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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: