County Loan Documents or the Microloan Documents or any other
instrument required hereunder is false or untrue in any material respect when
made.
(j) 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 or has not caused Entity
Guarantor to take the necessary steps to correct or cure the same within thirty (30)
days after written notice is given by Lender.
(k) A default under the Lease beyond any applicable notice and cure
period.
Upon the occurre` " �. f an Ev . t'=of Default, Lender, at Nitstion, shall, in addition to any
other remedies whic ,a fight "`entitled to by law, have the right to:
(1) To refrain from making advances under this Agreement and/or to require
Title to return advances of Loan proceeds held by Title;
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
t Npoe(3) uc h other acts or deeds which reasonably may be 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
Security Agreement and any other security document required
under this Agreement as security for the Loan.
-12-
(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 purchase the Equipment; to
collect and use any funds of Borrower; to use any funds which may
remain unadvanced under this Agreement; to enter into such
contracts and arrangements as Lender reasonably deems necessary
for such purposes; to prosecute and defend all actions or
proceedings in connection with the Loan Property or the
Equipment and do any and every act which Borrower might do in
its own behalf, (b) OMITTED; (c) to perform each of the terms,
covenants and conditions to be kept and performed by Borrower
under any contracts and/or leases obtained or held by Borrower in
connection with the operation of the Improvements or the purchase
of the Equipment, 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
Security Agreement and any other instrument required under this
Agreement, the Bank Loan Documents, the City Loan Documents,
County Loan Documents or the Microloan Documents; 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);
0, he 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;
- (6) declare the entire unpaid principal of the Note and all accrued
interest thereon immediately due and payable without notice;
N(7exercise any remedies under the Security Agreement, 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 Security Agreement,
the Mortgage and such other security instrument.
16. Default under Note and Security Agreement. 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 Security Agreement
and any other security instrument held by Lender in connection with the Loan.
-13-
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:
Preferred Powder Coating, LLC
1369 Mississippi Street
New Brighton, MN 55112
Attention: Lloyd Peterson
If to Lender: "At
Economic Development Authority of th City of Elk River
13065 Orono Parkway
Elk River, Minnesota 55330
Attn: Director of Economic Development
or addressed to any such party at such other address as such party shall Ater 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.
Binding 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. 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.
21. 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.
22. Entire Agreement. This Agreement, the Note, the Security Agreement 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 may be amended only in a writing signed by the parties hereto.
-14-
23. 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 Security Agreement 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
Security Agreement or the other documents executed in connection herewith, other than
the gross negligence or willful misconduct of Lender in the creation and/or
implementation of its Forgivable Loan program.
[Signature Pages follow]
[Remainder of page intentionally left blank.]
-15-
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.
BORROWER:
Preferred Powder Coating, LLC. a
Minnesota limited liability company
By:
Name: Lloyd Peterson
Its: President
-16-
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.
ECONOMIC DEVELOPMENT
AUTHORITY OF THE CITY OF ELK
RIVER
By:
NameIts:
Name:
Its:
-17-
EXHIBIT A
List of Equipment
GP:3453246 0
-Ig-
MORTGAGE
AND
ASSIGNMENT OF RENTS
AND
SECURITY AGREEMENT
AND
FIXTURE FINANCING STATEMENT
(Forgivable Loan Program)
This Mortgage and Assignment of Rents and Security Agreement and Fixture
Financing Statement ("Mortgage") is made as of August , 2013, by PREFERRED
REAL ESTATE HOLDINGS, LLC, a Minnesota limited liability company
("Mortgagor"), in favor of the ECONOMIC DEVELOPMENT AUTHORITY OF THE
CITY OF ELK RIVER, a public body corporate and politic of the State of Minnesota
("Mortgagee").
THE MAXIMUM AMOUNT SECURED BY THIS MORTGAGE IS
$200,000.00 OF PRINCIPAL INDEBTEDNESS, TOGETHER WITH ALL INTEREST
ACCRUING THEREON AND ANY AMOUNTS WHICH MAY BE ADVANCED BY
MORTGAGEE IN PROTECTION OF THE MORTGAGED PREMISES OR THE LIEN
OF THIS MORTGAGE.
RECITALS
A. Preferred Powder Coating, LLC (`Borrower") has executed and delivered
to Mortgagee a Promissory Note effective as of the date hereof in the principal amount of
$200,000.00 and bearing interest at the rate set forth therein, with principal being due and
payable as set forth therein and with all principal and interest, if not sooner paid, being
due and payable on a date to be determined, no later than December 31, 2023 (the
Promissory Note as the same may be renewed, extended, replaced, modified or amended
is herein called the "Note"). The proceeds of the Note are being utilized to purchase
equipment for use in Borrower's business operations from the Mortgaged Property (as
defined below).
B. Contemporaneous herewith, Borrower has entered into that certain loan
agreement (the "Loan Agreement") setting forth the terms and conditions of the
Borrower's and Lender's obligations with relation to this loan facility.
C. Mortgagor is the owner of the Mortgaged Property and is the landlord
under that certain unrecorded lease dated August , 2013, with Borrower, as tenant,
leasing the entire Mortgaged Property to Borrower. Mortgagor is construction certain
improvements upon the Mortgaged Property for Borrower's use, pursuant to the Lease
(the "Improvements").
D. As a condition of entering into the loan facility, Lender has required that
Mortgagor provide an "Entity Guaranty" of Borrower's obligations under Note, the Loan
Agreement and any other documents relating to or arising from this loan facility. Lender
further required that Mortgagor's obligations under the Entity Guaranty be secured by
this Mortgage.
NOW THEREFORE, in consideration of the Recitals and for the purpose of
securing the payment and performance of all of Mortgagor's obligations under the Entity
Guaranty (collectively "Obligations"); and to secure the performance of all covenants,
conditions and agreements herein and in the Entity Guaranty, Mortgagor does hereby
mortgage, grant, bargain, sell, release and convey unto Mortgagee, with power of sale,
forever all of Mortgagor's right, title and interest in all the tracts or parcels of land lying
and being in Sherburne County, Minnesota, legally described in Exhibit A hereto,
(hereinafter the "Land"), whether now owned or hereafter acquired, together with: (i) all
building materials, supplies and equipment now or hereafter located on the Land and
suitable or intended to be incorporated in any building, structure, or other improvement
located or to be erected on the Land; and (ii) all of the buildings, structures and other
improvements now standing or at any time hereafter constructed or placed upon the
Land; and (iii) all heating, plumbing and lighting apparatus, motors, engines, and
machinery, electrical equipment, incinerator apparatus, air conditioning equipment, water
and gas apparatus, pipes, faucets, and all other fixtures of every description which are
now or may hereafter be placed or used upon the Land or in any building or improvement
now or hereafter located thereon; and (iv) all equipment purchased with the Loan
proceeds, as set forth on Exhibit A to the Loan Agreement, as updated from time to time
(collectively, the "Equipment"); and (v) all additions, accessions, increases, parts,
fittings, accessories, replacements, substitutions, betterments, repairs and proceeds to any
and all of the foregoing; and (vi) all hereditaments, easements, appurtenances, estates,
rents, issues, profits, condemnation awards, proceeds of policies of insurance and other
rights and interests now or hereafter belonging or in any way pertaining to the Land or to
any building or improvement now or hereafter located thereon; and (vii) all leases or
other occupancy agreements now or hereafter in effect in any way appertaining to the
-2-
Land or to any building or improvement now or hereafter located thereon, including,
without limitation, all cash and security deposits, advance rentals and deposits or
payments of a similar nature ("Leases"), and all Rents (as herein defined) (all of the
foregoing, together with the Land, hereinafter being referred to as the "Property" or
"Mortgaged Property"),
TO HAVE AND TO HOLD the Mortgaged Property unto Mortgagee forever;
PROVIDED, NEVERTHELESS, That this Mortgage is given upon the express
condition that if Mortgagor shall cause to be paid and performed all of the Obligations,
and shall also keep and perform all and singular the coyits herein contained on the
part of Mortgagor to be kept and performed then tha Mortgage and the estate hereby
granted shall cease and be and become void and shall ased of record at the expense
of Mortgagor; otherwise this Mortgage shall be and iiffiain t full force and effect.
