7.5. SR 07-20-2015
Request for Action
To Item Number
Mayor and City Council 7.5
Agenda Section Meeting Date Prepared by
Public HearingJuly 20, 2015Amanda Othoudt, EDD
Item Description Reviewed by
Property Tax Abatement and Microloan Agreement Cal Portner, City Administrator
for Scott Morrell, LLC (Morrell Companies)
Reviewed by
Action Requested
1.Open public hearing to consider comment on the proposed property tax abatement assistance and
microloan for Scott Morrell, LLC (Morrell Companies).
2.Following the public hearing, the Council is asked to consider adoption of the attached resolutions
approving property tax abatements and microloan and authorizing execution of a tax abatement
agreement and microloan documents for Scott Morrell, LLC (Morrell Companies)
Background/Discussion
The City Council must hold a public hearing and invite comments for any business subsidy in the amount
greater than $150,000.
The attached staff report provides background on the project as considered by the EDA on July 20 for
land sale and property tax abatement.
Financial Impact
Up to $125,000 in city tax abatement assistance, to be distributed “pay as you go” for 15 years. This
abates the entire share of taxes on the property. In addition, the Economic Development Authority of
the city of Elk River will provide an approximately $200,000 microloan to Morrell in connection with the
Project.
Attachments
EDA Staff Memo for Property Tax Abatement (July 20, 2015)
EDA Staff Memo for Microloan Application (July 20, 2015)
Tax Abatement Application
Microloan Application
Springsted Analysis Tax Abatement (June 23, 2015)
Springsted Analysis Microloan (June 18, 2015)
Property Tax Abatement Agreement
Microloan Agreement
Security Agreement (Microloan)
Mortgage and Assignment of Rents and Security Agreement and Fixture Financing Statement
Entity Guaranty
Personal Guaranty
Promissory Note
Resolution Approving Loan Agreement and Related Documents
Resolution approving Property Tax Abatement for Lot 1, Block 2, NEBC
N:\\Public Bodies\\Agenda Packets\\07-20-2015\\Final\\x7.5 sr Scott Morrell LLC (Morrell Companies) Property Tax Abatement.docx
Request for Action
To Item Number
Economic Development Authority 6.2
Agenda Section Meeting Date Prepared by
General BusinessJuly 20, 2015Amanda Othoudt, EDD
Item Description Reviewed by
Morrell Companies Property Tax Abatement Cal Portner, City Administrator
Financing
Reviewed by
Action Requested
Approve, by motion, and provide a recommendation to City Council for Property Tax Abatement
Assistance for Scott Morrell, LLC/Morrell Oversize (Morrell Companies).
Background/Discussion
The Finance Committee reviewed and recommended the EDA approve Morrell Companies application
for Property Tax Abatement financing.
Scott Morrell, LLC is requesting a 15 year pay-as-you-go Tax Abatement from the city of Elk River for up
to $121,905. The tax abatement will allow Morrell Companies to purchase the property in Natures Edge
Business Center and to support annual cash flow for debt service on the approximate $2.380M project to
be financed in combination of debt, equity, and EDA Jobs Incentive Microloan.
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 in the amount of 89,300 for a
term of 10 years.
Morrell Companies is a full-service carrier offering a variety of standard and specialized transportation
services. The project proposal includes a wash facility, light duty maintenance, and office space. They
currently employ 105 people with an average hourly wage of $23/hour. Of the 105 employees, 13 FTE
are employed by Morrell Oversize with an average hourly wage of $27.94/hour. Morrell Companies is
proposing to hire 8 FTE with the proposed expansion.
The proposed project would consist of a 13,824 square foot facility with an estimated taxable value of
approximately $859,000. The project is estimated to generate $160,500 in total property taxes per year
upon completion. The city share of the property taxes abated per year equal approximately $8,107.
The project scored 39 out of 45 total possible points. Based on the analysis provided by Springsted, it
appears that Morrell Companies 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.
Financial Impact
Up to $121,905 in city tax abatement assistance, to be distributed “pay as you go” for 15 years. This
abates the entire city share of taxes on the property.
Attachments
Property Tax Abatement Application
Springsted Analysis (April 23, 2015)
Property Tax Abatement Agreement
N:\\Public Bodies\\Agenda Packets\\07-20-2015\\Final\\x7.5 at1 Morrell Companies Property Tax Abatement EDA MEMO.docx
Request for Action
To Item Number
Economic Development Authority 6.3
Agenda Section Meeting Date Prepared by
General BusinessJuly 20, 2015Amanda Othoudt, EDD
Item Description Reviewed by
Morrell Companies Jobs Incentive Microloan Cal Portner, City Administrator
Reviewed by
Action Requested
Approve, by motion, and provide recommendation to the City Council on the following Scott Morrell,
LLC/Morrell Oversize (Morrell Companies) Jobs Incentive Microloan application.
Background/Discussion
The city received an application for a $200,000 Jobs Incentive Microloan Program from Scott Morrell,
LLC/Morrell Oversize (Morrell Companies).
The Finance Committee reviewed and recommended the EDA approve Morrell Companies application
for a Jobs Incentive Microloan.
The goal of the Jobs Incentive Microloan program is to encourage the growth of new jobs and the
retention of existing jobs. The company currently employs 105 people with an average hourly wage of
$23 per hour. Of the 105 employees, 13 FTE are employed by Morrell Oversize with an average hourly
wage of $27.94/hour. Morrell Companies proposes to hire 8 FTE with the expansion. The average
hourly wages of the retained jobs and the new jobs exceed the minimum requirements of at least
$15/hour.
Analysis
The attached memo from Springsted summarizes the analysis completed to date. Mikaela Huot will be at
the meeting to verbally support the analysis.
Staff’s analysis is shown in bold font, alongside the applied policy.
Purpose: To assist existing businesses with expansion and attract new businesses to the city
whose local operations will expand the city’s economy through job retention and
creation and maintain/grow the city’s tax base. The purpose of the Jobs Incentive
Program is to encourage the creation of quality, high-paying jobs within the city.
Morrell Trucking will bring 8 FTE jobs to Elk River within 2 years, paying
between $16-$20 per hour, exclusive of benefits.
Amount: Up to $200,000 of secondary financing not to exceed 20% of the project cost.
The total project cost is $2,380,545. The $200,000 requested is 8.4% of the total
project cost.
Equity: Must have private-sector commitments for 50% of the project cost. Borrower must
provide 10% or more of project financing.
The applicant provides 21% ($500,000) as equity contribution. Assuming
receipt of the full microloan requested amount of $200,000 (8.4% of project
cost), private-sector financing provides the remaining 70.6% through debt.
Criteria: Borrower must create one new full-time job for each $20,000 loaned, retain one new
full-time job for each $10,000 loaned, or combination of retainage and creation to
meet the requirements. All new jobs must be created within two years and be retained
for the period of the loan. Said jobs must pay greater of $15 per hour or 150% of state
or federal minimum wage, exclusive of benefits required by law. Any loans shall meet
the city of Elk River Business Subsidy Policy for the creation of new jobs, as well as a
5-year location requirement.
A combination of 8 FTE jobs upon completion and 13 retained jobs provides up
to $290,000 as qualifying maximum loan amount, subject to other requirements
being met. If approved, the loan agreement will reflect the requirement to
provide 8 new jobs and 4 retained jobs (8 * $20,000 = $160,000) and (4 * $10,000
= $40,000)
Summary
For the $200,000 requested, the application meets the minimum job creation, wage, and financial
participation required by Policy. Uses of the funds as proposed are eligible expenses.
Click here to enter financial impact.
Attachments
Springsted Analysis (June 23, 2015)
Jobs Incentive Microloan Application
Microloan Agreement
Entity Guarantee
Personal Guarantee
Security Agreement
Mortgage
Promissory Note
May 26, 2015
City of Elk River
ATTN: Amanda Othoudt
13065 Orono Parkway
Elk River, MN 55330
RE: City of Elk River Tax Abatement Application — Morrell Companies
Dear Ms. Othoudt,
This letter is my official pledge of commitment to break ground on our proposed 13, 824 square foot expansion located
at 10755 170th Circle NW, Elk River, MN, no later than August 31, 2015
We are planning on moving into our new facility and begin operations by the Summer of 2016.
If you have any questions or need additional information, please do not hesitate to contact Annie Deckert, Decklan
Group, at 763-568-9498.
I appreciate your time.
=spectW,
1 ,1
ler y rre President/Owner
Morrell Comp s/Scott Morrell, LLC
Attached: City of Elk River Tax Abatement Application
VI11. APPLICATION FOR TAX ABATEMENT
A. APPLICANT INFORMATION
Name of Corporation/Partnership S C o i t 0 o�_ " I I L L
Address 10155 17 0 f k C4 -do
o
PrimaryContact Ahtni Dfl c��-� / TeK-J "op-r-cll
Address Q12 Moiv (,21 NW SV,+c 'L JO %��P'tyt�- MN 55�J�0
Phone'6356e`l`}11�x 1mmt O�yvuecid cklam eavp•tom
Brief description of the corporation/partnership's business, including history, principal
product or service: l r
MOF-1wil Go w,Pow yrs 15 aT�I�^.IY OwNe-el bv>51nrLS WI�o 1�wS 17C� iV
Pivcp- Since- 10169.. It 0%4, a cOw.w.o� COIF.19i,rlL,F�ncL;�n
CA1,J bats btNcr 0'"W"�v a f"11 6cW1Lc CnW�-:rt- whi(.�. 5
V of 61 JorM^�i ! e70-{ Sir : a+kd Re- S Qea'. 1' Zc: te+n g?O&AW--tiova C'S -
y i:d.1'.}io��s1 IN{p F-V�nRti+Or oln
Brief description of the proposed project:
Mo {r11 oJca.4tyc Iry P"f!C)S1r+9-6 6,aU
oww•c.A F..R.ccl IN N=BC.• The Goowy.1 o�ep o .l -tU= FA v� _±W, '}.og o+L�
Awc� 1 or � 1 v/ ►5 . THS {.K;.U+r ,�, I I PI�.,;d c a vws� fnl;i,r , 1 ��.a-r
lMabr� .�rL� % nPF�� �Dbi4e- dna. i'l.r O66n L' t2 f co, til _Y'
Attorney Name F irig V;F-V�- fL-
Address %OI . N An MN [i(f4
Phone y1e°1L!'2.131 FaxZla,Zi•6114 Email ke-t-g4DtZ
Accountant
n
Phone W&- Z• 071 -'VV- r V Fax Email
Architect Name
Phone
Page 8 of 14
Email
CD ✓ -1
aawfelo er
NAW
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B. PROJECT INFORMATION
1. Xroject will be:
ndstrial: 4 New Construction � Expansion _Redevelopment / Rehab.
ffice/research facility that conforms to Business Park zoning standards
_Commercial Redevelopment/Rehabilitation
_Other
2. In a dition to the City of Elk River, applicant is requesting Tax Abatement from:
Sherburne County School District 728
3. The project will be: ^ Owner Occupied _Leased Space
4. Project Address
Parcel Identification
10155 170
5. Site Plan and Construction Plans Attached: .? Yes No
6. Total Amount of Tax Abatement Requeste : $ I �� 0 5 over 10—year s.
City Portion: Annual $ 1 o i Total $ 17 , W5 (15 4 K
County Portion: Annual $ 0 Total $ 461, 00
ISD 728 Portion: Annual $ Total $
7. Current Real Estate Taxes on Project Site: $
Estimated Real Estate Taxes upon Completion: Phase I $ �✓ 11
Phase II $
8. Construction Start Date:
Construction Completion Date:
If Phased Project:
C. PUBLIC PURPOSE
61 AWI �)I, tiol5
_Year % Completed
_Year % Completed
It is the policy of the City of Elk River that the use of Tax Abatement should result
in a benefit to the public. Please indicate how this project will serve a public
puj� ose.
Job Creation/Retention Number of existing jobs FTE � Wo"Ai pdorsze.
Number of jobs created by project 95 FTL—
Average hourly wage of jobs created/retained 2-7.11
New industrial development which will result in additional private
-ivestment in the area.
nhancement and/or diversification of the City of Elk River's economic base.
TThe project contributes to the fulfillment of the City's Economic Development
Strategic Plan.
Removal of blight.
Rehabilitation of a high profile or priority site.
Significantly increase the City's tax base.
Page 9 of 14 Pa N EE H E a 1t
NAWREJ
D. SOURCES & USES
SOURCES
Bank Loan
Other Private Funds
Owner Cash Equity
Fed Grant/Loan
State Grant/Loan
EDA Micro Loan
Tax Abatement
ID Bonds
TOTAL
USES
Land Acquisition
Site Development }
Construction =
NAME
rht6A',kof =ikH4,cr—
Machinery & Equipment
Architectural & Engineering Fees
Loge Fees 16�5100Hal 4 v+tioe-)
Interest During Construction
Debt Service Reserve
Contingencies
TOTAL
Page 10 of 14
AMOUNT
I�l,a o, 645
$ 1700 000
$
$
$ 7,00�OD0
$
AMOUNT
$ V1, 351
$
$ 11 U, , 7tp°I
$ moo, moo
$ ' 61 1; 2-57
$ °1 0j 000
$ 2, %OF 54,GL
pPi_H 1 agW/ �I Aye^[ 00 Y
Y
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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
F) Letter of Commitment from Applicant Pledging to Complete
During the Proposed Project Duration
G) Letter of Commitment from the Other Sources of Financing,
Stating Terms and Conditions of their Participation in the Project
H) Dien refiindable 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 — List of Shareholders/Partners
Exhibit D — But -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. The 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 be requested by the City after the filing of this
application. I
Applicant N
Page 11 of 14
P®Mf RI IY
NATURE
Project Narrative — Morrell Companies Tax Abatement
City of Elk River
Background
Morrell Companies is a family owned business which has been located in Elk River since 1962. Larry and
Arlyce Morrell started the business as a common carrier trucking company, and after recognizing the
growth potential of the business, opened an aggregate division in 1974. Throughout the years,
numerous additional divisions were formed to haul concrete products, recycling material and heavy
equipment. With this growth, the entire family became involved in the family business in a variety of
capacities, and this involvement as allowed for continued growth and expansion.
Morrell Companies was originally located on the corner of Jackson & School Street. In 1996, Morrell
Companies built a 36, 000 sq. ft. facility at their current location; 10752 171x` Ave NW, without any
assistance through businesses subsidies. This facility has provided them an even greater ability to serve
their customers, while providing enough room for expansion. In the early 2000s, Todd, Terry and Trent
Morrell transitioned into leadership positions within the company, with their mother and father
stepping down to work in the company on a part time basis. Morrell Companies is now a full service
carrier which offers a vast variety of standard and specialized transportation services.
The current property is owned by Morrell Properties, LLC (a holding company), with Morrell Oversize
Inc., operating out of the facility. There are several other divisions of the entire organization which
operate out of this facility. Recognizing the opportunity for growth, Morrell Oversize is looking to
expand its operations onto the 4.08 acre lot adjacent to the current facility.
Corporation/Partnership Description
Scott Morrell, LLC (real estate entity) is owned By Terry and Renee Morrell
Morrell Oversize, Inc. (business entity) is owned by Renee Morrell
Project
On March 16, 2015, the Elk River EDA and City Council approved the purchase agreement for Morrell
Oversize to expand their operation on a 4.08 acre lot in city owned Nature's Edge Business Center. Terry
Morrell, is proposing to build a 13,824 square foot facility. The facility will provide a wash facility, light
duty maintenance and office space for the growing company. The property will be owned by Scott
Morrell, LLC (holding company). This expansion provides Morrell Oversize a huge opportunity for
growth, creating new job opportunities for the Elk River community, and ensuring the long term success
of Morrell Companies as a whole.
Project Benefits
Morrell Companies is a long-standing community business which has operated in the Elk River
community for over 50 years; providing significant tax base, and well -paying jobs for the Elk River
Community. Morrell Companies currently employ 105 people at an average hourly wage of $23/hr. Of
these 105 FTE, 13 FTE are employed by Morrell Oversize with an average hourly wage of $27.94/hr.
Morrell Oversize plans on hiring a minimum of 8 FTE within the next two years, paying an average of
$23.21 an hour, as a result of this expansion.
Since 2003, the Morrell's have paid nearly $1M in property taxes. Their proposed expansion is
estimated to generate $35,311 a year in property taxes, bringing their total tax contribution to over
$125,000 annually.
According to Sherburne County, the proposed Morrell Oversize expansion is eligible for a total of
$17,037/yr in abatement between the city and the county:
• City: $8,107/yr
• County: $8,930/yr
In addition to the increase in tax base, the sale a city owned property, and creation of jobs, the attached
economic impact study indicates that this project will not only increase the overall sustainability of
Morrell Companies, but the expansion of Morrell Oversize will:
• Create five indirect and induced jobs throughout the local economy, which will pay
$36,628 in average annual salary, or $17.61 per hour
• Increase consumer expenditures by $316,019 annually
• Bring a total of 13 direct and indirect jobs into the area
• Bring 7 residents to Elk River
• Bring 17 residents to Sherburne County
Enclosed you will find a 3rd party economic impact study which outlines the specific economic impacts of
this project to Elk River and Sherburne County.
Subsidy Impact
To ensure this project moves forward in the City of Elk River and Sherburne County, Morrell Oversize is
asking for pay-as-you-go tax abatement assistance from both entities. Based upon the project
information, Assistant County Administrator Dan Weber has provided the following annual tax estimate:
• County = $8,930
• City = $8,107
School = $7,299
• State = $8,354
MV = $1,798
•
Other= $823
Total = $35,311
Looking at the attached projections, to help ensure business sustainability and total project cost, Morrell
Oversize is asking for a total of $210,905 in pay-as-you-go abatement; with $121,605 coming from the
City of Elk River. This number is calculated based upon $8,107/yr for fifteen years.
Looking at past projects Elk River has granted abatement to, this is a comparable request. Since 2004,
Elk River has granted abatement to twelve businesses, with terms ranging from 10-15 years.
Businesses who received abatement for 15 years include:
• Envision Company, LLC (Sportech). $460,000, total of $920,00 with County abatement
• O'Brien Holdings (CDI), $138,470, total of $276,940 with County Abatement
• Medical Extrusion Technologies, $114,998, total of $229,996 with County abatement
• Provo Enterprises (Alliance Machine), $103,978, total of $207,956 with County abatement
Business who received abatement for 10-12 years include:
• United Healthcare, 10 years, $850,000
• The Bank of Elk River, 12 years, $195,000, total of $495,000 with County abatement
• Quality Label, 10 years, $133,947, total of $267,894 with County abatement
• Orluck Industries, 12 years, $100,760, total of $201,520 with County abatement
Morrell's longstanding presence in the Elk River community, existing jobs and average hourly rate far
exceed past projects receiving abatement.
The most recent tax incentive provided to an Elk River business was Preferred Powder Coating, who
received approximately $1.15M up front, with a total project cost of over $6M, or 19% of the total
project cost. Morrell's request is 8.9% of total project cost.
Morrell Oversize is also applying for tax abatement from the Sherburne County, to help offset the cost
of their $2.38M project, and ensure their long-term success. The attached projections demonstrate the
need for the pay-as-you-go abatement over the course of 15 years.
Initial scoring on the City's current tax abatement applications shows the project scoring a minimum of
30 (moderate desirability), assuming worst case scenario for question 10. In the 50 years of operation,
Morrell Companies has never applied for, nor received, any business subsidies to operate their business.
How the Project Meets Public Purpose
This project serves four of the public purposes as outlined in the City of Elk River Tax Abatement
Application:
Job Creation/Retention
Upon completing their expansion, Morrell Companies anticipates hiring 8 FTE within two years,
averaging $23.21/hr. Additional job creation is outlined above.
Enhancement and/or diversification of the City of Elk River's Economic Base and Significantly increases
the City's tax base
This project will both enhance and diversify the city's economic base, and increase the city's tax base.
Not only will this project bring a non -tax generated parcel onto the tax rolls in perpetuity, but based on
the County Assessors initial valuation of the project, Morrell Companies will pay approximately $35,311
in taxes.
While Morrell Companies is seeking abatement dollars from both the city and county, Independent
School District 728 will receive approximately $7,299 a year in taxes per year upon project completion.
The project contributes to the fulfillment of the City's Economic Development Strategic Plan
The proposed project contributes to the first goal of the City's Economic Development Strategic Plan:
Business Development- attract new businesses and support existing businesses to increase the city's
industrial tax base, commercial tax base and employment base.
Morrell Oversize's expansion supports the following Commercial Strategies as outlined in the Strategic
Plan:
➢ Promote available sites, encourage business retention and expansion to grow existing
commercial base with business recruitment/attraction techniques
➢ Diversify economic base to include a wide variety of retail and service industries, as well
as additional fine dining opportunities
Please see information included in Job Creation/Retention, Enhancement and/or diversification of the
City of Elk River's Economic Base and significantly increases the city's tax base.
