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Dbq Hardwoods purchase by CityMEMORANDUM October 17, 2002 TO: FROM: SUBJECT: The Honorable Mayor and City Council Members Michael C. Van Milligen, City Manager Offer to Buy Real Estate and Acceptance - Robert and Lynn Miller and Dubuque Hardwoods. Inc. The City has been negotiating the sale of the Hardwoods property for over two years. The property was included as an identified Acquisition Parcel in a recent amendment to the Ice Harbor Urban Renewal Plan. The acquisition will support the adopted Master Plan for the Port of Dubuque and further the redevelopment activities taking place as part of the Amedca's River projects. The negotiated purchase of this property includes the following significant terms: Pumhase price of $2.1 million, half to be paid at closing (on or before December 1, 2002) and half on the date of possession (July 1. 2003). $1,641,036 of the purchase price reflects land value, with the remainder covering relocation and moving expenses for the Millers and Dubuque Hardwoods. 2. The real property conveyed includes property which Dubuque Hardwoods claims an interest in but which the City disputes. The disputed real estate will be conveyed to the City and the City will acknowledge the value of such real estate for purposes of a charitable contribution by Dubuque Hardwoods. Dubuque Hardwoods will provide the City with a termination of the lease between Dubuque Hardwoods and Midwest Hardwoods at closing and will also provide the City with a Quit Claim Deed from Midwest Hardwoods for any interest it may claim in the real estate. As a condition of the pumhase, the City has a right to obtain a Phase I environmental assessment prior to closing December 1, 2002. Permission is granted to Preston Engineenng (they did the Phase I) to access the property and conduct the study. If the Phase II is acceptable, the City will purchase the property "as is" and agrees to release, indemnify and hold harmless only Dubuque Hardwoods. Dubuque Hardwoods will pay $100,000 to Midwest Hardwoods for moving expenses per a prior agreement between the two companies. The City will be responsible for the excess of Midwest Hardwoods' moving expenses over the $100,000 payment. The terms of the offer result from lengthy negotiation-and compromise by both parties. The conclusion of this purchase will allow both the property owner and the City to move ahead with their respective redevelopment plans. Midwest Hardwoods, which operates the saw milling operation on the site as a tenant of Dubuque Hardwoods, will be required to relocate its operation. Dubuque Hardwoods has a prior agreement with its tenant to assist in that relocation. Sitco, which is the primary customer of Midwest Hardwoods, stores logs and finished lumber on the site, and also may require relocation as part of this project based on inventory on-hand at time of possession. I want to thank Corporation Counsel Barry Lindahl. Economic Development Director Bill Baum and former Assistant City Manager Tim Moerman for all their hard work on these negotiations. Economic Development Director Bill Baum is recommending execution ~f this Purchase Agreement. t concur with the recommendation and respectfully request Mayor and City Council approval. Michael C. Van Milligen MCVM/jh Attachment cc: Barry Lindahl, Corporation Counsel Cindy Steinhauser, Assistant City Manager William Baum, Economic Development Director CITY OF DUBUQUE, IOWA MEMORANDUM October 17, 2002 TO: FROM: SUBJECT: Michael Van Milligen, City Manager William Baum. Economic Development Director/~~ Offer to Buy Real Estate and Acceptance - Robert and Lynn Miller and Dubuque Hardw(~Ods, Inc. Introduction This memorandum presents for City Council review and approval an Offer to Buy Real Estate and Acceptance for the sale of land owned by Robert and Lynn Miller and Dubuq [,e Hardwoods, Inc. on the 4th Street Peninsula to the City. Background The City has been negotiating the sale of the Hardwoods property for over two years. The property was included as an identified Acquisition Pamel in a recent amendment to the Ice Harbor Urban Renewal Plan. The acquisition will support the adopted Master Plan for the Port of Dubuque and further the redevelopment activities taking place as part of the America's River projects. Discussion The negotiated purchase of this property includes the following significant terms: Purchase price of $2.1 million, half to be paid at closing (on or before December 1, 2002) and half on the date of possession (July 1, 2003). $1,641,036 of the purchase price reflects land value, with the remainder covering relocation and mowng expenses for the Millers and Dubuque Hardwoods. The real property conveyed includes property which Dubuque Hardwoods claims an interest in but which the City disputes. The disputed real estate will be conveyed to the City and the City will acknowledge the value of such real estate for purposes of a charitable contribution by Dubuque Hardwoods. Dubuque Hardwoods will provide the City with a termination of the lease between Dubuque Hardwoods and Midwest Hardwoods at closing and will also provide the City with a Quit Claim Deed from Midwest Hardwoods for any interest it may claim in the real estate. As a condition of the purchase, the City has a right to obtain a Phase II environmental assessment prior to closing December 1, 2002. Permission is granted to Preston Engineering (they did the Phase I) to access the property and conduct the study. If the Phase II is acceptable, the City will purchase the property "as is" and agrees to release, indemnify and hold harmless only Dubuque Hardwoods. Dubuque Hardwoods will pay $100,000 to Midwest Hardwoods for moving expenses per a prior agreement between the two companies. The City will be responsible for the excess of Midwest Hardwoods' moving expenses over the $100,000 payment. The terms of the offer result from lengthy negotiation and compromise by both parties. The conclusion of this purchase will allow both the property owner and the City to move ahead with their respective redevelopment plans. Midwesl Hardwoods, which operates the saw milling operation on the site as a tenant of Dubuque Hardwoods. will be required to relocate its operation. Dubuque Hardwoods has a prior agreement with its tenant to assist in that relocation. Sitco, which is the primary customer of Midwest Hardwoods, stores logs and finished lumber on the site, and also may require relocation as part of this project based on inventory on-hand at time of possession. Recommendation I would recommend that the City Council approve the Offer to Buy Real Estate and th Acceptance for the property on the 4 Street Peninsula owned by Robert and Lynn Miller and Dubuque Hardwoods, Inc. This action will continue the City's efforts to redevelop the Port of Dubuque area as envisioned in the recently adopted Master Plan. Action Step The action step is to approve the attached Offer to Buy Real Estate and Acceptance. attachment F:\USERS\Pmyh re\WPDOCS~LOANDOC\DBQHARDWOODS\offert(3buy, mem.doc Barry A. Lindakl, Esg. Corporation Counsel Suite 330, Harbor V'tew Place 300 Main Street Dubuque. Iowa 52001-6944 (5631 583-41~3 office (563] 583-1040 fax balesq@mwcLnet October 18, 2002 Mr. Michael Van Milligen, City Manager City Hall - City Manager's Office 50 West 13~h Street Dubuque, IA 52001 RE: Dubuque Hardwoods Dear Mike: I am pleased to deliver to you the Offer To Buy Real Estate And Acceptance signed by Robert and Lynn Miller on behalf of themselves and Dubuque Hardwoods, Inc. I believe this agreement meets the requirements established by the City Council for the acquisition of this property. I checked through my file and I see that we began these discussions ~n October of 2000. I would recommend that you sign the agreement and submit it to the City Council at the October 21, 2002 City Council meeting for approval. Corporation Counsel BAL:tls Enclosure Prepared By: Brian J. Kane, 2100 Asbury Road, Suite 2, Dubuque, IA 52001 (563) 582-7980 OFFER TO BUY REAL ESTATE AND ACCEPTANCE TO: ROBERT MILLER and LYNN MILLER, husband and wife, and DUBUQUE HARDWOODS, INC., an Iowa business corporation (collectively "Sellers") The undersigned Buyer hereby offers to purchase certain real estate located in Dubuque County, Iowa, from the Sellers, upon the following terms and conditions: 1. Real Estate Description. Buyer offers to buy real estate in Dubuque County, Iowa, described as follows: Market Square; Cypress Street, Wall Street, Washington Street and alleys located between the NE'LY line of Sixth Street and the NW'LY line of Market Street and the SE'LY fight of way line of the Canadian National Illinois Central Railroad in the City of Dubuque, Dubuque County, Iowa Lots 1, 2, 37, and 38 in Block 21 in Dubuque Harbor Improvement Co.'s Addition, In the City of Dubuque, Iowa, according to the Recorded plat of said Addition. Lots 15, 16, 17, 18, 19, 20, 21, and 22; and, That part of lots 1, 2, 3, 4, 5, 6, 7, 8, 12, 13, and 14, lying southerly Of a line which is parallel to and 50 feet