Agenda - Council - 04/10/2001 - Laserfiche WebLink

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CASE # _~_~__ CONSIDER ENTERING INTO AN INTERCREDITOR AGREEMENT REGARDING SYSTEMATIC REFRIGERATION, INC. By: William K. Goodrich, City Attorney Background: In July 2000, the City entered into an agreement for Loan fi.om Minnesota Investment Fund (the "Loan Agreement") with Systematic Refrigeration, Inc./Mateski Properties, LLC (the "Developer"). The Loan Agreement provided that the City was to lend $300,000.00 to Developer. The funds were granted to the City from the Minnesota Department of Trade and Economic Development as a Minnesota Investment Fund Grant (the "MYF Grant"). The Loan Agreement provided that the loan was to be secured by the equipment purchased with the loan proceeds. The City required the Developer to execute a Security Agreement and Financing Statements in order to perfect the lien on the equipment. The Financing Statements provide that the City is to have a lien on all equipment owned by the Developer. The Developer is now negotiating to secure additional financing and the new lender is requesting that the City execute an Intercreditor Agreement which will limit the City's lien to only that equipment purchased with the original loan proceeds. The first loan payment was due November 1, 2000, which was paid together with all subsequent monthly payments to date. The current balance due on the Note is $289,210.39. The purchase price of the equipment purchased was $249,300.99. Recommendation: Staff recommends entering into the Intercreditor Agreement provided (1) that Developer reduces the loan to $250,000.00 by an inm~ediate principal reduction payment of $39,000.00 and (2) that all prior secured creditors subordinate their interest in the equipment to the City. Council Action: Motion to authorize the City's Mayor and City Administrator to execute an Intercreditor Agreement with Bremer Business Finance Corporation providing that the City subordinate its lien on the Systematic Refrigeration, Inc. personal property except for the equipment purchased with the proceeds of the $300,000.00 Promissory Note between the City and Systematic Refrigeration, Inc. and Mateski Properties, LLC dated July 5, 2000, contingent upon (1) Systematic reducing the Note to $250,000.00 principal balance and (2) all prior lenders subordinating their lien positions in the Equipment to the City, and subject to the City Attorney's finat approval as to form and substance. Review Checklist: City Attorney City Administrator Finance Director CC: 04/10/01 -215-