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HomeMy WebLinkAbout87- Schnee Loan Agreement, 1987 . .. " . " ~ .. . . . , . f.OA~, AGR~EMENT This Loan Agreement is made and entered into this 20th day of July, 1987, by and between STEVEN P. AND JEAN M. SCHNEE, hereinafter referred to as "Borrower" and the City of Bozeman, hereinafter referred to as the "Lender". RECITALS WHEREAS the Lender has been awarded a grant by the Montana Department of Commerce (DOC) under the Community Development Block Grant (CDBG) Program; and WHEREAS the purpose of this grant is to increase employment opportunities for low and moderate income persons residing within the Lender's jurisdictional area; and WHEREAS the Borrower wishes to borrow CDBG funds from the Lender to expand a business enterprise within the Lender's juris- dictional area; and WHEREAS, in consideration for the proposed loan, the Borrower has agreed to create eight ( 8 ) full-time equivalent posi- tions to be made available for low and moderate income persons and comply with all provisions of the hiring and training plan attached hereto as "Exhibit A" and by this reference is made , a part hereof. A full-time equivalent employee is an individual who is employed for 40 hours a week or a combination of indivi- duals whose combined hours of employment equal 413 hours per week. WHEREAS the Borrower has agreed not to remove the business activities or facilities for which the loan is intended florn the Lender's jurisdictional area during the term of the loan; NOW, THEREFORE, in consideration of the mutual covenants and conditions herein, the parties agree as follows: l. Amount of Loan: The Lender agrees under the terms and condi- -----.....-........ tions of this Agreement, to make a loan for the acquisition and remodeling of property located at 121 West Main Street, Bozeman, Montana; the purchase of handicraft manufacturing equipment, and the expansion of mail order inventory, to Borrower in the princi- pal amount of One Hundred Fifty Thousand Dollars ($150,000.1313) to be repaid over a term of twenty (213) years. This loan is evidenced by a promissory note executed by the Borrower and 1 . . ~ . . . personally guaranteed by Steven P. and Jean M. Schnee. A copy of this note and personal guarranty is attached hereto as "Exhibit A" and by this reference is made a part thereof. 2. Interest Rate and Repayment of Loan: The note attached hereto as "Exhibit B" shall bear interest at five percent (5%) . The loan shall commence on July 15, 1987, in the amount of One Hundred Fifty Thousand Dollars ($150,000.00) . principal and interest will be deferred through December 31, 1989. Commencing on January 1, 1990, and the first of each month thereafter through December 1 , 1990, the Borrower agrees to make a Five Hundred Dollar ($500.00) payment which will be applied to the principal balance of the loan. The remaining principal balance of One Hundred Forty-four Thousand Dollars ($144,000.00) shall accrue interest commencing January 1 , 1991, at the rate of five percent (5%) interest and amortized over a twenty (20) year period with monthly payments of Nine Hundres Fifty and 34/100 Dollars ($950.34) . payments will be made on the first day of the month in which they are due. The Borrower will pay a Twenty-five Dollar ($25.00) late charge for any payment not made by the last day of the month in which it is due. All payments shall be first applied to penalties, then interest and thereafter to principal. There will be no penalty for prepayment of the loan. 3. Requests for Funds: The Borrower will submit to the Lender - written requests for funds periodically as needed for the pur- poses of the loan specified herein. with each of these requests the Borrower will provide evidence sufficient for the Lender to determine the propriety of the proposed use of the funds requested. Said requirements shall be outlined in the Administra- tive Manual kept on file in the Bozeman City-County Planning Office. 4. Conditions of Loan: -- (a) The Lender's obligation to make the loan provided for hereby is contingent on the Lender's receipt of CDBG funds for this purpose from DOC. 2 . , . . (b) During the entire t~rm of indebtedness the Borrower will deliver to the Lender quarterly balance sheets, profit and loss statements, and other financial records as the Lender may reasonably request from time to time. The Borrower will also submit annual financial statements with full disclosure notes which must at a minimum be reviewed by a certified public accountant. In this regard, at any time a certified public accountant audits any such statements the Borrower will furnish the Lender with a copy of all summary sheets and written opinions and reports of the certified public