MORTGAGOR REPRESENTS, WARRANTS AND COVENANTS to and with
Mortgagee that Mortgagor has good right and full power and authority to execute this
Mortgage and to mortgage the Mortgaged Property; that the Mortgaged Property is free
from all liens and encumbrances except those identified in Exhibit B hereto (collectively,
the "Other Mortgages"); that Mortgagee shall quietly enjoy and possess the Mortgaged
Property; that Mortgagor will warrant and defend the title to the Mortgaged Property
against all claims, whether now existing or hereafter arising. The covenants and
warranties of this paragraph shall survive foreclosure of this Mortgage and shall run with
the Land.
AND IT IS FURTHER COVENANTED AND AGREED AS FOLLOWS:
ARTICLE ONE
GENERAL COVENANTS, AGREEMENTS, WARRANTIES
1.1 Payment of Obligations, Observance of Covenants. Mortgagor will duly
pay and perform its Obligations and will perform all other agreements and covenants by
Mortgagor to be performed hereunder.
1.2 Payment of Impositions. Mortgagor agrees to pay, before a penalty might
attach for nonpayment thereof, all taxes, assessments, water and sewer charges, and other
fees, taxes and charges of whatsoever nature levied upon or assessed or placed against the
Mortgaged Property (collectively "Impositions"). Mortgagor will likewise pay all taxes,
assessments and other charges, levied upon or assessed, placed or made against, or
measured by, this Mortgage, or the recordation hereof, or the Obligations, provided that
Mortgagor shall not be obliged to pay such tax, assessment or charge if such payment
would be contrary to law or would result in the payment of an usurious rate of interest on
the Obligations. Mortgagor shall promptly furnish to Mortgagee all notices received by
Mortgagor of amounts due under this Section and upon Mortgagee's request, shall deliver
proper receipts evidencing the payment of such amounts. In the event of a judicial decree
or legislative enactment after the date of this Mortgage, providing that any such
imposition may not be lawfully paid by Mortgagor, or in the event that the payment of
-3-
any such imposition by Mortgagor would result in the payment of a usurious rate of
interest on the Obligations, the Obligations, together with interest, shall become
immediately due and payable, or, at Mortgagee's option, Mortgagee may pay any amount
or portion of such Imposition as renders the Obligations unlawful or usurious, in which
event Mortgagor shall concurrently therewith pay the remaining lawful and non-usurious
portion or balance of said Imposition.
1.3 Payment of Operatin.Costs, Prior Mortgages and Liens. Mortgagor
agrees that it will pay, or cause to be paid, all operating costs and expenses of the
Mortgaged Property; keep the Mortgaged Property free from mechanics' and material
suppliers' and other liens, subject to Mortgagor's right to contest in good faith as set forth
in Section 1.4 hereof, will keep the Mortgaged Property free from levy, execution or
attachment and will immediately pay when due all indebtedness which may be secured
by mortgage, lien or charge on the Mortgaged Property and upon request will exhibit to
Mortgagee satisfactory evidence of such payment and discharge.
1.4 Contest of Impositions, Liens and Levies. Mortgagor shall not be required
to pay, discharge or remove any Imposition, lien or levy so long as Mortgagor shall in
good faith contest the same or the validity thereof by appropriate legal proceedings which
shall operate to prevent the collection of the levy, lien or Imposition so contested and the
sale of the Mortgaged Property, or any part thereof to satisfy the same; provided,
however, that Mortgagor, prior to the date such levy, lien or Imposition is due and
payable or, in the case of a mechanic's lien or other involuntary lien within (30) days
after the same shall have been filed, shall have given such reasonable security as may be
demanded by Mortgagee to insure such payments and any penalties and interest that may
accrue thereon and prevent any sale or forfeiture of the Mortgaged Property by reason of
such nonpayment. Any such contest shall be prosecuted with due diligence and
Mortgagor shall promptly after final determination thereof pay the amount of any such
levy, lien or Imposition so determined, together with all interest and penalties, which may
be payable in connection therewith. Notwithstanding the provisions of this Section,
Mortgagor shall, and Mortgagee may (but shall have no obligation to), pay any such levy,
lien or Imposition notwithstanding such contest if in the reasonable opinion of
Mortgagee, the Mortgaged Property is in jeopardy or in danger of being forfeited or
foreclosed.
1.5 *ifi"tenance and Repairs; Inventory. Mortgagor agrees that it will keep
and maintain (or cause to be kept and maintained) the Mortgaged Property (including,
without limitation, the Equipment) in good condition and repair, free from any waste or
misuse, and will comply with all requirements of law, municipal ordinances and
regulations, restrictions and covenants affecting the Mortgaged Property and its use, and
will promptly repair or restore any buildings, improvements or structures now or
hereafter on the Mortgaged Property which may become damaged or destroyed.
Mortgagor further agrees that without the prior consent of Mortgagee it will not remove
from the Mortgaged Property any or all of the Equipment or any fixtures or any personal
property that is included in the Mortgaged Property unless the same is immediately
replaced with like fixtures or personal property of at least equal value, or is otherwise
removable under Section 6.1 hereof, or expand any improvements on the Mortgaged
-4-
Property, erect any new improvements or make any material alterations in any
improvements which will materially alter the basic structure, materially and adversely
affect the market value or materially change the existing architectural character of the
Mortgaged Property. Mortgagor agrees that it will complete within a reasonable time any
buildings now or at any time in the process of erection on the Mortgaged Property.
Mortgagor agrees not to acquiesce in any rezoning classification, modification or
restriction affecting the Mortgaged Property without Mortgagee's prior written consent.
Mortgagor agrees that it will not abandon the Mortgaged Property. Upon request of
Mortgagee, Mortgagor shall deliver to Mortgagee an inventory in detail reasonably
acceptable to Mortgagee of any personal property owned by Mortgagor that is included in
the Mortgaged Property pursuant to the terms hereof together with a certification by
Mortgagor that said inventory is a true and complete schedule of the personal property to
be included in the Mortgaged Property pursuant to the terms hereof. Such inventory shall
list any conditional sales contracts and other t' le retention arrangements to which such
personal property may be subject.
1.6 Insurance.
(a) So long as the Obligatio remains unpaid, Mort shall, at its
own cost, maintain or cause to be maintained with insurers of°'recognized
responsibility acceptable to Mortgagee the following insurance:
(i) hazard and fire insurance on the improvements now
existing or hereafter constructed on the Land insuring against loss by fire,
hazards included in the term "extended coverage," loss by vandalism or
malicious mischief, and such other hazards, casualties and contingencies
as may be required by Mortgagee, on the basis of replacement cost
without a coinsurance clause, in an amount equal to the full replacement
cost thereof (without deduction for depreciation) or such additional
amounts and for such periods as may be required by Mortgagee;
(ii) comprehensive general public liability insurance covering
the liability of Mortgagor against claims for bodily injury, death or
property damage occurring on or about the Mortgaged Property in such
minimum amounts and limits as Mortgagee may require but in no event,
less than $2,000,000.00 combined single limit per occurrence and naming
Mortgagee as an additional insured;
(iii) insurance covering the Mortgaged Property against loss or
damage by explosion, rupture or bursting of steam boilers, steam pipes,
steam turbines, steam engines or pressure vessels or fly wheels located on
or a part of the Mortgaged Property and providing for full repair and full
replacement cost coverages;
(iv) Intentionally Omitted; and
-5-
(v) such other forms of insurance in such minimum amounts as
Mortgagee may reasonably require or as may be required by law.
Mortgagor shall pay or cause to be paid all premiums on insurance
required hereunder by making payment directly to the insurer. Mortgagee
shall have the right to hold the policies and renewals thereof, and
Mortgagor shall promptly furnish to Mortgagee all such policies, renewals
thereof, renewal notices and all paid-premium receipts received by it. All
policies of insurance and any and all refunds of unearned premiums are
hereby assigned to Mortgagee as additional security for the payment of the
Obligations secured hereby. In the event of foreclosure of this Mortgage,
all right, title and interest of Mortgagor in and to any insurance policies
then in force shall pass to the purchaser at the foreclosure sale.
(b) The policies of all such insurance shall have mortgagee and
loss payable provisions in favor of Mortgagee. All such insurance shall be
in form acceptable to Mortgagee, shall provide for at least thirty (30) days'
prior written notice of cancellation, termination or modification thereof to
Mortgagee, shall permit Mortgagee to make premium payments to prevent
cancellation, and shall provide that no act or negligence of Mortgagor or
of any occupant of the Mortgaged Property, and no occupancy or use of
the Mortgaged Property for purposes more hazardous than permitted by
the terms of the policy, will affect the validity or enforceability of such
insurance as against Mortgagee. In the event of loss under such insurance
Mortgagor shall give prompt notice to the insurance carrier and
Mortgagee; Mortgagor shall duly make proof of loss, and shall
immediately furnish to Mortgagee a copy of such proof of loss.