Legal Description & PID
Lot 1, Elk 2 Nature's Edge Business Center
75-820-0205
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Zrd-01 ON
May 26, 2015
City of Elk River
ATTN: Amanda Othoudt
13065 Orono Parkway
Elk River, MN 55330
RE: City of Elk River Micro Loan Application — Morrell Companies
Dear Ms. Othoudt,
This letter is my official pledge of commitment to break ground on our proposed 13, 824 square foot expansion located
at 10755 170`' Circle NW, Elk River, MN, no later than August 31, 2015
We are planning on moving into our new facility and begin operations by the Summer of 2016.
If you have any questions or need additional information, please do not hesitate to contact Annie Deckert, Decklan
Group, at 763-568-9498.
1 appreciate your time.
Respectf
y Mo President/Owner
Morrell Companies/Scott Morrell, LLC
Attached: City of Elk River Micro Loan Application
ELK RIVER ECONOMIC DEVELOPMENT
MICROLOAN FUND APPLICATION
I. CONTACT INFORMATION
Legal Name of Business: Scott Morrell, LLC
Project Site Address: 10755 170th Circle
City / State / Zip
Contact Person(s)
Business Phone
Email
Check One:
Social Security No.
Elk River, MN 55330
Terry Morrell (owner), Annie Deckert (agent)
763-568-9498 (Annie) F
annie@decklangroup.com
Proprietor
470-98-9616
XCorporation
Federal ID # 47-1077819 State ID # 5016VI D O
2. NATURE OF LOAN REQUEST
Which Micro -Loan Program are you applying for?
Industrial Incentive Program
Downtown Revitalization Financing Program
Energy Efficiency Improvement Program
X Jobs Incentive Program
Amount Requested: $200,000 Total Project Cost: $2,380,545
Type of project:
New construction for a start-up business
X New construction for an existing business
On site expansion
Equipment purchase
Remodeling: (circle one) Commercial / Retail / Industrial
Other
Partnership
Page 2 of 8 PyA�WRE A Et A'®A Y
Please give a brief summary of your business and its products or service:
Morrell Companies is a family owned business which has been located in Elk
River since 1962. Larry and Arlyce Morrell started the business as a common
carrier trucking company, and after recognizing the growth potential of the
business, opened an aggregate division in 1974. Throughout the years,
numerous additional divisions were formed to haul concrete products,
recycling material and heavy equipment. With this growth, the entire family
became involved in the family business in a variety of capacities, and this
involvement as allowed for continued growth and expansion.
Morrell Companies was originally located on the corner of Jackson & School
Street. In 1996, Morrell Companies built a 36, 000 sq. ft. facility at their
current location; 10752 171st Ave NW, without any assistance through
businesses subsidies. This facility has provided them an even greater ability
to serve their customers, while providing enough room for expansion. In the
early 2000s, Todd, Terry and Trent Morrell transitioned into leadership
positions within the company, with their mother and father stepping down to
work in the company on a part time basis. Morrell Companies is now a full
service carrier which offers a vast variety of standard and specialized
transportation services.
The current property is owned by Morrell Properties, LLC (a holding
company), with Morrell Oversize Inc., operating out of the facility. There are
several other divisions of the entire organization which operate out of this
facility. Recognizing the opportunity for growth, Morrell Oversize is looking
to expand its operations onto the 4.08 acre lot adjacent to the current facility.
Please give a brief summary of the project:
On March 16, 2015, the Elk River EDA and City Council approved the
purchase agreement for Morrell Oversize to expand their operation on a 4.08
acre lot in city owned Nature's Edge Business Center. On May 18th, the City
Council provided preliminary approval on the proprety's rezoning and CUP
necessary for the proposed use.
Terry Morrell, is proposing to build a 13,824 square foot facility. The facility
will provide a wash facility, light duty maintenance and office space for the
growing company. The property will be owned by Scott Morrell, LLC (holding
company). This expansion provides Morrell Oversize a huge opportunity for
growth, creating new job opportunities for the Elk River community, and
ensuring the long term success of Morrell Companies as a whole.
Page of PRWI REO BY
NATURE
Please describe how this loan will impact your project:
This loan will be used to help offset the cost of the
land.
3. FINANCING
Project Costs
Land
$
349,351
Buildings (includes site improvements)
$
1,824,769
Equipment/Machinery/Fixtures
(attach list and estimated costs)
$
80,600
Professional Fees
$
35,825
Other (Contingencies)
$
90,000
Total Costs
$
2,380,545
Comments:
Proposed Sources of Financing
SOURCE NAME
TERMS AMOUNT
Bank Loan The Bank of Elk River
$ 1,680,545
Applicant Contribution
$ 500,000
Other
$
Fed Grant/Loan
$
State Grant/Loan
$
EDA Microloan Jobs Incentive
$ 200,000
Tax Increment Financing
$
Tax Abatement
$
Total Financing
$ 2,380,545
Page4of8 P0WIR10 BY
NATURE
Collateral Assignments
Lien
Description of Collateral Position
To Bank 1 Building 1st
To Bank 2
To Private Sources
To Other Sources
To Federal Govt
To State
To EDA Microloan
Page 5 of 8
PAWFAEA RAEt
N'' 'A'
Value of Collateral
Land
Buildings
Machinery & Equip.
Other
Other
Book Value
$ 296,500
Cost Existing Liens
$ 349,351
$ $1,824,769
$ $ 80,600
4. JOB & WAGE GOALS
Present # of Employees 13 FTE Total Payroll
$
Jobs To Be Created*
PleASe nrovide the followinv information on iobs you expect to create within 2-vears.
job Title
Number
of jobs
Average
Hourly
Wage
Annual
Salary
Are the Jobs
Permanent or
Temporary?
Expected
Hiring
Date
Driver
4
$18.00
Before 5/2017
Clerical
2
$16.00
Before 5/2017
Maintenance
2
$20.00
Before 5/2017
*If loan is for job retention only, please explain in Business Plan.
**Wage does not include benefits; please see attached spreadsheet. Average hourly
benefit is $5.21
Program Objectives
(Check all that apply)
X The project contributes to the fulfillment of the city's approved and adopted
economic development and/or redevelopment plans.
The project prevents or eliminates slums and blight.
X The project increases the local tax base.
The project brings a structure into compliance with an existing building code
violation.
Page 6 of 8 P 0 w E 8 P 0 8 Y
NAYURE
S. PROJECT CONTACTS
Attorney
Name Heinrich A. Brucker, Ryan, Brucker & Kalis, Ltd.
Address 201 Minnesota Avenue North, Aitkin, MN 53431
Phone 218-927-2136
Accountant
Name Scott Moller, Moller & Barrett LLP
Address 225 South 6th Street #4390, Minneapolis, MN 55402
Phone 612-372-0090
Financing Sources (lenders, partners. etc...)
Name Glen Hardin, The Bank of Elk River
Address 630 Main Street NW, Elk River, MN 53530
Phone 763-241-8590
Parent Company
Name Morrell Administrative Company (Morrell Companies)
Address 10752 1719t Avenue, NW, Elk River, MN 55330
Phone 763-441-2011
Page 7 of 8 PBQ N E B E B (�B Y
�N "'
6. ATTACHMENTS CHECK LIST
Please attach the following:
A) Written Business Plan:
1. Description of Business
2. Ownership
3. Management
4. Date Established
5. Products/Services
6. Future Plans
B) Financial Statements for Past Two Years
C) Financial Projections for Two Years
D) Resume of Owner/Management
E) Personal Financial Statements of Proprietor, Partners,
Guarantors
F) Letter of Commitment from Applicant Pledging to Complete
During the Proposed Project Duration
G) Letter of Commitment from the Other Sources of Financing,
Stating Terms and Conditions of their Participation in
Project
H) Fee of 1% of amount of loan request ( +7, 0 00)
7. AGREEMENT
I / We certify that all information provided in this application is true and correct to the best
of my/our knowledge. I / We authorize the city of Elk River and the Finance Committee to
check credit references and verify financial and other information. I %-We`agree to provide
any additional information as may b ues e the city and the Finance
APPLICANT
BY T e P- h- M o �4SII
DATE Z 1 M"-( 1-015
Page 16 of 17 P O W F A E O B F
Morrell Companies -Job Creation Spreadsheet
Current Employees
2015
Ave. hrly
wage*
Value of
benefits
With
benefits
David Anderson - Driver
$
30.65
$
5.21
$
35.86
Tyler Benz- Driver
$
26.86
$
5.21
$
32.07
Ryan Bjorstrom - Driver
$
23.73
$
5.21
$
28.94
Brody 8oese - Shop
$
12.50
$
-
$
12.50
Robert Dipprey - Driver
$
31.90
$
5.21
$
37.11
RyanJaremko - Shop
$
15-00
$
-
$
15.00
Thomas Krats - Driver
$
17.50
$
-
$
17.50
Justin Morrell - Driver
$
32.96
$
5.21
$
38.17
Renee Morrell - Clerical
$
20.00
$
5.21
$
25.21
Brian Quigley - Driver
$
31.99
$
5.21
$
37.20
Kevin Schrupp- Driver
$
28.25
$
5.21
$
33.46
Kyle Schrupp - Driver
$
15.00
$
5.21
$
20.21
Brian Vanderweyst - Driver
$
24-74
$
5.21
$
29.95
Jobs to be created
y Spring
2017
Driver
$18.00
$
5.21
$23.21
Driver
$18.00
$
5.21
$23.21
Driver
$18.00
$
5.21
$23.21
Driver
$18.00
$
5.21
$23.21
Clerical
$16.00
$
5.21
$21.21
Clerical
$16.00
$
5.21
$21.21
Maintenance
$20.00
1 $
5.21 1
$25.21
Maintenance
$20.00
$
5.21
$25.21
* excludes benefits
Job Creation Spreadsheet - Morrell.xlsx
DRAFT MEMORANDUM
TO: Amanda Othoudt, Economic Development Director
FROM: Mikaela Huot, Vice President/Consultant
DATE: June 23, 2015
SUBJECT: Morrell 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, Scott Morrell, LLC/Morrell Oversize. The developer proposes to purchase land from the Economic
Development Authority of the City located within the 2nd phase of the Nature’s Edge Business Center and construct
an approximate 13,824 square foot building that would be expanding their business in addition to the existing 36,000
square foot facility already located in the City. Morrell Companies is a full service carrier which offers a vast variety
of standard and specialized transportation services. The company is purchasing land from the City for a total
purchase price of $349,351. The company currently employs 105 people with an average hourly wage of $23/hour.
Of the 105 employees, 13 FTE are employed by Morrell Oversize with an average hourly wage of $27.94/hour. The
applicant expects to hire 8 FTE employees with the planned expansion. According to the applicant, the tax
abatement assistance will be used as annual cash flow to support debt service on the approximate $2.380M project
to be financed with a combination of debt, equity and EDA microloan.
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
Springsted Incorporated
380 Jackson Street, Suite 300
Saint Paul, MN 55101-2887
Tel: 651-223-3000
Fax: 651-223-3002
www.springsted.com
City of Elk River, Minnesota
Morrell request for Tax Abatement
June 23, 2015
Page 2
the project upon completion and net operating income available to support debt service, it can be determined that the
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 PID: 75-820-0205
o EMV as of Jan. 2, 2014 for taxes payable 2015 is $0
Assumed to be ‘base’ value of abatement
Tax exempt property owned by EDA with no taxable value
Value estimate provided by Sherburne County
o EMV as of Jan. 2, 2016 for taxes payable 2017 is $859,000
Total Value: $859,000
Value estimate provided by County Assessor
Abatement term and participation
o City for up to 15 years
First Year of Abatement
o Taxes payable 2017
o Construction complete by December 31, 2015
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
Morrell request for Tax Abatement
June 23, 2015
Page 3
Tax Abatement Revenue Estimates
Morrell
Abatement Project City Abatement
Estimated Annual Tax Abatement Revenue $8,107
Total Estimated Tax Abatement Revenues (15 Years) $121,609
Estimated Present Value of Total Revenues $86,674
The above table illustrates the projected net revenues that tax abatement would generate for the proposed term of 15
years for the City. The company has also requested tax abatement assistance from the County for a term of 10
years. The estimated total abatement revenues as requested from the County are equal to $89,300. 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). 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 $2.380 million acquisition and subsequent construction of an expansion on current
City-owned property located in the 2nd phase of the Nature’s Edge Business Center. The developer has requested
approximately $121,609 in abatement assistance over 15 years from the City and $89,300 over 10 years from the
County.
The Developer’s submittal includes a preliminary total project budget of $2,380,545 as shown in the table below.
Project Costs Total Cost Sources of Funds Total Sources
Land Acquisition $349,351 Bank Loan $1,680,545
Site Development/Construction $1,824,769 Equity $500,000
Machinery & Equipment $80,600 EDA microloan $200,000
Professional Fees & Other $35,825
Total Costs $2,380,545 Total Sources $2,380,545
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
City of Elk River, Minnesota
Morrell request for Tax Abatement
June 23, 2015
Page 4
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 is pay-as-you-go financing.
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
City of Elk River, Minnesota
Morrell request for Tax Abatement
June 23, 2015
Page 5
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 has indicated that the abatement revenues are necessary to ensure business sustainability and
support projected annual debt service. The implication being that “but for” abatement assistance the project will not
proceed.
To complete the “but-for” test and make the determination of whether the project is likely to proceed as proposed
without the use of public dollars, we review the project showing a result if the developer receives the requested
assistance and one showing a result without assistance.
We utilized the project cost and operating information provided by the developer to understand the anticipated
performance of the project. The purpose of evaluating the operating pro forma and accompanying financial data is to
understand the potential return to the developer through the initial development of the project and the operation of the
enterprise over a period of time (10 years). The developer has indicated the project as proposed without assistance
does not provide sufficient net operating income to provide acceptable investor returns.
Generally, should the rates of return lie below a reasonable range without assistance; we could assume the project
as proposed would not move forward without assistance. Should the returns lie within a reasonable range with the
assistance, we could assume the amount of assistance tested is appropriate for the project. All such estimates
should be viewed as general indicators of performance and not exact forecasts. The number of current and future
variables affecting these estimates and actual results are great. There is no set Return on Equity (ROE) and Internal
Rate of Return (IRR) benchmark that dictates whether a project needs financial assistance or not.
An additional measure of project feasibility is the Debt Coverage Ratio (DCR), which is a calculation detailing the
ratio by which operating income exceeds the debt-service payments for the project. If the DCR is greater than 1.0 it
indicates the project has operating income that is greater than the debt-service payment by some margin; conversely
if the DCR is less than 1.0 it indicates the project is incapable of meeting its debt-service payment and would need to
seek additional revenue sources in order to pay its debt. Typical lending standards will require a DCR of greater than
1.0 as a measure of cushion in the event actual revenues and expenses are different than projected.
The Developer’s submittal includes financial and cash flow projections, sources and uses of funds, and proformas
with and without abatement assistance. The application also includes a letter of commitment from the Bank of Elk
River for financing of the project in the amount of $1,680,600 for a term of 20 years. There are certain conditions of
the financing, one of which being a minimum debt coverage ratio of 1.20. The annual operating proformas with and
without assistance indicate low return on equity based on the project not receiving abatement assistance. The
proformas also illustrate that without annual tax abatement assistance, the minimum debt coverage ratios as required
by the lender would not be met. The proforma with and without tax abatement is an analysis of the developer’s use
City of Elk River, Minnesota
Morrell request for Tax Abatement
June 23, 2015
Page 6
of the annual abatement revenues to reduce the mortgage liability on the property and increase the projected return
on equity for the project. The analysis indicates the tax abatement assistance will have a positive impact on the
return.
Conclusion
The developer has requested assistance in the amount of $121,609 from the City of Elk River and that the project
would not be feasible without assistance as demonstrated by the return on equity comparisons. There are several
methods to determine if a project would proceed “but for” assistance. Based on the available information, in this case
a debt service and project cash flow gap analysis was utilized to test the viability of the project. The tables as
provided in the application indicate that the tax abatement assistance reduces the annual debt service burden on
project cash flows and improve the projected return on equity. “But for” abatement assistance, a reduction in
operating and/or borrowing costs, 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 105 jobs and creation of 8 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@springsted.com with any questions or to discuss.
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DRAFT MEMORANDUM
TO: Amanda Othoudt, Economic Development Director
FROM: Mikaela Huot, Vice President/Consultant
DATE: June 18, 2015
SUBJECT: Morrell Trucking – Microloan Fund Application Review
Summary
The City of Elk River received a loan request from Morrell Trucking (the applicant) through the Economic Development
Microloan Fund. The applicant has indicated the funds would be used to aid in the acquisition and construction of an
expansion to their existing facility. The company has also requested tax abatement assistance in a separate
application. At the request of City staff, Springsted has undertaken an initial review of the company’s application and
request to determine that, based upon the provided information, the applicant meets the guidelines as set forth by the
City of Elk River’s Economic Development Microloan Fund policy. The purpose of this memo is to outline the
components of the Microloan Fund Policy and Application including the requests for additional information that is
necessary for review as it relates to the application submitted to the City by Morrell Trucking.
Project Eligibility Requirements under Jobs Incentive Program
For a project to qualify under the Jobs Incentive Program of the City of Elk River Economic Development Microloan
Fund policy an applicant must meet certain criteria:
Must create one new full-time job for each $20,000 loaned, retain one new full-time job for each
$10,000 loaned, or combination of retainage and creation to meet the requirements:
All new jobs must be created within 2 years and retained for the period of the loan:
Created and retained jobs must pay greater than $15.00 per hour or 150% of State or Federal
minimum wages (whichever is greater):
Any loans shall meet the City of Elk River Business Subsidy Policy for the creation of new jobs as
well as a 5 year location requirement:
Eligible costs must be used for costs related to job creation and retention:
The application received by the City includes a requested loan amount of $200,000 with 8 jobs being created and 105
jobs retained within the City due to the application. The average hourly wages of the existing retained jobs and the
jobs to be created exceed the minimum requirement of at least $15/hour.
Springsted Incorporated
380 Jackson Street, Suite 300
Saint Paul, MN 55101-2887
Tel: 651-223-3000
Fax: 651-223-3002
www.springsted.com
City of Elk River, Minnesota
Morrell Trucking Microloan Fund Review
June 18, 2015
Page 2
3. Permitted Fund Uses of Microloan (Page 6 of Policy)
To qualify for receipt of a microloan, the applicant must utilize the funds for the specific purposes outlined in the City’s
Economic Development Microloan policy. Funds may be used by the borrower for costs related to job creation and
retention as a result of the project. According to the policy, loans may be used for the following activities:
1. Building construction
2. Land acquisition
3. Machinery
4. Furniture, fixtures, and equipment (FF&E)
5. Renovation and modernization of buildings
6. Exterior renovation of retail, commercial and industrial buildings
7. Public infrastructure needed for economic development expansions
8. Investment real estate with a minimum of 50% of the space pre-leased
The applicant has indicated the funds would be used to aid in offsetting the cost of land acquisition.
4. Business Eligibility (Page 7 of Policy)
In addition to having an eligible project a business must also meet certain criteria before it is deemed eligible to
receive forgivable loan funds. According to the Economic Development Microloan Fund Policy, to be eligible for a
microloan a business must meet the following
Business must be a for-profit corporation, partnership or sole proprietorship:
Business must be a small business as defined by the small business administration:
Business must have a positive net worth:
Business must be an industrial, manufacturing, or technology-based industry:
Religious, political, casino, sports facilities and pornographic enterprises are not eligible to use the
Economic Development Forgivable Loan Program:
Based on the submitted application, the business is a for-profit corporation defined as a small business, is an
industrial, manufacturing or technology-based industry and is not a religious, political, casino, sports facilities, or
pornographic enterprise. The most recent full years of financial statements show positive net worth.
5. Microloan Fund Terms & Conditions (Page 7 of Policy)
To be determined if loan terms approved by the EDA.
6. Regulation for New Construction and Improvements (Page 7 of Policy)
To be regulated if funding is approved and determined to be used for any improvements of the existing building.
City of Elk River, Minnesota
Morrell Trucking Microloan Fund Review
June 18, 2015
Page 3
7. Loan Security and Guarantee Requirements (Page 8 of Policy)
The City’s Economic Development Microloan Fund policy states that prior to the City granting a loan to a proposed
business, that the proposed project must meet certain loan security requirements. These requirements are:
Applicant must be able to secure the loan by providing the EDA with a minimum of a subordinate
mortgage upon the building and/or assets or other approved collateral:
Applicant must demonstrate the financial means to repay the loans, as determined by the Economic
Development Authority:
Whenever possible, personal guarantees will be made part of any loan agreement:
Key person life insurance may be required as determined by the EDA Finance Committee based on
loan amount and company ownership partners:
8. Timing of Project Expenses (Page 8 of Policy)
To be regulated if funding is approved and determined to be used for any improvements of the existing building.