accountant. Further, the Borrower will make its records relating to this Agreement avail- able for inspection during normal business hours to the Lender and DOC. (c) The Borrower will submit status reports on project performance at the request of, and in the format prescribed by, the Lender. The Borrower will submit the following to the Lender: ( 1 ) Biannual business plan reports describing the Borrower's progress toward achieving the objectives of and implementing the strategies contained in the Lender's CDBG application (a nd , if applicable, outlined in the Business plan section of the project Implementation Schedule attached hereto as "Exhibit 0"); ( 2 ) A construction progress report with each request for funds. (d) Upon receipt of reasonable advance notice the Borrower will permit representatives of the Lender and DOC to inspect the Borrower's facilities and records which are the subject of this loan. (e) That Borrower will comply with the final hiring and training plan attached hereto as "Exhibit A" which by this reference is made a part hereof. The Borrower will file quarter- ly employment reports with the Lender and DOC showing the degree to which the Borrower has complied with the hiring commitments established hereby. The conditions contained in this section apply until DOC approves the Grantees Conditional or Final Certi- fication of Completion upon project closeout. 3 . . . . . (f) This Agreement is non-assignable except upon the writ- ten consent of the Lender. Such consent will not be unreason- ably withheld. A request for consent to assignment must include a statement justifying the request and the certified financial statement of the proposed assignee. This statement must be current to within 90 days of the request. The Lender reserves the right to deny requests for assignment. Said denial of Assignment must be reasonably documented in writing and approved by the Bozeman City Manager. (g) The Lender upon the request of the borrower, may modify the terms, rates, and conditions of the loan, provided reasonable documentation is presented certifying the need of the modifica- tion. Said modification may not alter any of the conditions of the grant approved by the Montana Department of Commerce. (h) It is expressly understood that the proceeds of this loan are designated solely for the purpose of legitimate acquisi- tion and remodeling of the building located at 121 West Main Street, Bozeman, Montana, and the purchase of equipment and the expansion of mail order inventory [a 11 items offered for sale through mail order catalog]. It is expressly understood that the proceeds of this loan may not be used for the expansion of the retail inventory to be sold on the premises. ( i ) The Borrower waives any and all claims and recourse against the Lender, including the right of contribution for loss and damage to persons or property arising from, growing out of, or in any way connected with or incident to this Agreement. Further, the Borrower will idemnify, hold harmless, and defend the Lender against any and all claims, demands, damages, costs, expenses or liability arising out of the performance of the Borrower. S. Security (AS is applicable). (a) As security for the performance of this Agreement, the Borrower will grant a security interest to the Lender in all real property described in the second priority deed of trust attached 4 . . . , , hereto as "Exhibit E" which by this reference is made a part hereof. (b) The Borrower will also provide the Lender with second priority security interest in all of the equipment used in the operation of the Borrower's business, accounts receivable, and ) inventory to secure repayment of the loan provided hereunder. An v I. .. itemized list of said assets, accounts receivable and inventory I,' and their true values and a certified and notarized statement of the chief executive officer of the Borrower as to any equipment's true value will be provided to Lender and updated periodically. (c) The Lender's security priority interest in the Borrower's assets described in subparagraph (b) above, will be evidenced by appropriate Uniform Commercial Code forms as required by the Secretary of State of Montana to secure such assets to the Lender pursuant to sections 30-9-101 through 30-9-511, Montana Code Annotated. These Uniform Commercial Code forms will indicate the Lender's security position, identify other secured creditors and their security positions, and indicate that the secured parties are entitled to "proceeds" in the event that any such equipment is sold and not replaced by the Borrower to operate its business. The Uniform Commercial Code forms will be filed in all necessary state and county offices. (d) Should the borrower default in repayment of the