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CDC - Item 5A - Loan Agreement With The Rosemead Chamber of CommerceROSEMEAD COMMUNITY DEVELOPMENT COMMISSION STAFF REPORT TO: THE HONORABLE CHARIMAN AND COMMIS ONERS FROM: JEFF ALLRED, EXCUTIVE DIRECTOR DATE: SEPTEMBER 14, 2010 SUBJECT: LOAN AGREEMENT WITH THE ROSEMEAD CHAMBER OF COMMERCE On June 1, 2010, the Rosemead Chamber of Commerce approached the City regarding the need for a loan in order to help them fund the implementation of a new business plan. Per the direction from the City Council, the attached Promissory Note (Attachment A) and Negative Pledge Agreement (Attachment B) will provide for a $25,000 loan to be repaid by 2015. The terms of the loan include annual payments on July 1st of each year commencing July 1, 2012 with an interest rate of zero percent (0%). Payments not made by July 10th of each year would accrue penalties at the rate of three percent (3%). The loan will be secured by a Negative Pledge Agreement, which will be recorded with the County on the Chamber's offices located at 3953 Muscatel Avenue. Staff Recommendation Staff recommends that the Community Development Commission authorize the loan of $25,000 to the Rosemead Chamber of Commerce and execute the Promissory Note to be secured by the Negative Pledge Agreement. PUBLIC NOTICE PROCESS This item has been noticed through the regular agenda notification process. Submitted by: C r le7lorth Matthew E. HawAssistant City Manager Attachments: A - Promissory Note B - Negative Pledge Agreement ITEM NO. rJA APPROVED FOR COMMUNITY DEVELOPMENT COMMISSION AGENDA: Attachment A PROMISSORY NOTE $25,000.00 Rosemead, California .2010 For value received, the ROSEMEAD CHAMBER OF COMMERCE ("Borrower"), does hereby covenant and promise to pay to the ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION, a public body, corporate and politic ("Commission"), or order, the principal sum of Twenty-Five Thousand and No/100 Dollars ($25,000.00). Principal is payable in lawful money of the United States of America without setoff, deduction or counterclaim and shall be paid to the Commission, in installments as provided in Section 2 below, at 8838 E. Valley Boulevard, Rosemead, California 91770, or at such other place as Commission may from time to time designate by written notice to Borrower, Terms of the Loan. (a) No interest is payable on the outstanding principal. Principal is payable in four (4) annual installments of $6,000.00 (Six Thousand and NO/100 Dollars) each commencing on July 1, 2012 (the "Commencement Date"), and continuing thereafter on the same day of each succeeding year until July 1, 2015 (the "Maturity Date"), at which time all outstanding principal shall be filly due and payable. (b) To the extent that Borrower makes any payment or Commission receives any payment or proceeds for Borrower's benefit, which are subsequently invalidated, declared to be fraudulent or preferential, or are required to be set aside or to be repaid to a trustee, debtor in possession, receiver, custodian or any other party under any bankruptcy law. common law or equitable cause, then, to such extent, the obligations of Borrower hereunder intended to be satisfied shall be revised and continue as if such payment or proceeds had not been received by Commission. (c) Borrower shall pay to Commission a charge ("Late Charge") for the collection of late payments in an amount equal to three percent (3%) of any payment required hereunder which is not paid within ten (10) days after the date such payment is due, as liquidated damages and not as a penalty. Without limiting the foregoing, Borrower agrees that the Late Charge shall be due and payable upon the entire unpaid principal amount if not paid when due upon the Maturity Date. Acceptance of any Late Charge does not constitute a waiver by Commission of the default with respect to the overdue amount and shall not prevent Commission from exercising any other rights or remedies available to it. From and after the Maturity Date of this Note or such earlier date as all sums owing on this Note become due and payable by acceleration or otherwise, all sums owing on this Note, at Commission's option, will bear interest until paid in full at a rate equal to ten percent (10%) per annum. (d) All payments on this Note will be applied first to the payment of any costs, fees, Late Charges, or other charges incurred in connection with the indebtedness evidenced by this Note; then to the reduction of the principal balance. Borrower may prepay this Note, in whole or in part, at any LA 94935-7649-0518 v3 -I- time without any penalty or additional fees; all such prepayments shall be applied to the installments due under this Note in the inverse order of their maturity. (e) The Loan is unsecured, but supported by a Negative Pledge Agreement (the "Negative Pledge Agreement") by Borrower, executed as of the