6.1 EDSR 07-20-2015 ilk Request for Action
River
To Item Number
Economic Development Authority 6.1
Agenda Section Meeting Date Prepared by
General Business July 20, 2015 Amanda Othoudt, EDD
Item Description Reviewed by
Envision Co.,LLC Property Tax Abatement Cal Portner, City Administrator
Financing (Sportech, Inc.) Reviewed by
Action Requested
Approve,by motion,and provide a recommendation to City Council for Tax Abatement Assistance for
Envision Companies,LLC. (Sportech, Inc.)
Background/Discussion
The Finance Committee reviewed and recommended the EDA approve Envision Co.,LLC application
for Property Tax Abatement financing.
Envision is requesting up to a 20-year Property Tax Abatement from the city of Elk River for up to
$1,288,590. The maximum abatement term for the city is up to 20 years if only 1 or 2 entities participate
in the abatement of the city receives written denial of participation from one of the other taxing entities
(County or School District).The company has previously requested participation from the School District
and has received a letter of denial of participation.
The county also received a tax abatement application that they considered at their July 7 County Board
meeting with formal review and a public hearing anticipated for August 4.
The proposed project would consist of a 105,000 square foot facility with an estimated taxable value of
approximately$5,243,700 million. The project is estimated to generate$216,383 in total property taxes
per year upon completion. The city share of the property taxes abated per year equal approximately
$49,136.
The form of financial assistance proposed would be considered up front internal financing in which the
city would defer receiving upfront payment of the land in the amount of$1,288,590.The city would
collect the annual abatement revenues from the proposed project (city and county share,if participation is
approved) to reimburse the development fund for the land cost of$1,288,590.
The project scored 45,at the highest end of the desirability range. Based on the analysis provided by
Springsted,it appears that Envision would not proceed with the project without assistance.
A public hearing has been scheduled for the July 20 City Council meeting to invite comments from the
public.A public hearing must be held for any business subsidy in the amount greater than $150,000.
1 ® I E R E I Ill
NATUR
Financial Impact
In the analysis compiled by Springsted,up to $1,288,590 in city tax abatement assistance is proposed to
be distributed as "up front financing" for up to 20 years. This abates the entire city share of taxes on the
property. It is expected that the county will participate,and their portion of the taxes would supplement
the development fund income. Once the development fund received full reimbursement for the land, the
abatement would end. If the county does not choose to participate in the abatement,it is not expected
that the full value of the land cost of$1,288,590 would be realized over the maximum 20-year term of the
abatement.
Attachments
• Tax Abatement Application
• Springsted Analysis (June 23, 2015)
• Business Subsidy Agreement
• Property Tax Abatement Agreement
• Purchase Agreement
N:\Departments\Community Development\Economic Development\EDA\Administrative\Agenda\EDA Agenda Packets\2015\7-20-2015\6.1 sr
Envision(Sportech)Property Tax Abatement.docx
DECKLAN
812 Main Street NW^'Suite 250-Elk River,MN 55330"'www.decklangroup.com
May 22, 2015 Emailed to:AOthoudt @elkrivermn.gov
City of Elk River
ATTN:Amanda Othoudt
13065 Orono Parkway
Elk River, MN 55330
RE:CITY OF ELK RIVER TAX ABATEMENT APPLICATION—SPORTECH,INC.
Dear Ms.Othoudt,
Enclosed you will find a tax abatement application for Sportech,Inc. Decklan Group has been retained
by Sportech,Inc to work with you as we move forward with this application.
We have also submitted a complete tax abatement application to Sherburne County. Sportech, Inc
would like to break ground late summer/early fall of 2015.
Please do not hesitate to contact me at 763-568-9498 or annie@decklangroup.com if you have any
questions,or need additional information.
Thank you
Respectfully
Anni -13. Decker!
Annie B. Deckert
Decklan Group,President
Attached:City of Elk River Tax Abatement Application
VIII APPLICATION FOR TAX ABATEMENT
A APPLICANT INFORMATION
Name of Corporation/Partnership
=hV I S I U h CO _ L L C l S p o Lh c L)
Addre;s I0rI300 1-751VI AV-e Nwl .Slk MVte-, MN ;533 0
Primary Contact A ti In l-e P-e e Ie G 11.--1
\ddres it 12 0°141 St NW, S uI+C 2;0 , =tl' h y-c r, MN ; 5 '3 $ 0
Phonci o3.5b1 `41 ax '----- Email 01h101ie2decklah¢1LOUp. (0t
AiLllot1r'iI INii,Fr .,,-how• co. be L�ln� iN 4-1,-, piAiri.�'Cci vk41211�.}- e T
Brief desc ption tp the tcorporration/partnership's business, including history,principal
prod 4t t or sc ice:
Sp Ri-cc ► 15 of .-a,v"il( owvieJ jihviovollio t- -ivrh pk -1icS
-1-tie) niofolt-nicit. SprUimlit.ip 1k tilt Jelly vi 4 pE-odic}toh of vlo►I+,
pa 0 0 f r i c deice-eSsofit'S f o i'r pow•ctt-6+oFtto tndo‘tlr-Y Spb -i-r ,
b{ ci in in 19°14 in the C•ipli,o n 9 0,11-mais olhd kit, /i tic t,
e x p hOtnl eve i l -}-thic4 wit-1,06 t(-11". t°I*I of :;-11(- 11-1 veil-•
Brief description of the proposed project:It
SPOt.+Td^ wov,IJ Ilk c {v viv-ckt,i5t fwo City owned Pots-tsls
in thr Second p ha5r o f Ned-to-et/ ::.-Ici c BUST hcSS Cc+,- t -x14 oaf-t.)
i1 0'01164-K a Io41460 Si. ft. fnc41 f u o be- vtocd •Iv ciSce►i414r Crab
SiS.feh.' k Pm-% foe- Jdt&I•c osviS • TkCPC 1S P-00n, -v • •Xpatid qn
Aiditlonod •�3,500 t in the f tifurt•c (approxl• Z.o1Rs)
Attorney Name N/1 °t t'' J. 1Iev1 GI-Irc Jfkikme -f MiC/tt Ijcit- AII•+en PLLP
Address 14l 454' Avs 1 d vlf'C B, PlYnickif JAN .
Phone163• 4-57...3019 Fax Email 17olthAvtotrrO Ity�INW. CO►'►'t
xf-LZ3
Accountant Name Mt ow+ JD Inn Son, kg Poll. 4 Co/1.000Y
Address 4810 W1ii r co n2- P14YvY, Wk.,tc Fror -j�olk-c, MN y5 no
Phony: 1/51' 4o•7.5i3 3 Fax Email r>njoPoiSon OFre1pA ,Cf>4+S.(►m1
Contractor Name 12.-06 (5 ) 12-J FYakl CA/ Cjtl•-1/40vl
Address 11po me-moil, mcivhis pz.04d. Mfod o4 I4 .J 9 L- N N 5.5/20
Phone t,51. 31°S•7005 Fax ir+y,• 10$I. 02.3S Ismail R. :ichgelLePI f•-Mh•Lc"r '
Engiuecr Name
Address
Phone Fax 1:.mail
Architect Name
Address
Phone Fax Email
Page 8'of1.3 fi E.Ei 11
NA1
NATURE
B. PROJECT INFORMATION
1. The project will be:
Industrial: 2 New Construction Expansion Redevelopment/ Rehab.
Office/research facility that conforms to Business Park zoning standards
Commercial Redevelopment/Rehabilitation
Other
2. In addition to the City of Elk River,applicant is requesting Tax Abatement from:
.1 Sherburne County School District 728
3. The project will be: it Owner Occupied Leased Space
4. 1'rojectAddress 10752 1bSth C1R-e�L
Parcel Identification Number(s) •SZla'0Z05 76'$1-$• 01J0
5. Site Plan and Construction Plans Attached: A Yes No
1171415 (05 over 5- ors.
6. Total Amount of Tax Abatement Requested: $ y,
City Portion: Annual$ 9i,)3 b Total S_19.L 7 LO 1 20
County Portion: Annual $ r>4.X23 Total$ i It $45
ISD 728 Portion: Annual$ 'Total $
7. Current Real Estate"Taxes on Project Site: $
Estimated Real Estate Taxes upon Completion: Phase I $ Z I L 3S,
1 Phase II $ 2.0 t ?J1
8, Construction Start Date: tS t�f L°1 5
Construction Completion Date: M°9/ 2.0 j 6
if Phased Project: Year °o Completed
Year %Completed
C. PUBLIC PURPOSE
It is the policy of the City of Elk River that the use of Fax Abatement should result
in a benefit to the public. Please indicate how this project will serve a public
p trpose. 7.0 4
Job Creation/Retention Number of existing jobs
Number of jobs created by project
Average hourly wage of jobs created/retained +I°I•b7
New industrial development which will result in additional private
investment in the area.
Enhancement and/or diversification of the City of Elk River's economic base.
The project contributes to the fulfillment of the City's Economic Development
Strategic Plan.
Removal of blight.
Rehabilitation of a high profile or priority site.
4 Significantly increase the City's tax base.
Page 9 Of 14 P 9 M t A t i 1 1
NATURE
D. SOURCES & USES
SOURCES NAME AMOUNT
Bank Loan 6�IM�N g0ndc $ 10j 4 ,47 4
Other Private Funds $ Zb}
Owner Cash Equity $ ( t 9 i !O
l'ed Grant/Loan $
State Grant/Loan $
EDA Micro Loan $
Tax Abatement $ I ► IVO t V9 0
ID Bonds $
TOTAL $ 9 %1(1, 0
USES AMOUNT
Land Acquisition $ 11 ZS ), Sal D
Site Development $ V(0 7, 2.1 5
Construction $ 5 , Ito, 52.5
Machinery& Equipment $ 2-110 0 , 00 0
Architectural&Engineering Fees
Legal Fees $
Interest During Construction $
Debt Service Reserve $
Contingencies $
TOTAL $ 1 / (01/050
Page 10 of 14 P_/ rt t l t 9 .
NATURE
E. ADDITIONAL DOCUMENTATION AND CHECKLIST
Applicants will also be required to provide the following documentation:
A) Written business plan, including a description of the business,
ownership/management,date established,products and services, and
future plans
B) Financial Statements for Past Two Years
Profit &Loss Statement
Balance Sheet
C) Current Financial Statements
Profit&Loss Statement to Date
Balance Sheet to Date
D) Two Year Financial Projections
E) Personal Financial Statements of all Major Shareholders
Profit&Loss
Current Tax Return
I) Letter of Commitment from Applicant Pledging to Complete
During the Proposed Project Duration
G) Letter of Commitment from the Other Sources of Financing,
Stating Perms and Conditions of their Participation in the Project
II) N___ __c__a_b►_Application deposit of$5,000,with any unused portion
to be refunded if project does not proceed
I) Construction Plans and Itemized Project Construction Statement
J) Attach the following documentation as Exhibits
Exhibit A —Corporation/Partnership Description
Exhibit B—Description of Project
Exhibit C—I.ist of Shareholders/Partners
Exhibit D—Bid-For Analysis
Exhibit E—List of Prospective Lessees
Exhibit F—Legal Description and PID Number(s)
Note: All Major shareholders will be required to sign personal guarantees and a minimum
assessment agreement if up front financing of the project is required.
The undersigned certifies that all information provided in this application is true and correct
to the best of the undersigned's knowledge. "File undersigned authorizes the City of Elk
River to check credit references,verify financial and other information,and share this
information with other political subdivisions as needed. The undersigned also agrees to
provide any additional information as may he requested by the City after the filing of this
application.
Applicant Name / Date ZZ 'c
Page 11of1{ / 10 ■ EA [ 1 If
NATURE
Corporation/Partnership Description
Both entities are S-Corps and 100%owned by Chris, Deb,Andrew and Taylor Carlson.
• Envision, LLC(the real estate entity)
• Sportech, Inc. (the business entity)
Description of Project
Sportech, Inc. is a family owned, innovation-driven plastics thermoformer specializing in the design,
development and production of quality products and accessories for the recreational and utility product
industry that began in 1994. The first product designed by current owner, CEO Chris Carison's father,
was the Indy Lightshield,which eliminates show from covering the headlights of snowmobiles. This
product is recognized today as one of the most innovative and best-selling accessories ever introduced
to the snowmobile market. Since then,Sportech has continued to evolve and grow,through their
development of numerous ground-breaking aftermarket snowmobile products and significant company
growth. As a supplier to OEMs,they design and manufacture windshields, body panels and screen
printed parts for motorcycles, snowmobiles,scooters,ATVs, UTVs and more. Clients include Polaris,
Honda and John Deere.
Originally a home based business in the Carlson garage,the company moved to a 10,000 square foot
facility in 1998, and built a brand new 96,000 sq.ft.facility(Building 1) in Elk River in 2008. In 2012,an
additional 55,000 square foot facility(Building 2)was added in Elk River for warehouse and assembly
productions. Because of Sportech's rapid growth,the company recently conducted a facility needs
assessment to best prepare for future growth. This assessment identified 5-6 pieces of new equipment
to go into service within the next two years, resulting in a minimum of 80,000 additional square feet
(eliminating the current 55,000 square foot facility).
Sportech has seen tremendous employee growth in the past several years as well: 17 new employees
hired in 2010,43 in 2011, 52 in 2012 and 82 in 2013 and 80 in 2014. Unfortunately,there has been
turnover during this time. Sportech currently employs 204 FTE,and anticipates hiring a minimum of 72
FTE, averaging$19.67/hr within the next two years. This does not include any additional employees
hired with the planned acquisition (as described below) in 2016.
Sportech wants to purchase approximately 14 acres(two city-owned lots) in Elk River's Natures Edge
Business Center and build a 105,000 square foot facility with room to expand an additional 73,500
square feet. The facility will be used to assemble cab systems and parts(primarily doors&windshields)
for vehicle OEM's. Additionally,this facility will offer a highly efficient assembly operation, more
advanced thermoforming,and a location where the in-depth manufacturing processes are executed
start to finish: 1) raw materials in, 2) materials processed, 3) manufactured,4)assembled,5)packaged,
and 6)shipped. Currently,this process is split between Sportech's two buildings. It's imperative
Sportech is able to expand to manage its growth,and the company would like to break ground this year.
This project will strengthen the local economy through increased tax base,the retention of over 200
well-paying jobs, and the creation of a minimum of 72 new FTE by the end of 2017 between the two
buildings. This does not include any additional employees hired with the planned acquisition(as
described below) in 2016.
Currently,Sportech contributes over$320,000 annually in property taxes between the two buildings.
Preliminary tax estimates anticipate the new facility will generate a minimum of$216,383 in taxes per
year. Upon project completion, its current headquarters,and new building (excluding proposed
expansion), will contribute an estimated $330,000 per year in property tax base revenue for Minnesota.
Based upon an economic impact study conducted by third-party firm CTG Research,the project will
result in the following:
• Create 113 indirect and induced jobs throughout the local economy,which will pay$38,757 in
average annual salary,or$18.63 per hour
• Increase consumer expenditures by$3,041,737 annually
• Bring a total of 60 residents to Elk River
• Bring a total of 151 residents to Sherburne County
Combined with Sportech's existing employment of 204 FTE,total economic impact with the current
facilities and proposed facilities is:
• 549 direct, indirect and induced jobs
• $11,659,991 in consumer expenditures annually
• 230 residents in Elk River
• 581 residents in Sherburne County
Description of Request-City
Sportech is requesting abatement in the amount of$982,720 from the City over a 20 year term.
Sportech has received a written letter from ISD 728 denying their abatement request, statutorily
permitting them to apply for a 20 year term. This amount was based upon the estimated valuation of
the 105,000 sq.ft.facility provided by Sherburne County. Since December of 2014,Sportech has been
working with city staff and the EDA on discussions to purchase the two lots in NEBC. During this
process,we ran into several roadblocks,which caused us to explore options in surrounding
communities. Luckily, with the help of Economic Development Director Amanda Othoudt and other
elected officials,Sportech was able to reach an agreement which allows the company to remain in Elk
River,and continue their aggressive growth trajectory.
As indicated prior,Sportech is in the process of an acquisition(to be complete in 2016),which will result
in an additional 73,500 sq.ft. expansion,expected to be completed in 2018. Per the county assessor,
once the expansion is complete,the property is expected to generate$320,376/year in property taxes,
broke out as follows:
• City=$72,759
• County=$80,143
• School=$65,502
• State=$75,387
• MV=$16,216
• Other=$7,369
TOTAL=$320,376
Assuming the expansion is complete in 2018, based on current tax rates, it is fair to assume Sportech's
total abatement request will be complete in 12-13 years,versus the 20 year requested term.
Furthermore,the City's development fund will be reimbursed$1,288,590 between year 9-10 of the
term.
Description of Request—County
Sportech is requesting abatement in the amount of$811,845 from Sherburne County over a 15 year
term. If the county does not provide abatement,the city would be paid back for the land by year 18 of
the term, provided Sportech builds the 73,500 expansion.
Sportech is only requesting abatement for the initial building, not the taxes generated by the planned
expansion.
