6.1 EDSR 12-19-2016 C' of
� Request for Action
River
To Item Number
Economic Development Authority 6.1
Agenda Section Meeting Date Prepared by
General Business November 29,2016 Amanda Othoudt,EDD
Item Description Reviewed by
Industrial Incenrive Microloan Application for Cal Portner,City Administrator
Heritage Millwork, Inc. Reviewed by
Action Requested
Approve,by motion,a$100,000 Industrial Incentive Microloan to Heritage Millwork, Inc. and authorize
the President and Executive Director to execute the Loan Agreement and any Loan Documents to which
the EDA is a party on.
Background/Discussion
The city received a financial application from Heritage Millwork, Inc. (HMI) requesting a$100,000
Industrial Incentive Microloan.
The EDA Finance Committee reviewed the application and recommended approval of the loan request
on November 29 in two separate motions. The first motion approved the request in accordance with the
terms of the EDA's policy (10 year Am, 5 Year Balloon) and holding a 3rd lien position on the equipment
in addition to requiring the applicant to provide personal and corporate guarantees. The second motion
recommended approval of the loan request in accordance with the SBA terms specifically for this loan.
The SBA's policy does not allow any lender to have preferential terms. The applicant has submitted a
request to the SBA to make an exception to their policy,which would allow the EDA to follow the terms
of their existing microloan policy.
If the SBA denies the bank/applicant's request for an exception to their policy,the Committee would
recommend approval up to a 10-year Am, 10-Year Balloon,holding a 3`d lien position on the equipment
in addition to requiring the applicant to provide personal and corporate guarantees.
The loan request of$100,000 is not considered a business subsidy according to Minnesota Statutes
116J.993 and therefore does not require a public hearing.
Background
HMI is located in Ramsey,MN and employ 57 full-time employees. They plan to keep their existing
facility in Ramsey and will retain all 57 jobs at that location. They propose to purchase a 20,800 sf facility
located at 15725 Jarvis and create five new full-time employees in Elk River. The facility will pre-finish
their products and store products from Ramsey,allowing increased capacity in Ramsey. Products will be
transported from Ramsey to Elk River for a pre-finished before a return to Ramsey for completion and
shipment to the customer.
rOIEREI al
ATURE
Approximately half of the facility will be used for pre-finishing with the remaining being used for
warehouse/storage space of product. A small portion of the existing office will be used for office space.
The total project cost is projected to be $2,045,900. HMI will receive approximately$1,7M in private
financing to purchase real estate and equipment from the First National Bank of Elk River and through
the SBA 504 program,representing 83% of the total project costs. The applicant will contribute
$245,900 to the project as equity,representing 12%of the total project costs. The applicant has applied
for the Industrial Incentive Microloan program to finance the remaining$100,000 representing 4.8%of
the total project costs. A commitment letter from First National Bank of Elk River is attached to their
application.
Summary
The application meets the minimum job creation criteria and wage requirement per policy for the
$100,000 requested. Uses of the funds as proposed are eligible expenses. The applicant meets the
financial equity contribution of 10% as required by the Policy.
Ultimately, the EDA Finance committee and EDA Commissioners have the discretion to consider each
application in terms of its consistency with the goals of the city's Comprehensive Plan and Economic
Development Strategic Plan and in relation to the project's overall impact on the community's economy.
Financial Impact
The full request of$100,000 would be funded through the Microloan fund account. As of December 14,
2016, the balance of the Microloan Fund cash account is $678,248.94.
Attachments
• Microloan Application (October 31, 2016)
• First National Bank Commitment Letter (November 10, 2016)
• HMI Project Commitment Letter (October 13,2016)
• Summary of Proposed Terms—City Letter (November 18,2016)
• P. Menth Resume
• Loan Agreement
• Security Agreement
• Personal Guaranty
• Promissory Note
• UCC
• Resolution
ELK RIVER ECONOMIC DEVELOPMENT
MICROLOAN FUND APPLICATION
I. CONTACT INFORMATION
Legal Name of Business: Heritage Millwork, Inc.
Project Site Address: 15725 Jarvis
City / State / Zip Elk River, MN 55330
Contact Person(s) Annie Deckert, Decklan Group, Pat Menth, Heritage Millwork
Business Phone 763-568-9498 (Annie), 763-323-7501 (Heritage Millwork)
Email annie@decklangroup.com
Check One: Proprietor X Corporation Partnership
Social Security No.
Federal ID # 41-1864718 State ID# 3129323
2. NATURE OF LOAN REQUEST
Which Micro-Loan Program are you applying for?
X Industrial Incentive Program
Downtown Revitalization Financing Program
Energy Efficiency Improvement Program
Jobs Incentive Program
Amount Requested: $ 100,000 Total Project Cost: $ 2,045,900
Type of project:
New construction for a start-up business
New construction for an existing business
On site expansion
X Equipment purchase
Remodeling: (circle one)Commercial/Retail/ Industrial
X Other Building purchase
Page 2 of 8 Fpiiiiii �
Please give a brief summary of your business and its products or service:
Heritage Millwork Inc. (HMI) was first established in 1997 in Ramsey,
Minnesota and offers over a dozen door designs that are stocked in multiple
p
different sizes and species. They began in a 32,000 square foot facility, and
expanded an additional 30,000 square feet in 1997 to accommodate their
growth. In addition to their wood offerings, they offer a Visions Interior
Glass Program that has evolved tremendously throughout the years. Through
this Y g
this program, HMI stocks 11 glass patterns in five different sizes and can
also special order over 25 other glass patterns.
HMI offers customers quality products at good prices. Since being in the
business for roughly 20 years, they have acquired a very knowledgeable sales
g
staff that has over 150 combined years of experience in the art. Throughout
the g
years Heritage Millwork Inc. has increased the inventory and services
that it distributes. They now have a large inventory of interior and exterior
doors with eight different types of wood, many molding profiles, a full line of
LJ Smith Stair Parts, and pre-finishing any interior or exterior p roducts.
The majority of HMI sales is to customers in Minnesota (80%), with the
remaining to customers in Wisconsin (12%) and South Dakota (2%). They
have nominal sales in Ohio, Colorado, Illinois and North Carolina.
HMI is currently managed by Pat Menth, and he will be overseeing the Elk
River location as well.
By moving forward with this project, HMI hopes that by offering pre-
finishing, this will help deter a major competitor from entering the market.
Please give a brief summary of the project:
HMI currently has one location in Ramsey MN, who employs 57 full-time
employees. A key component of their business is pre-finishing their products;
this is currently outsourced.
HMI would like to purchase a 20,800 sf facility located at 15725 Jarvis in Elk
River, MN to bring the pre-finishing portion of their business in-house. This
will result in increased capacity, efficiency and revenue, providing a quicker
turnaround time and service to their customers.
They will keep their facility and 57 full-time employees in Ramsey, and will
be creating five new full-time employees at their new location. This facility
will
be used to pre-finish their products, and to store additional products from
their facility in Ramsey, allowing them to increase capacity at their Ramsey
facility as well. Products will be transported from their Ramsey facility, to
the proposed Elk River facility where it will be pre-finished. Products will
Page 3of8 r; eiiti 11
NATURE
then be delivered back to Ramsey to be completed, and shipped to their
customers. This saves both cost and time. Approximately half of the facility
will be used for pre-finishing, with the remaining being used for
warehouse/storage space of product. A small portion of the existin g office will
be used for office space.
Please describe how this loan will impact your project:
The Industrial Incentive program will not only bring a new business into Elk
River, but will assist with their expansion, boost productivity and help
expand the city's economy through the creation of five high paying and high
. g
quality full-time employees for local residents.. The average wage of the new
jobs is $23.20/hour; $28.95/hour (this includes benefits). This will also help
maintain the city's tax base. Base wages will range from $15.00-$30.00/hr.
This loan provides the opportunity for HMI to bring a key service of their
operations in house, purchase a new facility and key equipment that will
allow them to bring their business to the next level. This is an exciting
endeavor for the company, and pending the outcome of brining this service in-
house, there's potential for future company and employee growth in the long-
term.
HMI prides themselves in hiring local, employing Veterans, women,
minorities and providing continuous training and development opportunities
for their employees. Additionally, they hold annual employee appreciation
events for not only their employees, but family members as well.
