Document Ogden_doc_d842e40a07

Page 1 of 4 Ogden City Council Work Session: March 21, 2017 DESTINATION EXPRESS, LLC PROJECT ($500,000) - Approval of a Special Economic Development Project Valued Over $100,000 Purpose of Work Session: To Review and Discuss a Proposed $500,000 Project - Destination Express, LLC, a Startup Travel Services Provider Executive Summary The Administration will reviewed a proposed Special Economic Development Program project valued over $100,000. Destination Express, LLC, a startup travel services provider, is seeking a $500,000 loan from the City’s CDBG funds to cover startup costs including the purchase of software that will allow the company to book airline flights as well as hotels, cruises, and other typical travel package amenities. Per the Program Guidelines, Council approval is required. Background February 28, 2017 The Council Office received an Administrative Transmittal requesting the Council adopt a Resolution approving the Destination Express, LLC project for $500,000. Central Business District Revitalization Program (New name of Economic Development Projects Program under consideration) The Central Business District Revitalization Program originated in 2005 as the 25th Street Infill Development Program. The Program was initially designed to facilitate the elimination of blight and complete infill construction projects in the 25th Street Historic District. The Program has undergone several changed over the years. In 2010, it was expanded to include all of the central business district and the name was changed to the Central Business District Infill Program. In 2012 the program was expanded to allow the use of funds to promote business expansion and capital development in the area. The changes also allowed CDBG funds to be used as a loan guarantee. ---PAGE BREAK--- Page 2 of 4 Ogden City Council Work Session: March 21, 2017 The Council is currently considering additional changes to the Program. Proposed changes include changing the name to the Economic Development Projects Program and allowing the use of funds citywide. A summary of the changes to this Program is attached. Destination Express, LLC Destination Express, LLC (Destination) is a startup travel services company with two principals, Randall A. Hunt of Clearpath Strategies, LLC, and Bruce Stratford of Stratford Legal P.C. Destination will be working with other local companies--such as Get Away Today--to provide complete travel packages for customers. In order to bring added value to the travel service industry, Destination intends to purchase software that will allow it to book not only hotels, cruises, and theme parks, but also air travel through major airlines and charter air service providers. Providing charter services will allow Destination to provide a more controlled experience for its customers. Without this ability, customers who purchase travel packages are at the mercy of airlines and therefore subject to travel delays and cancellations. Destination hopes that by providing a more controlled experience customers will have a better overall travel experience. If the City is successful in enticing another airline to the Ogden-Hinckley Airport, Destination intends to utilize that air service to create packages for its northern Utah and other regional customers. Proposal The Ogden City Business Development Division has been assisting Destination Express, LLC with its efforts to create a new travel service in Ogden City. Staff are proposing to provide a loan through the Business Information Center (BIC) using funds set aside in the 2017 Annual Action Plan for the Special Economic Development Projects Program. Terms and conditions of the loan are as follows: Lender: Ogden City Borrower: Destination Express, LLC. Loan Amount: $500,000 ---PAGE BREAK--- Page 3 of 4 Ogden City Council Work Session: March 21, 2017 Interest Rate: 5% Security: All Business Assets, Including Software System Source of Funds: CDBG Funds, Special Economic Development Projects Program* Term: Five Years Repayment Schedule: First 24 months - $0 payment Beginning July 1, 2019, Months 25-60 - $6,962.96 Final payment –$370,509.17 Due May 1, 2022 Loan Purpose: Software and other startup costs Justification: Job Creation (15 New Jobs within first two years) Per HUD Guidelines, CDBG funds may only be used for furniture, fixtures, equipment, inventory and working capital. *CS Note: Before these CDBG funds can be used for this purpose, the Council must first approve the 2017 Annual Action Amendment Plan the related FY2017 Budget Amendment, and changes to the Central Business District Revitalization Program Guidelines. The Program Guidelines must be amended to change the name to Special Economic Development Projects Program and authorize the use of funds for economic development purposes city-wide. The Council will consider these related items prior to considering this proposed action. For more information, please review the separate agenda items relating to the 2017 Annual Action Plan Amendment the FY2017 Budget Amendment for the Annual Action Plan Amendment and changes to the Central Business District Revitalization Program Guidelines. Questions 1. Please explain why the Administration believes this is a good use of CDBG funds. ---PAGE BREAK--- Page 4 of 4 Ogden City Council Work Session: March 21, 2017 2. Please review the potential economic impacts Destination Express’ business could have in Ogden. 3. Has Destination Express identified the office space where they will open? If so, where will the company be located? 4. Are there projects that will not be funded because of this loan to Destination Express? If so, please identify these. 5. Please explain what would happen if Destination Express defaults on the loan. Council Staff Contact: Janene Eller-Smith, (801)629-8165 ---PAGE BREAK--- 1 Summary of Infill Program Guideline Changes 2005-2017 May 3, 2005 The City Council adopted Resolution 2005-11 establishing the 25th Street Infill Development Program Guidelines as part of the Five Year Consolidated Plan for July 1, 2005 through June 30, 2010. This program was established to allow the use of CDBG funds in the historic district to stimulate capital investment, and promote job creation and retention activities. The program was designed to enhance the viability of the historic district within established HUD regulations. The program included the following guidelines:  The funds shall be used to eliminate blight conditions in the historic district or to benefit persons of low or moderate income  The infill projects may be either commercial or residential in nature  The funds may be used to create or retain job for persons of low or moderate income  The infill projects may be either new construction or reconstruction  Projects will be considered based upon the availability of funds and the overall benefit