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3.0. EDSR 05-10-1999 ELK RIVER ECONOMIC DEVELOPMENT AUTHORITY MEMORANDUM TO: Economic Development Authority FROM: Paul T. Steinman, Director of Economic Development DATE: May 10, 1999 SUBJECT: Worksession Agenda Memo Business Incubator Project Overview What follows is a proposed layout for the business incubator worksession: • 4:00 Introduction, Outline Major Issues for Discussion - Paul Steinman • 4:15 -Incubator Companies/Prospects, Other Issues-Harlan Jacobs • 4:30 Presentation of Incubator Companies - Harlan Jacobs Protectorcare, Inc. SolarAttic, Inc. Watermark, LLC MAS Technologies, Inc. • 5:30 - EDA Discussion, Q&A Issue The purpose of this meeting is to provide an overview of the business incubator project and to address questions and comments of the EDA regarding the project. April 15, 1999, marked the second year anniversary, and upon completion of two full years of operation, it appears that this is an appropriate time to review the project, including past/future challenges and EDA commitment to the project. Analysis The EDA is leasing approximately 13,186 square feet of space in the former Furniture and Things building. This was an original two year lease, however, the EDA elected to extend by an additional two years to April 14, 2001. The original two year lease was at a cost of$1.50 per square foot, the two year • extension, which we are currently in, is at a cost of$1.65 per square foot. The EDA has the ability within the lease to extend the term two more times at two 13065 Orono Parkway • P. O. Box 490 • Elk River, MN 55330-1743 • (612) 441-7420 • Fax (61.2) 441-7425 Equal Opportunity Housing and EqualOpportunity Employment years each at a cost of$1.85 per square foot and $3.00 per square foot • respectively. The EDA paid Larry Hickman over the first two years of the lease term, approximately $80,000 for leasehold improvements to the facility. Mr. Hickman agreed, in turn, that a certain percentage of these leasehold costs would be reimbursed to the EDA should we elect not to extend the lease at a certain time in the future. The repayment agreement amortizes the leaseholds over a seven year period. The repayment schedule currently shows that if the EDA were to elect not to extend the lease term beyond the current ending date of April 14, 2001, Mr. Hickman would repay the EDA $34,823 for the leasehold improvements completed in the building in 1997. An analysis of the revenues and expenses for 1997, 1998, and to April 30, 1999, is as follows: 1997 1998 1999 (to 4/30) Revenues to EDA - Rent $ 4,255 $14,978 $ 4,742 Expenses Leaseholds $46,903 $38,793 $ 7,301 Rent Paid by EDA $14,832 $19,776 $ 6,592 Signage $ 1,873 --- _ 411 Cleaning $ 509 $ 442 $ 0 IP Consultant Retainer $ 4,500 $ 6,000 $ 2,000 Supplies --- $ 1,269 $ 100 Advertising/Marketing --- $ 1,313 $ 0 Total Expenses $68,617 $67,593 $15,993 What follows are the original projections for revenues and expenses for the business incubator project: 1997 1998 1999 (to 4/30) Revenues to EDA Rent $ 7,083 $12,833 $4,083 Expenses Leaseholds $46,903 $38,793 $ 7,301 Rent Paid by EDA $14,832 $19,776 $ 6,592 Signage $ 3,000 -- --- Cleaning $ 0 $ 0 $ 0 Consultant Retainer $ 4,500 $ 6,000 $ 2,000 Supplies --- $ 0 $ 0 Advertising/Marketing --- $ 0 $ 0 Contingency $ 5,000 $ 5,000 $ 2,000 • Total Expenses $74,235 $69,569 $17,893 The funding source for the business incubator project consists of recycled state dollars which were granted to the City of Elk River, and the city in turn loaned these dollars to Tescom. As this loan is repaid, it has created a funding source for micro enterprise projects such as the Elk River Business Incubator. Re-use • of these dollars is required to meet certain eligibility standards established by the State of Minnesota to create jobs for low/moderate income people or creation of a micro enterprise such as the incubator project. This fund should be able to continue to be a source of dollars for this project through the end of the current lease term and the two potential lease term extensions. As of April 15, 1999, the EDA has completed its payments to Larry Hickman for leasehold improvements, therefore, the facility should be to a point where it will almost cash flow on a monthly basis from rents received of the four tenants. These rents are as follows: • Protectorcare 1,561 s.f. $2.50/s.f. = $ 325.21/month • Watermark - 1,493 s.f. $2.00/s.f. _ $ 248.83/month • MAS Technologies - 2,267 s.f. $3.00/s.f. = $ 566.75/month • SolarAttic - 3,546 s.f. - $2.25/s.f. = $ 664.88/month $1,805.67/month • EDA Leases 13,186 s.f. at $1.65/s.f. $1,813.08/month Conclusion • There are two primary issues which will arise over the next twelve months of the incubator project. These issues are: • Should the EDA opt to extend the lease term from April 2001 to April 2003? This issue needs to be determined early on so that as we proceed with negotiations with potential prospects we have the ability to enter into full two year subleases. • Graduation of incubator tenants aid in relocation to other space in the community • SolarAttic graduates on April 14, 2000 • Watermark scheduled to graduate April 14, 2000 • Protectorcare scheduled to graduate April 14, 2000 • MAS Technologies scheduled to graduate May 31, 2000 Staff will likely be spending a considerable amount of time with the incubator companies over the next year to help them find suitable space for potential relocation outside the facility. 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A� t? :: _yi t:ss I' 1 4.. 1�' v(f Q Z t \l am<. ,yoi, , 91 ' ��f -, -%,...:,z, :_. ° it., • , �' '0---: mit i 1.rz` .. may xa 8�\ ; it ` 4Fa ••`�•. 11y1' .,. 1015:-:'K' ','Y,`` ''' .. ,Tri ../.4.6,•;,0' y ' ' ''' 11"s..��_ lfssr f#'. t. 7onesS 550220.1 • ACCEPTANCE On behalf of the Company, the undersigned Chief Manager, hereby accepts the above Contribution Agreement of City of Elk River Economic Development Authority to contribute a 13 month lease of office space for 1493 square feet in Elk River Business Center commencing March 15, 1998 to the Company in consideration for 1,536 Membership Units in the Company, which Units are representative of Membership Interest in the Company on the date hereof having a .7% Voting Interest and a .7% Financial Interest, and is subject to the terms of the Member Control Agreement. Dated: April 7, 1998 WATERMARK,LLC By: •( � Michael Gill, Its Chief Manager S 4111 JonesS 550220.1 • EXHIBIT A CONTRIBUTION AGREEMENT THE UNDERSIGNED, CITY ELK RIVER ECONOMIC DEVELOPMENT AUTHORITY, having a business address in the state of Minnesota, hereby agrees to contribute a 13 month lease of office apace for 1493 square feet in Elk River Business Center commencing March 15, 1998, to Watermark, LLC (the "Company") at the time this Agreement is executed in consideration for 1,536 Membership Units in the Company, which Units are representative of a Membership Interest on the date hereof having a .7% Voting Interest, and a .7% Financial Interest, (as those terms are defined in the Member Control Agreement dated February 23, 1998, by the Members of the Company), and which Voting Interest and Financial Interest are subject to adjustment from time to time in accordance with the terms of the Member Control Agreement and the total number of Membership Units from time to time outstanding. The undersigned represents that the Membership Interest covered by this Contribution Agreement is being purchased by the undersigned for its own account for investment and not with the view to, or for resale in connection with, any distribution thereof. The undersigned understands that(1)the Membership Interest covered by this Contribution Agreement will not be registered under the applicable state or federal securities laws by reason of specific exemptions under the provisions of such laws which depend, in part, upon the undersigned's investment intent, and (2) the Company understands that the investment intent set forth above means that the undersigned does not intend to dispose of all or any part of the Membership Interest acquired pursuant to this Contribution Agreement. The undersigned makes these representations in order • that the Company may rely upon them. The undersigned also agrees that a statement setting forth the foregoing may be placed in the required records of the Company. CITY OF ELK RIVER'6 NOM1C EVELOPMENT AUTHORITY Dated: April 7, 1998 By G� Its # — • FINAL • LEASE elti-/ nTennant Building) THIS LEASE,made as of the / 7 day of ('1 , 1997,by and between Larry Hickman,hereinafter called "Landlord" and City of Elk River Economic Development Authority, a Public Body Corporate and Politic,hereinafter called "Tenant." ARTICLE I. - BASIC TERMS 1.01 (A) Address of Landlord: 12888 - 187th Circle NW Elk River, MN 55330 or such other address as may from time to time be designated by Landlord in writing. (B) Address of Tenant: Elk River City Hall 13065 Orono Parkway Elk River, MN 55330 or such other address as may from time to time be designated by Tenant in writing. (C) Premises: Approximately 13,186 square feet of space in the Building as shown on Exhibit "A" attached hereto. • (D) Building: The building in which the Premises is located, the common address of which is 16820 Highway 10, consisting of approximately 28,000 square feet, together with the land, and any parking areas, walkways, landscaped areas and other improvements appurtenant thereto. The legal description of the parcel of real estate on which the Building is situated is attached hereto as Exhibit "B". (E) Term: The period of time commencing April 15, 1997 and expiring April 14, 1999 unless sooner terminated as set forth herein or extended as provided in Article III hereof. (F) Rent: All sums, moneys or payments required to be paid by Tenant to Landlord pursuant to this Lease. (G) Base Rent: $39,558 for the Term($1.50 per square foot),payable as follows: (1) $19,779 per annum ($1,648 per month) for the period from April 15, 1997 through April 14, 1998; (2) $19,779 per annum ($1,648 per month) for the period from April 15, 1998 through April 14, 1999; • 1 • (H) Leasehold Improvements: At the actual cost of$ , not to exceed $81,253, for the Term,payable as follows: (1) $25,000 at commencement of the Term; (2) The balance, together with interest at the rate of 8.5% per annum, in equal monthly installments commencing on April 15, 1997. (I) Permitted Uses: Office, manufacturing, warehouse and other uses permitted by applicable zoning ordinances. (J) Broker(s): NONE (K) Exhibits: A. Description of Premises B. Legal Description of Real Estate C. Plans and Specifications 1.02 Effect of Reference to Basic Terms: Each reference in this Lease to any of the Basic Terms contained in Section 1.01 shall be construed to incorporate into such reference all of the definitions set forth in Section 1.01. ARTICLE II. - GRANT AND TERM • 2.01 In consideration of the rents, covenants, agreements and conditions hereinafter provided to be paid, kept, performed and observed, Landlord leases to Tenant and Tenant hereby hires from Landlord the Premises described in Section 1.01(C). 