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5.0. & 5.1. & 5.2. EDSR 04-14-2008!'+/i City of Elk -..-^ River REQUEST FO R ACTIO N To Item Number Economic Develo ment Authori 5 - 5.1 - 5.2 Agenda Section Meeting Date Prepared by Catherine Mehelich, Director of Economic Develo ment Item Description Reviewed by Consider Sportech, Inc. Expansion Project -Public Hearing Lori ohnson, Ci Administrator - Consider Disposition of EDA Property and Business Subsidies Reviewed by -Consider Micro Loan Action Requested The EDA is asked to hold a public hearing to consider comment on the disposition of EDA property and on the proposed business subsidies for the project. Following the public hearing, the EDA is asked to consider approval of the following actions regarding the Sportech, Inc. expansion project: 1) Resolution Authorizing the Sale of Land 2) Resolution Authorizing Execution of Abatement Agreements 3) $100,000 Micro Loan as recommended by EDA Finance Committee Background/Discussion Sale of EDA Property Attached for your review is the purchase agreement that has been prepared by the EDA's attorney at Briggs & Morgan, and since executed by Envision Company, LLC. In summary, the purchase agreement allows for the 9.29-acre lot to be sold upfront to Envision Company, LLC for the purchase price of $1.00, conditioned upon approval from the City of Elk River and Sherburne County to reimburse the land at market value in the amount of $809,345 at 6% interest through tax abatement revenues generated for up to 10-years as a result of the project. The City Council is scheduled to hold a public hearing and consider approval of the tax abatement at its April 21, 2008 meeting. Sherburne County will schedule its public hearing and consider approval late April/early May. In addition, the purchase agreement includes the statutory provisions for the sale of EDA property. MN Statutes requires the EDA to provide notice and hold a public hearing prior to the sale of property, review building plans and specs, and a reversion clause if the project is not completed as agreed. Financial Impact Development costs for the Northstar Business Park have been paid off by previous lot sales and the $400,000 MN Employment & Economic Development Public Infrastructure Grant, to afford the EDA the ability to provide the 9.29-acre lot in the form of upfront assistance for this unique project. S:\Industrial Siting\Sportech Expansion II\Memos\4.14.08 LllA Action Requested.doc In accordance with the City's Tax Abatement Policy, Ehlers and Associates, Inc. have completed abut- for analysis and financial projection far the tax abatement to conclude that at an estimated market value of $4,800,000 the project will generate sufficient tax abatement revenue to repay the EDA within the 10- year term at a modest interest rate. It should be noted that there is no minimum assessment agreement that establishes a minimum market value to guarantee repayment in the 10-year term. Staff has evaluated the company's application based on the attached Tax Abatement and Business Subsidy Policies and the Tax Abatement Application Review Worksheet, which indicates that the project scored 36 out of 45 possible points, which equates to a "moderately desirable" project based on the City's project priorities. Proposed Business Subsidies The expansion project, estimated at a cost of $6,359,000, will involve finance participation from the company's lender, equity participation, and the following public financing applications: * City of Elk River Tax Abatement (land purchase) $ 404,672 * Sherburne County Tax Abatement (land purchase) $ 404,672 * EDA Micro Loan (equipment) $ 100,000 * MN Investment Fund Loan (equipment) 500 000 Total $1,409,345 The Business Subsidy Agreement establishes the following job and wage goals to be met within 2-years as a result of the assistance: • Retention of 66 full-time jobs • Creation of 25 full-time jobs at hourly wages not less than $12.00 The City's Business Subsidy Policy requires the minimum wage for new or retained jobs at $15.00 per hour. Deviations are allowed to be considered for projects that result in a significant tax base increase. Therefore it should be noted that 19 of the 25 new positions are proposed at wages below the City's Business Subsidy Policy, but are also at a market rate wage for the types of positions. Industrial Incentive Micro Loan The attached staff report to the EDA Finance Committee re: Sportech, Inc. Micro Loan application provides background about the $100,000 Micro Loan request to assist in financing a portion of the company's new equipment needs. At its meeting on Apri17, 2008 the EDA Finance Committee approved a motion to recommend approval of the Micro Loan request at the terms outlined below: * Loan Amount: $100,000 * Interest Rate: fixed, 2 points below prime * Term: 10-year amortization; 5-year balloon * Security: 1ti` position lien on related equipment purchase Attachments • EDA Resolution Authorizing the Sale of Land • EDA Resolution Authorizing Execution of Abatement Agreements • DRAFT Tax Abatement Agreement • Purchase Agreement • Preliminary Building Plans S:AIndustrial Siting\Sportech Expansion II\Memos\4.14.08 EllA Action Requested.doc • Tax Abatement Application Review Worksheet • Sportech, Inc. Projected Job Creation, dated March 13, 2008 • Staff Report to EDA Finance Committee re: Sportech, Inc. Application, April 8, 2008 Action Motion by Second by Vote Follow Up S:\Indus[rial Si[ing\Sportech P;xpansion II\Memos\4.14.08 I;DA Action Requested.doc EXTRACT OF MINUTES OF MEETING OF THE BOARD OF COMMISSIONERS OF THE ECONOMIC DEVELOPMENT AUTHORITY OF THE CITY OF ELK RIVER, MINNESOTA HELD: April 14, 2008 Pursuant to due call and notice thereof, a meeting of the Board of Commissioners of the Economic Development Authority of the City of Elk River, Sherburne County, Minnesota, was duly called and held at the City Hall in the City of Elk River on Monday, the 14th day of April, 2008, at 5:30 o'clock p.m. The following Commissioners were present: and the following were absent: Commissioner its adoption: introduced the following resolution and moved RESOLUTION AUTHORIZING THE SALE OF LAND A. WHEREAS, the Economic Development Authority of the City of Elk River, Minnesota (the "Authority") is the owner of certain real property located in the City of Elk River, Minnesota identified as Lot 4, Block 1, NORTHSTAR BUSINESS PARK, Sherburne County, Minnesota, Parcel Identification No. 75-757-0120 (the "Land"). B. WHEREAS, it has been proposed that the Authority sell the Land to Envision Company, LLC. (the "Purchaser"), pursuant to Minnesota Statutes, Section 469.029. C. WHEREAS, the Authority and the Purchaser have entered into a purchase agreement providing for the sale of the Land, contingent on, among other things, the approval of such sale following a public hearing (the "Purchase Agreement"). D. WHEREAS, the Authority has, on the date hereof, held a public hearing on such sale of the Land. E. WHEREAS, under the terms of the Purchase Agreement, the Purchaser is obligated to pay the Authority the purchase price of $ NOW, THEREFORE, BE IT RESOLVED by the Board of Commissioners of the Economic Development Authority of the City of Elk River as follows: 1. The Board of Commissioners hereby approves the sale of the Land in accordance with the terms of the Purchase Agreement, the execution of which is hereby ratified. 