to the historic district  Funds may be granted or loaned based upon the justifiable need and impact of the activity  Funds will be used in the historic district on projects and activities that accomplish the goals and objectives identified by the Mayor and City Council  Major infill projects using funds of $100,000 or more from the 25th Street Infill program shall be approved by the City Council. June 29, 2010 The City Council adopted Resolution 2010-9 expanding the Infill Program from the 25th Street Historic District to an area from 20th to 27th and Wall Avenue to Adams Avenue. The program was renamed the Central Business District Infill Program. No other program changes were made. March 20, 2012 The City Council adopted Resolution 2012-5 amending the scope of the Central Business District Infill Program to include assisting businesses to eliminate blight or to benefit low to moderate income person through activities which expand business capacity, create or ---PAGE BREAK--- 2 retain jobs or promote capital development. The revised program read as follows: (changes highlighted): The Central Business District Revitalization Program is intended to facilitate and stimulate capital investment in Ogden’s Central Business District and to promote job creation/retention activities. The funds may be used in a broad manner that contributes to enhancing the viability of the district so long as the activity meets one of the national objectives established by HUD for the use of CDBG funds. The program guidelines are as follows:  The funds shall be used to eliminate blight conditions in the Central Business District to to benefit persons of low to moderate income  The Infill projects may be commercial, residential, or mixed use in nature  The funds may be used to create or retain job for persons of low or moderate income  The infill projects may be either new construction, reconstruction, or to assist projects that will encourage capital development, business expansion, and/or job retention  Projects will be considered based upon the availability of funds and the overall benefit to the historic district public  Funds may be granted or loaned based upon the justifiable need and impact of the activity  Funds may be used as a loan guarantee for CDBG-funded loan activities  Funds will be used in the historic district Central Business District on projects and activities that accomplish the goals and objectives identified by the Mayor and City Council  Major infill projects using funds of $100,000 or more from the CBD Infill program shall be approved by the City Council. March 21, 2017 – Proposed Changes The Council is considering changing the name of the Program to the Economic Development Projects Program and allowing the use of funds citywide. Proposed Changes are as follows: The Central Business District Revitalization Program Special Economic Development Projects (SEDP) is intended to facilitate and stimulate capital investment in Ogden’s Central Business District City and to promote job creation/retention activities. The funds may be used in a broad manner that contributes to enhancing the economic viability of the City’s airport, historic ---PAGE BREAK--- 3 districts, main corridors, distressed areas and the Central Business dDistrict so long as the activity meets one of the national objectives established by HUD for the use of CDBG funds. The program guidelines are as follows:  The funds shall be used to eliminate blight conditions in the Central Business District to to benefit persons of low to moderate income  The Infill projects may be commercial or residential, or mixed use in nature  The funds may be used to create or retain job for persons of low or moderate income  rThe infill pPojects may be either new construction, reconstruction, or to assist projects that will encourage capital development, business expansion, and/or job retention  Projects will be considered based upon the availability of funds and the overall benefit to the public  Funds may be granted or loaned based upon the justifiable need and impact of the activity  Funds may be used as a loan guarantee for CDBG-funded loan activities  Funds will be used in the Central Business District City on for projects and activities that accomplish the goals and objectives identified by the Mayor and City Council  Major infill projects using funds Projects of $100,000 or more using funds from SEDP the CBD Infill program shall be approved by the City Council. ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- MAB 2-24-17 -8 ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- Page 1 of 4 PROMISSORY NOTE SMALL BUSINESS LOAN LOAN NUMBER: SEDP17-0001 AMOUNT: $500,000 Date: March 2017 1. PARTIES The undersigned, Destination Express, LLC, a Utah Limited Liability Company, hereinafter collectively referred to in the singular as the “Borrower”, and Ogden City Corporation, the “Lender”. 2. FOR VALUE RECEIVED The “Borrower” promise(s) to pay to the order of Ogden City Corporation, the “Lender”, the sum of FIVE HUNDRED THOUSAND and no/100th DOLLARS ($500,000.00) (Principal) or so much of that amount that shall be dispersed to Borrower by Lender by 12/15/2017, under the conditions of this Note and the Loan Agreement. 3. INSTALLMENT PAYMENTS. All Principal shall bear interest beginning the first of JUNE in the YEAR TWO THOUSAND SEVENTEEN (6/1/2017) at the rate of FIVE PERCENT per year until paid in full. Payments will be deferred for TWENTY-FOUR (24) months (deferral of interest?). repayments will be paid in lawful money of the United States of America and structured as listed below: Beginning July 1, 2019 (7/1/2019), payments of principal and interest in the amount of SIX THOUSAND NINE HUNDRED SIXTY-TWO DOLLARS and 96/100th DOLLARS ($6,962.96) shall be payable for THIRTY-SIX (36) months. The remaining balance (estimated to be THREE HUNDRED SEVETY THOUSAND FIVE HUNDRED NINE and 17/100th DOLLARS ($370,509.17), together with all accrued interest thereon, shall be paid as a balloon payment on or before July 1, 2022 (7/1/2022). All payments required under this Note shall be delivered to the office of: Guffey Home Loans, Inc. 952 Chambers Street, Suite 1 South Ogden, UT 84403 DRAFT ---PAGE BREAK--- Page 2 of 4 or at such other place as shall be designated by the Lender. 