List of Shareholders/Partners
Envision,LLC(the real estate entity)
• Chris Carlson, 39.16%
• Deb Carlson,36.19%
• Andrew Carlson, 10.84%
• Taylor Carlson, 10.84%
Sportech, Inc. (the business entity)
• Chris Carlson,44.91%
• Deb Carlson,44.91%
• Andrew Carlson,5.09%
• Taylor Carlson, 5.09%
Legal Description&PID(s)
Lots 1 &2, Nature's Edge Business Center, 2nd Addition
75-828-0205 and 75-828-0210
ISD
District Office
728 815 Hi
0 1 Highway 10
hwa
Elk River,Minnesota 55330
JD Independent 763.2413400
School District
728 feedback@elkriverk;2.mn.us
is 8k River Area School&strict www.elkriver.kl2,mn.us
� I
C
April 16,2015
To Whom it May Concern,
0
o
- We have received your request to participate in tax abatement financing for the Sportech,Inc.
project in Elk River and we have determined to not participate in the project.
go
a If you have any questions,please do not hesitate to contact me at 763-241-3403.
v
a Thank you
Respectfully,
0
Yl
a
Gregory Hein Dr.Mark Bezek
Executive Director of Business, ISD 728 ISD 728 Superintendent
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Springsted Incorporated
380 Jackson Street, Suite 300
Saint Paul,MN 55101-2887
Springsted
Tel: 651-223-3000
Fax: 651-223-3002
www.springsted.com
DRAFT MEMORANDUM
TO: Amanda Othoudt, Economic Development Director
FROM: Mikaela Huot,Vice President/Consultant
DATE: June 23,2015
SUBJECT: Envision Co., LLC(Sportech)Proposed Tax Abatement—Project Analysis
The City of Elk River has asked Springsted to evaluate a tax abatement request for assistance submitted by the
developer, Envision Co., LLC(Sportech).The developer proposes to purchase land from the Economic Development
Authority of the City located within the 2^d phase of the Nature's Edge Business Center and construct an approximate
105,000 square foot facility to be used to assemble cab systems and parts for vehicle OEMS. There are plans for a
potential future expansion of an additional 73,500 square feet that is not currently included within this analysis. The
company is purchasing land from the City for a total purchase price of$1,288,590. The company currently employs
204 FTE and plans to create an additional 72 new FTE by the end of 2017. According to the applicant, the tax
abatement assistance will be used as annual cash flow to support debt service on the approximate$9.7M project to
be financed with a combination of debt and equity.
The purpose of this memo is to summarize the analysis that Springsted prepared, including the estimate of tax
abatement revenues for the project and to assist with determining whether the project as proposed is likely to
proceed "but for" the requested tax abatement assistance. The analysis is based on our review of the project
components and financials and general rationale for assistance as submitted by the developer.
There are several methods available to determine if a project would proceed "but for" the assistance. An analysis
comparing the rates of return with and without assistance is a common method used to analyze the "but for" test.
However, in some cases,a review of the project's sources and uses of funds and operating cash flow performance is
done to determine if an operating gap exists or if the project performance is not expected to meet minimum financing
requirements and return thresholds to assist with determining that a project meets the"but for"test. If,following the
review, it is determined that the project has a shortage of debt, cash, and/or equity based on the projected value of
the project upon completion and net operating income available to support debt service, it can be determined that the
Public Sector Advisors
City of Elk River,Minnesota
Envision Co.,LLC(Sportech)request for Tax Abatement
June 23,2015
Page 2
project would not proceed "but for" the assistance. It is important to note that tax abatement does not statutorily
require a "but for" analysis to determine if the project would proceed without assistance, however it must be
determined that the project is in the public interest and that the benefits outweigh the costs and the City's current tax
abatement policy requires this finding be made.
Tax Abatement Assumptions
Springsted made certain assumptions to calculate the estimated amount of tax abatement revenue generated by the
proposed new project. Those assumptions include the following:
• City of Elk River proposed tax abatement
o Abate incremental land&building value
o PIDs:75-828-0205 and 75-828-0210
o EMV as of Jan. 2,2014 for taxes payable 2015 is So
• Assumed to be`base'value of abatement
• Tax exempt property owned by EDA with no taxable value
• Value estimate provided by County Assessor
o EMV as of Jan.2,2016 for taxes payable 2017 is$5,243,700
• Land: $1,236,200
• Building: $4,007,500
• Total Value: $5,243,700
• Value estimate provided by County Assessor
• Abatement term and participation
o Request for City assistance for 20 years
• Recommended City participation for 15 years
o Request for County assistance for 15 years
• Recommended County participation for 12 years
• First Year of Abatement
o Taxes payable 2017(based on partial value)
o Construction commences summer/fall 2015
o Construction complete by December 31,2016
• 2015 tax rates remain constant through term(Rates Provided by Sherburne County)
o City: 47.190%
• Class rates remain constant through abatement term
• Fiscal disparities contribution-NA
• 0%annual market value inflator assumed
• Present Value Assumptions
o 4%Discount Rate
o Dated Date of December 31, 2015
City of Elk River,Minnesota
Envision Co.,LLC(Sportech)request for Tax Abatement
June 23,2015
Page 3
Tax Abatement Revenue Estimates
Partici.ation and Number of Years
Cit Yes—15 Years Yes—20 Years Yes—15 Years Yes—20 Years
Count No No Yes—12 Years Yes—15 Years
Estimated Annual Tax Abatement Revenue —�
Estimated Cit Share $49,136 $49,136 $49,136 $49,136
Estimated Count Share $54,123 $54,123 $54,123 $54,123
Total Estimated Tax Abatement Revenues
Estimated Cit Share $699,924 $945,605 $699,924 $945,605
Estimated Count Share —_ $608,587 $770,955
Estimated Total Combined Revenues $699,924 $945,605 $1,308,512 $1,716 560
The above table illustrates the projected net revenues that tax abatement would generate based on various terms of
collection. The application for abatement assistance includes a proposed term of 20 years for the City and 15 years
for the County with an estimated total abatement revenue amount as requested from the City of $982,722 and
$811,845 from the County. Assuming partial value is realized in the first year (2017), the estimated abatement
amounts are summarized above. The maximum abatement term for the City is up to 20 years if only 1 or 2 entities
participate in the abatement or the City receives written denial of participation from one of the other taxing entities
(County or School District). The company has previously requested participation from the School District and has
received a letter of denial of participation. All participation levels and amounts would be subject to individual policy
and Board decisions following anticipated public hearings. Revenues captured through tax abatement and provided
as reimbursement to the property owner for certain costs must be used only for those properties that benefit from the
tax abatement.
Developer Request for Tax Abatement Assistance
The developer submitted a request for tax abatement assistance from the City of Elk River and Sherburne County to
assist with financing the proposed $9.7 million acquisition and subsequent construction of an approximate 105,000
square foot facility on current City-owned property located in the 2nd phase of the Nature's Edge Business Center.
The developer has requested approximately $982,722 in abatement assistance over 20 years from the City and
$811,845 over 15 years from the County.
The Developer's submittal includes a preliminary total project budget of $9,696,330 as shown in the table on the
following page.
City of Elk River,Minnesota
Envision Co.,LLC(Sportech)request for Tax Abatement
June 23,2015
Page 4
Land Acquisition $1,288,590 Bank Loan $6,468,474
Site Development $667,215 Equity $1,939,266
Construction $5,640,525 Tax Abatement $1,288,590
Machinery&Equipment $2,100,000
Total Costs $9,696,330 Total Sources $9,696,330
Project Financing
There are generally two ways in which assistance can be provided for most projects, either upfront or on a pay-as-
you-go basis. With upfront financing,the City would finance a portion of the Developer's initial project costs through
the issuance of bonds or as an internal loan. Future revenues would be collected by the City and used to pay debt
service on the bonds or repayment of the internal loan. With pay-as-you-go financing, the Developer would finance
all project costs upfront and would be reimbursed over time for a portion of those costs as revenues are available.
Pay-as-you-go-financing is generally more acceptable than upfront financing for the City because it shifts the risk for
repayment to the Developer. If revenues are less than originally projected,the Developer receives less and therefore
bears the risk of not being reimbursed the full amount of their financing. However, in some cases pay as you go
financing may not be financially feasible. With bonds, the City would still need to make debt service payments and
would have to use other sources to fill any shortfall of revenues. With internal financing,the City reimburses the loan
with future revenue collections and may risk not repaying itself in full if revenues are not sufficient. The form of
financial assistance proposed in this case would be considered upfront internal financing in which the City would
defer receiving upfront payment for the land in the amount of $1,288,590. The City would collect the annual
abatement revenues from the proposed project(City and County share, if participation is approved)to reimburse the
Development fund for the land cost of $1,288,590. An interest component has not been included and is simply
payment in full for the price of the land.
, ,,d ° k f
„7*� �S`a.'�?�e-: tea`'-:���a.a �'� .� �?�:�a
Total Estimated Tax Abatement Revenues
Estimated Cit Share $699,924 $945,605 $699,924 $945,605
Estimated Count Share $608,587 $770,955
Estimated Total Combined Revenues $699 924 $945,605 $1,308 512 $1716,560
Total Land Cost $1,288,590 $1,288,590 $1,288,590 $1,288,590
Estimated Sur.Ius 1 Deficit 1111=1M $342,985 $19,922 $427,970
The table above shows what the impact of participants (City and County) and number of years may have on the
ability of the City to receive full payment for the land price of$1,288,590. Scenario 3 which includes City participation
City of Elk River,Minnesota
Envision Co.,LLC(Sportech)request for Tax Abatement
June 23,2015
Page 5
for 15 years and County participation for 12 years illustrates that sufficient revenues are projected to be available to
repay the Development Fund for the full value of the land.
Developer Proforma"But For"Analysis
In approving an abatement project,the Elk River EDA has requested that a finding be made that the proposed project
would not reasonably be expected to occur solely through private investment within the reasonably foreseeable
future. The developer has provided a "but-for" argument stating that the financial assistance from the City is
necessary to provide sufficient project cash flow and market returns to investors that will achieve project feasibility.
The developer has stated the assistance is necessary due to the costs of developing the site and inability of the
project to fully support those costs upon completion. The current estimated project costs are in excess of the
estimated future value of the building upon development as provided by the County. Based on this analysis,the EDA
could be justified in determining that the project meets the"but for"test and would not proceed without assistance.
As stated tax abatement does not statutorily require a"but for" analysis to determine if the project would proceed
without assistance. A city, county or school district may grant a tax abatement, by contract or otherwise, of the
taxes imposed by the city on a parcel of property,which may include personal property and machinery,or defer the
payments of the taxes and abate the interest and penalty that otherwise would apply,if:
• it expects the benefits to the city of the proposed abatement agreement to at least equal the costs to the city
of the proposed agreement or intends the abatement to phase-in a property tax increase, as provided in
clause(2)(vii);and
• it finds that doing so is in the public interest because it will:
o increase or preserve tax base;
o provide employment opportunities in the political subdivision;
o provide or help acquire or construct public facilities;
o help redevelop or renew blighted areas;
o help provide access to services for residents of the political subdivision;
o finance or provide public infrastructure;
o phase-in a property tax increase on the parcel resulting from an increase of 50 percent or more in
one year on the estimated market value of the parcel, other than increase attributable to
improvement of the parcel;or
o stabilize the tax base through equalization of property tax revenues for a specified period of time
with respect to a taxpayer whose real and personal property is subject to valuation under
Minnesota Rules,chapter 8100.
The Developer's submittal includes a 20 year financial and cash flow projection for the project and company. Review
of the financial statements indicates that cash is shown to be depleted in 2015 and 2016 to finance the expansion
project. The project is limited to the amount of financing as offered by the lender, Bremer Bank. Absent a reduction
in project costs, the result is a financing gap that is proposed to be filled with financial assistance through tax
abatement revenues from the City(and County)to assist with purchasing the land.
City of Elk River,Minnesota
Envision Co.,LLC(Sportech)request for Tax Abatement
June 23,2015
Page 6
Conclusion
The developer has requested tax abatement assistance from both the City and County to assist with financing a
portion of the project costs associated with acquisition and subsequent construction of a 105,000 square foot facility.
The developer has indicated that the project would not be feasible without assistance due to the limitations on
achieving sufficient upfront financing. There are several methods to determine if a project would proceed "but for"
assistance. Based on the available information, in this case a review of the financial statements and ability to attract
debt and equity investment was utilized to test the viability of the project. "But for"abatement assistance,a reduction
in total project costs (land cost), or increased revenues or some combination of the above, the developer has
indicated the project as proposed would not go forward. In addition, it is important to note that the developer has
indicated that the project will aid in the retainage of 204 FTE jobs and creation of 72 new jobs in the City of Elk River.
Thank you for the opportunity to be of assistance to the City of Elk River. Please contact me at 651-223-3036 or
mhuot(a.springsted.com with any questions or to discuss.
Projected Tax Abatement Report
City of Elk River,Minnesota
Proposed Tax Abatement for Envision Co.,LLC
Initial Analysis based on Request: City Participation for 15 Years
Total EMV of$5,243,700
Less:
Non- Retained Times: Maximum Maximum Maximum P.V.
Annual Total Total Abated Captured Tax Tax Tax Tax Total Annual
Period Estimated Net Tax Net Tax Net Tax Capacity Abatement Abatement Abatement Tax Abate To
Ending Market Value(1) Capacity(2) Capacity(3) Capacity Rate City(4) County School District Abatement 12/31/15
47.19% 51.98% 42.48%
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) 4.00%
12/31/17 1,310,925 25,469 0 25,469 146.431% 12,019 0 0 12,019 11,112
12/31/18 5,243,700 104,124 0 104,124 146.431% 49,136 0 0 49,136 43,682
12/31/19 5,243,700 104,124 0 104,124 146.431% 49,136 0 0 49,136 42,002
12/31/20 5,243,700 104,124 0 104,124 146.431% 49,136 0 0 49,136 40,386
12/31/21 5,243,700 104,124 0 104,124 146.431% 49,136 0 0 49,136 38,833
12/31/22 5,243,700 104,124 0 104,124 146.431% 49,136 0 0 49,136 37,339
12/31/23 5,243,700 104,124 0 104,124 146.431% 49,136 0 0 49,136 35,903
12/31/24 5,243,700 104,124 0 104,124 146.431% 49,136 0 0 49,136 34,522
12/31/25 5,243,700 104,124 0 104,124 146.431% 49,136 0 0 49,136 33,195
12/31/26 5,243,700 104,124 0 104,124 146.431% 49,136 0 0 49,136 31,918
12/31/27 5,243,700 104,124 0 104,124 146.431% 49,136 0 0 49,136 30,690
12/31/28 5,243,700 104,124 0 104,124 146.431% 49,136 0 0 49,136 29,510
12/31/29 5,243,700 104,124 0 104,124 146.431% 49,136 0 0 49,136 28,375
12/31/30 5,243,700 104,124 0 104,124 146.431% 49,136 0 0 49,136 27,284
12/31/31 5,243,700 104,124 0 104,124 146.431%1 49,136 0 0 49,136 26,234
$699,924 $0 $0 $699,924 $490,985
(1) Total estimated market value as provided by County Assessor based on 105,000 square foot new facility. 0%annual market value inflator
(2) Total net tax capacity based on commercial-industrial property class rates (1.5%first$150,000 value and 2%value above$150,000)
(3) Non abated net tax capacity assumed to be$0 as value currently owned by EDA and tax exempt
(4) Based on 2015 local tax capacity rates. Subject to change annually with actual rates
Public Sector Advisors
Projected Tax Abatement Report
City of Elk River,Minnesota
Proposed Tax Abatement for Envision Co.,LLC
Initial Analysis based on Request: City Participation for 20 Years
Total EMV of$5,243,700
Less:
Non- Retained Times: Maximum Maximum Maximum P.V.
Annual Total Total Abated Captured Tax Tax Tax Tax Total Annual
Period Estimated Net Tax Net Tax Net Tax Capacity Abatement Abatement Abatement Tax Abate To
Ending Market Value(1) Capacity(2) Capacity(3) Capacity Rate City(4) County School District Abatement 12/31/15
47.19% 51.98% 42.48%
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) 4.00%
12/31/17 1,310,925 25,469 0 25,469 146.431% 12,019 0 0 12,019 11,112
12/31/18 5,243,700 104,124 0 104,124 146.431% 49,136 0 0 49,136 43,682
12/31/19 5,243,700 104,124 0 104,124 146.431% 49,136 0 0 49,136 42,002
12/31/20 5,243,700 104,124 0 104,124 146.431% 49,136 0 0 49,136 40,386
12/31/21 5,243,700 104,124 0 104,124 146.431% 49,136 0 0 49,136 38,833
12/31/22 5,243,700 104,124 0 104,124 146.431% 49,136 0 0 49,136 37,339
12/31/23 5,243,700 104,124 0 104,124 146.431% 49,136 0 0 49,136 35,903
12/31/24 5,243,700 104,124 0 104,124 146.431% 49,136 0 0 49,136 34,522
12/31/25 5,243,700 104,124 0 104,124 146.431% 49,136 0 0 49,136 33,195
12/31/26 5,243,700 104,124 0 104,124 146.431% 49,136 0 0 49,136 31,918
12/31/27 5,243,700 104,124 0 104,124 146.431% 49,136 0 0 49,136 30,690
12/31/28 5,243,700 104,124 0 104,124 146.431% 49,136 0 0 49,136 29,510
12/31/29 5,243,700 104,124 0 104,124 146.431% 49,136 0 0 49,136 28,375
12/31/30 5,243,700 104,124 0 104,124 146.431% 49,136 0 0 49,136 27,284
12/31/31 5,243,700 104,124 0 104,124 146.431% 49,136 0 0 49,136 26,234
12/31/32 5,243,700 104,124 0 104,124 146.431% 49,136 0 0 49,136 25,225
12/31/33 5,243,700 104,124 0 104,124 146.431% 49,136 0 0 49,136 24,255
12/31/34 5,243,700 104,124 0 104,124 146.431% 49,136 0 0 49,136 23,322
12/31/35 5,243,700 104,124 0 104,124 146.431% 49,136 0 0 49,136 22,425
12/31/36 5,243,700 104,124 0 104,124 146.431% 49,136 0 0 49,136 21,563
$945,605 $0 $0 $945,605 $607,775
(1) Total estimated market value as provided by County Assessor based on 105,000 square foot new facility. 0%annual market value inflator
(2) Total net tax capacity based on commercial-industrial property class rates(1.5%first$150,000 value and 2%value above$150,000)
(3) Non abated net tax capacity assumed to be$0 as value currently owned by EDA and tax exempt
(4) Based on 2015 local tax capacity rates. Subject to change annually with actual rates
Public Sector Advisors
Projected Tax Abatement Report
City of Elk River,Minnesota
Proposed Tax Abatement for Envision Co.,LLC
Initial Analysis based on Request: City Participation for 15 Years and County Participation for 12 Years
Total EMV of$5,243,700
Less:
Non- Retained Times: Maximum Maximum Maximum P.V.
