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7.1 EDSR 10-21-2024The Elk River Vision A welcoming community with revolutionary and spirited resourcefulness, exceptional service, and community engagement that encourages and inspires prosperity Request for Action To Economic Development Authority Item Number 7.1 Meeting Date October 21, 2024 Prepared By Joshua Mollan, Economic Development Specialist Item Description Loan Extension Request - Hemmer Companies Reviewed by Cal Portner Action Requested Approve, by motion, a resolution approving the loan extension for Hemmer Companies (Distinctive Iron) and authorization to execute the amended loan documents. Background/Discussion The EDA approved a loan to Distinctive Iron in 2015 and an additional $100,000 loan to the company in 2019. The existing balance of $89,338.20 of the first loan combined with the additional loan was structured as a new loan in the amount of $189,338.20. Amortized over 20 years, the present balance is $152,723.43 with a maturity date of October 1, 2024, as a balloon payment. Distinctive Iron submitted a request to extend the maturity date of the loan to October 1, 2026 under existing terms, which is congruent with the extension policy for this loan program. Financial statements and a letter from their primary lender, Bank of Elk River, were provided, and it was determined that refinancing of the loan would result in an increase in monthly payments due to an increased interest rate as well as origination fees. At last month's meeting, the EDA authorized a continuance of the payment schedule with Distinctive Iron while documents were drafted and the extension formally considered. Distinctive Iron has met all requirements of the existing loan terms and there have been no issues with payment history. Staff is supportive of this extension request. Financial Impact The EDA will continue to receive the regular monthly payments through October 1, 2026, when the balloon payment will become due. Mission/Policy/Goal Support Elk River businesses. Attachments 1. EDA Resolution 24-06 2. Amendment Agreement Page 15 of 124 EL185\30\977420.v1 ECONOMIC DEVELOPMENT AUTHORITY OF THE CITY OF ELK RIVER COUNTY OF SHERBURNE STATE OF MINNESOTA RESOLUTION NO. 24-06 RESOLUTION APPROVING A MASTER AMENDMENT AGREEMENT (DISTINCTIVE IRON PROJECT) WHEREAS, on September 25, 2019, the Economic Development Authority of the City of Elk River (the “EDA”) provided a loan to Hemmer Companies L.L.C., a Minnesota limited liability company (the “Borrower”), pursuant to the EDA’s Microloan Program (the “Program”) in the amount of $126,000.00 (the “Original Loan”) and on September 25, 2019, the EDA provided an additional loan to the Borrower pursuant to the Program in the amount of $100,000 (the “2019 Loan” and together with the Original Loan, the “Loan”). WHEREAS, in connection with the 2019 Loan, the EDA and the Borrower amended and restated the documents related to the Original Loan to account for the 2019 Loan and entered into an Amended and Restated Loan Agreement, dated September 25, 2019 (the “Loan Agreement”), between the Borrower and the EDA. WHEREAS, the Loan was secured by (i) an Amended and Restated Promissory Note, dated September 25, 2019 (the “Promissory Note”), from Borrower to the EDA; (ii) an Amended and Restated Security Agreement, dated September 25, 2019 (the “Security Agreement”), from Distinctive Iron, LLC (the “Entity Guarantor”), in favor of the EDA providing the EDA with a security interest in certain equipment (the “Equipment”) owned by Distinctive Iron, LLC (the “Entity Guarantor”); (iii) an Amended and Restated Mortgage and Assignment of Rents and Security Agreement and Fixture Financing Statement (the “Mortgage”), executed by Borrower, in favor of EDA, covering property located in the City of Elk River, Minnesota (the “City”); (iv) a Personal Guaranty, dated September 25, 2019, from Cynthia Mae Hemmer & Steven Michael Hemmer (the “Personal Guaranties); and (v) an Entity Guaranty, dated September 25, 2019 (the “Entity Guaranty” and together with the Personal Guaranties, the “Guaranties”), from the Entity Guarantor. The Loan matures on October 1, 2024 with a balloon payment due at maturity. WHEREAS, the Board of Commissioners (the “Board”) of the EDA has received a request from the Borrower that the EDA extend the maturity date of the Loan by two years. WHEREAS, the EDA has caused to be prepared the Master Amendment Agreement which, among other things, amends the documents relating to the Loan to reflect the extension of the maturity date, 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 as follows: 1.01. The Master Amendment Agreement as presented to the EDA, together with all related documents necessary in connection therewith (the “Loan Documents”) is hereby in all respects approved, in substantially the form on file with the City’s Economic Development Page 17 of 124 EL185\30\977420.v1 Director; and the President and Executive Director are hereby authorized and directed to execute the Loan Documents to which it is a party and to carry out, on behalf of the EDA, the EDA’s obligations thereunder. 