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5.0. 6.0. EDSR 10-11-1999 ELK RIVER ECONOMIC DEVELOPMENT AUTHORITY 0 MEMORANDUM TO: Economic Development Authority FROM: Paul T. Steinman,Director of Economic r ._ Development DATE: October 7, 1999 SUBJECT: Agenda Memo for October 11, 1999, EDA Meeting 5. Consider ProTech Engineering Micro Loan Request Please see the attached memo and supporting information from Assistant ED Director Marc Nevinski. • 6. Consider Alternatives to Pursue Collection From Northstar Die Casting Issue The EDA provided a $50,000 micro loan to Northstar Die Casting in 1998. Since that time the company has run into a number of significant challenges to staying in business and approximately six or seven months ago, went out of business. At that time the owner of Northstar Die Casting merged the assets of the company with another company he owns and changed its name to Badger Die Casting and continued operations. Steve Whiting is the owner of Badger Die Casting and previously, the owner of Northstar Die Casting. Mr. Whiting has a number of other businesses that he operates in Wisconsin. North Star Die Casting has not made a payment on the micro loan since February 1999, and currently owes approximately $47,000 plus interest. The EDA secured its position on this micro loan with a personal guaranty from Steve Whiting and his partner at the time, Larry Lawson. Several months ago staff began the process of collecting on this loan by serving notice to Steve Whiting and Larry Lawson that 41, our intention is to file suit to collect on the loan based upon their personal guarantees. 13065 Orono Parkway • P. 0. Box 490 • Elk River, MN 55330-1743 • (612) 441-7420• Fax (612) 441-7425 Equal Opportunity Housing and Equal Opportunity Employment EDA Agenda Memo October 11, 1999,Meeting Page 2 • The purpose of this issue is to bring the EDA up to date on this process. City Attorney Peter Beck will be available at the EDA meeting to provide a summary of the actions taken and answer questions about the process. Staff has been in contact with Steve Whiting and it does not appear that he is willing at this time to provide payment of the amount due. Staff has not been in contact with Larry Lawson regarding this issue. Staff recommends the EDA continue its approach to this issue through legal means and, at the same time, open discussions with either Mr. Whiting or Mr. Lawson for a possible negotiated settlement of this matter. Peter Beck will be available at the EDA meeting to help answer questions and provide direction to the EDA regarding this issue. Attachments • Personal Guaranty Documentation • • Promissory Note • ITEM 5. A. T ELK RIVER ECONOMIC DEVELOPMENT AUTHORITY MEMORANDUM TO: Economic Development Authority FROM: Marc Nevinski,Assistant Director of /y, Economic Development eV DATE: October 11, 1999 SUBJECT: Micro Loan Request: ProTech Engineering- Brad Butalla & John House Issue Brad Butalla and John House have requested a Supplemental Micro Loan of $50,000 to assist in the start-up of their new company, ProTech Engineering. Dollars from.the Micro Loan Fund and several financial institutions will be used for the purchase of mold making equipment. The company has a four year agreement to lease a 5,000 square foot bay in the Decker Building on East Highway 10. ProTech plans to employ four people within two years. di Background ProTech Engineering will make molds used in the plastic injection molding process. Mr. Butalla stated that the industry trend is moving towards a shorter turn-around time of six to eight weeks while maintaining high tolerances. This is accomplished using the latest technology to manufacture the molds. At this time, few companies have such technology and ProTech plans to establish itself in the market using the latest equipment to keep pace with the industry trend. Initially ProTech will be a sub-contractor for other mold makers, but the company intends for its primary customer base to eventually be comprised of original equipment manufacturers. Several companies have already expressed in writing an interest in retaining ProTech's services. Financing for the project will come from a variety sources. Five year loans from the following asset lenders have been secured. The interest rates are fixed from 9.25% to 10.25% and the loans are amortized for the full term. Loans RP Capital $ 124,720 Copelco Capital $ 114,086 Center Capital $ 91,270 Intech Funding Corp $ 155,000 • Micro Loan $ 50,000 Equity Investor Contribution $ 65,000 Owner Contribution $ 45,000 Total $ 645,076 13065 Orono Parkway • P. O. Box 490 • Elk River, MN 55330-1743 • (612) 441-7420 • Fax (612) 441-7425 Equal Opportunity Housing and Equal Opportunity Employment ® The use of funds will include: Equipment & Machinery $ 540,076 Leasehold Improvements $ 10,000 Inventory/Working Capital $ 95,000 Total $645,076 The EDA will have a second lien position on all equipment. Mr. Butalla stated that mold making equipment has a useful life of 10 — 20 years. Additionally, the finance committee noted that the value of such equipment often increases immediately after purchase and then depreciates slowly. None the less, several committee members commented on the risk associated with this collateral position. Finance Committee Recommendation The EDA Finance Committee reviewed ProTech's application on September 29, 1999 and noted that the company meets or exceeds the Micro Loan Fund's criteria. Micro Loan Criteria ProTech Engineering • Max. Loan Amount: $50,000 • Amount requested: $50,000 • Interest rate: 1 below prime • Rate requested: 1 below prime • • Equity to EDA loan ratio of 1:1 • Equity to EDA loan ratio of 2.2:1 • 1 job created per $20,000 loaned • 1 job created per $12,500 loaned • Min. average wage of$8 per hour • Average wage of$24.50 per hour The Finance Committee unanimously recommended that the EDA approve a Supplemental Financing Loan to ProTech Engineering contingent on the submittal of the following documents: • Contracts for purchase of equipment • Financing agreements with lenders • Lease agreement with Dave Decker • Shareholder buyout agreement ProTech Engineering will also be require d to execute the following paperwork which is standard procedure for all EDA Micro Loans: • Security Agreement • Promissory Note • Personal Guarantees • Job Performance Agreements (with new requirements of Business Subsidy Law) A UCC-1 financing agreement will also be filed to protect the interests of the EDA. • Finally, it should also be noted that, due to the unusual conventional financing structure, the Micro Loan will be set up as a direct loan instead of as a participation loan. Attachments • Application • Resumes • EDA Finance Committee meeting minutes - September 29, 1999 • Letter to Mr. Butalla requesting additional documentation. i S APPLICATION ECONOMIC DEVELOPMENT MICRO LOAN FUND ELK RIVER, MINNESOTA Or I. CONTACT INFORMATION Company: Pr csTt C c-vt A i P e c`‘‘*".2 ) T.\c. . Address: qct y 2 N•w Y t b �J,�✓. -' -. �. =_ =,�1 _. - City/State/Zip Elk R;vp e') t�J SS33o Contact Person(s) o_A Business Phone Fax . . Home Phone tort--7-1,3-/(o ti Email Check One: Proprietor }C Corporation Partnership Social Security No. • Federal ID 41_11111111111111111_ State ID # IL NATURE OF LOAN REQUEST • Which Micro-Loan Program are you applying for? ( Supplemental Financing Program Redevelopment Financing Program Industrial Incentive Program Amount Requested: $ S01000. 6o Total Project Cost: $ £'/O7 OOO•oa Type of project: New construction for a start up business. New construction for an existing business. On site expansion Equipment purchase Remodeling: (circle one) Commercial/Retail /Industrial Other • Please give a brief summary of your business and its prod-ictsor service: C.,G3wkci �') p c`i 4,if l-2 t 1"� vvvo v it- aG41.1lr i (6,4« , l y t'tis�-b ° M wt.o�d5 ��s e 1r"`0 l�S ake_ r wv1,1vetr v.c.4 e1 e 6 C c t pV , wk\c.e_ 1 �.e �occ`,�5 KY`e c.J 4p6 - ` ' Please give a brief summary of the project: • • • O Please describe how this loan will impact your project: • ‘),t-o �e�`; IN: .. moi`` �.2 c.�Sik� S l bav\ t( p ck.a.s - p-vt -s w III. FINANCING • r ' Project Costs Land $ j . Site improvements $ • Buildings (attach plans & costs) $ Equipment/Machinery/Fixtures (attach list and estimated costs) $ 5:2:0)c oo• co Remodeling Industrial Inventory/Working Capital $ Other (attach description) $ Total Costs $ 5 84,000, pe Comments: • • Proposed Sources of Financing SOURCE NAME TERMS AMOUNT • Bank Loan Cofeo Qa + A $ 333,20O.eo Bank Loan L'ewk'-0-A. Coop 1 • .�� $ 822.4::3t,.00 Other Private Funds I'v e S r $ qav;,c Applicant Contribution $ Other $ Fed Grant/Loan $ State Grant/Loan $ EDA Micro,Loan e'cirt 3 '4i— $ SOS d°c) Total Financing $ S$/, Lf" Comments: • Collateral Assignments Lien Description Position To Bank 1 C2 . To Bank 2 C A tQA Cd.p 2� To Private Sources To Other Sources To Federal Govt To State To EDA Micro Loan Comments: Value of Collateral Existing Book Value Cost Liens • • Land • $ •$ — $ Buildings $ $ - $ Machinery & Equip. $ 9j60-0 $ 534.00, $ Lf 211 L.