7.0. EDSR 04-12-1993 TO: EDA FINANCE COMMITTEE
lk River FROM: WILLIAM RUBIN, ED COORDINATO
U " -
DATE: MARCH 31, 1993
SUBJECT: LOAN REQUEST FROM TESCOM
CORPORATION, INC.
INTRODUCTION
Tescom Corporation, Inc. , 12616 Industrial Boulevard, requests
a loan from the EDA Revolving Loan Fund in the amount of
$50,000 . This loan will be used by Tescom Corporation to
leverage existing financing sources for the construction of a
new 28,000 square foot facility in the Elk River Industrial
Park for its high purity controls division. This expansion
will enable Tescom to operate its two divisions autonomously.
Its industrial controls division will be retained in the
existing 34,000 square foot facility.
BACKGROUND
The request for a $50,000 loan from the EDA completes the final
411 element in Tescom' s financing package. The cost of
constructing the new facility, equipping it, and remodeling the
existing facility totals $2, 161,900 . Those costs are broken
down as follows :
- Building $ 950,000
- Land $ 100,000
- Equipment, Machinery, Fixtures $1,031,900
- Remodeling (Existing Facility) $ 80,000
TOTAL $2, 161,900
Sources of financing for this project are broken down as
follows :
- Industrial Development Revenue Bond (IDRB) $1,500,000
( issued 6/92)
- Capital Equipment Allocation (Norwest Bank) $ 114,200
- Working Capital (Norwest Bank) $ 147,700
- DTED-City Loan $ 250,000
(approved 10/92)
- Tax Increment Financing (TIF) $ 100,000
(approved 3/93)
- EDA Revolving Loan $ 50,000
TOTAL $2, 161,900
In order to qualify for the DTED Grant-City Loan in the amount
of $250,000, it was necessary to demonstrate that all sources
of local incentives had been maximized. That is, DTED will not
approve grant requests unless a City fully utilizes its
720 Dodge Avenue N.W., Elk River, Minnesota 55330 (612) 441-7420
,• incentive programs (IDRB, TIF, Revolving Loan, etc. ) Further,
DTED funds cannot be drawn until closing documents on the local
incentives are evidenced.
Loan repayments are proposed as follows :
SOURCE TERMS INTEREST RATE
IDRB 15 year amortization
10 year balloon Variable
DTED Grant-City 10 years 4-1/2% for 5 years
Loan 6-% for 5 years
EDA Loan 10 years 6%
COMPANY NARRATIVE
Information on Tescom is outlined in greater detail and is
attached to the loan application. Tescom' s Elk River facility
currently employs 190 people and an additional 45 jobs will be
created as a result of the expansion. Sales from the Elk River
facilities exceed $20,000,000 . These sales, combined with the
411 sales from the Watertown, South Dakota facility, exceed
$30, 000,000 .
A leveraged buy-out (LBO) in December, 1986, prevents the
company from reducing the amount of conventional financing for
this expansion. While Tescom is still highly leveraged, it has
proven the ability to service its debt over the six years since
the LBO.
FINANCIAL ANALYSIS
In July, 1992, the City' s audit firm completed a financial
analysis of the company. This was a requirement of the DTED
application. The audit firm's findings are attached to this
memo. While that opinion is eight months old, staff believes
that Tescom' s financial condition has not changed and,
therefore, it remains a good candidate for servicing its debt
on this expansion project.
ACTION REQUESTED
Upon its review of the Tescom loan request, the EDA Finance
Committee is asked to make a recommendation to the EDA
Commissioners on the funding of this loan. The EDA will meet
on April 12 , 1993, to consider this matter.
411 RECOMMENDATION
I recommend that the EDA Finance Committee approve a $50,000
loan to Tescom Corporation, Inc. , subject to the filing of a
' 411
mortgage against the development site and the execution of a
corporate promissory note.
ECONOMIC DEVELOPMENT REVOLVING LOAN FUND
ELK RIVER, MINNESOTA
APPLICATION
411 APPLICANT Tescom Corporation
ADDRESS 12616 Industrial Blvd.
