HomeMy WebLinkAbout87- Schnee Loan Agreement, 1987
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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
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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-
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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
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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
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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:
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(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.
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(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.
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(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
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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
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I. .. itemized list of said assets, accounts receivable and inventory
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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
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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;
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(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.
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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
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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
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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
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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
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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
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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
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that no officer, member, agent, or employee of the Lender who
participates in the administration of this Agreement in other
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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
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Steven P. Schnee
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Jea M. Schnee
STATE OF MONTANA )
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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.
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LENDER
CITY OF BOZEMAN
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James wysocki,
City Manager
STATE OF MONTANA )
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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_
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