southerly from the Centerline of the Illinois Central Gulf Raikoad Company's main Tract, as now located; all in Block 18, In Dubuque Harbor Improvement Company's Addition, in the City of Dubuque, Iowa, according to the recorded Plat thereof. Lot lA of vacated alley in Block 18 of Dubuque Harbor Improvement Company's Addition from Market Square to the I.C.R.R.R.O.W. In the City of Dubuque, Iowa, according to the recorded Plats thereof. Lots 31, 32, 33, 34, 35, and 36, in Block 21, Lots 1 to 38, both inclusive, in Block 27, and Lots 31, 33, 34, and 35, in Block 28, All in Dubuque Harbor Improvement Co.'s Addition, Page 1 of 14 in the City of Dubuque, Iowa, according to the Recorded plat of said Addition. Lots 1, 33, 34, 35, 36, in Block 20; Lots numbered 3 to 19, inclusive, in Block 21; That part of lots 2, 3, 4, 31 and 32, in Block 20, and, That part of lots 8 and 27, in Block 28, lying easterly of the Dubuque & Dunleith Bridge Company's right of way; Lots 1, 2, 3, 4, 5, 6, 7, 28, 29, 30, and 32, in Block 28; All in Dubuque Harbor Improvement Company's Addition, in the City of Dubuque, Iowa, according to the respective recorded Plats thereof, with any easement and appurtenant servient estates, but subject to any zoning and other ordinances, any covenants of record, any easements of record for public utilities, roads and highways, and any other easements of record, hereafter designated the "Real Estate." Sellers acknowledge that Buyer disputes Sellers' ownership of the highlighted portion shown on Exhibit "C" below. Buyer acknowledges that Sellers dispute Buyer's objection to Sellers' ownership of the highlighted areas shown on Exhibit "C". This transaction resolves in full such dispute. 2. Bargain Sale/Purchase Price. The parties acknowledge that: (a) The Buyer, as a municipal corporation in the State of Iowa, has commenced eminent domain proceedings to condemn the Real Estate; and, (b) The parties acknowledge that the value of the Real Estate, shown by the appraisal obtained by Seller, is $3,281,000.00. Attached hereto as Exhibit "A" and by this reference made a part hereof is the March 8, 2002 cover letter to the appraisal performed for Sellers by Mr. Thomas Kane, of Tom Kane Appraisals, of Dubuque, Iowa, which the parties acknowledge to be the value of the Real Estate shown by the appraisal; and, (c) The Sellers (and their predecessors), as long term citizens mud as a corporate citizen of the City of Dubuque, Iowa, and with the intent to make a gift, are willing to sell the Real Estate to Buyer for: (i) $2,100,000.00, which includes relocation expenses, to be paid pursuant to Section 2(d)(i) below, allocated as shown on Exhibit "B-I" attached hereto and by this reference made a part hereof; and, Page 2 of 14 (d) (ii) Sellers, with donative intent, give the balance of the value of the Real Estate, or $1,181,000.00, to Buyer, allocated as shown on Exhibit "B-2" attached hereto and by this reference made a part hereof. Buyer acknowledges that Buyer is a charitable entity within the meaning of Section 501(c)(3) of the Interual Revenue Code of 1986, as amended. Buyer agrees to execute at the Closing (defined below) the Form 8283, Non-Trust Charitable Contribution, recognizing the receipt of, and the value (pursuant to the appraisal) of the charitable contribution made by Sellers to Buyer as referred to herein; and, The bargain sale aspect of this transaction shall be paid as follows: (i) $2,100,000.00 shall be paid as follows: $1,050,000.00 to be paid at the Closing (first allocated to DUBUQUE HARDWOODS, INC. andnext to the other Sellers) by certified check, cashier's check, electronic funds transfer or other means which provides immediately available cash to the Sellers; and, 03) $1,050,000.00 to be paid to Sellers on the Date of Possession (defined below). (ii) The purchase and bargain sale of this Real Estate, and the acceptance of the charitable contribution made herein, is subject only to the conditions and contingencies described in this Offer to Buy Real Estate and Acceptance. Buyer represents to Sellers that Buyer has sufficient funds to close this transaction in a timely fashion. 3. Real Estate Taxes. Real estate taxes shall be prorated to the date of Closing. Buyer shall be responsible for real estate taxes, if any, after the date of Closing on the Real Estate. Page 3 of 14 4. Special Assessments. Buyer shall pay all special assessments which are a lien on the Real Estate as of the date of acceptance of this offer. All other special assessments shallbe paid byBnyer. The parties acknowledge that there are no special assessments against the Real Estate as of the date hereof. 