6.1 EDSR 05-16-2016 tc of Request for Action
River
To Item Number
Economic Development Authority 6.1
Agenda Section Meeting Date Prepared by
General Business April 18,2016 Amanda Othoudt, EDD
Item Description Reviewed by
Satisfaction Agreement for Sportech, Inc. Cal Portner, City Administrator
Reviewed by
Action Requested
Approve,by motion,a resolution and a certificate of forgiveness for Sportech, Inc.
Background/Discussion
The EDA approved the Forgivable Loan guidelines in February of 2013 to stimulate private sector
investment, spur new construction, create and retain employment opportunities, and promote the sale of
city-owned property.
Sportech requested a$111,155.13 Forgivable Loan to help fund a 6,210 square foot Customer Innovation
Center. The expansion was designed to create a separate space for product engineering and innovation.
As part of the Loan Agreement, Sportech was required to create 4 full-time jobs with three of the four
awarded to low to moderate income individuals. They were required to retain the jobs for a minimum of
one year and upon completion of the goals and requirements the loan would be forgiven per policy. The
Council approved the request on February 3,2014,with the project commencing on April 25,2014.
On March 27, 2015,the EDA approved the release of the mortgage and entered into an escrow
agreement with Sportech, Inc. as an alternative to the mortgage. The escrow agreement required
Sportech to place $111,155.13 in escrow,held by a title company, to be returned on April 1, 2016,
provided the job goals are met.
Sportech has since met the goals and has formally requested a satisfaction of the Loan Agreement.
Financial Impact
N/A
Attachments
• Sportech Letter of Request
• Resolution
• Certificate of Forgiveness
• Release of Escrow Agreement
• UCC Termination
• Forgivable Loan Agreement
11, 111111111 11
NATURE
sP Air in.
April 12, 2016
City of Elk River
ATTN:Amanda Othoudt
13065 Orono Parkway
Elk River, MN 55330
Ms. Othoudt,
Sportech Inc. has satisfied all job and wage goals as identified in our forgivable loan agreement
with the Economic Development Authority of the City of Elk River.
This letter is our formal letter requesting a satisfaction agreement forgiving the entire principle
balance of the note dated April 25, 2014.
Thank you
Respectfully,
/ /
Chris Carlson, President
Sportech Inc.
ECONOMIC DEVELOPMENT AUTHORITY OF
THE CITY OF ELK RIVER
COUNTY OF SHERBURNE
STATE OF MINNESOTA
RESOLUTION NO. 16-03
RESOLUTION APPROVING ISSUANCE OF A CERTIFICATE OF FORGIVENESS AND
RELEASE OF ESCROW AGREEMENT
WHEREAS, Sportech, Inc. (the "Borrower") has heretofore entered into a Loan
Agreement,dated April 25,2014,by and between the Economic Development Authority of the City
of Elk River("EDA") and the Borrower(the"Loan Agreement"); and
WHEREAS, in accordance with Section 6 of the Loan Agreement the Borrower has
notified the EDA that all conditions have been met for the loan to be forgiven and has requested
that the EDA issue a Certificate of Forgiveness and
WHEREAS, in accordance with Section 3 of the Escrow Agreement dated March _,
2015 between the Borrower, the EDA and Old Republic National Title Insurance Company, the
Borrower has notified the EDA that all conditions have been met to release the Escrow
Agreement and the Borrower has requested that the EDA issuer a Release of Escrow Agreement.
NOW THEREFORE BE IT RESOLVED By the Board of Commissioners (the"Board") of
the Economic Development Authority of the City of Elk River("EDA") as follows:
Section 1. EDA Approval. The EDA hereby finds that conditions have been met for the
loan to be forgiven, and the President and the Executive Director are hereby authorized and directed
to execute the Certificate of Forgiveness and Release of Escrow Agreement, together with any
related documents necessary in connection therewith (the "Release Documents"), on behalf of the
EDA and deliver the Note and the Personal Guaranties (as defined in the Loan Agreement) to the
Borrower. The approval hereby given to the Release Documents includes approval of such
additional details therein as may be necessary and appropriate and such modifications thereof,
deletions therefrom and additions thereto including without limitation filling in any missing
information, as may be necessary and appropriate and approved by legal counsel to the EDA and by
the officers authorized herein to execute said documents prior to their execution; and said officers
are hereby authorized to approve said changes on behalf of the EDA. The execution of any
instrument by the appropriate officers of the EDA herein authorized shall be conclusive evidence of
the approval of such document in accordance with the terms hereof.
478266v1 JSB EL185-31
Approved by the Board of Commissioners of the Economic Development Authority of the
City of Elk River this 16th day of May,2016.
President
ATTEST:
Secretary
478266v1 JSB EL185-31
CERTIFICATE OF FORGIVENESS
April_,2016
WHEREAS, the Economic Development Authority of the City of Elk River (the
"EDA"), a body corporate and politic subdivision of the State of Minnesota and Sportech, Inc., a
Minnesota corporation (the "Borrower") have entered into a Loan Agreement dated April 25,
2014 (the"Loan Agreement"); and
WHEREAS,the Loan Agreement requires the Borrower to meet certain conditions as set
forth in the Loan Agreement;
WHEREAS, the Borrower has met the conditions set forth in the Loan Agreement to
forgive the loan;
NOW, THEREFORE, this is to certify that the Borrower has met the conditions set
forth in the Loan Agreement to forgive the loan. As a result, the EDA shall forgive all
outstanding principal and interest due on the loan and relieve the Borrower of all further
obligations under the Loan Agreement and deliver to the Borrower the following:
(a) Promissory Note marked cancelled;
(b) the Personal Guaranty and Entity Guaranty(as defined in the Loan Agreement)to the
Borrower; and
(c) UCC Termination Statement(to be completed and filed in the Borrower's discretion).
478255v1 JSB EL185-31 1
IN WITNESS WHEREOF, the Economic Development Authority of the City of Elk
River has caused this Certificate of Forgiveness to be executed with by its duly authorized
officer as of the date first written above.
