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9. EDSR 04-08-2013 El REQUEST FOR ACTION River TO ITEM NUMBER Economic Development Authori 9. AGENDA SECTION MEETING DATE April 8, 2013 ITEM DESCRIPTION REVIEWED By Authorization of Resolution No. 13-03 to write off Suzanne Fischer, Community Operations and Nicole's Finishing Touch Salon Micro Loan Development Director REVIEWED BY ACTION REQUESTED Authorize Resolution No. 13-03 to write off outstanding balance of$6894.28 owed by the former Nicole's Finishing Touch Salon to the City's Downtown Business Revitalization Micro Loan Program. BACKGROUND/DISCUSSION January 2008 - EDA awarded a $25,000 Downtown Business Revitalization Micro Loan to Nicole's Finishing Touch Salon, Inc. The loan terms were: 2 years, 3% fixed, Personal guaranty. This was a direct loan with Elk River EDA. Monthly payments were $1074.53. December 2008 - Nicole Fox, owner of Nicole's Finishing Touch Salon, Inc., submitted a request for the EDA's consideration of a one year extension on its Micro Loan. The Finance Committee recommended approval and the issue was addressed at the January 2009 EDA Meeting. January 2009 - The EDA approved the request based on the Finance Committee's recommendation with the waiver of pending late fees. The Micro Loan extension fee was 1% of the loan balance and had fixed monthly payments were $687.61. April 2009—Nicole Fox requests a second 1-year extension on its Micro Loan. The Finance Committee reviewed request,recommended approval and moved issue to the May 2009 EDA Meeting. May 2009 -The EDA approved the request based on the Finance Committee's recommendation. The loan was extended at the 3%interest rate and payments were reduced$250.00 per month with a balloon payment due in January 2012. November 2011 —Nicole's Salon closed. Ms. Fox filed for bankruptcy and it was discharged June 2012. August 2012 - Staff updated the Finance Committee stating that they had worked the city attorney, however all discussions to date indicated the City no longer had any rights or remedies to collect payment. FUIEREI / T NATURE The write off of this delinquent loan is necessary to accurately reflect the accounting of the City's Downtown Business Revitalization Micro Loan Program. FINANCIAL IMPACT The City's General Fund will not be affected by this write off but the Micro Loan Fund balance will be reduced. ATTACHMENTS • Resolution No. 13-03,Authorizing Write-off of Loan Balance—Nicole's Finishing Touch Salon • February 8,2008 Loan Agreement • January 14,2008—Memo to EDA,Mayor and City Council • February 8,2008—Memo to Nicole Fox,Nicole's Finishing Touch Salon • December 19, 2008—Memo to EDA Finance Committee • January 12, 2009—Request for Action to EDA • January 28, 2009 Memo to Nicole Fox,Nicole's Finishing Touch Salon • April 27, 2009 EDA Finance Committee Minutes • May 11, 2009—Request for Action to EDA • May 13,2009—Memo to Nicole Fox, Nicole's Finishing Touch Salon • Bankruptcy Discharge documents dated June 5, 2012 • August 2, 2012 Memo to Finance Committee RESOLUTION NO. 13- 03 A RESOLUTION OF THE ECONOMIC DEVELOPMENT AUTHORITY OF THE CITY OF ELK RIVER,AUTHORIZING THE WRITE-OFF OF THE OUTSTANDING LOAN BALANCE OF $6,894.28 OWED BY THE FORMER NICOLE'S FINISHING TOUCH SALON TO THE CITY OF ELK RIVER'S DOWNTOWN BUSINESS REVITALIZATION MICRO LOAN FUND WHEREAS,Nicole's Finishing Touch Salon, a sole proprietorship, formerly located at 617 Main Street NW, and the City of Elk River,a municipal corporation entered into a Loan Agreement on February 8,2008 for $25,000.00 (Exhibit A);and WHEREAS,within 8 months of opening the owner began to have trouble keeping up with her contractual loan payments; and WHEREAS,in December 2008, the Finance Committee reviewed and recommended approval of a one year loan extension request from the borrower at the current 3%interest rate and with reduced monthly payments of$687.61;and WHEREAS, the EDA approved the Finance Committee's recommendation at their regular January 2009 meeting;and WHEREAS,in April 2009, the Finance Committee reviewed and recommended approval of a second one year loan extension request from the borrower at the current 3%interest rate,reduced monthly payments of$250.00 and a balloon payment in January 2012;and WHEREAS, the EDA approved the Finance Committee's recommendation at their regular May 2009 meeting;and WHEREAS, in November 2011, Ms. Nicole Fox filed for bankruptcy and had it discharged in June 2012, and; WHERES,in August 2012, staff informed the Finance Committee they had worked the city attorney but all discussions to date indicated the City no longer had any rights or remedies to collect payment, and; WHEREAS, the write off of this delinquent loan is necessary to accurately reflect the accounting of the City's Downtown Business Revitalization Micro Loan Program;and WHEREAS, the City's General Fund will not be affected by this write off but the City's Downtown Business Revitalization Micro Loan Fund balance will be reduced. NOW THEREFORE,BE IT RESOLVED by the Council of the City of Elk River that the City Administrator (?) is authorized the write-off of the outstanding loan balance of$6,894.28 owed by the former Nicole's Finishing Touch Salon to the City's Downtown Business Revitalization Micro Loan Program. �a , Eaii lr 11A lJ11 Passed and adopted by the Elk River Economic Development Authority this day of ,2013. AT1 EST: Dan Tveite,President Suzanne Fischer,Executive Director PROMISSORY NOTE $25,000 Elk River, Minnesota February 2008 THE UNDERSIGNED WARRANT THAT THE PROCEEDS FROM THIS NOTE SHALL BE USED SOLELY FOR BUSINESS PURPOSES. FOR VALUE RECEIVED, the undersigned, Nicole's Finishing Touch Salon Inc., a Minnesota corporation,promises to pay to the order of the Economic Development Authority of the City of Elk River(the "Lender"), at its office in Elk River, Minnesota, or at such other place as any present or future holder of this Note may designate from time to time, the principal sum of twenty-five thousand and no/100 Dollars ($25,000) (the "Principal Balance"), plus interest thereon at a fixed rate of Three percent `3%) per annum. Interest shall be computed on the basis of the actual number of days elapsed in a 360-day year. The outstanding principal balance and accrued interest shall be due and payable in arrears in monthly installments of$ 1,074.53, commencing on March 8, 2008 and on the first day of each month thereafter up to and including March 8, 2010. The entire unpaid principal balance hereof