The URL can be used to link to this page

7.0.EDSR 06-14-2004 ITEM # 7. City of Elk -�-� River MEMORANDUM TO: Economic Development Authority FROM: Catherine Mehelich, Director of Economic Development DATE: June 14, 2004 SUBJECT: Consider Micro Loan and Tax Rebate Financing Assistance for Badger Ventures, LLC (Gradient Technology) Project Attachments • Ms. Steinmetz Staff Report Re: Micro Loan Policy Amendments and Micro Loan Application from Badger Ventures,LLC Application,June 14, 2004. • The Bank of Elk River Financing Proposal for Gradient Technology,May 27,2004. 1110 • City of Elk River Business Subsidy Policy. • Correspondence from Sid Inman, Ehlers &Assoc. Re: Gradient Technology,June 2, 2004. • Tax Rebate Financing Policy and Staff Proposal Review Worksheet,June 11,2004. • Draft City Council Resolution Approving Property Tax Abatements. • Draft Tax Abatement and Business Subsidy Agreement. Background At its April meeting the City Council held a public hearing on the Tax Abatement (Tax Rebate Financing) request and business subsidy for Badger Ventures,LLC. The EDA and Council took no action on the request due to several unresolved issues related to the Tax Rebate Financing (TRF) application. The unresolved issues included: • Identification of a bank lender and proposed project financing terms • The possibility of an EDA Micro Loan request of up to $100,000 • Identification of the amount and source of eligible equity • Completion and review of a but for analysis At its May meeting the EDA requested that the Finance Committee consider making a recommendation to the EDA regarding possible amendments to the Industrial Incentive ($100,000) Micro Loan Program eligibility for citywide use rather than limited to the West Business Park. In addition, the Finance Committee was asked to review and make recommendation on a Micro Loan application from Badger Ventures,LLC (Gradient Technology). Consider Financing Assistance for Badger Ventures,LLC (Gradient Technology)Project June 14,2004 EDA Meeting Page 2 of 3 Project Description Gradient Technology (G.D.O., Inc.) demilitarizes munitions for various branches of the military. None of the demilitarization is performed at the company's Minnesota facility,but rather at Crane Naval Service Warfare Center in Crane, Indiana. The Minnesota facility will be used for Gradient Technology's business office and for providing chemical engineering design services and equipment fabrication. The company will also have a lab for conducting research and development. The company currently employs 13 full-time staff,including 7 based in Minnesota and 6 in Indiana and elsewhere. The positions have an hourly wage between$15-75.00 per hour. Staff has been in contact over the past one and a half years with Eric Haehn,Vice President/CFO of Gradient Technology. The company currently leases space in Blaine,MN and is seeking a suitable location within the northwest metro area to relocate. Badger Ventures,LLC proposes to construct a 13,000-square foot light industrial/business park building for lease to Gradient Technology's office,research&development, and equipment fabrication operation. Badger Ventures proposes to purchase 2.05-acres within the Elk River Business Park and has requested that the city and county consider a write down of the land cost ($145,556) to $0 through a pay-as-you-go note to the limited liability company. Analysis Bank Lender, Micro Loan and Financing Terms The company has selected The Bank of Elk River as its primary lender for the project. The bank's financing terms is attached. In addition the company applied for$100,000 from the city's Industrial Incentive Program Micro Loan. The attached memo from Assistant Director of Economic Development, Heidi Steinmetz, outlines the committee's recommendations regarding policy amendments and the current application. In addition to the 7 existing Minnesota based positions the company is committing to create up to 5 new positions at the Minnesota facility within 2-years. The new positions will likely consist of management and engineers at a wage range between$15-75.00 per hour. The job and wage goals for Badger Ventures,LLC & Gradient Technology meet the attached City of Elk River Business Subsidy Policy that requires the job creation to have a minimum wage of$15.00 per hour, exclusive of benefits. The project sources and uses include: Project Costs Land—2.05 Acres $ 145,556 Construction— 13,000 SF $1,035,000 Total Project $1,180,556 Project Financing Bank Loan $ 883,500 • EDA Micro Loan $ 100,000 °el Cash Equity 4% $ 47,056—cash Eligible Equity 5% $ 60,000—exhaust hoods purchased Ineligible Equity $ 90,000—company labor Total $1,180,556 Consider Financing Assistance for Badger Ventures,LLC(Gradient Technology)Project June 14,2004 EDA Meeting Page 3 of 3 . Eligible Equity and But-For Analysis The Tax Rebate Financing does not appear in the project financing since the city and county would be providing the TRF on a pay-as-you-go basis and the company is financing the upfront land cost. For the purpose of the Micro Loan Policy and the Tax Rebate Financing Policy, the estimated $90,000 in company labor is not counted toward equity requirements of up to 10%. Ehlers &Associates has completed a but-for analysis of the project. The attached email from Sid Inman of Ehlers indicates that the but-for test is met by using the amount of the abatement and the micro loan to make the net land price competitive with available land in other communities. Recommendations Consider Approval of Micro Loan Amendments The Finance Committee has reviewed the Micro Loan Policy and is recommending that the EDA consider approval of the policy amendments as outlined in the attached Ms. Steinmetz staff report. The City Council will also need to consider approval of the Micro Loan Policy amendments. Consider Approval of Badger Ventures, LLC $100,000 Micro Loan Request The Finance Committee has reviewed the application and is recommending that the EDA consider approval of the$100,000 Badger Ventures Micro Loan request with the terms as outlined in the attached Ms. Steinmetz staff report. Since the amount of the loan request qualifies as a business subsidy in accordance with the MN Business Subsidy Statute, the City Council will need to hold a public hearing and consider approval of the Micro Loan as it applies to the business subsidy being provided. Consider Recommendation to City Council for Approval of Badger Ventures TRF Request Gradient Technology has provided the necessary information for the city's consideration of the Tax Rebate Financing request. Staff's analysis via the attached TRF Policy and Staff Proposal Review Worksheet indicates that Badger Ventures,LLC and Gradient Technology have met the minimum requirements of the City's Tax Rebate Financing Policy. Staff recommends that the EDA consider making a recommendation to the City Council for approval of the Badger Ventures,LLC (Gradient Technology) Tax Rebate Financing request up to $72,778 on a pay-as-you-go basis for up to 10- years. The attached resolution and draft Tax Abatement and Business Subsidy Agreement will be provided to the City Council for consideration at its June 21,2004 meeting. The Sherburne County Board of Commissioners will consider the Badger Ventures TRF request for up to $72,778 and the EDA's recommendation at its June 15, 2004 meeting. 1111 City of Elk -�-1 River MEMORANDUM TO: Economic Development Authority FROM: Heidi Steinmetz, Assistant Director of Economic Development 45 DATE: June 14, 2004 SUBJECT: Consider Micro Loan Fund Policy Amendments and Micro Loan Application: Badger Ventures, LLC (Gradient Technology) Attachments • City of Elk River Micro Loan Fund Policy • Finance Committee Minutes &Staff Memos o June 1, 2004 o June 9, 2004 • • Application—Badger Ventures,LLC (Gradient Technology) Issue On June 1 and June 9, 2004, the Finance Committee reviewed the attached Micro Loan Fund Policy regarding the criteria for the Industrial Incentive Program. Suggested Micro Loan Policy Amendments • Eliminate the Supplemental Micro Loan Program • All Micro Loans be consummated via a bank participation loan • Add to the bank participation loan agreement and the Business Subsidy Agreement o "If Borrower defaults on the loan, the City will collect based on a pro-rata basis with the participating bank" o "If Borrower does not meet the job and wage goals specified in the Subsidy Agreement, the interest rate will change to 2 points above the participating bank's rate, effective from the two year anniversary of the loan closing. Upon subsequent achievement of the jobs and wage goals, the interest rate will revert back to the rate when the loan was originated, effective from the date of attainment of the job and wage goals" • Amend the following Industrial Incentive Program Criteria: o Amount: Eliminate"Up to $100,000 of secondary financing not to exceed 40% of the project cost" and change to "up to $100,000 of secondary financing not to exceed 20% of the project cost" o Rate: Eliminate "4 points below the lowest prime rate published..."and change to "2 points below the lowest prime rate published in the Wall Street Journal the day the loan is closed, or 3 %whichever is greater" Consider Micro Loan Application: Badger Ventures,LLC(Gradient Technology) EDA—June 14,2004 Page 2 of 2 o Term: Add"Balloon payment must not be longer than balloon payment of the participating bank" o Criteria: Eliminate "Borrower must locate in the West Business Park" Badger Ventures Application On June 9,2004 the Finance Committee unanimously recommended that the EDA consider awarding Badger Ventures,LLC a$100,000 Industrial Incentive Program Micro Loan contingent upon and subject to proposed amendments to the Micro Loan Policy. The proposed use of the loan is to finance construction costs of a new 13,000 square foot light industrial/business park building in Elk River. The loan is proposed to be structured as a participation loan with The Bank of Elk River. A representative from Gradient Technology will be available at the EDA meeting to discuss the proposed project and answer questions. Recommendations Staff recommends that the EDA consider the suggested amendments to the Micro Loan Fund Policy regarding the following: • Criteria for the Industrial Incentive Program • Eliminate the Supplemental Micro Loan Program • All Micro Loans be consummated via a bank participation loan 111. Regarding the suggested additions to the bank participation loan agreement and the Business Subsidy Agreement, staff recommends that the EDA consider maintaining the current agreements. It is important that industrial financing incentives remain flexible while meeting, not exceeding, the MN Business Subsidy Law. Staff also recommends that the EDA consider approval of the application from Badger Ventures,LLC (Gradient Technology) for a $100,000 Industrial Incentive Program Micro Loan upon consideration of the proposed Micro Loan Policy amendments. The terms of the loan are as follows: Rate fixed, 2 points below prime with a 3% floor Term 15-year amortization,up to 5-year balloon payment Security Secured by 2"d position on the real estate,personal guarantee from owners and spouses Structure participation loan with The Bank of Elk River Job performance agreement to include 5 new full-time jobs in Elk River with (subsidy agreement) estimated wages ranging from$15-$75.00 within 2- years ELK RIVER ECONOMIC DEVELOPMENT MICRO LOAN FUND POLICY & GUIDELINES Revised April 2003 PURPOSE The Economic Development Authority for the City of Elk River (EDA) recognizes the need to stimulate private sector investment into manufacturing facilities and equipment in order to create new jobs, boost productivity and retain existing jobs for local residents.Additionally, the need exists to encourage investment in the expansion and/or rehabilitation of commercial and retail buildings in order to maintain the economic viability of Elk River's central business district. Subsequently, the purpose of this program is to provide low interest, long-term (i.e. greater than one year) loans as incentives for industrial development within the City of Elk River and to encourage commercial and retail business owners in the central business district to rehabilitate their existing buildings. II. LOAN PROGRAMS In order to meet the economic and community development objectives of the EDA, three distinct loan programs exist within the Micro Loan Fund to promote business growth in Elk River. Supplemental Financing Program Purpose: The Supplemental Financing Program is designed for industrial firms who have maximized their conventional financing and equity resources and subsequently would be unable to complete a project without EDA assistance. Amount: Up to $50,000 of secondary financing (not to exceed 40% of the project cost. Equity: Must have private-sector commitments for 50% of the project cost. Borrower to provide 10% or more of project financing. Rate: Fixed; 1 point below the lowest prime rate published in the Wall Street Journal the day the loan is closed, or 2%, whichever is greater. Term: Financing with a balloon payment in up to 3-years. Loans may be amortized up to the following limits: 15-years on real estate uses; 10-years on equipment uses. Extension: In the event that the Borrower is unable to obtain conventional financing to replace the Micro Loan at the end of three years, the • loan may be extended up to two additional years at a market rate of interest. Elk River Economic Development Authority Micro Loan Fund Policy&Guidelines Page 2 of 8 Criteria: 1. Borrower must create one new full-time job for each $20,000 loaned within two years. Said jobs must pay a minimum wage of$9.00 per hour plus benefits. Borrower will also be required to meet certain provisions of the City's Business Subsidy Policy. 