9. Procedural Guidelines for Application and Approval (Page 8 of Policy)
To be regulated if funding is approved and determined to be used for any improvements of the existing building.
The EDA Finance Committee is asked to evaluate the project application based on the
following criteria
a. Project design: evaluation of project design will include review of proposed activities, time lines and a
capacity to implement
b. Financial feasibility: availability of funds, private involvement, financial packaging and cost effectiveness
Appropriate ratio of private funds to microloan funds: $2,180,545/$200,000
Sufficient cash e to cover proposed debt service as demonstrated by financial statements and
projections: financial information provided by the company indicates that the project will be able to
support debt service upon receipt of the requested tax abatement assistance from the City and County in
conjunction with this project.
Ability to demonstrate positive net worth: based on receipt of tax abatement assistance in
conjunction with the microloan funds allows the project to maintain positive cash flow to support debt
service, meet minimum equity requirements and maintain positive net worth.
Letter of commitment from applicant pledging to complete the project during proposed project
duration: Provided
Letter of commitment from other financing sources stating terms and conditions of their
participation. Provided
Sufficient collateral: Provided
City of Elk River, Minnesota
Morrell Trucking Microloan Fund Review
June 18, 2015
Page 4
c. All other information as required in the application and/or additional information as may be requested by the
Economic Development Authority
d. Project compliance with all city codes and policies
e. Program Objectives: In addition to quality job and wage creation/retention requirements, the applicant must
meet all Microloan Fund criteria and demonstrate how the proposed activities will meet at least one of the
following objectives:
The project contributes to the fulfillment of the city’s approved and adopted economic development
and/or redevelopment plans
The project prevents or eliminates slums and blight
The project increases the local tax base
The project brings a structure into compliance with an existing building code violation
TAX ABATEMENT AND BUSINESS SUBSIDY AGREEMENT
BY AND BETWEEN
CITY OF ELK RIVER, MINNESOTA
AND
SCOTT MORRELL, LLC
464427v2 JSB EL185-33
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 Business Subsidies Act ..................................................................... 6
Section 3.9 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-
464427v2 JSB EL185-33
TAX ABATEMENT AND BUSINESS SUBSIDY 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 Scott Morrell, LLC, a Minnesota limited liability company (the “Developer”).
WlTNESSETH:
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, Section
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, the Council has approved this Agreement 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 Tax Abatement and Business Subsidy Agreement, as the same
may be from time to time modified, amended or supplemented;
Benefit Date means the date on which a Certificate of Occupancy for the Project is issued
by the City;
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;
464427v2 JSB EL185-33
County means Sherburne County, Minnesota;
Developer means Scott Morrell, LLC, a Minnesota limited liability company, its
successors and assigns;
Event of Default means any of the events described in Section 4.1;
Project means the construction of an approximate 13,824 square foot manufacturing
facility to be located within the 2nd phase of the City’s Nature’s Edge Business Center located in
the City;
Morrell Oversize, Inc. means Morrell Oversize, 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 Lot 1, Block 2, Natures Edge Business Center, Parcel ID # 75-820-0205, 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.
464427v2 JSB EL185-33
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 or on behalf of 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 construct the Project or 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 or on behalf of 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.
464427v2 JSB EL185-33
(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.
464427v2 JSB EL185-33
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 or Morrell Oversize, Inc. and none of such costs shall be paid by the
City except as reimbursed as specifically provided in this Agreement. The Developer will
construct the Project or cause the Project to be constructed 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 paid invoices for site development costs of the
Tax Abatement Property in an amount not less than the Reimbursement Amount, the City shall
reimburse the Developer for site development costs of the Tax Abatement Property actually
incurred in an amount not to exceed $121,609 (the “Reimbursement Amount”) pursuant to the
Abatement Program as provided in Section 3.9.
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 site
development 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.
The Developer shall complete the Project or cause the Project to be completed by
___________, 2016. All work with respect to the Project to be constructed or provided by or on
behalf of 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 or cause the Project to be repaired or
rebuild.
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 the Developer.
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, except
464427v2 JSB EL185-33
between the Developer and Morrell Oversize, Inc., without the prior written approval of the City.
The City shall be entitled to require as conditions to any such approval that:
(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 or cause to be paid all real property taxes with respect to all parts of the
Tax Abatement Property acquired, owned or leased by it or acquired and owned by Morrell
Oversize, Inc. 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.
464427v2 JSB EL185-33
Section 3.8 Business Subsidies Act.
(1)In order to satisfy the provisions of Minnesota Statutes, Sections 116J.993 to
116J.995 (the “Business Subsidies Act”), the Developer acknowledges and agrees that the
amount of the “Business Subsidy” granted to the Developer under this Agreement is the value of
a portion of the Tax Abatement Property, which is approximately $121,609, and that the
Business Subsidy is needed because the Project is not sufficiently feasible for the Developer to
undertake without the Business Subsidy. The public purpose of the Business Subsidy is to
increase the tax base in the City. The Developer represents that it currently has in the state 105
full-time equivalent permanent employees and they agree that it will meet the following goals
(the “Goals”): it will cause Morrell Oversize, Inc. to retain its existing 105 jobs in Minnesota
and create at least 8 full time equivalent jobs in connection with the development of the
Development Project at an average hourly wage of at least $15.00 per hour or 150% of the state
or federal minimum wage, whichever is greater, excluding benefits, within two years from the
Benefit Date, which is the date the Developer or Morrell Oversize, Inc. receives a certificate of
occupancy for the Project.
(2)If none of the Goals are met, the Developer 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, the Developer 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 8 (i.e. number of jobs set forth in the
Goals).
(3)The Developer agrees to (i) report its progress on achieving the Goals to the City
until the later of the date the Goals are met or two years from the Benefit Date, or, if the Goals
are not met, until the date the Business Subsidy is repaid, (ii) include in the report the
information required in Section 116J.994, Subdivision 7 of the Business Subsidies Act on forms
developed by the Minnesota Department of Employment and Economic Development, and (iii)
send completed reports to the City. The Developer 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 the
Developer 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, the Developer 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.
(4)The Developer agrees to cause Morrell Oversize, Inc. to continue operations of
the Project for at least five (5) years after the Benefit Date.
(5)Other than a $200,000 microloan from the Economic Development Authority of
the City of Elk River, the Tax Abatements and comparable tax abatements from the County,
there are no other state or local government agencies providing financial assistance for the
Project other than the City and the County.
(6)There is no parent corporation of Morrell Oversize, Inc. or the Developer.
464427v2 JSB EL185-33
Section 3.9 Duration of Abatement Program. The Tax Abatement Program shall exist
for a period of up to 15 years beginning with real estate taxes payable in 2017 through 2031. On
or before February 1 and August 1 of each year commencing August 1, 2017 until the earlier of
the date that the Developer shall have received the Reimbursement Amount or February 1, 2032
the City shall pay the Developer the amount of the Tax Abatements received by the City in the
previous six month period. 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.
464427v2 JSB EL185-33
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 or cause to be paid 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 construct or 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 30 days’ written notice to the Developer citing with
specificity the item or items of default and notifying the Developer that it has 30 days within
which to cure said Event of Default. If the Event of Default has not been cured within said 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 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.
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
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
464427v2 JSB EL185-33
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, leasing, 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.
464427v2 JSB EL185-33
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:
Scott Morrell, LLC
10752 171st Avenue
Elk River, MN 55330
Attention: Terry and Renee Morrell
(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: Director of Economic Development
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.
464427v2 JSB EL185-33
Section 5.6 Duration. This Agreement shall remain in effect through the earlier of the
date the Developer receives the Reimbursement Amount or February 1, 2032, unless earlier
terminated or rescinded in accordance with its terms.
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.
464427v2 JSB EL185-33
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.
SCOTT MORRELL, LLC
By
Its
This is a signature page to the Tax Abatement and Business Subsidy Agreement by and between
the City of Elk River, Minnesota and Scott Morrell, LLC
464427v2 JSB EL185-33
CITY OF ELK RIVER, MINNESOTA
By
Its Mayor
By
Its City Clerk
This is a signature page to the Tax Abatement and Business Subsidy Agreement by and between
the City of Elk River, Minnesota and Scott Morrell, LLC
464427v2 JSB EL185-33
LOAN AGREEMENT
(Microloan)
THIS LOAN AGREEMENT (“Agreement”) is made effective as of August ____, 2015,
by and between SCOTT MORRELL, LLC, a Minnesota limited liability company (“Borrower”),
and the ECONOMIC DEVELOPMENT AUTHORITY OF THE CITY OF ELK RIVER, a
public body corporate and politic of the State of Minnesota (“Lender”).
RECITALS
A.Borrower has applied to Lender for a Microloan Program loan on the Loan
Property (as hereinafter defined) in the principal amount of $200,000.00.
B.Lender is willing to make such mortgage loan to Borrower in the principal
amount of $200,000.00 (the “Loan”), subject to all of the terms and conditions of this
Agreement.
C.Contemporaneously with the execution hereof, Borrower is delivering to Lender
the following security documents:
(i)A Promissory Note (“Note”) effective as of the date herewith made by
Borrower and payable to the order of Lender, in the original principal amount of
$200,000.00.
(ii)A Security Agreement securing the Note (“Security Agreement”). The
Security Agreement is of even date herewith, is executed by Morrell Oversize, Inc., as the
entity guarantor, in favor of Lender, as secured party, and provides a security interest in
certain existing equipment currently owned or hereafter acquired by Morrell Oversize,
Inc. (the “Equipment”);
(iii)The personal guaranties of Terry Morrell, President and co-owner of
Borrower and Renee Morrell, ______ and co-owner of Borrower (collectively, the
“Personal Guaranties”);
(iv)An entity guaranty (the “Entity Guaranty”) of Morrell Oversize, Inc. (the
“Entity Guarantor”);
(v)A Mortgage and Assignment of Rents and Security Agreement and Fixture
Financing Statement (“Mortgage”). The Mortgage is of even date herewith, is executed
by Borrower, as mortgagor, in favor of Lender, as mortgagee, and covers property situated
in Sherburne County, Minnesota legally described as Lot 1, Block 2, Natures Edge
Business Center, according to the plat thereof on file and of record in Sherburne County,
State of Minnesota (the “Loan Property”) as well as a security interest in certain other
property described therein.
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NOW, THEREFORE, in consideration of the mutual covenants hereinafter contained, it is
hereby agreed as follows:
1.Amount and Purpose of Loan. Borrower agrees to take and Lender agrees to
make a mortgage loan in the principal amount of Two Hundred Thousand and No/100s Dollars
($200,000.00) (the “Loan”) to be advanced in a single disbursement as hereinafter provided, the
Loan to be evidenced by the Note and secured by the Security Agreement, the Personal
Guaranties, the Entity Guaranty, the Mortgage and any other security document required under
this Agreement. The Loan proceeds will be used only towards a down payment on Borrower’s
purchase of the Loan Property.
2.Equipment and Security Interest. The Entity Guarantor has provided Lender a
preliminary list of the Equipment that shall be subject to the Equipment Security Interest, which
is attached as Exhibit A. The Security Agreement will provide Lender with a first priority
security interest in the Equipment.
3.Title Insurance. Sherburne County Abstract & Title Company \[Old Republic
National Title Insurance Company\] (“Title”) is designated as the title insurer with respect to this
Agreement. Title will insure Lender against loss or damage on account of mechanic’s liens
upon or unmarketability of the title to the Loan Property, and will ensure that the Mortgage
constitutes a second priority lien upon Borrower’s interest in the Loan Property as contemplated
by this Agreement, subject only to a mortgage in favor of The Bank of Elk River in the amount
of $____________ (the “First Lien Mortgage”). Borrower agrees to promptly and fully observe
and comply with the reasonable requirements of Title and Lender with respect to the title, the
Mortgage, disbursements of funds and such other reasonable requirements as Title may make.
4.Documents to be Delivered. Borrower covenants and agrees to immediately
cause the compliance with the following conditions:
(a)Note. Deliver to Lender the Note.
(b)Security Agreement. Deliver to Lender the Security Agreement, together
with evidence that a UCC-1 Financing Statement has been or will be duly filed for
record.
(c)Personal Guaranties. Deliver to Lender the Personal Guaranties.
(d)Entity Guaranty. Deliver to Lender the Entity Guaranty.
(e)Mortgage. Deliver to Lender the Mortgage, together with evidence that
the Mortgage has been or will be duly filed for record.
(f)Notice and Cure Agreement. Deliver to Lender the Consent and Notice
and Cure Agreement, with respect to the Contract for Deed.
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464429v2 EL185-33
(g)Title Insurance Policy. Deliver to Lender a Mortgagee’s title insurance
policy (“Title Policy”), from Title issued to Lender in the amount of $200,000.00 with
respect to the Mortgage and insuring that the Mortgage is a first lien on the Loan Property
free and clear of mechanic’s liens, materialmen’s liens, taxes, special assessments, rights
of parties in possession, other than: (i) the First Lien Mortgage; and (ii) the rights of
tenants as tenants only under existing leases, and questions of title and survey approved in
writing by Lender.
(h)Organizational Documents and Resolutions. Deliver to Lender copies of
the (i) articles of organization for Borrower certified by the Minnesota Secretary of State,
(ii) certificate of good standing for Borrower issued by the Minnesota Secretary of State;
(iii) copies of Borrower’s operating agreement, member control agreement and bylaws;
and (iv) certified copies of resolutions of Borrower authorizing the execution and
delivery of this Agreement, the Note, the Mortgage and any other document to be
executed by Borrower pursuant to this Agreement.
(i)Organizational Documents and Resolutions. Deliver to Lender copies of
the (i) articles of organization for Entity Guarantor certified by the Minnesota Secretary
of State, (ii) a certificate of good standing for Entity Guarantor issued by the Minnesota
Secretary of State; (iii) a copy of Entity Guarantor’s articles of incorporation and bylaws;
and (iv) a certified copy of resolutions of Entity Guarantor authorizing the execution and
delivery of the Entity Guaranty, the Security Agreement and any other document to be
executed by Entity Guarantor pursuant to this Agreement.
(j)Insurance. Deliver to Lender: (i) a certificate or policy for all insurance
required, under the terms hereof to be maintained by Borrower; and (ii) evidence that no
part of the Loan Property is located in an area designated as being a flood plain or flood
hazard area as defined by the Flood Hazard Boundary Map published by the Federal
Insurance Administration.
(k)Compliance with Laws, Etc. Deliver to Lender such evidence as Lender
may require as to the compliance of the Loan Property with: (i) all applicable laws,
codes, rules, regulations and ordinances, including, without limitation, those relative to
environmental protection, protection of wetlands, building and zoning matters and the
Americans with Disabilities Act; and (ii) the requirements of any restrictive covenants,
conditions and restrictions; conditional use permit or planned unit development
applicable to the Loan Property.
(l)Hazardous Substances. Deliver to Lender evidence acceptable to Lender,
that: (i) the Loan Property has not been used as a hazardous waste storage facility or
burial site; (ii) the soil is free from hazardous waste, hazardous substances, pollutants and
contaminants; and (iii) no hazardous waste, hazardous substance, pollutant or
contaminant has been used in the construction or use of any building or other
improvement on the Loan Property. For purposes of this subparagraph, the terms
“hazardous waste,” “hazardous substances,” “pollutants” and “contaminants” shall
include, but not be limited to, polychlorinated biphenyls (PCBs), asbestos, petroleum
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products and any other chemical or substance determined to be a hazard to human health
or the environment.
(m)Indemnity. Deliver to Title any indemnity agreement in favor of Title in
the form required by Title in order for Title to issue the title insurance policies referred to
above.
(n)Lease. Deliver to Lender a copy of the lease agreement for the use of the
Loan Property, executed no later than the date of this Agreement, by and between
Borrower, as landlord, and Entity Guarantor, as tenant (the “Lease”).
(o)Program Fee. Deliver to Lender the program fee of $______; the Lender
acknowledges that the Borrower has previously paid the Lender’s program fee.
Lender may waive any of the above requirements in its sole discretion.
6.Disbursement of Loan. Upon receipt by Lender of all of the items required
pursuant to Section 4 above in the form and condition required therein and confirmation from
Title that Title is prepared to issue the mortgagee’s title insurance policy as required herein,
Lender agrees to disburse the Loan proceeds to Borrower.
7.Access to Loan Property. Lender and its respective representatives shall have at
all reasonable times the right to enter and have free access to the Loan Property and the right to
inspect the Loan Property.
8.Books and Records. Borrower agrees to maintain accurate and complete books,
accounts and records in regard to the Loan Property in a manner reasonably acceptable to
Lender. Lender and its representatives shall have the right to inspect, examine and copy all such
books and records of Borrower and Borrower shall, at Lender’s request, furnish such information
as Lender may reasonably demand. Borrower shall also ensure that Entity Guarantor maintains
accurate and complete books, accounts and records in regard to the Equipment in a manner
reasonably acceptable to Lender. Lender and its representatives shall have the right to inspect,
examine and copy all such books and records of Entity Guarantor and Entity Guarantor shall, at
Lender’s request, furnish such information as Lender may reasonably demand.
9.Encumbrances and Transfer. Other than the First Lien Mortgage and the Lease to
the Entity Guarantor, Borrower agrees not to sell, transfer, lease or convey the Loan Property or
any part of it, or any interest therein, or encumber the Loan Property or any part of it, in any
manner, without written consent of Lender which consent may be granted or withheld in the sole
discretion of Lender. This requirement shall apply to each and every sale, transfer, lease or
conveyance, whether voluntary or involuntary and whether or not Lender has consented to any
such prior sale, transfer lease or conveyance. The Entity Guarantor has agreed, pursuant to the
Security Agreement, not to sell, transfer, lease or convey the Equipment or any part of it, or any
interest therein, or encumber the Equipment or any part of it, in any manner, without the written
consent of Lender which consent may be granted or withheld in the sole discretion of Lender.
This requirement shall apply to each and every sale, transfer, lease or conveyance, whether
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464429v2 EL185-33
voluntary or involuntary and whether or not Lender has consented to any such prior sale, transfer
lease or conveyance.
10.Time of Essence. Time is of the essence in the performance of this
Agreement.
11.Assignability. Borrower shall not assign this Agreement without written consent
of Lender, which consent may be withheld, conditioned or delayed in Lender’s sole discretion.
Lender may freely assign or otherwise transfer (including by participation) all or any part of its
interest in the Loan or any or all of the Loan documents, in Lender’s sole discretion.
12.Miscellaneous Covenants of Borrower. Borrower covenants and agrees with
Lender that, without cost to Lender, Borrower will or will cause Entity Guarantor to:
(a)Performance of Conditions. Promptly keep, perform and comply with all
of the terms, covenants and conditions to be kept and performed by Borrower and/or
Entity Guarantor, as required by the City of Elk River (the “City”) and any other
governmental body having jurisdiction over the Loan Property; keep unimpaired the
rights of Borrower and/or Entity Guarantor under any permit or agreement issued or
made by the City or other governmental body having jurisdiction over the Loan Property;
and to enforce the prompt performance of all of the terms, covenants and conditions to be
kept and performed by the City or other governmental body having jurisdiction over the
Loan Property, respectively, under any permits or agreements issued or made by the City
or such other governmental bodies, and any contractors under all contracts obtained or
held by Borrower and/or Entity Guarantor in connection with construction or operation of
the Borrower or Entity Guarantor’s businesses.
(b)Amendment, Etc. of Documents. Not amend, cancel, terminate,
supplement or waive any of the material terms, covenants and conditions of any permit or
agreement issued or made by the City or any other governmental body having jurisdiction
over the Loan Property, or any other contracts obtained or held by Borrower and/or
Entity Guarantor in connection with any contracts, documents or agreements referred to
herein without the prior written approval of Lender.
(c)Performance of Note, Security Agreement, etc. Without limiting the
foregoing, keep and perform all of the terms, covenants, conditions and requirements of
the Note, the Security Agreement, the Mortgage, and this Agreement.
(d)Insurance. During the term of this Agreement, Borrower shall procure and
maintain or cause to be procured and maintained at its sole expense, casualty insurance,
public liability insurance and such other types of insurance as are reasonably required by
Lender from time to time, including, without limitation, the coverages expressly required
of Entity Guarantor by the Mortgage, insuring Lender and Borrower with coverages, in
amounts and with companies satisfactory to Lender. The policy or policies or duly
executed certificate or certificates for such insurance and renewals or replacements
thereof shall be deposited with Lender.
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(e)Pay Charges. Immediately pay all loan charges including, but not limited
to: (i) Lender’s attorneys’ fees; (ii) title insurance fees, costs and premiums; (iii)
mortgage registration taxes and filing fees of the Mortgage and any other instruments
required under this Agreement.
(f)Default Notices. Provide Lender with a copy of any default notice
received pursuant to the First Lien Mortgage documents or any governmental authority
(to the extent that such notice is sent by a party other than Lender), promptly after receipt
of the same.