ECONOMIC DEVELOPMENT
AUTHORITY OF THE CITY OF ELK
RIVER
By
President
By
Executive Director
478255v1 JSB EL185-31 2
RELEASE OF ESCROW AGREEMENT
Old Republic National Title Insurance Company
National Commercial Title Services Group
10655 Park Run Drive, Suite 160
Las Vegas,NV 89144
Sportech, Inc.
10800 175th Avenue NW
Elk River, MN 55330
RE: Escrow Agreement between Sportech, Inc., the Economic Development
Authority of the City of Elk River and Old Republic National Title Insurance
Company dated March_, 2015 (the "Escrow Agreement")
Sportech, Inc. (the"Borrower"),the Economic Development Authority of the City of Elk
River(the "Lender") and Old Republic National Title Insurance Company (the"Escrow
Agents") entered into the above described Escrow Agreement in connection with the granting of
a forgivable loan by the Lender to the Borrower. Under the Escrow Agreement,the Borrower
agreed to provide certain Funds (as defined in the Escrow Agreement")to be escrowed with the
Escrow Agent.
Section 3(b) of the Escrow Agreement provides that if the Borrower has met certain
requirements,then the EDA will provide a Satisfaction Notice(as defined in the Escrow
Agreement)to the Escrow Agent. The Borrower has met all requirements set forth in Section
3(b) of the Escrow Agreement and this letter serves as the Satisfaction Notice required to release
the Funds held by the Escrow Agent to the Borrower. Upon the payment of such Funds to the
Borrower,the Escrow Agreement is terminated.
This Satisfaction of Escrow Agreement is effective this_day of April, 2016.
ECONOMIC DEVELOPMENT
AUTHORITY OF THE CITY OF ELK
RIVER
By
President
By
Executive Director
478269v1 JSB EL185-31
478269v1 JSB EL185-31
UCC FINANCING STATEMENT AMENDMENT
FOLLOW INSTRUCTIONS
A.NAME&PHONE OF CONTACT AT FILER(optional)
B.E-MAIL CONTACT AT FILER(optional)
C.SEND ACKNOWLEDGMENT TO: (Name and Address)
I
THE ABOVE SPACE 13 FOR F1UNG OFFICE USE ONLY
1a.INITIAL FINANCING STATEMENT FILE NUMBER 1b.❑This FINANCING STATEMENT AMENDMENT Is to be fled(for record)
(or recorded)in the REAL ESTATE RECORDS
Filer.again ArtenareM Addersilan(Fain UCC3Ad)e0Q provide Debtors name in kern 13
2.m TERMINATION:Effectiveness of the Financing Statement Identified above is terminated with respect to the security Interest(s)of Secured Party authorizing this Termination
Statement
3.❑ASSIGNMENT(full or partial): Provide name of Assignee in Item 7a or 7b,=I address of Assignee in item 7c cod name of Assignor in item 9
For partial assignment,complete Items 7 and 9 and also indicate affected collateral in item 8
4.❑CONTINUATION: Effectiveness of the Financing Statement identified above with respect to the security interest(s)of Secured Party authorizing this Continuation Statement Is
continued for the additional period provided by applicable law
5.❑PARTY INFORMATION CHANGE:
Check Itfle of these two boxes: &CIQ Check)>Ae of these three boxes to:
This Change affects['Debtor or['Secured Party of record ❑ oar ale Nan 77a wr7b, item 770 ❑7:« item 7c c item ❑to be dote t 'dery sa or lab" °
6. CURRENT RECORD INFORMATION: Complete for Party Information Change-provide only rmfl name(Se or 88)
6a.ORGANIZATIONS NAME
Economic Development Authority of the City of Elk River
OR lab INDIVIDUAL'S SURNAME FIRST PERSONAL NAME ADDITIONAL NAME(SyINITIAL(S) SUFFIX
7. CHANGED OR ADDED INFORMATION:Compete for Assignment or Party Information Change-provide ody gm nacre(7s or 7b)(use exaa,hit nacre:do not omit.modify.or abbreviate any widths Doors name)
7a.ORGANIZATIONS NAME
OR 7b.INDIVIDUAL'S SURNAME
INDIVIDUAL'S FIRST PERSONAL NAME
INDIVIDUAL'S ADDITIONAL NAME(S)ANITIAL(S) SUFFIX
7c. MAILING ADDRESS CITY STATE POSTAL CODE COUNTRY
8.❑COLLATERAL CHANGE: Ma check ono of these four boxes: ❑ADD collateral ❑DELETE collateral ❑RESTATE covered collateral ❑ASSIGN collateral
Indicate collateral:
9.NAME OF SECURED PARTY OF RECORD AUTHORIZING THIS AMENDMENT: Provide only gm name(9a or 9b)(name of Assignor.If this Is an Assignment)
If this is an Amendment authorized by a DEBTOR,check here❑and provide name of authorizing Debtor
9a.ORGANIZATION'S NAME
Sportech,Inc.
OR
9b.INDIVIDUAL'S SURNAME FIRST PERSONAL NAME ADDITIONAL NAME(S)I1NITIAL(S) SUFFIX
10.OPTIONAL FILER REFERENCE DATA:
International Association of Commercial Administrators(IACA)
FIUNG OFFICE COPY—UCC FINANCING STATEMENT AMENDMENT(Form UCC3)(Rev.04/20/11)
FORGIVABLE LOAN PROGRAM
LOAN AND BUSINESS SUBSIDY AGREEMENT
THIS LOAN AGREEMENT("Agreement")is made effective as of April 25,2014 (the
"Closing Date"), by and between SPORTECH, INC., a Minnesota corporation ("Borrower"),
and the ECONOMIC DEVELOPMENT AUTHORITY OF THE CITY OF ELK RIVER, a
public body corporate and politic of the State of Minnesota("Lender").
RECITALS
A. Borrower has applied to Lender for a term loan on the Loan Property (as
hereinafter defined) under Lender's "Forgivable Loan Program" in the principal amount of One
Hundred Eleven One Hundred Fifty-five Thousand and 13/100s Dollars ($111,155.13)
(the"Loan").
B. Lender is willing to make the Loan to Borrower, subject to all of the terms and
conditions of this Agreement.