and all accrued and unpaid interest hereon shall,if not earlier paid,be fully due and payable on March 8,2010. This Note is secured by a Guaranty made by Nicole Ashley Fox("Guarantor"),all of even date herewith. Installment payments hereunder shall be applied first to accrued but unpaid interest, and then to the reduction of principal then due and owing. The undersigned may prepay this Note in whole or in part at any time without penalty. No prepayment, however, shall suspend any required payments of either principal or interest under this Note or reduce the amount of any scheduled monthly payment. Any prepayment shall be applied first to accrued but unpaid interest and the remainder to the principal portions of the monthly installments in the inverse order such monthly installments become due. If any installment or payment is paid more than ten (10) days after the due date thereof, the undersigned agree to pay a late payment charge of eight percent (8%) of the installment or payment to cover the expenses of collection. This provision shall not be deemed to excuse a late payment or be deemed a waiver of any other rights the holder hereof may have,including the right to declare the Principal Balance and interest thereon immediately due and payable. The occurrence of any of the following events shall constitute an Event of Default under this Note: (i) any breach or default in the payment of this Note; or(ii) any breach or default under the terms of the Guaranty or under any other note, obligation, mortgage, guaranty, other agreement, or other writing heretofore, herewith or hereafter existing to which any maker,endorser, any guarantor or surety of this Note or any other person providing security for this Note or for guaranty of this Note is a party; or (iii) the insolvency, death, dissolution, liquidation, merger or consolidation of any such maker, endorser, guarantor, surety or other person; or(iv) any appointment of a receiver, trustee or similar officer of any property of any such maker, endorser, guarantor, surety or other person; or(v) any assignment for the benefit of creditors of any such maker, endorser, guarantor, surety or other person; or (vi) any commencement of any proceeding under any bankruptcy, insolvency,receivership,dissolution,liquidation or similar law by or against any such maker, endorser, guarantor, surety or other person; or (vii) the sale, lease or other disposition(whether in one transaction or in a series of transactions) to one or more persons of all or a substantial part of the assets of any such maker, endorser, guarantor, surety or other person; or(viii) any such maker, endorser, guarantor, surety or other person takes any action to revoke or terminate any agreement, liability or security in favor of the Lender; or(ix)the entry of any judgment or other order for the payment of money in the amount of$5,000.00 or more against any such maker, endorser, guarantor, surety or other person; or(x) the issuance or levy of any writ, warrant, attachment, garnishment, execution or other process against any property of any such maker, endorser, guarantor, surety or other person; or(xi) the attachment of any tax lien to any property of any such maker, endorser, guarantor, surety or other person; or (xii) any statement, representation or warranty made by any such maker, endorser, guarantor, surety or other person(or any representative of any such maker, endorser, guarantor, surety or -1- other person) to any present or future holder of this Note at any time shall be incorrect or misleading in any material respect when made; or(xiii) there is a material adverse change in the condition(financial or otherwise),business or property of any such maker, endorser, guarantor, surety or other person; or(xiv) any present or future holder of this Note shall in good faith believe that the prospect of due and punctual payment or performance of this Note or the due and punctual payment or performance of any other note, obligation, mortgage, guaranty, or other agreement heretofore,herewith or hereafter given to or acquired by any present or future holder of this Note in connection with this Note is impaired; or(xv)a default by the undersigned on any obligations they owe to other creditors. Upon the commencement of any proceeding under any bankruptcy law by or against any such maker, endorser, guarantor, surety or other person, this Note automatically shall become immediately due and payable for the entire unpaid principal balance of this Note plus accrued interest and other charges, fees and expenses under this Note without any declaration,presentment,demand,protest,or other notice of any kind. Upon the occurrence of any other Event of Default and at any time thereafter,the then holder of this Note may, at its option, declare this Note to be immediately due and payable and thereupon this Note shall become due and payable for the entire unpaid principal balance of this Note plus accrued interest and other charges,fees and expenses under this Note without any presentment, demand,protest or other notice of any kind. The undersigned(i)waives demand,presentment,protest,notice of protest,notice of dishonor and notice of nonpayment of this Note;(ii)agrees to promptly provide all present and future holders of this Note from time to time with financial statements of the undersigned and such other information respecting the financial condition,business and property of the undersigned as any such holder of this Note may request, in form and substance acceptable to such holder of this Note; (iii) agrees that when or at any time after this Note becomes due the then holder of this Note may offset or charge the full amount owing on this Note, or any portion thereof, against any account then maintained by the undersigned with such holder of this Note without notice; (iv) agrees to pay on demand all fees, costs and expenses of all present and future holders of this Note in connection with this Note and any security and guaranties for this Note, and any transactions and matters relating to this Note and to any security and guaranties for this Note,including but not limited to audit fees and expenses and reasonable attorneys'fees and legal expenses,plus interest on such amounts at the rate set forth in this Note;and(v)consents to the personal jurisdiction of the state and federal courts located in the State of Minnesota in connection with any controversy related in any way to this Note or any security or guaranty for