2.02 Tenant shall have and hold the Premises for and during the Lease Term described in Section 1.01 (E), subject to the payment of the Rent and to the full and timely performance by Tenant of the covenants and conditions hereinafter set forth. 2.03 In the event Tenant takes possession of the Premises prior to the beginning of the Term hereof with Landlord's consent, all the provisions of this Lease shall be in full force and effect upon Tenant's so taking possession except that no payment of rent shall be made with respect to the period prior to the beginning of the Term hereof. ARTICLE III. - OPTION TO EXTEND TERM 3.01 Tenant is hereby granted the option to extend the Term of this Lease for 3 (three) successive Renewal Terms of 2 (two)years each. Such option may be exercised by Tenant at least 60 days prior to the expiration of the initial Term or any Renewal Term by Tenant giving written notice of the exercise of Tenant's option hereunder to the Landlord. If Tenant does not give such notice of exercise of this option,this Lease shall terminate at the end of the then current Term or Renewal Term and this option shall also expire and be of no further force and effect. In the event that Tenant does exercise an option for a Renewal Term hereunder, Tenant's occupancy of the Premises shall be in accordance with all of the terms and conditions of this 2 • Lease except that the Base Rent for each Renewal Term shall be as follows: First Renewal Term: $1.65 per square foot or $ 21,757 per annum ($ 1,813 per month) Second Renewal Term: $1.85 per square foot or$ 24,394 per annum($ 2,033 per month) Third Renewal Term: Not to exceed$3.00 per square foot or$ 39,558 per annum ($3,297 per month) ARTICLE III. - RESERVATIONS BY LANDLORD 4.01 Landlord excepts and reserves the roof, exterior walls and Common Areas of the Building as described in Article XVII below, and further reserves the right to place, install, maintain, carry through, repair and replace such utility lines, pipes, wires, appliances, tunneling and the like in, over, through and upon the Premises as may be reasonably necessary or advisable for the servicing of the Premises or any other portions of the Building. 4.02 Notwithstanding any provision in this Lease to the contrary, it is agreed that Landlord reserves the right, without invalidating this Lease or modifying any provision thereof, at any time, and from time to time, (i) to make alterations, changes and additions to the Building, (ii) to add additional areas to the Building and/or to exclude areas therefrom, (iii) to construct additional buildings and other improvements, (iv) to remove or relocate the whole or any part of • any building, and (v)to relocate any other tenant in the Building. It is further understood that the existing layout of the Building, and any appurtenant walks, roadways, parking areas, entrances, exits, and other improvements shall not be deemed to be a warranty, representation or agreement on the part of the Landlord that same will remain exactly as presently built, it being understood and agreed that Landlord may change their number, dimensions and locations of the walks, as Landlord shall deem proper. ARTICLE IV. -USE; HAZARDOUS MATERIAL 5.01 The Premises hereby leased shall be used by and/or at the sufferance of Tenant only for the purposes set forth in Section 1.01(I) above and for no other purposes. Tenant shall not use or permit the use of the Premises in any manner that will tend to create waste or a nuisance, or will tend to unreasonably disturb other tenants in the Building, and shall keep its mechanical apparatus free of noise and vibration which may be transmitted beyond the confines of the Premises. 5.02 Tenant covenants throughout the Lease Term, at Tenant's sole cost and expense, promptly to comply with all laws and ordinances and the orders, rules and regulations and requirements of all federal, state and municipal governments and appropriate departments, commissions, boards, and officers thereof, foreseen or unforeseen, ordinary as well as extraordinary, and whether or not the same require structural repairs or alterations, which may be applicable to the Premises, or the use or manner of use of the requirements of all policies of public liability, fire and all other • policies of insurance at any time in force with respect to the buildings and improvements on the Premises and the equipment thereof 3 • 5.03 In the event any Hazardous Material (hereinafter defined) is brought or caused to be brought into or onto the Premises or the Building by Tenant, Tenant shall handle any such material in compliance with all applicable federal, state and/or local regulations. For purposes of this Section, "Hazardous Material" means and includes any hazardous, toxic or dangerous waste, substance or material defined as such in (or for purposes of) the Comprehensive Environmental Response, Compensation, and Liability Act, any so-called "Superfund" or "Superlien" law, or any federal, state or local statute, law, ordinance, code, rule, regulation, order or decree regulating, relating to, or imposing liability or standards of conduct concerning, any hazardous, toxic or dangerous waste, substance or material, as now or at any time hereafter in effect. Tenant shall submit to Landlord prior to the time that Hazardous Materials are brought onto the Premises and on an annual basis copies of its approved hazardous materials communication plan, OSHA monitoring plan, and permits required by the Resource Recovery and Conservation Act of 1976, if Tenant is required to prepare, file or obtain any such plans or permits. Tenant will comply with reasonable requests of Landlord regarding the handling of Hazardous Materials on the Premises. Tenant will indemnify and hold harmless Landlord from any losses, liabilities, damages, costs or expenses (including reasonable attorneys' fees) which Landlord may suffer or incur as a result of Tenant's introduction into or onto the Premises of any Hazardous Material. This Section shall survive the expiration or sooner termination of this Lease. ARTICLE VI. -RENT • 6.01 Base Rent. Tenant covenants to pay without notice, deduction, set-off or abatement to Landlord the Base Rent specified in Section 1.01(G) in lawful money of the United States in equal consecutive monthly installments in advance on the fifteenth day of each month during the Lease Term. Rent for any partial month shall be prorated on a mer diem basis. Rent shall be payable to Landlord at Landlord's address shown at Section 1.01(A) above or such other place as Landlord may designate from time to time in writing. Tenant shall pay the first full month's Base Rent at the beginning of the term. Base Rent includes Real Estate Taxes, Insurance Premiums and Common Area Expenses, and Tenant will not be required to pay any additional rent therefor or for increases thereto. 6.02 Service Charge. Tenant's failure to make any monetary payment required of Tenant hereunder within ten (10) days of the due date therefor shall result in the imposition of a service charge for such late payment in the amount of five percent (5%) of the amount due. In addition, any sum not paid within thirty (30) days of the due date therefor shall bear interest at the rate of eighteen percent (18%) per annum (or such lesser percentage as may be the maximum amount permitted by law) from the date due until paid. ARTICLE VII. -UTILITIES AND SERVICES 7.01 Landlord shall provide the following as a service for all Tenants of the Building: electricity, gas, water, fuel, sewer charges, trash hauling and any other services or utilities used in, servicing • or assessed against the Premises, unless otherwise herein expressly provided. Tenant shall contract in its own name and timely pay for all charges for telephone and fax services. 4 1111 ARTICLE VIII. - QUIET ENJOYMENT 8.01 Landlord covenants that Tenant, on paying the Rents herein provided and keeping, performing and observing the covenants, agreements and conditions herein required of Tenant, shall peaceably and quietly hold and enjoy the Premises for the term aforesaid, subject, however, to the terms of this Lease. ARTICLE VIII. - SUBLETTING 9.01 Landlord acknowledges that Tenant will operate a"business incubator" in the Premises and will sublet portions of the Premises to other businesses. Notwithstanding any sublease, Tenant shall remain liable hereunder and shall not be released without the express written agreement of Landlord to such release. Tenant shall retain all rents payable to Tenant arising out of such subleases. ARTICLE IX. - DAMAGE OR DESTRUCTION 10.01 If the Premises or the Building or any part thereof is so damaged by fire or other casualty, cause or condition whatsoever as to be substantially untenantable and the Landlord shall determine not to restore same, Landlord may, by written notice to Tenant given within sixty (60) days after such damage, terminate this Lease as of the date of the damage. If this Lease is not • terminated as above provided and if the Premises are made partially or wholly untenantable as aforesaid, Landlord, at its expense, shall restore the same with reasonable promptness to the condition in which Landlord furnished the Premises to Tenant at the commencement of the term of this Lease as to those items that were provided at Landlord's expense without any reimbursement by Tenant. Landlord shall be under no obligation to restore any alterations, improvements or additions to the Premises made by Tenant or paid for by Tenant, including, but not limited to, any of the initial finish done or paid for by Tenant or any subsequent changes, alterations or additions made by Tenant. 10.02 If, as a result of fire or other casualty, cause or condition whatsoever the Premises are made partially or wholly untenantable and, if Landlord has not given the termination notice within sixty(60) days as above provided for and fails within one hundred twenty(120) days after such damage occurs to eliminate substantial interference with Tenant's use of the Premises or substantially to restore same, Tenant may terminate this Lease as of the end of said one hundred twenty (120) days by notice to Landlord given not later than five (5) days after expiration of said one hundred twenty (120) day period. If the Premises are rendered totally untenantable but this Lease is not terminated, all rent shall abate from the date of the fire or other relevant cause or condition until the Premises are ready for occupancy and reasonably accessible to Tenant. If a portion of the Premises is untenantable, rent shall be prorated on a per diem basis and apportioned in accordance with the portion of the Premises which is usable by the Tenant until the damaged part is ready for the Tenant's occupancy. In all cases, due allowance shall be made • for reasonable delay caused by adjustment of insurance loss, strikes, labor difficulties or any cause beyond Landlord's reasonable control. For the purposes of this Lease, the Premises shall be considered tenantable so long as and to the extent that the Premises are occupied. In any 5 event, Tenant shall be responsible for the removal or restoration, when applicable, of all its damaged property and debris from the Premises, upon request by Landlord or reimburse Landlord for the cost of removal. ARTICLE XI. - LANDLORD'S RIGHTS 11.01 Landlord reserves the following rights: (a) To change the name of the Building without notice or liability to Tenant; (b) To exhibit the Premises to others and to display "For Lease" signs on the Premise during the last six months of the Term or any extension thereof; (c) To remove abandoned or unlicensed vehicles and vehicles that are unreasonably interfering with the use of the parking lot by others and to charge the responsible tenant for the expense of removing said vehicles; (d) To take any and all measures, including making inspection, repairs, alterations, additions and improvements to the Premises or to the Building as may be necessary or desirable for safety, protection or preservation of the Premises or the Building or Landlord's interests, or as may be necessary or desirable in the operation thereof. • Landlord may enter upon the Premises at any reasonable time for the purpose of exercising any or all of the foregoing rights hereby reserved without being deemed guilty of an eviction or disturbance of Tenant's use or possession and without being liable in any manner to Tenant. ARTICLE XII. -HOLDING OVER 12.01 In the event of a holding over by Tenant after expiration or termination of this Lease without the consent in writing of Landlord, Tenant shall be deemed a tenant at sufferance and shall pay rent for such occupancy at the rate equal to the last-current aggregate Base prorated for the entire holdover period. Except as otherwise agreed, any holding over with the written consent of Landlord shall constitute Tenant month-to-month tenant. ARTICLE XII. - SIGNS AND ADVERTISEMENTS 13.01 Tenant shall not put upon nor permit to be put upon any part of the Building, any signs, billboards or advertisements whatever in any location or any form without the prior written consent of Landlord. 13.02 Tenant shall be permitted to put upon any part of the Premises any signs necessary for the purpose of showing a business location, or as determined necessary and appropriate to the operation of a"business incubator". • 6 • ARTICLE XIII. -MORTGAGE AND TRANSFER; ESTOPPEL CERTIFICATES 14.01 Landlord shall have the right to transfer, mortgage, pledge or otherwise encumber, assign and convey, in whole or part, the Premises, the Building, this Lease, and all or any part of the rights now or thereafter existing and all rents and amounts payable to Landlord under the provisions hereof. Nothing herein contained shall limit or restrict any such rights, and the rights of the Tenant under this Lease shall be subject and subordinate to all instruments executed and to be executed in connection with the exercise of any such rights, including, but not limited to, the lien of any mortgage, deed of trust, or security agreement now or hereafter place upon Landlord's interest in the Premises. This paragraph shall be self-operative. Tenant covenants and agrees to execute and deliver upon demand such further instruments subordinating this Lease to the lien of any such mortgage, deed of trust or security agreement as shall be requested by the Landlord and/or mortgagee or proposed mortgagee or holder of any security agreement provided, however, that so long as Tenant is not in.default under this lease, Tenant's right to occupy the Premises shall not be affected as a result of such subordination or the exercise of any rights by any mortgagee or other successor to Landlord or Landlord's mortgagee. 14.02 Estoppel Certificates. Upon Landlord's written request, Tenant shall execute, acknowledge and deliver to Landlord a written statement certifying: (i) that none of the terms or provisions of this Lease have been changed (or if they have been changed, stating how they have been changed); (ii) that this Lease has not been cancelled or terminated; (iii) the last date of payment of the Base Rent and other charges and the time period covered by such payment; (v) • such other matters as may be reasonably required by Landlord or the holder of a mortgage, deed or trust or lien to which the property is or becomes subject. Tenant shall deliver such statement to Landlord within ten (10) days after Landlord's request. If Tenant does not provide such statement within such 10-day period, then any such statement by Tenant may be given by Landlord, and any prospective purchaser or encumbrancer, may conclusively presume and rely upon the following facts; (ii) that this Lease has not been cancelled or terminated except as otherwise represented by Landlord, (iii) that not more than one month's Base Rent or other charges have been paid in advance; and (iv) that Landlord is not in default under the Lease. In such event, Tenant shall be stopped from denying the truth of such facts. ARTICLE XIV. -EMINENT DOMAIN 15.01 If the Premises or such substantial part thereof as reasonably renders the remainder unfit for the intended uses shall be taken by any competent authority under the power of eminent domain or be acquired for any public or quasi-public use or purpose, the Term of this Lease shall cease and terminate upon the date when the possession of said Premises or the part thereof so taken shall be required for such use or purpose and without apportionment of the award and Tenant shall not have a claim against Landlord for the value of any unexpired term of this Lease. If any condemnation proceeding shall be instituted in which it is sought to take any part of the Building or to change the grade of any street or alley adjacent to the Building and such taking or change of grade makes it necessary or desirable to remodel the Building to conform to the changed grade, Landlord shall have the right to terminate this Lease after having given written notice of termination to Tenant not less than ninety (90) days prior to the date of termination designated in the notice. In either of said events, rent at the then current rate shall be apportioned 7 • as of the date of the termination. No money or other consideration shall be payable by the Landlord to the Tenant for the right of termination and the Tenant shall have no right to share in the condemnation award or in any judgement for damages caused by the taking or the change of grade. Nothing in this paragraph shall preclude an award being made to Tenant by the condemning authority for loss of business or depreciation to and costs of removal of equipment or fixtures, provided that such award shall not diminish the award otherwise available to Landlord. ARTICLE XVI. -LANDLORD'S INABILITY TO PERFORM 16.01 If, by reason of inability to obtain and utilize labor, materials or supplies; circumstances directly or indirectly the result of a state of war or national or local emergency; any laws, rules, orders,regulations or requirements of any governmental authority now or hereafter in force; strikes or riots; accident in, damage to or the making of repairs, replacements, or improvements to the Premises or any of the equipment thereof; or by reason of any other cause beyond the reasonable control of Landlord, Landlord shall be unable to perform or shall be delayed in the performance of any covenant to supply any service, such nonperformance or delay in performance shall not render Landlord liable in any respect for damages to either person or property, constitute a total or partial eviction, constructive or otherwise, work an abatement of rent of relieve Tenant from the fulfillment of any covenant or agreement contained in this Lease. ARTICLE XVI. - COMMON AREA • 17.01 The term "Common Area" means all the areas and facilities of the Building not intended for renting and, instead, designed for the common use and benefit of Landlord and all or substantially all of the tenants, their employees, agents, customers and invitees. The Common Area includes, but is not limited to, all parking lots, rail spurs, truck courts, landscaped and vacant areas, driveways, walks and curbs with facilities appurtenant to each as such areas may exist from time to time. Landlord shall operate and maintain the Common Area at its own cost. Landlord hereby grants to Tenant the non-exclusive revocable use of the Common Area by Tenant, Tenant's employees, agents, customers and invitees, which use shall be subject at all times to such reasonable, uniform and non-discriminatory rules and regulations as may from time to time be established by Landlord. 