3. FINANCING
Project Costs
Buildings $ 940,000
Equipment/Machinery/Fixtures
(attach list and estimated costs) $ 1,061,000
Soft Costs $ 29,900
Contingencies $ 10,000
Professional Fees $ 5,000
Total Costs $ 2,045,900
Comments:
Page 4of8 1EE1 / t
Proposed Sources of Financing
SOURCE NAME TERMS AMOUNT
First National Bank Real Estate 4.0% 20-yr $ 470,000
First National Bank Equipment 4.0% 10-yr $ 431,500
SBA 504 Real Estate 4.3% 20-yrs $ 376,000
SBA 504 Equipment 4.1% 10-yrs $ 422,500
Applicant Contribution $ 245,900
EDA Microloan Industrial Incentive 3%, 10 yrs* $ 100,000
Tax Increment Financing $
Tax Abatement $
Total Financing $ 2,045,900
*We have requested an exception to the SBA that the microloan can be
structured to adhere with the city policy, however, should the SBA deny the
exception, we kindly ask the Finance Committee to allow the loan cannot
mature prior to the maturity of the SBA loan.
Collateral Assignments
Lien
Description of Collateral Position
To FNB Real Estate & Equipment 1st
To SBA 504 Real Estate & Equipment 2nd
To Private Sources
To Other Sources
To Federal Govt
To State
To EDA Microloan Equipment & Personal Guaranty 3rd
Page5of8 t $ VEIEI i
NATURE
Value of Collateral
Book Value Cost Existing Liens
Land ('16 Assessment) $ 102.900 $ $
Buildings $_603,300 $ 940,000 $
Machinery&Equip. $ $ 1,060,000 $
Other $ $ $
Other $ $ $
4. JOB & WAGE GOALS
Present# of Employees 0 (at this location), 57 at the Ramsey location
Jobs To Be Created*
Please provide the following information on jobs you expect to create within 2-years.
Average Are the Jobs Expected
Number Hourly Base Permanent or Hiring
Job Title of Jobs Wage** Wage Temporary? Date
Machine Operator 2 34.50 28.00 Permanent w/in rn 2 years of
Labor(packaging, 2 19.00 15.00 Permanent win 2 years of
shinning) CO
Supervisor 1 37.75 30.00 Permanent w/in 2 years of
CO
*If loan is for job retention only,please explain in Business Plan.
**wages include benefits
Program Objectives
(Check all that apply)
X The project contributes to the fulfillment of the city's approved and
adopted economic development and/or redevelopment plans.
The project prevents or eliminates slums and blight.
The project increases the local tax base.
The project brings a structure into compliance with an existing building code
violation.
Page 6of8 F' iitiii it
NATURE
5. PROJECT CONTACTS
Attorney
Name
Address
Phone
Accountant
Name
Address
Phone
Financing Sources (lenders,partners,etc...)
Name Chad Vitzthum, First National Bank
Address 812 Main Street NW, Elk River, MN 55330
Phone 763-241-3600
Name
Address
Phone
Parent Company
Name
Address
Phone
Others
Name Annie Deckert, Decklan Group
Address 812 Main Street NW, Suite 250 Elk River, MN 55330
Phone 763-568-9498, annie@decklangroup.com
Name
Address
Phone
Page 7 of 8 [NATUPEJ
6. 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 1013- Zo 15 Vinni4C-i AIS
X lot;1 Ik --
C) Financial Projections for Two Years
20 Zo I°I � =►K P-14vP to 'rFiov
D) Resume of Owner/Management
KE) Personal Financial Statements of Proprietor,Partners,
Guarantors
F) Letter of Commitment from Applicant Pledging to Complete
During the Proposed Project Duration
G) Letter of Commitment from the Other Sources of Financing,
Stating Terms and Conditions of their Participation in
Project
H) Fee of 1°/n of amount of loan request
7. AGREEMENT
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.
APPLICANT SIGNATURE �
BY Patrick Menth, President/Owner of Heritage Millwork, Inc.
DATE
Yage8of8 Ip, N E 1 E 0 1 Y
FIRST NATIONAL 812 Main Street Phonc 763.24!.3637
y= BANK of Elk River Elk River MN
55330 Fax 763.433.3800
www.fnbeccom
November 1st,2016
City of Elk River
13065 Orono Pkwy,
Elk River, MN 55330
RE: Heritage Millwork, Inc.
Micro Loan Application
To whom it may concern:
I have been the banking relationship manager for Heritage Millwork for the ears
ast three years. B
p y Based on
my examination and analysis of past financial performance and projected financial P erformance
provided to First National Bank of Elk River, Heritage Millwork Inc.,demonstrates the ability to service
ce
debt repayment necessary to support the building and equipment acquisition proposed in their
r
application with the City of Elk River. While Heritage Millwork, Inc.demonstrates the ability to service
ice
debt payments on the debt, I do anticipating an equity gap requiring alternative funding sources
inciuo=ng the utilization of the SBA 504 program and program like the City of Elk River's Micro Loan
program to make the project a reality. First National Bank of Elk River has approved financin g consistent
with the financing outlined in the Micro Loan application contingent upon the approvals of the SBA
pp and
the City of Elk River's Micro Loan.
If you have any questions please feel free to contact me at your convenience
Sinc- - y
.-- /4
Chad A.Vitzthum
Senior Vice President
First National Bank of Elk River
October 13,2016
Elk River Economic Development Authority
Amanda Othoudt,Economic Development Director
13065 Orono Parkway
Elk River, MN 55330
RE:Letter of Commitment
Dear Ms.Othoudt,
This letter is my official pledge of commitment to begin our project located at 15725 Jarvis NW, Elk
River, MN no
later than January 1,2017.
We are planning on moving into our new facility by May of 2017.
If you have any questions or need additional information,please do not hesitate to contact Annie Deckert,
Decklan Group,at 763-568-9498.
I appreciate your time.
Respectfully,
IF A' if‘
Patrick Menth
President&Owner, Heritage Millwork Inc.
City of -
Elk
River
November 18,2016
Heritage Millwork, Inc.
Attn: Mr. Patrick Menth
6190 McKinley ey S t.NW
Ramsey,MN 55303
Dear Mr. Menth;
The City of Ells River is pleased to present the following proposal. This proposal is for discussion
purposes only and should not be construed as a lending commitment.A commitment can only be made
after completion of our underwriting process,review and approval of all third party reports and
completion of documentation acceptable to the Economic Development Authority of the City of Elk River
("EDA")and the Borrower and is subject to approval by the City Council and the Board of the EDA
Summary of Proposed Terms&Conditions for
Heritage Millwork, Inc
BORROWER: Heritage Millwork, Inc
LOAN AMOUNT: $100,000
INTEREST RATE: Fixed rate at 3.0%fixed for five years.
COSTS&FEES: Fees and closing cost estimated not to exceed$5,000
TERM/REPAYMENT: Estimated monthly principal and interest payments of
approximately$970 based on above loan amount, 10 year
amortization. Loan will mature in 5 years. If the Borrower
requests and certain conditions are met at the end of the 5-year
term,a 2 year extension at the same interest rate will be considered
by the EDA
13065 Orono Parkway
Elk River,MN 55330
Phone: 763.635.1000
PlIERLI er
NATURE
www.E1kRiverMN.gov
COLLATERAL: A subordinate security interest is proposed in the new equipment to
be purchased. Subject to the approval of the EDA,the City of Elk
River's security interest may be subordinate to the priority lien of
one or more entities providing senior financing to the Borrower.
LOAN TO VALUE: Loan to value not to exceed 90%of the value of the
Purchase price of the equipment proposed to be purchased.
GUARANTY: Guaranties of all owners Heritage Millwork,Inc.
Sincerely,
Amanda Othoudt
Economic Development Director
virr...w 4r Ammik vrommemmummisomme
Issommurnomi■In.............................. 411111111111111111111111110.,
RESUME
--a._
Name: Patrick W Menth
....._
First Middle Maiden Last Social Security Number
Marital Status: Married
If applicable:
Spouse's Name: Linda L Menth N/A
First Middle Maiden Last Social Security Number
EDUCATION
College and/or Technical Training Dates Attended Major Degree
Name and Location From To (or Courses Completed) (and/or Certificate)
NO if r,-( fferutu14A) eoblit in 0,v Mt ajte5t S.ela .2 c in Av )3 4 shr,.. Atizy
A
WORK EXPERIENCE
List chronologically, beginning with present employment:
/1
Company: 11 . ' 1,
- 4 i il -Z-- Percent of Business Owned: 1.--
ie)- V I
Address: to i 90 ikISK'A Q Sifr Ai ), .Amre,-/ _ "2,A1 5r312.3
From: ApAL I'WI to Present Title: Pot Osiv-e^-4r
Responsibilities: 0 II A- . *",-rir,t 1 -1 el et-gri‘‘ '
Company: ,-bektifiZI* Mf-reigilei.ti."‘. Percent of Business Owned: — 0
Address: hi/41.1 33.-- ":14.1"4/64.,ti, . /AO
From: .i.v...-. Meg To: j'997 Title: 6e-riedifs-%, /441ImitA.....