2. Borrower must be an industrial firm and comply with the provisions of the city's industrial and business park zoning ordinances. Redevelopment Financing Program Purpose: The Redevelopment Financing Program is available to business and property owners in the central business district (CBD) for the rehabilitation and restoration of their buildings. Amount: Up to $50,000 of secondary financing (not to exceed 40% of the project cost. Equity: Must have private-sector commitments for 50% of the project cost. Borrower to provide 10% or more of project financing. Rate: Fixed; 2 points below the lowest prime rate published in the Wall Street Journal the day the loan is closed, or 2%,whichever is greater. Term: Financing with a balloon payment in up to 3-years. Loans may be /11111 amortized up to the following limits: 15-years on real estate uses; 10-years on equipment uses. Extension: In the event that the Borrower is unable to obtain conventional financing to replace the Micro Loan at the end of three years, the loan may be extended up to two additional years at a market rate of interest. Criteria: 1. At a minimum, 20% of Micro Loan dollars must be used for the improvement of the building's facade. 2. Borrower must be located in the Central Business District (see attached map). Industrial Incentive Program Purpose: The purpose of the Industrial Incentive Program is to encourage industrial development that supports the tax base and brings quality jobs to the city. Amount: Up to $100,000 of secondary financing (not to exceed 40% of the project cost. rEquity: have private-sector commitments.for 50% of the project cost. Borrower to provide 10% or more of project financing. Elk River Economic Development Authority Micro Loan Fund Policy&Guidelines Page 3 of 8 Rate: Fixed;4 points below the lowest prime rate published in 410 the Wall Street Journal the day the loan is closed, or 2%, whichever is greater. Term: Financing with a balloon payment in up to 5-years. Loans may be amortized up to the following limits: 15-years on real estate uses; 10-years on equipment uses. Extension: In the event that the Borrower is unable to obtain conventional financing to replace the Micro Loan at the end of five years, the loan may be extended up to two additional years at a market rate of interest. Criteria: 1. Borrower must be an industrial firm and create one new full-time job for each $20,000 loaned within 2 years. Said jobs must pay a minimum wage of$10.00 per hour plus benefits. Loans in excess of$75,000 shall meet the City's Business Subsidy Policy for new job and wage goals, as well as location requirements. 2. Borrower must locate in the West Business Park (see attached map)and comply with the provisions of the city's industrial and business park zoning ordinances. 0 III. USES 1. Permitted Fund Uses: a. Building construction b. Land acquisition c. Machinery d. Furniture, fixtures, and equipment (FF&E) e. Renovation and modernization of buildings f. Exterior renovation of retail, commercial and industrial buildings g. Public infrastructure needed for economic development expansions h. Investment real estate with a minimum of 50% of the space pre-leased 2. Ineligible Fund Uses: a. Expenditures for the construction and/or renovation of residential units b. Working capital c. Refinancing of existing debt d. Inventory IV. BUSINESSES ELIGIBILITY Any project meeting the above criteria, and located or proposed to be located within ill the city limits of Elk River as defined by this program, may be eligible for an Economic Development Micro Loan as further defined herein: Elk River Economic Development Authority Micro Loan Fund Policy&Guidelines Page 4 of 8 • Business must be a for-profit corporation, partnership, or sole proprietorship. • • Business must be a small business as defined by the Small Business Administration (SBA). • Business must have a positive net worth. • Religious, political, and pornographic enterprises are not eligible to use the Economic Development Micro Loan Fund. V. MICRO LOAN FUND TERMS & CONDITIONS 1. Loan Structure All EDA Micro Loans will be structured as participation loans and will be serviced by the project's primary lending institution. Such an arrangement allows for the central distribution and collection of funds and simplifies the financing process for all parties involved. A participation agreement will be signed by the borrower, primary lender and the EDA. The EDA may require additional agreements to be signed by the borrower (i.e. security agreement,personal guarantees, job performance agreement). 2. Simultaneous Micro Loans The simultaneous use of different Micro Loan Fund Programs by any one borrower or for any one project is prohibited. 3. Call of Loan 411/ A loan shall become due and payable in full if a business relocates outside of the city of Elk River prior to the maturity date of the EDA loan. 4. Late Payment Charge A late payment charge of up to 8% of the installment amount may be enforced. VI. REGULATION FOR NEW CONSTRUCTION AND IMPROVEMENTS All buildings which public funds will be used for construction or renovation are to be brought into conformance with city codes and policies. Repairs may include the following systems and portions of real property: a. Mechanical heating, plumbing, and electrical b. Structural;including the facade of the structure and energy related improvements. c. Hook-up to city services (i.e. water, sewer) VII. LOAN SECURITY AND GUARANTEES 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. Elk River Economic Development Authority Micro Loan Fund Policy&Guidelines Page 5 of 8 VIII. TIMING OF PROJECT EXPENSES 411 No project should commence until the Elk River Economic Development Authority has approved the loan application. Any costs incurred prior to the approval of the loan application are generally not eligible expenditures. No building construction should commence until the required City permits are secured. The applicant will be responsible for all legal, recording, and other fees required for protection of a security interest in the loan, payable by a 1% processing fee,which is paid at the time of application. IX. PROCEDURAL GUIDELINES FOR APPLICATION AND APPROVAL 1. All applicants shall first contact a primary lending institution to determine if additional equity is needed, and if so, how much. 2. The applicant and the primary lender shall then meet with City Staff to obtain information about the Micro Loan program, discuss the project, and obtain application forms. 3. The applicant shall complete and submit an application form to the City, along with a processing fee of 1% of the loan request. (The fee is used to cover processing expenses and will be returned if application is denied.) The applicant • must provide evidence of their ability to meet the equity requirements or provide a letter of commitment for conventional financing from the primary lending institution. 4. The application will be reviewed by the City staff to determine if it conforms to all City policies and ordinances and to consider the following: a. The availability and applicability of other governmental grants and/or loan programs. b. Whether the proposed project will result in conformance with building and zoning codes. c. Whether it is desirous and in the best interests of the public to provide funding for the project. 5. The EDA Finance Committee and EDA Commissioners will review each application in terms of its consistency with the goals of the Growth Management, Strategic, and Economic Development Plans and in relation to the project's overall impact on the community's economy. Redevelopment Loan applications will also be reviewed by an HRA member in conjunction with the EDA Finance Committee. They will also evaluate the project application in terms of the following: • a. Project Design - Evaluation of project design will include review of proposed activities, time lines and a capacity to implement. Elk River Economic Development Authority Micro Loan Fund Policy&Guidelines Page 6 of 8 b. Financial Feasibility-Availability of funds,private involvement, financial packaging and cost effectiveness. • • Appropriate ratio of private funds to Micro Loan funds. • Sufficient cash flow to cover proposed debt service as demonstrated by financial statements and projections. • Business must show a positive net worth. • Letter of Commitment from applicant pledging to complete the project during proposed project duration, if the loan application is approved. • Letter of Commitment from other financing sources stating terms and conditions of their participation in the project if applicable. • Sufficient collateral. 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 Micro Loan 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. 6. A written request for an extension shall be accompanied by a copy of current financial statements and a $500 upfront processing fee. The processing fee is used to cover processing expenses and will be returned if request is denied. The • application for an extension beyond the original term should include a letter of denial from a conventional lender. Refinancing will not be allowed solely for the purpose of reducing the interest rate due to lower market interest rates. Elk River Economic Development Authority Micro Loan Fund Policy&Guidelines Page 7 of 8 7. The EDA Finance Committee will recommend the approval, denial, or request a . resubmission. A recommendation from the Finance Committee will be forwarded to the EDA for final action. X. LOAN POLICY REVIEW The above criteria will be reviewed on an annual basis to ensure that the policies reflected in this document are consistent with the economic development goals set forth by the City. XI. COMPLIANCE WITH STATE STATUTES Each company receiving assistance in excess of$75,000 from the EDA Micro Loan Fund shall be subject to the provisions and requirements set forth by Minnesota State Statute 116J.993 and the City's Business Subsidy Policy summarized below: Progress Reports The borrower shall file a report annually for two years after the closing of the loan or until all goals set forth in the application have been meet,which ever is later. Reports shall be completed using the format drafted by the State of Minnesota and shall be filed with the City in March of each year for the previous year. Maintain Facility The borrower agrees to maintain and operate its facility at the site where the loan is used for a period of 5-years after the date the loan is closed. Goal Attainment In addition to attaining or exceeding the jobs and wages goals set forth in Section IV of the Application, the borrower agrees to achieve at least one of the goals for community development set forth in Section IX,part 5, subdivision (e) of the Micro Loan Fund Policy. Redevelopment loans in the central business district are exempt from job creation and wage goals stated in Section IX, part 5, subdivision (e) provided the loan amount does not exceed 50% of the project cost. Failure to Comply Businesses failing to comply with the above provisions will be subject to fines, repayment requirements in accordance with the state statute, and be deemed ineligible by the State to receive any loans or grants from public entities for a period of 5-years. XII. RIGHT OF REFUSAL The Elk River Economic Development Authority may deny any project which it deems inappropriate according to the guidelines established in this document. . Elk River Economic Development Authority Micro Loan Fund Policy&Guidelines Page 8 of 8 MEETING OF THE EDA FINANCE COMMITTEE • HELD AT THE ELK RIVER CITY HALL TUESDAY,JUNE I, 2004 Members Present: Chris Carlson,Steve King, Cliff Lundberg,Tom McNair (excused at 5:20 for discussion on Badger Ventures recommendation),Paul Motin (excused at 5:15 p.m.) and Jim Simpson (excused at 5:20 for discussion on Badger Ventures recommendation) Members Absent: Dan Tveite Staff Present: Assistant Director of Economic Development Heidi Steinmetz 1. Presentation by Duane Goetsch of Badger Ventures.LLC (Gradient Technology) Mr. Goetsch provided an overview of the project. The Finance Committee asked questions regarding the following issues: • Company ownership • Details regarding a legal tie between Badger Ventures and Gradient Technology • Proposed lease structure between Badger Ventures and Gradient Technology • Confirmation that Badger Ventures requested the$100,000 yet won't be providing the proposed 5 jobs. Gradient Technology would actually provide the jobs. • Status,of the company's MN Technology,Inc. grant • • The company's forbearance issue • Expansion needs beyond the proposed project • Experience with government contracts • Aftermarket for the company's machinery and equipment • Whether the jobs located at Gradient Technology's Blaine location will be moved to Elk River • Amount of truck deliveries per day • Need for outside storage • Confirmation that the potential tiny explosions during testing are indoor only • Details on the 35%Minority Interest line item on Table 2.1 of Gradient Technology's Past Financial Performance • Relationship with Alliant Tech Mr. Goetsch was excused from the meeting to allow the committee to discuss the application and determine a recommendation for EDA consideration. 