7.1. SR 10-17-2016
Request for Action
To Item Number
Mayor and City Council 7.1
Agenda Section Meeting Date Prepared by
Public HearingOctober 17, 2016Amanda Othoudt, EDD
Item Description Reviewed by
Property Tax Abatement and Forgivable Loan Cal Portner, City Administrator
Agreement from SBH Properties, LLC (Apex
Reviewed by
Embroidery, Inc.)
Action Requested
1.Open public hearing to consider comments on the proposed property tax abatement assistance
and a forgivable loan agreement for SBH Properties, LLC (Apex Embroidery, Inc.).
2.Following the public hearing, the Council is asked to consider the attached resolution to approve
or deny a property tax abatement and forgivable loan and authorizing execution of the tax
abatement agreement and forgivable loan documents for SBH Properties, LLC.
Background/Discussion
A public hearing must be held and comments taken for a business subsidy greater than $150,000. The
attached staff report provides background on the project as considered earlier by the EDA for financial
assistance in the construction of a 13,312 square foot manufacturing facility.
Financial Impact
Up to $78,007 in city tax abatement assistance, to be distributed “pay as you go” for 10 years. This abates
the entire share of taxes on the property. In addition, the Elk River EDA will provide a $200,000
forgivable loan for the project. The Forgivable Loan Fund balance is $200,000 which will be fully
depleted.
Attachments
EDA Staff Report for Property Tax Abatement (September 29, 2016)
EDA Staff Report for Forgivable Loan Application (October 17, 2016)
Springsted Analysis (September 23, 2016)
Updated Springsted Analysis (October 10, 2016)
Resolution
Property Tax Abatement Application
Property Tax Abatement Agreement
Forgivable Loan Application
Forgivable Loan Agreement
Environmental Indemnification Agreement – Forgivable Loan
Entity Guarantee – Forgivable Loan
Personal Guarantee – Forgivable Loan
Mortgage Agreement – Forgivable Loan
Security Agreement – Forgivable Loan
Promissory Note – Forgivable Loan
Request for Action
To Item Number
Economic Development Authority 6.3
Agenda Section Meeting Date Prepared by
General BusinessOctober 17, 2016Amanda Othoudt, EDD
Item Description Reviewed by
SBH Properties, LLC (Apex Embroidery & Design, Cal Portner, City Administrator
Inc.) Property Tax Abatement Request
Reviewed by
Action Requested
Approve or deny, by motion, $70,970 property tax abatement for SBH Properties, LLC. (Apex
Embroidery & Design, Inc.)
Background/Discussion
SBH Properties, LLC dba/Apex Embroidery & Design requested 12-year pay-as-you-go property tax
abatement from the city in the amount of $85,164.
The applicant has also submitted an application for tax abatement assistance from the county totaling
$77,592 over 10 years. The total requested combined abatement revenue amount from both the city and
the county total $162,756 which equates to approximately 9.3% of the total project costs. The applicant
has also requested a $200,000 forgivable loan from the city. The combination of public funding consisting
of tax abatement dollars and forgivable loan money equates to 20.7% of the total project costs.
The proposed $1.75 million project consists of constructing a 13,312 sq. ft. facility on approximately 1.4
th
acres of land at 9775 158 Circle NW. They will have the option in the future to purchase an adjacent
parcel that would provide room to expand their proposed facility by an additional 14,975 sq. ft. Apex
Embroidery & Design plans to create seven new jobs averaging $17.71/hour within two years of project
completion. In addition, they propose to relocate 18 FT employees with an average wage of $15.57 per
hour.
The attached memos from Springsted summarize the analyses completed to date. At their September 29
meeting, the EDA Finance Committee discussed the applicant’s financial need analysis in detail and
requested that Springsted prepare an updated alternative analysis to understand how an increase of
assumed lease rate based on a blended rate of office and industrial market lease rates may impact cash
flow of the project and amount of city abatement assistance needed for the project to proceed.
Following this discussion, the EDA Finance committee recommended that the EDA approve up to a 12
year property tax abatement for Apex to meet the immediate financing gap that is needed for the project
to proceed. Further discussion by the EDA Finance Committee directed staff to shorten the abatement
term if Springsted could show through alternative assumptions that a shorter term of abatement would
cover the immediate financing gap the company needed based on the blended rate of $5.50 SF.
Springsted’s updated assumption quantifies the alternate assumptions based on a blended lease rate of
$5.50 SF ($4.75 for industrial and $6.25 for office), for a total revenue stream of $1,096,816 ($948,248 of
lease rates and $148,568 of combined City and County tax abatement) over 14 years total (abatement
term of 10 years). An increase of the lease rate based on a blended rate increases revenues available for
the applicant to support debt service payments which should result in a reduction of the amount of tax
abatement revenues needed for the project to move forward.
The analysis shows total abatement revenues generated by both the city and the county of $148,567
($7,097 City share and $7,759 County share) over 10 years, resulting in a reduction of $14,195 from the
original 12 year abatement request of 162,762.
It should be noted that the first mortgage debt has a 20 year amortization and the requested term of
abatement is 10 and 12 years, respectively, for the county and city. Once the abatement assistance has
terminated, the lease rate and/or debt service payments would need to be adjusted in order for there to
be sufficient revenues to support the remaining debt payments. The applicant has not indicated any
future plans to refinance this debt, or plans to adjust the lease rate to cover the remaining debt service on
the first mortgage. Staff is concerned that this will put the city at risk of abating property taxes over the
course of 10-12 years if the company cannot financially support the debt service payments after the
abatement term is up.
The project scored 35 out of 45 total possible points, indicating a moderate project desirability rating. The
applicant has recently indicated that they will be incorporating energy efficiency items into their design.
This would result in an additional 2 points, or a total of project score of 37 out of 45 possible points.
Financial Impact
The property tax abatement request would result in the abatement of $70,970 in city property taxes over
the next 10 years.
Attachments
Property Tax Abatement Application & Score Sheet
EDA Finance Committee Staff Report (September 29, 2016)
Springsted Analysis (September 23, 2016)
Updated Springsted Analysis (October 10, 2016)
Apex Embroidery Property Tax Abatement Agreement
Lease Comps
Request for Action
To Item Number
Economic Development Authority 6.2
Agenda Section Meeting Date Prepared by
General BusinessOctober 17, 2016Amanda Othoudt, EDD
Item Description Reviewed by
Forgivable Loan Application from Apex Cal Portner, City Administrator
Embroidery, Inc.
Reviewed by
Action Requested
Approve, by motion, a $200,000 forgivable loan for Apex Embroidery Design, Inc.
Background/Discussion
Apex Embroidery, Inc. is requesting a $200,000 forgivable loan and city tax abatement assistance of
$85,164 over 12 years and $77,590 over 10 years from the county for a total of $162,754.
The EDA Finance Committee reviewed the application and the applicant’s financials at their September
29 meeting and recommended the EDA approve a $200,000 Forgivable Loan to Apex.
Apex Embroidery provides a variety of apparel decorating solutions, including screen printed transfers,
custom applique, custom rhinestone transfers digital transfers, embroidery programing, laser cutting, heat
transfer and more. They work with a variety of clients, and have produced products for Ralph Lauren,
North Face, Tommy Hilfiger, Harley Davidson, Warner Brothers, and Abercrombie & Fitch.
In business since 1998, they were originally located in Hopkins, MN before leasing an Elk River space in
2001. In 2008, Apex leased a 7,500 sq. ft. facility in Ramsey. Continuing to grow, they wish to build a new
facility in Elk River.
Apex plans to invest $306,000 in additional equipment and pledge to grow their workforce by seven
employees averaging $17.71/hour within two years of project completion. They propose to relocate 18
FT employees with an average wage of $15.57 per hour.
th
The project consists of a 13,312 sq. ft. facility on approximately 1.4 acres of land at 9775 158 Circle
NW. They will have the option to purchase and adjacent parcel for room to expand their new proposed
facility an additional 14,975 square feet.
The applicant must meet the following criteria for the Forgivable Loan Program:
Forgivable Loan Criteria
a)50% of project financing from another source
b)Maximum loan amount $200,000
c)Minimum of one job paying equal or greater to $12.82/hr. created per $35,000 requested,
51% of which must be awarded to low and moderate income (LMI) employees
Template Updated 4/14
d)Retain jobs for a minimum of one year
e)Interest – 3% or two points below prime
f)Financial Feasibility
i)Appropriate ratio of private funds to Forgivable Loan funds
ii)Sufficient cash flow to cover proposed debt service
iii)Ability to demonstrate a positive net worth.
iv)Letter of Commitment from applicant pledging to complete the project during
proposed project duration.
v)Letter of Commitment from other financing sources stating terms and conditions of
their participation in the project if applicable
vi)Sufficient collateral
vii)Certificate of Good Standing from the Minnesota Secretary of State or other
satisfactory evidence of good standing.
viii)Project compliance with all city codes and policies
Apex’s application scored 278 out of a possible 465 points on the Forgivable Loan scoring sheet.
Apex Embroidery & Design Application Breakdown
1.Amount Requested: $200,000
2.Interest Rate: 3%
3.Job Creation: 7 jobs at no less than $15/hr. At least 51% will be awarded to LMI applicants.
4.Job Retention – retain the jobs for a minimum of one year.
5.Financial Feasibility
a.Private Funding – $1,550,968 of private investment to $200,000 in public funds, a 7:1 ratio.
b.Cash Flow – According to the profit and loss statement provided, they have had a positive
cash flow for each of the past three years.
c.Letter of Commitment – Brian Hill, President of Apex Embroidery & Design, submitted a
letter dated August 24, 2016, committing to complete the expansion by the Spring of 2017.
d.Letter of commitment from other financing – Neil Gagnon of The Bank of Elk River
submitted a letter on September 6, 2016, stating Apex demonstrates the ability to service
debt payments on the proposed project. The debt structure proposed to The Bank of Elk
River will allow for a loan on the land, building and equipment of up to $1,450,000. The
final loan will be calculated based off the lesser of 80% of the appraised value or cost and
be amortized over a period of 20 years, 5-year balloon at 4.25 percent. The Bank will also
be primary lender for an equipment loan of $351,000 over a period of 6 years at 4.55%.
e.Collateral – the city will seek a subordinate position on the real estate and secure a
personal guarantee.
f.Certificate of Good Standing – Received by the city.
Financial Impact
The Forgivable Loan Fund balance is $200,000 which would be fully depleted. The borrower will pay all
legal and filing fees at closing. The Forgivable Loan will be secured by a second lien position on the real
estate, in addition the applicant will provide a both a personal guarantee and an entity guarantee.
Attachments
Forgivable Loan Application & Review Worksheet
EDA Finance Committee Staff Report (September 29, 2016)
N:\\Public Bodies\\Agenda Packets\\10-17-2016\\7.1 - missing 2 attachments\\7.1 at2 EDA Staff Report Apex Forgivable Loan Application
Request.docx
Forgivable Loan Agreement
Environmental Indemnification Agreement
Entity Guarantee
Personal Guarantee
Mortgage Agreement
Security Agreement
Promissory Note
Resolution
N:\\Public Bodies\\Agenda Packets\\10-17-2016\\7.1 - missing 2 attachments\\7.1 at2 EDA Staff Report Apex Forgivable Loan Application
Request.docx
Springsted Incorporated
380 Jackson Street, Suite 300
Saint Paul, MN 55101-2887
Tel: 651-223-3000
Fax: 651-223-3002
www.springsted.com
MEMORANDUM
TO: Members of the EDA Finance Committee Meeting
Amanda Othoudt, Economic Development Director
FROM: Mikaela Huot, Vice President/Consultant
DATE: September 23, 2016
SUBJECT: SBH Properties, LLC: Request for Tax Abatement Assistance
The City of Elk River has asked Springsted to evaluate a tax abatement request for assistance submitted by the
applicant, SBH Properties, LLC. The applicant proposes to build a new facility within the City of Elk River to allow for
growth of the business and expand existing operations. The total estimated square feet for the expansion is
approximately 13,312. The company currently employs 18 full time employees and has indicated in the application a
need for additional personnel. The company is anticipating the hiring of an additional 7 employees with an average
wage of those jobs equaling $17.60/hour. According to the applicant, the tax abatement assistance will be used as
annual cash flow to support debt service and equity investment on the approximate $1.75M project to be financed
with a combination of debt, equity and the City’s Forgivable Loan program.
The purpose of this memo is to summarize the analysis that Springsted prepared, including the estimate of tax
abatement revenues for the project and to assist with determining whether the project as proposed is likely to
proceed “but for” the requested tax abatement assistance. The analysis is based on our review of the project
components and financials and general rationale for assistance as submitted by the applicant.
There are several methods available to determine if a project would proceed “but for” the assistance. An analysis
comparing the rates of return (return on equity and/or internal rate of return) with and without assistance is a common
method used to analyze the “but for” test. In some cases, a review of the project’s sources and uses of funds and
operating cash flow performance is done to determine if an operating gap exists or if the project performance is not
expected to meet minimum financing requirements and return thresholds to assist with determining that a project
meets the “but for” test. If, following the review, it is determined that the project has a shortage of debt, cash, and/or
equity based on the projected value of the project upon completion and net operating income available to support
debt service, it can be determined that the project as proposed may not proceed “but for” the assistance. It is also
City of Elk River, Minnesota
SBH Properties, LLC Tax Abatement Project
September 23, 2016
Page 2
important to analyze what other options may be available to close any financing gap that may not require public
assistance. It is important to note that tax abatement does not statutorily require a “but for” analysis to determine if
the project would proceed without assistance, however it must be determined that the project is in the public interest
and that the benefits outweigh the costs. The City’s current tax abatement policy requires this finding be made. It
should also be noted that the City’s approach to the use of tax abatement is to finance the extraordinary costs
associated with a new development or project.
Tax Abatement Assumptions
Springsted made certain assumptions to calculate the estimated amount of tax abatement revenue generated by the
proposed new project. Those assumptions include the following:
City of Elk River proposed tax abatement
o City participation for 12 year
o County participation for 10 years
Subject to policy, review and approvals
Abate incremental new value
o PID: 75-811-0125
o EMV as of Jan. 2, 2016 for taxes payable 2017 is $51,800
o Existing land value
o Assumed to be ‘base’ value of abatement
Estimated new value after construction is $832,000
o Value estimate provided by County Assessor
o Taxes estimated in application for assistance
o Incremental value of $780,200 would be abated
o Full value for payable 2019 (100% total value)
Abatement term and participation
o Request for City assistance for 12 years
o Request for County assistance for 10 years
Anticipated First Year of Abatement
o Taxes payable 2019 (based on full estimated value)
o Construction commences in 2017 and complete by December 31, 2017
2016 tax rates remain constant through term (Rates Provided by Sherburne County)
o City : 46.170%
o County: 50.478%
o School: 39.268%
o Other: 4.778%
o Total 140.694%
Class rates remain constant through term
o 1.5% first $150,000 market value and 2% value above $150,000
0% annual market value inflator assumed
City of Elk River, Minnesota
SBH Properties, LLC Tax Abatement Project
September 23, 2016
Page 3
SBH Properties, LLC Proposed Tax Abatement City County
Participation and Number of Years
City for 12 years County for 10 years
(based on application – subject to review and approval)
Estimated Annual Abatement Revenue
$7,097 $7,759
(upon full buildout for taxes payable 2019)
Total Estimated Abatement Revenues $85,167 $77,595
Total Estimated Combined Abatement Revenues $162,762
The above table illustrates the projected net revenues that the tax abatement project could generate based on the
applicant’s request. The application for abatement assistance includes a proposed term of 12 years from the City
and 10 years from the County. Total abatement revenue amount as requested from the City is approximately
$85,167 and $77,595 from the County from a total of $162,762. The maximum abatement term for the City is up to
20 years if only 1 or 2 entities participate in the abatement or the City receives written denial of participation from one
of the other taxing entities (County or School District). Revenues captured through tax abatement and provided as
reimbursement to the property owner for certain costs must be used only for those properties that benefit from the tax
abatement.
Applicant Request for Tax Abatement Assistance
The applicant submitted a request for tax abatement assistance to the City of Elk River to assist with financing the
proposed $1.75 million project for the construction of a new building located within the City. The applicant has
requested approximately $162,762 in abatement assistance over 12 years from the City and 10 years from the
County, respectively, which equates to approximately 9.29% of the total project costs. The applicant’s submittal
includes a preliminary total project budget of $1,750,968 as shown in the table below.
Project Costs Total Cost Sources of Funds Total Sources
Land Acquisition $121,968 Bank Loan $1,049,774
Site Development 154,000 Equipment Loan 351,000
Building Construction 1,064,000 Equity 150,194
Machinery & Equipment 321,000 EDA Forgivable Loan 200,000
Architectural & Engineering & Legal 10,000
Moving Expenses 30,000
Closing Costs 35,000
Contingency 15,000
Total $1,750,968 Total $1,750,968
City of Elk River, Minnesota
SBH Properties, LLC Tax Abatement Project
September 23, 2016
Page 4
Project Financing
There are generally two ways in which assistance can be provided for most projects, either upfront or on a pay-as
you go basis. With upfront financing, the City would finance a portion of the applicant’s initial project costs through
the issuance of bonds or as an internal loan. Future revenues would be collected by the City and used to pay debt
service on the bonds or repayment of the internal loan. With pay-as-you-go financing, the applicant would finance all
project costs upfront and would be reimbursed over time for a portion of those costs as revenues are available. Pay-
as-you-go-financing is generally more acceptable than upfront financing for the City because it shifts the risk for
repayment to the applicant. If revenues are less than originally projected, the applicant receives less and therefore
bears the risk of not being reimbursed the full amount of their financing. However, in some cases pay as you go
financing may not be financially feasible. With bonds, the City would still need to make debt service payments and
would have to use other sources to fill any shortfall of revenues. With internal financing, the City reimburses the loan
with future revenue collections and may risk not repaying itself in full if revenues are not sufficient.
The form of financial assistance proposed in this case would be pay as you go financing whereby the applicant would
incur all project costs upfront and be reimbursed annually as tax abatement revenues are generated. The applicant
has illustrated in the sources of revenue that the project would be financed upfront with a combination of debt
financing, equity and EDA forgivable loan. The applicant would be responsible to provide financing for the full project
cost amount upfront, including any portion that would be reimbursed by the City, through additional debt or equity that
would be subject to project feasibility and market. Should the tax abatement be approved, the City would collect the
annual abatement revenues from the proposed project and provide as reimbursement to the applicant. No interest
component would be incorporated.
Applicant Proforma “But For” Analysis
In approving an abatement project, the City and EDA have requested that a finding be made that the proposed
project as proposed would not reasonably be expected to occur solely through private investment within the
reasonably foreseeable future. The applicant has provided a “but-for” argument stating that the financial assistance
from the City is necessary to provide sufficient project cash flow and market returns to the investor that will achieve
project feasibility, through an increase in revenues and estimated total return on equity upon project completion. The
applicant plans to lease the space and use the rental income (at a rate of $5/square foot) to support annual debt
service payments on the mortgage with any tax abatement assistance providing additional cash flow.
It has been the practice of the EDA and City of Elk River relative to the use of tax abatement revenues to typically
finance extraordinary costs and the level of assistance for each project is, in part, dictated by the ‘extraordinary’ costs
of the project. Based on the applicant’s stated position relative to the need for tax abatement assistance and
supporting documentation, the City could make its “but for” finding and provide the assistance. However, additional
review of the ‘extraordinary’ costs of the project and the factors driving the financial gap may also be considered.
Our analysis of the financial information provided by the applicant indicates that the tax abatement has a positive
impact on the projected returns and cash flow of the proposed project. Without the abatement assistance, the project
is not projected to produce sufficient cash flow to service annual debt service. This is based on a rental rate of $5
City of Elk River, Minnesota
SBH Properties, LLC Tax Abatement Project
September 23, 2016
Page 5
per square foot (13,312). As a side note, the applicant’s materials include square footage of 16,312, as opposed to
actual square footage of the project of 13,312. Based on the annual rents estimated to be received from the
$5/square foot for 13,312 of square feet the project would generate an estimated annual rental income of $66,560 to
support the debt service payments. The estimated annual debt service payments for the first mortgage ($1,049,774
with a 20 year term and 4.25% interest rate) would be $78,007. Annual abatements from both the City and County
totaling $14,856 would provide sufficient income to make annual debt service payments. The estimated annual
payments for the equipment loan ($351,000 with a 6 year term and 4.55% interest rate) would be an additional
$66,958 and not projected to be supported by any annual abatement revenues.
As stated tax abatement does not statutorily require a “but for” analysis to determine if the project would proceed
without assistance; however a city, county or school district may grant a tax abatement, by contract or otherwise, of
the taxes imposed by the city on a parcel of property, which may include personal property and machinery, or defer
the payments of the taxes and abate the interest and penalty that otherwise would apply, if:
it expects the benefits to the city of the proposed abatement agreement to at least equal the costs to the city
of the proposed agreement or intends the abatement to phase-in a property tax increase, as provided in
clause (2)(vii); and
it finds that doing so is in the public interest because it will:
o increase or preserve tax base;
o provide employment opportunities in the political subdivision;
o provide or help acquire or construct public facilities;
o help redevelop or renew blighted areas;
o help provide access to services for residents of the political subdivision;
o finance or provide public infrastructure;
o phase-in a property tax increase on the parcel resulting from an increase of 50 percent or more in
one year on the estimated market value of the parcel, other than increase attributable to
improvement of the parcel; or
o stabilize the tax base through equalization of property tax revenues for a specified period of time
with respect to a taxpayer whose real and personal property is subject to valuation under
Minnesota Rules, chapter 8100.
The applicant has stated the project would increase the City’s tax base and provide additional employment
opportunities. The applicant’s submittal includes a projected sources and uses of funds, project description,
anticipated number of jobs created, 2014 and 2015 financial statements and 3 years of projected statements (2016-
2018). The one year cash flow showing the results with and without abatement assistance include the annual rental
income (rent per square foot and leasable square feet) from the proposed project and estimated debt service
payments on the building (20 year term at 4.25%) and equipment (6 year term at 4.55%) loans. There are two
scenarios, one with assistance and one without that also include the $200,000 forgivable loan, with a projected return
on equity calculation for each. As stated previously, the tax abatement would provide additional annual cash flow to
the project to assist with increasing the projected return on equity for the owner, as well as assisting with providing
City of Elk River, Minnesota
SBH Properties, LLC Tax Abatement Project
September 23, 2016
Page 6
sufficient cash flow for debt service payments on the first mortgage. The lender has provided a letter indicating that
financial assistance through the forgivable loan and tax abatement programs are an important component of
receiving financing.
Based on our analysis of the provided annual cash flow, additional annual revenues through an increase in rental
incomes or other funding source (or a reduction in debt service payments through reduced mortgage amount)
beyond the tax abatement would be needed to meet both the annual payments on the first mortgage (with
assistance) and equipment loan (with or without assistance). Tax abatement revenues would be necessary, absent
other annual revenue increases, to support first mortgage debt payments. For illustration purposes, an increase in
the rental rate from $5/square foot to $6/square foot would provide approximately the same annual revenues as the
City and County abatement assistance. The developer has also requested a $200,000 forgivable loan from the EDA
to assist with the upfront financing of acquisition, construction and equipment expenditures related to the project.
Financing the additional $200,000 as a first mortgage would not be projected to be supported from the provided
annual per square foot rental rate of $5 ($66,560 annually) and would require additional annual revenues from the
project.
Conclusion
The applicant has requested tax abatement assistance from the City to assist with financing a portion of the project
costs associated with construction of an approximate 13,312 square foot new facility. The applicant has indicated that
the project requires tax abatement assistance to provide sufficient returns and cash flow upon project completion.
Supporting documentation from the applicant’s lender, The Bank of Elk River, has stated that financing may be
available up to $1.45M and the final loan amount will be determined based on the lesser of 80% of appraised value
or cost and be amortized over 20 years. Stated within this documentation is that the City and EDA’s forgivable loan
and tax abatement assistance is an important component to allow the project to proceed and obtain the financing.
As discussed, there are several methods to determine if a project would proceed “but for” the assistance. When
making a but-for determination, it is also necessary to understand what components may impact the likelihood that a
project would proceed as proposed with or without public assistance. An increase in revenues (through public
assistance or owner investor equity or increased rental rates beyond the projected $5/square foot) and/or decrease in
project costs may assist with reducing a potential gap and may increase the likelihood that a project would proceed
as proposed without public assistance. . We understand all adjustments are subject to market and feasibility. In this
project, assuming all variables remain constant, an increase in the rental rate from $5 to $6 per square foot (as
illustration) is estimated to provide approximately the same annual revenues as projected City and County tax
abatement revenues. The City has information through MNCAR showing several existing leases in the City with
rates greater than $5. Additional discussion on the ability to increase annual rates may be warranted, which should
reduce and/or eliminate the need for public assistance through tax abatement.
Thank you for the opportunity to be of assistance to the City of Elk River. Please contact me at 651-223-3036 or
mhuot@springsted.com with any questions or to discuss.
Projected Tax Abatement Report
City of Elk River, Minnesota
Tax Abatement Projections
SBH Properties LLC
City & County Abatement: 12 and 10 Years, Respectively
Less:
Non-RetainedTimes:TaxTaxTax
AnnualTotalTotalAbatedCapturedTaxAnnualAbatementAbatementAbatementTotal
PeriodEstimatedNet TaxNet TaxNet TaxCapacityTotalCityCountySchool DistrictTax
EndingMarket ValueCapacityCapacityCapacityRateTax46.17%50.48%39.27%Abatement
(1)(2)(3)(4)(5)(6)(7)(8)(9)(10)(11)
12/31/16 51,8005185180140.694%00000
12/31/17 51,8005185180140.694%00000
12/31/18 51,8005185180140.694%00000
12/31/19 832,00015,89051815,372140.694%21,6277,0977,759014,857
12/31/20 832,00015,89051815,372140.694%21,6277,0977,759014,857
12/31/21 832,000 15,89051815,372140.694%21,6277,0977,759014,857
12/31/22 832,000 15,89051815,372140.694%21,6277,0977,759014,857
12/31/23 832,000 15,89051815,372140.694%21,6277,0977,759014,857
12/31/24 832,000 15,89051815,372140.694%21,6277,0977,759014,857
12/31/25 832,000 15,89051815,372140.694%21,6277,0977,759014,857
12/31/26 832,000 15,89051815,372140.694%21,6277,0977,759014,857
12/31/27 832,000 15,89051815,372140.694%21,6277,0977,759014,857
12/31/28 832,000 15,89051815,372140.694%21,6277,0977,759014,857
12/31/29 832,000 15,89051815,372140.694%21,6277,097007,097
12/31/30 832,000 15,89051815,372140.694%21,6277,097007,097
12/31/31 832,000 15,89051815,372140.694%21,6270000
12/31/32 832,000 15,89051815,372140.694%21,6270000
$302,778$85,167$77,595$0$162,762
Springsted Incorporated
380 Jackson Street, Suite 300
Saint Paul, MN 55101-2887
Tel: 651-223-3000
Fax: 651-223-3002
www.springsted.com
MEMORANDUM
TO: Amanda Othoudt, Economic Development Director
FROM: Mikaela Huot, Vice President/Consultant
DATE: October 17, 2016
SUBJECT: SBH Properties, LLC: Request for Tax Abatement Assistance
The City of Elk River asked Springsted to evaluate a tax abatement request for assistance submitted by the
applicant, SBH Properties, LLC. The applicant proposes to build a new facility within the City of Elk River to allow for
growth of the business and expand existing operations. The total estimated usable square footage for the facility is
approximately 13,312. According to the applicant and supporting financial materials, the tax abatement assistance
will be used as annual cash flow to support debt service and equity investment on the approximate $1.75M project to
be financed with a combination of debt, equity and the City’s Forgivable Loan program.
The purpose of this memo is to summarize an updated alternate analysis that Springsted prepared, based on
adjusted lease rates to understand how an increase in an assumed lease rate may impact cash flow of the project
and needed amount of City abatement assistance. The analysis is following the EDA Finance Committee’s
September 29 meeting in which much discussion focused on the current proposed lease rate driving the need for
assistance. It was determined that any increases in the actual lease rate should result in a reduction of required tax
abatement assistance. Our review of the project components and financials and general rationale for assistance is
based on the initial application materials as submitted by the applicant.
The applicant plans to lease the space and use the rental income to support annual debt service payments on the
mortgage with any tax abatement assistance providing additional cash flow. Based on the applicant’s initial
information provided on the project, the annual rents estimated to be received from a $5/square foot lease rate for
13,312 of usable square feet would generate an estimated annual rental income of $66,560 to support the debt
service payments. The estimated annual debt service payments for the first mortgage ($1,049,774 with a 20 year
term and 4.25% interest rate) would be $78,007. Annual abatements from both the City and County totaling $14,856
($7,097 City share and $7,759 County share) would provide sufficient income to make annual debt service payments.
The first mortgage debt has a 20 year amortization and the requested term of abatement is 10 and 12 years,
respectively, for the County and City. Once the abatement assistance has terminated, the lease rate and/or debt
service payments would need to be adjusted in order for there to be sufficient revenues to support debt payments.