loan, the Lender may resort to the property described in subparagraphs (a) and (b) above, and engage in any remedies allowable by the laws of Montana. (e) Three years from the date hereof and at the end of each succeeding three-year period, the Lender and its designated agent/s, may review, reevaluate and examine the property pledged as security for repayment of this loan. Should the Lender deter- mine in its reasonable judgment that such security is inadequate in value to fully secure the balance of the loan unpaid on the date of such review, the Lender or the Borrower may, after con- sultation with the Department of Commerce and after being directed 5 \ by the Bozeman City Manager, ~equi~e/allow that the Borrower and its individual guarantors pledge, by whatever means or docu- ments the Lender deems to be appropriate, such additional proper- ty as the Lender deems necessary to fully secure repayment of the remaining balance of the loan. ( f) The Borrower will provide the Lender with a standard title insurance policy in the amount of the loan proceeds for the real property upon which the Borrower intends to remodel a build- ing from which to operate its business within 30 days after title to the property is acquired by the Borrower. Said title insu- rance policy may be that which was provided the Borrower by the seller. (g) The Borrower will purchase and be responsible to pay the premiums on life insurance pOlicies upon the lives of Steven P. and Jean M. Schnee for the sum of the remaining balance of the loan. The Lender will be named as the beneficiary of these policies. The Borrower will require the vendor of the life insurance polidies to provide to the Lender proof of payment of the insurance premiums and documentation stating that the Lender is the beneficiary of the policies. This proof must be provided simultaneously upon execution of this Agreement and thereafter on an annual basis. 6. Events of Default: If any of the following events occur, the Lender may, in its sole discretion, declare such event a default under this Agreement: (a) Any representation or warranty made by the Borrower in this Agreement or in any request or certificate or other informa- tion furnished to the Lender hereunder proves to have been incor- rect in any material respect; and that the Borrower knew or should have know was incorrect when submitted to the lender. (b) The Borrower fails in any material respect to carry out its obligations under its proposal to the Lender for the loan provided hereunder; 6 (c) The Borrower defaults in the payment of any indebted- ness for any money adversely effecting Lender's security interest, for which the Borrower is liable as principal obligor or becomes liable as guarantor; (d) The Borrower applies for or consents to the appointment of a receiver, trustee or liquidator, admits in writing to its ability to pay its debts as they become due, makes a general assignment for the benefit of creditors, or invokes any relief under any chapter of the united States Bankruptcy Code; (e) The Borrower fails to provide adequate collateral for the subject loan in accordance with Section 5, above; ( f) The Borrower fails to pay all local real and personal property taxes specific to the project funded by the proceeds of this loan; (g) The Borrower relocates its work force outside of the Lender's jurisdictional area to the extent that there is a fifty percent (50%) reduction of the work force from the agreed minimal level of four (4 ) full-time equivalent employees; (h) The Borrower fails to provide to the Lender documented proof of the existence of term life insurance for the remaining outstanding principal balance of the loan on the lives of Steven P. and Jean M. Schnee with the stated beneficiary of these poli- cies being the Lender; ( i ) The Borrower fails to execute any documents necessary to make the Lender secure in its financial position as stated in this Agreement; ( j ) The Borrower sells, transfers, pledges or hypothecates its assets so as to render the Lender insecure in its position of having the loan repaid; (k) The Borrower violates any term, assurance, or conditions of this Agreement. 