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HomeMy WebLinkAboutResolution #1195RRSOLIITION NO. 1195 A RESOLUTION APPROVING A MEMORANDUM OF UNDERSTANDING BETWEEN THE CANTON INDUSTRIAL CORPORATION AND THE CITY OF CANTON WHEREAS, it is in the best interest of the City of Canton to enter into a letter or memorandum of understanding as set forth in Exhibit A hereto attached. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF CANTON, Fulton County, Illinois as follows: 1. That the attached Exhibit A, being a Memorandum or Letter of Understanding dated March 16, 1987 is hereby fully incorporated by reference. 2. That the attached Exhibit A is hereby approved by the Canton City Council and the Mayor and City Clerk are hereby authorized and directed to execute and deliver same on behalf of the City of Canton. 3. That this Resolution shall be in full force and effect immediately upon its passage by the City Council of the City of Canton, Fulton County, Illinois and approval by the Mayor thereof. PASSED by the City Council of the City of Canton, Fulton County, Illinois at a special meeting this 19th day of March 1987 upon a roll call vote as follows: AYES: Alderman Zilly, Steck, Sarff, lJorkman, Kohler, May and Chapman NAYS: None ABSENT: Alderman Kovachevich APPRO ED: Donald E. Edwards, Mayor. ATTEST: Nancy( bites, City Clerk. ~ fi CANTON INDUSTRIAL CORPORATION March 16, 1987 City of Canton 210 East Chestnut Canton, IL 61520 RE: Loan Agreements with The Canton Industrial Corporation Gentlemen: In connection with the closing of our books for the year ended December 31, 1986 and the preparation of an amended prospectus for submission to the Securities and Exchange Commission with respect to Warrants to purchase one Common Share of the Corporation (the "Warrants") that are currently outstanding, we are writing to propose to you amendments and/or waivers with respect to several provisions in the Loan Agreement (DCCA Grant) between the City and the Corporation dated as of August 31, 1984 (the "DCCA Loan") and the Loan Agreement (HHS/OCS) between the City and the Corporation dated as of September 21, 1984 (the "HHS Loan") and related documents (collectively, the "Loan Agreements"). 1. Payments of principal and interest Because we were negotiating a possible exchange of Common Shares of the Corporation for all or part of the outstanding indebtedness of the Corporation to the City at the time, the Corporation did not make scheduled payments of principal and interest on December 1, 1986 pursuant to the terms of the HHS Loan and the DCCA Loan and the related Promissory Notes. We do not presently intend to pursue our discussions with the City of a possible equity-for-debt exchange. However, in the short term, it would be in the best interests of the Corporation if cash could be conserved for operations rather than used for debt service. Accordingly, we request that the City waive the defaults in payment of principal and interest due December 1, 1986 under the HHS Loan and the DCCA Loan and the related Promissory Notes, and we propose that the pay- EXHIBIT A, RESOLUTION N0. 260 East Elm Street ~ canton Illinois 61520 ^ (309) 647-4232 City of Canton Page 2 ment schedules set forth in Section 2 of the HHS Loan and the DCCA Loan and in the related Promissory Notes be modi- fied by adding the installments of principal and interest that were due and payable on December 1, 1986 to the installments due and payable on June 1, 1987, at which time both the amounts originally due and payable on December 1, 1986 and the amounts currently scheduled for payment on June 1, 1987 will be due and payable. 2. Warrant Exercise Proceeds. In a letter to the City dated April 10, 1986 (the "Letter Agreement"), the Corporation agreed to apply certain proceeds from the exercise of Warrants to purchase Common Shares of the Corporation issued in connection with the Corporation's public offering (the "Warrant Exercise Proceeds"~ to the payment of indebtedness of the Corporation to the City. To date, the Corporation has received $4,500 in Warrant Exercise Proceeds. According to paragraph 2 of the Letter Agreement, the Corporation should have paid these Warrant Exercise Proceeds to the City on the first business day of the month following the month in which they were received by the Corporation. The Corporation failed to do so because it was under the mistaken impression that the Letter Agreement did not require payments to the City until the Corporation had received an aggregate of $200,000 of Warrant Exercise Proceeds. The Corporation requests that the City waive this default and proposes that it not be required to make any payments of Warrant Exercise Proceeds to the City until June 1, 1987, at which date the Corporation will pay Warrant Exercise Proceeds to the City up to the amount agreed to be paid in paragraph 1 of the Letter Agreement. 3. Building Improvements. The Real Estate Mortgage from the Corporation to the City dated Septem- ber 19, 1984, securing the amounts loaned under the HHS Loan provides that the Corporation may make "changes and alterations in or to and replacement of the buildings, structures or improvements included in the premises encumbered by this mortgage," but "no changes or alterations involving an estimated cost of more than $50,000.00 for all such changes and alterations in the aggregate while the mortgage shall remain unsatisfied of record, shall be undertaken without mortgagee's prior written consent, which consent shall not be unreasonably withheld. ." The Corporation has interpreted this provision as applying only to changes or alterations that were capitalized on the Corporation's books rather than currently expensed and, accordingly, did not consider that it had exceeded the $50,000 limitation in 1986. The Corporation's accountants, e City of Canton Page 3 in connection with their year-end audit of the Corporation's books, have advised the Corporation that certain items of expenditure that the Corporation had initially intended to expense can be capitalized and that it would be advantageous from a tax and financial accounting standpoint to do so. Capitalizing these expenditures, however, causes the changes and alterations to exceed $50,000 in the aggregate through December 31, 1986, resulting in a technical default under the provision described above. The Corporation accordingly requests the City to waive compliance with the above-described prior written consent requirement for 1986 and prior years, so as to eliminate this default. The agreement of the City to the waivers and modifications described herein will facilitate the closing of the Corporation's books for 1986 and, by eliminating all defaults under the Loan Agreements and related documents, will increase the likelihood that the Corporation will receive significant proceeds from the exercise of outstand- ing Warrants. If the proposals set forth herein are agree- able to you, please sign the enclosed counterpart of this letter and return it to the undersigned. Your signature will constitute your approval of the amendments and modifications to the Loan Agreements, the Letter Agreement and the related Promissory Notes set forth herein and your waiver of all presently existing defaults described herein. Very truly yours, THE CANTON INDUSTRIAL CORPORATION Accepted and agreed to: CITY OF CANTON, an gy ~ ~ Illinois municipal Eliza th A. Foley, corporation Presi ent By Mayor Attest Clerk