Annual Total Total Abated Captured Tax Tax Tax Tax Total Annual
Period Estimated Net Tax Net Tax Net Tax Capacity Abatement Abatement Abatement Tax Abate To
Ending Aarket Value° Capacity(2) Capacity(3) Capacity Rate City(4) County School District Abatement 12/31/15
47.19% 51.98% 42.48%
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) 4.00%
12/31/17 1,310,925 25,469 0 25,469 146.431% 12,019 13,239 0 25,257 23,352
12/31/18 5,243,700 104,124 0 104,124 146.431% 49,136 54,123 0 103,259 91,797
12/31/19 5,243,700 104,124 0 104,124 146.431% 49,136 54,123 0 103,259 88,266
12/31/20 5,243,700 104,124 0 104,124 146.431% 49,136 54,123 0 103,259 84,871
12/31/21 5,243,700 104,124 0 104,124 146.431% 49,136 54,123 0 103,259 81,607
12/31/22 5,243,700 104,124 0 104,124 146.431% 49,136 54,123 0 103,259 78,468
12/31/23 5,243,700 104,124 0 104,124 146.431% 49,136 54,123 0 103,259 75,450
12/31/24 5,243,700 104,124 0 104,124 146.431% 49,136 54,123 0 103,259 72,548
12/31/25 5,243,700 104,124 0 104,124 146.431% 49,136 54,123 0 103,259 69,758
12/31/26 5,243,700 104,124 0 104,124 146.431% 49,136 54,123 0 103,259 67,075
12/31/27 5,243,700 104,124 0 104,124 146.431% 49,136 54,123 0 103,259 64,495
12/31/28 5,243,700 104,124 0 104,124 146.431% 49,136 54,123 0 103,259 62,015
12/31/29 5,243,700 104,124 0 104,124 146.431% 49,136 0 0 49,136 28,375
12/31/30 5,243,700 104,124 0 104,124 146.431% 49,136 0 0 49,136 27,284
12/31/31 5,243,700 104,124 0 104,124 146.431%1 49,136 0 0 49,136 26,234
$699,924 $608,587 $0 $1,308,512 $941,595
'1) Total estimated market value as provided by County Assessor based on 105,000 square foot new facility. 0%annual market value inflator
(2) Total net tax capacity based on commercial-industrial property class rates(1.5%first$150,000 value and 2%value above$150,000)
(3) Non abated net tax capacity assumed to be$0 as value currently owned by EDA and tax exempt
(4) Based on 2015 local tax capacity rates. Subject to change annually with actual rates
Public Sector Advisors
Projected Tax Abatement Report
City of Elk River,Minnesota
Proposed Tax Abatement for Envision Co.,LLC
Initial Analysis based on Request: City Participation for 20 Years and County Participation for 15 Years
Total EMV of$5,243,700
Less:
Non- Retained Times: Maximum Maximum Maximum P.V.
Annual Total Total Abated Captured Tax Tax Tax Tax Total Annual
Period Estimated Net Tax Net Tax Net Tax Capacity Abatement Abatement Abatement Tax Abate To
Ending Aarket Value(1 Capacity(2) Capacity(3) Capacity Rate City(4) County School District Abatement 12/31/15
47.19% 51.98% 42.48%
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) 4.00%
12/31/17 1,310,925 25,469 0 25,469 146.431% 12,019 13,239 0 25,257 23,352
12/31/18 5,243,700 104,124 0 104,124 146.431% 49,136 54,123 0 103,259 91,797
12/31/19 5,243,700 104,124 0 104,124 146.431% 49,136 54,123 0 103,259 88,266
12/31/20 5,243,700 104,124 0 104,124 146.431% 49,136 54,123 0 103,259 84,871
12/31/21 5,243,700 104,124 0 104,124 146.431% 49,136 54,123 0 103,259 81,607
12/31/22 5,243,700 104,124 0 104,124 146.431% 49,136 54,123 0 103,259 78,468
12/31/23 5,243,700 104,124 0 104,124 146.431% 49,136 54,123 0 103,259 75,450
12/31/24 5,243,700 104,124 0 104,124 146.431% 49,136 54,123 0 103,259 72,548
12/31/25 5,243,700 104,124 0 104,124 146.431% 49,136 54,123 0 103,259 69,758
12/31/26 5,243,700 104,124 0 104,124 146.431% 49,136 54,123 0 103,259 67,075
12/31/27 5,243,700 104,124 0 104,124 146.431% 49,136 54,123 0 103,259 64,495
12/31/28 5,243,700 104,124 0 104,124 146.431% 49,136 54,123 0 103,259 62,015
12/31/29 5,243,700 104,124 0 104,124 146.431% 49,136 54,123 0 103,259 59,629
12/31/30 5,243,700 104,124 0 104,124 146.431% 49,136 54,123 0 103,259 57,336
12/31/31 5,243,700 104,124 0 104,124 146.431% 49,136 54,123 0 103,259 55,131
12/31/32 5,243,700 104,124 0 104,124 146.431% 49,136 0 0 49,136 25,225
12/31/33 5,243,700 104,124 0 104,124 146.431% 49,136 0 0 49,136 24,255
12/31/34 5,243,700 104,124 0 104,124 146.431% 49,136 0 0 49,136 23,322
12/31/35 5,243,700 104,124 0 104,124 146.431% 49,136 0 0 49,136 22,425
12/31/36 5,243,700 104,124 0 104,124 146.431% 49,136 0 0 49,136 21,563
$945,605 $770,955 $0 $1,716,560 $1,148,588
(1) Total estimated market value as provided by County Assessor based on 105,000 square foot new facility. 0%annual market value inflator
(2) Total net tax capacity based on commercial-industrial property class rates(1.5%first$150,000 value and 2%value above$150,000)
(3) Non abated net tax capacity assumed to be$0 as value currently owned by EDA and tax exempt
(4) Based on 2015 local tax capacity rates. Subject to change annually with actual rates
Public Sector Advisors
BUSINESS SUBSIDY AGREEMENT
THIS BUSINESS SUBSIDY AGREEMENT,made and entered as of the day of July,
2015 (the "Agreement"),by and between the City of Elk River, Minnesota, a Minnesota municipal
corporation(the"City")and Sportech,Inc., a Minnesota corporation("Sportech").
RECITALS
WHEREAS, Envision Company, LLC, a Minnesota limited liability company
("Envision"), and an affiliate of Sportech's, has agreed to acquire from the City certain property
legally described as Lots 1 and 2, Block 2, Natures Edge Business Center Second Addition,
Sherburne County, located in the City (the "Property") and construct thereon an approximately
105,000 square foot manufacturing facility to be located in the City and leased to and operated
by Sportech(the"Project"); and
WHEREAS, the City believes that the development and construction of the Project are
vital and are in the best interests of the City, will result in preservation and enhancement of the
tax base, provide employment opportunities and are in accordance with the public purpose and
provisions of the applicable state and local laws and requirements under which the Project has
been undertaken and is being assisted; and
WHEREAS, pursuant to Minnesota Statutes, Sections 469.1812 through 469.1815, the
City has established a tax abatement program and entered into an Tax Abatement Agreement and
a Purchase Agreement with Envision,both dated as of the date hereof,pursuant to which the City
will apply certain property tax abatement to the purchase price of the Property; and
WHEREAS, the requirements of Minnesota Statutes, Sections 116J.993 through
116J.995 (the "Business Subsidy Law"), apply to the use of the property tax abatements to the
purchase price of the Property; and
WHEREAS, the City has adopted criteria for awarding business subsidies that comply
with the Business Subsidy Law, after public hearings for which notice was published; and
WHEREAS, the Council has approved this Agreement as a subsidy agreement under the
Business Subsidy Law; and
WHEREAS, in consideration of the City's grant of the property tax abatements for
Envision's acquisition of the Property and Envision's construction of the Project for Sportech,
Sportech has agreed to enter into this Agreement in accordance with the Business Subsidy Law;
NOW, THEREFORE, in consideration of the premises and the mutual obligations of the
parties hereto, each of them does hereby covenant and agree with the other as follows:
460000v3 JSB EL185-31
1. Business Subsidy Law Terms. The parties agree and represent to each other as
follows:
(a) In order to satisfy the provisions of the Business Subsidy Law, Sportech
acknowledges and agrees that the amount of the "Business Subsidy" granted to Envision under the
Tax Abatement Agreement and the Purchase Agreement is the value of the Property, which is no
less than $1,288,590.00, and that the Business Subsidy is needed because the Project is not
sufficiently feasible for Envision to undertake without the Business Subsidy. The public purpose of
the Business Subsidy is to increase the tax base and create employment opportunities in the City.
Sportech represents that as of July 20, 2015 Sportech has 211 full-time equivalent permanent
employees in the City. Sportech agrees that it will meet the following goals (the "Goals"): it will
create, during the period commencing on July 20, 2015 and ending on a date not later than two
years after a certificate of occupancy for the Project is issued by the City (the "Benefit Date"), at
least 10 full-time equivalent jobs in connection with the development of the Project at an hourly
wage of at least the greater of $15.00 per hour or 150% of the state or federal minimum wage,
whichever is greater.
(b) If none of the Goals are met, Sportech agrees to repay all of the Business Subsidy to
the City, plus interest ("Interest") set at the implicit price deflator defined in Minnesota Statutes,
Section 275.70, Subdivision 2, accruing from and after the Benefit Date, compounded
semiannually. If the Goals are met in part, Sportech will repay a portion of the Business Subsidy
(plus Interest) determined by multiplying the Business Subsidy by a fraction, the numerator of
which is the number of jobs in the Goals which were not created at the wage level set forth above
and the denominator of which is 10.
(c) Sportech agrees to (i)report its progress on achieving the Goals to the City until the
date the Goals are met, or, if the Goals are not met,until the date the Business Subsidy is repaid, (ii)
include in the report the information required in Section 116J.994, Subdivision 7 of the Business
Subsidies Act on forms developed by the Minnesota Department of Employment and Economic
Development, and (iii) send completed reports to the City. Sportech agrees to file these reports no
later than March 1 of each year commencing March 1, 2016, and within 30 days after the deadline
for meeting the Goals. The City agrees that if it does not receive the reports, it will mail Sportech a
warning within one week of the required filing date. If within 14 days of the post marked date of
the warning the reports are not made, Sportech agrees to pay to the City a penalty of$100 for each
subsequent day until the report is filed up to a maximum of$1,000.
(d) Sportech agrees to continue operations at the Project for at least 5 years after the
Benefit Date.
(e) Other than the tax abatements from the City pursuant to the Tax Abatement
Agreement and comparable tax abatements from Sherburne County,there are no other state or local
government agencies providing financial assistance for the Project; provided, however, Sportech
intends to seek additional funding under the jobs creation fund after the Project is complete
(f) There is no parent corporation of Sportech or Envision.
460000v3 JSB EL185-31 2
2. Notices and Demands. Except as otherwise expressly provided in this
Agreement, a notice, demand, or other communication under the Agreement by either party to
the other shall be sufficiently given or delivered it if is dispatched by registered or certified mail,
postage prepaid,return receipt requested, or delivered personally:
As to the City: City of Elk River, Minnesota
Elk River City Hall
13065 Orono Parkway
Elk River, MN 55330-5600
Attn: City Administrator
As to Sportech: Sportech, Inc.
10800 - 175th Ave NW
Elk River, MN 55330
Attn: Chris Carlson
or at such other address with respect to either such party as that party may, from time to time,
designate in writing and forward to the other.
3. Counterparts. This Agreement may be simultaneously executed in any number of
counterparts, all of which shall constitute one and the same instrument.
(Remainder of Page Intentionally Left Blank.)
460000v3 JSB ELI 85-31 3
IN WITNESS WHEREOF, the City has caused this Agreement to be duly executed in its
name and behalf and its seal to be hereunto duly affixed and Sportech has caused this Agreement
to be duly executed in its name and behalf as of the date first above written.
CITY OF ELK RIVER,MINNESOTA
By:
Its: Mayor
By:
Its: City Clerk
460000v3 JSB EL185-31 S-j
SPORTECH, INC.
By:
Its:
460000v3 JSB EL185-31 S-2
TAX ABATEMENT AGREEMENT
BY AND BETWEEN
CITY OF ELK RIVER, MINNESOTA
AND
ENVISION COMPANY, LLC
459599v5 JSB EL185-31
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS 1
Section 1.1 Definitions 1
ARTICLE II REPRESENTATIONS AND WARRANTIES 3
Section 2.1 Representations and Warranties of the City 3
Section 2.2 Representations and Warranties of the Developer 3
ARTICLE III UNDERTAKINGS BY DEVELOPER AND CITY 5
Section 3.1 Construction of Project and Reimbursement of Tax Abatement
Property Cost 5
Section 3.2 Limitations on Undertaking of the City 5
Section 3.3 Commencement and Completion of Construction 5
Section 3.4 Damage and Destruction 5
Section 3.5 Change in Use of Project 5
Section 3.6 Prohibition Against Transfer of Project and Assignment of
Agreement 5
Section 3.7 Real Property Taxes 6
Section 3.8 Duration of Abatement Program 8
ARTICLE IV EVENTS OF DEFAULT 9
Section 4.1 Events of Default Defined 9
Section 4.2 Remedies on Default 9
Section 4.3 No Remedy Exclusive 9
Section 4.4 No Implied Waiver 9
Section 4.5 Agreement to Pay Attorney's Fees and Expenses 10
Section 4.6 Release and Indemnification Covenants 10
ARTICLE V ADDITIONAL PROVISIONS 11
Section 5.1 Conflicts of Interest 11
Section 5.2 Titles of Articles and Sections 11
Section 5.3 Notices and Demands 11
Section 5.4 Counterparts 11
Section 5.5 Law Governing 11
Section 5.6 Duration 12
Section 5.7 Provisions Surviving Rescission or Expiration 12
-i-
459599v5 JSB EL185-31
TAX ABATEMENT AGREEMENT
THIS AGREEMENT, made as of the day of July, 2015, by and among the City
of Elk River, Minnesota (the "City"), a municipal corporation and political subdivision of the
State of Minnesota, and Envision Company, LLC, a Minnesota limited liability company (the
"Developer").
W1TNESSETH:
WHEREAS, pursuant to Minnesota Statutes, Sections 469.1812 through 469.1815, the
City has established a Tax Abatement Program; and
WHEREAS, the City believes that the development and construction of a certain Project
(as defined herein), and fulfillment of this Agreement are vital and are in the best interests of the
City, will result in preservation and enhancement of the tax base, provide employment
opportunities and are in accordance with the public purpose and provisions of the applicable state
and local laws and requirements under which the Project has been undertaken and is being
assisted; and
WHEREAS, the requirements of the Business Subsidy Law, Minnesota Statutes, Sections
116J.993 through 116J.995, apply to this Agreement; and
WHEREAS, the City has adopted criteria for awarding business subsidies that comply
with the Business Subsidy Law, after public hearings for which notice was published; and
WHEREAS, in connection with the assistance provided under this Agreement, the
Council has approved a Subsidy Agreement Sportech, Inc., a Minnesota corporation
("Sportech") as a subsidy agreement under the Business Subsidy Law.