CITY Elk River STATE MN ZIP CODE 55330
CONTACT PERSON(S) Edward A. Cunnington
BUSINESS PHONE 241-3250 HOME PHONE
AMOUNT REQUESTED $50,000
TERMS REQUESTED 10 years @ Prime rate
SOCIAL SECURITY NUMBER FED ID # 41-1572998
STATE ID # 8161473
1 . Type of Project:
X Construction/New Building Expansion/Existing
Building
X Equipment/Machinery Purchase Remodel/Commercial
411 Retail/Industrial
Industrial Inventory Working Capital
Other
2 . Describe Project:
Construction of a 28,080 square foot facility for the High Purity
Controls Division of Tescom, plus equipment and remodeling
necessary to provide adequate facilities for each division's
autonomous operation. (High Purity Controls and Industrial Controls)
3 . Purpose of Loan:
To leverage existing funding from Industrial Development Revenue
Bond and Minnesota Small City Development grant and Tax Increment
Financing to allow completion of the described project.
4 . Cost of Project:
A) Land $ 100,000
B) Buildings (attach plans & costs) $ 950,000
C) Equipment/Machinery/Fixtures (attach list
and estimated costs) $ 1,031,900
• D) Remodeling $ 80,000
E) Industrial Inventory/Working Capital $
F) Other (attach description) $
TOTAL COSTS $ 2,161,900
5 . Proposed Financing:
SOURCE NAME TERMS AMOUNT
A) Bank Loan C/E Allocation $ 114,200
B) Bank Loan IDRB $ 1,500,000
C) Other Private Funds W/C $ 147,700
D) Applicant Contribution $
E) Other TIF $ 100,000
•
F) Fed Grant/Loan MSCDP $ 250,000
111
G) State Grant/Loan $
Elk River
H) This Loan EDRLF $ 50.000
TOTAL FINANCING $2,161,900
-2-
• 6 . Collateral to be assigned (Describe and show lien position) :
A) To Bank: All assigned to Norwest
B) To Bank:
C) To Private Funding Source:
D) To Other Source:
E) To Federal Govt: (Grant through City) Second position on machine & equipment.
F) To State:
G) To This Loan: Second position on machine and equipment.
7 . Value of Collateral: •
COST BOOK VALUE EXISTING
LIENS
A) Land $ 112,000 $ 112,000 $ 112,000
B) Buildings $ 940,430 $ 748,885 $ 748,885
C) Mach. & Equip. $ 1,590,960 $ 1,008,080 $1,008,080
D) Other F & F $ 761,500 $ 414,855 $ 414,855
E) Other $ $ $
8 . Employment*:
411
Present: # of Employees 190 Total Payroll$6,792,700 (10/15/92;
After Project: # of Employees 235 Total Payroll$9,262,650 (12/31/9
*If Loan is for Job Retention Only, Explain in Business Plan.
9 . Attorney, Accountant (Names, addresses, phone) :
Richard Hackett Glenn Bougie
Gray, Plant, Mooty, Mooty & Bennett McGladrey, Pullen & Co.
3400 City Center 3600 W. 80th Street
33 South Sixth Street Suite 500
Minneapolis, MN 55402 Bloomington, MN 55413
(612) 343-2874 (612)835-9930
10 . Bank and Other Credit References (Names, addresses, phone) :
Ron Gockowski
Norwest Bank Minnesota
109 So. 7th Street
Minneapolis, MN 55402
(612) 673-8577
S
•
-3-
11. Attach and include the following:
X A) Written Business Plan:
1. Description of Business
2. Ownership
• 3. Management
4 . Date established
5 . Products/Services
6 . Future Plans
PP B) Financial Statements for past two years
PP C) Financial Projections for two years
X D) Resume of Owner/Management
DNA E) Personal Financial Statements of proprietor, partners, .
guarantors
DNA F) Letter of commitment from applicant pledging to complete
during the proposed project duration
DTED G) Letter of commitment from the other sources of financing,
stating terms and conditions of their participation in
project
H) Other
•
I) Other
X J) Fee ( 1% of amount of loan request) ($500)
NOTE:
PP - Previously provided
DTED - Note DTED application information
DNA - Does not apply to this situation
-4-
• I/We certify that all information provided in this application is
true and correct to the best of my/our knowledge. I/We authorize the
City of Elk River and the Finance Committee to check credit
references and verify financial and other information. I/We agree to
provide any additional information as may be requested by the City
and the Finance Committee.
DATE 15 March 1993
Applicant Name Tescom Corporation
By
By
•
•
•
-5-
• Tescom Summary
Tescom Corporation of 12616 Industrial Boulevard, Elk River, MN
55330, is a manufacturer of regulators, valves, and control
devices. Tescom markets these devices worldwide to the following
market segments: semiconductor, general industrial, specialty gas,
instrumentation, government/aerospace, and petroleum/hydraulic.
Tescom has three operating divisions; one in Watertown, SD (Smith
Equipment) and two in Elk River, MN (High Purity Controls and
Industrial Controls) . Tescom's Elk River facility currently
employs 190 people and anticipates creating in excess of 45 new
positions by year end, 1994.
The proposed new facility in Elk River will house the High Purity
Controls Division and a cleanroom which will meet the needs of a
very select group of semiconductor manufacturers (Intel, Motorola,
Texas Instruments, IBM, AT&T, AMD, et al) . The upgraded facility
is necessary to meet the stringent cleanliness requirements in this
marketplace.
The additional space in the current building will provide the
Industrial Controls Division the necessary facility to better focus
• on its alternative fuel programs for vehicles (Ford, G.M. , and
Chrysler) , as well as various petroleum, government, and aerospace
applications.
In the Elk River facilities sales are expected to exceed $20
million in 1993 and $22 million in 1994. In 1995 we anticipate the
expansionary effect of the electronics products and some of the
positive results from the significant development efforts begun in
1993 .
Product brochures are enclosed.
•
COMPANY PERSONNEL
See Schedule H, Corporate Staff Organization Chart
The Company's management team is listed below:
Years with
Name . Title Age Company
Donald E. Glesmann President,
Shareholder 56 28
Edward A. Cunnington Vice President,
Shareholder 50 16
Dennis I . Indahl Vice President,
Shareholder 55 7
George J. Kunik Chief Financial
Officer 62 27
Randall R. Robison Director,
Human Resources 37 6
Mark W. Cramer Director,
Total Quality Control 33 4
Allen G. Amundson MIS Manager 49 3
Donald Glesmann
Mr. Glesmann holds a B.S. degree in Mechanical Engineering from the
University of Nebraska. He started with Tescom as a Project
Engineer in the Pressure Controls Division. He advanced to the
positions of Chief Engineer, Product Manager, General Manager, Vice
President, and, in 1984, to his current position as President/CEO.
Under Mr. Glesmann's direction as General Manager, from 1976-1984,
the Pressure Controls Division showed significant growth
and improved profitability.
Mr. Glesmann's technical expertise is in the area of engineering
and manufacturing. He has designed and developed numerous
products, directed products through production, and promoted
various products in the marketplace. In the past fifteen years,
Mr. Glesmann has been primarily responsible for direction of an
t• operating entity (division or corporation) .
•
Edward Cunnington
Mr. Cunnington holds both B.S. and M.S. degrees from the University
of Minnesota. He started with Tescom in 1975 as a Regional Sales
Manager and advanced to Divisional Marketing Manager. In 1984 he
was promoted to General Manager of the Pressure Controls Division
and in 1985 to Vice President.
Mr. Cunnington has been credited with establishing the current
Pressure Controls distribution system, expansion of the product
line, increasing market share, and developing (within the
organization) a strong employee sensitivity and commitment to the
customers.
While his technical expertise and education are principally in
marketing, Mr. Cunnington has several years of engineering
education. In addition, due to the nature of the business and size
of the operation, he has worked closely with all the functions of
manufacturing and has an excellent understanding of the business
operation. He has 20 years of industrial and manufacturing related
experience.
Dennis Indahl
• Mr. Indahl is a graduate of the University of Minnesota with a
B.A. degree in Sociology/Psychology. He joined Tescom as Materials
Manager of the Pressure Controls Division in 1983 .
In late 1984 , Mr. Indahl accepted a temporary position as Materials
Manager of the Smith Equipment Division and was sub-
sequently named General Manager/Vice President of that Division
in January, 1985.
Mr. Indahl has significant materials management experience and is
responsible for much of the successful MRP (Material Requirements
Planning) implementation at both Divisions. Through his efforts,
both Divisions have experienced extremely high inventory accuracy
and customer service levels.
