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HomeMy WebLinkAbout94-33 RESOLUTION N0.94-33 • Resolution Authorizing a Loan Not To Exceed $225,000 In Urban Development Action Grant Repayment Funds To Assist Virginia Church Furniture In The Purchase of Equipment, Leasehold Improvements and a Working Capital Line of Credit to allow for the company's expansion and increased employment WHEREAS, Virginia Church Furniture (VCF) has applied for a UDAG loan, in the amount of $225,000 for the purchase of equipment, leasehold improvements and a working capital line of credit for their existing business located in the Town of Pulaski to allow for the company's growth and expansion; and WHEREAS, according to the UDAG application and business plan, the project's budget includes: Purpose Amount Term Purchase of Equipment and Vehicles $46,600 5 years Leasehold Improvements $42,500 5 years Working Capital Line of Credit $135,900 1 year from disbursement TOTAL PROJECT ~,~ $225,000 WHEREAS, VCF must comply with the attached budget, which is part of this ordinance. Minor adjustment may be made within a category (Equipment,. Leasehold Improvements, • Working Capital), but in no case may the category amount be exceeded without the prior approval of Town Council. WHEREAS, the working capital line of credit will be disbursed on a drawdown basis and additionally secured by the contract. Each disbursement shall have a term of one-year from the time of disbursement. The drawdown method for the working capital line of credit is detailed in Section 6 below. WHEREAS, due to the. high number of jobs created and retained, Town Council is providing VCF credit for the owner's previous investment of 10 percent and the Bank's existing participation of 45 percent of the total project cost. WHEREAS, the Town has available certain Urban Development Action Grant Repayment Funds, being repaid by Pulaski Furniture Corporation and Magnox-Pulaski, Inc., and these funds have been segregated and designated for specified activities including economic development and downtown revitalization. WI~REAS, due to the complexity of this loan, Town Council directs the Town Manager to find a qualified financial institution to administer the loan and drawdown requests. Any fees associated for the bank's administration will be the xesponsibility~ of VCF. NOW THEREFORE, be it RESOLVED by-the Town Council of the Town of Pulaski, Virginia, • sitting in regular session on December:-20,1994; that: • Section 1. The amount not to exceed $226,000 Pram the Urban Development Action Grant Repayment Funds, be and hereby is, appropriated for expenditure, to be loaned to Virginia Church Furniture for the purchase of equipment, leasehold improvements and a working capital • line of credit for the existing industry located in the Town of Pulaski. - Section 2. Said loans are contingent upon Virginia Church Furniture upon the Town having a first position on newly purchased equipment and trucks and a shared first position on all inventory, raw material and in-process and finished goods. Working Capital line of credit loans will also be secured by the original contracts used to obtain the disbursement. President Don Beverly and Vice-President Tim Thompson will personally guarantee the UDAG loans. Their wives will sign off on all joint assets of the company but the wives will not personally guarantee the loan. The loan is also secured by a first deed of trust on a 12,475 square foot parcel owned by VCF in the Town of Dublin (Deed Book 445, page 56). Section 3. The loan shall bear an interest rate of two-thirds of the prime lending rate at the time of loan closing. The term'for the equipment and leasehold improvements shall not exceed 5 years. The term for the working capital line of credit disbursements shall not exceed one-year from the time of disbursement. The interest rate for the initial 12 months of the loan shall be two-thirds of the prime lending rate at the time of loan closing. As an incentive for job creation, during years 2 through 5 of the loan, the Town will reduce the • interest rate by 0.036 percent for each additional full time job created and maintained in the Town of Pulaski. The baseline number of full time jobs will be measured as of the day of loan closing. The number of full time jobs created is equal to the average number of full-time positions during the preceding 12 months over and above the baseline number established at loan closing. Section 5. Each disbursement for equipment and leasehold improvements will be made on a drawdown basis. In order to obtain a drawdown, VCF must submit a copy of the invoice, bill or other acceptable documentation. The loan administrator will issue a reimbursement for the exact amount of the invoice. The disbursements must substantially be in conformance with the attached budget and in no case may a category amount be exceeded without the prior approval of Town Council. Section 6. Each disbursement for the working capital line of credit will be made on a drawdown basis as .follows: a.-VCF would submit a Dopy of a contract(s) and request a drawdown on the working capital- line of credit; b. The Town would allow VCF access to up to .50 percent of the total contract amount; a VCF would secure. the amount accessed by the contract and use it to buy materials for that • specific order. Since,they are paid upon delivery, VCF would be in a position to repay that specific drawdown immediately. d. VCF would be requu+ed to repay each drawdown in one year or less. e The total amount of the line of credit will not exceed $135,900 over five years. r n ~~ry .. ~ 'J Revised n LJ • Vir inia Church Furniture UDAG Re uest Proposed Budget (Revised) Equipment: 846,600 Amount Term 24' Diesel Van/Used $ 18,000 5 ears Forklift with Road Tires $ 11,000 5 ears Com uter U date $ 2,100 5 ears Borin Machine $ 5,500 5 ears Sin le head Router $ 10,000 5 ears Leasehold Improvements: $42,500 Roof Buildin No. 1 $ 7,000 5 ears Roof Buildin No. 3 $ 9,000 5 ears Roaf Re air No. 4 2,500 5 ears Enclose sides of Buildin No. 2 $ 16,000 5 ears Buildin No.4 $ 8,000 5 ears Working Capital: $135,900 Workin Ca ital/Invento Existin $135,900 5 ears TOTAL $ 225,000 Page 1 • Section 7. Due to the complexity of the loan, a bank will administer the loan, including ' approval of the requests for payment, calculation of interest xate, calculation of number of jobs and maintenance of the budget. Any and all fees associated with the bank's administration are the responsibility of Virginia Church Furniture. Section 8• In no case may the UDAG funds be used to retire existing debt or to pay off creditors. c 'o .The loan includes a restriction that their salaries not be increased by more than 5 percent per year over the term of the loan. Additionally, there is a cap on bonuses, which cannot exceed 25 percent of profits annually. Section 10. The Town Manager and Town Attorney are hereby authorized to draft, approve, and/or exebute appropriate loan documents not inconsistent with the terms of this resolution. Such documentation may include appropriate provisions for the protection of Town, including but not limited to reservation of the right of the Town to withhold payment or accelerate the maturity of indebtedness for good cause shown. Section 11. Nothing contained herein shall be deemed a pledge of the full faith and credit of the Town, nor shall it create a general obligation of the Town, nor shall any monies be loan from the General Fund of the Town. Section 12. Tbis ordinance is effective upon adoption and is adopted by recorded vote of the Town Council of the Town of Pulaski, Virginia, on this 20th day of December 1994 as follows: John Johnston ,fie John W. Stone ~e Bettye H. Steger ~e W. Edgar Hale A y e Roy H. D'Ardenne, Jr. A Y e W.H. Schrader, Jr. A y e Alma H. Holston Ay_e Elbert G. Black ~e TOWN OF ULASI VIR NIA Bye ..-L_ Andrew L. Graham, Mayor Attzst: R h A. Harrell, Clerk of Council b:a~dvcf •' -{