' (c) Subject to the rights of the mortgagee under any Other
Mortgage which has priority over this Mortgage, Mortgagee is authorized
and empowered to settle, collect and receive all fire and hazard insurance
proceeds, to apply such proceeds to all expenses (including reasonable
attorneys' fees) reasonably incurred by Mortgagee in collecting the same
and, at Mortgagee's option and in its sole discretion, apply the balance of
said proceeds ("Net Proceeds") to payment of the Obligations or make the
Net Proceeds available for the repair and restoration of the Mortgaged
Property; provided, however, Mortgagor may settle claims without
Mortgagee's consent if the loss is less than $5,000.00 and no Event of
Default exists at the time of settlement. Mortgagor shall apply any such
proceeds to the repair and restoration of the Mortgaged Property. So long
as no Event of Default exists, any settlement of a fire and hazard insurance
claim of more than $5,000.00 shall require the consent of Mortgagor,
which consent will not be unreasonably withheld.
(d) If Mortgagee elects to apply the Net Proceeds to repair and
restoration of the Mortgaged Property (i) the Net Proceeds shall be held by
Mortgagee and at Mortgagee's election may be disbursed either by
-6-
Mortgagee or a disbursing agent selected by Mortgagee and paid by
Mortgagor, (ii) upon Mortgagee's request prior to disbursement of any Net
Proceeds or thereafter, from time to time, Mortgagor will deposit with
Mortgagee such amounts in excess of remaining Net Proceeds as
Mortgagee reasonably determines is required to complete the repair and
restoration, (iii) the Net Proceeds and any funds deposited by Mortgagor
shall be held and disbursed in accordance with sound construction loan
disbursement practices, including, but not limited to, approval of the plans
and specifications, appraisal, its other conditions for disbursement of draw
requests and inspection of the work, and such other reasonable conditions
as Mortgagee may impose and (iv) any Net Proceeds not so applied to
repair and restoration shall be applied to the payment of the Obligations. If
an Event of Default occurs prior to full disbursement, any undisbursed
portion of the Net Proceeds and any funds deposited by Mortgagor with
Mortgagee may at Mortgagee's option be applied to the Obligations.
1.7 Inspection. Mortgagee, or its agents, shall have the right to enter upon the
Mortgaged Property during ordinary business hours for the purposes of inspecting the
Mortgaged Property or any part thereof. Mortgagee shall have no duty, however, to
make such inspection. Mortgagee, or its agents, shall also have the right during ordinary
business hours to examine the books and records of Mortgagor pertaining to the
Mortgaged Property and to make extracts therefrom and copies thereof. The parties agree
that Mortgagee's right to inspect the books and records of Mortgagor, as described in this
provision, relates solely to the Mortgaged Property.
1.8 Protection of Mortgagee's Security. If Mortgagor fails to perform any of
the covenants and agreements contained in this Mortgage and such failure shall continue
beyond any applicable notice and cure period contained in Article Two hereof or if any
action or proceeding is commenced which does or may adversely affect the Mortgaged
Property or the interest of Mortgagor or Mortgagee therein, or the title of Mortgagor
thereto, then Mortgagee, at Mortgagee's option, may perform such covenants and
agreements, defend against such action or proceeding, or otherwise act as Mortgagee
deems necessary to protect its interest. In the event that, after damage to or destruction of
the Mortgaged Property or condemnation of a portion of the Mortgaged Property or a sale
under threat thereof, the proceeds are used to restore the Mortgaged Property, and the
insurance, sale or condemnation proceeds which are paid to Mortgagee are not sufficient
to pay for such restoration, Mortgagee may nevertheless effect the restoration. Any
amounts disbursed or costs incurred by Mortgagee pursuant to this Section, including
interest and reasonable attorney's fees, shall become additional Obligations of Mortgagor
secured by this Mortgage. All amounts disbursed or costs incurred by Mortgagee
pursuant to this paragraph shall be payable upon demand, and shall bear interest from the
date of disbursement or incurrence at the rate set forth in the Note unless payment of
interest at such rate would be contrary to law, in which event such amounts shall bear
interest at the highest rate permitted by law. Mortgagee shall, at its option, be subrogated
to any encumbrance, lien, claim or demand, and to all the rights and securities for the
payment thereof, paid or discharged with the principal sum secured hereby or by
Mortgagee under the provisions hereof, and any such subrogation rights shall be
-7-
additional and cumulative security for this Mortgage. Nothing contained in this Section
shall require Mortgagee to incur any expense or do any act hereunder, and Mortgagee
shall not be liable to Mortgagor for any damages or claims arising out of action taken by
Mortgagee pursuant to this paragraph.
1.9 Hazardous Materials. Mortgagor hereby represents and warrants to
Mortgagee that the Mortgaged Property has not at any time been used for storage,
transfer, transportation or disposal of hazardous substances, hazardous wastes, pollutants,
contaminants or similar substances (collectively "Hazardous Substances"), or for the
discharge of the same into the environment in violation of any law, regulation, or judicial
or administrative order or judgment; and the Mortgaged Property is not contaminated by,
and does not contain, any Hazardous Substances. Mortgagor will not use or permit the
use of the Mortgaged Property for such purposes. Mortgagor will fully indemnify
Mortgagee and defend Mortgagee against any claims, losses, damages, actions, costs and
expenses of any kind, including without limitation, court costs and reasonable attorneys
fees, in connection with any Hazardous Substances now or hereafter located on the
Mortgaged Property or any other violation of any federal, state or local environmental
statute, ordinance, rule or regulation ("Environmental Laws"). This indemnity shall not
apply to the extent that the willful act or omission of the Mortgagee contributes to the
actual or threatened discharge, dispersal, release, storage, treatment, generation, disposal
or escape of the Hazardous Substances. The indemnity provisions of this Section shall
survive the foreclosure or other termination of this Mortgage.
Without limiting the generality of the foregoing, Mortgagor agrees that upon the
discovery of a release or threatened release of Hazardous Substances on or from the
Mortgaged Property, it will promptly, diligently and without cost to Mortgagee, proceed
to remediate all contamination in accordance with all applicable laws, ordinances, rules
and regulations, and the requirements of all governmental authorities having jurisdiction,
and otherwise to the satisfaction of Mortgagee. A failure to do so shall constitute a
default by Mortgagor under this Mortgage.
1.10 Escrows. Upon the request of Mortgagee after the occurrence of an Event
of Default (whether or not such Event of Default is subsequently cured), Mortgagor shall
deposit with Mortgagee, on the first day of each and every month, commencing with the
date the first payment shall be due on the Note which is after the date of such request, a
deposit to pay the Impositions and insurance premiums (collectively "Charges") in an
amount equal to:
(a) One-twelfth (1/12) of the Impositions next to become due upon the
Mortgaged Property; provided, however, that, in the case of the first such deposit,
there shall be deposited in addition an amount as estimated by Mortgagee which,
when added to monthly deposits to be made thereafter as provided for herein,
shall assure that there will be sufficient funds on deposit to pay the Impositions as
they come due; plus
(b) One-twelfth (1/12) of the annual premiums on each policy of
insurance required to be maintained hereunder; provided that with the first such
-8-
deposit there shall be deposited, in addition, an amount equal to one-twelfth
(1/12) of such annual insurance premiums multiplied by the number of months
elapsed between the date premiums on each policy are last paid to and including
the date of deposit.
The amount of such deposits shall be based upon Mortgagee's reasonable estimate as to
the amount of Impositions and premiums of insurance next to be payable. Mortgagee
will, upon timely presentation to Mortgagee by Mortgagor of the bills therefor, pay the
Charges from such deposits. In the event the deposits on hand shall not be sufficient to
pay all of the Charges when the same shall become due from time to time, or the prior
deposits shall be less than the currently estimated monthly amounts, then Mortgagor shall
pay to Mortgagee on demand any amount necessary to make up the deficiency. The
excess of any such deposits shall be returned to Mortgagor or credited towards
subsequent Charges, at the discretion of Mortgagee. If an Event of Default shall occur
under the terms of this Mortgage, Mortgagee may, at its option, without being required so
to do, apply any deposits on hand to the Obligations, in such order and manner as
Mortgagee may elect. When the Obligations has been fully paid, any remaining deposits
shall be returned to Mortgagor as its interest may appear. All deposits are hereby pledged
as additional security for the Obligations, shall be held for the purposes for which made
as herein provided, may be held by Mortgagee and may be commingled with other funds
of Mortgagee, shall be held without any allowance of interest thereon, and shall not be
subject to the decision or control of Mortgagor. Mortgagee shall not be liable for any act
or omission made or taken in good faith. In making any payments, Mortgagee may rely
on any statement, bill or estimate procured from or issued by the payee without inquiry
into the validity or accuracy of the same. If the taxes shown in the tax statement shall be
levied on property more extensive than the Mortgaged Property, Mortgagee shall be
under no duty to seek a tax division or apportionment of the tax bill, and any payment of
taxes based on a larger parcel shall be paid by Mortgagor, and Mortgagor shall
expeditiously cause a tax subdivision to be made.