5. Risk of Loss and Insurance. The parties acknowledge that the Real Estate is not susceptible to loss from the date of this Offer through and including the Date of Possession hereof; therefore, prior to Sellers' delivery of possession of the Real Estate to Buyer, all risk of loss shall be upon Buyer until possession of the Real Estate shall be delivered to Buyer on the Date of Possession. Sellers shall maintain existing liabitityinsurance as set out in Exltibit "D" attached hereto and by this reference made a part hereof from the Date of Closing to the Date of Possession. 6. Care and Maintenance. The Real Estate shall be preserved in its present condition and delivered intact at the time possession is delivered to Buyer, ordinary and reasonable wear and tear excepted. See Sections 8 and 19 below. 7. Possession/Date of Closing. If Buyer timely perfon'ns all obligations, possession of the Real Estate shall be delivered to Buyer free from all tenancies (except for MIDWEST HARDWOODS, INC.) on (or at the election of Sellers, before) July 1,2003 ("Date of Possession"). The Closing shall occur on or before December 2, 2002 (herein sometimes referred as the "Closing Date" or "Closing"). Sellers shall, prior to July 1, 2003, remove at Sellers' cost all of the property described in the inventory' attached hereto as Exhibit "E" and by this reference made a part hereof and no personal property of Sellers shall be located upon the Real Estate after July 1, 2003. In all other respects, n'o personal property of Sellers shall be located upon the Real Estate after the Date of Possession. The parties agree to physically meet at the Real Estate on the Date of Possession to inspect the Real Estate. If Sellers fail to deliver possession to Buyer on or before the Date of Possession, or should Sellers allow any of their personal property to remain on the Real Estate (not including buildings or fixtures), then Sellers shall be obligated to pay to Buyer $1,000.00 per day as a penalty until such personal property is removed. The parties agree to cooperate in order to effectuate the foregoing. Sellers are not responsible to Buyer for moving the personal property of MIDWEST HARDWOODS, INC. 8. Improvements. All improvements that integrally belong to or are part of the Real Estate shall be considered a part of the Real Estate and included in this sale. Notwithstanding the foregoing, Sellers mayremove any such improvements or other fixtures whichbelong to or are apart of the Real Estate at or prior to the Date of Possession. 9. Use of the Purchase Price. At time of settlement, funds of the purchase price maybe used to pay taxes and other liens and to acquire outstanding interests, if any, of others. 10. Abstract of Title. Sellers, at Buyer's expense, shall promptly obtain an abstract of title to the Real Estate (except for the streets, alleys and other areas depicted on Exhibit "C" attached hereto and by this reference made a part hereof) continued through the date of this agreement which Page 4 of 14 shall be examined by Buyer' s attorney. Such abstract shall show merchantable title in Sellers to that portion of the Real Estate to which title is not disputed in conformity with this agreement, Iowa law and title standards of the Iowa State Bar Association. The Sellers shall make every reasonable effort to promptly perfect title. The abstract shall become the property of Buyer when the purchase price is paid in full. Sellers shall pay the cost of any additional abstracting and title work due to any act or omission of Sellers. The abstract shall be obtained from an abstractor qualified by the Title Guaranty Division of the Iowa Housing Finance Authority. 11. Deed. On the Closing Date, Sellers shall convey the Real Estate to Buyer by Warranty Deed (Corporate Grantor or otherwise) (and certain portions of the Real Estate as designated on Exhibit "C" via Quit Claim Deed), free and clear of all liens and encumbrances but subject to easements and restrictions of record. Any general warranties of title contained in the Warranty Deed(s) shall extend only to the time of acceptance of this Offer to Buy Real Estate and Acceptance, with special warranties as to acts of Sellers continning up to time of delivery of the Warranty Deed(s). Sellers shall additionally deliver to Buyer a termination of the Lease by and between DUBUQUE HARDWOODS, INC., as Landlord, and MIDWEST HARDWOODS, INC., as Tenant, effective as of the Date of Possession as well as a Quit Claim Deed fi:om MIDWEST HARDWOODS, INC. to Buyer with regard to the Real Estate. 