NOW, THEREFORE, in consideration of the premises and the mutual obligations of the
parties hereto, each of them does hereby covenant and agree with the other as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. All capitalized terms used and not otherwise defined herein
shall have the following meanings unless a different meaning clearly appears from the context:
Agreement means this Agreement, as the same may be from time to time modified,
amended or supplemented;
Business Day means any day except a Saturday, Sunday or a legal holiday or a day on
which banking institutions in the City are authorized by law or executive order to close;
City means the City of Elk River, Minnesota;
County means Sherburne County, Minnesota;
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459599v5 JSB EL185-31
Developer means Envision Company, LLC, a Minnesota limited liability company, its
successors and assigns;
Event of Default means any of the events described in Section 4.1;
Mortgage means the Mortgage, Security Agreement, Assignment of Leases and Rents
and Fixture Financing Statement dated as of the date hereof from the Developer to the City to
secure the amount payable under the Purchase Price Note;
Project means the construction by the Developer of an approximately 105,000 square foot
manufacturing facility to be located in the City and leased to and operated by Sportech;
Purchase Agreement means the Agreement of Purchase and Sale between Developer and
City, dated as of July , 2015;
Purchase Price Note means the promissory note from the Developer to the City in the
principal amount of$1,288,589.00, dated as of the date hereof;
Sportech means Sportech, Inc., a Minnesota corporation, its successors and assigns;
State means the State of Minnesota;
Tax Abatement Act means Minnesota Statutes, Sections 469.1812 through 469.1815;
Tax Abatement Program means the actions by the City pursuant to Minnesota Statutes,
Section 469.1812 through 469.1815, as amended, and undertaken in support of the Project;
Tax Abatement Property means all and any portion of the real property currently
identified as Lots 1 and 2, Block 2, Natures Edge Business Center Second Addition, Sherburne
County, located in the City;
Tax Abatements means the City's share of annual real estate taxes on the Tax Abatement
Property abated in accordance with the Tax Abatement Program.
Unavoidable Delays means delays beyond the reasonable control of the party seeking to
be excused as a result thereof which are the direct result of war, terrorism, strikes, other labor
troubles, fire or other casualty to the Project, litigation commenced by third parties which, by
injunction or other similar judicial action, directly results in delays, unusually severe or
prolonged bad weather, acts of God, or acts of any federal, state or local governmental unit
(other than the City in exercising its rights under this Agreement) which directly result in delays.
Unavoidable Delays shall not include delays in the Developer's obtaining of permits or
governmental approvals necessary to enable construction of the Minimum Improvements by the
dates such construction is required under this Agreement, unless (a) Developer has timely filed
any application and materials required by the City for such permit or approvals, and (b) the delay
is beyond the reasonable control of the Developer.
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459599v5 JSB EL185-31
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1 Representations and Warranties of the City. The City makes the following
representations and warranties:
(1) The City is a municipal corporation and a political subdivision of the State and
has the power to enter into this Agreement and carry out its obligations hereunder.
(2) The Tax Abatement Program was created, adopted and approved in accordance
with the terms of the Tax Abatement Act.
(3) To finance the costs of the Project to be undertaken by the Developer, the City
proposes, subject to the further provisions of this Agreement, to convey the Tax Abatement
Property to the Developer and apply the Tax Abatements to reimburse the Developer for a
portion of the costs of the Tax Abatement Property as further provided in this Agreement.
(4) The City has made the findings required by the Tax Abatement Act for the Tax
Abatement Program.
Section 2.2 Representations and Warranties of the Developer. The Developer makes the
following representations and warranties:
(1) The Developer has the power to enter into this Agreement and to perform its
obligations hereunder and is not in violation of its articles, operating agreement or member
control agreement or any local, state or federal laws.
(2) The Developer is a limited liability company validly existing under the laws of
this State and has full power and to enter into this Agreement and carry out the covenants
contained herein.
(3) The Developer will cause the Project to be constructed in accordance with the
terms of this Agreement and all local, state and federal laws and regulations (including, but not
limited to, environmental, zoning, energy conservation,building code and public health laws and
regulations).
(4) The Developer will obtain or cause to be obtained, in a timely manner, all
required permits, licenses and approvals, and will meet, in a timely manner, all requirements of
all applicable local, state, and federal laws and regulations which must be obtained or met before
the Project may be lawfully constructed.
(5) The construction of the Project would not be undertaken by the Developer, and in
the opinion of the Developer would not be economically feasible within the reasonably
foreseeable future, without the assistance and benefit to the Developer provided for in this
Agreement.
3
459599v5 JSB EL185-31
(6) Neither the execution and delivery of this Agreement, the consummation of the
transactions contemplated hereby, nor the fulfillment of or compliance with the terms and
conditions of this Agreement is prevented, limited by or conflicts with or results in a breach of,
the terms, conditions or provisions of any contractual restriction, evidence of indebtedness,
agreement or instrument of whatever nature to which the Developer is now a party or by which it
is bound, or constitutes a default under any of the foregoing.
(7) The Developer will cooperate fully with the City with respect to any litigation
commenced with respect to the Project but only to the extent that the City and the Developer are
not adverse parties to the litigation.
(8) The Developer will cooperate fully with the City in resolution of any traffic,
parking, trash removal or public safety problems which may arise in connection with the
construction and operation of the Project.
4
459599v5 JSB EL185-31
ARTICLE III
UNDERTAKINGS BY DEVELOPER AND CITY
Section 3.1 Construction of Project and Reimbursement of Tax Abatement Property
Cost.
(1) The costs of the Tax Abatement Property and the construction of the Project shall
be paid by the Developer. The Developer will construct the Project in accordance with the
approved construction plans and at all times prior to the termination of this Agreement will
operate and maintain, preserve and keep the Project or cause the Project to be maintained,
preserved and kept with the appurtenances and every part and parcel thereof, in good repair and
condition.
(2) Upon submission to the City of a purchase agreement and settlement statement
relating to the purchase of the Tax Abatement Property in an amount not less than the
Reimbursement Amount, the City shall reimburse the Developer for the costs of the Tax
Abatement Property of $1,288,590.00 (the "Reimbursement Amount") pursuant to the
Abatement Program as provided in Section 3.8.
Section 3.2 Limitations on Undertaking of the City. Notwithstanding the provisions of
Section 3.1, the City shall have no obligation to reimburse the Developer for the costs of the Tax
Abatement Property, if the City, at the time or times such payment is to be made, is entitled
under Section 4.2 to exercise any of the remedies set forth therein as a result of an Event of
Default which has not been cured.
Section 3.3 Commencement and Completion of Construction. Subject to Unavoidable
Delays, the Developer shall complete the Project by December 31, 2016. All work with respect
to the Project to be constructed or provided by the Developer shall be in conformity with the
construction plans as submitted by the Developer and approved by the City.
Nothing in this Agreement shall be deemed to impair or limit any of the City's rights or
responsibilities under its zoning laws or construction permit processes.
Section 3.4 Damage and Destruction. In the event of damage or destruction of the
Project the Developer shall repair or rebuild the Project.
Section 3.5 Change in Use of Project. The City's obligations pursuant to this Agreement
shall be subject to the continued operation of the Project by Sportech.
Section 3.6 Prohibition Against Transfer of Project and Assignment of Agreement. The
Developer represents and agrees that prior to the termination date of this Agreement the
Developer shall not transfer the Project or any part thereof or any interest therein, without the
prior written approval of the City. The City shall be entitled to require as conditions to any such
approval that:
5
459599v5 JSB EL185-31
(1) Any proposed transferee shall have the qualifications and financial responsibility,
in the reasonable judgment of the City, necessary and adequate to fulfill the obligations
undertaken in this Agreement by the Developer.
(2) Any proposed transferee, by instrument in writing satisfactory to the City shall,
for itself and its successors and assigns, and expressly for the benefit of the City, have expressly
assumed all of the obligations of the Developer under this Agreement and agreed to be subject to
all the conditions and restrictions to which the Developer is subject.
(3) There shall be submitted to the City for review and prior written approval all
instruments and other legal documents involved in effecting the transfer of any interest in this
Agreement or the Project.
Section 3.7 Real Property Taxes. The Developer shall, so long as this Agreement
remains in effect, pay all real property taxes with respect to all parts of the Tax Abatement
Property acquired and owned by it which are payable pursuant to any statutory or contractual
duty that shall accrue subsequent to the date of its acquisition of title to the Tax Abatement
Property (or part thereof) and until title to the property is vested in another person. The
Developer agrees that for tax assessments so long as this Agreement remains in effect:
(a) It will not seek administrative review or judicial review of the
applicability of any tax statute relating to the ad valorem property taxation of real
property contained on the Tax Abatement Property determined by any tax official to be
applicable to the Project or the Developer or raise the inapplicability of any such tax
statute as a defense in any proceedings with respect to the Tax Abatement Property,
including delinquent tax proceedings; provided, however, "tax statute" does not include
any local ordinance or resolution levying a tax;
(b) It will not seek administrative review or judicial review of the
constitutionality of any tax statute relating to the taxation of real property contained on
the Tax Abatement Property determined by any tax official to be applicable to the Project
or the Developer or raise the unconstitutionality of any such tax statute as a defense in
any proceedings, including delinquent tax proceedings with respect to the Tax Abatement
Property; provided, however, "tax statute" does not include any local ordinance or
resolution levying a tax;
(c) It will not seek any tax deferral or abatement, either presently or
prospectively authorized under Minnesota Statutes, Section 469.181, or any other State or
federal law, of the ad valorem property taxation of the Tax Abatement Property so long
as this Agreement remains in effect.
Section 3.8 Duration of Abatement Program. The Tax Abatement Program shall exist
for a period of up to 20 years beginning with real estate taxes payable in 2017 and continuing
through 2036. On or before February 1 and August 1 of each year commencing August 1, 2017
until the earlier of the date that the Purchase Price Note shall have been paid in full or February
1, 2037 the City shall pay the Reimbursement Amount by applying the amount of the Tax
Abatements received by the City in the previous six month period, together with property tax
6
459599v5 JSB EL185-31
abatement amounts paid by the County to the Developer which the Developer hereby agrees to
pay to the City, to the principal amount of the Purchase Price Note in an aggregate amount equal
to $1,288,589.00. After the Release Date, as defined in the Mortgage, the City shall continue to
retain the Tax Abatements and the Developer shall continue to remit to the City property tax
abatement amounts paid by the County to the Developer to pay in full any remaining unpaid
balance of the Purchase Price of the Tax Abatement Property. The City may terminate the Tax
Abatement Program and this Agreement at an earlier date if an Event of Default occurs and the
City rescinds or cancels this Agreement.
7
459599v5 JSB EL185-31
ARTICLE IV
EVENTS OF DEFAULT
Section 4.1 Events of Default Defined. The following shall be "Events of Default"
under this Agreement and the term "Event of Default" shall mean whenever it is used in this
Agreement any one or more of the following events:
(1) Failure by the Developer to timely pay any ad valorem real property taxes, special
assessments,utility charges or other governmental impositions with respect to the Project.
(2) Failure by the Developer to cause the construction of the Project to be completed
pursuant to the terms, conditions and limitations of this Agreement.
(3) Failure by the Developer to observe or perform any other covenant, condition,
obligation or agreement on its part to be observed or performed under this Agreement.
Section 4.2 Remedies on Default. Whenever any Event of Default referred to in Section
4.1 occurs and is continuing, the City, as specified below, may take any one or more of the
following actions after the giving of thirty (30) days' written notice to the Developer citing with
specificity the item or items of default and notifying the Developer that it has thirty (30) days
within which to cure said Event of Default. If the Event of Default has not been cured within
said thirty(30) days:
(a) The City may suspend its performance under this Agreement until it
receives assurances from the Developer, deemed adequate by the City, that the Developer
will cure its default and continue its performance under this Agreement.
(b) The City may cancel and rescind this Agreement.
(c) The City may accelerate the Purchase Price Note and foreclose the
Mortgage.
(d) The City may take any action, including legal or administrative action, in
law or equity, which may appear necessary or desirable to enforce performance and
observance of any obligation, agreement, or covenant of the Developer under this
Agreement.
Notwithstanding the foregoing, upon any failure of the Developer or Sportech to satisfy
the requirements of Section 3.8, the City's sole remedy shall be as provided in Section 3.8(2).
Section 4.3 No Remedy Exclusive. No remedy herein conferred upon or reserved to the
City is intended to be exclusive of any other available remedy or remedies, but each and every
such remedy shall be cumulative and shall be in addition to every other remedy given under this
Agreement or now or hereafter existing at law or in equity or by statute. No delay or omission to
exercise any right or power accruing upon any default shall impair any such right or power or
8
459599v5 JSB EL185-31
shall be construed to be a waiver thereof but any such right and power may be exercised from
time to time and as often as may be deemed expedient.
Section 4.4 No Implied Waiver. In the event any agreement contained in this Agreement
should be breached by any party and thereafter waived by the other party, such waiver shall be
limited to the particular breach so waived and shall not be deemed to waive any other concurrent,
previous or subsequent breach hereunder.
Section 4.5 Agreement to Pay Attorney's Fees and Expenses. Whenever any Event of
Default occurs and the City shall employ attorneys or incur other expenses for the collection of
payments due or to become due or for the enforcement or performance or observance of any
obligation or agreement on the part of the Developer herein contained, the Developer agrees that
they shall, on demand therefor, pay to the City the reasonable fees of such attorneys and such
other expenses so incurred by the City.
Section 4.6 Release and Indemnification Covenants.
(1) The Developer releases from and covenants and agrees that the City and its
governing body members, officers, agents, servants and employees shall not be liable for and
agrees to indemnify and hold harmless the City and its governing body members, officers,
agents, servants, and employees against any loss or damage to property or any injury to or death
of any person occurring at or about or resulting from any defect in the Project.
(2) Except for any willful misrepresentation or any willful or wanton misconduct of
the following named parties, the Developer agrees to protect and defend the City and its
governing body members, officers, agents, servants and employees, now or forever, and further
agrees to hold the aforesaid harmless from any claim, demand, action or other proceeding
whatsoever by any person or entity whatsoever arising or purportedly arising from a breach of
the obligations of the Developer under this Agreement, or the transactions contemplated hereby
or the acquisition, construction, installation, ownership, maintenance and operation of the
Project.
(3) The City and its governing body members, officers, agents, servants and
employees shall not be liable for any damages or injury to the persons or property of the
Developer or its officers, agents, servants or employees or any other person who may be about
the Project due to any act of negligence of any person.
(4) All covenants, stipulations, promises, agreements and obligations of the City
contained herein shall be deemed to be the covenants, stipulations, promises, agreements and
obligations of the City and not of any governing body member, officer, agent, servant or
employee of the City in the individual capacity thereof.
9
459599v5 JSB EL185-31
ARTICLE V
ADDITIONAL PROVISIONS
Section 5.1 Conflicts of Interest. No member of the governing body or other official of
the City shall participate in any decision relating to this Agreement which affects his or her
personal interests or the interests of any corporation, partnership or association in which he or
she is directly or indirectly interested. No member, official or employee of the City shall be
personally liable to the City in the event of any default or breach by the Developer or successor
or on any obligations under the terms of this Agreement.
Section 5.2 Titles of Articles and Sections. Any titles of the several parts, articles and
sections of this Agreement are inserted for convenience of reference only and shall be
disregarded in construing or interpreting any of its provisions.
Section 5.3 Notices and Demands. Except as otherwise expressly provided in this
Agreement, a notice, demand or other communication under this Agreement by any party to any
other shall be sufficiently given or delivered if it is dispatched by registered or certified mail,
postage prepaid, return receipt requested, or delivered personally, and
(1) in the case of the Developer is addressed to or delivered personally to:
Envision Company, LLC
10800- 175th Ave NW
Elk River, MN 55330
Attn: Chris Carlson
(2) in the case of the City is addressed to or delivered personally to the City at:
City of Elk River
Elk River City Hall
13065 Orono Parkway
Elk River, MN 55330-5600
Attn: City Administrator
or at such other address with respect to any such party as that party may, from time to time,
designate in writing and forward to the other, as provided in this Section.
Section 5.4 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall constitute one and the same instrument.
Section 5.5 Law Governing. This Agreement will be governed and construed in
accordance with the laws of the State of Minnesota.
Section 5.6 Duration. This Agreement shall remain in effect through the earlier of the
date the Purchase Price Note is paid in full or February 1, 2037, unless earlier terminated or
rescinded in accordance with its terms.
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459599v5 JSB EL185-31
Section 5.7 Provisions Surviving_Rescission or Expiration. Sections 4.5 and 4.6 shall
survive any rescission, termination or expiration of this Agreement with respect to or arising out
of any event, occurrence or circumstance existing prior to the date thereof.
11
459599v5 JSB EL185-31
IN WITNESS WHEREOF, the City has caused this Agreement to be duly executed in its
name and on its behalf, and the Developer has caused this Agreement to be duly executed in its
name and on its behalf, on or as of the date first above written.
ENVISION COMPANY, LLC
By
Christopher Carlson
Its Chief Manager
This is a signature page to the Tax Abatement Agreement by and between the City of Elk River,
Minnesota and Envision Company, LLC.
1
Error!Unknown document property name.
CITY OF ELK RIVER, MINNESOTA
By
Its Mayor
By
Its City Clerk
This is a signature page to the Tax Abatement Agreement by and between the City of Elk River,
Minnesota and Envision Company, LLC.
459599v5 JSB EL185-31
PURCHASE AGREEMENT
1. PARTIES. This Purchase Agreement (this "Agreement") is made on this day of
July, 2015 (the "Effective Date"), by and between the City of Elk River, a Minnesota municipal
corporation (the "City") and Envision Company, LLC, a Minnesota limited liability company (the
`Buyer"). This Agreement, unless accepted, executed and returned to the Buyer sooner, shall
become null and void at 4:30 p.m. on July , 2015.