2161233v1 The motion for adoption of the foregoing resolution was duly seconded by Commissioner and, after full discussion thereof, and upon a vote being taken thereof, the following voted in favor thereof: and the following voted against same: Adopted this 14th day of April, 2008. Chair Attest: Secretary 2161233v1 2 STATE OF MINNESOTA COUNTY OFSHERBURNE ECONOMIC DEVELOPMENT AUTHORITY OF THE CITY OF ELK RIVER I, the undersigned, being the duly qualified and acting Secretary of the Economic Development Authority of the City of Elk River, DO HEREBY CERTIFY that I have carefully compared the attached and foregoing extract of minutes with the original minutes of a meeting of the Board of Commissioners of said Economic Development Authority held on the date therein indicated, which are on file and of record in my office, and the same is a full, true and complete transcript therefrom insofar as the same relates to a Resolution Approving the Sale of Land. WITNESS my hand as such Secretary of the Economic Development Authority of the City of Elk River of this day of April, 2008. Secretary 2161233v1 3 PURCHASE AGREEMENT RELATING TO A LOT IN NORTHSTAR BUSINESS PARK, SHERBURNE COUNTY, MINNESOTA Parties. The parties to this Purchase Agreement are: a. The Economic Development Authority of the City of Elk Ri er, a body corporate and politic organized pursuant to Minnesota Statutes, Section 469.090 to 469.1082, 13065 Orono Parkway, Elk River, MN 55330-5600, Attention: Executive Director (the "Seller"); and b. Envision Company, LLC., a Minnesota limited liability, 15703 Jarvis Street, Elk River, Minnesota 55330, Attention: Chris Carlson (the "Buyer"). This Agreement sometimes refers to Seller and Buyer individually as a "Party" and collectively as the "Parties". 2. Pro er .The real property that is the subject of this Agreement is located in the City of Elk River, Sherburne County, Minnesota and is legally described as Lot 4, Block 1, NORTHSTAR BUSINESS PARK, Sherburne County, Minnesota (the "Property"). The property is vacant land. The term "Property", as used in this Agreement includes all hereditaments and appurtenances to the Property. The Parties do not contemplate the conveyance of any personal property pursuant to this Agreement. 3. Purchase and Sale. Seller agrees to sell the Property to Buyer pursuant to the terms of this Agreement, and Buyer agrees to purchase the Property from Seller pursuant to the terms of this Agreement. Upon the purchase of the Property, Buyer intends to lease the Property to its affiliate, Sportech, Inc., a Minnesota corporation ("Sportech"). 4. Purchase Price. The purchase price for the Property is One Dollar ($1.00) (the "Purchase Price") and is payable in cash at closing. 5. Plans and Specifications. Prior to Seller's execution of this Agreement Buyer will deliver plans and specifications ("the Plans and Specifications") for the improvements Buyer or Sportech intends to construct on the Property (the "Improvements") to Seller for review as required by Minnesota Statutes, Section 469.105, Subd. 7. Seller's execution of this Agreement evidences Seller's approval of the Plans and Specifications for purposes of Minn. Stat Section 469.105 Subd 7. Seller's approval of the Plans and Specifications pursuant to this Section constitutes approval for purposes of this Agreement only. Seller's review and approval or disapproval of Plans and Specifications pursuant to this Agreement is not intended to and does not satisfy any requirements of the City of Elk River's ordinances and is not intended as a substitute for any plan review provided for therein. 2150570v4 6. Conveyance Terms. Upon Buyer's full performance of Buyer's obligations under this Agreement, Seller must execute and deliver to Buyer a Quit Claim Deed conveying fee title to the Property to Buyer subject only to: a. Building, zoning and subdivision statutes, laws, ordinances and regulations; b. Reservations of minerals or of mineral rights in favor of the State of Minnesota, if any; c. The lien of real estate taxes and special assessments not yet due and payable; and d. Covenants, conditions, restrictions, easements, encumbrances or other defects in title which are disclosed by the Evidence of Title, as defined in Section 9, and which are not the subject of a timely Objection, as defined in Section 10, or which are the subject of a timely Objection that Buyer waives pursuant to the provisions of Section 10(b). The following covenants in favor of Seller: (i) Within one year of the Date of Closing, as defined in Section 9, Buyer or Sportech must complete the construction of the Improvements in accordance with the Plans and Specifications, as evidenced by the City of Elk River's issuance of a Certificate of Occupancy, and devote the Property to use as a manufacturing facility; and (ii) Buyer must not transfer title to the Property within one year of the Date of Closing without the consent of Seller which consent Seller will not unreasonable withhold or delay. Notwithstanding the foregoing, if, within one year of the date the deed from Seller to Buyer is recorded, Buyer defaults in the performance of its obligations under a mortgage recorded against title to the Property and the mortgagee forecloses the mortgage or obtains a deed in lieu of foreclosure, the purchaser at the sheriff s sale or the grantee under the deed in lieu of foreclosure will have until the earlier of (i) the date one year from the date the Sheriff s Certificate of Sale or deed in lieu of foreclosure is recorded or (ii) the date two years from the date the deed from Seller to Buyer is recorded, to (A) complete the construction of the Improvements in accordance with the Plans and Specifications, or such to complete the construction of any improvements that Seller, in Seller's sole and absolute discretion, approves as a substitute for the Improvements, as evidenced by the City of Elk River's issuance of a certificate of occupancy and to (B) devote the Property to a use that is permitted use under the applicable provisions of the City of Elk River's zoning code. Notwithstanding the provisions of Section 6(e)(ii) a transfer of title to the Property pursuant to sheriffs sale or a deed in lieu of foreclosure does not require the consent of the Seller. 2150570v4 2 f. Aright of re-entry for breach of either of the covenants described in Section 6(e). If Buyer or Buyer's successors in title violate either of the covenants set forth in Section 6(e), Seller may commence an action in Sherburne County District Court seeking a judicial decree from the District Court that the Quit Claim Deed is canceled, that title to the Property reverts to Seller and that the Purchase Price is forfeited to the Seller, all as set forth in Minnesota Statute Section 469.105, Subd. 6. The forgoing is Seller's sole and exclusive remedy in the event of a breach of the covenants described in Section 6(e). Seller will not agree to subject the right of reentry described in this Section 6(f) to the lien of Buyer's mortgage, but Seller agrees that if Buyer defaults in the performance of its obligations under a mortgage recorded against title to the Property and the mortgagee forecloses or acquires title pursuant to a deed in lieu of foreclosure, Seller will release the covenants described in Section 6(e) and the right of reentry described in this Section 6(f) upon payment, by the party acquiring title to the Property at the sheriff s foreclosure sale or the party acquiring title through a deed in lieu of foreclosure, to Seller of an amount equal to $2.00 per square foot of the Property. (hereinafter, collectively, the "Permitted Encumbrances"). 7. Possession. Upon Buyer's full performance of Buyer's obligations under this Agreement, Seller must deliver possession of the Property to Buyer. 