1.11 Compliance with Code. Mortgagor covenants that when completed the
Improvements shall comply with all applicable restrictions, conditions, codes,
ordinances, regulations and laws of the City of Elk River (the "City") and other
governmental bodies having jurisdiction over the Mortgaged Property, including, without
limitation, the Americans with Disabilities Act and those related to environmental
protection. Mortgagor has NOT commenced construction of the Improvements.
ARTICLE TWO
EVENTS OF DEFAULT
Each of the following occurrences shall constitute an Event of Default hereunder:
2.1 Failure to pay. Mortgagor's failure to pay any amount due under the
Entity Guaranty or any other amount required to be paid by Mortgagor hereunder when
due.
-9-
2.2 Other Performance Failure. The Mortgagor's failure duly to observe or
perform any of the other terms, conditions, covenants or agreements required to be
observed or performed by Mortgagor hereunder or in the Entity Guaranty and the
continuation of such failure for a period of thirty (30) days after Mortgagee gives
Mortgagor written notice of such failure.
2.3 Breach of Warranty of Title. Subject to Mortgagor's right to contest in
good faith as set forth in Section 1.4 hereof, the breach of any warranty of title or any
other warranty made by Mortgagor hereunder.
2.4 Misrepresentation. The making of any material misstatement in any
financial statement or report submitted to Mortgagee by or on behalf of Mortgagor.
2.5 Foreclosure. The institution of a foreclosure or other enforcement
proceedings by the holder of any other lien on the Mortgaged Property (without hereby
implying Mortgagee's consent to any mortgage or other lien).
2.6 Sale of Property. The sale, assignment, conveyance, mortgage,
encumbrance, lease or transfer o£ (i) Mortgagor's interest in the Mortgaged Property or
any part thereof, or any interest ,rein; or (ii) any transfer in ownership or control of
Mortgagor, without the prior consent of Mortgagee, which consent may be
granted or withheld by Mortgagee "ts ,, iscretion.
449
2.9 Breach of Other Agreements, etc. Any default or breach under any other
note, mortgage or other obligation of Mortgagor now held or hereafter acquired by
Mortgagee or City, or any other failure to comply with the terms and conditions thereof
and the continuance thereof beyond any applicable notice and/or cure period contained
therein.
..
ARTICLE THREE
ACCELERATION FORECLOSURE, OTHER REMEDIES
Upon any Event of Default, Mortgagee may, at its option, exercise one or more of
the following rights and remedies (and any other rights and remedies available to it):
3.1 Acceleration. Mortgagee may declare immediately due and payable all
unmatured Obligations secured by this Mortgage, and the same shall thereupon be
immediately due and payable, without notice or demand.
3.2 UCC Remedies. Mortgagee shall have and may exercise with respect to
all fixtures and any personal property included in the Mortgaged Property, all the rights
and remedies accorded upon default to a secured party under the Uniform Commercial
Code, as in effect in the State of Minnesota.
3.3 Foreclosure; Action or Advertisement. Mortgagee may (and is hereby
authorized and empowered to) foreclose this Mortgage by action or advertisement,
pursuant to the statutes of the State of Minnesota in such case made and provided, power
-10-
being expressly granted to sell the Mortgaged Property at public auction and convey the
same to the purchaser to the full extent of Mortgagor's interest and, out of the proceeds
arising from such sale, to pay all Obligations secured hereby with interest, and all legal
costs and charges of such foreclosure and the maximum attorneys' fees permitted by law,
which costs, charges and fees Mortgagor agrees to pay. Any real estate or interest or
estate sold hereunder may be sold in one parcel, as an entirety, or in such parcels and in
such manner or order as Mortgagee, in its sole discretion, may elect. In case of any sale
of the Mortgaged Property pursuant to any judgment or decree of any court or at public
auction or otherwise in connection with the enforcement of any of the terms of this
Mortgage, Mortgagee, its successors and assigns, may become the purchaser, and for the
purpose of making settlement for or payment of the purchase price, shall be entitled to
deliver over and use any sum then due under the Entity Guaranty and any claims for
interest accrued and unpaid thereon, together with all other sums, with interest, advanced
and unpaid hereunder, and all statutory charges for such foreclosure including maximum
attorney's fees allowed by law in order that there may be credited as paid on the purchase
price the sum then due under the Note and all other sums, with interest, advanced and
unpaid hereunder, and all charges and expenses of such foreclosure including maximum
attorney's fees allowed by law.
3.4 Receiver. Mortgagee shall be entitled as a matter of right without notice
and without giving bond and without regard to the solvency or insolvency of Mortgagor,
or waste of the Mortgaged Property or adequacy of the security of the Mortgaged
Property, to apply for the appointment of a receiver, in accordance with the statutes and
law made and provided. The receiver shall collect the rents, and all other income of any
kind; manage the Mortgaged Property so to prevent waste; execute leases within or
beyond the period of receivership, pay all expenses for normal maintenance of the
Mortgaged Property and perform the terms of this Mortgage and apply the rents, issues
and profits in the following order to (i) payment of the reasonable fees of said receiver,
(ii) application of tenant security deposits as required by Minnesota Statutes § 504B.178,
(iii) payment when due of prior or current real estate taxes or special assessments with
respect to the Mortgaged Property or, if this Mortgage so requires, to the periodic escrow
for the payment thereof, (iv) the payment when due of premiums for insurance of the type
required by this Mortgage or, if this Mortgage so requires, to the periodic escrow for the
payment thereof, and (v) as further provided in any Assignment of Rents executed by
Mortgagor as further security for the Obligations (whether included in this Mortgage or
separate instrument), including but not limited to applying the same to the costs and
expenses of the receivership, including reasonable attorney's fees, to the repayment of the
Obligations and to the operation, maintenance, upkeep and repair of the Mortgaged
Property, including payment of taxes and payments of premiums of insurance.
Mortgagor does hereby irrevocably consent to such appointment.
3.5 Specific Performance. Mortgagee may bring suit for specific performance
of any covenant or warranty hereunder.
3.6 Forbearance and Other Rights of Mortgagee. Any delay by Mortgagee in
exercising any right or remedy hereunder, or otherwise afforded by law or equity, shall
not be a waiver of or preclude the exercise of such right or remedy or any other right or
-11-
remedy hereunder or at law or in equity. The failure of Mortgagee to exercise any option
to accelerate maturity of the Obligations secured by the Mortgage, the forbearance by
Mortgagee before or after the exercise of such option, or the withdrawal or abandonment
of proceedings provided for by this Mortgage shall not be a waiver of the right to exercise
such option or to accelerate the maturity of such Obligations by reason of any past,
present or future event which would permit acceleration. The procurement of insurance
or the payment of taxes or other liens or charges by Mortgagee shall not be a waiver of
Mortgagee's right to accelerate the maturity of the Obligations. Mortgagee's receipt of
any awards, proceeds or damages shall not operate to cure or waive default by
Mortgagor. Mortgagee may at any time, without notice, release any person liable for
payment of any Obligations, extend the time or agree to alter the terms of payment of any
of the Obligations, accept additional security of any kind, release any plat or map of the
Mortgaged Property or the creation of any easement thereon or any covenants restricting
use or occupancy thereof, or agree to alter or amend the terms of this Mortgage in any
way. No such release, modification, addition or change shall affect the liability of any
person other than the person so released, for payment of any Obligations, nor affect the
priority and first lien status of this Mortgage upon any property not so released.