2. SALE OF PROPERTY. The City agrees to sell to the Buyer and the Buyer agrees to buy
from the City, the real estate located in Sherburne County, Minnesota, legally described on the
attached Exhibit A (the "Property"), together with any and all easements and rights of every kind
and nature benefitting or appurtenant to the Property, free and clear of liens and encumbrances,
except those liens or encumbrances agreed to by the Buyer.
3. PURCHASE PRICE AND MANNER OF PAYMENT. The Buyer shall pay the City
One Million Two Hundred and Eighty-Eight Thousand Five Hundred and Ninety Dollars
($1,288,590.00) for the Property (the "Purchase Price"). The Purchase Price shall be paid on the
Closing Date(as defined below)by the delivery of$1.00 and a promissory note in the amount of the
Purchase Price less $1.00, in substantially the form attached hereto as Exhibit B (the "Purchase
Price Note") which shall be payable by the Buyer from tax abatement revenues generated by the
Property, to the extent approved by the City in accordance with applicable law, and which shall be
secured a Mortgage, Security Agreement, Assignment of Leases and Rents and Fixture Financing
Statement from the Buyer, as mortgagor, to the City, as mortgagee in substantially the form
attached hereto as Exhibit C(the"Mortgage").
4. OBLIGATIONS OF THE CITY. The City shall provide the following documentation:
4.1. Representations and Warranties. The representations and warranties of the City
contained in this Agreement must be true now and on the Closing Date in all
material respects as if made on the Closing Date and the City shall have delivered to
the Buyer on the Closing Date, a certificate dated the Closing Date, signed by an
authorized representative of the City, certifying that such representations and
warranties are true as of the Closing Date in all material respects (the "Closing
Certificate").
4.2. Title. Title shall have been found marketable, or been made marketable, in
accordance with the requirements and terms of Section 8 below.
4.3. Performance of the City's Obligations. The City shall have performed all of the
obligations required to be performed by the City under this Agreement in all
material respects. Included within the obligations of the City under this Agreement
shall be the following:
1
455958v10 SJS EL185-31
4.3.1. The City agrees to cooperate with the Buyer as reasonably necessary to
permit the Buyer to investigate the Property.
4.3.2. The City shall deliver to the Buyer the Title Evidence required in Section 8.1
ten(10)days from the Effective Date of this Agreement.
4.3.3. The City shall deliver to the Buyer copies of all plans, contracts, permits,
warranties, written reports, studies or test results relating to the Property
which are in the City's possession or control within ten (10) days from the
Effective Date of this Agreement.
5. CONTINGENCIES OF THE PARTIES:
5.1. Buyer's Contingencies.
5.1.1. Testing. On or before July 31, 2015 (the "Contingency Date"), the Buyer
shall have determined that the Buyer is satisfied with the results of, and
matters disclosed by, any environmental site assessments, soil tests,
engineering inspections,hazardous substances and environmental reviews of
the Property, all such tests, assessments, inspections and reviews to be
obtained at the Buyer's sole cost and expense.
a. The Buyer shall pay all costs and expenses of such investigation and
testing and shall promptly repair and restore any damage to the
Property caused by the Buyer's testing and return the Property to
substantially the same condition as existed prior to entry. The Buyer
shall indemnify, defend and hold the City harmless from any claim
for damage to person or property arising from any investigation or
inspection of the Property conducted by the Buyer, the Buyer's
agents or contractors,including the cost of attorneys' fees.
b. Copies of any written reports, studies or test results obtained by the
Buyer in connection with the Buyer's inspection of the Property or
investigation relating to the Property shall be delivered to the City
promptly upon receipt of the same at no cost to the City.
5.1.2. Land Use Approvals. The Buyer shall have obtained, at the Buyer's sole
cost and expense, on or before the Closing Date, all consents, agreements,
approvals, easements, licenses and adequate assurances that are legally
necessary for the Buyer to own and use the Property as intended, including,
but not limited to (i) zoning changes; (ii) land use approvals; (iii)tax
abatement financing; and(iv)job creation funding designation.
5.1.3. Title. The Title Evidence and/or Title Commitment is acceptable or is made
acceptable to Buyer in accordance with the requirements and terms of
Section 8 on or before the Closing Date.
455958v10 SJS EL185-31 2
5.1.4. Performance of City's Obligations. On or before the Closing Date, the City
shall have performed all of the obligations required to be performed by the
City under this Agreement, as and when required by this Agreement.
5.1.5. Financing. On or before the Closing Date, Buyer shall have obtained
reasonable construction financing from Buyer's lender to build such
improvements on the Property desired by Buyer.
5.1.6 Tax Abatement Financing. On or before the Closing Date, the City shall
have (i) approved tax abatement financing pursuant to Minnesota Statutes,
Sections 469.1813 to 469.1815 for the Property after a public hearing in
accordance with applicable law, and (ii) the City and the Buyer shall have
executed a definitive Tax Abatement Agreement (the "Abatement
Agreement") setting forth the terms and conditions of the assistance to be
provided to the Buyer. The Buyer will cooperate with the City's review and
analysis of providing tax abatement assistance and will provide to the City
all documents and information requested by the City in connection with that
effort.
5.2. City's Contingency. On or before the Closing Date, the City shall be satisfied that
the provisions and conditions outlined in Section 5.1.6 above are completed.
5.3. Termination of Agreement Based on Contingencies. If either party determines that
any of their respective contingencies listed in this Section have not been satisfied in their sole
discretion,by the applicable date,then this Agreement may be terminated by written notice from the
party to the other, which notice must be given no later than the deadline set forth for each
Contingency. If the party does not give written notice of termination on or before such date, all of
such contingencies will be deemed to have been satisfied and the parties shall proceed to close this
transaction in accordance with the terms of this Agreement. If this Agreement is terminated by
either party in accordance with this Section,neither party shall have any further rights or obligations
regarding this Agreement or the Property. All of the contingencies set forth in this Agreement are
specifically stated and agreed to be for the sole and exclusive benefit of the respective party and
each party shall have the right to unilaterally waive any of its contingencies by written notice to the
other party.
5.4. Extension of the Contingency Date. The Buyer may extend the Contingency Date
for up to thirty(30)days.
6. CLOSING. The closing of the purchase and sale contemplated by this Agreement (the
"Closing") shall occur on or before August 31, 2015 or such date on which the parties may agree
(the"Closing Date"). Notwithstanding the foregoing, Buyer may, at Buyer's sole discretion,extend
the Closing Date up to thirty(30) days. The City agrees to deliver possession of the Property to the
Buyer on the Closing Date.
455958v10 SJS EL185-31 3
6.1. City's Closing Documents. On the Closing Date, the City shall execute and deliver
to the Buyer the following (collectively, "City's Closing Documents"), all in form
and content reasonably satisfactory to the City and the Buyer:
6.1.1. Deed. A quit claim deed conveying the Property to the Buyer in
substantially the form set forth in Exhibit D hereto.
6.1.2. City's Affidavit. An Affidavit of Title by the City stating that on the Closing
Date there are no outstanding, unsatisfied judgments, tax liens or
bankruptcies against or involving the City or the Property; that there has
been no skill, labor or material furnished to the Property for which payment
has not been made or for which mechanics' liens could be filed; and that
there are no other unrecorded instruments affecting the Property, together
with whatever standard owner's affidavit (ALTA form) which may be
required by the Title Company to issue an Owner's Policy of Title Insurance
with the standard exceptions waived.
6.1.3. Original Documents. Original copies of any surveys, environmental tests,
plans and records in the City's possession and not previously provided to
Buyer.
6.1.4. FIRPTA Affidavit. A non-foreign affidavit, properly executed, containing
such information as is required by the Internal Revenue Code Section
1445(b)(2)and its regulations.
6.1.7. Well Certificate. A certificate signed by the City warranting that there are no
wells on the Property or if there are wells, a Well Certificate in the form
required by law.
6.1.8. Other Documents. Any other documents reasonably required in order to
complete the transaction contemplated by this Agreement.
6.2. Buyer's Closing Documents. On the Closing Date, the Buyer shall execute, as
appropriate and deliver to the City the following (collectively, "Buyer's Closing
Documents"):
6.2.1. Purchase Price Note, Mortgage and Abatement Agreement. The Purchase
Price Note, the Mortgage, and an executed definitive Abatement Agreement
setting forth the terms and conditions of the assistance to be provided to the
Buyer.
6.2.2. Other Documents. Such affidavits of Buyer, Certificates of Value or other
documents as may be reasonably required in order to complete the
transaction contemplated by this Agreement.
455958v10 SJS EL185-31 4
7. PRORATIONS. The City and the Buyer agree to the following prorations and allocation
of costs regarding this Agreement:
7.1. Title Insurance and Closing Fees. The Buyer shall pay the cost of the Title
Commitment (as defined in Section 8.3). The Buyer shall pay the cost of the title
insurance premium, any additional premiums for endorsements, and the state deed
tax. The parties shall share equally any reasonable and customary closing fee and
charges imposed by the title company.
7.2. Real Estate Taxes and Special Assessments. The City shall pay, on or before the
Closing Date, all levied special assessments, constituting a lien against the Property
as of the effective date, including, without limitation, any installments of special
assessments that are payable with general real estate taxes in the year in which
Closing occurs. Any general real estate taxes payable in all years prior to the year in
which the Closing occurs shall be paid by the City. Any general real estate taxes
payable in the year in which Closing occurs shall be the responsibility of the Buyer.
7.3. Recording Costs. The City shall pay the cost of recording all documents necessary
to vest marketable title in the Buyer and to cure title objections, if any. The Buyer
shall pay the cost of recording all other documents, including,but not limited to, the
quit claim deed.
7.4. Attorneys' Fees. Each of the parties shall pay its own attorneys' fees.
8. TITLE EXAMINATION. Title Examination shall be conducted as follows:
8.1. City's Title Evidence. Within 10 days of the Effective Date, the City shall furnish
the following(collectively,"Title Evidence")to the Buyer:
8.1.1. Certificate of Title. A current Certificate of Title for the Property.
8.1.2. Survey. A copy of any existing land survey of the Property in the City's
possession or control. The Buyer, at the Buyer's option, also may obtain, at
the Buyer's expense, a new survey of the Property. Any new survey shall be
certified and delivered to the City as well as the Buyer and any other parties
that the Buyer may designate.
8.2. Title Commitment. The Buyer may order, within seven (7) days of receiving the
Title Evidence, in Buyer's sole discretion and at the Buyer's expense, a commitment
(the "Title Commitment") issued by any title insurance company acceptable to
Buyer("Title Company"), for an owner's title insurance policy in the full amount of
the Purchase Price, showing fee simple title to the Property in City subject only to
Buyer's permitted encumbrances, deleting standard exceptions and including
affirmative insurance endorsements relating to zoning, contiguity, access,
appurtenant easements and other matters as may be identified by Buyer.
455958v10 SJS EL185-31 5
8.3 Buyer's Objections. No later than twenty (20) days after receiving the Title
Evidence or, if applicable, the Title Commitment, the Buyer must make written
objections ("Objections") to the marketability of title to the Property based on the
Title Evidence or, if applicable, the Title Commitment. If the Buyer elects to obtain
a new survey, objections based upon the survey must be made within seven(7) days
after receipt of said survey but in no event later than the Contingency Date. The
Buyer's failure to make Objections within such time period will constitute a waiver
of Objections. However, any matter which is not referenced in the Title
Commitment and is first recorded, discovered or disclosed after the effective date of
the Title Commitment, whichever is later may be objected to by the Buyer in the
manner described herein. The Buyer need not object to mortgages or other liens. If
not sooner satisfied, the City shall cause the Property to be released from any
mortgages or other liens against the Property at the Closing. Any matter shown on
such Title Evidence, other than a mortgage or other lien and not objected to by the
Buyer shall be a "Permitted Encumbrance" hereunder. Within ten (10) days after
receipt of the Buyer's Objections, the City shall notify the Buyer in writing if the
City elects not to cure the Objections. If such notice is given within said ten (10)
day period, the Buyer may either waive the Objections or terminate this Agreement
by giving written notice of termination to the City within ten (10) days after the
City's notice is given to the Buyer. If written notice by the City is not given within
the ten (10) day period, the City shall use commercially reasonable efforts to correct
any Objections within thirty(30) days after the expiration of the ten (10) day period
("Cure Period"). If the Title Company is willing to issue a title insurance policy to
the Buyer that does not except from title insurance coverage an item the Buyer has
objected to, the objection relating to such item shall be deemed cured. If the
Objections are not cured within the Cure Period, the Buyer shall have the option to
do any of the following:
8.3.1 Terminate this Agreement by giving written notice to the City within ten
(10) days after the expiration of the Cure Period and neither the City nor
the Buyer shall have further rights or obligations hereunder.
8.3.2 Waive the objections and proceed to close without reduction in the
Purchase Price.
The Buyer shall make the election within ten (10) days after expiration of the
City's Cure Period. A failure to make an election within such period shall be
deemed an election to proceed to close pursuant to subsection 8.3.2.
9. REPRESENTATIONS AND WARRANTIES BY THE CITY. The City represents
and warrants to the Buyer that the following are true in all material respects now and, as
modified by any changes about which the City notifies the Buyer in writing following after the
date hereof, will be true in all material respects on the Closing Date:
9.1. Authority. The City is a public body corporate and politic, duly created under and
subject to the laws of the State of Minnesota; the City has the requisite power and
authority to enter into and perform this Agreement and those City Closing
455958v10 SJS EL185-31
Documents signed by it; such documents have been or will be duly authorized by
all necessary action on the part of the City and have been or will be duly executed
and delivered; such execution, delivery and performance by the City of such
documents does not conflict with or result in a violation of any judgment, order,
or decree of any court or arbiter to which the City is a party; such documents are
valid and binding obligations of the City, and are enforceable in accordance with
their terms, subject to bankruptcy, reorganization, insolvency, moratorium and
other laws affecting the rights and remedies of creditors generally and principles
of equity.
9.2. Utilities. The City has received no notice of actual or threatened reduction or
curtailment of any utility service now supplied to the Property.
9.3. Rights of Others to Purchase the Property. The City has not entered into any
other contracts for the sale of the Property, nor are there any rights of first refusal
or options to purchase the Property or any other rights of others that might prevent
the sale of the Property contemplated by this Agreement.
9.4. Use of the Property. To the best of the City's knowledge without investigation,
the Property is usable for its current uses without violating any federal, state, local
or other governmental building, zoning, health, safety, platting, subdivision or
other law, ordinance or regulation, or any applicable private restriction, and such
use is a legal conforming use.
9.5. Proceedings. There is no action, litigation, investigation, condemnation or
proceeding of any kind pending or, to the best of the City's knowledge without
investigation, threatened against the City or any portion of the Property.
9.6. Wells. No wells exist on the Property.
9.7. Sewage Treatment Systems. No sewage treatment system exists on the Property.
9.8. Title. The City owns fee title to the Property.
9.9. Assessments. The Property is not subject to any special assessments or
reassessments.
9.10. Methamphetamine. To the best of the City's knowledge, the Property has not been
used for the production of methamphetamine.
The City's representations shall be true, accurate and complete as of the date of this Agreement,
in all material respects and, as modified by any notices given by the City to the Buyer, on the
Closing Date in all material respects. If any time prior to Closing, the Buyer shall determine that
any representation herein made by the City was not true in all material respects when made, the
Buyer's sole remedy shall be to terminate this Agreement by giving notice to the City and
seeking any applicable remedies for breach from the City.
455958v10 SJS EL185-31 7
Notwithstanding the above paragraph, all representations and warranties shall terminate on the
Closing Date. Any claim by the Buyer not made by written notice delivered to the City before
the date the representation or warranty terminates shall be deemed waived.
10. "AS IS, WHERE IS." The Buyer acknowledges that the Buyer has inspected or has had
the opportunity to inspect the Property and agrees to accept the Property "AS IS" with no right of
set off or reduction in the Purchase Price. Such sale shall be without representation of warranties,
express or implied, either oral or written,made by the City or any official, employee or agent of the
City with respect to the physical condition of the Property, including but not limited to, the
existence or absence of petroleum, hazardous substances, pollutants or contaminants in, on, or
under, or affecting the Property or with respect to the compliance of the Property or its operation
with any laws, ordinances, or regulations of any government or other body, except as stated above.
The Buyer acknowledges and agrees that the City has not made and does not make any
representations, warranties, or covenants of any kind or character whatsoever, whether expressed or
implied, with respect to warranty of income potential, operating expenses, uses, habitability, tenant
ability, or suitability for any purpose, merchantability, or fitness of the Property for a particular
purpose, all of which warranties City hereby expressly disclaims, except as stated above. The
Buyer is relying entirely upon information and knowledge obtained from the Buyer's own
investigation, experience and knowledge obtained from the Buyer's own investigation, experience
or personal inspection of the Property. The Buyer expressly assumes, at closing, all environmental
and other liabilities with respect to the Property and release and indemnify the City from same,
whether such liability is imposed by statute or derived from common law including,but not limited
to, liabilities arising under the Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA"), the Hazardous and Solid Waste Amendments Act, the Resource
Conservation and Recovery Act ("RCRA"), the federal Water Pollution Control Act, the Safe
Drinking Water Act, the Toxic Substances Act, the Superfund Amendments and Reauthorization
Act, the Toxic Substances Control Act and the Hazardous Materials Transportation Act, all as
amended, and all other comparable federal, state or local environmental conservation or protection
laws, rules or regulations. The foregoing assumption and release shall survive Closing. All
statements of fact or disclosures, if any, made in this Agreement or in connection with this
Agreement, do not constitute warranties or representations of any nature. The foregoing provision
shall survive Closing and shall not be deemed merged into any instrument of conveyance delivered
at Closing.
11. REPRESENTATIONS AND WARRANTIES BY THE BUYER. The Buyer
represents and warrants to the City that the Buyer is a Minnesota limited liability company; that
the Buyer has the requisite capacity, power and authority to enter into this Agreement and the
Buyer's Closing Documents; such execution, delivery and performance by the Buyer of such
documents does not conflict with or result in a violation of any judgment, order or decree of any
court or arbiter to which the Buyer is a party; such documents are valid and binding obligations
of the Buyer, and are enforceable in accordance with their terms.
12. CONDEMNATION; DAMAGE. If, prior to the Closing, (i) eminent domain
proceedings are commenced against all or any material part of the Property, or(ii) all or any part
of the Property is substantially damaged by fire, casualty, the elements or any other cause, then
the City shall immediately give notice to the Buyer of such fact and at the Buyer's option (to be
exercised within fifteen (15) days after the City's notice), the Buyer may terminate this
455958v10 SJS EL185-31 8
Agreement, in which event neither party will have further obligations under this Agreement. If
the Buyer fails to give such notice, then there shall be no reduction in the Purchase Price, but the
City shall assign to the Buyer at the Closing all of City's right, title and interest in and to any
award made or to be made in the condemnation proceedings or payment of a claim by any
insurance company. If Buyer does not terminate this Agreement after such damage, or if the
Property is damaged but not substantially, the City shall promptly commence to repair such
damage or destruction and return the Property to its condition prior to such damage, to the extent
there is insurance available for such repair. If such damage is completely repaired prior to the
Closing Date then there will be no reduction in the Purchase Price and the City shall retain the
proceeds of all insurance related to such damage. If such damage is not completely repaired
prior to the Closing Date, but the City is diligently proceeding to repair, then the City must
complete the repair after the Closing Date and is entitled to receive the proceeds of all insurance
related to such damage after repair is completed; provided,however, Buyer has the right to delay
the Closing Date until repair is completed. If the City fails to diligently proceed to repair such
damage, then Buyer has the right to require a closing to occur. Prior to the Closing, the City
shall not designate counsel, appear in, or otherwise act with respect to any condemnation
proceedings without the Buyer's prior written consent. For purposes of this section,the words"a
material part" means a part if substantially damaged or acquired by a condemning authority
would materially hinder Buyer's operations on the Property.
13. COMMISSIONS. Both the Buyer and the City represent that they have not entered into
a contract with any real estate broker, whereby the broker is entitled to a commission resulting
from the transaction contemplated by this Agreement. Each party agrees to indemnify, defend
and hold harmless the other party against any claim made by a real estate broker for a
commission or fee based on alleged acts or agreements with the indemnifying party.
14. REMEDIES.
14.1. Buyer's Remedies. If the City fails to consummate this Agreement for any reason
except the Buyer's default or the termination of this Agreement pursuant to a right to
terminate given herein, the Buyer may, as its sole and exclusive remedy, terminate
this Agreement by giving thirty (30) days' written notice to the City, pursuant to
Minnesota Statutes Section 559.21, as amended from time to time, in which event
neither party shall be further obligated to the other (except for the Buyer's and the
City's indemnities set forth in this Agreement). The Buyer specifically waives any
right to make a claim against the City for compensatory or consequential damages or
any other type of monetary claim, except for the indemnity obligations set forth in
this Agreement.
14.2. City's Remedies. If the Buyer fails to consummate this Agreement for any reason
except the City's default or the termination of this Agreement pursuant to a right to
terminate given herein, the City's sole and exclusive remedy shall be to terminate
this Agreement by giving thirty (30) days' written notice to the Buyer, pursuant to
Minnesota Statutes Section 559.21, as amended from time to time, in which case
neither party shall be further obligated to the other.
455958v10 SJS EL185-31 9
14.3. Indemnification Remedy. Notwithstanding the foregoing provisions of this
Section 14, in the event of any default by the Buyer or the City under or in
connection with any indemnification pursuant to this Agreement, and in the event of
any failure by the defaulting party to cure such default within 30 days after the date
of notice of default by the non-defaulting party to the defaulting party, the non-
defaulting party shall be entitled to seek and recover all legal and equitable relief
available under applicable law,including,without limitation,monetary damages.
15. ASSIGNMENT. The Buyer may not assign this Agreement without the prior written
consent of the City.
16. SURVIVAL. All of the terms of this Agreement and warranties and representations
herein contained shall survive and be enforceable after the Closing.
17. NOTICES. Any notice required or permitted hereunder shall be given by personal
delivery upon an authorized representative of a party hereto; or if mailed by United States mail
postage prepaid; or if transmitted by facsimile copy followed by mailed notice; or if deposited
cost paid with a nationally recognized, reputable overnight courier, properly addressed as
follows:
If to the City: City of Elk River
Attn: City Administrator
13065 Orono Parkway
Elk River, MN 55330
If to the Buyer: Envision Company, LLC
Attn: Chris Carlson
10800- 175th Ave NW
Elk River,MN 55330
Notices shall be deemed effective on the earlier of the date of receipt or the date of deposit, as
aforesaid; provided, however, that if notice is given by deposit, the time for response to any
notice by the other party shall commence to run one business day after any such deposit. Any
party may change its address for the service of notice by giving notice of such change 10 days
prior to the effective date of such change.
18. CAPTIONS. The paragraph headings or captions appearing in this Agreement are for
convenience only, are not a part of this Agreement and are not to be considered in interpreting
this Agreement.
19. ENTIRE AGREEMENT, MODIFICATIONS. This written Agreement constitutes the
complete agreement between the parties and supersedes any prior oral or written agreements
between the parties regarding the Property. There are no verbal agreements that change this
Agreement and no waiver of any of its terms will be effective unless in a writing executed by the
parties.
455958v10 SJS EL185-31 10
20. BINDING EFFECT. This Agreement binds and benefits the parties and their successors
and assigns.
21. CONTROLLING LAW. This Agreement has been made under the substantive laws of
the State of Minnesota, and such laws shall control its interpretation.
22. MULTIPLE COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed an original and all of which shall constitute one and the
same instrument.
BUYER
ENVISION COMPANY,LLC
By: Christopher Carlson
Its: Chief Manager
SELLER
CITY OF ELK RIVER
By:
Its: Mayor
By:
Its: City Clerk
455958v10 SJS EL185-31 11
EXHIBIT A
Legal Description of the Property
Lots 1 and 2, Block 2, Natures Edge Business Center Second Addition, Sherburne County,
Minnesota.
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455958v10 SJS EL185-31
EXHIBIT B
Form of Purchase Price Note
PROMISSORY NOTE
Envision Company, LLC (the "Developer"), hereby acknowledges itself to be indebted and,
for value received, hereby promises to pay to the City of Elk River, Minnesota (the "City") or its
registered assigns (the registered owner of this Note is referred to herein as the "Registered
Owner"), the principal sum of One Million Two Hundred Eighty-Eight Thousand Five Hundred
Eighty-Ninety Dollars ($1,288,589.00), which is equal to the Purchase Price for the Property, as
such terms are defined in the Purchase Agreement(hereinafter defined).
The principal amount of this Promissory Note (the "Note") shall equal, from time to time,
the principal amount stated above, as reduced to the extent that such principal shall have been paid
in whole or in part pursuant to the terms hereof. This Note is issued pursuant to that certain
Purchase Agreement, dated as of July , 2015, as the same may be amended from time to time
(the "Purchase Agreement"), by and between the City and the Developer, and is secured by that
certain Mortgage, Security Agreement, Assignment of Leases and Rents and Fixture Financing
Statement, dated as of July , 2015,by the Developer, as mortgagor, for the benefit of the City, as
mortgagee. This Note will not bear interest.
The amounts due under this Note shall be payable in semiannual installments, commencing
August 1, 2017, and on each February 1 and August 1 thereafter to and including February 1, 2037
(the "Maturity Date"), or, if the first day of either February 1 or August 1 should not be a Business
Day(as defined in that certain Tax Abatement Agreement, dated as of July , 2015, as the same
may be amended from time to time, by and between the City and the Developer (the "Abatement
Agreement")),the next succeeding Business Day(the"Payment Dates") in an amount equal to, and
the City will credit against the principal amount of this Note, the amount of the Tax Abatements (as
defined in the Abatement Agreement) received by the City in the 6-month period preceding such
Payment Date together with property tax abatement amounts paid by Sherburne County, Minnesota
(the "County") to the Developer which the Developer hereby agrees to pay to the City.
Notwithstanding the foregoing and other provisions contained in this Note, upon the Release Date
(as defined in the Mortgage), this Note shall be deemed paid in full and any outstanding balance
shall be forgiven; provided, however, that, as provided in the Abatement Agreement, the City shall
continue to retain the Tax Abatements and the Developer shall continue to remit to the City the
property tax abatement amounts paid by the County to the Developer to pay in full any remaining
unpaid balance of the Purchase Price of the Tax Abatement Property until the City has received
such payments in an aggregate amount equal to$1,288,589.00.
Prior to the release or satisfaction of the Mortgage, upon an event of default in the
Mortgage,the City may declare the amounts due under this Note to be immediately due and payable
in full.
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455958v10 SJS EL185-31
IN WITNESS WHEREOF, Envision Company, LLC, has caused this Note to be executed and
delivered as of July ,2015.
ENVISION COMPANY, LLC
By:
Its:
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455958v10 SJS EL185-31
EXHIBIT C
Form of Mortgage
THIS INSTRUMENT WAS PREPARED BY,
AND WHEN RECORDED SHOULD BE
RETURNED TO:
Kennedy& Graven, Chartered
470 U.S. Bank Plaza
200 South 6th Street
Minneapolis, MN 55402
MORTGAGE, SECURITY AGREEMENT,
ASSIGNMENT OF LEASES AND RENTS
AND FIXTURE FINANCING STATEMENT
THIS MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT OF LEASES AND
RENTS AND FIXTURE FINANCING STATEMENT (this "Mortgage") is made as of July
2015,by Envision Company, LLC, a Minnesota limited liability company ("Developer"), having
its principal offices at 10800— 175th Ave NW, Elk River, Minnesota 55330, in favor of the City
of Elk River, a Minnesota municipal corporation(the"City").
RECITALS
WHEREAS, the City has agreed to convey the land described in Exhibit A attached
hereto and all mineral rights, hereditaments, easements and appurtenances thereto (collectively,
the "Land") to Developer pursuant to the Agreement of Purchase and Sale between Developer
and City, dated as of July _, 2015 (the "Purchase Agreement", which term shall include any
amendment, modification, supplement, extension, renewal, replacement or restatement thereof)
in exchange for a promissory note in the principal amount of ONE MILLION TWO HUNDRED
EIGHTY-EIGHT THOUSAND FIVE HUNDRED EIGHTY-NINETY AND 00/100 DOLLARS
($1,288,589.00), dated the same date as this Mortgage, without interest thereon, with principal
being due and payable as set forth therein and with all principal, if not sooner paid, being due
and payable on the Maturity Date, as defined below(the "Purchase Price Note", which term shall
include any amendment, modification, supplement, extension, renewal, replacement or
restatement thereof) evidencing Developer's obligation to pay the Purchase Price, as defined in
the Purchase Agreement(the"Loan").
WHEREAS, the Developer intends to construct an approximately 105,000 square foot
manufacturing facility to be located on the Land (the "Project") and lease the Project to Sportech,
Inc.,a Minnesota corporation and affiliate of the Developer("Sportech").
WHEREAS, the City is requiring that the Mortgage secure the Purchase Price Note. The
Purchase Price Note, the Purchase Agreement and the Tax Abatement Agreement by and
between the Developer and the City, dated as of July 2015 (the "Abatement Agreement"), are
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hereby incorporated by reference, and, together with this Mortgage, as any of the same may be
amended, modified, supplemented, extended, renewed, replaced or restated, are sometimes
collectively referred to as the "Abatement Documents".
WHEREAS, the obligations secured by this Mortgage (the "Obligations") are as follows:
(i) the principal amount of $1,288,589.00 of the Purchase Price Note; plus
(ii) all other amounts advanced by City in protection of the Mortgaged
Property or this Mortgage.
WHEREAS, the Obligations shall mature on or before February 1, 2037 (the "Maturity
Date").
WHEREAS, the maximum principal indebtedness secured hereby is $1,288,589.00 plus
amounts which may be advanced by City in protection of the Mortgaged Property or this
Mortgage.
NOW, THEREFORE, Developer, in consideration of City making the Loan, and to
secure the Loan and payment and performance of the Obligations, hereby grants, bargains, sells,
conveys and mortgages to City, its successors and assigns, forever, with power of sale, and
grants to City, its successors and assigns, a security interest in, the following, all of which is
called the"Mortgaged Property":
A. LAND AND IMPROVEMENTS
The Land and all improvements and structures thereon(the "Improvements"); and
B. FIXTURES AND PERSONAL PROPERTY
All fixtures (the "Fixtures"), and all machinery, equipment and personal property
(collectively the "Personal Property") now or hereafter located on, in or under the Land and the
Improvements, or usable in connection with the Land or the Improvements, and which are owned
by Developer or in which Developer has an interest, including any construction and building
materials stored on and to be included in the Improvements, plus any repairs, replacements and
betterments to any of the foregoing and the proceeds and products thereof; and
C. LEASES AND RENTS
All rights of Developer with respect to tenants or occupants now or hereafter occupying
any part of the Land or the Improvements, if any, including all leases and licenses and rights in
connection therewith, whether oral or written (collectively the "Leases"), and all rents, income,
both from services and occupation, royalties, revenues and payments, including prepayments and
security deposits (collectively the "Rents"), which are now or hereafter due or to be paid in
connection with the Land,the Improvements, the Fixtures or the Personal Property; and
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455958v10 SJS EL185-31
D. AFTER ACQUIRED PROPERTY AND PROCEEDS
All after acquired property similar to the property herein described and conveyed which
may be subsequently acquired by Developer and used in connection with the Land, the
Improvements, the Fixtures, the Personal Property and other property; and all cash and non-cash
proceeds and products of all of the foregoing property.
TO HAVE AND TO HOLD the same, and all estate therein, together with all the rights,
privileges and appurtenances thereunto belonging, to the use and benefit of City, its successors
and assigns, forever.
PROVIDED NEVERTHELESS, should Developer pay and perform all the Obligations,
then these presents will be of no further force and effect, and this Mortgage shall be satisfied by
City, at the expense of Developer.
This Mortgage constitutes an assignment of rents and profits within the meaning of
Minnesota Statutes, §§ 559.17 and 576.01, and is intended to comply fully with the provisions
thereof, and to afford City, to the fullest extent allowed by law, the rights and remedies of a
mortgage City or secured City pursuant thereto.
This Mortgage also constitutes a security agreement within the meaning of the Uniform
Commercial Code as in effect in the State of Minnesota(the "UCC"), with respect to all property
described herein as to which a security interest may be granted and/or perfected pursuant to the
UCC, and is intended to afford City, to the fullest extent allowed by law, the rights and remedies
of a secured party under the UCC.
DEVELOPER FURTHER agrees as follows:
ARTICLE I
AGREEMENTS
Section 1.1 Performance of Obligations; Incorporation by Reference. Developer shall
pay and perform the Obligations. Time is of the essence hereof. All of the covenants,
obligations, agreements, warranties and representations of Developer contained in the Abatement
Documents and all of the terms and provisions thereof, are hereby incorporated herein and made
a part hereof by reference as if fully set forth herein.
Section 1.2 Further Assurances. If City requests, Developer shall sign and deliver and
cause to be recorded as City shall direct any further mortgages, instruments of further assurance,
certificates and other documents as City reasonably may consider necessary or desirable in order
to perfect, continue and preserve the Obligations and City's rights, title, estate, liens and interests
under the Abatement Documents. Developer further agrees to pay to City, upon demand, all
costs and expenses incurred by City in connection with the preparation, execution, recording,
filing and refiling of any such documents, including attorneys' fees and title insurance costs.
Section 1.3 Sale, Transfer, Encumbrance. City acknowledges that Developer intends
to sell the Mortgaged Property to a third-party before the maturity of the Purchase Price Note,
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who would lease the land and buildings located thereon to Sportech pursuant to a lease of no less
than ten(10) years. Notwithstanding the foregoing, prior to the Release Date (as defined below),
if Developer sells, conveys, transfers or otherwise disposes of or encumbers any part of its
interest in the Mortgaged Property, whether voluntarily, involuntarily or by operation of law,
other than in a sale that includes a leaseback to Sportech as previously provided herein, City
shall have the option, upon ten (10) days written notice to Developer, to declare the Obligations
immediately due and payable if Developer fails to correct such action and/or remove such
encumbrance.
Section 1.4 Insurance. Developer shall obtain, maintain and keep in full force and
effect(and upon request of City shall furnish to City copies of)policies of insurance as described
in, and meeting the requirements set forth in, Exhibit C attached hereto, and upon request of
City shall furnish to City proof of payment of all premiums for such insurance. At least ten (10)
days prior to the termination of any such coverage, Developer shall provide City with evidence
satisfactory to City that such coverage will be renewed or replaced upon termination with
insurance that complies with the provisions of this Section. Developer, at its sole cost and
expense, from time to time when City shall so request, will provide City with evidence, in a form
acceptable to City, of the full insurable replacement cost of the Mortgaged Property. All
property (including boiler and machinery) and liability insurance policies maintained by
Developer pursuant to this Section shall (i) include effective waivers by the insurer of all claims
for insurance premiums against City, and (ii) provide that any losses shall be payable
notwithstanding (a) any act of negligence by Developer or City, (b) any foreclosure or other
proceedings or notice of foreclosure sale relating to the Mortgaged Property, or (c) any release
from liability or waiver of subrogation rights granted by the insured. All insurance policies
maintained by Developer pursuant to the foregoing provisions shall respond on a primary basis
relative to any other insurance carried by City in the event of loss. Insurance terms not otherwise
defined herein shall be interpreted consistent with insurance industry usage.
Section 1.5 Taxes, Liens and Claims, Utilities. Developer, at least five (5) days before
any penalty attaches thereto, shall pay and discharge, or cause to be paid and discharged, all
taxes, assessments and governmental charges and levies (collectively "Impositions") imposed
upon or against the Mortgaged Property or the Rents, or upon or against the Obligations, or upon
or against the interest of City in the Mortgaged Property or the Obligations, except Impositions
measured by the income of City. Developer shall provide evidence of such payment at City's
request. Developer shall keep the Mortgaged Property free and clear of all liens, encumbrances,
easements, covenants, conditions, restrictions and reservations (collectively "Liens") except
those listed on Exhibit B attached hereto (the "Permitted Encumbrances"). Developer shall pay
or cause to be paid when due all charges or fees for utilities and services supplied to the
Mortgaged Property. Notwithstanding anything to the contrary contained in this Section,
Developer shall not be required to pay or discharge any Imposition or Lien so long as Developer
shall in good faith, and after giving notice to City, contest the same by appropriate legal
proceedings. If Developer contests any Imposition or Lien against the Mortgaged Property,
Developer shall provide such security to City as City shall reasonably require against loss or
impairment of Developer's ownership of or City's lien on the Mortgaged Property and shall in
any event pay such Imposition or Lien before loss or impairment occurs.
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Section 1.6 Maintenance and Repair; Compliance with Laws. Developer shall cause
the Mortgaged Property to be operated, maintained and repaired in safe and good repair, working
order and condition, reasonable wear and tear excepted; shall not commit or permit waste
thereof; except as provided in any Loan Document, shall not remove, demolish or substantially
alter the design or structural character of any Improvements without the prior written consent of
City; shall complete or cause to be completed forthwith any Improvements which are now or
may hereafter be under construction upon the Land; shall comply or cause compliance with all
laws, statutes, ordinances and codes, and governmental rules, regulations and requirements,
applicable to the Mortgaged Property or the manner of using or operating the same, and with any
covenants, conditions, restrictions and reservations affecting the title to the Mortgaged Property,
and with the terms of all insurance policies relating to the Mortgaged Property; and shall obtain
and maintain in full force and effect all consents, permits and licenses necessary for the use and
operation of the Mortgaged Property.
Section 1.7 Leases.
(a) Notwithstanding Section 1.3 hereof, Developer shall not enter into any
Lease without City's prior written consent, other than the lease to Sportech to which the City
hereby consents, and shall furnish to City, upon execution, including the lease to Sportech, a
complete and fully executed copy of any Lease authorized by the City. Developer shall provide
City with a copy of each proposed Lease requiring the consent of City and with any information
requested by City regarding the proposed tenant thereunder. City may declare each Lease to be
prior or subordinate to this Mortgage, at City's option.
(b) Developer shall, at its cost and expense, perform each obligation to be
performed by the landlord under any Lease; not borrow against, pledge or further assign any
rents or other payments due thereunder; not permit the prepayment of any rents or other
payments due for more than thirty (30) days in advance; and not permit any tenant thereunder to
assign its Lease or sublet the premises covered by its Lease, unless required to do so by the terms
thereof and then only if such assignment does not work to relieve the tenant of any liability for
performance of its obligations thereunder.
(c) If any tenant under any Lease shall default under its Lease, Developer
shall, in the ordinary course of business, exercise sound business judgment with respect to such
default,but may discount, compromise, forgive or waive claims or discharge such tenant from its
obligations under its Lease or terminate or accept a surrender of the Lease.
(d) If Developer fails to perform any obligations of Developer under the
Project Lease or any other Lease or if City becomes aware of or is notified by the Tenant or any
other tenant of a failure on the part of Developer to so perform, City may, but shall not be
obligated to, without waiving or releasing Developer from any obligation in this Agreement or
any of the other Abatement Documents, remedy such failure, and Developer agrees to repay
upon demand all sums incurred by City in remedying any such failure, together with interest
thereon from the date incurred at a rate equal to the "Prime Rate" as set forth from time to time
in The Wall Street Journal (the"Default Rate").
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Section 1.8 Indemnity. Developer shall indemnify City and its directors, officers,
agents and employees (collectively the "Indemnified Parties") against, and hold the Indemnified
Parties harmless from, all losses, damages, suits, claims, judgments, penalties, fines, liabilities,
costs and expenses by reason of, or on account of, or in connection with the construction,
reconstruction or alteration of the Mortgaged Property, or any accident, injury, death or damage
to any person or property occurring in, on or about the Mortgaged Property or any street, drive,
sidewalk, curb or passageway adjacent thereto. The indemnity contained in this Section shall
include costs of defense of any such claim asserted against an Indemnified Party, including
attorneys' fees. The indemnity contained in this Section shall survive payment and performance
of the Obligations and satisfaction and release of this Mortgage and any foreclosure thereof or
acquisition of title by deed in lieu of foreclosure.
Section 1.9 Release. Notwithstanding anything contained in this Mortgage to the
contrary, the parties agree that this Mortgage shall be satisfied and released upon the following
events (the "Release Date"):
(a) Upon Developer obtaining a certificate of occupancy for the Project; and
(b) Developer delivering to the City a proposed form of lease between a third-
party purchaser and Sportech with a duration of at least ten(10) years.
Upon receipt of items (a) and (b) above, the Mayor and City Clerk shall execute
and deliver a Satisfaction of Mortgage in recordable form to a title company selected by the
Developer with instructions to record such Satisfaction of Mortgage upon receipt of an executed
copy of such ten(10) year lease.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Developer makes the following representations and warranties:
Section 2.1 Ownership, Liens, Compliance with Laws. Developer owns the
Mortgaged Property free from all Liens, except the Permitted Encumbrances. All applicable
zoning, environmental, land use, subdivision, building, fire, safety and health laws, statutes,
ordinances, codes, rules, regulations and requirements affecting the Mortgaged Property permit
the current use and occupancy thereof, and Developer has obtained all consents, permits and
licenses required for such use. Developer has examined and is familiar with all applicable
covenants, conditions, restrictions and reservations, and with all applicable laws, statutes,
ordinances, codes and governmental rules, regulations and requirements affecting the Mortgaged
Property, and the Mortgaged Property complies with all of the foregoing.
Section 2.2 Use. The Mortgaged Property is not homestead property nor is it
agricultural property or in agricultural use.
Section 2.3 Utilities; Services. The Mortgaged Property is serviced by all necessary
public utilities, and all such utilities are or shall be operational and have sufficient capacity.
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There is no contract or agreement providing for services to or maintenance of the Mortgaged
Property which cannot be cancelled upon 30 days' or less notice.
ARTICLE III
CASUALTY; CONDEMNATION
Section 3.1 Casualty, Repair, Proof of Loss. If any portion of the Mortgaged Property
shall be damaged or destroyed by any cause (a"Casualty"), Developer shall:
(a) give immediate notice to the City; and
(b) promptly commence and diligently pursue to completion (in accordance
with plans and specifications approved by City) the restoration, repair and rebuilding of the
Mortgaged Property as nearly as possible to its value, condition and character immediately prior
to the Casualty; and
(c) if the Casualty is covered by insurance, immediately make proof of loss
and collect all insurance proceeds, all such proceeds to be payable to City or as City shall direct.
If an Event of Default shall be in existence, or if Developer shall fail to provide notice to City of
filing proof of loss, or if Developer shall not be diligently proceeding, in City's reasonable
opinion, to collect such insurance proceeds, then City may,but is not obligated to, make proof of
loss, and is authorized,but is not obligated, to settle any claim with respect thereto, and to collect
the proceeds thereof. Developer shall not accept any settlement of an insurance claim, the result
of which shall be a payment which is $10,000 or more less than the full amount of the claim,
without the prior written consent of City.
Section 3.2 Use of Insurance Proceeds. City shall make the net insurance proceeds
received by it (after reimbursement of City's out-of pocket costs of collecting and disbursing the
same) available to Developer to pay the cost of restoration, repair and rebuilding of the
Mortgaged Property, subject to the following conditions:
(a) There shall be no Event of Default in existence at the time of any
disbursement of the insurance proceeds.
(b) City shall have determined, in its reasonable discretion, that the cost of
restoration, repair and rebuilding is and will be equal to or less than the amount of insurance
proceeds and other funds deposited by Developer with City.
(c) City shall have determined, in its reasonable discretion, that the
restoration, repair and rebuilding can be completed in accordance with plans and specifications
approved by City(such approval not to be unreasonably withheld), in accordance with codes and
ordinances and in accordance with the terms, and within the time requirements in order to
prevent termination, of any Lease, and in any event not less than six (6) months prior to the
Maturity Date.
(d) All funds shall be disbursed, at City's option, in accordance with City's
customary disbursement procedures for construction loans.
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(e) The Casualty shall have occurred more than twelve (12) months prior to
the Maturity Date.
(f) No tenant shall have the right to terminate any Lease as a result of the
Casualty.
If any of these conditions shall not be satisfied, then City shall have the right to use the
insurance proceeds to prepay the Purchase Price Note. If any insurance proceeds shall remain
after completion of the restoration,repair and rebuilding of the Mortgaged Property, they shall be
disbursed to Developer, or at the City's discretion,used to prepay the Purchase Price Note.
Section 3.3 Condemnation. If any portion of the Mortgaged Property shall be taken,
condemned or acquired pursuant to exercise of the power of eminent domain or threat thereof(a
"Condemnation"), Developer shall:
(a) give immediate notice thereof to City, and send a copy of each document
received by Developer in connection with the Condemnation to City promptly after receipt; and
(b) diligently pursue any negotiation and prosecute any proceeding in
connection with the Condemnation at Developer's expense. If an Event of Default shall be in
existence, or if Developer, in City's reasonable opinion, shall not be diligently negotiating or
prosecuting the claim, City is authorized, but not required, to negotiate and prosecute the claim
and appear at any hearing for itself and on behalf of Developer and to compromise or settle all
compensation for the Condemnation. City shall not be liable to Developer for any failure by
City to collect or to exercise diligence in collecting any such compensation. Developer shall not
compromise or settle any claim resulting from the Condemnation if such settlement shall result
in payment of$10,000 or more less than City's reasonable estimate of the damages therefrom.
All awards shall be paid to City.
Section 3.4 Use of Condemnation Proceeds. City shall make the net proceeds of any
Condemnation received by it (after reimbursement of City's out-of-pocket costs of collecting and
disbursing the same) available to Developer for restoration, repair and rebuilding of the
Mortgaged Property, subject to the following conditions:
(a) There shall be no Event of Default in existence at the time of any
disbursement of the condemnation proceeds.
(b) City shall have determined, in its reasonable discretion, that the cost of
restoration, repair and rebuilding is and will be equal to or less than the amount of condemnation
proceeds and other funds deposited by Developer with City.
(c) City shall have determined, in its reasonable discretion, that the
restoration, repair and rebuilding can be completed in accordance with plans and specifications
approved by City(such approval not to be unreasonably withheld), in accordance with codes and
ordinances and in accordance with the terms, and within the time requirements in order to
prevent termination of any Lease, and in any event not less than six (6) months prior to the
Maturity Date.
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(d) All funds shall be disbursed, at City's option, in accordance with City's
customary disbursement procedures for construction loans.
(e) The Condemnation shall have occurred more than twelve (12) months
prior to the Maturity Date.
(f) No tenant shall have the right to terminate any Lease as a result of the
Condemnation.
If any of these conditions shall not be satisfied, then City shall have the right to use the
condemnation proceeds to prepay the Purchase Price Note. If any condemnation proceeds shall
remain after completion of the restoration, repair and rebuilding of the Mortgaged Property, they
shall be disbursed to Developer, or at City's discretion, used to prepay the Purchase Price Note.
ARTICLE IV
DEFAULTS AND REMEDIES
Section 4.1 Events of Default. A Developer Event of Default, as defined in the
Abatement Agreement, shall constitute an"Event of Default"hereunder.
Section 4.2 Remedies. Upon the occurrence of an Event of Default, all of the
Obligations, at the option of City, shall be accelerated and become immediately due and payable
upon notice to Developer. In either event, the Obligations shall be due and payable without
presentment, demand or further notice of any kind. Except as provided in Section 4.2 of the
Abatement Agreement, City shall have the right to proceed to protect and enforce its rights by
one or more of the following remedies:
(a) City SHALL HAVE THE RIGHT TO SELL THE MORTGAGED
PROPERTY AT PUBLIC AUCTION AND CONVEY THE SAME TO THE PURCHASER IN
FEE SIMPLE, as provided by law, Developer to remain liable for any deficiency. Said sale may
be as one tract or otherwise, at the sole option of City. In the event 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, City, its successors or
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 the Purchase Price Note, together
with all other sums, with interest, if any, advanced or secured hereby and unpaid hereunder, in
order that there may be credited as paid on the purchase price the total amount of the Obligations
then due, including principal of the Purchase Price Note and all other sums, with interest, if any,
advanced or secured hereby and unpaid hereunder or under any of the other Abatement
Documents.
(b) City SHALL HAVE THE RIGHT TO OBTAIN THE APPOINTMENT
OF A RECEIVER at any time after the occurrence of an Event of Default. City may apply for
the appointment of a receiver to the district court for the county where the Mortgaged Property or
any part thereof is located, by an action separate from any foreclosure of this Mortgage pursuant
to Minnesota Statutes Chapter 580 or pursuant to Minnesota Statutes Chapter 581, or as a part of
the foreclosure action under said Chapter 581 (it being agreed that the existence of a foreclosure
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pursuant to said Chapter 580 or a foreclosure action pursuant to said Chapter 581 is not a
prerequisite to any action for a receiver hereunder). City shall be entitled to the appointment of a
receiver without regard to waste, adequacy of the security or solvency of Developer. The
receiver, who shall be an experienced property manager, shall collect (until the Obligations are
fully paid and satisfied and, in the case of a foreclosure sale, during the entire redemption period)
the Rents, and shall manage the Mortgaged Property, execute Leases within or beyond the period
of the receivership if approved by the court and apply all rents, profits and other income
collected by him in the following order:
(i) to the payment of all reasonable fees of the receiver, if any,
approved by the court;
(ii) to the repayment of tenant security deposits, with interest thereon,
as required by Minnesota Statutes, Section 504.20;
(iii) to the payment when due of delinquent or current real estate taxes
or special assessments with respect to the Mortgaged Property, or the periodic escrow for
the payment of the same;
(iv) to the payment when due of premiums for insurance of the type
required by this Mortgage, or the periodic escrow for the payment of the same;
(v) to the payment for the keeping of the covenants required of a lessor
or licensor pursuant to Minnesota Statutes, Section 504.18, subdivision 1;
(vi) to the payment of all expenses for normal maintenance of the
Mortgaged Property; and
(vii) the balance to City (a) if received prior to the commencement of a
foreclosure, to be applied to the Obligations, in such order as City may elect and (b) if
received after the commencement of a foreclosure, to be applied to the amount required
to be paid to effect a reinstatement prior to foreclosure sale, or, after a foreclosure sale to
any deficiency and thereafter to the amount required to be paid to effect a redemption, all
pursuant to Minnesota Statutes, Sections 580.30, 580.23 and 581.10, with any excess to
be paid to Developer. Provided, that if this Mortgage is not reinstated nor the Mortgaged
Property redeemed as provided by said Sections 580.30, 580.23 or 581.10, the entire
amount paid to City pursuant hereto shall be the property of City together with all or any
part of the Mortgaged Property acquired through foreclosure.
City shall have the right, at any time and without limitation, as provided in Minnesota
Statutes, Section 582.03, to advance money to the receiver to pay any part or all of the items
which the receiver should otherwise pay if cash were available from the Mortgaged Property and
sums so advanced, with interest at the Default Rate, shall be secured hereby, or if advanced
during the period of redemption shall be part of the sum required to be paid to redeem from the
sale.
(c) City SHALL HAVE THE RIGHT TO ENTER AND TAKE
POSSESSION of the Mortgaged Property and manage and operate the same in conformity with
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all applicable laws and take any action which, in City's judgment, is necessary or proper to
conserve the value of the Mortgaged Property.
(d) City SHALL HAVE ALL OF THE RIGHTS AND REMEDIES
PROVIDED IN THE UNIFORM COMMERCIAL CODE including the right to proceed under
the Uniform Commercial Code provisions governing default as to any Personal Property
separately from the real estate included within the Mortgaged Property, or to proceed as to all of
the Mortgaged Property in accordance with its rights and remedies in respect of said real estate.