Mr. Indahl has more than 30 years of manufacturing related
experience. For the four years prior to joining Tescom, he
was Materials Manager for a division of White Farm Equipment.
George Kunik
Mr. Kunik holds a degree in Economics from St. Thomas College. He
also attended the University of Minnesota and DePaul University.
Mr. Kunik started with Tescom as a Cost Accountant and progressed
• to the positions of Assistant Treasurer,
•
Controller, and to his current position as Corporate
Secretary/Treasurer/CFO.
Mr. Kunik has been instrumental in implementing Tescom's functional
budgeting process, autonomous divisional accounting, an internal
auditing program, and a risk management program.
Mr. Kunik has 34 years of accounting and financial experience,
primarily related to product distribution and manufacturing.
Randall Robison
Mr. Robison joined Tescom in 1985 as Director of Human Resources.
He holds a Bachelors' degree in Public Administration from the
University of California at Los Angeles. Prior to joining Tescom
he held similar positions with NAPCO Industries and Audiotronics
Corporation.
Mr. Robison is responsible for having structured the Company's
flexible benefit plan and the 401 "k" retirement plan. He
coordinates proactive employee policies with the two divisions and
conducts training sessions on numerous employee benefit issues.
Employee satisfaction is a tribute to the Corporate emphasis on
• employee needs.
Mark Cramer
Mr. Cramer holds a degree in Agricultural Engineering (mechanical)
from the University of Minnesota and a diploma from Anoka Community
College in Respiratory Therapy. At present, he is completing work
for a Master's degree in Statistics from the University of
Minnesota. Mr. Cramer started with Tescom as a Quality Engineer,
was promoted to Quality Assurance Manager for the Pressure Controls
Division, and in 1988 was promoted to Corporate Director of Total
Quality Control .
He has been instrumental in introducing the philosophies of Dr. W.
Edwards Deming and Total Quality to the organization. He has
developed extensive training courses to assist the Corporation in
it's transformation to Total Quality.
Mr. Cramer has over nine years of experience in technical and
management positions, operating and managing in the Total Quality
philosophy.
Allen Amundson
Mr. Amundson pursued a BS degree in Physics through 1963 at
•
Southern College, in Tennessee. He has more than twenty years
experience in the MIS field involved with manufacturing or manu-
facturing related companies. This experience includes seven years
with a supplier of manufacturing software. Responsibilities
included management of technical support, system conversions, and
application software.
Mr. Amundson has also attended numerous classes and seminars in the
MIS and manufacturing disciplines.
Other Tescom People
There are 335 people employed in the Company. Voluntary personnel
turnover for the past five years of 3 .1% is reflective of employee
satisfaction (note: four employees included in the turnover rate
have returned to the Company) . Employee involvement in the
improvement process is not only vital to the success of the
Company, it also is a major reason why the employees are very
satisfied with the work environment and are dedicated to the
overall prosperity of the Company. While there is a bargaining
unit covering approximately 80 people at the Elk River facility,
there are only 23 members of the union. Two contracts, with the
!II bargaining unit have been successfully completed during the
previous five years, with no lost time. The current contract is
effective into July, 1993 . Smith Equipment does not have a
bargaining unit.
Tescom's policy, regarding compensation practices, is to be
competitive in the labor market served. This policy includes all
pay practices, including benefits. The benefit package features
flexible benefits, 401 "k" retirement plan, liberal tuition
reimbursement plan, and a vacation/sick leave plan, known as
personal time off (PTO) .
The flexible benefit plan allows each employee to select from five
health insurance plans, life insurance coverages from $10 ,000 to
$300,000, two dental insurance plans, short term disability, and
long term disability. Each person designs the benefit package
which best meets their individual needs.
The 401 "k" retirement plan offers matching provisions, fixed
contributions, and 100% vesting upon enrollment.
•
•
CAPITAL EQUIPMENT AND EXPENSE NEEDS RELATED TO THE 1993 EXPANSION
0
'.HIGH PURITY CONTROLS ;INDUSTRIAL CONTROLS
I CAPITAL I,EXPENSE CAPITAL ''EXPENSE !'