8. Closin .The Parties must meet at the offices of Seller at 13065 Orono Parkway, Elk River, Minnesota at 9:30 a.m., on May 7, 2008, or at such other place or other date as the Parties may establish by written agreement or pursuant to the provisions of Section 10 below (the "Date of Closing"), at which time: a. Seller must: (i) execute and deliver to Buyer the deed described in Section 6 above. Seller will include on the deed the statement "The Seller certifies that the Seller does not know of any wells on the described real property." (ii) execute and deliver to Buyer and Buyer's title insurer, if any, an appropriate Minnesota Uniform Conveyancing Form Affidavit (Form 117-M) evidencing the absence of bankruptcies, judgments, tax liens involving parties with the same or similar names as the Seller and evidencing the absence of mechanic's lien rights affecting the Property, unrecorded interests affecting the Property, persons in possession of the Property and known encroachments or boundary line questions affecting the Property; (iii) execute and deliver to Buyer anon-foreign affidavit in recordable form containing such information as is required under IRC Section 1445(b)(2) and any regulations relating thereto; (iv) provide Buyer or Title, as defined in Section 10 with the information necessary to complete a Minnesota Certificate of Real Estate Value; and 2150570v4 3 (v) pay or provide evidence of payment of the following: the State Deed Tax due upon the execution of the deed described in Section 6; and one-half of Title's fee to conduct and insure the closing of this transaction. b. Buyer must: (i) Tender the Purchase Price to Seller pursuant to the provisions of Section 4 above; and (ii) Pay or provide evidence of payment of the following: the cost of Evidence of Title, as defined in Section 9, the premium for Buyer's owner's policy of title insurance, if any; the changes for any endorsements to Buyer's title insurance policy that Buyer elects to purchase; the recording fee due upon the recording the deed from Seller to Buyer; all costs associated with Buyer's financing, if any, including mortgagee's title insurance policy costs and premiums, if any, and one-half of Title's fee to conduct and insure the closing of this transaction. 9. Evidence of Title. Seller has delivered to Buyer a commitment from Sherburne County Abstract, as agent for Old Republic National Title Insurance Company ("Title") to issue an ALTA Form 2006 Owner's Policy of Title Insurance identifying Buyer as the proposed insured (the "Title Commitment") and Seller has delivered or will deliver to Buyer within ten (10) days of the date hereof, an ALTA/ACSM survey (the "Survey") of the Property certified to Seller, Buyer, and Title. The Title Commitment and Survey are referred to, collectively, in this Agreement as the "Evidence of Title." Buyer must reimburse Seller for the cost of the Evidence of Title (i) at Closing; (ii) contemporaneously with Buyer's delivery of a notice to Seller terminating this Agreement pursuant to Section 14; or (iii) upon Seller's termination of this Agreement pursuant to Section 15(c). 10. Examination of Title. Within ten (10) business days of Buyer's receipt of the last item of the Evidence of Title or within ten (10) days of Buyer's discovery of a defect in the marketability of Seller's title to the Property which defect was not reasonably ascertainable from the Evidence of Title, Buyer may give Seller written notice of alleged defect(s) in the marketability of Seller's actual or record title to the Property and request that Seller make Seller's title marketable (an "Objection"). The encumbrances described in Section 6 may not serve as a basis for an Objection. Within five (5) business days of Seller's receipt of Buyer's Objection(s), Seller must notify Buyer, in writing, if Seller will attempt to make Seller's title to the Property marketable. If Seller notifies Buyer that Seller will attempt to make Seller's title to the Property marketable, Seller must use commercially reasonable efforts to do so within one hundred twenty (120) days from Seller's receipt of Buyer's Objection, and, if necessary, the Date of Closing must be rescheduled accordingly. If Seller makes Seller's title marketable within the one hundred and twenty (120) day period, Seller must notify Buyer, in writing, and the Parties must close pursuant to the terms of the Agreement. The new "Date of Closing" must be the date fifteen (15) days from the date Seller notifies Buyer that Seller's title is marketable. If Seller notifies Buyer that Seller does not intend to make Seller's title marketable or if Seller notifies Buyer that Seller intends to make Seller's title marketable but, notwithstanding Seller's use of commercially 2150570v4 4 reasonable efforts, Seller is unable to make Seller's title marketable within one hundred twenty (120) days from Seller's receipt of Buyer's Objection, Buyer may either: a. terminate this Agreement pursuant to the procedures set forth in Section 19 below; or b. notify Seller that Buyer waives Buyer's Objection. If Buyer waives Buyer's Objection, the matter giving rise to such Objection will be deemed a permitted encumbrance and the Parties must fully perform their obligations under this Agreement. The Parties must establish a new Date of Closing by mutual agreement, but if the Parties cannot establish a new Date of Closing by mutual agreement, the Date of Closing will be the date fifteen (15) days from the effective date of Buyer's notice to Seller that Buyer waives Buyer's Objection. If Buyer does not notify Seller of Buyer's election to terminate this Agreement pursuant to subsection (a) above or waive Buyer's Objection pursuant to subsection (b) above within fifteen (15) days of Buyer's receipt of notice from Seller that Seller does not intend to make Seller's title to the Property marketable or the expiration of the one hundred twenty (120) day period provided for above, as the case may be, this Agreement automatically terminates and Buyer must deliver an executed and recordable quit claim deed to the Property or other recordable instrument to Seller to evidence the termination of this Agreement. 11. Seller's Representations. Seller makes the following representations to Buyer: a. Seller represents that, to the best of Seller's actual knowledge, there is no action, litigation, governmental investigation, condemnation or administrative proceeding of any kind pending against Seller with respect to the Property or otherwise involving any portion of Property, and no third party has threatened Seller with commencement of any such action, litigation, investigation, condemnation or administrative proceeding. b. Seller represents that, to the best of Seller's actual knowledge, there are no wells located on the Property. c. Seller represents that, to the best of Seller's actual knowledge, there are no underground or above ground storage tanks of any size or type located on the Property. d. Seller represents that, to the best of Seller's actual knowledge, there are no Hazardous Substances located on the Property; the Property is not subject to any liens or claims by government or regulatory agencies or third parties arising from the release or threatened release of Hazardous Substances in, on or about Property; and Property has not been used in connection with the generation, disposal, storage, treatment or transportation of Hazardous Substances. For purposes of this Agreement, the term "Hazardous Substance" includes but is not limited to substances defined as "hazardous substances," "toxic substances" or "hazardous wastes" in the Comprehensive Environmental Response Compensation Liability Act of 1980, as amended, 42 U.S.C. §9601, et seq., and substances defined as "hazardous wastes," "hazardous substances," "pollutants, or contaminants" as defined in the Minnesota Environmental Response and 2150570v4 Liability Act, Minnesota Statutes, § 115B.02. The term "hazardous substance" must also include asbestos, polychlorinated biphenyls, petroleum, including crude oil or any fraction thereof, petroleum products, heating oil, natural gas, natural gas liquids, liquified natural gas, or synthetic gas useable for fuel (or mixtures of natural gas and synthetic gas). e. Seller represents that: (i) there are no special assessments levied or pending against the Property; (ii) the Property is exempt from ad valorem real estate taxes assessed in 2007 and due and payable in 2008; and (iii) there are no delinquent real estate taxes or installments of special assessments due and payable with respect to the Property. f. Seller represents that, to the best of Seller's actual knowledge, the Property has not been used for methamphetamine production. If, at any time prior to the Date of Closing, Seller acquires actual knowledge of events, circumstances or facts which render the representations set forth in this Section 11 inaccurate in any respect, Seller must immediately notify Buyer, in writing. All of the representations set forth in this Section 11 shall survive closing and shall not be merged in the delivery and execution of the Deed, except that Buyer's acceptance of the deed described in Section 6 from Seller and payment of the Purchase Price to Seller with knowledge that one or more of the matters set forth above are not as represented constitutes Buyer's waiver or release of any claims due to such misrepresentation. 