EDA Agenda 09-19-2006
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AGENDA
MONTICELLO ECONOMIC DEVELOPMENT AUTHORITY
Tuesday, September 19, 2006 - 4:00 p.m.
City Hall - Academy Room
Chair Bill Demeules, Vice Chair Barb Schwientek, Assistant Treasurer Ron Hoglund,
Council members Wayoe Mayer and Tom Perrault, Darrin Lahr, and Susie
Wojchouski.
MEMBERS:
STAFF:
1.
2.
3.
4.
. 5.
6.
7.
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Treasurer Rick Wolfsteller, Executive Director Ollie Koropchak, Recorder Angela
Schumann.
Call to Order.
Roll Call.
Consideration to approve the November 29, 2005 and September 5, 2006 EDA minutes.
Bills and Communications.
Executive Director's Report.
Committee Reports.
Unfmished Business:
A. Update on GMEF Loan No. 019 (GWJ, LLC.)
8. New Business:
A. Public Hearing - Consideration to approve the Business Subsidy Agreement and
authorize entering into the Loan Agreement between Karlsburger Foods, Inc. and the
Monticello EDA.
9. Adjournment.
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MINUTES
MONTICELLO ECONOMIC DEVELOPMENT AUTHORITY
Tuesday, November 29th, 2005
505 Walnut Street - Academy Room
Commissioners Present:
Darrin Lahr, Ron Hoglund, William Demeules, Tom Perrault,
Susie Wojchouski
Commissioners Absent:
Barb Schwientek, Wayne Mayer
Staff Present:
Ollie Koropchak, and Angela Schumann.
1. Call to Order.
Chairman Demeules called the meeting to order at 4:00 PM and declared a
quorum, noting absence of Commissioners Schwientek and Mayer.
2. Consideration to approve the October 25th. 2005 HRA meeting minutes.
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MOTION BY COMMISSIONER WOJCHOUSKI TO APPROVE THE
MINUTES OF THE EDA MEETING OF OCTOBER 25th, 2005.
MOTION SECONDED BY COMMISSIONER PERRAULT. MOTION
CARRIED, 5-0.
3. Consideration of adding or removing items from the agenda.
Koropchak added under item number 8 a potential EDA application.
4. Consideration to review and discuss proposed modification to the GMEF
Guidelines to accommodate re-use of Federal dollars.
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Koropchak noted that at the previous meeting, the commissioners had asked
Koropchak to further research the fund payback from the TCDC loan. Koropchak
reported that when fully paid back, the amount will be close to $600,000. The
EDA also looked at modification to GMEF guidelines in order to encourage use
of Federal dollars as compared to the current guidelines. In that regard,
Koropchak stated that she had followed up with Carol Pressley Olson. The City
would need to adopt a resolution designating the EDA as an LDO (Local
Development Organization). That resolution, along with the revised guidelines
would go to DEED for final approval. As part of this resolution, the Council
would recognize that they transfer development funds to the EDA and would no
longer have control over the funds. If the Council does not agree to that, then the
funding stays under the federal guidelines for its life. If the funds were under the
EDA as the LDO, the first re-use of funds are subject to the more restrictive
EDA Minutes 11/29/2005
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guideslines. Koropchak explained that the EDA attorney had drafted proposed
guidelines. His recommendation was to modify the current guidelines.
Koropchak discussed the changes that had been made within the guidelines as
requested by the EDA. If the EDA agrees with the proposed changes, the EDA
would need to call for a public hearing date as required.
Demeules asked about the financial control and decision-making authority clause.
Koropchak stated that the Council is the fmal authority in the current grant
agreement. If the Council authorizes the LDO resolution, the Council gives up
that authority.
Koropchak also noted that if the Council had designated the EDA as the LDO
prior to authorizing the grant, the EDA wouldn't have to follow guidelines at all.
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Lahr stated that the premise is that the EDA becomes an LDO, so once the money
cycles through once, the Federal HUD guidelines do not apply. Koropchak
confirmed. Koropchak indicated that she would note to the Council in her report
that once the EDA is designated as the LDO, the City could not recall those funds.
Lahr asked what the Council could do with the funds without the EDA.
Koropchak responded that they could manage their own loan program, but they
would have to continuously follow the Federal HUD regulations.
MOTION BY COMMISSIONER LAHR TO RECOMMEND THAT THE CITY
COUNCIL CONSIDER FOR APPROVAL THE MODIFICATION TO THE
GMEF GUIDELINES AND APPROVAL OF THE RESOLUTION
REQUESTING DESIGNATION AT THE DECEMBER 12TH, 2005 MEETING.
MOTION SECONDED BY COMMISSIONER HOGLUND. MOTION
CARRIED, 5-0.
5. Consideration to call for a public hearing date for modifications to the EDA
Business Subsidv Criteria.
Koropchak recommended a public hearing for Decemberl3th at 4:00 PM,
assuming Council approves modifications and designation of ED A as an LDO.
MOTION BY COMMISSIONER PERRAULT TO CALL FOR A PUBLIC
HEARING FOR THE MODIFICATION TO THE EDA BUSINESS SUBSIDY
CRITERIA ON TUESDAY, DECEMBER 13th, 2005 AT 4:00 PM.
MOTION SECONDED BY COMMISSIONER LAHR. MOTION CARRIED, 5-
O.
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6. Consideration to ratify the Mortgage Subordination Agreement between the SBA.
EDA and Tapper Holdings. LLC.
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EDA Minutes 11/29/2005
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Koropchak referred to the mortgage subordination agreement, stating that the
EDA had previously discussed this item, which refers to the position of the EDA.
The action required would ratify the EDA had decision, which was to allow the
SBA to take position before the EDA.
MOTION BY COMMISSIONER WOJCHOUSKI TO RATIFY THE
MORTGAGE SUBORDINATION AGREEMENT BETWEEN THE SBA, EDA
AND TAPPER HOLDINGS, LLC.
MOTION SECONDED BY COMMISSIONER PERRAULT. MOTION
CARRIED, 5-0.
7. Consideration of the Executive Director's Report.
Koropchak noted that she had followed up with a letter to Bruce and Cindy
Hammond regarding their loan and reminded them of their balloon payment
deadline. They have until January I, 2006 to make payment.
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Koropchak reported that Demeules' 6-year term is up. Koropchak stated that the
Mayor thought that perhaps they would open up all Committees for application.
Another Council member indicated that they thought they were operating well.
Demeules indicated that he would be willing to serve another term, if asked.
8. Other Business
Wojchouski asked about utilities in the area of the interchange project, as some
businesses had interruptions in service. Koropchak stated that they have noted
electrical surges and other power outages, however no cables had been cut. Lahr
reported that years ago they had looked at a feeder line in the area and he hadn't
heard of any other problems until Koropchak had called. City Engineer Bruce
Westby had indicated to Koropchak that there had been some other work near 39
east and west of project. Demeules stated that he thought the problem may have
started after crews stopped dewatering for the sewer project. Lahr stated that the
services are underground, but the feeder is overhead. If everyone is having
problems, it is more likely a feeder problem.
Lahr asked if they are long interruptions. Demeules stated that the interruptions
are approximately 5 minutes. Lahr stated that he would look into the matter
further.
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Mayer stated that the Fiber Optics task force will be seeking RFPs from
companies interested in installing and operating fiber optics in the community.
Lahr asked if these companies install and manage the systems. Mayer replied that
there is one that does both.
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EDA Minutes 11/29/2005
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Koropchak reported that she had visited with the company who has a purchase
agreement on the Clow Stamping building. Koropchak encouraged them to
complete application information, as the EDA could be part of financing. This
company wants to use all ofthe building and hopes to expand. Koropchak stated
that she cannot bring the application forward at this time, as the bank board is
reviewing their application and the EDA is subordinate to the lender. She did
note that the company is publicly held and does not have a personal guarantee. If
the SBA is involved, the president of the company has to give a personal
guarantee. Koropchak stated that she doesn't know if EDA would be involved
with equipment or building purchase. The company does not do production, only
engineering. They are projecting 38 new jobs with starting production, moving to
a total of 52 new jobs. This location would be their headquarters. Koropchak
advised that this application may be on the agenda on December 13th.
9. Adjournment
MOTION BY COMMISSIONER HOGLUND TO ADJOURN AT 4:40 PM.
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MOTION SECONDED BY COMMISSIONER. LAHR. MOTION CARRIED 5-
O.
Secretary
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MEETING MINUTES
MONTICELLO ECONOMIC DEVELOPMENT AUTHORITY
Tuesday, September 5, 2006 - 4:00 p.m.
City Hall - Academy Room
MEMBERS PRESENT:
Chair Bill Demeules, Vice Chair Barb Schwieutek, Tom Perrault, Ron
Hoglund, Wayne Mayer, Darrin Lahr, and Susie Wojchouski.
