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Home My WebLink About[05b] RLF Request: Prego, Inc dba The Local BlendDATE: Novembeer 9, 2009 MEMO TO: Economicc Developmennt Authority FROM: CynthiaSSmith-Strack MMunicipal Devvelopment Grroup RE: RLF Requuest: Prego, Inc., dba The Local Blend Backgroundd: In 2002 thee EDA/City eestablished aa Revolving Loan Fund (RLF) after a grant fromm the Minnesota Innvestment Fuund was seccured in conjuunction with the construcction of the FFabral (formerly ViccWest) facilityy. The RLF has an audiited balance as of December 31, 20008 of $54,313.58. RLF guidelinees are attacheed for your information. As indicated at the previoous EDA meeeting, the EDDA has receivved an appliccation for thee RLF Program fromm Jeff and Sttacie Engholmm, Owners of Prego, Inc. ddba The Locaal Blend. A coopy of the applicatioon is attachedd for review,supportive mmaterials incluuding profit/loss statementts and projections hhave been recceived and reeviewed by thhe RLF subcoommittee (Finnance Directoor Lori Bartlett, EDAA Member Jaccobson, EDAA Member Skaahen, a Reprresentative froom the Appliccant’s Financial Institution, Dougg Danielson, aand EDA Direector Strack). Eligible Loann Activities 1. Loann funds may bbe used for accquisition of laand and/or buuildings(s), rehabilitation off buildding(s), reconsstruction, neww constructionn, site improvements, utilitiies or infrasstructure, andd purchase off industrial equipment in coonnection withh starting a neew businness or expannding an existting businesss. 2. Landd and buildingg must be privvately owned, taxable propperty and propposed for commmercial and/oor industrial acctivities. 3. If buiilding(s) are bbeing purchassed or rehabillitated with funds from the Revolving Looan Fundd any/all buildding code violaations must bbe remedied. The project mmust comply wwith theSSt. Joseph Citty Code includding standardds relating to land use. 4. Revoolving loan funnd assistancee can be for nno more than one-half of thhe cost of the projeect. Ineligible activities incluude the operaation or expannsion of a cassino, sports faacility whenn the principaal tenant is a pprofessional ssports team, hhousing projeects and operaating expeenses. The proposeed project meeets the eligibility guidelines with the exxception of beeing less thann one- iscussed the ng on half the cost of the projectt. The EDA dcriteria appliccability at its rregular meeti October 28, 2009 and maade the followwing findings: the project sscale is muchh smaller than that originally envvisioned when crafting thee revolving loan fund guideelines; there is a demonstrated need for the project; the pproject will poositively impacct the tax basse; the projecct is consistennt with and supportiive of the “LLet’s Go Dowwntown” revitalization projject; the Appplicant proposses a second morttgage as seccurity and nott the purchasse of businesss property ssuch as restaaurant equipment, taables, chairs, and the like. ÉÐ3 Approval criteria for RLF applications are as follows: 1. A gap in project financing is demonstrated. 2. The business must locate, remodel or expand within the corporate limits of the City of St. Joseph. 3. The project will result in the creation or retention of existing jobs. 4. The project will result in an increase in tax base. 5. The project can demonstrate that the investment of public dollars induces private funds. 6. The project can demonstrate an excessive public infrastructure or improvement cost beyond the means of the affected community and private participants in the project. 7. The project provides higher wage levels to the community or will add value to current workforce skills; 8. Assistance is necessary to create new or retain existing businesses. 9. Job/wage goals must be consistent with the City of St. Joseph Business Subsidy policy. It is noted the project is exempt from the City of St. Joseph Business Subsidy Policy due to the value of the project being less than the statutory exemption of $150,000. Request Prego, Inc. is requesting a $24,000 loan from the RLF to complete façade/maintenance improvements including: storefront window replacement, tuck-pointing, lighting, awning repair, and new signage. The project estimate is $25,000. The EDA subcommittee is recommending approval of the $24,000 loan contingent on the filing of a second mortgage on the real property at 19 West Minnesota Street. The recommended term is seven (7) years; recommended rate is three (3) percent interest. The proposed loan to value ratio, based on an appraisal from April, 2008 and the existing mortgage balance is less than .90:1. Recommendation The EDA subcommittee finds the loan application complete, the proposed terms acceptable, proposed security acceptable, and creditworthiness of the Applicant acceptable. The EDA Subcommittee recommends approval of the RLF application. City staff is in the process of drafting loan documents with closing expected in December, a draft loan agreement is attached for Board Member information. The maintenance project is expected to begin within the week. Action: EDA recommendation to the City Council to approve or deny the RLF application is in order. 