12. Buyer's Representations. Buyer hereby represents to Seller as follows: a. The individuals executing this Agreement on behalf of Buyer represent and warrant that they have the authority to execute this Agreement on behalf of Buyer and to bind Buyer. Buyer represents that Buyer has the full and complete authority to enter into this Agreement and to purchase the Property. b. Buyer represents that Buyer has not engaged a real estate agent in connection with this transaction. 13. Buyer's Inspection and "AS IS" Sale. At all times prior to the Date of Closing, Buyer and its agents have the right, upon reasonable notice to Seller, to go upon the Property to inspect the Property and to determine the condition of the Property including, specifically, the presence or absence of Hazardous Substances, in, on, or about the Property. Buyer agrees to indemnify and defend Seller from and to hold Seller harmless against any and all claims, causes of action or expenses, including attorneys fees, relating to or arising from Buyer's or Buyer's agents or contractors presence on the Property prior to the Date of Closing. Buyer agrees to repair any damage to the Property caused by such inspections and to return the Property to substantially the same condition as existed prior to Buyer's inspection. BUYER ACKNOWLEDGES THAT BUYER IS PURCHASING THE PROPERTY IN RELIANCE ON THE REPRESENTATIONS OF SELLER SET FORTH IN SECTION 11; ON BUYER'S INSPECTION OF THE PROPERTY PURSUANT TO THIS SECTION 13; AND ON BUYER'S JUDGMENT REGARDING THE SUFFICIENCY OF SUCH INSPECTIONS. BUYER IS NOT RELYING ON ANY WRITTEN OR ORAL 2150570v4 6 REPRESENTATIONS, WARRANTIES OR STATEMENTS THAT SELLER OR SELLER'S AGENTS HAVE MADE EXCEPT FOR THE REPRESENTATIONS SET FORTH IN SECTION 11 OF THIS AGREEMENT. SUBJECT TO BUYER'S RIGHT TO TERMINATE THIS AGREEMENT PURSUANT TO SECTION 14, BUYER IS PURCHASING THE PROPERTY IN "AS IS" CONDITION RELYING ONLY ON THE REPRESENTATIONS SET FORTH IN SECTION 11. 14. Buyer's Contingencies. Buyer's obligations under this Agreement are contingent on: a. Buyer's determination, based on the inspections described in Section 13 above and any other relevant information, that the condition of the Property is acceptable to Buyer; b. Buyer's acquisition of a commitment for financing, acceptable to Buyer in Buyer's sole and absolute discretion, sufficient to permit Buyer or Sportech to construct the Improvements on the Property; c. Buyer's determination, that Buyer will be able to obtain all zoning or rezoning approvals, variances, conditional use permits, operating permits or other federal, state or local approvals or permits (collectively, "Permits") necessary for Buyer's intended use of the property as a manufacturing facility; and d. No taxpayer appealing Seller's Board's decision to approve the sale to Buyer pursuant to the terms of this Agreement within the twenty (20) day time period described in Minnesota Statute Section 469.105, Subd. 3. Buyer must use commercially reasonable efforts to satisfy the contingencies described in Sections 14(a), 14(b) and 14(c) on or before the Date of Closing. If one or more of the contingencies described in Section 14 is not satisfied as of the Date of Closing, Buyer may terminate this Agreement pursuant to the procedures set forth in Section 19. If Buyer does not notify Seller, in accordance with the requirements in Section 19, on or before the Date of Closing that Buyer is exercising one of the contingencies described in this Section 14, Buyer's right to exercise the contingencies described in this Section 14 terminates, and the Parties must proceed pursuant to the other provisions of this Agreement. 15. Seller's Contingencies. Seller's obligations under this Agreement are contingent on: a. No taxpayer appealing Seller's Board's decision to approve the sale to Buyer pursuant to the terms of this Agreement within the twenty (20) day time period described in Minnesota Statute Section 469.105, Subd. 3; and b. The City of Elk River and Sherburne County, having adopted tax abatement resolutions in form and substance acceptable to Seller, and Seller having entered into tax abatement agreements with the City of Elk River and Sherburne County; 2150570v4 7 c. Buyer having provided Seller with documentation, reasonably acceptable to Seller, evidencing Buyer's acquisition of a commitment for financing sufficient to permit Buyer or Sportech to construct the Improvements on the Property. If one or more of the contingencies described in this Section 15 are not satisfied as of the Date of Closing, Seller may terminate this Agreement pursuant to Section 19. 16. Condemnation. If a public or private entity with the power of eminent domain commences condemnation proceedings against all of any part of the Property, Seller must immediately notify Buyer, and Buyer may, at Buyer's sole option, terminate this Agreement pursuant to Section 19 below. Buyer has twenty (20) days from Buyer's receipt of Seller's notice to Buyer to exercise Buyer's termination right. If Buyer does not terminate this Agreement within said twenty (20) day period, the Parties must fully perform their obligations under this Agreement, with no reduction in the Purchase Price, and Seller must assign to Buyer, on the Date of Closing, all of Seller's right, title and interest in any award made or to be made in the condemnation proceedings. Seller must not designate counsel, appear or otherwise act with respect to any such condemnation proceedings without Buyer's prior written consent unless Buyer fails to respond within seven (7) days to a request for such written consent. 17. Assignment. Except as set forth in this Section 17, Buyer may not assign Buyer's rights or obligations under this Agreement to a third party without the written consent of Seller and Seller may grant or withhold Seller's consent to an assignment in Seller's sole and absolute discretion. The Seller herein acknowledges that it is the intention of the Buyer to complete an IRS Section 1031 Tax-Deferred Exchange and that Buyer may assign Buyer's rights and obligations under this Agreement to Commercial Partners Exchange Company, LLC, for the purpose of completing such exchange. Further, Buyer may assign Buyer's rights and obligations under this Agreement to an exchange accommodation title holder for the purpose of structuring a reverse section 1031 tax deferred according to Revenue Procedure 2000-37. Seller agrees to cooperate with the Buyer and/or its assigns in a manner necessary to complete said exchange; provided that Seller is not obligated to incur any additional cost, incur any additional current or potential liability or waive or otherwise impair any of Seller's rights under this Agreement. Buyer hereby notifies Seller that immediately prior to closing, Buyer shall assign the benefits of (but not the obligations in) in this Agreement to CPE EXCHANGE 30037, LLC, a Minnesota limited liability company, that is wholly owned by Commercial Partners Exchange Company, LLC, for the express purpose of facilitating a reverse 1031 tax deferred exchange under Revenue Procedure 2000-37 and 26 U.S.C. A. Section 1031. Seller herby consents to this assignment. 18. Default. If either Party defaults in the performance of any of the Party's obligations under this Agreement, the non-defaulting Party may, after written notice to the defaulting Party, suspend performance of its obligations under this Agreement, and the rights of the non-defaulting Party are as follows: a. Buyer's Default. If Buyer defaults in the performance of any of Buyer's obligations under this Agreement, Seller has the right to terminate this Agreement pursuant to Minnesota Statutes, Section 559.21, or Buyer may, in Buyer's sole and absolute discretion, elect to commence an action in Sherburne County District Court to recover liquidated damages of $15,000 from Buyer. Seller and Buyer have agreed upon 2150570v4 $15,000 as the amount of Seller's liquidated damages due to the difficulty and uncertainty of determining Seller's actual damages. Notwithstanding the foregoing, if one or more of the representations of Buyer in Section 12 is inaccurate, when made, or if Buyer defaults in the performance of Buyer's obligations under Section 13, the liquidated damage agreement above shall not apply, and Seller may commence an action against Buyer in Sherburne County District Court to recover Seller's actual damages. If Seller prevails in any such action, Seller is entitled to recover from Buyer Seller's reasonable attorneys fees and costs. The remedies set forth in this Section 18(a) are Seller's sole and exclusive remedies in the event of Buyer's default. b. Seller's Default. If Seller defaults in the performance of any of Seller's obligations under this Agreement, Buyer may: (i) terminate this Agreement pursuant to Section 19 below; or (ii) initiate an action in Sherburne County District Court to compel Seller's specific performance of Seller's obligations under this Agreement provided that Buyer commences such action within six (6) months of the date of Seller's default. If Buyer prevails in any such action for specific performance, Buyer may also recover Buyer's reasonable attorneys fees and costs; or (iii) If any one or more of the representations set forth in Section 11 are inaccurate, when made, Buyer may commence an action for damages against Seller in Sherburne County District Court, and if Buyer prevails in such action, Buyer may also recover from Seller Buyer's reasonable attorneys fees and costs. The remedies set forth in this Section 18(b) are Buyer's sole and exclusive remedies in the event of Seller's default. 19. Termination of this Agreement. Sections 10, 14, 16 and 18(b)(i) of this Agreement allow Buyer to terminate this Agreement under certain conditions. Section 15 allows Seller to terminate this Agreement under certain conditions. The following procedures govern the exercise of those termination rights. Section 18(a) allows Seller to terminate this Agreement under certain conditions, but a termination pursuant to Section 18(a) is governed solely by Minnesota Statutes Section 559.21 and not by this Section 19. a. The party that desires to terminate this Agreement (the "Terminating Party") must notify the other party (the "Non-Terminating Party"), in writing, of the Terminating Party's intent to terminate this Agreement. b. The Terminating Party's notice must recite the Section of this Agreement that authorizes the Terminating Party's termination of this Agreement and must describe the facts and circumstances which the Terminating Party asserts justify termination under the referenced Section. c. The Terminating Party's notice of termination is effective as of the date the Terminating Party deposits the notice of termination with the United States Postal Service, with all necessary postage paid, for delivery to the Non-Terminating Party via 2150570v4 9 certified mail, return receipt requested, at the address set forth in Section 1. If the Terminating Party delivers a notice of termination in a different manner than described in the preceding sentence, the notice of termination is effective as of the date the Non- Terminating Party actually receives the notice of termination. The Terminating Party must also mail a copy of the notice of termination to the Parties respective attorneys as provided for in Section 26 below. d. If the Non-Terminating Party disputes the Terminating Party's right to terminate this Agreement, the Non-Terminating Party must so notify the Terminating Party, in writing, within five (5) business days of the Non-Terminating Party's receipt of the Terminating Party's notice of termination. e. If the Non-Terminating Party does not dispute the Terminating Party's right to terminate the Agreement, Buyer must execute and delivery to Seller a recordable quit claim deed or other recordable instrument evidencing the termination of Buyer's rights in the Property. f. If the Parties dispute the validity of an attempted termination of this Agreement, either Party may initiate a civil action in a court of competent jurisdiction to determine the status of this Agreement, and the Party that prevails in any such action is entitled to recover its reasonable attorneys' fees and costs in the action from the non- prevailing Party. 20. Time. Time is of the essence for all provisions of this Agreement. 21. Survival of Terms. The Parties' obligations under this Agreement survive Seller's delivery of a deed to Buyer and the closing of this transaction. 22. Notices. All notices provided for in this Agreement must be in writing. The notice must be effective as of the date two days after the Party sending such notice deposits the notice with the United States Postal Service with all necessary postage paid, for delivery to the other Party via certified mail, return receipt requested, at the address set forth in Section 1 above. If Party delivers a notice provided for in this Agreement in a different manner than described in the preceding sentence, notice must be effective as of the date the other party actually receives the notice. The Party sending the notice must also mail a copy of the notice to the Parties' respective attorneys via first class United States mail at the addresses set forth below: Attorney for Buyer: Kermit Nash Fredrikson & Byron 200 South Sixth Street, Suite 4000 Minneapolis MN 55402 2150570v4 1 ~ Attorney for Seller: Briggs and Morgan, P.A. 2200 IDS Center 80 South Eighth Street Minneapolis, MN 55402-2157 Attn: Mr. Thomas L. Bray 23. Full Agreement. The Parties acknowledge that this Agreement represents the full and complete agreement of the Parties relating to the purchase and sale of the Property and all matters related to the purchase and sale of the Property. This Agreement supersedes and replaces any prior agreements, either oral or written, and any amendments or modifications to this Agreement must be in writing and executed by both Parties to be effective. 24. Governing Law. This Agreement has been made under the laws of the State of Minnesota and such laws must control its interpretation 25. Effective Date. This Agreement is effective as of the date the both Seller and Buyer have executed this Agreement (the "Effective Date). 26. Business Subsidy Agreement. a. To satisfy the provisions of Minnesota Statutes, Sections 116J.993 to 116J.995 (the "Business Subsidies Act"), Buyer acknowledges and agrees that the amount of the "Business Subsidy" granted to Buyer under this Agreement is an amount equal to $2.00 times the square foot area of the Property and that the Business Subsidy is needed because the Project is not sufficiently feasible for Buyer or Sportech to undertake without the Business Subsidy. The public purpose of the Business Subsidy is to encourage the construction of an 80,000 square foot manufacturing facility in the City of Elk River. The Buyer certifies that, as of the date of this Agreement, Sportech had sixty eight (68) full-time/full-time equivalent (full-time/FTE) employees within the City of Elk River. Sportech agrees that it will meet the following goals (the "Goals"): it will create at least twenty five (25) full time jobs in connection with the development of the Property (excluding any jobs previously existing in the State as of the date of this Agreement and relocated to the Property) and pay compensation, including benefits not mandated by law, of not less than $12 per hour by or before the date two years from the "Benefit Date," which is the earlier of the date Buyer or Sportech completes or occupies the Improvements as evidenced by the City of Elk River's issuance of a certificate of occupancy. b. If the Goals are not met, Buyer agrees to repay all or a part of the Business Subsidy to Seller, 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, Buyer 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 created at the wage level set forth above and the denominator of which is three (3) (i.e. number of jobs set forth in the Goals). 