Responsibilities. -71-4-47---pi 0-,...y144„,,, - 9,' ',J STAvie 7 -iiiii'll;d,
...---,
Company: J.--Arr-gfe.'1,&- tavitt g,terr Percent of Business Owned: - 44 —
Address: 251' '?". ,.#1,49,4, c2.4 et„eup ...Cr eu, 4--
From:iiiii-si ilc To:5.,er gii Title: 2,4.c hi•tisy.A f
Responsibilities: I . ' .,.'. ' t ... ,, .-'" , , '
MILITARY SERVICE
Branch: di& ._Aik Aii47-,..... 6%Artj From: S:4-l2r fill To: -Seo-r- 0)7c
Job Description: 0,41<ri,v-r?4i, -se e-c- •
Rank at Discharge: il..--5 Honorable: 141-Yes 0 No
' v
)
----
Date: /0-/1 --/ A.
— ,
LOAN AGREEMENT
(Microloan)
THIS LOAN AGREEMENT("Agreement") is made effective as of December , 2016,
by and between HERITAGE MILLWORK, INC., a Minnesota corporation ("Heritage") and
TRADITION FINISHING, INC., a Minnesota corporation, jointly and severally, ("Tradition"
and together with Heritage, the `Borrowers") and the ECONOMIC DEVELOPMENT
AUTHORITY OF THE CITY OF ELK RIVER, a public body corporate and politic of the State
of Minnesota("Lender").
RECITALS
A. Borrowers have applied to Lender for a Microloan Program loan to assist with
financing equipment in connection with the acquisition, renovation and constructing of a
manufacturing facility to be located at located at 15725 Jarvis St. NW, Elk River, Minnesota(the
"Loan Property") in the principal amount of$100,000.00.
B. Lender is willing to make such loan to Borrowers in the principal amount of
$100,000.00 (the"Loan"), subject to all of the terms and conditions of this Agreement.
C. Contemporaneously with the execution hereof, Borrowers are delivering to
Lender the following security documents:
(i) A Promissory Note ("Note") effective as of the date herewith made by
Borrowers and payable jointly and severally by the Borrowers to the order of Lender, in
the original principal amount of$100,000.00.
(ii) A Security Agreement securing the Note ("Security Agreement"). The
Security Agreement is of even date herewith, is executed by Heritage, in favor of the
Lender, as secured party, and provides a third lien security interest in equipment acquired
by the Heritage with the proceeds of the Loan(the "Equipment"); and
(iii) The personal guaranty of Patrick Menth, President of Heritage (the
"Personal Guaranty").
NOW, THEREFORE, in consideration of the mutual covenants hereinafter contained, it is
hereby agreed as follows:
1. Amount and Purpose of Loan. Borrowers agree to take and Lender agrees to
make a loan in the principal amount of One Hundred Thousand and No/100s Dollars
($100,000.00) (the "Loan") to be advanced in a single disbursement as hereinafter provided, the
Loan to be evidenced by the Note and secured by the Security Agreement, the Personal Guaranty
and any other security document required under this Agreement. The Loan proceeds will be
used to help finance the cost of acquisition of equipment to be used at the Loan Property. Subject
to the prepayment provisions set forth in the Note, the Borrowers agree,jointly and severally, to
1
491713v1 EL185-46
repay the Loan by making all payments of principal, interest and any premium, penalty or charge
that are required to be made under the Note at the times and in the amounts provided therein
2. Equipment and Security Interest. The Borrowers have provided Lender a
preliminary list of the Equipment to be acquired with the proceeds of the Loan that shall be
subject to the security interest in the Equipment, which is attached as Exhibit A. The Security
Agreement will provide Lender with a third priority security interest in such Equipment.
Borrowers will provide Lender a final list of Equipment purchased within ten (10) days of
purchasing the Equipment, including a description and serial number of each item. Heritage
hereby consents to the Lender recording a UCC-1 Filing Statement with respect to all such
Equipment.
3. Documents to be Delivered. Borrowers covenant and agree to immediately cause
the compliance with the following conditions:
(a) Note. Deliver to Lender the Note.
(b) Security Agreement. Deliver to Lender the Security Agreement, together
with evidence that a UCC-1 Financing Statement has been or will be duly filed for
record.
(c) Personal Guaranty. Deliver to Lender the Personal Guaranty.
(d) Organizational Documents and Resolutions. Deliver to Lender copies of
the (i) articles of incorporation for each of the Borrowers certified by the Minnesota
Secretary of State, (ii) a certificate of good standing for each of the Borrowers issued by
the Minnesota Secretary of State; (iii)bylaws for each of the Borrowers; and(iv) certified
resolutions of each of the Borrowers authorizing the execution and delivery of this
Agreement, the Note and any other document to be executed by Borrowers pursuant to
this Agreement.
(e) Insurance. Deliver to Lender: (i) a certificate or policy for all insurance
required, under the terms hereof to be maintained by Borrowers; and (ii) evidence that no
part of the Loan Property is located in an area designated as being a flood plain or flood
hazard area as defined by the Flood Hazard Boundary Map published by the Federal
Insurance Administration.
(f) Compliance with Laws, Etc. Deliver to Lender such evidence as Lender
may require as to the compliance of the Loan Property with: (i) all applicable laws,
codes, rules, regulations and ordinances, including, without limitation, those relative to
environmental protection, protection of wetlands, building and zoning matters and the
Americans with Disabilities Act; and (ii) the requirements of any restrictive covenants,
conditions and restrictions; conditional use permit or planned unit development
applicable to the Loan Property.
2
491713v1 EL185-46
(g) Lease. Deliver to Lender a copy of the lease agreement for the use of the
Loan Property, executed no later than the date of this Agreement, with at least a 5 year
term commencing upon issuance of a certificate of occupancy for the Development
Property, by and between.PLM Properties, LLC (the "Landlord"), as landlord, and
Tradition, as tenant(the"Lease").
(h) Program Fee. Deliver to Lender the program fee of$2,000.
Lender may waive any of the above requirements in its sole discretion.
4. Disbursement of Loan. Upon receipt by Lender of all of the items required
pursuant to Section 3 above in the form and condition required therein, Lender agrees to disburse
the Loan proceeds to Borrowers.
5. Access to Loan Property. Lender and its respective representatives shall have at
all reasonable times the right to enter and have free access to the Loan Property and the right to
inspect the Loan Property.
6. Books and Records. Borrowers agree to maintain accurate and complete books,
accounts and records in regard to the Loan Property and Equipment in a manner reasonably
acceptable to Lender. At Lender's request, the Borrowers shall furnish all such books, accounts
and records to the Lender's municipal or financial advisor as reasonably demanded. The
Lender's municipal advisor or financial advisor shall have the right to inspect, examine and copy
all such books, accounts and records. The Borrowers will not be required to provide their books,
accounts and records directly to the Lender. At the time of Lender's request of Borrowers'
books, accounts and records, the Borrowers, Lender, and municipal or financial advisor shall
enter into a non-disclosure agreement regarding the use and confidentiality of such information.
The Borrowers shall pay all costs associated with any analysis undertaken by the Lender's
municipal or financial advisor and all costs and attorneys fees with respect to the drafting and
negotiation of any non-disclosure agreement.
7. Encumbrances and Transfer. Other than any mortgage to finance improvements
to or operations at the Loan Property and the Lease from the Landlord to Tradition, Borrowers
agree not to sell, transfer, lease or convey the Loan Property or any part of it, or any interest
therein, or encumber the Loan Property or any part of it, in any manner, without written consent
of Lender which consent may be granted or withheld in the sole discretion of Lender. This
requirement shall apply to each and every sale, transfer, lease or conveyance, whether voluntary
or involuntary and whether or not Lender has consented to any such prior sale, transfer lease or
conveyance. Heritage has agreed, pursuant to the Security Agreement, not to sell, transfer, lease
or convey the Equipment or any part of it, or any interest therein, or encumber the Equipment or
any part of it, in any manner, without the written consent of Lender which consent may be
granted or withheld in the sole discretion of Lender. This requirement shall apply to each and
every sale, transfer, lease or conveyance, whether voluntary or involuntary and whether or not
Lender has consented to any such prior sale, transfer lease or conveyance.
3
491713v1 EL185-46
8. Time of Essence. Time is of the essence in the performance of this
Agreement.