(OO Other $ $ — $ Other Comments: IV. JOB & WAGE GOALS Present # of Employees 2.. Total Payroll 94 oat) Jobs To Be Created* Please provide.the following information on jobs you expect to create. Average Are the Jobs Expected Number Hourly Annual Permanent or Hiring Job• tTitletof Jobs Wage Salary Temporary? Date (Do \"A0. .cte , •,• 3 2.2,.00 675,c00 Qs.it.VVLtKu1 av4 2050-2A02. C C P ru.34tbti. o (0 0)oec K 2 c'2eo2 •, -3 lir MALLN%—z- C- 1 , I ls s ao �f 6acs " 7050-26'0 2. pro.) - 2i5;wttef Kew _ :1.• 2 o-o (vvtael2 &IVO Zor} *If loan is for job retention only, please explain in Business Plan. Job Creation Timetable Please indicate on the table below when individual jobs will be added to the firm. Number Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. Job Title of Jobs 1 2 3 4 5 6 7 8 7"001 (YlaVer. rC GNC 291, ( 1 Comments: IV. PROJECT CONTACTS Attorney Name • Address Phone • Accountant Name ,n cI ov e..r "rew ,S.uv i c NG,r Address 3! Li4 14'2 Lame nt.W• 4ndov4 . , OA-Ar .Ss Soy Phone (01.2..- 442-1 - oylq • Financing Sources Genders,partners, etc...) Name Cope \cc> Capi4-a...1 ( Gke4tk Address 4/0.2, cc k oti 544 4 , 5T2 . 3oc Ano k , 6'tN SS3 o3 Phone (412,- y33-a !73 Name C C&(27.-k--a\ • V ov►1 a e(Q Address Li Fare wt. S pr m..s ) CA-. 06 D 2 Phone l—goo- :qy9— g3Ro Name Address Phone • Name Address Phone . . Name Address Phone Parent Company Name Address Phone • Others Name Address Phone Name Address Phone V. ATTACHMENTS CHECK LIST Please attach the following: ✓ A) Written Business Plan: 1. Description of Business 2. Ownership 3. Management • 4. Date Established 5. Products/Services 6. Future Plans B) Financial Statements for Past Two Years ✓ C) Financial Projections for Two Years • ✓ D) Resume of Owner/Management v E) Personal Financial Statements of Proprietor, Partners, Guarantors 1 F) Letter of Commitment from Applicant P1 edging to Complete During the Proposed Project Duration G) Letter of Commitment from the Other Sources of Financing, • Stating Terms and Conditions of their Pstrticipation in Project H) Other I) Other J) Fee (1% of amount of loan request) • • AGREEMENT I/We certify that all information provided in this applicati in is true and correct to the best of my/our knowledge. I/We authorize ti ie City of Elk • River and the Finance Committee to check credit reference,; and verify financial and other information. I/We agree to provide an y additional information as may be requested by the City and the.Finar.ce Committee. DATE Sep 4. e vv,loe r 244 i ckrtct APPLICANT �• Pr:Teak • ‘5".:: v\61 r1/4-e-e-et BY ii- , /, BY ' • • • • • .• • S Bradley J. Butalla 22976 185th St. N.W. Big Lake, Minnesota 55309 Phone: (612) 263-1605 Education University of Minnesota-Duluth Bachelor of Industrial Engineering Graduation: November 1990 Experience Computer Aided Design and Manufacturing (CAD/CAM) • 7 years experience programming simultaneous 3, 4&5 axis machining centers►with CAD/CAM systems on close tolerance aerospace parts and plastic injection molds _ • Efficient with CAMAX CAMAND, PowerMill and MasterCam graphical programming systems with emphasis in simultaneous 5 axis surface machining • Developed post processors for CAMAX and MasterCam • 2 years experience in part design and plastic injection mold design Process Engineering • Responsible for design and development of manufacturing processes • Set up and monitor SPC charts • Computer Integrated Manufacturing (CIM) • Set up and maintained tool and fixture tracking systems • Analyzed and purchased syilii'are and hardware • Trained and supported employees in software and hardware • Supported a Novell Local Area Network of 150 users Software • Dbase, Lotus, WordPerfect, Statnet (SPC), Factorynet (DNC),Dos, Unix, AutoCad, Cadkey, Solidworkc, Superproject, CAMAX, PowerMill, MasterCam, Novell, SDRC (CAD) National Security • Facility Security Officer (FSO), with a Secret level clearance classcation • Established and supervise the Automated Information Systems for the security program Professional History Advance Tool, Inc., Blaine, MN January 1998 -present CNC Programmer . January 1998 - Present S&W Plastics, Inc., Eden Prairie, MN January 1995 -.January 1998 Design Engineer January 1995 -January 1998 CNC Programmer January 1996 -January 1998 • World Aerospace Corp., Maple Grove, MN April 1991 -Ja nu my 1995 Process Engineer October 1993 -January 1997 • CNC Programmer February 1992 -January 1997 CIM Engineer April 1991 - September 1992 References Available Upon Request • John W.House 15501 Basalt Street Northwest Ramsey,MN 55303 (612)323-8715 Objective Obtain a challenging Mold Builder position with an organization that will effectively use my experience and training in this field,and provide opportunities for growth. Summary Major strengths include: • Experience building close tolerance plastic injection molds. • Ability to understand complex mold layouts and part prints. • Effectively coordinate multiple molds. • Program and operate CNC mills;electrical discharge machines. • Communicate and develop strong relationships with customers and co-workers. - • Desire to learn and develop my career. - .