2150570v4 1 1 c. Buyer agrees to (i) report Sportech's progress on achieving the Goals to Seller 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 Minnesota Statutes, Section 116J.994, Subdivision 7 on forms developed by the Minnesota Department of Employment and Economic Development, and (iii) send completed reports to the City of Elk River. Buyer agrees to file these reports no later than March 1 of each year commencing March 1, 2009, and within 30 days after the deadline for meeting the Goals. Seller agrees that if it does not receive the reports, it will mail Buyer a warning. If within 14 days of the postmarked date of the warning the reports are not made, Buyer agrees to pay to Seller a penalty of $100 for each subsequent day until the report is filed up to a maximum of $1,000. d. Buyer agrees to continue operations within the City of Elk River for at least five (5) years after the Benefit Date. e. There are no other state or local government agencies providing financial assistance for the project other than Seller. f. There is no parent corporation of Buyer. g. Buyer certifies that it does not appear on the Minnesota Department of Employment and Economic Development's list of recipients that have failed to meet the terms of a business subsidy agreement. 2150570v4 1 2 Dated: April _, 2008 SELLER: THE ECONOMIC DEVELOPMENT AUTHORITY OF THE CITY OF ELK RIVER, a body corporate and politic, organized under Minnesota Statutes, Chapter 469 By Its President By Its Vice President By Its Executive Director 2150570v4 13 Dated: ~ , 2008 BUYER: Envision Co any .'~-- By Its Chief Manager 2150570v4 1 4 EXTRACT OF MINUTES OF MEETING OF THE BOARD OF COMMISSIONERS OF THE ECONOMIC DEVELOPMENT AUTHORITY OF THE CITY OF ELK RIVER, MINNESOTA HELD: April 14, 2008 Pursuant to due call and notice thereof, a meeting of the Board of Commissioners of the Economic Development Authority of the City of Elk River, Sherburne County, Minnesota, was duly called and held at the City Hall in said City on Monday, the 14th day of April, 2008, at 5:30 o'clock p.m. The following members were present: and the following were absent: Member adoption: introduced the following resolution and moved its RESOLUTION AUTHORIZING EXECUTION OF ABATEMENT AGREEMENTS A. WHEREAS, Envison Company, LLC, a Minnesota limited liability company (the "Developer") desires to purchase certain real property identified as Lot 4, Block 1, NORTHSTAR BUSINESS PARK, Sherburne County, Minnesota, Parcel Identification No. 75- 757-0120 (the "Land") on which the Developer or Sportech, Inc. will construct an approximately 80,000 square foot light industrial facility located at 17464 Tyler Street NW, Sherburne County, Elk River, Minnesota (the "Project"). B. WHEREAS, the Economic Development Authority of the City of Elk River (the "Authority") and the Developer have determined to enter into a Purchase Agreement providing for the Authority's conveyance of the Land to the Developer for the purpose of constructing the Project (the "Purchase Agreement"). C. WHEREAS, the Purchase Agreement provides that the Authority will convey the Land to the Developer at less than fair market value and the Authority has requested that the City of Elk River, Minnesota (the "City") and Sherburne County, Minnesota (the "County") reimburse the Authority for the amount of the discount in the price of the Land with tax abatements in accordance with Minnesota Statutes, Sections 469.1812 through 469.1815. D. WHEREAS, the Authority has requested that the City and the County each enter into a Tax Abatement Agreement providing for the reimbursement of the Authority for a portion of the cost of the Land in connection with the Project (collectively, the "Abatement Agreements"). 2161223v1 NOW, THEREFORE, BE IT RESOLVED by the Board of Commissioners of the Authority, as follows: 1. The Board of Commissioners hereby approves the Abatement Agreements in substantially the forms submitted, and the Chair and Secretary of the Authority are hereby authorized and directed to execute the Abatement Agreements on behalf of the Authority, subject to the approval thereof by the City and the County. 2. The approval hereby given to the Abatement Agreements 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 the Authority officials authorized by this resolution to execute the Abatement Agreements. The execution of the Abatement Agreements by the appropriate officer or officers of the Authority shall be conclusive evidence of the approval of the Abatement Agreements in accordance with the terms hereof. The motion for adoption of the foregoing resolution was duly seconded by member and, after full discussion thereof, and upon a vote being taken thereof, the following voted in favor thereof: and the following voted against same: 2161223v1 2 STATE OF MINNESOTA COUNTY OF SHERBURNE ECONOMIC DEVELOPMENT AUTHORITY OF THE CITY OF ELK RIVER I, the undersigned, being the duly qualified and acting Secretary of the Economic Development Authority of the City of Elk River, Minnesota, DO HEREBY CERTIFY that I have carefully compared the attached and foregoing extract of minutes with the original minutes of a meeting of the Board of Commissioners of the Economic Development Authority of the City of Elk River, Minnesota held on the date therein indicated, which are on file and of record in my office, and the same is a full, true and complete transcript therefrom insofar as the same relates to a Resolution Authorizing Execution of Tax Abatement Agreements. WITNESS my hand as such Secretary of the Board of Commissioners of the Economic Development Authority of the City of Elk River, Minnesota this day of , 2008. Secretary z~bizz3~i 3 TAX ABATEMENT AGREEMENT BY AND BETWEEN CITY OF ELK RIVER, MINNESOTA AND ECONOMIC DEVELOPMENT AUTHORITY OF THE CITY OF ELK RIVER, MINNESOTA 2159586v2 TABLE OF CONTENTS Page ARTICLE I DEFINITIONS ................................................................................................. 1 Section 1.1 Definitions ............................................................................................ 1 ARTICLE II ACKNOWLEDGEMENTS, REPRESENTATIONS AND WARRANTIES ............................................................................................... 3 Section 2.1 Acknowledgments, Representations and Warranties of the City......... 3 Section 2.2 Acknowledgments, Representations and Warranties of the EDA ..................................................................................................... 3 ARTICLE III UNDERTAKINGS BY EDA AND CITY ...................................................... 4 Section 3.1 Sale of Tax Abatement Property .......................................................... 4 Section 3.2 Limitations on Undertaking of the City ............................................... 4 Section 3.3 Duration of Abatement Program .......................................................... 4 ARTICLE IV EVENTS OF DEFAULT ................................................................................ 5 Section 4.1 Events of Default Defined ................................................._................. 5 Section 4.2 Remedies on Default ..........................',;............................................... 5 Section 4.3 No Remedy Exclusive ..............................._......................................... 5 Section 4.4 No Implied Waiver .............................................................................. 