this Note,or any transaction or matter relating to this Note or to any security or guaranty for this Note,waives any argument that venue in such forums is not convenient, and agree that any litigation initiated by the undersigned against the Lender or any other present or future holder of this Note relating in any way to this Note or any security or guaranty for this Note, or any transaction or matter relating to this Note or to any security or guaranty for this Note, shall be venued in either the District Court of Sherburne County, Minnesota, or the United States District Court, District of Minnesota. Interest on any amount under this Note shall continue to accrue, at the option of any present or future holder of this Note, until such holder receives final payment of such amount in collected funds in form and substance acceptable to such holder. No waiver of any right or remedy under this Note shall be valid unless in writing executed by the holder of this Note, and any such waiver shall be effective only in the specific instance and for the specific purpose given. All rights and remedies of all present and future holders of this Note shall be cumulative and may be exercised singly, concurrently or successively. This Note shall bind the undersigned and the successors and assigns of the undersigned. This Note shall be governed by and construed in accordance with the laws of the State of Minnesota. THE UNDERSIGNED REPRESENTS, CERTIFIES, WARRANTS AND AGREES THAT THE UNDERSIGNED HAS READ ALL OF THIS NOTE AND UNDERSTAND ALL OF THE PROVISIONS OF THIS NOTE. THE UNDERSIGNED ALSO AGREES THAT COMPLIANCE BY ANY PRESENT OR FUTURE HOLDER OF THIS NOTE WITH THE EXPRESS PROVISIONS OF THIS NOTE SHALL CONSTITUTE GOOD FAITH AND SHALL BE CONSIDERED REASONABLE FOR ALL PURPOSES. -2- Nicole's Finishing Touch Salon,Inc. A Minnesota corporation By: j ,. Its:A 'e:_?i'tr ','f�l.r%i� GP:2325282 vl -3- GUARANTY Elk River, Minnesota February , 2008 FOR VALUABLE CONSIDERATION, the receipt and sufficiency of which is hereby acknowledged, and in consideration of and to induce financial accommodations of any kind, with or without security, given or to be given or continued at any time and from time to time by the ECONOMIC DEVELOPMENT AUTHORITY OF THE CITY OF ELK RIVER(hereinafter called the "Lender")to or for the account of NICOLE'S FINISHING TOUCH SALON, INC. (hereinafter collectively called the "Borrower"), the undersigned absolutely and unconditionally guarantees to the Lender the full and prompt payment when due, whether at maturity or earlier by reason of acceleration or otherwise, of any and all indebtedness, obligations and liabilities of the Borrower (and any and all successors of the Borrower) to the Lender and also to others to the extent of their participations granted to or interests therein created or acquired for them by the Lender, now or hereafter existing, absolute or contingent, independent,joint, several or joint and several, secured or unsecured, due or to become due, contractual or tortious, liquidated or unliquidated, arising by assignment or otherwise, including without limitation all indebtedness, obligations and liabilities owed by the Borrower (and any and all successors of the Borrower) as a member of any partnership, syndicate, association or other group, and whether incurred by the Borrower (or any successor of the Borrower) as principal, surety, endorser, guarantor, accommodation party or otherwise (hereinafter collectively referred to as the "Indebtedness"); and the undersigned agrees to pay on demand all of the Lender's fees, costs, expenses and reasonable attorneys'fees in connection with the Indebtedness, any security therefor, and this guaranty, plus interest on such amounts at the highest rate then applicable to any of the Indebtedness. The Lender may at any time and from time to time, without consent of or notice to the undersigned, without incurring responsibility to the undersigned, without releasing, impairing or affecting the liability of the undersigned hereunder,upon or without any terms or conditions, and in whole or in part: (1) sell, pledge, surrender, compromise, settle, release, renew, subordinate, extend, alter, substitute, exchange, change, modify or otherwise dispose of or deal with in any manner and in any order any Indebtedness, any evidence thereof, or any security or other guaranty therefor; (2)accept any security for or other guarantors of any Indebtedness; (3) fail, neglect or omit to obtain, realize upon or protect any Indebtedness or any security therefor, to exercise any lien upon or right to any money, credit or property toward the liquidation of the Indebtedness, or to exercise any other right against the Borrower, the undersigned, any other guarantor or any other person; and (4) apply any payments and credits to the Indebtedness in any manner and in any order. No act, omission or thing, except full payment and discharge of the Indebtedness, which but for this provision could act as a release or impairment of the liability of the undersigned hereunder, shall in any way release, impair or otherwise affect the liability of the undersigned hereunder, and the undersigned waives any and all defenses of the Borrower pertaining to the Indebtedness, any evidence thereof, and any security therefor, except the defense of discharge by payment. The failure of any person or persons to sign this or any other guaranty shall not release,impair or affect the liability of the undersigned hereunder. This guaranty is a primary obligation of the undersigned and the Lender shall not be required to first resort for payment of the Indebtedness to the Borrower or any other person, their properties or estates, or any security or other rights or remedies whatsoever. The undersigned shall be and remain liable for any deficiency remaining after foreclosure of any mortgage or security interest securing the Indebtedness, whether or not the liability of the Borrower or any other person for such deficiency is discharged pursuant to statute,judicial decision or otherwise. The liability of the undersigned under this guaranty is joint and several and is in addition to and shall be cumulative with all other liabilities of the undersigned to the Lender, as guarantor or otherwise, without any limitation as to amount, unless the writing evidencing or creating such other liability specifically provides to the contrary. If any payment applied by the Lender to the Indebtedness is 1 thereafter set aside, recovered, rescinded or required to be returned for any reason (including without limitation the bankruptcy, insolvency or reorganization of the Borrower or any other person), the Indebtedness to which such payment was applied shall for the purposes of this guaranty be deemed to have continued in existence, notwithstanding such application, and this guaranty shall be enforceable as to such Indebtedness as fully as if such application had never been made. The undersigned waive: (1)notice of acceptance of this guaranty and of the creation and existence of the Indebtedness; (2) presentment, demand for payment, notice of dishonor, notice of nonpayment, and protest of any instrument evidencing the Indebtedness; and (3) all other demands and notices to the undersigned or any other person and all other actions to establish the liability of the undersigned hereunder. The undersigned consent to the personal jurisdiction of the state and federal courts located in the State of Minnesota in connection with any controversy related to this guaranty, waive any argument that venue in such forums is not convenient, and agree that any litigation initiated by the undersigned against the Lender in connection with this guaranty shall be venued in either the District Court of Sherburne County,Minnesota, or the United States District Court,District of Minnesota. All property of the undersigned, now or hereafter in the possession, control or custody of or in transit to the Lender for any purpose, including without limitation the balance of every account of the undersigned with and each claim of the undersigned against the Lender, shall be subject to a lien and security interest in favor of the Lender, as security for all liabilities of the undersigned to the Lender, and shall be subject to be set off against any and all such liabilities, and the Lender may at any time and from time to time at its option and without notice appropriate and apply any such property toward the payment of any and all such liabilities. The undersigned agree to promptly provide the Lender from time to time with financial statements of the undersigned, in form and substance acceptable to the Lender, at least once every 12 months and as otherwise requested by the Lender. The undersigned agree to promptly provide the Lender from time to time with such other information respecting the condition (financial and otherwise), business and property of the undersigned as the Lender may request, in form and substance acceptable to the Lender. The undersigned waive all claims, rights and remedies which the undersigned may now have or hereafter acquire against any person at any time now or hereafter liable to payment of any of the Indebtedness and as to any collateral security, including but not limited to all claims, rights and remedies of contribution, indemnification, exoneration, reimbursement, recourse and subrogation, whether or not such claim, right or remedy arises in equity, under contract, by statute, under common law or otherwise, whether or not the Indebtedness has been fully paid, and all payments and recoveries under this guaranty shall be considered equity investments by the undersigned in the Borrower;provided,nothing contained in this guaranty shall deprive the undersigned of any claim, right or remedy, after the Indebtedness has been fully paid, against any person other than the Borrower. No delay or failure by the Lender in exercising any right, and no partial or single exercise thereof shall constitute a waiver thereof. No waiver of any rights hereunder, and no modification or amendment of this guaranty shall be effective unless the same is in writing duly executed by the Lender, and each such waiver, if any, shall apply only with respect to the specific instance involved and shall not impair or affect the rights of the Lender or the provisions of this guaranty in any other respect at any other time. This guaranty shall continue until written notice of revocation of this guaranty, executed by the undersigned, has been received by the Lender; provided, no revocation of this guaranty shall affect in any manner any liability of the undersigned under this guaranty with respect to Indebtedness arising before the Lender receives such written notice of revocation, and the sole effect of revocation of this guaranty shall be to exclude from this guaranty Indebtedness thereafter arising which is unconnected with Indebtedness theretofore arising or transactions theretofore entered into. Any invalidity or unenforceability of any provision or application of this guaranty shall not affect other lawful provisions and applications hereof and to this end the provisions of this guaranty are declared to be severable. This guaranty shall bind the undersigned and the heirs, representatives, successors and 2 assigns of the undersigned, and of each of them respectively, and shall benefit the Lender, its successors and assigns. This guaranty shall be governed by and construed in accordance with the laws of the State of Minnesota. THE UNDERSIGNED REPRESENT, CERTIFY, WARRANT AND AGREE THAT THE UNDERSIGNED HAVE READ ALL OF THIS GUARANTY AND UNDERSTAND ALL OF THE PROVISIONS OF THIS GUARANTY. THE UNDERSIGNED ALSO AGREE THAT COMPLIANCE BY THE LENDER WITH THE EXPRESS PROVISIONS OF THIS GUARANTY SHALL CONSTITUTE GOOD FAITH AND SHALL BE CONSIDERED REASONABLE FOR ALL PURPOSES. Nicole Ashley Fox GP:2325285 vl 3 �,�// Oty of Elk River MEMORANDUM TO: Economic Development Authority Mayor & City Council FROM: Catherine Mehelich, Director of Economic Development DATE: January 14, 2008 SUBJECT: Consider $25,000 Micro Loan to Nicole's Finishing Touch Salon Attachments • Staff report to Finance Committee dated January 4, 2008 (see previous agenda item) • Finance Committee Minutes dated January 8,2008 (see previous agenda item) • City of Elk River Micro Loan Fund Policy (see previous agenda item) • City Council Minutes dated December 17,2007 Issue On January 8th, the Finance Committee reviewed an application from Nicole's Finishing Touch Salon to the Downtown Business Revitalization Micro Loan Program. The program was originally established for the purpose of assisting existing downtown businesses during the construction period of the new buildings. The program was limited to businesses established in the downtown district as of April 10,2006. As stated in the past, the Downtown Business Revitalization Micro Loan Program should be considered"high risk" lending with the potential of not being paid back due to the flexible application requirements and limited underwriting review. The loans are secured only by personal guarantee of the business owner. Since Nicole's Finishing Tough Salon does not fit the"existing business" criteria the Finance Committee was asked to consider the business's unique circumstances and hardship as a result of the downtown construction as described in the applicant's attached letter. Prior to the application submittal,staff provided a brief summary of the request to the City Council at its December 17,2007 meeting,in which the Council indicated a willingness to consider the request with further review and recommendation by the Finance Committee and EDA (see attached Council minutes). The Finance Committee recommends that the EDA consider approval of the Nicole's Finishing Tough Salon request for a$25,000 Downtown Business Revitalization Program Micro Loan, and waiver of the "existing business" criteria for this applicant's specific Consider Micro Loan to Nicole's Finishing Touch Salon January 14,2008 EDA Meeting Page 2 of 2 circumstance,and contingent upon the applicant's full payment of the Micro Loan application fee. Business owner,Nicole Fox was encouraged to attend the EDA meeting. Action Requested The EDA is asked to consider making a recommendation to the City Council for approval of the application for a$25,000 Downtown Business Revitalization Program Micro Loan to Nicole's Finishing Touch Salon per the recommendation of the Finance Committee with the following terms: Rate 3% fixed Term 2 years Security Personal Guarantee Structure Direct loan from EDA Following the EDA's action, the recommendation will be forwarded to the City Council for final consideration and action. 1-� Cit of River MEMORANDUM TO: Nicole Fox, Nicole's Finishing Touch Salon FROM: Catherine Mehelich, Director of Economic Development DATE: February 8, 2008 SUBJECT: EDA Micro Loan Payments Attached you will find the amortization schedule for the$25,000 EDA Micro Loan issued to you today. Please note that the first payment will be due March 8, 2008 in the amount of $1,074.53,and on the eighth day of each month thereafter up to and including March 8, 2010. • Payments should be made payable to: City of Elk River 13065 Orono Parkway Elk River,MN 55330 Or feel free to contact your bank to arrange automatic payment options from your account. Any questions can be directed to me at 763.635.1041 or the City Finance Department at 763.635.1000. C River MEMORANDUM TO: EDA Finance Committee FROM: Annie Deckert, Economic Development Assistant DATE: December 19, 2008 SUBJECT: Consider Loan Extension Request— Nicole's Finishing Touch Salon, Inc. Attachments • Letter from Nicole Fox of Nicole's Finishing Touch Salon, Inc, dated November 13, 2008 and current financial statements • January 14, 2008 EDA/ City Council Memo for Nicole's Finishing Touch Salon, Inc. Micro Loan Application • January 14, 2008 EDA Minutes • Nicole's Finishing Touch Salon, Inc. —Current Amortization Schedule • Nicole's Finishing Touch Salon, Inc. — Proposed Extended Amortization Schedule as requested by applicant (3% interest) • Micro Loan Policy & Guidelines Requested Action The Finance Committee is asked to review and provide a recommendation to the EDA regarding the Micro Loan extension request from Nicole's Finishing Touch Salon, Inc for one additional year at the current 3% interest rate. Issue Ms. Nicole Fox, owner of Nicole's Finishing Touch Salon, Inc., has submitted a request and application for the EDA's consideration of a one year extension on its micro loan at a the current 3% interest rate. The principal balance due on the loan after 8 months (Feb-Oct) is $16,832.55. Ms. Fox submitted the attached current financial statements for the Finance Committee's consideration. Ms. Fox has been invited to attend the Finance Committee meeting to provide an update on the current status and future plans of the company. Following any questions and answers with the applicant, she will be excused during the Finance Committee's discussion and recommendation. The Finance Committee's recommendation will be considered for final action by the EDA at its January 12, 2008 regular meeting. Consider Micro Loan Extension Request—Nicole's Finishing Touch Salon,Inc. December 18,2008 EDA Finance Committee Page 2 of 2 Background In January 2008, the EDA awarded a $25,000 Micro Loan at 3% interest to Nicole's Finishing Touch Salon, Inc. under the Downtown Business Revitalization Program. Ms. Fox indicated the loan would be used to increase advertising and other promotional activities to assist overcome negative impacts of their delay in relocating their business from Otsego to the Bluffs during the construction. The original terms of the loan were as follows: Term: 2 years Rate: 3% fixed Structure: Direct Loan with the Elk River Economic Development Authority Security: Personal guaranty Issues for Discussion • Monthly repayment on the loan has been slow and November & December's payment is outstanding • The Micro Loan policy states that in the event that the Borrower is unable to obtain conventional financing to replace the Micro Loan at the end of five years, the loan may be extended up to two additional years at a market rate of interest; the applicant is asking for a one year extension at a 3% interest rate and has been paying on the loan for 8 months Attached is a copy of the loan payment history. An automatic withdrawal may be an option to remedy the situation in the future. In addition, the Committee should take into consideration during its discussion the company's current financial condition, ability to repay the loan, and the EDA's security position. lk REQUEST FOR ACTION River To Item Number Economic Development Authority Agenda Section Meeting Date Prepared by January 12, 2009 Annie Deckert, Economic Development Assistant Item Description Reviewed by Consider EDA Micro Loan Extension Catherine Mehelich, Director of —Nicole's Finishing Touch Salon, Inc. Economic Development Reviewed by Action Requested The EDA is asked to consider the EDA Finance Committee's recommendation for approval of a I-year extension on the Nicole's Finishing Touch Salon, Inc. micro loan at a 3.0% interest rate with the following conditions: • a waiver of pending late fees • a Micro Loan Extension fee to be 1% of the loan balance • fixed monthly payments to begin February 8, 2009 Background/Discussion The attached staff report to the EDA Finance Committee and December 19, 2008 committee meeting minutes provide background regarding the extension request. In addition, EDA Commissioners Motin and Tveite both serve on the EDA Finance Committee and may provide additional comments regarding the committee's review and recommendation. Financial Impact The EDA Micro Loan Fund has a current cash balance of approximately $748,953.28. The principal balance due on the Nicole's Finishing Touch Salon, Inc. micro loan is $15,702.68. Attachments • EDA Finance Committee Meeting Minutes dated December 19, 2008. • EDA Micro Loan Fund Policy and Guidelines • Staff report to EDA Finance Committee re: Nicole's Finishing Touch Salon, Inc. Micro Loan Extension Request, December 19, 2008. Action Motion by Second by Vote Follow Up N:\Departments\Community Development\Economic Development\Micro Loan Fund\LOANS\Nicole's Salon\1.12.09 EDA Action Requested.doc City of Elk River MEMORANDUM TO: Nicole Fox, Nicole's Finishing Touch Salon FROM: Annie Deckert, Economic Development Assistant DATE:January 28, 2009 SUBJECT: EDA Micro Loan Payments Attached you will find the new amortization schedule and promissory note for the $25,000 EDA Micro Loan issued to you on February 8, 2008. Please note that the first payment will be due February 8, 2009 in the amount of $687.61, and on the eighth day of each month thereafter up to and including January 8, 2011. Please note that if any payment is paid more than ten (10) days after the due date, there will be a late payment charge of 8% of the payment to cover the expenses of collection. Any payment received after the 18th of each month will total $742.62. Payments should be made payable to: City of Elk River 13065 Orono Parkway Elk River, MN 55330 Or feel free to contact your bank to arrange automatic payment options from your account. Any questions can be directed to me at 763.635.1042 or the City Finance Department at 763.635.1000. MEETING OF THE EDA FINANCE COMMITTEE HELD AT THE ELK RIVER CITY HALL MONDAY, APRIL 27, 2009 Members Present: Cliff Lundberg,Paul Motin, Nate Oval,Larry Toth,Dan Tveite and Chris Carlson Members Absent: None Staff Present: Director of Economic Development Catherine Mehelich, Economic Development Assistant Annie Deckert 1. Accept EDA Finance Committee Minutes Motion by Tveite, second by Toth to accept the December 18, 2008 EDA Finance Committee Minutes as presented. The motion carried 6-0. Ms. Mehelich welcomed new Finance Committee member,Nate Oval,representing The Bank of Elk River. 2. Discuss Micro Loan Request: Nicole's Finishing Touc.h'Salon. Inc. Ms. Mehelich summarized the Micro Loan restructuring request from. .Nicole's Finishing Touch Salon, Inc. She indicated staff's concerns regarding placing additional securities and/or setting additional expectations for the loan. The original terms of the loan were for a 2-year term, 3% fixed rate,direct loan with the EDA,and secured by a personal guaranty from the owner. In January of 2009, following review and recommendation from the Finance Committee, the EDA:approved a 1-year extension on the loan terms in order to reduce the monthly payment to assist the business cash flow. The applicant, Nicole Fox, along with her step-father,Joe Brandenburg,"are requesting EDA consideration of restructuring the micro loan payments to an amount"which can be realistically handled by the business's strained cash flow. Mr. Brandenburg has indicated to staff that Ms. Fox can handle a monthly payment of$250. Ms. Mehelich inquired about the current'balances of the bank loans. Mr. Oval indicated the combined balance of the SBA and build-out loan were approximately$100,000. He also stated that Ms. Fox had attended a Business Network International(BNI) meeting with him, and has been working on her marketing efforts by meeting weekly with Stephanie Danielson,realtor for the residential portion of the Bluff's building.: Mr. Brandenburg, stepfather to Ms. Nicole Fox, owner of Nicole's Finishing Touch Salon, Inc,provided an update on the status and future plans for the business. Mr. Brandenburg indicated the empty building,current state of economy and unexpected build-out costs and City fees have made it difficult to survive. He stated that they"have worked with The Bank of Elk River to lower the interest rate and lengthen the term of their loans. They have also worked with MinnWest bank to lower her monthly rent payments. Mr. Brandenburg informed the committee that he has purchased Ms. Fox new equipment to offer additional services"and have replaced prior employees with new employees which better fit the salon and increase the marketability of the business. They have also restructured employees pay-scales to assist the cash flow. He indicated that he had replaced her prior financial tracking system with a new system,which would accurately track her cash flow, providing a better picture on how the business is doing. At this time,Nicole has made several lifestyle adjustments to accommodate her cash flow situation. Mr. Brandenburg indicated Ms. Fox is extremely active in donating gift cards and services to several community events, silent auctions and area schools. Ms. Fox indicated that she did have a business plan when she opened her business;however,with the current unpredictability of the economy,it was tough to maintain an accurate plan. She also indicated that her prior financial tracking system was not accurate and made it difficult to gauge how her business EDA Finance Committee Minutes Page 2 April 27,2009 Page 2 of 2 was doing. Ms. Fox stated she has looked at the operation of other salons and is trying to offer services and market herself in ways the others do not,in efforts to set herself apart from the rest. Mr. Brandenburg and Ms. Fox were excused from the meeting following this discussion. Discussion by the committee included working with Nicole's to allow her to stay in business and reducing her monthly payment down to $250.00,with a balloon payment due at the end of the current loan term,January 8, 2011. The committee recommended extending the loan term 1 year, keeping the monthly payments at$250.00,with a balloon payment due January 8, 2012:Itwas the consensus of the committee to extend the term of the loan 1 year, and reduce the current monthly payments of$687.61 to $250.00 with a balloon payment due January 8,2012 in which an extension can be considered if neccessary. The interest would remain the same,at 3%. MOVED BY TVIETE AND SECONDED BY TOTHTE,THE FINANCE COMMITTEE RECOMMENDS THAT THE EDA CONSIDERAPPROVING A 1-YEAR EXTENSION ON NICOLE'S FINISHING TOUCH SALON, INC LOAN AT A 3% INTEREST,A REDUCTION OF THE CURRENT MONTHLY`:PAYMENT OF $687.61 TO $250.00 WITH A BALLOON PAYMENT DUE ON JANUARY 8, 2012. THE MOTION CARRIED 6-0. 3. Other Business Mehelich informed the Committee that Dave Rymanowski was no longer with First National Bank, therefore the committee may want to replace him with a representative from First National Bank. Committee member Motin requested staff to research and report on the City's SAC/WAC rates in comparison to surrounding communities. 4. Closing The EDA Finance Committee meeting ended at 8:20 a.m. Respectfully submitted by, Annie Deckert Economic Development Assistant N:\Departments\Community Development\Economic Development\Micro Loan Fund\Finance Committee\2009\Minutes\4.27.09 minutes.doc i Elk REQUEST FOR ACTION River To Item Number Economic Development Authority Agenda Section Meeting Date Prepared by May 11, 2009 Annie Deckert,Economic Development Assistant Item Description Reviewed by Consider Amendment to Micro Loan Terms—Nicole's Salon Catherine Mehelich,Director of Economic Development Reviewed by Action Requested The EDA is asked to consider the EDA Finance Committee's recommendation for approval of a 1-year extension on the Nicole's Finishing Touch Salon, Inc. micro loan at a 3.0%interest rate with the following conditions: • a reduction of the current monthly payment of$687.61 to $250.00 • a balloon payment due on January 8, 2012 (at which time an extension can be considered if necessary) Background/Discussion The attached staff report to the EDA Finance Committee and April 27,2009 committee meeting minutes provide background regarding the amendment to Micro Loan terms request. In addition, EDA Commissioners Motin and Tveite both serve on the EDA Finance Committee and may provide additional comments regarding the committee's review and recommendation. Financial Impact The EDA Micro Loan Fund has a current cash balance of approximately$787,991. The principal balance due on the Nicole's Finishing Touch Salon,.Inc. micro loan is $14, 050.19. Attachments • EDA Finance Committee Meeting Minutes dated April 27, 2009. • EDA Micro Loan Fund Policy and Guidelines • Staff report to EDA Finance Committee re: Nicole's Finishing Touch Salon, Inc. Micro Loan Extension Request,April 27, 2009 Action Motion by Second by Vote Follow Up 1-� �i City of Elk River MEMORANDUM TO: Nicole Fox, Nicole's Finishing Touch Salon FROM: Annie Deckert, Economic Development Assistant DATE:May 13, 2009 SUBJECT: EDA Micro Loan Payments Attached you will find the new amortization schedule and promissory note for the $25,000 EDA Micro Loan issued to you on February 8, 2008. Please note that the next payment is due June 8, 2009 in the amount of $250.00, and on the eighth day of each month thereafter up to and including January 8, 2012. A balloon payment will be due on January 8, 2012 (an extension can be considered if necessary). Please note that if any payment is paid more than ten (10) days after the due date, there will be a late payment charge of 8% of the payment to cover the expenses of collection. Any payment received after the 18th of each month will total $270.00. Payments should be made payable to: City of Elk River 13065 Orono Parkway Elk River, MN 55330 Or feel free to contact your bank to arrange automatic payment options from your account. Any questions can be directed to me at 763.635.1042 or the City Finance Department at 763.635.1000. UNITED STATES BANKRUPTCY COURT DISTRICT OF MINNESOTA In re: Case No: 12-41113—NCD Nicole Ashley Fox asf Nicole's Finishing Touch Salon,Inc,asf N•cole's Salon,11,C 18629 Simonet Drive Elk River,MN 55330 Social security/Taxpayer ID/Employer 1D/Other Nos.: xxx—xx-9551 Debtor(s) Chapter 7 Case DISCHA RGE OF DEBTOR(S) It appears that the debtor(s)are entitled to a discharge, IT IS ORDERED: The debtor(s)are granted a discharge under section 727 of title 11,United States Code,(the Bankruptcy Code). Dated:6/5/12 suacyluactai United States Bankruptcy Judge NOTICE OF ENTRY AND FILING ORDER OR JUDGMENT Filed and docket entry made on June 5,2012 Lou Vosejpka Clerk,United States Bankruptcy Court By:admit)De. Clerk dsc712/01/2007—Mb 014795 6 5 9 0 5 0 1 4 8 1 2 0 1 8 page tascr |2/n}/2w7-Wh EXPLANATION O SCHARGE IN A CHAPTER 7 CASE .0bisuo6n order grants a discharge debtors. it is not a dismissal of the cuweuudi\dueoom determine how much money, if any,the trustee wifl pay to creditors. t'[)�`_��'��iI`��o�I"' -wI��d The dischat gc prohibits any attempt to collect from the debtors a debt that has been discharged. Foi example, a crt. iif.a.is not permitted to(a aintct a debtor by mail,phone,or otherwise,to file or continue a lawsuit,to attach Wages or other property,0110 take any other action to collect a discharged debt fwm the debtors, A creditor who violates thi order can be required to pay damages and attorney's fees to the debtor. debtors' F* a&s/hehmJ right if that lien was not avoided or eliminated iude bankruptcy case. Also,u debtor may voluntarily pay any debt that has been discharged The chapter 7 dischilrge order eliminates debtor's legal obligation to pay a debt that is discharged. Most hut not all yre`'^, debts tire discturrged If the debt existed cmi the date the bankruptcy -- ''-- filed. (if case W as begun- tart' �Ji(fex`m chapter oil hc Bankruptcy Code and convened/o chapter 7,the.discharge applies<v debts owed when the hamikrurecv case was converted.) Qe m't Not Discharged. Some of the common types of debts which are nia discharged in a chapter 7 bankruptcy case are: u, }/e`x for most taxes; hXktou incurred ^`pay mxu(iudmrgea.b}c taxes fin uease filed ouor after October 17,2005) - ` )(his an iii ht UdUlc. 01 tii-non' rn,iliTh 'I 1110.. 01 support; , � J.l Debts for most student loans: .e. Debts uvnxmt fines. peudiew forfeitures,or criminal restitution : 1. 