MEMBERS ABSENT:
None
STAFF:
Executive Director Ollie Koropchak, Recorder Angela Schumann.
GUEST:
Mike Maher, Karlsburger Foods
1. Call to Order.
Chairman Demeules called the meeting to order at 4:00 PM.
The Chairman requested that the EDA move directly to item 8 to discuss the loan application for
Karlsburger Foods, due to the presence of company president Mike Maher.
2.
RollCall.
All EDA Commissioners preseut.
3. Consideration to approve the November 29.2005 and April 25th. 2006 EDA minutes.
The minutes of the November 29,2005 meeting will be preseuted at an upcoming meeting.
MOTION BY COMMISSIONER WOJCHOUSKI TO TABLE ACTION ON THE MINUTES
OF THE NOVEMBER 29th, 2005 EDA MEETING TO TUESDAY, SEPTEMBER 19th, 2006.
MOTION SECONDED BY COMMISSIONER PERRAULT. MOTION CARRIED
UNANIMOUSLY.
Perrault noted that the second vote relating to item number five on page 2 of the April minutes was
not included in the minutes. Schumann stated that the motion had beeu carried.
Demeules noted a spelling correction on his name on the bottom of page 1 of the minutes
MOTION BY COMMISSIONER SCHWIENTEK TO APPROVE THE MINUTES OF APRIL
25th, 2006 AS AMENDED.
MOTION SECONDED BY COMMISSIONER PERRAULT. MOTION CARRIED
UNANIMOUSLY.
4.
Bills and Communications.
NONE.
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EDA Minutes - 09/05/06
5.
Executive Director's Report.
Koropchak reported that she had received an inquiry on relocation to the City's industrial
park from an outstate aluminum and glass manufacturer. She will be providing them with
information.
Koropchak stated that TJ Martin had paid off their loan. And that the GWJ balloon
payment is due.
6. Committee Reports
Mayer reported that the feasibility study had come back. The task force would be
meeting to review the report on the 6th and would present a formal recommendation to the
City Council on September 25th..
7. Unfinished Business
A. Consideration to review the revised EDA Fund Balances.
Koropchak reported that she had worked with the Finance department on
reconciling EDA fmancial statements dating back to the EDA's inception. In
working through the reconciliation, there was an approximately $180,000
adjustment that needed to be made to the cash balance report, She noted that the
revised reports were included in the EDA packet for reference.
Mayer inquired when the last reimbursement payment had been made to the liquor
store and what the EDA's reasoning was in paying back the funding. The
Commissioners indicated that the last payment had been made about 2 years prior.
Demeules stated that the EDA had sought to pay back the funding to become a
self-sufficient organization. Hoglund noted that at the time the EDA was
founded, there was no discussion on paying the funding back. Mayer stated that
if the funding can be better utilized in aiding businesses, then it should stay in the
EDA's fund balance.
8. New Business
A. Consideration to review the preliminary GMEF Loan application from
Karlsburger Foods, Inc.
Koropchak reviewed information regarding the loan application from Karlsburger
Foods. Karlsburger is constructing a 20,000 square foot building in the City's
industrial park and is anticipating approximately $315,250 in equipment and
machinery costs. Koropchak noted that the EDA has three options for choice of
loan amount. However, any amount over $100,000 requires a public hearing.
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EDA Minutes - 09/05/06
Koropchak stated that the uses and sources statements provided did not seem to
balance. Maher stated that it may have been due to the inclusion of the line of
credit use. Koropchak stated that based on the EDA's guidelines for machine and
equipment loans, 60% ofthe funding must be from the lender, with 30% from the
EDA. As such, the maximum loan for machine and equipment that the EDA
could approve would be $95,000. However, ifthe EDA chooses to look at the
building projects as a whole, versus just the estimated costs of machinery, the
30% amount allowable is greater. Koropchak stated that Karlsburger expects to
employ approximately 20 people within the next 2 years. Maher stated that he
believes the number to be 22. Mayer inquired about what would occur if the
company did not employ the stated amount by the end of the two years.
Koropchak stated that Karlsburger would need to make up that pro-rated share of
the loan, according to the business subsidy agreement.
Koropchak reported that the prime rate as of September 5th, 2006, per US Bank is
8.25%.
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Koropchak also noted that the company is expected to contribute $31,000 in tax
base, with approximately $21,000 staying within Monticello. Koropchak stated
that she had received a letter from Karlsburger's lender regarding credit in good
standing and a copy of Articles of Incorporation.
Demeules inquired as to the amount Karlsburger was seeking. Maher stated that
they would ask for the maximum amount.
Koropchak stated that pending the method the EDA chooses to use, the EDA
could loan anywhere between $95,000 for a calculation based on machinery and
equipment; $200,000 if the calculation were based on jobs, or $339,000 based on
EDA cash balance.
Wojchouski noted that essentially, the EDA has three different methods available
for determining a loan amount. Demueles noted that the loan would support the
economic development goals for the EDA and the park.
Schwientek stated that she supports the $200,000 amount calculated by job
creation.
B. Consideration to approve or deny GMEF No. 025 (determine business
subsidy amount) for Karlsburger Foods, Inc., and if applicable, call for a
public hearing.
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MOTION BY COMMISSIONER SCHWIENTEK TO APPROVE GMEF LOAN
NO. 025 FOR KARLS BURGER FOODS, INC. IN THE AMOUNT OF
$200,000, WITH TERM OF 7 YEARS, INTERST RATE OF 6.25% AND A
LOAN FEE OF $200. COLLATERLA, GUARANTEES AND OTHER
CONDITON REQUIREMENTS TO BE DETERMINED AND PREPARED BY
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EDA Minutes - 09/05/06
THE GMEF ATTORNEY. THE GMEF LOAN APPROVAL IS SUBJECT TO
PUBLIC HEARING ON BUSINESS SUBSIDY, LENDER LINE OF CREDIT
AND COUNCIL RATIFICAITON OF EDA ACTION.
MOTION SECONDED BY COMMISSIONER HOGLUND. MOTION
CARRIED UNANIMOUSLY.
MOTION BY COMMISSION WOJCHOUSKI TO CALL FOR A PUBLIC
HEARING ON SEPTEMBER 19TH, 2006 AT 4:00 PM FOR THE PROPOSED
BUSINESS SUBSIDY TO KARLSBURGER FOODS, INC.
MOTION SECONDED BY COMMISSIONER PERRAULT. MOTION
CARRIED UNANIMOUSLY.
9. Adjournment.
MOTION BY COMMISSIONER LAHR TO ADJOURN.
MOTION SECONDED BY COMMISSIONER MAYER. MOTION CARRIED
UNANIMOUSLY.
RECORDER ANGELA SCHUMANN
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EDA Agenda - 09/19/06
7.
Unfmished Business:
A. UDdate on GMEF Loan No. 019.
On September 8, 2006, I phoned Pat Jensen, president of GWJ, LLC., to inquire about the
balloon payment due on September 1, 2006, for GMEF Loan NO. 019. Pat appreciated the
reminder letter and thereafter began the process to refinance and is seeking a new lender. He
said it would be another 10 days to 2 weeks. I suggested he call prior to issuance of the
balloon payment for the amount of accrued interest.
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EDA Agenda - 09/19/06
SA. Public Rearm!!: - Consideration to approve the Business Subsidy A!!:reement and
authorize enterin\: into the Loan A!!:reement between Karlsbur!!:er Foods. Inc. and the
Monticello EDA.
A. Reference and back!!:round:
OPEN THE PUBLIC HEARING
The public hearing notice appeared in the local newspaper on September 7, 2006, meeting the
requirements of the Business Subsidy Act. A local government assistance of$100,000 or
greater requires a public hearing and a copy of the business subsidy agreement must be on file
at City Hall for review.
The EDA legal firm of Kennedy & Graven drafted the Business Subsidy Agreement and the
Loan Agreement in accordance with the EDA approval of September 5, 2006. The HRA
Purchase and Development Contract and the Loan Agreement are consistent with job creation
at twenty (20).
In addition to the Business Subsidy Agreement located within the Loan Agreement is a copy of
the EDA approval form and public hearing notice. A second line-of-credit letter from Wells
Fargo states: a low six figure revolving line of credit available for the purchase of equipment.
The line of credit from First Federal Savings Bank was $100,000.
The Council will consider ratifying the EDA's approval ofGMEF Loan No. 025 on September
25, 2006.
CLOSE THE PUBLIC HEARING
After closing the public hearing, please consider the following alternative action.
Mike Maher, president of Karlsburger Foods, Inc., has concerns with the amortization
schedule of 7 years for machinery and equipment as this causes a relatively high monthly
principal and interest payment. I believe he is going to request a 15-year amortization with a
balloon payment in year five. The EDA should consider his request and if so desired, amend
the approved loan term for GMEF No. 025.
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EDA Agenda - 09/19/06
B. Alternative Action:
1. A motion to approve the Business Subsidy Agreement and authorize entering into the
Loan Agreement between Karlsburger Foods, Inc. and the Monticello EDA.
