By Sara Quam
The Luverne Economic Development Authority is presenting a financial package to Netbriefings if the City Council approves.
It is necessary for the LEDA to go through the council because the LEDA doesn't have the $250,000 that it is offering as a loan to Netbriefings.
At its Tuesday morning meeting, the LEDA discussed the outline of terms that Netbriefings would be subject to.
Mayor Glen Gust said, "Our $250,000 compared to the $5 or 6 million heÕs coming up with is ..."
"... a drop in the bucket," LEDA member Bob Latham finished.
Netbriefings is an Internet Webcasting services company that announced June 21 it will expand in Luverne. The expansion will be in the form of a new customer and product service center if the final deal goes through.
Gary Anderson, CEO of Netbriefings, is the son of Wayne and LaVonne Anderson, rural Luverne.
Netbriefings came to the city's attention through Patrick Pelstring, with whom the city contracts to help recruit businesses to Luverne.
Keith Erickson, LEDA member and City Councilman, attends many of the recruitment activities. He said, "Of all the various companies that IÕve sat in on and visited with, it has the most potential."
The LEDA is also prepared to offer a very low interest rate to the company.
"We feel it would be a benefit to the community more than an interest payment," Erickson said.
The proposal
Amount: $250,000
Term: 120 months at $2,820 a month
Interest rate: 0% years 1 and 2 (payments deferred); 2% fixed over remaining life of the loan.
(The LEDA reasoned that because the first two years of a company's existence is so crucial, stopping interest accumulation would help ensure the business stays in Luverne.)
Payment Terms: Two years principal and interest deferred at no interest. Loan repayment beginning in the 25th month, continuing for 96 months
Collateral: Third position on accounts receivable; third position on equipment; first position on intellectual property/patent
Guarantees: Personal guarantees of $75,000
Warrants: LEDA receives 25-percent warrant coverage. In consideration for the terms of the loan, LEDA receives 62,500 warrants to purchase Netbriefings stock at $1 per share. LEDA can exercise the warrants at any point during the term of the loan, but the warrants expire 30 days after the date of pay-off of the loan.
Employment projections: Minimum expectations of five employees by the end of the first year and a target objective of 35 employees at the end of the fifth year to the 10th year.
If the company employment does not meet the minimum expectations, the interest rate will increase by 2 percent for the following year. The interest rate rise may be cumulative, such that if Netbriefings never meets its minimum annual employment expectation, the interest rate will rise to 12 percent at the end of the fifth year and remain at 12 percent until the loan is paid off.
If the company employment exceeds 35 employees, the interest rate will be reduced to 0 percent and stay at that rate as long as the company maintains 35 or more employees in Luverne.
Provided the company continues to be an employer in Luverne, an employment average will be conducted from the time the company reaches 35 employees until the end of the 10-year term. Based on the average, the company will be awarded a grant of $1,500 for each employee over the 35 mark.
If the company fails to employ the minimum expectations in Luverne, the LEDA shall have the right to declare default in the loan agreement, the balance of the loan shall become due and payable and the interest rate shall immediately rise to 12 percent until fully paid.
If the company is sold to another company and the operation is eliminated in Luverne, the above loan default terms will apply and the company shall be liable for a penalty payment equal to 25-percent of the outstanding loan balance.