17.02 Tenant shall not use any part of the Building exterior to the Premises for outside storage. No trash, crates, pallets, or refuse shall be permitted anywhere outside the Building by Tenant except in enclosed metal containers to be located as directed by Landlord. Tenant shall not park any trucks or trailers, loaded or empty, except in front of the docks on the concrete apron provided for such purposes. Tenant shall not park or permit parking of vehicles overnight anywhere about the Building's parking areas without the prior written consent of Landlord. ARTICLE XVII. - COMPLETION AND ACCEPTANCE OF PREMISES, MAINTENANCE AND CARE • 18.01 Completion and Acceptance. Landlord will complete the Premises in accordance with the Plans and Specifications attached hereto as Exhibit "C". Tenant acknowledges that it will 8 • reimburse Landlord for the actual documented costs, not to exceed $81,253., of completing such improvements as described in the Plans and Specifications attached as Exhibit C. Tenant will examine the Premises before taking possession hereunder. Unless Tenant furnishes Landlord with a notice in writing specifying any defect in the construction of the Premises within ten (10) days after taking possession, such taking of possession shall be conclusive evidence that at the time thereof the Premises were in good order and satisfactory condition and that all of the work to be completed by Landlord as specified on Exhibit C has been satisfactorily completed. Any leasehold improvements to be completed by Tenant as specified on Exhibit C or as otherwise allowed during the Term of this Lease shall be performed by Tenant in a good workmanlike manner and in accordance with all laws and regulations of applicable governing bodies. 18.02 Maintenance and Repair by Tenant. Tenant shall be responsible for all maintenance and repair to the Premises of whatsoever kind or nature that is not hereinafter set forth specifically as the obligation of Landlord. Tenant shall take good care of the Premises and fixtures, and keep them in good repair and free from filth, overloading, danger of fire or any pest or nuisance, and repair any damage or breakage done by Tenant or Tenant's agents, employees or invitees, including damage done to the Building by Tenant's equipment or installations. At the end of the term of this Lease or any extensions of renewal hereof, Tenant shall quit and surrender the Premises broom clean in as good condition as when received by Tenant, normal wear and tear excepted. In the event Tenant fails to maintain the Premises as provided for herein, Landlord shall have the right but not the obligation, to perform such maintenance as is required of Tenant in which event Tenant shall promptly reimburse Landlord for its costs in providing such • maintenance or repairs. 18.03 Maintenance and Repair by Landlord. During the term of this Lease, Landlord shall keep and maintain the roof, exterior walls, including glass and plate glass, gutters and downspouts of the Building and Premises in good condition and repair. Landlord shall be under no obligation and shall not be liable for any failure to make repairs that are Landlord's responsibility herein until and unless Tenant notifies Landlord in writing of the necessity therefor, in which event Landlord shall have a reasonable time thereafter to make such repairs. Landlord reserves the right to the exclusive use of the roof and exterior walls of the Building which Landlord is so obligated to maintain and repair. If any portion of the Premises which Landlord is obligated to maintain or repair is damaged by the negligence of Tenant, its agents, employees or invitees, then repairs necessitated by such damage shall be paid for by Tenant. Landlord shall furnish and pay for the upkeep, maintenance, repair and periodic servicing of the heating, ventilation and air conditioning system servicing the Premises. 18.04 Americans With Disabilities Act (ADA) Compliance. Landlord agrees to provide access from the parking lot through and including the main entrance to the Premises which complies with all applicable requirements of ADA. Tenant shall be responsible for complying with ADA requirements within the Premises. ARTICLE XVIII. - ALTERATIONS AND ADDITIONS, MECHANIC'S LIENS • 19.01 Alterations and Additions. Tenant shall not make any alteration, improvements, or additions to the Premises without prior written consent and approval of plans therefor by 9 . Landlord. Alterations, improvements or additions so made by either of the parties upon the Premises, moveable furniture and equipment placed in the Premises at the expense of Tenant, shall be and become the property of Landlord and shall remain upon and be surrendered with the Premises as part thereof at the termination of this Lease without disturbance, molestation, injury, or damage, unless Landlord elects to require Tenant to remove such alterations or improvements from the Premises. In the event damage to the Premises or the Building shall be caused by moving said furniture and equipment in or out of the Premises, said damage shall be promptly repaired at the cost of Tenant. 19.02 Mechanic's Liens. Tenant shall not cause nor permit any mechanic's liens or other liens to be placed upon the Premises or the Building and in case of the filing of any such lien claim therefor, Tenant shall promptly discharge same; provided however, that Tenant shall have the right to contest the validity or amount of any such lien upon its prior posting of security with Landlord, which security, in Landlord's sole reasonable judgment, must be adequate to pay and discharge any such liens in full plus Landlord's reasonable estimated of its legal fees. Tenant agrees to pay all legal fees and other costs incurred by Landlord because of any mechanic's or other liens attributable to Tenant being placed upon the Premises or the Building. ARTICLE XX. - INSURANCE 20.01 Public Liability, Property Damage Insurance. Tenant covenants and agrees to maintain on the Premises at all times during the term of this Lease, or any extension or renewal • thereof, a policy or policies of comprehensive public liability and property damage insurance with not less than $600,000.00 combined single limits for both bodily injury and property damage, which policy or policies shall name Landlord as additional insureds. 20.02 Fire and Extended Coverage Insurance - Waiver of Subrogation. Landlord shall maintain in effect with an insurance company authorized to conduct business in the State of Minnesota policies of insurance covering the Leased Premises providing protection (excluding excavation, footings and foundations) against all casualties included under standard insurance industry, practices within the classification of "Fire and Extended Coverage", each of such casualties being hereinafter referred to as an "Insured Casualty." At Landlord's option such policy may include rental interruption insurance. Tenant shall maintain in effect with an insurance company authorized to conduct business in the State of Minnesota and which has been approved by Landlord insurance covering Tenant's trade fixtures, furnishings and equipment and leasehold improvements made to the Leased Premises by Tenant providing protection to the extent of the replacement value of the same against the Insured Casualties. Landlord and Tenant hereby grant to each other, on behalf of any insurer providing fire and extended coverage to either of them covering the Leased Premises, improvements thereon, or contents thereof, a waiver of any right of subrogation any such insurer of one party may acquire against the other by virtue of payment of any loss under such insurance. Neither party shall have any interest in the proceeds of insurance obtained by the other party. Without Landlord's consent, Tenant shall not knowingly do anything in or about the Leased Premises which will in any way tend to increase • insurance rates or invalidate any policy on the Leased Premises or the building. If Tenant inadvertently engages in any such activity, Tenant shall, upon notice thereof, cease such activity unless Landlord consents thereto. If Landlord shall consent to such use, Tenant agrees to pay as 10 • additional rental any increase in premiums for insurance against loss by fire or extended coverage risks resulting from the business carried on in the Leased Premises by Tenant. 