2. A motion to deny approval of the Business Subsidy Agreement and deny entering into
the Loan Agreement between Karlsburger Foods, Inc. and the Monticello EDA. State
reasons.
3. A motion to table any action.
C. Recommendation:
EDA Treasurer Wolfsteller and Executive Director Koropchak recommend alternative no. 1 as
the loan agreement is consistent with the EDA action of September 5, 2006.
D. SUPt;lortinl!: Data:
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Loan Agreement (Business Subsidy Agreement within), EDA approval form, public hearing
notice, and letter from Wells Fargo.
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LOAN AGREEMENT
This Loan Agreement ("Agreement") is made this _ day of , 2006, by
Karlsburger Foods, Inc., a Minnesota corporation ("Borrower") and the Economic Development
Authority in and for the City of Monticello, Minnesota, a public body corporate and politic under
the laws of Minnesota ("Lender").
RECITALS
A. In consideration for the loan contemplated by this Agreement, Borrower is executing
and delivering to Lender this Loan Agreement.
B. Lender agrees to loan to Borrower the maximum amount of $200,000 to finance the
acquisition of the machinery and equipment described in Exhibit A attached hereto ("Machinery
and Equipment"), for placement at a new production and warehouse facility under construction at
3236 Chelsea Road West ("Property") in the City of Monticello, Minnesota (the "City").
ACCORDINGLY, to induce Lender to make the Loan to Borrower, and for good and
valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties
hereto agree as follows:
. I. The Loan Amount. Subject to and upon the terms and conditions of this Agreement,
Lender agrees to loan to Borrower the sum of Two Hundred Thousand and nollOOths Dollars
($200,000), or so much thereof as is disbursed to Borrower in accordance with this Agreement
("Loan"). The Loan shall be evidenced by a promissory note ("Note") payable by Borrower to
Lender and substantially in the form of Exhibit B attached to this Agreement, which shall be dated
as of the date of this Agreement. Proceeds of the Loan shall be disbursed in accordance with
Section 3 hereof.
2. Reoavment of Loan. The Loan shall be repaid with interest as follows:
(a) Interest at the rate of six and one-quarter percent (6.25%) per annum shall
accrue from the Loan Closing Date (as hereinafter defined) until the Loan is repaid in full.
(b) Payments of principal and interest shall commence on , 20_
(the "Initial Payment Date") and continue on the first day of each and every month
thereafter until paid in full. The entire remaining unpaid balance of principal and interest
shall be due and payable on the first day of the eighty-fourth (84th) month following the
Initial Payment Date.
3. Disbursement of Loan Proceeds.
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(a) The Loan proceeds shall be paid to Borrower on
such other date as the parties hereto agree ("Loan Closing Date").
, 2006 or
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(b) The following events shall be conditions precedent to the payment of the
Loan proceeds to Borrower on the Loan Closing Date:
(i) Borrower having executed and delivered to Lender, prior to the Loan
Closing Date and without expense to Lender, executed copies of this Agreement, the
Note, and a security agreement in substantially the form set forth as Exhibit C hereto
(the "Security Agreement"), and Borrower further having caused to be executed and
delivered to Lender a guaranty in substantially the form set forth hereto at Exhibit D
(the "Guaranty");
(ii) Borrower having provided evidence satisfactory to Lender that
Borrower has established a separate accounting system for the exclusive purpose of
recording the receipt and expenditure of the Loan proceeds; and
(iii) Borrower having paid $200 to Lender as a loan origination fee; and
(iv) Borrower having paid to Lender the full amount of the legal fees
incurred by Lender in the negotiation and preparation of this Agreement and any
other agreement or instrument securing the Loan.
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(v) Borrower having provided evidence satisfactory to Lender that
Borrower has obtained adequate financing to complete all activities related to
Borrower's undertakings on the Property.
4.
Representations and Warranties. Borrower represents and warrants to Lender that:
(a) Borrower is duly authorized and empowered to execute, deliver, and perform
this Agreement and to borrow money from Lender.
(b) The execution and delivery of this Agreement, and the performance by
Borrower of its obligations hereunder, do not and will not violate or conflict with any
provision of law and do not and will not violate or conflict with, or cause any default or
event of default to occur under, any agreement binding upon Borrower.
(c) The execution and delivery of this Agreement has been duly approved by all
necessary action of Borrower, and this Agreement has in fact been duly executed and
delivered by Borrower and constitutes its lawful and binding obligation, legally enforceable
against it.
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(d) Borrower warrants that it shall keep and maintain books, records, and other
documents relating directly to the receipt and disbursements of Loan proceeds and that any
duly authorized representative of Lender shall, at all reasonable times, have access to and
the right to inspect, copy, audit, and examine all such books, records, and other documents
of Borrower pertaining to the Loan until the completion of all closeout procedures and the
final settlement and conclusion of all issues arising out of this Loan.
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(e) Borrower warrants that it has fully complied with all applicable state and
federal laws pertaining to its business and will continue to comply throughout the terms of
this Agreement. If at any time Borrower receives notice of noncompliance from any
governmental entity, Borrower agrees to take any necessary action to comply with the state
or federal law in question.
(f) Borrower warrants that it will use the proceeds of the Loan made by Lender
solely for the Machinery and Equipment.
(g) Borrower warrants that it will not create, permit to be created, or allow to
exist any liens, charges, or encumbrances prior to the obligation created by this Loan
Agreement, except as otherwise authorized in writing by Lender.
5. Event of Default bv Borrower. The following shall be Events of Default under this
Agreement:
(a) failure to pay any principal or interest on the Loan when due;
(b) any representation or warranty made by Borrower herein or in any
document, instrwnent, or certificate given in counection with this Agreement, the Note, or
the Security Agreement that is false when made;
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( c) Borrower fails to pay its debts as they become due, makes an assignment for
the benefit of its creditors, admits in writing its inability to pay its debts as they become due,
files a petition under any chapter of the Federal Bankruptcy Code or any similar law, state or
federal, now or hereafter existing, becomes "insolvent" as that term is generally defined
under the Federal Bankruptcy Code, files an answer admitting insolvency or inability to pay
its debts as they become due in any involuntary bankruptcy case commenced against it, or
fails to obtain a dismissal of such case within thirty (30) days after its commencement or
convert the case from one chapter of the Federal Bankruptcy Code to another chapter, or be
the subject of an order for relief in such bankruptcy case, or be adjudged a bankrupt or
insolvent, or has a custodian, trustee, or receiver appointed for, or has any court take
jurisdiction of its property, or any part thereof, in any proceeding for the purpose of
reorganization, arrangement, dissolution, or liquidation, and such custodian, trustee, or
receiver is not discharged, or such jurisdiction is not relinquished, vacated, or stayed within
thirty (30) days of the appointment;
(d) a garnishment summons or writ of attachment is issued against or served
upon Lender for the attachment of any property of Borrower in Lender's possession or any
indebtedness owing to Borrower, unless appropriate papers are filed by Borrower contesting
the same within thirty (30) days after the date of such service or such shorter period of time
as may be reasonable in the circumstances;
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( e) any breach or failure of Borrower to perform any other term or condition of
this Agreement not specifically described as an Event of Default in this Agreement and such
breach or failure continues for a period of thirty (30) days after Lender has given written
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notice to Borrower specif'ying such default or breach, unless Lender agrees in writing to an
extension of such time prior to its expiration; provided, however, if the failure stated in the
notice cannot be corrected within the applicable period, Lender will not unreasonably
withhold its consent to an extension of such time if corrective action is instituted by
Borrower within the applicable period and is being diligently pursued until the Default is
corrected, but no such extension shall be given for an Event of Default that can be cured by
the payment of money (i.e., payment of taxes, insurance premiums, or other amounts
required to be paid hereunder);
(f) any breach by Borrower of any other agreement between Borrower, and
Lender, the City of Monticello, Minnesota, or the Housing and Redevelopment Authority in
and for the City of Monticello, Minnesota (the "HRA").
6. Business Subsidv Agreement. The provisions of this Section constitute the
"business subsidy agreement" for the purposes of the Business Subsidy Act.
(a) General Terms. The parties agree and represent to each other as follows:
(i) The subsidy provided to the Borrower consists of the principal amount of
the Loan described in Section 1.
(ii) The public purposes of the subsidy are to purchase the Machinery and
Equipment for placement at the Property, thereby increasing net jobs in the City and
the State and increasing the tax base of the City and the State.
(iii) The goals for the subsidy are: to purchase the Machinery and
Equipment for placement at the Property; to maintain such Machinery and
Equipment at the Property; and to create the jobs and wage levels in accordance with
Section 6(b) hereof.
(iv) If the goals described in clause (iii) are not met, the Borrower must
make the payments to the Lender described in Section 6(c).