C. Contemporaneously with the execution hereof, Borrower is executing and
delivering to Lender the following security documents:
(i) A Promissory Note ("Note") effective as of the date herewith made by
Borrower and payable to the order of Lender, in the original principal amount of
$111,155.13;
(ii) A Security Agreement securing the Note ("Security Agreement"). The
Security Agreement is of even date herewith, is executed by Borrower, as debtor,in favor
of Lender, as secured party, and provides a security interest in certain equipment to be
purchased using the proceeds of the Loan (the"Equipment");
(iii)The personal guaranty of Chris Carlson, President of Borrower(the"Personal
Guaranty");
(iv) An entity guaranty (the "Entity Guaranty") of Envision Company, LLC, a
Minnesota limited liability company(the"Entity Guarantor");and
(v) A Mortgage and Assignment of Rents and Security Agreement and Fixture
Financing Statement securing the Entity Guaranty ("Mortgage"). The Mortgage is of
even date herewith, is executed by Entity Guarantor,as mortgagor, in favor of Lender, as
mortgagee, and covers property therein described situated in Sherburne County,
Minnesota (the "Loan Property") together with all improvements now located or
hereafter placed thereof, as well as a security interest in the Equipment; and
NOW, THEREFORE, in consideration of the mutual covenants hereinafter contained, it
is hereby agreed as follows:
174124v5
1. Amount and Purpose of Loan. Borrower agrees to take and Lender agrees to
make a loan in the principal amount of$111,155.13 to be advanced in a single disbursement as
hereinafter provided, the Loan to be evidenced by the Note and secured by the Security
Agreement, the Personal Guaranty, the Entity Guaranty, the Mortgage and any other security
document required under this Agreement. The Loan proceeds will be used only to pay for the
costs of materials, labor and soft costs of constructing the Improvements(as defined below).
2. The Project.
(a) Construction of Improvements. Borrower agrees to improve as a part of
the Loan Property a project ("Project") consisting generally of constructing a 6,210
square foot expansion of the upper level of the existing building located on the Loan
Property, substantially in accordance with plans and specifications which have been
provided to Lender. The improvements to and equipping of the Loan Property
contemplated by the plans and specifications, as the same may be changed with the
approval of Lender, are herein referred to as the "Improvements." Entity Guarantor has
not commenced construction of the Improvements. Borrower shall cause Entity
Guarantor to commence construction of the Improvements promptly after the date of this
Agreement and will carry on continuously, diligently and with reasonable dispatch the
construction of the Improvements to full and final completion. Failure to complete the
Improvements on or before September 30,2014, shall be a default hereunder, except for
delays caused by fire, accident, labor dispute, war, insurrection, riot, act of government,
act of God,or any other cause reasonably beyond Borrower's control; provided Borrower
uses all reasonable efforts to minimize the extent of any such delay.
(b) Purchase of Equipment and Security Interest. Borrower has provided
Lender a preliminary list of the Equipment that it intends to purchase for use in its
business from the Project, attached hereto as Exhibit A. Borrower will complete the
purchase of the Equipment and take delivery of the same on or before the date that the
Certificate of Occupancy for the Loan Property is issued. If Borrower wishes to purchase
other or different Equipment, Borrower shall provide Lender an updated Exhibit A for its
review and approval, which approval will not be unreasonably withheld, so long as the
replacement equipment is substantially similar to the replaced Equipment in function and
value. Borrower will provide Lender a final list of Equipment purchased within fifteen
(15) days after the Certificate of Occupancy for the Loan Property is issued. The
Security Agreement will provide Lender with a 1' priority security interest in the
Equipment. Borrower agrees to promptly and fully observe and comply with the
reasonable requirements of Lender with respect to the Security Agreement,
disbursements of funds and such other reasonable requirements as Lender may make.
3. Title Insurance. Sherburne County Abstract and Title Company ("Title"), is
designated as the title insurer with respect to this Agreement. Title will insure Lender against
loss or damage on account of mechanic's liens upon or unmarketability of the title to the Loan
Property, and will insure that the Mortgage constitutes a first priority lien upon Borrower's
interest in the Loan Property as contemplated by this Agreement, subject only to the lien of the
mortgages set forth as Item I on Exhibit B to the Mortgage (the "Mortgage"). Borrower agrees
174124%5
to promptly and fully observe and comply with the reasonable requirements of Title and Lender
with respect to the title, the Mortgage, disbursements of funds and such other reasonable
requirements as Title may make.
4. Documents to be Delivered. Borrower covenants and agrees to immediately
cause the compliance with the following conditions:
(a) Note. Deliver to Lender the Note.
(b) Security Agreement. Deliver to Lender the Security Agreement, together
with evidence that a UCC-I Financing Statement has been or will be duly filed for
record.
(c) Personal Guaranty. Deliver to Lender the Personal Guaranty.
(d) Entity Guaranty, Deliver to Lender the Entity Guaranty.
(e) Mortgage. Deliver to Lender the Mortgage, together with evidence that
the Mortgage has been or will be duly filed for record.
(f) Title Insurance Policy. Deliver to Lender a Mortgagee's title insurance
policy ("Title Policy"), from Title issued to Lender in the amount of$11 1,155.13 with
respect to the Mortgage and insuring that the Mortgage is a first lien on the Loan Property
free and clear of mechanic's liens, materialmcn's liens, taxes, special assessments, rights
of parties in possession, other than: (i)the permitted encumbrances; and (ii) the rights of
tenants as tenants only under existing leases, and questions of title and survey approved
in writing by Lender,
(g) Organizational Documents and Resolutions. Deliver to Lender copies of
Borrower's: (i)articles of organization, certified by the Minnesota Secretary of State, (ii)
a certificate of good standing issued by the Minnesota Secretary of State; and (iii)
resolutions certified to Lender authorizing the execution and delivery of this Agreement,
the Security Agreement, the Note and any other document to be executed by Borrower
pursuant to this Agreement.
(Ii) Organizational Documents and Resolutions. Deliver to Lender copies of
Entity Guarantor's (1) articles of organization for Entity Guarantor certified by the
Minnesota Secretary of State, (ii) a certificate of good standing for Entity Guarantor
issued by the Minnesota Secretary of State; and (iii) a certified copy of resolutions of
Entity Guarantor authorizing the execution and delivery of this the Entity Guaranty,
Mortgage, and any other document to be executed by Entity Guarnntor pursuant to this
Agreement.