20.03 Indemnification of Landlord. Tenant shall indemnify and defend Landlord, its employees and agents and save them harmless from and against any and all loss (including loss of rents payable by Tenant or other tenants) and against all claims, actions, damages, liability and expenses in connection with loss of life, bodily and personal injury or damage to the Building arising from any occurrence in, upon or at the Premises or any part thereof, occasioned wholly or in part by any act or omission of Tenant, its agents, contractors, employees, servants, licenses, concessionaires or invitees or by anyone permitted to be on the Premises by Tenant. Tenant assumes all risks of and Landlord shall not be liable for injury to person or damage to property resulting from the condition of the Premises or from the bursting or leaking of any and all pipes, utility lines, connections, or air conditioning or heating equipment in, on or about the Premises, or from water, rain or snow which may leak into, issue or flow from any part of the Building. Tenant agrees, at all times, to indemnify and hold Landlord, its employees and agents harmless against all actions, claims, demands, costs, damages or expenses of any kind which may be brought or made against them or which they may pay or incur by reason of Tenant's occupancy of the Premises or Tenant's negligent performance of or failure to perform any of its obligations under this Lease. In case Landlord or its employees or agents shall, without fault on their part, be made a party to any litigation commenced by or against Tenant, then Tenant shall indemnity, defend and hold them harmless and shall pay all costs, expenses and reasonable attorney's fees 110 incurred or paid by them or such managing agent in connection with such litigation. ARTICLE XXI. -DEFAULT AND REMEDIES 21.01 In the event: (a) Tenant shall at any time fail to pay any item of Rent when due, or (b) Tenant shall fail to keep, perform or observe any other covenant, agreement, condition or undertaking hereunder and shall fall to remedy such default within ten(10) days after written notice thereof has been mailed by Landlord to Tenant; or if such default is one that will take longer than ten (10) days to remedy, Tenant fails to commence curing such default within ten (10) days and/or fails diligently to pursue such cure to completion; or (c) The Premises shall be vacated by Tenant for any period for which Tenant has not paid its Rent; Landlord shall have the right, without further notice to or demand, to re-enter and take exclusive possession of the Premises, with or without force or legal process, and to refuse to allow Tenant to enter the same or have possession thereof; to change the locks on the doors to the Premises; take possession of any furniture or other property in or upon the Premises (Tenant hereby • waiving the benefit of all exemptions by law), sell the same at public or private sale without notice and apply the proceeds thereof to the costs of sale, payment of damages and payment of 11 • the rent due under this Lease; all without being liable to Tenant for any damages or to any prosecution therefor; and (i) As agent of Tenant to relet the Premises or any part thereof for the balance of the Lease term or for a shorter or longer term and receive the rents therefor, applying them first to the payment of the expense of such reletting and, second, to the payment of damages suffered to the Premises and rents due and to become due under this Lease, Tenant remaining liable for and hereby agreeing to pay Landlord any deficiency; or (ii) To cancel and terminate the remaining term of this Lease, re-enter and take possession of the Premises free of this Lease and thereafter this Lease shall be null and void and the rents in such case shall be apportioned and paid on and up to the date of such entry. Thereafter both parties shall be released and relieved from and of any and all obligations thereafter to accrue hereunder. Tenant shall be liable for all loss and damage resulting from such breach or default; or (iii) To treat such default as an anticipatory breach of this Lease and, as liquidated damages for such default, be entitled to the difference, if any, between the sum which, at the time of such termination for • anticipatory breach represents the then present worth (computed at seven percent per year) of the excess aggregate rents and additional rents payable hereunder that would have accrued over the balance of the Lease term (including extensions) that the Lease would have run had it not been prematurely terminated. 21.02 Landlord's Rights to Cure. Landlord may, but shall not be obligated to, cure any default by Tenant (specifically including, but not by way of limitation, Tenant's failure to obtain insurance, make repairs, or satisfy lien claims); and whenever Landlord so elects, all costs and expenses paid by Landlord in curing such default, including without limitation reasonable attorney's fees, shall be so much Additional Rent due on demand, together with interest at the highest rate then payable by Tenant in the state in which the Premises are located, or in the absence of such a maximum rate at the rate of eighteen percent (18%) per annum, from the date of the advance to the date of repayment by Tenant to Landlord. 21.03 Remedies Cumulative. All rights and remedies provided in this Lease for Landlord's protection shall be cumulative and in addition to any other rights and remedies provided by law. Landlord shall be entitled to recover from Tenant its reasonable attorneys' fees incurred in enforcing its rights hereunder. 21.04 No Waiver. No waiver by Landlord of a breach or default by Tenant under the terms • and conditions of this Lease shall be construed to be a waiver of any subsequent breach or default, nor of any other term or condition of this Lease, and the failure of Landlord to assert any breach or to declare a default by Tenant shall not be construed to constitute unremedied. 12 • 21.05 No Reinstatement. Except as otherwise provided by applicable laws, no receipt of money by Landlord from Tenant after the expiration or termination of this Lease or after the service of any notice or after the commencement of any suit, or after final judgment for possession of the Premises shall reinstate, continue or extend the Term of this Lease or affect any such notice, demand or suit. 21.06 Default Under Other Leases. A default under this Lease shall, at Landlord's option, be deemed a default under any other leases between Landlord and Tenant for space in the Building. Likewise, a default under any other such lease between Landlord and Tenant shall, at Landlord's option, be deemed a default under this Lease. ARTICLE XXII. - DEFINITION OF LANDLORD 22.01 Landlord Means Owner. The term "Landlord" as used in this Lease, so far as covenants or obligations on the part of Landlord are concerned, shall be limited to mean and include only the owner or owners at the time in question of the fee of the Premises, and in the event of any transfer or transfers of the title to such fee, Landlord herein named (and in case of any subsequent transfers or conveyances, the then grantor) shall be automatically freed and relieved, from and after the date of such transfer or conveyance, of all liability as respects the performance of any covenants or obligations on the part of Landlord contained in this Lease thereafter to be performed; provided that any funds in the hands of such Landlord or the then • grantor at the time of such transfer, in which Tenant has an interest, shall be turned over to the grantee, and any amount then due and payable to Tenant by Landlord or the then grantor under any provisions of this Lease, shall be paid to Tenant when and as provided by the terms of this Lease. ARTICLE XXIII. -NOTICES 23.01 Except as otherwise herein provided, whenever by the terms of this Lease notice shall or may be given either to Landlord or to Tenant, such notice shall be in writing and shall be deemed to have been properly served if hand-delivered or sent by certified mail, return receipt requested,postage prepaid, at the addresses set forth at Sections 1.01(A) and(B) above. The date of such hand-delivery or mailing shall be deemed the date of service. ARTICLE XXIV. - MISCELLANEOUS 24.01 Persons Bound. The agreements, covenants and conditions of this Lease shall be binding upon and inure to the benefits of the heirs, legal representatives, successors and assigns of each of the parties hereto. If there be more than one Tenant herein named, the provisions of this Lease shall be applicable to and binding upon such Tenants jointly and severally, as well as their heirs, legal representatives, successors and assigns. 24.02 Partial Invalidity. If any term, covenant, condition or provision of this Lease or the • application thereof to any person or circumstance shall, to any extent be invalid, unenforceable or violate a party's legal rights, then such term, covenant, condition or provision shall be deemed to 13 • be null and void and unenforceable, however, all other provisions of this Lease, or the application of such term or provision to persons or circumstances other than those to which are held invalid, unenforceable or violative of legal rights, shall not be affected thereby, and each and every other term, condition, covenant and provision of this Lease shall be valid and be enforced to the fullest extent permitted by law. 24.03 Captions. The headings and captions used throughout this Lease are for convenience and reference only and shall in no way be held to explain, modify, amplify, or aid in the interpretation, construction or meaning of any provisions in this Lease. The words "Landlord" and "Tenant" wherever used in this Lease shall be construed to mean plural where necessary, and the necessary grammatical changes required to make the provisions hereof apply either to corporation, partnerships, or individuals, men or women, shall in all cases be assumed as though in each case fully expressed. 