7 In the event the Borrower fai'J.s to make timely payments under this Agreement or perform any of the covenants on its part or any event of default occurs as stated above, the Lender may declare the Borrower to be in default and there- after give the Borrower written notice setting forth the action or inaction which constitutes the default and giving the Borrower 30 days in which to correct the default. In the event that the Borrower fails to correct the default within 30 days of receipt of this notice, the Lender may notify the Borrower in writing that the full balance due upon this Agreement is then due and payable in full within 30 days. It is agreed by the parties hereto that the provisions of this Agreement provide for reasonable and sufficient notice to be given to the Borrower in case of the Borrower's fail- ure to perform any of its covenants and is sufficient for Borrower to rectify its actions or inactions of default. Any waiver by the Lender of any default by the Borrower does not constitute a waiver of a continuting breach or a waiver of a subsequent breach. Any agreement contrary to this Agreement is not binding upon either party hereto unless it is in writing and signed by both parties hereto. 7. Non-Discrimination. (a) Civil Rights Act ~ ~964. The Borrower will abide by the provisions of Title VI of the Civil Rights Act of 1964 which states that no person may, on the grounds of race, color, or national origin, be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any program or activity receiving federal financial assistance. (b) Section 109 of the Housing and Community Development Ac~ of 1974. In the performance of this contract the Borrower will -- obey this provision which states that; "No person in the United States may on the grounds of race, color, national origin, or sex be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any program or activity 8 , funded in whole or in part with the funds made available under this title. Any prohibition against discrimination on the basis of age under the Age Discrimination Act of 1974 or with respect to an otherwise qualified handicapped individual as provided in Section 504 of the Rehabilittion Act of 1973 will also apply to any such program or activity." 8. prevailing Salaries ~ Wages: The Borrower agrees to include the following wording in all construction contracts funded through this business expansion: The Contractor shall pay to all laborers and mechanics employed in the development of the project not less than the wages prevailing in the locality of the project, as pre- determined by the Secretary of Labor of the United States pursuant to the Davis-Bacon Act (Title 40, U.S.C., Secs. 276a-276A-S) . The Contractor shall submit to the Bozeman City-County Plan- ning office such copies and summaries (on forms prescribed by HUD and furnished by the Bozeman City-County Planning Office, of all his payrolls and those of each of his subcon- tractors, as required. Each payroll and summary shall be accompanied by a statement signed by the employer or his agency indicating that the payrolls are correct and com- plete, that the wage rates contained therein are not less than those determined by the Secretary of Labor, and that the classifications set forth for each laborer or mechanic conform with the work he performed. All laborers and mechanics employed in the development of the project shall be paid unconditionally and not less often than once a week, and without subsequent deduction or rebate on any account (except such payroll deductions as are permit- ted by the regulations issued by the Secretary of Labor under the Copeland Act (29 CFR Part 3) ) , the full amounts due at the time of payment computed at wage rates not less than those contained in the wage determination decision of the 9 . . , Secretary of Labor regar~less, of any contractual relation- ship which may be alleged to exist between the Contractor or subcontractor and such laborers and mechanics; and the wage determination decision and the Department of Labor Wage Rate Informaton Poster shall be posted by the Contractor at the site of the work in a prominent place where it can be easily seen by the workers. For the purpose of this clause, contri- butions made or costs reasonably anticipated under section l(b) (2) of the Davis-Bacon Act on behalf of laborers or mechanics are considered wages paid to such laborers or mechanics subject to the provisions of 29 CFR 5.5 (a) (1) (iv). Also for the purpose of this clause, regular contributions made or costs incurred for more than a weekly period under plans, funds or programs but covering the particular weekly period, are deemed to be constructively made or incurred during such weekly period. 9. Additional Assurance. The Borrower will remain fully obli- gated under the provisions of this Agreement notwithstanding its designation of any third party or parties with written approval of the Lender for the undertaking of all or any part of the program with respect to which assistance is being provided under this Agreement. The Borrower will comply with all applicable laws, rules and regulations of the Lender, the State of Montana, and the United States Government and with all lawful requirements of the Lender 50 as to insure that this Agreement is carried out in accordance with the obligations and responsibility of the Lender to the State of Montana. 