(i) Project Cost and Source of Funds Certificate. Deliver to Lender a sworn
certificate detailing costs and sources of funds to be utilized for the purchase, delivery
and installation of the Equipment ("Project Cost Certificate"), in a form acceptable to
Lender, verified on oath by a manager of Borrower showing an itemized breakdown of
1741:4.5
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the source and amount of all Project funds relating to the construction of the building
expansion. Not less than fifty percent (50%) of the Project funds must come from a
source other than the Loan proceeds. Borrower shall deliver to Lender lien waivers,
receipts for payment and other evidence of payment acceptable to Lender with respect to
any such portion of costs and charges incurred to the date of the Project Cost Certificate.
(j) Insurance. Deliver to Lender: (i) a certificate or policy for all insurance
required, under the terms hereof to be maintained by Borrower; and (ii) evidence that no
part of the Loan Property is located in an area designated as being a flood plain or flood
hazard area as defined by the Flood Hazard Boundary Map published by the Federal
Insurance Administration.
(k) Compliance With Laws, Etc. Deliver to Lender such evidence as Lender
may require as to the compliance of the Loan Property and the Improvements with: (i)all
applicable laws, codes, rules, regulations and ordinances, including, without limitation,
those relative to environmental protection, protection of wetlands, building and zoning
matters and the Americans with Disabilities Act; and (ii) the requirements of any
restrictive covenants, conditions and restrictions; conditional use permit and/or planned
unit development applicable to the Loan Property. Borrower represents and warrants that
it is in the process of obtaining a variance for its intended use of the Loan Property.
Borrower shall obtain such variance and provide a copy of the same to Lender on or
before the issuance of the Certificate of Occupancy for the Loan Property is issued.
(1) Hazardous Substances. Deliver to Lender evidence acceptable to Lender,
that: (i) the Loan Property has not been used as a hazardous waste storage facility or
burial site;(ii)the soil is free from hazardous waste,hazardous substances,pollutants and
contaminants; and (iii) no hazardous waste, hazardous substance, pollutant or
contaminant has been used in the construction or use of any building or other
improvement on the Loan Property, For purposes of this subparagraph, the terms
"hazardous waste," "hazardous substances," "pollutants" and "contaminants" shall
include, but not be limited to, polychlorinated biphenyls (PCBs), asbestos, petroleum
products and any other chemical or substance determined to be a hazard to human health
or the environment.
(m) Indemnity. Deliver to Title any indemnity agreement in favor of Title in
the term required by Title in order for Title to issue the title insurance policies referred to
above.
(n) Expend Funds; Lien Waivers; Property Documents. Not later than fifteen
(15) days after the issuance of the Certificate of Occupancy for the Project, Borrower
shall deliver to Lender: (i) a copy of the Certificate of Occupancy for the Project; (ii) a
final Equipment List executed by an officer of Borrower (which, upon acceptance by
Lender, will be attached hereto as Exhibit A-1); (iii) a final Project Cost Certificate; and
(iv) evidence acceptable to Lender that Borrower has paid all acquisition, delivery and
installation costs for the Equipment.
1741240
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(o) Consent. Deliver to Lender an original signed and notarized form of
consent to the Mortgage from any other lender, if required pursuant to the other loan
documents, in the form and content reasonably acceptable to Lender.
(p) Escrow and Disbursement Agreement. Deliver the Escrow and
Disbursement Agreement executed by Borrower and Title,to Lender.
(q) Lease. Deliver to Lender a copy of the Lease for the use of the Loan
Property, executed no later than the date of this Agreement, by and between Entity
Guarantor,as landlord,and Borrower,as Tenant.
(r) Program Fee. Borrower has paid this fee in full.
Lender may waive any of the above requirements in its sole discretion.
5. Disbursement of Loan. Upon receipt by Lender of all of the items required
pursuant to Section 4 above in the form and condition required therein and confirmation from
Title that Title is prepared to issue the mortgagee's title insurance policy as required herein,
Lender agrees to disburse the Loan proceeds into the escrow account set up pursuant to the
Escrow and Disbursement Agreement by and among Lender, Borrower and Title.
6. Forgivable Login and Business Subsidy Agreement.
(a) Loan Forgiveness Program. This Loan is made pursuant to the Lender's
Forgivable Loan Program and pursuant to a Business Subsidy under the Minnesota
Statutes, Sections 116..993 to 116.1.995 (the"Business Subsidies Act").
(b) Wage and Job Goals. Borrower acknowledges and agrees that the
amount of the Business Subsidy granted to the Borrower under this Agreement is
$111,155.13 and that this Business Subsidy is needed because the Improvement is not
sufficiently feasible for the Borrower to undertake without the Business Subsidy. The
public purpose of the Business Subsidy is to create new full-time jobs in the City of Elk
River and to enhance the tax base. Borrower agrees that it will meet the following goals
(the"Goals"): (i) a net increase of four(4) new full-time jobs and retain its existing full-
time jobs in the City within twenty-four(24)months of the date issuance of the Loan (the
"Commencement Date") at an annual wage of at least $35,000.00 of which at least three
(3) of the newly created jobs must be filled by individuals who meet the Stale of
Minnesota's most current low to moderate income guidelines as established by HUD for
Sherburne County at time of hire. Borrower agrees to provide documentation that an
individual hired for the newly created job meets the low to moderate income guidelines at
the time of hire. As of the date of execution of this Agreement, Borrower employs J $3
full-time employees. Once Borrower has achieved the Goals, the Goals must be
maintained for a period of at least one year. The employees filling the newly created jobs
must be filled and maintained employed, full-time, for at least one year following the date
of hire that the position is first filled. Front and after the Closing Date through and until
the Conversion Date (as defined below), Borrower shall not he required to make any
174124%5
-5-
payments of principal or interest, though interest shall accrue at the interest rate set forth
in the Note.