4. RIGHT TO PREPAY NOTE The undersigned reserve(s) the right to prepay at any time all or any part of the Principal without the payment of penalties or premiums. All payments on this Note shall be applied first to late charges, if any, second to accrued and unpaid interest, and the remaining balance shall be applied to outstanding Principal. Except as provided below, all payments on this Note shall be credited as of the due date thereof without adjustment of interest because paid either before or after such due date. 5. DEFAULT AND LATE PAYMENT PROVISIONS IN THE EVENT the undersigned shall fail to pay the Principal of this Note when due, and if such failure be subsisting fifteen days beyond said due date, the unpaid Principal of this Note, together with late charges, and together with unpaid and accrued interest, if any, shall at once become due and payable, at the option of the Lender, without notice to the undersigned. Failure of the Lender to exercise such option shall not constitute a waiver of such default. No default shall exist by reason of nonpayment of any required installment of Principal so long as the amount of any optional prepayments already made pursuant hereto equals or exceeds the amount of the required installments. If the Principal of this Note is not paid within 15 days of the due date, the undersigned shall pay to the Lender a one-time late charge of two percent on any installment not paid within 15 days of its due date. If this Note be reduced to judgment, such judgment shall bear the statutory interest rate on judgments, but not to exceed twelve percent (12%) per annum. 1. SALE, ASSIGNMENT, CONVEYANCE OR TRANSFER OF INTEREST CLAUSE, ETC. It is understood and agreed by the undersigned that the loan or value which the undersigned received from the Lender, the receipt of which is hereby acknowledged, is a loan made by a public agency for purposes of economic development to be used for acquisition of furniture, fixtures, equipment, inventory, or working capital. The undersigned further covenants and agrees that: a. In the event that the undersigned sells, conveys, disposes, or assigns any interest in the property used to secure this Note, or makes any intervivos transfer of said property, or allows title thereto to become vested in any other person or persons in any manner whatsoever, or if undersigned shall discontinue continuous occupancy of said property, or agrees to do any of the acts specified herein without the express written consent of the Lender being first obtained; or, DRAFT ---PAGE BREAK--- Page 3 of 4 b. In the event that the undersigned or its assignee(s) shall become insolvent, become bankrupt, either voluntary or involuntary, or make a general assignment for the benefit of creditors; or if any proceeding for enforcement of a judgment is commenced against the property of undersigned, or other person liable on this Note; or if a petition for any relief under any law relating to the relief of debtors or readjustment of indebtedness shall be filed by undersigned; or if a writ or order of attachment is issued against any of the property used to secure this title; then it is understood and agreed by the undersigned that, notwithstanding any other provisions of this Note or any accompanying security instrument used to secure this Note, the entire unpaid balance amount of principal and accrued interest of this Note, together with late charges, shall become immediately due and payable on demand in one lump sum, at the option of the Lender, without notice to the undersigned. Failure of the Lender to exercise such option shall not constitute a waiver of such default. 2. COSTS AND ATTORNEY'S FEES If suit is instituted by the Lender to recover on this Note, the undersigned agree(s) to pay all costs of such collection including reasonable attorneys’ fees and court costs. 3. SECURITY THIS NOTE is secured by a Security Agreement of even date herewith. THIS NOTE is also subject to the terms and conditions outlined in the Ogden City Small Business Loan Program. The terms and conditions in the Loan Agreement of even date herewith, signed by the undersigned, are incorporated herein and made a part hereof. 4. WAIVER OF DEMAND, PROTEST, AND NOTICE DEMAND, protest and notice of demand and protest are hereby waived, and the undersigned hereby waives, to the extent authorized by law, any and all homestead and other exemption rights which otherwise would apply to the debt evidenced by this Note. 5. COUNTERPARTS. This Note may be executed in as many counterparts as may be deemed necessary or convenient, and each counterpart shall be deemed an original. DRAFT ---PAGE BREAK--- Page 4 of 4 IN WITNESS WHEREOF, this Promissory Note has been duly executed by the undersigned on the March 2017. BORROWER: Destination Express, LLC, a Utah Limited Liability Company. By: By: By: By: Clearpath Strategies, LLC, as an authorized member of Destination Express, LLC Randall A. Hunt Manager of Clearpath Strategies, LLC Stratford Legal, PC, as an authorized member of Destination Express, LLC Bruce Stratford, Managing Member Stratford Legal P.C. DRAFT ---PAGE BREAK--- 1 SECURITY AGREEMENT LOAN NUMBER: SEDP17-0001 AMOUNT: $500,000 1. DATE OF AGREEMENT: this March 2017. 2. PARTIES: The undersigned, Destination Express, LLC, a Utah Limited Liability Company, hereinafter collectively referred to in the singular as the “Borrower”, and Ogden City Corporation, the “Lender”. 3. AGREEMENT. This Security Agreement is made in favor of Ogden City Corporation, the Lender. 4. CREATION OF SECURITY INTEREST. In consideration of financial accommodations given or to be given by Lender, and as security for the payment and performance of all of Borrower's indebtedness to Lender (including all debts, obligations or liabilities now or hereafter existing, absolute or contingent, and future advances), and pursuant to the terms of a certain Loan Agreement between Borrower and Lender, Borrower hereby grants to Lender a second position security interest and lien to Lender in the collateral described in paragraph 3 below. 5. COLLATERAL. The collateral subject to the security interest granted herein is the following, together with any and all documents of title covering the same (hereinafter collectively the "Collateral"): a. A “UCC -1 lien” of the “Destination Express, LLC” trademark; all computers, computer systems, software, including (name the software), software systems and intercommunicating components, all program source or object codes (collectively, the “Computer System”), all modifications and additions thereto, and all data stored by, through or in the Computer System, including data bases, client lists, historical data of all types, sales information, DRAFT ---PAGE BREAK--- 2 financial information, operating and training manuals, and any other information and data of all types whether or not specifically listed herein; all inventory, equipment, machinery, furnishings, appliances and fixtures of the Borrower and used by Borrower, for its business, now and at any time hereafter acquired. b. Proceeds and Payments. The proceeds, increase and products of such Collateral, accessions thereto, and any property which the Borrower may receive on account of such Collateral, including without limitation all monies due and to become due and payable under any of the foregoing. 6. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants: a. Good Title. Except as otherwise specified herein, Borrower has or upon acquisition will have, title to all Collateral and no other person, entity, agency or government has or purports to have, or upon acquisition will have, any right, title, lien, encumbrance, adverse claim or interest in any Collateral. b. Collateral Valid and Enforceable. As to Collateral which is accounts, chattel paper, or proceeds: all such Collateral is genuine, valid and enforceable in accordance with its terms, free from default, prepayment, defense and conditions precedent (except as accepted by Lender in writing); Borrower has no knowledge of any fact which would render any such Collateral valueless or uncollectible; each person appearing to be obligated on such Collateral has legal capacity to contract; and Borrower will not, without the written consent of Lender, compromise, settle or adjust any account or renew or extend time for payment thereof. c. Authority. Borrower has authority to enter into this Agreement. DRAFT ---PAGE BREAK--- 3 7. COVENANTS AND AGREEMENTS. Borrower covenants and agrees with Lender as follows: a. Payment. Borrower will pay all of the indebtedness secured hereby when due and Borrower will repay immediately, and without demand, all expenses, with interest at the legal rate of 12% per annum from the date of expenditure, (including reasonable attorneys' fees, legal expenses and costs) incurred by Lender under this Agreement. b. Liens, Insurance. Borrower will pay when due all taxes, assessments, charges or liens or encumbrances now or hereafter affecting the Collateral. At its own expense Borrower will insure any Collateral consisting of inventory with Lender as loss payee in form and amounts, with companies, and against risks and liabilities satisfactory to Lender, and Borrower hereby assigns the policies to Lender and agrees to deliver them to Lender at Lender's request and authorizes Lender to make any claim thereunder, to cancel the insurance upon default, and to receive payment of and endorse any instrument in payment of loss or return premium or other refund or return. c. Sale or Transfer. Borrower will not, without written consent of Lender, sell, encumber or otherwise dispose of or transfer any Collateral or interest therein or permit of suffer any such disposition or transfer. d. Collateral Lists. Borrower will from time to time execute and deliver to Lender such lists, descriptions and designations of Collateral, including inventory, as Lender may require to identify the nature, extent, condition, status and location of such Collateral. e. Protection of Collateral. As to all inventory Borrower will maintain and repair the Collateral; will use the Collateral lawfully and only within insurance coverages; will not use the Collateral so as to cause or result in any waste, unreasonable deterioration or DRAFT ---PAGE BREAK--- 4 depreciation; and will permit Lender to enter on Borrower's property and inspect the Collateral at any reasonable time. f. Records, Collection of Collateral. Borrower will keep proper records as to all Collateral and allow Lender to inspect such records at any reasonable time. Upon demand by Lender, Borrower will keep the Collateral and all proceeds separate from Borrower's other property. Unless otherwise notified by Lender, Borrower will enforce and collect at Borrower's expense all chattel paper and will observe and perform all terms and conditions on its part to be performed under any chattel paper. g. Financing Statements. Borrower will execute and deliver to Lender such financing statements or amendments thereof or supplements thereto, assignments, notices and other instruments as may be necessary or appropriate to preserve, perfect and enforce the security interest herein granted to Lender. 8. DEFAULT. Borrower shall be in default hereunder: a. Upon any failure of Borrower to pay when due any interest on or any principal of any indebtedness of Borrower to Lender. b. When any event occurs which results in the acceleration of the maturity date of any obligation of Borrower to others. c. If any representation or warranty of Borrower herein or otherwise made to Lender proves untrue in any material respect. d. Upon dissolution, termination of existence, bankruptcy, insolvency, business failure, petition for relief under the bankruptcy laws or appointment of a receiver for Borrower or any guarantor of any of the indebtedness of Borrower to Lender. DRAFT ---PAGE BREAK--- 5 e. When default shall occur in the observance or performance by Borrower of any provision of this Agreement or of any note or loan agreement executed pursuant hereto or in connection herewith. 9. REMEDIES UPON DEFAULT. When any event of default described above has occurred and is continuing, Lender may: a. Accelerate and declare the principal of and any accrued interest on all outstanding indebtedness and liabilities of Borrower to Lender immediately due and payable. b. If not then in possession of the Collateral, take possession of and protect the Collateral; require Borrower to assemble the Collateral and make it available to Lender at a reasonably convenient place to be designated by Lender; and enter upon such lands and properties where the Collateral might be located. c. Perform any obligations of Borrower, including, without limitation, make any payment, purchase, contest or compromise any encumbrances, charges or liens and pay taxes and expenses. d. Dispose of the Collateral by public or private sale, and any requirement of reasonable notice to the Borrower shall be met if such notice is mailed, postage prepaid, to the Borrower at Borrower's address as shown in the records of the Lender at least five days before the time of sale, disposition or other event giving rise to the required notice. e. Institute legal action against the Borrower or any other person liable for any indebtedness of Borrower to Lender, including any guarantors of such indebtedness, for recovery of such indebtedness. DRAFT ---PAGE BREAK--- 6 f. In addition to all other remedies described above, all of which shall be cumulative, and as a further cumulative remedy, Lender shall have all the rights and remedies of a secured party under the Uniform Commercial Code of Utah. 10. GENERAL. a. Responsibilities of Lender. Lender has no responsibility or liability for the validity, ownership, condition, existence, quantity, quality, value or delivery of any goods, rights or matters, evidences or represented by or as to any matter pertaining to the Collateral. Such care as Lender gives to the safekeeping of its own property of like kind shall constitute reasonable care of Collateral when in Lender's possession, but Lender is not required to make any presentment, demand, protect or give notice and need not take action to preserve any rights against any prior parties in connection with any obligation, paper or