2. Micro Loan Policy Discussion Mrs. Steinmetz stated that the Badger Ventures request for$100,000 does not meet the Industrial Incentive Program criteria,which states that the applicant must locate in the West Business Park. Mr. McNair stated that when the Industrial Incentive Program criteria were established that SoftPac and the Allina clinic were not located out west at the time. • Mr. Motin stated that a discussion took place at the recent Economic Development Strategic Planning Sessions regarding the need for industrial development out west. EDA Finance Committee Minutes Page 2 June 1,2004 • Mr. Motin excused himself from the meeting. Mr.Lundberg stated that he is concerned that the Finance Committee and EDA are being asked to consider awarding the$100,000 to finance a spec building. Mr. McNair mentioned that the Finance Committee and EDA approved a loan for the R&W building,which is a similar project. Mr.Lundberg asked about the interest rate differential between the Supplemental Program and the Industrial Incentive Program. Mrs. Steinmetz stated that the Supplemental Program is 1% below prime with a 2% floor and that the Industrial Incentive Program is 4%below prime with a 2% floor. Mr. Simpson stated that the Industrial Incentive Program criteria is not preventing industrial prospects from locating in the West Business Park,rather the lack of a joint marketing agreement between the City'and the private landowners is what is preventing industrial development. Mr. Simpson added that industrial prospects should be able to request loan funds without location provisions. THE FINANCE COMMITTEE RECOMMENDS THAT THE EDA CONSIDER ELIMINATING THE SUPPLEMENTAL MICRO LOAN PROGRAM AND THAT THE INDUSTRIAL INCENTIVE PROGRAM RATE CRITERIA BE CHANGED TO 2%BELOW PRIME WITH A 3% FLOOR. THE MOTION CARRIED 5-0. 3. Badger Ventures Micro Loan Application Discussion Committee members Mr. McNair and Mr. Simpson excused themselves from the discussion since The Bank of Elk River is financing a portion of the project. Mr. Carlson,Mr.Lundberg and Mr. King discussed the application. Mr. Lundberg stated that he would like a personal guarantee from the Badger Ventures owners and from Gradient Technology. Mr.Lundberg also stated that he would like the lease between Badger Ventures and Gradient Technology to specify a legal tie between the two companies. Mr. King inquired of any claw back provisions within the City's Business Subsidies Policy that will be held between the City and Badger Ventures. Mrs. Steinmetz stated that the company would have to repay the loan in full if job and wage goals were not met. Mr. King stated that he would like more provisions within the Business Subsidies agreement between the City and Badger Ventures. Mr.Lundberg concurred. The Committee suggested the following verbiage for a motion: The Finance Committee recommends that the EDA consider awarding Badger Ventures,LLC a$100,000 Industrial Incentive Micro Loan contingent upon the following: • Personal guarantee from the owners of Badger Ventures,LLC and Gradient Technology • A clear legal tie between Badger Ventures,LLC and Gradient Technology Since the Committee requested additional information (the City's Business Subsidies Policy) and due to a lack of a quorum,there was no action on the Badger Ventures request. Mrs. , Steinmetz stated that the Committee will have to consider the Badger Ventures application and motion for recommendation to the EDA at a later date. EDA Finance Committee Minutes Page 3 June 1,2004 4. Closing The EDA Finance Committee meeting ended at 5:30 p.m. Respectfully submitted by, % 2,Ste22L-/n-e-r- Heidi Steinmetz Assistant Director of Economic Development 11/4„ (.... . City of Elk -�-� River MEMORANDUM TO: EDA Finance Committee CC: Lori Johnson, Finance Director FROM: Heidi Steinmetz, Assistant Director of Economic Development .1.--\--S DATE: June I, 2004 SUBJECT: Micro Loan Application: Badger Ventures, LLC (Gradient . Technology) Issue Co-owner of Badger Ventures, T C, Duane Goetsch, has submitted the attached application for an Industrial Incentive Program Micro Loan in the amount of$100,000 to be used for . the construction of a new industrial/business park blinding in Elk River. The loan is proposed to be structured as a participation loan with The Bank of Elk River. Background Badger Ventures, T C proposes to construct a 13,000-square foot building for lease to Gradient Technology. Gradient Technology is currently leasing space in Blaine, MN and has been looking to expand in the Northwest Metro area for the past 1.5 yrs. Since 1996, Gradient Technology has demilitarized munitions for various branches of the military. None of the demilitarization will be performed in Elk River, but rather at Crane Naval Service Warfare Center in Crane, Indiana. The building will be used for Gradient Technology's business office, lab for conducting research and development and for providing chemical engineering design services and equipment fabrication. The applicant proposes to use the Micro Loan funds to finance construction costs itemized on the attached Project Budget Report. The applicant has proposed that the EDA take a second position on the real estate. The project costs include: _ Proiect Costs: , Land-2.05 Acres $145,556 Construction $1,035,000 Total $1,180,556 Micro Loan Application: Badger Ventures,LLC(Gradient Technology) EDA Finance Committee—June 1,2004 , Page 2 of3 9 Proposed Project Financing: Bank Loan $883,500 Private Equity $47,056—cash $60,000—exhaust hoods purchased $90,000—company labor EDA Micro Loan $100,000 Total $1,180,556 In addition, the company has requested a land write-down using City and County Tax Rebate Financing (TRF) in the amount of$145,556 ($72,778 from the City and $72,778 from the County). The TRF will be assigned to The Bank of Elk River and first used to pay the Micro Loan. jobs The company currently employs 13 full-time staff, including 7 based in Blaine, Minnesota and 6 in Indiana and elsewhere. The positions have an hourly wage between$16-$75.00 per hour. The company anticipates creating up to 5 new full-time jobs in Elk River with estimated wages ranging from $10-$75.00 within 2-years. Micro Loan Criteria In addition to the financial criteria that must be considered, the Finance Committee must 4110 also consider to what degree the applicant satisfies the criteria set forth in the attached Micro Loan Fund policy: The attached March 4, 2003 Finance Committee minutes indicate that the Committee discussed that the $100,000 Industrial Incentive Program criteria should continue to specify that the borrower must locate in the West Business Park. The EDA approved this and several amendments to the Micro Loan Policy in April of 2003. The EDA has recently requested the Finance Committee's review and recommendation of whether the $100;000 program should be eligible city-wide. The attached Finance Committee minutes and memo indicate that the Finance Committee and EDA also discussed this issue in 1997 and 1999. Gradient Technology has identified a 2.05 acre site in the Elk.River Business Park (East Business Park). Below are additional comparisons between the Industrial Incentive Program Micro Loan criteria and the company's proposal: Micro Loan Criteria Gradient Technology * Max. Loan Amount: $100,000 * Amount requested: $100,000 * Interest Rate: 4 below prime, 2% floor * Rate requested: 4 below prime, 2% floor * 1 job created per $20,000 loaned * 1 job created per $20,000 loaned * Min. average wage of$10 per hour * Estimated wage range of$10-$75 per hour *Location: West Business Park *Location: East Business Park As in past Micro Loan meetings, the applicant will be given an opportunity to present the • project and application. Following the presentation the Finance Committee may ask questions of the applicant. The applicant will then be excused from the meeting, allowing Micro Loan Application: Badger Ventures,LLC(Gradient Technology) EDA Finance Committee—June 1,2004 Page 2of3 the committee to discuss the application and determine a recommendation for EDA consideration. Attachments • May 4, 2004 Finance Committee Minutes • Application—Badger Ventures, TIC,including the following attachments: o Business Plan o Project Budget Report o Preliminary site layout and building plans o Management structure o Resumes of owners/management o Personal Financial Statements of owners/management o. Commitment letter from applicant • City of Elk River Micro Loan Fund Policy • March 4, 2003 Finance Committee Minutes • July 20, 1999 Finance Committee Memo • August 21, 1997 Finance Committee Minutes • OMEETINGPoliOF THE EDA FINANCE COMMITTEE cy HELDDiscussATion THE ELK RIVER CITY HALL WEDNESDAY,JUNE 9, 2004 Members Present: Steve King,Cliff Lundberg,Paul Motin and Dan Tveite Members Absent: Tom McNair,Jim Simpson and Chris Carlson Staff Present: Assistant Director of Economic Development Heidi Steinmetz 1. MOVED BY STEVE KING AND SECONDED BY PAUL MOTIN,THE FINANCE COMMITTEE VOTED TO RECONSIDER THE MICRO LOAN POLICY MOTION MADE ON JUNE 1,2004. Discussion points regarding possible amendments to the Micro Loan Fund Policy were as follows: • Should loan amounts reflect the size of the project? • Should commercial,retail and home-based businesses be considered? • Should there be more provisions in the City's Business Subsidies Policy? Due to time constraints,the Committee postponed further policy discussion until later in the meeting. 2. Micro Loan Consider Micro Loan Application: Badger Ventures.LLC (Gradient Technology) Eric Haehn of Gradient Technology entered the meeting and answered questions regarding the following issues: • The company's forbearance issue • Status of the company's MN Technology,Inc.grant • Exhaust hoods included in the equity contribution • Labor included in the equity contribution • Proposed jobs Mr. Haehn was excused from the meeting to allow the committee to discuss the application and determine a recommendation for EDA consideration. Mr.Motin asked that details regarding the exhaust hoods be provided prior to the June 14, 2004 EDA meeting. 