(c) Reporting. Borrower agrees to (i) report its progress on achieving the
Goals to the Lender until the Goals are met,or the Business Subsidy is repaid, whichever
occurs earlier, (ii) include in the report the information required on forms developed by
the Minnesota Department of Employment and Economic Development, and (iii) send
the completed reports to Lender. The Borrower agrees to file these reports no later than
April 1 of each year and within thirty days after the deadline for meeting the Goals. The
Lender agrees that if it does not receive the reports, it will mail the Borrower a warning
within one week of the required filing date. If within fourteen (14) days of the post
marked date of the warning letter the reports are not made, the Borrower agrees to pay to
the Lender a penalty of S100.00 for each subsequent day until the report is filed up to a
maximum of$1,000.
(d) Guidelines. The Loan will be forgiven as set forth below if Borrower
meets all of the following requirements:
(i) Location/Existence. Borrower's business in now, and since the execution
of this Agreement has at all times been, located in Elk River and has been open
for business as a going concern and Borrower agrees to maintain its business in
the City of Elk River for a period of five(5)years after the Closing date.
(ii) Job Creation/Maintenance. Borrower has met all of the Goals identified in
subsection(b)of this section.
(iii) No Defaults. As of the Determination Date, there are no defaults under
this Agreement or any other agreement between Lender and Borrower which is
beyond any notice and cure period.
(e) Completion. Within a reasonable time after: (i)the 3'1 Anniversary of the
Commencement Date; or (ii) such earlier date as Borrower requests Lender's review,
Lender will determine, in its sole and absolute discretion, whether Borrower has fully and
timely complied with the requirements of this Section 6. Borrower will promptly provide
all such documentation as Lender reasonably requests in Lender's effort to determine
whether Borrower has timely complied with the requirements of this Section 6. The date
upon which Lender gives Borrower written notice of its determination of Borrower's
compliance with the requirements of this Section 6 is the "Determination Date". If
Borrower has timely and completely complied with all of the requirements of this Section
6, as strictly interpreted, Lender will forgive all outstanding principal and interest due and
owing pursuant to the Loan as of the Determination Date. Within a reasonable time
thereafter, Lender will return the Note and will provide a satisfaction and release of the
Mortgage.
(f) Default. If the Goals established in this Section 6 are not met at as of the
2"d Anniversary of the Commencement Date, then Borrower shall, upon thirty (30)days
1741240
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written notice,repay the Business Subsidy as follows: (1)all interest accrued to date shall
be capitalized as of the next occurring first of a calendar month (the "Conversion Date");
(ii) the term of the Loan shall be five (5) years, commencing upon the Conversion Date;
(iii) Lender will calculate the monthly payments due and owing from Borrower, based
upon a ten (10) year amortization; (iv) the first payment will be due and payable on the
Conversion Date; and (v)the terms and conditions of this Loan Agreement and any other
related loan document and the Borrower's obligations thereunder shall continue until the
Loan and all accrued interest is repaid in full.
7. Access to Loan Property. Lender and its respective representatives shall have at
all reasonable times the right to enter and have free access to the Loan Property and the right to
inspect all work done,labor performed and material furnished in connection therewith,
S. Books and Records. Borrower agrees to maintain accurate and complete books,
accounts and records in regard to the Loan Property and the Equipment in a manner reasonably
acceptable to Lender. Lender and its representatives shall have the right to inspect, examine and
copy all such books and records of'Borrower and Borrower shall, at Lender's request, furnish
such information as Lender may reasonably demand.
9. Encumbrances and Transfer. Borrower agrees not to sell, transfer, lease or
convey the Loan Property, or any part thereof, or any interest therein, or encumber the Loan
Property,or any part of thereof, in any manner, without written consent of Lender which consent
may be granted or withheld in the sole discretion of Lender, except that Lender will not
unreasonably withhold consent where Borrower relocates within the City of Elk River and
provides alternate and equivalent security in a form approved by Lender. This requirement shall
apply to each and every sale,transfer, lease or conveyance, whether voluntary or involuntary and
whether or not Lender has consented to any such prior sale,transfer lease or conveyance.
10. Time of Essence. Time is of the essence in the performance of this Agreement.
11. Assignability. Borrower shall not assign this Agreement or all or any part of any
advances to be made hereunder without written consent of Lender which consent may be granted
or withheld in the sole discretion of Lender.
12. Miscellaneous Covenants of Borrower. Borrower covenants and agrees with
Lender that, without costs to Lender, Borrower will:
(a) Performance of Conditions. Promptly keep: perform and comply with all
of the terms, covenants and conditions to be kept and performed by Borrower and/or
Entity Guarantor,as required by the City of Elk River(the"City") and any other
governmental body having jurisdiction over the Loan Property as a condition of platting,
rezoning or developing the Loan Property;keep unimpaired the rights of Borrower and/or
Entity Guarantor under any permit or agreement issued or made by the City or other
governmental body having jurisdiction over the Loan Property and any contracts obtained
or held by Borrower and/or Entity Guarantor in connection with the construction or
operation of the Improvements; and to enforce the prompt performance of all of the
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terms,covenants and conditions to be kept and performed by the City or other
governmental body having jurisdiction over the Loan Property,respectively, under any
permits or agreements issued or made by the City or such other governmental bodies, and
any contractors under all contracts obtained or held by Borrower and/or Entity Guarantor
in connection with construction or operation of the Improvements or Borrower's
business.
(b) Amendment, Etc. of Documents. Not amend, cancel, terminate,
supplement or waive any of the material terms, covenants and conditions of any permit or
agreement issued or made by the City or any other governmental body having jurisdiction
over the Loan Property, or any other contracts obtained or held by Borrower in
connection with the construction or operation of the improvements or any contracts,
documents or agreements referred to herein without the prior written approval of Lender.
(c) Performance of Note, Security Agreement, Etc. Without limiting the
foregoing, keep and perform all of the terms, covenants, conditions and requirements of
the Note,the Security Agreement,and this Agreement.
(d) Insurance. During the term of the this Agreement, Borrower shall procure
and maintain or cause to be procured and maintained at its sole expense, casualty
insurance, public liability insurance and such other types of insurance as are reasonably
required by Lender from time to time, including, without limitation, the coverages
expressly required of Borrower by the Mortgage, insuring Lender, in amounts and with
companies satisfactory to Lender. The policy or policies or duly executed certificate or
certificates for such insurance and renewals or replacements thereof shall be deposited
with Lender.