9. Assignability. Neither of the Borrowers shall assign this Agreement without
written consent of Lender, which consent may be withheld, conditioned or delayed in Lender's
sole discretion. Lender may freely assign or otherwise transfer(including by participation) all or
any part of its interest in the Loan or any or all of the Loan documents, in Lender's sole
discretion.
10. Miscellaneous Covenants of Borrowers. Borrowers covenant and agree with
Lender that,without cost to Lender, Borrowers will or will cause Landlord to:
(a) Performance of Conditions. Promptly keep, perform and comply with all
of the terms, covenants and conditions to be kept and performed by Borrowers and/or
Landlord, as required by the City of Elk River (the "City") and any other governmental
body having jurisdiction over the Loan Property; keep unimpaired the rights of
Borrowers and/or Landlord under any permit or agreement issued or made by the City or
other governmental body having jurisdiction over the Loan Property; and to enforce the
prompt performance of all of the terms, covenants and conditions to be kept and
performed by the City or other governmental body having jurisdiction over the Loan
Property, respectively, under any permits or agreements issued or made by the City or
such other governmental bodies, and any contractors under all contracts obtained or held
by Borrowers and/or Landlord in connection with construction or operation of the
Borrowers or Landlord's businesses.
(b) Amendment, Etc. of Documents. Not amend, cancel, terminate,
supplement or waive any of the material terms, covenants and conditions of any permit or
agreement issued or made by the City or any other governmental body having jurisdiction
over the Loan Property, or any other contracts obtained or held by Borrowers in
connection with any contracts, documents or agreements referred to herein without the
prior written approval of Lender.
(c) Performance of Note, Security Agreement, etc. Without limiting the
foregoing, keep and perform all of the terms, covenants, conditions and requirements of
the Note,the Security Agreement and this Agreement.
(d) Insurance. During the term of this Agreement, Borrowers shall procure
and maintain or cause to be procured and maintained at their sole expense, casualty
insurance, public liability insurance and such other types of insurance as are reasonably
required by Lender from time to time, with coverages and in amounts normally held by
owners of property similar to the Loan Property (as improved) and with companies
satisfactory to Lender. The policy or policies or duly executed certificate or certificates
for such insurance and renewals or replacements thereof shall be deposited with Lender.
(e) Pay Charges. Pay all loan charges including, but not limited to: (i)
Lender's attorneys' fees; and (ii) filing fees of any instruments required under this
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491713v1 EL185-46
Agreement (collectively, the "Administrative Costs") within 30 days of the Lender
providing written notice to the Borrowers of Lender's costs. Administrative Costs shall
be evidenced by invoices, statements or other reasonable written evidence of costs
incurred by the City.
(f) Default Notices. Provide Lender with a copy of any default notice
received by either of the Borrowers pursuant to any documents related to any financing
secured by the Loan Property or the Equipment (to the extent that such notice is sent by a
party other than Lender),promptly after receipt of the same.
(g) Continual Operation. At all times while any portion of the Loan remains
outstanding, Borrowers will: (i) maintain their status as for profit entities; (ii) maintain a
positive net worth; and (iii) will operate their business from the Loan Property in a first
class manner.
(h) Title to Equipment. Heritage represents that it owns or will own all of the
Equipment listed in Exhibit A "free and clear," that Lender will have a "third priority"
lien in the Equipment listed in Exhibit A pursuant to the Security Agreement and that no
other party has any right, title or interest in the Equipment listed in Exhibit A except for
the senior liens of the First National Bank of Elk River and the United States Small
Business Administration.
11. Warranties. Borrowers represents and warrants to Lender the following:
(a) The Borrowers are corporations duly formed, validly existing and in good
standing under the laws of the State of Minnesota.
(b) The making and performance of this Agreement and the execution and
delivery of the Note and any other instrument required hereunder are within the powers
of the Borrowers and have been duly authorized by all necessary corporate action on the
part of the Borrowers. This Agreement and the Note and any other instruments required
hereunder have been duly executed and delivered and are the legal, valid and binding
obligations of the Borrowers, legally enforceable against them,jointly and severally.
(c) The execution and delivery of the Security Agreement are within the
powers of Heritage and has been duly authorized by all necessary corporation action on
the part of Heritage. The Security Agreement has been duly executed and delivered and
is the legal, valid and binding obligations of Heritage enforceable in accordance with
their respective terms.
(d) No litigation, tax claims or governmental proceedings are pending or
threatened against the Borrowers, the Landlord or the Loan Property, and no judgment or
order of any court or administrative agency is outstanding against the Borrowers, the
Landlord or the Loan Property which would have a material adverse effect on Borrowers
or the Loan Property.
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491713v1 EL185-46
(e) Borrowers have filed all tax returns (federal and state) required to be filed
for all prior years and paid all taxes shown thereon to be due, including interest and
penalties. Borrowers will file all such returns and pay all such taxes for the current and
future years.
(f) All information, financial or other, which has been submitted by
Borrowers, the personal guarantor, and the Landlord in connection with the Loan is true,
accurate and complete in all material respects.
12. Indemnification. Borrowers agree,jointly and severally, to indemnify Lender and
save it harmless against all loss, liability, expense, or damages including but not limited to
attorneys' fees, which may arise by reason of the assertion of any lien against the Loan Property
or the Equipment.
13. Defaults. Each of the following shall constitute an Event of Default:
(a) If Borrowers or Landlord abandons the Loan Property.
(b) Bankruptcy, reorganization, assignment, insolvency or liquidation
proceedings, or other proceedings for relief under any applicable bankruptcy law or other
law for relief of debtors are instituted by or against either of the Borrowers and, if such
proceedings are instituted against either of the Borrowers, an order,judgment or decree,
without the consent of Borrowers appointing a trustee or receiver for either of the
Borrowers or any part of their property or approving a petition under the bankruptcy laws
of the United States or any similar laws of any state or other competent jurisdiction, shall
have remained in force undischarged or unstayed for a period of 30 days.
(c) Any judgment, attachment, garnishment or other similar process is entered
against either of the Borrowers or against any property or assets of either of the
Borrowers and is not released, satisfied or discharged or bonded to Lender's satisfaction
within 30 days of entry.
(d) Any of the terms, covenants or conditions of any permit or other
agreement issued or made by the City or other governmental body having jurisdiction
over the Loan Property are not complied with within the time required thereby or are
terminated or modified by the City or such other governmental body and Borrowers have
not taken or has not caused the Landlord to take the necessary steps to correct or cure the
same within 30 days after written notice is given by Lender.
(e) Any mechanic's or material supplier's lien is filed, against the Loan
Property and is not released, satisfied or discharged or bonded to Lender's satisfaction,
subject, however, to Heritage's right to contest the same in accordance with the
provisions of the Security Agreement.
(f) A transfer which violates by Paragraph 9 hereof, Encumbrances and
Transfer, occurs.
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(g) If Borrowers: (i) fail to pay when due any amount due under this
Agreement, the Note, or any other documents listed in Section 3; (ii) fails to perform any
other obligation to be performed under this Agreement, the Note, the Security
Agreement, or any other document executed by Borrowers pursuant to this Agreement; or
(iii) fails to pay any amount or perform any obligation under any other note, or other
agreement now or hereafter made by Borrowers in favor of or with Lender or otherwise
now or hereafter held by Lender, and such failure continues beyond any applicable cure
period.
(h) If Borrowers fail to timely provide Lender any information necessary for
Lender to perfect its security interest in the Equipment.
(i) Any representation or warranty by Borrowers contained herein or in the
Note, the Security Agreement, or any other instrument required hereunder is false or
untrue in any material respect when made.
(j) A default under the Personal Guaranty or the Security Agreement beyond
any applicable notice and cure period.
Upon the occurrence of an Event of Default, Lender, at its option, shall, in addition to any other
remedies which it might be entitled to by law,have the right to:
(a) Take possession of the Equipment;
(b) Perform such other acts or deeds which reasonably may be necessary to
cure any default existing under this Agreement, and to this end, it is hereby agreed as
follows:
(i) All sums expended by Lender in effectuating its rights under
paragraphs (ii) and (iii) of this paragraph shall be deemed to have
been advanced under this Agreement and to be secured by the
Security Agreement and any other security document required under
this Agreement as security for the Loan.