(v) The subsidy is needed to purchase the Machinery and Equipment for
placement at the Property.
(vi) The Borrower must continue to use the aforementioned Machinery and
Equipment at the Property for at least five years after the Benefit Date (defined
hereinafter).
(vii) The Borrower does not have a parent corporation.
(viii) The Borrower has not received, and does not expect to receive,
financial assistance from any other "grantor" as defined in the Business Subsidy Act,
in connection with the Property.
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(b) Job and Wage Goals. The "Benefit Date" of the assistance provided in this
Agreement is the Loan Closing Date. Within two years after the Benefit Date (the
"Compliance Date"), the Borrower shall (i) retain at least 16 full-time permanent jobs
permanent to the Property from another location outside the City, (ii) cause the average
hourly wage of the 16 retained jobs to be at least $21.37 per hour, exclusive of benefits; (iii)
cause to be created at least four new full-time permanent jobs on the Property (above and
beyond the 16 retained jobs); and (iv) cause the average hourly wage of the four new jobs to
be $18.00 per hour, exclusive of benefits. Jobs created by tenants of the Property will count
toward the requirements of this Section. Notwithstanding anything to the contrary herein, if
the wage and job goals described in this paragraph are met by the Compliance Date, those
goals are deemed satisfied. The Lender may, after a public hearing, extend the Compliance
Date by up to one year, provided that nothing in this section will be construed to limit the
Lender's legislative discretion regarding this matter.
(c) Remedies. Ifthe Borrower fails to meet the goals described in Section 6(a)(iii),
the Borrower shall repay to the Lender upon written demand from the Lender a "pro rata
share" of the outstanding principal amount of the Loan together with interest on that amount
at the implicit price deflator as defined in Minnesota Statutes, Section 275.50, subd. 2. The
term "pro rata share" means percentages calculated as follows:
(i) if the failure relates to the number of jobs, the jobs required less the jobs
created, divided by the jobs required;
.
(ii) if the failure relates to wages, the number of jobs required less the
number of jobs that meet the required wages, divided by the number of jobs
required;
(iii) if the failure relates to use of the Machinery and Equipment at the
Property in accordance with Section 6(a)(vi), 60 less the number of months of use of
the Machinery and Equipment at the Property (where any month in which the
Machinery and Equipment is in use for at least 15 days constitutes a month of use),
commencing on the Benefit Date and ending with the date the Machinery and
Equipment ceases use as determined by the Authority Representative, divided by 60;
and
(iv) if more than one of clauses (i) through (iii) apply, the sum of the
applicable percentages, not to exceed 100%.
.
Nothing in this Section shall be construed to limit the Lender's remedies under Section 7
hereof. In addition to the remedy described in this Section and any other remedy available
to the Lender for failure to meet the goals stated in Section 6(a)(iii), the Borrower agrees and
understands that it may not a receive a business subsidy from the Lender or any grantor (as
defined in the Business Subsidy Act) for a period of five years from the date of the failure or
until the Borrower satisfies its repayment obligation under this Section, whichever occurs
first.
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.
.
.
(d) Reports. The Borrower must submit to the Lender a written report regarding
business subsidy goals and results by no later than February 1 of each year, commencing
February 1, 2007 and continuing until the later of (i) the date the goals stated Section
6(a)(iii) are met; (ii) 30 days after expiration of the period described in Section 6(a)(vi); or
(iii) if the goals are not met, the date the subsidy is repaid in accordance with Section 6( c).
The report must comply with Section 116J .994, subdivision 7 of the Business Subsidy Act.
The Lender will provide information to the Borrower regarding the required forms. If the
Borrower fails to timely file any report required under this Section, the Lender will mail the
Borrower a warning within one week after the required filing date. If, after 14 days of the
postmarked date of the warning, the Borrower fails to provide a report, the Borrower must
pay to the Lender a penalty of $100 for each subsequent day until the report is filed. The
maximum aggregate penalty payable under this Section $1,000.
7. Lender's Remedies upon Borrower's Default. Upon an Event of Default by
Borrower and after provision by Lender of written notice, Lender shall have the right to exercise
any or all of the following remedies (and any other rights and remedies available to it):
(a) declare the principal amount of the Loan and any accrued interest thereon to
be immediately due and payable upon providing written notice to Borrower;
(b) suspend its performance under this Loan Agreement;
( c) take any action provided for at law to enforce compliance by Borrower with
the terms ofthis Agreement and the Note;
(d) exercise its rights under the Guaranty; and
( e) exercise its rights under the Security Agreement.
In addition to any other amounts due on the Loan, and without waiving any other right of
Lender under any this Agreement or any other instrument securing the Loan applicable
documents, Borrower shall pay to Lender a late fee of $250 for any payment not received in full
by Lender within 30 calendar days of the date on which it is due. Furthermore, interest will
continue to accrue on any amount due until the date on which it is paid to Lender, and all such
interest will be due and payable at the same time as the amount on which it has accrued.
8. Lender's Costs of Enforcement of Agreement. If an Event of Default has occurred
as provided herein, then upon demand by Lender, Borrower shall payor reimburse Lender for all
expenses, including all attorneys fees and expenses incurred by Lender in connection with the
enforcement of this Agreement and the Note, or in connection with the protection or enforcement of
the interests and collateral security of Lender in any litigation or bankruptcy or insolvency
proceeding or in any action or proceeding relating in any way to the transactions contemplated by
this Agreement.
9.
Indemnification.
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.
(a) Borrower shall and does hereby agree to protect, defend, indemnifY and hold
Lender, and its officers, agents, and employees, harmless of and from any and all liability,
loss, or damage that it may incur under or by reason of this Agreement, and of and from any
and all claims and demands whatsoever that may be asserted against Lender by reason of
any alleged obligations or undertakings on its part to perform or discharge any of the terms,
covenants, or agreements contained herein.
(b) Should Lender, or its officers, agents, or employees incur any such liability
or be required to defend against any claims or demands pursuant to Section 9, or should a
judgment be entered against Lender, the amount thereof, including costs, expenses, and
attorneys fees, shall bear interest thereon at the rate then in effect on the Note, shall be
secured hereby, shall be added to the Loan, and Borrower shall reimburse Lender for the
same immediately upon demand, and upon the failure of Borrower to do so, Lender may
declare the Loan immediately due and payable.
( c) This indemnification and hold harmless prOVlSlon shall survive the
execution, delivery, and performance of this Agreement and the creation and payment of
any indebtedness to Lender. Borrower waives notice of the acceptance of this Agreement
by Lender.
.
(d) Nothing in this Agreement shall constitute a waiver of or limitation on any
immunity from or limitation on liability to which Borrower is entitled under law.
10. Miscellaneous.
(a) Waiver. The performance or observance of any promise or condition set
forth in this Agreement may be waived, amended, or modified only by a writing signed by
Borrower and Lender. No delay in the exercise of any power, right, or remedy operates as a
waiver thereof, nor shall any single or partial exercise of any other power, right, or remedy.
(b) Assignment. This Agreement shall be binding upon Borrower and its
successors and assigns and shall inure to the benefit of Lender and its successors and
assigns. All rights and powers specifically conferred upon Lender may be transferred or
delegated by Lender to any of its successors and assigns. Borrower's rights and obligations
under this Agreement may be assigned only when such assignment is approved in writing
by Lender.
(c) Governing Law. This Agreement is made and shall be governed in all
respects by the laws of the state of Minnesota. Any disputes, controversies, or claims
arising out of this Agreement shall be heard in the state or federal courts of Minnesota, and
all parties to this Agreement waive any objection to the jurisdiction of these courts, whether
based on convenience or otherwise.
.
(d) Severabilitv. If any provision or application of this Agreement is held
unlawful or unenforceable in any respect, such illegality or unenforceability shall not affect
7
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.
.
other provisions or applications that can be given effect, and this Agreement shall be
construed as if the unlawful or unenforceable provision or application had never been
contained herein or prescribed hereby.
(e) Notice. All notices required hereunder shall be given by depositing in the
U.S. mail, postage prepaid, certified mail, return receipt requested, to the following
addresses (or such other addresses as either party may notify the other):
To Lender:
Economic Development Authority in and for the City of
Monticello, Minnesota
505 Walnut Street, Suite I
Monticello, MN 55362
Attn: Executive Director
To Borrower:
Karlsburger Foods, Inc.
12450 Fernbrook Lane
Dayton, MN 55327
Attn: Michael Maher
(f) Termination. If the Loan is not disbursed pursuant to this Agreement by March
_,2007 or within 180 days of date of ED A approval, this Agreement shall terminate and neither
party shall have any further obligation to the other, except that if the Loan is not disbursed
because Borrower has failed to use its best efforts to comply with the conditions set forth in
Section 3 of this Agreement then Borrower shall pay to Lender all reasonable attorneys fees,
costs, and expenses incurred by Lender in connection with this Agreement and the Note.
(g) Entire Agreement. This Agreement, together with the Exhibits hereto, which are
incorporated by reference, constitutes the complete and exclusive statement of all mutual
understandings between the parties with respect to this Agreement, superseding all prior or
contemporaneous proposals, communications, and understandings, whether oral or written,
concerning the Loan.
(h) Headings. The headings appearing at the beginning of the several sections contained
in this Agreement have been inserted for identification and reference purposes only and shall not be
used in the construction and interpretation of this Agreement.
8
.
.
.
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the proper
officers thereunto duly authorized on the day and year first written above.
ECONOMIC DEVELOPMENT
AUTHORITY IN AND FOR THE CITY OF
MONTICELLO, MINNESOTA
By:
Title:
By:
Title:
[SIGNATURE PAGE TO LOAN AGREEMENT -KARLSBURGER FOODS, INC.]
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KARLSBURGER FOODS, INC.
By:
Title:
.
[SIGNATURE PAGE TO LOAN AGREEMENT -KARLSBURGER FOODS, INC.]
.
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Item No.
HPS3672
1590-2
912-2
SKIOB
.
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EXHffiIT A
DESCRIPTION OF MACHINERY AND EQUIPMENT
Description
Marion Mixer
Lee Steam Kettle, Style D
Volumetric Technology Twin Head Piston Filler
Volumetric Technology Twin Lane Cup Filler
Sure Kaps Hand Capper
A & K Equipment Warehouse Racking
Boiler
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EXHIBIT B TO LOAN AGREEMENT
PROMISSORY NOTE
-$200,000-
-6.25%-
,2006
Karlsburger Foods, Inc., a Minnesota corporation ("Maker"), for value received, hereby
promises to pay to the Economic Development Authority in and for the City of Monticello,
Minnesota, a public body corporate and politic under the laws of Minnesota or its assigns (Authority
and any assigns are collectively referred to herein as "Holder"), at its designated principal office or
such other place as the Holder may designate in writing, the principal sum of Two Hundred
Thousand and nollOOths Dollars ($200,000) or so much thereof as may be advanced under this
Note, with interest as hereinafter provided, in any coin or currency that at the time or times of
payment is legal tender for the payment of private debts in the United States of America. The
principal of and interest on this Note is payable in installments due as follows:
1. Interest at the rate of six and one-quarter percent (6.25%) per annum shall accrue
from the Loan Closing Date, as defined in the loan agreement of even date between Borrower and
Lender ("Loan Agreement") until the Loan is repaid in full.
2. Payments of principal and interest shall commence on ,20_ (the "Initial
Payment Date") and continue on the frrst day of each and every month thereafter until paid in full.
The entire remaining unpaid balance of principal and interest shall be due and payable on the first
day of the eighty-fourth (84th) month following the Initial Payment Date.
3. The Maker shall have the right to prepay the principal of this Note, in whole or in
part, on any date a principal and interest payment is due and payable.
4. This Note is given pursuant to the Loan Agreement, a security agreement of even
date herewith delivered by the Maker (the "Security Agreement"), and a guaranty of even date
herewith delivered by Michael Maher, Paul Cserpes, and Lisa Taylor (the "Guaranty"). If either the
Loan Agreement, the Security Agreement, or the Guaranty is found to be invalid for whatever
reason, such invalidity shall constitute an Event of Default hereunder.
All of the agreements, conditions, covenants, provisions, and stipulations contained in the
Loan Agreement, the Security Agreement, the Guaranty, or any other instrument securing this Note
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. It is agreed that time is of the essence of this Note. If an Event of
Default occurs under the Loan Agreement, the Security Agreement, the Guaranty, or any other
instrument securing this Note, then the Holder of this Note may at its right and option, without
notice, declare immediately due and payable the principal balance of this Note and interest accrued
thereon, together with reasonable attorneys fees and expenses incurred by the Holder of this Note in
collecting or enforcing payment hereof, whether by lawsuit or otherwise, and all other sums due
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.
hereunder or any instrument securing this Note. The Maker of this Note agrees that the Holder of
this Note may, without notice to and without affecting the liability of the Maker, accept additional
or substitute security for this Note, or release any security or any party liable for this Note or extend
or renew this Note.
5. The remedies of the Holder of this Note as provided herein, and in the Loan
Agreement, the Security Agreement, the Guaranty, or any other instrument securing this Note
shall be cumulative and concurrent and may be pursued singly, successively, or together, and, at the
sole discretion of the Holder of this Note, may be exercised as often as occasion therefor shall
occur; and the failure to exercise any such right or remedy shall in no event be construed as a waiver
or release thereof.
The Holder of this Note shall not be deemed, by any act of omission or commission, to have
waived any of its rights or remedies hereunder unless such waiver is in writing and signed by the
Holder and then only to the extent specifically set forth in the writing. A waiver with reference to
one event shall not be construed as continuing or as a bar to or waiver of any right or remedy as to a
subsequent event. This Note may not be amended, modified, or changed except only by an
instrument in writing signed by the party against whom enforcement of any such amendment,
modifications, or change is sought.
6. If any term of this Note, or the application thereof to any person or circumstances
shall, to any extent, be invalid or unenforceable, the remainder of this Note, or the application of
such term to persons or circumstances other than those to which it is invalid or unenforceable shall
not be affected thereby, and each term of this Note shall be valid and enforceable to the fullest
extent permitted by law.
7. It is intended that this Note is made with reference to and shall be construed as a
Minnesota contract and is govemed by the laws thereof. Any disputes, controversies, or claims
arising out of this Agreement shall be heard in the state or federal courts of Minnesota, and all
parties to this Agreement waive any objection to the jurisdiction of these courts, whether based on
convenience or otherwise.
8. The performance or observance of any promise or condition set forth in this Note
may be waived, amended, or modified only by a writing signed by the Maker and the Holder. No
delay in the exercise of any power, right, or remedy operates as a waiver thereof, nor shall any
single or partial exercise of any other power, right, or remedy.
9. IT IS HEREBY CERTIFIED AND RECITED that all conditions, acts, and things
required to exist, happen, and be performed precedent to or in the issuance of this Note do exist,
have happened, and have been performed in regular and due form as required by law.
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IN WITNESS WHEREOF, the Maker has caused this Note to be duly executed as of the
day of , 20 .
KARLSBURGER FOODS, INC.
By:
Title:
.
[SIGNATURE PAGE FOR PROMISSORY NOTE - KARLSBURGER FOODS, INC.]
.
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EXHIBIT C
SECURITY AGREEMENT
THIS SECURITY AGREEMENT, dated as of July _, 2006, is made and entered into by
and between KARLS BURGER FOODS, INC. (the "Debtor"), a Minnesota corporation with its
principal place of business at 12450 Fernbrook Lane, Dayton, Minnesota 55327 and the
ECONOMIC DEVELOPMENT AUTHORITY IN AND FOR THE CITY OF MONTICELLO,
MINNESOTA (the "Secured Party"), a public body corporate and politic, with its principal place
of business at 505 Walnut Street, Suite I, Monticello, Minnesota 55362.
1. Securitv Interest and Collateral. To secure the payment of the Note in the original
aggregate principal amount of $200,000, issued pursuant to a Loan Agreement dated as of
, 20--, between the Debtor and the Secured Party, the proceeds of which will be
applied to the acquisition of machinery and equipment for use at a production and warehouse
facility located at 3236 Chelsea Road West in the City of Monticello, Minnesota (the "Facility"),
the Debtor hereby grants the Secured Party a security interest (herein called the "Security
Interest") in the following property (herein called the "Equipment"):
any and all machinery and equipment acquired with the proceeds of the Note and
installed in, attached to, or used in connection with the Facility, as described in
Exhibit A of the Loan Agreement,
together with all parts, additions, replacements, and repairs to the Equipment now or hereafter
installed in, attached to, or used in the Facility, and the proceeds thereof (collectively with the
Equipment, the "Collateral").
2. Debtor's Reoresentations. Warranties. and Covenants. Debtor represents,
warrants, covenants, and agrees as follows:
(a) Organization. The Debtor is a Miunesota corporation, and Debtor has full power
and authority to execute, deliver, and perform this Security Agreement, and to own its property
and conduct its business as presently conducted and as proposed to be conducted.
(b) Authorization. The execution, delivery, and performance of this Security
Agreement by the Debtor has been duly authorized by all necessary action and will not:
(i) require any consent or approval of any entity which has not been obtained; or
(ii) violate any material provision of any indenture, contract, agreement or instrument
to which Debtor is a party or by which it is bound.
(c) Performance bv Debtor. Unless Debtor obtains Secured Party's written consent to
the contrary, or except as provided in the Loan Agreement, Debtor shall not:
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(i)
terminate its interest in any ofthe Collateral; or
(ii) sell, transfer, or assign, or offer to sell, transfer or assign all or any part of the
Collateral or permit all or any part of the Collateral to be sold, transferred, or assigned; or
(iii) remove or consent to the removal of any of the Equipment from the Facility.