(e) Pay Charges. Immediately pay: (1) One percent (1%) processing fee (if
not already paid): (ii) all of Lender's attorneys' fees; and (iii)all loan charges including,
but not limited to, recording fees and Mortgage Registration Taxes for the Mortgage and
any other instruments required under this Agreement, except to the extent otherwise
payable by Lender.
(f) Continual Operation. At all times while any portion of the Loan remains
outstanding, Borrower will: (i) maintain its status as a for profit entity; (ii) maintain a
positive net worth; and (iii) will operate its business from the Loan Property (from and
after issuance of the Certificate of Occupancy for the Loan Property).
(g) Default Notices. Provide Lender with a copy of any default notice
received pursuant to any other loan documents(to the extent that such notice is sent by a
party other than Lender) or any governmental authority, promptly after receipt of the
same.
(h) Title to Equipment. Borrower owns or will own all of the Equipment 'free
and clear," that Lender will have a "first priority" lien in the Equipment pursuant to the
Security Agreement and that no other party has any right,title or interest in the Equipment.
I]4124v5
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(i) Positive Net Worth. On the Commencement Date and each anniversary
thereof, Borrower shall provide interim financial statements (to date) of Borrower
consisting of at least statements of income, cash flow, and a balance sheet such year to
date, setting forth in each case in comparative form corresponding figures from the
previous fiscal year, which statements shall be certified by Borrower as true, correct and
complete. In each such interim financial statement, Borrower must show a positive net
worth.
13. Warranties. Borrower represents and warrants to Lender the following:
(a) The Borrower is a Minnesota corporation duly formed, validly existing
and in good standing under the laws of the State of Minnesota.
(b) The making and performance of this Agreement and the execution and
delivery of the Note and any other instrument required hereunder are within the powers
of the Borrower and have been duly authorized by all necessary company action on the
part of the Borrower. This Agreement, the Note, the Security Agreement and any other
instruments required hereunder have been duly executed and delivered and are the legal,
valid and binding obligations of the Borrower enforceable in accordance with their
respective terms.
(c) No litigation, tax claims or governmental proceedings are pending or
threatened against the Borrower or the Loan Property, and no judgment or order of any
court or administrative agency is outstanding against the Borrower or the Equipment
which would have a material adverse effect on Borrower or the Equipment.
(d) Borrower has filed all tax returns (federal and state) required to be filed
for all prior years and paid all taxes shown thereon to be due, including interest and
penalties. Borrower will file all such returns and pay all such taxes for the current and
future years.
(e) All information, financial or other, which has been submitted by Borrower
and Guarantors in connection with the Loan is (rue, accurate and complete in all material
respects.
14. Indemnification. Borrower agrees to indemnify Lender and save it harmless
against all loss, liability, expense, or damages including but not limited to attorneys' fees, which
may arise by reason of any default by Borrower under this Agreement, the Note, the Security
Agreement. the Subsidy Agreement or any other document supporting this Loan.
15. Defaults. Each of the following shall constitute an Event of Default:
(a) If (i) Entity Guarantor fails to commence construction of the
Improvements within thirty (30) days after the date of this Agreement; (ii) work on
construction of the Improvements is halted for more than five (5) consecutive business
1?4I24v5
.9..
days; (iii)construction of the Improvements is not completed by September 30,2014;(iv)
the Improvements are not constructed in accordance with this Agreement; or (v)
Borrower or Entity Guarantor abandons the Loan Property. Borrower shall not be
considered in default under subsections(ii) and (iii) hereunder for delays caused by fire,
accident, labor dispute, war, insurrection, riot, act of government, act of God, or any
other cause reasonably beyond Borrower's control; provided Borrower uses all
reasonable efforts to minimize the extent of any such delay.
(b) Bankruptcy, reorganization, assignment, insolvency or liquidation
proceedings,or other proceedings for relief under any applicable bankruptcy law or other
law for relief of debtors are instituted by or against Borrower and, if such proceedings are
instituted against Borrower, an order, judgment or decree, without the consent of
Borrower appointing a trustee or receiver for Borrower or any part of its property or
approving a petition under the bankruptcy laws of the United States or any similar laws
of any state or other competent jurisdiction,shall have remained in force undischarged or
unstayed for a period of thirty(30)days.
(c) Any of the terms, covenants or conditions of any permit or other
agreement issued or made by the City or other governmental body having jurisdiction
over the Loan Property, including,but not limited to, those relating to the cost of or time
for installation of the improvements, are not complied with within the time required
thereby or are terminated or modified by the City or such other governmental body and
Borrower has not taken the necessary steps to correct or cure the same within thirty (30)
days after written notice is given by Lender.
(d) Any mechanic's or material supplier's lien is filed, against the Loan
Property and is not released, satisfied or discharged or bonded to Lender's satisfaction,
subject, however, to Borrower's right to contest the same in accordance with the
provisions of the Security Agreement.
(e) Any judgment, attachment,garnishment or other similar process is entered
against Borrower or against any property or assets of Borrower and is not released,
satisfied or discharged or bonded to Lender's satisfaction within thirty(30)days of entry.
(f) Borrower fails to timely: (i)purchase the Equipment; (ii) take delivery of
the Equipment; (iii) provide Lender any information necessary for Lender to perfect its
security interest.
(g) A transfer which violates by Paragraph 9 hereof; Encumbrances and
Transfer,occurs.
(h) Borrower: (i) fails to pay any amount due under this Agreement, the Note,
the Security Agreement, or the Microloan Documents when due; (ii) fails to perform any
other obligation to be performed under this Agreement, the Note,the Security Agreement
or the Microloan Documents or any other document executed by Borrower pursuant to
this Agreement;or(iii)fails to pay any amount or perform any ohligation under any other
1741240
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note,mortgage or other agreement now or hereafter made by Borrower in favor of or with
Lender or otherwise now or hereafter held by Lender, or City, and such failure continues
beyond any applicable cure period.
(i) Any representation or warranty by Borrower contained herein or in the
Note, the Security Agreement, or the Microloan Documents or any other instrument
required hereunder is false or untrue in any material respect when made.