5 ARTICLE V AD DITIONAL PROVISIONS ........................................................................ 6 Section 5.1 Conflicts of Interest .............................................................................. 6 Section 5.2 Titles of Articles and Sections ............................................................. 6 Section 5.3 Notices and Demands .................:.:..................................................... 6 Section 5.4 Counterparts ........................................................................................ 6 Section 5.5 La`~~ Governing .................................................................................... 6 Section 5.6 Duration ............................................................................................... 7 2159586v2 -1- TAX ABATEMENT AGREEMENT THIS AGREEMENT, made as of the day of May, 2008, by and between the City of Elk River, Minnesota (the "City"), a municipal corporation and political subdivision of the State of Minnesota, and the Economic Development Authority of the City of Elk River (the "EDA"). WITNESSETH: WHEREAS, pursuant to Minnesota Statutes, Sections 469.1812 through 469.1815, the City has established a Tax Abatement Program; and WHEREAS, Envison Company, LLC, a Minnesota limited liability company (the "Developer") desires to purchase certain real property_ ,;identified as Lot 4, Block 1, NORTHSTAR BUSINESS PARK, Sherburne County, Minnesota, Parcel Identification No. 75- 757-0120 (the "Tax Abatement Property") on which the Developer or Sportech, Inc. will construct an approximately 80,000 square foot light industrial facility located at 17464 Tyler Street NW, Sherburne County, Elk River, Minnesota (the "Project"). WHEREAS, the EDA and the Developer have entered into a Purchase Agreement providing for the EDA's conveyance of the Tax Abatement Property to the Developer for the purpose of constructing the Project (the "Purchase Agreement"). WHEREAS, the Purchase Agreement provides that the EDA will convey the Tax Abatement Property to the Developer at less than fair market value and the EDA has requested that the City and Sherburne County, Minnesota (the "County") reimburse the EDA for the amount of the discount in the price of the Tax Abatement Property with tax abatements in accordance with Minnesota Statutes, Sections 469.1812 through 469.1815. WHEREAS, the City-.believes that the development and construction of the Project, 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 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 Agreement, as the same may be from time to time modified, amended or supplemented; 2159586v2 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; C~ means the City of Elk River, Minnesota; Count means Sherburne County, Minnesota; Developer means Envison Company, LLC, a Minnesota limited liability company; EDA means the Economic Development Authority of the City of Elk River, Minnesota; Event of Default means any of the events described in Section 4.1; Project means the construction of an approximately 80,000 square foot light industrial facility to be constructed by the Developer or Sportech, Inc... at 17464 Tyler Street NW in the City; 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 No. 75-757-0120, located in the City; Tax Abatements means 100% of the City's share of real estate taxes on the Tax Abatement Property abated in accordance with the Tax Abatement Program. zis9sa6~z 2 ARTICLE II ACKNOWLEDGEMENTS, REPRESENTATIONS AND WARRANTIES Section 2.1 Acknowledgments 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) The City has made the findings required by the Tax Abatement Act for the Tax Abatement Program. (4) The City acknowledges and understands that the EDA is selling the Tax Abatement Property to Sportech, Inc. at a price less than fair market value. The City intends to reimburse the EDA for a portion of the amount of the discount in the price of the Tax Abatement Property from the Tax Abatements as provided herein. Section 2.2 Acknowledgments Representations and Warranties of the EDA. The EDA makes the following representations and wan•anties: (1) The EDA.is a public body corporate and politic and has the power to enter into this Agreement and carry out its obligations hereunder. (2) The EDA has duly authorized the sale of the Tax Abatement Property to the Developer. zis9ss~~z 3 ARTICLE III UNDERTAKINGS BY EDA AND CITY Section 3.1 Sale of Tax Abatement Property. The City shall reimburse the EDA for a portion of the cost of the Tax Abatement Property in an amount not to exceed $460,000 (the "Reimbursement Amount") pursuant to the Abatement Program as provided in Section 3.3. 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 EDA for the Project costs incurred by the EDA, in any amount, 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 Duration of Abatement Pro~rarn• The Tax Abatement Program shall exist for a period of up to twelve years beginning with real estate taxes payable in" 2010 and continuing through 2021. On or before February 1 and August -1 of each year commencing August 1, 2010 until the earlier of the date that the EDA shall have received the Reimbursement Amount or February 1, 2022 the City shall pay the EDA 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 in accordance with Section 4.2. 2is9ss6~z 4 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 EDA to cause the sale of the Tax Abatement Property to be completed pursuant to the terms, conditions and limitations of the Purchase Agreement. (2) Failure by the EDA 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 refei~ed to in Section 4.1 occurs and is continuing, the City, as specified below, may only take any one ormore of the following actions after the giving of thirty (30) days' written notice to the EDA citing with specificity the item or items of default and notifying the EDA that it has thirty (30) days within which to cure said Event of Default. The following remedies are the City's sole and exclusive remedies for an uncured default by the EDA under this Agreement. If the Event of Default has not been cured within said thirty (30) days: (a) The City may suspend its performance under this Agreement until it receives assurances from .the EDA, deemed adequate by the City, that the EDA will cure its default and continue its performance under this Agreement. (b) The City may cancel and rescind this Agreement and recover from the EDA amounts paid to the EDA under Section 3.8 plus Interest as defined in 3.7(2). 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 maybe 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 limited to the particular breach so waived and shall not be deemed to waive any other concurrent, previous or subsequent breach hereunder. 2159586v2 S 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 EDA 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 EDA is addressed to or delivered personally to: Economic Development Authority of the City ofElk-River City Hall 13065-Orono Parkway Elk River, MN 55330-5600 (2) in the case of the City is addressed to or delivered personally to the City at: City of Elk River, Minnesota Elk River City Hall 13065 Orono Parkway Elk River, MN 5330-5600 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. 2159586v2 6 Section 5.6 Duration. This Agreement shall remain in effect through the earlier of the date the EDA receives the Reimbursement Amount or February 1, 2022, unless earlier terminated or rescinded in accordance with its terms. 2159586v2 7 IN WITNESS WHEREOF, the City has caused this Agreement to be duly executed in its name and on its behalf, and the EDA has caused this Agreement to be duly executed in its name and on its behalf, on or as of the date first above written. ECONOMIC DEVELOPMENT AUTHORITY OF THE CITY OF ELK RIVER, MINNESOTA By Its Chair By Its Secretary This is a signature page to the Tax Abatement Agreement by and between the City of Elk River, Minnesota and the Economic Development Authority of the City of Elk River, Minnesota. 