1.02. The approval hereby given to the Loan Documents includes approval of 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. Page 18 of 124 EL185\30\977420.v1 Approved by the Board of Commissioners of the Economic Development Authority of the City of Elk River this 1st day of October, 2024. President ATTEST: Executive Director Page 19 of 124 1 DOCSOPEN\EL185\30\976961.v1-9/24/24 MASTER AMENDMENT AGREEMENT This Master Amendment Agreement (the “Master Amendment Agreement”) is made this ____ day of October, 2024, with an effective date of October 1, 2024 (the “Effective Date”), between the ECONOMIC DEVELOPMENT AUTHORITY OF THE CITY OF ELK RIVER, a public body corporate and politic under the laws of the State of Minnesota (the “Lender”), and HEMMER COMPANIES L.L.C., a Minnesota limited liability (the “Borrower”). RECITALS WHEREAS, on February 17, 2015, the Lender provided a loan to the Borrower in the principal amount of $126,000.00 (the “First Loan”). WHEREAS, the First Loan was secured by (i) a Promissory Note, dated February 17, 2015 (the “Original Promissory Note”), from Borrower to the Lender; (ii) a Security Agreement, dated February 17, 2015 (the “Original Security Agreement”), from Distinctive Iron, LLC (the “Entity Guarantor”), in favor of Lender, as secured party, providing a security interest in certain equipment; (iii) a Mortgage and Assignment of Rents and Security Agreement and Fixture Financing Statement (the “Original Mortgage”), executed by Borrower, as mortgagor, in favor of Lender, as mortgagee; and (iv) Guaranty Agreements, each dated February 17, 2015, from Cynthia Mae Hemmer & Steven Michael Hemmer (the “Personal Guaranties) and the Entity Guarantor (the “Entity Guarantor” and together with the Personal Guaranties, the “Guaranties”). WHEREAS, on September 25, 2019, the Lender made an additional loan to the Borrower in the amount of $100,000 (the “Second Loan” and together with the First Loan, the “Loan”). WHEREAS, in connection with the Second Loan, the Lender and the Borrower amended and restated certain documents related to the First Loan and executed and delivered the following documents including: (i) an Amended and Restated Promissory Note, dated September 25, 2019 (the “Note”), from Borrower to the Lender; (ii) an Amended and Restated Security Agreement, dated September 25, 2019 (the “Security Agreement”), from the Entity Guarantor in favor of the Lender; (iii) an Amended and Restated Mortgage and Assignment of Rents and Security Agreement and Fixture Financing Statement (the “Mortgage”), executed by Borrower, in favor of Lender and covering property legally described in Exhibit A attached hereto; (iv) a Personal Guaranty, dated September 25, 2019, from the Personal Guarantors (the “Personal Guaranties”); and (v) an Entity Guaranty, dated September 25, 2019 (the “Entity Guaranty” and together with the Personal Guaranties, the “Guaranties”), from the Entity Guarantor (collectively, the “Loan Documents”). WHEREAS, to secure the Loan, the Borrower executed and delivered the Mortgage, recorded in the Office of County Recorder, Sherburne County, Minnesota on September 26, 2019, as Document No. 879287; and Page 20 of 124 2 DOCSOPEN\EL185\30\976961.v1-9/24/24 WHEREAS, the current outstanding principal balance of the Loan is $152,723.43 and matures on October 1, 2024 with a balloon payment due at maturity. WHEREAS, the Borrower and the Lender desire to extend the maturity date of the Loan to provide the Borrower with additional time for repayment and have determined the need to amend certain provisions of the Loan Documents. NOW THEREFORE, the Lender and the Borrower, each in consideration of the representations, covenants and agreements of the other as set forth herein, mutually represent, covenant and agree as follows: ARTICLE I AMENDMENTS Section 1.1. Amendments to the Note. (a) The maturity date in the Note is hereby extended to October 1, 2026 and the term “Maturity Date” in the Note shall mean October 1, 2026. (b) The interest rate on the outstanding balance of the Original Note (as defined in the Note) and the New Note (as defined in the Note) shall be 3.00%. (c) The paragraphs titled Original Note Balance and New Note Balance shall be deleted in the entirety and replaced with the new paragraph as set forth below to reflect that the outstanding principal balance on the Loan ($_____________) (the “Outstanding Balance”) shall be paid as follows: The Borrower shall be obligated to make monthly installments (“New Monthly Installment”) in the amount of ________________, which New Monthly Installment shall commence on November 1, 2024, and continue on the first (1st) day of each and every monthly thereafter until the Maturity Date, when all unpaid principal and interest shall be payable in full