24.04 No Option. Submission of this instrument for examination does not constitute a reservation of nor option for the Premises. The instrument does not become effective as a lease or otherwise until execution and delivery by both Landlord and Tenant. 24.05 Brokers. Tenant represents that it has dealt directly with and only with the broker or brokers set forth at Item 1.01(J) above, and that Tenant knows of no other broker who negotiated this Lease or is entitled to any commission in connection herewith. Tenant agrees to indemnity, defend and hold harmless Landlord from and against any commissions or claims by any other • broker or brokers pertaining to Tenant's having entered into this Lease. 24.06 Applicable Law. This Lease, its interpretation and enforcement shall be governed by the laws of the state in which the Premises are located. 24.07 Waiver of Jury. Landlord and Tenant agree that, to the extent permitted by law, each shall and hereby does waive trial by jury in any action, proceeding or counterclaim brought by either against the other on any matter whatsoever arising out of or in any way connected with this Lease. 24.08 Allocation of Rent. Landlord and Tenant agree that no portion of the Base Rent paid by Tenant during the portion of the Term of the Lease occurring after the expiration of any period during which such rent was abated shall be allocated for income tax purposes by Landlord or Tenant to such rent abatement period, nor is such rent intended by the parties to be allocable for income tax purposes to any abatement period. ARTICLE XIXV. - ENTIRE AGREEMENT 25.01 This Lease contains the entire agreement between the parties and no modification of this Lease shall be binding upon the parties unless evidenced by an agreement in writing signed by the Landlord and the Tenant after the date hereof If there be more than one Tenant named herein, the provisions of this Lease shall be applicable to and binding upon such tenants jointly and severally. 14 • ARTICLE XXVI. - EXHIBITS 26.01 Reference is made to the Exhibits listed at Section 1.01 (K) above, which exhibits are attached hereto and incorporated herein by reference. IN WITNESS WHEREOF, the parties have signed triplicate counterparts hereof as of the date and year hereinabove set forth. TENANT(Elk Riverg onomic Develop ent Authority) By: �i11 !041 Its: B • Its:_ C ►7�.,-*. LANDLORD ( ) /. B) • Its\ 15 • EXHIBIT A Description of Premises • • 16 • 64•-9' i - L_i ‘ .... 6{•-6" t. e v O O 4 e lip a aie. 1:o wi o .,....,,.....,.., aH 8a BH 4 t' r • J I 21'-9" IIH m 1 by S"- �/ • M J o /.. 1 -4 2 6t r- Co• 1 1 • t 33•-6. 1 ; 4 O -1 1 O .-t:.ext w • _. a 1 N - I 1 e -•y.:....=... B t I -. a • 39*-r 23-9" 1 1 n I I 1 1 q NI • S 11 T 1 JDHt1C iJc-yT 1tID 'a , F.IER -- - -''-�-S50ATES �ul\r��I I.M\V U II I�rVVI'�� PAUL \IRC 1111Tel,. IN, IrwHp-.a _ •IDMHIIt. '- ! �-� fa-m:4171 �\ LS MOcU J. ��',.. S'1'1.___—.. I COM "'R I El Rp.••Mnrxta 55390 :.-re a:m.r • • • • . • . • -1).".',7 I • 111111111111111El 1II II II II • I • IS • 11 I ......1. I: . II II • . II 11 II 48-10. 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I MOML I ......,..„,............-••••AO . i Po gat sl%manes i A . . . • 2 1 171/k1 Cr.* ....1=1....i /k ' S NOIE3 ••••••••••••••.••••• .'• I ..... ' ... ,..v. ra...414114 ..... erto.e.•••• 1..1 , '3. 1 IES.MON M.A. I Emer.Mmncia 55550 ia..._— r ,.g.10 'WI r"..1. I.-.....-..-....L i... • FINAL • REPAYMENT AGREEMENT THIS AGREEMENT made this 'a day of //16"4- . 199 7 by and between the City of Elk River Economic Development Authority ("EDA") and Larry Hickman ("Hickman"). BACKGROUND The EDA has created the Elk River Business Incubator ("ERBI") to support the development of new high technology companies during the early years of their development. The EDA has made arrangements with Hickman to lease certain space and real property owned by Hickma described on Exhibit A attached hereto. That lease agreement is dated /'►� (1' , 1997 ("the Lease"). The EDA, Hickman, and Genesis Business Centers, Ltd., have or will also enter into memorandum of understanding agreements with various companies who will be subtenants of the EDA in the ERBI. In order to make the ERBI habitable for the new high technology companies, the EDA has invested the actual amount of $ , not to exceed $81,253, to accomplish construction of the leasehold improvements listed on Exhibit B attached hereto. • Hickman and the EDA agree that the leasehold improvements described on Exhibit B will remain the property of Hickman at the end of the Lease term or any renewal or extension thereof and Hickman and the EDA desire that Hickman reimburse the EDA for a pro-rated portion of the cost of those improvements at the termination of the Lease. NOW, THEREFORE, in consideration of the foregoing and the mutual promises and agreements hereinafter contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties covenant and hereto agree as follows: 1. EDA will pay Hickman for the cost of leasehold improvements as provided within the Lease. Such leasehold improvements are identified on Exhibit B attached hereto. 2. EDA and Hickman agree that the actual cost of such improvements is $ , not to exceed $81,253, based upon a description of such improvements identified on Exhibit B. 3. So long as the EDA has performed all of its obligations under the Lease, at the termination of the Lease or at the termination of any renewal term or extension thereof, Hickman will reimburse the EDA for a proportionate share of the • cost of leasehold improvements as described in Paragraph 2 hereof. The proportionate share shall be as set forth on Exhibit C attached hereto. Such • payment shall be due and payable to the EDA within thirty (30) days after termination of the Lease or any extension or renewal thereof(for purposes of this Agreement, the term "extension or renewal thereof', shall include a new lease between the parties which encompass all or part of space previously leased from Hickman by the EDA). IN WITNESS WHEREOF, the parties have set their hands and seals as of the day first above written. /L L. r 'ickman CITY OF ELK RIVER ECONOMIC DEVELOPMENT AUTHORITY By: $I Its: 4414-44`t • And. �� Its: E • • Exhibit A Lease • • EXHIBIT B PLANS AND SPECIFICATIONS ( -P3s) v • 2. CD NNNNNNNN -+ -1, " M > 5 5 o co m 0 Cr, .11. w N m COI to * p0 _100 > c C 0o m . � cl yco cD aa mo ? a -{. - CD a _ a a v m cc M a s i „:, I • D 0 •A. A A Ja A td w w w co W Co W co W to co to co W Co Co Co W W W W Co Co Co Co Co Co N N m 4U A. 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Et RM.+•M ,•,:,,,,--. >..o i r.efala 55»0 <ta2.� ' �_�m,v Exhibit C • Repayment Schedule Total cost of leasehold improvements: $81,253 #of months Hickman repayment #of months Hickman repayment EDA leases to EDA: EDA leases to EDA: from Hickman: from Hickman: 1 $80,286 42 $40,627 2 $79,318 43 $39,659 3 $78,351 44 $38,692 4 $77,384 45 $37,725 5 $76,417 46 $36,757 6 $75,449 47 $35,790 7 $74,482 48 $34,823 8 $73,515 49 $33,855 9 $72,547 50 $32,888 10 $71,580 51 $31,921 11 $70,613 52 $30,954 12 $69,645 53 $29,986 13 $68,678 54 $29,019 14 $67,711 55 $28,052 15 $66,744 56 $27,084 16 $65,776 57 $26,117 17 $64,809 58 $25,150 III 18 $63,842 59 $24,182 19 $62,874 60 $23,215 20 $61,907 61 $22,248 21 $60,940 62 $21,281 22 $59,972 63 $20,313 23 $59,005 64 $19,346 24 $58,038 65 $18,379 25 $57,071 66 $17,411 26 $56,103 67 $16,444 27 $55,136 68 $15,477 28 $54,169 69 $14,509 29 $53,201 70 $13,542 30 $52,234 71 $12,575 31 $51,267 72 $11,608 32 $50,299 73 $10,640 33 $49,332 74 $9,673 34 $48,365 75 $8,706 35 $47,398 76 $7,738 36 $46,430 77 $6,771 37 $45,463 78 $5,804 38 $44,496 79 $4,836 39 $43,528 80 $3,869 40 $42,561 81 $2,902 41 $41,594 82 $1,935 83 $967 III 84 $0 • ELK RIVER BUSINESS INCUBATOR MEMBER COMPANY SELECTION GUIDELINES The primary purpose of the Business Incubator is to provide inexpensive space and support for higher technology, (start-up and existing) small companies whose success would add significantly to the growth and diversification of the City of Elk River's economic base. The Elk River Economic Development Authority (EDA) will, as its primary objective, select companies which appear to have the necessary fundamentals established to assure their future growth and success. I. Basic Entry Guidelines The following basic entry guidelines will be used to determine the eligibility of applicants to the Business Incubator: 1. Retail/service businesses will not be considered. 2. Businesses which compete exclusively in the local market with • other similar local businesses will not be considered. 3. Manufacturing/assembly businesses will be screened to assure the facility is able to accommodate their intended process and byproducts. 4. Companies marketing new products/technology in the energy field are encouraged to apply. 5. Companies must be involved in product manufacturing/assembly or be high technology-service related. 6. The principals must have substantial technical and/or managerial skills, or demonstrated experience and education in the product field. 7. Companies must clearly demonstrate a need for incubator services. II. Specific Application Guidelines Evidence of the following specific guidelines is to be provided at the time of application to the Business Incubator: 1. Companies will be required to give hiring preference to persons meeting certain eligibility requirements. • 2. Companies will be required to allow opportunities for local businesses to manufacture products for the company. • 3. Existing companies will be considered for incubator occupancy if either (a) it is deemed that circumstances clearly indicate that a move to the incubator will help retain and/or create jobs in Elk River that would otherwise be lost, and if those circumstances are considered to be the result of factors other than poor management or inadequate technical skills, or (b) the aim is to begin a research and/or production effort that is new and for which there is inadequate space in the company's present facility. 