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3.6. SR 04-10-2006 City of Elk River REQUEST FOR COUNCIL ACTION Agenda Section Meeting Date Consent April 1 0, 2006 Item Number 3.6.* Prepared by Catherine Mehelich, Director of Economic Develo ment Reviewed by Scott Clark, Community Development Director Introduction On November 21,2005 the City Council awarded a pay-as-you-go tax abatement and business subsidy up to $133,947 for the Quality Label and Barcode, Inc. project which includes the construction of a 25,000- square foot light industrial building located in the Elk River Business Park. Sherburne County also provided tax abatement toward the project in a matching amount. Jon Jacobs, one of the owners of Quality Label and Barcode, Inc., has requested that the City of Elk River authorize an assignment of the Tax Abatement payments to its lender Great Northern Bank. The Tax Abatement and Business Subsidy Agreement, dated February 28,2006, between the City and Jon Jacobs requires written approval from the City of any transfer or assignment of the Agreement. Discussion An assignment of tax abatement and tax increment financing payments is quite common among other cities and development projects. Financial Impact There is no financial impact to the City by granting the assignment. The assignment simply authorizes all tax abatement payments to be made direcrly to Great Northern Bank rather than Jon Jacobs. Attachments . Assignment of Tax Rebates Action Requested Staff recommends that the City Council approve the request for assignment and authorize the Mayor and City Administrator to execute the Assignment of Tax Rebates from Jon Jacobs to Great Northern Bank. Council Action Motion by _ Second by _ Vote Follow Up S:\Industrial Siting\Quality Label\TRF\4.1O.06 CC Assignment.doc ASSIGNMENT OF TAX REBATES THIS AGREEMENT, Made this _ day of March, 2006, by and between CPE EXCHANGE 25613, LLC, a Minnesota limited liability company (the "Guarantor"); Jon M. Jacobs ("Jacobs")(Guarantor and Jacobs shall be referred to as "Assignor", both individually and collectively); and Great Northern Bank, a Minnesota bank corporation (the "Lender"). RECITALS Jacobs and Chad Johnson (the "Borrower") have entered into a Construction and Term Loan Agreement of even date herewith with the Lender (the "Loan Agreement"), under which the Lender has agreed to make advances to the Borrower not exceeding the aggregate principal sum of Two Million Three Hundred Thousand and nolIOO Dollars ($2,300,000.00) in accordance with the terms thereof, to finance construction on land owned by Guarantor and located within the City of Elk River, Sherburne County, State of Minnesota, legally described on Exhibit "A" attached hereto (the "Project"). Advances to be made under the Loan Agreement will be evidenced by the Guarantor's Mortgages, Security Agreements and Fixture Financing Statements (the "Mortgages") and Borrower's Promissory Notes (hereafter "Notes") of even date therewith payable to the order of the Lender in the aggregate principal amount of Two Million Three Hundred Thousand and nolI 00 Dollars ($2,300,000.00). Assignor has been approved through the City of Elk River, a municipal corporation and political subdivision of the State of Minnesota and by Sherburne County, State of Minnesota for tax abatement financing, and has entered into Tax Abatement and Business Subsidy Agreements with each on or about this same date. The Lender has required, as a condition to making any Advances under the Loan Agreement, the execution hereof by the Assignor, the City of Elk River and Sherburne County. ACCORDINGL Y, in consideration of the foregoing, the Assignor does hereby grant, assign, transfer and set over unto the Lender all of its rights, title and interest in and to any and all tax rebates or abatements ("Rebates") received from the City of Elk River and Sherburne County in connection with the tax abatement financing. The Assignment shall terminate when Assignor has fully performed. The Assignor agrees' that no change in the terms thereof shall be valid without the written approval of the Lender. The Assignor agrees not to assign, sell, pledge, mortgage or otherwise transfer or encumber its interest in the Rebates so long as this Assignment is in effect. The Assignor hereby irrevocably constitutes and appoints the Lender as its attorney-in- fact to demand, receive, and enforce the Assignor's right with respect to the Rebates, to receive payments under the Tax Abatement Agreements and file appropriate receipts, releases and satisfactions for and on behalf of and in the name of the Assignor or, at the option of the Lender, in the name of the Lender, with the same force and effect as the Assignor could if this Assignment had not been made. Assignor authorizes the rebates to be paid directly to Lender. This Assignment shall constitute a perfected, absolute and present assignment. The Lender may, without affecting any of its rights or remedies against the Assignor and Borrower under any other instrument, document or agreement, exercise its right under this Assignment as the Assignor's attorney-in-fact in any manner permitted by law, and in addition, the Lender shall have the right to exercise and enforce any or all rights and remedies available after default to a secured party under the Uniform Commercial Code, as adopted in the State of Minnesota. The Assignor and Borrower hereby agree to pay all reasonable costs and expenses (including without limitation reasonable attorneys' fees) which the Lender may incur in exercising any of its rights under this Assignment. This Assignment shall be binding uponthe Assignor, its heirs, representatives, assigns, and successors, and shall inure to the benefit of the Lender, its successors and assigns. The Assignor has concurrently executed and delivered to the Lender this Assignment, and the Assignor intends to be bound by the terms of this Assignment. This Agreement can be waived, modified, amended, terminated or discharged only explicitly in writing, signed by the Lender. A waiver signed by the Lender shall be effective only in a specific instance and for the specific purpose given. Mere delay or failure to act shall not preclude the exercise or enforcement of any of the Lender's rights or remedies hereunder. All rights and remedies of the Lender shall be cumulative and may be exercised singularly or concurrently, at the Lender's option, and the exercise or enforcement of anyone such right or remedy shall neither be a condition to nor bar the exercise or enforcement of any other. IN WITNESS WHEREOF, the Assignor has executed this Assignment as of the day and year first above written. ASSIGNOR: CPE EXCHANGE 25613, LLC By: Jeffrey R. Peterson Its: Chief Manager Jon M. Jacobs This Assignment is hereby acknowledged. It is understood that all payments made by the City pursuant to its Tax Abatement and Business Subsidy Agreement with Jacobs shall be made directly to Lender at Great Northern Bank, 12725 43rd Street NE, St. Michael, MN 55376. This Assignment shall in no way otherwise alter the terms of the agreement. CITY OF ELK RIVER By: Its: Mayor By: Its: Administrator This Assignment is hereby acknowledged. It is understood that all payments shall be made directly to Lender at Great Northern Bank, 12725 43rd Street NE, St. Michael, MN 55376. SHERBURNE COUNTY By: Its: County Administrator