City of Elk River, Minnesota
SBH Properties, LLC Tax Abatement Project
October 17, 2016
Page 2
Due to the inequity of timing for the analysis between tax abatement revenues and debt service regarding total
number of years, we focused on the period of time in which the requested term of abatement would be in place
through 2030. We have assumed the building would commence in 2017 and the abatement in 2019. To understand
how an increase in the lease rate may impact the need for abatement assistance during this same period of time (14
years) we made assumptions as to an alternate lease rate for the project. For illustration purposes, an increase in
the rental rate from $5/square foot to a blended rate of $5.50/square foot ($4.75 for industrial and $6.25 for office)
over the same period of time as the term of the City and County abatement assistance would result in increased
revenues for the project. An increase in annual lease revenues should result in an estimated decrease in the need
for City tax abatement revenues over that same period. See table below to outline this alternate analysis:
Original Assumptions Alternate Assumptions
Lease Rate $5.00/SF $5.50/SF
Total Lease Revenues (14 Years) $931,840 $948,248
Total Abatement Revenues (City) $85,167 $70,973
Total Abatement Revenues (County) $77,595 $77,595
Total Abatement Revenues $162,762 $148,567
Number of Years City 12 10
Number of Years County 10 10
Total Estimated Revenues (14 Years) $1,094,602 $1,096,816
An increase in the annual lease rate for the office portion of the project (with slight decrease in the industrial portion)
would result in an overall increase in annual cash flow for the project. Understanding the term of the debt service is
20 years and longer than the term of abatement assistance, we quantified what the increase in lease rates would do
to the need for the abatement assistance. To maintain an equal amount of total revenues through the abatement
period (12 years) we estimated a reduced term by approximately 2 years, resulting in a 10 year term for both the City
and County.
Based on our analysis of the provided annual cash flow, additional annual revenues through an increase in rental
incomes or other funding source) beyond the tax abatement would be needed to meet both the annual payments on
the first mortgage (with assistance) and equipment loan (with or without assistance) over a 20 year period (and
beyond the term of abatement assistance). Tax abatement revenues would be necessary, absent other annual
revenue increases, to support first mortgage debt payments.
Thank you for the opportunity to be of assistance to the City of Elk River. Please contact me at 651-223-3036 or
mhuot@springsted.com with any questions or to discuss.
Projected Tax Abatement Report
City of Elk River, Minnesota
Tax Abatement Projections
SBH Properties LLC
City & County Abatement: 12 and 10 Years, Respectively
Less:
Non-RetainedTimes:TaxTaxTax
AnnualTotalTotalAbatedCapturedTaxAnnualAbatementAbatementAbatementTotal
PeriodEstimatedNet TaxNet TaxNet TaxCapacityTotalCityCountySchool DistrictTax
EndingMarket ValueCapacityCapacityCapacityRateTax46.17%50.48%39.27%Abatement
(1)(2)(3)(4)(5)(6)(7)(8)(9)(10)(11)
12/31/16 51,8005185180140.694%00000
12/31/17 51,8005185180140.694%00000
12/31/18 51,8005185180140.694%00000
12/31/19 832,00015,89051815,372140.694%21,6277,0977,759014,857
12/31/20 832,00015,89051815,372140.694%21,6277,0977,759014,857
12/31/21 832,000 15,89051815,372140.694%21,6277,0977,759014,857
12/31/22 832,000 15,89051815,372140.694%21,6277,0977,759014,857
12/31/23 832,000 15,89051815,372140.694%21,6277,0977,759014,857
12/31/24 832,000 15,89051815,372140.694%21,6277,0977,759014,857
12/31/25 832,000 15,89051815,372140.694%21,6277,0977,759014,857
12/31/26 832,000 15,89051815,372140.694%21,6277,0977,759014,857
12/31/27 832,000 15,89051815,372140.694%21,6277,0977,759014,857
12/31/28 832,000 15,89051815,372140.694%21,6277,0977,759014,857
12/31/29 832,000 15,89051815,372140.694%21,6277,097007,097
12/31/30 832,000 15,89051815,372140.694%21,6277,097007,097
12/31/31 832,000 15,89051815,372140.694%21,6270000
12/31/32 832,000 15,89051815,372140.694%21,6270000
$302,778$85,167$77,595$0$162,762
Projected Tax Abatement Report
City of Elk River, Minnesota
Tax Abatement Projections
SBH Properties LLC
City & County Abatement: Each 10 Years
Less:
Non-RetainedTimes:TaxTaxTax
AnnualTotalTotalAbatedCapturedTaxAnnualAbatementAbatementAbatementTotal
PeriodEstimatedNet TaxNet TaxNet TaxCapacityTotalCityCountySchool DistrictTax
EndingMarket ValueCapacityCapacityCapacityRateTax46.17%50.48%39.27%Abatement
(1)(2)(3)(4)(5)(6)(7)(8)(9)(10)(11)
12/31/16 51,8005185180140.694%00000
12/31/17 51,8005185180140.694%00000
12/31/18 51,8005185180140.694%00000
12/31/19 832,00015,89051815,372140.694%21,6277,0977,759014,857
12/31/20 832,00015,89051815,372140.694%21,6277,0977,759014,857
12/31/21 832,000 15,89051815,372140.694%21,6277,0977,759014,857
12/31/22 832,000 15,89051815,372140.694%21,6277,0977,759014,857
12/31/23 832,000 15,89051815,372140.694%21,6277,0977,759014,857
12/31/24 832,000 15,89051815,372140.694%21,6277,0977,759014,857
12/31/25 832,000 15,89051815,372140.694%21,6277,0977,759014,857
12/31/26 832,000 15,89051815,372140.694%21,6277,0977,759014,857
12/31/27 832,000 15,89051815,372140.694%21,6277,0977,759014,857
12/31/28 832,000 15,89051815,372140.694%21,6277,0977,759014,857
12/31/29 832,000 15,89051815,372140.694%21,6270000
12/31/30 832,000 15,89051815,372140.694%21,6270000
12/31/31 832,000 15,89051815,372140.694%21,6270000
12/31/32 832,000 15,89051815,372140.694%21,6270000
$302,778$70,973$77,595$0$148,567
Resolution 16-____
A Resolution of the City of Elk River Approving Property Tax Abatement
For Certain Real Property In The City Pursuant To Minnesota Statutes,
Sections 469.1812 to 469.1815 And Specifying the Terms Thereof
WHEREAS, the City of Elk River, Minnesota (the “City”) is authorized by Minnesota
Statutes, Sections 469.1812 to 469.1815 (the “Abatement Act”) to grant a property tax
Abatement (as defined in Section 3 of this resolution) in order to achieve one or more public
purposes identified in the Abatement Act; and
WHEREAS, the City has reviewed a proposal by Apex Embroidery Design, Inc. (the
“Developer”) to construct and equip an approximately 13,312 square foot manufacturing
facility to be owned by SBH Properties, LLC and leased to the Developer (the “Facility”) to
be located in the City on the property identified as Lot 5, Block 1, Renner Fourth Addition,
Sherburne County, Minnesota, parcel identification number 758110125 (the “Development
Property”); and
WHEREAS, the Development Property is not located in a tax increment financing district;
and
WHEREAS, the City and the Economic Development Authority of the City of Elk River (the
“EDA”) have also determined that is reasonable and necessary to provide certain financial
assistance to Developer in order to facilitate Developer’s plans for the Facility and the
Development Property, and to that end, the City will consider approving a Tax Abatement and
Business Subsidy Agreement between the City and Developer (the “Abatement Agreement”);
and
WHEREAS, among other things, the proposed Abatement Agreement will provide that the
City will assist the Developer in financing a portion of the cost of the Facility, subject to certain
terms and conditions, including the adoption of this resolution (the “Abatement Assistance”);
and the Developer will construct the Facility, or cause the Facility to be constructed, subject to
certain terms and conditions; and
WHEREAS, on the date hereof, the City conducted a duly noticed public hearing on the
Abatement at which the views of all interested persons were heard; and
WHEREAS, all capitalized terms in this resolution have the meanings provided in the
Abatement Agreement unless context clearly requires otherwise.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Elk
River, Minnesota, as follows:
1. Benefits Equal Costs. It is hereby found and determined that the benefits to
the City from the Abatement will be at least equal to the costs to the City of the Abatement for
the following reasons:
(a) The Abatement will stimulate commercial development and therefore will
increase the tax base.
(b) The Facility will generate significant City tax revenues after termination of the
Abatement, which revenues will far exceed the amount of the Abatement itself.
2. Public Purposes. It is further found and determined that the Abatement will
serve the following public purposes set forth in Section 469.1813, subdivision 1 of the
Abatement Act:
(a) The Abatement will stimulate commercial development and therefore will
increase the tax base.
(b) The Abatement will provide employment opportunities in the City.
3. Abatement Approved. The Abatement is hereby approved and adopted subject
to the following terms and conditions:
(a) “Abatement” or “Abatements” means the City’s share of annual real estate
taxes on the Development Property for a term of up to 12 years in a principal amount not to
exceed $85,167, or such lesser amount as approved by the City Council.
(b) The City will pay the Abatements in the amount, at the time, and in
accordance with all the terms and conditions set forth in the Abatement Agreement, which
are incorporated herein by reference.
(c) The Abatement is subject to modification in accordance with the Abatement
Act, but only to the extent so permitted under the terms of the Abatement Agreement.
(d) In accordance with Section 469.1815 of the Abatement Act, the City will add to
its levy in each year during the term of the Abatement the total estimated amount of current
year Abatement granted under this resolution.
(e) The City makes no warranties or representations regarding the amount or
availability of the Abatements.
(f) In accordance with Section 469.1813, subdivision 8 of the Abatement Act, in
no case shall the Abatement, together with all other abatements approved by the City under the
Abatement Act and paid in any one year exceed the greater of 10% of the City’s net tax capacity
for that year or $200,000.
4. Execution of Documents. The City Council hereby approves the Abatement
Agreement and any related documents necessary in connection therewith (collectively, the
“Documents”) and, the Mayor and City Clerk are hereby authorized and directed to execute
the Documents to which the City is a party on behalf of the City and to carry out, on behalf
of the City, the City’s obligations thereunder. In the event of absence or disability of the
officers, any of the Documents authorized by this Resolution to be executed may be
executed without further act or authorization of the Council by any duly designated acting
official, or by such other officer or officers of the City as, in the opinion of the City
Attorney, may act in their behalf. In accordance with Section 116J.994, Subd. 3(d) of the
Business Subsidy Act, the City further approves a Loan Agreement between the Economic
Development Authority of the City of Elk River (the “EDA”) and the Developer for the
provision of a forgivable loan in the amount of $200,000 from the EDA to the Developer,
and consents to the EDA entering into the Loan Agreement and related documents with the
Developer.
5. Finalizing Documents. The approval hereby given to the Documents
includes approval of such additional details therein as may be necessary and appropriate and
such modifications thereof, deletions therefrom and additions thereto as may be necessary
and appropriate and approved by legal counsel to the City and by the officers authorized
herein to execute said Documents prior to their execution; and said officers are hereby
authorized to approve said changes on behalf of the City. The execution of any instrument
by the appropriate officers of the City herein authorized shall be conclusive evidence of the
approval of such Document in accordance with the terms hereof.
6. Conflicting Provisions. In the event of a conflict between the content of this
resolution and the Documents, the terms of the Documents shall prevail.
7. Effective Date. This resolution is effective upon execution in full of the
Abatement Agreement.
th
Passed and adopted this 17 day of October, 2016.
John J. Dietz, Mayor
ATTEST:
Tina Allard, City Clerk
Vill. APPLICATION FOR TAX ABATEMENT
A. APPLICANT INFORMATION
Name of Corporation/Partnership S 5 H P R o P{ yJItS, L
Address ln4 I +zoo A, CI-ecAK Lak-o, WW 55319
Primary Contact Iaiy H�II , AP -CX hi ivic.
Addres-ss 6361 gjAv(is� Lok -v Covr.1 NW Eaw,f-eY'MN 6;3o3
Phone I 0 Z+1.4634, 163 441.4 7 Emal
Brief description of the corporation/partnership's business, including history, principal
wlitd by
W1
IQSrF
Brief description of the
Attorney Name g,M E H A G 1,47-Y $ 51z i T -A 1 L+J
Address 0 LO N tial icK FIVA, :1400 Ql, at�d(
Phone 0 Fax Email_
Accountant Name LyM'ltt LLP
Contractor Name `, AS401,; it5jl-I-[.
Address i0°o7 °�31-d AVt N , oyst_oL�.+N 553
Phone 1b 3 42 ' 7,001- Fax
Engineer Name
Phone
Architect Name
Phone
Cin' of Elk River
Tax Abatement Policy
Amended May 2006
Email
Email
Email
M
IW -to
lo -t h b
B. PROJECT INFORMATION
1. The project will b
XIndustrial: lNew Construction _ Expansion _Redevelopment / Rehab.
--Office/research facility that conforms to Business Park zoning standards
_Commercial Redevelopment/Rehabilitation
2. In ddition to the City of Elk River, applicant is requesting Tax Abatement from:
Sherburne County School District 728
3. The project will be: X Owner Occupied _Leased Space
4. Project Address II75 158th LII -SIC NW. 51k-FiV154., MC455330
Parcel Identification Number(s) 15 '611- 0 0
5. Site Plan and Construction Plans Attached: Yes —No
6. Total Amount of Tax Abatement Requested: S I 2 1 5 uver 1 y� s.\
City Portion: Annual $_ �11 O�Total $ 5,14x4 (12 a
County Portion: Annual $_ 11 5I—Total $ 15q 0 (10 it -5
ISD 728 Portion: Annual $ Total
7. Current Real Estate Taxes on Project Site: $ d 641,. D
Estimated Real Estate Taxes upon Completion: Phase 1
y Phase Il $ f
8. Construction Start Date: e (it. NO V t 1 fop I b
Construction Completion Date: PIt- I ki 9 7.0 h
If Phased Project: Year % Completed
Year % Completed
C. PUBLIC PURPOSE
It is the policy of the City of Elk River that the use of Tax Abatement should result
in a benefit to the public. Please indicate how this project will serve a public
purpose. i Q (hCW iv 1
ob Creation/Retention Number of existing jobs % I k tai VGF
Number of jobs created by project
Average hourly wage of jobs create0
ANew industrial development which will result in additional private
investment in the area.
Enhancement and/or diversification of the City of Elk River's economic base.
The project contributes to the fulfillment of the City's Economic Development
Strategic Plan.
_Removal of blight. N/A
Rehabilitation of a high profile or priority site.
--X-Significantly increase the City's tax base.
City of Elk River
Tax Abatement Policy
Amended May 2006
9-
D. SOURCES & USES
SOURCES
Bank Loan
gahKat4e��-
Owner Cash Equity
Fed Grant/Loan
NAM; AMOUNT
6noy- of :IKnVt� kcal ,5}
F3 VsfL � vhevti $ �,QOD
$�5t94
State Grant/Loan
FI�ee�r)an Loa
EDA l✓t '
$ 200 000
Tax Abatement
ID Bonds
$
TOTAL
he 6 nK01 :F. hq5 aW'"J fh-" FttndS
$ 150
4 0 b t uses -ts t jV 1+Y
USES
AMOUNT QQ
$ I I U
Land Acquisition
to
$ 164, 0 0 o
Site Development
$
Construction
Machinery & Equipment
$--J��
Architectural & Engineering Fees ie L-tQ01
S 10 f 0 0 D
I MoVIK XpC�i
CIoSIVi�co5 5
$ 35,000
Contingencies
TOTAL
$—Tlb5—
City of Elk River
Tax Abatement Policy
Amended May 20U6 - 10-
E. ADDITIONAL DOCUMENTATION AND CHECKLIST
Applicants will also be required to provide the following documentation:
x A) Written business plan, including a description of the business,
ownership/management, date established, products and services, and
future plans
_ B) Financial Statements for Past Two Years
Profit & Loss Statement
Balance Sheet
�C) Current Financial Statements
Profit & Loss Statement to Date
Balance Sheet to Date
)D) Two Year Financial Projections
__.%_E) Personal Financial Statements of all Major Shareholders
Profit & Loss
Current Tax Return
___�_F) Letter of Commitment from Applicant Pledging to Complete
During the Proposed Project Duration
__J_G) Letter of Commitment from the Other Sources of Financing,
Stating Terms and Conditions of their Participation in the Project
_J— H) Non-refundable application deposit of $5,000
I) Construction Plans and Itemized Project Construction Statement
�) Attach the following documentation as Exhibits
f-- Exhibit A — Corporation/Partnership Description
Y Exhibit B — Description of Project
Exhibit C — List of Shareholders/Partners
Exhibit D — Bat -For Analysis
t Exhibit E — List of Prospective Lessees
`L Exhibit F — Legal Description and PID Number(s)
Note: All Major shareholders will be required to sign personal guarantees and a minimum
assessment agreement if up front financing of the project is required.
The undersigned certifies that all information provided in this application is true and correct
to the best of the undersigned's knowledge. The undersigned authorizes the City of Elk
River to check credit references, verify financial and other information, and share this
information with other political subdivisions as needed. The undersigned also agrees to
provide any additional information as may be requested by the City after the filing of this
application. n
Applicant Name
City of Elk River
Tax Abatement Policy
,Amended May 2006
�IL41I(P
11-
X. TAX ABATEMENT APPLICATION REVIEW WORKSHEET
TO BE COMPLETED BY CITY STAFF
1. The project meets the criteria set forth in Section V of the Tax Abatement policy.
_✓a) Meets at least one of the objectives in Section III.
Demonstrates need for Tax Abatement with the but for analysis.
Consistent with all city plans and ordinances.
tr d) Serves at least two public purposes as defined in Section V(g).
N
2. Ratio of Pri ate to All Public
mInvestment in Project:
$ I �� Private Investment
Public Investment RG7�)rt7cx> > i((a�
11 Ratio Private: Public Financing
Less than
3. Job Creation in the City of Elk River:
Number of new jobs as a result of the project.
Number of existing/retained jobs
,)-S Total
4. Ratio of Public Investment to Job Creation:
$ 2
YVA t Public Investment
c Number of new jobs created/retained
$—JYS /14f Public Investment per new job
5. Wage Level of new jobs created/retained
Minimum hourly wage
of jobs created/retained:' / %
6. Project size:
The project will result in the construction
of square feet 2
Less than
Points:
5:1 — 5
41 4
3:1 3
2:1 2
2:1 1
r
Points: —>
25+ 5
20+ 4
15+ 3
10+ 2
10 1
Points: 9
$8,000 or less 5
$10,000 or less 4
$12,000 or less 3
Jj51000 or less 2
Over $15,000 1
Points: 3
Over $21/ hour
$18-21 / hour
$14-17 / hour
$10-13 / hour
Under $10 / hour
Points:y
40,000+ 5
30,000+ 4
20,000+ 3
(-1f000+ 2
10,000 or less 1
Page 13 of 14 POMFAEO AI
I�pruRE
7. Market Value/Tax Base Generation: Points:
The project will result in a per square foot
Industrial
Commercial
estimated market value (land and building)
$80/sf+
$110/sf+ 5
of ?3_Av(X>C_
$70/sf+
$100/sf+ 4
$60/44
$90/sf+ 3
x$50/sf+
$80/sf+ 2
$40/sf+
$70/sf+ 1
8. Type of. Project:
Points:
100% Owner Occupied
5
Mix Owner Occupied & Investment
4
Investment Property
3
9. Use:
Points:
Industrial or Business Park Project
5
Commercial Rehabilitation/Redevelopment
4
10. Likelihood that the project will result in Points:
unsubsidized, spin-off development. High
-Moderate
Low
Sub - Total Points: of a possible 45 points.
11. Bonus Points Bonus Points: 3
✓The project will be 100% Pay-aryougo Tax Abatement 3 points
The project contributes to the goals of Energy City. 2 points
• Product promotes sensible use of energy, OR
• Project utilizes significant energy efficient design &/or
materials in construction.
Total Points:Z
Overall project desirability: High 45-38 points
Moderate 37-29 points
Low 28-20 points
Not Eligible 19-0 points
Page 14 of 14 row [ w [ o e r
NATURE
OkIPIE
X
SOLUTIONS FOR DECORATING PROFESSIONALS
August 24, 2016
Elk River Economic Development Authority
Amanda Othoudt, Economic Development Director
13065 Orono Parkway
Elk River, MN 55330
RE: Letter of Commitment
Dear Ms. Othoudt,
This letter is my official pledge of commitment to begin our project located at 9775 158th Circle NW, Elk River,
MN no later than November 1, 2016.
We are planning on moving into our new facility by the Spring of 2017.
If you have any questions or need additional information, please do not hesitate to contact Annie Deckert,
Decklan Group, at 763-568-9498.
I appreciate your time.
Respectfully,
Brian Hill
President, Apex Embroidery & Design
6361 Sunfish Lake ct nw, #300, Ramsey, MN 55303 877-935-7766 763-241-4634 fax 763-441-8417
orders@`apexemb.net www.apexemb.net www.starbirdinc.com www.hotprintz.net
bw—
Bank
September 6, 2016
City of Elk River
13065 Orono Pkwy
Elk River, MN 55330
Re: Apex Embroidery Design, Inc. Forgivable Loan application/Tax Abatement application
To whom it may concern:
The Bank of Elk River has had a banking relationship with Apex Embroidery Design, Inc. for the past 14
years. Based on The Bank of Elk River's analysis of past financial performance and the projected
financial outlay provided to The Bank of Elk River Apex Embroidery Design, Inc. demonstrates the ability
to service repayment requirements necessary to support the building project proposed in their
applications with the City of Elk River.
The debt structure being proposed to The Bank of Elk River will allow for a loan on the land, building and
equipment of up to $1,450,000. The final loan amount will be calculated based off the lesser of 80% of
appraised value or cost and be amortized over a period of 20 years.
While Apex Embroidery Design, Inc. demonstrates the ability to service the debt payments, the
Forgivable Loan program/Tax Abatement is important to make the project a reality. The letter is only an
assessment of Apex Embroidery Design, Inc. to service debt outlined in the application and not a
commitment to lend from the Bank of Elk River. The final approval of the Forgivable Loan application
and Tax Abatement application will be necessary for final approval to make a commitment.
51ncgain�+-----��
Neil
Vice President
The Bank of Elk River
630 Main Street, Elk River, MN 55330 p) 763-441-1000 ' f) 763-441-0847 www.thebankofelkriver.com PAa be,mc
Apex Embroidery Design, Inc. — Business Plan/Summary
(Apex) was founded in January of 1998 as a single person business providing embroidery
programing services to apparel decorators mainly in the Midwest. In 2001, Apex added one
employee, a laser cutting system, and began offering laser material cutting services (applique
cutting) as an expansion to the programming services that we offered to our embroidery
customers. Apex steadily grew its applique cutting and programming business until 2008 when
the embroidery industry was seriously jolted by the economic downturn of the great recession.
In 2009, as a response to market changes, Apex expanded our product selection and
began offering heat transfer materials wholesale as well as custom heat transfers to better
diversify our product offerings and smooth seasonal sales peaks and valleys.
In 2011, Apex acquired Starbird, Inc., an embroidery programing (digitizing) provider
that was in Plymouth, MN to both increase our embroidery programing capacity and also to
free up time to further develop the business. Since 2011, Apex's heat transfer business has
grown steadily and we added to our product mix custom rhinestone transfers, spangle
transfers, and most recently screen printed transfers. Apex now employee 18 full time
employees, and normally 2 or 3 part time high school interns during the school year of which
quite a few have stayed with the company through their college years.
Apex is known in the industry as an innovator and top quality provider of the products
we produce and have done work for companies such as Ralph Lauren, North Face, Tommy
Hilfiger, Harley Davidson, Warner Brothers, Abercrombie and Fitch, along with many more
national brands.
Approx. 50% of our business is in the Midwest with the balance spread throughout the
country but is predominantly on the east and west coasts. Our clients are consist of primarily
apparel decorators including but not limited to embroidery companies, screen printing
companies, advertising specialty distributor, fulfilment companies as well as so smaller
manufactures.
Investment Impact statement
In our effort to continue our company growth, Apex is proposing the addition of the
following equipment; an INO automatic print, dry, and stacking production line for the purpose
of increasing our print production capacity as well as the efficiency of our printing operations.
This line will also provide us the additional needed capacity for the introduction a new product
that we have developed which is more efficient process of manufacturing multi -color heat
transfers. The Adelco dryer is for increasing throughput of our existing printing presses, the
Uni-Kote screen coater is for improving product consistency by mechanizing our screen coating
process. This is not a labor saving device it is strictly for quality control. The new wash out
booth is in increase our capacity for processing and reclaiming screens. The maxipress shuttle
heat press is to increase our production capacity for custom printed fabrics for our custom
applique part of our business.
Apex's present facility is currently a leased space in Ramsey, MN consisting of 4,500 sq.
ft. of production space, 3,000 sq. ft. of office and 1,500 sq. ft. of storage. There is no room to
expand within the building at our current location. We have explored existing buildings but
have found that what is available has been either too small, too large or by the time we
remodel to accommodate our requirements are not a cost effective alternative. This is why
we are pursuing the option of a new construction project.
We have considered many sites throughout the NW Metro, and have decided to locate
in Elk River due to the availability of a variety of incentives and funding options that are crucial
to support our continued growth, sustainability and success.
Brian Hill
1998 -Present
Apex Embroidery Design, Inc. / Ramsey, MN
Founder
- Grown Apex from a 1 person embroidery programming company to a multi product full service
supplier to apparel decorators with 18 employees and projected sales 2015 of $2.35M
-Primary day to day roll is marketing, business development and CFO.
1996-1998
Dakota Sportswear & Logo Magic / Sales and Programing Hopkins, MN / Embroidery Production Devils Lake, ND
Dakota Sportswear / Logo Magic
-Partner 10%
Large client projects specialist.
- met with large clients regarding project
Embroidery QA
-address and resolved embroider production issues related to programming
Logo Magic
General Manager
- Managed all aspects of Embroidery programing business including staff of 4,
marketing, trade shows, client relations.
1993-1995
Medallion Emblem / Duluth, MN
Director of Marketing
- Coordinated all aspects of marketing including national and regional trade shows,
direct mail campaigns, print advertising and product literature.
Account rep.
- Coordinated production of customer orders through our overseas contract manufactures.
1992-1993
County Market / Cloquet, MN
Assistant Store Manager
-Coordinated operational aspects of a grocery store, including stocking shelves
setting ad displays, product ordering and managing a staff of 4 stock people
Education
B.S. Business from St. John's University
minoring in finance and marketing
Business Record Details
Minnesota Business Name
Apex Embroidery Design, Inc.
Business Type
Business Corporation (Domestic)
File Number
10A-72
Filing Date
02/06/1998
Renewal Due Date
12/31/2016
Number of Shares
10,000
Chief Executive Officer
Brian T Hill
6361 Sunfish Lake Court NW #30
Ramsey, MN 55303
USA
Filing History
Filing History
MN Statute
302A
Home Jurisdiction
Minnesota
Status
Active / In Good Standing
Registered Office Address
6361 Sunfish Lake Ct NW
Ramsey, MN 55303
USA
Registered Agent(s)
BrianTHill
Principal Executive Office Address
6361 Sunfish Lake Court NW #30
Ramsey, MN 55303
USA
Select the item(s) you would like to order: order Selected Copies
Filing Date Filing
02/06/1998 Original Filing- Business Corporation (Domestic)
02/06/1998 Business Corporation (Domestic) Business Name
12/01/1999 Registered Office and/or Agent - Business Corporation
(Domestic)
Effective Date
L 07/11/2003 Registered Office and/or Agent -Business Corporation
(Domestic)
L 08/29/2007 Registered Office and/or Agent - Business Corporation
(Domestic)
02016 Office of the Minnesota Secretary of State -terms and conditions
APEX - METAL Building Preliminary Construction Statement Sharp Associates
1 st floor- 13,372 sf for Commercial 500 Bunker Lake Blvd NW
Mezz- 2,944 sf Buildings Anoka, MN 55303
TOTAL 16,316 sf Phone 763-425-2002
LAND
BLUE PRINTS
SURVEY
SOIL TESTS
PERMITS
BONDS
FINANCING
12:39 PM
8/30/2016
DESCRIPTION
BY SUBCONTRACTOR
PROJECT COSTS
VALUE
TAXES
SPECIAL ASSESSMENTS
TITLE WORK
FILING FEES
ATTORNEY'S FEES
DRAFTING
By Subcontractor
$
1,000.00
ARCHITECT
Allowance
$
12,000.00
STRUCTURAL
Allowance
$
3,000.00
LANDSCAPE
MECHANICAL
ELECTRICAL
PRINTING
By Subcontractor
$
500.00
ORIGINAL
ENGINEERING
Allowance
$
6,000.00
STAKING
AS BUILT
ORIGINAL
ON SITE
Allowance
$
2,500.00
APPLICATIONS
Allowance
$
1,400.00
BUILDING
Allowance
$
11,133.00
SURCHARGE
See Building
SAC & WAC
None
HOOK UP CHARGE
METERS
WATER SHED DIST.