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JOSEPH REVOLVING LOAN FUND THIS AGREEMENT is made and entered into as the _____ day of December, 2009, by and between the City of St. Joseph, hereinafter called "City," and Prego, Inc. a Minnesota Corporation , hereinafter referred to collectively as "Developer," and Stacie Engholm and Jeff Engholm, personally, hereinafter referred to collectively as “Guarantors.” RECITALS WITNESSETH: WHEREAS, the Developer has applied to the City of St. Joseph for a $24,000.00 loan from the City’s Revolving Loan Fund; and WHEREAS, the City of St. Joseph has approved a low-interest loan to Developer in the amount of $24,000.00 conditioned on Developer meeting certain obligations as set out in this agreement; NOW, THEREFORE, it is agreed by and between the parties hereto as follows: ARTICLE 1 DEFINITIONS SECTION 1.1, DEFINITIONS. In this Agreement, unless a different meaning clearly appear from the context: 1. CITY means the City of St. Joseph. 2. COLLATERAL means the equipment, inventory and receivables of Developer currently owned or to be acquired in the future. 3. DEVELOPER shall mean Prego, Inc., a Minnesota Corporation. 4. DEVELOPMENT PROPERTY means the real property located at 19 West Minnesota Street, City of St. Joseph, Stearns County, Minnesota. 5. GUARANTOR shall mean Stacie Engholm and Jeff Engholm. 6. INITIAL DISBURSEMENT DATE means the date of the first disbursement of any Loan Proceeds by the City to the Developer. 7. MORTGAGOR shall mean Stacie Engholm and Jeff Engholm. 8. PROJECT shall mean front façade maintenance and repair at the Security Property. 9. SECURITY PROPERTY means the real property described as legally in Exhibit A hereto attached. 1 ARTICLE 2 FINANCING FOR PROJECTS SECTION 2.1, PROJECT FINANCING. The Developer represents that it needs the funds in order to implement the Project, and that it seeks a low interest loan from the City to implement the Project. ARTICLE 3 LOAN TERMS AND CONDITIONS SECTION 3.1, BASIC LOAN TERMS. The principal amount of the loan by the City to the Developer shall be in the amount of $24,000.00. The loan shall bear interest at rates shown in Section 5.4 below and shall be repaid according to the promissory note, attached hereto as Exhibit B and incorporated by this reference. SECTION 3.2, PREPAYMENT. Prepayment of the entire loan balance may occur at any time during the loan without penalty. SECTION 3.3, ASSIGNMENT. Neither Developer nor Mortgagor shall sell the Development Property or assign its rights or interests or any party therein or its right or interest in this Loan Agreement, or any part thereof. In the event the Developer or the Mortgagor, as the case may be, sells, conveys, transfers, further mortgages or encumbers or disposes of the Development Property, or any part thereof, or any interest therein, or agrees so to do, the Developer shall immediately pay on the Loan an amount equal to the unpaid principal balance and accrued interest thereon to date of payment. This shall be in addition to any other remedies at law or equity available to the City. ARTICLE 4 DEFAULT SECTION 4.1, DEFAULT. The Developer shall be in default under this Contract upon the happening of any of the following events: (a) the Developer fails to pay when due any amount payable on the Loan and such nonpayment is not remedied within ten (10) business days after written notice thereof to the Developer by the City; (b) the Developer is in breach of any material respect of any obligation or agreement under this Agreement (other than nonpayment of any amount payable on the Loan) and remains in breach in any material respect for thirty (30) business days after written notice thereof to the Developer by the City; provided, however, that if such breach shall reasonably be incapable of being cured within such thirty (30) business days after notice, and if the Developer commences and diligently prosecutes the appropriate steps to cure such breach, no default shall exist so long as the Developer is proceeding to cure such breach; (c) if any material covenant, warranty, or representation of the Developer shall prove to be untrue in any material respect, provided such covenant, warranty or representation of the Developer remains untrue in any material respect for thirty (30) business days after written notice thereof to the Developer by the City; provided, however, that if such untruth shall reasonably be incapable of being corrected within such thirty (30) business days after notice, and if the Developer commences and diligently prosecutes the appropriate steps to correct such untruth, no default shall exist so long as the Developer is so proceeding to correct such untruth; 2 (d) the Developer, on or after the Initial Disbursement Date, fails to pay its debts as they become due, makes an assignment for the benefit of its creditors, admits in writing its inability to pay its debts as they become due, files a petition under any chapter of the Federal Bankruptcy Code or any similar law, state or federal, now or hereafter existing, becomes "insolvent" as that term is generally defined under the Federal Bankruptcy Code, files an answer admitting insolvency or inability to pay its debts as they become due in any involuntary bankruptcy case commenced against it, or fails to obtain a dismissal of such case within sixty (60) days after its commencement or convert the case from one chapter of the Federal Bankruptcy Code to another chapter, or be the subject of an order for relief in such bankruptcy case, or be adjudged a bankrupt or insolvent, or has a custodian, trustee, or receiver appointed for it, or has any court take jurisdiction of its property, or any part thereof, in any proceeding for the purpose of reorganization, arrangement, dissolution, or liquidation, and such custodian, trustee, or receiver is not discharged, or such jurisdiction is not relinquished, vacated, or stayed within sixty (60) days of the appointment; (e) a final judgment is entered against the Developer that the City reasonably deems will have a material, adverse impact on the Developer's ability to comply with the Developer’s obligations under this Agreement; (f) the Developer merges or consolidates with any other entity without the prior written approval of the City, which consent the City will not unreasonably withhold; (g) there is a loss, theft, substantial damage, or destruction of all or any part of the Collateral that is not remedied to the City's satisfaction within sixty (60) business days after written notice thereof by the City to the Developer. SECTION 4.2, REMEDIES UPON DEFAULT. (a) In the event of a default and the failure to cure it in the time allotted therefore, the City shall have the right at its option and without demand or notice, to declare all or any part of the loan including but not limited to the promissory note immediately due and payable; and in addition to the rights and remedies granted hereby, the City may exercise all of the rights and remedies of the City under the Uniform Commercial Code or any applicable law. (b) Developer agrees in the event of a default and the failure to cure it in the time allotted therefore, to make the Collateral available to the City at a place in Minnesota to be designated by the City, which is reasonably convenient. In the event of any lawsuit under this contract then reasonable attorney's fees and costs will be awarded to the City if it is the prevailing party. If any notice of sale, disposition or other intended action by the City is required by law to be given to Developer, such notice shall be deemed reasonably and properly given if mailed to Developer at the Development Property or at such other address of Developer as may be shown on the City's records, at least fifteen (15) days before such sale, disposition other intended action. Waiver of and default hereunder by the City shall not be a waiver of any other default or of the same default, on a later occasion. No delays or failure by the City to exercise any right or remedy shall be a waiver of such right or remedy and no single or partial exercise by the City of any right or remedy shall preclude other or further exercise thereof of the exercise of any other right or remedy at any other time. 3 SECTION 4.3, COLLATERAL. (a) The Guarantor/ Mortgagor shall grant to the City a second mortgage in the Security Property. Developer shall execute the Mortgage attached as Exhibit C. Developer shall grant the City a security interest in the Collateral to secure the loan of funds made to Developer pursuant to this agreement by executing the Security Agreement attached as Exhibit D. Said mortgage shall be subordinate to the prior mortgage of record as of the date of this agreement. The Guarantor acknowledges and agrees that the Mortgage on the Security Property in favor of the City is given for good and adequate consideration as the Guarantor/ Mortgagor are both the majority holders of membership interests in the Developer and the availability of the loan to the Developer, which is the subject of this Agreement, is of direct personal benefit to the Guarantor/ Mortgagor. ARTICLE 5 LOAN DISBURSEMENT PROVISIONS SECTION 5.1, DISBURSEMENT OF LOAN FUNDS. Loan disbursements not to exceed the amount of $24,000.00 shall be for the Project. The loan funds shall be disbursed to Developer at the time of presentation of pro-forma invoices evidencing the amount paid by the Developer for completion of the Project. SECTION 5.2, [OMITTED]. SECTION 5.3, PROJECT TIME FRAME (SCHEDULE). The Developer shall complete the Project within six (6) months of the issuance of a building permit for the Project unless an extension of the project time frame is approved by the City. SECTION 5.4, LOAN TERMS – REPAYMENT SCHEDULE. The term of the Loan shall be Seven (7) years, commencing as of the Initial Disbursement Date. The Loan shall bear interest at a rate of Three percent (3%) per annum and interest shall commence to accrue as of the Initial Disbursement Date. SECTION 5.5. LOAN REPAYMENTS SCHEDULE. Payments of principal and interest shall commence on the first day of the first month immediately following the Initial Disbursement Date, and shall continue on the first day of each and every month thereafter until paid in full. Such payments shall fully amortize the Loan over Seven (7) years; provided, however, the entire remaining unpaid balance of th principal and interest shall be due and payable in full on the first day of the Eight-Fourth (84) month following the Initial Disbursement Date. SECTION 5.6. ADVERSE CHANGE. If there has been any adverse material change in the Developer’s financial condition, organization, operations, or its ability to repay the project financing, the city may not authorize disbursement of funds. ARTICLE 6 GUARANTEE SECTION 6.1 GUARANTEE. Guarantors agree to personally guarantee all payments due to the City and agree to execute the Guarantees attached as Exhibit E to this Agreement. Guarantors represents to the City that Guarantors together constitute the majority interest holders of Developer and as such will receive material benefit from the loan from the City to Developer which is the subject of this Agreement. 4 ARTICLE 7 PROVISION OF RETAINED JOBS SECTION 7.1, EMPLOYMENT RETAINED. The Developer agrees to take affirmative action to ensure that at least one permanent, full-time equivalent job will be retained as a result of the Project. SECTION 7.2, EMPLOYMENT DOCUMENTATION. The Developer shall complete and provide to the City notification of employment as requested by the City, unless otherwise required by law, and provided that the employment objective set forth in Section 7.1 has been met. ARTICLE 8 [Intentionally left blank] ARTICLE 9 NONDISCRIMINATION SECTION 9.1, NONDISCRIMINATION. The provisions of Minnesota Statutes, Section 181.59, which relate to civil rights and discrimination, shall be considered a part of this Agreement as though wholly set forth herein. ARTICLE 10 DEVELOPER’S ACKNWLEDGEMENTS, REPRESENTATIONS, AND WARRANTS SECTION 10.1, ACKNOWLEDGEMENTS. The Developer acknowledges that the City is loaning its funds from its Revolving Loan Fund. The Developer further acknowledges that the Developer has made certain representations and statements as to those activities of the Project to be carried out and completed by the Developer. The Developer acknowledges that nothing contained in this Agreement, nor any act of the City shall be deemed or construed to create any relationship of third-party beneficiary, principal and agent, limited or general partnership, or joint venture. SECTION 10.2, REPRESENTATIONS AND WARRANTIES. Developer warrants and represents, in connection with the Grant and for the benefit of the City, that: (a) The Developer acknowledges that the City, in selecting the Developer as recipient of revolving loan funds, relied in material part upon the assured completion of the Project to be carried out by the Developer, and the Developer assures the City that said Project will be carried out by the Developer. (b) The Developer warrants that to the best of its knowledge, it has obtained all federal, state, and local governmental approvals, reviews, and permits required by law to be obtained in connection with the Project. (c) The Developer warrants that it shall keep and maintain books, records and other documents relating directly to the receipt and disbursements of revolving loan proceeds 5 and that any duly authorized representative of the City shall, at all reasonable times, have access to and the right to inspect, copy, audit, and examine all such books, records and other documents of the Developer necessary to determine compliance with this agreement until the conclusion of all issues arising out of this loan. (d) The Developer warrants that it has fully complied with all applicable state and federal laws pertaining to its business and will continue said compliance throughout the terms of this Agreement. If at any time notice of noncompliance is received by the Developer, it agrees to take any action to comply with the State and Federal law in question. (e) The Developer warrants that the $24,000.00 loan, which is the subject of this agreement, is necessary to retain job(s) as described under this Agreement, and is necessary for the successful completion of the improvements to the Development Property. ARTICLE 11 OTHER SPECIAL CONDITIONS SECTION 11.1, WORKERS COMPENSATION INSURANCE. Developer has obtained worker’s compensation insurance as required by Minnesota Law. SECTION 11.2, PAYMENT OF CITY’S COSTS. Developer shall pay reasonable attorneys fees incurred in preparing all documentation related to this loan and all other costs incurred by the City in processing this loan request, including recording fees and mortgage registration tax. SECTION 11.3. BUSINESS WITH THE STATE OF MINNESOTA/STATE TAX LAWS. The Developer is required by Minnesota Law to provide its Minnesota tax identification number if it does business with the State of Minnesota. This information may be used in the enforcement of Federal and State tax laws. Supplying these numbers could result in an action to require the Developer to file State tax returns and pay delinquent State tax liabilities. This Agreement will not be approved unless these numbers are provided. These numbers will be available to Federal and State tax authorities and State personnel involved in the payment of State obligations. Minnesota Tax ID: ____________ Federal Employer ID: ______________ SECTION 11.4. EFFECT ON OTHER AGREEMENTS. Nothing in this Agreement shall be construed to modify any term of any other agreement to which the City and the Developer are parties. SECTION 11.4. RELEASE AND INDEMNIFICATION COVENANTS. Except for any breach of the representations and warranties of the City or the negligence or other wrongful act or omission of the following named parties, the Developer agrees to protect and defend the City and the governing body members, officers, agents, servants, and employees thereof, now and forever, and further agrees to hold the aforesaid harmless from any claim, demand, suit, action, or other proceeding whatsoever by any person or entity whatsoever arising or purportedly arising from the Project and the Developer's activities on the Development Property. SECTION 11.5. MODIFICATIONS. This Agreement may be modified solely through written amendments hereto executed by the Developer and the City. SECTION 11.6. NOTICES AND DEMANDS. Any notice, demand, or other communication under this Agreement by either party to the other shall be sufficiently given or delivered only if it is dispatched by registered or certified mail, postage prepaid, return receipt requested, or delivered personally: 6 (a) as to the City: City of St. Joseph ATTN: Judy Weyrens, City Administrator 25 College Avenue North, PO Box 668 St. Joseph, MN 56374 (b) as to the Developer: Prego, Inc. ATTN: Jeff Engholm St. Joseph, MN 56374 or at such other address with respect to any party as that party may, from time to time, designate in writing and forward to the others as provided in this Section 11.6. SECTION 11.7. CONFLICT OF INTERESTS; REPRESENTATIVES NOT INDIVIDUALLY LIABLE. No officer or employee of the City may acquire any financial interest, direct or indirect, in this Agreement, the Project or in any contract related to the Project. No officer, agent, or employee of the City shall be personally liable to the Developer or any successor in interest in the event of any default or breach by the City or for any amount that may become due to the Developer or on any obligation or term of this Agreement. SECTION 11.8. BINDING EFFECT. The covenants and agreements in this Agreement shall bind and benefit the heirs, executors, administrators, successors, and assigns of the parties to this Agreement. SECTION 11.9. PROVISIONS NOT MERGED WITH DEED. None of the provisions of this Agreement are intended to or shall be merged by reason of any deed transferring any interest in the Development Property and any such deed shall not be deemed to affect or impair the provisions and covenants of this Agreement. SECTION 11.10. TITLES OF ARTICLES AND SECTIONS. Any titles of the several parts, Articles, and Sections of this Agreement are inserted only for convenience of reference and shall be disregarded in construing or interpreting any of its provisions. SECTION 11.11. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall constitute one and the same instrument. SECTION 11.12. CHOICE OF LAW AND VENUE. This Agreement shall be governed by and construed in accordance with the laws of the state of Minnesota without regard to its conflict of laws provisions. Any disputes, controversies, or claims arising out of this Agreement shall be heard in the state or federal courts of Minnesota, and all parties to this Agreement waive any objection to the jurisdiction of these courts, whether based on convenience or otherwise. SECTION 11.13. WAIVER. The failure or delay of any party to take any action or assert any right or remedy, or the partial exercise by any party of any right or remedy shall not be deemed to be a waiver of such action, right, or remedy if the circumstances creating such action, right, or remedy continue or repeat. SECTION 11.14. ENTIRE AGREEMENT. This Agreement, with the exhibits hereto, constitutes the entire agreement between the parties pertaining to its subject matter and it supercedes all prior contemporaneous agreements, representations, and understandings of the parties pertaining to the subject matter of this Agreement. SECTION 11.15. SEPARABILITY. Wherever possible, each provision of this Agreement and each related document shall be interpreted so that it is valid under applicable law. If any provision of this Agreement or any related document is to any extent found invalid by a court or other governmental entity 7 of competent jurisdiction, that provision shall be ineffective only to the extent of such invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement or any other related document. SECTION 11.16. IMMUNITY. Nothing in this Agreement shall be construed as a waiver by the City of any immunities, defenses, or other limitations on liability to which the City is entitled by law, including but not limited to the maximum monetary limits on liability established by Minnesota Statutes, Chapter 466. 8 IN WITNESS WHEREOF, the City has caused this Agreement to be duly executed in its name and behalf and the Developer has caused this Agreement to be duly executed in its name and behalf as of the date first above written. CITY OF ST. JOSEPH (SEAL) _____________________________ Alan Rassier, Mayor ______________________________ Judy Weyrens, City Administrator PREGO, INC. ______________________________ By: Jeff Engholm Its: President JEFF ENGHOLM, individually ______________________________ By: Jeff Engholm STACIE ENGHOLM , individually ______________________________ By: Stacie Engholm 9 State of Minnesota) ) s.s. County of Stearns ) The foregoing instrument was acknowledged before me this ______ day of December, 2009 by Judy Weyrens, as City Administrator of the City of St. Joseph. _________________________________ Notary Public State of Minnesota) ) s.s. County of Stearns ) The foregoing instrument was acknowledged before me this ______ day of December 2009, by Alan Rassier, as Mayor of the City of St. Joseph. _________________________________ Notary Public State of Minnesota) ) s.s. County of Stearns ) The foregoing instrument was acknowledged before me this _______ day of December, 2009, by Jeff Engholm, as President of Prego, Inc., a Minnesota Corporation. _________________________________ Notary Public State of Minnesota) ) s.s. County of Stearns ) The foregoing instrument was acknowledged before me this _______ day of December, 2009, by Jeff Engholm, individually. _________________________________ Notary Public State of Minnesota) ) s.s. County of Stearns ) The foregoing instrument was acknowledged before me this _______ day of December, 2009, by Stacie Engholm, individually. _________________________________ Notary Public 10 EXHIBIT A Legal Description of Security Property EXHIBIT B Promissory Note EXHIBIT C Mortgage EXHIBIT D Security Agreement EXHIBIT E Personal Guaranty 11