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HomeMy WebLinkAbout89-1011 Peele 89-lokt MEMORANDUM OF AGREEMENT THIS MEMORANDUM OF AGREEMENT is between the City of Elgin, Illinois (the "Issuer") and Francine Peele and Gordon Peele (collectively the "Borrower") . 1 . Preliminary Statement. Among the matters of mutual inducement which have resulted in this Agreement are the following: (a) The Issuer is authorized under its home rule powers, as set forth in the 1970 Constitution of the State of Illinois, Article VII, Section 6, and the provisions of an Ordinance adopted on February 13 , 1980 , as from time to time supplemented and amended (the "Ordinance") , to issue economic development revenue bonds for the purpose of financing, in whole or in part, the cost of the acquisition, purchase, construction, reconstruction, improvement, betterment or extension of any economic project and to enter into a loan agreement with the Borrower pursuant to which the proceeds of such revenue bonds may be lent to the Borrower to finance the costs of the construction and equipping of such an economic development project. (b) The Borrower wishes to obtain satisfactory assurance from the Issuer that the proceeds of the sale of the economic development revenue bonds of the Issuer will be made available to them to finance the costs of constructing an approximately 120, 000 square foot building and equipping the same to be located on Fox Lane, near the northwest tollroad, in Elgin, Illinois for use in the manufacture of sports paraphernalia (the "Project") . (c) Subject to the conditions contained herein and to the due compliance with all requirements of law, the Issuer, by virtue of such statutory authority as may now or hereafter be conferred by the Ordinance, will issue and sell its economic development revenue bonds in an amount not to exceed $3 ,500 , 000 (the "Bonds") to finance the costs of the Project. 2 . Undertakings on the Part of the Issuer. Subject to the conditions above stated, the Issuer agrees as follows: (a) That it will authorize the issuance and sale of the Bonds pursuant to the terms of the Ordinance as then in force. (b) That it will, at the proper time and subject in all respects to the prior advice, consent and approval of the Borrower, adopt or cause to be adopted, such proceedings and authorize the execution of such documents as may be necessary and advisable for the authorization, issuance, and sale of the Bonds as aforesaid, and that it will enter into a loan agreement whereby the Borrower will pay to or on behalf of the Issuer such sums as shall be sufficient to pay the principal and interest and redemption premium, if any, on the Bonds as and when the same shall become due and payable. 3. Undertakings on the Part of the Borrower. Subject to the conditions above stated, the Borrower agrees as follows : (a) That they will use all reasonable efforts to find one or more purchasers for the Bonds . -2- (b) That contemporaneously with the delivery of the Bonds they will enter into a loan agreement with the Issuer under the terms of which the Borrower will obligate themselves to pay to the Issuer sums sufficient in the aggregate to pay the principal of and interest and redemption premium, if any, on the Bonds as and when the same shall become due and payable. 4. General Provisions. (a) All commitments of the Issuer under Paragraph 2 hereof and of the Borrower under Paragraph 3 hereof are subject to the condition that on or before December 31 , 1989 (or such other date as shall be mutually satisfactory to the Issuer and the Borrower) , the Issuer and the Borrower shall have agreed to mutually acceptable terms and conditions of the loan agreement and of the Bonds and other instruments or proceedings relating to the Bonds. The decision not to approve or agree to any term or condition of any document or not to take any action prior to issuance of the Bonds shall rest solely within the complete discretion of the parties to this Agreement. (b) If the events set forth in (a) of this Paragraph 4 do not take place within the time set forth or any extension thereof and the Bonds in an amount not exceeding the amount stated above are not sold within such time, the Borrower agrees that they will reimburse the Issuer for all reasonable and necessary direct out-of-pocket expenses which the Issuer may incur at the Borrower ' s request or as a result or arising out of this Agreement including but not limited to the payment of attorney and other consultant fees arising from the execution of this Agreement and the performance by the Issuer of its -3- obligations hereunder, and this Agreement shall thereupon terminate. IN WITNESS WHEREOF, the Issuer has entered into this Agreement by its officers thereunto duly authorized and the Borrower has executed the same as of the kk day of C,- C , 1989. CITY OF LGIN, ILLINOIS Mayor J (SEAL) ATTEST: City Clerk • By ���.-L�-, � �.� FRANCINE PEELE Y GORDON PEELE -4- September 11, 1989 MEMORANDUM TO: Mayor and City Council FROM: City Manager SUBJECT: Industrial Development Bonds for P and K Products Company, Inc. PURPOSE: To submit a recommendation from the Elgin Develop- ment Commission (EDC) to approve an application to issue industrial development bonds for P and K Products Company, Inc. amounting to $3 ,480,000 (maximum City allocation) . BACKGROUND: The staff has been assisting representatives of P and K Products for the past six months. A formal applica- tion was presented in July, 1989 but lacked the approved financing and bond counsel. However the EDC reviewed the application pending these matters being resolved. The letter of credit, financing and bond counsel was submit- ted to the EDC at the September 8th meeting. Thus, their attached recommendation. FISCAL IMPACT: None RECOMMENDATION: A Resolution of Intent is on the regular agenda of the council meeting in the amount of $3 , 480,000 . 411P / flames J. ook, City Manager JJC/JHB/daw lel AREA CHAMBER OF 24 East Chicago Street, P.O. Box 648 COMMERCE Elgin. Illinois 60121-Area Code (312) 741-5660 September 8 , 1989 The Honorable George VanDeVoorde Mayor, City of Elgin 150 Dexter Court Elgin, IL 60120 Dear Mayor : The Elgin Development Council approved the application of P & K Products Co. , Inc . for $3 , 500 , 000 of industrial development bonds, at its September 8th meeting. P & K Products began its operation in Elgin 1967 , in a very small building and is now one of the largest manufacturers of its kind in the world. We are requesting the City Council ' s approval of this application. sincerely, M. Edward Kelly, C E Executive Vice President MEK:bc C111t1u)I.I.FINANCIAL GROUP, INC. 2340 North River Road • Suite 309 • Des Plaines, Illinois 60018.312/299-9440 HAND DELIVER July 11 , __ : 3 Hon. Jim Bolerjack, Finance Director City of Elgin 150 Dexter Court Elgin, Illinois 60120 Re: Indu.= _al Re-r, .ue L•Jr_...J P&K rr :uucts Cj. , Inc . Elgin , :llino�� Dear Mr . 3cler; ack: behalf of cur clients , Gordon and Francine :- -.-e cf _ r:. Products Co. , we are pleased to make formal appl_cat_ .._ _ the 2_ _v of Elgin for industrial Re'._nue Bond financing in the amour_ :_ $3 , 3C : . 00 : . _s acoli:a=i _._ is being made based upon -;c_ that Cit of Elgin' s total fee will be $2 , 330 , and, acctr�_.gly, _. cneck for $2 , 300 accompanies this application. PSK Products has been a long-term corporate res _::ent in Elgin, having been in your city for twenty years . P&K' s growth has been e_ _losive , and that is why they re:vire a new building at this time . As will see , P&K manufactures sports novelty iters for baseball , football , hockey an: basketball teams . At this point in time , the r_e.v product brochures are not yet ready, so we can only include one set of older brochures , but even these will show you the product line . Carroll Financial Group , Inc. has been retained td secure the IRB financing. Although we do not have a loan commitment at this time (we were just re- tained in the last few days ) , we believe that financing will be readily available . When you review the enclosed finanl details, we are certain that you will agree . The application is be_n 7..ae at tnis time , per pre- vious discussions, so that Elgin' s "cap" mc.._ _ be available to P&K. We will ....al. _ _ cur questions and comments a_.: _ _ .;erd to - or';int- with you and other City Officials on this most w,t2thY-lils project. Very truly yours , CARROLL F:N:y`JCIAL GROUP, INC. ARC: ntm ALAN R. ?RESID_N • P&K Products Co. , Inc. 1575 Holmes Road Elgin, Illinois 60123 312-695-7070 Francine A. Peele Gordon A. Peele P&K Products has been a long time employer within the City of Elgin. For the last 20 years they have been in the business of manufacturing novelty items under various licensing agreements. The items they have have produced and the nature of the business has changed during the years, but they are a major producer of certain novelty items licensed by the major sports leagues . They have these license agreements with the NFL (football) , NBA (basketball) , NHL (hockey) , National Baseball League , various college teams and other agreements with other brand name product. The products they produce under these license agreements are wastepaper baskets , clocks , helmets , decals, popcorn containers, coolers , lamps , snack sets, party bowls, wall decors and a host of other products . The company has experienced management headed by Gordon Peele , (100% stock- holder who started the business ) , his wife , Francine Peele , a national sales manager , and a manufacturing head, all of who have been with' the firm for many years. The company sells its products nationwide through sales and trade shows with over 5, 000 accounts , all of the accounts are less than 5% of their volume . The company' s business has been tremendous having increased sales from approximately $1, 600 ,000 in the year ended 7/31/85 to $4 , 600 ,000 in the year ended 7/31/38 . The interim financial statement for the period ending 4/30/89 was $5, 100 ,000 and based on internal figures it appears that year end 97/31/89 ) value will reach $6,200 ,000 . Backlogs are growing and new products are coming on line every day. The company believes that the year ending 7/31/90 will reach $9 .000 ,000 with volume