3. Continued: Micro Loan Policy Discussion The Committee continued their discussion regarding possible amendments to the Micro Loan Policy. Mr. King expressed his concern that The Bank of Elk River's balloon payment for the Badger Ventures loan is shorter than the balloon payment for the proposed Micro Loan. The Committee discussed that the West Business Park is currently receiving a benefit that other Elk River industrial/business parks are not receiving(Industrial Incentive Program criteria states that borrowers must locate in the West Business Park). The Committee discussed that this is an unfair advantage for the West Business Park. i EDA Finance Committee Minutes Page 2 June 9,2004 • It was of the Finance Committee's consensus that an in depth review of the Micro Loan Policy must occur at a later date,yet initial Micro Loan Policy amendments should take place due to the Badger Ventures application. MOVED BY CLIFF LUNDBERG AND SECONDED BY DAN TVEITE,THE FINANCE COMMITTEE RECOMMENDS THAT THE EDA CONSIDER THE FOLLOWING AMENDMENTS TO THE MICRO LOAN FUND POLICY AND GUIDELINES: • ELIMINATE THE SUPPLEMENTAL MICRO LOAN PROGRAM • AMEND THE FOLLOWING INDUSTRIAL INCENTIVE PROGRAM CRITERIA: o AMOUNT: ELIMINATE"UP TO$100,000 OF SECONDARY FINANCING NOT TO EXCEED 40%OF THE PROJECT COST" AND CHANGE TO "UP TO $100,000 OF SECONDARY FINANCING NOT TO EXCEED 20%OF THE PROJECT COST" o RATE: ELIMINATE"4 POINTS BELOW THE LOWEST PRIME RATE PUPLISHED..."AND CHANGE TO " 2 POINTS BELOW THE LOWEST PRIME RATE PUBLISHED IN THE WALL STREET JOURNAL THE DAY THE LOAN IS CLOSED, OR 3%, WHICHEVER IS GREATER" o TERM: ADD "BALLOON PAYMENT MUST NOT BE LONGER THAN BALLOON PAYMENT OF THE PARTICIPATING BANK" o CRITERIA: ELIMINATE "BORROWER MUST LOCATE IN THE • WEST BUSINESS PARK" THE FINANCE COMMITTEE RECOMMENDS THAT ALL MICRO LOANS BE CONSUMMATED VIA A BANK PARTICIPATION LOAN. THE FINANCE COMMITTEE ALSO RECOMMENDS THAT THE FOLLOWING BE ADDED TO THE BANK PARTICIPATION LOAN AGREEMENT AND THE BUSINESS SUBSIDY AGREEMENT: • "IF BORROWER DEFAULTS ON THE LOAN,THE CITY WILL COLLECT BASED ON A PRO-RATA BASIS WITH THE PARTICIPATING BANK" • "IF BORROWER DOES NOT MEET THE JOB AND WAGE GOALS SPECIFIED IN THE SUBSIDY AGREEMENT,THE INTEREST RATE WILL CHANGE TO 2 POINTS ABOVE THE PARTICIPATING BANK'S RATE,EFFECTIVE FROM THE TWO YEAR ANNIVERSARY OF THE LOAN CLOSING. UPON SUBSEQUENT ACHIEVEMENT OF THE JOB AND WAGE GOALS,THE INTEREST RATE WILL REVERT BACK TO THE RATE WHEN THE LOAN WAS ORIGINATED,EFFECTIVE FROM THE DATE OF ATTAINMENT OF THE JOB AND WAGE GOALS" THE MOTION CARRIED 4-0. .4111 EDA Finance Committee Minutes Page 3 June 9,2004 4.5. ClosCinontignued: Consider Micro Loan Application: Badger Ventures.LLC (Gradient • Technology) MOVED BY DAN TVEITE AND SECONDED BY STEVE KING,THE FINANCE COMMITTEE RECOMMENDS THAT THE EDA CONSIDER AWARDING BADGER VENTURES,LLC A$100,000 INDUSTRIAL INCENTIVE PROGRAM MICRO LOAN CONTINGENT UPON AND SUBJECT TO PROPOSED AMENDMENTS TO THE MICRO LOAN POLICY. THE MOTION CARRIED 4-0. The EDA Finance Committee meeting ended at 6:20 p.m. Respectfully submitted by, /4/64: 26';Z- 14f Heidi Steinmetz Assistant Director of Economic Development • City of Elk -�-1 River MEMORANDUM TO: EDA Finance Committee CC: Lori Johnson, Finance Director FROM: Heidi Steinmetz, Assistant Director of Economic Development \AS DATE: June 9, 2004 SUBJECT: Consider Micro Loan Application: Badger Ventures, LLC (Gradient Technology) Issue The attached meeting minutes summarize the Finance Committee's consideration of the Badger Ventures,LLC Micro Loan application on June 1, 2004. Due to the Committee's 411/ request for additional information (the City's Business Subsidies Policy and information regarding the legal tie between Badger Ventures and Gradient Technology) and a lack of a quorum, there was no action on the Badger Ventures request. Therefore, the Committee must continue discussions on the consideration of the request. The attached memorandum summarizes the request. Business Subsidies Policy The City's Business Subsidies Policy and background material about the MN Business Subsidy Law is attached. Note page five which states that"Each company receiving a business subsidy shall be subject to the subsidy agreement and reporting provisions and requirements set forth by the MN Business Subsidy Law". In addition, Finance Committee members may recall at the recent Economic Development Strategic Planning Sessions that a discussion was held regarding a concern that the City's Business Subsidies Policy$15/hour wage requirement may be too high. Staff requests the Finance Committee's input be provided in a recommendation to the EDA. An analysis of area community business subsidies wages is attached for your review. Legal Tie Between Badger Ventures & Gradient Technology Staff obtained the opinion of the City's TIF/Abatement attorney regarding the legal tie between Badger Ventures and Gradient Technology. Verbiage will be included in the Tax Abatement agreement and the Micro Loan Subsidy Agreement between Badger Ventures and Gradient Technology requiring Badger Ventures to require Gradient Technology to • accomplish job and wage goals. Consider Micro Loan Application: Badger Ventures,LLC(Gradient Technology) EDA Finance Committee—June 9,2004 Page 2 of 2 • Attachments • June 1, 2004 Finance Committee Minutes • June 1, 2004 Memorandum, Micro Loan Application: Badger Ventures,LLC (Gradient Technology) • City of Elk River Business Subsidies Policy • Fact Sheet: 2002 Business Subsidies Law • Frequently Asked Questions About the 2000 Business Subsidies Law • Minnesota Business Subsidies Law Statutes 2003 • Analysis of area community business subsidies wages • • HKH' EC M LON RIND AE.]Cwt o4 • �e r s eco by f�cid( s s---oy< 1 . amnia 1W3M 04 Company: go-J-jer Vert-1-1,,re s L f e' Address: r2 3S Lt) A)esf le../,/,',.e Dr.i'ue -sti.,-;ie 4 City / State / Zip D i,:^° t Pith sI LI Vt9 ContactPerson(s) l7wc•t.e. A . GoE4-s- , Business Phone 763- 792- x/990 Fax 76 3- 79-1- gi97z 1-lome Phone - 61.2 - $/O - 3670 Email goe>-i-se.�, Q c{ra..4. -eco,. eOrpt J �J Check One: Proprietor X. Corporation Z Partnership Social Security No. 321)- Cc - /6 /2 Federal ID # 070 - 0-7 9(,l r7 t State ID # Aii/A 11, t H. N4t}E CF LON FST Which Micro-Loan Program are you applying for? _Supplemental Financing Program Redevelopment Financing Program ,X industrial Incentive Program Amount Requested: $ /00, OOD Total Project Cost: ^2J : 33 . t f BA 5-6-6 Type of project: New construction For a start up business. XNew construction for an existing business. On site expansion Equipment purchase Remodeling: (circle one),Commercial/ Retail / Industrial Cather Please give a brief summary of your business and its products or sen-ice: • rvr -"1 � , r-r--7r. 1 co ; Inn-1niii.i0 1 1117rrruLn a/ C : l n 1.n CT CPi.! • Please give a brief summary of the project: Please describe how this loan will impact your project: Hi. R1UI`G Project Costs Land $ /7,o0°. /15 55-4 Site improvements $ -e'e Buildings (attach plans & costs) see- crtta G!pct $ 74 pr'e ion['rtreJ Equipment/Machinery/Fixtures ptans JJ (attach list and estimated costs) $ Remodeling Industrial Inventory/Working Capital ( e. ,h e $ / 03S, 000 LPi-affect Budget" Other (rte-4 ') i Repo r- rf89 s'66 Total Costs $ -9"24-43-3i Comments: • L.II; River Economic Development Authority Micro Loan Fund Application Pagc 2 of T 7 • .-1 rc'7f_` + 001 i iln-1n1 ii i.-1-1 I I T r71111C1 00C. n in C. 7 COI • Proposed Sources of Financing SOURCE NAME TERMS AMOUNT Bank Loan ori g,ve{ ,10 r , Ayric.r{. $ (aLS,aec F63 540 3y Qc,tiocn Bank Loan $ Ocher Private Funds $ fiq7 oc Applicant: Contribution $ /1"� $3-3 Il Other Fed Grant/Loan $ State Grant/loan icir art EDA Micro Loan yr &taw - $ QUO,C 0° Total Financing $4 -—* Comments: faX /2eo64t R%z.a A a-n /14S, S-..5-6 ( 77? 4oni Ct �$ 7a, 77g Collateral Assignments J O») l Uu r� y� Lien Description of Collateral Position / sr To Bank I ee i Es 4a�e , r �k To Bank 2 To Private Sources TO Other Sources To Federal Govt To State 2/i� To EDA Micro Loan ge.o.I 654,4e Comments: • Elk River Economic Development.authority \iicro Loan Fund Application Page 3 cif i onr , n Lr+ rr Coti • Value of Collateral Existing Book Value Cost Ilen s I..and $ ' i r $ ) crcr: $ Buildings $ 784--:25-5 $ 5, 353 $ Machinery & Equip. $ $ $ Other $ $ $ Other $ $ $ Comments: IV J+B&VACE MIS Present# of Employees /- Total Payroll 1,000,t')o a Jobs To Be Created* l" /11inAesota_ 0 6 Please provide the following information on jobs you expect to create. 0 Average Are the jobs Expected Number 1-Iourly Annual Permanent or Hiring Job Title of)obs Wage Salary Temporary? Date DtT i I040c0 fery,...0.rie..6' /o101 } /0.0 0 , , /No > Dra-clrs "..0...... r 1r/os .... 1 /8.0 0 �/ � �11 , /S 0 Q i, // /o.r �Qctcian / l/ 1-.. I /S. co I 1 7✓ 1 r03 2/r11n r sw, C-die,,.. tdtss. I /.-0,J'.a '% !/I ,! Oea "'If loan is for job retention only, please explain in Business Plan. Job Creation Timetable Please indicate on the table below when individual jobs will be added to the firm. Number Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. job Title of Jobs 1 2 3 4 5 6 7 S U I x z I I X �0 _____ I Elk'River Economic Development Authority licro Loan Fund Application Page 4 of 7 c r .rl 7 / cc7c / cat I nn-Inriu-in i I til r rruvn et c : f n 4.n C I Re1.1 • i)1 1114ECT©c IS Attorney pp //f/ Name ��st `� Aso circ-t?S 1 7✓v� Address S1 '7S 1A1�w>�1- 1 V S..s: 70 Phone it/ ,'�1�t P�tsi mN SS I11a 76, 3- S(0 Accountant Address /S-5-0O ,��.�r nU.��, .P C en-firer 710 a,!a ,4ue . C. / rw, /r, mat) �' Phone ra i - 3-73- 9000 Financing Sources Menders,partners, etc...) Name o El& h Address io SL S C I Lli v ar VI pJ -(1.5"33 Phone 76,3 -1 `/I - 8SD Z Name Address Phone Name Address Phone Name Address Phone Parent Company Name Address Phone Others Name Address Phone Name Address Phone • Elk River Economic Development Authority Page ,[' Micro Loin Fund Application 7l ==.1 cqi11.1 T Rl-i?J,1 egg• :Ln +.n PT Pew G-B](ll Si" Please attach the following: v ;l) 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 i\vo Years ✓ C) Financial Projections for Two Years D) Resume of Owner/Management E) Personal Financial Statements of Proprietor,Partners, Guarantors /17) Letter of Commitment from Applicant Pledging to Complete / During the Proposed Project Duration V G) Letter of Commitment from the Other Sources of Financing, Stating Terms and Conditions of their Participation in Project w,CC be- .et-vaeGQi/e- . .eefzV 1/ Hj Other Pp 'ec i /7aclffe6 Repo rZL V I) Other Pre ltinerta 5i''-e//Gtraz p1ez25 J). Fee (1°/, of amount of loan request:) • Elk River Economic Development Authority Page 6 of 7 Nlicto Loan Fund Application �. KREEMEW 1 / 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 be requested by the City and the Finance Com.mittee. DATE -S/;/.041 APPI..ICA 1'NAME vQ. 1 e '4`- BY , BY • Elk River Economic Development Authority Micro Loan Fund.i\ppl.ication Page 7 of 7 l2.11: 15AM Gradient Techno 1 osd 763-717-949e0.516 P. 1 p- 1 rlmy MAY.2B.2204 32:02AM NO.503 P.2 4•:■ PlITLIE BANK • OF ELK RMsR Member FDIC MMN STREET OFFICE•630 MWMf1 Meat•Ent River,MN 55330•C763)441-1000 May 27,2004 Mr.Erie Haelm and Duane Goetsch Gradient Technology 8744 West 35W Service Drive Suite A Blaine,MN 55449 RE: Financing proposal for the construction of a 13.000 square foot commercial building in the Elk River Business Park. Dear Eric and Duane: Thank you for opportunity to provide financing for the above referenced project Below I have outlined the terms under which The Bank of Elk River proposes to provide a loan to finance the subject property. • I. CCnstructio Loan Borrower: Badger Ventures,LLC Loan Amount; 5983,500 maximum amount:not to exceed 84%of appraised market value. Interest Rate:variable rate based on prime rate plus 1%with a door of 6.75%. Costs/Fees: Origination fee equal to 1%of the construction loan amount plus all out-of—pocket costs incurred by The Bank of Elk River in underwriting/dosing the transaction. The estimated closing costs include title insurance premium,title insurance construction draw fees,recording fees,mortgage registration rax,appraisal fee.environmental fee,legal(bank)and survey. Repayment/Term; Interest only,payable monthly.Principal due upon the earlier of completion of construction or 9 months following closing. Collateral: Firat real estate mortgage and assigmnent of leases and rents on the subject property Guarantees:Personal guarantees of Duane Goetsch and Nancy M.Dickerson MAIN STREET• SCHOOL STREET • OTSEGO ELK RIVER WAL-MART •MAPLE GROVE WAL-MART wwav,lieBankofElkRiver.com Eank TheBankofEfCRtver.com • May AY.28.20042,11: 16RM Gradient Technology 763-717-9481110.516 P.2 p. 3 MAY.28.2004 10;e2AM N0.503 P.3 • Life Insurance: A collateral assignmast of life insurance in the amount of$500,000 shall be required during the construction period and until the City of Elk Rivet Loan funds arc advanced to reduce The Bank of Elk River construction loan to 8883,500 or leas. A final"as-built" appraisal will also be required to confirm the completed project value supports a 75%loan-to- value oan to- value ratio for the portion of the debt carried by The Bank of Elk River. Prepayment Penalty: None II. perinanent Mort ewe Loan: Borrower: Same as construction loan. Loan Amount: A. The Bank of Elk River to provide S1183,500 maximum amount of finding in the form of a 1"real estate mortgage,not to exceed 75%of the appraised value and in any event not more than.$883,500. B. The City of Elk River Revolving Loan Fnnd to provide 5100,000 maximum amount of funding in the form of a Zee real estate mortgage,not to exceed 8.5%of the appraised value and in any event not more than S100,000. Interest Rote: A.The Bank of Elk Rivet 6.25%,fixed rate for 3 years. B,The City of Elk River Revolving Loan Fund(subject to approval by City of Elk River)prime • tate minus 4%with a floor of 2%. Costs/Fees: No additional fees or costs other than $100.00 extension and modification recording cost to convert from construction to term loan. Repayment/Terra: A. The Bank of Elk River 1'mortgage would be amortized based on a 20-year amortization with a three-year balloon, B. The City of Elk River 2M mortgage loan would be attvctured based on the tax rebate schedule.An assignment of the tax rebate in favor of the lender will be required.This schedule is anticipated to provide$12,000 in annual loan payment capacity with tax rebate payments being distributed to the lender semi-annually. The initial loan will be for a five year period at the below market interest rate. The City Revolving Loan Fund allows for an additional 2 year extension at market sates.The City Loan is expected to contain a 7-year balloon(maxamum term on City loan fund). Collateral: Same as the construction loan. Guarantees: Same as the construction loan. • Nas `AY.2^o.2a04 211: 16AM Gradient Techno 1 ogy 763-717-948d'0.516 P.3 p. 4 MAY.29.2004 10:02PM NO.503 P.4 Prepayment penalty, None. Other Conditions for both Construction and Permanent Loans: Appraisal: Project must be supported by an independent appraisal obtained and reviewed in accordance with The Bank of Elk River and USPAP. Environmental Assessment: Project must be supported by an environmental assessment conducted by The Bank of Elk River. Said report must be in a forst and substance acceptable to The Bank of Elk River. Title Insurance: Borrower must provide a commitment for a mortgagee's title insurance policy covering the property and reporting fee simple title is in the Borrower's name and the Bank's mortgage will be a fust priority mortgage lien on the property, all title matters tinter be acceptable to The Bank of Elk River which shall include the title insurance company insuring against mechanics liens. All construction draws made through title insurance company approved by The Bank of Elk River. Survey. Borrower must provide an ALTA survey of the property certified to The Bank of Elk River and the title insurance company in form and substance acceptable to The Bank of Elk River, Financial Statements: During the term of the loan,the Borrower will deliver an annual financial statement to The Bank of Elk River within 120 days of the and of each yam. Guarantors to • provide a personal financial statement annually. Tenant(G.D.O.d/b/a Gradient Technology)to provide an annual financial state hent within 120 Of the tenant's fiscal year end. Tax Returns: During the term of the loan the Borrower will annually deliver nue and exact copies of their Federal Income Tax Return as soon as available. Guarantor to provide annually true and accurate copies of their Federal Income Tax Return as soon as available. Insurance: The Bank of Elk River will require evidence of insurance on the properly naming the Bank as additional insured/mortgage loss payee.The insurance shall be in an amount equal to or greater than the outstanding mortgage balance. Leases: The Bank of Elk River will require copies of all leans associated with the property. Debt Services The Bank of Elk River will require that the annual net operating income exceed 115 14 of annual debt service. The proposed financing is in effect until June 30th,2004. The proposal is conditioned upon receiving confirmation from the City of Elk River of approval of the revolving loan fund component and the tax abatement component, I will be happy to assist you with applying for the City Loan Funds. •• Mai L..Y:2q.,004 211. 16AM Gradient Technology 783-717-94800.516 P.4 p. 5 MAY.213.2004. 10:03AM .503 P.S • i In order to proceed we will need to receives sworn construction statement including a complete set of plans and specifications for the building along with a copy of the purchase agreement for the land. I will also need a copy of the Articles of Organization and tar ID#for Badger Ventures.LLC. In order to proceed with the financing package described above please remit a non-refundable payment of 53,50000. The payment will be allocated to obtaining en appraisal of the property and satisfying a.portion of the origination fee Please countersign and return with your payment the enclosed copy of this letter to indicate your interest in further pursuing the transaction outlined above. I would sincerely appreciate the opporttmity to develop a relationship with you and your company and create a mutually acceptable snancang package for this property. If you have any questions or require additional information please contact me at 763-2414502. Sincerely, _. —4<e7:7:41•7 Torn McNair Vice resident • Accepted thia1 day of ,2004. Ventures,LIC -erf••••4J, Duane A. Goerach • • City ofElk -� Riv:41; --*** r.. • Business Subsidies Policy Adopted: Economic Development Authority November 12,2002 Housing&Redevelopment Authority November 25,2002 City Council November 25,2002 Amended: Economic Development Authority December 9,2002 City of Elk River 13065 Orono Parkway Elk River,MN 55330 • (763) 635-1000 •• CITY OF ELK RIVER POLICY AND PROCEDURES RELATING TO THE USE OF BUSINESS SUBSIDIES I. PURPOSE For the purposes of this document, the term "City"shall include the Elk River City Council,Economic Development Authority, and Housing and RedevelopmentAuthority. The purpose of this policy is to establish guidelines and criteria regarding the use of business subsidies, such as tax increment financing (TIF), tax abatement, and other business subsidies for private development projects within the City of Elk River and shall be in addition to the requirements and limitations set forth by provisions of Minnesota State Statute 116J.993 (MN Business Subsidy Law), and by the City's policy and guidelines of the particular form of subsidy. These guidelines shall be used in processing and reviewing applications requesting business subsidies assistance. The fundamental purpose of business subsidies in the City is to encourage desirable development or redevelopment that would not otherwise occur"but for" the assistance provided through business subsidies. It is the intent of the City to provide business subsidies, as well as other incentives that the City may deem appropriate, at the shortest term required for the project to proceed. The • City reserves the right to approve or reject projects on a case-by-case basis, taking into account established policies, specific project criteria, and demand on city services in relation to the potential benefits to be received from a proposed project. Meeting policy guidelines or other criteria does not guarantee the award of business subsidies. Furthermore, the approval or denial of one project is not intended to set precedent for approval or denial of another project. Whenever possible it is the City's intent to coordinate the use of business subsidies with other applicable taxing jurisdictions. II. DEFINITION OF "BUSINESS SUBSIDY" The following types of assistance having a value in excess of$25,000 are defined as a "business subsidy"within the MN Business Subsidy Law: • State and local government agency grants; • Contributions of personal property,real property, or infrastructure; • The principal amount of a loan that exceeds $75,000 at rates below those commercially available; • Reductions or deferrals of taxes or fees; • Guarantees of any payment under any loan,lease, or other obligation; and, • Preferential use of government facilities. City of Elk River Business Subsidies Policy 2 • III. PUBLIC PURPOSE OBJECTIVES OF BUSINESS SUBSIDIES In accordance with the MN Business Subsidy Law, the City will consider using business subsidies to assist private development projects to achieve one or more of the following public purpose objectives: • To retain local jobs and/or increase the number and diversity of jobs that offer stable employment and/or attractive wages and benefits. • To enhance and diversify the City of Elk River's tax base. • To encourage additional unsubsidized private development in the area, either directly or indirectly through "spin off" development. • To achieve development on sites which would not be developed without business subsidies assistance. • To remove blight and/or encourage development of commercial and industrial areas in the city that result in higher quality development or redevelopment and private investment. • To offset increased costs of development of specific properties when the unique physical characteristics of the site may otherwise preclude private investment. • To create opportunities for the construction, operation and maintenance of affordable housing. IV. GENERAL POLICIES FOR THE USE OF BUSINESS SUBSIDIES A. Business subsidy assistance will be provided from the City,by a"pay-as-you-go" note method, to the developer if the business subsidy is tax increment financing or tax abatement. Requests for up front financing will be considered on a case-by-case basis. B. A developer requesting business subsidy assistance must demonstrate, to the satisfaction of the City, sufficient cash equity investment in the project as required within the City's policy for the particular form of subsidy. C. Business subsidy will not be provided in circumstances where land and /or property price is demonstrated by the County Assessor to be in excess of fair market value. This would normally be where the acquisition price is more than 10%in excess of market value. D. A developer must be able to demonstrate to the City, or,if applicable, to the underwriting authority, a market-demand for a proposed project. E. Business subsidy will not be used in cases where the subsidy would create an unfair and significant competitive financial advantage over other similar projects in the area. F. Business subsidy will not be used for projects that would place extraordinary • demands on city infrastructure and services. City of Elk River Business Subsidies Policy 3 •.411° G. If requested by the City, the developer shall provide adequate financial guarantees to ensure completion of the project,including,but not limited to: assessment agreements,letters of credit, cash escrows, and personal guaranties. H. Each developer must be able to demonstrate to the City's satisfaction, an ability to construct, operate, and maintain the proposed project based on past experience, general reputation,and credit history. I. If requested by the City, or its consultants,the developer shall provide sufficient market, financial, environmental, or other data relative to the successful operation of the project. J. Projects receiving business subsidy approval from other affected taxing jurisdictions will be more favorably received by the City. V. GUIDELINES FOR COMMERCIAL/INDUSTRIAL BUSINESS SUBSIDIES A. Business subsidies will not be used for on-site retail or service businesses unless it is a redevelopment project that demonstrates that it will result in a substantial increase in tax base and a significant improvement in quality employment. B. The project must be consistent with the City's Comprehensive Plan,Land Use Plan, and Zoning Ordinances. C. The project must result in the retention of existing jobs that would be lost"but for" the proposed development or result an increase and diversification in local jobs. Business retention jobs will be considered on a one-for-one match to job creation only in cases where job loss is specific and demonstrable in accordance with the MN Business Subsidy Law. D. Specific wage and job goals will be determined by the City giving consideration to the particular form of the subsidy, nature of the development, the purpose of the subsidy, local economic conditions and similar factors. The recipient will have up to two years to meet the job and wage goals established by the City. The minimum wage for a job to be considered a new or retained job shall be $15.00 per hour exclusive of benefits. Deviations less than the wage floor will be considered on a case-by-case basis and in accordance with the requirements of the MN Business Subsidy Law. E. Business subsidies will not be used for commercial/industrial projects that have a history of inconsistent compliance with applicable environmental rules and regulations. City of Elk River Business Subsidies Policy 4 • VI. SUBSIDY AGREEMENT AND REPORTING REQUIREMENTS Each company receiving a business subsidy shall be subject to the subsidy agreement and reporting provisions and requirements set forth by the MN Business Subsidy Law and summarized below: A. Progress Reports The recipient shall file a report annually for two years after the receiving the subsidy or until all goals set forth in the subsidy agreement have been met,which ever is later. Reports shall be completed using the format drafted by the State of Minnesota and shall be filed with the City no later than March 1 of each year for the progress made the previous year. B. Maintain Facility The recipient agrees to maintain and operate its facility at the site where the subsidy is used for a period of five years after the date the subsidy is provided. C. Failure to Comply Businesses failing to comply with the subsidy agreement will be subject to fines, repayment requirements,and be deemed ineligible by the State to receive any loans or grants from public entities for a period of five years. VII. SUBSIDY APPLICATION PROCESS AND PROCEDURE A. Application for business subsidies shall be made on forms for the particular form of assistance provided by the City of Elk River Director of Economic Development, or designee. A fee of$ 5,000.00 shall accompany any Tax Increment Finance,Tax Abatement, or grant request application to cover the City's initial legal, administrative, and planning costs. Micro-Loan applications shall include a fee in the amount of 1% of the loan requested. Following a review by appropriate City Staff the application shall be referred to the either the Economic Development Authority, or Housing and Redevelopment Authority, for recommendation to the City Council for further action. B. The application for business subsidies shall request information required within the City's policies on the particular form of subsidy including but not limited to; a detailed description of the project;a preliminary site plan; the amount of business subsidy requested; the public purpose of the project;the number and types of jobs to be created;the wages and benefits to be paid new employees;and verifiable funding sources and uses. City of Elk River Business Subsidies Policy 5 Mehelich, Catherine 0 rom: Sid Inman [sid@ehlers-inc.com] ent: Wednesday, June 02, 2004 9:31 AM To: CMehelich@ci.elk-river.mn.us Subject: Gradient Technology I have reviewed the documents from Gradient Technology and have the following comments. It is my understanding that your goal is to arrive at a final land price that makes the land competitive with other available land in other communities. The argument is that "But For" this land price the project would not happen. Using the amount of the abatement and Micro Loan you have reduced the net land price to achieve this goal. In my opinion this meets the But For test. Last, I noted that the total equity is over 16% which is over the cities minimum. Please let me know if you have other questions. Sid Inman - Senior Vice President 41, Ehlers and Associates Inc. PH 651-697-8507 FAX 651-697-8555 This email has been scanned for all viruses by the MessageLabs Email Security System. • 1 At • , iii,(L ...., City of k ...„ Rive? • Economic Development Tax Rebate Financing Policy & Application Amended:August 2002 Adopted: April 10, 2000 City of Elk River,Minnesota 0 Table of Contents I. Policy Purpose 3 II. Difference Between TRF & TIF 3 Ill. Objectives of Tax Rebate Financing 3 4 IV. Policies for the Use of TRF 4 - 5 V. Project Qualifications 5 6 VI. Subsidy Agreement & Reporting Requirements 6 VII. Application Process City of Elk River 7 Application to Other Political Subdivisions 7 VIII. Application 8 Applicant Information 8 Project Information 9 Public Purpose 9 Sources&Uses 10 Checklist&Additional Information 11 IX. Application Review Worksheet 12 X. Exhibits 14 A Corporation/Partnership Description B Project Description C Shareholders D But for Analysis E Prospective Lessees F Legal Description and PID Number XI. Sample But-For Analysis 15 City of Elk River Tax Rebate Financing Policy,Amended August 2002 - 2 - I. POLICY PURPOSE For the purposes of this d curie,the term"City"shall include the Elk Rizer City Council,Economic • Dewwlapment Authority,and Housing and Redetelop hent Authority. The purpose of this policy is to establish the City of Elk River's position relating to the use of Tax Rebate Financing (TRF), otherwise referred to as Tax Abatement,for private development above and beyond the requirements and limitations set forth by State Law. This policy shall be used as a guide in the processing and review of applications requesting tax rebate assistance.The fundamental purpose of tax rebate financing in Elk River is to encourage desirable development or redevelopment that would not otherwise occur but for the assistance provided through TRF. The City of Elk River is granted the power to utilize TRF by the Minnesota Tax Abatement Act, as amended. It is the intent of the City to provide the minimum amount of TRF,as well as other incentives, at the shortest term required for the project to proceed. The City reserves the right to approve or reject projects on a case by case basis, taking into consideration established policies,project criteria, and demand on city services in relation to the potential benefits from the project.Meeting policy criteria does not guarantee the award of TRF to the project.Approval or denial of one project is not intended to set precedent for approval or denial of another project. II. DIFFERENCE BETWEEN TRF & TIF The primary difference between Tax Rebate Financing (TRF) and Tax Increment Financing (TIF) is the way in which the dollars are awarded to the project. When TIE is • awartheded to a are prorejectqibyred thtoe citycontr,thibutee oththereir ppoolitirtcalion suofbdithevisiionsncrease(thde school to dithstreipct and county) uroject. Conversely,when TRF is requested, each political subdivision has the option of granting its portion of the increased taxes to the project. Subsequently,the dollars generated for the project with TRF are generally less than the dollars generated with TIF. III. OBJECTIVES OF TAX REBATE FINANCING As a matter of adopted policy,the City will consider using TRF to assist private development projects to achieve one or more of the following objectives: • To retain local jobs and/or increase the number and diversity of jobs that offer stable employment and/or attractive wages and benefits. • To enhance and diversify the city of Elk River's economic base. • To encourage additional unsubsidized private development in the area, either directly or indirectly through "spin off" development. • To facilitate the development process and to achieve development on sites which would not be developed without TRF assistance. • To remove blight and/or encourage redevelopment of commercial and industrial areas in the city that result in high quality redevelopment and private • reinvestment. City of Elk River Tax Rebate Financing Policy,Amended August 2002 3 • To offset increased costs of redevelopment (i.e. contaminated site clean up) over and above the costs normally incurred in development. 4111) • To create opportunities for affordable housing. • To contribute to the implementation of other public policies, as adopted by the city from time to time,such as the promotion of quality urban or architectural design,energy conservation, and decreasing capital and/or operating costs of local government. IV. POLICIES FOR THE USE OF TRF a. TRF assistance will be provided to the developer upon receipt of taxes by the City,otherwise referred to as the pay-as ego method. Requests for up front financing will be considered on a case-by-case basis. b. Any developer receiving TRF assistance shall provide a minimum of twenty percent (20%) cash equity investment in the project. Projects utilizing the SBA504 program will be required to provide a minimum of ten percent (10%) cash equity investment. c. TRF will not be used in circumstances where land and/or property price is in excess of fair market value. d. Developer shall be able to demonstrate a market demand for a proposed project. e. TRF will not be utilized in cases where it would create an unfair and significant competitive financial advantage over other projects in the area. f. TRF shall not be used for projects that would place extraordinary demands on city services or for projects that would generate significant environmental impacts. g. The developer must provide adequate financial guarantees to ensure completion of the project,including, but not limited to: assessment agreements,letters of credit,personal guaranties, and etcetera. h. The developer shall adequately demonstrate,to the City's sole satisfaction, an ability to complete the proposed project based on past development experience, general reputation, and credit history, among other factors, including the size and scope of the proposed project. i. For the purposes of underwriting the proposal,the developer shall provide any requested market, financial, environmental, or other data requested by the City or its consultants. • j. TRF proposals shall not be used to support speculative office projects. Speculative projects are defined as those projects which have pre-leasing agreements or letters of intent for less than 50% of the available space. City of Elk River Tax Rebate Financing Policy,Amended August 2002 - 4 - • In addition,leasible office projects must meet the following guidelines: 1. Evidence of the 50% occupancy must be reported to the Director of • Economic Development six months following an issued certificate of occupancy. 2. 50% of the jobs within the leasible office building space must be considered "new" jobs to the City of Elk River,meaning jobs not located in the City at any time prior to occupying space in the project. 3. Business retention jobs will be considered on a one-for-one match to job creation only in cases where job loss is specific and demonstrable in accordance with the MN Business Subsidy Law. Evidence may include documentation that the company will have to close involuntarily,or the company has received an attractive offer to move to another state or community. k All TRF proposals shall optimize the private development potential of a site. V. PROJECT QUALIFICATIONS All TRF projects considered by the City of Elk River must meet each of the following requirements: a. The project shall meet at least one of the objectives set forth in Section III of this document. • b. The use of TRF will be limited to: • Industrial development, expansion,redevelopment, or rehabilitation; or • Commercial redevelopment or rehabilitation; or • Research and development facilities that satisfy Business Park zoning requirements; or • Office facilities with a minimum new construction of 25,000 square feet and minimum market value of$1,000,000 upon project completion; or • - Residential development and redevelopment may be eligible for TRF under a separate set of policies and only with the recommendation of the HRA. c. The developer shall demonstrate that the project is not financially feasible lit for the use of TRF. Evaluation of the project's financial feasibility without TRF shall be provided by the City's financial advisor on requests of over $25,000 total. d. The project shall comply with all provisions set forth in the state's Tax Abatement Law, statues 469.1812 to 469.1815, as amended. • City of Elk River Tax Rebate Financing Policy,Amended August 2002 - 5 - e. The project must be consistent with the City's Comprehensive Plan,Land Use Plan, and Zoning Ordinances. di f. The project shall serve at least two of the following public purposes: • Job creation or job retention. • Increase of tax base. • Enhancement or diversification of the city's economic base. • Development or redevelopment that will spur additional private investment in the area. • Fulfillment of defined city objectives, such as those identified in the Strategic Plan for Economic Development or the city's Comprehensive Plan, among others. • Removal of blight or the rehabilitation of a high profile or priority site. VI. SUBSIDY AGREEMENT & REPORTING REQUIRMENTS All developers/businesses receiving Tax Rebate Financing assistance from the City of Elk River shall be subject to the provisions and requirements set forth by the City's Business Subsidy Criteria as adopted, and State Statute 116J.993 as summarized below. All developers/businesses receiving TRF assistance shall enter into a Subsidy Agreement with the City of Elk River that identifies: the reason for the subsidy,the public purpose served by the subsidy,and the goals for the subsidy, as well as other subsidy agreement criteria set forth by Statute 116J.993. • The developer/business shall file a report annually for two years after the date the benefit is received or until all goals set forth in the application and Subsidy Agreement have been met,whichever is later.Reports shall be completed using the format drafted by the State of Minnesota and shall be filed with the City of Elk River no later than March 1 of each year for the previous calendar year. Businesses fulfilling job creation requirements must file a report to that effect with the city within 30 days of meeting the requirements. The developer/business owner shall maintain and operate its facility at the site where TRF assistance is used for a period of five years after the benefit is received. In addition to attaining or exceeding the jobs and wages goals set forth in the Subsidy Agreement,the borrower shall achieve at least one of the objectives set forth in Section III of this document. Developers / Businesses failing to comply with the above provisions will be subject to fines, repayment requirements,termination of the assistance, and be deemed ineligible by the State to receive any loans or grants from public entities for a period of five years. City of Elk River Tax Rebate Financing Policy,Amended August 2002 - 6 • VII. APPLICATION PROCESS FOR TRF 41) A. CITY OF ELK RIVER 1. Applicant submits the completed application along with a$5,000 application fee. The application fee will be used toward the cost of services provided in the evaluation of financial feasibility and preparation of legal documents. The balance of the application fee will be returned to the applicant. 2. City staff reviews the application and completes the Application Review Worksheet. 3. Results of the Worksheet are submitted to the appropriate governing authorities for preliminary approval of the proposal. 4. If preliminary approval is granted, all necessary notices, resolutions and agreements are prepared by City staff and/or consultants. 5. Public hearing(s) on the proposed project are held. 6. The EDA or HRA recommends approval or denial of the proposal to the City Council. 7. The City Council grants final approval or denial of the proposal. 11/ B. APPLICATIONS TO OTHER POLITICAL SUBDIVISIONS It is recommended that applicants intending to seek TRF from Sherburne County and/or School District 728 make their applications to those bodies concurrent with their application to the City of Elk River. For more information on applying for TRF through Sherburne County and/or School District 728, contact: Alex Wikstrom Sherburne County Budget/ Economic Development Coordinator 763-241-2700 Dr.Alan Jensen Superintendent- School District 728 763-241-3400 • City of River Tax Rebate Financing Policy,Amended August 2002 - 7 - // TAX REBATE FINANCING PROPOSAL REVIEW WORKSHEET 411 TO BE COMPLETED BY CITY STAFF 1. The project meets the criteria set forth in Section V of the Tax Rebate Financing policy/ IV a) Meets at least one of the objectives in Section III. t/b) Demonstrates need for TRF with the but for analysis. c) Consistent with all city plans and ordinances. d) Serves at least two public purposes as defined in Section V. 64 /`LoPti/ 2. Ratio of Private to Public Investment in Project: Points: 7 F.69-3/5-4=)C7 -t-$/O7O5Co Private investment^ ??0, -S 5:1- 5 $ 295,5562 Public Investment F / c)CcA$1X / X47 �•'/ Ratio Private : Public Financing 3:1 3 2:1 2 Less than 2:1 1 3.Job Creation in the City of Elk River: Points: 6 Number of new jobs as a result of the project. 25+ 5 7 Number of existing/retained jobs 20+ 4 12 Total 15+ 3 (i0+ Less than 10 1 • 4. Ratio of TRF to new jobs created/retained: Points: $/••/"; SSG. 1RF request $8,000 or less 5 /2• Number of new jobs created/retained $10,000 or less 4 $ /2 / 2-7 of TRF per new job created/retained $12 001 . - 3 ,000 or less Over$15,000 1 5. Wage Level of jobs created: Points: Average hourly wage Over$21/ hour 5 of jobs created/retained: /5— 75 $1 --211 hour 4 ($T4-17 / hour 3 $3O737 hour 2 Under$10 / hour 1 6. Project size: Points: 2 The project will result in the construction 40,000+ 5 of square feet /3, C9c 305000+ 4 20,000+ 3 10, 0b-0+ 27 10,000 or less I • City of Elk River Tax Rebate Financing Policy,Amended August 2002 - 12 • 7. Type of Project: Points: 100% Owner Occupied 41.11. 410 Mix Owner Occupied&Investment 4 Investment Property 3 8. Use: Points: S t'Industrial or Business Park Project Commercial Rehabilitation/Redevelopment 4 9. The project will pay annual Points: property taxes in the first fully 35,000+ 5 assessed year of$ 2V, __©Q 25,000+ 4 15 000+ 10,000+ 2 Under$10,000 1 10. Likelihood that the project will result in Points: unsubsidized,spin-off development. High 5 t/Moderate Low 1 Sub- Total Points: 2? of a possible 45 points. III9. Bonus Points Bonus Points: .� The project will be 100%Pay-asyou do TRF. 3 .o'. The project contributes to the goals of Energy City. 2 points • Product promotes sensible use of energy, OR • Project utilizes significant energy efficient design&/or materials in construction. Total Points: �2 Overall project analysis: High 45-38oints Moderate 3_229_ppints Low 28-20 points Not Eligible 19-0 points III City of Elk River Tax Rebate Financing Policy,Amended August 2002 - 13 - Yom','°.... • RESOLUTION NO. RESOLUTION APPROVING PROPERTY TAX ABATEMENTS BE IT RESOLVED by the City Council (the "Council") of the City of Elk River, Minnesota(the "City"), as follows: 1. Recitals. (a) Badger Ventures, LLC (the "Developer") proposes to construct an approximately 13,000 square foot light manufacturing facility in the City (the "Project"). The Developer has requested that the City provide financial assistance to the Developer for the Project. The City proposes to use the abatement for the purposes provided for in the Abatement Law (as hereinafter defined), including the Project. The proposed term of the abatement will be for up to ten years in an amount not to exceed $72,778. The abatement will apply to 100% of the City's share of the property taxes (the "Abatement") derived from the property described as , Elk River Business Park(the "Property"). (b) On the date hereof, the Council held a public hearing on the question of • the Abatement, and said hearing was preceded by at least 10 days but not more than 30 days prior published notice thereof. (c) The Abatement is authorized under Minnesota Statutes, Sections 469.1812 through 469.1815 (the "Abatement Law"). 2. Findings for the Abatement. The City Council hereby makes the following findings: (a) The Council expects the benefits to the City of the Abatement to at least equal or exceed the costs to the City thereof. (b) Granting the Abatement is in the public interest because it will increase or preserve the tax base of the City and provide employment opportunities in the City. (c) The Property is not located in a tax increment financing district. (d) In any year, the total amount of property taxes abated by the City by this and other resolutions, if any, does not exceed the greater of ten percent (10%) of the current levy or$200,000. 3. Terms of Abatement. The Abatement is hereby approved; provided, however, the this approval is contingent upon the approval by Sherburne County of an abatement program for • the Project upon the same terms as set forth below for the County's share of property tax amount which the County receives from the Property. The terms of the Abatement are as follows: (a) The Abatement shall be for up to ten (10) years and shall apply to the taxes payable in the years 2006 through 2015, inclusive. 1630423v2 • (b) The City will abate 100% of the City's share of property tax amount which the City receives from the Property,not to exceed $72,778. (c) The Abatement shall be subject to all the terms and limitations of the Abatement Law. (d) The Abatement may not be modified or changed during its term. The motion for the adoption of the foregoing resolution was made by member and duly seconded by member and, upon a vote being taken thereon after full discussion thereof, the following voted in favor thereof: and the following voted against the same: Whereupon said resolution was declared duly passed and adopted. 1111) 1630423v2 2 STATE OF MINNESOTA ) • ) SS COUNTY OF SHERBURNE) I, the undersigned, being the duly qualified and acting Clerk of the City of Elk River, Minnesota (the "City"), by reason of my office as Clerk, DO HEREBY CERTIFY that I have compared the attached and foregoing extract of minutes with the original thereof on file in my office, and that the same is a full, true and complete transcript of the minutes of a meeting of the City Council of the City, duly called and held on the date therein indicated, insofar as such minutes relate to property tax abatements for the Badger Ventures, LLC Project. WITNESS my hand this 21st day of June, 2004. S City Clerk • 1630423v2 • • TAX ABATEMENT AND BUSINESS SUBSIDY AGREEMENT BY AND BETWEEN CITY OF ELK RIVER, MINNESOTA AND BADGER VENTURES, LLC S1630424v2 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 No 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 7 • ARTICLE IV EVENTS OF DEFAULT 8 Section 4.1 Events of Default Defined 8 Section 4.2 Remedies on Default 8 Section 4.3 No Remedy Exclusive 8 Section 4.4 No Implied Waiver 8 Section 4.5 Agreement to Pay Attorney's Fees and Expenses 9 Section 4.6 Release and Indemnification Covenants 9 ARTICLE V ADDITIONAL PROVISIONS 10 Section 5.1 Conflicts of Interest 10 Section 5.2 Titles of Articles and Sections 10 Section 5.3 Notices and Demands 10 Section 5.4 Counterparts 10 Section 5.5 Law Governing 10 Section 5.6 Duration 11 Section 5.7 Provisions Surviving Rescission or Expiration 11 Exhibit A SUBSIDY AGREEMENT A-1 • 1630424v2 _i_ • TAX ABATEMENT AND BUSINESS SUBSIDY AGREEMENT THIS AGREEMENT, made as of the day of June, 2004, by and among the City of Elk River, Minnesota (the "City"), a municipal corporation and political subdivision of the State of Minnesota, and Badger Ventures, LLC, a Minnesota limited liability company (the "Developer"), W1TNESSETH: WHEREAS,pursuant t o Minnesota S tatutes, S ections 4 69.1812 through 4 69.1815, 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 Minnesota Statutes, Section 1167.993 through 116J.995 (the "Business Subsidy Law") 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 the Subsidy Agreement attached as Exhibit A to 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 Agreement, as the same may be from time to time modified, amended or supplemented; Business Day means any day except a Saturday, Sunday or a legal holiday or a day on which banking institutions in the City are authorized by law or executive order to close; City means the City of Elk River, Minnesota; • County means Sherburne County, Minnesota; 1630424v2 • 1111) Developer means Badger Ventures, 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 by the Developer of an approximately 13,000 square foot light manufacturing facility to be located in the City; 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 the real property identified as , Elk River Business Park, located in the City; Tax Abatements means 100% of the City's share of real estate taxes on the Tax Abatement Property abated in accordance with the Tax Abatement Program. 1630424v2 2 ARTICLE II REPRESENTATIONS AND WARRANTIES Section 2.1 Representations and Warranties of the City. The City makes the following representations and warranties: (1) The City is a municipal corporation and a political subdivision of the State and has the power to enter into this Agreement and carry out its obligations hereunder. (2) The Tax Abatement Program was created, adopted and approved in accordance with the terms of the Tax Abatement Act. (3) To finance the costs of the Project to be undertaken by the Developer, the City proposes, subject to the further provisions of this Agreement, to reimburse the Developer for 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 D eveloper w ill c ause the Project to be c onstructed in accordance with the terms of this Agreement and all local, state and federal laws and regulations (including, but not limited to, environmental, zoning, energy conservation, building code and public health laws and regulations). (4) The Developer will obtain or cause to be obtained, in a timely manner, all required permits, licenses and approvals, and will meet, in a timely manner, all requirements of all applicable local, state, and federal laws and regulations which must be obtained or met before the Project may be lawfully constructed (5) The construction of the Project would not be undertaken by the Developer, and in the opinion of the Developer would not be economically feasible within the reasonably foreseeable future, without the assistance and benefit to the Developer provided for in this Agreement. 1630424v2 3 110 i (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 provision 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 D eveloper w ill cooperate fully with the City with respect t o any 1 itigation commenced with respect to the Project. (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. 1630424v2 4 • ARTICLE III UNDERTAKINGS BY DEVELOPER AND CITY 411 Section 3.1 Construction of Project and Reimbursement of Tax Abatement Property Cost. (1) The costs of the Tax Abatement Property and the construction of the Project shall be paid by the Developer. The Developer will construct the Project in accordance with the approved construction plans and at all times prior to the termination of this Agreement will operate and maintain, preserve and keep the Project or cause the Project to be maintained, preserved and kept with the appurtenances and every part and parcel thereof, in good repair and condition. (2) Upon submission to the City of a purchase agreement and settlement statement relating to the purchase of the Tax Abatement Property in an amount not less than the Reimbursement Amount, the City shall reimburse the Developer for the costs of the Tax Abatement Property actually incurred in an amount not to exceed $72,778 (the "Reimbursement Amount")pursuant to the Abatement Program as provided in Section 3.8. Section 3.2 Limitations on Undertaking of the City. Notwithstanding the provisions of 5 Sections 3.1, the City shall have no obligation to reimburse the Company for the costs of the Tax Abatement Property, if the City, at the time or times such payment is to be made, is entitled under Section 4.2 to exercise any of the remedies set forth therein as a result of an Event of Default which has not been cured. Section 3.3 Commencement and Completion of Construction. The Developer shall complete the Project by December 31, 2004. All work with respect to the Project to be constructed or provided by the Developer shall be in conformity with the construction plans as submitted by the Developer and approved by the City. Nothing in this Agreement shall be deemed to impair or limit any of the City's rights or responsibilities under its zoning laws or construction permit processes. Section 3.4 Damage and Destruction. In the event