1)ehts fot'personal inuiies or death caused by the debtor's operation of a motor vehicle while intoxicated; e. Some debts which Were not properly listed by the debtor; i/ }}chmdhu/ thchuokmp/cycouunnecifioally has decided or will decide in this bankruptcy case are not diochu,&u]: ipeNykxab�b the debtor has ureun1ro �bnn min compliance withUuBxukinpxy{lde requirements for reaffirmation of debts. • i Debts.nw,Jx,certain pension,profit shud»g,. stock bonus,other retirement plans,`vmthe Thrift Savings Plan for federal employees for certain types of ltxins horn these plans(in a case filed on or after October 17, 205). This information is only a general summary of the bankruptcy discharge. There are exceptions to these general rules. Because the law is complicated.you may want to consult an attorney to determine the exact effect of the discharge in this case. 14 793 65905014812098 ilk coot REQUEST FOR ACTION River TO ITEM NUMBER Finance Committee 3 AGENDA SECTION MEETING DATE PREPARED BY August 2,2012 Annie Deckert,Director of Economic Development ITEM DESCRIPTION REVIEWED By Executive Director's Report Cal Portner,City Administrator REVIEWED BY ACTION REQUESTED None. BACKGROUND/DISCUSSION The purpose of this item is to provide an update of the Micro Loan Program to the Finance Committee. In February 2011,the city entered into an agreement structured by First National Bank of Elk River with Ethanol Technologies of Minnesota on their participation loan. Per the agreement,the borrower agrees to make seasonal payments on the loan. Because this is a participation loan with First National Bank and we do not receive the payments, this information is not reflected on the attached Micro Loan summary sheet. In November 2011,Nicole Fox,owner of Nicole's Salon,closed her business. Staff has been informed that Ms. Fox has filed for bankruptcy and it has been discharged. The balance on her loan is $6,894.28. Staff is working with the city attorney to determine any further action;however discussions to this point indicate the city no longer has any rights or remedies to collect payment. The current cash balance of the Micro Loan fund is $1,319,451.08,with$276,222.96 in notes receivable. The$50,000 deposit receivable is through our partnership with the Minnesota Community Capital Fund (MCCF). The MCCF is a nonprofit corporation that leverages funds through pooling resources and provides its members with greater flexibility and the capability of offering larger loans to small businesses. Staff recently held an educational lunch program with local lenders to discuss the programs the MCCF offers. Staff continues to heavily market the Micro Loan Program through various marketing materials, social media outlets, trade shows and direct mails. Additionally,the city's vision and goals identify the following goals: • Innovation-develop new programs and services to meet the needs of the community • Opportunities- foster a pro-business atmosphere that provides incentives and other opportunities for new and existing business growth rOWERED J N:\Departments\Community Development\Economic Development\Micro Loan Fund\Finance Committee\2012\Executive Director's Report.docx NATURE NICOLE'S FINISHING TOUCH SALON,INC. 617 Main St $25,000 EDA MICRO LOAN Elk River,MN 55330 Amortization Schedule Dated: February 8,2008 • Payable to: City of Elk River Amount: $25,000.00 Due: 8th of each month Interest Rate: 3.00% Term: 24 Months-1/12/09 Loan Extended 1 Year Payments: Monthly Principal&Interest Starting March 8,2008 Payment Pymnt Total Unpaid Date Period Rmng Payment Principal Interest glance Paid $25,000.00 3/8/08 23 $1,074.53 $1,012.04 $62.49 $23,987.96 03/07/2008 4/8/08 22 $1,074.53 1,014.56 $59.97 22,973.40 04/10/2008 5/8/08 21 $1,074.53 1,017.10 $57.43 21,956.30 05/09/2008 6/8/08 20 $1,074.53 1,019.64 $54.89 20,936.66 06/13/2008 7/8/08 19 $1,074.53 1,022.19 $52.34 19,914.48 07/17/2008 8/8/08 18 $1,074.53 1,024.74 $49.79 18,889.73 08/13/2008 9/8/08 17 $1,074.53 1,027.31 $47.22 17,862.43 09/11/2008 10/8/08 16 $1,074.53 1,029.87 $44.66 16,832.55 10/10/2008 11/8/08 15 $0.00 $42.08 16,832.55 12/8/08 14 $1,300.00 1,032.45 $225.47 15,800.11 12/12/2008 Applicatlo n fee approved Loan Application Fee 158.00 01/12/2009 by EDA Loan Extension-Principal Balance 15,958.11 (2 months interest from 12/08 2/8/09 23 $687.61 607.82 $79.79 15,350.29 02/11/2009-2/09) 3/8/09 22 $687.61 649.23 $38.38 14,701.05 03/19/2009 4/8/09 21 $687.61 650.86 $36.75 14,050.19 04/15/2009 29.40'interest through 4/1/09 5/8/09 20 $687.61 652.48 $35.13 13,397.71 05/06/2009 Loan Extension-Principal Balance 13,397.71 6/8/09 31 $250.00 216.51 $33.49 13,181.20 06/08/2009 7/8/09 30 $250.00 217.05 $32.95 12,964.16 07/10/2009 8/8/09 29 $250.00 217.59 $32.41 12,746.57 08/10/2009 9/8/09 28 $250.00 218.13 $31.87 12,528.43 09/04/2009 10/8/09 27 $250.00 218.68 $31.32 12,309.76 10/08/2009 11/8/09 26 $250.00 219.23 $30.77 12,090.53 11/09/2009 12/8/09 25 $250.00 219.77 $30.23 11,870.76 12/11/2009 1/8/10 24 $250.00 220.32 $29.68 11,650.43 01/13/2010 2/8/10 23 $250.00 220.87 $29.13 11,429.56 02/10/2010 3/8/10 22 $250.00 221.43 $28.57 11,208.13 03/11/2010 4/8/10 21 $250.00 221.98 $28.02 10,986.15 04/09/2010 5/8/10 20 $250.00 222.53 $27.47 10,763.62 05/12/2010 1,107.14 $142.86 6/8/10 19 $250.00 223.09 $26.91 10,540.53 06/08/2010 7/8/10 18 $250.00 223.65 $26.35 10,316.88 07/08/2010 8/8/10 17 $250.00 224.21 $25.79 10,092.67 08/10/2010 9/8/10 16 $250.00 224.77 $25.23 9,867.90 09/14/2010 10/8/10 15 $250.00 225.33 $24.67 9,642.57 10/13/2010 2,228.18 $271.82 11/8/10 14 $250.00 225.89 $24.11 9,416.68 11/15/2010 12/8/10 13 $250.00 226.46 $23.54 9,190.22 12/15/2010 2,680.54 319.46 1/8/11 12 $250.00 227.02 $22.98 8,963.20 01/10/2011 2/8/11 11 $250.00 227.59 $22.41 8,735.60 02/14/2011 3/8/11 10 $250.00 228.16 $21.84 8,507.44 03/10/2011 682.78 $67.22 4/8/11 9 $250.00 228.73 $21.27 8,278.71 04/11/2011 5/8/11 8 $250.00 229.30 $20.70 8,049.41 05/11/2011 6/8/11 7 $250.00 229.88 $20.12 7,819.53 06/14/2011 7/8/11 6 $250.00 230.45 $19.55 7,589.08 07/12/2011 8/8/11 5 $250.00 231.03 $18.97 7,358.05 08/11/2011 9/8/11 4 $250.00 231.60 $18.40 7,126.45 09/12/2011 10/8/11 3 $250.00 232.18 $17.82 6,894.26 10/17/2011 Filed bankruptcy-loan written off 11/8/11 2 $250.00 232,76 $17.24 6,661.50 12/8/11 1 $250.00 233.35 $16.65 6,428.15 1/8/12 0 $6,444.22 6,428.15 $16.07 0.00 TOTAL $26,840.90 $25,158.00 $1,682.90 To assist in achieving these goals, staff continues to examine available tools and determine roles to initiate necessary changes;an action step identified in the city's Vision and Goals. The creation of the Energy Efficiency Improvement Micro Loan and SAC/WAC Payment Program are newer programs created to assist in supporting these goals. Any additional new program concepts will be brought forth in front of the Finance Committee for discussion at a future meeting. ATTACHMENTS • Micro Loan Summary-July 2012 • Micro Loan Balance Sheet-July 2012 Action Motion by Second by Vote Follow Up N:\Departments\Community Development\Economic Development\Micro Loan Fund\Finance Committee\2012\Executive Director's Report.docx