increases of at least $3 ,000 ,000 or more projected for the next few years thereafter . The firm just completed a move a few years ago into their current 53 ,000 sq. ft. building at 1575 Holmes Road and are in the process of adding a 10 ,000 sq. ft. mezzanine . Even with this additional space , P&K will not be able to handle their volume without a major expansion. They are also renting 10 ,000 sq. ft. for storage and warehousing. The company has a long time history in Elgin and wishes to remain in the community. They have operated at 970 Elizabeth Street where they began their manufacturing operation, 640 Church Street for several years, and currently at 1575 Holmes Street. .They have purchased a parcel of land on Fox Lane and the Northwest Toll Road next to the proposed Panasonic site and wish to build a 120 ,000 sq.ft. manufacturing facility plus the purchase of equipment to accomplish this expansion. The building to be constructed is similar to the building now occupied at 1575 Holmes Road. The building earned the company an award at the most recent Elgin Chamber of Commerce annual meeting for its appearance . The following details are provided in accordance with your application entitled "Review of Industrial Development Bond Requests" : 1. Economic A. Project Costs (approximatel Land (actual closing costs ) $1 , 175 ,000 Construction Costs 3, 240 , 000 Equipment 225 ,000 Soft Costs 225,000 Misc. 55 ,000 Total Project Costs $4 , 900 ,000 Equity 1 , 400 ,000 IRB Loan Request $3 , 500 ,000 B. Financial Stability 1. Prospectus - N/A 2 . Report to Stockholders N/A 3. 3 year statements - attached 4 . Intermim Financial Statement - attached 5. D&B Report - not available 6. Lender - Manufacturers Bank on construction loan; IRB lender to be determined 7 . Not available 8 . Not available 9, 10 , 11. See below 12. 20 years C. Use Office and light manufacturing - the property will be similar to the project at 1575 Holmes Road which is general purpose in nature . D. Employment and Benefit to the Community P&K Products is a long term employer in the City of Elgin that has been a good corporate citizen in the community. Their present employment is approximate 56 with payroll estimated to be approx- imately $1, 600 ,000 for the year ended 7/31/89 . It is believed that the employment will proportionately raise by 30 to 35 employees in the first year of complete operation in the new facility. There will be additional jobs created during the construction phase of the project. Employment will continue to increase as the projected volumes increase . The employment created will come primarily from the Elgin area. The majority of the current employment (70% ) is for clerical and basic labor with the balance (30% ) being professional (graphic artist and designers ) and supervisory. The employment is basically full-time help. Enclosed is an article on the value of 100 jobs to the community that was prepared a few years ago. The company is in the manufacturing business and does not collect Retail Occupation Tax. Real estate taxes on the real estate when the building is completed should yield a gross amount of approximately $80 ,000 per year . 2 . Environmental The property is approximately 7 . 2 acres of land on Fox Lane and the Northwest Tollroad. A photocopy of the Plat of Survey of the real estate involved is attached for your reference . The property is presently zoned under the City of Elgin zoning as M-1, Manufacturing District. The attached copy of the Plat of Survey shows the access to Fox Lane which extends Eastwara to McLean Boulevard and Westward to Randall Road. The plant will be approximately 120 ,000 sq.ft. of space similar in design to the current facility. The company produces no air toxic substances, odor , noise or glare and the operation is such that they require no pollution control devices . They are prepared to pay sewer costs for sewer extension to the facility as part of the project. The use will be in full compliance with all City codes and ordinances . They ave always been in compliance with the codes and ordinances of local municipalities at their present facility. The project will next to the new Panasonic site . 3. Community Service The only increase in traffic that is anticipated in the area would be for the approximately 30 to 35 employees that would be hired. It is anticipated that this would produce approximately 38 more automobiles and no new truck traffic. Since they are within a few hundred feet of the present facility, they are aware that the present street capacity is adequate to carry the additional load of traffic that would be produced. In so far as utility requirements are concerned, they do not use any large amount of water per day in the operation. Water is available at the site. There is no need for line extensions. In so far as sewage is concerned, they will have to extend the line from its present location to the plant. Normal sewage will be discharged from the plant and.-'. there are no pretreatment requirements . Gas and electric utilities are presently at the site . Any increases in enrollment in local schools will be negligible .