(ii) Borrowers hereby constitute and appoint Lender their true and
lawful attorney-in-fact with full power of substitution either in the
name of Lender or in the name of Borrowers or in the name of both,
for the following purposes: (A) to prosecute and defend all actions
or proceedings in connection with the Loan Property or the
Equipment and do any and every act which Borrowers might do in
their own behalf; (B) to perform each of the terms, covenants and
conditions to be kept and performed by Borrowers under any
contracts and/or leases obtained or held by Borrowers in connection
with the operation of the Loan Property and any other contracts; (C)
without limiting the foregoing, to perform each of the terms,
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491713v1 EL185-46
covenants and conditions to be kept or performed by Borrowers
under this Agreement, the Security Agreement and any other
instrument required under this Agreement; and (D) to do all things
that Lender reasonably deems necessary or advisable for the purpose
of carrying out the powers enumerated in (A), (B), (C) and (D) of
this Subparagraph(ii);
(iii) The powers herein granted Lender shall be deemed to be powers
coupled with an interest and the same are irrevocable;
(c) cancel this Agreement;
(d) bring appropriate action to enforce such performance and the correction of
such Event of Default;
(e) declare the entire unpaid principal of the Note and all accrued interest
thereon immediately due and payable without notice;
(fl exercise any remedies under the Personal Guaranty or the Security
Agreement, foreclose any other security instrument referred to in this Agreement and/or
exercise any other rights or remedies it may have under the Personal Guaranty, the
Security Agreement and any other security instruments.
16. Default under Note and Security Agreement. The failure by Borrowers to keep or
perform any of the terms, covenants and conditions to be kept or performed by either of them
under this Agreement shall constitute a default under the Note, the Security Agreement and any
other security instrument held by Lender in connection with the Loan.
17. Notices. Any notices given hereunder shall be in writing and shall be deemed to
have been given when delivered personally or three (3) days after deposited in the United States
mail,registered,postage prepaid, addressed as follows:
If to Heritage:
Heritage Millwork, Inc.
15725 Jarvis St.NW
Elk River,Minnesota 55330
Attention: Patrick Menth
If to Tradition:
Tradition Furnishings, Inc.
15725 Jarvis St. NW
Elk River, Minnesota 55330
Attention: Patrick Menth
If to Lender:
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491713v1 EL185-46
Economic Development Authority of the City of Elk River
13065 Orono Parkway
Elk River, Minnesota 55330
Attn: Director of Economic Development
or addressed to any such party at such other address as such party shall hereafter furnish by
notice to the other party. Any notice delivered personally to Borrowers shall be delivered to an
officer of Borrowers, and any notice delivered personally to Lender shall be delivered to an
officer of Lender at the address for Lender for the mailing of notices. Either party may change its
address for the giving of notices by giving the other party at least ten (10) days' notice in the
manner provided above.
18. Headings. The headings used in this Agreement are for convenience only and do
not define, limit or construe the contents of this Agreement.
19. Bindings on Successors and Assigns. Subject to the limitations on transfer
contained in this Agreement, this Agreement shall be binding upon and inure to the benefit of the
successors and assigns of the parties hereto.
20. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of Minnesota, without giving effect to any choice or conflict of law
provision or rule.
21. Counterparts. This Agreement may be executed in two (2) or more counterparts,
each of which shall be an original and all of which shall constitute the same agreement.
22. Entire Agreement. This Agreement, the Note, the Security Agreement and the
other documents executed by Borrowers and/or Lender pursuant to this Agreement contain the
entire agreement between the parties with respect to the subject matter hereof and supersede all
prior understandings and agreements, both oral and written. This Agreement may be amended
only in a writing signed by the parties hereto.
23. Fees and Expenses. Borrowers agree to pay to Lender immediately upon demand
all costs and expenses, including, without limitation, all attorneys' fees, incurred by Lender in
connection with the enforcement of the Lender's rights and/or the collection of any amounts
which become due to Lender under this Agreement, the Note, the Security Agreement or the
other documents executed in connection herewith; and the prosecution or defense of any action
in any way related to this Agreement, the Note, the Security Agreement or the other documents
executed in connection herewith.
24. Business Subsidies Act.
(a) In order to satisfy the provisions of Minnesota Statutes, Sections 116J.993
to 116J.995 (the "Business Subsidies Act"), the Borrowers acknowledge and agree that
the amount of the "Business Subsidy" granted to the Borrowers under this Agreement is
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491713v1 EL185-46
the amount of the loan, which is $100,000, and that the Business Subsidy is needed
because the project is not sufficiently feasible for the Borrowers to undertake without the
Business Subsidy. The public purpose of the Business Subsidy is to develop
manufacturing facilities, increase the tax base in the City and stimulate the creation and
retention of jobs. In consideration of the Business Subsidy provided to assist with the
Borrowers' acquisition of equipment for the Loan Property, the Borrowers represent that
it will cause meet following goals (the "Goals"): the Borrowers shall create 5 full-time
equivalent jobs in Elk River, Minnesota, at the Loan Property at an hourly wage equal to
$19.00 per hour inclusive of benefits, whichever is greater, by the two (2) year
anniversary of the date of closing on the Loan.
(b) If none of the Goals are met, the Borrowers,jointly and severally, agree to
repay all of the Business Subsidy to the City, plus interest ("Interest") set at the greater of
4% per annum or the implicit price deflator defined in Minnesota Statutes Section
275.70, subdivision 3, accruing from and after the date of closing on the Loan,
compounded semiannually. If the Goals are met in part, the Borrowers agree,jointly and
severally, to repay a portion of the Business Subsidy (plus Interest) determined by
multiplying the Business Subsidy by a fraction, the numerator of which is the number of
jobs in the Goals which were not created at the wage level set forth above and the
denominator of which is 5 (i.e. number of jobs set forth in the Goals).
(c) The Borrowers agree to: (i) report its progress on achieving the Goals to
the City until the later of the date the Goals are met or two years from the Benefit Date,
or, if the Goals are not met, until the date the Business Subsidy is repaid, (ii) include in
the report the information required in Section 116J.994, subdivision 7 of the Business
Subsidies Act on forms developed by the Minnesota Department of Employment and
Economic Development, and (iii) send completed reports to the City. The Borrowers
agree to file these reports no later than March 1 of each year commencing March 1, 2017,
and within 30 days after the deadline for meeting the Goals. The City agrees that if it
does not receive the reports, it will mail the Borrowers a warning within one week of the
required filing date. If within 14 days of the post marked date of the warning the reports
are not made, the Borrowers agree to pay to the City a penalty of $100 for each
subsequent day until the report is filed up to a maximum of$1,000.
(d) The Borrowers agree that they will continue operations in the City for at
least five years after the date of closing on the Loan.
(e) Other than the loan provided pursuant to this Agreement, there are no
other state or local government agencies providing financial assistance for the project.
(f) There is no parent corporation of the Borrowers.
[Signature Pages follow]
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491713v1 EL185-46
Signature Page to Loan Agreement
IN TESTIMONY WHEREOF, each of the parties hereto has caused these presents to be
effective as of the day and year first above written.
HERITAGE MILLWORK, INC.
By:
Its:
TRADITION FURNISHINGS, INC.
By:
Its:
S-1
491713v1 EL185-46
Signature Page to Loan Agreement
IN TESTIMONY WHEREOF, each of the parties hereto has caused these presents to be
effective as of the day and year first above written.
ECONOMIC DEVELOPMENT AUTHORITY
OF THE CITY OF ELK RIVER
By:
Name:
Its: President
By:
Name:
Its: Executive Director
S-2
491713v1 EL185-46
EXHIBIT A
Equipment List
Item No. Description Purchase Price Status
Lineal Finishing System $627,398
Vertical Door Manual Finishing $433,436
Curing System
491713v1 EL185-46
SECURITY AGREEMENT
(Microloan)
This SECURITY AGREEMENT ("Agreement") is made to be effective as of December
_, 2016, by HERITAGE MILLWORK, INC., a Minnesota corporation ("Grantor") and the
ECONOMIC DEVELOPMENT AUTHORITY OF THE CITY OF ELK RIVER (the "Secured
Party").
AGREEMENT
In consideration of the above recitals, and the promises set forth in this Agreement, the
parties agree as follows:
1. OBLIGATIONS. "Obligations" means collectively each debt, liability and obligation of
every type and nature which the Grantor may now or at any time hereafter owe to
Secured Party (including without limitation the obligations of the Grantor created under
the loan agreement (the "Loan Agreement") and the promissory note of the Grantor to
Secured Party of even date herewith and all amendments, replacements, restatements, and
substitutions therefor), whether now existing or hereafter created or arising, and whether
direct or indirect, due or to become due, absolute or contingent, and the repayment or
performance of any of the foregoing if any such payment or performance is at any time
avoided, rescinded, set aside, or recovered from or repaid by Secured Party, in whole or
in part, in any bankruptcy, insolvency, or similar proceeding instituted by or against the
Grantor or any other guarantor of any Obligation, or otherwise, including but not limited
to all principal, interest, fees, expenses and other charges.
