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Badger Ventures,LLC Micro Loan <br /> EDA Meeting April 11,2005 <br /> Page 2 of 2 <br /> "The participation agreement shall include the provision that if the borrower defaults on the <br /> • loan, the EDA will collect all further payments during the default based on a pro rata basis <br /> with the participating bank, excluding the distribution of proceeds resulting from the <br /> foreclosure on collateral." <br /> The provision was added with the intent that if a company were to get behind in loan <br /> payments that the payments would be distributed on a pro rated basis. <br /> The Badger Ventures,LLC participation loan is being structured whereas tax rebate <br /> payments, as provided from the City to The Bank of Elk River through an Assignment, <br /> would be dedicated to the payment of the EDA Micro Loan. The Bank has agreed that all <br /> collections of tax rebates will be remitted to the EDA. Paragraph 4 of the Agreement <br /> further indicates that under an event of default any proceeds other than tax rebates may be <br /> applied on a pro rata basis. <br /> At the time of the Micro Loan Policy amendments the EDA did not contemplate a situation <br /> where the EDA could be senior with respect to tax rebate collections and subordinate with <br /> respect to other collections. In this case that structure appears to provide the EDA adequate <br /> protection that its portion of the loan will have a sufficient source of revenue to cause it to <br /> be repaid. <br /> Requested Action <br /> Staff recommends that the EDA and Council approve a waiver from this provision of the <br /> • Micro Loan Policy for the Badger Ventures,LLC Micro Loan. <br />