evidence of indebtedness held as Collateral. b. Right of Lender to Collect. Lender, in its own name or in Borrower's name and at any time (and regardless of whether or not Borrower shall be in default hereunder) and at Borrower's expense, may, but is not obligated to: notify any lessee, obligor, or account debtor on Collateral to make payment to Lender; (ii) collect by legal proceedings or otherwise and endorse, receive and receipt for all lease payments, proceeds and other sums and property now or hereafter payable on or on account of the Collateral; (iii) enter into any extension, reorganization, deposit, merger, waiver, modification or other agreement pertaining to or deposit, surrender, accept, hold or apply other property in exchange for any Collateral; (iv) insure, process and preserve Collateral; and make any compromise or settlement, and take any action it deems advisable, and exercise all the rights, powers DRAFT ---PAGE BREAK--- 7 and remedies of an owner with respect to the Collateral. Borrower hereby constitutes and appoints Lender its true, lawful and irrevocable attorney to demand, receive and enforce payments and to give receipts, releases, satisfaction for and to sue for all monies payable to Borrower under or by reason of any of the Collateral. Provided, however, until notice to the contrary, Borrower shall be entitled to collect, sue for and receive the payment of all monies due or to become due on any of the Collateral as trustee for and on behalf of the Lender, until Lender shall elect to do so. 11. MISCELLANEOUS. Borrower understands and agrees: a. Time. Time is of the essence hereof. b. No Waiver. Lender's acceptance of partial or delinquent payments or failure of Lender to exercise any right or remedy hereunder shall not be a waiver of any obligation of Borrower or right of Lender, nor constitute a modification of this Agreement, nor constitute a waiver of any other similar default subsequently occurring. c. Successors and Assigns. This Agreement and all rights and liabilities hereunder and in and to the Collateral shall inure to the benefit of Lender, its successors and assigns and shall be binding upon Borrower, its successors and assigns. d. Governing Law. This Agreement shall be construed and governed by the laws of Utah. e. Credit Agreement. This Agreement is executed and delivered pursuant to the terms of a certain Loan Agreement between Lender and Borrower and is entitled to the benefits thereof. f. Captions. The captions of the various sections hereof are for convenience only and shall not control or limit the meaning or construction hereof. DRAFT ---PAGE BREAK--- 8 IN WITNESS WHEREOF, this Security Agreement has been duly executed by the undersigned on day of March 2017. LENDER: BORROWER: OGDEN CITY, a municipality and political subdivision of the state of Utah Destination Express, LLC, a Utah Limited Liability Company. By: Clearpath Strategies, LLC, as an authorized member of Destination Express, LLC By: By: Michael P Caldwell, Mayor By: Randall A. Hunt, Manager of Clearpath Strategies, LLC Stratford Legal, P.C., as an authorized member of Destination Express, LLC Attest: By: Ogden City Recorder’s Office Bruse Stratford, Managing Member Stratford Legal P.C. Ogden City Attorney’s Office DRAFT ---PAGE BREAK--- 1 LOAN AGREEMENT LOAN NUMBER: SEDP17-0001 AMOUNT: $500,000 1. PARTIES: : The undersigned, Destination Express, LLC, a Utah Limited Liability Company, hereinafter collectively referred to in the singular as the “Borrower”, and Ogden City Corporation, the “Lender”. 2. DATE OF AGREEMENT: this March 2017. 3. PROMISE TO PAY: Borrower promises to pay to Lender FIVE HUNDRED THOUSAND DOLLARS ($500,000.00) and interest as well as other charges as avowed in the promissory note. 4. ACCOUNTABILITY: Although this agreement may be signed below by more than one person, each of the undersigned understand that they are each as individuals responsible and jointly and severally liable for compliance with the terms of this loan agreement and paying back the full amount. 5. PROMISE TO ABIDE: In consideration of the premises and the mutual promises hereinafter contained, and in consideration of the Lender making the loan, Borrower hereby warrants, represents and agrees to all provisions listed in this Loan Agreement. 6. NOTE. The loan shall be evidenced by a promissory note in the form of the note attached hereto as Exhibit the provisions of which are incorporated herein by reference (which note is herein sometimes referred to as the "Note"). The terms and provisions of the loan as to interest rate, repayment, default, voluntary prepayment and similar such matters are as contained in the Note. 7. USE OF PROCEEDS. The proceeds of the loan shall be used in compliance with HUD CDBG 24 CFR 570.203 and only in connection with the financing of furniture, fixtures, equipment, inventory and working capital for the limited liability business which agrees to physically be located in Ogden, UT and whose mailing address is PO BOX 150113 in Ogden, Utah. 8. SECURITY. As support and security for the loan and the Note Borrower will deliver to Lender: a. Deliver to Lender a duly executed and valid Security Agreement/UCC-1 Financing Statement executed by Borrower, in favor of Lender to serve as security for repayment of the Note. DRAFT ---PAGE BREAK--- 2 All documents required in this Section 8, regardless of their form or subject matter, are herein sometimes collectively referred to as the "Security Agreements". All Security Agreements shall be in form and content satisfactory to Lender. 9. CONDITIONS OF LOAN/WARRANTIES. The loan, Note and the accommodations given hereunder to Borrower by Lender are specifically made upon the following representations and warranties by Borrower, each of which shall constitute a continuing covenant hereunder: a. Borrower has fully complied with all of the provisions of this Agreement and is entitled to disbursement, it being understood that the making of any disbursement or part thereof when Borrower is not so entitled will not constitute a waiver of such compliance. b. The terms and conditions of the Note and Security Agreements have been complied with. c. The Note, the Security Agreements, this Agreement and all other documents contemplated to be executed and delivered hereby have been duly authorized and executed and constitute valid obligations of the obligors or persons executing such documents and are enforceable in accordance with their respective terms. d. The Security Agreements provided for herein create a valid lien upon the collateral and mortgaged property, free and clear of all encumbrances except as may be expressly waived by Lender and except as provided for herein; and Borrower has full, valid and complete title to all the collateral and mortgaged property. e. There are no actions, suits or proceedings pending or, to Borrower's knowledge, threatened against or affecting the Borrower or the collateral or mortgaged property, at law or in equity, or before or by any governmental agency, which, if adversely determined, would impair the ability of Borrower to continue its function in the ordinary course or to pay when due any amounts which may become payable on the Note. Borrower shall furnish to Lender satisfactory evidence of compliance with this subparagraph upon request by Lender. 