113. Insurance. The Borrower agrees that upon the completion of remodeling its facilities it will keep the improvements and the capital equipment upon said premises insured against loss by fire in an amount equivalent to the value of the Loan payable to the Lender for the monetary amount of Borrower's obligation to the Lender. However, the Borrower may, upon written approval of the Lender, in the event of loss by fire, apply insurance proceeds received by the Lender towards the payment of the loan or use the proceeds to rebuild the improvements destroyed by fire. If the 113 L . . . . . Borrower chooses this latter option, the Lender will hold the insurance proceeds and pay them to materialmen, contractors, and laborers for services rendered and materials furnished and delivered in the rebuilding of the improvements. It is under- stood that it is the Borrower's duty to see that no liens are filed upon the premises by reason of any rebuilding. The Borrow- er shall require the carrier/s to place copies of the insurance policy or policies with the Lender within 30 days of the date of . completion of the manufacturing facilities Borrower intends to erect. During the term of this Loan Agreement, when the Borrower renews the insurance policy by payment of an additional year's premium, the Borrower shall require the carrier's to provide proof of payment of the premium to the Lender so as to keep the Lender advised at all times that the property is insured. Failure to so notify the Lender is an event of default of this Loan Agreement for purposes of the default provisions of Section 6 above. 11. Litigation. The Borrower states that to the best of its knowledge and belief there are no suits or proceedings pending or threatened against or effecting it which, if adversely deter- mined, would have a material adverse effect on its financial condition. In addition, to the knowledge of the Borrower there are no proceedings by or before any governmental commission, board, bureau or other administrative agency pending or threat- ened against the Borrower. 12. Disputes. In the event that either party incurs legal expenses to enforce the terms and conditions of this Agreement, the prevailing party is entitled to recover reasonable attorney's fees and other costs and expenses, whether the same are incurred with or without suit. 13. Avoidance of Conflict of Interest. The Borrower covenants - - that no officer, member, agent, or employee of the Lender who participates in the administration of this Agreement in other 11 '. I . . . . . . . . , than a purely ministrial capacity will have any personal inter- est, real or apparent, in the proceeds of the loan provided hereby. For purposes of this covenant an impermissible conflict of interest exists if the officer, member, agent or employee; any member of his or her immediate family; his or her partner; or an organization which employes, or is about to employ, any of the foregoing has a financial or other interest in the proceeds hereof during his or her tenure or for one year thereafter. The Borrower shall ilncorporate, or cause to be incorporated, in all contracts or subcontracts a provision prohibiting such interest pursuant to the purposes of this section. 14. Construction and Venue. This Agreement will be construed under and governed by the laws of the State of Montana. In the event of litigation concerning it, venue is in the 18th Judicial District in and for the County of Gallatin, State of Montana. BORROWER ~ P"j ........ ..,..,. ,," ,/ . lA_fc>v<"'- ,.,"",,-/1: ~ , i' (f Steven P. Schnee , ~ m . ",Jc)./rLLL Jea M. Schnee STATE OF MONTANA ) :ss County of Gallatin ) On this ~CJ day Of~ ,1987, before me, a Notary Public for the State of M tan, personally appeared Steven P. Schnee and Jean M. Schnee, known to me to be the persons whose names are subscribed to the above instrument and acknowledged to me that they executed the same. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my Notarial Seal the day and year first above written. ~~~e oC Monj:ana. __Residing at..:..to21MA~ ,11, -(:~mmission Expires: ?/ty If? ( Sean 12 . ~ ... .. ~ ,,- .,," . . . .. . , " LENDER CITY OF BOZEMAN ~G James wysocki, City Manager STATE OF MONTANA ) :ss County of Gallatin On the ~O day of ~ ,1987. before me, a Notary Public for the State of M ta , personally appeared James Wysocki, known to me to be the person described in and who executed the foregoing instrument as City Manager of the City of Bozeman, whose name is subscribed to the within instrument and acknowleged to me that he executed the same for and on behalf of said City. WITNESS WHEREOF, I have hereunto set my hand and affixed the da nd year first written above. (Seall_ 13