(j) Any of the terms, covenants or conditions of any permit or other
agreement issued or made by the City or other governmental body having jurisdiction
over the Loan Property, including, but not limited to, those relating to the cost of or time
for installation of the Improvements, are not complied with within the time required
thereby or are terminated or modified by the City or such other governmental body and
Borrower has not taken the necessary steps to correct or cure the same within thirty (30)
days after written notice is given by Lender.
(k) A default under the Lease,beyond any applicable notice and cure period.
Upon the occurrence of an Event of Default, Lender, at its option, shall, in addition to any other
remedies which it might be entitled to by law,have the right to:
(I) To refrain from making advances under this Agreement and/or to require Title to
return advances of Loan proceeds held by Title;
(2) To enter into possession of the Loan Property and perform any and all work and
labor necessary to complete the Improvements substantially as required under this
Agreement through a licensed contractor and to do all things necessary or
incidental thereto;
(3) To perform such other acts or deeds which reasonably may be necessary to cure
any default existing under this Agreement, and to this end, it is hereby agreed as
follows:
(i) All sums expended by Lender in effectuating its rights under
Subparagraphs (2) and (3) of this Paragraph shall be deemed to have been
advanced under this Agreement and to be secured by the Security
Agreement and any other security document required under this
Agreement as security for the Loan.
(ii) Borrower hereby constitutes and appoints Lender its true and lawful
attorney-in-fact with full power of substitution either in the name of
Lender of in the name of Borrower or in the name of both, for the
following purposes: (a) to purchase the Equipment; to collect and use any
funds of Borrower; to use any funds which may remain unadvaneed under
this Agreement; to enter into such contracts and arrangements as Lender
reasonably deems necessary for such purposes; to prosecute and defend all
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actions or proceedings in connection with the Loan Property or the
Equipment and do any and every act which Borrower might do in its own
behalf; (b) OMITTED; (c) to perform each of the terms, covenants and
conditions to be kept and performed by Borrower under any contracts
and/or leases obtained or held by Borrower in connection with the
operation of the Improvements or the purchase of the Equipment, and any
other contracts; (d) without limiting the foregoing, to perform each of the
terms, covenants and conditions to be kept or performed by Borrower
under this Agreement, the Security Agreement and any other instrument
required under this Agreement,or the Microloan Documents; and(e)to do
all things that Lender reasonably deems necessary or advisable for the
purpose of carrying out the powers enumerated in (a), (b), (c) and (d) of
this Subparagraph(ii);
(iii) The powers herein granted Lender shall be deemed to be powers coupled
with an interest and the same are irrevocable;
(4) cancel this Agreement;
(5) bring appropriate action to enforce such performance and the correction of such
Event of Default;
(6) declare the entire unpaid principal of the Note and all accrued interest thereon
immediately due and payable without notice;
(7) exercise any remedies under the Security Agreement, foreclose the Mortgage and
any other security instrument referred to in this Agreement and/or exercise any
other rights or remedies it may have under the Security Agreement, the Mortgage
and such other security instrument.
16. Default under Note and Security Agreement. The failure by Borrower to keep or
perform any of'the terms, covenants and conditions to be kept or performed by it under this
Agreement shall constitute a default under the Note, the Security Agreement and any other
security instrument held by Lender in connection with the Loan.
17. Notices. Any notices given hereunder shall be in writing and shall be deemed to
have been given when delivered personally or three (3) days after deposited in the United States
mail, registered,postage prepaid,addressed as follows:
If to Borrower:
Sported, Inc.,
IOROO 175th Avenue N.W.
Elk River, Minnesota 55330
Attention: Chris Carlson, President
171124v7
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if to Lender:
Economic Development Authority of the City of Elk River
13065 Orono Parkway
Elk River, Minnesota 55330
Attn: Director of Economic Development
or addressed to any such party at such other address as such party shall hereafter furnish by
notice to the other party. Any notice delivered personally to Borrower shall be delivered to an
officer of Borrower, and any notice delivered personally to Lender shall be delivered to an
officer of Lender at the address for Lender for the mailing of notices. Either party may change
its address for the giving of notices by giving the other party at least ten (10) days' notice in the
manner provided above.
18. Headings. The headings used in this Agreement are for convenience only and do
not define, limit or construe the contents of this Agreement.
19. Binding on Successors and Assigns. Subject to the limitations on transfer
contained in this Agreement,this Agreement shall be binding upon and inure to the benefit of the
successors and assigns of the parties hereto.
20, Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of Minnesota, without giving effect to any choice or conflict of law
provision or rule.
21. Counterparts. This Agreement may be executed in two (2) or more counterparts,
each of which shall be an original and all of which shall constitute the same agreement.
22. Entire Agreement. This Agreement, the Note, the Security Agreement and the
other documents executed by Borrower and/or Lender pursuant to this Agreement contain the
entire agreement between the parties with respect to the subject matter hereof and supersede all
prior understandings and agreements, both oral and written. This Agreement may be amended
only in a writing signed by the parties hereto.
23. Fees and Expenses. Borrower agrees to pay to Lender immediately upon
demand all costs and expenses, including, without limitation, all attorneys' fees, incurred by
Lender in connection with the enforcement of the Lender's rights and/or the collection of any
amounts which become due to Lender under this Agreement, the Note, the Security Agreement
or the other documents executed in connection herewith; and the prosecution or defense of any
action in any way related to this Agreement, the Note, the Security Agreement or the other
documents executed in connection herewith, other than the gross negligence or willful
misconduct of Lender in the creation and/or implementation of its Forgivable Loan program.
(Signature Pages follow)
)Remainder of page intentionally left blank.)
174 L'4vi
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Signature Page to Loan Agreement
IN TESTIMONY WHEREOF,each of the parties hereto has caused these presents to
he effective as of the day and year first above written.
BORROWER:
SPORTECH, C.
By:
Chris Carlson
Its: President
1741240
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Signature Page to Loan Agreement
IN TESTIMONY WHEREOF, each of the parties hereto has caused these presents to
be effective as of the day and year first above written
ECONOMIC DEVELOPMENT AUTHORITY
OF THE CITY OF ELK RIVER
Name: Dan Tveite
Its: President
By le
Name: : Beeman
Its: Executive Director
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EXHIBIT A
List of Equipment
8 Computer Workstations
Additional CAD Software
Conference and Display Systems
1141205
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PROMISSORY NOTE
April 25,2014
Amount: $111,155.13
Interest: 3.00%
Maturity: To Be Determined
FOR VALUE RECEIVED, the undersigned, SPORTECH, INC., a Minnesota
corporation ("Borrower"), promises to pay to the order of the Economic Development
Authority of the City of Elk River, a public body corporate and politic of the State of
Minnesota ("Lender"), at 13065 Orono Parkway, Elk River, Minnesota 55330, or such
other place as the Lender or any other holder of this note may designate in writing,on or
before the Maturity Date (as defined below), the principal sum of One Hundred Eleven
Thousand One Hundred Fifty-five and 13/100 Dollars ($111,155.13), together with
interest on any and all amounts remaining unpaid thereon from time to time from the date
hereof(computed on the basis of actual days elapsed in a year of 360 days) at a fixed
interest rate of three percent(3%)per annum.
This Note is made pursuant to a Loan Agreement ("Loan Agreement") between
Borrower and Lender of even date herewith and secured by, among other things Security
Agreement ("Security Agreement") given by Borrower and those certain Personal
Guaranty made by Chris Carlson as well as that certain Entity Guaranty made by
Envision Company, LLC, all of which are made to Lender of even date herewith
(collectively, the Security Documents). All of the terms and conditions contained in the
Security Documents which are to be kept and performed by Borrower are hereby made a
part of this Note to the same extent and with the same force and effect as if they were
fully set forth herein; and Borrower covenants and agrees to keep and perform them, or
cause them to be kept and performed, strictly in accordance with their terms.
This Note is made pursuant to Lender's Forgivable Loan program. On the
Determination Date (as defined in the Loan Agreement), Lender will make a
determination as to whether Borrower has fully and timely complied with the
requirements of the program. If Borrower has done so, Lender will forgive the entire
principal balance of the Note, together with interest, pursuant to the terms of the Loan
Agreement as of the Determination Date. If Lender determines that Borrower has failed
to timely and fully comply with the terms of the program, Borrower will be required to
begin making monthly installment payments of principal and interest due hereunder,
commencing on the Conversion Date (as defined in the Loan Agreement), which
payments shall continue on the first (10) day of each and every month thereafter until the
59'h monthly anniversary of the Conversion Date (the "Maturity Date"), when all
outstanding principal and accrued but unpaid interest shall he payable in full. All unpaid
interest which has accrued to the Conversion Date shall he capitalized into principal and
the principal and interest payments under this Note shall be calculated based upon a five
(5) year term and a ten (10) year amortization, as of the Conversion Date. Lender shall
174338■1
use commercially reasonable efforts to inform Borrower of its monthly installment
payment prior to the Conversion Date; provided that failure to do so shall not be a Lender
default or extend the time for payment. To the extent that there is any conflict between
the Loan Agreement and this paragraph,the terms of the Loan Agreement shall control.
If the Lender,or any other holder of this note,has not received the full amount of
any Monthly Installment provided for in this note, by the end of seven (7) calendar days
after the date it is due, Borrower shall pay a late charge fee to the Lender, or any other
holder of this note. The amount of the late charge fee shall be eight percent (8.00%) of
the overdue Monthly Installment. The Borrower shall pay this late charge fee on
demand, however, collection of the late charge fee shall not be deemed a waiver of the
Lender's right to declare an Event of Default and exercise its rights and remedies as
provided for in the Loan Agreement and the Security Agreement.
Each Monthly Installment and other payments made under this note shall be
applied as follows: (i) first, to be applied against and pay interest which has accrued and
remains unpaid on the date the payment is received; then (ii) to be applied against and
pay unpaid late charges and any other charges, including attorneys' fees and protective
advances; and then(iii)all remaining amounts, if any, shall be applied against and reduce
the then outstanding principal balance of this note.
If an Event of Default shall occur hereunder or under the Loan Agreement or the
Security Agreement and any cure period provided for in the Loan Agreement or the
Security Agreement has expired, the Borrower agrees to pay a default rate of interest
equal to ten percent (10.00%) per anmmn as the applicable interest rate of this note, and
the entire principal amount outstanding, accrued interest and any other charges due
hereon shall at once become due and payable at the option of the Lender or the holder
hereof. Any failure of the lender to exercise its right to increase the interest rate by the
default rate of interest set forth above or its option to accelerate this note at any time shall
not constitute a waiver of the right to exercise the same right to increase the interest rate
or accelerate at any subsequent time. Notwithstanding anything contained herein to the
contrary, the default rate of interest hereon shall never exceed the highest rate permitted
by law.
The Bonnwer may prepay the principal under this note at any time and from time
to time, in whole or in part, without premium or penalty. No partial prepayment shall
postpone the due date of any Monthly Installment or reduce the amount of any such
Monthly Installment unless the Lender agrees otherwise in writing.
All sums payable to the Lender under this note shall be paid in immediately
available funds.
The Borrower promises to pay all costs in connection with the enforcement of this
note, including but not limited to, those costs, expenses and attorneys' fees of Lender
whether or not suit is filed with respect thereto and whether or not such cost or expense is
paid or incurred or to be paid or incurred prior to or after the entry of judgment or for the
1743380
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pursuance of, or defense of any litigation, appellate, bankruptcy or insolvency
proceeding.
Presentment, notice of dishonor and protest are hereby waived by all makers,
sureties, guarantors and endorsers hereof: This note shall be binding upon Borrower, its
successors and assigns.
The remedies of Lender, as provided herein and in the Loan Agreement and the
Security Agreement, shall be cumulative and concurrent and may be pursued singly,
successively or together, at the sole discretion of Lender,and may be exercised as often
as occasion therefor shall occur, and the failure to exercise any such right or remedy
shall in no event he construed as a waiver or release thereof.
Time is of the essence hereof.
This note shall be governed by and be construed under the laws of the State of
Minnesota, without regard to principles of conflicts of law.
IN WITNESS V 'HEREOF, the undersigned has caused this note to be effective
as of the day and year first above written.
SPORTECH,
a Minnesota corporation
By:
Chris Carlson
Its President
74338v4
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