10. FINANCIAL STATEMENTS AND CERTIFICATION. DRAFT ---PAGE BREAK--- 3 a. Borrower shall maintain complete and accurate books of account and business and accounting records in accordance with generally accepted accounting principles as recognized by the American Institute of Certified Public Accountants, through a qualified third-party. b. Borrower shall furnish to Lender within ninety (90) days after the end of each annual fiscal period of Borrower, unaudited financial statements of the Borrower for such fiscal period, including a balance sheet and a statement of net worth, all prepared in accordance with generally accepted principles of accounting practices currently employed by Borrower and certified by an independent certified public accountant acceptable to Lender. c. Borrower shall also furnish to Lender, if requested by Lender, quarterly within thirty (30) days after the end of each quarterly fiscal period (excluding the period when audited statements shall be submitted) unaudited financial statements of Borrower for such fiscal period, including a balance sheet and statement of net worth, all prepared in accordance with generally accepted principles of accounting practice and certified by an appropriate corporate officer. d. Borrower shall maintain and provide evidence to support how the funds provided to borrower have been expended. Such documentation must include, to the extent applicable, invoices, schedules containing comparisons of budgeted amounts and actual expenditures, construction progress schedules signed by appropriate parties general contractor and/or a project architect), and/or other documentation appropriate to the nature of the activity. e. Borrower shall also provide or cause to be provided from time to time such further information regarding the business affairs and financial condition of Borrower as Lender may request. 11. GENERAL INSURANCE COVERAGE. Borrower will maintain adequate fire, public liability and other insurance as the Lender may reasonably require and will take out and keep in force such insurance as is normally carried by business persons similarly situated to Borrower. Such insurance DRAFT ---PAGE BREAK--- 4 shall include, without limitation, hazard insurance (fire, and extended coverage) on all of Borrower’s improvements, equipment, inventory, personal and real property on the business premises and any other pledged real or personal property in an amount of not less than FIVE HUNDRED THOUSAND and NO/100ths Dollars ($500,000.00) on personal property, equipment, and fixtures. Said policy or policies shall name Lender as loss payee and shall provide that there shall be no termination or reduction in coverage without prior notice to Lender. 12. LITIGATION/COMPLIANCE WITH LAWS. Borrower will advise Lender in writing of all litigation (including threatened litigation and any matter which may become the subject of litigation) involving Borrower or any of the secured or mortgaged property and of all complaints and charges made by any governmental department, bureau, commission or Lender affecting Borrower, Borrower's business, or the mortgaged property. Borrower will comply with all laws and regulations of the federal government, the State of Utah, the City of Ogden and any of their subdivisions or agencies with regard to Borrower's business and to the mortgaged property. Borrower will pay when due all taxes, assessments and governmental charges levied or assessed upon Borrower or levied or assessed against the mortgaged property as such taxes and charges become due and payable. Borrower shall comply with applicable provisions of the Community Development Block Grant Program (CDBG) as found in 24 CFR Part 570, including, but not limited to the Davis-Bacon Act (40 U.S.C. 276, et seq.), Contract Work Hours and Safety Standards Act (40 U.S.C. 327-330), Copeland Anti-Kickback Act (18 U.S.C. 276c), Executive Orders 11246, 11625, and Section 3 of the Housing and Urban Development Act of 1968 (12 U.S.C. 1701u). 13. JOB CREATION/LMI, AND MINORITY EMPLOYMENT AGREEMENT. Borrower agrees to comply with HUD hiring guidelines found in 24 CFR 570 Community Development Block Grants including but not limited to sections 24 CFR 570.203 Special Economic Development Activities. a. Borrower agrees to recruit local low-to-moderate income (LMI) workers by outreaching to local universities, tech colleges and other community partners. b. Borrower agrees to recruit local low-to-moderate income (LMI) workers by submitting job openings to Ogden City, through the Business Information Center, using Schedule B. DRAFT ---PAGE BREAK--- 5 Ogden City will then post such opportunities with entities that provide services to LMI and/or Section 3 residents and/or MBE, including but not limited to the Utah Department of Workforce Services (DWS) and the Ogden Housing Authority. c. Borrower agrees to create FIFTEEN, (15) new full-time equivalent (FTE) jobs (“Job Creation”) after receipt of funds from this Loan and within TWO years of first dispersal of this Loan. Borrower shall at a minimum, report progress or completion of such Job Creation to Ogden City within three months of receipt of funds from this Loan, and at 6 month intervals thereafter, and/or as required by Lender. i. To comply with Job Creation monitoring, Borrower shall provide a copy of Borrower’s payroll prior to disbursement of funds under this loan. Payroll must be from a period ending within 30 days prior to disbursement of funds under this Loan (if existing company). ii. Borrower agrees to physically locate their business and operations in either Ogden City’s targeted economic development area of the Neighborhood Revitalization Strategic Area (NRSA) or the Hinckley Airport Census’ Tract (2019) in Ogden, UT. iii. If the Borrower’s business is located in the Ogden City’s Neighborhood Revitalization Strategic Area (NRSA), the activity will meet the national objective as a low-moderate income (LMI) area established in 24 CFR 570.208(a)(1)(vii). 