If City should elect to proceed separately as to such Personal Property, Developer agrees to make
such Personal Property available to City at a place or places acceptable to City, and if any
notification of intended disposition of any of such Personal Property is required by law, such
notification shall be deemed reasonably and properly given if given at least ten (10) days before
such disposition in the manner hereinafter provided.
(e) City SHALL HAVE THE RIGHT TO FILE PROOF OF CLAIM and
other documents as may be necessary or advisable in order to have its claims allowed in any
receivership, insolvency, bankruptcy, reorganization, arrangement, adjustment, composition or
other judicial proceedings affecting Developer, its creditors or its property, for the entire amount
due and payable by Developer in respect of the Obligations at the date of the institution of such
proceedings, and for any additional amounts which may become due and payable by Developer
after such date.
Each remedy herein specifically given shall be in addition to every other right now or
hereafter given or existing at law or in equity, and each and every right may be exercised from
time to time and as often and in such order as may be deemed expedient by City and the exercise
or the beginning of the exercise of one right shall not be deemed a waiver of the right to exercise
at the same time or thereafter any other right. City shall have all rights and remedies available
under the law in effect now and/or at the time such rights and remedies are sought to be
enforced, whether or not they are available under the law in effect on the date hereof.
Section 4.3 Expenses of Exercising Rights Powers and Remedies. The reasonable
expenses (including any receiver's fees, attorneys' fees, appraisers' fees, environmental
engineers' and/or consultants' fees, costs incurred for documentary and expert evidence,
stenographers' charges, publication costs, costs (which may be estimated as to items to be
expended after entry of the decree of foreclosure) of procuring all abstracts of title, continuations
of abstracts of title, title searches and examinations, title insurance policies and commitments
and extensions therefor, Torrens duplicate certificates of title, UCC and chattel lien searches, and
similar data and assurances with respect to title as City may deem reasonably necessary either to
prosecute any foreclosure action or to evidence to bidders at any sale which may be had pursuant
to any foreclosure decree the true condition of the title to or the value of the Mortgaged Property,
and agent's compensation) incurred by City after the occurrence of any Event of Default and/or
in pursuing the rights, powers and remedies contained in this Mortgage shall be immediately due
and payable by Developer, with interest thereon from the date incurred at the Default Rate, and
shall be added to the indebtedness secured by this Mortgage.
Section 4.4 Restoration of Position. In case City shall have proceeded to enforce any
right under this Mortgage by foreclosure, sale, entry or otherwise, and such proceedings shall
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have been discontinued or abandoned for any reason or shall have been determined adversely,
then, and in every such case, Developer and City shall be restored to their former positions and
rights hereunder with respect to the Mortgaged Property subject to the lien hereof.
Section 4.5 Marshalling. Developer, for itself and on behalf of all persons, parties and
entities which may claim under Developer, hereby waives all requirements of law relating to the
marshalling of assets, if any, which would be applicable in connection with the enforcement by
City of its remedies for an Event of Default hereunder, absent this waiver. City shall not be
required to sell or realize upon any portion of the Mortgaged Property before selling or realizing
upon any other portion thereof
Section 4.6 Waivers. No waiver of any provision hereof shall be implied from the
conduct of the parties. Any such waiver must be in writing and must be signed by the party
against which such waiver is sought to be enforced. The waiver or release of any breach of the
provisions set forth herein to be kept and performed shall not be a waiver or release of any
preceding or subsequent breach of the same or any other provision. No receipt of partial
payment after acceleration of any of the Obligations shall waive the acceleration. No payment
by Developer or receipt by City of a lesser amount than the full amount secured hereby shall be
deemed to be other than on account of the sums due and payable hereunder, nor shall any
endorsement or statement on any check or any letter accompanying any check or payment be
deemed an accord and satisfaction, and City may accept any check or payment without prejudice
to City's right to recover the balance of such sums or to pursue any other remedy provided in this
Mortgage. The consent by City to any matter or event requiring such consent shall not constitute
a waiver of the necessity for such consent to any subsequent matter or event.
Section 4.7 City's Right to Cure Defaults. If Developer shall fail to comply with any
of the terms of the Abatement Documents with respect to the procuring of insurance, the
payment of taxes, assessments and other charges, the keeping of the Mortgaged Property in
repair, or any other term contained herein or in any of the other Abatement Documents, City may
make advances to perform the same without releasing Developer from any of the Obligations.
Developer agrees to repay upon demand all sums so advanced and all sums expended by City in
connection with such performance, including without limitation attorneys' fees, with interest at
the Default Rate from the dates such advances are made, and all sums so advanced and/or
expenses incurred, with interest, shall be secured hereby,but no such advance and/or incurring of
expense by City, shall be deemed to relieve Developer from any default hereunder or under any
of the other Abatement Documents, or to release Developer from any of the Obligations.
Section 4.8 Suits and Proceedings. City shall have the power and authority, upon
prior notice to Developer, to institute and maintain any suits and proceedings as City may deem
advisable to (i) prevent any impairment of the Mortgaged Property by any act which may be
unlawful or by any violation of this Mortgage, (ii) preserve or protect its interest in the
Mortgaged Property, or (iii) restrain the enforcement of or compliance with any legislation or
other governmental enactment, rule or order that may be unconstitutional or otherwise invalid, if,
in the sole opinion of City, the enforcement of or compliance with such enactment, rule or order
might impair the security hereunder or be prejudicial to City's interest.
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ARTICLE V
MISCELLANEOUS
Section 5.1 Binding Effect; Survival; Number; Gender. This Mortgage shall be
binding on and inure to the benefit of the parties hereto, and their respective heirs, legal
representatives, successors and assigns. All agreements, representations and warranties
contained herein or otherwise heretofore made by Developer to City shall survive the execution,
delivery and foreclosure hereof. The singular of all terms used herein shall include the plural, the
plural shall include the singular, and the use of any gender herein shall include all other genders,
where the context so requires or permits.
Section 5.2 Severability. The unenforceability or invalidity of any provision of this
Mortgage as to any person or circumstance shall not render that provision unenforceable or
invalid as to any other person or circumstance.
Section 5.3 Notices. Any notice or other communication to any party in connection
with this Mortgage shall be in writing and shall be sent by manual delivery, telegram, telex,
facsimile transmission, overnight courier or United States mail (postage prepaid) addressed to
such party at the address specified below, or at such other address as such party shall have
specified to the other party hereto in writing. All periods of notice shall be measured from the
date of delivery thereof if manually delivered, from the date of sending thereof if sent by
telegram, telex or facsimile transmission, from the first Business Day(as defined in the Purchase
Agreement) after the date of sending if sent by overnight courier, or from four days after the date
of mailing if mailed. Notices shall be given to or made upon the respective parties hereto at their
respective addresses set forth below:
If to Developer: Envision Company, LLC
10800— 175th Ave NW
Elk River, MN 55330
Attn: Chris Carlson
Fax No.
If to City: City of Elk River
13065 Orono Parkway
Elk River, MN 55330
Attn: City Administrator
Fax No. 763-635-1090
Either party may change its address for notices by a notice given not less than five(5) Business
Days prior to the effective date of the change.
Section 5.4 Applicable Law. This Mortgage and the other Abatement Documents
shall be construed and enforceable in accordance with, and be governed by, the laws of the State
of Minnesota, without giving effect to conflict of laws or principles thereof. Whenever possible,
each provision of this Mortgage and any other statement, instrument or transaction contemplated
hereby or relating hereto, shall be interpreted in such manner as to be effective and valid under
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such applicable law, but, if any provision of this Mortgage or any other statement, instrument or
transaction contemplated hereby or relating hereto shall be held to be prohibited or invalid under
such applicable law, such provision shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the remaining provisions of
this Mortgage or any other statement, instrument or transaction contemplated hereby or relating
hereto.
Section 5.5 Waiver of Jury Trial. Developer and City each irrevocably waives any
and all right to trial by jury in any legal proceeding arising out of or relating to this Mortgage or
any of the other Abatement Documents or the transactions contemplated hereby or thereby.
Section 5.6 Effect. This Mortgage is in addition and not in substitution for any other
guarantees, covenants, obligations or other rights now or hereafter held by City from any other
person or entity in connection with the Obligations.
Section 5.7 Assignability. City shall have the right to assign this Mortgage, in whole
or in part, or sell participation interests herein, to any person obtaining an interest in the
Obligations.
Section 5.8 Headings. Headings of the Sections of this Mortgage are inserted for
convenience only and shall not be deemed to constitute a part hereof
Section 5.9 Fixture Filing. This instrument shall be deemed to be a Fixture Filing
within the meaning of the Minnesota Uniform Commercial Code, and for such purpose, the
following information is given:
Name and address of Debtor: Envision Company, LLC
10800— 175th Ave NW
Elk River, MN 55330
Attn: City Administrator
Name and address of
Secured Party: City of Elk River
13065 Orono Parkway
Elk River, MN 55330
Attn: City Administrator
Description of the types (or
items) of property covered
by this Fixture Filing: See granting clause on pages 2 and 3 hereof.
Description of real estate
to which the collateral is
attached or upon which it
is or will be located: See Exhibit A hereto.
Some of the above-described collateral is or is to become fixtures upon the above-
described real estate, and this Fixture Filing is to be filed for record in the public real estate
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records. This Mortgage secures an obligation incurred for the construction of an improvement
on land and is a construction mortgage within the meaning of Minnesota Statutes, Section 336.9-
313.
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IN WITNESS WHEREOF, Developer has executed this Mortgage as of the date first
written above.
ENVISION COMPANY,LLC,
a Minnesota limited liability company
By:
Its:
STATE OF MINNESOTA )
ss.
COUNTY OF SHERBURNE)
The foregoing instrument was acknowledged before me this day of
, 2015, by , the of Envision
Company, LLC, a Minnesota limited liability company on behalf of said limited liability
company.
Notary Public
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EXHIBIT A
LEGAL DESCRIPTION
Lots 1 and 2, Block 2, Natures Edge Business Center Second Addition, Sherburne County,
Minnesota.
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EXHIBIT B
PERMITTED ENCUMBRANCES
[To be added from Title Commitment]
1. [Mortgage to Bremer Bank]
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EXHIBIT C
INSURANCE REQUIREMENTS
PROPERTY INSURANCE
As to Improvements while under construction:
An ORIGINAL (or evidence acceptable to City of) Builder's Risk"All-Risk", Completed
Value (Non-Reporting) Form POLICY naming Developer as an insured, and covering the
interests of all contractors (of all tiers) in the Project, reflecting coverage of 100% of the
insurable replacement cost, and written by a carrier approved by City with a current A.M.
Best Company rating of at least A:VII (which is authorized to do business in the State of
Minnesota), that includes:
City's Loss Payable Endorsement naming the City of Elk River, Minnesota, in
Elk River, Minnesota, as Mortgagee
30-day notice to City in the event of cancellation or non-renewal by either party
or material adverse change
Replacement Cost Measure of Recovery
Stipulated Value/Agreed Amount Endorsement(No Coinsurance)
Coverage for Foundations, Off-site (Unscheduled and Temporary Locations),
Transit, Testing, Flood, Earthquake, Collapse, and Boiler and
Machinery/Mechanical and Electrical Breakdown, in such amounts as City and
Developer mutually agree is appropriate
Coverage for indirect loss exposures (customarily referred to as "soft cost"
exposures), "Contingent Liability from Operation of Building Laws" coverage,
"Demolition Costs" coverage, "Increased Cost of Construction" coverage, and
"Increased Time to Rebuild" coverage, with such additional limits for such
coverages as City may reasonably require
Policy to permit partial occupancy
No insurer subrogation action or recovery against any party whose interests are
covered under the policy
Deductible not to exceed $5,000
Coverage to become effective upon the date of the Notice to Proceed, the date of
site mobilization, or the start of any shipment of materials, machinery or
equipment to the site, whichever is earlier, and to remain in effect until replaced
by the permanent All Risk Property Insurance described below, or until such other
time as may be mutually agreed upon by City and Developer
As to completed Improvements:
An ORIGINAL (or evidence acceptable to City of) Special Form (or so-called All Risk)
Hazard Insurance POLICY naming Developer as an insured, reflecting coverage of 100% of the
replacement cost, and written by a carrier approved by City with a current A.M. Best Company
rating of at least A:VII (which is authorized to do business in the State of Minnesota), that
includes:
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City's Loss Payable Endorsement naming the City of Elk River, Minnesota, in
Elk River, Minnesota, as Mortgagee
30-day notice to City in the event of cancellation or non-renewal by either party
or material adverse change
Replacement Cost Measure of Recovery
Stipulated Value/Agreed Amount Endorsement(No Coinsurance)
Boiler and Machinery Coverage (including business income, extra expense
coverage)
Flood Insurance
One (1) year's business interruption, leasehold interest and/or rent loss insurance
in an amount acceptable to City
Extra expense coverage in an amount acceptable to City
"Contingent Liability from Operation of Building Laws" coverage, "Demolition
Costs" coverage, "Increased Cost of Construction" coverage, and "Increased
Time to Rebuild" Coverage, with such additional limits for such coverages as
City may reasonably require
No exclusion for"Collapse"
Earthquake Coverage
Deductible not to exceed $5,000
II. LIABILITY INSURANCE
An ORIGINAL (or evidence acceptable to City of) Commercial General Liability
Insurance POLICY (Insurance Services Offices policy form title) naming Developer as an
insured, providing coverage on an "occurrence" rather than a "claims made" basis, and written
by a carrier approved by City with a current A.M. Best Company rating of at least A:VII (which
is authorized to do business in the State of Minnesota), that includes:
Combined general liability policy limit of at least $2,000,000.00 each occurrence,
applying to liability for Bodily Injury, Personal Injury and Property Damage,
which combined limit may be satisfied by the limit afforded under the
Commercial General Liability Policy, or by such Policy in combination with the
limits afforded by an Umbrella or Excess Liability Policy (or policies); provided,
that the coverage afforded under any such Umbrella or Excess Liability Policy is
at least as broad in all material respects as that afforded by the underlying
Commercial General Liability Policy
Coverage for Bodily Injury, Property Damage, Personal Injury, Contractual
Liability, Independent Contractors and Products-Completed Operations Liability
Automobile Liability insurance covering liability for Bodily Injury and Property
Damage arising out of the ownership, use, maintenance or operation of all owned,
nonowned and hired automobiles and other motor vehicles utilized by Developer
in connection with the Project, which coverage may be provided under a separate
policy
Deductible not to exceed $5,000
Additional Insured Endorsement naming the City of Elk River, Minnesota and a
Severability of Interest provision
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30-day notice to City in the event of cancellation or non-renewal by either party
or material adverse change
III. WORKER'S COMPENSATION
An ORIGINAL CERTIFICATE of Worker's Compensation coverage in the statutory
amount, naming Developer as an insured, written by a carrier approved by City.
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EXHIBIT D
Form of Quit Claim Deed
(Top 3 inches reserved for recording data)
QUIT CLAIM DEED
DEED TAX DUE: $ DATE:
(month/day/year)
FOR VALUABLE CONSIDERATION, CITY OF ELK RIVER,MINNESOTA
(insert name of Grantor)
a municipal corporation under the laws of Minnesota ,("Grantor"),
hereby conveys and quitclaims to ENVISION COMPANY,LLC
(insert name of Grantee)
a limited liability company under the laws of Minnesota ,("Grantee"),
real property in Sherbume County,Minnesota,legally described as follows:
Lots 1 and 2,Block 2,Natures Edge Business Center Second Addition,Sherbume County,Minnesota
Check here if all or part of the described real property is Registered(Torrens)❑
together with all hereditaments and appurtenances and subject to covenants, conditions, restrictions and provisions of
that certain ; provision of the ordinances, building and zoning laws of
the City,and state and federal laws and regulations insofar as they affect this real estate;and easements,covenants,and
restrictions of records.
This Deed conveys after-acquired title.
Check applicable box: Grantor
❑ The Seller certifies that the Seller does not
know of any wells on the described property. CITY OF ELK RIVER,MINNESOTA
❑ A well disclosure certificate accompanies this (name of Grantor)
document. (If electronically filed,insert WDC
number. ). By:
❑ I am familiar with the property described in this (signature)
instrument and I certify that the status and
number of wells on the described real property Its: Mayor
have not changed since the last previously filed (type of authority)
well disclosure certificate.
By:
(signature)
Its: City Clerk
(type of authority)
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455958v10 SJS EL185-31
State of Minnesota,County of
This instrument was acknowledged before me on by
(month/day/year)
as Mayor
(name of authorized signer) (type of authority)
and by
(name of authorized signer)
as City Clerk of City of Elk River.Minnesota,a Minnesota municipal corporation
(name of Grantor) (type of authority)
(Seal,if any)
(signature of notarial officer)
Title(and Rank):
My commission expires:
(month/day/year)
THIS INSTRUMENT WAS DRAFTED BY: TAX STATEMENTS FOR THE REAL PROPERTY
(insert name and address) DESCRIBED IN THIS INSTRUMENT SHOULD BE SENT
TO:
Kennedy&Graven,Chartered
470 U.S.Bank Plaza Envision Company,LLC
200 South 6th Street 10800—175th Ave NW
Minneapolis,MN 55402 Elk River,MN 55330
Attention:Chris Carlson
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455958v10 SJS EL185-31