I ENGINEEERING: I ENGINEERING:
Transducers (6) ; $4,800 Lase*plotter for Medusa system ; $5,000
'Copy machine $8,000 1 Lab instrumentation ! 5,000'
i 6"Gauges (16) 4.000!Microscope and accessories ; 3.300•
I Fittings, tubing, hoses 3,000!Tool chest,tools i I $2,000
I Rotometers (3) I 1,350 I Load cell I 1,500
I Flow meter (1) j 2,500 I I Storage cabinets, benches . 1 1,250
I Tools, vices I 1,800!Cycle test equipment ! 1,200►
i
I Delta P transducer 2,0001
' f 1
I I i
I
I I I i
I QUALITY: i QUALITY:
Supermic 35,0001 I Johnson gages j j 15,000
I Optical comparator, 14" 18,0001 I Gages and hand tools, misc. i j 10,000
1 Larson spring tester I 13,0001 I Bore gages ! 7,800
Pin gages, .011-.500 I I 2,000 I Torque meter, portable I 7,500 I
Surface plate (3'X 4') i 1.8001 I Gage blocks, grade 1 (master) ! I 5,000;
I Gage blocks, grade 2 (working) ! I 1,550 I Force gages,0-10/0-30 I i 2.600
I ! I Surface plate, rework I 2,150'
I I Gage blocks, grade 3 (shop) j I 1,150
0 I I
I
I I
ASSEMBLY AND TEST: I ASSEMBLY AND TEST: I
I Cleanroom 350,0001 I Delta P gauge I ! 1,200 I
I Nitrogen compressor 69,000
Reverse osmosis/DI water system ' 50,000 I ! I
Test panels I 15,0001
Shoe cleaner (4) I 4,800!
I Tubing,fittings I j 3,200 I j
I
1 . f I 1
I MACHINE SHOP: I MACHINE SHOP: '
I Aqueous cleaner I 45,000 I I Hardinge chucker I 15.000'
I Shop air compressor 12,000 I I Roll marker I 10,000 I
I Move 1 11,000!Microscope and light I 2,000'
Maintenance equipment ! 1 7,000 I Arbor press ! 1,500
Water eater, coolant reclaimer I 4,500 I I Bar stock racks ! 1,500 I
Floor sweeper 3,500 I Bar stock carts (3) I 1,500
Storage cabinet ' I 1,200 I Grinder stand, deburring I 1,400 I
I I I Carbide grinder I 1,4001
I Pedestal grinder and dust collector I 1,3001
I Storage cabinet I i 1,200
I I I Radii cutter, engine lathe 1 j 1,000
I Bridgeport indexer and collets j 1,000
• -1
I!CAPITAL 1:EXPENSE': 11 CAPITAL II EXPENSE-I
I METAL FINISHING: 1METAL FINISHING:
Tanks,tables,and racks $40,0001 1 I
41) I Benches, lights, bins,carts I 11 $3,8001
Spectrophotometer 1,4001
!Lights,test equipment, reagents 1,350'
Washer, dryer,pumps 11 1,100 i
1 Glassware I 1,0001
'Cleaning and spill materials ! 1,000
SHIPPING AND RECEIVING:
Forklift ( 16,0001 1 .1
Computer,terminal, printer I 3,0001
Material handling, pkging, stores I 1 2,7001
Scales: package, barrels i I 1,5001 ( i
Weight count scale i 1,5001 I
I Stockroom/shipping terminals 1 8001 I I
1 I 1
j I i
OFFICE: OFFICE:
Panels: elec, phone, EDP races 30,0001 Fax machine $3,500
Cabling and MIS linkage I 20,0001
Move 1 17,0001 I
I I REMODELING:
GROUNDS: I Panels: elec, phone, EDP races 1 40,0001 1
'Equipment,floor types for clean I 10,0001 I Clean and repaint production area I I $20,000
'Lawn sprinklers I 5,000 I 1 Recarpet office area I 15,0001
l IShop inspection room I 48___,001
• 1 I Clean HVAC duct work I ` 1 2,500
1 I I Dehumidfier for QA room 1 3.5001
i I 1 1
I i 1
SUB TOTAL: 1 $761,0001 $71,150 I SUB TOTAL: I 123.2001 76.550
TOTAL CAPITAL ITEMS: $884,200'
I TOTAL EXPENSE ITEMS: I I :'$147,700.