12. Time is of the Essence. Time is of the essence in this contract. 13. Remedies of the Parties (a) If Buyer fails to timely perform this contract, or any of Sellers' conditions herein are not satisfied (or waived in writing) at or prior to Closing, Sellers shall not be required to close hereunder: Alternatively, Sellers may, at or prior to Closing, forfeit this Contract as provided by Iowa Code Chapter 656(2001). (b) If Sellers fail to timely perform this contract, or if any of Buyer's conditions herein are not satisfied (or waived in writing) at or prior to Closing, Buyer shall not be required to close hereunder. (c) Buyer and Sellers are also entitled to utilize any and all other remedies or actions at law or in equity available to them and shall be entitled to obtain judgment for costs and attorney's fees as permitted by law. The parties specifically agree that each of them shall have the remedy of specific performance in equity notwithstanding any other provision herein or by law to the contrary. 14. Contract Binding on Successors in Interest. This contract shall apply to and bind the successors in interest of the parties. 15. Construction. Words and phrases shall be construed as in the singular or plural number and as masculine, feminine or neuter gender, according to the context. Page 5 of 14 16. Time for Acceptance. If this Offer is not accepted by Buyer on or before OctObei' 22, 2002 it shall become void. 17. Conditions Precedent to Buyer's Obligation to Purchase. Buyer's obligation to purchase the Real Estate under the bargain purchase referred to herein and to accept the charitable contribution from Sellers as referred to herein is expressly conditioned upon the satisfaction of the following conditions prior to Closing: (a) The approval of this Offer to Buy Real Estate and Acceptance by the City Council of the City of Dubuque, Iowa on or before October 21, 2002; and, (b) Buyer obtaining an acceptable Phase II report from Preston Engineering byNovember 30, 2002. Unless Buyer advises Sellers in writing that Buyer does not desire to proceed with this transaction on or before November 30, 2002, this condition shall be deemed satisfied and of no further force or effect. Preston Enl~Sneering may enter upon the Real Estate for this purpose by contacting Seller, Robert Miller, in advance. (c) Approval by Buyer's City Council of the sale of the Real Estate to DUBUQUE INITIATIVES by not later than November 30, 2002. 18. Conditions Precedent to Sellers' Obligation to Make Bargain Sale and Make Contribution and Give Charitable Contribution. Sellers' obligation to make the bargain sale and give the charitable contribution herein with respect to the Real Estate is expressly conditioned upon the satisfaction of the following conditions prior to Closing: (a) Sellers obtaining approval of this Offer to Buy Real Estate and Acceptance by the Board of Directors and Shareholders of Seller, DUBUQUE HARDWOODS, INC. 19. Condition and Groundwater Hazards. (a) As of the Closing Date, Buyer shall have inspected the Real Estate and shall accept it in "AS IS" condition as of the Closing Date. Buyer shall release, indenmify and hold harmless Sellers with regard to any environmental claim, clean-up or remediation imposed or threatened by the State of Iowa, the federal government or any other governmental agency or entity, or any private person, arising Out of or related to the Real Estate, which indemnity and defense shall survive the closing hereof. (b) Sellers have disclosed to Buyer the Phase II testing documentation in Sellers' possession and Sellers incorporate such information herein by this reference. Page 6 of 14 20. Moving/Relocation Expenses. Buyer shall have no obligation to pay any moving or relocation expenses to Sellers in addition to the purchase price referred to in Section 2 hereof. Further, Sellers specifically acknowledge that Buyer shall have no obligation to pay $100,000.00 to MIDWEST HARDWOODS, INC. for moving expense pursuant to the Lease wherein Sellers are the landlord and MIDWEST HARDWOODS, INC., is the tenant, dated effective January 1, 2000. Seller, DUBUQUE HARDWOODS, INC., shall pay such $100,000.00 to MIDWEST HARDWOODS, INC. pursuant to the Lease and Sellers shall have no further obligation to Buyer for moving, relocation or re-establishment expenses to MIDWEST HARDWOODS, INC. Buyer shall provide moving, relocation and re-establishment consultation from Graham & Associates, at Buyer's expense, to Sellers and MIDWEST HARDWOODS, INC. Buyer, or its designee, shall deal directly with .MIDWEST HARDWOODS, INC. in connection with any other moving, relocation or re-establishment expense(s) MIDWEST H33LDWOODS, INC. may have because of Buyer's acquisition of the Real Estate in excess of $100,000.00, which excess moving, relocation and re- establishment expenses shall by paid by Buyer. 