(g)Continual Operation. At all times while any portion of the Loan remains
outstanding, Borrower will: (i) maintain its status as a for profit entity; (ii) maintain a
positive net worth; and (iii) will operate its business from the Loan Property in a first
class manner.
(h)Title to Equipment. Borrower represents that Entity Guarantor owns or
will own all of the Equipment “free and clear,” that Lender will have a “first priority”
lien in the Equipment pursuant to the Security Agreement and that no other party has any
right, title or interest in the Equipment.
13.Warranties. Borrower represents and warrants to Lender the following:
(a)The Borrower is limited liability company duly formed, validly existing
and in good standing under the laws of the State of Minnesota.
(b)The making and performance of this Agreement and the execution and
delivery of the Note, the Mortgage, the Security Agreement and any other instrument
required hereunder are within the powers of the Borrower and the Entity Guarantor and
have been duly authorized by all necessary company action on the part of the Borrower
and the Entity Guarantor. This Agreement and the Note, Mortgage, Security Agreement
and any other instruments required hereunder have been duly executed and delivered and
are the legal, valid and binding obligations of the Borrower and the Entity Guarantor
enforceable in accordance with their respective terms.
(c)No litigation, tax claims or governmental proceedings are pending or
threatened against the Borrower, the Entity Guarantor or the Loan Property, and no
judgment or order of any court or administrative agency is outstanding against the
Borrower, the Entity Guarantor or the Loan Property which would have a material
adverse effect on Borrower, the Entity Guarantor or the Loan Property.
(d)Borrower and the Entity Guarantor have filed all tax returns (federal and
state) required to be filed for all prior years and paid all taxes shown thereon to be due,
including interest and penalties. Borrower and the Entity Guarantor will file all such
returns and pay all such taxes for the current and future years.
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(e)All information, financial or other, which has been submitted by Borrower
the personal guarantors and the Entity Guarantor in connection with the Loan is true,
accurate and complete in all material respects.
(f)Entity Guarantor is under common ownership.
14.Indemnification. Borrower agrees to indemnify Lender and save it harmless
against all loss, liability, expense, or damages including but not limited to attorneys’ fees, which
may arise by reason of the assertion of any lien against the Loan Property or the Equipment.
Borrower will indemnify and hold Lender harmless from any damages Lender may suffer or
incur from Borrower’s breach of its covenant in Section 12(h).
15.Defaults. Each of the following shall constitute an Event of Default:
(a)If Borrower or Entity Guarantor abandons the Loan Property.
(b)Bankruptcy, reorganization, assignment, insolvency or liquidation
proceedings, or other proceedings for relief under any applicable bankruptcy law or other
law for relief of debtors are instituted by or against Borrower and, if such proceedings are
instituted against Borrower, an order, judgment or decree, without the consent of
Borrower appointing a trustee or receiver for Borrower or any part of its property or
approving a petition under the bankruptcy laws of the United States or any similar laws
of any state or other competent jurisdiction, shall have remained in force undischarged or
unstayed for a period of thirty (30) days.
(c)Any judgment, attachment, garnishment or other similar process is entered
against Borrower or against any property or assets of Borrower and is not released,
satisfied or discharged or bonded to Lender’s satisfaction within thirty (30) days of entry.
(d)Any of the terms, covenants or conditions of any permit or other
agreement issued or made by the City or other governmental body having jurisdiction
over the Loan Property are not complied with within the time required thereby or are
terminated or modified by the City or such other governmental body and Borrower has
not taken or has not caused the Entity Guarantor to take the necessary steps to correct or
cure the same within thirty (30) days after written notice is given by Lender.
(e)Any mechanic’s or material supplier’s lien is filed, against the Loan
Property and is not released, satisfied or discharged or bonded to Lender’s satisfaction,
subject, however, to Borrower’s right to contest the same in accordance with the
provisions of the Security Agreement.
(f)A transfer which violates by Paragraph 9 hereof, Encumbrances and
Transfer, occurs.
(g)Borrower: (i) fails to pay any amount due under this Agreement, the Note,
the Mortgage when due; (ii) fails to perform any other obligation to be performed under
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this Agreement, the Note, the Mortgage, or any other document executed by Borrower
pursuant to this Agreement; or (iii) fails to pay any amount or perform any obligation
under any other note, mortgage or other agreement now or hereafter made by Borrower in
favor of or with Lender or otherwise now or hereafter held by Lender or Bank, and such
failure continues beyond any applicable cure period.
(h)Entity Guarantor fails to timely provide Lender any information necessary
for Lender to perfect its security interest in the Equipment.
(i)Any representation or warranty by Borrower contained herein or in the
Note, the Security Agreement, or any other instrument required hereunder is false or
untrue in any material respect when made.
(j)A default under the Lease, the Entity Guaranty, the Personal Guaranties,
or the Security Agreement beyond any applicable notice and cure period.
Upon the occurrence of an Event of Default, Lender, at its option, shall, in addition to any other
remedies which it might be entitled to by law, have the right to:
(a) To enter into possession of the Loan Property;
(b) To perform such other acts or deeds which reasonably may be necessary to
cure any default existing under this Agreement, and to this end, it is hereby agreed as
follows:
All sums expended by Lender in effectuating its rights under
(i)
paragraphs (ii) and (iii) of this paragraph shall be deemed to have
been advanced under this Agreement and to be secured by the
Security Agreement and any other security document required under
this Agreement as security for the Loan.
Borrower hereby constitutes and appoints Lender its true and lawful
(ii)
attorney-in-fact with full power of substitution either in the name of
Lender or in the name of Borrower or in the name of both, for the
following purposes: (a) to prosecute and defend all actions or
proceedings in connection with the Loan Property or the Equipment
and do any and every act which Borrower might do in its own
behalf; (b) to perform each of the terms, covenants and conditions to
be kept and performed by Borrower under any contracts and/or
leases obtained or held by Borrower in connection with the operation
of the Loan Property and any other contracts; (c) without limiting
the foregoing, to perform each of the terms, covenants and
conditions to be kept or performed by Borrower under this
Agreement, the Security Agreement and any other instrument
required under this Agreement; and (d) to do all things that Lender
reasonably deems necessary or advisable for the purpose of carrying
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out the powers enumerated in (a), (b), (c) and (d) of this
Subparagraph (ii);
(iii)The powers herein granted Lender shall be deemed to be powers
coupled with an interest and the same are irrevocable;
(c)cancel this Agreement;
(d)bring appropriate action to enforce such performance and the correction of
such Event of Default;
(e)declare the entire unpaid principal of the Note and all accrued interest
thereon immediately due and payable without notice;
(f)exercise any remedies under the Entity Guaranty, the Personal Guaranties,
or the Security Agreement, foreclose the Mortgage and any other security instrument
referred to in this Agreement and/or exercise any other rights or remedies it may have
under the Entity Guaranty, the Personal Guaranties, Security Agreement, the Mortgage
and any other security instruments.
16.Default under Note and Security Agreement. The failure by Borrower to keep or
perform any of the terms, covenants and conditions to be kept or performed by it under this
Agreement shall constitute a default under the Note, the Security Agreement and any other
security instrument held by Lender in connection with the Loan.
17.Notices. Any notices given hereunder shall be in writing and shall be deemed to
have been given when delivered personally or three (3) days after deposited in the United States
mail, registered, postage prepaid, addressed as follows:
If to Borrower:
Scott Morrell, LLC
13001 Twilight Road
Onamia, MN 56359
Attention: Chief Executive Manager/President
If to Lender:
Economic Development Authority of the City of Elk River
13065 Orono Parkway
Elk River, Minnesota 55330
Attn: Director of Economic Development
or addressed to any such party at such other address as such party shall hereafter furnish by
notice to the other party. Any notice delivered personally to Borrower shall be delivered to an
officer of Borrower, and any notice delivered personally to Lender shall be delivered to an
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464429v2 EL185-33
officer of Lender at the address for Lender for the mailing of notices. Either party may change its
address for the giving of notices by giving the other party at least ten (10) days’ notice in the
manner provided above.
18.Headings. The headings used in this Agreement are for convenience only and do
not define, limit or construe the contents of this Agreement.
19.Bindings on Successors and Assigns. Subject to the limitations on transfer
contained in this Agreement, this Agreement shall be binding upon and inure to the benefit of the
successors and assigns of the parties hereto.
20.Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of Minnesota, without giving effect to any choice or conflict of law
provision or rule.
21.Counterparts. This Agreement may be executed in two (2) or more counterparts,
each of which shall be an original and all of which shall constitute the same agreement.
22.Entire Agreement. This Agreement, the Note, the Security Agreement and the
other documents executed by Borrower and/or Lender pursuant to this Agreement contain the
entire agreement between the parties with respect to the subject matter hereof and supersede all
prior understandings and agreements, both oral and written. This Agreement may be amended
only in a writing signed by the parties hereto.
23.Fees and Expenses. Borrower agrees to pay to Lender immediately upon demand
all costs and expenses, including, without limitation, all attorneys’ fees, incurred by Lender in
connection with the enforcement of the Lender’s rights and/or the collection of any amounts
which become due to Lender under this Agreement, the Note, the Security Agreement or the
other documents executed in connection herewith; and the prosecution or defense of any action
in any way related to this Agreement, the Note, the Security Agreement or the other documents
executed in connection herewith.
24.Business Subsidies Act.
(a)In order to satisfy the provisions of Minnesota Statutes, Sections 116J.993
to 116J.995 (the “Business Subsidies Act”), the Borrower acknowledges and agrees that
the amount of the “Business Subsidy” granted to the Borrower under this Agreement is
the amount of the loan, which is $200,000, and that the Business Subsidy is needed
because the project is not sufficiently feasible for the Borrower to undertake without the
Business Subsidy. The public purpose of the Business Subsidy is to develop
manufacturing facilities, increase the tax base in the City and stimulate the creation and
retention of jobs. In consideration of the Business Subsidy provided for the Borrower’s
acquisition of the Loan Property, the Borrower represents that pursuant to the terms of
the Lease, it will cause the Entity Guarantor to meet the following goals (the “Goals”):
the Entity Guarantor shall retain its existing 105 jobs in Minnesota and create at least 8
additional full-time equivalent jobs at the Loan Property at an hourly wage equal to the
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464429v2 EL185-33
greater of $15.00 per hour or 150% of the state or federal minimum wage, whichever is
greater, by the two (2) year anniversary of the date the Borrower or the Entity Guarantor
receives a certificate of occupancy for the Project.
(b)If none of the Goals are met, the Borrower agree to repay all of the
Business Subsidy to the City, plus interest (“Interest”) set at the greater of 4% per annum
or the implicit price deflator defined in Minnesota Statutes Section 275.70, subdivision 3,
accruing from and after the date of closing on the Loan, compounded semiannually. If
the Goals are met in part, the Borrower agrees to 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 8 (i.e. number of jobs set
forth in the Goals).
(c)The Borrower agrees to: (i) report its progress on achieving the Goals to
the City until the later of the date the Goals are met or two years from the Benefit Date,
or, if the Goals are not met, until the date the Business Subsidy is repaid, (ii) include in
the report the information required in Section 116J.994, subdivision 7 of the Business
Subsidies Act on forms developed by the Minnesota Department of Employment and
Economic Development, and (iii) send completed reports to the City. The Borrower
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 the Entity Guarantor and the Borrower 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, the Borrower 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)The Borrower agrees that, pursuant to the terms of the Lease, it will cause
the Entity Guarantor to continue operations in the City for at least five years after the date
of closing on the Loan.
(e)Other than certain property tax abatements provided by the City of Elk
River, Minnesota and Sherburne County, Minnesota, and the loan provided pursuant to
this Agreement, there are no other state or local government agencies providing financial
assistance for the project.
(f)There is no parent corporation of the Entity Guarantor or the Borrower.
\[Signature Pages follow\]
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464429v2 EL185-33
Signature Page to Loan Agreement
IN TESTIMONY WHEREOF, each of the parties hereto has caused these presents to be
effective as of the day and year first above written.
SCOTT MORRELL, LLC
By:
Name: Terry Morrell
Its: President
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464429v2 EL185-33
Signature Page to Loan Agreement
IN TESTIMONY WHEREOF, each of the parties hereto has caused these presents to be
effective as of the day and year first above written.
ECONOMIC DEVELOPMENT AUTHORITY
OF THE CITY OF ELK RIVER
By:
Name:
Its:
By:
Name:
Its:
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464429v2 EL185-33
EXHIBIT A
Equipment List
\[to be added
464429v2 EL185-33
SECURITY AGREEMENT
(Microloan)
This SECURITY AGREEMENT (“Agreement”) is made to be effective as of August
___, 2015, by MORRELL OVERSIZE, INC., a Minnesota limited liability company (“Morrell
Oversize”) and the ECONOMIC DEVELOPMENT AUTHORITY OF THE CITY OF ELK
RIVER (the “Secured Party”).
AGREEMENT
In consideration of the above recitals, and the promises set forth in this Agreement, the
parties agree as follows:
1. OBLIGATIONS. “Obligations” means collectively each debt, liability and obligation of
every type and nature which Scott Morrell, LLC, a Minnesota limited liability company
(“Borrower”) may now or at any time hereafter owe to Secured Party (including without
limitation the obligations created under the loan agreement (the “Loan Agreement”) and
the promissory note of Borrower to Secured Party of even date herewith and all
amendments, replacements, restatements, and substitutions therefore), together with
Morrell Oversize’s obligations to Secured Party pursuant to the Entity Guaranty of even
date herewith, whether now existing or hereafter created or arising, and whether direct or
indirect, due or to become due, absolute or contingent, and the repayment or performance
of any of the foregoing if any such payment or performance is at any time avoided,
rescinded, set aside, or recovered from or repaid by Secured Party, in whole or in part, in
any bankruptcy, insolvency, or similar proceeding instituted by or against Borrower,
Morrell Oversize or any guarantor of any Obligation, or otherwise, including but not
limited to all principal, interest, fees, expenses and other charges.
2. COLLATERAL. “Collateral” means collectively all of the following property of Morrell
Oversize, whether now owned or hereafter acquired and wherever located: (a) equipment
specified on the attached Exhibit A; (b) accessions, additions and improvements to,
replacements of, and substitutions for any of the foregoing; (c) all products and proceeds
of any of the foregoing; and (d) books, records and data in any form relating to any of the
foregoing.
3. SECURITY INTEREST. Morrell Oversize grants to Secured Party a security interest
(“Security Interest”) in the Collateral to secure the payment and performance of the
Obligations. The Security Interest continues in effect until this Agreement is terminated
in writing by Secured Party.
4. REPRESENTATIONS, WARRANTIES AND COVENANTS. Morrell Oversize
represents, warrants and agrees that:
4.1.Principal Office/Residence. Morrell Oversize’s chief executive office/residence
is located at the address specified on the signature pages to this Agreement.
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464432v1 EL185-33
Morrell Oversize must give Secured Party written notice prior to any change in
the location of Morrell Oversize’s principal office/residence.
4.2.Organization; Authority. Morrell Oversize is a limited liability company, duly
organized, existing and in good standing under the laws of the state of its
organization and has full power and authority to enter into this Agreement.
Morrell Oversize’s state of organization/residence is Minnesota and its exact legal
name is as set forth on the signature page to this Agreement. Morrell Oversize
will not change its state of organization, form of organization or name without
Secured Party’s prior written consent.
4.3.Perfection of Security Interest. Morrell Oversize will execute and deliver, and
irrevocably appoints Secured Party (which appointment is coupled with an
interest) Morrell Oversize’s attorney-in-fact to execute and deliver in Morrell
Oversize’s name, all financing statements (including, but not limited to,
amendments, terminations and terminations of other security interests in any of
the Collateral), control agreements and other agreements which Secured Party
may at any time reasonably request in order to secure, protect, perfect, collect or
enforce the Security Interest, Morrell Oversize shall, at any time and from time to
time, take such steps as Secured Party may reasonably request for Secured Party:
(i) to obtain an acknowledgement, in form and substance reasonably satisfactory
to Secured Party, of any bailee having possession of any of the Collateral that
such bailee holds such Collateral for Secured Party; (ii) to obtain “control” of any
investment property, deposit accounts, letter-of-credit rights or electronic chattel
paper (as such terms are defined in the UCC, as hereinafter defined), with any
agreements establishing control to be in form and substance reasonably
satisfactory to Secured Party; and (iii) otherwise to ensure the continued
perfection and priority of the Security Interest in any of the Collateral and the
preservation of the rights of Secured Party therein.
4.4.Enforceability of Collateral. To the extent the Collateral consists of accounts,
instruments, documents, chattel paper, letter-of-credit rights, letters of credit or
general intangibles, the Collateral is enforceable in accordance with its terms, is
genuine, complies with applicable laws concerning form, content and manner of
preparation and execution, and all persons appearing to be obligated on the
Collateral have authority and capacity to contract and are in fact obligated as they
appear to be on the Collateral.
4.5.Title to Collateral. Morrell Oversize holds good and marketable title to the
Collateral free of all security interests and encumbrances. Morrell Oversize will
keep the Collateral free of all security interests and encumbrances except for the
Security Interest. Morrell Oversize will defend Secured Party’s rights in the
Collateral against the claims and demands of all other persons.
4.6.Collateral Location. Morrell Oversize will keep all tangible Collateral at
_________________, Elk River, Minnesota 55330.
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464432v1 EL185-33
4.7.Collateral Use. Morrell Oversize must use the Collateral only for business
purposes. Morrell Oversize must not use or keep any Collateral for any unlawful
purpose or in violation of any federal, state or local law, statute or ordinance.
4.8.Maintenance of Collateral. Morrell Oversize must maintain all tangible Collateral
in good condition and repair. Morrell Oversize must not commit or permit
damage to or destruction of any of the Collateral. Morrell Oversize must give
Secured Party prompt written notice of any material loss of or damage to any
tangible Collateral and of any other happening or event that materially affects the
existence, value or amount of the Collateral.
4.9.Disposition of Collateral. Morrell Oversize must not sell or otherwise dispose of
any Collateral or any interest in any Collateral without the prior written consent of
Secured Party, except that until the occurrence of an Event of Default (as defined
in Section 5 below), Morrell Oversize may sell any inventory constituting
Collateral in the ordinary course of Morrell Oversize’s business.
4.10.Taxes, Assessments and Liens. Morrell Oversize must promptly pay all taxes and
other governmental charges levied or assessed upon or against any Collateral.
4.11.Records; Access. Morrell Oversize must keep accurate and complete records
pertaining to the Collateral and to Morrell Oversize’s business and financial
condition and will submit to Secured Party all reports regarding the Collateral and
Morrell Oversize’s business and financial condition as and when Secured Party
may reasonably request. During normal business hours, Morrell Oversize must
permit Secured Party and its representatives to examine or inspect any Collateral,
wherever located, and to examine, inspect and copy Morrell Oversize’s books and
records relating to the Collateral and Morrell Oversize’s business and financial
condition.
4.12.Insurance. Morrell Oversize must keep all tangible Collateral insured against
risks of fire (including so-called extended coverage), theft and other risks and in
such amounts as Secured Party may reasonably request, with any loss payable to
Secured Party to the extent of its interest. Morrell Oversize assigns to Secured
Party all money due or to become due with respect to, and all other rights of
Morrell Oversize with respect to, all insurance concerning the Collateral and
Morrell Oversize directs the issuer of any such insurance to pay all such money
directly to Secured Party.
4.13.Collection Costs. Morrell Oversize must reimburse Secured Party on demand for
all costs of collection of any of the Obligations and all other expenses incurred by
Secured Party in connection with the perfection, protection, defense or
enforcement of the Security Interest and this Agreement, including all reasonable
attorneys’ fees incurred by Secured Party whether or not any litigation or
bankruptcy or insolvency proceeding is commenced.
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464432v1 EL185-33
4.14.Financing Statements. Morrell Oversize authorizes Secured Party to file one or
more financing or continuation statements, and amendments thereto, relative to all
or any part of the Collateral without Morrell Oversize’s signature where permitted
by law, in each case in such form and substance as Secured Party may determine.
Morrell Oversize shall pay all filing, registration and recording fees and any taxes,
duties, imports, assessments and charges arising out of or in connection with the
execution and delivery of this Agreement, any agreement supplemental hereto,
any financing statements, and any instruments of further assurance.
5. EVENTS OF DEFAULT. Each of the following is an “Event of Default” under this
Agreement: (a) Borrower or Morrell Oversize fails to pay any of the Obligations when
due and any applicable grace period lapses without cure by Borrower or Morrell
Oversize; (b) Borrower or Morrell Oversize fails to timely perform any other Obligation
and any applicable grace period lapses without cure by Borrower or Morrell Oversize; (c)
any representation made by Morrell Oversize in this Agreement or in any financial
statement or report submitted by Borrower or Morrell Oversize to Secured Party proves
to have been materially false or misleading when made; (d) Morrell Oversize or
Borrower ceases to conduct its business; (e) Morrell Oversize or Borrower is or becomes
insolvent, however defined; (f) Morrell Oversize or Borrower voluntarily files, or has
filed against it involuntarily, a petition under the United States Bankruptcy Code; or (g) if
Morrell Oversize or Borrower is dissolved or liquidated.