2. COLLATERAL. "Collateral" means collectively all of the following property of the
Grantor, whether now owned or hereafter acquired: (a) equipment specified on the
attached Exhibit A wherever located; (b) accessions, additions and improvements to,
replacements of, and substitutions for any of the foregoing wherever located; (c) all
products and proceeds of any of the foregoing wherever located; and (d) books, records
and data, wherever located, in any form relating to any of the foregoing.
3. SECURITY INTEREST. The Grantor grants to Secured Party a security interest
("Security Interest") in the Collateral to secure the payment and performance of the
Obligations. The Security Interest continues in effect until this Agreement is terminated
in writing by Secured Party.
4. REPRESENTATIONS, WARRANTIES AND COVENANTS. The Grantor represents,
warrants and agrees that:
4.1. Principal Office/Residence. The Grantor' chief executive office/residence is
located at the address specified on the signature pages to this Agreement. The
Grantor must give Secured Party written notice prior to any change in the location
of the Grantor' principal office/residence.
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491715v1 EL185-46
4.2. Organization; Authority. The Grantor is a corporation, duly organized, existing
and in good standing under the laws of the state of its organization and has full
power and authority to enter into this Agreement. The Grantor' state of
organization/residence is Minnesota and its exact legal name is as set forth on the
signature page to this Agreement. The Grantor will not change its state of
organization, form of organization or name without Secured Party's prior written
consent.
4.3. Perfection of Security Interest. The Grantor will execute and deliver, and
irrevocably appoints Secured Party (which appointment is coupled with an
interest) the Grantor's attorney-in-fact to execute and deliver in the Grantor's
name, all financing statements (including, but not limited to, amendments,
terminations and terminations of other security interests in any of the Collateral),
control agreements and other agreements which Secured Party may at any time
reasonably request in order to secure, protect, perfect, collect or enforce the
Security Interest, the Grantor shall, at any time and from time to time, take such
steps as Secured Party may reasonably request for Secured Party: (i) to obtain an
acknowledgement, in form and substance reasonably satisfactory to Secured
Party, of any bailee having possession of any of the Collateral that such bailee
holds such Collateral for Secured Party; and(ii) otherwise to ensure the continued
perfection and priority of the Security Interest in any of the Collateral and the
preservation of the rights of Secured Party therein.
4.4. Enforceability of Collateral. To the extent the Collateral consists of accounts,
instruments, documents, chattel paper, letter-of-credit rights, letters of credit or
general intangibles, the Collateral is enforceable in accordance with its terms, is
genuine, complies with applicable laws concerning form, content and manner of
preparation and execution, and all persons appearing to be obligated on the
Collateral have authority and capacity to contract and are in fact obligated as they
appear to be on the Collateral.
4.5. Title to Collateral. The Grantor holds good and marketable title to the Collateral
free of all security interests and encumbrances. The Grantor will keep the
Collateral free of all security interests and encumbrances except for the Security
Interest and the senior liens of the United States Small Business Administration
and the First National Bank of Elk River. The Grantor will defend Secured
Party's rights in the Collateral against the claims and demands of all other
persons.
4.6. Collateral Location. The Grantor will keep all tangible Collateral at 15725 Jarvis
Street NW, Elk River, Minnesota 55330.
4.7. Collateral Use. The Grantor must use the Collateral only for business purposes.
The Grantor must not use or keep any Collateral for any unlawful purpose or in
violation of any federal, state or local law, statute or ordinance.
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491715v1 EL185-46
4.8. Maintenance of Collateral. The Grantor must maintain all tangible Collateral in
good condition and repair. The Grantor must not commit or permit damage to or
destruction of any of the Collateral. The Grantor must give Secured Party prompt
written notice of any material loss of or damage to any tangible Collateral and of
any other happening or event that materially affects the existence, value or
amount of the Collateral.
4.9. Disposition of Collateral. The Grantor must not sell or otherwise dispose of any
Collateral or any interest in any Collateral without the prior written consent of
Secured Party, except that until the occurrence of an Event of Default (as defined
in Section 5 below), the Grantor may sell any inventory constituting Collateral in
the ordinary course of the Grantor's business.
4.10. Taxes, Assessments and Liens. The Grantor must promptly pay all taxes and
other governmental charges levied or assessed upon or against any Collateral.
4.11. Records; Access. Grantor agrees to maintain accurate and complete books,
accounts and records in regard to the Loan Property and Equipment in a manner
reasonably acceptable to Secured Party. At Secured Party's request, the Grantor
shall furnish all such books, accounts and records to the Secured Party's
municipal or financial advisor as reasonably demanded. The Secured Party's
municipal advisor or financial advisor shall have the right to inspect, examine and
copy all such books, accounts and records. The Grantor will not be required to
provide its books, accounts and records directly to the Secured Party. At the time
of Secured Party's request of Grantor's books, accounts and records, the Grantor,
Secured Party, and municipal or financial advisor shall enter into a non-disclosure
agreement regarding the use and confidentiality of such information. The Grantor
shall pay all costs associated with any analysis undertaken by the Secured Party's
municipal or financial advisor and all costs and attorneys fees with respect to the
drafting and negotiation of any non-disclosure agreement.
4.12. Insurance. The Grantor must keep all tangible Collateral insured against risks of
fire (including so-called extended coverage), theft and other risks and in such
amounts as Secured Party may reasonably request, with any loss payable to
Secured Party to the extent of its interest. The Grantor assigns to Secured Party
all money due or to become due with respect to, and all other rights of the Grantor
with respect to, all insurance concerning the Collateral and the Grantor directs the
issuer of any such insurance to pay all such money directly to Secured Party.
4.13. Collection Costs. The Grantor must reimburse Secured Party on demand for all
costs of collection of any of the Obligations and all other expenses incurred by
Secured Party in connection with the perfection, protection, defense or
enforcement of the Security Interest and this Agreement, including all reasonable
attorneys' fees incurred by Secured Party whether or not any litigation or
bankruptcy or insolvency proceeding is commenced.
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491715v1 EL185-46
4.14. Financing Statements. The Grantor authorizes Secured Party to file one or more
financing or continuation statements, and amendments thereto, relative to all or
any part of the Collateral without the Grantor' signature where permitted by law,
in each case in such form and substance as Secured Party may determine. The
Grantor shall pay all filing, registration and recording fees and any taxes, duties,
imports, assessments and charges arising out of or in connection with the
execution and delivery of this Agreement, any agreement supplemental hereto,
any financing statements, and any instruments of further assurance.
5. EVENTS OF DEFAULT. Each of the following is an "Event of Default" under this
Agreement: (a) the Grantor fails to pay any of the Obligations when due and any
applicable grace period lapses without cure by the Grantor; (b) the Grantor fails to timely
perform any other Obligation and any applicable grace period lapses without cure by the
Grantor; (c) any representation made by the Grantor in this Agreement or in any financial
statement or report submitted by the Grantor to Secured Party proves to have been
materially false or misleading when made; (d) the Grantor ceases to conduct its business;
(e) the Grantor is or becomes insolvent, however defined; (f) the Grantor voluntarily
files, or has filed against it involuntarily, a petition under the United States Bankruptcy
Code; or(g)if the Grantor is dissolved or liquidated.
6. REMEDIES UPON EVENT OF DEFAULT. Upon the occurrence of an Event of
Default and at any time thereafter, Secured Party may exercise one or more of the
following rights and remedies: (a) declare any or all unmatured Obligations to be
immediately due and payable without presentment or any other notice or demand and
immediately enforce payment of any or all of the Obligations; (b) require the Grantor to
make the Collateral available to Secured Party at a place to be designated by Secured
Party; (c) exercise and enforce any rights or remedies available upon default to a secured
party under the Uniform Commercial Code as amended from time to time ("UCC"), and,
if notice to the Grantor of the intended disposition of Collateral or any other intended
action is required by law, such notice shall be commercially reasonable if given at least
ten (10) calendar days prior to the intended disposition or other action; and (d) exercise
and enforce any other rights or remedies available to Secured Party by law or agreement
against the Collateral, the Grantor, or any other person or property. Secured Party's duty
of care with respect to Collateral in its possession will be fulfilled if Secured Party
exercises reasonable care in physically safekeeping the Collateral or, in the case of
Collateral in the possession of a bailee or other third person, exercises reasonable care in
the selection of the bailee or other third person. Mere delay or failure to act will not
preclude the exercise or enforcement of any of Secured Party's rights or remedies. All
rights and remedies of Secured Party are cumulative and may be exercised singularly or
concurrently, at Secured Party's option.