ARTICLE FOUR
ASSIGNMENT OF RENTS
4.1 Assignment. As security in addition to the lien of this Mortgage upon the
Property, Mortgagor hereby grants, transfers and assigns to Mortgagee all of the right,
title and interest of Mortgagor in and to all Leases and all rents, income, profits,
revenues, royalties, bonuses, rights, accounts, contract rights, general intangibles and
benefits (all of which are sometimes hereinafter referred to as "Rents"), now or hereafter
accruing or owing by reason of a Lease of any or all of the Property.
4.2 Covenants of Performance. To protect the security of this Assignment,
Mortgagor warrants, covenants and agrees:
(a) to faithfully abide by, perform and discharge each and
every obligation, covenant and agreement under any Leases to be
performed by Mortgagor thereunder; to give prompt written notice to
Mortgagee of any notice of default on the part of Mortgagor with respect
to any Lease received from a tenant thereunder; to enforce or secure short
of termination of any Lease the performance of each and every obligation,
covenant, condition and agreement of the Leases by the tenants thereunder
to be performed; not to borrow against, pledge or assign any of the Rents,
or anticipate the Rents; not to waive, excuse, condone or in any manner
release or discharge any tenant thereunder of or from the obligations,
covenants, conditions and agreements to be performed under the Lease or
to permit the tenant to assign its interest in the Lease unless required to do
so by the terms of the Lease; not to terminate the Leases or accept a
surrender thereof or a discharge of the tenant unless required to do so by
the terms of the Lease; not to consent to a subordination of the interest of
-12-
the tenant thereunder to any party other than Mortgagee and then only if
specifically required to do so by Mortgagee;
(b) at Mortgagor's sole cost and expense, to appear in and
defend any action or proceeding arising under, growing out of or in any
manner connected with the Leases or the obligations, duties or liabilities
of Mortgagor and tenants thereunder, and to pay all costs and expenses of
Mortgagee, including attorneys' fees in a reasonable sum, in any such
action or proceeding in which Mortgagee may appear or with respect to
which it may incur costs;
(c) that Mortgagor has the full right and title to assign the
Rents; that at the date of this Mortgage there exist no Leases which now or
in the future affect the Mortgaged Property which have not been disclosed
to Mortgagee in writing; and that there is no outstanding assignment or
pledge of the Leases or Rents; and ii....._
(d) to furnish to Mortgagee, at Mortgagee's written request, a
complete list of all Leases and security deposits made thereunder as to any
part of the Mortgaged Property, showing the type of lease, the name cthe
tenant, the monthly rental, the date to which paid, the term of the Lease,
the date of occupancy, and the date of expiration and any and every
special premium, concession or inducement granted to the tenant.
4.3 Ass gnmeni"`Absolute. This Assignment is absolute and is effective
immediately. Notwithstanding the foregoing, until an Event of Default, as defined in
ARTICLE TWO above, has occurred, Mortgagor may receive, collect and enjoy the
Rents. Upon or at any time after an Event of Default has occurred, Mortgagee may at its
optio without notice: ...........
(a) in the name, place and stead of Mortgagor (i) enter upon,
manage and operate the Mortgaged Property, or retain the services of an
independent contractor to manage and operate the same, (ii) make,
enforce, modify and accept surrender of the Leases, (iii) obtain or evict
tenants, demand, collect, sue for, receive and give acquittances for, fix or
modify Rents and enforce all rights of Mortgagor under the Leases, and
(iv) perform any and all other acts that may be necessary or proper to
protect the security of this Assignment; provided always, however, that
until the end of any redemption period available to Mortgagor after any
foreclosure of this Mortgage Mortgagee shall continue to deal with the
Leases on the Property in a reasonable businesslike manner, recognizing
and protecting Mortgagor's continuing rights during such period to retake
possession and control of the Mortgaged Property upon paying the
appropriate redemption price, and to resume the management of such
Leases;
-13-
(b) give or require Mortgagor to give notice to any and all
tenants under the Leases authorizing and directing the tenants to pay all
Rents due under the Leases directly to Mortgagee; and
(c) apply for, and Mortgagor hereby consents to, the
appointment of a receiver of the Mortgaged Property.
4.4 Application of Rents.
(a) All Rents collected by Mortgagee, or by a receiver, shall be held
and applied by Mortgagee in its reasonable discretion, in accordance with
applicable law, including, without limitation to: (i) payment of all reasonable fees
of the receiver, if any, approved by the court; (ii) the repayment when due of all
tenant security deposits pursuant to the provisions of Minnesota Statutes §
504B.178; (iii) payment of all delinquent or current real estate taxes and special
assessments payable with respect to the Property or, if this Mortgage so requires,
to the periodic escrow for the payment thereof, (iv) payment of all premiums then
due for the insurance required by the provisions of this Mortgage or, if this
Mortgage so requires, to the periodic escrow for the payment thereof, (v) payment
of expenses incurred for normal maintenance of the Mortgaged Property.
(b) Any amounts remaining after such application shall be applied as
follows:
(i) if received prior o any forec dsure sale o the Mortgaged Property
to Mortgagee for payment of the indebtedness secured by this Mortgage,
but no such payment made after acceleration of the indebtedness shall
affect such acceleration; and
(ii) if received during or with respect to a period after a foreclosure
sale of the Mortgaged Property:
(1) if the purchaser at the foreclosure sale is not Mortgagee,
first to Mortgagee to the extent of any deficiency of the sale
proceeds to repay the indebtedness secured by this Mortgage,
second to the purchaser as a credit to the redemption price, but if
the Mortgaged Property is not redeemed, then to the purchaser of
the Mortgaged Property;
(2) if the purchaser at the foreclosure sale is Mortgagee, first to
Mortgagee to the extent of any deficiency of the sale proceeds to
repay the indebtedness secured by this Mortgage and the balance to
be retained by Mortgagee as a credit to the redemption price, but if
the Mortgaged Property is not redeemed, then to Mortgagee,
whether or not such deficiency exists.
4.5 Continuing Effect. The rights and powers of Mortgagee under this
Assignment and the application of the Rents shall continue and remain in full force and
-14-
effect both before and after commencement of any action or procedure to foreclose this
Mortgage, after any foreclosure sale of Mortgagor's interest in the Property in connection
with the foreclosure of this Mortgage, and until expiration of the period of redemption
from any such foreclosure sale, whether or not any deficiency from the unpaid balance of
the Obligations exists after such foreclosure sale.
4.6 Mortgagee Not Obligated. Mortgagee shall not be obligated by this
Assignment for the control, care, management or repair of the Mortgaged Property, nor
for the carrying out of any of the terms and conditions of the Leases; nor shall this
Assignment operate to make Mortgagee responsible or liable for any waste committed on
the Mortgaged Property by the tenants or any other party, or for any dangerous or
defective condition of the Mortgaged Property, or for any violation of Environmental
Laws or for any negligence in the management, upkeep, repair or control of the
Mortgaged Property resulting in any loss or any injury or death to any person.
4.7 Hold Harmless. Mortgagor shall and does agree to indemnify and to hold
Mortgagee harmless of and from any and all liability, loss or damage which it may or
might incur under or by reason of this Assignment, and of and from any and all claims
and demands whatsoever which may be asserted against it by reason of any alleged
obligations or undertakings on its part to perform or discharge any of the terms,
covenants or agreements contained in the Leases; provided, however, that such
indemnification shall not apply if the same arises out of Leases intentionally breached by
Mortgagee which were made by Mortgagor in the ordinary course of managing the
Mortgaged Property and prior to the time Mortgagee obtained the right to possess and
manage the Mortgaged Property, or if the same arises out of the negligent or willful act of
Mortgagee in operating and using the Mortgaged Property. Should Mortgagee incur any
such liability, loss or damage under any Lease or by reason of this Assignment, or in the
defense of any such claims or demands, the amount thereof, including costs, expenses,
and reasonable attorneys' fees, shall be secured hereby and Mortgagor shall reimburse
Mortgagee therefor immediately upon demand. Mortgagee shall give Mortgagor notice
of any such claim and Assignor shall have the opportunity to defend Mortgagee in
connection therewith with counsel reasonably acceptable to Mortgagee; provided
Mortgagee's failure to give such notice and opportunity to defend shall not affect
Mortgagor's obligations under this Section except to the extent Mortgagor is actually
prejudiced by such failure.