6. REMEDIES UPON EVENT OF DEFAULT. Upon the occurrence of an Event of
Default and at any time thereafter, Secured Party may exercise one or more of the
following rights and remedies: (a) declare any or all unmatured Obligations to be
immediately due and payable without presentment or any other notice or demand and
immediately enforce payment of any or all of the Obligations; (b) require Morrell
Oversize to make the Collateral available to Secured Party at a place to be designated by
Secured Party; (c) exercise and enforce any rights or remedies available upon default to a
secured party under the Uniform Commercial Code as amended from time to time
(“UCC”), and, if notice to Morrell Oversize of the intended disposition of Collateral or
any other intended action is required by law, such notice shall be commercially
reasonable if given at least ten (10) calendar days prior to the intended disposition or
other action; and (d) exercise and enforce any other rights or remedies available to
Secured Party by law or agreement against the Collateral, Morrell Oversize, Borrower, or
any other person or property. Secured Party’s duty of care with respect to Collateral in its
possession will be fulfilled if Secured Party exercises reasonable care in physically
safekeeping the Collateral or, in the case of Collateral in the possession of a bailee or
other third person, exercises reasonable care in the selection of the bailee or other third
person. Mere delay or failure to act will not preclude the exercise or enforcement of any
of Secured Party’s rights or remedies. All rights and remedies of Secured Party are
cumulative and may be exercised singularly or concurrently, at Secured Party’s option.
7. MISCELLANEOUS. The following miscellaneous provisions are a part of this
Agreement:
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464432v1 EL185-33
7.1.Definitions. Terms not otherwise defined in this Agreement shall have the
meanings ascribed to them, if any, under the UCC and such meanings shall
automatically change at the time that any amendment to the UCC, which changes
such meanings, shall become effective.
7.2.Notices. All notices under this Agreement must be in writing and will be deemed
given when delivered or placed in the United States mail, registered or certified,
postage prepaid, addressed to the respective party at the respective address set
forth below its signature on the signature page to this Agreement. Any party may
change its address for notices under this Agreement by giving written notice to
the other parties.
7.3.Amendments/Waivers. This Agreement may be waived, amended, modified or
terminated and the Security Interest may be released only in a writing signed by
Secured Party. Any waiver signed by Secured Party will be effective only in the
specific instance and for the specific purpose given.
7.4.Applicable Law. This Agreement is governed by the laws of the State of
Minnesota without regard to the conflict of law principles. If any provision of
this Agreement is held unlawful or unenforceable in any respect, such illegality or
unenforceability will not affect other provisions or applications that can be given
effect and this Agreement will be construed and enforced as if the unlawful or
unenforceable provision or application had never been contained in or prescribed
by this Agreement.
7.5.Caption Headings. Caption headings in this Agreement are for convenience
purposes only and are not to be used to interpret or define the provisions of this
Agreement.
7.6.Integration. This Agreement embodies the entire agreement and understanding
among the parties relative to subject matter hereof and supersedes all prior
agreements and understandings relating to such subject matter.
7.7.Successors and Assigns. This Agreement is binding upon and will inure to the
benefit of the parties and their successors and assigns.
7.8.Counterparts. This Agreement may be executed in several counterparts, each of
which will be an original, and all of which will constitute one and the same
instrument.
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464432v1 EL185-33
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first
written above.
MORRELL OVERSIZE:
MORRELL OVERSIZE, LLC,
a Minnesota limited liability company
By:
____________________
Address:
10752 171st Avenue
Elk River, MN 55330
Attention: Terry and Renee Morrell
S-1
464432v1 EL185-33
SECURED PARTY:
ECONOMIC DEVELOPMENT
AUTHORITY OF THE CITY OF ELK
RIVER
By:
Its:
By:
Its:
Address:
13065 Orono Parkway
Elk River, MN 55330
S-2
464432v1 EL185-33
EXHIBIT A
List of Equipment
All of the following property of Morrell Oversize, whether now owned or hereafter acquired and
wherever located: (a) equipment specified below; (b) accessions, additions and improvements to,
replacements of, and substitutions for any of the foregoing; (c) all products and proceeds of any
of the foregoing; and (d) books, records and data in any form relating to any of the foregoing.
Description
ItemPurchase Price
Status
A-1
464432v1 EL185-33
MORTGAGE
AND
ASSIGNMENT OF RENTS
AND
SECURITY AGREEMENT
AND
FIXTURE FINANCING STATEMENT
(Microloan)
This Mortgage and Assignment of Rents and Security Agreement and Fixture Financing
Statement (“Mortgage”) is made as of ______________________, 2015, by SCOTT
MORRELL, LLC, a Minnesota limited liability company (“Mortgagor”), in favor of the
ECONOMIC DEVELOPMENT AUTHORITY OF THE CITY OF ELK RIVER, a public body
corporate and politic of the State of Minnesota (“Mortgagee”).
THE MAXIMUM AMOUNT SECURED BY THIS MORTGAGE IS $200,000.00 OF
PRINCIPAL INDEBTEDNESS, TOGETHER WITH ALL INTEREST ACCRUING
THEREON AND ANY AMOUNTS WHICH MAY BE ADVANCED BY MORTGAGEE IN
PROTECTION OF THE MORTGAGED PREMISES OR THE LIEN OF THIS MORTGAGE.
RECITALS
A. Mortgagor has executed and delivered to Mortgagee a Promissory Note effective
as of the date hereof in the principal amount of $200,000.00 and bearing interest at the rate set
forth therein, with principal being due and payable as set forth therein and with all principal and
interest, if not sooner paid, being due and payable on August 1, 2020 (the Promissory Note as the
same may be renewed, extended, replaced, modified or amended is herein called the “Note”).
The proceeds of the Note are being utilized to pay the cost of improvements to the Mortgaged
Property (as defined below) and to purchase equipment to be utilized at the Mortgage Property.
B. Contemporaneous herewith, Mortgagor has entered into that certain loan
agreement (the “Loan Agreement”) setting forth the terms and conditions of Mortgagor and
Lender’s obligations with relation to this loan facility.
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464431v2 EL185-33
C. Mortgagor is the landlord under that certain unrecorded lease dated _______,
2015, with Morrell Oversize, Inc. (the “Entity Guarantor”), as tenant, leasing a portion of the
Mortgaged Property to the Entity Guarantor.
D. As a condition of providing the loan pursuant to the Loan Agreement, Lender
required that Mortgagor’s obligations under the Loan Agreement be secured by this Mortgage.
NOW THEREFORE, in consideration of the Recitals and for the purpose of securing the
payment and performance of all of Mortgagor’s obligations under the Loan Agreement
(collectively “Obligations”); and to secure the performance of all covenants, conditions and
agreements herein and in the Loan Agreement, Mortgagor does hereby mortgage, grant, bargain,
sell, release and convey unto Mortgagee, with power of sale, forever all of Mortgagor’s right,
title and interest in all the tracts or parcels of land lying and being in Sherburne County,
Minnesota, legally described in Exhibit A hereto, (hereinafter the “Land”), whether now owned
or hereafter acquired, together with: (i) all building materials, supplies and equipment now or
hereafter located on the Land and suitable or intended to be incorporated in any building,
structure, or other improvement located or to be erected on the Land; and (ii) all of the buildings,
structures and other improvements now standing or at any time hereafter constructed or placed
upon the Land; and (iii) all heating, plumbing and lighting apparatus, motors, engines, and
machinery, electrical equipment, incinerator apparatus, air conditioning equipment, water and
gas apparatus, pipes, faucets, and all other fixtures of every description which are now or may
hereafter be placed or used upon the Land or in any building or improvement now or hereafter
located thereon; and (iv) all additions, accessions, increases, parts, fittings, accessories,
replacements, substitutions, betterments, repairs and proceeds to any and all of the foregoing;
and (v) all hereditaments, easements, appurtenances, estates, rents, issues, profits, condemnation
awards, proceeds of policies of insurance and other rights and interests now or hereafter
belonging or in any way pertaining to the Land or to any building or improvement now or
hereafter located thereon; and (vi) all leases or other occupancy agreements now or hereafter in
effect in any way appertaining to the Land or to any building or improvement now or hereafter
located thereon, including, without limitation, all cash and security deposits, advance rentals and
deposits or payments of a similar nature (“Leases”), and all Rents (as herein defined) (all of the
foregoing, together with the Land, hereinafter being referred to as the “Property” or “Mortgaged
Property”),
TO HAVE AND TO HOLD the Mortgaged Property unto Mortgagee forever;
PROVIDED, NEVERTHELESS, that this Mortgage is given upon the express condition
that if Mortgagor shall cause to be paid and performed all of the Obligations, and shall also keep
and perform all and singular the covenants herein contained on the part of Mortgagor to be kept
and performed, then the Mortgage and the estate hereby granted shall cease and be and become
void and shall be released of record at the expense of Mortgagor; otherwise this Mortgage shall
be and remain in full force and effect.
MORTGAGOR REPRESENTS, WARRANTS AND COVENANTS to and with
Mortgagee that Mortgagor has good right and full power and authority to execute this Mortgage
and to mortgage the Mortgaged Property; that the Mortgaged Property is free from all liens and
encumbrances except a mortgage in favor of The Bank of Elk River in the amount of
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464431v2 EL185-33
$__________ (the “First Lien Mortgage”) and those other certain permitted encumbrances
identified in Exhibit B hereto (the “Permitted Encumbrances”); that Mortgagee shall quietly
enjoy and possess the Mortgaged Property; that Mortgagor will warrant and defend the title to
the Mortgaged Property against all claims, whether now existing or hereafter arising. The
covenants and warranties of this paragraph shall survive foreclosure of this Mortgage and shall
run with the Land.
AND IT IS FURTHER COVENANTED AND AGREED AS FOLLOWS:
ARTICLE ONE
GENERAL COVENANTS, AGREEMENTS, WARRANTIES
1.1.Payment of Obligations; Observance of Covenants. Mortgagor will duly pay and
perform its Obligations and will perform all other agreements and covenants by Mortgagor to be
performed hereunder.
1.2.Payment of Impositions. Mortgagor agrees to pay, before a penalty might attach
for nonpayment thereof, all taxes, assessments, water and sewer charges, and other fees, taxes
and charges of whatsoever nature levied upon or assessed or placed against the Mortgaged
Property (collectively “Impositions”). Mortgagor will likewise pay all taxes, assessments and
other charges, levied upon or assessed, placed or made against, or measured by, this Mortgage,
or the recordation hereof, or the Obligations, provided that Mortgagor shall not be obliged to pay
such tax, assessment or charge if such payment would be contrary to law or would result in the
payment of an usurious rate of interest on the Obligations. Mortgagor shall promptly furnish to
Mortgagee all notices received by Mortgagor of amounts due under this Section and upon
Mortgagee’s request, shall deliver proper receipts evidencing the payment of such amounts. In
the event of a judicial decree or legislative enactment after the date of this Mortgage, providing
that any such imposition may not be lawfully paid by Mortgagor, or in the event that the payment
of any such imposition by Mortgagor would result in the payment of a usurious rate of interest
on the Obligations, the Obligations, together with interest, shall become immediately due and
payable, or, at Mortgagee’s option, Mortgagee may pay any amount or portion of such
Imposition as renders the Obligations unlawful or usurious, in which event Mortgagor shall
concurrently therewith pay the remaining lawful and non-usurious portion or balance of said
Imposition.
1.3.Payment of Operating Costs; Prior Mortgages and Liens. Mortgagor agrees that it
will pay, or cause to be paid, all operating costs and expenses of the Mortgaged Property; keep
the Mortgaged Property free from mechanics’ and material suppliers’ and other liens, subject to
Mortgagor’s right to contest in good faith as set forth in Section 1.4 hereof; will keep the
Mortgaged Property free from levy, execution or attachment and will immediately pay when due
all indebtedness which may be secured by mortgage, lien or charge on the Mortgaged Property
and upon request will exhibit to Mortgagee satisfactory evidence of such payment and discharge.
1.4.Contest of Impositions, Liens and Levies. Mortgagor shall not be required to pay,
discharge or remove any Imposition, lien or levy so long as Mortgagor shall in good faith contest
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464431v2 EL185-33
the same or the validity thereof by appropriate legal proceedings which shall operate to prevent
the collection of the levy, lien or Imposition so contested and the sale of the Mortgaged Property,
or any part thereof to satisfy the same; provided, however, that Mortgagor, prior to the date such
levy, lien or Imposition is due and payable or, in the case of a mechanic’s lien or other
involuntary lien within (30) days after the same shall have been filed, shall have given such
reasonable security as may be demanded by Mortgagee to ensure such payments and any
penalties and interest that may accrue thereon and prevent any sale or forfeiture of the
Mortgaged Property by reason of such nonpayment. Any such contest shall be prosecuted with
due diligence and Mortgagor shall promptly after final determination thereof pay the amount of
any such levy, lien or Imposition so determined, together with all interest and penalties, which
may be payable in connection therewith. Notwithstanding the provisions of this Section,
Mortgagor shall, and Mortgagee may (but shall have no obligation to), pay any such levy, lien or
Imposition notwithstanding such contest if in the reasonable opinion of Mortgagee, the
Mortgaged Property is in jeopardy or in danger of being forfeited or foreclosed.
1.5.Maintenance and Repairs; Inventory. Mortgagor agrees that it will keep and
maintain (or cause to be kept and maintained) the Mortgaged Property in good condition and
repair, free from any waste or misuse, and will comply with all requirements of law, municipal
ordinances and regulations, restrictions and covenants affecting the Mortgaged Property and its
use, and will promptly repair or restore any buildings, improvements or structures now or
hereafter on the Mortgaged Property which may become damaged or destroyed. Mortgagor
further agrees that without the prior consent of Mortgagee it will not remove from the Mortgaged
Property any fixtures or any personal property that is included in the Mortgaged Property unless
the same is immediately replaced with like fixtures or personal property of at least equal value,
or is otherwise removable under Section 6.1 hereof; or expand any improvements on the
Mortgaged Property, erect any new improvements or make any material alterations in any
improvements which will materially alter the basic structure, materially and adversely affect the
market value or materially change the existing architectural character of the Mortgaged Property.
Mortgagor agrees that it will complete within a reasonable time any buildings now or at any time
in the process of erection on the Mortgaged Property. Mortgagor agrees not to acquiesce in any
rezoning classification, modification or restriction affecting the Mortgaged Property without
Mortgagee’s prior written consent. Mortgagor agrees that it will not abandon the Mortgaged
Property. Upon request of Mortgagee, Mortgagor shall deliver to Mortgagee an inventory in
detail reasonably acceptable to Mortgagee of any personal property owned by Mortgagor that is
included in the Mortgaged Property pursuant to the terms hereof together with a certification by
Mortgagor that said inventory is a true and complete schedule of the personal property to be
included in the Mortgaged Property pursuant to the terms hereof. Such inventory shall list any
conditional sales contracts and other title retention arrangements to which such personal property
may be subject.
1.6.Insurance.
(a) So long as the Obligations remain unpaid, Mortgagor shall, at its own cost,
maintain or cause to be maintained with insurers of recognized responsibility acceptable
to Mortgagee the following insurance:
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464431v2 EL185-33
hazard and fire insurance on the improvements now existing or
(i)
hereafter constructed on the Land insuring against loss by fire, hazards included
in the term “extended coverage,” loss by vandalism or malicious mischief, and
such other hazards, casualties and contingencies as may be required by
Mortgagee, on the basis of replacement cost without a coinsurance clause, in an
amount equal to the full replacement cost thereof (without deduction for
depreciation) or such additional amounts and for such periods as may be required
by Mortgagee;
comprehensive general public liability insurance covering the
(ii)
liability of Mortgagor against claims for bodily injury, death or property damage
occurring on or about the Mortgaged Property in such minimum amounts and
limits as Mortgagee may require but in no event, less than $2,000,000.00
combined single limit per occurrence and naming Mortgagee as an additional
insured;
insurance covering the Mortgaged Property against loss or damage
(iii)
by explosion, rupture or bursting of steam boilers, steam pipes, steam turbines,
steam engines or pressure vessels or fly wheels located on or a part of the
Mortgaged Property and providing for full repair and full replacement cost
coverage; and
such other forms of insurance in such minimum amounts as
(iv)
Mortgagee may reasonably require or as may be required by law.
Mortgagor shall pay or cause to be paid all premiums on insurance required
hereunder by making payment directly to the insurer. Mortgagee shall have the
right to hold the policies and renewals thereof, and Mortgagor shall promptly
furnish to Mortgagee all such policies, renewals thereof, renewal notices and all
paid-premium receipts received by it. All policies of insurance and any and all
refunds of unearned premiums are hereby assigned to Mortgagee as additional
security for the payment of the Obligations secured hereby. In the event of
foreclosure of this Mortgage, all right, title and interest of Mortgagor in and to
any insurance policies then in force shall pass to the purchaser at the foreclosure
sale.
The policies of all such insurance shall have mortgagee and loss payable
(b)
provisions in favor of Mortgagee. All such insurance shall be in form acceptable to
Mortgagee, shall provide for at least thirty (30) days’ prior written notice of cancellation,
termination or modification thereof to Mortgagee, shall permit Mortgagee to make
premium payments to prevent cancellation, and shall provide that no act or negligence of
Mortgagor or of any occupant of the Mortgaged Property, and no occupancy or use of the
Mortgaged Property for purposes more hazardous than permitted by the terms of the
policy, will affect the validity or enforceability of such insurance as against Mortgagee.
In the event of loss under such insurance Mortgagor shall give prompt notice to the
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464431v2 EL185-33
insurance carrier and Mortgagee; Mortgagor shall duly make proof of loss, and shall
immediately furnish to Mortgagee a copy of such proof of loss.
Subject to the rights of the mortgagee under the First Lien Mortgage
(c)
which has priority over this Mortgage, Mortgagee is authorized and empowered to settle,
collect and receive all fire and hazard insurance proceeds, to apply such proceeds to all
expenses (including reasonable attorneys’ fees) reasonably incurred by Mortgagee in
collecting the same and, at Mortgagee’s option and in its sole discretion, apply the
balance of said proceeds (“Net Proceeds”) to payment of the Obligations or make the Net
Proceeds available for the repair and restoration of the Mortgaged Property; provided,
however, Mortgagor may settle claims without Mortgagee’s consent if the loss is less
than $5,000.00 and no Event of Default exists at the time of settlement. Mortgagor shall
apply any such proceeds to the repair and restoration of the Mortgaged Property. So long
as no Event of Default exists, any settlement of a fire and hazard insurance claim of more
than $5,000.00 shall require the consent of Mortgagor, which consent will not be
unreasonably withheld.
If Mortgagee elects to apply the Net Proceeds to repair and restoration of
(d)
the Mortgaged Property (i) the Net Proceeds shall be held by Mortgagee and at
Mortgagee’s election may be disbursed either by Mortgagee or a disbursing agent
selected by Mortgagee and paid by Mortgagor, (ii) upon Mortgagee’s request prior to
disbursement of any Net Proceeds or thereafter, from time to time, Mortgagor will
deposit with Mortgagee such amounts in excess of remaining Net Proceeds as Mortgagee
reasonably determines is required to complete the repair and restoration, (iii) the Net
Proceeds and any funds deposited by Mortgagor shall be held and disbursed in
accordance with sound construction loan disbursement practices, including, but not
limited to, approval of the plans and specifications, appraisal, its other conditions for
disbursement of draw requests and inspection of the work, and such other reasonable
conditions as Mortgagee may impose and (iv) any Net Proceeds not so applied to repair
and restoration shall be applied to the payment of the Obligations. If an Event of Default
occurs prior to full disbursement, any undisbursed portion of the Net Proceeds and any
funds deposited by Mortgagor with Mortgagee may at Mortgagee’s option be applied to
the Obligations.
1.7.Inspection. Mortgagee, or its agents, shall have the right to enter upon the
Mortgaged Property during ordinary business hours for the purposes of inspecting the Mortgaged
Property or any part thereof. Mortgagee shall have no duty, however, to make such inspection.
Mortgagee, or its agents, shall also have the right during ordinary business hours to examine the
books and records of Mortgagor pertaining to the Mortgaged Property and to make extracts
therefrom and copies thereof. The parties agree that Mortgagee’s right to inspect the books and
records of Mortgagor, as described in this provision, relates solely to the Mortgaged Property.