(d) Title to Collateral. Debtor shall keep good marketable title to all ofthe Collateral,
and none of the Collateral is subject to any lien or security interest except for the security interest
created by this Security Agreement and other security interests consented to in writing by
Secured Party. Debtor has not granted, and will not grant or permit to exist, any lien or security
interests in all or a portion of the Collateral other than the liens in favor of Secured Party and
other liens consented to in writing by Secured Party. Debtor shall defend the Collateral against
all claims and demands of all and any other persons at any time claiming any interest therein
adverse to Secured Party.
(e) Actions and Proceedings. There are no actions at law, suits in equity, or other
proceedings before any governmental agency, commission, bureau, tribunal, or other arbitration
proceedings against or affecting Debtor, that if adversely determined would adversely affect
Debtor's interest in the Collateral or would adversely affect the rights of Debtor to pledge and
assign all or a part of the Collateral or the rights and security afforded Secured Party hereunder.
.
(f) Insurance. The Debtor agrees it will keep the Equipment insured, or cause the
Equipment to be kept insured, at all times against loss by fire or other hazards concerning which,
in the judgment of the Secured Party, insurance protection is reasonably necessary and in
amounts sufficient to protect against loss or damage of the Equipment. Such policy or policies
will contain a loss payable clause in favor of Secured Party or its successors or assigns, in form
satisfactory to Secured Party, provided, however, that Debtor may, at its reasonable discretion,
self-insure the Equipment.
(g) No Fixture. If any of the Collateral is or becomes a fixture, Debtor agrees to
furnish Secured Party, at Secured Party's request, with a statement or statements signed by all
persons who have or claim an interest in the real estate concerned, which statements shall
provide that the signer consents to the security interest created hereby and disclaims any interest
in the Collateral as fixtures.
.
(h) Understandings Regarding Collateral. Debtor acknowledges that the Collateral is
or will be of the design, capacity, and manufacture specified for and by Debtor, and that Debtor
is satisfied that the same is or will be suitable for its intended purposes. Debtor further
acknowledges and agrees that Secured Party has not made, and does not make, any
representation, warranty, or covenant with respect to merchantability, fitness for any purpose,
durability, patent, copyright or trademark infringement, suitability, or capability of any item of
Collateral in any respect or in connection with any other purpose or use of Debtor, or any other
representation, warranty, or covenant of any kind or character expressed or implied with respect
thereto. Debtor accordingly agrees not to assert any claim whatsoever against Secured Party
C-2
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.
based thereon. Debtor further agrees, regardless of cause, not to assert any claim whatsoever
against Secured Party for loss of anticipatory profits or consequential damages.
(i) Use of Collateral. The Collateral will be used for its intended business purpose
and will at all times be located at the Facility, except as provided in the Loan Agreement.
G) Condition of Collateral. Debtor will keep the Collateral in good condition and
repair, reasonable wear and tear excepted, and will permit Secured Party to enter the Facility at
reasonable times and upon reasonable notice for the purpose of examining the Collateral.
(k) Costs of Collection. In the event of any action or proceeding to collect or realize
upon the Collateral or to enforce any of Secured Party's rights hereunder, the Debtor shall pay:
(i) all of Secured Party's attorneys fees and legal expenses, with interest thereon,
incurred by the Secured Party;
(ii) all taxes, levies, insurance expenses, and costs of repairs to, or maintenance of,
the Collateral; and
(iii) all costs of the Secured Party reasonably incurred in taking possession of,
disposing of, or preserving the Collateral after any Event of Default (defined below).
3. Event of Default. Upon the occurrence of a default in the payment of the Note, in
the Loan Agreement dated as of , 2006, between the Debtor and the Secured Party (the
"Loan Agreement") or in this Security Agreement, the Secured Party may exercise any remedy
available to it under the terms of the Loan Agreement, the Note, or this Security Agreement, and
may, without limiting any other right or remedy available to it, exercise and enforce any and all
rights and remedies available upon default to a secured party under the Uniform Commercial
Code as enacted in the State of Minnesota, Minnesota Statutes, Chapter 336, as amended (the
"UCC"), and the Secured Party and all representatives of the Secured Party are hereby granted
the right to enter upon any property of the Debtor, without a hearing or prior notice thereof, for
the purpose of taking possession of the Collateral. If notice to the Debtor of any intended
disposition of the Collateral or any other intended action is required by law in a particular
instance, such notice shall be deemed commercially reasonable if given (in the manner specified
in this Security Agreement) at least ten calendar days prior to the date of the intended disposition
or other action.
4. Further Assurances. The Debtor shall execute and deliver to the Secured Party,
promptly and at the Debtor's expense, fmancing statements, including without limitation a UCC-
I Financing Statement listing the Equipment and all proceeds thereof as collateral. Debtor
agrees that the Secured Party is authorized, at its option, to file a photocopy or other reproduction
of this Security Agreement as a financing statement and such photocopy or other reproduction
shall be sufficient as a financing statement under the UCC, and the Debtor hereby irrevocably
appoints the Secured Party as the Debtor's attorney-in-fact to execute and file, from time to time,
on its behalf, one or more financing statements with respect to the Collateral and to execute such
other documents and instruments on behalf of the Debtor as the Secured Party, in its sole
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judgment, shall deem necessary or desirable for the purposes of effectuating this Security
Agreement, such power being coupled with an interest.
5. Cumulative Remedies. All of the Secured Party's rights and remedies herein are
cumulative and in addition to any rights or remedies available at law or in equity, including the
DCC, and may be exercised concurrently or separately. The Debtor shall pay all costs, expenses,
losses, damages, and legal costs (including attorneys fees) incurred by the Secured Party as a
result of enforcing any terms or conditions of this Security Agreement.
6. No Liabilitv Imposed on the Secured Partv. The Secured Party shall not be
obligated to perform or discharge, nor does it hereby undertake to perform or discharge, any
obligation, duty, or liability, nor shall this Security Agreement operate to place responsibility for
the control, care, or management of the Equipment upon Secured Party; provided, that upon
payment in full of the Note, the Secured Party shall execute and file DCC termination statements
in the offices in which financing statements with respect to the Collateral are effective.
7. Indemnification. The Debtor hereby agrees to indemnify and to hold the Secured
Party harmless of and from any and all liability, loss, or damage which it mayor might incur
under or by reason of this Security Agreement, and of and from any and all claims and demands
whatsoever which may be asserted against it by reason of any alleged obligations or undertakings
on its part to perform or discharge any of the terms, covenants, or agreements contained herein.
Should the Secured Party incur any such liability or be required to defend against any such
claims or demands, or should a judgment be entered against the Secured Party, the amount
thereof, including costs, expenses, and attorneys fees, shall bear interest thereon at the rate then
in effect on the Note, shall be secured hereby, and shall be added to the obligations of the Debtor
secured hereunder. The Debtor shall reimburse the Secured Party for such additional obligations
immediately upon demand, and upon the failure of the Debtor to do so, the Secured Party may
declare such additional obligations immediately due and payable.
8. Expenses of Secured Partv. All expenses paid or incurred in protecting, storing,
warehousing, insuring, handling, and shipping the Collateral, all costs of keeping the Collateral
free of liens, encumbrances, and security interests (other than the security interest created by this
Security Agreement), and the removing of the same and all excise, property, sales, and use taxes
imposed by state, federal, or local authority on any of the Collateral or with respect to the sale
thereof, shall be borne and paid for by the Debtor and if the Debtor fails to promptly pay any
amounts thereof when due, the Secured Party may, at its option, but shall not be required to, pay
the same, and upon such payment the same shall constitute additional obligations of the Debtor
and shall bear interest at the rate specified in the Note and shall be secured by the security
interests granted hereunder.
9. Continuing Rights. The rights and powers of the Secured Party hereunder shall
continue and remain in full force effect until the Note (and any additional obligations referred to
in Sections 7 and 8 hereof) is paid in full.
10. Books and Records. The Debtor will permit the Secured Party, and its
representatives, at reasonable times and upon reasonable notice, to examine the Debtor's books
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and records (including data processing records and systems) with respect to the Facility and the
Collateral and make copies thereof at any time and from time to time, and the Debtor will furnish
such information reports to the Secured Party and its representatives regarding the Collateral as
the Secured Party and its representatives may from time to time request. The Secured Party shall
have the authority, at any time, to require the Debtor to place upon the Debtor's books and
records relating to the Collateral and other rights to payment covered by the security interest
created in this Security Agreement a notation stating that any such Collateral and other rights of
payment are subject to a security interest in favor of the Secured Party.
11. Successors and Assigns. This Security Agreement and each and every covenant,
agreement, and provision hereof shall be binding upon the Debtor, and its successors and
assigns, and shall inure to the benefit of the Secured Party, and its successors and assigns.
12. Governing Law. This Security Agreement is executed pursuant to and shall be
governed by the laws of the State of Minnesota.
.
13. Severabilitv. It is the intent of this Security Agreement to confer to the Secured
Party the rights and benefits hereunder to the full extent allowable by law, including all rights
available under the DCe. The unenforceability or invalidity of any provisions hereof shall not
render any other provision or provisions herein contained nnenforceable or invalid. Any
provisions judicially determined to be unenforceable shall be severable from this Security
Agreement.
14. Miscellaneous.
(a) Waiver. The performance or observance of any promise or condition set forth in
this Security Agreement may be waived only in writing. No delay in the exercise of any power,
right or remedy operates as a waiver thereof, nor shall any single or partial exercise of any other
power, right or remedy.
(b) Assignment. This Security Agreement shall be binding upon the Debtor, and its
successors and assigns, and shall inure to the benefit of the Secured Party, and its successors and
assigns. All rights and powers specifically conferred upon the Secured Party may be transferred
or delegated by the Secured Party to any of its successors and assigns, including any successor
holder of the Note.
(c) Certain Defined Terms. Capitalized terms used in this Security Agreement and
defined in this Security Agreement or the Note are used with the meanings given in this Security
Agreement or the Note.
.
(d) Other Matters. If any provision or application of this Security Agreement is held
nnlawful or unenforceable in any respect, such illegality or nnenforceability shall not affect other
provisions or applications which can be given effect, and this Security Agreement shall be
construed as if the nnlawful or unenforceable provision or application had never been contained
herein or prescribed hereby. All representations and warranties contained in this Security
Agreement or in any other agreement between Debtor and Secured Party shall survive the
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execution, delivery, and performance of this Security Agreement and the creation and payment
of any indebtedness to Secured Party. Debtor waives notice of the acceptance of this Security
Agreement by Secured Party.
(e) Notice. All notices required hereunder shall be given by depositing in the u.S.
mail, postage prepaid, certified mail, return receipt requested, to the following addresses (or such
other addresses as either party may notify the other):
To Debtor:
Karlsburger Foods, Inc.
12450 Fernbrook Lane
Dayton, MN 55327
Attn: Michael Maher
To Secured Party:
Economic Development Authority in and for the City of
Monticello, Minnesota
505 Walnut Street, Suite I
Monticello, Minnesota 55362
Attn: Executive Director
(The remainder ofthis page is intentionally left blank.)
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.
IN WITNESS WHEREOF, the Debtor and the Secured Party have executed this Security
Agreement as of the date set forth above.
THIS DOCUMENT DRAFTED BY:
Kennedy & Graven, Chartered (MNI)
470 U.S. Bank Plaza
200 South Sixth Street
Minneapolis, MN 55402
(612) 337-9300
KARLSBURGER FOODS, INC.
By:
Its
C-7
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DEBTOR'S ACKNOWLEDGMENT
to the
Security Agreement, dated as of July _, 2006
STATE OF MINNESOTA )
) ss.
COUNTY OF )
The foregoing instrument was acknowledged before me this _ day of , 2006,
by , the of Karlsburger Foods, Inc., a Minnesota corporation, on
behalf of the corporation.
Notary Public
C-8
.
.
.
Signature of the Secured Party with respect to the Security Agreement, dated as of
,2006.
ECONOMIC DEVELOPMENT
AUTHORITY IN AND FOR THE CITY
OF MONTICELLO, MINNESOTA
By:
President
By:
Executive Director
C-9
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.
.
SECURED PARTY'S ACKNOWLEDGMENT
to the
Security Agreement, dated as of , 2006
STATE OF MINNESOTA )
) ss.
COUNTY OF )
The foregoing instrument was acknowledged before me this _ th day of , 2006, by
and , the President and Executive Director, respectively, of
the Economic Development Authority in and for the City of Monticello, Minnesota, a public body
corporate and politic, on behalf of the Authority.
Notary Public
C-lO
.
.
.
EXHmIT D
GUARANTY AGREEMENT
This Guaranty Agreement is made and entered into this _ day of , 20-, by
Michael Maher, Paul Cserpes, and Lisa Taylor ("Guarantors") for the benefit of the Economic
Development Authority in and for the City of Monticello, Minnesota ("Lender"), a public body
corporate and politic.
WITNESSETH:
WHEREAS, Karlsburger Foods, Inc., a Minnesota corporation (the "Borrower") proposes to
borrow the sum of $200,000 from Lender for machinery and equipment acquisition for a production
and warehouse facility located in the City of Monticello; and
WHEREAS, pursuant to the loan agreement of even date herewith between Borrower and
Lender (the "Loan Agreement") Borrower has agreed to repay to Lender $200,000 together with
interest thereon at the rate and within the time stated in Borrower's promissory note of even date
herewith ("Note"); and
WHEREAS, to secure payment of the Note, Lender has required, and Guarantors have
agreed to provide, a guaranty of the indebtedness above described between Borrower and Lender;
and
WHEREAS, Guarantors will receive a direct financial benefit from the loan to Borrower by
Lender pursuant to the Note.
NOW, THEREFORE, to induce Lender to make the loan to Borrower, Guarantors hereby
covenant and agree with Lender, for the benefit of all who at any time become holders of the Note,
as follows:
Section 1.1. Guarantors hereby unconditionally guarantee to Lender for the benefit of the
Holder (as defined in the Note) from time to time of the Note: (a) the full and prompt payment of
the principal of the Note when and as the same shall become due, whether at the stated maturity
thereof, by acceleration or otherwise; (b) the full and prompt payment of any interest on the Note
when and as the same shall become due; and (c) any other amounts due Lender under the Loan
Agreement or the Note. All payments shall be paid in lawful money of the United States of
America. Each and every default in payment of the principal of or interest on the Note shall give
rise to a separate cause of action hereunder, and separate suits may be brought hereunder as each
cause of action arises.
Section 1.2. The obligations of Guarantors under this Guaranty shall be absolute and
unconditional and shall remain in full force and effect until the entire principal of and interest on the
Note shall have been paid, and such obligations shall not be affected, modified or impaired upon the
happening from time to time of any event, including, without limitation, any of the following:
0-1
.
.
.
a. The compromise, settlement, or release of less than all of the obligations,
covenants or agreements of Borrower under the Note;
b. The failure to give notice to any person of the occurrence of an event of
default under the terms and provisions of this Guaranty or the Note executed by Borrower:
c. The extension of the time for payment of principal of or interest on the Note
or under this Guaranty;
d. Any failure, omission, delay, or lack on the part of Lender to enforce, assert
or exercise any right, power, or remedy conferred on Lender in this Guaranty or other
instruments executed and delivered in connection with the loan contemplated thereby, or
any other act or acts on the part of Lender or any of the holders from time to time of the
Note;
e. The default or failure of Guarantors to perform any of the obligations set
forth in this Guaranty.
Section 1.3. No set-off, counterclaim, reduction, or diminution of any obligation, or any
defense of any kind or nature that Borrower has or may have Lender shall be available hereunder to
Guarantors against Lender.
Section 1.4. In the event of a default in the payment of principal of the Note when and as
the same shall become due, whether at the stated maturity thereof, by acceleration or otherwise, or
in the event of a default in the payment of any interest on the Note when and as the same shall
become due, or upon the occurrence and continuance of any Event of Default under the Agreement,
Lender may proceed hereunder; and Lender, in its sole discretion, shall have the right to proceed
first and directly against either Guarantor or both Guarantors for the full amount due without
proceeding against or exhausting any other remedies it may have as to Borrower.
Section 1.5. Guarantor hereby expressly waives notice from Lender or the holders from
time to time of the Note of acceptance of or any reliance upon this Guaranty. Guarantors agree to
pay all the costs, expenses, and fees, including attorneys' fees, which may be incurred by Lender in
enforcing or attempting to enforce this Guaranty whether the same shall be enforced by suit or
otherwise.
Section 1.6. This Guaranty is entered into by Guarantors with Lender for the benefit of
Lender and the holders from time to time of the Note, all of whom shall be entitled to enforce
performance and observance of this Guaranty.
Section 1.7. Guarantors are duly authorized and empowered to execute, deliver, and
perform this Agreement and to borrow money from Lender.
Section 1.8. The performance or observance of any promise or condition set forth in this
Guaranty may be waived, amended, or modified only by a writing signed by Guarantors and
D-2
.
.
.
Lender. No delay in the exercise of any power, right, or remedy operates as a waiver thereof, nor
shall any single or partial exercise of any other power, right, or remedy.
Section 1.9. This Guaranty is made and shall be govemed in all respects by the laws of the
state of Minnesota. Any disputes, controversies, or claims arising out of this Guaranty shall be
heard in the state or federal courts of Minnesota, and all parties to this Guaranty waive any objection
to the jurisdiction of these courts, whether based on convenience or otherwise.
Section 1.10. If any provision or application of this Guaranty is held unlawful or
unenforceable in any respect, such illegality or unenforceability shall not affect other provisions or
applications that can be given effect, and this Guaranty shall be construed as if the unlawful or
unenforceable provision or application had never been contained herein or prescribed hereby.
Section 1.11. All notices required hereunder shall be given by depositing in the u.S. mail,
postage prepaid, certified mail, return receipt requested, to the following addresses (or such other
addresses as either party may notify the other):
To Lender:
505 Walnut Street
Suite 1
Monticello, MN 55362
Attn: Executive Director
To Michael Maher:
To Paul Cserpes:
To Lisa Taylor:
Section 1.12. This Guaranty constitutes the complete and exclusive statement of all mutual
understandings between the parties with respect to this Guaranty, superseding all prior or
contemporaneous proposals, communications, and understandings, whether oral or written,
conceming the Guaranty. Nothing contained herein shall effect or impair Lender's rights under the
Loan Agreement, the Note, or the Security Agreement.
Section 1.13. The obligation of each Guarantor under this Guaranty shall be jointly and
several with the obligations of each other Guarantor, shall be binding upon the heirs and estate of
both Guarantors, and shall survive the death, divorce, or any other change in situation or
relationship of any or all Guarantors.
D-3
.
.
.
IN WITNESS WHEREOF, Guarantors have caused this Guaranty to be executed as of the
date first above written.
Michael Maher
Paul Cserpes
Lisa Taylor
[SIGNATURE PAGE FOR GUARANTY- KARLSBURGER FOODS, INC.]
0-4
/
/!A J
DEVELOPMENT SERVICES
Economic Development Director
Phone:
Fax:
E-mail:
(763) 271-3208
(763) 295-4404
o [lie .koropchakUV.ci .monticello.mn. us
MONTICELLO
Economic Development Authority
in and for the City of Monticello, Minnesota
GREATER MONTICELLO ENTERPRISE FUND APPROV ALlDISAPPROV AL
Preliminary Loan Application Approval.
Business Subsidy Public Hearing
_September 5,2006
_September 19,2006
Loan terms negotiated and agreed upon between
the developer, the lending institution, and the EDA
Executive Director.
Yes
Formal Loan Application and Financial Statements
analyzed by the lending institution or City Staff.
_Analyzes by lender and declared
creditworthy business
Building and Site Plan Preliminary and/or Final Review.
. Building Permit approval or construction connnitment.
Final approval
_Yes, permit issued August 17, 2006_
Loan documentation reviewed and/or prepared by the
EDA Attorney.
_To be prepared by EDA Attorney_
ECONOMIC DEVELOPMENT AUTHORITY APPROVAL OR DISAPPROVAL:
LOAN NUMBER: GMEF No. 025 LOAN APPROVED: Yes
BORROWER: _ Karlsburger Foods, Inc.
ADDRESS: _12450 Fernbrook Lane, Dayton, MN 55327
DISAPPROVED:
LOAN AMOUNT: _Two Hundred Thousand Dollars and no cents_ ($200,000.00)
RATE: YIXED RATE AT 6.25% DATE: _September 5, 2006
TERMS: _Amortized over seven years _Machinery and Equipment Loan
FEE: _$200 Loan Fee due and payable not later than September 29,2006
** OTHER (SECOND PAGE)
A motion was made by EDA Connnissioner _Barb Schwientek to (approve) Greater Monticello
Enterprise Funds in the amount of _Two Hundred Thousand Dollars and No Cents _dollars and cents
to developer _ Karlsburger Foods, Inc.
this_5th _dayof_September_,_2006_.
Seconded by EDA Connnissioner _Ron Hoglund
.
Monticello City Hall. 505 Walnut Street. Suite I. Monticello. MN 55362-8831 . (763) 295-271) . Fax (763) 295-4404
Office of Public Works. 909 Golf Course Rd.. Monticello. MN 55362 . (763) 295-3170 . Fax (763) 271-3272
.
GMEF Approval/Disapproval
Page 2
YEAS: Barb Schwientek
Ron Hogluund, William Demeules,
Tom Perrault, Wayne Mayer,
Darrin Lahr, and Susie Wojchouski
NAYS:
None.
ABSENT:
None.
GMEF disbursed
EDA Treasurer.
by Check No.
CITY COUNCIL MAY REVERSE AN EDA LOAN DECISION WITHIN TWENTY -ONE DAYS OF
EDA APPROVAL. TO CITY COUNCIL Jo Council September 25, 2006
ACCEPTANCE OF TERMS
I (We) hereby accept the terms stated above as approved by the Economic Development Authority in and
for the City of Monticello.
DATED:
Developer
. **
Approval subject to receipt ofletter relative to line of credit in the amount of $200,000 from Wells Fargo.
Creation of 20 full-time jobs and wages as attached. Equity amount at least 10% of ED A Loan or $20,000.
Collateral determined by EDA Attorney (Machinery & Equipment Liens). GMEF No. 025 becomes null
and void if funds are not drawn upon or disbursed within 180 days of date of ED A approval or March 5,
2007. Failure to pay principal and interest when due may result in the loan being immediately called.
Legal fees responsibility of applicant.
Machinery and equipment for placement at new facility under constmction located at 3236 Chelsea Road
West, Monticello, MN, 55362.
.
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12450 Fernbrook Lane
Dayton, MN 55327
DEVELOPMENT SERVICES
Phone~ (763)271.3208
Fax (763) 2li5-4404
Emili I 0 l! iC:.koroDchakraki. mOflticcllo.mn.lls
.-
Economic Development Directof
MONTICELLO
CITY OF MONTICELLO, MINNESOTA
II
JOB AND WAGE LEVEL - EXISTING JOBS
II
Please indicate number of current permanent employees at each level ancl indicate the corresponding benefit level.
Number of .lobs
HOUl'lv \Va~e
Level
Hourlv Value
of Voluntarv
Benefits IS)
Full-time
Part-time
(Excl. benefits)
e-
Less than $7.00
$7.00 to $7.99
$8.00 to $9.99
$10.00 to $11. 99
$12.00 to$13.99
$14.00to$15.99
~\ "leo
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$18.00 to$19.99
3
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\':'\,tiL{D
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_w'\CtrxISTINr; CUR \.1
Mnnticel1n City Hall, 505 \Valnut Sm~ct, SlIi[c J, Monticello, /l.fN 55362-8831 . (763) 295-2711 . Fax.: (763) 295.4404
Office of Public \\forks, 909 Golf Course Rd.. MomlceJJo, MN 55]62 .(63) 295-3170 . Fax: 063; 2--;1-3272
KARLSBURGER FOODS, INC.
12450 Fernbrook Lane
Dayton, MN 55327
DEVELOPMENT SERVICES
Phone (763.1271.3208
Fax (763) :295-4404
Email ollie.kororJChakrZhcl.rr:olltlcello.mr..us
Economic Development Director
MONTICELLO
CITY OF MONTICELLO, iVIINNESOTA
II
JOB AND WAGE LEVEL GOALS - NEW JOBS
II
Please indicate number oFadclitional employees at each level and indicate the corresponding benefit level. Number of
new permanent jobs anticipated to be created over the first two years of relocation or expansion.
Job Creation
Hourlv Wa~e
Level
HOUl'lv Vallie
oFVoluntarv
Benefits (S)
FlIll-time
Pan-time
(bcl. bendits)
e-
Less than $7.00
$7.00 to $7.99
$8.00 to $9.99
$10.00 to $11.99
$12.00to$13.99
2.
$14.00 to $15.99
L';;l ~i c) 0
$16.00to$17.99
$18.00 to $19.99
;J..
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Monticello City Hall. 505 \.Valnu! Street, Suite L 1\.'lonticello. i\'IN 55362-R83[ . (163) 295-271 r ' Fax: (763) 295-4404
Oftice of Public \.Vorks, 909 GolfCollr"e Rd., Monticello, ;vIN 55.362' O(3) 295.3170' Fax (763:.271-.1.272
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09/06/2006 10:19
7633231745
KARLS BURGER FOODS
FAX NO. B126673622
AUG-31-2008 THU 04:55 PM WELLS FARGO ANOKA
II
MAC N9214-ll20
2015 n,l,d ^vC!nu~ North
AnolCEJ, MN 55303
Twin Cilielll Buainl'td Da"Jc.jng
Anoia. Office
Av....:J ~ or....U-e...
August 31, 2006
To Whom It May Concern:
RE: Karlsburger Foods Inc.
12450 Fembrook LN N
Dayton MN 55327
The above named company currently has slow six figure revolving line of credit
available for the purchase of equipment.
Karlsburger Foods Inc. h!\S been a vatuI'd customer ofilie bank since October, 1968 and
their accounts and borrowings have been handled as agr=d. If you require any additional
infonnation, please give me a call lit 612-316-1933.
Sinc;erely,
~d/
Tl'd Verlee
Assistant Vice President
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