2is9sa6~z S-1 CITY OF ELK RIVER, MINNESOTA By Its Mayor By Its Administrator This is a signature page to the Tax Abatement Agreement by and between the City of Elk River, Minnesota and the Economic Development Authority of the City of Elk River, Minnesota. zis9ss6~z S-2 • r~ ~J z~ oZ w~ ~~za ma~ ~ ~Z ~o~ ~w Q°V z~ •° i ~L v i w ~ ~ o @' ~ a`; ~ ~ y Q > O ~~ ~ a V i V 3 80/6Z/F 0008O~J ~'~~~~kl cm m = II Ds r X m C ® ® b ca ® ~ ~ O r~ O o 7 p O p p p p p p ~ p OH z O ~ ~ Z Z o 0 Z 0 Z o Z Z O O ~ Z O Z O ~ Z ~o O ~ m.~ ~ ~ m m N Vl m (n m N r i m N N m V1 m N nm N ~O m r D Z D D D D D D r~D m O ~ o m r o ~ z~ c' o ~' ~ ~' c' D Z O ~ j ~ (~ < ~ ~ ~ f~Tl N P O D U O o ~ ~ m ~ z m ~ ~o °q mmmm ~ ~ ~~ m ~~~~ OO A° ~ ~ /~ = W m ~~ ,, a ~ ~ m ~~ W= {D A D D p ~ / _/_~___~ I ___ D O A~ p p D ~ ~ - ~• / /~ / I I I ( LINEREASEMENT E I ~ ~ PIPE / COMPANY !~--- I r / ___ --- ~~ I -~ - ~ --- _---- = ' ~ I _ f---- ~ ,~ ' ~ ~~ ° I i / ~ ~~. 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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. L b)/ Demonstrates need for Tax Abatement with the but for analysis. L/c) Consistent with all city plans and ordinances. Serves at least two public purposes as defined in Section V(g). 2. Ratio of Private to All Public Investment in Project: $ ~ 9x~c`~ ~vate Investment $ Public Investment ~~~~~,~-~ /Y1C.t jYf/~' ,~ ~ f Ratio Private: Public Financing Less than ~--° Points---~ 5:1 5 4:1 4 3:1 3 2:1 2 2:1 1 3.~ob Creation in the City of Elk River: Points: ~S Number of new jobs as a result of the project. 25+ 5 > Number of existing/retained jobs 20+ 4 ~~ Total 15+ 3 10+ 2 Less than 10 1 4. Ratio of Pu is Investment to Job Creation: ~ Points: $ ~~'~ Public Investment~f~~.~+/~L~m/~ $8,000 or less 5 9 Number of nezv jobs created/retained $10,000 or less 4 $ ~ of Public Investment per new job $12,000 or less 3 $15,000 or less 2 Over $15,000 1 5. Wage Level of neaa~ jobs created/retained Points: ~- Minimum hourly wage Over $21 / hour 5 of jobs created/retained: ~ ~ ~a $18-21 /hour 4 $14-17 /hour 3 $10-13 /hour 2 Under $10 /hour 1 6. Project size: Points: The project will result in the construction 40,000+ 5 of square feet ~ ~ ~Q 30,000+ 4 20,000+ 3 10,000+ 2 10,000 or less 1 City of Elk River Tax Abatement Policy Amended May 2006 - 13- 7. Market Value/Tax Base Generation: Points: The project will result in a per square foot Industrial Commercial es ~ t d market value (land and building) $80/sf+ _' $110/sf+ 5 ~ ~ $70/sf+ of ~ $100/sf+ 4 $60/sf+ $90/sf+ 3 $50/sf+ $80/sf+ 2 $40/sf+ $70/sf+ 1 Y~---- 8. Type of Project: Points: ~00% Owner Occupied 5 Mix Owner Occupied & Investment 4 Investment Property 3 9. Use: Points: industrial or Business Park Project 5 Commercial Rehabilitation/Redevelopment 4 10. Likelihood that the project will result in Points: unsubsidized, spin-off development. (/High 5 Moderate 3 Low 1 Sub -Total Points: ~~ of a possible 45 points. .--~ 11. Bonus Points Bonus Points: ~~ The project will be 100% Pay-a.ryougo Tax Abatement 3 points _~The project contributes to the goals of Energy City. 2 points • Product promotes sensible use of energy, OK Project utilizes significant energy efficient design &/or materials in construction. Total Points _~SG:' Overall project desirability: H,i lg~,a ._-.., ..._ _.... _4 z.-38 points Moderate 37-29 oints " "--- ~"..__. . Low 2$-~(~ ~pomts Not Eligible 19-0 points City of Elk River Tax Abatement Policy Amended May 2006 - 14- SPORTECH, INC. Projected lob Creation March 13, 2008 ., ..- Customer Service Administrative $ 14.00 HR Generalist Administrative $ 14.00 NPD Engineer Administrative $ 17.00 Receptionist Administrative $ 12.00 Sales Staff Administrative $ 18.00 General Manager Leadership $ 40.00 Sales Manager Leadership $ 45.00 Production Production $ 12.00 Production Production $ 12.00 Production Production $ 12.00 Production Production $ 12.00 Production Production $ 12.00 Production Production $ 12.00 Production Production $ 12.00 Production Production $ 12.00 Production Production $ 12.00 Production Production $ 12.00 Production Production $ 12.00 Production Production $ 12.00 Production Production $ 12.00 Production Production $ 12.00 Production Production $ 12.00 Production Production $ 12.00 Production Supervisor Supervisor $ 17.50 Production Supervisor Supervisor $ 17.50 Job Creation Count 25 Average Wage $ 15.48 ~~ ~•- iver MEMORANDUM TO: EDA Finance Committee Tim Simon, Finance Director FROM: Catherine Mehelich, Director of Economic Developmen DATE: April 8, 2008 SUBJECT: Consider Micro Loan Application -Sportech, Inc. A meeting of the EDA Finance Committee will be held at City Hall on Tuesday, Apri18, 2008 at 7:00 am to review a Micro Loan application. Attached is the Micro Loan application submitted by Chris Carlson of Sportech, Inc. Sportech is an established Elk River company that designs and produces plastic components fox primarily the powersports industry. Mr. Chris Carlson will be present to discuss the project with the committee. Staff has been working with Sportech, Inc. over the past year to identify a site and financing assistance to relocate and expand the company's operations in Elk River. The proposed project includes selling its existing facilities located on Jarvis Street, and relocating to a 9.29- acre lot in the EDA-owned Northstar Business Park to accommodate the construction of an 80,000-square foot light industrial facility, the retention of 66 full-time jobs and the creation of 25 new full-time jobs within 2-years of project completion. The expansion project, estimated at a cost of $6,359,000, will involve finance participation from the company's lender, equity participation, and the following public financing applications as outlined in the attached sources & uses: • City of Elk River Tax Abatement (land purchase) $404,672 • Sherburne County Tax Abatement (land purchase) $404,672 • EDA Micro Loan (equipment) $100,000 • Ciry application to MN Dept of Employment $500,000 & Economic Development (DEED) fox a MN Investment Fund loan (equipment) Consider EDA Micro Loan Application -Sportech, Inc. April 8, 2008 EDA Finance Comrruttee Meeting Page 2 of 2 Sportech, Inc. is requesting an EDA Industrial Incentive Micro Loan of $100,000 toward the purchase equipment, of which the the EDA would obtain a 15i position lien. In addition to the financial criteria that must be considered, the Finance Committee must also consider to what degree the applicant satisfies the criteria set forth in the Micro Loan Fund policies outlined below: Micro Loan Criteria • Max. Loan Amount: $100,000 • Interest rate: fined, 2 below prime • Equity: 10% of project • Private Financing: 50% of project • 1 job created per $20,000 loaned • Minimum wage of $15 per hour St~ortech, Inc. • Amount requested: $100,000 • Rate requested: fixed, 2 below prime • Equity proposed: 24% of project • Private Financing: 64% of project • 1 job created per $16,700 loaned • 6 jobs created at $15+/hr wage (in addition to 19 new jobs at $12-14/hr In accordance with the MN Business Subsidy Law, any loan amounts over $75,000 require a Business Subsidy Agreement for job and wage goals to be created as a result of the assistance. The Business Subsidy Agreement for this project will include the EDA Micro Loan, Tax Abatement and MN Investment Fund Loan as a package to be considered fox approval following public hearing at the April 14``' EDA meeting and April 21 S` City Council meeting. Requested Action The EDA Finance Committee is asked to provide a recommendation to the EDA fox approval of the micro loan with the following terms and conditions: Loan Amount: $100,000 Interest Rate: fixed, 2 points below prime Term: 10-year amortization; 5-year balloon Security: 15C position lien on related equipment purchase Attachments • Micro Loan Fund Policy & Guidelines • Sportech, Inc. Micro Loan Fund Application and related attachments S:\Industrial Siting\Sportech Expansion II\Memos\4.8.08 Finance Comm.doc