1.8.Protection of Mortgagee’s Security. If Mortgagor fails to perform any of the
covenants and agreements contained in this Mortgage and such failure shall continue beyond any
applicable notice and cure period contained in Article Two hereof or if any action or proceeding
is commenced which does or may adversely affect the Mortgaged Property or the interest of
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464431v2 EL185-33
Mortgagor or Mortgagee therein, or the title of Mortgagor thereto, then Mortgagee, at
Mortgagee’s option, may perform such covenants and agreements, defend against such action or
proceeding, or otherwise act as Mortgagee deems necessary to protect its interest. In the event
that, after damage to or destruction of the Mortgaged Property or condemnation of a portion of
the Mortgaged Property or a sale under threat thereof, the proceeds are used to restore the
Mortgaged Property, and the insurance, sale or condemnation proceeds which are paid to
Mortgagee are not sufficient to pay for such restoration, Mortgagee may nevertheless effect the
restoration. Any amounts disbursed or costs incurred by Mortgagee pursuant to this Section,
including interest and reasonable attorney’s fees, shall become additional Obligations of
Mortgagor secured by this Mortgage. All amounts disbursed or costs incurred by Mortgagee
pursuant to this paragraph shall be payable upon demand, and shall bear interest from the date of
disbursement or incurrence at the rate set forth in the Note unless payment of interest at such rate
would be contrary to law, in which event such amounts shall bear interest at the highest rate
permitted by law. Mortgagee shall, at its option, be subrogated to any encumbrance, lien, claim
or demand, and to all the rights and securities for the payment thereof, paid or discharged with
the principal sum secured hereby or by Mortgagee under the provisions hereof, and any such
subrogation rights shall be additional and cumulative security for this Mortgage. Nothing
contained in this Section shall require Mortgagee to incur any expense or do any act hereunder,
and Mortgagee shall not be liable to Mortgagor for any damages or claims arising out of action
taken by Mortgagee pursuant to this paragraph.
1.9.Hazardous Materials. Mortgagor hereby represents and warrants to Mortgagee
that the Mortgaged Property has not at any time been used for storage, transfer, transportation or
disposal of hazardous substances, hazardous wastes, pollutants, contaminants or similar
substances (collectively “Hazardous Substances”), or for the discharge of the same into the
environment in violation of any law, regulation, or judicial or administrative order or judgment;
and the Mortgaged Property is not contaminated by, and does not contain, any Hazardous
Substances. Mortgagor will not use or permit the use of the Mortgaged Property for such
purposes. Mortgagor will fully indemnify Mortgagee and defend Mortgagee against any claims,
losses, damages, actions, costs and expenses of any kind, including without limitation, court
costs and reasonable attorneys’ fees, in connection with any Hazardous Substances now or
hereafter located on the Mortgaged Property or any other violation of any federal, state or local
environmental statute, ordinance, rule or regulation (“Environmental Laws”). This indemnity
shall not apply to the extent that the willful act or omission of the Mortgagee contributes to the
actual or threatened discharge, dispersal, release, storage, treatment, generation, disposal or
escape of the Hazardous Substances. The indemnity provisions of this Section shall survive the
foreclosure or other termination of this Mortgage.
Without limiting the generality of the foregoing, Mortgagor agrees that upon the discovery
of a release or threatened release of Hazardous Substances on or from the Mortgaged Property, it
will promptly, diligently and without cost to Mortgagee, proceed to remediate all contamination
in accordance with all applicable laws, ordinances, rules and regulations, and the requirements of
all governmental authorities having jurisdiction, and otherwise to the satisfaction of Mortgagee.
A failure to do so shall constitute a default by Mortgagor under this Mortgage.
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464431v2 EL185-33
1.10.Escrows. Upon the request of Mortgagee after the occurrence of an Event of
Default (whether or not such Event of Default is subsequently cured), Mortgagor shall deposit
with Mortgagee, on the first day of each and every month, commencing with the date the first
payment shall be due on the Note which is after the date of such request, a deposit to pay the
Impositions and insurance premiums (collectively “Charges”) in an amount equal to:
One-twelfth (1/12) of the Impositions next to become due upon the
(a)
Mortgaged Property; provided, however, that, in the case of the first such deposit, there
shall be deposited in addition an amount as estimated by Mortgagee which, when added
to monthly deposits to be made thereafter as provided for herein, shall assure that there
will be sufficient funds on deposit to pay the Impositions as they come due; plus
One-twelfth (1/12) of the annual premiums on each policy of insurance
(b)
required to be maintained hereunder; provided that with the first such deposit there shall
be deposited, in addition, an amount equal to one-twelfth (1/12) of such annual insurance
premiums multiplied by the number of months elapsed between the date premiums on
each policy are last paid to and including the date of deposit.
The amount of such deposits shall be based upon Mortgagee’s reasonable estimate as to the
amount of Impositions and premiums of insurance next to be payable. Mortgagee will, upon
timely presentation to Mortgagee by Mortgagor of the bills therefor, pay the Charges from such
deposits. In the event the deposits on hand shall not be sufficient to pay all of the Charges when
the same shall become due from time to time, or the prior deposits shall be less than the currently
estimated monthly amounts, then Mortgagor shall pay to Mortgagee on demand any amount
necessary to make up the deficiency. The excess of any such deposits shall be returned to
Mortgagor or credited towards subsequent Charges, at the discretion of Mortgagee. If an Event
of Default shall occur under the terms of this Mortgage, Mortgagee may, at its option, without
being required so to do, apply any deposits on hand to the Obligations, in such order and manner
as Mortgagee may elect. When the Obligations have been fully paid, any remaining deposits
shall be returned to Mortgagor as its interest may appear. All deposits are hereby pledged as
additional security for the Obligations, shall be held for the purposes for which made as herein
provided, may be held by Mortgagee and may be commingled with other funds of Mortgagee,
shall be held without any allowance of interest thereon, and shall not be subject to the decision or
control of Mortgagor. Mortgagee shall not be liable for any act or omission made or taken in
good faith. In making any payments, Mortgagee may rely on any statement, bill or estimate
procured from or issued by the payee without inquiry into the validity or accuracy of the same.
If the taxes shown in the tax statement shall be levied on property more extensive than the
Mortgaged Property, Mortgagee shall be under no duty to seek a tax division or apportionment of
the tax bill, and any payment of taxes based on a larger parcel shall be paid by Mortgagor, and
Mortgagor shall expeditiously cause a tax subdivision to be made.
1.11.Compliance with Code. Mortgagor covenants that when completed the
Improvements shall comply with all applicable restrictions, conditions, codes, ordinances,
regulations and laws of the City of Elk River (the “City”) and other governmental bodies having
jurisdiction over the Mortgaged Property, including, without limitation, the Americans with
8
464431v2 EL185-33
Disabilities Act and those related to environmental protection. Mortgagor has NOT commenced
construction of the Improvements.
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464431v2 EL185-33
ARTICLE TWO
EVENTS OF DEFAULT
Each of the following occurrences shall constitute an Event of Default hereunder:
2.1.Failure to pay. Mortgagor’s failure to pay any amount due under the Loan
Agreement or any other amount required to be paid by Mortgagor hereunder when due.
2.2.Other Performance Failure. The Mortgagor’s or the Entity Guarantor’s failure to
duly observe or perform any of the other terms, conditions, covenants or agreements required to
be observed or performed by Mortgagor hereunder or by the Entity Guarantor in the Entity
Guaranty and the continuation of such failure for a period of thirty (30) days after Mortgagee
gives Mortgagor written notice of such failure.
2.3.Breach of Warranty of Title. Subject to Mortgagor’s right to contest in good faith
as set forth in Section 1.4 hereof, the breach of any warranty of title or any other warranty made
by Mortgagor hereunder.
2.4.Misrepresentation. The making of any material misstatement in any financial
statement or report submitted to Mortgagee by or on behalf of Mortgagor.
2.5.Foreclosure. The institution of a foreclosure or other enforcement proceedings by
the holder of any other lien on the Mortgaged Property (without hereby implying Mortgagee’s
consent to any mortgage or other lien).
2.6.Sale of Property. The sale, assignment, conveyance, mortgage, encumbrance,
lease or transfer of: (i) Mortgagor’s interest in the Mortgaged Property or any part thereof, or any
interest therein; or (ii) any transfer in ownership or control of Mortgagor, without the prior
written consent of Mortgagee, which consent may be granted or withheld by Mortgagee at its
sole discretion.
2.7.Breach of the First Lien Mortgage, Other Agreements, etc. Any default or breach
under the First Lien Mortgage, any other note, mortgage or other obligation of Mortgagor or
Borrower now held or hereafter acquired by Mortgagee or City, or any other failure to comply
with the terms and conditions thereof and the continuance thereof beyond any applicable notice
and/or cure period contained therein.
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ARTICLE THREE
ACCELERATION AND FORECLOSURE; OTHER REMEDIES
Upon any Event of Default, Mortgagee may, at its option, exercise one or more of the
following rights and remedies (and any other rights and remedies available to it):
3.1.Acceleration. Mortgagee may declare immediately due and payable all
unmatured Obligations secured by this Mortgage, and the same shall thereupon be immediately
due and payable, without notice or demand.
3.2.UCC Remedies. Mortgagee shall have and may exercise with respect to all
fixtures and any personal property included in the Mortgaged Property, all the rights and
remedies accorded upon default to a secured party under the Uniform Commercial Code, as in
effect in the State of Minnesota.
3.3.Foreclosure; Action or Advertisement. Mortgagee may (and is hereby authorized
and empowered to) foreclose this Mortgage by action or advertisement, pursuant to the statutes
of the State of Minnesota in such case made and provided, power being expressly granted to sell
the Mortgaged Property at public auction and convey the same to the purchaser to the full extent
of Mortgagor’s interest and, out of the proceeds arising from such sale, to pay all Obligations
secured hereby with interest, and all legal costs and charges of such foreclosure and the
maximum attorneys’ fees permitted by law, which costs, charges and fees Mortgagor agrees to
pay. Any real estate or interest or estate sold hereunder may be sold in one parcel, as an entirety,
or in such parcels and in such manner or order as Mortgagee, in its sole discretion, may elect. In
case of any sale of the Mortgaged Property pursuant to any judgment or decree of any court or at
public auction or otherwise in connection with the enforcement of any of the terms of this
Mortgage, Mortgagee, its successors and assigns, may become the purchaser, and for the purpose
of making settlement for or payment of the purchase price, shall be entitled to deliver over and
use any sum then due under the Entity Guaranty and any claims for interest accrued and unpaid
thereon, together with all other sums, with interest, advanced and unpaid hereunder, and all
statutory charges for such foreclosure including maximum attorney’s fees allowed by law in
order that there may be credited as paid on the purchase price the sum then due under the Note
and all other sums, with interest, advanced and unpaid hereunder, and all charges and expenses
of such foreclosure including maximum attorneys’ fees allowed by law.
3.4.Receiver. Mortgagee shall be entitled as a matter of right without notice and
without giving bond and without regard to the solvency or insolvency of Mortgagor, or waste of
the Mortgaged Property or adequacy of the security of the Mortgaged Property, to apply for the
appointment of a receiver, in accordance with the statutes and law made and provided. The
receiver shall collect the rents, and all other income of any kind; manage the Mortgaged Property
so to prevent waste; execute leases within or beyond the period of receivership, pay all expenses
for normal maintenance of the Mortgaged Property and perform the terms of this Mortgage and
apply the rents, issues and profits as permitted by Minnesota Statutes, Section 576.25 in the
following order to (i) payment of the reasonable fees of said receiver, (ii) application of tenant
security deposits as required by Minnesota Statutes Section 504B.178, (iii) payment when due of
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464431v2 EL185-33
prior or current real estate taxes or special assessments with respect to the Mortgaged Property
or, if this Mortgage so requires, to the periodic escrow for the payment thereof, (iv) the payment
when due of premiums for insurance of the type required by this Mortgage or, if this Mortgage
so requires, to the periodic escrow for the payment thereof; and (v) as further provided in any
Assignment of Rents executed by Mortgagor as further security for the Obligations (whether
included in this Mortgage or separate instrument), including but not limited to applying the same
to the costs and expenses of the receivership, including reasonable attorneys’ fees, to the
repayment of the Obligations and to the operation, maintenance, upkeep and repair of the
Mortgaged Property, including payment of taxes and payments of premiums of insurance.
Mortgagor does hereby irrevocably consent to such appointment.
3.5.Specific Performance. Mortgagee may bring suit for specific performance of any
covenant or warranty hereunder.
3.6.Forbearance and Other Rights of Mortgagee. Any delay by Mortgagee in
exercising any right or remedy hereunder, or otherwise afforded by law or equity, shall not be a
waiver of or preclude the exercise of such right or remedy or any other right or remedy
hereunder or at law or in equity. The failure of Mortgagee to exercise any option to accelerate
maturity of the Obligations secured by the Mortgage, the forbearance by Mortgagee before or
after the exercise of such option, or the withdrawal or abandonment of proceedings provided for
by this Mortgage shall not be a waiver of the right to exercise such option or to accelerate the
maturity of such Obligations by reason of any past, present or future event which would permit
acceleration. The procurement of insurance or the payment of taxes or other liens or charges by
Mortgagee shall not be a waiver of Mortgagee’s right to accelerate the maturity of the
Obligations. Mortgagee’s receipt of any awards, proceeds or damages shall not operate to cure
or waive default by Mortgagor. Mortgagee may at any time, without notice, release any person
liable for payment of any Obligations, extend the time or agree to alter the terms of payment of
any of the Obligations, accept additional security of any kind, release any plat or map of the
Mortgaged Property or the creation of any easement thereon or any covenants restricting use or
occupancy thereof, or agree to alter or amend the terms of this Mortgage in any way. No such
release, modification, addition or change shall affect the liability of any person other than the
person so released, for payment of any Obligations, nor affect the priority and lien status of this
Mortgage upon any property not so released.
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ARTICLE FOUR
ASSIGNMENT OF RENTS
4.1.Assignment. As security in addition to the lien of this Mortgage upon the
Property, Mortgagor hereby grants, transfers and assigns to Mortgagee all of the right, title and
interest of Mortgagor in and to all Leases and all rents, income, profits, revenues, royalties,
bonuses, rights, accounts, contract rights, general intangibles and benefits (all of which are
sometimes hereinafter referred to as “Rents”), now or hereafter accruing or owing by reason of a
Lease of any or all of the Property.
4.2.Covenants of Performance. To protect the security of this Assignment,
Mortgagor warrants, covenants and agrees:
(a)to faithfully abide by, perform and discharge each and every obligation,
covenant and agreement under any Leases to be performed by Mortgagor thereunder; to
give prompt written notice to Mortgagee of any notice of default on the part of Mortgagor
with respect to any Lease received from a tenant thereunder; to enforce or secure short of
termination of any Lease the performance of each and every obligation, covenant,
condition and agreement of the Leases by the tenants thereunder to be performed; not to
borrow against, pledge or assign any of the Rents, or anticipate the Rents; not to waive,
excuse, condone or in any manner release or discharge any tenant thereunder of or from
the obligations, covenants, conditions and agreements to be performed under the Lease or
to permit the tenant to assign its interest in the Lease unless required to do so by the terms
of the Lease; not to terminate the Leases or accept a surrender thereof or a discharge of
the tenant unless required to do so by the terms of the Lease; not to consent to a
subordination of the interest of the tenant thereunder to any party other than Mortgagee
and then only if specifically required to do so by Mortgagee;
(b)at Mortgagor’s sole cost and expense, to appear in and defend any action
or proceeding arising under, growing out of or in any manner connected with the Leases
or the obligations, duties or liabilities of Mortgagor and tenants thereunder, and to pay all
costs and expenses of Mortgagee, including attorneys’ fees in a reasonable sum, in any
such action or proceeding in which Mortgagee may appear or with respect to which it
may incur costs;
(c)that Mortgagor has the full right and title to assign the Rents; that at the
date of this Mortgage there exist no Leases which now or in the future affect the
Mortgaged Property which have not been disclosed to Mortgagee in writing; and that
there is no outstanding assignment or pledge of the Leases or Rents; and
(d)to furnish to Mortgagee, at Mortgagee’s written request, a complete list of
all Leases and security deposits made thereunder as to any part of the Mortgaged
Property, showing the type of lease, the name of the tenant, the monthly rental, the date to
which paid, the term of the Lease, the date of occupancy, and the date of expiration and
any and every special premium, concession or inducement granted to the tenant.
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4.3.Assignment Absolute. This Assignment is absolute and is effective immediately.
Notwithstanding the foregoing, until an Event of Default, as defined in ARTICLE TWO above,
has occurred, Mortgagor may receive, collect and enjoy the Rents. Upon or at any time after an
Event of Default has occurred, Mortgagee may at its option, without notice:
(a)in the name, place and stead of Mortgagor (i) enter upon, manage and
operate the Mortgaged Property, or retain the services of an independent contractor to
manage and operate the same, (ii) make, enforce, modify and accept surrender of the
Leases, (iii) obtain or evict tenants, demand, collect, sue for, receive and give
acquittances for, fix or modify Rents and enforce all rights of Mortgagor under the
Leases, and (iv) perform any and all other acts that may be necessary or proper to protect
the security of this Assignment; provided always, however, that until the end of any
redemption period available to Mortgagor after any foreclosure of this Mortgage
Mortgagee shall continue to deal with the Leases on the Property in a reasonable
businesslike manner, recognizing and protecting Mortgagor’s continuing rights during
such period to retake possession and control of the Mortgaged Property upon paying the
appropriate redemption price, and to resume the management of such Leases;
(b)give or require Mortgagor to give notice to any and all tenants under the
Leases authorizing and directing the tenants to pay all Rents due under the Leases
directly to Mortgagee; and
(c)apply for, and Mortgagor hereby consents to, the appointment of a
receiver of the Mortgaged Property.
4.4.Application of Rents.
(a)All Rents collected by Mortgagee, or by a receiver, shall be held and
applied by Mortgagee in its reasonable discretion, in accordance with applicable law,
including, without limitation to: (i) payment of all reasonable fees of the receiver, if any,
approved by the court; (ii) the repayment when due of all tenant security deposits
pursuant to the provisions of Minnesota Statutes Section 504B.178; (iii) payment of all
delinquent or current real estate taxes and special assessments payable with respect to the
Property or, if this Mortgage so requires, to the periodic escrow for the payment thereof;
(iv) payment of all premiums then due for the insurance required by the provisions of this
Mortgage or, if this Mortgage so requires, to the periodic escrow for the payment thereof;
(v) payment of expenses incurred for normal maintenance of the Mortgaged Property.
(b)Any amounts remaining after such application shall be applied as follows:
(i)if received prior to any foreclosure sale of the Mortgaged Property
to Mortgagee for payment of the indebtedness secured by this Mortgage, but no
such payment made after acceleration of the indebtedness shall affect such
acceleration; and
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(ii)if received during or with respect to a period after a foreclosure
sale of the Mortgaged Property:
(1)if the purchaser at the foreclosure sale is not Mortgagee,
first to Mortgagee to the extent of any deficiency of the sale proceeds to
repay the indebtedness secured by this Mortgage, second to the purchaser
as a credit to the redemption price, but if the Mortgaged Property is not
redeemed, then to the purchaser of the Mortgaged Property;
(2)if the purchaser at the foreclosure sale is Mortgagee, first to
Mortgagee to the extent of any deficiency of the sale proceeds to repay the
indebtedness secured by this Mortgage and the balance to be retained by
Mortgagee as a credit to the redemption price, but if the Mortgaged
Property is not redeemed, then to Mortgagee, whether or not such
deficiency exists.
4.5.Continuing Effect. The rights and powers of Mortgagee under this Assignment
and the application of the Rents shall continue and remain in full force and effect both before and
after commencement of any action or procedure to foreclose this Mortgage, after any foreclosure
sale of Mortgagor’s interest in the Property in connection with the foreclosure of this Mortgage,
and until expiration of the period of redemption from any such foreclosure sale, whether or not
any deficiency from the unpaid balance of the Obligations exists after such foreclosure sale.
4.6.Mortgagee Not Obligated. Mortgagee shall not be obligated by this Assignment
for the control, care, management or repair of the Mortgaged Property, nor for the carrying out of
any of the terms and conditions of the Leases; nor shall this Assignment operate to make
Mortgagee responsible or liable for any waste committed on the Mortgaged Property by the
tenants or any other party, or for any dangerous or defective condition of the Mortgaged
Property, or for any violation of Environmental Laws or for any negligence in the management,
upkeep, repair or control of the Mortgaged Property resulting in any loss or any injury or death to
any person.