7. MISCELLANEOUS. The following miscellaneous provisions are a part of this
Agreement:
7.1. Definitions. Terms not otherwise defined in this Agreement shall have the
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491715v1 EL185-46
meanings ascribed to them, if any, under the UCC and such meanings shall
automatically change at the time that any amendment to the UCC, which changes
such meanings, shall become effective.
7.2. Notices. All notices under this Agreement must be in writing and will be deemed
given when delivered or placed in the United States mail, registered or certified,
postage prepaid, addressed to the respective party at the respective address set
forth below its signature on the signature page to this Agreement. Any party may
change its address for notices under this Agreement by giving written notice to
the other parties.
7.3. Amendments/Waivers. This Agreement may be waived, amended, modified or
terminated and the Security Interest may be released only in a writing signed by
Secured Party. Any waiver signed by Secured Party will be effective only in the
specific instance and for the specific purpose given.
7.4. Applicable Law. This Agreement is governed by the laws of the State of
Minnesota without regard to the conflict of law principles. If any provision of
this Agreement is held unlawful or unenforceable in any respect, such illegality or
unenforceability will not affect other provisions or applications that can be given
effect and this Agreement will be construed and enforced as if the unlawful or
unenforceable provision or application had never been contained in or prescribed
by this Agreement.
7.5. Caption Headings. Caption headings in this Agreement are for convenience
purposes only and are not to be used to interpret or define the provisions of this
Agreement.
7.6. Integration. This Agreement embodies the entire agreement and understanding
among the parties relative to subject matter hereof and supersedes all prior
agreements and understandings relating to such subject matter.
7.7. Successors and Assigns. This Agreement is binding upon and will inure to the
benefit of the parties and their successors and assigns.
7.8. Counterparts. This Agreement may be executed in several counterparts, each of
which will be an original, and all of which will constitute one and the same
instrument.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first
written above.
HERITAGE MILLWORK,INC.,
a Minnesota corporation
By:
Its:
Address:
Heritage Millwork, Inc.
Attn: Patrick Menth
15725 Jarvis St. NW
Elk River, MN 55330
S-1
491715v1 EL185-46
SECURED PARTY:
ECONOMIC DEVELOPMENT
AUTHORITY OF THE CITY OF ELK
RIVER
By:
Its:
By:
Its:
Address:
13065 Orono Parkway
Elk River, MN 55330
S-2
491715v1 EL185-46
EXHIBIT A
List of Equipment
All of the following property of the Grantor, whether now owned or hereafter acquired and
wherever located: (a) equipment specified below; (b) accessions, additions and improvements to,
replacements of, and substitutions for any of the foregoing; (c) all products and proceeds of any
of the foregoing; and (d)books,records and data in any form relating to any of the foregoing.
Item No. Description Purchase Price Status
Lineal Finishing System $627,398
Vertical Door Manual Finishing $433,436
Curing System
A-1
491715v1 EL185-46
PERSONAL GUARANTY
(Microloan—Patrick Menth)
Elk River, Minnesota
December_, 2016
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 (the "Lender")
to or for the account of Heritage Millwork, Inc. ("Heritage") and Tradition Finishing, Inc.
("Tradition" and together with Heritage, the "Borrowers"), the undersigned absolutely and
unconditionally guaranty 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 Borrowers (and any and all successors of either of the
Borrowers) to 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 Borrowers (and any and all successors of
either of the Borrower) as a member of any partnership, syndicate, association or other group,
and whether incurred by the Borrowers (or any successor of either the Borrowers) as principal,
surety, endorser, guarantor, accommodation party or otherwise (collectively, 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 either of the Borrowers, 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 Borrowers
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
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491712v1 EL185-46
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 either of the Borrowers 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 either of the Borrowers
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 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 either of the Borrowers 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 waives: (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 consents 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, waives any argument that venue in such forums is not convenient, and
agrees 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 agrees 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 agrees 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 waives all claims, rights and remedies which the undersigned may now
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491712v1 EL185-46
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 Borrowers; 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 Borrowers. 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 is the President of Heritageand the undersigned acknowledges and
agrees that the Indebtedness is being utilized by the Borrowers to assist in financing equipment
to be used at the real property located at 15725 Jarvis St. NW, Elk River, Minnesota (the
"Property"), and such equipment will materially financially benefit the undersigned and,
therefore, the undersigned's obligations under this Guaranty are proper,valid and enforceable.
THE UNDERSIGNED REPRESENTS, CERTIFIES, WARRANTS AND AGREES
THAT THE UNDERSIGNED HAS READ ALL OF THIS GUARANTY AND UNDERSTAND
ALL OF THE PROVISIONS OF THIS GUARANTY. THE UNDERSIGNED ALSO AGREES
THAT COMPLIANCE BY THE LENDER WITH THE EXPRESS PROVISIONS OF THIS
GUARANTY SHALL CONSTITUTE GOOD FAITH AND SHALL BE CONSIDERED
REASONABLE FOR ALL PURPOSES.
Patrick Menth
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491712v1 EL185-46
PROMISSORY NOTE
(Microloan)
December , 2016
Amount: $100,000.00
Interest: 3.00%
Maturity: [January 1,2022 or 27]
FOR VALUE RECEIVED, the undersigned, HERITAGE MILLWORK, INC., a
Minnesota corporation ("Heritage") and Tradition Finishing, Inc., a Minnesota corporation
("Tradition" and collectively with Heritage, the "Borrowers"),jointly and severally, promise to
pay to the order of the ECONOMIC DEVELOPMENT AUTHORITY OF THE CITY OF ELK
RIVER, a public body corporate and politic of the State of Minnesota ("Lender"), at 13065
Orono Parkway, Elk River, Minnesota 55330, or such other place as the Lender or any other
holder of this Note may designate in writing, on or before [January 1, 2022 or 27] ("Maturity
Date"), the principal sum of One Hundred Thousand and 00/100 Dollars ($100,000.00), together
with interest on any and all amounts remaining unpaid thereon from time to time from the date
hereof(computed on the basis of actual days elapsed in a year of 360 days) at a fixed interest rate
of three percent(3%)per annum.
This Note is made pursuant to a Loan Agreement, between Borrowers and Lender, of
even date herewith ("Loan Agreement") which provides for the payment of a portion the cost of
purchasing equipment in connection with the acquisition, renovation and equipping of an
existing facility for use in the Borrowers' manufacturing business. The principal amount of this
Note shall be amortized over a [five(5) or ten (10)] year period.
Based on the foregoing, the Borrowers shall be obligated to make monthly installments
(each a "Monthly Installment") in the amount of , which Monthly Installments
shall commence on [January 1, 2017,] and continue on the first (1st) day of each and every
month thereafter until the Maturity Date, when all outstanding principal and accrued but unpaid
interest shall be payable in full.
This Note is secured by, among other things a Security Agreement ("Security
Agreement") given by Heritage to Lender and the Personal Guaranty made by Patrick Menth, to
Lender both of which are made to Lender of even date herewith (collectively, the "Security
Documents"). All of the terms and conditions contained in the Security Documents which are to
be kept and performed by the Borrowers are hereby made a part of this Note to the same extent
and with the same force and effect as if they were fully set forth herein; and Borrowers covenant
and agree to keep and perform them, or cause them to be kept and performed, strictly in
accordance with their terms.
If the Lender, or any other holder of this Note, has not received the full amount of any
Monthly Installment provided for in this Note, by the end of ten (10) calendar days after the date
it is due, Borrowers shall pay a late charge fee to the Lender, or any other holder of this Note.
The amount of the late charge fee shall be five percent (5.00%) of the overdue Monthly
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491716v1 EL185-46
Installment. The Borrowers shall pay this late charge fee on demand, however, collection of the
late charge fee shall not be deemed a waiver of the Lender's right to declare an Event of Default
and exercise its rights and remedies as provided for in the Loan Agreement and the Security
Documents.
Each Monthly Installment and other payments made under this Note shall be applied as
follows: (i) first, to be applied against and pay interest which has accrued and remains unpaid on
the date the payment is received; then (ii) to be applied against and pay unpaid late charges and
any other charges, including attorneys' fees and protective advances; and then (iii) all remaining
amounts, if any, shall be applied against and reduce the then outstanding principal balance of this
Note.