-- Experience 1998 to present. Advance Tool Minneapolis,MN Lead Mold Builder 1996 to 1998 Otsego Tool Minneapolis,MN Mold Builder 1995 to 1996 Fluroware,Inc. Minneapolis,MN CNC Electrical Discharge Machine Specialist 1994 to 1995 Mc Gee Tool Minneapolis,MN Mold Builder 1993 to1994 Detail Tool Minneapolis,MN Mold Builder 1992 to 1993 Otsego Tool Minneapolis,MN Mold Builder 1988 RNN Construction Company Gilman,MN Carpenter Education 1989 to 1991 Anoka Technical College Anoka,MN Received degree in Machine Tool Trades with a major in mold building. 1987 to 1990 Elk River High School Elk River,MN Related courses include: metal working,mathematics,trigonometry. Hobbies,Ect. My hobbies include: reading,fishing,hunting,carpentry,and automobile restoration. 411 • EDA Finance Committee Meeting Minutes Wednesday September 29, 1999 4:00 PM Elk River City Hall ProTech Engineering— Brad Butalla & John House Present: Brad Butalla & John House — ProTech Engineering Norene Butalla —ProTech Accountant & Investor Committee Members/Staff x Cliff Lundberg x Jim Simpson _Dan Tveite x Lloyd Brutlag x Jeff Gongoll _Tom McNair Tom Bender x Paul Steinman-Staff x Marc Nevinski-Staff Background Brad Butalla presented ProTech Engineering's business plan. ProTech will make molds used in the plastic injection molding process. Mr. Butalla stated that the industry trend is moving towards a shorter turn-around time of six to eight weeks while maintaining high tolerances. This is accomplished using the latest technology to manufacture the molds. At this time, few companies have such technology and ProTech plans to establish itself in the market • using the latest equipment to keep pace with the industry trend. Initially ProTech will be a sub-contractor for other mold makers, but the company intends for its primary customer base to eventually be comprised of OEM's. Several companies have already expressed in writing an interest in retaining ProTech's services. The company will need $500,000 worth of machinery and equipment, and about $50,000 in computers and leasehold improvements. ProTech will have two shareholders (Mr. Butalla and Mr. House) and one investor (Roger and Norene Butalla). The investors have not co-signed for any loans or placed liens on any equipment. ProTech will be closing on loans from four asset lenders around the country. (RP Capital, Copelco Capital, Center Capital, and Intech Capital) Mr. Butalla indicated he was able to find better loan terms by using four separate lenders, thus saving the company about $10,000 that it will use as start- up/working capital. ProTech will be leasing 5000 SF in the Decker Building on East Hwy 10 for four years. They plan to be in the building by December 1, 1999 and • operating by January 1, 1999. The company plans to employee four people • within two years and as many as nine people within three years. Wages will range from 20-30 dollars per hour. Recommendation The Finance Committee noted that ProTech meets or exceeds the criteria set forth by the Loan Fund guidelines. Subsequently the committee recommended that the EDA approve a loan to ProTech Engineering with the stipulation that the following documentation be obtained: • Accurate quotes for the purchase of equipment • Financing agreements • Lease agreement • Shareholder buyout agreement • Personal Guarantees • • ELK RIVER ECONOMIC DEVELOPMENT AUTHORITY • October 6, 1999 Mr. Brad Butalla ProTech Engineering 22976 185th St NW Big Lake, MN 55309 Dear Mr. Butalla, The EDA Finance Committee is happy to recommend that the Economic Development Authority approve ProTech Engineering's request for a $50,000 Micro Loan. The EDA will review your application at its next meeting on Monday, October 11 at 6:00 pm. It would be helpful if you and/or Mr. House could make a brief presentation to the EDA at that time. As I stated in our phone conversation on Monday, October 4, before we can close on the Micro Loan, we will need additional documentation of the following: • Contracts for the purchase of equipment • . Financing agreements with other lenders • Building lease agreement • Shareholder buyout agreement You had indicated a need to close on this loan in mid-November and we anticipate being able to accommodate your time table. However, it will be necessary for you to have closed on the loans with your other lenders prior to closing on the Micro Loan. Also, as standard procedure for all Micro Loans, ProTech will be required to complete some additional paperwork, including: • Security agreement • Promissory note • Personal Guarantees • Job performance agreement • UCC-1 financing statement Should you have any questions, please contact me at (612) 241-5526 or Paul Steinman at (612) 441-4905. Sincerely, • Marc Nevinski Assistant Director of Economic Development 13065 Orono Parkway • P. O. Box 490 • Elk River, MN 55330-1743 • (612) 441-7420 • Fax (612) 441-7425 Equal Opportunity Housing and Equal Opportunity Employment 6 • NORTHSTAR DIE CASTING Principal $43,457.11 Interest - 9 months @8.5% $2,770.39 (Jan. 1 - Oct. 1) Balance Due $46,227.50 • • • GUARANTY Elk River, Minnesota January 29 , 1998 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 NORTHSTAR DIE CASTING, L.L.C. (hereinafter 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 Phi11A 543278.1 • 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 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 Phi11A 543278.1 2. 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 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. 4° r . Larry awson S ve hiting • PhillA 543278.1 3. IIIPROMISSORY NOTE $50,000.00 Elk River,Minnesota January 29 , 1998 THE UNDERSIGNED WARRANTS THAT THE PROCEEDS FROM THIS NOTE SHALL BE USED SOLELY FOR BUSINESS PURPOSES. FOR VALUE RECEIVED,the undersigned,Northstar Die Casting,L.L.C.,a Minnesota limited liability company,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 Fifty Thousand and no/100 Dollars($50,000)(the"Principal Balance"),plus interest thereon at the rate of eight and one-half percent(8.5%)per annum. The principal amount under this Note shall be disbursed as follows:on the date of execution of this Note, Lender shall disburse the First Draw in the amount of$ //,08 3.60;on March 1,1998,Lender shall disburse the Second Draw in the amount of$ ;and on April 1,1998,Lender shall disburse the Third Draw in an amount equal to the remaining amount of principal under the Note,$ . On May 1,1998,the undersigned shall pay to Lender all accrued interest owing as of that date. Further,on May 1,1998,and on the first day of each month thereafter up to and including April 1,2003,the undersigned shall make monthly payments of principal and interest of$1,025.83. The entire unpaid Principal Balance hereof and all accrued and unpaid interest hereon shall be fully due and payable on May 1,2003. This Note is secured by a Security Agreement covering certain personal property owned by the undersigned located in Sherburne County,Minnesota,and a Guaranty made by Steve Whiting and Larry Lawson("Guarantors"), each of even date herewith. Payments hereunder shall be applied first to payment of accrued interest and then to reduction of principal, except that if any advance made by the holder hereof under the terms of any instrument securing this Note is not repaid, any monies received,at the option of the holder,may first be applied to repay such advances,plus interest thereon,and •the balance,if any,shall be applied as above. Interest shall be computed on the basis of the actual number of days elapsed in a 360-day year.. 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. 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 chall 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 Security Agreement or 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 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 chall 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; (xv) a default by the undersigned on any obligations they owe to other creditors; (xvi)failure of the PhillA 543264.2 dersigned to relocate its business operations from the City of Fridley to the City of Elk River by April 1,1998;or xvii)relocation of the business operations of the undersigned outside the City of Elk River after Aril 1,1998. Upon the occurrence of any such Even of Default,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 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 ghts 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, CERUFIES, 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. Northstar Die Ca (., L.L.C.,a Minnesota limited liability company Air . By: '4r- 6;),............- Its: , .GYBi/ By: /j4 Its: C`isiin.r-t • .. ... . . .. .. Phi11A 543264.2 —2—