4.7.Hold Harmless. Mortgagor shall and does agree to indemnify and to hold
Mortgagee harmless of and from any and all liability, loss or damage which it may or might
incur under or by reason of this Assignment, and of and from any and all claims and demands
whatsoever which may be asserted against it by reason of any alleged obligations or undertakings
on its part to perform or discharge any of the terms, covenants or agreements contained in the
Leases; provided, however, that such indemnification shall not apply if the same arises out of
Leases intentionally breached by Mortgagee which were made by Mortgagor in the ordinary
course of managing the Mortgaged Property and prior to the time Mortgagee obtained the right
to possess and manage the Mortgaged Property, or if the same arises out of the negligent or
willful act of Mortgagee in operating and using the Mortgaged Property. Should Mortgagee
incur any such liability, loss or damage under any Lease or by reason of this Assignment, or in
the defense of any such claims or demands, the amount thereof, including costs, expenses, and
reasonable attorneys’ fees, shall be secured hereby and Mortgagor shall reimburse Mortgagee
therefor immediately upon demand. Mortgagee shall give Mortgagor notice of any such claim
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and Assignor shall have the opportunity to defend Mortgagee in connection therewith with
counsel reasonably acceptable to Mortgagee; provided Mortgagee’s failure to give such notice
and opportunity to defend shall not affect Mortgagor’s obligations under this Section except to
the extent Mortgagor is actually prejudiced by such failure.
4.8.Authorization to Tenants. The tenants under any of the Leases are hereby
irrevocably authorized and directed to recognize the claims of Mortgagee or its assigns
hereunder without investigating the reason for any action taken by Mortgagee, or the validity or
the amount of indebtedness owing to Mortgagee, or the existence of any such event of default, or
the application of the Rents to be made by Mortgagee. Mortgagor hereby irrevocably directs and
authorizes each tenant to pay to Mortgagee all sums due under its Lease and consents and directs
that said sums shall be paid to Mortgagee without the necessity for a judicial determination that
any such event of default has occurred or that Mortgagee is entitled to exercise its rights
hereunder, and to the extent such sums are paid to Mortgagee, Mortgagor agrees that the tenants
shall have no further liability to Mortgagor for the same. The sole signature of Mortgagee shall
be sufficient for the exercise of any rights under this Assignment and the sole receipt of
Mortgagee for any sums received shall be a full discharge and release therefor to the tenants or
occupants of the Mortgaged Property.
4.9.Mortgagee Attorney-in-Fact. Mortgagor hereby irrevocably appoints Mortgagee
as its agent and attorney in fact, which appointment is coupled with an interest, to exercise any
rights or remedies hereunder and to execute and deliver during the term of this Assignment such
instruments as Mortgagee may deem necessary to make this Assignment and any further
assignment effective.
4.10.Mortgagee Not in Possession. Nothing herein contained and no actions taken
pursuant to this Assignment shall be construed as constituting Mortgagee a “Mortgagee in
Possession.”
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ARTICLE FIVE
CONDEMNATION
5.1.Notice. Mortgagor will give Mortgagee prompt notice of any action, actual or
threatened, in condemnation or eminent domain, direct or inverse.
5.2.Awards. Subject to any obligations under the First Lien Mortgage, which has
priority over this Mortgage, Mortgagor hereby assigns, transfers, and sets over to Mortgagee the
entire proceeds of any award or payment which becomes payable by reason of any taking of or
damage to the Mortgaged Property, or any part or appurtenance thereof, either temporarily or
permanently, in or by condemnation or other eminent domain proceedings or by reason of sale
under threat thereof, or in anticipation of the exercise of the right of condemnation or other
eminent domain proceedings. Mortgagor will file or prosecute in good faith and with due
diligence what would otherwise be its claim in any such award or payment and cause the same to
be collected and paid over to Mortgagee, and Mortgagor irrevocably authorizes and empowers
Mortgagee, which power is coupled with an interest and is irrevocable, in the name of Mortgagor
or otherwise, in the event that Mortgagor fails to do so, to file and prosecute any such claim and
to collect, receipt for and retain the same. The proceeds of the award or payment, after deducting
all reasonable costs, attorneys’ fees and other expenses which may have been incurred by
Mortgagee in collection thereof, at the sole discretion of Mortgagee, may be released to
Mortgagor, applied to restoration of the Mortgaged Property or applied to the payment of any
part of the Obligations, in such order of application as Mortgagee may determine. If proceeds
are made available to be applied to restoration, they shall be held and disbursed in accordance
with Paragraph 1.6(d) hereof.
ARTICLE SIX
UNIFORM COMMERCIAL CODE
6.1.Security Interest. This Mortgage shall constitute a security agreement as defined
in the Uniform Commercial Code with respect to, and Mortgagor hereby grants Mortgagee a
security interest in, all of fixtures and any personal property included in the Mortgaged Property
and substitutions therefor and proceeds thereof. Mortgagor hereby authorizes Mortgagee to file
one or more financing statements, covering such fixtures and personal property (in a form
satisfactory to Mortgagee) which Mortgagee may reasonably consider necessary or appropriate
to perfect its security interest. Mortgagor also authorizes Mortgagee to file amendments to
financing statements, and terminations of financing statements filed by other secured parties, all
with respect to all fixtures and personal property included in the Mortgaged Property, in such
form and substance as Mortgagee, in its reasonable discretion, may determine. Mortgagor will
pay to Mortgagee, on demand, the amount of any and all costs and expenses (including
reasonable attorneys’ fees and legal expenses) paid or incurred by Mortgagee in connection with
the exercise of any right or remedy referred to in this Section. In any instance where Mortgagor
in its sound discretion determines that any item subject to a security interest under this Mortgage
has become: (i) inadequate, obsolete, worn out, or (ii) unsuitable, undesirable or unnecessary for
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464431v2 EL185-33
the operation of the Mortgaged Property, Mortgagor may, at its expense, remove and dispose of
it and substitute and install other items not necessarily having the same function, provided, that
such removal and substitution shall not impair the operating utility and unity of the Mortgaged
Property. With respect to items which are a part of the Mortgaged Property, all items substituted
for such items shall become a part of the Mortgaged Property and subject to the lien of this
Mortgage. Any amounts received or allowed Mortgagor upon the sale or other disposition of the
removed items of property shall be applied against the cost of acquisition and installation of the
substituted items. Nothing herein contained shall be construed to prevent any tenant or subtenant
from removing from the Mortgaged Property trade fixtures, furniture and equipment installed by
it and removable by tenant under its terms of any one or more of the Leases, on the condition,
however, that Mortgagor shall assure the repair of any and all damages to the Mortgaged
Property resulting from or caused by the removal thereof. Mortgagee acknowledges that no
items of personal property are included in the Mortgaged Property.
6.2.Fixture Filing. From the date of its recording, this Mortgage shall be effective as
a financing statement with respect to all goods constituting part of the Mortgaged Property which
are or are to become fixtures related to the real estate described herein. For this purpose, the
following information is set forth:
(a)Name and Address of Mortgagor:
Scott Morrell, LLC
10752 171st Avenue
Elk River, MN 55330
Attention: Terry and Renee Morrell
(b)Name and address of Secured Party:
Economic Development Authority of the City of Elk River
13065 Orono Parkway
Elk River, MN 55330
Attention: Director of Economic Development
(c)This document covers goods which are or are to become fixtures.
(d)The real estate to which such fixtures are or are to be attached is that
described in Exhibit A attached hereto.
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ARTICLE SEVEN
MISCELLANEOUS
7.1.Mortgagee’s Remedies Cumulative. All remedies of Mortgagee are distinct and
cumulative to any other right or remedy under this Mortgage or afforded by law or equity, and
may be exercised concurrently or independently, as often as the occasion therefore arises.
7.2.Successors and Assigns Bound; Captions. The covenants and agreements herein
contained shall bind, and the rights hereunder shall inure to, the respective heirs, legal
representatives, successors and assigns of Mortgagee and Mortgagor. The captions and headings
of the Sections of this Mortgage are for convenience only and are not to be used to interpret or
define the provisions hereof.
7.3.Notices. Any notice from Mortgagee to Mortgagor under this Mortgage shall be
deemed to have been given by Mortgagee and received by Mortgagor, when delivered personally
to an officer of Mortgagor or three (3) days after the date it is mailed by certified mail addressed
as follows:
Scott Morrell, LLC
10752 171st Avenue
Elk River, MN 55330
Attention: Terry and Renee Morrell
7.4.Governing Law; Severability. This Mortgage shall be governed by the laws of the
State of Minnesota. In the event that any provision or clause of this Mortgage conflicts with
applicable law, such conflict shall not affect other provisions of this Mortgage which can be
given effect without conflicting provisions and to this end the provisions of this Mortgage are
declared to be severable.
7.5.Counterparts. This Mortgage may be executed in any number of counterparts,
each of which shall be an original but all of which together shall constitute one instrument.
7.6.Waiver of Appraisement, Homestead, Marshaling. Mortgagor hereby waives the
benefit of any homestead, appraisement, evaluation, stay and extension laws now or hereinafter
in force. Mortgagor hereby waives any rights available with respect to marshaling of assets so as
to require the separate sales of any portion of the Mortgaged Property or to require Mortgagee to
exhaust its remedies against a specific portion of the Mortgaged Property before proceeding
against the other.
7.7.Subsequent Agreements. Any agreement hereafter made by Mortgagor and
Mortgagee pursuant to this Mortgage shall be superior to the rights of the holder of any
intervening lien or encumbrance.
\[Signature Page follows\]
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464431v2 EL185-33
Signature Page to Mortgage
IN WITNESS WHEREOF, Mortgagor has caused this Mortgage to be duly executed as of
the day and year first written.
SCOTT MORRELL, LLC,
a Minnesota limited liability company
By:
Terry Morrell
Its: President
STATE OF MINNESOTA )
) ss.
COUNTY OF ________ )
The foregoing instrument was acknowledged before me on ______________, 2015, by
Terry Morrell, President of Scott Morrell, LLC, a Minnesota limited liability company, on behalf
of the limited liability company.
Notary Public
My Commission Expires:
This Instrument was drafted by:
Kennedy & Graven, Chartered (JSB)
470 U.S. Bank Plaza
200 South Sixth Street
Minneapolis, Minnesota 55402
Telephone: (612) 337-9300
S-1
464431v2 EL185-33
EXHIBIT A
Legal Description
Lot 1, Block 2, Natures Edge Business Center, according to the plat thereof on file and of record
in Sherburne County, Minnesota.
A-1
464431v2 EL185-33
EXHIBIT B
Permitted Encumbrances
1)That certain \[mortgage\] in the amount of $_____ from Scott Morrell, LLC, and for the
benefit of The Bank of Elk River dated _______________, recorded in the Office of the
Sherburne County Recorder/Registrar of Titles on ________________, 20___, as
Document No. ________________.
2)That certain \[Lease to Morrell Oversize\].
B-1
464431v2 EL185-33
ENTITY GUARANTY
(Microloan)
Elk River, Minnesota
August ___, 2015
FOR VALUABLE CONSIDERATION, the receipt and sufficiency of which is hereby
acknowledged, and in consideration of and to induce financial accommodations of any kind, with
or without security, given or to be given or continued at any time and from time to time by the
ECONOMIC DEVELOPMENT AUTHORITY OF THE CITY OF ELK RIVER (the “Lender”)
to or for the account of SCOTT MORRELL, LLC (the “Borrower”), the undersigned absolutely
and unconditionally guarantees to the Lender the full and prompt payment when due, whether at
maturity or earlier by reason of acceleration or otherwise, of any and all indebtedness,
obligations and liabilities of the Borrower (and any and all successors of the Borrower) to the
Lender, now or hereafter existing, absolute or contingent, independent, joint, several or joint and
several, secured or unsecured, due or to become due, contractual or tortious, liquidated or
unliquidated, arising by assignment or otherwise, including without limitation all indebtedness,
obligations and liabilities owed by the Borrower (and any and all successors of the Borrower) as
a member of any partnership, syndicate, association or other group, and whether incurred by the
Borrower (or any successor of the Borrower) as principal, surety, endorser, guarantor,
accommodation party or otherwise (collectively, the “Indebtedness”); and the undersigned agrees
to pay on demand all of the Lender’s fees, costs, expenses and reasonable attorneys’ fees in
connection with the Indebtedness, any security therefor, and this guaranty, plus interest on such
amounts at the highest rate then applicable to any of the Indebtedness.
The Lender may at any time and from time to time, without consent of or notice to the
undersigned, without incurring responsibility to the undersigned, without releasing, impairing or
affecting the liability of the undersigned hereunder, upon or without any terms or conditions, and
in whole or in part: (1) sell, pledge, surrender, compromise, settle, release, renew, subordinate,
extend, alter, substitute, exchange, change, modify or otherwise dispose of or deal with in any
manner and in any order any Indebtedness, any evidence thereof, or any security or other
guaranty therefor; (2) accept any security for, or other guarantors of, any Indebtedness; (3) fail,
neglect or omit to obtain, realize upon or protect any Indebtedness or any security therefor, to
exercise any lien upon or right to any money, credit or property toward the liquidation of the
Indebtedness, or to exercise any other right against the Borrower, the undersigned, any other
guarantor or any other person; and (4) apply any payments and credits to the Indebtedness in any
manner and in any order. No act, omission or thing, except full payment and discharge of the
Indebtedness, which but for this provision could act as a release or impairment of the liability of
the undersigned hereunder, shall in any way release, impair or otherwise affect the liability of the
undersigned hereunder, and the undersigned waives any and all defenses of the Borrower
pertaining to the Indebtedness, any evidence thereof, and any security therefor, except the
defense of discharge by payment. The failure of any person or persons to sign this or any other
guaranty shall not release, impair or affect the liability of the undersigned hereunder. This
guaranty is a primary obligation of the undersigned and the Lender shall not be required to first
resort for payment of the Indebtedness to the Borrower or any other person, their properties or
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464434v1 EL185-33
estates, or any security or other rights or remedies whatsoever. The undersigned shall be and
remain liable for any deficiency remaining after foreclosure of any mortgage or security interest
securing the Indebtedness, whether or not the liability of the Borrower or any other person for
such deficiency is discharged pursuant to statute, judicial decision or otherwise.
The liability of the undersigned under this guaranty is in addition to and shall be
cumulative with all other liabilities of the undersigned to the Lender, as guarantor or otherwise,
without any limitation as to amount, unless the writing evidencing or creating such other liability
specifically provides to the contrary. If any payment applied by the Lender to the Indebtedness
is thereafter set aside, recovered, rescinded or required to be returned for any reason (including
without limitation the bankruptcy, insolvency or reorganization of the Borrower or any other
person), the Indebtedness to which such payment was applied shall for the purposes of this
guaranty be deemed to have continued in existence, notwithstanding such application, and this
guaranty shall be enforceable as to such Indebtedness as fully as if such application had never
been made.
The undersigned waives: (1) notice of acceptance of this guaranty and of the creation and
existence of the Indebtedness; (2) presentment, demand for payment, notice of dishonor, notice
of nonpayment, and protest of any instrument evidencing the Indebtedness; and (3) all other
demands and notices to the undersigned or any other person and all other actions to establish the
liability of the undersigned hereunder. The undersigned consents to the personal jurisdiction of
the state and federal courts located in the State of Minnesota in connection with any controversy
related to this guaranty, waives any argument that venue in such forums is not convenient, and
agrees that any litigation initiated by the undersigned against the Lender in connection with this
guaranty shall be venued in either the District Court of Sherburne County, Minnesota, or the
United States District Court, District of Minnesota.
All property of the undersigned, now or hereafter in the possession, control or custody of
or in transit to the Lender for any purpose, including without limitation the balance of every
account of the undersigned with and each claim of the undersigned against the Lender, shall be
subject to a lien and security interest in favor of the Lender, as security for all liabilities of the
undersigned to the Lender, and shall be subject to be set off against any and all such liabilities,
and the Lender may at any time and from time to time at its option and without notice
appropriate and apply any such property toward the payment of any and all such liabilities. The
undersigned agrees to promptly provide the Lender from time to time with financial statements
of the undersigned, in form and substance acceptable to the Lender, at least once every 12
months and as otherwise requested by the Lender. The undersigned agrees to promptly provide
the Lender from time to time with such other information respecting the condition (financial and
otherwise), business and property of the undersigned as the Lender may request, in form and
substance acceptable to the Lender.
The undersigned waives all claims, rights and remedies which the undersigned may now
have or hereafter acquire against any person at any time now or hereafter liable to payment of
any of the Indebtedness and as to any collateral security, including but not limited to all claims,
rights and remedies of contribution, indemnification, exoneration, reimbursement, recourse and
subrogation, whether or not such claim, right or remedy arises in equity, under contract, by
2
464434v1 EL185-33
statute, under common law or otherwise, whether or not the Indebtedness has been fully paid,
and all payments and recoveries under this guaranty shall be considered equity investments by
the undersigned in the Borrower; provided, nothing contained in this guaranty shall deprive the
undersigned of any claim, right or remedy, after the Indebtedness has been fully paid, against any
person other than the Borrower. No delay or failure by the Lender in exercising any right, and
no partial or single exercise thereof shall constitute a waiver thereof. No waiver of any rights
hereunder, and no modification or amendment of this guaranty shall be effective unless the same
is in writing duly executed by the Lender, and each such waiver, if any, shall apply only with
respect to the specific instance involved and shall not impair or affect the rights of the Lender or
the provisions of this guaranty in any other respect at any other time. This guaranty shall
continue until written notice of revocation of this guaranty, executed by the undersigned, has
been received by the Lender; provided, no revocation of this guaranty shall affect in any manner
any liability of the undersigned under this guaranty with respect to Indebtedness arising before
the Lender receives such written notice of revocation, and the sole effect of revocation of this
guaranty shall be to exclude from this guaranty Indebtedness thereafter arising which is
unconnected with Indebtedness theretofore arising or transactions theretofore entered into.
Any invalidity or unenforceability of any provision or application of this guaranty shall
not affect other lawful provisions and applications hereof and to this end the provisions of this
guaranty are declared to be severable. This guaranty shall bind the undersigned and the
representatives, successors and assigns of the undersigned, and of each of them respectively, and
shall benefit the Lender, its successors and assigns. This guaranty shall be governed by and
construed in accordance with the laws of the State of Minnesota.
The undersigned is the occupant of the real property legally described as Lot 1, Block 2,
Natures Edge Business Center, Sherburne County, Minnesota (the “Property”). Borrower is
acquiring the Property and will be leasing it to the undersigned pursuant to a certain lease
agreement (the “Lease”). Borrower and the undersigned are under common ownership. The
undersigned acknowledges and agrees that the Indebtedness is being utilized by Borrower to
finance the cost of improvements to the Property, and such improvements and equipment will
support the undersigned’s ability to fulfill its obligations under the Lease and, therefore, the
undersigned’s obligations under this Guaranty are proper, valid and enforceable. This Guaranty
has been approved by unanimous consent of the board of governors of the undersigned.
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464434v1 EL185-33
THE UNDERSIGNED REPRESENTS, CERTIFIES, WARRANTS AND AGREES
THAT THE UNDERSIGNED HAS READ ALL OF THIS GUARANTY AND
UNDERSTANDS ALL OF THE PROVISIONS OF THIS GUARANTY. THE
UNDERSIGNED ALSO AGREES THAT COMPLIANCE BY THE LENDER WITH THE
EXPRESS PROVISIONS OF THIS GUARANTY SHALL CONSTITUTE GOOD FAITH AND
SHALL BE CONSIDERED REASONABLE FOR ALL PURPOSES.
MORRELL OVERSIZE, INC.,
a Minnesota limited liability company
By:
Terry Morrell, President
4
464434v1 EL185-33
PERSONAL GUARANTY
(Microloan — Terry Morrell and Renee Morrell)
Elk River, Minnesota
August ___, 2015
FOR VALUABLE CONSIDERATION, the receipt and sufficiency of which is hereby
acknowledged, and in consideration of and to induce financial accommodations of any kind, with
or without security, given or to be given or continued at any time and from time to time by the
ECONOMIC DEVELOPMENT AUTHORITY OF THE CITY OF ELK RIVER (the “Lender”)
to or for the account of SCOTT MORRELL, LLC (the “Borrower”), the undersigned absolutely
and unconditionally guaranty to the Lender the full and prompt payment when due, whether at
maturity or earlier by reason of acceleration or otherwise, of any and all indebtedness,
obligations and liabilities of the Borrower (and any and all successors of the Borrower) to the
Lender, now or hereafter existing, absolute or contingent, independent, joint, several or joint and
several, secured or unsecured, due or to become due, contractual or tortious, liquidated or
unliquidated, arising by assignment or otherwise, including without limitation all indebtedness,
obligations and liabilities owed by the Borrower (and any and all successors of the Borrower) as
a member of any partnership, syndicate, association or other group, and whether incurred by the
Borrower (or any successor of the Borrower) as principal, surety, endorser, guarantor,
accommodation party or otherwise (collectively, the “Indebtedness”); and the undersigned agree
to pay on demand all of the Lender’s fees, costs, expenses and reasonable attorneys’ fees in
connection with the Indebtedness, any security therefor, and this guaranty, plus interest on such
amounts at the highest rate then applicable to any of the Indebtedness.