21. Recording Costs. Notwithstanding any other provision herein, the Buyer shall be responsible for all recording costs and abstracting costs in connection with the transactions contemplated herein. 22..Miscellaneous. The parties agree that all understandings and agreements, if any, previously made between the parties hereto are merged in this Agreement, which alone fully and~ completely expresses their understanding with respect to the purchase and bargain sale of the Real Estate. This agreement may not be changed or terminated orally, but only by an instrument in writing executed by all of the parties hereto~ This agreement shall not be transferred or assigned without the prior written consent of the other party hereto, which consent shall not be tmreasonably withheld. This agreement shall be governed by and construed in accordance with the laws of the State of Iowa. This Offer to Buy Real Estate and Acceptance may be signed in counterparts or by facsimile signatures which, when taken together, shall constitute one original agreement. Eachparty shall bear and be responsible for its own attorneys' fees. DATED: OCTOBER 23, 2002. THE CITY OF DUBUQUE, AN IOWA MUNICIPAL CORPORATION, BUYER Michael C. VanMilligen, Its City Manager THIS OFFER IS ACCEPTED OCTOBEP,21, 2002. Page 7 of 14 DUBUQUE HARDWOODS, INC. By: /s/ ROBERT J. MILLER /s/ Robert J. Miller Its President /s/ Lynn Miller G:\WPDOCSkDONNAB~DOCS~Dubuque Hardwoods (Miller Robert) Offer to Buy Real Estate and Acceptance.wpdoct ober 17, 2 0 0 2 Page 8 of 14 Estate. EXHIBIT "A" See attached March 8, 2002 cover letter kom Tom Kane Appraisals appraisal of the Real Page 9 of 14 SUMMARY APPRAISAL OF THE MARKET VALUE OF THE DUBUQUE HARDWOODS FACILITY DUBUQUE ICE HARBOR 205 East 6th STREET DUBUQUE, IOWA AS OF: FEBRUARY 20, 2002 DATED: MARCH 8, 2002 PREPARED FOR: MR. BRIAN KANE- A'I-rORNEY 2100 ASBURY ROAD, SUITE B DUBUQUE, IOWA 52002 PREPARED BY THOMAS P. KANE KANE APPRAISAL AND REAL ESTATE, INC. 11020 LAKEVIEW DRIVE DUBUQUE, IOWA 52003 PH: 563-556-2068 FAX: 563-557-8107 March 8, 2002 Mr. Brian Kane-A~orney 2100 Asbury Road, Suite B Dubuque, Iowa 52002 Dear Mr. Kane, As requested, I have personally inspected the Dubuque Hardwoods FaciIity Iocated in the Dubuque Ice Harbor area. The purpose of the Appraisal is to estimate the Market Value of the Fee SimpIe Interest of the subject property. The function of the Appraisal is for investment analysis purposes, in-lieu of ongoing negotiations with the City of Dubuque, which intends to acquire the subject parceI for development purposes. The intended users of the report are you and your designated property representatives. I certify that, to the best of my knowledge and belief: I) The statements of fact contained in this report are true and correct. 2) The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions, and are my personal, unbiased, professional analyses, opinions and conclusions. 3) I have no present or prospective interest in the property that is the subject of this report, and I have no personal interest or bias with respect to the parties involved. 4) My compensation is not contingent upon the reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value estimate, the attainment of a stipulated result, or the occurrence of a subsequent event. 5) My analyses, opinions, and conclusions were developed, and this report has been prepared in accordance with the final rule by Office of the Comptroller of the Currency (12 CFR Part 34) dated August 24, 1990, as amended, the Uniform Standards of Professional Appraisal Practice and in conformity with the requirements of the Code of Professional Ethics and the Standards of Professional Practice of the Appraisal institute. 6) I have made a personal inspection of the property that is the subiect of this report. 7) No one provided significant professional assistance to the person signing this report. 8) The value estimates in this report were not based on a requested minimum valuation, a specific valuation, or for the approval of any loan. 9) The use of this report is subject to the requirements of the Appraisaf Institute relating to review by its duty authorized representatives. 