Allowance
$
800.00
COUNTYACCESS
MPCA
Allowance
$
300.00
SITE WORK
UTILITY
COMMIT FEE & COSTS
BROKER FEE
ATTORNEY'S FEE
INSPECTION FEE
FILING FEE
INTERIM FEE
CONST INTEREST
ADVERTISING
Prepared by Monte Helget
1 of 5
No Land: $1,218,000.00
$74.65 / sf
APEX - METAL Building
1 st floor- 13,372 sf
Mea- 2,944 sf
TOTAL 16,316 sf
INSURANCE
EXCAVATING
CEMENT WORK
STRUCTURAL
ROOFING
PLATEICANTIBUCKS
SEWER 8 WATER
MECHANICAL
12:39 PM
8/30/2016
Preliminary Construction Statement
for Commercial
Buildings
Sharp Associates
500 Bunker Lake Blvd NW
Anoka, MN 55303
Phone 763-425-2002
DESCRIPTION
BY SUBCONTRACTOR
PROJECT COSTS
CONSTRUCTION
Allowance
$
2,500.00
PERMANENT
SITE PREPARATION
DEMOLITION
FILL
COMPACTION
EXCAVATION
Bu Subcontractor
$
30,000.00
BACK FILL
FINAL GRADING
FOOTINGS
By Subcontractor
$
96,000.00
MASONRYBLOCK
MASONRY BRICK
SLABS
SITE CONCRETE
CURB & GUTTER
BOARD OPENING
POLISH FLOOR
JOIST & DECK
See Supply
ERECTION
By Subcontractor
$
120,000.00
MISC. METALS
PRECAST
REINFORCING
SUPPLY
By Subcontractor
$
156,000.00
INSULATION
See Erection
MEMBRANE
METAL
See Supply
MATERIAL
LABOR
SANITARY
WATER -For Fire Protection
Allowance
$
10,000.00
STORM
Allowance
$
2,500.00
SEPTIC TANK
Allowance
$
8,000.00
WELL
Allowance
$
9,000.00
PLUMBING
By Subcontractor
$
25,990.00
HVAC Ventilation
By Subcontractor
$
128,132.00
Prepared by Monte Helget
2of5
No Land: $1,218,000.00
$74.65 / sf
APEX - METAL Building Preliminary Construction Statement Sharp Associates
1st floor- 13,372 sf for Commercial 500 Bunker Lake Blvd NW
Mezz- 2,944 sf Buildings Anoka, MN 55303
TOTAL 16,316 sf Phone 763-425-2002
ELECTRICAL
FIRE PROTECTION
OVERHEAD DOORS
DOCK EQUIPMENT
DOORS & WINDOWS
EXTERIOR FINISH
INTERIOR FINISH
12:39 PM
8/30/2016
DESCRIPTION
BY SUBCONTRACTOR
PROJECT COSTS
FLAMM WASTE TRAP
UTILITY CHARGES
Trench Drain
WIRING
By Subcontractor
$
110,370.00
FIXTURE ALLOWANCE
PHONE, COMP WIRING
UTILITY SERVICE
Allowance
—$--10,000
00
UTILITY CHARGES
Allowance
$
1,500.00
PHONE SLEEVES
By Subcontractor
$
2,380.00
SPRINKLING SYSTEM
By Subcontractor
$
32,960.00
MONITORS
By Subcontractor
$
4,200.00
EXTINGUISHER
MECH, ROOM
DOORS
By Subcontractor
$
7,775.00
OPERATORS
See Doors
BUMPERS
See Doors
LEVELERS
See Doors
SEALS
See Doors
STEEL DOORS
By Subcontractor
$
10,805.00
WOOD DOORS
See Steel Drs
ALUMINUM DOORS
See Glass
HARDWARE
See Steel Drs
WEATHER STRIPPING
See Steel Drs
WINDOWS
See Glass
GLASS & GLAZING
By Subcontractor
-F-31,200
00
CAULKING
By Subcontractor
$
770.00
PAINTING
ADDRESS PLATES
By Subcontractor
-$-400
00
FRAMING MATERIAL
By Subcontractor
$58,520.00
FRAMING LABOR
See Material
SHEETROCK MATERIAL
See Material
SHEETROCK LABOR
See Material
CARPENTRY FINISHING
By Subcontractor
$
7,400.00
WAREHOUSE PAINT
CEILING & JOIST PAINT
PAINT/STAIN/VARNISH
By Subcontractor
-F-23,000
00
CARPET
By Subcontractor
$
18,645.00
Prepared by Monte Helget
3of5
No Land: $1,218,000.00
$74.65 / sf
APEX - METAL Building Preliminary Construction Statement Sharp Associates
1st floor- 13,372 sf for Commercial 500 Bunker Lake Blvd NW
Mezz- 2,944 sf Buildings Anoka, MN 55303
TOTAL 16,316 sf Phone 763-425-2002
HARDWARE
IRON
SIGNS
SITE WORK
CLEAN-UP
12:39 PM
8/30/2016
DESCRIPTION
BY SUBCONTRACTOR
PROJECT COSTS
V A TILE
See Carpet
CERAMIC TILE
See Carpet
SUSPENDED CEILINGS
By Subcontractor
$
2,210.00
CABINETS
By Subcontractor
$
4,470.00
COUNTER TOPS
See Cabinets
WINDOW SILLS
By Subcontractor
$
1,960.00
MILLWORK
FRP
See Carpentry
HANDICAP SIGNS
See Holders
PAPER HOLDERS
Allowance
$
800.00
MIRRORS
See Glass
HANDICAP BARS
See Plumbing
BATH PARTITIONS
FLOOR MATS
By Subcontractor
$
509.00
STAIRWAYS
By Subcontractor
T-14,550
00
RAILINGS
See Stairs
ROOF ACCESS
BOLLARDS
See Stairs
Setting Plates on Wall
MATERIAL
By Owner
LABOR
By Owner
ASPHALT
Allowance
$
65,400.00
BASE
See Asphalt
BLACK DIRT
See Excavation
SOD
Allowance
-F-35,31
0 00
PLANTING
See Sod
IRRIGATION
See Sod
ROCK
See Sod
Curb & Gutter
Allowance
$
20,849.00
HAULING
By Subcontactor
$
3,000.00
LABOR / CONST.
By Subcontactor
$
4,500.00
FINAL
By Subcontactor
$
4,500.00
TEMPORARY FACILITIES
By Subcontactor
$
1,500.00
SUPERVISION & MGMT
$
15,000.00
MISC. CONTINGENCIES
$
22,424.00
Prepared by Monte Helget
4of5
No Land: $1,218,000.00
$74.65 / sf
APEX - METAL Building Preliminary Construction Statement Sharp Associates
1st floor- 13,372 sf for Commercial 500 Bunker Lake Blvd NW
Mezz- 2,944 sf Buildings Anoka, MN 55303
TOTAL 16,316 sf Phone 763-425-2002
DUE CONTRACTOR
SUBTOTAL
TOTAL
12:39 PM
8/30/2016
Prepared by Monte Helget
5of5
No Land: $1,218,000.00
$74.65 / sf
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TAX ABATEMENT AND BUSINESS SUBSIDY AGREEMENT
BY AND BETWEEN
CITY OF ELK RIVER, MINNESOTA
AND
APEX EMBROIDERY DESIGN, INC.
487587v2 JSB EL185-45
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS ............................................................................................. 1
Section 1.1 Definitions ........................................................................................ 1
ARTICLE II REPRESENTATIONS AND WARRANTIES ............................................. 3
Section 2.1 Representations and Warranties of the City ....................................... 3
Section 2.2 Representations and Warranties of the Developer ............................. 3
ARTICLE III UNDERTAKINGS BY DEVELOPER AND CITY ...................................... 5
Section 3.1 Construction of Project and Reimbursement of Tax Abatement
Property Cost .................................................................................... 5
Section 3.2 Limitations on Undertaking of the City ............................................. 5
Section 3.3 Commencement and Completion of Construction ............................. 5
Section 3.4 Damage and Destruction ................................................................... 5
Section 3.5 Change in Use of Project .................................................................. 5
Section 3.6 Prohibition Against Transfer of Project and Assignment of
Agreement ........................................................................................ 5
Section 3.7 Real Property Taxes .......................................................................... 6
Section 3.8 Business Subsidies Act ..................................................................... 6
Section 3.9 Duration of Abatement Program ....................................................... 8
ARTICLE IV EVENTS OF DEFAULT.............................................................................. 9
Section 4.1 Events of Default Defined ................................................................. 9
Section 4.2 Remedies on Default ......................................................................... 9
Section 4.3 No Remedy Exclusive ...................................................................... 9
Section 4.4 No Implied Waiver ........................................................................... 9
Section 4.5 Agreement to Pay Attorney’s Fees and Expenses ............................ 10
Section 4.6 Release and Indemnification Covenants .......................................... 10
ARTICLE V ADDITIONAL PROVISIONS ................................................................... 11
Section 5.1 Conflicts of Interest ........................................................................ 11
Section 5.2 Titles of Articles and Sections......................................................... 11
Section 5.3 Notices and Demands ..................................................................... 11
Section 5.4 Counterparts ................................................................................... 11
Section 5.5 Law Governing ............................................................................... 11
Section 5.6 Duration ......................................................................................... 12
Section 5.7 Provisions Surviving Rescission or Expiration ................................ 12
-i-
487587v2 JSB EL185-45
TAX ABATEMENT AND BUSINESS SUBSIDY AGREEMENT
THIS AGREEMENT, made as of the ___day of October, 2016, by and among the City
of Elk River, Minnesota (the “City”), a municipal corporation and political subdivision of the
State of Minnesota, and Apex Embroidery Design, Inc., a Minnesota corporation (the
“Developer”).
WlTNESSETH:
WHEREAS, pursuant to Minnesota Statutes, Sections 469.1812 through 469.1815, the
City has established a Tax Abatement Program; and
WHEREAS, the City believes that the development and construction of a certain Project
(as defined herein), and fulfillment of this Agreement are vital and are in the best interests of the
City, will result in preservation and enhancement of the tax base, provide employment
opportunities and are in accordance with the public purpose and provisions of the applicable state
and local laws and requirements under which the Project has been undertaken and is being
assisted; and
WHEREAS, the requirements of the Business Subsidy Law, Minnesota Statutes, Sections
116J.993 through 116J.995, apply to this Agreement; and
WHEREAS, the City has adopted criteria for awarding business subsidies that comply
with the Business Subsidy Law, after public hearings for which notice was published; and
WHEREAS, the Council has approved this Agreement as a subsidy agreement under the
Business Subsidy Law.
NOW, THEREFORE, in consideration of the premises and the mutual obligations of the
parties hereto, each of them does hereby covenant and agree with the other as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. All capitalized terms used and not otherwise defined herein
shall have the following meanings unless a different meaning clearly appears from the context:
Agreement means this Tax Abatement and Business Subsidy Agreement, as the same
may be from time to time modified, amended or supplemented;
Benefit Date means the date on which a Certificate of Occupancy for the Project is issued
by the City;
Business Day means any day except a Saturday, Sunday or a legal holiday or a day on
which banking institutions in the City are authorized by law or executive order to close;
City means the City of Elk River, Minnesota;
1
487587v2 JSB EL185-45
County means Sherburne County, Minnesota;
Developer means Apex Embroidery Design, Inc., a Minnesota corporation, its successors
and assigns;
Event of Default means any of the events described in Section 4.1;
Project means the construction and equipping of an approximately 13,312 square foot
manufacturing facility to be owned by SBH Properties and leased to the Developer for use in its
apparel decorating business located in the City;
SBH Properties means SBH Properties, LLC, a Minnesota limited liability company, its
successors or assigns;
State means the State of Minnesota;
Tax Abatement Act means Minnesota Statutes, Sections 469.1812 through 469.1815;
Tax Abatement Program means the actions by the City pursuant to Minnesota Statutes,
Section 469.1812 through 469.1815, as amended, and undertaken in support of the Project;
Tax Abatement Property means all and any portion of the real property currently
identified as Parcel Identification Number 758110125, Lot 5, Block 1, Renner Fourth Addition,
Sherburne County, Minnesota, located in the City;
Tax Abatements means the City’s share of annual real estate taxes on the Tax Abatement
Property, abated in accordance with the Tax Abatement Program.
2
487587v2 JSB EL185-45
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1 Representations and Warranties of the City. The City makes the following
representations and warranties:
(1) The City is a municipal corporation and a political subdivision of the State and
has the power to enter into this Agreement and carry out its obligations hereunder.
(2) The Tax Abatement Program was created, adopted and approved in accordance
with the terms of the Tax Abatement Act.
(3) To finance the costs of the Project to be undertaken by or on behalf of the
Developer, the City proposes, subject to the further provisions of this Agreement, to convey the
Tax Abatement Property to the Developer and apply the Tax Abatements to reimburse the
Developer for a portion of the costs of the Tax Abatement Property as further provided in this
Agreement.
(4) The City has made the findings required by the Tax Abatement Act for the Tax
Abatement Program.
Section 2.2 Representations and Warranties of the Developer. The Developer makes the
following representations and warranties:
(1) The Developer has the power to enter into this Agreement and to perform its
obligations hereunder and is not in violation of its articles, bylaws or any local, state or federal
laws.
(2) The Developer is a corporation validly existing under the laws of this State and
has full power and to enter into this Agreement and carry out the covenants contained herein.
(3) The Developer will construct the Project or cause the Project to be constructed in
accordance with the terms of this Agreement and all local, state and federal laws and regulations
(including, but not limited to, environmental, zoning, energy conservation, building code and
public health laws and regulations).
(4) The Developer will obtain or cause to be obtained, in a timely manner, all
required permits, licenses and approvals, and will meet, in a timely manner, all requirements of
all applicable local, state, and federal laws and regulations which must be obtained or met before
the Project may be lawfully constructed
(5) The construction of the Project would not be undertaken by or on behalf of the
Developer, and in the opinion of the Developer would not be economically feasible within the
reasonably foreseeable future, without the assistance and benefit to the Developer provided for in
this Agreement.
3
487587v2 JSB EL185-45
(6) Neither the execution and delivery of this Agreement, the consummation of the
transactions contemplated hereby, nor the fulfillment of or compliance with the terms and
conditions of this Agreement is prevented, limited by or conflicts with or results in a breach of,
the terms, conditions or provisions of any contractual restriction, evidence of indebtedness,
agreement or instrument of whatever nature to which the Developer is now a party or by which it
is bound, or constitutes a default under any of the foregoing.
(7) The Developer will cooperate fully with the City with respect to any litigation
commenced with respect to the Project but only to the extent that the City and the Developer are
not adverse parties to the litigation.
(8) The Developer will cooperate fully with the City in resolution of any traffic,
parking, trash removal or public safety problems which may arise in connection with the
construction and operation of the Project.
4
487587v2 JSB EL185-45
ARTICLE III
UNDERTAKINGS BY DEVELOPER AND CITY
Section 3.1 Construction of Project and Reimbursement of Tax Abatement Property
Cost.
(1) The costs of the Tax Abatement Property and the construction of the Project shall
be paid by the Developer or SBH Properties and none of such costs shall be paid by the City
except as reimbursed as specifically provided in this Agreement. The Developer will construct
the Project or cause the Project to be constructed in accordance with the approved construction
plans and at all times prior to the termination of this Agreement will operate and maintain,
preserve and keep the Project or cause the Project to be maintained, preserved and kept with the
appurtenances and every part and parcel thereof, in good repair and condition.
(2) Upon submission to the City of paid invoices for site development costs of the
Tax Abatement Property in an amount not less than the Reimbursement Amount, the City shall
reimburse the Developer for site development costs of the Tax Abatement Property actually
incurred in an amount not to exceed $\[70,970\] (the “Reimbursement Amount”) pursuant to the
Abatement Program as provided in Section 3.9.
Section 3.2 Limitations on Undertaking of the City. Notwithstanding the provisions of
Section 3.1, the City shall have no obligation to reimburse the Developer for the site
development costs of the Tax Abatement Property, if the City, at the time or times such payment
is to be made, is entitled under Section 4.2 to exercise any of the remedies set forth therein as a
result of an Event of Default which has not been cured.
Section 3.3 Commencement and Completion of Construction. The Developer shall
complete the Project or cause the Project to be completed by ___________, 2016. All work with
respect to the Project to be constructed or provided by or on behalf of the Developer shall be in
conformity with the construction plans as submitted by the Developer and approved by the City.
Nothing in this Agreement shall be deemed to impair or limit any of the City’s rights or
responsibilities under its zoning laws or construction permit processes.
Section 3.4 Damage and Destruction. In the event of damage or destruction of the
Project the Developer shall repair or rebuild the Project or cause the Project to be repaired or
rebuild.
Section 3.5 Change in Use of Project. The City’s obligations pursuant to this Agreement
shall be subject to the continued operation of the Project by the Developer.
Section 3.6 Prohibition Against Transfer of Project and Assignment of Agreement. The
Developer represents and agrees that prior to the termination date of this Agreement the
Developer shall not transfer the Project or any part thereof or any interest therein, except
between the Developer and SBH Properties, without the prior written approval of the City. The
City shall be entitled to require as conditions to any such approval that:
5
487587v2 JSB EL185-45
(1) Any proposed transferee shall have the qualifications and financial responsibility,
in the reasonable judgment of the City, necessary and adequate to fulfill the obligations
undertaken in this Agreement by the Developer.
(2) Any proposed transferee, by instrument in writing satisfactory to the City shall,
for itself and its successors and assigns, and expressly for the benefit of the City, have expressly
assumed all of the obligations of the Developer under this Agreement and agreed to be subject to
all the conditions and restrictions to which the Developer is subject.
(3) There shall be submitted to the City for review and prior written approval all
instruments and other legal documents involved in effecting the transfer of any interest in this
Agreement or the Project.
Section 3.7 Real Property Taxes. The Developer shall, so long as this Agreement
remains in effect, pay or cause to be paid all real property taxes with respect to all parts of the
Tax Abatement Property acquired, owned or leased by it or acquired and owned by SBH
Properties which are payable pursuant to any statutory or contractual duty that shall accrue
subsequent to the date of its acquisition of title to the Tax Abatement Property (or part thereof)
and until title to the property is vested in another person. The Developer agrees that for tax
assessments so long as this Agreement remains in effect:
(a) It will not seek administrative review or judicial review of the
applicability of any tax statute relating to the ad valorem property taxation of real
property contained on the Tax Abatement Property determined by any tax official to be
applicable to the Project or the Developer or raise the inapplicability of any such tax
statute as a defense in any proceedings with respect to the Tax Abatement Property,
including delinquent tax proceedings; provided, however, “tax statute” does not include
any local ordinance or resolution levying a tax;
(b) It will not seek administrative review or judicial review of the
constitutionality of any tax statute relating to the taxation of real property contained on
the Tax Abatement Property determined by any tax official to be applicable to the Project
or the Developer or raise the unconstitutionality of any such tax statute as a defense in
any proceedings, including delinquent tax proceedings with respect to the Tax Abatement
Property; provided, however, “tax statute” does not include any local ordinance or
resolution levying a tax;
(c) It will not seek any tax deferral or abatement, either presently or
prospectively authorized under Minnesota Statutes, Section 469.181, or any other State or
federal law, of the ad valorem property taxation of the Tax Abatement Property so long
as this Agreement remains in effect.
Section 3.8 Business Subsidies Act.
(1) In order to satisfy the provisions of Minnesota Statutes, Sections 116J.993 to
116J.995 (the “Business Subsidies Act”), the Developer acknowledges and agrees that the
amount of the “Business Subsidy” granted to the Developer under this Agreement is the value of
a portion of the Tax Abatement Property, which is approximately $\[70,970\], and that the
6
487587v2 JSB EL185-45
Business Subsidy is needed because the Project is not sufficiently feasible for the Developer to
undertake without the Business Subsidy. The public purpose of the Business Subsidy is to
increase the tax base and provide employment opportunities in the City. The Developer agrees
that it will meet the following goals (the “Goals”): it will cause the Developer to relocate its
existing 18 jobs in Minnesota to the City and create at least 7 full time equivalent jobs in
connection with the development of the Development Project at an average hourly wage of at
least $15.00 per hour or 150% of the state or federal minimum wage, whichever is greater,
excluding benefits, within two years from the Benefit Date, which is the date the Developer or
SBH Properties receives a certificate of occupancy for the Project.
(2) If none of the Goals are met, the Developer agrees to repay all of the Business
Subsidy to the City, plus interest (“Interest”) set at the implicit price deflator defined in
Minnesota Statutes, Section 275.70, Subdivision 2, accruing from and after the Benefit Date,
compounded semiannually. If the Goals are met in part, the Developer will repay a portion of
the Business Subsidy (plus Interest) determined by multiplying the Business Subsidy by a
fraction, the numerator of which is the number of jobs in the Goals which were not relocated or
created at the wage level set forth above and the denominator of which is 25 (i.e. number of jobs
set forth in the Goals).
(3) The Developer agrees to (i) report its progress on achieving the Goals to the City
until the later of the date the Goals are met or two years from the Benefit Date, or, if the Goals
are not met, until the date the Business Subsidy is repaid, (ii) include in the report the
information required in Section 116J.994, Subdivision 7 of the Business Subsidies Act on forms
developed by the Minnesota Department of Employment and Economic Development, and (iii)
send completed reports to the City. The Developer agrees to file these reports no later than
March 1 of each year commencing March 1, 2017, and within 30 days after the deadline for
meeting the Goals. The City agrees that if it does not receive the reports, it will mail the
Developer a warning within one week of the required filing date. If within 14 days of the post
marked date of the warning the reports are not made, the Developer agrees to pay to the City a
penalty of $100 for each subsequent day until the report is filed up to a maximum of $1,000.
(4) The Developer agrees to cause the Developer to continue operations of the Project
for at least five (5) years after the Benefit Date.
(5) Other than a $200,000 forgivable loan from the Economic Development
Authority of the City of Elk River, the Tax Abatements and comparable tax abatements from the
County, there are no other state or local government agencies providing financial assistance for
the Project other than the City and the County.
(6) There is no parent corporation of SBH Properties or the Developer.
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487587v2 JSB EL185-45
Section 3.9 Duration of Abatement Program. The Tax Abatement Program shall exist
for a period of up to \[10\] years beginning with real estate taxes payable in 2019 through \[2028.\]
On or before February 1 and August 1 of each year commencing August 1, 2019 until the earlier
of the date that the Developer shall have received the Reimbursement Amount or February 1,
\[2029\] the City shall pay the Developer the amount of the Tax Abatements received by the City
in the previous six month period. The City may terminate the Tax Abatement Program and this
Agreement at an earlier date if an Event of Default occurs and the City rescinds or cancels this
Agreement.
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487587v2 JSB EL185-45
ARTICLE IV
EVENTS OF DEFAULT
Section 4.1 Events of Default Defined. The following shall be “Events of Default”
under this Agreement and the term “Event of Default” shall mean whenever it is used in this
Agreement any one or more of the following events:
(1) Failure by the Developer to timely pay or cause to be paid any ad valorem real
property taxes, special assessments, utility charges or other governmental impositions with
respect to the Project.
(2) Failure by the Developer to construct or cause the construction of the Project to be
completed pursuant to the terms, conditions and limitations of this Agreement.
(3) Failure by the Developer to observe or perform any other covenant, condition,
obligation or agreement on its part to be observed or performed under this Agreement.
Section 4.2 Remedies on Default. Whenever any Event of Default referred to in Section
4.1 occurs and is continuing, the City, as specified below, may take any one or more of the
following actions after the giving of 30 days’ written notice to the Developer citing with
specificity the item or items of default and notifying the Developer that it has 30 days within
which to cure said Event of Default. If the Event of Default has not been cured within said 30
days:
(a) The City may suspend its performance under this Agreement until it
receives assurances from the Developer, deemed adequate by the City, that the Developer
will cure its default and continue its performance under this Agreement.
(b) The City may cancel and rescind this Agreement.
(c) The City may take any action, including legal or administrative action, in
law or equity, which may appear necessary or desirable to enforce performance and
observance of any obligation, agreement, or covenant of the Developer under this
Agreement.
Section 4.3 No Remedy Exclusive. No remedy herein conferred upon or reserved to the
City is intended to be exclusive of any other available remedy or remedies, but each and every
such remedy shall be cumulative and shall be in addition to every other remedy given under this
Agreement or now or hereafter existing at law or in equity or by statute. No delay or omission to
exercise any right or power accruing upon any default shall impair any such right or power or
shall be construed to be a waiver thereof but any such right and power may be exercised from
time to time and as often as may be deemed expedient.
Section 4.4 No Implied Waiver. In the event any agreement contained in this Agreement
should be breached by any party and thereafter waived by the other party, such waiver shall be
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487587v2 JSB EL185-45
limited to the particular breach so waived and shall not be deemed to waive any other concurrent,
previous or subsequent breach hereunder.
Section 4.5 Agreement to Pay Attorney’s Fees and Expenses. Whenever any Event of
Default occurs and the City shall employ attorneys or incur other expenses for the collection of
payments due or to become due or for the enforcement or performance or observance of any
obligation or agreement on the part of the Developer herein contained, the Developer agrees that
they shall, on demand therefor, pay to the City the reasonable fees of such attorneys and such
other expenses so incurred by the City.
Section 4.6 Release and Indemnification Covenants.
(1) The Developer releases from and covenants and agrees that the City and its
governing body members, officers, agents, servants and employees shall not be liable for and
agrees to indemnify and hold harmless the City and its governing body members, officers,
agents, servants, and employees against any loss or damage to property or any injury to or death
of any person occurring at or about or resulting from any defect in the Project.
(2) Except for any willful misrepresentation or any willful or wanton misconduct of
the following named parties, the Developer agrees to protect and defend the City and its
governing body members, officers, agents, servants and employees, now or forever, and further
agrees to hold the aforesaid harmless from any claim, demand, action or other proceeding
whatsoever by any person or entity whatsoever arising or purportedly arising from a breach of
the obligations of the Developer under this Agreement, or the transactions contemplated hereby
or the acquisition, construction, installation, ownership, leasing, maintenance and operation of
the Project.
(3) The City and its governing body members, officers, agents, servants and
employees shall not be liable for any damages or injury to the persons or property of the
Developer or its officers, agents, servants or employees or any other person who may be about
the Project due to any act of negligence of any person.
(4) All covenants, stipulations, promises, agreements and obligations of the City
contained herein shall be deemed to be the covenants, stipulations, promises, agreements and
obligations of the City and not of any governing body member, officer, agent, servant or
employee of the City in the individual capacity thereof.
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487587v2 JSB EL185-45
ARTICLE V
ADDITIONAL PROVISIONS
Section 5.1 Conflicts of Interest. No member of the governing body or other official of
the City shall participate in any decision relating to this Agreement which affects his or her
personal interests or the interests of any corporation, partnership or association in which he or
she is directly or indirectly interested. No member, official or employee of the City shall be
personally liable to the City in the event of any default or breach by the Developer or successor
or on any obligations under the terms of this Agreement.
Section 5.2 Titles of Articles and Sections. Any titles of the several parts, articles and
sections of this Agreement are inserted for convenience of reference only and shall be
disregarded in construing or interpreting any of its provisions.
Section 5.3 Notices and Demands. Except as otherwise expressly provided in this
Agreement, a notice, demand or other communication under this Agreement by any party to any
other shall be sufficiently given or delivered if it is dispatched by registered or certified mail,
postage prepaid, return receipt requested, or delivered personally, and
(1) in the case of the Developer is addressed to or delivered personally to:
Apex Embroidery Design, Inc.
th
9775 158 Circle, NW
Elk River, MN 55330
Attention: __________
(2) in the case of the City is addressed to or delivered personally to the City at:
City of Elk River
Elk River City Hall
13065 Orono Parkway
Elk River, MN 55330-5600
Attn: Director of Economic Development
or at such other address with respect to any such party as that party may, from time to time,
designate in writing and forward to the other, as provided in this Section.
Section 5.4 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall constitute one and the same instrument.
Section 5.5 Law Governing. This Agreement will be governed and construed in
accordance with the laws of the State of Minnesota.
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487587v2 JSB EL185-45
Section 5.6 Duration. This Agreement shall remain in effect through the earlier of the
date the Developer receives the Reimbursement Amount or February 1, \[2029\], unless earlier
terminated or rescinded in accordance with its terms.
Section 5.7 Provisions Surviving Rescission or Expiration. Sections 4.5 and 4.6 shall
survive any rescission, termination or expiration of this Agreement with respect to or arising out
of any event, occurrence or circumstance existing prior to the date thereof.
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487587v2 JSB EL185-45
IN WITNESS WHEREOF, the City has caused this Agreement to be duly executed in its
name and on its behalf, and the Developer has caused this Agreement to be duly executed in its
name and on its behalf, on or as of the date first above written.
APEX EMBROIDERY DESIGN, INC.
By
Its
This is a signature page to the Tax Abatement and Business Subsidy Agreement by and between
the City of Elk River, Minnesota and Apex Embroidery Design, Inc.
S-1
487587v2 JSB EL185-45
CITY OF ELK RIVER, MINNESOTA
By
Its Mayor
By
Its City Clerk
This is a signature page to the Tax Abatement and Business Subsidy Agreement by and between
the City of Elk River, Minnesota and Apex Embroidery Design, Inc.
S-2
487587v2 JSB EL185-45
ELK RIVER ECONOMIC DEVELOPMENT
FORVIABLE LOAN APPLICATION
I. CONTACT INFORMATION
Legal Name of Business: Apex Embroidery Design, Inc.
Project Site Address: 9775 158`s Circle NW
City / State / Zip
Contact Person(s)
Business Phone
Check One:
Social Security No.
Elk River, MN 55330
Annie Deckert. 763-568-9498, anide@decklangroup.com
763-241-4634 Fax
Proprietor
763-441-8417
X Corporation Partnership
Federal ID # 41-1901329 State ID # 3682215
il. NATURE OF LOAN REQUEST
Does your project involve purchasing city -owned property?
Yes
X No
Amount Requested: $ 200,000 Total Project Cost: $1,7150,968
Type of project
New construction for a startup business.
X New construction for an existing business.
On site expansion
Equipment purchase
Other
Project timeline:
Apex Embroidery would like to begin construction no later than November 1, 2016
and anticipates the project will take approximately 16 weeks to complete. Apex
would like to be in their building by the Spring of 2017.
Forgivable Loan Fund Application Page 9 of 8
DRAFT
Please give a brief summary of your business and its products or service:
Apex Embroidery has been in business since 1998 and was originally located in
Hopkins, MN. Due to considerable growth, the company moved to Elk River in
2001. In 2008, the company moved to the city of Ramsey due to their building in Elk
River being sold. Apex continues to grow, and is now looking to build their own
building to accommodate their growth.
Apex provides a wide variety of apparel decorating solutions, including screen
printed transfers, custom applique, custom rhinestones, digital transfers, and more.