The Lender may at any time and from time to time, without consent of or notice to the
undersigned, without incurring responsibility to the undersigned, without releasing, impairing or
affecting the liability of the undersigned hereunder, upon or without any terms or conditions, and
in whole or in part: (1) sell, pledge, surrender, compromise, settle, release, renew, subordinate,
extend, alter, substitute, exchange, change, modify or otherwise dispose of or deal with in any
manner and in any order any Indebtedness, any evidence thereof, or any security or other
guaranty therefor; (2) accept any security for, or other guarantors of, any Indebtedness; (3) fail,
neglect or omit to obtain, realize upon or protect any Indebtedness or any security therefor, to
exercise any lien upon or right to any money, credit or property toward the liquidation of the
Indebtedness, or to exercise any other right against the Borrower, the undersigned, any other
guarantor or any other person; and (4) apply any payments and credits to the Indebtedness in any
manner and in any order. No act, omission or thing, except full payment and discharge of the
Indebtedness, which but for this provision could act as a release or impairment of the liability of
the undersigned hereunder, shall in any way release, impair or otherwise affect the liability of the
undersigned hereunder, and the undersigned waive any and all defenses of the Borrower
pertaining to the Indebtedness, any evidence thereof, and any security therefor, except the
defense of discharge by payment. The failure of any person or persons to sign this or any other
guaranty shall not release, impair or affect the liability of the undersigned hereunder. This
guaranty is a primary obligation of the undersigned and the Lender shall not be required to first
1
464437v1 EL185-33
resort for payment of the Indebtedness to the Borrower or any other person, their properties or
estates, or any security or other rights or remedies whatsoever. The undersigned shall be and
remain liable for any deficiency remaining after foreclosure of any mortgage or security interest
securing the Indebtedness, whether or not the liability of the Borrower or any other person for
such deficiency is discharged pursuant to statute, judicial decision or otherwise.
The liability of the undersigned under this guaranty is joint and several and is in addition
to and shall be cumulative with all other liabilities of the undersigned to the Lender, as guarantor
or otherwise, without any limitation as to amount, unless the writing evidencing or creating such
other liability specifically provides to the contrary. If any payment applied by the Lender to the
Indebtedness is thereafter set aside, recovered, rescinded or required to be returned for any
reason (including without limitation the bankruptcy, insolvency or reorganization of the
Borrower or any other person), the Indebtedness to which such payment was applied shall for the
purposes of this guaranty be deemed to have continued in existence, notwithstanding such
application, and this guaranty shall be enforceable as to such Indebtedness as fully as if such
application had never been made.
The undersigned waive: (1) notice of acceptance of this guaranty and of the creation and
existence of the Indebtedness; (2) presentment, demand for payment, notice of dishonor, notice
of nonpayment, and protest of any instrument evidencing the Indebtedness; and (3) all other
demands and notices to the undersigned or any other person and all other actions to establish the
liability of the undersigned hereunder. The undersigned consent to the personal jurisdiction of
the state and federal courts located in the State of Minnesota in connection with any controversy
related to this guaranty, waive any argument that venue in such forums is not convenient, and
agree that any litigation initiated by the undersigned against the Lender in connection with this
guaranty shall be venued in either the District Court of Sherburne County, Minnesota, or the
United States District Court, District of Minnesota.
All property of the undersigned, now or hereafter in the possession, control or custody of
or in transit to the Lender for any purpose, including without limitation the balance of every
account of the undersigned with and each claim of the undersigned against the Lender, shall be
subject to a lien and security interest in favor of the Lender, as security for all liabilities of the
undersigned to the Lender, and shall be subject to be set off against any and all such liabilities,
and the Lender may at any time and from time to time at its option and without notice
appropriate and apply any such property toward the payment of any and all such liabilities. The
undersigned agree to promptly provide the Lender from time to time with financial statements of
the undersigned, in form and substance acceptable to the Lender, at least once every 12 months
and as otherwise requested by the Lender. The undersigned agree to promptly provide the
Lender from time to time with such other information respecting the condition (financial and
otherwise), business and property of the undersigned as the Lender may request, in form and
substance acceptable to the Lender.
The undersigned waive all claims, rights and remedies which the undersigned may now
have or hereafter acquire against any person at any time now or hereafter liable to payment of
any of the Indebtedness and as to any collateral security, including but not limited to all claims,
rights and remedies of contribution, indemnification, exoneration, reimbursement, recourse and
2
464437v1 EL185-33
subrogation, whether or not such claim, right or remedy arises in equity, under contract, by
statute, under common law or otherwise, whether or not the Indebtedness has been fully paid,
and all payments and recoveries under this guaranty shall be considered equity investments by
the undersigned in the Borrower; provided, nothing contained in this guaranty shall deprive the
undersigned of any claim, right or remedy, after the Indebtedness has been fully paid, against any
person other than the Borrower. No delay or failure by the Lender in exercising any right, and
no partial or single exercise thereof shall constitute a waiver thereof. No waiver of any rights
hereunder, and no modification or amendment of this guaranty shall be effective unless the same
is in writing duly executed by the Lender, and each such waiver, if any, shall apply only with
respect to the specific instance involved and shall not impair or affect the rights of the Lender or
the provisions of this guaranty in any other respect at any other time. This guaranty shall
continue until written notice of revocation of this guaranty, executed by the undersigned, has
been received by the Lender; provided, no revocation of this guaranty shall affect in any manner
any liability of the undersigned under this guaranty with respect to Indebtedness arising before
the Lender receives such written notice of revocation, and the sole effect of revocation of this
guaranty shall be to exclude from this guaranty Indebtedness thereafter arising which is
unconnected with Indebtedness theretofore arising or transactions theretofore entered into.
Any invalidity or unenforceability of any provision or application of this guaranty shall
not affect other lawful provisions and applications hereof and to this end the provisions of this
guaranty are declared to be severable. This guaranty shall bind the undersigned and the heirs,
representatives, successors and assigns of the undersigned, and of each of them respectively, and
shall benefit the Lender, its successors and assigns. This guaranty shall be governed by and
construed in accordance with the laws of the State of Minnesota.
The undersigned are the owners and members of the Borrower and the undersigned
acknowledge and agree that the Indebtedness is being utilized by the Borrower to improve the
real property legally described as Lot 1, Block 2, Natures Edge Business Center, Sherburne
County, Minnesota (the “Property”) and to purchase equipment to be used at the Property, and
such improvements and equipment will materially financially benefit the undersigned and,
therefore, the undersigneds’ obligations under this Guaranty are proper, valid and enforceable.
THE UNDERSIGNED REPRESENT, CERTIFY, WARRANT AND AGREE THAT
THE UNDERSIGNED HAVE READ ALL OF THIS GUARANTY AND UNDERSTAND ALL
OF THE PROVISIONS OF THIS GUARANTY. THE UNDERSIGNED ALSO AGREE THAT
COMPLIANCE BY THE LENDER WITH THE EXPRESS PROVISIONS OF THIS
GUARANTY SHALL CONSTITUTE GOOD FAITH AND SHALL BE CONSIDERED
REASONABLE FOR ALL PURPOSES.
Terry Morrell
____________________________________
Renee Morrell
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464437v1 EL185-33
PROMISSORY NOTE
(Microloan)
July ___, 2015
Amount: $200,000.00
Interest: 2.00%
Maturity: August 1, 2020
FOR VALUE RECEIVED, the undersigned, SCOTT MORRELL, LLC , a Minnesota
limited liability company (“Borrower”), promises to pay to the order of the ECONOMIC
DEVELOPMENT AUTHORITY OF THE CITY OF ELK RIVER, a public body corporate and
politic of the State of Minnesota (“Lender”), at 13065 Orono Parkway, Elk River, Minnesota
55330, or such other place as the Lender or any other holder of this Note may designate in
writing, on or before August 1, 2020 (“Maturity Date”), the principal sum of Two Hundred
Thousand and 00/100 Dollars ($200,000.00), together with interest on any and all amounts
remaining unpaid thereon from time to time from the date hereof (computed on the basis of
actual days elapsed in a year of 360 days) at a fixed interest rate of two percent (2%) per annum.
This Note is made pursuant to a Loan Agreement, between Borrower and Lender, of even
date herewith (“Loan Agreement”) which provides for the payment of the cost of certain real
property. The principal amount of this Note shall be amortized over a twenty (20) year period.
Based on the foregoing, the Borrower shall be obligated to make monthly installments
(each a “Monthly Installment”) in the amount of _________ and __/100 Dollars ($_________),
which Monthly Installments shall commence on September 1, 2015, and continue on the first
(1st) day of each and every month thereafter until the Maturity Date, when all outstanding
principal and accrued but unpaid interest shall be payable in full. The final payment shall be a
balloon payment in the amount of all outstanding principal and accrued but unpaid interest.
This Note is secured by, among other things a Security Agreement (“Security
Agreement”) given by Morrell Oversize, Inc. to Lender, a Mortgage and Assignment of Rents
and Security Agreement and Fixture Financing Statement covering property owned by the
Borrower (the “Mortgage”), the Personal Guaranties made by Terry Morrell and Renee Morrell,
and that certain Entity Guaranty made by Morrell Oversize, Inc. all of which are made to Lender
of even date herewith (collectively, the “Security Documents”). All of the terms and conditions
contained in the Security Documents which are to be kept and performed by Borrower are
hereby made a part of this Note to the same extent and with the same force and effect as if they
were fully set forth herein; and Borrower covenants and agrees to keep and perform them, or
cause them to be kept and performed, strictly in accordance with their terms.
If the Lender, or any other holder of this Note, has not received the full amount of any
Monthly Installment provided for in this Note, by the end of seven (7) calendar days after the
date it is due, Borrower shall pay a late charge fee to the Lender, or any other holder of this Note.
The amount of the late charge fee shall be eight percent (8.00%) of the overdue Monthly
Installment. The Borrower shall pay this late charge fee on demand, however, collection of the
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late charge fee shall not be deemed a waiver of the Lender’s right to declare an Event of Default
and exercise its rights and remedies as provided for in the Loan Agreement and the Security
Agreement.
Each Monthly Installment and other payments made under this Note shall be applied as
follows: (i) first, to be applied against and pay interest which has accrued and remains unpaid on
the date the payment is received; then (ii) to be applied against and pay unpaid late charges and
any other charges, including attorneys’ fees and protective advances; and then (iii) all remaining
amounts, if any, shall be applied against and reduce the then outstanding principal balance of this
Note.
If an Event of Default shall occur hereunder or under the Loan Agreement or any
Security Document and any cure period provided for in the Loan Agreement or such Security
Document has expired, the Borrower agrees to pay a default rate of interest equal to ten percent
(10.00%) per annum as the applicable interest rate of this Note, and the entire principal amount
outstanding, accrued interest and any other charges due hereon shall at once become due and
payable at the option of the Lender or the holder hereof. Any failure of the Lender to exercise its
right to increase the interest rate by the default rate of interest set forth above or its option to
accelerate this Note at any time shall not constitute a waiver of the right to exercise the same
right to increase the interest rate or accelerate at any subsequent time. Notwithstanding anything
contained herein to the contrary, the default rate of interest hereon shall never exceed the highest
rate permitted by law.
The Borrower may prepay the principal under this note at any time and from time to time,
in whole or in part, without premium or penalty. No partial prepayment shall postpone the due
date of any Monthly Installment or reduce the amount of any such Monthly Installment unless
the Lender agrees otherwise in writing.
All sums payable to the Lender under this Note shall be paid in immediately available
funds.
The Borrower promises to pay all costs in connection with the enforcement of this Note,
including but not limited to, those costs, expenses and attorneys’ fees of Lender whether or not
suit is filed with respect thereto and whether or not such cost or expense is paid or incurred or to
be paid or incurred prior to or after the entry of judgment or for the pursuance of, or defense of,
any litigation, appellate, bankruptcy or insolvency proceeding.
Presentment, notice of dishonor and protest are hereby waived by all makers, sureties,
guarantors and endorsers hereof. This Note shall be binding upon Borrower, its successors and
assigns.
The remedies of Lender, as provided herein and in the Loan Agreement and the Security
Documents, shall be cumulative and concurrent and may be pursued singly, successively or
together, at the sole discretion of Lender, and may be exercised as often as occasion therefor
shall occur; and the failure to exercise any such right or remedy shall in no event be construed as
a waiver or release thereof.
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Time is of the essence hereof.
This Note shall be governed by and be construed under the laws of the State of Minnesota,
without regard to principles of conflicts of law.
\[Signature Page Follows\]
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IN WITNESS WHEREOF
, the undersigned has caused this Note to be effective as of the
day and year first above written.
SCOTT MORRELL, LLC
a Minnesota limited liability company
By:
Terry Morrell
Its: President
S-1
464438v2 EL185-33
ECONOMIC DEVELOPMENT AUTHORITY
OF THE CITY OF ELK RIVER
COUNTY OF SHERBURNE
STATE OF MINNESOTA
RESOLUTION NO. _________
RESOLUTION APPROVING LOAN AGREEMENT AND RELATED DOCUMENTS
(MORRELL PROJECT)
WHEREAS, the Board of Commissioners (the “Board”) of the Economic Development
Authority of the City of Elk River (the “EDA”) has received a proposal from Scott Morrell, LLC
(the “Borrower”) that the EDA assist in financing the Borrower’s acquisition certain real property
by providing a loan to the Borrower in the amount of $200,000 (the “Loan”) pursuant to the EDA’s
Microloan Program (the “Program”).
WHEREAS, the EDA has caused to be prepared a Loan Agreement (the “Loan
Agreement”) with the Borrower setting forth, among other things, the terms and conditions under
which the EDA will make the loan, a copy of which is on file with the Executive Director.
NOW THEREFORE, BE IT RESOLVED by the Board of Commissioners of the Economic
Development Authority of the City of Elk River as follows:
1.01. Subject to approval by the City Council after a public hearing, the Loan Agreement as
presented to the EDA, together with all related documents necessary in connection therewith, including
without limitation, a Promissory Note from the Borrower evidencing the Loan, a Mortgage in certain
real property, a Security Agreement in certain equipment, personal guaranties from Terry Morrell and
Renee Morrell, and an entity guaranty from Morrell Oversize, Inc. (all as defined in and described in the
Loan Agreement) (collectively, the “Loan Documents”) are hereby in all respects approved, in
substantially the form submitted and the President and Executive Director are hereby authorized and
directed to execute the Loan Agreement and any Loan Documents to which it is a party on behalf of
the EDA and to carry out, on behalf of the EDA, the EDA’s obligations thereunder.
1.02. The approval hereby given to the Loan Documents includes approval of such
additional details therein as may be necessary and appropriate and such modifications thereof, deletions
therefrom and additions thereto as may be necessary and appropriate and approved by legal counsel to
the EDA and by the President and Executive Director prior to executing said documents; and said
officers are hereby authorized to approve said changes on behalf of the EDA. The execution of any
instrument by the President and Executive Director shall be conclusive evidence of the approval of
such document in accordance with the terms hereof. In the event of absence or disability of said
officers, any of the documents authorized by this Resolution to be executed may be executed without
further act or authorization of the Board by any duly designated acting official, or by such other officer
or officers of the Board as, in the opinion of the City Attorney, may act in their behalf.
464430v2 JSB EL185-33
Approved by the Board of Commissioners of the Economic Development Authority of the
City of Elk River this 20th day of July, 2015.
President
ATTEST:
Executive Director
464430v2 JSB EL185-33
CITY OF ELK RIVER
RESOLUTION #2015-____
APPROVING PROPERTY TAX ABATEMENT FOR
CERTAIN REAL PROPERTY IN THE CITY PURSUANT TO
MINNESOTA STATUTES, SECTIONS 469.1812 TO 469.1815
AND SPECIFYING THE TERMS THEREOF
WHEREAS, the City of Elk River, Minnesota (the “City”) is authorized by Minnesota Statutes,
Sections 469.1812 to 469.1815 (the “Abatement Act”) to grant a property tax Abatement (as defined in
Section 3 of this resolution) in order to achieve one or more public purposes identified in the
Abatement Act;
WHEREAS, the City has reviewed a proposal by Morrell Properties, LLC (the “Developer”) to
construct an approximate 13,824 square foot manufacturing facility (the “Facility”) to be located in the
City on the property identified as Lot 1, Block 2, Natures Edge Business Center, tax parcel number 75-
820-0205 (the “Development Property”);
WHEREAS, the City proposes to sell the Development Property to the Developer, and to that
end, the City will consider approving a Purchase Agreement between the City and Developer (the
“Purchase Agreement”);
WHEREAS, the Development Property is not located in a tax increment financing district;
WHEREAS, the City and the Economic Development Authority of the City of Elk River (the
“EDA”) have also determined that is reasonable and necessary to provide certain financial assistance to
Developer in order to facilitate Developer’s plans for the Facility and the Development Property, and to
that end, the City will consider approving aTax Abatement and Business Subsidy Agreement between
the City and Developer (the “Abatement Agreement”);
WHEREAS, among other things, the proposed Abatement Agreement will provide that the
City will assist the Developer in financing a portion of the cost of the Facility, subject to certain terms
and conditions, including the adoption of this resolution (the “Abatement Assistance”); and the
Developer will construct the Facility, subject to certain terms and conditions;
WHEREAS, on the date hereof, the City conducted a duly noticed public hearing on the
Abatement at which the views of all interested persons were heard;
WHEREAS, all capitalized terms in this resolution have the meanings provided in the
Abatement Agreement unless context clearly requires otherwise;
NOW, THEREFORE, BE IT RESOLVED BY the City Council (the “Council”) of the
City of Elk River, Minnesota as follows:
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1. Benefits Equal Costs. It is hereby found and determined that the benefits to the City
from the Abatement will be at least equal to the costs to the City of the Abatement for the following
reasons:
(a) The Abatement will stimulate commercial development and therefore will increase the
tax base.
(b) The Facility will generate significant City tax revenues after termination of the
Abatement, which revenues will far exceed the amount of the Abatement itself.
2. Public Purposes. It is further found and determined that the Abatement will serve the
following public purposes set forth in Section 469.1813, subdivision 1 of the Abatement Act:
(a) The Abatement will stimulate commercial development and therefore will increase
the tax base.
(b) The Abatement will provide employment opportunities in the City.
3. Abatement Approved. The Abatement is hereby approved and adopted subject to the
following terms and conditions:
(a) “Abatement” or “Abatements” means the City’s share of annual real estate taxes on
the Development Property for a term of up to 15 years in a principal amount not to exceed
$121,609 with interest as provided in the Abatement Agreement.
(b) The City will pay the Abatements in the amount, at the time, and in accordance with
all the terms and conditions set forth in the Abatement Agreement, which are incorporated herein
by reference.
(c) The Abatement is subject to modification in accordance with the Abatement Act, but
only to the extent so permitted under the terms of the Abatement Agreement.
(d) In accordance with Section 469.1815 of the Abatement Act, the City will add to its levy
in each year during the term of the Abatement the total estimated amount of current year Abatement
granted under this resolution.
(e) The City makes no warranties or representations regarding the amount or availability of
the Abatements.
(f) In accordance with Section 469.1813, subdivision 8 of the Abatement Act, in no case
shall the Abatement, together with all other abatements approved by the City under the Abatement Act
and paid in any one year exceed the greater of 10% of the City’s net tax capacity for that year or
$200,000.
5. Execution of Documents. The City Council hereby approves the Purchase Agreement,
the Abatement Agreement and any related documents necessary in connection therewith
(collectively, the “Documents”) and, the Mayor and City Clerk are hereby authorized and directed to
execute the Documents to which the City is a party on behalf of the City and to carry out, on behalf
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of the City, the City’s obligations thereunder. In the event of absence or disability of the officers,
any of the Documents authorized by this Resolution to be executed may be executed without
further act or authorization of the Council by any duly designated acting official, or by such other
officer or officers of the City as, in the opinion of the City Attorney, may act in their behalf. In
accordance with Section 116J.994, Subd. 3(d) of the Business Subsidy Act, the City further approves
a Loan Agreement between the Economic Development Authority of the City of Elk River (the
“EDA”) and the Developer and consents to the EDA entering into the Loan Agreement and related
documents with the Developer.
6. Finalizing Documents. The approval hereby given to the Documents includes
approval of such additional details therein as may be necessary and appropriate and such
modifications thereof, deletions therefrom and additions thereto as may be necessary and
appropriate and approved by legal counsel to the City and by the officers authorized herein to
execute said Documents prior to their execution; and said officers are hereby authorized to approve
said changes on behalf of the City. The execution of any instrument by the appropriate officers of
the City herein authorized shall be conclusive evidence of the approval of such Document in
accordance with the terms hereof.
7. Conflicting Provisions. In the event of a conflict between the content of this resolution
and the Documents, the terms of the Documents shall prevail.
8. Effective Date. This resolution is effective upon execution in full of the Abatement
Agreement.
th
Approved by the City Council of the City of Elk River this 20 day of July, 2015.
Mayor
ATTEST:
City Clerk
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