date hereof, in favor of Commission and in the form of attached Exhibit 1 to this Loan Agreement. The Negative Pledge Agreement provides that so long as this Loan remains unpaid all or in part, Borrower agrees not to grant any lien on its wholly-owned and unencumbered real property located at 3953 Muscatel Avenue, Rosemead, CA 91770-1748, and also provides that the Borrower will not to sell or transfer such real property, as all more particularly provided in the Negative Pledge Agreement. (f) The parties hereto intend to conform strictly to the applicable usury laws. In no event shall the Commission be entitled to interest exceeding the maximum rate permitted by law. If fulfillment of any provision of this Note, or of any other document pertaining to the indebtedness evidenced hereby, at the time performance of such provisions shall be due, would involve exceeding the maximum rate of interest prescribed by law, then the obligation to be fulfilled shall be reduced automatically so as to equal such maximum rate. If the Commission shall ever receive anything of value deemed interest under applicable law which would exceed interest at the highest lawful rate, an amount equal to any amount which would have been excessive interest shall be applied to the reduction of principal installments payable with respect to this Note in the inverse order of their maturity and not to the payment of interest, or if such amount which would have been excessive interest exceeds the unpaid balance of principal hereof, such excess shall be refunded to Borrower. All sums paid or agreed to be paid to the Commission for the use, forbearance or detention of the indebtedness of the Borrower to the Commission hereunder shall, to the extent permitted by applicable law, be amortized, prorated, allocated, and spread throughout the full stated term of such indebtedness so that the amount of interest on account of such indebtedness does not exceed the maximum permitted by applicable law. 3. Acceleration on Default. If Borrower fails to pay the principal of, or any other amount payable by Borrower under this Note, as and when the same is due and payable or there is a Default under and as defined in the Negative Pledge Agreement by Borrower, then, in addition to all rights and remedies of the Commission under the Agreement, applicable law or otherwise, all such rights and remedies being cumulative, the Commission may, at its option, declare all amounts owing under this Note to be due and payable, whereupon the then unpaid principal balance hereof shall forthwith become due and payable. 4. Cost of Collection. Borrower agrees to pay the following costs, expenses and attorneys' fees paid or incurred by Commission: (i) costs and expenses of collection or enforcement of. and attorneys' fees paid or incurred in connection with the collection or enforcement of, this Note, whether or not suit is filed; and (ii) costs of suit and such sum as the Court may adjudge as attorneys' fees in an action to enforce payment of this Note or any part of it. 5. Forbearance Not a Waiver. No delay or omission on the part of Commission in exercising any rights under this Note or the Deed of Trust on breach or default by Borrower shall operate as a waiver of such right or any other right under this Note or the Deed of Trust for the same breach or default or any other breach or default. LA #4935-7648-0518 0 -2- 6. Assignment. Commission shall have the right to sell, assign or otherwise transfer, in whole or in part, this Note, the Deed of Trust, and any other instrument evidencing or securing the indebtedness of this Note without the consent of Borrower. Borrower shall not sell, assign or otherwise transfer this Note, in whole or in part, without the prior written consent of Commission which consent the Commission is under no obligation to give. 7. No Oral Modifications. Neither this Note nor any of the terms or provisions hereof can be altered, modified, amended, waived, extended, changed, discharged or terminated orally or by a course of conduct, but only by an agreement in writing signed by the party against whom enforcement of any alteration, modification, amendment, waiver, extension, change, discharge or termination is sought. 8. Time is of the Essence. Time is of the essence for each and every obligation under this Note. ROSEMEAD CHAMBER OF COMMERCE By: (Print Name & Title) By: (Print Name & Title) LA 94835-7648-05 18 v3 -3- Attachment B Recording Requested By And When Recorded Return To: Rosemead Community Development Commission 8838 E. Valley Boulevard Rosemead, California 91770 Attn: City Clerk Exempt Recording Per Government Space Above This Line For Recorder's Use Code Sections 6103 and 27383 EXHIBIT 1 to Promissory Note Between Borrower and Lender NEGATIVE PLEDGE AGREEMENT This NEGATIVE PLEDGE AGREEMENT (this "Agreement") is dated as of 2010, and is made by the undersigned Rosemead Chamber of Commerce (the "Borrower") in favor of Rosemead Community Development Commission (the "Lender"). RECITALS A. Pursuant to the Promissory Note dated as of , 2010 (as it may hereafter be amended, modified, restated or supplemented from time to time, the "Note") among the Borrower, and the Lender, Lender expects to extend a certain loan to Borrower subject to the terms of the Note. B. The obligation of the Lender to make a certain loan to the Borrower is subject to the condition, among others, that the Borrower enters into this Agreement. NOW THEREFORE, the Borrower, for valuable consideration, receipt of which hereby is acknowledged, jointly and severally hereby agree as follows: 1. Capitalized Terms. Capitalized terms not otherwise defined herein shall have the meanings given them in the Note. 2. Negative Pledge. In order to induce the Lender to extend a loan to the Borrower, the Borrower hereby agrees that so long as any amounts owing under the Note remain outstanding, the Borrower will not, nor will it permit, as the case may be, the granting of a lien in, or otherwise mortgage, encumber, pledge, grant a security interest, and/or enter into a negative pledge agreement with respect to, the real property of the Borrower, located at 3953 Muscatel Avenue, Rosemead, CA 91 770-1 748, and legally described on Exhibit "A" attached LA #4840-5034-0615 v2 DRAFT 7126/10 hereto (collectively, the "Property"), or any equity or other interest in the Property, even in the ordinary course of Borrower's business. Borrower also agrees not to sell, convey, grant, lease, give, contribute, assign, or otherwise transfer any of Borrower's assets, including, without limitation, the Property. 3. Nature of Negative Pledge, Waivers. This is an absolute, unconditional and continuing Agreement and will remain in full force and effect until all of the terms and conditions of the Note have been fully satisfied. This Agreement will extend to and cover renewals, extensions, modifications and/or marketing of the Note and any number of extensions of time for payment thereof and will not be affected by any surrender, exchange, acceptance, or release by the Lender of any pledge or any security held by it for any of the Note. 4. Representations and Covenants. The Borrower represents and warrants that: (a) the Borrower is the sole owner of the Property and has not made any prior sale, pledge, encumbrance; assignment or other disposition of any of the Property and the same is free from all mortgages, deeds of trust, liens and other encumbrances; (b) the Borrower will defend, at the Borrower's expense, the Property against all claims and demands of all persons at any time claiming the same or any interest therein; (c) the Borrower has the full right, power and authority to execute, deliver and perform this Agreement and the execution, delivery and performance of this Agreement by the Borrower has been duly authorized by all necessary action on the Borrower's part; and (d) the execution, delivery and performance of this Agreement by the Borrower does not and will not violate or conflict with the terms of any law, rule, regulation, order, decree, agreement or instrument to which the Borrower is a party or by which it or the Property is bound. 5. Default. All or any of the following will constitute a Default under this Agreement: (a) the breach of any representation of the Borrower herein, (b) the failure of the Borrower to perform any covenants or agreements contained herein, and/or (c) the occurrence of a default under the Note. 6. Representations and Warranties to Survive. All representations, warranties, covenants and agreements made by the Borrower herein will survive the execution and delivery of this Agreement without limitation as to time and amount. 7. Notices. All notices, requests, demands and other communications required or permitted to be given under the terms of this Agreement by one party to the other shall be in writing addressed to the recipient party's Notice Address set forth below and shall be deemed to have been duly given or made (a) if delivered personally (including by commercial courier or delivery service) to the party's Notice Address, then as of the date delivered (or if delivery is 2 LA #4840-5034-0615 v2 DRAFT 7/26110 refused, on presentation), or (b) if mailed by certified mail to the party's Notice Address, postage prepaid and return receipt requested, then at the time received at the party's Notice Address as evidenced by the return receipt, or (c) if mailed by first class mail to the party's Notice address, postage prepaid, then on the third (3rd) business day following deposit in the United States Mail. Any party may change its Notice Address by a notice given in the foregoing form and manner. The Notice Addresses of the parties are: If to the Lender: Rosemead Community Development Commission 8838 E. Valley Boulevard Rosemead, California 91770 Attn: Executive Director If to the Borrower: Rosemead Chamber of Commerce 3953 Muscatel Avenue Rosemead, California 91770 Attn: president 8. Miscellaneous. 8.1 This Agreement is binding upon and inures to the benefit of the Lender and the Borrower and their respective successor and assign, provided, however, that the Borrower may not assign this Agreement in whole or in part without the prior written consent of the Lender (which consent the Lender is under no obligation to give), and Lender at any time may assign this Agreement in whole or in part in connection with any sale, assignment or other transfer of the Note. 8.2 This Agreement (including the documents and instruments referred to herein and therein) constitutes the entire agreement of the parties with respect to the subject matter hereof and thereof and supersedes all other prior agreements and understandings, both written and oral, between the parties with respect to the subject matter hereof and thereof. This Agreement may be amended or modified in whole or in part at any time only by an agreement in writing executed in the same manner as this Agreement after authorization to do so by the parties hereto. 8.3 In case any one or more of the provisions contained in this Agreement should be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability in any respect, the validity, legality and enforceability of the remaining provisions contained herein will not in any way be affected or impaired thereby. 8.4 This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed will be deemed to be an original and all of which taken together will constitute one and the same agreement. Any 3 LA #4840-5034-0615 v2 DRAFT 7126/10 party so executing this Agreement by facsimile transmission shall promptly deliver a manually executed counterpart, provided that any failure to do so shall not affect the validity of the counterpart executed by facsimile transmission. 8.5 Acknowledgement by Loan Parties. THE BORROWER ACKNOWLEDGES THAT IT HAS BEEN REPRESENTED BY INDEPENDENT LEGAL COUNSEL OF IT CHOOSING IN THE NEGOTIATION, EXECUTION AND DELIVERY OF THIS AGREEMENT, AND THE BORROWER ACKNOWLEDGES THAT IT HAS READ AND UNDERSTANDS THIS AGREEMENT. IN PARTICULAR, THE BORROWER UNDERSTANDS THAT THIS AGREEMENT WILL BE RECORDED IN THE REAL PROPERTY RECORDS OF THE COUNTY WHERE THE PROPERTY IS LOCATED, AND THAT THIS AGREEMENT WILL MAKE BORROWER'S TITLE TO THE PROPERTY UNMARKETABLE, SO THAT NO ONE WILL LIKELY PURCHASE OR LEASE ANY PART OF THE PROPERTY OR LOAN MONEY AND ACCEPT A MORTGAGE OR SECURITY INTEREST ON ANY PART OF THE PROPERTY. NONETHELESS, BORROWER IS VOLUNTARILY EXECUTING AND DELIVERING THIS AGREEMENT AND IS AGREEING TO BE BOUND BY ITS TERMS. 8.6 Governing Law. This Agreement has been delivered and accepted at and will be deemed to have been made at Rosemead, California and will be interpreted and the rights and liabilities of the parties hereto determined in accordance with the laws of the State of California, without regard to conflicts of law principles. 8.7 Consent to Jurisdiction. THE BORROWER HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR STATE OF CALIFORNIA COURT SITTING IN THE COUNTY OF LOS ANGELES IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENTS, AND THE BORROWER HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREINAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. 8.8 Arbitration. As a manner to resolve disputes arising under this Agreement the parties may agree to submit a matter to non-binding arbitration. Such arbitration LA #4840-5034-0615 v2 DRAFT 7126110 4 shall not in any way waive either parties' rights and remedies against the other party which may be available under the law. Costs for arbitration shall be borne equally by the parties. 8.9 WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED BY LAW, THE BORROWER HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT OR THE RELATIONSHIP ESTABLISHED THEREUNDER. LA #4840-5034-0615 v2 DRAFT 7/26/10 5 The Lender and the Borrower have caused this Agreement to be duly executed by their respective duly authorized officers or representatives as of the date first set forth above. BORROWER: ROSEMEAD CHAMBER OF COMMERCE By: Title: By: Title: LENDER: ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION By: Title: Attest: Commission Secretary LA #4840-5034-0615 v2 DRAFT 7126/10 ACKNOWLEDGMENT ,State of California ) ) ss County of Los Angeles ) On before (Name of Notary) notary public, personally appeared who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. (Notary Signature) State of California ) ) ss County of Los Angeles ) On before (Name of Notary) notary public, personally appeared who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. (Notary Signature) 7 LA #4840-5034-0615 v2 DRAFT 7126/10 EXHIBIT A LEGAL DESCRIPTION [To Be Attached] LA #4840-5034-0615 v2 DRAFT 7126/10