HomeMy WebLinkAboutR-1994-102 Collection Guarantee AgreementRESOLUTION NO. R94- 102
A RESOLUTION authorizing and directing the City Manager of the City of
Yakima to enter into a collection guarantee agreement
with lending institutions.
WHEREAS, the City Council has established economic development as
an ongoing priority within the City of Yakima, and
WHEREAS, access to funds is an important aspect to small business
development; and
WHEREAS, the use of United States Department of Housing and Urban
Development Action Grant (hereafter "UDAG") funds for collection
guarantees is an appropriate expense under Title 1 of Housing and Urban
Development Regulations within the CDBG target area; and,
WHEREAS, the City Council deems it to be in the best interest of the
City to enter into collection guarantee agreements for small business loans
with participating lending institutions, and utilizing UDAG money as the
sole and exclusive source for said collection guarantees, now, therefore,
BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF YAKIMA:
The City Manager of the City of Yakima is hereby authorized and
directed to enter into collection guarantee agreements with participating
lending institutions (Pioneer Bank, U. S. Bank, Key Bank, Seafirst Bank,
Yakima Federal and West One Bank) to guarantee collection of 75% of loans
made under the Yakima Micro Loan Program utilizing UDAG money as the
sole and exclusive source for said collection guarantees as approved on
December 14, 1993 by the Yakima City Council.
ADOPTED BY THE CITY COUNCIL thisl9thday of July , 1 994.
Mayor
A'1"!'EST:
City Clerk
COLLECTION GUARANTEE AGREEMENT
BETWEEN THE CITY OF YAKIMA
AND
PIONEER BANK
This Collection Guarantee is made and entered into this 1st day of July, 1994, by and
between the City of Yakima, Community and Economic Development Department,
hereinafter the "City," and Pioneer Bank, hereinafter the "Lender."
RECITALS
1. John/Joyce Johnson, hereinafter the "Debtor," desires to obtain a loan of
Eighteen Thousand Seven Hundred and Forty -Five Dollars ($18,745.00) from Lender
for the general purpose of developing a successful small business in the City of
Yakima.
2. The Lender will make the loan under the terms set forth in the loan
agreement attached hereto as Exhibit "A," provided that security in the form of a
collection guarantee is furnished by the City.
3. The City desires that the Lender make said loan to the Debtor and is willing
to provide a collection guarantee to the Lender under the terms and conditions set
forth below.
COLLECTION GUARANTEE TERMS/CONDITIONS
In consideration of the mutual covenants, promises, and conditions herein contained,
it is agreed by and between the City and the Lender as follows:
1. Collection Guarantee.
As security for the Debtor performing his/her loan obligations to the Lender, the
City guarantees to Lender, its successors and assigns, repayment of seventy-five
percent (75%) of loan principal and interest. The City's guarantee obligation is
expressly conditioned upon the satisfaction of the terms/conditions stated herein.
2. Source of Collection Guarantee Funds.
The sole and exclusive source of collection guarantee funds is United
States Department of Housing and Urban Development Action Grant
("UDAG") money received by the City and that is currently held in City
of Yakima Economic Development Fund No. 123. Lender agrees that it
will not seek guarantee repayment except from said UDAG money in City
Fund No. 123. Lender also recognizes that said money and the
disbursement thereof is subject to various federal laws and regulations.
3. Term of Collection Guarantee.
The term of this Agreement commences upon execution hereof and continues until
said loan is paid in full or until June 1, 2001, whichever occurs first.
Page 1 of 4
(1,)agr/collect on ,uarentee.pu
4. Collection. Guarantee Payment upon Loan Default.
"Default" means the failure of the Debtor to pay when due the principal and/or
interest owed to the Lender on an installment if the loan documents are for
installment payments; or on maturity if the loan documents require a lump sum
payment by the Debtor. Failure of the Debtor to comply with other loan
terms/conditions shall not in itself constitute a default for purposes of the Lender
filing a claim against the City pursuant to this Agreement. In the event of recovery
by the Lender, all sums received shall first be applied to the interest and principal
owing under the loan.
The Lender shall be authorized to make a demand for collection guarantee payment to
the City upon compliance with the following;
a. Providing proof to the City that the Debtor is in bankruptcy;
b. Providing proof to the City that the Debtor is in default under the
loan and the Lender has delivered to both the Debtor and the City
a minimum of two (2) letters subsequent to the default, at least
thirty (30) days apart, explaining the consequences for failure to
remedy the default.
c. Providing proof to the City that the Lender has liquidated all
collateral as described in collateral security document(s) to the
loan agreement, attached hereto as Exhibit "B." "Liquidate"
means that the Lender has exhausted all collateral by one of the
following methods:
i. converted all collateral into cash;
ii. demonstrated, to the satisfaction of the City,
that the collateral is without sufficient value
to convert to cash; or
iii. demonstrated that the Debtor has filed for
bankruptcy.