4.8 Authorization to Tenants. The tenants under any of the Leases are hereby
irrevocably authorized and directed to recognize the claims of Mortgagee or its assigns
hereunder without investigating the reason for any action taken by Mortgagee, or the
validity or the amount of indebtedness owing to Mortgagee, or the existence of any such
event of default, or the application of the Rents to be made by Mortgagee. Mortgagor
hereby irrevocably directs and authorizes each tenant to pay to Mortgagee all sums due
under its Lease and consents and directs that said sums shall be paid to Mortgagee
without the necessity for a judicial determination that any such event of default has
occurred or that Mortgagee is entitled to exercise its rights hereunder, and to the extent
such sums are paid to Mortgagee, Mortgagor agrees that the tenants shall have no further
liability to Mortgagor for the same. The sole signature of Mortgagee shall be sufficient
-15-
for the exercise of any rights under this Assignment and the sole receipt of Mortgagee for
any sums received shall be a full discharge and release therefor to the tenants or
occupants of the Mortgaged Property.
4.9 Mortgagee Attorney-in-Fact. Mortgagor hereby irrevocably appoints
Mortgagee as its agent and attorney in fact, which appointment is coupled with an
interest, to exercise any rights or remedies hereunder and to execute and deliver during
the term of this Assignment such instruments as Mortgagee may deem necessary to make
this Assignment and any further assignment effective.
4.10 Mortgagee Not in Possession. Nothing herein contained and no actions
taken pursuant to this Assignment shall be const as constituting Mortgagee a
"Mortgagee in Possession."
ARTICLE FIV
CONDEMNATION
5.1 Notice. Mortgagor will give Mortgagee prompt notice r£ any action,
actual or threatened, in conde UZ eminent domain, direct or inverse`:` F'
5.2 Awards. Subject to any obligations under any Other Mortgage which has
priority over this Mortgage, Mortgagor hereby assigns, transfers, and sets over to
Mortgagee the entire proceeds of any award or payment which becomes payable by
reason of any taking of or damage to the Mortgaged Property, or any part or appurtenance
thereof, either temporarily or permanently, in or by condemnation or other eminent
domain proceedings or by reason of sale under threat thereof, or in anticipation of the
exercise of the right of condemnation or other eminent domain proceedings. Mortgagor
will file or prosecute in good faith and with due diligence what would otherwise be its
claim in any such award or payment and cause the same to be collected and paid over to
Mortgagee, and Mortgagor irrevocably authorizes and empowers Mortgagee, which
power is coupled with an interest and is irrevocable, in the name of Mortgagor or
otherwise, in the event that Mortgagor fails to do so, to file and prosecute any such claim
and to collect, receipt for and retain the same. The proceeds of the award or payment,
after deducting all reasonable costs, attorneys fees and other expenses which may have
been incurred by Mortgagee in collection thereof, at the sole discretion of Mortgagee,
may be released to Mortgagor, applied to restoration of the Mortgaged Property or
applied to the payment of any part of the Obligations, in such order of application as
Mortgagee may determine. If proceeds are made available to be applied to restoration,
they shall be held and disbursed in accordance with Paragraph 1. 6 (d) hereof.
ARTICLE SIX
UNIFORM COMMERCIAL CODE
6.1 Security Interest. This Mortgage shall constitute a security agreement as
defined in the Uniform Commercial Code with respect to, and Mortgagor hereby grants
Mortgagee a security interest in, all of fixtures and equipment and any personal property
-16-
included in the Mortgaged Property and substitutions therefor and proceeds thereof.
Mortgagor hereby authorizes Mortgagee to file one or more financing statements,
covering such fixtures and personal property (in a form satisfactory to Mortgagee) which
Mortgagee may reasonably consider necessary or appropriate to perfect its security
interest. Mortgagor also authorizes Mortgagee to file amendments to financing
statements, and terminations of financing statements filed by other secured parties, all
with respect to all fixtures and personal property included in the Mortgaged Property, in
such form and substance as Mortgagee, in its reasonable discretion, may determine.
Mortgagor will pay to Mortgagee, on demand, the amount of any and all costs and
expenses (including reasonable attorneys' fees and legal expenses) paid or incurred by
Mortgagee in connection with the exercise of any right or remedy referred to in this
Section. In any instance where Mortgagor in its sound discretion determines that any
item subject to a security interest under this Mortgage has become: (i) inadequate,
obsolete, worn out, or (ii) unsuitable, undesirable or unnecessary for the operation of the
Mortgaged Property, Mortgagor may, at its expense, remove;;and dispose of it and
substitute and install other items not necessarily having the same''function, provided, that
such removal and substitution shall not impair the operating utility and unity of the
Mortgaged Property. With respect to items which are a part of the Mortgaged Property,
all items substituted for such items shall become a part of the Mortgaged Property and
subject to the lien of this Mortgage. Any amounts received or allowed Mortgagor upon
the sale or other disposition of the removed items of property shall be applied against the
cost of acquisition and installation of the substituted items. Nothing herein contained
shall be construed to prevent any tenant or subtenant from removing from the Mortgaged
Property trade fixtures, furniture and equipment installed by it and removable by tenant
under its terms of any one or more of the Leases, on the condition, however, that
Mortgagor shall assure the repair of any and all damages to the Mortgaged Property
resulting from or caused by the removal thereof.
Mortgagee acknowledges that no items of personal property are included in the
Mortgaged Property.
6.2 Fixture Filing. From the date of its recording, this Mortgage shall be
effective as a financing statement with respect to all goods constituting part of the
Mortgaged Property which are or are to become fixtures related to the real estate
described herein. For this purpose,the following information is set forth:
(a) Name and Address of Debtors:
Preferred Real Estate Holdings, LLC
1369 Mississippi Street
New Brighton, MN 55112
Attention: Lloyd Peterson
[Borrower- confirm that this is your notice address]
-17-
(b) Name and address of Secured Party:
Economic Development Authority of the City of Elk River
13065 Orono Parkway
Elk River, MN 55330
Attn: Director of Economic Development
(c) This document covers goods which are or are to become
fixtures.
(d) The real estate to which such fixtures are or are to be
attached is that described in Exhibit A attached hereto. The owner of such
real estate is Debtor.
ARTICLE SEVEN
MISCELLANEOUS
7.1 Mortgagee's Remedies Cumulative. All remedies o kk rtgagee are
distinct and cumulative to any other right or remedy under this Mortgage fforded by
law or equity, and may be exercised concurrently or independently, as often as the
occasion therefore arises.
7.2 Successors and AsnBoun %aptions. The covenants and agreements
herein contained shall bind, and the rights hereunder shall inure to, the respective heirs,
legal representatives, successors and assigns of Mortgagee and Mortgagor. The captions
and headings of the Sections of this Mortgage are for convenience only and are not to be
used to interpret or define the provisions hereof,,
7.3 Notices. Any notice am`Mort' ee to Mortgagor under this Mortgage
shall be deemed to have been given by Mortgagee and received by Mortgagor, when
delivered personally to an officer of Mortgagor or three (3) days after the date it is mailed
by certified mail addressed as follows:
IN Preferred Real Estate Holdings, LLC
1369 Mississippi Street
'New Brighton, MN 55112
:Attention: Lloyd Peterson
7.4 Governing Law, Severability. This Mortgage shall be governed by the
Laws of the State of Minnesota. In the event that any provision or clause of this
Mortgage conflicts with applicable law, such conflict shall not affect other provisions of
this Mortgage which can be given effect without conflicting provisions and to this end the
provisions of this Mortgage are declared to be severable.
7.5 Counterparts. This Mortgage may be executed in any number of
counterparts, each of which shall be an original but all of which together shall constitute
one instrument.
-18-
7.6 Waiver of Appraisement, Homestead, Marshaling. Mortgagor hereby
waives the benefit of any homestead, appraisement, evaluation, stay and extension laws
now or hereinafter in force. Mortgagor hereby waives any rights available with respect to
marshaling of assets so as to require the separate sales of any portion of the Mortgaged
Property, or to require Mortgagee to exhaust its remedies against a specific portion of the
Mortgaged Property before proceeding against the other.
7.7 Subsequent Agreements. Any agreement hereafter made by Mortgagor
and Mortgagee pursuant to this Mortgage shall be superior to the rights of the holder of
any intervening lien or encumbrance.
7.8 Construction Mortgage. This Mortgage secures an obligation incurred for
the construction of an improvement on land and is a construction mortgage.
[Remainder of page intentionally left blank]
[Signature Page follows]
-19-
Signature Page to Mortgage
IN WITNESS WHEREOF, Mortgagor has caused this Mortgage to be duly
executed as of the day and year first written.
PREFERRED REAL ESTATE
HOLDINGS C, a Minnesota limited
liability c y
B
Lloyd Pete President
STATE OF MINNESOTA )
COUNTY OF HENNEPIN )
The foregoing instrument was acknowledged before me on August , 2013, by
Lloyd Peterson, President of Preferred Real Estate Holdings, LLC, a Minnesota limited
liability company, on behalf of the limited liability company.
Notary Public
y Commission Expires:
ThrInstrument as Drafted by:
Gray, Plant, Mooty, Mooty
& Bennett, P.A._(, H)
500 IDS Center
80 South Eighth Street'
Minneapolis, Minnesota 55402-3796
Telephone: (612) 632-3000
-20-
EXHIBIT A
Legal Description
-21-
EXHIBIT B
Permitted Encumbrances
1) [Bank Mortgage]
2) [City Mortgage I]
3) [City Mortgage 2]
4) [Microloan Mortgage]
GP:3470897 vl
-22-
SECURITY AGREEMENT
(Forgivable Loan Program)
This SECURITY AGREEMENT ("Agreement") is made to be effective as of , 2013, by
PREFERRED POWDER COATING, LLC,a Minnesota limited liability company("Debtor')and THE ECONOMIC
DEVELOPMENT AUTHORITY OF THE CITY OF ELK RIVER(the"Secured Party").
AGREEMENT
In consideration of the above recitals, and the promises set forth in this Agreement, the parties agree as
follows:
1. OBLIGATIONS. "Obligations" means collectively each debt, liability and obligation of every type and
nature which Debtor may now or at any time hereafter owe to Secured Party(including without limitation the
obligations created under the loan agreement(the"Loan Agreement')and the promissory note of the Debtor
to Secured Party of even date herewith and all amendments, replacements, restatements, and substitutions
therefore), whether now existing or hereafter created or arising, and whether direct or indirect, due or to
become due, absolute or contingent, and the repayment or performance of any of the foregoing if any such
payment or performance is at any time avoided,rescinded, set aside, or recovered from or repaid by Secured
Party,in whole or in part,in any bankruptcy,insolvency,or similar proceeding instituted by or against Debtor
or any guarantor of any Obligation, or otherwise, including b t limited to all principal, interest, fees,
expenses and other charges.
2. COLLATERAL. "Collateral" means collectively all of the following property of Debtor, whether now
owned or hereafter acquired and wherever located: (a)equipment specified on the attached Exhibit A;
(b)accessions, additions and improvements to, replacements of, and substitutions for any of the foregoing;
(c)all products and proceeds of any of the foregoing; and(d)books,records and data in any form relating to
any of the foregoing.
3. SECURITY INTEREST. Debtor grants to secured Party a sec interest ("Security Interest") in the
Collateral to secure the payment and performance of the Obligations. The Security Interest continues in effect
until this Agreement is terminated in writing by Secured Party.
4. REPRESENTATIONS,WARRANTIES AND COVENANTS. Debtor represents,warrants and agrees that:
4.1 Principal Office/Residence. Debtor's chief executive office/residence is located at the address
specified on the signature pages to this Agreement. Debtor will give Secured Party written notice
prior to any change in the location of Debtor's principal office/residence.
4.2 Organization;Authority. Debtor is a limited liability company,duly organized,existing and in good
standing under the laws of the state of its organization and has full power and authority to enter into
this Agreement. Debtor's state of organization/residence is Minnesota and its exact legal name is as
set forth on the signature page to this Agreement. Debtor will not change its state of organization,
form of organization or name without Secured Party's prior written consent.
4.3 Perfection of Security Interest. Debtor will execute and deliver, and irrevocably appoints Secured
Party (which appointment is coupled with an interest) Debtor's attorney-in-fact to execute and
deliver in Debtor's name, all financing statements (including, but not limited to, amendments,
terminations and terminations of other security interests in any of the Collateral),control agreements
and other agreements which Secured Party may at any time reasonably request in order to secure,
protect,perfect, collect or enforce the Security Interest. Debtor shall, at any time and from time to
time, take such steps as Secured Party may reasonably request for Secured Party: (i)to obtain an
acknowledgement, in form and substance reasonably satisfactory to Secured Party, of any bailee
having possession of any of the Collateral that such bailee holds such Collateral for Secured Party;
(ii) to obtain "control" of any investment property, deposit accounts, letter-of-credit rights or
electronic chattel paper (as such terms are defined in the UCC, as hereinafter defined), with any
agreements establishing control to be in form and substance reasonably satisfactory to Secured
Party; and(iii)otherwise to insure the continued perfection and priority of the Security Interest in
any of the Collateral and the preservation of the rights of Secured Party therein.
4.4 Enforceability of Collateral. To the extent the Collateral consists of accounts, instruments,
documents,chattel paper,letter-of-credit rights,letters of credit or general intangibles,the Collateral
is enforceable in accordance with its terms, is genuine, complies with applicable laws concerning
form,content and manner of preparation and execution,and all persons appearing to be obligated on
the Collateral have authority and capacity to contract and are in fact obligated as they appear to be on
the Collateral.
4.5 Title to Collateral. Debtor holds,or will hold at the time Debtor acquires an interest in after acquired
Collateral,good and marketable title to the Collateral free of all security interests and encumbrances
except for the prior security interest of Lender pursuant to the Microloan loan facility, the Security
Interest and the subordinate security interests of. (i)the Bank of Elk River;and(ii)the City of Elk
River. Debtor will keep the Collateral free of all security interests and encumbrances except for the
interest of the Microloan loan facility,the Security Interest and the other security interests referenced
in this Section 4.5. Debtor will defend Secured Party's rights in the Collateral against the claims and
demands of all other persons.
4.6 Collateral Location. Debtor will keep all tangible Collateral at Debtor's principal office.
4.7 Collateral Use. Debtor will use the Collateral only for business purposes. Debtor will not use or
keep any Collateral for any unlawful purpose or in violation of any federal, state or local law, statute
or ordinance.
4.8 Maintenance of Collateral. Debtor will maintain all tangible Collateral in good condition and repair.
Debtor will not commit or permit damage to or destruction of any of the Collateral. Debtor will give
Secured Party prompt written notice of any material loss of or damage to any tangible Collateral and
of any other happening or event that materially affects the existence, value or amount of the
Collateral.
4.9 Disposition of Collateral. Debtor will not sell or otherwise dispose of any Collateral or any interest
in any Collateral without the prior written consent of Secured Party,except that until the occurrence
of an Event of Default(as defined in Section 5 below), Debtor may sell any inventory constituting
Collateral in the ordinary course of Debtor's business.
4.10 Taxes, Assessments and Liens. Debtor will promptly pay all taxes and other governmental charges
levied or assessed upon or against any Collateral.
4.11 Records;Access. Debtor will keep accurate and complete records pertaining to the Collateral and to
Debtor's business and financial condition and will submit to Secured Party all reports regarding the
Collateral and Debtor's business and financial condition as and when Secured Party may reasonably
request. During normal business hours, Debtor will permit Secured Party and its representatives to
examine or inspect any Collateral, wherever located, and to examine, inspect and copy Debtor's
books and records relating to the Collateral and Debtor's business and financial condition.
4.12 Insurance. Debtor will keep all tangible Collateral insured against risks of fire(including so-called
extended coverage), theft and other risks and in such amounts as Secured Party may reasonably
request, with any loss payable to Secured Party to the extent of its interest. Debtor assigns to
Secured Party all money due or to become due with respect to, and all other rights of Debtor with
respect to,all insurance concerning the Collateral and Debtor directs the issuer of any such insurance
to pay all such money directly to Secured Party.
-2-
4.13 Collection Costs. Debtor will reimburse Secured Party on demand for all costs of collection of any
of the Obligations and all other expenses incurred by Secured Party in connection with the
perfection,protection,defense or enforcement of the Security Interest and this Agreement,including
all reasonable attorneys' fees incurred by Secured Party whether or not any litigation or bankruptcy
or insolvency proceeding is commenced.
4.14 Financing Statements. Debtor authorizes Secured Party to file one or more financing or
continuation statements, and amendments thereto, relative to all or any part of the Collateral
without Debtor's signature where permitted by law, in each case in such form and substance as
Secured Party may determine. Debtor shall pay all filing,registration and recording fees and any
taxes, duties, imports, assessments and charges arising out of or in connection with the execution
and delivery of this Agreement,any agreement supplemental hereto,any financing statements,and
any instruments of further assurance.