in accordance with the amortization schedule attached hereto as Exhibit B. The principal amount of the Outstanding Balance will be amortized over a period of twenty (20) years beginning on October 1, 2019. (d) All references to the Note and the Mortgage in the Note are hereby deemed to include the amendments set forth in this Master Amendment Agreement. Section 1.2. Amendments to the Loan Agreement, Security Agreement, Personal Guaranties and Entity Guaranty. (a) All references to the Note and the Mortgage in the Loan Agreement, Security Agreement, Personal Guaranties and Entity Guaranty are hereby deemed to include the amendments set forth in this Master Amendment Agreement. Page 21 of 124 3 DOCSOPEN\EL185\30\976961.v1-9/24/24 Section 1.3. Amendments to the Mortgage. (a) The Mortgage is hereby amended to the extent that the Note shall mature on October 1, 2026. (b) All references to the Note and the Mortgage in the Mortgage are hereby deemed to include the amendments set forth in this Master Amendment Agreement. ARTICLE II MISCELLANEOUS Section 2.1. Effective Date. The amendments made to the Note, the Loan Agreement, the Security Agreement, the Personal Guaranties, the Entity Guaranty, and the Mortgage, as set forth in this Master Amendment Agreement, shall be effective as of October 1, 2024. Section 2.2. Certain Defined Terms. Terms used in this Master Amendment Agreement and not defined herein shall have the meanings given in the Loan Agreement. Section 2.3. Confirmation of Agreements. Except as specifically amended by this Master Amendment Agreement, the Note, the Loan Agreement, and the Mortgage are hereby ratified and confirmed and remain in full force and effect. Section 2.4. Recording. The Lender shall record this Master Amendment Agreement against the Property with the Office of the County Recorder of Sherburne County, Minnesota. The Borrower shall pay all costs for recording. Section 2.5. Fees. The Borrower shall pay all fees and costs, including attorneys’ fees, in connection with the preparation of this Master Amendment Agreement. (The remainder of this page is intentionally left blank.) Page 22 of 124 S-1 DOCSOPEN\EL185\30\976961.v1-9/24/24 IN WITNESS WHEREOF, the Lender and the Borrower have caused this Master Amendment Agreement to be executed in their respective names all as of the date and year first written above. ECONOMIC DEVELOPMENT AUTHORITY OF THE CITY OF ELK RIVER By: Name: Its: President By: Name: Its: Executive Director STATE OF MINNESOTA ) ) SS. COUNTY OF SHERBURNE) The foregoing instrument was acknowledged before me this _____________, 2024, by _______________, the President of the Economic Development Authority of the City of Elk River, on behalf of the Lender. Notary Public STATE OF MINNESOTA ) ) SS. COUNTY OF SHERBURNE) The foregoing instrument was acknowledged before me this ____ day of _____________, 2024, by _______________, the Executive Director of the Economic Development Authority of the City of Elk River, on behalf of the Lender. Notary Public Page 23 of 124 S-2 DOCSOPEN\EL185\30\976961.v1-9/24/24 Execution page of the Borrower to the Master Amendment Agreement, dated as of the date and year first written above. HEMMER COMPANIES L.L.C. By: Cynthia Mae Hemmer Its: President STATE OF MINNESOTA ) ) SS COUNTY OF __________ ) The foregoing instrument was acknowledged before me this ____ day of __________, 2024, by _______________________________________, the ________________________ of Hemmer Companies L.L.C., a Minnesota limited liability company, on behalf of the Borrower. Notary Public Page 24 of 124 S-3 DOCSOPEN\EL185\30\976961.v1-9/24/24 Consents of the Personal Guarantors and Entity Guarantor to the Master Amendment Agreement. DISTINCTIVE IRON, LLC, a Minnesota limited liability company By: Name:_______________________________ Its:_________________________________ STATE OF MINNESOTA ) ) SS COUNTY OF __________ ) The foregoing instrument was acknowledged before me this ____ day of __________, 2024, by _______________________________________, the ________________________ of Distinctive Iron, LLC, a Minnesota limited liability company, on behalf of the Borrower. Notary Public Cynthia Mae Hemmer STATE OF MINNESOTA ) ) SS COUNTY OF __________ ) The foregoing instrument was acknowledged before me this ____ day of __________, 2024, by _______________________________________, on behalf of such individual. ____________________________________ Steven Michael Hemmer STATE OF MINNESOTA ) ) SS COUNTY OF __________ ) The foregoing instrument was acknowledged before me this ____ day of __________, 2024, by _______________________________________, on behalf of such individual. Page 25 of 124 A-1 DOCSOPEN\EL185\30\976961.v1-9/24/24 EXHIBIT A LEGAL DESCRIPTION OF PROPERTY Lot 2, Block 1, Cascade Industrial Park Second Addition, Elk River, Sherburne County, Minnesota Page 26 of 124 A-2 DOCSOPEN\EL185\30\976961.v1-9/24/24 EXHIBIT B AMORTIZATION SCHEDULE Page 27 of 124