4. Companies must be able to demonstrate credible projections which show significant job creation and growth. 5. Companies must have a prepared and legally acceptable stock "offering statement" prior to entry into the business incubator. 6. Companies must agree to a stock "barter" transaction whereby the EDA, building owner, and business incubator consultant would be provided company stock in lieu of services rendered 7. Upon acceptance, member companies must agree to retain operations of the company within the City of Elk River for a specified period of time. 8. Companies are required to have a completed business plan and a working product prototype prior to acceptance into the • incubator. Considerations which enhance a companies eligibility for admittance to the Business Incubator: 1. Companies are considered to have the potential of creating significant employment opportunities in Elk River in the near future, provided that such business projections are deemed to be realistic. 2. Companies are involved in higher technology or energy technology related products. • eda\bincapp.doc • ELK RIVER BUSINESS INCUBATOR APPLICATION FORM Name of Business: Name of Principal: Address: Phone: Fax: Ownership structure: Sole Proprietorship ❑ Partnership ❑ Corporation ❑ Business is primarily involved in: Research and Development ❑ Product Manufacturing/Assembly ❑ Other ❑ Principal product(s): • Activities to be undertaken in the incubator facility: Projected number of employees (including principal) at incubator operation: Full Time Part Time Initially After 6 months At the end of 1 Year 410 At the end of 3 Years 410 The Business has the following characteristics: Advances Technology ❑ Projects Fast to Moderate Growth ❑ Medical Related Product/Technology ❑ Energy Related Product/Technology ❑ If Business is a sole proprietorship, indicate principals net worth: $0 - $24,999 ❑ $25,000 - $74,999 ❑ $75,000 - $99,999 ❑ $100,000 - $200,000 ❑ Greater than $200,000 ❑ List the amount of equity you have received to date in the form of stock ownership and/or direct investment: $0 - $24,999 ❑ $300,000 - $400,000 ❑ $25,000 - $74,999 ❑ $400,000 - $500,000 ❑ $75,000 - $99,999 ❑ $500,000 - $1,000,000 ❑ $100,000 - $200,000 ❑ $1,000,000 - $1,500,000 ❑ $200,000 - $300,000 ❑ $1,500,000 + up ❑ List the amount of equity you will require from outside sources over the period of: • one year in the Business Incubator $ two years in the Business Incubator $ The Business is currently in operation: Yes ❑ No ❑ Current Location of Business Number of Years In Operation Current Number of Employees Most Recent Annual Sales The Business will require approximately square feet of space in the Business Incubator, with the following special needs/requirements: • • Please attach the following information: • Business Plan, including financial projections, current sales figures (if any), Profit and Loss Statement, and Balance Sheet. • Personal financial statements • Signature: Printed name: Company name: Date: • eda\bincapp.doc MEMORANDUM OF UNDERSTANDING MEMORANDUM OF UNDERSTANDING ("Agreement") is made and entered into this day of , 19_by and between the City of Elk River Economic Development Authority (EDA), Larry Hickman, Genesis Business Centers, Ltd., and ,, a corporation organized and existing under the laws of the State of (the "Company"). BACKGROUND The EDA has created the Elk River Business Incubator (ERBI) to support the development of new high technology companies ("Member Companies") during the early years of such Member Companies' development. The Company has been approved as a potential Member Company, and the Company desires the support, services, and programs of the EDA as part of the Elk River Business Incubator. EDA, through its creation of the Elk River Business Incubator, is prepared to arrange for the provision of certain services in accordance with • the terms of this Agreement. NOW, THEREFORE, in consideration of the premises and of the mutual promises and covenants contained in this Agreement and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties covenant and agree as follows: 1. SERVICES OF ERBI 1.1. Rent of Available Space. At the time of execution of this Memorandum of Understanding, the Company shall have executed a Lease for space within the Elk River Business Incubator. The terms and conditions of such space rental shall be strictly in accordance with the Lease, substantially in the form of Exhibit A attached hereto. 1.2. Leasehold Improvements. In order for the Company (and additional companies) to occupy space within the Elk River Business Incubator, the EDA has provided leasehold improvements in the form of construction of restroom facilities, partition walls, doors, windows, carpeting, and other improvements, at a total cost of$ . Such leasehold improvements were constructed in order to make the Elk River Business Incubator available to all qualified applicants, including the Company. 2. CONSIDERATION 2.1. Issuance of Stock. In consideration for the services provided to the Company hereunder, the Company, at the time of execution of the Company lease attached as Exhibit A hereto, shall convey and issue to the EDA (Landlord), Larry Hickman (Building Owner), and Genesis Business Centers, Ltd. (EDA Business Incubator Consultant), a number of shares of the voting common stock of the Company ("Shares") as follows: A) For the service provided in Rent of Available Space: EDA (Landlord) (# of shares) Shares which is equal to dollars per square foot of space leased per year, at a value of per share. Larry Hickman (Building (# of shares) Shares Owner) which is equal to dollars per square foot of space leased per year, at a value of per share. Genesis Business Centers, (# of shares) Shares Ltd. (EDA Business which is equal to Incubator Consultant) dollars per square foot of space leased per year, at a value of per share. B) For the service provided in construction of leasehold improvements: EDA (Landlord) (# of shares) Shares equal in dollar value to _% of the total cost of leasehold improvements, at a value of per share. All Shares issued to the EDA, Larry Hickman, and Genesis Business Centers, Ltd., pursuant to this Agreement shall be subject to any restrictions on transferability under state and federal securities laws, and shall be entitled to all rights and privileges to which other shares of voting common stock the Company are subject. . 2.2. Adjustments Stock Issued. In the event that the shares of voting common stock of the Company are changed into or exchanged for a different number or kind of shares or other securities of the Company or of another corporation by reason of any reorganization, merger, consolidation, recapitalization, reclassification, stock, split, combination of shares of dividends payable in capital stock, the Company shall convey and issue to the EDA, Larry Hickman, and Genesis Business Centers, Ltd. additional shares of the voting common stock of the Company, so that the value of current shares owned by EDA, Larry Hickman, and Genesis Business Centers, Ltd. is not less than the value used to determine number of shares set forth in Section 2.1.(A) of this Agreement. 2.3. Continuing Obligation. The Company and the EDA may mutually agree (however none of the parties are required to so agree) to an extension or renewal of the lease term. In such event, additional shares shall be issued to the EDA, Larry Hickman, and Genesis Business Centers, Ltd., at the commencement of such extension or renewal on the same basis as is set forth in Section 2.1., except that an appropriate proportional adjustment shall be made to the number of shares issued in the event that subsequent to the date of this Memorandum, there has been any change in the voting shares of the Company by reason of any reorganization, merger, • consolidation, recapitalization, reclassification, stock split, combination of shares, or dividend payable in capital stock. 2.4. Anti-dilution Clause. In the event that the shares of voting common stock of the Company are sold to parties other than EDA, Larry Hickman, and Genesis Business Centers, Ltd., at a value which is less than the value used to determine number of shares set forth in Section 2.1.(A) of this Agreement, the Company shall convey and issue to EDA, Larry Hickman, and Genesis Business Centers, Ltd., additional shares of the voting common stock of the Company so that the value of current shares owned by EDA, Larry Hickman, and Genesis Business Centers, Ltd., is not less than the value used to determine number of shares set forth in Section 2.1.(A) of this Agreement. 2.5. Location Commitment; Mandatory Repurchase; Put Options. So long as EDA is owner of any Shares of Company stock, the Company's administrative, marketing, product development, warehouse and manufacturing facilities shall be located within the City of Elk River. In the event that the Company no longer maintains ALL such facilities within the City of Elk River, the EDA shall have the option to require the Company to repurchase the Shares owned by EDA within 30 days of written demand. 1111 The repurchase price shall be the last price per share offered in any private or public offering authorized by the Board of Directors of the Company, but not less than twice the price used to calculate Shares provided to the EDA under 2.1.