1 iv. If the Borrower's business is located in Ogden Census Tract 2019, then the poverty rate exceeds 20%, the activity will meet the HUD national objective as a low/moderate income job presumed in 24 CFR 570.208(a)(4)(B)(v) v. Borrower agrees to report Job Creation every six months after first dispersal of Loan: 1. Using the form shown in Schedule A attached hereto, 1 HUD Program Income Limits: Census Tract Poverty data: DRAFT ---PAGE BREAK--- 6 2. Provide “verified payrolls” as described below, or as otherwise directed by Lender. Such payroll verification must be signed by the Borrower or authorized agent (or other verifiable certification by Borrower that the payroll is correct and true such as from verified email), and include hours worked, names of employees, job titles, and if necessary, wages. 3. Borrower agrees to obtain and maintain and provide to Lender any reasonably necessary verification to document Job Creation and, if requested, the income status of persons employed by the assisted enterprise. To determine the income status of persons employed or seeking to be employed, standard guidelines established by the Department of Housing and Urban Development will be utilized. These guidelines are based upon family size and total family income and generally refer to LMI persons whose gross income is less than 80% of the area median income. d. In the event that special training or work experience is necessary to qualify for employment, Borrower agrees to give first priority preference to low-to-moderate income local residents, when hiring and providing training opportunities. 14. CONTINUANCE OF AGREEMENT, WAIVER; TERMINATION. This Agreement shall continue as long as any loan or any part thereof or renewal or extension thereof remains unpaid. No consent or waiver under this Agreement shall be effective unless in writing. No waiver of any breach or default shall be deemed a waiver of any breach or default thereafter occurring. This Agreement shall terminate and be of no further force or effect upon the payment in full by Borrower to the Lender of all principal and any accrued interest on the Loan. 15. FEES AND COSTS. Borrower shall pay all fees and charges in connection with this transaction, including any charges for title insurance, recording fees, preparation of documents, service fees, attorneys' fees and any other fees which may be incurred by Lender in connection with the preparation of this Agreement and of any loan documents and which may be incurred by Lender in exercising any right, power or remedy provided for herein or in any loan document. All loan, DRAFT ---PAGE BREAK--- 7 guaranty and security documents contemplated herein shall be in form and substance satisfactory to Lender. 16. SURVIVAL OF CONTENTS. All representations and covenants of Borrower herein shall survive the making of all disbursements. The Note, and the Security Agreement are hereby made subject to all conditions, agreements and covenants contained herein to the same extent as if they were fully set forth in and made a part of said Note and Security Agreement. 17. REMEDIES CUMULATIVE. All rights, powers and remedies given to Lender herein or in any other loan document are cumulative and are not alternative, and are in addition to all statutes or rules of law; and partial exercise or forbearance or delay by Lender in exercising the same shall not operate as any waiver thereof or of any other power or rights hereunder are granted by law, and the same shall continue in full force and effect until specifically waived by an instrument in writing executed by Lender. 18. EVENTS OF DEFAULT. a. If any default by Borrower in any representations or warranties made herein, or any default by Borrower in the observance of any obligation undertaken by Borrower pursuant to this Agreement and which remains uncured after written notice from Lender to Borrower, or (iii) a general assignment for the benefit of creditors, voluntary filing under any bankruptcy law or law for the benefit of creditors, or the entry of an order for relief in the case of an involuntary petition in bankruptcy shall constitute a default hereunder and under the Note. Any event or default under the Note and under any Security Agreement shall constitute an event of default hereunder. i. Upon the occurrence of any event of default and at any time thereafter, the Lender may declare the unpaid balance of all loans and the Note plus all accrued interest thereon and all other indebtedness of Borrower to Lender immediately due and payable without presentation, protest, notice of protest, notice of default or other notice of any kind (all of which are expressly waived hereby). Upon the occurrence of any event of default under any other loans or obligations of Borrower DRAFT ---PAGE BREAK--- 8 to Lender, the Lender may declare the unpaid balance of the loan contemplated hereby and Note plus all accrued interest thereon immediately due and payable. 19. MISCELLANEOUS. a. Nothing herein contained shall be deemed to establish any trust fund for the benefit of any person or persons, nor to impose any liability upon Lender to pay or be chargeable with any claims of third persons against the Borrower. b. Borrower shall indemnify and hold Lender harmless from any liability, cost or damage arising out of Borrower's breach hereof. Lender may appear in and defend any action or proceeding purporting to affect the rights or duties of the parties hereunder or any security given for the loan, and Borrower shall pay all of Lender's costs and expenses. c. The section headings used herein are for reference and for convenience only and shall not enter into the interpretations hereof. d. This Agreement may be executed in as many counterparts as may be deemed necessary or convenient, and each counterpart shall be deemed an original. e. In the event any one or more of the provisions contained in this Agreement or in any documents which are the subject of this Agreement shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, unenforceability or illegality shall not affect any other provision of this Agreement and/or of such other documents, and this Agreement and such documents shall be construed as if such provision had never been contained herein or therein. f. Lender may at any time extend the time of payment of the principal and/or interest under any of the loans and any extension so granted shall be deemed made in pursuance of this Agreement and not in modification hereof. 