They are a manufacturer who has been in business for 19 years, and has continued to
see consistent growth. They work with a wide variety of clients, including, but not
limited to embroidery companies, screen printing companies, fulfillment companies
and smaller manufacturers. They have produced products for Ralph Lauren, North
Face, Tommy Hilfiger, Harley Davidson, Warner Brothers and Abercrombie &
Fitch. Approximately half of their business is in the Midwest, with the remaining
spread throughout the United States, predominately on the East and West coasts.
Additional business information can be found in the attached business summary.
Please give a brief summary of the project:
Apex Embroidery currently leases a 7,500 building in Ramsey, MN. Because of their
rapid growth, they desire to build capacity through building their own building,
purchasing additional equipment, and growing their workforce by approximately 6-
10 employees within two years of project completion. They will be bringing a total of
18 full-time employees into the City of Elk River, currently averaging $15.57 per hour.
They are committing to creating a minimum of 7 additional full-time employees
within two years from project completion averaging $17.71 per hour.
They are proposing to purchase 1.4 acres of land to construct a 13,312 square foot
facility at 9775158' Circle NW. They will have the option to purchase an adjacent
parcel for room to expand their new proposed facility an additional 14,975 sf, more
than doubling the size of their proposed building.
They will be purchasing an additional full -production line, dryer and screen coater,
totaling $306,000.
Please describe how this loan will impact your project:
This loan, will tremendously impact this project through stimulating private
investment to help spur new construction, create and retain new employment
opportunities for an industrial use looking to increase capacity and efficiency
through the construction (and ownership) of a new building, and purchase of over
$320,000 of new machinery and equipment.
Forgivable Loan Fund Application Page 10 of 8
DRAFT
This project will result in the development of one of four vacant lots on a cul-de-sac
on the east end of Elk River and an increase of approximately $30,000/yr in property
taxes. This loan is imperative to leverage private investment and will improve
employment and economic opportunity for citizens in the region.
The new equipment will increase print production capacity, as well as the efficiency
of their printing operations. It will also provide us the additional needed capacity for
the introduction of a new product they've developed which is a more efficient process
of manufacturing multi -color heat transfers.
Apex has considered numerous sites in Ramsey, and throughout the NW Metro.
Their decision to locate in Elk River is due to the availability of this program, as well
as tax abatement through the city and the county. The combination of these
programs is crucial to support their continued growth, sustainability and success.
Additional capabilities are outlined in the attached investment impact statement.
III. FINANCING
Project Costs
Land
Site improvements
Buildings (attach plans & costs)
Equipment/Machinery/Fixtures
(attach list and estimated costs)
Moving Expenses
Professional Fees
Other (Contingencies + Closing fees ($35k)
Total Costs
Comments:
Proposed Sources of Financing
SOURCE NAME
Forgivable Loan Fund Application
DRAFT
$ 121,968
$ 154.000
$ 1.064,000
$ 321.000
$ 30.000
$ 10.000
$ 50.000
$ 1.750.968
TERMS AMOUNT
Page 11 of 8
Bank Loan Bank of ER — Real Estate 20 -yr amm. 5 -yr $1,049,774
balloon, 4.25%
Bank Loan Bank of ER - Equipment 6 -yr amm. 6 -yr $ 351,000
Term, 4.55%
Other Private Funds
$
Applicant Contribution Owner Equity
$ 150,194
Sherb. Co. RLF (?)
$
EDA Forgivable Loan
$ 200,000
Tax Abatement
$
Total Financing
$1,750,968
Collateral Assigmnents
Lien
Description of Collateral
Position
To Bank 1 Real Estate
1st
To Bank 2 Machinery & Equipment
1st
To Private Sources
To Other Sources
To Federal Govt
To State
To EDA Micro Loan
EDA Forgivable Loan Real Estate
2nd
Value of Collateral
Land (per Beacon)
Buildings
Machinery & Equip.
Other
Forgivable Loan Fund Application
DRAFT
Book Value Cost
$ 51,800 $ 121,968
$ 1,218,000 $ 1,218,000
$ 306,000 $ 306,000
Existing Liens
Page 12 of 8
Other S $ $
IV. JOB & WAGE GOALS
How many employees do you currently have? 18
Guidelines require a minimum of one job created for every $35,000 requested. Of total jobs
created, at least 51% must be taken to a low to moderate income person.
Jobs To Be Created*
Please provide the followin informarion on jobs you expect to create Within 2 -years.
job Title
Number
of obs
Average
Hourly
wage**
Annual
Salary
Are the Jobs
Permanent or
Temporary?
Expected
Hiring
Date
Sales
1
28.00
Permanent
w/in 2 yrs of CO
Artist
1
19.00
Permanent
w/in 2 y of CO
Screen Printing
3
16.00
Permanent
w/in 2 yrs of CO
Customer Service
1 1
15.00
Permanent
w/in, 2 yrs of CO
Production/Digital
1
14.00
Permanent
-/in 2 yrs of CO
** hourly wage includes benefits
Program Objectives
(Check all that apply)
X_ The project contributes to the fulfillment of the city's approved and adopted
economic development and/or redevelopment plans.
The project prevents or eliminates slums and blight.
X The project increases the local tax base.
The project brings a structure into compliance with an existing building code
violation.
Forgivable Loan Fund Application Page 13 of 8
DRAFT
V. PROJECT CONTACTS
Attorney
Name Barna, Guzy & Steffen, Ltd.
Address 200 Coon Rapids Blvd NW, #400, Coon Rapids, MN 55433
Phone 763-780-8500
Accountant
Name Lurie, LLP
Address 2501 Wayzata Blvd., Minneapolis, MN 55405
Phone 612-377-4404
Financing Sources (lenders, partners, etc...
Name The Bank of Ells River, Neil Gagnon
Address 630 Main Street, Elk River, MN 55330
Phone 763-241-8584
Project Contact
Name Annie Deckert, Decklan Group
Address 812 Main St NW. Suite 250, Elk River, MN 53530
Phone 763-568-9498
Others
Name
Address
Name
Address
Forgivable Loan Fund Application Page 14 of 8
DRAFT
VI. ATTACHMENTS CHECK LIST
Please attach the following:
--A—A) Written Business Plan:
M. Description of Business
Jo Ownership
3. Management
A* Date Established
JPProducts/Services
J0 Future Plans
X B) Financial Statements for Past Two Years
X C) Financial Projections for Two Years
x D) Resume of Owner/Management
—)C --E) Personal Financial Statements of Proprietor, Partners,
Guarantors
—X -_F) Letter of Commitment from Applicant Pledging to Complete
During the Proposed Project Duration
X G) Letter of Commitment from the Other Sources of Financing,
Stating Terms and Conditions of their Participation in
Project
Y" 1-1) Fee of 1% of amount of loan request
`\ 1) Certificate of Good Standing
VI. AGREEMENT
I / We certify that all information provided in this application is true and correct to the best
of my/our knowledge. I / We authorize the City of Elk River and the Finance Committee
to check credit references and verify financial and other information. I / We agree to
provide any additional information as may be requested by the City and the Finance
Committee.
APPLICANT
BY Q
DATE 14 A V19 7i06
J
Forgivable Loan Fund Application
DRAFT Page 15 of 17
LMI Income Limits
I. OVERVIEW
Below is the Low and moderate income limits for Sherburne County. In order to qualify for the
Forgivable Loan program as outlined above, 51% of the full-time jobs created by the project need to be
filled by employees falling into the category in the table below. To calculate the income of the individual
or household:
1. The Family's entire income must be counted.
2. A family is all persons living in the same household who are related by blood, marriage, or adoption.
3. Adult children who continue to live at home should be included in the entire family's income.
4. A dependent child who is living outside of the home but continues to be claimed by the parent(s) as a
dependent on their taxes should include their parents' income along with theirs to make up the
family's income.
FY 2015
Income
Limit
Li
Area
Me
FY 2015
I person
2 person
3 Person
4 Person
5 Person
6 Person
7 Person
8 Person
Income
Income
Limit
Cateeory
Sherburne
$86,600
Low
m
Limits
$46,100
$52,650
$59,250
$65,800
$71,100
$76,350
$81,600
$86,900
Countyincome
Forgivable Loan Policy and Application P 0 W E A E o 8 r
Page 18 of 20 NATU
APPLICATION REVIEW WORKSHEET
TO BE COMPLETED BY CITY STAFF
1. The project meets the criteria set forth in Section IV of the Forgivable Loan Policy.
Check those which apply. Must meet first four to score 20 points. 0 points if any ofthe first four boxes are unchecked
✓Creates new jobs which meet the federal low to moderate income guidelines
11 teases tax base
he project can demonstrate that investment of public dollars induces private funds
The project provides higher wage levels to the community or will add value to current workforce skills.
Th project results in the sale and development of city owned property (additiona1100 pointsgiven)
✓Applicant has sufficient collateral (if box isn't checked loan won't be considered)
Subtotal Section 1(maximum 120points) 30
2. Consideration of Capacity. Check those which apply. Must meet all four to score 20 points. 0 points if any boxes are
unchecked.
Applicant included a realistic implementation /project schedule
Applicant has the ability to administer and monitor project
Applicant has the ability to conform to city, state and federal requirements
Applicant has agreed to annual progress reports and submission of salary surveys for all new hires
Subtotal Section 2 (maximum 20points) 90
3. Impact: a Points
Number of new jobs as a result of the project: ✓�* /�S
*Award five points perjob created up to 150 points
Ratio of loan funds to jobs created/retained
$15,000 or less/job 80 points
$15,001-$24,999/job 60 points
$25,000-$34,999/job 40 points �
$35,000 and over/job 20 points U CJ
Increase in the local real estate tax base --
>$500,000 20 points
$250,000 to $500,000 15 points
<$250,000 10 points
Immediacy of Impact n
*20 points awarded ifproject will begin within 6 months C9
Subtotal Section 3 (maximum 270points) C)55*minimum of60pomts must come from this section m order for project to be considered
Forgivable Loan Policy and Application P 0 V E O E 1 I t
Page 16 of 20 NATURE
TURF
4. Wage Level of new jobs created: Points
Minimum hourly wage of jobs created/retainedl5'57 1 7 h�,
Over $21/ hour 5 points
$18-21 / hour 4 points
$14-17 / hour 3 points
$12.82-13 / hour 2 points
Below $12.82/ hour application disqualified 3
5. Project size: ii 22 �� I Z
The project will result in the construction of I % square feet.
80,000+
50 points
65,000+
40 points
50,000+
30 points
35,000+
20 points
25,000+
10 point --
Subtotal Sections 4-5 (maximum 55points)
WA
Sub - Total Points: _ V V of a possible 465 points.
Forgivable Loan Policy and Application
Page 17 of 20 PANEAEA AT
➢ATURE
AC-) PIX
v
SOLUTIONS FOR DECORATING PROFESSIONALS
August 24, 2016
Elk River Economic Development Authority
Amanda Othoudt, Economic Development Director
13065 Orono Parkway
Elk River, MN 55330
RE: Letter of Commitment
Dear Ms. Othoudt,
This letter is my official pledge of commitment to begin our project located at 9775 158`h Circle NW, Elk River,
MN no later than November 1, 2016.
We are planning on moving into our new facility by the Spring of 2017.
If you have any questions or need additional information, please do not hesitate to contact Annie Deckert,
Decklan Group, at 763-568-9498.
I appreciate your time.
Respectfully,
Brian Hill
President, Apex Embroidery & Design
6361 Sunfish Lake ct nw, #300, Ramsey, MN 55303 877-935-7766 763-241-4634 fax 763-441-8417
orders Ci apexemb. net www.apexemb.net www.starbirdinc.com www.hotprintz.net
r`
c Bank
K Ri V 1 l
September 6, 2016
City of Elk River
13065 Orono Pkwy
Elk River, MN 55330
Re: Apex Embroidery Design, Inc. Forgivable Loan application/Tax Abatement application
To whom it may concern:
The Bank of Elk River has had a banking relationship with Apex Embroidery Design, Inc. for the past 14
years. Based on The Bank of Elk River's analysis of past financial performance and the projected
financial outlay provided to The Bank of Elk River Apex Embroidery Design, Inc. demonstrates the ability
to service repayment requirements necessary to support the building project proposed in their
applications with the City of Elk River.
The debt structure being proposed to The Bank of Elk River will allow for a loan on the land, building and
equipment of up to $1,450,000. The final loan amount will be calculated based off the lesser of 80% of
appraised value or cost and be amortized over a period of 20 years.
While Apex Embroidery Design, Inc. demonstrates the ability to service the debt payments, the
Forgivable Loan program/Tax Abatement is important to make the project a reality. The letter is only an
assessment of Apex Embroidery Design, Inc. to service debt outlined in the application and not a
commitment to lend from the Bank of Elk River. The final approval of the Forgivable Loan application
and Tax Abatement application will be necessary for final approval to make a commitment.
Sincerely
Neilen
Vice President
The Bank of Elk River
630 Main Street, Elk River, MN 55330 p) 763-441-1000 f) 763-441-0847 www.thebankofelkriver.com Me.b,mc
Apex Embroidery Design, Inc. — Business Plan/Summary
(Apex) was founded in January of 1998 as a single person business providing embroidery
programing services to apparel decorators mainly in the Midwest. In 2001, Apex added one
employee, a laser cutting system, and began offering laser material cutting services (applique
cutting) as an expansion to the programming services that we offered to our embroidery
customers. Apex steadily grew its applique cutting and programming business until 2008 when
the embroidery industry was seriously jolted by the economic downturn of the great recession.
In 2009, as a response to market changes, Apex expanded our product selection and
began offering heat transfer materials wholesale as well as custom heat transfers to better
diversify our product offerings and smooth seasonal sales peaks and valleys.
In 2011, Apex acquired Starbird, Inc., an embroidery programing (digitizing) provider
that was in Plymouth, MN to both increase our embroidery programing capacity and also to
free up time to further develop the business. Since 2011, Apex's heat transfer business has
grown steadily and we added to our product mix custom rhinestone transfers, spangle
transfers, and most recently screen printed transfers. Apex now employee 18 full time
employees, and normally 2 or 3 part time high school interns during the school year of which
quite a few have stayed with the company through their college years.
Apex is known in the industry as an innovator and top quality provider of the products
we produce and have done work for companies such as Ralph Lauren, North Face, Tommy
Hilfiger, Harley Davidson, Warner Brothers, Abercrombie and Fitch, along with many more
national brands.
Approx. 50% of our business is in the Midwest with the balance spread throughout the
country but is predominantly on the east and west coasts. Our clients are consist of primarily
apparel decorators including but not limited to embroidery companies, screen printing
companies, advertising specialty distributor, fulfilment companies as well as so smaller
manufactures.
Investment Impact statement
In our effort to continue our company growth, Apex is proposing the addition of the
following equipment; an INO automatic print, dry, and stacking production line for the purpose
of increasing our print production capacity as well as the efficiency of our printing operations.
This line will also provide us the additional needed capacity for the introduction a new product
that we have developed which is more efficient process of manufacturing multi -color heat
transfers. The Adelco dryer is for increasing throughput of our existing printing presses, the
Uni-Kote screen coater is for improving product consistency by mechanizing our screen coating
process. This is not a labor saving device it is strictly for quality control. The new wash out
booth is in increase our capacity for processing and reclaiming screens. The maxipress shuttle
heat press is to increase our production capacity for custom printed fabrics for our custom
applique part of our business.
Apex's present facility is currently a leased space in Ramsey, MN consisting of 4,500 sq.
ft. of production space, 3,000 sq. ft. of office and 1,500 sq. ft. of storage. There is no room to
expand within the building at our current location. We have explored existing buildings but
have found that what is available has been either too small, too large or by the time we
remodel to accommodate our requirements are not a cost effective alternative. This is why
we are pursuing the option of a new construction project.
We have considered many sites throughout the NW Metro, and have decided to locate
in Elk River due to the availability of a variety of incentives and funding options that are crucial
to support our continued growth, sustainability and success.
Brian Hill
1998 -Present
Apex Embroidery Design, Inc. / Ramsey, MN
Founder
- Grown Apex from a 1 person embroidery programming company to a multi product full service
supplier to apparel decorators with 18 employees and projected sales 2015 of $2.35M
-Primary day to day roll is marketing, business development and CFO.
1996-1998
Dakota Sportswear & Logo Magic / Sales and Programing Hopkins, MN / Embroidery Production Devils Lake, ND
Dakota Sportswear / Logo Magic
-Partner 10%
Large client projects specialist.
- met with large clients regarding project
Embroidery QA
-address and resolved embroider production issues related to programming
Logo Magic
General Manager
- Managed all aspects of Embroidery programing business including staff of 4,
marketing, trade shows, client relations.
1993-1995
Medallion Emblem / Duluth, MN
Director of Marketing
- Coordinated all aspects of marketing including national and regional trade shows,
direct mail campaigns, print advertising and product literature.
Account rep.
- Coordinated production of customer orders through our overseas contract manufactures.
1992-1993
County Market / Cloquet, MN
Assistant Store Manager
-Coordinated operational aspects of a grocery store, including stocking shelves
setting ad displays, product ordering and managing a staff of 4 stock people
Education
B.S. Business from St. John's University
minoring in finance and marketing
Business Record Details
Minnesota Business Name
Apex Embroidery Design, Inc.
Business Type
Business Corporation (Domestic)
File Number
10A-72
Filing Date
02/06/1998
Renewal Due Date
12/31/2016
Number of Shares
10,000
Chief Executive Officer
Brian T Hill
6361 Sunfish Lake Court NW #30
Ramsey, MN 55303
USA
Filing History
Filing History
MN Statute
302A
Home Jurisdiction
Minnesota
Status
Active / In Good Standing
Registered Office Address
6361 Sunfish Lake Ct NW
Ramsey, MN 55303
USA
Registered Agent(s)
Brian T Hill
Principal Executive Office Address
6361 Sunfish Lake Court NW #30
Ramsey, MN 55303
USA
Select the item(s) you would like to order: order Selected Copies
Filing Date Filing
02/06/1998 Original Filing- Business Corporation (Domestic)
02/06/1998 Business Corporation (Domestic) Business Name
12/01/1999 Registered Office and/or Agent - Business Corporation
(Domestic)
Effective Date
L 07/11/2003 Registered Office and/or Agent- Business Corporation
(Domestic)
U 08/29/2007 Registered Office and/or Agent - Business Corporation
(Domestic)
02016 Office of the Minnesota Secretary of State -terms and conditions
APEX - METAL Building Preliminary Construction Statement Sharp Associates
1 st floor- 13,372 sf for Commercial 500 Bunker Lake Blvd NVV
Mezz- 2,944 sf Buildings Anoka, MN 55303
TOTAL 16,316 sf Phone 763-425-2002
LAND
BLUE PRINTS
SURVEY
SOIL TESTS
PERMITS
BONDS
FINANCING
12:39 PM
8/30/2016
DESCRIPTION
BY SUBCONTRACTOR
PROJECT COSTS
VALUE
TAXES
SPECIAL ASSESSMENTS
TITLE WORK
FILING FEES
ATTORNEY'S FEES
DRAFTING
By Subcontractor
$
1,000.00
ARCHITECT
Allowance
7-12,000
00
STRUCTURAL
Allowance
$
3,000.00
LANDSCAPE
MECHANICAL
ELECTRICAL
PRINTING
By Subcontractor
$
500.00
ORIGINAL
ENGINEERING
Allowance
—$-6,000
00
STAKING
AS BUILT
ORIGINAL
ON SITE
Allowance
$
2,500.00
APPLICATIONS
Allowance
$
1,400.00
BUILDING
Allowance
$
11,133.00
SURCHARGE
See Building
SAC & WAC
None
HOOK UP CHARGE
METERS
WATER SHED DIST.
Allowance
$
800.00
COUNTYACCESS
MPCA
Allowance
$
300.00
SITE WORK
UTILITY
COMMIT FEE & COSTS
BROKERFEE
ATTORNEY'S FEE
INSPECTION FEE
FILING FEE
INTERIM FEE
ON INTEREST
ADVERTISING
Prepared by Monte Helget
1 of 5
No Land: $1,218,000.00
$74.65 1 sf
APEX - METAL Building
1st floor- 13,372 sf
Mea- 2,944 sf
TOTAL 16,316 sf
INSURANCE
EXCAVATING
CEMENT WORK
STRUCTURAL
ROOFING
PLATEICANTIBUCKS
SEWER & WATER
MECHANICAL
12:39 PM
8/30/2016
Preliminary Construction Statement
for Commercial
Buildings
Sharp Associates
500 Bunker Lake Blvd NW
Anoka, MN 55303
Phone 763-425-2002
DESCRIPTION
BY SUBCONTRACTOR
PROJECT COSTS
CONSTRUCTION
Allowance
$
2,500.00
PERMANENT
SITE PREPARATION
DEMOLITION
FILL
COMPACTION
EXCAVATION
Bu Subcontractor
$
30,000.00
BACK FILL
FINAL GRADING
FOOTINGS
By Subcontractor
$
96,000.00
MASONRY BLOCK
MASONRY BRICK
SLABS
SITE CONCRETE
CURB & GUTTER
BOARD OPENING
POLISH FLOOR
JOIST & DECK
See Supply
ERECTION
By Subcontractor
$
120,000.00
MISC. METALS
PRECAST
REINFORCING
SUPPLY
By Subcontractor
$
156,000.00
INSULATION
See Erection
MEMBRANE
METAL
See Supply
MATERIAL
LABOR
SANITARY
WATER -For Fire Protection
Allowance
$
10,000.00
STORM
Allowance
$
2,500.00
SEPTIC TANK
Allowance
$
8,000.00
WELL
Allowance
$
9,000.00
PLUMBING
By Subcontractor
$
25,990.00
HVAC Ventilation
By Subcontractor
$
128,132.00
Prepared by Monte Helget
2of5
No Land: $1,218,000.00
$74.65 / sf
APEX - METAL Building Preliminary Construction Statement Sharp Associates
1st floor- 13,372 sf for Commercial 500 Bunker Lake Blvd NVV
Mezz- 2,944 sf Buildings Anoka, MN 55303
TOTAL 16,316 sf Phone 763-425-2002
ELECTRICAL
FIRE PROTECTION
OVERHEAD DOORS
DOCK EQUIPMENT
DOORS & WINDOWS
EXTERIOR FINISH
INTERIOR FINISH
12:39 PM
8/30/2016
DESCRIPTION
BY SUBCONTRACTOR
PROJECT COSTS
FLAMM WASTE TRAP
UTILITY CHARGES
Trench Drain
WIRING
By Subcontractor
$
110,370.00
FIXTURE ALLOWANCE
PHONE, COMP WIRING
UTILITY SERVICE
Allowance
$
10,000.00
UTILITY CHARGES
Allowance
$
1,500.00
PHONE SLEEVES
By Subcontractor
$
2,380.00
SPRINKLING SYSTEM
By Subcontractor
$
32,960.00
MONITORS
By Subcontractor
$
4,200.00
EXTINGUISHER
MECH. ROOM
DOORS
By Subcontractor
$
7,775.00
OPERATORS
See Doors
BUMPERS
See Doors
LEVELERS
See Doors
SEALS
See Doors
STEEL DOORS
By Subcontractor
$
10,805.00
WOOD DOORS
See Steel Drs
ALUMINUM DOORS
See Glass
HARDWARE
See Steel Drs
WEATHER STRIPPING
See Steel Drs
WINDOWS
See Glass
GLASS & GLAZING
By Subcontractor
$
31,200.00
CAULKING
By Subcontractor
$
770.00
PAINTING
ADDRESS PLATES
By Subcontractor
$
400.00
FRAMING MATERIAL
By Subcontractor
$58,520.00
FRAMING LABOR
See Material
SHEETROCK MATERIAL
See Material
SHEETROCK LABOR
See Material
CARPENTRY FINISHING
By Subcontractor
$
7,400.00
WAREHOUSE PAINT
CEILING & JOIST PAINT
PAINTISTAINNARNISH
By Subcontractor
$
23,000.00
CARPET
By Subcontractor
$
18,645.00
Prepared by Monte Helget
3of5
No Land: $1,218,000.00
$74.65 / sf
APEX - METAL Building Preliminary Construction Statement Sharp Associates
1st floor- 13,372 sf for Commercial 500 Bunker Lake Blvd NW
Mezz- 2,944 sf Buildings Anoka, MN 55303
TOTAL 16,316 sf Phone 763-425-2002
HARDWARE
IRON
SIGNS
SITE WORK
CLEAN-UP
12:39 PM
8/30/2016
DESCRIPTION
BY SUBCONTRACTOR
PROJECT COSTS
V A TILE
See Carpet
CERAMIC TILE
See Carpet
SUSPENDED CEILINGS
By Subcontractor
$
2,210.00
CABINETS
By Subcontractor
$
4,470.00
COUNTERTOPS
See Cabinets
WINDOW SILLS
By Subcontractor
$
1,960.00
MILLWORK
FRP
See Carpentry
HANDICAP SIGNS
See Holders
PAPER HOLDERS
Allowance
$
800.00
MIRRORS
See Glass
HANDICAP BARS
See Plumbing
BATH PARTITIONS
FLOOR MATS
By Subcontractor
$
509.00
STAIRWAYS
By Subcontractor
$
14,550.00
RAILINGS
See Stairs
ROOF ACCESS
BOLLARDS
See Stairs
Setting Plates on Wall
MATERIAL
By Owner
LABOR
By Owner
ASPHALT
Allowance
$
65,400.00
BASE
See Asphalt
BLACK DIRT
See Excavation
SOD
Allowance
$
35,310.00
PLANTING
See Sod
IRRIGATION
See Sod
ROCK
See Sod
Curb & Gutter
Allowance
$
20,849.00
HAULING
By Subcontactor
$
3,000.00
LABOR / CONST.
By Subcontactor
$
4,500.00
FINAL
By Subcontactor
$
4,500.00
TEMPORARY FACILITIES
By Subcontactor
$
1,500.00
SUPERVISION & MGMT
$
15,000.00
MISC. CONTINGENCIES
—$-22,424
00
Prepared by Monte Helget
4of5
No Land: $1,218,000.00
$74.65 / sf
APEX - METAL Building Preliminary Construction Statement Sharp Associates
1st floor- 13,372 sf for Commercial 500 Bunker Lake Blvd NW
Mezz- 2,944 sf Buildings Anoka, MN 55303
TOTAL 16,316 sf Phone 763-425-2002
DUE CONTRACTOR
SUBTOTAL
TOTAL
12:39 PM
8/30/2016
Prepared by Monte Helget
5of5
No Land: $1,218,000.00
$74.65 / sf
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r
LOAN AGREEMENT
(Forgivable Loan Program)
THIS LOAN AGREEMENT (“Agreement”) is made effective as of October __, 2016
(the “Closing Date”), by and between APEX EMBROIDERY DESIGN, 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 Forgivable Loan Program loan for
Borrower’s acquisition of land and construction and equipping of a new manufacturing facility
th
located on certain real property at 9775 158 Circle, NW, Elk River, Minnesota 55330 (the
“Loan Property”) in the principal amount of $200,000.00.
B. Lender is willing to make such loan to Borrower in the principal amount of
$200,000.00 (the “Loan”), subject to all of the terms and conditions of this Agreement.
C. Contemporaneously with the execution hereof, Borrower is delivering to Lender
the following security documents:
(i) A Promissory Note (“Note”) effective as of the date herewith made by
Borrower and payable to the order of Lender, in the original principal amount of
$200,000.00.
(ii) A Security Agreement securing the Note (“Security Agreement”). The
Security Agreement is of even date herewith, is executed by Borrower, as debtor, in
favor of Lender, as secured party, and provides a second position security interest in
certain equipment to be purchased using the proceeds of the Loan (the “Equipment”);
(iii) The personal guaranty of Brian Hill, President of Borrower (the “Personal
Guaranty”);
(iv) 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 Borrower, as mortgagor, in favor of Lender, as
mortgagee, and covers the Loan Property as well as a security interest in certain other
property described therein; and
(v) An entity guaranty (the “Entity Guaranty”) of SBH Properties, LLC (the
“Entity Guarantor”).
NOW, THEREFORE, in consideration of the mutual covenants hereinafter contained, it is
hereby agreed as follows:
487521v2 EL185-45
1. Amount and Purpose of Loan. Borrower agrees to take and Lender agrees to
make a loan in the principal amount of Two Hundred Thousand and No/100s Dollars
($200,000.00) (the “Loan”) to be advanced in a single disbursement as hereinafter provided, the
Loan will be evidenced by the Note and secured by the Personal Guaranty, the Security
Agreement, the Mortgage, the Entity Guaranty and any other security document required under
this Agreement. The Loan proceeds will be used only towards the cost of the construction and
equipping of a new manufacturing facility on the Loan Property.
2. The Project.
(a) Construction. For the purposes of this Agreement, the term “Loan Property”
means the real estate described in the Mortgage together with all improvements now located or
hereafter placed thereon. Borrower agrees to improve as a part of the Loan Property a project
(“Project”) consisting generally of constructing and equipping a new manufacturing facility for
its apparel decorating business, 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.” Construction has not commenced of the
Improvements. \[Borrower shall cause Entity Guarantor\] to commence construction of the
Improvements promptly after the date of this Agreement and to 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 _____________, shall be a default hereunder.
(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 on the Loan
Property, 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 value. Borrower will provide Lender a final list of Equipment purchased
within 15 days after the Certificate of Occupancy for the Loan Property is issued. The Security
Agreement will provide Lender with a 2nd 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. __________ (“Title”) is designated as the title insurer with
respect to this Agreement. Title will insure Lender against loss or damage on account of
mechanic’s liens upon or unmarketability of the title to the Loan Property, and will ensure that
the Mortgage constitutes a second priority lien upon Borrower’s interest in the Loan Property as
contemplated by this Agreement, subject only to a mortgage in favor of the Bank of Elk River
in the amount of $_________ (the “First Lien Mortgage”). Borrower agrees to promptly and
fully observe and comply with the reasonable requirements of Title and Lender with respect to
the title, the Mortgage, disbursements of funds and such other reasonable requirements as Title
may make.
2
487521v2 EL185-45
4. Documents to be Delivered. Borrower covenants and agrees to immediately
cause the compliance with the following conditions:
(a) Note. Deliver to Lender the Note.
(b) Security Agreement. Deliver to Lender the Security Agreement, together
with evidence that a UCC-1 Financing Statement has been or will be duly filed for
record.
(c) Personal 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) Bank Loan Documents. Deliver to Lender copies of all of the documents
relating to the First Lien Mortgage (the “Bank Loan Documents”).
(g) Environmental Indemnification Agreement. Deliver to Lender the
Environmental Indemnification Agreement.
(h) Organizational Documents and Resolutions. Deliver to Lender copies of
the (i) articles of organization for Entity Guarantor certified by the Minnesota Secretary
of State, (ii) certificate of good standing for Entity Guarantor issued by the Minnesota
Secretary of State; (iii) Entity Guarantor’s operating agreement, member control
agreement and bylaws; and (iv) certified resolutions of Entity Guarantor authorizing the
execution and delivery of the Mortgage, the Entity Guaranty and any other document to
be executed by Entity Guarantor pursuant to this Agreement.
(i) Organizational Documents and Resolutions. Deliver to Lender copies of
the (i) articles of incorporation for Borrower certified by the Minnesota Secretary of
State, (ii) certificate of good standing for Borrower issued by the Minnesota Secretary of
State; (iii) Borrower’s bylaws; and (iv) certified resolutions of Borrower authorizing the
execution and delivery of the Note, the Security Agreement, and this Agreement and any
other document to be executed by Borrower pursuant to this Agreement.
(j) Project Cost and Source of Funds Certificate. Deliver to Lender a sworn
certificate detailing costs and sources of funds to be utilized for the Project (“Project Cost
Certificate”), in a form acceptable to Lender, verified on oath by a authorized
representative of Borrower showing an itemized breakdown of: (i) the source and amount
of all Project funds; and (ii) of the total cost of the Project. Not less than 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
3
487521v2 EL185-45
acceptable to Lender with respect to any such portion of costs and charges incurred to the
date of the Project Cost Certificate.
(k) 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.
(l) 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 or planned unit
development applicable to the Loan Property.
(m) 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.
(n) Program Fee. Deliver to Lender the program fee of $2,000.
(o) Indemnity. Deliver to Title any indemnity agreement in favor of Title in
the form required by Title in order for Title to issue the title insurance policies referred to
above.
(p) Expend Funds; Lien Waivers; Property Documents. Not later than 15
days after the issuance of the certificate of occupancy for the Loan Property, Borrower
shall deliver to Lender: (i) a copy of the certificate of occupancy for the Loan Property;
(ii) a final Project Cost Certificate; (iii) a final Equipment List executed by an officer of
Borrower (which, upon acceptance by Lender, will be attached hereto as Exhibit A-1);
and (vi) evidence acceptable to Lender that Borrower has paid all costs of the Project.
(q) Lease. Deliver to Lender a copy of the lease agreement for the use of the
Loan Property, executed no later than the date of this Agreement, by and between Entity
Guarantor, as landlord, and the Borrower, as tenant (the “Lease”).
Lender may waive any of the above requirements in its sole discretion.
4
487521v2 EL185-45
5. Disbursement of Loan. Upon receipt by Lender of all of the items required
pursuant to Section 4 above, with the exception of item (o) which shall be delivered after
construction has been completed, in the form and condition required therein and confirmation
from Title that Title is prepared to issue the mortgagee’s title insurance policy as required herein,
Lender agrees to disburse the Loan proceeds to Borrower.
6. Forgivable Loan Requirements and Covenants.
(a) Loan Forgiveness Program. This Loan is made pursuant to the Lender’s
Forgivable Loan Program. From and after the Closing Date through and until the
Conversion Date (as defined below), Borrower shall not be required to make any
payments of principal or interest, though interest shall accrue at the interest rate set forth
in the Note.
(b) Reporting. On each anniversary of the Closing Date, Borrower shall
provide an annual report in a form acceptable to Lender, certified by an officer of
Borrower, reporting: (i) the number of jobs created by Borrower; (ii) the hourly wage
paid to each position; (iii) average weekly hours worked by each employee; and (iv) the
location of the business, and each annual reports shall have the pay stubs for each
employee attached.
(c) Guidelines. The Loan will be forgiven as set forth below if Borrower
meets all of the following requirements:
(i) Location/Existence. Upon the delivery of a certificate of
occupancy for the Project, the Borrower’s business will be located in Elk River
and has been open for business as a going concern.
(ii) Job Creation/Maintenance. The Borrower has relocated 18 jobs to
the City and has created not less than 7 new jobs from and after the date of
completion of the Project, which date shall be the date the Certificate of
Occupancy for the Loan Property is issued (the “Benefit Date”). For the relocated
and created jobs: (A) the salary/wage of each position must be $15.00/hour or
greater; (B) at least 13 of the created jobs must be filled by a person who meets
State of Minnesota’s most current low to moderate income guidelines; (C) the
employee filling such job must have worked for at least 1,750 hours in any 12
month period; provided that the 12-month period shall commence no later than
the 2 year anniversary of the Benefit Date. If the employee initially hired to any
created position leaves or is terminated prior to completing the required time of
employment, Lender may allow a replacement employee hired to fill the position
to complete the requirements of this section, in the sole discretion of Lender as to:
(X) whether to allow such “tacking”; and (Y) the terms and conditions of such
completion.
5
487521v2 EL185-45
(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.
(d) Completion. Within a reasonable time after: (i) the 3rd Anniversary of the
Benefit 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, the Personal Guaranty and the Entity Guaranty to
Borrower and will provide a satisfaction and release of the Mortgage and a termination of
the financing statement filed in connection with the Security Agreement. If, however,
Lender determines that Borrower has not fully or timely complied with the requirements
of this Section 6 or at any time after the 2nd Anniversary of the Benefit Date reasonably
determines that Borrower cannot comply with the requirements of this Section 6, then: (i)
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 7 years, commencing
upon the Conversion Date; (iii) Lender will calculate the monthly payments due and
owing from Borrower, based upon a 7 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 the Loan Property.
8. Books and Records. Borrower agrees to maintain accurate and complete books,
accounts and records in regard to the Loan Property in a manner reasonably acceptable to
Lender. Lender, acting solely through its municipal or financial advisor, 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 solely to the Lender’s municipal or finance advisor,
as may reasonably be demanded. The Borrower will not be required to provide its books and
records directly to the Lender. Borrower shall also ensure that Entity Guarantor maintains
accurate and complete books, accounts, and records in a manner reasonably acceptable to
Lender. Lender and its representatives shall have the right to inspect, examine and copy all such
books and records of Entity Guarantor and Entity Guarantor shall, at Lender’s request, furnish
such information as Lender may reasonably demand.
6
487521v2 EL185-45
9. Encumbrances and Transfer. Other than the First Lien Mortgage and the Lease to
the Entity Guarantor, Borrower agrees not to sell, transfer, lease or convey the Loan Property,
the Equipment or any part thereof, or any interest therein, or encumber the Loan Property, the
Equipment or any part thereof, in any manner, without written consent of Lender which consent
may be granted or withheld in the sole discretion of Lender. This requirement shall apply to
each and every sale, transfer, lease or conveyance, whether voluntary or involuntary and whether
or not Lender has consented to any such prior sale, transfer lease or conveyance. 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 without written consent
of Lender, which consent may be withheld, conditioned or delayed in Lender’s sole discretion.
Lender may freely assign or otherwise transfer (including by participation) all or any part of its
interest in the Loan or any or all of the Loan documents, in Lender’s sole discretion.
12. Miscellaneous Covenants of Borrower. Borrower covenants and agrees with
Lender that, without cost to Lender, Borrower will or will cause Entity Guarantor to:
(a) Performance of Conditions. Promptly keep, perform and comply with all
of the terms, covenants and conditions to be kept and performed by Borrower and/or
Entity Guarantor, as required by the City of Elk River (the “City”) and any other
governmental body having jurisdiction over the Loan Property 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
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 and/or
Entity Guarantor 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. Borrower will provide to Lender complete documentation
concerning any change made to the Project.
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(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 this Agreement, Borrower shall procure and
maintain or cause to be procured and maintained at its sole expense, casualty insurance,
public liability insurance and such other types of insurance as are reasonably required by
Lender from time to time, including, without limitation, the coverages expressly required
of Entity Guarantor by the Mortgage, insuring Lender and Borrower with coverages, in
amounts and with companies satisfactory to Lender. The policy or policies or duly
executed certificate or certificates for such insurance and renewals or replacements
thereof shall be deposited with Lender.
(e) Pay Charges. Pay at closing, or within 30 days of written notice from the
Lender, all loan charges including, but not limited to: (i) Lender’s attorneys’ fees; (ii) title
insurance fees, costs and premiums; and (iii) filing fees of any instruments required under
this Agreement.
(f) Default Notices. Provide Lender with a copy of any default notice
received by the Borrower or the Entity Guarantor pursuant to any documents related to
any financing secured by the Loan Property, promptly after receipt of the same.
(g) Continual Operation. At all times while any portion of the Loan remains
outstanding, Borrower will: (i) maintain its status as a for profit entity; (ii) maintain a
positive net worth; and (iii) will operate its business from the Loan Property in a first
class manner (from and after issuance of the Certificate of Occupancy for the Loan
Property).
(h) Default Notices. Provide Lender with a copy of any default notice
received pursuant to the Bank Loan Documents (to the extent that such notice is send by
a party other than Lender) or any governmental authority, promptly after receipt of the
same.
(i) 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, other than the superior security interests in the Equipment granted pursuant
to the Bank pursuant to the Bank Loan Documents.
(j) Positive Net Worth. On the Closing 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.
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13. Warranties. Borrower represents and warrants to Lender the following:
(a) The Borrower is a 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, the Security Agreement, the Mortgage 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 and the
Note, Mortgage, 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 and the Entity Guarantor enforceable in accordance with their respective
terms.
(c) No litigation, tax claims or governmental proceedings are pending or
threatened against the Borrower, the Entity Guarantor or the Loan Property, and no
judgment or order of any court or administrative agency is outstanding against the
Borrower, the Entity Guarantor or the Loan Property which would have a material
adverse effect on Borrower, the Entity Guarantor or the Loan Property.
(d) Borrower and the Entity Guarantor have filed all tax returns (federal and
state) required to be filed for all prior years and paid all taxes shown thereon to be due,
including interest and penalties. Borrower and the Entity Guarantor will file all such
returns and pay all such taxes for the current and future years.
(e) All information, financial or other, which has been submitted by
Borrower, the personal guarantors, and the Entity Guarantor in connection with the Loan
is true, accurate and complete in all material respects.
(f) The Borrower and the Entity Guarantor a under common ownership.
14. Indemnification. Borrower agrees to indemnify Lender and save it harmless
against all loss, liability, expense, or damages including but not limited to attorneys’ fees, which
may arise by reason of the assertion of any lien against the Loan Property. Borrower will
indemnify and hold Lender harmless from any damages Lender may suffer or incur from any
default by Borrower under this Agreement, the Security Agreement, the Note 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 by November 30, 2016; (ii) work on construction of the Improvements is
halted for more than 5 consecutive business days; (iii) construction of the Improvements
is not completed by _____________; (iv) the Improvements are not constructed in
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487521v2 EL185-45
accordance with this Agreement; or (v) Borrower or Entity Guarantor abandons the Loan
Property.
(b) Bankruptcy, reorganization, assignment, insolvency or liquidation
proceedings, or other proceedings for relief under any applicable bankruptcy law or other
law for relief of debtors are instituted by or against Borrower and, if such proceedings are
instituted against Borrower, an order, judgment or decree, without the consent of
Borrower appointing a trustee or receiver for Borrower or any part of its property or
approving a petition under the bankruptcy laws of the United States or any similar laws
of any state or other competent jurisdiction, shall have remained in force undischarged or
unstayed for a period of 30 days.
(c) Any judgment, attachment, garnishment or other similar process is entered
against Borrower or against any property or assets of Borrower and is not released,
satisfied or discharged or bonded to Lender’s satisfaction within 30 days of entry.
(d) Any of the terms, covenants or conditions of any permit or other
agreement issued or made by the City or other governmental body having jurisdiction
over the Loan Property are not complied with within the time required thereby or are
terminated or modified by the City or such other governmental body and Borrower has
not taken or has not caused the Entity Guarantor to take the necessary steps to correct or
cure the same within thirty (30) days after written notice is given by Lender.
(e) Any mechanic’s or material supplier’s lien is filed, against the Loan
Property and is not released, satisfied or discharged or bonded to Lender’s satisfaction.
(f) A transfer which violates by Paragraph 9 hereof, Encumbrances and
Transfer, occurs.
(g) Borrower fails to timely: (i) complete the Project (which will be deemed
timely if completed by ______________; or (ii) provide Lender any information
necessary for Lender to perfect its security interest.
(h) Borrower: (i) fails to pay when due any amount due under this Agreement,
the Note, or any other documents listed in Section 3; (ii) fails to perform any other
obligation to be performed under this Agreement, the Security Agreement, the Mortgage,
the Note, or any other document executed by Borrower pursuant to this Agreement; or
(iii) fails to pay any amount or perform any obligation under any other note, mortgage or
other agreement now or hereafter made by Borrower in favor of or with Lender or
otherwise now or hereafter held by Lender or Bank, and such failure continues beyond
any applicable cure period.
(i) Any representation or warranty by Borrower contained herein or in the
Note, the Mortgage, the Security Agreement, or any other instrument required hereunder
is false or untrue in any material respect when made.
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(j) A default under the Entity Guaranty, the Security Agreement, the
Mortgage or the Personal Guaranty beyond any applicable notice and cure period.
Upon the occurrence of an Event of Default, Lender, at its option, shall, in addition to any other
remedies which it might be entitled to by law, have the right to:
(a) 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
paragraphs (ii) and (iii) of this paragraph shall be deemed to have
been advanced under this Agreement and to be secured by any the
Security Agreement and any other security document required under
this Agreement as security for the Loan.
(ii) 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 and to do all things
necessary or incidental thereto;
(iii) Borrower hereby constitutes and appoints Lender its true and lawful
attorney-in-fact with full power of substitution either in the name of
Lender or in the name of Borrower or in the name of both, for the
following purposes: (A) to prosecute and defend all actions or
proceedings in connection with the Loan Property or the Equipment
and do any and every act which Borrower might do in its own
behalf; (B) to perform each of the terms, covenants and conditions to
be kept and performed by Borrower under any contracts and/or
leases obtained or held by Borrower in connection with the operation
of the Improvements or the purchase of the Equipment and any other
contracts; (C) without limiting the foregoing, to perform each of the
terms, covenants and conditions to be kept or performed by
Borrower under this Agreement, the Security Agreement and any
other instrument required under this Agreement; and (D) to do all
things that Lender reasonably deems necessary or advisable for the
purpose of carrying out the powers enumerated in (A), (B), (C) and
(D) of this Subparagraph (ii);
(iv) The powers herein granted Lender shall be deemed to be powers
coupled with an interest and the same are irrevocable;
(b) cancel this Agreement;
(c) bring appropriate action to enforce such performance and the correction of
such Event of Default;
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(d) declare the entire unpaid principal of the Note and all accrued interest
thereon immediately due and payable without notice;
(e) exercise any remedies under the Entity Guaranty, the Security Agreement,
the Personal Guaranty, foreclose the Mortgage, foreclose any other security instrument
referred to in this Agreement and/or exercise any other rights or remedies it may have
under the Entity Guaranty, the Personal Guaranty, the Mortgage, the Security Agreement
and any other security instruments.
16. Default under Note and Security Agreement. The failure by Borrower to keep or
perform any of the terms, covenants and conditions to be kept or performed by it under this
Agreement shall constitute a default under the Note, the Security Agreement, the Mortgage 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:
Apex Embroidery Design, Inc.
th
9775 158 Circle NW
Elk River, MN 55330
Attention: ____________
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. Bindings on Successors and Assigns. Subject to the limitations on transfer
contained in this Agreement, this Agreement shall be binding upon and inure to the benefit of the
successors and assigns of the parties hereto.
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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, the
Mortgage 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 Mortgage 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, the Mortgage, or the other
documents executed in connection herewith.
24. Business Subsidies Act.
(a) In order to satisfy the provisions of Minnesota Statutes, Sections 116J.993
to 116J.995 (the “Business Subsidies Act”), the Borrower acknowledges and agrees that
the amount of the “Business Subsidy” granted to the Borrower under this Agreement is
the amount of the loan, which is $200,000, and that the Business Subsidy is needed
because the project is not sufficiently feasible for the Borrower to undertake without the
Business Subsidy. The public purpose of the Business Subsidy is to develop
manufacturing facilities, increase the tax base in the City and stimulate the creation and
retention of jobs. In consideration of the Business Subsidy provided for the Project, the
Borrower represents that it will meet the following goals (the “Goals”): the Borrower
shall relocate 18 jobs to the City of Elk River Minnesota and create 7 full-time equivalent
jobs in Elk River, Minnesota (the “City”), at the Loan Property at an hourly wage equal
to the greater of $15.00 per hour or 150% of the state or federal minimum wage,
whichever is greater (the “Jobs”), by the two (2) year anniversary of the date a certificate
of occupancy is issued for the Project (the “Benefit Date”).
(b) If none of the Goals are met, the Borrower agrees to repay all of the
Business Subsidy to the City, plus interest (“Interest”) set at the greater of 2.00% per
annum or the implicit price deflator defined in Minnesota Statutes Section 275.70,
subdivision 3, accruing from and after the date of closing on the Loan, compounded
semiannually. If the Goals are met in part, the Borrower agrees to repay a portion of the
Business Subsidy (plus Interest) determined by multiplying the Business Subsidy by a
fraction, the numerator of which is the number of Jobs in the Goals which were not
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487521v2 EL185-45
relocated and created at the wage level set forth above and the denominator of which is
25 (i.e. number of Jobs set forth in the Goals).
(c) The Borrower agrees to: (i) report the Entity Guarantor’s progress on
achieving the Goals to the City until the later of the date the Goals are met or two years
from the Benefit Date, or, if the Goals are not met, until the date the Business Subsidy is
repaid, (ii) include in the report the information required in Section 116J.994, subdivision
7 of the Business Subsidies Act on forms developed by the Minnesota Department of
Employment and Economic Development, and (iii) send completed reports to the City.
The Borrower agrees to file these reports no later than March 1 of each year commencing
March 1, 2017, and within 30 days after the deadline for meeting the Goals. The City
agrees that if it does not receive the reports, it will mail the Entity Guarantor and the
Borrower a warning within one week of the required filing date. If within 14 days of the
post marked date of the warning the reports are not made, the Borrower agrees to pay to
the City a penalty of $100 for each subsequent day until the report is filed up to a
maximum of $1,000.
(d) Pursuant to the terms of the Entity Guaranty, the Entity Guarantor has
agreed that it will continue operations in the City and maintain the Jobs for at least 5
years after the Benefit Date.
(e) Other than the loan provided pursuant to this Agreement and abatement
assistance from the City and the County, there are no other state or local government
agencies providing financial assistance for the project.
(f) There is no parent corporation of the Entity Guarantor or the Borrower.
\[Signature Pages follow\]
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487521v2 EL185-45
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.
APEX EMBROIDERY DESIGN, INC.
By:
Its: ___________________________
By:
Its: __________________________
S-1
487521v2 EL185-45
Signature Page to Loan Agreement
IN TESTIMONY WHEREOF, each of the parties hereto has caused these presents to be
effective as of the day and year first above written.
ECONOMIC DEVELOPMENT AUTHORITY
OF THE CITY OF ELK RIVER
By:
Name:
Its: President
By:
Name:
Its: Executive Director
S-2
487521v2 EL185-45
EXHIBIT A
LIST OF EQUIPMENT
\[attach list of equipment\]
S-1
487521v2 EL185-45
ENVIRONMENTAL INDEMNIFICATION AGREEMENT
THIS AGREEMENT is made as of the ___ day of October, 2016, by APEX
EMBROIDERY DESIGN, INC., a Minnesota corporation (“Borrower”), SBH PROPERTIES,
LLC, a Minnesota limited liability company (the “Entity Guarantor”) and ECONOMIC
DEVELOPMENT AUTHORITY OF THE CITY OF ELK RIVER, a public body corporate and
politic of the State of Minnesota (“Lender”).
RECITALS
A. Lender has agreed to lend to Borrower the sum of up to $200,000.00 (the
“Loan”).
B. The Loan is secured by, among other things, an Mortgage and Assignment of
Rents and Security Agreement and Fixture Financing Statement dated even herewith (the
“Mortgage”) pertaining to certain land described in the Mortgage and improvements thereon
(collectively, the “Property”) owned by the Entity Guarantor and located in Sherburne County,
Minnesota, the personal guaranty of Brian Hill, and an entity guaranty from SBH Properties, LLC.
C. Lender has refused to make the Loan to Borrower unless this Agreement is
executed and delivered by Borrower and Entity Guarantor.
AGREEMENT
NOW, THEREFORE, in consideration of Lender’s agreement to make the Loan to
Borrower, Borrower and Entity Guarantor hereby warrant and represent to, and covenant and
agreeswith, Lender as follows:
1. Definitions. As used in this Agreement, the following terms shall have the
following meanings:
(a) “Environmental Regulation” means a Law relating to the environment and/or to
human health or safety, or governing, regulating or pertaining to the generation,
treatment, storage, handling, transportation, use or disposal of any Hazardous
Substance.
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487523v1 JSB EL185-45
(b) “Hazardous Substance” means any substance or material defined in or governed
or regulated by any Environmental Regulation as a dangerous, toxic or hazardous
pollutant, contaminant, chemical, waste, material or substance, and also expressly
includes urea-formaldehyde, polychlorinated biphenyls, dioxin, radon, lead-based
paint, asbestos, asbestos containing materials, nuclear fuel or waste, radioactive
materials, explosives, carcinogens and petroleum products, including but not
limited to crude oil or any fraction thereof, natural gas, natural gas liquids,
gasoline and synthetic gas, and any other waste, material, substance, pollutant or
contaminant the presence of which on, in, about or under the Property would
subject the owner or operator thereof to any damages, penalties, fines or liabilities
under any applicable Environmental Regulation.
(c) “Law” means any federal, state or local law, statute, code, ordinance, rule,
regulation or requirement.
2. Warranties and Representations. Borrower and Entity Guarantor warrant and
represent to Lender that to Borrower’s and Entity Guarantor’s knowledge, and except as
otherwise described in documents identified on Exhibit A attached hereto:
(a) There is not located on, in, about or under the Property any Hazardous Substances
except for Hazardous Substances of the type ordinarily used, stored or
manufactured in connection with the operation of the Property as it is presently
operated, and such existing Hazardous Substances have been and are used, stored
and manufactured in compliance with all Environmental Regulations.
(b) The Property is not presently used, and has not in the past been used, as a landfill,
dump, disposal facility or gasoline station, or for industrial, manufacturing or
military purposes, or for the storage, generation, production, manufacture,
processing, treatment, disposal, handling, transportation or deposit of any
Hazardous Substances.
(c) There has not in the past been, and no present threat now exists of, a spill,
discharge, emission or release of a Hazardous Substance in, upon, under, over or
from the Property or from any other property which would have an impact on the
Property.
(d) The Property is in compliance with, and there are no past or present
investigations, administrative proceedings, litigation, regulatory hearings or other
actions completed, proposed, threatened or pending, alleging noncompliance with
or violation of, any Environmental Regulations respecting the Property, or
relating to any required environmental permits covering the Property.
(e) Borrower and Entity Guarantor have disclosed to Lender all reports and
investigations commissioned by or in the possession or control of Borrower or
Entity Guarantor and relating to Hazardous Substances and the Property.
(f) There are not now, nor have there ever been, any above ground or underground
storage tanks located in or under the Property. All storage tanks identified on
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487523v1 JSB EL185-45
Exhibit A have been registered and/or permitted as required by Environmental
Regulations, and evidence of such registration and/or permitting has been given to
Lender. There are no wells on or under the Property, except as identified on
Exhibit A.
3. Covenants and Agreements. Borrower and Entity Guarantor covenant and agree
as follows:
(a) Except for substances normally used for maintenance or operation of the Property
which are used, stored and disposed of in accordance with all applicable
Environmental Regulations and except as identified on Exhibit A, Borrower and
Entity Guarantor shall not, nor shall it permit others to, place, store, locate,
generate, produce, create, process, treat, handle, transport, incorporate, discharge,
emit, spill, release, deposit or dispose of any Hazardous Substance in, upon,
under, over or from the Property. Borrower and Entity Guarantor shall cause all
Hazardous Substances found on or under the Property, which are not permitted
under the foregoing sentence, to be properly removed therefrom and properly
disposed of at Borrower’s and Entity Guarantor’s cost and expense. Borrower
and Entity Guarantor shall not install or permit to be installed any underground
storage tank on or under the Property. Borrower and Entity Guarantor shall give
written notice to Lender prior to a change in the operations on the Property.
(b) In the event that (i) Lender reasonably believes that a violation of an
Environmental Regulation may have occurred in connection with the Property;
(ii) Lender receives notice from Borrower or Entity Guarantor or otherwise has
knowledge that an event described in subparagraph 3(d) has occurred; (iii) Lender
reasonably believes that a representation or warranty of Borrower or Entity
Guarantor in Paragraph 2 was untrue in any material respect when made or has
become untrue in any material respect; (iv) Lender receives notice from Borrower
or a Entity Guarantor or otherwise has knowledge of a change in operations on the
Property and Lender reasonably believes that the new operations may entail the
presence of more or different Hazardous Substances on the Property; or
(v) Lender reasonably believes that Hazardous Substances are present on the
Property which were not previously known by Lender to be present on the
Property; then, in any such event, Borrower and Entity Guarantor shall at their
cost obtain and deliver to Lender an environmental review, audit, assessment
and/or report relating to the Property or shall have any previously delivered
materials updated and/or amplified, by an engineer or scientist selected by
Borrower and Entity Guarantor and acceptable to Lender; if Borrower and Entity
Guarantor fail to do so within 45 days after such request is made, Lender shall
have the right to do so, in which event Borrower and Entity Guarantor shall
reimburse Lender for the cost incurred by Lender in doing so within 10 days
following demand therefor by Lender.
(c) Borrower and Entity Guarantor shall, promptly after obtaining actual knowledge
thereof, give notice to Lender of: (i) any activity in violation of any applicable
Environmental Regulations relating to the Property, (ii) any governmental or
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487523v1 JSB EL185-45
regulatory actions instituted or threatened under any Environmental Regulations
affecting the Property, (iii) all claims made or threatened by any third party
against Borrower or Entity Guarantor or the Property relating to any Hazardous
Substance or a violation of any Environmental Regulations, (iv) discovery by
Borrower pr Entity Guarantor of any occurrence or condition on or under the
Property or on or under any real property adjoining or in the vicinity of the
Property which could subject Borrower, Entity Guarantor, Lender or the Property
to a claim under any Environmental Regulations. Any such notice shall include
copies of any written materials received by Borrower or Entity Guarantor.
(d) Any investigation or any remedial or corrective action taken with respect to the
Property shall be done under the supervision of a qualified consultant, engineer or
scientist acceptable to Lender who shall, at Borrower’s and Entity Guarantor’s
cost and at the completion of such investigation or action, provide a written report
of such investigation or action to Lender. Borrower amd Entity Guarantor shall
also provide Lender with a copy of any interim reports prepared in connection
with any such investigation or action.
(e) If the Property has, or is suspected to have, asbestos or asbestos containing
materials (“ACM”) which, due to its condition or location or due to any planned
building renovation or demolition, is recommended to be abated by repair,
encapsulation, removal or other action, Borrower and Entity Guarantor shall
promptly carry out the recommended abatement action. If the recommended
abatement includes removal of ACM, Borrower and Entity Guarantor shall cause
the same to be removed and disposed of offsite by a licensed and experienced
asbestos removal contractor, all in accordance with Environmental Regulations.
Upon completion of the recommended abatement action, Borrower and Entity
Guarantor shall deliver to Lender a certificate, signed by an officer of Borrower
and Entity Guarantor and the consultant overseeing the abatement action,
certifying to Lender that the work has been completed in compliance with all
applicable laws, ordinances, codes and regulations (including without limitation
those regarding notification, removal and disposal) and that no airborne fibers
beyond permissible exposure limits remain on site.
(f) After an Event of Default (as defined in the Loan Agreement between the
Borrower and the Lender dated an even date herewith), Lender shall have the
right, after 10 days’ prior written notice to Borrower Entity Guarantor, to have an
environmental review, audit, assessment, testing program and/or report with
respect to the Property performed or prepared by an environmental engineering
firm selected by Lender. Borrower and Entity Guarantor shall provide reasonable
access to the Property to such environmental engineering firm during normal
business hours to conduct such review. Borrower and Entity Guarantor shall
reimburse Lender for the cost incurred for each such action within 10 days
following demand therefor by Lender.
4. Indemnity. The Borrower and the Entity Guarantor shall indemnify Lender, any
participant of Lender, its and their directors, officers, employees, agents, contractors, licensees,
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487523v1 JSB EL185-45
invitees, and the respective heirs, legal representatives, successors and assigns of all such persons
and parties (hereinafter collectively referred to as “Indemnified Parties”) against, shall hold the
Indemnified Parties harmless from, and shall reimburse the Indemnified Parties for, any and all
loss, damage, liability, cost and expense directly or indirectly incurred by the Indemnified
Parties, including reasonable attorneys’ and consultants’ fees, resulting from: (a) the presence or
discovery of any Hazardous Substance in, upon, under or over, or emanating from, the Property,
whether or not the Borrower or Entity Guarantor is responsible therefor, and whether or not it
was placed, located, deposited or released by the Borrower or Entity Guarantor, or (b) any
violation of any Environmental Regulation, or both (a) and (b). Borrower and Entity Guarantor
agree that the Indemnified Parties shall have no responsibility for, and Borrower and Entity
Guarantor hereby release the Indemnified Parties from responsibility for, damage or injury to
human health, property, the environment or natural resources caused by Hazardous Substances
and for abatement, clean-up, detoxification, removal or disposal of, or otherwise with respect to,
Hazardous Substances. The indemnity contained in this paragraph 4 shall be deemed continuing
for the benefit of the Indemnified Parties, including any purchaser at a foreclosure or other sale
under Mortgage, any transferee of the title from Lender, and any subsequent owner of the
Property, and shall survive the satisfaction or release of the Mortgage, any foreclosure of or other
sale under the Mortgage and/or any acquisition of title to the Property or any part thereof by
Lender, or anyone claiming by, through or under Lender, by deed in lieu of foreclosure or
otherwise, and also shall survive the repayment or any other satisfaction of the Loan.
Notwithstanding the foregoing, the indemnity contained in this paragraph 4 shall not apply with
respect to any loss, damage, liability, cost or expense which Borrower and Entity Guarantor
prove by a preponderance of the evidence was caused solely by or resulted solely from any act or
omission of any person, other than the Borrower and Entity Guarantor or an agent, employee,
invitee, guarantor, or contractor of the Borrower or the Entity Guarantor, which occurred after
Lender or anyone claiming by, through or under Lender acquired title to the Property by
foreclosure of Mortgage or deed in lieu of foreclosure or otherwise and control of the Property.
Any amounts covered by the foregoing indemnification shall bear interest from the date incurred
at the rate set forth in the promissory note evidencing the Loan, and shall be payable on demand.
Borrower and Entity Guarantor agree that their obligations under this Agreement are separate
from, independent of, and in addition to their obligations, if any, under the Mortgage and other
documents which secure the Loan.
5. Liability. The liability of Borrower and Entity Guarantor under this Agreement
shall not be subject to any limitations on liability set forth any document evidencing or securing
the Loan. Without limitation, the obligations and liability of Borrower and Entity Guarantor
under this Agreement shall in no way be waived, released, discharged, reduced, mitigated or
otherwise affected by Lender’s making of the Loan with knowledge of the matters described in
documents identified on Exhibit A attached hereto, or of the presence of any Hazardous
Substance on, in, about or under the Property or any property adjoining or in the vicinity of the
Property, or of any violation of any Environmental Regulation or any condition or state of facts
or circumstances which with notice or lapse of time or both might ripen into such a violation, or
by any neglect, delay or forbearance of Lender in demanding, requiring or enforcing payment or
performance of the obligations and liability of Borrower and Entity Guarantor hereunder, or by
the receivership, bankruptcy, insolvency or dissolution of Borrower, the Entity Guarantor, or any
affiliate thereof. No action or proceeding brought or instituted under this Agreement, and no
recovery made as a result thereof, shall be a bar or a defense to any further action or proceeding
5
487523v1 JSB EL185-45
under any other agreement. Borrower and Entity Guarantor shall reimburse Lender and the other
Indemnified Parties for all attorneys’ fees and expenses incurred in connection with the
enforcement of the Indemnified Parties’ rights under this Agreement, including those incurred in
any case, action, proceeding or claim under the Federal Bankruptcy Code or any successor
statute.
6. Notices. Any notice or other communication to any party in connection with this
Agreement shall be in writing and shall be sent in accordance with the provisions of the Loan
Agreement.
7. Governing Law and Construction. The validity, construction and enforceability
of this Agreement shall be governed by the laws of the State of Minnesota, without giving effect
to conflict of laws or principles thereof, but giving effect to federal laws of the United States
applicable to national banks. Whenever possible, each provision of this Agreement and any
other statement, instrument or transaction contemplated hereby or relating hereto, shall be
interpreted in such manner as to be effective and valid under such applicable law, but, if any
provision of this Agreement or any other statement, instrument or transaction contemplated
hereby or relating hereto shall be held to be prohibited or invalid under such applicable law, such
provision shall be ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this Agreement or
any other statement, instrument or transaction contemplated hereby or relating hereto.
8. Consent to Jurisdiction. At the option of Lender, this Agreement may be enforced
in any Federal Court or State Court sitting in Sherburne County, Minnesota; and Borrower and
Entity Guarantor consent to the jurisdiction and venue of any such Court and waives any
argument that venue in such forums is not convenient. In the event Borrower or Entity
Guarantor commence any action in another jurisdiction or venue under any tort or contract
theory arising directly or indirectly from the relationship created by this Agreement, Lender at its
option shall be entitled to have the case transferred to one of the jurisdictions and venues above-
described, or if such transfer cannot be accomplished under applicable law, to have such case
dismissed without prejudice.
9. Waiver of Jury Trial. Borrower, Entity Guarantor and Lender irrevocably waive
any and all right to trial by jury in any legal proceeding arising out of or relating to this
Agreement or any of the Loan documents (as that term is used in the Loan Agreement) or the
transactions contemplated hereby or thereby.
10. Binding Effect; Gender. This Agreement shall inure to the benefit of Lender, and
the Indemnified Parties, and shall bind Borrower, Entity Guarantor and theirs heirs; executors,
administrators, personal representatives, legal representatives, successors and assigns. The
obligations of Borrower and Entity Guarantor under this Agreement shall be enforceable in all
events against Borrower, Entity Guarantor, their heirs, executors, administrators, personal
representatives, legal representatives, successors and assigns, and each of them, jointly and
severally, and shall be enforceable, in the event of the death of a Borrower or Entity Guarantor,
as a claim against his or her estate or otherwise against the representatives of his or her estate,
the heirs-at-law, the devisees and beneficiaries of the total estate and each of them. The use of
any gender herein shall include all other genders.
6
487523v1 JSB EL185-45
11. Counterparts. This Agreement may be executed in any number of counterparts,
each executed counterpart constituting an original, but all together only one agreement.
\[signature pages follow\]
7
487523v1 JSB EL185-45
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first
above written.
BORROWER:
APEX EMBROIDERY DESIGN, INC.
By:
Its: __________________________
By:
Its: __________________________
STATE OF MINNESOTA )
) ss.
COUNTY OF ________ )
The foregoing instrument was acknowledged before me on ______________, 2016, by
______________ and ____________, __________ and _____________, respectively, of Apex
Embroidery Design, Inc., a Minnesota corporation, on behalf of the corporation.
Notary Public
My Commission Expires:
S-2
487523v1 JSB EL185-45
ENTITY GUARANTOR:
SBH PROPERTIES, LLC
By:
Its: __________________________
By:
Its: __________________________
STATE OF MINNESOTA )
) ss.
COUNTY OF ________ )
The foregoing instrument was acknowledged before me on ______________, 2016, by
______________ and ____________, __________ and _____________, respectively, of SBH
Properties, LLC, a Minnesota limited liability company, on behalf of the company.
Notary Public
My Commission Expires:
S-2
487523v1 JSB EL185-45
LENDER:
ECONOMIC DEVELOPMENT
AUTHORITY OF THE CITY OF ELK
RIVER
By:
Its: President
By:
Its: Executive Director
STATE OF MINNESOTA )
) ss.
COUNTY OF ________ )
The foregoing instrument was acknowledged before me on ______________, 2016, by
____________, the President, and ____________, the Executive Director, of the Economic
Development Authority of the City of Elk River, a public body corporate and politic of the State
of Minnesota, on behalf of the corporation.
Notary Public
My Commission Expires:
This Instrument was drafted by:
Kennedy & Graven, Chartered (JSB)
470 U.S. Bank Plaza
200 South Sixth Street
Minneapolis, Minnesota 55402
Telephone: (612) 337-9300
S-3
487523v1 JSB EL185-45
EXHIBIT A
Environmental Disclosure Documents
\[Borrower to insert\]
A-1
487523v1 JSB EL185-45
ENTITY GUARANTY
(Forgivable Loan Program)
Elk River, Minnesota
October __, 2016
FOR VALUABLE CONSIDERATION, the receipt and sufficiency of which is hereby
acknowledged, and in consideration of and to induce financial accommodations of any kind, with
or without security, given or to be given or continued at any time and from time to time by the
ECONOMIC DEVELOPMENT AUTHORITY OF THE CITY OF ELK RIVER (the “Lender”)
to or for the account of APEX EMBROIDERY & DESIGN, INC. (the “Borrower”), SBH
PROPERTIES, LLC (the “Entity Guarantor”) absolutely and unconditionally guarantees to the
Lender the full and prompt payment when due, whether at maturity or earlier by reason of
acceleration or otherwise, of any and all indebtedness, obligations and liabilities of the Borrower
(and any and all successors of the Borrower) to the Lender, now or hereafter existing, absolute or
contingent, independent, joint, several or joint and several, secured or unsecured, due or to
become due, contractual or tortious, liquidated or unliquidated, arising by assignment or
otherwise, including without limitation all indebtedness, obligations and liabilities owed by the
Borrower (and any and all successors of the Borrower) as a member of any partnership,
syndicate, association or other group, and whether incurred by the Borrower (or any successor of
the Borrower) as principal, surety, endorser, guarantor, accommodation party or otherwise
(collectively, the “Indebtedness”); and the Entity Guarantor agrees to pay on demand all of the
Lender’s fees, costs, expenses and reasonable attorneys’ fees in connection with the
Indebtedness, any security therefor, and this guaranty, plus interest on such amounts at the
highest rate then applicable to any of the Indebtedness.
The Lender may at any time and from time to time, without consent of or notice to the
Entity Guarantor, without incurring responsibility to the Entity Guarantor, without releasing,
impairing or affecting the liability of the Entity Guarantor hereunder, upon or without any terms
or conditions, and in whole or in part: (1) sell, pledge, surrender, compromise, settle, release,
renew, subordinate, extend, alter, substitute, exchange, change, modify or otherwise dispose of
or deal with in any manner and in any order any Indebtedness, any evidence thereof, or any
security or other guaranty therefor; (2) accept any security for, or other guarantors of, any
Indebtedness; (3) fail, neglect or omit to obtain, realize upon or protect any Indebtedness or any
security therefor, to exercise any lien upon or right to any money, credit or property toward the
liquidation of the Indebtedness, or to exercise any other right against the Borrower, the Entity
Guarantor, any other guarantor or any other person; and (4) apply any payments and credits to
the Indebtedness in any manner and in any order. No act, omission or thing, except full payment
and discharge of the Indebtedness, which but for this provision could act as a release or
impairment of the liability of the Entity Guarantor hereunder, shall in any way release, impair or
otherwise affect the liability of the Entity Guarantor hereunder, and the Entity Guarantor waives
any and all defenses of the Borrower pertaining to the Indebtedness, any evidence thereof, and
any security therefor, except the defense of discharge by payment. The failure of any person or
persons to sign this or any other guaranty shall not release, impair or affect the liability of the
Entity Guarantor hereunder. This guaranty is a primary obligation of the Entity Guarantor and
1
487520v1 EL185-45
the Lender shall not be required to first resort for payment of the Indebtedness to the Borrower or
any other person, their properties or estates, or any security or other rights or remedies
whatsoever. The Entity Guarantor shall be and remain liable for any deficiency remaining after
foreclosure of any mortgage or security interest securing the Indebtedness, whether or not the
liability of the Borrower or any other person for such deficiency is discharged pursuant to statute,
judicial decision or otherwise.
The liability of the Entity Guarantor under this guaranty is in addition to and shall be
cumulative with all other liabilities of the Entity Guarantor to the Lender, as guarantor or
otherwise, without any limitation as to amount, unless the writing evidencing or creating such
other liability specifically provides to the contrary. If any payment applied by the Lender to the
Indebtedness is thereafter set aside, recovered, rescinded or required to be returned for any
reason (including without limitation the bankruptcy, insolvency or reorganization of the
Borrower or any other person), the Indebtedness to which such payment was applied shall for the
purposes of this guaranty be deemed to have continued in existence, notwithstanding such
application, and this guaranty shall be enforceable as to such Indebtedness as fully as if such
application had never been made.
The Entity Guarantor waives: (1) notice of acceptance of this guaranty and of the creation
and existence of the Indebtedness; (2) presentment, demand for payment, notice of dishonor,
notice of nonpayment, and protest of any instrument evidencing the Indebtedness; and (3) all
other demands and notices to the Entity Guarantor or any other person and all other actions to
establish the liability of the Entity Guarantor hereunder. The Entity Guarantor consents to the
personal jurisdiction of the state and federal courts located in the State of Minnesota in
connection with any controversy related to this guaranty, waives any argument that venue in
such forums is not convenient, and agrees that any litigation initiated by the Entity Guarantor
against the Lender in connection with this guaranty shall be venued in either the District Court of
Sherburne County, Minnesota, or the United States District Court, District of Minnesota.
All property of the Entity Guarantor, now or hereafter in the possession, control or
custody of or in transit to the Lender for any purpose, including without limitation the balance of
every account of the Entity Guarantor with and each claim of the Entity Guarantor against the
Lender, shall be subject to a lien and security interest in favor of the Lender, as security for all
liabilities of the Entity Guarantor to the Lender, and shall be subject to be set off against any and
all such liabilities, and the Lender may at any time and from time to time at its option and
without notice appropriate and apply any such property toward the payment of any and all such
liabilities. The Entity Guarantor agrees to promptly provide the Lender from time to time with
financial statements of the Entity Guarantor, in form and substance acceptable to the Lender, at
least once every 12 months and as otherwise requested by the Lender. The Entity Guarantor
agrees to promptly provide the Lender from time to time with such other information respecting
the condition (financial and otherwise), business and property of the Entity Guarantor as the
Lender may request, in form and substance acceptable to the Lender.
The Entity Guarantor waives all claims, rights and remedies which the Entity Guarantor
may now have or hereafter acquire against any person at any time now or hereafter liable to
payment of any of the Indebtedness and as to any collateral security, including but not limited to
2
487520v1 EL185-45
all claims, rights and remedies of contribution, indemnification, exoneration, reimbursement,
recourse and subrogation, whether or not such claim, right or remedy arises in equity, under
contract, by statute, under common law or otherwise, whether or not the Indebtedness has been
fully paid, and all payments and recoveries under this guaranty shall be considered equity
investments by the Entity Guarantor in the Borrower; provided, nothing contained in this
guaranty shall deprive the Entity Guarantor of any claim, right or remedy, after the Indebtedness
has been fully paid, against any person other than the Borrower. No delay or failure by the
Lender in exercising any right, and no partial or single exercise thereof shall constitute a waiver
thereof. No waiver of any rights hereunder, and no modification or amendment of this guaranty
shall be effective unless the same is in writing duly executed by the Lender, and each such
waiver, if any, shall apply only with respect to the specific instance involved and shall not impair
or affect the rights of the Lender or the provisions of this guaranty in any other respect at any
other time. This guaranty shall continue until written notice of revocation of this guaranty,
executed by the Entity Guarantor, has been received by the Lender; provided, no revocation of
this guaranty shall affect in any manner any liability of the Entity Guarantor under this guaranty
with respect to Indebtedness arising before the Lender receives such written notice of revocation,
and the sole effect of revocation of this guaranty shall be to exclude from this guaranty
Indebtedness thereafter arising which is unconnected with Indebtedness theretofore arising or
transactions theretofore entered into.
Any invalidity or unenforceability of any provision or application of this guaranty shall
not affect other lawful provisions and applications hereof and to this end the provisions of this
guaranty are declared to be severable. This guaranty shall bind the Entity Guarantor and the
representatives, successors and assigns of the Entity Guarantor, and of each of them respectively,
and shall benefit the Lender, its successors and assigns. This guaranty shall be governed by and
construed in accordance with the laws of the State of Minnesota.
The undersigned is the owner of the real property commonly known as
__________________, Sherburne County, Minnesota (the “Property”). Upon completion of
certain improvements to the Property, Borrower will be the tenant of the Property, pursuant to a
written lease with the undersigned (the “Lease”). Borrower and the undersigned are under
common ownership. The undersigned acknowledges and agrees that the Indebtedness is being
utilized by Borrower to finance the acquisition, construction and equipping of a facility for use in
its business operations from the Property, and such equipment will support Borrower’s ability to
fulfill its obligations under the Lease and, therefore, the undersigned's obligations under this
Entity Guaranty are proper, valid and enforceable. This Entity Guaranty has been approved by
unanimous consent of the board of governors of the undersigned.
3
487520v1 EL185-45
THE ENTITY GUARANTOR REPRESENTS, CERTIFIES, WARRANTS AND
AGREES THAT THE UNDERSIGNED HAVE READ ALL OF THIS GUARANTY AND
UNDERSTAND ALL OF THE PROVISIONS OF THIS GUARANTY. THE ENTITY
GUARANTOR ALSO AGREES THAT COMPLIANCE BY THE LENDER WITH THE
EXPRESS PROVISIONS OF THIS GUARANTY SHALL CONSTITUTE GOOD FAITH AND
SHALL BE CONSIDERED REASONABLE FOR ALL PURPOSES.
SBH PROPERTIES, LLC
a Minnesota limited liability company
By:
Its: _______________________________________
4
487520v1 EL185-45
PERSONAL GUARANTY
Brian Hill
(Forgivable Loan Program)
Elk River, Minnesota
October __, 2016
FOR VALUABLE CONSIDERATION, the receipt and sufficiency of which is hereby
acknowledged, and in consideration of and to induce financial accommodations of any kind, with
or without security, given or to be given or continued at any time and from time to time by the
ECONOMIC DEVELOPMENT AUTHORITY OF THE CITY OF ELK RIVER (the “Lender”)
to or for the account of APEX EMBROIDERY DESIGN, INC. (the “Borrower”), the
undersigned absolutely and unconditionally guaranties to the Lender the full and prompt
payment when due, whether at maturity or earlier by reason of acceleration or otherwise, of any
and all indebtedness, obligations and liabilities of the Borrower (and any and all successors of
the Borrower) to the Lender, now or hereafter existing, absolute or contingent, independent,
joint, several or joint and several, secured or unsecured, due or to become due, contractual or
tortious, liquidated or unliquidated, arising by assignment or otherwise, including without
limitation all indebtedness, obligations and liabilities owed by the Borrower (and any and all
successors of the Borrower) as a member of any partnership, syndicate, association or other
group, and whether incurred by the Borrower (or any successor of the Borrower) as principal,
surety, endorser, guarantor, accommodation party or otherwise (collectively, the
“Indebtedness”); and the undersigned agrees to pay on demand all of the Lender’s fees, costs,
expenses and reasonable attorneys’ fees in connection with the Indebtedness, any security
therefor, and this guaranty, plus interest on such amounts at the highest rate then applicable to
any of the Indebtedness.
The Lender may at any time and from time to time, without consent of or notice to the
undersigned, without incurring responsibility to the undersigned, without releasing, impairing or
affecting the liability of the undersigned hereunder, upon or without any terms or conditions, and
in whole or in part: (1) sell, pledge, surrender, compromise, settle, release, renew, subordinate,
extend, alter, substitute, exchange, change, modify or otherwise dispose of or deal with in any
manner and in any order any Indebtedness, any evidence thereof, or any security or other
guaranty therefor; (2) accept any security for, or other guarantors of, any Indebtedness; (3) fail,
neglect or omit to obtain, realize upon or protect any Indebtedness or any security therefor, to
exercise any lien upon or right to any money, credit or property toward the liquidation of the
Indebtedness, or to exercise any other right against the Borrower, the undersigned, any other
guarantor or any other person; and (4) apply any payments and credits to the Indebtedness in any
manner and in any order. No act, omission or thing, except full payment and discharge of the
Indebtedness, which but for this provision could act as a release or impairment of the liability of
the undersigned hereunder, shall in any way release, impair or otherwise affect the liability of the
undersigned hereunder, and the undersigned waives any and all defenses of the Borrower
pertaining to the Indebtedness, any evidence thereof, and any security therefor, except the
defense of discharge by payment. The failure of any person or persons to sign this or any other
487524v1 EL185-45
guaranty shall not release, impair or affect the liability of the undersigned hereunder. This
guaranty is a primary obligation of the undersigned and the Lender shall not be required to first
resort for payment of the Indebtedness to the Borrower or any other person, their properties or
estates, or any security or other rights or remedies whatsoever. The undersigned shall be and
remain liable for any deficiency remaining after foreclosure of any mortgage or security interest
securing the Indebtedness, whether or not the liability of the Borrower or any other person for
such deficiency is discharged pursuant to statute, judicial decision or otherwise.
The liability of the undersigned under this guaranty is in addition to and shall be
cumulative with all other liabilities of the undersigned to the Lender, as guarantor or otherwise,
without any limitation as to amount, unless the writing evidencing or creating such other liability
specifically provides to the contrary. If any payment applied by the Lender to the Indebtedness is
thereafter set aside, recovered, rescinded or required to be returned for any reason (including
without limitation the bankruptcy, insolvency or reorganization of the Borrower or any other
person), the Indebtedness to which such payment was applied shall for the purposes of this
guaranty be deemed to have continued in existence, notwithstanding such application, and this
guaranty shall be enforceable as to such Indebtedness as fully as if such application had never
been made.
The undersigned waives: (1) notice of acceptance of this guaranty and of the creation and
existence of the Indebtedness; (2) presentment, demand for payment, notice of dishonor, notice
of nonpayment, and protest of any instrument evidencing the Indebtedness; and (3) all other
demands and notices to the undersigned or any other person and all other actions to establish the
liability of the undersigned hereunder. The undersigned consents to the personal jurisdiction of
the state and federal courts located in the State of Minnesota in connection with any controversy
related to this guaranty, waives any argument that venue in such forums is not convenient, and
agrees that any litigation initiated by the undersigned against the Lender in connection with this
guaranty shall be venued in either the District Court of Sherburne County, Minnesota, or the
United States District Court, District of Minnesota.
All property of the undersigned, now or hereafter in the possession, control or custody of
or in transit to the Lender for any purpose, including without limitation the balance of every
account of the undersigned with and each claim of the undersigned against the Lender, shall be
subject to a lien and security interest in favor of the Lender, as security for all liabilities of the
undersigned to the Lender, and shall be subject to be set off against any and all such liabilities,
and the Lender may at any time and from time to time at its option and without notice
appropriate and apply any such property toward the payment of any and all such liabilities. The
undersigned agrees to promptly provide the Lender from time to time with financial statements
of the undersigned, in form and substance acceptable to the Lender, at least once every 12
months and as otherwise requested by the Lender. The undersigned agrees to promptly provide
the Lender from time to time with such other information respecting the condition (financial and
otherwise), business and property of the undersigned as the Lender may request, in form and
substance acceptable to the Lender.
The undersigned waives all claims, rights and remedies which the undersigned may now
have or hereafter acquire against any person at any time now or hereafter liable to payment of
2
487524v1 EL185-45
any of the Indebtedness and as to any collateral security, including but not limited to all claims,
rights and remedies of contribution, indemnification, exoneration, reimbursement, recourse and
subrogation, whether or not such claim, right or remedy arises in equity, under contract, by
statute, under common law or otherwise, whether or not the Indebtedness has been fully paid,
and all payments and recoveries under this guaranty shall be considered equity investments by
the undersigned in the Borrower; provided, nothing contained in this guaranty shall deprive the
undersigned of any claim, right or remedy, after the Indebtedness has been fully paid, against any
person other than the Borrower. No delay or failure by the Lender in exercising any right, and
no partial or single exercise thereof shall constitute a waiver thereof. No waiver of any rights
hereunder, and no modification or amendment of this guaranty shall be effective unless the same
is in writing duly executed by the Lender, and each such waiver, if any, shall apply only with
respect to the specific instance involved and shall not impair or affect the rights of the Lender or
the provisions of this guaranty in any other respect at any other time. This guaranty shall
continue until written notice of revocation of this guaranty, executed by the undersigned, has
been received by the Lender; provided, no revocation of this guaranty shall affect in any manner
any liability of the undersigned under this guaranty with respect to Indebtedness arising before
the Lender receives such written notice of revocation, and the sole effect of revocation of this
guaranty shall be to exclude from this guaranty Indebtedness thereafter arising which is
unconnected with Indebtedness theretofore arising or transactions theretofore entered into.
Any invalidity or unenforceability of any provision or application of this guaranty shall
not affect other lawful provisions and applications hereof and to this end the provisions of this
guaranty are declared to be severable. This guaranty shall bind the undersigned and the heirs,
representatives, successors and assigns of the undersigned, and of each of them respectively, and
shall benefit the Lender, its successors and assigns. This guaranty shall be governed by and
construed in accordance with the laws of the State of Minnesota.
The undersigned is an owner of the Borrower and the undersigned acknowledges and agrees that
the Indebtedness is being utilized by the Borrower to acquire land and construct and equip a new
th
manufacturing facility on real property located at 9775 158 Circle, NW, Elk River, Minnesota
55330 (the “Property”), and such acquisition and construction will materially financially benefit
the undersigned and, therefore, the undersigned’s obligations under this Guaranty are proper,
valid and enforceable.
THE UNDERSIGNED REPRESENTS, CERTIFIES, WARRANTS AND AGREES
THAT THE UNDERSIGNED HAS READ ALL OF THIS GUARANTY AND UNDERSTAND
ALL OF THE PROVISIONS OF THIS GUARANTY. THE UNDERSIGNED ALSO AGREES
THAT COMPLIANCE BY THE LENDER WITH THE EXPRESS PROVISIONS OF THIS
GUARANTY SHALL CONSTITUTE GOOD FAITH AND SHALL BE CONSIDERED
REASONABLE FOR ALL PURPOSES.
Brian Hill
3
487524v1 EL185-45
MORTGAGE
AND
ASSIGNMENT OF RENTS
AND
SECURITY AGREEMENT
AND
FIXTURE FINANCING STATEMENT
(Forgivable Loan Program)
This Mortgage and Assignment of Rents and Security Agreement and Fixture Financing
Statement (“Mortgage”) is made as of October __, 2016, by SBH PROPERTIES, LLC, a
Minnesota limited liability company (“Mortgagor”), in favor of the ECONOMIC
DEVELOPMENT AUTHORITY OF THE CITY OF ELK RIVER, a public body corporate and
politic of the State of Minnesota (“Mortgagee”).
THE MAXIMUM AMOUNT SECURED BY THIS MORTGAGE IS $200,000.00 OF
PRINCIPAL INDEBTEDNESS, TOGETHER WITH ALL INTEREST ACCRUING
THEREON AND ANY AMOUNTS WHICH MAY BE ADVANCED BY MORTGAGEE IN
PROTECTION OF THE MORTGAGED PREMISES OR THE LIEN OF THIS MORTGAGE.
RECITALS
A. Apex Design & Embroidery, Inc. (the “Borrower”) has executed and delivered to
Mortgagee a Promissory Note effective as of the date hereof in the principal amount of
$200,000.00 and bearing interest at the rate set forth therein, with principal being due and
payable as set forth therein and with all principal and interest, if not sooner paid, being due and
payable on ___________, 202_ (the Promissory Note as the same may be renewed, extended,
replaced, modified or amended is herein called the “Note”). The proceeds of the Note are being
utilized to pay a portion of the acquisition of land and the construction and equipping of a new
manufacturing facility on the Mortgaged Property (as defined below).
B. Contemporaneous herewith, Borrower has entered into that certain loan
agreement (the “Loan Agreement”) setting forth the terms and conditions of Mortgagor and
Lender’s obligations with relation to this loan facility.
487519v1 EL185-45
C. Mortgagor is the owner of the Mortgaged Property and is the landlord under that
certain unrecorded lease dated ___________, 2016, with the Borrower as tenant leasing a portion
of the Mortgaged Property to the Borrower.
D. As a condition of entering into the loan facility, Lender has required that
Mortgagor provide an “Entity Guaranty” of Borrower’s obligations under Note, the Loan
Agreement and any other documents relating to or arising from this loan facility. Lender further
required that Mortgagor’s obligations under the Entity Guaranty be secured by this Mortgage.
NOW THEREFORE, in consideration of the Recitals and for the purpose of securing the
payment and performance of all of Mortgagor’s obligations under the Entity Guaranty
(collectively “Obligations”); and to secure the performance of all covenants, conditions and
agreements herein and in the Entity Guaranty, Mortgagor does hereby mortgage, grant, bargain,
sell, release and convey unto Mortgagee, with power of sale, forever all of Mortgagor’s right,
title and interest in all the tracts or parcels of land lying and being in Sherburne County,
Minnesota, legally described in Exhibit A hereto, (hereinafter the “Land”), whether now owned
or hereafter acquired, together with: (i) all building materials, supplies and equipment now or
hereafter located on the Land and suitable or intended to be incorporated in any building,
structure, or other improvement located or to be erected on the Land; and (ii) all of the buildings,
structures and other improvements now standing or at any time hereafter constructed or placed
upon the Land; and (iii) all heating, plumbing and lighting apparatus, motors, engines, and
machinery, electrical equipment, incinerator apparatus, air conditioning equipment, water and
gas apparatus, pipes, faucets, and all other fixtures of every description which are now or may
hereafter be placed or used upon the Land or in any building or improvement now or hereafter
located thereon; and (iv) all additions, accessions, increases, parts, fittings, accessories,
replacements, substitutions, betterments, repairs and proceeds to any and all of the foregoing;
and (v) all hereditaments, easements, appurtenances, estates, rents, issues, profits, condemnation
awards, proceeds of policies of insurance and other rights and interests now or hereafter
belonging or in any way pertaining to the Land or to any building or improvement now or
hereafter located thereon; and (vi) all leases or other occupancy agreements now or hereafter in
effect in any way appertaining to the Land or to any building or improvement now or hereafter
located thereon, including, without limitation, all cash and security deposits, advance rentals and
deposits or payments of a similar nature (“Leases”), and all Rents (as herein defined) (all of the
foregoing, together with the Land, hereinafter being referred to as the “Property” or “Mortgaged
Property”),
TO HAVE AND TO HOLD the Mortgaged Property unto Mortgagee forever;
PROVIDED, NEVERTHELESS, that this Mortgage is given upon the express condition
that if Mortgagor shall cause to be paid and performed all of the Obligations, and shall also keep
and perform all and singular the covenants herein contained on the part of Mortgagor to be kept
and performed, then the Mortgage and the estate hereby granted shall cease and be and become
void and shall be released of record at the expense of Mortgagor; otherwise this Mortgage shall
be and remain in full force and effect.
MORTGAGOR REPRESENTS, WARRANTS AND COVENANTS to and with
Mortgagee that Mortgagor has good right and full power and authority to execute this Mortgage
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and to mortgage the Mortgaged Property; that the Mortgaged Property is free from all liens and
encumbrances except a mortgage in favor of the Bank of Elk River in the amount of
$___________ (the “First Lien Mortgage”) and those other certain permitted encumbrances
identified in Exhibit B hereto (the “Permitted Encumbrances”); that Mortgagee shall quietly
enjoy and possess the Mortgaged Property; that Mortgagor will warrant and defend the title to
the Mortgaged Property against all claims, whether now existing or hereafter arising. The
covenants and warranties of this paragraph shall survive foreclosure of this Mortgage and shall
run with the Land.
AND IT IS FURTHER COVENANTED AND AGREED AS FOLLOWS:
ARTICLE ONE
GENERAL COVENANTS, AGREEMENTS, WARRANTIES
1.1. Payment of Obligations; Observance of Covenants. Mortgagor will duly pay and
perform its Obligations and will perform all other agreements and covenants by Mortgagor to be
performed hereunder.
1.2. Payment of Impositions. Mortgagor agrees to pay, before a penalty might attach
for nonpayment thereof, all taxes, assessments, water and sewer charges, and other fees, taxes
and charges of whatsoever nature levied upon or assessed or placed against the Mortgaged
Property (collectively “Impositions”). Mortgagor will likewise pay all taxes, assessments and
other charges, levied upon or assessed, placed or made against, or measured by, this Mortgage,
or the recordation hereof, or the Obligations, provided that Mortgagor shall not be obliged to pay
such tax, assessment or charge if such payment would be contrary to law or would result in the
payment of an usurious rate of interest on the Obligations. Mortgagor shall promptly furnish to
Mortgagee all notices received by Mortgagor of amounts due under this Section and upon
Mortgagee’s request, shall deliver proper receipts evidencing the payment of such amounts. In
the event of a judicial decree or legislative enactment after the date of this Mortgage, providing
that any such imposition may not be lawfully paid by Mortgagor, or in the event that the payment
of any such imposition by Mortgagor would result in the payment of a usurious rate of interest
on the Obligations, the Obligations, together with interest, shall become immediately due and
payable, or, at Mortgagee’s option, Mortgagee may pay any amount or portion of such
Imposition as renders the Obligations unlawful or usurious, in which event Mortgagor shall
concurrently therewith pay the remaining lawful and non-usurious portion or balance of said
Imposition.
1.3. Payment of Operating Costs; Mortgages and Liens. Mortgagor agrees that it will
pay, or cause to be paid, all operating costs and expenses of the Mortgaged Property; keep the
Mortgaged Property free from mechanics’ and material suppliers’ and other liens, subject to
Mortgagor’s right to contest in good faith as set forth in Section 1.4 hereof; will keep the
Mortgaged Property free from levy, execution or attachment and will immediately pay when due
all indebtedness which may be secured by mortgage, lien or charge on the Mortgaged Property
and upon request will exhibit to Mortgagee satisfactory evidence of such payment and discharge.
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1.4. Contest of Impositions, Liens and Levies. Mortgagor shall not be required to pay,
discharge or remove any Imposition, lien or levy so long as Mortgagor shall in good faith contest
the same or the validity thereof by appropriate legal proceedings which shall operate to prevent
the collection of the levy, lien or Imposition so contested and the sale of the Mortgaged Property,
or any part thereof to satisfy the same; provided, however, that Mortgagor, prior to the date such
levy, lien or Imposition is due and payable or, in the case of a mechanic’s lien or other
involuntary lien within (30) days after the same shall have been filed, shall have given such
reasonable security as may be demanded by Mortgagee to ensure such payments and any
penalties and interest that may accrue thereon and prevent any sale or forfeiture of the
Mortgaged Property by reason of such nonpayment. Any such contest shall be prosecuted with
due diligence and Mortgagor shall promptly after final determination thereof pay the amount of
any such levy, lien or Imposition so determined, together with all interest and penalties, which
may be payable in connection therewith. Notwithstanding the provisions of this Section,
Mortgagor shall, and Mortgagee may (but shall have no obligation to), pay any such levy, lien or
Imposition notwithstanding such contest if in the reasonable opinion of Mortgagee, the
Mortgaged Property is in jeopardy or in danger of being forfeited or foreclosed.
1.5. Maintenance and Repairs; Inventory. Mortgagor agrees that it will keep and
maintain (or cause to be kept and maintained) the Mortgaged Property in good condition and
repair, free from any waste or misuse, and will comply with all requirements of law, municipal
ordinances and regulations, restrictions and covenants affecting the Mortgaged Property and its
use, and will promptly repair or restore any buildings, improvements or structures now or
hereafter on the Mortgaged Property which may become damaged or destroyed. Mortgagor
further agrees that without the prior consent of Mortgagee it will not remove from the Mortgaged
Property any fixtures or any personal property that is included in the Mortgaged Property unless
the same is immediately replaced with like fixtures or personal property of at least equal value,
or is otherwise removable under Section 6.1 hereof; or expand any improvements on the
Mortgaged Property, erect any new improvements or make any material alterations in any
improvements which will materially alter the basic structure, materially and adversely affect the
market value or materially change the existing architectural character of the Mortgaged Property.
Mortgagor agrees that it will complete within a reasonable time any buildings now or at any time
in the process of erection on the Mortgaged Property. Mortgagor agrees not to acquiesce in any
rezoning classification, modification or restriction affecting the Mortgaged Property without
Mortgagee’s prior written consent. Mortgagor agrees that it will not abandon the Mortgaged
Property. Upon request of Mortgagee, Mortgagor shall deliver to Mortgagee an inventory in
detail reasonably acceptable to Mortgagee of any personal property owned by Mortgagor that is
included in the Mortgaged Property pursuant to the terms hereof together with a certification by
Mortgagor that said inventory is a true and complete schedule of the personal property to be
included in the Mortgaged Property pursuant to the terms hereof. Such inventory shall list any
conditional sales contracts and other title retention arrangements to which such personal property
may be subject.
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1.6. Insurance.
(a) So long as the Obligations remain unpaid, Mortgagor shall, at its own cost,
maintain or cause to be maintained with insurers of recognized responsibility acceptable
to Mortgagee the following insurance:
(i) hazard and fire insurance on the improvements now existing or
hereafter constructed on the Land insuring against loss by fire, hazards included
in the term “extended coverage,” loss by vandalism or malicious mischief, and
such other hazards, casualties and contingencies as may be required by
Mortgagee, on the basis of replacement cost without a coinsurance clause, in an
amount equal to the full replacement cost thereof (without deduction for
depreciation) or such additional amounts and for such periods as may be required
by Mortgagee;
(ii) comprehensive general public liability insurance covering the
liability of Mortgagor against claims for bodily injury, death or property damage
occurring on or about the Mortgaged Property in such minimum amounts and
limits as Mortgagee may require but in no event, less than $2,000,000.00
combined single limit per occurrence and naming Mortgagee as an additional
insured;
(iii) insurance covering the Mortgaged Property against loss or damage
by explosion, rupture or bursting of steam boilers, steam pipes, steam turbines,
steam engines or pressure vessels or fly wheels located on or a part of the
Mortgaged Property and providing for full repair and full replacement cost
coverage; and
(iv) such other forms of insurance in such minimum amounts as
Mortgagee may reasonably require or as may be required by law.
Mortgagor shall pay or cause to be paid all premiums on insurance required
hereunder by making payment directly to the insurer. Mortgagee shall have the
right to hold the policies and renewals thereof, and Mortgagor shall promptly
furnish to Mortgagee all such policies, renewals thereof, renewal notices and all
paid-premium receipts received by it. All policies of insurance and any and all
refunds of unearned premiums are hereby assigned to Mortgagee as additional
security for the payment of the Obligations secured hereby. In the event of
foreclosure of this Mortgage, all right, title and interest of Mortgagor in and to
any insurance policies then in force shall pass to the purchaser at the foreclosure
sale.
(b) The policies of all such insurance shall have mortgagee and loss payable
provisions in favor of Mortgagee. All such insurance shall be in form acceptable to
Mortgagee, shall provide for at least thirty (30) days’ prior written notice of cancellation,
termination or modification thereof to Mortgagee, shall permit Mortgagee to make
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487519v1 EL185-45
premium payments to prevent cancellation, and shall provide that no act or negligence of
Mortgagor or of any occupant of the Mortgaged Property, and no occupancy or use of the
Mortgaged Property for purposes more hazardous than permitted by the terms of the
policy, will affect the validity or enforceability of such insurance as against Mortgagee.
In the event of loss under such insurance Mortgagor shall give prompt notice to the
insurance carrier and Mortgagee; Mortgagor shall duly make proof of loss, and shall
immediately furnish to Mortgagee a copy of such proof of loss.
(c) Subject to the rights of the mortgagee under the First Lien Mortgage
which has priority over this Mortgage, Mortgagee is authorized and empowered to settle,
collect and receive all fire and hazard insurance proceeds, to apply such proceeds to all
expenses (including reasonable attorneys’ fees) reasonably incurred by Mortgagee in
collecting the same and, at Mortgagee’s option and in its sole discretion, apply the
balance of said proceeds (“Net Proceeds”) to payment of the Obligations or make the Net
Proceeds available for the repair and restoration of the Mortgaged Property; provided,
however, Mortgagor may settle claims without Mortgagee’s consent if the loss is less
than $5,000.00 and no Event of Default exists at the time of settlement. Mortgagor shall
apply any such proceeds to the repair and restoration of the Mortgaged Property. So long
as no Event of Default exists, any settlement of a fire and hazard insurance claim of more
than $5,000.00 shall require the consent of Mortgagor, which consent will not be
unreasonably withheld.
(d) If Mortgagee elects to apply the Net Proceeds to repair and restoration of
the Mortgaged Property (i) the Net Proceeds shall be held by Mortgagee and at
Mortgagee’s election may be disbursed either by Mortgagee or a disbursing agent
selected by Mortgagee and paid by Mortgagor, (ii) upon Mortgagee’s request prior to
disbursement of any Net Proceeds or thereafter, from time to time, Mortgagor will
deposit with Mortgagee such amounts in excess of remaining Net Proceeds as Mortgagee
reasonably determines is required to complete the repair and restoration, (iii) the Net
Proceeds and any funds deposited by Mortgagor shall be held and disbursed in
accordance with sound construction loan disbursement practices, including, but not
limited to, approval of the plans and specifications, appraisal, its other conditions for
disbursement of draw requests and inspection of the work, and such other reasonable
conditions as Mortgagee may impose and (iv) any Net Proceeds not so applied to repair
and restoration shall be applied to the payment of the Obligations. If an Event of Default
occurs prior to full disbursement, any undisbursed portion of the Net Proceeds and any
funds deposited by Mortgagor with Mortgagee may at Mortgagee’s option be applied to
the Obligations.
1.7. Inspection. Mortgagee, or its agents, shall have the right to enter upon the
Mortgaged Property during ordinary business hours for the purposes of inspecting the Mortgaged
Property or any part thereof. Mortgagee shall have no duty, however, to make such inspection.
Mortgagee, or its agents, shall also have the right during ordinary business hours to examine the
books and records of Mortgagor pertaining to the Mortgaged Property and to make extracts
therefrom and copies thereof. The parties agree that Mortgagee’s right to inspect the books and
records of Mortgagor, as described in this provision, relates solely to the Mortgaged Property.
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1.8. Protection of Mortgagee’s Security. If Mortgagor fails to perform any of the
covenants and agreements contained in this Mortgage and such failure shall continue beyond any
applicable notice and cure period contained in Article Two hereof or if any action or proceeding
is commenced which does or may adversely affect the Mortgaged Property or the interest of
Mortgagor or Mortgagee therein, or the title of Mortgagor thereto, then Mortgagee, at
Mortgagee’s option, may perform such covenants and agreements, defend against such action or
proceeding, or otherwise act as Mortgagee deems necessary to protect its interest. In the event
that, after damage to or destruction of the Mortgaged Property or condemnation of a portion of
the Mortgaged Property or a sale under threat thereof, the proceeds are used to restore the
Mortgaged Property, and the insurance, sale or condemnation proceeds which are paid to
Mortgagee are not sufficient to pay for such restoration, Mortgagee may nevertheless effect the
restoration. Any amounts disbursed or costs incurred by Mortgagee pursuant to this Section,
including interest and reasonable attorney’s fees, shall become additional Obligations of
Mortgagor secured by this Mortgage. All amounts disbursed or costs incurred by Mortgagee
pursuant to this paragraph shall be payable upon demand, and shall bear interest from the date of
disbursement or incurrence at the rate set forth in the Note unless payment of interest at such rate
would be contrary to law, in which event such amounts shall bear interest at the highest rate
permitted by law. Mortgagee shall, at its option, be subrogated to any encumbrance, lien, claim
or demand, and to all the rights and securities for the payment thereof, paid or discharged with
the principal sum secured hereby or by Mortgagee under the provisions hereof, and any such
subrogation rights shall be additional and cumulative security for this Mortgage. Nothing
contained in this Section shall require Mortgagee to incur any expense or do any act hereunder,
and Mortgagee shall not be liable to Mortgagor for any damages or claims arising out of action
taken by Mortgagee pursuant to this paragraph.
1.9. Hazardous Materials. Mortgagor hereby represents and warrants to Mortgagee
that the Mortgaged Property has not at any time been used for storage, transfer, transportation or
disposal of hazardous substances, hazardous wastes, pollutants, contaminants or similar
substances (collectively “Hazardous Substances”), or for the discharge of the same into the
environment in violation of any law, regulation, or judicial or administrative order or judgment;
and the Mortgaged Property is not contaminated by, and does not contain, any Hazardous
Substances. Mortgagor will not use or permit the use of the Mortgaged Property for such
purposes. Mortgagor will fully indemnify Mortgagee and defend Mortgagee against any claims,
losses, damages, actions, costs and expenses of any kind, including without limitation, court
costs and reasonable attorneys’ fees, in connection with any Hazardous Substances now or
hereafter located on the Mortgaged Property or any other violation of any federal, state or local
environmental statute, ordinance, rule or regulation (“Environmental Laws”). This indemnity
shall not apply to the extent that the willful act or omission of the Mortgagee contributes to the
actual or threatened discharge, dispersal, release, storage, treatment, generation, disposal or
escape of the Hazardous Substances. The indemnity provisions of this Section shall survive the
foreclosure or other termination of this Mortgage.
Without limiting the generality of the foregoing, Mortgagor agrees that upon the discovery
of a release or threatened release of Hazardous Substances on or from the Mortgaged Property, it
will promptly, diligently and without cost to Mortgagee, proceed to remediate all contamination
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in accordance with all applicable laws, ordinances, rules and regulations, and the requirements of
all governmental authorities having jurisdiction, and otherwise to the satisfaction of Mortgagee.
A failure to do so shall constitute a default by Mortgagor under this Mortgage.
1.10. Escrows. Upon the request of Mortgagee after the occurrence of an Event of
Default (whether or not such Event of Default is subsequently cured), Mortgagor shall deposit
with Mortgagee, on the first day of each and every month, commencing with the date the first
payment shall be due on the Note which is after the date of such request, a deposit to pay the
Impositions and insurance premiums (collectively “Charges”) in an amount equal to:
(a) One-twelfth (1/12) of the Impositions next to become due upon the
Mortgaged Property; provided, however, that, in the case of the first such deposit, there
shall be deposited in addition an amount as estimated by Mortgagee which, when added
to monthly deposits to be made thereafter as provided for herein, shall assure that there
will be sufficient funds on deposit to pay the Impositions as they come due; plus
(b) One-twelfth (1/12) of the annual premiums on each policy of insurance
required to be maintained hereunder; provided that with the first such deposit there shall
be deposited, in addition, an amount equal to one-twelfth (1/12) of such annual insurance
premiums multiplied by the number of months elapsed between the date premiums on
each policy are last paid to and including the date of deposit.
The amount of such deposits shall be based upon Mortgagee’s reasonable estimate as to the
amount of Impositions and premiums of insurance next to be payable. Mortgagee will, upon
timely presentation to Mortgagee by Mortgagor of the bills therefor, pay the Charges from such
deposits. In the event the deposits on hand shall not be sufficient to pay all of the Charges when
the same shall become due from time to time, or the prior deposits shall be less than the currently
estimated monthly amounts, then Mortgagor shall pay to Mortgagee on demand any amount
necessary to make up the deficiency. The excess of any such deposits shall be returned to
Mortgagor or credited towards subsequent Charges, at the discretion of Mortgagee. If an Event
of Default shall occur under the terms of this Mortgage, Mortgagee may, at its option, without
being required so to do, apply any deposits on hand to the Obligations, in such order and manner
as Mortgagee may elect. When the Obligations have been fully paid, any remaining deposits
shall be returned to Mortgagor as its interest may appear. All deposits are hereby pledged as
additional security for the Obligations, shall be held for the purposes for which made as herein
provided, may be held by Mortgagee and may be commingled with other funds of Mortgagee,
shall be held without any allowance of interest thereon, and shall not be subject to the decision or
control of Mortgagor. Mortgagee shall not be liable for any act or omission made or taken in
good faith. In making any payments, Mortgagee may rely on any statement, bill or estimate
procured from or issued by the payee without inquiry into the validity or accuracy of the same.
If the taxes shown in the tax statement shall be levied on property more extensive than the
Mortgaged Property, Mortgagee shall be under no duty to seek a tax division or apportionment of
the tax bill, and any payment of taxes based on a larger parcel shall be paid by Mortgagor, and
Mortgagor shall expeditiously cause a tax subdivision to be made.
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1.11. Compliance with Code. Mortgagor covenants that when completed the
improvements to the Mortgaged Property shall comply with all applicable restrictions,
conditions, codes, ordinances, regulations and laws of the City of Elk River (the “City”) and
other governmental bodies having jurisdiction over the Mortgaged Property, including, without
limitation, the Americans with Disabilities Act and those related to environmental protection.
Mortgagor has NOT commenced construction of improvements to the Mortgaged Property.
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487519v1 EL185-45
ARTICLE TWO
EVENTS OF DEFAULT
Each of the following occurrences shall constitute an Event of Default hereunder:
2.1. Failure to pay. Mortgagor’s failure to pay any amount due under the Entity
Guaranty or any other amount required to be paid by Mortgagor hereunder when due.
2.2. Other Performance Failure. The Mortgagor’s or Entity Guarantor’s failure to duly
observe or perform any of the other terms, conditions, covenants or agreements required to be
observed or performed by Mortgagor hereunder or by Entity Guarantor in the Entity Guaranty
and the continuation of such failure for a period of thirty (30) days after Mortgagee gives
Mortgagor written notice of such failure.
2.3. Breach of Warranty of Title. Subject to Mortgagor’s right to contest in good faith
as set forth in Section 1.4 hereof, the breach of any warranty of title or any other warranty made
by Mortgagor hereunder.
2.4. Misrepresentation. The making of any material misstatement in any financial
statement or report submitted to Mortgagee by or on behalf of Mortgagor.
2.5. Foreclosure. The institution of a foreclosure or other enforcement proceedings by
the holder of any other lien on the Mortgaged Property (without hereby implying Mortgagee’s
consent to any mortgage or other lien).
2.6. Sale of Property. The sale, assignment, conveyance, mortgage, encumbrance,
lease or transfer of: (i) Mortgagor’s interest in the Mortgaged Property or any part thereof, or any
interest therein; or (ii) any transfer in ownership or control of Mortgagor, without the prior
written consent of Mortgagee, which consent may be granted or withheld by Mortgagee at its
sole discretion.
2.7. Breach of the Mortgages, Other Agreements, etc. Any default or breach under the
First Lien Mortgage, any other note, mortgage or other obligation of Mortgagor or Borrower now
held or hereafter acquired by Mortgagee or City, or any other failure to comply with the terms
and conditions thereof and the continuance thereof beyond any applicable notice and/or cure
period contained therein.
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ARTICLE THREE
ACCELERATION AND FORECLOSURE; OTHER REMEDIES
Upon any Event of Default, Mortgagee may, at its option, exercise one or more of the
following rights and remedies (and any other rights and remedies available to it):
3.1. Acceleration. Mortgagee may declare immediately due and payable all
unmatured Obligations secured by this Mortgage, and the same shall thereupon be immediately
due and payable, without notice or demand.
3.2. UCC Remedies. Mortgagee shall have and may exercise with respect to all
fixtures and any personal property included in the Mortgaged Property, all the rights and
remedies accorded upon default to a secured party under the Uniform Commercial Code, as in
effect in the State of Minnesota.
3.3. Foreclosure; Action or Advertisement. Mortgagee may (and is hereby authorized
and empowered to) foreclose this Mortgage by action or advertisement, pursuant to the statutes
of the State of Minnesota in such case made and provided, power being expressly granted to sell
the Mortgaged Property at public auction and convey the same to the purchaser to the full extent
of Mortgagor’s interest and, out of the proceeds arising from such sale, to pay all Obligations
secured hereby with interest, and all legal costs and charges of such foreclosure and the
maximum attorneys’ fees permitted by law, which costs, charges and fees Mortgagor agrees to
pay. Any real estate or interest or estate sold hereunder may be sold in one parcel, as an entirety,
or in such parcels and in such manner or order as Mortgagee, in its sole discretion, may elect. In
case of any sale of the Mortgaged Property pursuant to any judgment or decree of any court or at
public auction or otherwise in connection with the enforcement of any of the terms of this
Mortgage, Mortgagee, its successors and assigns, may become the purchaser, and for the purpose
of making settlement for or payment of the purchase price, shall be entitled to deliver over and
use any sum then due under the Entity Guaranty and any claims for interest accrued and unpaid
thereon, together with all other sums, with interest, advanced and unpaid hereunder, and all
statutory charges for such foreclosure including maximum attorney’s fees allowed by law in
order that there may be credited as paid on the purchase price the sum then due under the Note
and all other sums, with interest, advanced and unpaid hereunder, and all charges and expenses
of such foreclosure including maximum attorneys’ fees allowed by law.
3.4. Receiver. Mortgagee shall be entitled as a matter of right without notice and
without giving bond and without regard to the solvency or insolvency of Mortgagor, or waste of
the Mortgaged Property or adequacy of the security of the Mortgaged Property, to apply for the
appointment of a receiver, in accordance with the statutes and law made and provided. The
receiver shall collect the rents, and all other income of any kind; manage the Mortgaged Property
so to prevent waste; execute leases within or beyond the period of receivership, pay all expenses
for normal maintenance of the Mortgaged Property and perform the terms of this Mortgage and
apply the rents, issues and profits as permitted by Minnesota Statutes, Section 576.25 in the
following order to (i) payment of the reasonable fees of said receiver, (ii) application of tenant
security deposits as required by Minnesota Statutes Section 504B.178, (iii) payment when due of
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487519v1 EL185-45
prior or current real estate taxes or special assessments with respect to the Mortgaged Property
or, if this Mortgage so requires, to the periodic escrow for the payment thereof, (iv) the payment
when due of premiums for insurance of the type required by this Mortgage or, if this Mortgage
so requires, to the periodic escrow for the payment thereof; and (v) as further provided in any
Assignment of Rents executed by Mortgagor as further security for the Obligations (whether
included in this Mortgage or separate instrument), including but not limited to applying the same
to the costs and expenses of the receivership, including reasonable attorneys’ fees, to the
repayment of the Obligations and to the operation, maintenance, upkeep and repair of the
Mortgaged Property, including payment of taxes and payments of premiums of insurance.
Mortgagor does hereby irrevocably consent to such appointment.
3.5. Specific Performance. Mortgagee may bring suit for specific performance of any
covenant or warranty hereunder.
3.6. Forbearance and Other Rights of Mortgagee. Any delay by Mortgagee in
exercising any right or remedy hereunder, or otherwise afforded by law or equity, shall not be a
waiver of or preclude the exercise of such right or remedy or any other right or remedy
hereunder or at law or in equity. The failure of Mortgagee to exercise any option to accelerate
maturity of the Obligations secured by the Mortgage, the forbearance by Mortgagee before or
after the exercise of such option, or the withdrawal or abandonment of proceedings provided for
by this Mortgage shall not be a waiver of the right to exercise such option or to accelerate the
maturity of such Obligations by reason of any past, present or future event which would permit
acceleration. The procurement of insurance or the payment of taxes or other liens or charges by
Mortgagee shall not be a waiver of Mortgagee’s right to accelerate the maturity of the
Obligations. Mortgagee’s receipt of any awards, proceeds or damages shall not operate to cure
or waive default by Mortgagor. Mortgagee may at any time, without notice, release any person
liable for payment of any Obligations, extend the time or agree to alter the terms of payment of
any of the Obligations, accept additional security of any kind, release any plat or map of the
Mortgaged Property or the creation of any easement thereon or any covenants restricting use or
occupancy thereof, or agree to alter or amend the terms of this Mortgage in any way. No such
release, modification, addition or change shall affect the liability of any person other than the
person so released, for payment of any Obligations, nor affect the priority and lien status of this
Mortgage upon any property not so released.
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ARTICLE FOUR
ASSIGNMENT OF RENTS
4.1. Assignment. As security in addition to the lien of this Mortgage upon the
Property, Mortgagor hereby grants, transfers and assigns to Mortgagee all of the right, title and
interest of Mortgagor in and to all Leases and all rents, income, profits, revenues, royalties,
bonuses, rights, accounts, contract rights, general intangibles and benefits (all of which are
sometimes hereinafter referred to as “Rents”), now or hereafter accruing or owing by reason of a
Lease of any or all of the Property.
4.2. Covenants of Performance. To protect the security of this Assignment,
Mortgagor warrants, covenants and agrees:
(a) to faithfully abide by, perform and discharge each and every obligation,
covenant and agreement under any Leases to be performed by Mortgagor thereunder; to
give prompt written notice to Mortgagee of any notice of default on the part of Mortgagor
with respect to any Lease received from a tenant thereunder; to enforce or secure short of
termination of any Lease the performance of each and every obligation, covenant,
condition and agreement of the Leases by the tenants thereunder to be performed; not to
borrow against, pledge or assign any of the Rents, or anticipate the Rents; not to waive,
excuse, condone or in any manner release or discharge any tenant thereunder of or from
the obligations, covenants, conditions and agreements to be performed under the Lease or
to permit the tenant to assign its interest in the Lease unless required to do so by the terms
of the Lease; not to terminate the Leases or accept a surrender thereof or a discharge of
the tenant unless required to do so by the terms of the Lease; not to consent to a
subordination of the interest of the tenant thereunder to any party other than Mortgagee
and then only if specifically required to do so by Mortgagee;
(b) at Mortgagor’s sole cost and expense, to appear in and defend any action
or proceeding arising under, growing out of or in any manner connected with the Leases
or the obligations, duties or liabilities of Mortgagor and tenants thereunder, and to pay all
costs and expenses of Mortgagee, including attorneys’ fees in a reasonable sum, in any
such action or proceeding in which Mortgagee may appear or with respect to which it
may incur costs;
(c) that Mortgagor has the full right and title to assign the Rents; that at the
date of this Mortgage there exist no Leases which now or in the future affect the
Mortgaged Property which have not been disclosed to Mortgagee in writing; and that
there is no outstanding assignment or pledge of the Leases or Rents; and
(d) to furnish to Mortgagee, at Mortgagee’s written request, a complete list of
all Leases and security deposits made thereunder as to any part of the Mortgaged
Property, showing the type of lease, the name of the tenant, the monthly rental, the date to
which paid, the term of the Lease, the date of occupancy, and the date of expiration and
any and every special premium, concession or inducement granted to the tenant.
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4.3. Assignment Absolute. This Assignment is absolute and is effective immediately.
Notwithstanding the foregoing, until an Event of Default, as defined in ARTICLE TWO above,
has occurred, Mortgagor may receive, collect and enjoy the Rents. Upon or at any time after an
Event of Default has occurred, Mortgagee may at its option, without notice:
(a) in the name, place and stead of Mortgagor (i) enter upon, manage and
operate the Mortgaged Property, or retain the services of an independent contractor to
manage and operate the same, (ii) make, enforce, modify and accept surrender of the
Leases, (iii) obtain or evict tenants, demand, collect, sue for, receive and give
acquittances for, fix or modify Rents and enforce all rights of Mortgagor under the
Leases, and (iv) perform any and all other acts that may be necessary or proper to protect
the security of this Assignment; provided always, however, that until the end of any
redemption period available to Mortgagor after any foreclosure of this Mortgage
Mortgagee shall continue to deal with the Leases on the Property in a reasonable
businesslike manner, recognizing and protecting Mortgagor’s continuing rights during
such period to retake possession and control of the Mortgaged Property upon paying the
appropriate redemption price, and to resume the management of such Leases;
(b) give or require Mortgagor to give notice to any and all tenants under the
Leases authorizing and directing the tenants to pay all Rents due under the Leases
directly to Mortgagee; and
(c) apply for, and Mortgagor hereby consents to, the appointment of a
receiver of the Mortgaged Property.
4.4. Application of Rents.
(a) All Rents collected by Mortgagee, or by a receiver, shall be held and
applied by Mortgagee in its reasonable discretion, in accordance with applicable law,
including, without limitation to: (i) payment of all reasonable fees of the receiver, if any,
approved by the court; (ii) the repayment when due of all tenant security deposits
pursuant to the provisions of Minnesota Statutes Section 504B.178; (iii) payment of all
delinquent or current real estate taxes and special assessments payable with respect to the
Property or, if this Mortgage so requires, to the periodic escrow for the payment thereof;
(iv) payment of all premiums then due for the insurance required by the provisions of this
Mortgage or, if this Mortgage so requires, to the periodic escrow for the payment thereof;
(v) payment of expenses incurred for normal maintenance of the Mortgaged Property.
(b) Any amounts remaining after such application shall be applied as follows:
(i) if received prior to any foreclosure sale of the Mortgaged Property
to Mortgagee for payment of the indebtedness secured by this Mortgage, but no
such payment made after acceleration of the indebtedness shall affect such
acceleration; and
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487519v1 EL185-45
(ii) if received during or with respect to a period after a foreclosure
sale of the Mortgaged Property:
(1) if the purchaser at the foreclosure sale is not Mortgagee,
first to Mortgagee to the extent of any deficiency of the sale proceeds to
repay the indebtedness secured by this Mortgage, second to the purchaser
as a credit to the redemption price, but if the Mortgaged Property is not
redeemed, then to the purchaser of the Mortgaged Property;
(2) if the purchaser at the foreclosure sale is Mortgagee, first to
Mortgagee to the extent of any deficiency of the sale proceeds to repay the
indebtedness secured by this Mortgage and the balance to be retained by
Mortgagee as a credit to the redemption price, but if the Mortgaged
Property is not redeemed, then to Mortgagee, whether or not such
deficiency exists.
4.5. Continuing Effect. The rights and powers of Mortgagee under this Assignment
and the application of the Rents shall continue and remain in full force and effect both before and
after commencement of any action or procedure to foreclose this Mortgage, after any foreclosure
sale of Mortgagor’s interest in the Property in connection with the foreclosure of this Mortgage,
and until expiration of the period of redemption from any such foreclosure sale, whether or not
any deficiency from the unpaid balance of the Obligations exists after such foreclosure sale.
4.6. Mortgagee Not Obligated. Mortgagee shall not be obligated by this Assignment
for the control, care, management or repair of the Mortgaged Property, nor for the carrying out of
any of the terms and conditions of the Leases; nor shall this Assignment operate to make
Mortgagee responsible or liable for any waste committed on the Mortgaged Property by the
tenants or any other party, or for any dangerous or defective condition of the Mortgaged
Property, or for any violation of Environmental Laws or for any negligence in the management,
upkeep, repair or control of the Mortgaged Property resulting in any loss or any injury or death to
any person.
4.7. Hold Harmless. Mortgagor shall and does agree to indemnify and to hold
Mortgagee harmless of and from any and all liability, loss or damage which it may or might
incur under or by reason of this Assignment, and of and from any and all claims and demands
whatsoever which may be asserted against it by reason of any alleged obligations or undertakings
on its part to perform or discharge any of the terms, covenants or agreements contained in the
Leases; provided, however, that such indemnification shall not apply if the same arises out of
Leases intentionally breached by Mortgagee which were made by Mortgagor in the ordinary
course of managing the Mortgaged Property and prior to the time Mortgagee obtained the right
to possess and manage the Mortgaged Property, or if the same arises out of the negligent or
willful act of Mortgagee in operating and using the Mortgaged Property. Should Mortgagee
incur any such liability, loss or damage under any Lease or by reason of this Assignment, or in
the defense of any such claims or demands, the amount thereof, including costs, expenses, and
reasonable attorneys’ fees, shall be secured hereby and Mortgagor shall reimburse Mortgagee
therefor immediately upon demand. Mortgagee shall give Mortgagor notice of any such claim
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487519v1 EL185-45
and Assignor shall have the opportunity to defend Mortgagee in connection therewith with
counsel reasonably acceptable to Mortgagee; provided Mortgagee’s failure to give such notice
and opportunity to defend shall not affect Mortgagor’s obligations under this Section except to
the extent Mortgagor is actually prejudiced by such failure.
4.8. Authorization to Tenants. The tenants under any of the Leases are hereby
irrevocably authorized and directed to recognize the claims of Mortgagee or its assigns
hereunder without investigating the reason for any action taken by Mortgagee, or the validity or
the amount of indebtedness owing to Mortgagee, or the existence of any such event of default, or
the application of the Rents to be made by Mortgagee. Mortgagor hereby irrevocably directs and
authorizes each tenant to pay to Mortgagee all sums due under its Lease and consents and directs
that said sums shall be paid to Mortgagee without the necessity for a judicial determination that
any such event of default has occurred or that Mortgagee is entitled to exercise its rights
hereunder, and to the extent such sums are paid to Mortgagee, Mortgagor agrees that the tenants
shall have no further liability to Mortgagor for the same. The sole signature of Mortgagee shall
be sufficient for the exercise of any rights under this Assignment and the sole receipt of
Mortgagee for any sums received shall be a full discharge and release therefor to the tenants or
occupants of the Mortgaged Property.
4.9. Mortgagee Attorney-in-Fact. Mortgagor hereby irrevocably appoints Mortgagee
as its agent and attorney in fact, which appointment is coupled with an interest, to exercise any
rights or remedies hereunder and to execute and deliver during the term of this Assignment such
instruments as Mortgagee may deem necessary to make this Assignment and any further
assignment effective.
4.10. Mortgagee Not in Possession. Nothing herein contained and no actions taken
pursuant to this Assignment shall be construed as constituting Mortgagee a “Mortgagee in
Possession.”
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ARTICLE FIVE
CONDEMNATION
5.1. Notice. Mortgagor will give Mortgagee prompt notice of any action, actual or
threatened, in condemnation or eminent domain, direct or inverse.
5.2. Awards. Subject to any obligations under the First Lien Mortgage, which has
priority over this Mortgage, Mortgagor hereby assigns, transfers, and sets over to Mortgagee the
entire proceeds of any award or payment which becomes payable by reason of any taking of or
damage to the Mortgaged Property, or any part or appurtenance thereof, either temporarily or
permanently, in or by condemnation or other eminent domain proceedings or by reason of sale
under threat thereof, or in anticipation of the exercise of the right of condemnation or other
eminent domain proceedings. Mortgagor will file or prosecute in good faith and with due
diligence what would otherwise be its claim in any such award or payment and cause the same to
be collected and paid over to Mortgagee, and Mortgagor irrevocably authorizes and empowers
Mortgagee, which power is coupled with an interest and is irrevocable, in the name of Mortgagor
or otherwise, in the event that Mortgagor fails to do so, to file and prosecute any such claim and
to collect, receipt for and retain the same. The proceeds of the award or payment, after deducting
all reasonable costs, attorneys’ fees and other expenses which may have been incurred by
Mortgagee in collection thereof, at the sole discretion of Mortgagee, may be released to
Mortgagor, applied to restoration of the Mortgaged Property or applied to the payment of any
part of the Obligations, in such order of application as Mortgagee may determine. If proceeds
are made available to be applied to restoration, they shall be held and disbursed in accordance
with Paragraph 1.6(d) hereof.
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487519v1 EL185-45
ARTICLE SIX
UNIFORM COMMERCIAL CODE
6.1. Security Interest. This Mortgage shall constitute a security agreement as defined
in the Uniform Commercial Code with respect to, and Mortgagor hereby grants Mortgagee a
security interest in, all of fixtures and any personal property included in the Mortgaged Property
and substitutions therefor and proceeds thereof. Mortgagor hereby authorizes Mortgagee to file
one or more financing statements, covering such fixtures and personal property (in a form
satisfactory to Mortgagee) which Mortgagee may reasonably consider necessary or appropriate
to perfect its security interest. Mortgagor also authorizes Mortgagee to file amendments to
financing statements, and terminations of financing statements filed by other secured parties, all
with respect to all fixtures and personal property included in the Mortgaged Property, in such
form and substance as Mortgagee, in its reasonable discretion, may determine. Mortgagor will
pay to Mortgagee, on demand, the amount of any and all costs and expenses (including
reasonable attorneys’ fees and legal expenses) paid or incurred by Mortgagee in connection with
the exercise of any right or remedy referred to in this Section. In any instance where Mortgagor
in its sound discretion determines that any item subject to a security interest under this Mortgage
has become: (i) inadequate, obsolete, worn out, or (ii) unsuitable, undesirable or unnecessary for
the operation of the Mortgaged Property, Mortgagor may, at its expense, remove and dispose of
it and substitute and install other items not necessarily having the same function, provided, that
such removal and substitution shall not impair the operating utility and unity of the Mortgaged
Property. With respect to items which are a part of the Mortgaged Property, all items substituted
for such items shall become a part of the Mortgaged Property and subject to the lien of this
Mortgage. Any amounts received or allowed Mortgagor upon the sale or other disposition of the
removed items of property shall be applied against the cost of acquisition and installation of the
substituted items. Nothing herein contained shall be construed to prevent any tenant or subtenant
from removing from the Mortgaged Property trade fixtures, furniture and equipment installed by
it and removable by tenant under its terms of any one or more of the Leases, on the condition,
however, that Mortgagor shall assure the repair of any and all damages to the Mortgaged
Property resulting from or caused by the removal thereof. Mortgagee acknowledges that no
items of personal property are included in the Mortgaged Property.
6.2. Fixture Filing. From the date of its recording, this Mortgage shall be effective as
a financing statement with respect to all goods constituting part of the Mortgaged Property which
are or are to become fixtures related to the real estate described herein. For this purpose, the
following information is set forth:
(a) Name and Address of Mortgagor:
th
9775 158 Circle, NW
Elk River, MN 55330
Attention: __________
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487519v1 EL185-45
(b) Name and address of Secured Party:
Economic Development Authority of the City of Elk River
13065 Orono Parkway
Elk River, MN 55330
Attention: Director of Economic Development
(c) This document covers goods which are or are to become fixtures.
(d) The real estate to which such fixtures are or are to be attached is that
described in Exhibit A attached hereto.
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487519v1 EL185-45
ARTICLE SEVEN
MISCELLANEOUS
7.1. Mortgagee’s Remedies Cumulative. All remedies of Mortgagee are distinct and
cumulative to any other right or remedy under this Mortgage or afforded by law or equity, and
may be exercised concurrently or independently, as often as the occasion therefore arises.
7.2. Successors and Assigns Bound; Captions. The covenants and agreements herein
contained shall bind, and the rights hereunder shall inure to, the respective heirs, legal
representatives, successors and assigns of Mortgagee and Mortgagor. The captions and headings
of the Sections of this Mortgage are for convenience only and are not to be used to interpret or
define the provisions hereof.
7.3. Notices. Any notice from Mortgagee to Mortgagor under this Mortgage shall be
deemed to have been given by Mortgagee and received by Mortgagor, when delivered personally
to an officer of Mortgagor or three (3) days after the date it is mailed by certified mail addressed
as follows:
Apex Design Embroidery, Inc.
th
9775 158 Circle, NW
Elk River, MN 55330
Attention: __________
7.4. Governing Law; Severability. This Mortgage shall be governed by the laws of the
State of Minnesota. In the event that any provision or clause of this Mortgage conflicts with
applicable law, such conflict shall not affect other provisions of this Mortgage which can be
given effect without conflicting provisions and to this end the provisions of this Mortgage are
declared to be severable.
7.5. Counterparts. This Mortgage may be executed in any number of counterparts,
each of which shall be an original but all of which together shall constitute one instrument.
7.6. Waiver of Appraisement, Homestead, Marshaling. Mortgagor hereby waives the
benefit of any homestead, appraisement, evaluation, stay and extension laws now or hereinafter
in force. Mortgagor hereby waives any rights available with respect to marshaling of assets so as
to require the separate sales of any portion of the Mortgaged Property or to require Mortgagee to
exhaust its remedies against a specific portion of the Mortgaged Property before proceeding
against the other.
7.7. Subsequent Agreements. Any agreement hereafter made by Mortgagor and
Mortgagee pursuant to this Mortgage shall be superior to the rights of the holder of any
intervening lien or encumbrance.
\[Signature Page follows\]
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487519v1 EL185-45
Signature Page to Mortgage
IN WITNESS WHEREOF, Mortgagor has caused this Mortgage to be duly executed as of
the day and year first written.
APEX EMBROIDERY DESIGN, INC.,
a Minnesota corporation
By:
Its: ___________________________
By:
Its: ___________________________
STATE OF MINNESOTA )
) ss.
COUNTY OF ________ )
The foregoing instrument was acknowledged before me on ______________, 2016, by
__________ and _____________, __________ and ___________, respectively, of Apex
Embroidery Design, Inc., a Minnesota corporation, on behalf of the corporation.
Notary Public
My Commission Expires:
This Instrument was drafted by:
Kennedy & Graven, Chartered (JSB)
470 U.S. Bank Plaza
200 South Sixth Street
Minneapolis, Minnesota 55402
Telephone: (612) 337-9300
S-1
487519v1 EL185-45
EXHIBIT A
Legal Description
Parcel Identification Number 758110125, Lot 5, Block 1, Renner Fourth Addition, Sherburne
County, Minnesota
B-1
487519v1 EL185-45
EXHIBIT B
Permitted Encumbrances
B-1
487519v1 EL185-45
SECURITY AGREEMENT
(Forgivable Loan Program)
This SECURITY AGREEMENT (“Agreement”) is made to be effective as of October ____,
2016, by APEX EMBROIDERY & DESIGN, INC., a Minnesota corporation (“Debtor”) and
THE ECONOMIC DEVELOPMENT AUTHORITY OF THE CITY OF ELK RIVER (the
“Secured Party”).
AGREEMENT
In consideration of the above recitals, and the promises set forth in this Agreement, the
parties agree as follows:
1. OBLIGATIONS. “Obligations” means collectively each debt, liability and obligation of
every type and nature which Debtor may now or at any time hereafter owe to Secured
Party (including without limitation the obligations created under the loan agreement (the
“Loan Agreement”) and the promissory note of the Debtor to Secured Party of even date
herewith and all amendments, replacements, restatements, and substitutions therefore),
whether now existing or hereafter created or arising, and whether direct or indirect, due
or to become due, absolute or contingent, and the repayment or performance of any of the
foregoing if any such payment or performance is at any time avoided, rescinded, set
aside, or recovered from or repaid by Secured Party, in whole or in part, in any
bankruptcy, insolvency, or similar proceeding instituted by or against Debtor or any
guarantor of any Obligation, or otherwise, including but not limited to all principal,
interest, fees, expenses and other charges.
2. COLLATERAL. “Collateral” means collectively all of the following property of Debtor,
whether now owned or hereafter acquired and wherever located: (a) equipment specified
on the attached Exhibit A; (b) accessions, additions and improvements to, replacements
of and substitutions for any of the foregoing; (c) all products and proceeds of any of the
foregoing; and (d) books, records and data in any form relating to any of the foregoing.
3. SECURITY INTEREST. Debtor grants to Secured Party a security interest (“Security
Interest”) in the Collateral to secure the payment and performance of the Obligations.
The Security Interest continues in effect until this Agreement is terminated in writing by
Secured Party.
4. REPRESENTATIONS, WARRANTIES AND COVENANTS. Debtor represents,
warrants and agrees that:
4.1. Principal Office/Residence. Debtor’s chief executive office/residence is located
at the address specified on the signature pages to this Agreement. Debtor will
give Secured Party written notice prior to any change in the location of Debtor’s
principal office/residence.
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488002v1 EL185-45
4.2. Organization; Authority. Debtor is a limited liability company, duly organized,
existing and in good standing under the laws of the state of its organization and
has full power and authority to enter into this Agreement. Debtor’s state of
organization/residence is Minnesota and its exact legal name is as set forth on the
signature page to this Agreement. Debtor will not change its state of
organization, form of organization or name without Secured Party's prior written
consent.
4.3. Perfection of Security Interest. Debtor will execute and deliver, and irrevocably
appoints Secured Party (which appointment is coupled with an interest) Debtor’s
attorney-in-fact to execute and deliver in Debtor’s name, all financing statements
(including, but not limited to, amendments, terminations and terminations of other
security interests in any of the Collateral), control agreements and other
agreements which Secured Party may at any time reasonably request in order to
secure, protect, perfect, collect or enforce the Security Interest. Debtor shall, at
any time and from time to time, take such steps as Secured Party may reasonably
request for Secured Party: (i) to obtain an acknowledgement, in form and
substance reasonably satisfactory to Secured Party, of any bailee having
possession of any of the Collateral that such bailee holds such Collateral for
Secured Party; (ii) to obtain “control” of any investment property, deposit
accounts, letter-of-credit rights or electronic chattel paper (as such terms are
defined in the UCC, as hereinafter defined), with any agreements establishing
control to be in form and substance reasonably satisfactory to Secured Party; and
(iii) otherwise to insure the continued perfection and priority of the Security
Interest in any of the Collateral and the preservation of the rights of Secured Party
therein.
4.4. Enforceability of Collateral. To the extent the Collateral consists of accounts,
instruments, documents, chattel paper, letter-of-credit rights, letters of credit or
general intangibles, the Collateral is enforceable in accordance with its terms, is
genuine, complies with applicable laws concerning form, content and manner of
preparation and execution, and all persons appearing to be obligated on the
Collateral have authority and capacity to contract and are in fact obligated as they
appear to be on the Collateral.
4.5. Title to Collateral. Debtor holds, or will hold at the time Debtor acquires an
interest in after acquired Collateral, good and marketable title to the Collateral
free of all security interests and encumbrances except for the prior security
interest of Lender pursuant to the Microloan loan facility, the Security Interest
and the superior security interests of the Bank of Elk River (to the extent that
Debtor secures financing therefrom on or before the one (1) year anniversary
hereof) and (iii) Lender, pursuant to a separate loan facility. Debtor will keep the
Collateral free of all security interests and encumbrances except for the interest of
the Microloan loan facility, the Security Interest and the other security interests
referenced in this Section 4.5. Debtor will defend Secured Party's rights in the
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488002v1 EL185-45
Collateral against the claims and demands of all other persons.
4.6. Collateral Location. Debtor will keep all tangible Collateral at Debtor’s principal
office.
4.7. Collateral Use. Debtor will use the Collateral only for business purposes. Debtor
will not use or keep any Collateral for any unlawful purpose or in violation of any
federal, state or local law, statute or ordinance.
4.8. Maintenance of Collateral. Debtor will maintain all tangible Collateral in good
condition and repair. Debtor will not commit or permit damage to or destruction
of any of the Collateral. Debtor will give Secured Party prompt written notice of
any material loss of or damage to any tangible Collateral and of any other
happening or event that materially affects the existence, value or amount of the
Collateral.
4.9. Disposition of Collateral. Debtor will not sell or otherwise dispose of any
Collateral or any interest in any Collateral without the prior written consent of
Secured Party, except that until the occurrence of an Event of Default (as defined
in Section 5 below), Debtor may sell any inventory constituting Collateral in the
ordinary course of Debtor's business.
4.10. Taxes, Assessments and Liens. Debtor will promptly pay all taxes and other
governmental charges levied or assessed upon or against any Collateral.
4.11. Records; Access. Debtor will keep accurate and complete records pertaining to
the Collateral and to Debtor’s business and financial condition and will submit to
Secured Party all reports regarding the Collateral and Debtor’s business and
financial condition as and when Secured Party may reasonably request. During
normal business hours, Debtor will permit Secured Party and its representatives to
examine or inspect any Collateral, wherever located, and to examine, inspect and
copy Debtor's books and records relating to the Collateral and Debtor’s business
and financial condition.
4.12. Insurance. Debtor will keep all tangible Collateral insured against risks of fire
(including so-called extended coverage), theft and other risks and in such amounts
as Secured Party may reasonably request, with any loss payable to Secured Party
to the extent of its interest. Debtor assigns to Secured Party all money due or to
become due with respect to, and all other rights of Debtor with respect to, all
insurance concerning the Collateral and Debtor directs the issuer of any such
insurance to pay all such money directly to Secured Party.
4.13. Collection Costs. Debtor will reimburse Secured Party on demand for all costs of
collection of any of the Obligations and all other expenses incurred by Secured
Party in connection with the perfection, protection, defense or enforcement of the
Security Interest and this Agreement, including all reasonable attorneys' fees
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488002v1 EL185-45
incurred by Secured Party whether or not any litigation or bankruptcy or
insolvency proceeding is commenced.
4.14. Financing Statements. Debtor authorizes Secured Party to file one or more
financing or continuation statements, and amendments thereto, relative to all or
any part of the Collateral without Debtor’s signature where permitted by law, in
each case in such form and substance as Secured Party may determine. Debtor
shall pay all filing, registration and recording fees and any taxes, duties, imports,
assessments and charges arising out of or in connection with the execution and
delivery of this Agreement, any agreement supplemental hereto, any financing
statements, and any instruments of further assurance.
5. EVENTS OF DEFAULT. Each of the following is an “Event of Default” under this
Agreement: (a) Debtor fails to pay any of the Obligations when due and any applicable
grace period lapses without cure by Debtor; (b) Debtor fails to timely perform any other
Obligation and any applicable grace period lapses without cure by Debtor; (c) any
representation made by Debtor in this Agreement or in any financial statement or report
submitted to Secured Party proves to have been materially false or misleading when
made; (d) Debtor ceases to conduct its business; (e) Debtor is or becomes insolvent,
however defined; (f) Debtor voluntarily files, or has filed against it involuntarily, a
petition under the United States Bankruptcy Code; or (g) if Debtor is dissolved or
liquidated.
6. REMEDIES UPON EVENT OF DEFAULT. Upon the occurrence of an Event of
Default and at any time thereafter, Secured Party may exercise one or more of the
following rights and remedies: (a) declare any or all unmatured Obligations to be
immediately due and payable without presentment or any other notice or demand and
immediately enforce payment of any or all of the Obligations; (b) require Debtor to make
the Collateral available to Secured Party at a place to be designated by Secured Party; (c)
exercise and enforce any rights or remedies available upon default to a secured party
under the Uniform Commercial Code as amended from time to time (“UCC”), and, if
notice to Debtor of the intended disposition of Collateral or any other intended action is
required by law, such notice shall be commercially reasonable if given at least ten (10)
calendar days prior to the intended disposition or other action; and (d) exercise and
enforce any other rights or remedies available to Secured Party by law or agreement
against the Collateral, Debtor, or any other person or property. Secured Party’s duty of
care with respect to Collateral in its possession will be fulfilled if Secured Party exercises
reasonable care in physically safekeeping the Collateral or, in the case of Collateral in the
possession of a bailee or other third person, exercises reasonable care in the selection of
the bailee or other third person. Mere delay or failure to act will not preclude the exercise
or enforcement of any of Secured Party’s rights or remedies. All rights and remedies of
Secured Party are cumulative and may be exercised singularly or concurrently, at Secured
Party’s option.
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488002v1 EL185-45
7. MISCELLANEOUS. The following miscellaneous provisions are a part of this
Agreement:
7.1. Definitions. Terms not otherwise defined in this Agreement shall have the
meanings ascribed to them, if any, under the UCC and such meanings shall
automatically change at the time that any amendment to the UCC, which changes
such meanings, shall become effective.
7.2. Notices. All notices under this Agreement must be in writing and will be deemed
given when delivered or placed in the United States mail, registered or certified,
postage prepaid, addressed to the respective party at the respective address set
forth below its signature on the signature page to this Agreement. Any party may
change its address for notices under this Agreement by giving written notice to
the other parties.
7.3. Amendments/Waivers. This Agreement may be waived, amended, modified or
terminated and the Security Interest may be released only in a writing signed by
Secured Party. Any waiver signed by Secured Party will be effective only in the
specific instance and for the specific purpose given.
7.4. Applicable Law. This Agreement is governed by the laws of the State of
Minnesota without regard to the conflict of law principles. If any provision of
this Agreement is held unlawful or unenforceable in any respect, such illegality or
unenforceability will not affect other provisions or applications that can be given
effect and this Agreement will be construed and enforced as if the unlawful or
unenforceable provision or application had never been contained in or prescribed
by this Agreement.
7.5. Caption Headings. Caption headings in this Agreement are for convenience
purposes only and are not to be used to interpret or define the provisions of this
Agreement.
7.6. Integration. This Agreement embodies the entire agreement and understanding
among the parties relative to subject matter hereof and supersedes all prior
agreements and understandings relating to such subject matter.
7.7. Successors and Assigns. This Agreement is binding upon and will inure to the
benefit of the parties and their successors and assigns.
7.8. Counterparts. This Agreement may be executed in several counterparts, each of
which will be an original, and all of which will constitute one and the same
instrument.
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488002v1 EL185-45
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first
written above.
DEBTOR: SECURED PARTY:
APEX EMBROIDERY DESIGN, INC., ECONOMIC DEVELOPMENT
a Minnesota corporation AUTHORITY OF THE CITY OF ELK
RIVER
By:
Its:_________________________________ By:
Address: Its:
th
9775 158 Circle NW
Elk River, MN 55330 By:
Its:
Address:
13065 Orono Parkway
Elk River, MN 55330
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488002v1 EL185-45
EXHIBIT A
List of Equipment
All of the following property of Debtor, whether now owned or hereafter acquired and wherever
located: (a) equipment specified below; (b) accessions, additions and improvements to,
replacements of, and substitutions for any of the foregoing; (c) all products and proceeds of any
of the foregoing; and (d) books, records and data in any form relating to any of the foregoing.
\[specific items of Equipment to be inserted\]
A-1
488002v1 EL185-45
PROMISSORY NOTE
(Forgivable Loan)
October __, 2016
Amount: $200,000.00
Interest: 3.00%
Maturity: To Be Determined
FOR VALUE RECEIVED, the undersigned, APEX EMBROIDERY DESIGN, 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 Two Hundred
Thousand Hundred and 00/100 Dollars ($200,000.00), together with interest on any and all
amounts remaining unpaid thereon from time to time from the date hereof (computed on the
basis of actual days elapsed in a year of 360 days) at a fixed interest rate of three percent (3%)
per annum.
This Note is made pursuant to a Loan Agreement, between Borrower and Lender, of even
date herewith (“Loan Agreement”). All capitalized terms which are not otherwise defined herein
shall have the meanings set forth in the Loan Agreement.
This Note is secured by, among other things, the Mortgage by SBH Properties, LLC (the
“Entity Guarantor”) in favor of Lender, the Security Agreement by the Borrower to the Lender,
the Personal Guaranty made by Brian Hill, and that certain Entity Guaranty made by the Entity
Guarantor, 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, 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 (1st) day of each and every month thereafter until the 5th anniversary of the Conversion
Date (the “Maturity Date”), when all outstanding principal and accrued but unpaid interest shall
be payable in full. All unpaid interest which has accrued to the Conversion Date shall be
capitalized into principal and the principal and interest payments under this Note shall be
calculated based upon a 5 year term and a 20 year amortization, as of the Conversion Date.
487518v2 EL185-45
Lender shall 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 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 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 Documents.
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
Documents and any cure period provided for in the Loan Agreement or the Security Documents
has expired, the Borrower agrees to pay a default rate of interest equal to ten percent (10.00%)
per annum as the applicable interest rate of this note, and the entire principal amount
outstanding, accrued interest and any other charges due hereon shall at once become due and
payable at the option of the Lender or the holder hereof. Any failure of the Lender to exercise
its right to increase the interest rate by the default rate of interest set forth above or its option to
accelerate this note at any time shall not constitute a waiver of the right to exercise the same
right to increase the interest rate or accelerate at any subsequent time. Notwithstanding
anything contained herein to the contrary, the default rate of interest hereon shall never exceed
the highest rate permitted by law.
The Borrower may prepay the principal under this note at any time and from time to time,
in whole or in part, without premium or penalty. No partial prepayment shall postpone the due
date of any monthly installment or reduce the amount of any such monthly installment unless the
Lender agrees otherwise in writing.
All sums payable to the Lender under this Note shall be paid in immediately available
funds.
The Borrower promises to pay all costs in connection with the enforcement of this Note,
including but not limited to, those costs, expenses and attorneys’ fees of Lender whether or not
suit is filed with respect thereto and whether or not such cost or expense is paid or incurred or to
be paid or incurred prior to or after the entry of judgment or for the pursuance of, or defense of,
any litigation, appellate, bankruptcy or insolvency proceeding.
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Presentment, notice of dishonor and protest are hereby waived by all makers, sureties,
guarantors and endorsers hereof. This Note shall be binding upon Borrower, its successors and
assigns.
The remedies of Lender, as provided herein and in the Loan Agreement and the Security
Documents, shall be cumulative and concurrent and may be pursued singly, successively or
together, at the sole discretion of Lender, and may be exercised as often as occasion therefor
shall occur; and the failure to exercise any such right or remedy shall in no event be construed as
a waiver or release thereof.
Time is of the essence hereof.
This Note shall be governed by and be construed under the laws of the State of Minnesota,
without regard to principles of conflicts of law.
\[Signature Page Follows\]
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IN WITNESS WHEREOF, the undersigned has caused this Note to be effective as of the
day and year first above written.
APEX EMBROIDERY DESIGN, INC.
a Minnesota corporation
By:
Its: ___________________________
By:
Its: ___________________________
S-1
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