(A) of this Agreement. . 3. COMPANY RESPONSIBILITIES 3.1. Financial Statements and Employee Reports. The Company shall provide EDA with "bookkeeper-prepared" quarterly financial statements and all available audited financial statements (Note: EDA does not require the Company to incur the cost of"audited" statements as a requirement of this agreement). The Company shall also provide EDA with detailed periodic data on all employees of the Company, including salaries, number and names of Company employees, titles and positions of each employee, and the names and positions of the Company's officers and Board members. 3.2. Annual Objectives. The Company shall maintain a written policy statement on a quarterly and annual basis defining its objectives with respect to its growth and development, and shall provide EDA with copies of such written policy statement. The Company shall also provide to EDA periodic reports on the Company's growth and development, as may be reasonably requested by EDA from time to time. 3.3. Regular Meetings. The Company shall conduct and hold regular periodic meetings with the EDA Executive Director and members of • the EDA Commission as determined appropriate for the purpose of reviewing the Company's progress. The Company acknowledges that as part of the services provided to it hereunder, the Company shall receive advice and counsel from such Executive Director and EDA Commissioners. The Company shall hold and conduct such meetings at least once every quarter during the term of this Agreement. 3.4. Board Meetings. The Company shall provide EDA with written notice of, and allow an EDA representative or designee to attend, all regular and special meetings of the Company's Board of Directors and/or Board of Advisors (collectively the `Boards"). Although an EDA representative or designee may offer guidance or advice to the Boards, no officer, director, agent, or employee of EDA shall be deemed a member of the Company's Boards. Any EDA representative or designee attending the meetings for the Company's Boards shall attend without a vote, without compensation, and without fiduciary or legal responsibility to the Company, its officers, directors, or stockholders. The Company shall indemnify the EDA, including its representative or designee attending such Board meetings, against all costs and liabilities to the same extent as the Company so indemnifies its officers and/or directors. The EDA, or its representative or designee, shall hold all Company information in strict confidence. S3.5. Job Openings. The Company agrees to post all job openings with the Private Industry Council 5 at 657 Main Street NW, Elk River, Minnesota 55330, Phone 441-5903, and the Company agrees to keep a written record of all persons interviewed and hired by completing the Notice to Employee attached as Exhibit B. The Company acknowledges that a • portion of the funds used to facilitate the Elk River Business Incubator are provided from Federal Community Development Block Grants and as such, the EDA and Company are required to meet certain standards for the use of such funds. 3.6. Vendor Contracts. The Company shall make available to the EDA Executive Director, its vendor contracts. Such vendor contracts will be used to provide opportunities to local manufacturing companies and service providers in order to create and retain jobs in our community. The Company is strongly encouraged to utilize local businesses in its manufacturing and production of goods, however the Company is allowed to make the final decision on its own vendors at all times. 4. INDEMNIFICATION. The Company shall indemnify and hold harmless the EDA from any loss, damage, expense, liability, or claim, including without limitation attorneys' fees and expenses of litigation, to which such parties may become subject arising out of: (a) any failure of the Company to perform any of its covenants, agreements or undertaking contained in this Agreement, the lease of space, or in any other agreement executed in connection with the transactions contemplated herein; or (b) any other action or inaction of the Company, its directors, officers, employees, or • designees, which action or inaction is not a result of any fault on the part of the EDA. 5. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION. A. The EDA agrees that during the term of this Agreement and for a period of two (2) years immediately thereafter, it shall not, other than to EDA Commissioners, and in a non-public format, disclose to any individual, firm, corporation, partnership, or other business entity, or use for its own financial gain or benefit, any Confidential Information (defined below), that it obtained during the term of this Agreement. "Confidential Information" shall mean any and all information (other than trade secrets) relating to the Company's business provided to the EDA during the term of this Agreement or to which the EDA had access or which it compiled during the term of this Agreement, not generally known to the public, and with respect to which (i) the Company has clearly indicated to the EDA that such information is confidential and proprietary, or (ii) the Company has provided written notice to the EDA confirming that such information is confidential and proprietary. The Company agrees and acknowledges that it will not be required by this Agreement to disclose to the EDA (and the EDA neither desires access to or disclosure of), any trade secrets of the Company or any • third party. B. Section 5A. shall not apply to any information: (i) Generally known in the trade or to the public • through no fault of the EDA; or (ii) Disclosed to the EDA by any party having legitimate possession thereof and the unrestricted right to make such disclosure; or (iii) Hereafter published in any publication for public distribution or filed as public information with any governmental authority; or (iv) Required to be disclosed by applicable law or legal process with the exception of the Open Meeting Laws governing public boards and commissions; or (v) Within the EDA's legitimate possession prior to the Company's disclosure. • 6. TERMS AND TERMINATION. 6.1. Term. The term of this Agreement shall be for a period equal to the term of the Lease attached herein as Exhibit A. Either party may terminate this Agreement with or without cause by providing written notice to the other party ninety (90) days prior to termination. The provisions in this Agreement calling for performance by any party after termination shall continue in full force and effect. • 6.2. Termination by the EDA for Cause. The EDA may immediately terminate this Agreement, without providing any prior notice to the Company, for cause, defined as follows: A. The Company materially breaches any of the terms or conditions of this Agreement, the Lease, or, and any other agreement in connection with the subject matter hereof, if such breach continues for ten (10) days after the k DA has provided the Company with written notice of the breach; or B. The Company intentionally engages in conduct or activities materially damaging to the EDA. 6.3. Termination by Company for Cause. The Company may immediately terminate this Agreement, without providing any prior notice to the EDA, for cause, defined as follows: A. The EDA materially breaches any of the terms or conditions of this Agreement, the Lease, or, and any other agreement in connection with the subject matter hereof, if such breach continues for ten (10) days after the Company has • provided the EDA with written notice of the breach; or B. The EDA intentionally engages in conduct or activities materially damaging to the Company. • 7. GOVERNING LAW. This Agreement shall be governed, construed, and enforced in accordance with the substantive laws, but not the conflicts, of the State of Minnesota. 8. BINDING ARBITRATION. Any controversy or claim arising out of or relating to this contract, or the breach thereof, shall be settled by arbitration in accordance with the Rules of the American Arbitration Association, and judgment upon the award rendered by the Arbitrator(s) may be entered in any court having jurisdiction thereof. 9. SEVERABILITY. If any provision or covenant of this Agreement should be held by any court to be invalid or unenforceable, either in whole or in part, such invalidity or unenforceability shall not affect the validity of enforceability of the remaining provisions or covenants of this Agreement, all of which shall remain in full force and effect. Should any covenant contained herein be held by any court of competent jurisdiction to be overly broad and unenforceable, the parties agree that any such court may enforce so much of such covenant or restriction as is otherwise enforceable. 10. NOTICES. All communications provided for hereunder shall be in writing and shall be deemed to be given when delivered in person or . deposited in the United States Mail, First Class, Certified Mail, Return Receipt Requested, with proper postage prepaid, and addressed to the party and at the address specified below. 11. ENTIRE AGREEMENT. This Agreement and the Schedules attached hereto represent the complete and mutual understanding of the parties with respect to the subject matter hereof, and supersede and cancel all previous and contemporaneous written and oral agreements and communications with respect to the subject matter hereof, except for the Lease herein attached as Exhibit A. IN WITNESS WHEREOF, the parties have set their hands and seals as of the day first above written. CITY OF ELK RIVER EDA: THE COMPANY: By By Typed Name Typed Name Title Title Date Date • By By Typed Name Typed Name Title Title Date Date • LARRY HICKMAN By Typed Name Title Date GENESIS BUSINESS CENTERS, LTD. By Typed Name Title Date • 11 Exhibit A • Lease •