20. DISBURSEMENTS. The loan will be disbursed as set forth in the Promissory Note. Loan proceeds will be authorized as per the policy outlined by the Housing and Urban Development’s Community Development Block Grant Program and the Federal Office of Management and Budget’s Circulars. DRAFT ---PAGE BREAK--- 9 21. REPAYMENT: The entire principal and interest due under the Note shall in all events be due and payable on or before the SIXTIETH MONTH OF THE LOAN TERM, WHICH WILL BE THIRTY-SIXTH MONTH of repayment, as detailed in the Promissory Note. a. Repayment will be deferred until July 1, 2019. DRAFT ---PAGE BREAK--- 10 IN WITNESS WHEREOF, Borrower has caused this Loan Agreement to be duly executed this day of March 2017. LENDER: BORROWER: OGDEN CITY, a municipality and political subdivision of the state of Utah Destination Express, LLC, a Utah Limited Liability Company. By: Clearpath Strategies, LLC, as an authorized member of Destination Express, LLC By: By: Michael P Caldwell, Mayor By: Randall A. Hunt, Manager of Clearpath Strategies, LLC Stratford Legal, P.C., as an authorized member of Destination Express, LLC Attest: By: Ogden City Recorder’s Office Bruse Stratford, Managing Member Stratford Legal P.C. Ogden City Attorney’s Office DRAFT ---PAGE BREAK--- 11 SCHEDULE A Ogden City Community Economic Development Job Creation Monitoring Report Small Business Loan Program Business Name: Destination Express, LLC Loan SEDP17-0001 Business Address: PO BOX 150113. Ogden, UT 84415 Business Owner(s): Stratford Legal P.C. and ClearPath Strategies LLC Employee Name Job Title Date Hired Hours Per Week Hispanic or Non- Hispanic Ethnicity Household Size Household Income Unemployed When Hired Receiving Employer Health Care? *Additionally, Borrower will provide payroll verification of all employees hired before and after receipt of loan proceeds from Ogden City, and if so instructed by Ogden City, may also self-declare their income range using current HUD income guidelines. Low-to moderate income (LMI) is gross earnings of 80% or less of area median income based on household size.2 I certify that this job creation report is true and accurate and reflects jobs filled by employees of the Business hired after receipt of loan proceeds from Ogden City. Signature Title Date 2 HUD LMI Income Guidelines: DRAFT ---PAGE BREAK--- 12 SCHEDULE A Ogden City Community Economic Development Job Creation Monitoring Report HUD Low-to-Moderate Income (LMI) Limits DRAFT ---PAGE BREAK--- SCHEDULE D DWS-OSD 59 SCHEDULE B Rev. 02/2009 State of Utah Department of Workforce Services JOB ORDER FORM 4 Ways to Submit a JOB ORDER  Online: jobs.utah.gov  E-mail: [EMAIL REDACTED]  FAX: 1-[PHONE REDACTED]  Phone: 1-888-920-WORK (9675)  EMPLOYER INFORMATION COMPANY NAME: CONTACT PERSON: STREET ADDRESS: CITY: STATE: ZIP CODE: PHONE NUMBER: ( ) - FAX NUMBER: ( ) - FEDERAL ID# (FEIN): EMAIL ADDRESS: UT EMPLOYER TAX ID# (UI ID): FEDERAL CONTRACTOR (FCJL): Yes No AFFIRMATIVE ACTION EMPLOYER: Yes No JOB SITE LOCATION:  JOB TITLE: NUMBER OF OPENINGS: JOB DESCRIPTION (Include tasks, duties, responsibilities):  JOB DETAILS: SALARY: From $ To $ BENEFITS: Yes No HOURS: From (am/pm) To (am/pm) SHIFTS (check all that apply): Day Swing Graveyard Rotating WORK: Full-Time Part-Time Seasonal Temporary DAYS OFF: Sat Sun Mon Tues Wed Thurs Fri  JOB REQUIREMENTS (Must be bona fide qualifications required to perform the job.) EXPERIENCE (Years/Months): AGE: to IS VEHICLE REQUIRED? Yes No LIFTING (lbs.): DRIVER’S LICENSE: Yes No LICENSE TYPE: A / B / C / D ENDORSEMENTS: H / N / T / X / P EDUCATION: None GED HS AA BA/BS MA/MS PhD Cert./Lic. ADDITIONAL INFORMATION / CLOSING DATE (If applicable): REFERRAL INSTRUCTIONS (How would you like applicants to apply?): Equal Opportunity Employer Program Auxiliary aids and services are available upon request to individuals with disabilities by calling (801) 526-9240. Individuals with speech and/or hearing impairments may call Relay Utah by dialing 711. Spanish Relay Utah: 1-[PHONE REDACTED] BUSINESS may also post their own job opening directly to jobs.utah.gov/employer and email (or mail) a complete copy of the current job posting to the Business Information Center Manager. DRAFT ---PAGE BREAK--- SCHEDULE D SCHEDULE C Special Economic Development Projects Program Special Economic Development Projects Program (SEDP) is intended to facilitate and stimulate capital investment in Ogden City and to promote job creation/ retention activities. The funds may be used in a broad manner that contributes to enhancing the economic viability of the City’s airport, historic districts, main corridors, distressed areas and the Central Business District so long as the activity meets one of the national objectives established by HUD for the use of CDBG funds. The program guidelines are as follows:  The funds shall be used to eliminate blight conditions in the City or to benefit persons of low to moderate income  The projects may be either commercial or residential in nature  The funds may be used to create or retain jobs for persons of low or moderate income  Projects may be either new construction, reconstruction, or to assist projects that will encourage capital development, business expansion, and/or job retention  Projects will be considered based upon the availability of funds and the overall benefit to the public  Funds may be granted or loaned based upon the justifiable need and impact of the activity  Funds may be used as a loan guarantee for CDBG-funded loan activities  Funds will be used in the City for projects and activities that accomplish the goals and objectives identified by Mayor and City Council  Projects of $100,000 or more using funds from SEDP shall be approved by the City Council. DRAFT ---PAGE BREAK--- SCHEDULE D Destination Express, LLC - Loan Reporting Dates Loan Funded By: April 15, 2017 Date Information to Report Time Requirement June 30, 2017 Receipts and Expenditures for advanced:  Working Capital  Pre-purchase Bids Copy of Insurance – with City as Loss Payee 3 Months after Disbursement June 30, 2017 1st Job Creation and Payroll Report  Reference Schedule A 90 days after 1st Disbursement September 30, 2017 2nd Job Creation and Payroll Report  Reference Schedule A 3 Months after 1st Disbursement March 31, 2017 3rd Job Creation and Payroll Report  Reference Schedule A 6 Months after 1st Disbursement September 30, 2018 4th Job Creation and Payroll Report  Reference Schedule A 1 Year after Disbursement March 31, 2019 DUE: FINAL Job Creation and Payroll Report  Reference Schedule A  Must create 15 Full-time equivalent jobs by or before this date 18 months after 1st Disbursement March 31, 2018 1st Annual Unaudited Financial Reports:  Balance Sheet  Statement of Net Worth 2 years after 1st Disbursement March 31, 2019 2nd Annual Unaudited Financial Reports:  Balance Sheet  Statement of Net Worth 90 days after the end of each annual fiscal year March 31, 2020 3rd Annual Unaudited Financial Reports:  Balance Sheet  Statement of Net Worth 90 days after the end of each annual fiscal year March 31, 2021 4th Annual Unaudited Financial Reports:  Balance Sheet  Statement of Net Worth 90 days after the end of each annual fiscal year March 31, 2022 5th Annual Unaudited Financial Reports:  Balance Sheet  Statement of Net Worth 90 days after the end of each annual fiscal year January 1, 2022 Begin planning for pending balloon payments.  Your business is likely “bankable”  If you need to refinance, you may contact the [EMAIL REDACTED] for referrals to local traditional lenders 6 Months before final payment due July 1, 2022 DUE: Balloon Payment Due Loan Maturity Date DRAFT