!TOTAL CAPITAL EQUIPMENT AND EXPENSE REQUIREMENTS FOR 1993 EXPANSION: 1$1,031;900 I
Rev.9, February 18, 1993
III
'4.. V` � ;1�'1ti ;� }yt K RECEIVED OCT 1 6 1992
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5,-k-3-4.r 4 I�_ ;„y,•c „k'. , '• r,��,, Y 12616 INDUSTRIAL BOULEVARD ELK RIVER,MINNESOTA 55330-2491
`4. =''R ^�- ., .,^ v. ,yr -.. PHONE:(612)441-6330 HIGH PURITY DIVISION FAX:(612)241-3209
`,.'' -"� f u 14-4- , t INDUSTRIAL DIVISION FAX:(612)2414210
CORPORATE/ACCTG.FAX:(612)241-3298
October 14 , 1992
Ms . Carol Pressley-Olson
Community Development Division
Department of Trade and Economic Development
900 American Center Building
150 East Kellogg Boulevard
St. Paul , MN 55101-1421
Dear Ms. Pressley-Olson,
This letter is in response to your request for supplemental
information for the grant request made on our behalf by the City of
411 Elk River. Our intended high purity facility will need significant
equipment for support of the product and processes. The following
is a partial list of the equipment needed and how the grant would
be used if approved:
UL 500 Helium leak detector $ 47,000
Nitrogen compressor 69,000 vuND6)
Shop air compressor 12,000 TI-VPM
Super micrometer 50,000
Tool grinder 25,000 b-ro)-CIV
Optical comparator 30 ,000 LaiNNQ
Spring tester 13 ,000
Johnson thread gages and gage blocks 25 , 000
$271 ,000
If more information is required, please let me know.
Yours truly,
i
Edwa\d A. Cunnington
Vice resident, Tescom Corporation
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EXHIBIT FP-2A
1111
Norwest Bank Minnesota, N.A.
MORWEST BANKS Norwest Center
.17:7 ? Sixth and Marquette
Minneapolis. Minnesota 55479-0001
612/667-1234
July 21, 1992 INFORMATION
Mr. William Rubin
EamunicDe Development Coordinator
City of ver
720 Dodge Avenue
04 Elk River, MN 55330
Dear Mr. Rubin:
As you know, Norwest Bank Minnesota, National Association recently
issued a standby letter of credit in the amount of $1,520,550 to
support the repayment of industrial development revenue bonds issued
by the City of Elk River to finance expansion of Tesoam Corporation's
facilities. When combined with existing credit facilities
outstanding, the issuance of this letter of credit put Tesccan at its
11 maximum debt capacity available from Norwest. Consequently, lam
writing this letter to confirm that, other than the letter of credit
just issued, Norwest is unable to provide additional financing to
P • Tescan for completion of the Elk River expansion.
Please ca11 me should you have any questions on this matter.
Sincerely,
74.4 (--64.(f-Q14:
Ronald E. Gockowski
Vice President
I
I
I
I
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ABDO
50
goRtAml ICK
CERTIFIED PUBLIC ACCOUNTANTS
AND CONSULTANTS
William Rubin
Economic Development Coordinator
City of Elk River
720 Dodge Avenue NW
Elk River, Minnesota 55330
Dear Mr. Rubin:
Enclosed is our report of the agreed upon procedures between the
111 City of Elk River, its Economic Development Authority and Abdo,
Abdo & Eick regarding the grant application to the State of
Minnesota Department of Trade & Economic Development for funding of
the Tescom Corporation construction project.
111 It is our understanding that you are performing a due diligence
search of Tescom Corporation as part of a grant application to the
State of Minnesota Department of Trade & Economic Development. Our
participation in this due diligence search is to apply certain
accounting analysis procedures to the financial statements and
financial information of Tescom Corporation and report thereon.
We conducted our accounting analysis by first obtaining from Tescom
the following documents:
1) Audited financial statements (audited by McGladrey & Pullen)
for the four years ending December 31, 1988, 1989, 1990 and
1991.
2) Unaudited, internally prepared interim financial statements
111 for the period from January 1, 1992 through July 3 , 1992 .
3) Detailed budget projections of the three years ending December
31, 1993 , 1994 and 1995.
4) Corporate income tax returns (prepared by McGladrey & Pullen)
for the three years ending December 31, 1989, 1990 and 1991.
5) Accounts payable aging at July 3, 1992 .
6) Accounts receivable aging at July 3, 1992.
11 Member of American Institute of Certified Public Accountants Private Companies Practice Section
US EAST HICKORY sTREEL$5570 302 RN FIST PEARL STREET 1060 NORTHLAND PLATA
Pa BOX 7166 Tn 001E 345 1000 VEST EOTH STREET
MANKATO,MINNESOTA 56002.066 QOATpNNA,M09NESOM 150600H5 6�WESPOUS MMNESOTA 5540
15011625.2727 IS073 45125176 16125 01Sg070
FAX 15011 7069179 FAX(307)4560799 FAX E642E 0961620
• 7) Schedule of existing debt and terms thereof at June 30, 1992.
8) Analysis of proposed financing (including the grant currently
being applied for) for the construction of the new facility in
Elk River by Tescom Corporation.
After obtaining these documents, we performed the following
procedures:
• 1) We tested the financial documents listed above for internal
consistency.
2) We calculated pertinent ratios on selected key figures of the
financial statements for the four and one-half year period.
3) We calculated the debt service requirements of Tescom
Corporation assuming the financing occurred as proposed, and
compared these requirements with projected cash availability.
4) We analyzed the aged accounts receivable accounts payable as
of July 3 , 1992 .
5) We calculated an estimate of liquidation values of Tescom
Corporation' s assets, using commercial lending general
practices, in order to determine the coverage provided by the
security in relation to the debt being secured.
6) We determined the procedures performed by the City of Elk
River as part of their due diligence search and reviewed the
results of their lien searches and name searches in order to
identify any filings of public record against Tescom
Corporation.
Conclusion
On the basis of the procedures described above, nothing came to our
attention which would cause us to have reservations about the
financial information presented to us. We are not aware of any
omissions, judgements or liens, other than those encountered in the
ordinary course of business and fully disclosed in the audited
financial statements described above.
In addition, nothing came to our attention to indicate Tescom
Corporation would be unable to service the debt to the city
resulting from the grant from the State of Minnesota Department of
Trade & Economic Development. Finally, nothing came to our
attention which would cause us to believe Tescom Corporation does
not fulfill the requirements of the State of Minnesota Department
- • of Trade & Economic Development for such grants.
This letter is solely for the information of the Cit
• y of Elk River,
i er,
its Economic Development Authority, the State of Minnesota
Department of Trade & Economic Development, and Tescom Corporation,
and to be used only in connection with the grant application being
submitted to the State of Minnesota Department of Trade & Economic
Development.
111
074 Zla 1.
July 24, 1992 Abdo, Abdo & Eick
Minneapolis, Minnesota Certified Public Accountants
1111
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Minnesota Department of Office of the Commissioner
Trade and Economic Development 900 American Center
150 East Kellogg Boulevard
IISt. Paul, MN 55101-1421
612/296-6424
Fax: 612/296-1290
October 15, 1992
Jim Tralle INFORMATION
Mayor
720 Dodge Avenue NW
Elk River, MN 55330
Dear Mayor Tralle:
I am pleased to inform you that your application for a Minnesota Small
Cities Economic Development Program grant has been approved in the amount of
$250,000. As outlined in the approved application, the city will make a loan of
$250,000 to Tescom Corporation, Inc to assist in the expansion of its Elk River
operation.
This grant is made from the federal Community Development Block Grant
Program. A grant agreement is being prepared by Community Development Division
staff. They will also provide you with additional information about your grant
•
award and will do all they can to help you achieve your community development
goals. Also, please note that your approved application becomes part of the
grant agreement. For additional information, contact Jennifer Engh, Acting
Deputy Commissioner, at 612/297-2515.
Finally, let me extend my congratulations to you and your staff for devel-
oping an approach which will effectively address your community development
needs.
Si ncere_ly,
j
/
E. Peter Gillette, Jr.
Commissioner
ED.GEN/I13-1
0
An Equal Opportunity Employer