Prior to guarantee payment, the Lender agrees to permit the City and/or its designee
access to the Lender's records pertaining to the Loan.
If the Lender asserts a claim against the City pursuant to this Agreement, the City
shall have the right to reduce its liability hereunder if the City determines that the
Lender has failed to obtain and/or perfect the security interests in or liens on the
collateral listed and described in Exhibit B; or if the City determines that the Lender
has engaged in fraudulent activities, gross negligence, or willful misconduct with
respect to the Loan. However, the City shall not be entitled to reduce its liability
under this Agreement by an amount exceeding the actual loss sustained by The City
as A result of the Lender's action(s) and/or omission(s).
In the event the Lender asserts a claim against the City under this Agreement, and
upon payment of the claim by the City, the Lender shall assign all rights and
remedies to the City. "Rights and remedies" as used herein includes, but is not limited
to, the note, all security agreements, and other documents and security held by the
Lender in connection with the defaulted loan. The City, as assignee, shall take such
Page 2 of 4
(1a)agr/colloction guaranteed?.
legal action against the Debtor as warranted to secure payment from the Debtor or
the Debtor's assets.
If the City obtains recovery on a defaulted loan after its assignment from the Lender,
the proceeds of the recovery, net City recovery costs, including attorney's fees, shall
be shared between the City and the Lender in proportion to the exposure of each on
the defaulted loan.
5. Change. Extension. or Acceleration of Loan Indebtedness.
The Lender shall not, without the prior written consent of the City, renew,
compromise, extend, accelerate, or otherwise change the time for payment or the
terms of Debtor's indebtedness.
6. Collateral Lien Priority.
The collateral listed and described in Exhibit B shall be used to secure the entire loan
to the Debtor, with equal lien priority for the guaranteed and unguaranteed portions
of the loan. The unguaranteed portion of the loan will not be paid first or given any
preference or priority over the guaranteed portion.
7. Severability.
If any portion of this Agreement is changed per mutual agreement or any portion is
held invalid, the remainder of the Agreement shall remain in full force and effect.
8. Integration.
This written document constitutes the entire agreement between the City and the
Lender. No changes and/or additions to this Agreement shall be valid or binding
upon either party unless such change and/or addition be in writing and executed by
both parties.
9. Notices.
Unless stated otherwise herein, all notices and demands shall be in writing and sent
to the parties to their addresses as follows:
TO CITY:
TO LENDER
Director
Community & Economic Development
Yakima City Hall
129 North 2nd Street
Yakima, WA 98901
Vice President
Pioneer Bank
P.O. Box 2949
Yakima, WA 98907
or to such addresses as the parties may hereafter designate in writing. Notices shall
be deemed effective when mailed or hand delivered at the addresses specified above.
Page 3 of 4
(1.)egr/collection querentee.pn
10. Governing Law.
Where not preempted by federal law, this Agreement shall be governed and
construed in accordance with the law of the State of Washington.
11. Attorney's Fees and Costs.
In the event that any suit or action is instituted
compliance with and/or interpret any of the terms,
Agreement, the prevailing party shall be entitled to
court costs, such sums as the court may adjudge as
venue for any action to enforce and/or interpret
Yakima County Superior Court, State of Washington.
by either party to enforce the
covenants, or conditions of this
collect, in addition to necessary
reasonable attorney's fees. The
this Agreement shall lie in the
CITY OF YAKIMA PIO ' BANK
BY:
Dick Zais, ty Manager
ATTEST:
City Clerk
CITY CONTRACT
STATE OF WASHINGTON
:ss.
County of Yakima
Its:
I certify that I know or have satisfactory evidence that a ie. //. 'lwr- is
the person who appeared before me, and said person acknowledged that he/she
signed this instrument, on oath stated that he/she was authorized to execute the
J�
instrument and acknowledged it as the (- 4 s,M ,1 of Pioneer Bank to be the
free and voluntary act of such party for the uses and purposes mentioned in the
instrument.
DATED: 7/7/N
Page 4 of 4
(1s)a4r/collection Wnrantee.pm
N(6TARY PUBLIC in and for the State of
Washington, residing at
My commission expires: