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5.2. & 5.4. EDSR 08-14-2000 ELK RIVER ECONONIPMENT AUTHORITY Item # 5.2 & 5.4 ill TO: Elk River EDA FROM: Cathy Mehelich, Director of Economic Development DATE: August 10, 2000 SUBJECT: Equity Management, Inc. Project Issue Per state law, the EDA is to consider public input on the following items as it relates to the Ripplinger development proposal: 1) Sale/disposal of EDA public property North Half of Lot 1, Block 1, Country Crossing Business Center 2nd Addition. 2) Granting Subsidy Assistance in an amount exceeding $100,000 to be provided in the form of a land sale write down Background Equity Management, Inc. (Linda Norha) has proposed to construct a 22,500 square foot multi-tenant light industrial building on half of a site currently • owned by the EDA (located at Joplin Street& 183rd Ave). Equity Management has requested that the EDA provide the following assistance in order to encourage the development project to occur: • Subdivide the property into two lots $ 8,000 • Transfer the north half of the property $165,400 to Equity Management, Inc. at a 100% write down of market value • Split the cost of water/sewer installation $ 2,500 Total value of assistance requested $175,900 Current market value of the 4.36 acres is $330,800. The City of Elk River purchased the property in December 1997 with excess tax increment finance revenues in the amount of$198,750. The property was then transferred to the EDA for sale and marketing. Limitations exist on the EDA sale of the property since the purchase was last funded by tax increment finance dollars. Any sale proceeds would be considered increment and would need to be returned to the County for distribution. The source of funds for subdivision expenses and water/sewer • installation would come from the EDA reserve fund. 13065 Orono Parkway • P. O. Box 490 • Elk River, MN 55330-1743 • (612) 441-7420 • Fax (612) 441-7425 Equal Equal Opportunity Housing and Equal Opportunity Employment Staff has evaluated the Equity Management's Tax Increment Financing • Application and has determined that subsidy assistance is appropriate for the project based on the level of assumed risk for the investment project and the project goals to be met by the development. The public purposes to be met by the development include 1) Enhance & diversify the City's industrial tax base, and 2) Contribute to the fulfillment of the City's Strategic Plan for Industrial Development, and 3) Eventual job creation. The project has potential to stimulate additional private investment in the West Business Park and also provide leasible light industrial space that is currently lacking in Elk River. Following the public hearing, the EDA may determine that the creation of jobs is not a primary goal of the project and henceforth, set wage and job goals at zero. The EDA may consider an alternative project goal for the subsidy to be the construction of a minimum of 22,000 square feet of leasible light industrial space within one year. Staff has worked with planning and engineering staff to design a global area storm drainage system to accommodate the three developments currently proposed in the West Business Park. Staff recommends that a condition of the property sale include the Equity Management, Inc.'s participation in the global storm drainage plan. This requirement has been drafted as part of • the purchase agreement. The expenditure of approximately $10,000 for extension of water & sewer has been a point of negotiation between staff and the developer. Please refer to the attached memo from the City Administrator for staff recommendation. Requested Action Following the public hearing, staff recommends that the EDA consider action on the following items: 1) Sale of the described property to Equity Management, Inc. in accordance with the purchase agreement and approved plans and specifications; and 2) Granting subsidy assistance in the amount of$175,900 per the Performance/Assistance Agreement to Equity Management, Inc. with recommendation to City Council for final approval. Attachments • Site Map • Application for Tax Increment Financing—Equity Management, Inc. • Purchase Agreement— Equity Management, Inc. • Performance/Assistance Agreement—Equity Management, Inc. • S z tl -2 . -.; .., 44 ° -." f2 ... — ' E.1,. ;Of.$ 1 3: " !".., ?; t & 1 i 0 If, --, •.-,..;t;2.,i• . ..i., I -1 4•i I-K-:•10:::,-:los ; --t-;2.: :,* ? ..2: LI:'I::::::.; : A ',._. . s' . s•E i i 2,1 OA'5,I **:!:• , .. 4! ! !.!° - .••••1 44 ‘,51± --, Elea w r4 k3 ''S:ELII il g s_,'Tt——, 1:E 2. '1 C4 E 03;.V:I:,,,, '''', -77;•... ,,,,2 ISI1:' '. SL..."'. 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I I / ( \,....,t.i.., I : VS'cr .., N \::- Cl) c,/r.'/ ....... I k 44! / 477E4 o '''' i Z_ •-• -r: 5 1 I '1_2-1 / . ;,,!!! 0 r;..g Cl) I 1 \ / 3 /' E.. 1..., ,-) 1' I '',', I-.i:..-a! N ii: '7'17..- I .pi 0 II - / he, C:7 - r-.'..••• . i 1 - ••-; / 6-•' ' / 1 1 3.1 ;.. 4-- I - T - -- PC Y--------°':i -e - .4, -- 1%... iz I ./. ..rs..4!...../. ,!!!!0.....!...,-- 1 i 1 I 411 S-Eg z 6. 0 C,...) t....] A-',.. 1 !::::::iViS:3 ; ..- 1;.1 VII. APPLICATION FOR TAX INCREMENT FINANCING 7,4 '5 cc ley/,"ca f,orn. Gt.�.'/1 h e ecm ,6;`ft e®l ////),P//;,9e/ • A. APPLICANT INFORMATION A pip/,'c 7e/c, Name of Corporation/Partnership Edi,,'f y /10,n CP-,Pien ,0rc t, , Address 2b O S t, N W; Stt/` -e ll ) l k Pt e v , yj'�A/. Primary Contact 1, ,‘,„ (10 © t- A ct ft- Address j(9O S S Al t,t)� S f-e If Fl k k � � e� /I'IN Phone Li 1/f- SYS, Fax s/q5 Email On a separate sheet, please provide the following: • Brief description of the corporation/partnership's business, including history, principal product or service, etc... Attach as Exhibit A . • Brief description of the proposed project. Attach as Exhibit B. • List names of officers and shareholders/partners with more than • five percent (5%) interest in the corporation/partnership. Attach as Exhibit C. • A but-for analysis. Attach as Exhibit D. Attorney Name Address Phone Fax Email Accountant Name j may Address 790 o x 'rx-PS A-v-e . a GO, g 1csavn fv�� m M Phone 2 4/-/- a S.O o Fax Email Contractor Name ,'U-P r 5 ey,t5c s a r , T e. Address p , 13o ©�c 5'7, l k1 /?e'v r 9 fyIN c c ? O Phone 41 / - k a Fax Email Engineer Name Rid it ©P ,'5 n. ‘-P O Lk P Address 9 O 419 I P r C-d,`w Lc, vk e , R r c.o kl y n i z WI in At S"4/4/.3 Phone 7/A-Lac-- '57 c52._ Fax 74,3-1/2S-L6/4/ Email Architect Name /Z ft-P I/ D p c t 6-1-05 n Y-c p • Address 9 O -/ 9 ( l e vt. MAI. ez l &-v e,k 1�/ Pcr v 11 Al Phone`7/03-I.-Jac-6,s/ a. Fax 7/,3--1/, c�,- /p 1, i'-f Email 8 B. PROJECT INFORMATION The project will be: X Industrial Greenfield: X New Construction Expansion • Commercial Redevelopment: New Construction Rehabilitation Industrial Redevelopment: New Construction Rehabilitation Other The project will be: _Owner Occupied X Leased Space If leased space, please attach a list names and addresses of future lessees and indicate the status of commitments or lease agreements.Attach as Exhibit E. Project Address Jr;p 1,'r_ S'tt NU) + 4 !�U e Al ll', ej- Le al Description - f _ _ re. Loctrt4hy Chocs;v\c : U1S r ,CS €$ -er -eC`r_7K.cl_ te4,1,'1-�`� Site Plan Attached: V Yes No PPS' e j I vn ' r'Ct r`/ Amount of Tax Increment Requested for: Land Purchase $ T ei'� Oc (3 Public Improvement $ Site Improvement $ Current Real Estate Taxes on Project Site: $ �'.Z h 1-? noc.v K. Estimated Real Estate Taxes upon Completion: Phase I $ 33, ? O B as €d c- � r8 S _et') Construction Start Date: :t.t. 1 y b o en Construction Completion Date: Qc_ f h -e r- ©r, If Phased Project: Year % Completed Year % Completed C. PUBLIC PURPOSE It is the policy of the City of Elk River that the use of Tax Increment Financing should result in a benefit to the public. Please indicate how this project will serve a public purpose. Job Creation: Number of existing jobs Number of jobs created by project Average hourly wage of jobs created X New industrial development which will result in additional private investment in the area. X Enhancement or diversification of the city's economic base. X The project contributes to the fulfillment of the City's Strategic Plan for Economic Development. Removal of blight or the rehabilitation of a high profile or priority • site. LOther: W,' 1I i'ytf w de lieLprnPrtt r f ) e West l3uSr 'n eSS /��r^1�. 9 D. SOURCES & USES • SOURCES NAME AMOUNT Bank Loanif ., . r . ' -ee- $ 5 -2 , © O '2 Other Private Funds s $ Equity $ L/04, O00 Fed Grant/Loan $ State Grant/Loan $ EDA Micro Loan $ Tax Increment $ ID Bonds $ TOTAL $ 5-"-D/ O0© USES AMOUNT Land Acquisition $ Site Development C i' II S iI °e,vov'k) $ 1 .3'F?l 040 Construction $ 7q/7, DO() Machinery & Equipment $ Architectural & Engineering Fees $ / g o a o0 Legal Fees $ 17 (9 00 Interest During Construction $ (O, no Debt Service Reserve $ Contingencies $ TOTAL $ 9' 5-:0, 600 • • 10 E. ADDITIONAL DOCUMENTATION Applicants will also be required to provide the following documentation. • A) Written business plan, including a description of the business, ownership/management, date established, products and services, and future plans B) Financial Statements for Past Two Years Profit & Loss Statement Balance Sheet C) Current Financial Statements Profit & Loss Statement to Date Balance Sheet to Date D) Two Year Financial Projections F) Personal Financial Statements of all Major Shareholders Profit & Loss Current Tax Return G) Letter of Commitment from Applicant Pledging to Complete During the Proposed Project Duration • H) Letter of Commitment from the Other Sources of Financing, Stating Terms and Conditions of their Participation in Project I) Application fee of$5000 (to be returned upon project completion.) Note: All Major shareholders will be required to sign personal guarantees if up front financing of the project is required. The undersigned certifies that all information provided in this application is true and correct to the best of the undersigned's knowledge. The undersigned authorizes the City of Elk River to check credit references and verify financial and other information. The undersigned also agrees to provide any additional information as may be requested by the City after the filing of this application. Applicant Name E ti,'.4 Y y4 a ve ra C�sy► P h f, roc,Date ?/a'/Dd By l_) c/itett, Its �,.�ted pp/iet 4-p T 0 11 • E. ADDITIONAL DOCUMENTATION: A) EQUITY MANAGEMENT, INC. a Minnesota Sub S Corporation established in October of 1991 . Linda Norha Owner and Gary Santwire, Manager. Presently owns and leases . various commercial properties . B) See F (Personal Financial Statement and Tax Return) C) See F D) We project that this new building will go from 0 occupancy to 100% occupancy in the next two years which will create a positive cash flow. F) See attached personal Financial Statement and Tax Return. G) We hereby commit to construct a 22, 500 square foot Light Industrial lease building. H) To be submitted upon final selection of lender. I) Not Applicable • • EXHIBIT A Description of the corporation or partnership • EXHIBIT B Description of the proposed project EXHIBIT C Names of officers and shareholders/partners with more than five percent (5%) interest in the corporation/partnership. EXHIBIT D But-for analysis EXHIBIT E Prospective Lessees • • 14 • EXHIBIT A Description of the corporation or partnership The northerly half of the proposed development will be owned by Equity Management, Inc . , a sub S corporation 200 5th Street NW, Suite H Elk River, MN 55330 EXHIBIT B Description of the proposed project Single story 22, 500 square foot masonry office/light mfg/ warehouse building on the northerly half of subject property EXHIBIT C Names of officers and shareholders/partners with more than five percent (5%) interest in the corporation/partnership Linda M. Norha, President 100% • D.Russell Norha, Gopher EXHIBIT D But-for analysis See attached EXHIBIT E Prospective Lessees Small to medium sized light industrial companies which are allowed by the underlying zoning requirements . • JUL 21 '00 02:26PM 763 441 8829 P.1 BUT-FOR ANALYSIS • EXHIBIT D - EQUITY MANAGEMENT NO TAX INCREMENT WITH TAX INCREMENT COST: Land: $109,000.00 $0.00 Site Work: $163,000.00 $163,000.00 Construction: $787.000.00 $787.000.00 Total $1,059,000.'00 $950,000.00 MORTGAGE: $659,000.00 $550,000.00 EQUITY: $400,000.'00 $400,000.00 • ANNUAL INCOME: 22,500 B.F.@ 54.50 S.F. $101,250.00 $101,250.00 ANNUAL EXPENSE: Mortgage 22.5 years i 925% $73,228:00 $61,116.00 NET INCOME: $28,022.00 $40,134.00 TOTAL RETURN ON EQUITY 7.05% 10.03% EQUITY MANAGEMENT, INC. ""k = �60/- � /14id TAX INCREMENT FINANCING PROPOSAL REVIEW WORKSHEET • 1. The project meets the criteria set forth in Section III of the City's TptaF Increment Financing policy. a) Meets minimum thresholds for size, value, and tax capacity. 1/ b) Meets at least one of the objectives in Section III and satisfies the provision set forth in Section IV. c) Demonstrates need for TIF with the but-for analysis. L/ e) Consistent with all city plans and ordinances. f) Serves at least two public purpose as defined in Section IV. 2. Ratio of Private to Public Investment in Project: Points: $ ?SC, OG0 Private investment 5:1 41110 $ /73, 1/00 Public Investment CZ"'/7 szr�vrv€ e, a) 4:1 4 —/ 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: 3 GfNIiVaaW Number of new jobs as a result of the project. 40+ 5 Number of existing/retained jobs divided by 10. 30+ 4 /�-/a' Total E/ 7 20+ C3-'M 10+ 2 • Less than 10 1 4. Ratio of TIF to new jobs created: Points: $173. i/CO TIF request $15,000 or less 5� ? /8 Number of new jobs created $20,000 or less 4 $ 30 of TIF per new job created $22,000 or less 3 $25,000 or less 2 Over $25,000 1 5. Wage Level of jobs created: Points: Average hourly wage Over $21/hour 5 of jobs created: /'iv4t1Gt.7? $18-21 /hour 4 $14-17 /hour 3 $10-13 /hour 2 Under $10 /hour 1 6. Project size: Points: 2 4 The project will result in the construction 80,000+ 5 of square feet 22,COC e 65,000+ 4 50,000+ 37 S (cr7rerZ35,000+ • /6/90,17e-'7 /27,2d 25,000+ 1 12 7. Type of Project: Points: 3 • 100% Owner Occupied 5 Mix Owner Occupied & Investment 4 (/ Investment Property 8. Use: Points: S.- 1.. 1/ Manufacturing ✓Research & Development 4 Commercial Redevelopment 3 V Warehouse/Distribution 2 Housing 1 9. The project will pay annual Points: ) property taxes in the first fully 85,000+ 5 assessed year of$ 3T3, -7'S-CD - t ° 70,000+ .22, 'cD C ,e 55,000+ < �J 40,000+ 2 3-6' 2.S0 25,000+ 1 10. Likelihood that the project will result in Points: unsubsidized, spin-off development. L-High 5 Moderate 3 III Low 1 Sub - Total Points: : / of a possible 45 points. 9. Bonus Points Bonus Points: /11 /1/4 The project will be 100% Pay-as-you-go TIF. 3 points 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: Overall project analysis: Hi h 45-38 oints (-Moderate 37-29 poinis -, Low 28-20 points Not Eligible 19-0 points • 13 • PURCHASE AGREEMENT THIS PURCHASE AGREEMENT (the "Purchase Agreement") is made this day of August, 2000, by and between Equity Management, Inc. ("Buyer"), and the Economic Development Authority in and for the City of Elk River, a public body corporate and politic ("Seller"). In consideration of the mutual covenants and undertakings contained herein the parties agree as follows: 1. Sale and Purchase of Property. Seller agrees to sell, and Buyer agrees to purchase, certain real property situated in the County of Sherburne, State of Minnesota, consisting of certain land legally described on Exhibit A attached hereto and made a part hereof, together with all the appurtenant rights, mineral rights, privileges, and easements belonging thereto (the "Property"). 2. Purchase Price. Buyer agrees to pay to Seller, as the purchase price for the Property (the "Purchase Price"), the sum of $1.00 which shall be paid in cash at closing. 3. Title. As soon as reasonably possible after Buyer's acceptance of this • Purchase Agreement, Seller shall deliver to Buyer a commitment for an owner's title insurance policy issued by a title company to be determined by Seller, naming Buyer as the proposed owner-insured of the Property in the amount of the Purchase Price (the "Commitment"). Buyer will be allowed 10 days after receipt of the Commitment for examination thereof and for making any objections to the marketability of the title to the Property, said objections to be made by written notice delivered to Seller within said 10 day period or to be deemed waived. If any objections are so made to the marketability of the title to the Property, Seller shall be allowed 90 days after the making of such objections by Buyer to cure such objections and make the title to the Property good and marketable of record in Seller. Pending the correction of the title, the Closing Date and the payments hereunder required shall be postponed, but upon correction of the title and within 15 days after written notice of such correction given by Seller to Buyer, Seller and Buyer shall perform this Purchase Agreement according to its terms. If the title to the Property, as evidenced by the Commitment, is not good and marketable of record in Seller and is not made so within 90 days after the date on which the Buyer delivers written objections thereto to Seller, or is not good and marketable of record in Seller at the Closing Date, Buyer may either: a. Terminate this Purchase Agreement by giving written notice to Seller in which event this Purchase Agreement shall become null and • • void and neither party shall have any further right or obligation hereunder; or b. Elect to accept the title in its unmarketable condition by giving written notice to Seller, in which event Buyer shall proceed to close the purchase of the Property in accordance with the terms of this Purchase Agreement and without any reduction in the Purchase Price. 4. Inspection. At Buyer's expense, Buyer, its agents and designees, are hereby granted the right at any time or times after the date hereof to enter upon and inspect, analyze, and test the Property. Buyer shall hold Seller harmless from any liability resulting from the entering upon the Property or the performing of any of the tests or inspections referred to in this Section 4 by Buyer, its agents or designees. 5. Covenants and Warranties of Seller. Seller covenants and warrants to Buyer as follows: a. To the best of Seller's knowledge, there is no action, litigation, investigation, condemnation or proceeding of any kind pending or threatened against Seller or the Property, or any interest therein, which could adversely affect the Property or title thereto, and Seller has no • knowledge of any reasonable basis for the commencement of any such action, litigation, investigation, condemnation or proceeding. Seller shall give Buyer prompt written notice if any such action, litigation, investigation, condemnation, or proceeding is commenced on or prior to the Closing Date. b. Seller certifies that to the best of Seller's knowledge there are no wells on the Property. c. Seller states that to the best of Seller's knowledge there is no individual sewage treatment system, as defined in Minn. Stat. 115.55. Buyer acknowledges that Buyer will be purchasing the Property relying only on such investigations, testing and inquiries of and regarding the Property as Buyer shall have chosen to make. Except as specifically set forth in this Purchase Agreement, the Seller has not made, and shall not be deemed to have made, and Buyer hereby disclaims any reliance on, any warranty or representation, oral or written, express or implied, regarding the Property, the condition of the Property, the soil conditions existing on the Property, the environmental conditions on the Property, the zoning or other laws and ordinances applicable to the Property, the uses to which the Property may be put, or any other thing or matter relating to the Property. -2- 1110 6. Closing. The closing shall take place on September 1, 2000, or such other date as is mutually agreed upon. Such date, or such other date as this transaction actually closes, is herein referred to as the "Closing Date". The closing shall take place at Elk River City Hall, 13065 Orono Parkway, Elk River, Minnesota 55330, or such other location as the parties shall mutually agree upon. At the closing, Seller shall deliver to Buyer: a. A warranty deed properly executed and in recordable form with all applicable transfer taxes paid and stamps, if any, affixed thereto, conveying the Property to Buyer and warranting title thereto subject to: real estate taxes and installments of special assessments due and payable in 2000 and thereafter; building and zoning laws and ordinances; State and Federal rules and regulations; and restrictions, reservations, rights and easements of record. The deed shall include a covenant running with the land which incorporates the conditions of this agreement with respect to use of the Property. b. All certificates, instruments and other documents necessary to permit the recording of the warranty deed. c. A Seller's Affidavit containing statements as to the • knowledge of Seller with respect to judgments, bankruptcies, tax liens, mechanics liens, parties in possession, unrecorded interests, encroachment or boundary line questions, and related matters, properly executed on behalf of Seller. d. An affidavit of Seller in form and content satisfactory to Buyer stating that Seller is not a "foreign person" within the meaning of Section 1445 of the Internal Revenue code; e. Such other instruments and documents as are necessary to vest title to the Property in Buyer. Upon delivery of the foregoing items, Buyer shall deliver to Seller the Purchase Price payable under Section 2(b) of this Purchase Agreement. 7. Conditions Subsequent. Notwithstanding anything to the contrary contained in this Agreement, the consummation of the transaction contemplated by this Agreement and the closing provided in Paragraph 6 hereof shall be contingent upon Buyer satisfying the following conditions subsequent: a. Buyer shall provide Seller with plans and specifications for development of the Property. • -3- • b. Buyer shall commence construction of an office-warehouse building on the Property (the "Building") by January 1, 2001. If Buyer has not commenced construction of the Building by January 1, 2001, Seller may, at any time before substantial construction has commenced, cancel the sale of the Property. Upon such cancellation, title to the Property shall return to Seller at no cost to Seller. c. Buyer shall complete construction of the Building and receive a certificate of occupancy for the Building no later than December 31, 2001. d. The Building shall meet the following criteria: (i) The Minimum size of the Building shall be 22,000 square feet; (ii) The Building shall comply in all respect with the Ordinances of the City of Elk River; and (iii) Buyer shall convey to Seller, or Seller's designee, such easement or other property interest as Seller shall determine necessary • to accommodate a drainage pond on the Property. Buyer shall share, with the two properties immediately adjacent to the Property, in the cost of establishing and maintaining said pond. 8. Real Estate Taxes. Real estate taxes due and payable in 1999 and all prior years, if any, shall be paid by Seller. Real estate taxes due and payable in 2000, if any, shall be prorated as of the Closing Date based upon the parties' respective period of ownership and possession of the Property in the calendar year of closing. On or prior to the Closing Date, Seller shall pay all special assessments, whether or not then due, then levied against the Property. Seller shall pay on the date of closing any deferred real estate taxes, including "Green Acres" taxes, or special assessments, the payment of which is required as a result of the closing. Seller makes no representation concerning the amount of future real estate taxes or future special assessments. 9. Expenses, Possession. Seller agrees to deliver possession of the Property to Buyer on the Closing Date. In the event Buyer chooses to obtain title insurance or in the event Buyer's lender requires the issuance of title insurance, Buyer shall be responsible for any costs associated with closing with a title company including, but not limited to, the closing fee and all premiums for issuance of either the owner's policy or the lender's policy of title insurance. 10. Notices. All documents to be delivered and all correspondence and • notices to be given in connection with this Purchase Agreement shall be in writing and -4- • given by personal delivery or sent by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to Buyer: Equity Management, Inc. 200 5th Street N.W., Suite H Elk River, MN 55330 Attn: Linda Norha If to Sellers: Elk River Economic Development Authority Attention: Executive Director 13065 Orono Parkway, Elk River, Minnesota 55330 With a copy to: Gray, Plant, Mooty, Mooty & Bennett Attention: Peter K. Beck 3400 City Center 33 South Sixth Street Minneapolis, Minnesota 55402 Each such mailed notice or communication shall be deemed to have been given to or served upon, the party to whom it is addressed three days after the date the same is 1111 deposited in the United States registered or certified mail, return receipt requested, postage prepaid, properly addressed in the manner above provided. Either party hereto may change such party's address for the service of notice hereunder by written notice of said change to the other party hereto, in the manner above specified ten (10) days prior to the effective date of said change. 11. Assignment. This Purchase Agreement shall be binding upon and inure to the benefit of each of the parties hereto, their respective successors and assigns. The foregoing notwithstanding, Buyer shall not assign or convey its rights in the Property or this Purchase Agreement within one year of the Closing Date without first obtaining the consent of Seller and any such assignment or conveyance purportedly made without Seller's consent shall be null and void. Any such assignment or conveyance shall be specifically subject to the Conditions Subsequent set forth in Paragraph 7. 12. Commissions. Seller warrants and represents that it has dealt with no realtors or brokers in connection with this transaction and that it will indemnify, defend and hold harmless Buyer against any claim made by an agent or broker for a commission or fee based on acts or agreements of Seller. Buyer warrants and represents that it will indemnify, defend and hold harmless Seller against any claim made by an agent or broker for a commission or fee based on acts or agreements of Buyer. -5- :, meg • 13. Default. Should Buyer default in the performance of its obligation to purchase hereunder, Seller's shall be entitled to cancel and terminate this Purchase Agreement in accordance with Minn. Stat. 559.21, as amended. 14. Survive Closing. All of the covenants, warranties, and provisions of this Purchase Agreement shall survive and be enforceable after the closing of this transaction. 15. Complete Agreement. This is a final agreement between the parties and contains their entire agreement and supersedes all previous understandings and agreements, oral or written, relative to the subject matter of this Purchase Agreement. 16. Time of the Essence. Time is of the essence in the performance of this Purchase Agreement. 17. Controlling Law. This Purchase Agreement has been made and entered into under the laws of the State of Minnesota, and said laws shall control the interpretation hereof. 18. Captions. The paragraph headings or captions appearing in this Purchase Agreement are for convenience only, are not a part of this Purchase • Agreement, and are not to be considered in interpreting this Purchase Agreement. 19. Binding Effect. This Purchase Agreement shall be binding upon and enforceable against each of the parties hereto when and only if executed by the party against whom enforcement of this Purchase Agreement is sought. IN WITNESS WHEREOF, the parties have executed this Purchase Agreement on the date first above written. -6- • Seller: ECONOMIC DEVELOPMENT IN AND FOR THE CITY OF ELK RIVER By Its Buyer: EQUITY MANAGEMENT, INC. By Its S S -7- • Exhibit A Legal Description GP:723977 vl • • • PERORMANCE /ASSISTANCE AGREEMENT August 14, 2000 The Elk River Economic Development Authority (hereinafter referred to as the "Grantor") and Equity Management, Inc. (hereinafter referred to as the "Recipient") agree that the assistance under this Agreement is a "Business Subsidy" as defined by 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 the Recipient, and repayment of the subsidy if the Recipient is in default under this agreement, including this Section hereof. Accordingly, it is agreed: (a) The amount if the subsidy is $ 175,900 The type of subsidy is Land sale writedown (source TIF) & subdivision and utility extension expenses incurred by the Grantor for the project. The subsidy will be used by the Recipient to Construct a 22,500 square foot multi- tenant light industrial building on the northerly half of the Lot 1, Block 1 Country Crossing Business • Center Second Addition. (b) The public purposes of the subsidy includes The construction of leasible space for light industrial firms that will 1) enhance and diversify the city's economic industrial base and 2) contribute to the fulfillment of the city's Strategic Plan for Industrial Development and 3) result in additional private investment in the area and 4) eventually provide job creation. (c) The goals of the subsidy include the above public purposes, the completion of 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 upon which this is granted, August 14, 2000. (d) If the Recipient fails to meet its obligations under this Agreement, the Recipient shall repay all amounts of the subsidy theretofore paid to the Recipient by the Grantor, together with interest accruing at the annual rate per annum equal to the implicit price deflator of Minnesota statutes, Section 275.70, subdivision 2, with all such interest accruing on each subsidy payment made to the Recipient hereunder from the • date of said payments. If the Recipient meets some but not all of the job goals hereinafter defined, the Recipient may request in writing, and the Grantor may agree, in its absolute discretion, that the subsidy 1 be repaid by the Recipient on a pro rata basis. The Recipient represents that the subsidy is needed in order to induce the Recipient to complete the project in the City of Elk River. The Recipient covenants that it will continue its operations in the Grantor's jurisdiction for at least five years after the benefit date. (e) The Recipient represents that it is a subsidiary of the following parent corporation: Company Name: Address: (f) The Recipient represents that it has accepted subsidies from the following public entities: • Elk River EDA—Land sale write down & subdivision and utility extension expenses incurred by the Grantor for the project. (g) The Recipient represents that it is not in default on the date hereof on any subsidy agreement entered into by the Recipient under the Subsidy Law. (h)The Recipient represents that it is not able to complete this project in • its current location, which is N/A because (i) The Recipient represents that it currently has in the State of Minnesota 0 full-time equivalent permanent employees and, for its "job goals"hereunder, will create due to the project an additional 0 full time equivalent permanent employee positions within two years of the benefit date, with these jobs having wage levels of at least $0 per hour, exclusive of benefits, as required by EDA Micro Loan policy. The Recipient estimates that the actual average wage for the jobs it creates will be at least $ 0 per hour, exclusive of benefits. It is anticipated that the project will create higher wage jobs by providing space for small and emerging industrial companies to grow. However, because the Recipient itself, a development corporation, can not be held directly responsible for the creation of jobs as a result of the project, the Recipient represents as an alternative goal, the construction of a minimum of 22,500 square feet of leasible light industrial space to be completed within one year of the benefit date. • (j) The Recipient shall complete and file with the Grantor an annual report in a form supplied by its Executive Director. The Subsidy Law 2 requires that if the Recipient does not file such reports, when due, the Grantor must mail the Recipient a warning within one week of the filing date, and if, after 14 days after the postmark data of that warning, the Recipient continues to fail to report, then the Recipient is required to and shall pay the Grantor a penalty of$100 for each subsequent day until the report is filed, up to a maximum of$1000. The Recipient shall file these reports with the Grantor, in care of its Executive Director at the following times: • On March 1 of each year, beginning with the March 1 immediately following the benefit date. • Within 30 days of the "Compliance Date," hereby defined to be the date which is two years after the benefit date. • If the job goals are not met by the compliance date, every subsequent anniversary thereof until the subsidy is repaid, as may be required hereunder. Each March 1 report shall reflect the prior calendar year, and each subsequent report shall reflect the period since the last reporting period. (k) If the Recipient fails to meet the job goals by the compliance date, the Grantor, upon receiving written request by the Recipient indicating • the reasons why the job goals have not been met and the Recipient's reasonable assurance that the goals will be met, may, in its absolute discretion, grant a one year extension of the compliance date. (1) This section of this Agreement is intended to be the "Subsidy Agreement"required by Section 116J.994, Subdivision 3 of the Subsidy Law. In the event that any provision of this Section is 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. In witness whereof, the Grantor and the Recipient have dully executed this agreement by their duly authorized representatives. Elk River Economic Equity Management, Inc Development Authority (Grantor) (Recipient) By By Pat Dwyer Linda Norha Its President Its President • By Catherine Mehelich Its Executive Director s:\eda\prospect\santwire\equitymg.doc 3