5. EVENTS OF DEFAULT. Each of the following is an"Event of Defaulf'under this Agreement: (a)Debtor
fails to pay any of the Obligations when due and any applicable grace period lapses without cure by Debtor;
(b)Debtor fails to timely perform any other Obligation and any applicable grace period lapses without cure by
Debtor; (c)any representation made by Debtor in this Agreement or in any financial statement or report
submitted to Secured Party proves to have been materially false or misleading when made;(d)Debtor ceases
to conduct its business; (e)Debtor is or becomes insolvent, however defined; (f)Debtor voluntarily files, or
has filed against it involuntarily, a petition under the United States Bankruptcy Code; or (g)if Debtor is
dissolved or liquidated.
6. REMEDIES UPON EVENT OF DEFAULT. Upon the occurrence of an Event of Default and at any time
thereafter,Secured Party may exercise one or more of the following rights and remedies: (a)declare any or all
unmatured Obligations to be immediately due and payable without presentment or any other notice or demand
and immediately enforce payment of any or all of the Obligations; (b)require Debtor to make the Collateral
available to Secured Party at a place to be designated by Secured Party;(c)exercise and enforce any rights or
remedies available upon default to a secured party under the Uniform Commercial Code as amended from
time to time("UCC"),and,if notice to Debtor of the intended disposition of Collateral or any other intended
action is required by law, such notice shall be commercially reasonable if given at least ten(10)calendar days
prior to the intended disposition or other action; and (d)exercise and enforce any other rights or remedies
available to Secured Party by law or agreement against the Collateral,Debtor,or any other person or property.
Secured Party's duty of care with respect to Collateral in its possession will be fulfilled if Secured Party
exercises reasonable care in physically safekeeping the Collateral or,in the case of Collateral in the possession
of a bailee or other third person, exercises reasonable care in the selection of the bailee or other third person.
Mere delay or failure to act will not preclude the exercise or enforcement of any of Secured Party's rights or
remedies. All rights and remedies of Secured Party are cumulative and may be exercised singularly or
concurrently,at Secured Party's option.
7. MISCELLANEOUS. The following miscellaneous provisions are a part of this Agreement:
7.1 Definitions. Terms not otherwise defined in this Agreement shall have the meanings ascribed to
them, if any, under the UCC and such meanings shall automatically change at the time that any
amendment to the UCC,which changes such meanings,shall become effective.
7.2 Notices. All notices under this Agreement must be in writing and will be deemed given when
delivered or placed in the United States mail, registered or certified, postage prepaid, addressed to
the respective party at the respective address set forth below its signature on the signature page to
this Agreement. Any party may change its address for notices under this Agreement by giving
written notice to the other parties.
7.3 Amendments/Waivers. This Agreement may be waived, amended, modified or terminated and the
Security Interest may be released only in a writing signed by Secured Party. Any waiver signed by
Secured Party will be effective only in the specific instance and for the specific purpose given.
-3-
7.4 Applicable Law. This Agreement is governed by the laws of the State of Minnesota without regard
to the conflict of law principles. If any provision of this Agreement is held unlawful or
unenforceable in any respect, such illegality or unenforceability will not affect other provisions or
applications that can be given effect and this Agreement will be construed and enforced as if the
unlawful or unenforceable provision or application had never been contained in or prescribed by this
Agreement.
7.5 Caption Headings. Caption headings in this Agreement are for convenience purposes only and are
not to be used to interpret or define the provisions of this Agreement.
7.6 Integration. This Agreement embodies the entire agreement and understanding among the parties
relative to subject matter hereof and supersedes all prior agreements and understandings relating to
such subject matter.
7.7 Successors and Assigns. This Agreement is binding upon and will inure to the benefit of the parties
and their successors and assigns.
7.8 Counterparts. This Agreement may be executed in several counterparts, each of which will be an
original,and all of which will constitute one and the same instrument.
-4-
IN WITNESS WHEREOF,the parties have executed this Agreement as of the date first written above.
DEBTOR: SECURED PARTY:
PREFERRED POWDER COATING,LLC,a ECONOMIC DEVELOPMENT AUTHORITY
Minnesota limited liability company OF THE CITY OF ELK RIVER
By: Lloyd Peterson
Its: President By
Its
Address:
1369 Mississippi Street
New Brighton,MN 55112 By
Its
Address:
13065 Orono Parkway
Elk River,MN 55330
-5-
EXHIBIT A
List of Equipment
All of the following property of Debtor, whether now owned or hereafter acquired and wherever
located: (a) equipment specified below; (b) accessions, additions and improvements to,
replacements of, and substitutions for any of the foregoing; (c) all products and proceeds of any
of the foregoing; and (d) books, records and data in any form relating to any of the foregoing.
[specific items of Equipment to be inserted]
GP:3470863 vt
-6-
PURCHASE AGREEMENT
FOR
WETLAND BANKING CREDITS
THIS AGREEMENT is made this day of_September_, 2013 between
The City of Elk River(Seller) and_Preferred Real Estate Holdings, LLC (Buyer).
1. Seller agrees to sell to Buyer, and Buyer agrees to buy from Seller, the wetland banking credits
(Credits) listed below:
CREDITS TO BE SOLD
Credit Acres or Wetland Plant Community Type' Cost per State Fee
Sub- Sq. Ft. Circ. 39 Acre or Sq. 6.5% Fee Cost
Group' Type' Foot
A .54 2 Wet Meadow $0.50 0.065 $764.48
Acres
B 0.065
C 0.065
D 0.065
E 0.065
Totals
_❑ Check here if additional credit sub-groups are part of this account and are listed on an attachment to this document.
'A separate credit sub-group shall be established for each wetland or wetland area that has different wetland characteristics.
'Circular 39 types: 1, 1L,2, 3,4,5, 6,7,8,B,U.
3Wedand plant community type: shallow open water,deep marsh,shallow marsh, sedge meadow,fresh meadow,wet to
wet-mesic prairie,calcareous fen,open bog or coniferous bog, shrub-carr/alder thicket,hardwood swamp or coniferous
swamp,floodplain forest,seasonally flooded basin. See Wetland Plants and Plant Communities of Minnesota and
Wisconsin(Eggers and Reed,1997)as modified by the Board of Water and Soil Resources,United States Army Corps
of Engineers..
2. Seller represents and warrants as follows:
a) The Credits are deposited in an account in the Minnesota Wetland Bank administered by the
Minnesota Board of Water and Soil Resources (BWSR) pursuant to Minn. Rules Chapter
8420.0700-.0760.
b) Seller owns the Credits and has the right to sell the Credits to Buyer.
3. Buyer will pay Seller a total of$ 11,761.20 for the Credits, as follows:
a) $0 as earnest money, to be paid when this Agreement is signed; and
b) The balance of$11,761.20 to be paid on the Closing Date listed below.
Page 1 of 2
BWSR Form: wca-bank-12(purchase agreement).doc
Revised 6/1/2010
4. [® ] Buyer, [❑ ] Seller agrees to pay to a withdrawal fee of$764.48 to the State of Minnesota based
on 6.5% of the agreed to purchase price. At the Closing Date, [®] Buyer, [❑ ] Seller will execute a check
made out for this amount, payable to the Board of Water and Soil Resources.
5. The closing of the purchase and sale shall occur on_ , 2013(Closing Date) at Sherburne
County Abstract and Title 351 Main St NW Elk River, MN. The Closing Date and location may be changed
by written consent of both parties. Upon payment of the balance of the purchase price, Seller will sign a
fully executed Application for Withdrawal of the Credits in the form specified BWSR, provide a copy of the
Application for Withdrawal to the Buyer and forward the same to the BWSR along with the check for the
withdrawal fee.
6. Buyer has applied or will apply to the City of Elk River (Local Government Unit (LGU) or other
regulatory authority) for approval of a replacement plan utilizing the Credits as the means of replacing
impacted wetlands. If the LGU has not approved the Buyer's application for a replacement plan utilizing the
Credits by the Closing Date, and no postponement of the Closing Date has been agreed to by Buyer and
Seller in writing, then either Buyer or Seller may cancel this Agreement by giving written notice to the other.
In this case, Seller shall return Buyer's earnest money, and neither Buyer nor Seller shall have any further
obligations under this Agreement. If the LGU has approved the replacement plan and the Seller is ready to
proceed with the sale on the Closing Date, but Buyer fails to proceed, then the Seller may retain the earnest
money as liquidated damages.
(Signature of Seller) (Date) (Signature of Buyer) (Date)
Page 2 of 2
BWSR Form: wca-bank-12(purchase agreement).doc
Revised 6/1/2010