If an Event of Default shall occur hereunder or under the Loan Agreement or any
Security Document and any cure period provided for in the Loan Agreement or such Security
Document has expired, the Borrowers agree to pay a default rate of interest equal to ten percent
(10.00%) per annum as the applicable interest rate of this Note, and the entire principal amount
outstanding, accrued interest and any other charges due hereon shall at once become due and
payable at the option of the Lender or the holder hereof. Any failure of the Lender to exercise its
right to increase the interest rate by the default rate of interest set forth above or its option to
accelerate this Note at any time shall not constitute a waiver of the right to exercise the same
right to increase the interest rate or accelerate at any subsequent time. Notwithstanding anything
contained herein to the contrary, the default rate of interest hereon shall never exceed the highest
rate permitted by law.
Either of the Borrowers may prepay the principal under this Note at any time and from
time to time, in whole or in part, without premium or penalty. No partial prepayment shall
postpone the due date of any Monthly Installment or reduce the amount of any such Monthly
Installment unless the Lender agrees otherwise in writing.
All sums payable to the Lender under this Note shall be paid in immediately available
funds.
The Borrowers, jointly and severally, promise to pay all costs in connection with the
enforcement of this Note, including but not limited to, those costs, expenses and attorneys' fees
of Lender whether or not suit is filed with respect thereto and whether or not such cost or
expense is paid or incurred or to be paid or incurred prior to or after the entry of judgment or for
the pursuance of, or defense of, any litigation, appellate,bankruptcy or insolvency proceeding.
Presentment, notice of dishonor and protest are hereby waived by all makers, sureties,
guarantors and endorsers hereof. This Note shall be binding upon each of the Borrowers, their
successors and assigns.
The remedies of Lender, as provided herein and in the Loan Agreement and the Security
Documents, shall be cumulative and concurrent and may be pursued singly, successively or
together, at the sole discretion of Lender, and may be exercised as often as occasion therefor
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shall occur; and the failure to exercise any such right or remedy shall in no event be construed as
a waiver or release thereof.
Time is of the essence hereof.
This Note shall be governed by and be construed under the laws of the State of Minnesota,
without regard to principles of conflicts of law.
[Signature Page Follows]
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491716v1 EL185-46
IN WITNESS WHEREOF, the undersigned have caused this Note to be effective as of
the day and year first above written.
HERITAGE MILLWORK, INC.
a Minnesota corporation
By:
Its:
TRADITION FINISHING, INC.
a Minnesota corporation
By:
Its:
S-1
491716v1 EL185-46
UCC FINANCING STATEMENT
FOLLOW INSTRUCTIONS
A.NAME&PHONE OF CONTACT AT FILER(optional)
B.E-MAIL CONTACT AT FILER(optional)
C.SEND ACKNOWLEDGMENT TO: (Name and Address)
THE ABOVE SPACE IS FOR FILING OFFICE USE ONLY
1.DEBTOR'S NAME: Provide only mg Debtor name(1a or 1b)(use exact,full name;do not omit,modify,or abbreviate any part of the Debtor's name);if any part of the Individual Debtor's
name will not fit in line lb,leave all of item 1 blank,check here and provide the Individual Debtor information in item 10 of the Financing Statement Addendum(Form UCC1Ad)
la.ORGANIZATION'S NAME
OR
lb.INDIVIDUAL'S SURNAME FIRST PERSONAL NAME ADDITIONAL NAME(S)/INITIAL(S) SUFFIX
1c. MAILING ADDRESS CITY STATE POSTAL CODE COUNTRY
2.DEBTOR'S NAME: Provide only gL_e Debtor name(2a or 2b)(use exact,full name;do not omit,modify,or abbreviate any part of the Debtor's name);if any part of the Individual Debtor's
name will not fit in line 2b,leave all of item 2 blank,check here and provide the Individual Debtor information in item 10 of the Financing Statement Addendum(Form UCC1Ad)
2a.ORGANIZATION'S NAME
OR
2b.INDIVIDUAL'S SURNAME FIRST PERSONAL NAME ADDITIONAL NAME(S)/INITIAL(S) SUFFIX
2c. MAILING ADDRESS CITY STATE POSTAL CODE COUNTRY
3.SECURED PARTY'S NAME(or NAME of ASSIGNEE of ASSIGNOR SECURED PARTY): Provide only Qua Secured Party name(3a or 3b)
3a.ORGANIZATION'S NAME
OR 3b.INDIVIDUAL'S SURNAME FIRST PERSONAL NAME ADDITIONAL NAME(S)/INITIAL(S) SUFFIX
3c. MAILING ADDRESS CITY STATE POSTAL CODE COUNTRY
4.COLLATERAL: This financing statement covers the following collateral:
5.Check l y if applicable and check g y one box:Collateral is ❑held in a Trust(see UCC1Ad,item 17 and Instructions) cal being administered by a Decedent's Personal Representative
6a.Check only if applicable and check only one box: 6b.Check only if applicable and check an&one box:
❑Public-Finance Transaction El Manufactured-Home Transaction 0 A Debtor is a Transmitting Utility 0 Agricultural Lien U Non-UCC Filing
7.ALTERNATIVE DESIGNATION(if applicable): Lessee/Lessor 0 Consignee/Consignor ❑ Seller/Buyer 0 Bailee/Bailor ❑ Licensee/Licensor
8.OPTIONAL FILER REFERENCE DATA:
FILING OFFICE COPY—UCC FINANCING STATEMENT(Form UCC1)(Rev.04/20/11)
1.144 ,
City of
Elk ..„....
River
ECONOMIC DEVELOPMENT AUTHORITY
OF THE CITY OF ELK RIVER
COUNTY OF SHERBURNE
STATE OF MINNESOTA
RESOLUTION NO. 16-07
RESOLUTION APPROVING LOAN AGREEMENT
AND RELATED DOCUMENTS
HERITAGE MILLWORK INC. PROJECT
WHEREAS, the Board of Commissioners (the"Board") of the Economic Development
Authority of the City of Elk River (the"EDA") has received a proposal from Heritage
Millwork, Inc. and Tradition Furnishing, Inc.,or affiliates thereof(collectively,the
"Borrowers"),that the EDA assist the Borrowers the purchase,renovation and equipping of
an existing building (the"Project")located on certain real property in the City of Elk River,
Minnesota (the "City") by providing a loan to the Borrowers in the amount of$100,000 (the
"Loan") pursuant to the EDA's Microloan Program (the"Program"). Proceeds of the Loan
will be used by the Borrowers to provide gap financing for equipment to be used at the
Project;and
WHEREAS, the EDA has caused to be prepared a Loan Agreement (the"Loan
Agreement")with the Borrowers setting forth,among other things,the terms and conditions
under which the EDA will make the loan,a copy of which is on file with the Executive
Director;
NOW,THEREFORE, BE IT RESOLVED by the Board of Commissioners of the
Economic Development Authority of the City of Elk River,Minnesota,as follows:
1. The Loan Agreement as presented to the EDA,together with all related documents
necessary in connection therewith,including without limitation,a Promissory Note
from the Borrowers evidencing the Loan,a Security Agreement evidencing a third
position security interest in certain equipment,and a personal guaranty from Patrick
Menth, (all as defined in and described in the Loan Agreement) (collectively,the
"Loan Documents") are hereby in all respects approved,in substantially the form on
file with the City's Economic Development Director;and the President and
Executive Director are hereby authorized and directed to execute the Loan
Agreement and any Loan Documents to which the EDA is a party on behalf of the
EDA and to carry out, on behalf of the EDA, the EDA's obligations thereunder.
2. The approval hereby given to the Loan Documents includes deviation from the
Program requirements as set forth in the Loan Documents and includes approval of
tiVEREI er
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such additional details therein as may be necessary and appropriate and such
modifications thereof, deletions therefrom and additions thereto as may be necessary
and appropriate and approved by legal counsel to the EDA and by the President and
Executive Director prior to executing said documents;and said officers are hereby
authorized to approve said changes on behalf of the EDA. The execution of any
instrument by the President and Executive Director shall be conclusive evidence of
the approval of such document in accordance with the terms hereof. In the event of
absence or disability of said officers,any of the documents authorized by this
Resolution to be executed may be executed without further act or authorization of
the Board by any duly designated acting official, or by such other officer or officers
of the Board as,in the opinion of the City Attorney,may act in their behalf.
Approved by the Board of Commissioners of the Economic Development Authority of the
City of Elk River this 19th day of December,2016.
Dan Tveite,President
ATTEST:
Amanda Othoudt,Executive Director
IPOIERES iT