3 The prospective values estimated in this report were based on market data and conditions as of March 8, 2002, which were projected to remain stable, it is impossible to accurately anticipate the future conditions that could influence the values, i project that market conditions should continue to improve at a moderate rate. Any substantial changes in market conditions could have a favorable or unfavorable influence on the vatues. I accept no responsibilitY regarding future changes in the market that could not be anticipated as of the date of this report. I project the marketing period for a sale to be about 12 to 48 months. This transmittal letter and certification precede the Appraisal report, further describing the subject property and continuing the reasoning ,and pertinent data ieading to the estimated value. Your attention is directed to the "General UnderlyingAssumptons and,'LimitingCondit'ons whichareconsideredusualforthistypeofassignmentandhave been included at the end of this report. As a result of my investigation, and based upon the analysis of the following data, it is my opinion that the Market Value of the subject property, as of March 8, 2002 is as follows: $3,281,000 THREE ~LLION TWO HUNDRED EIGHTY-ONE THOUSAND DOLLARS /s/ Thomas P. Kane Kane Appraisal and Real Estate, Inc. Certified General Appraiser iowa #483-72-5444 EXHIBIT "B-1" Dubuque Hardwoods, Inc. Robert & Lynn Miller $395,000.00 $100,000.00 $495,000.00 $1,605,000.00 $2,100,000.00 Page 10 of 14 EXHIBIT "B-2" Allocation of charitable contribution: Robert & Lynn Miller Dubuque Hardwoods, Inc. $890,350.00 $290,650.00 $1,181,000.00 Page 11 of 14 EXHIBIT "C" Streets, alleys and other areas depicted on attached. Estate.) (Also, generally shows all the Real Page 12 of 14 EXI-IIBIT "D" See attached existing insurance of Sellers for the Real Estate. Page 13 of 14 OCT.-17' 02(THU) 12:57 GOODMANN INS. SERV'S TEL:o19S$6114. P, O02 CCI 0327157 ACENCY BILL AGENT COPY COM-DREHENSIVE INEURANCE POLICY genergl cu$u~;Ity DECLARATION RENEWS_L OF; CCI 0327157 POMCYNUMBBR t POLICYFERIOPi_i ,C~VERAG~ISPRO~DEDINTHE 0327157 104/01~2002 {04/0~/2003 I GENEmAL CaS'UALTY CO OF WI ~MEDINSURED~NOADD~S~ ~AGENT ~WOODS ~GOOD~ INS SERVICES ZNC 205 E~T 5TH PO BOX 1088 D~UQ~ IA 52001 D~UQ~ ~ 061 52004 AG~NCY 0140887 PREM. BLDG. 001 001 PRFA~. ~L~G. COV. 001 001 C DEDUCTIBLE: $ 5,000 CO~ECI~tL ~ROPERTY COVERAGE PART DECLARATIONS DESCRIPTION OF PREMISEC LOCATION~ CONSTRUCTION AND OCCUPANCY 205 EAST 5TE, DLT~UQUE, IA FRAME - OFf!CE AND SHOP COV. APPLIES ONLY WHERE A LIMIT OF INS. iS SKONN BELOW. · ~ ) LIMIT OF INSU~CE COVERED CAUSES oF LOSS $ 80,000 SPECIAL $ 10,000 SPECIAL $ THE D~DUCTIBLE A~PLIES ON A PER OCCURRENCE BASIS. COINS. 80 O~TIONAL COVERASBS: APPLICABLE ONLY BY AN ENTRY IN THE SCHEDUL~ AGREED VALUE B.EPLACFJ~ENT PBEM. ~LDS, COV. ( + } EXPIRATION DATE AMOUNT COST C $ VALUABLE ~APERS AND RECORDS - COST OF RESEARCH !~CREASED LIMIT IF INDICATED BY AN ( X ) REPLACEMENT COST APPLIES TO ( + ) A- BUILDING ~USINESS PERSONAL PROPERTY C- PERSONAL ~ROPERTY OF OTHERS COVERAGE APPLIES ONLY WHEN A LIMIT OF INSURANC~ IS SHO~N BELOW. BUSINESS INCOME: COY. ( * ) COV. CAUSES OF LOBS LIMIT OF INS. COINS. $ % EXTRA EXPENSE: L1-MIT OF INS. MAX1-MIH~ PERIOD MONTHL~ LT2~IT EXT. PERIOD OF INDEMNITY OF INDEMNITY OF INDEI4~-/TY ( AGREED V/LLUE - AMOUNT ~XPIRATION DATE CAUSES OF LOSS LIMITS ON LOSS PAYMENTS BUSINESS INCOME: I - INCLUDING RENTAL VALUE II - OTHER THAN RENTAL VALUE !Ii - RENT~LL VALUE TOTAL PROPERTY PREMIUM: $ 2,478 7908 (0~-96) OCT. -17' 02(THU) i2:57 CCI 0327157 A~E~CY hILL P~NEW~L DECLA~ATION GOODMANN INS, SERV'S TEL:3195561142 AGENT COPY COMPREF~NSIVE INSURA~TE POLICY P, O03 RENEWAL CCI 0327157 POLICYNUMBER I POLiCYPERiO~ I COVERAGEIS PROVIDEDIN THE NAMEDINSURBDANOADDRESS A~FHT DUBUQUE HARDWOODs INC GOODNRN INS SERVICES INC 205 EAST 5T~ 2774 UNIVERSITY PO BOX 1088 DUBUQUE IA 52001 DUBUQUE IA 061 52004 0140887 CC~ERCI-AL PROPERTY COVEP~GE PA~T DECLARATIONS (CONTINUED) SUPPLEF~NTAL SCHEDULE DESCRIPTION OF PREMISES PREM. BLDG. LO~TION, CONS~UCTION ~ 001 002 205 ~T 5~, D~UQ~, IA ~ - STO~E CO~S~S PROdDeD: COV. ~PLI~S ONLY ~RE A LI~T OF INS. IS SHOWN PR~M, B~G. COV. ( + ) LI~T OF ~S~CK CO~ED ~USES OF LOSS COI~. % D~UCT!B~: $ 5,000 ~ DRDUCTIBLE ~PLIES ON A m~R OCC~CE OPT!0N~ CO~S: ~PLI~LE ONLY BY ~ ~NTRY IN T~ SCHEDU~ BE~. PREM. B~G. COY. ( + ) EXPI~ION DAE ~ COST ( X ) 001 002 A $ ( X ) B C $ N/A IF I~iQA~ED BY ~ ( X ), ~P~CE~ COST ~PLIES T0 "STO~": ( ) ~O~GE ~AIES O~Y ~EN A LI~T OF INS~ IS SHO~ RUSI~SS INGOt: ~V. CAUSE~ ~ ~ER!OD MONTHLY LI~T EXT. PERIOD coY. ( . ) OF LOSS LIMIT OF INS. GOiNS. EXTRA EXPENSE: LIMIT OF INS. ( * ) BUSINESS INCOME: I - INCLUDING REAF~AL Iii - RENTAL VALuE OF INDEMNITY OF INDFi~NITY OF INDEMNITy AGREED VALUE - AMOUNT EXPIRATION DATE coy. CAUSES OF LOSS LIMITS ON LOSS ~AYMENT~ II - OTHER THAN RENTA~ VALUE CP 7504 (01-91) OCT. -17' 02(THU) 12:37 G00DMANN INS. SERV' S Ih/~ D~clamtton Pag~/s attacl~i Previous No, ~ ~ 1 N~ and add.ss of the ~a~¢d MI~EST ~OODS, iNC. D~UQ~, IA 52001 TEL:5195561142 P, O04 and forms pan of califfi~a~ prori~ont ('Form SLC-3 USA). ~odty Re~ No. C~cate No. ~2387/2001 ~ 3140 Effective from 02-01-2002 both daya at 12:01 a.m. standard time Insurance is eff~:tiv¢ with cortain UNDERWRIIER$ AT LLOYD'S, LONDON. ,Amount Coverage to 02-0~-2003 Pemel/~ge lO0% Rate Prem/um $500,000. $ 50,000, L'~J NON-COI~IBUSTIBLE, ONE, STORY' BUILDING, 0CCUPIED kB SAI~i[LL S!I~IATE.D AT: 205 E, 5Tit, DUBUQUE, IA CONT~VfS OF fTF21 A 1.458 ~7,290.00 t,458 REPL,\CE~bFf COST (BUILDING & CONIt=NTS) 8O% L'O- !NSURANC~ $5.000. DSD. APPLIES EACH CLAIM SI:~CIAL CAUSES OF LOSS 729. O0 250, d0 POLICY FEE 165.38 S/L TJX NO FLAT CANCELLATIONS - 25% brJ. NI~I EARED P~MIUM Sp:cialconifitions POL1CT PROVISIONS, IL0017, IL0276, E~. ~1, ~ C~U10, CP1030, 1L0935, ~-l, CP0090 ~331, ~191. ~918, ~34t, ~.542, ~998 D~ ~DS, t~. (TI~,EIDLDER) 205 E, ~ S~ice of Suit may ~ made upon: ~IE~ES ~[ M0~ -- ~ 750 SE~{ ST, , ~ ~, ~ 10019 Dat~ 02-22-2002 d.lbtjk F'£lh~r VV-EST~INSU1L{~,ICE, IN'C. by AGENT First Western Insuranoe Sl:N~lal Risk paoilltles Box 65660 We~t Des Moin~S iowa 50265-0660 See attached inventory list. EXHIBIT "E" Page 14 of 14 DUBUQUE HARDWOODS INVENTORY Sawdust Dryer Unit: 5 main components Portable chipper: Semi cab: Storage building N. W. comer of property 200 parleys of used clectric motors, parts, etc. Lathe: 3'Wx 12'L x 5'H Fir~ truck: Semi ~tor: S~mi c~b: 25 wood pMlets: 4 Truck beds & d¢clcs: Semi cab: Semi cab: Pull siz~ wagon: 1Hle Of steel: 6 Loads of miso. metals outside: l~rewood -~plittcr unit: Comsisfing of feeder, saw, control cab, & 120' conveyor 10 End dump loads of firewood Rail Road Box Car: '. 40 pallets of misc. storage Conveyor. 30' 20 Truck tires: Semi trailer: Var~ SmaR John Dec-re Cat4 Bbom Track: Dump Truck: 20 TruCk tires: Semi !~actor: 2 55 gal. barrels 0f oil: 2 Pick-up c~mper shells: 6 Pallets of misc. 150 Pallets of parts & niisc. P:XH cBIT "F" Oct.]6, 2002 4:02PM BARRY A LINDAHL, ESQ No,8715 ?, 24/26 DUBUQUE HARDWOODS INVENTORY coNTINUED Page 2 Shop Area: 10 Pallets of misc. 2 Tool boxes: I00 cu. ft. each 3 Work bench~s: 30 cu. ft. each Air compressor: 15 Pallets of parts Work bench: 5' x 5' x 20 Pallets of bolts & misc. parts Welder: Fork Band saw: Lathe: Milling machine: Welder: Tool box: I00 cu. fL Metal cabinet: Work bench: 6' x$' x 4' Welder: 8 Pallets of misc. 10 55 gal. barrels ofwa.ste oil 20 Pallets ofpart~ .Refer unit: Semi trailer .8 Pallets oft,arts 2 Pallets of pipe 30 tires: . · 8 Loads 0fhand mOved lUmber 2 Freezers: Model A Auto: Auto: Olds Cutlass ' 2 Loads of lire wood 2'Wood burner furnaces: 10 Pallets of misc. Refzigerator: 100 cu. fL Oct.16. 2002 4:02PM BARRY A LINDAHL, ESQ No.8715 P 25/26 DUBUQUE HARDWOODS INVENTORY CONTINUED Page 3 BREAK AREA: Side by side refer: 200 em fi. Freezer: Refer: 3 Mierowayes: Table: 12'xYx3' Dishwasher: 4 Dishpaeks: 5 Book cartons:' OFFICE: Desk: 100 cu ft. 30/S chairs: 40 cu. ii. each Credenza, sm refer: Book case: ~2 Ann chairs: Television: ' 20, Counter area: 2 Desks: I'00 cu~ ft. each 2 PC's 4 Dishpacks 10 Book cartons 3 ~Four drawer files STORAGE ROOM: 30 Pallets 0fmisc. ' 2 Desks: 1 PC ... 2 Drawer file 10 Book cartons ' 0ct.18. 2002 4:02PM BARRY A L[NDABL, ESQ N0.8715 P 26/26 DUBUQUE HARDWOODS INVENTORY CONTINUED Page 4 YARD EQUIPlVIENT: Case loadeax. (621) · Samsung loader.'. OUTSIDE STORAGE: Mulch: 100 loads Tub grinder.. 5 End dump loads of (scxap). Mulch: 75 loads 2 Semi Van Trailers for storage 200 Cement blocks: Portable confinement areas 2,000 lbs. 5 End ch~mp loads of saw dust. Old dryer anit (scrap) Track frame: (scrap) Truck motor: (scrap) Conveyor: (scrap) I3 Old fuel. storage tanksi 500 gal. to 5,000 gal. (scrap) Old furnace £or dryer unit: (scrap_ 150 Cement blocks: Portable confmement areas 1,000 lbs. Truck ~otor:. (scrap). 12 Culverts: (serap) 20 Old truck and car tires Auger ~m~t: (scrap). 200 Logs: .,. 2 'Tanks: (scrap) . 2 LoMs of steel: (sCrap) ' 5 Loads of finished wood 6 Metal storage racks:..