of damage or destruction of the Project the Developer shall repair or rebuild the Project. Section 3.5 No 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 Company. Section 3.6 Prohibition Against Transfer of Project and Assignment of Agreement. The Developer represents and agrees that prior to the termination date of this Agreement the Developer shall not transfer the Project or any part thereof or any interest therein, without the prior written approval of the City. The City shall be entitled to require as conditions to any such approval that: 1630424v2 5 S (1) Any proposed transferee shall have the qualifications and financial responsibility, in the reasonable judgment of the City, necessary and adequate to fulfill the obligations undertaken in this Agreement by the Developer. (2) Any proposed transferee, by instrument in writing satisfactory to the City shall, for itself and its successors and assigns, and expressly for the benefit of the City, have expressly assumed all of the obligations of the Developer under this Agreement and agreed to be subject to all the conditions and restrictions to which the Developer is subject. (3) There shall be submitted to the City for review and prior written approval all instruments and other legal documents involved in effecting the transfer of any interest in this Agreement or the Project. Section 3.7 Real Property Taxes. The Developer shall, so long as this Agreement remains in effect, pay all real property taxes with respect to all parts of the Tax Abatement Property acquired and owned by it which are payable pursuant to the provisions of the Assessment Agreement and any other 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 5 applicability of any tax statute relating to the ad valorem property taxation of real property contained on the Tax Abatement Property determined by any tax official to be applicable to the Project or the Developer or raise the inapplicability of any such tax statute as a defense in any proceedings with respect to the Tax Abatement Property, including delinquent tax proceedings; provided, however, "tax statute" does not include any local ordinance or resolution levying a tax; (b) It will not seek administrative review or judicial review of the constitutionality of any tax statute relating to the taxation of real property contained on the Tax Abatement Property determined by any tax official to be applicable to the Project or the Developer or raise the unconstitutionality of any such tax statute as a defense in any proceedings, including delinquent tax proceedings with respect to the Tax Abatement Property; provided, however, "tax statute" does not include any local ordinance or resolution levying a tax; (c) It will not seek any tax deferral or abatement, either presently or prospectively authorized under Minnesota Statutes, Section 469.181, or any other State or federal law, of the ad valorem property taxation of the Tax Abatement Property so long as this Agreement remains in effect. Section 3.8 Business Subsidies Act. In order to satisfy the provisions of Minnesota Statutes, Sections 116J.993 to 1161995 (the "Subsidy Law"), the Developer acknowledges and • agrees that the amount of the "Business Subsidy" granted to the Developer under this Agreement is the Reimbursement Amount,which is approximately$72,778, and that the Business Subsidy is 1630424v2 6 • 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 develop new jobs within the City and to increase the tax base in the City. The Developer agrees that it will deliver, simultaneously with the execution of this Agreement, the Subsidy Agreement in the form attached as Exhibit A hereto, (the "Subsidy Agreement") executed by G.D.O., Inc. d/b/a Gradient Technology ("Gradient") pursuant to which Gradient agrees to meet the goals set forth therein (the "Goals") in compliance with the Subsidy Law. Section 3.9 Duration of Abatement Program. The Tax Abatement Program shall exist for a period of up to ten years beginning with real estate taxes payable in 2006 through 2015. On or before February 1 and August 1 of each year commencing August 1, 2006 to and including February 1, 2016 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. •• 1630424v2 7 ARTICLE IV EVENTS OF DEFAULT Section 4.1 Events of Default Defined. The following shall be "Events of Default" under this Agreement and the term "Event of Default" shall mean whenever it is used in this Agreement any one or more of the following events: (1) Failure by the Developer to timely pay any ad valorem real property taxes, special assessments,utility charges or other governmental impositions with respect to the Project. (2) Failure by the Developer to cause the construction of the Project to be completed pursuant to the terms, conditions and limitations of this Agreement. (3) Failure b y the D eveloper t o observe o r p erform any other covenant, condition, obligation or agreement on its part to be observed or performed under this Agreement. Section 4.2 Remedies on Default. Whenever any Event of Default referred to in Section 4.1 occurs and is continuing, the City, as specified below, may take any one or more of the following actions after the giving of thirty (30) days' written notice to the Developer citing with specificity the item or items of default and notifying the Developer that it has thirty (30) days within which to cure said Event of Default. If the Event of Default has not been cured within said thirty(30) days: (a) The City may suspend its performance under this Agreement until it receives assurances from the Developer, deemed adequate by the City, that the Developer will cure its default and continue its performance under this Agreement. (b) The City may cancel and rescind the 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 any other party, such waiver shall be 1630424v2 8 • 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, such, action or other proceeding whatsoever by any person or entity whatsoever arising or purportedly arising from a breach of the obligations of the Developer under this Agreement, or the transactions contemplated hereby or the acquisition, construction, installation, ownership, maintenance and operation of the Project. (3) The City and its governing body members, officers, agents, servants and employees shall not be liable for any damages or injury to the persons or property of the Developer or its officers, agents, servants or employees or any other person who may be about the Project due to any act of negligence of any person. (4) All covenants, stipulations, promises, agreements and obligations of the City contained herein s hall b e deemed to be the c ovenants, 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. • 1630424v2 9 • 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 the 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 the 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: Badger Ventures, LLC (2) in the case of the City is addressed to or delivered personally to the City at: City of Elk River, Minnesota Elk River City Hall 13065 Orono Parkway Elk River, MN 55330-5600 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. • 1630424v2 10 • Section 5.6 Duration. This Agreement shall remain in effect through February 1, 2016, unless earlier terminated or rescinded in accordance with its terms. Section 5.7 Provisions S urviving Rescission o r Expiration. S ections 4.5 and 4.6 s hall 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 • • 1630424v2 11 • 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. BADGER VENTURES, LLC By Its By Its i This is a signature page to the Tax Abatement and Business Subsidy Agreement by and between the City of Elk River, Minnesota and Badger Ventures, LLC. 1630424v2 5-1 • CITY OF ELK RIVER, MINNESOTA By Its Mayor By Its Administrator 111 This is a signature page to the Tax Abatement and Business Subsidy Agreement by and between the City of Elk River, Minnesota and Badger Ventures, LLC. . 1630424v2 S-2 Exhibit A SUBSIDY AGREEMENT The City of Elk River, Minnesota, 13065 Orono Parkway, Elk River, MN 55330-5600, (the "City"), the Economic Development Authority of the City of Elk River, 13065 Orono Parkway, Elk River, MN 55330-5600, (the "EDA") and G.D.O., Inc. d/b/a Gradient Technology, a Minnesota corporation, 8744 W 35W Service Drive #A, Blaine, MN, 55449 ("Gradient") agree that Gradient and its affiliate, Badger Ventures, LLC ("Badger") have received assistance which is a "Business Subsidy" as defined by the City of Elk River Micro Loan Policy and Minnesota Statutes, Sections 116J.993 through 116J.995 (the "Subsidy Law"), and is subject to the provisions thereof, including without limitation,job creation goals, reporting requirements, five year commitment by Gradient, and repayment of the subsidy if Gradient is in default under this agreement. Accordingly, it is agreed: (1) The amount of the "Business Subsidy" is the total of approximately $72,778 of tax abatement assistance from the City to Badger and the $100,000 City Micro Loan, sub-prime financing,to Gradient. (2) The public purposes of the subsidy include job creation and enhancement of the 11111 City's industrial tax base. (3) The goals of the subsidy include the above public purposes, the construction by Badger of an approximately 13,000 square foot light manufacturing facility to be located in the City(the "Project") and the retention of the Project for at least five years after the "Benefit Date" of the Project, as defined in the Subsidy Law,which is hereby determined to be the date Gradient occupies the Project. Gradient represents that the Business Subsidy is needed in order to induce Badger to complete the Project in the City of Elk River. (4) Gradient represents that it currently has in the State of Minnesota 7 full-time equivalent permanent employees and agrees to meet the following goals (the "Goals"): it will create at least 5 full-time equivalent jobs in connection with the development of the Project at a direct hourly wage of at least$15.00 per hour within two years from the "Benefit Date". (5) If the Goals are not met, Gradient agrees to repay to the EDA and the City all or a part of the Business Subsidy theretofore paid to Gradient and Badger by the EDA and 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, Gradient will repay a portion of the Business Subsidy (plus Interest) determined b y multiplying the B usiness S ubsidy b y a fraction, the numerator o f which i s the number of jobs in the Goals which were not created at the wage level set forth above and the denominator of which is 5 (i.e. number of jobs set forth in the Goals). • (6) Gradient agrees to continue operations of the Project for at least five (5) years after the Benefit Date. 1630424v2 A-1 • (7) Gradient represents that it is affiliated with Badger and there is no parent corporation of either Gradient or Badger. (8) Gradient represents that Gradient and Badger have accepted business subsidies from the following additional public entities: (a) Approximately $72,778 of tax abatement assistance from Sherburne County, Minnesota to Badger. (b) No additional business subsidies to Gradient. (9) Gradient represents that neither it nor Badger is in default on the date hereof on any subsidy agreement entered into under the Subsidy Law. (10) Gradient agrees to (i) report its progress on achieving the Goals to the EDA 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 Subsidy Law on forms developed by the Minnesota D epartment of E mployment and Economic D evelopment, and(iii) s end c ompleted reports to the EDA. Gradient agrees to file these reports no later than March 1 of each year commencing March 1, 2005, and within 30 days after the deadline for meeting the Goals. The EDA agrees that if it does not receive the reports, it will mail Gradient 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, Gradient agrees to pay to the EDA a penalty of$100 for each subsequent day until the report is filed up to a maximum of$1,000. (11) If Gradient fails to meet the job goals by the compliance date, the City and the EDA, upon receiving written request by Gradient indicating the reasons why the job goals have not been met and Gradient's reasonable assurance that the goals will be met, may, in their absolute discretion, grant a one year extension of the compliance date. (12) In the e vent t hat any provision o f t his Agreement i s inconsistent or in conflict with any provision of the Subsidy Law, and in the event that any provision of the Subsidy Law provides additional requirements, the provisions of the Subsidy Law shall apply and govern. S 1630424v2 A-2 In witness whereof, the EDA and the Company have dully executed this agreement by their duly authorized representatives. G.D.O., INC., d/b/a Gradient Technology By Its By Its 1630424v2 A-3 • CITY OF ELK RIVER, MINNESOTA By Its Mayor By Its Administrator ECONOMIC DEVELOPMENT AUTHORITY OF CITY OF ELK RIVER, MINNESOTA By Its President s By Its Executive Director . 1630424v2 A-4