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HomeMy WebLinkAboutInformational Report - Unite PD Economic Relief Loan PgrmSTAFF REPORT CITY OF PALM DESERT ECONOMIC DEVELOPMENT DEPARTMENT MEETING DATE: June 11, 2020 PREPARED BY: Wayne Olson, Senior Development Analyst REQUEST: Receive and file an update of the Unite Palm Desert Economic Relief Program — Focus Area 1 Recommendation 1. Receive and file an update of the Unite Palm Desert Economic Relief Program (UPDERP)— Focus Area 1 Executive Summary On May 14, 2020, the City Council approved the Unite Palm Desert Economic Relief Program, which included allocating $1 M of funds toward supporting local and small businesses in the form of an emergency business loan program. The loan application period opened on May 27, 2020, and will close on June 3, 2020. As of June 2, over 200 applications were received totaling over $3.OM in requested funding. Loan Subscription Rate and Application Review The Economic Development Subcommittee met on June 1, 2020, and discussed the prioritization of the loan applications in the event of over-subscription. In addition, the subcommittee offered direction on the scoring matrix to be used in evaluating the loan applications. A loan application review committee has been formed that includes a diverse representation of City staff from the Community Development, Economic Development & Finance Departments. Objective scoring criteria is being used to review applications, which includes the following weighted categories: • Businesses owned by Palm Desert residents • Businesses having employees that reside in Palm Desert • Having a physical storefront in Palm Desert • Businesses still closed due to State and County COVID-19 guidance • Businesses having larger economic impact / putting people back to work; and • Unique Palm Desert Business that are not found elsewhere Once the loan applications are approved by the committee (estimated by June 15, 2020), notifications will be sent to recipients, and a customized loan agreement will be drafted and Staff Report Unite Palm Desert Economic Relief Program Update June 11, 2020 Page 2 of 2 signed by all the relevant parties. Funds are estimated to be made available within approximately 30 days of a completed loan agreement. Loan Aareement 8� Loan Foraiveness The loan agreement and promissory note is attached for your information. The loan agreement and promissory note will be specific to each business owner depending on their eligibility. Staff worked with the legal team at BB&K to develop the agreement and promissory note that incorporates comments from relevant City staff. Evidence for forgiveness of a loan will require documentation that the loan proceeds were used to mitigate business losses that match the proposed uses identi�ed within the original loan application and reflected in the loan agreement. Eligible expenses to qualify for loan forgiveness include but are not limited to, lease or mortgage payments, utilities, equipment leases, inventory loss, supplies or expenses necessary to address COVID-19, local, state or federal health guidelines. Capital improvements are not a qualifiable expense under the loan program. Fiscal Analvsis On May 14, 2020, the City Council approved $1 M of funding by re-assigning funds from the Invest Palm Desert Incentive Program to the UPDERP loan program. Therefore, funds are currently available for the UPDERP Focus Area 1 loan program in the Economic Development Fund. LEGAL REVIEW RH DEPT. REVIEW FINANCIAL REVIEW - -- ASSISTANT CITY MANAGER Ma-v�ti.� A(.v�cwe�z Robert w Martin Alvarez Director of Hargreaves Economic City Attorney Development City Manager Lauri Aylaian: AF ���� Janet M. Moore Director of Finance Attachment: UPDERP Loan Agreement and Promissory Note .�lndy Firestine Andy Firestine Assistant City Manager W\Staff Reports - Shared�Drak Reports�06-11-2020\Economic Development\SR 6 11 20 UPDERP Update-Final dx 1 UNITE PALM DESERT ECONOMIC RELIEF PROGRAM FORGIVABLE LOAN AGREEMENT INFO PAGE 1. Date of Agreement ___________________________________ 2. Borrower Name ___________________________________ 3. Business (or DBA) ___________________________________ 4. Forgivable Loan Amount ___________________________________ 5. Expenses ___________________________________ 6. Regular Operations ___________________________________ 7. Completion Date ___________________________________ 8. Anniversary Dates ___________________________________ 9. Annual Report ___________________________________ 10. Borrower’s Address ___________________________________ 2 LOAN DISCLOSURES/SUMMARY Total Amount of Funds Provided Total Dollar Cost of Financing Term or Estimated Term Method or Frequency and Amount of Payments Description of Prepayment Policies Total Cost of Financing (Expressed as Annualized Rate) 3 UNITE PALM DESERT ECONOMIC RELIEF PROGRAM FORGIVABLE LOAN AGREEMENT This Forgivable Loan Agreement (“Agreement”) is entered into as of the date listed on the Informational Page [See. No. 1], attached hereto and incorporated herein by this reference (the “Info Page”) among the City of Palm Desert (the “City”) and [See No. 2 Info Page] (the “Borrower”) who owns and operates [See No. 3 Info Page] (the “Business”). WHEREAS, the City, pursuant to and in compliance with all laws applicable to the City, and in particular the provisions of Unite Palm Desert Economic Relief Program (the “Program”) approved on May 14, 2020, to help local businesses and economic sectors alleviate business interruption impacts resulting from the COVID-19 pandemic; and WHEREAS, the Program includes the funding of forgivable economic relief loans to private entities for the funding of the day-to-day operating expenses of the business and to recover from documented losses due to COVID-19; and WHEREAS, this Agreement has been prepared to facilitate the funding of a forgivable economic relief loan in the maximum amount of $ [See No. 4 Info Page] (the “Forgivable Loan”) from the City to the Borrower in connection with certain expenses to be undertaken by the Borrower (the “Expenses”), which Expenses are described on [See No. 5 Info Page]; and WHEREAS, the Expenses are for the benefit of the Borrower’s Business, which Business and the regular operations thereof are described on [See No. 6 Info Page] (“Regular Operations”) NOW , THEREFORE, the parties hereto agree as follows: A. Borrower’s Covenants 1. The Borrower agrees to undertake and complete the Expenses by [See No. 7 Info Page] (the “Completion Date”), subject to any extensions granted to the Borrower by the City, and to use the proceeds of the Forgivable Loan solely in connection therewith. All Expenses must be completed by the second anniversary of the origination of the loan. 2. The Borrower agrees that it will own and operate the Business throughout the term of the Forgivable Loan, in substantially the same manner as historically operated, subject to interruptions occasioned by COVID-19 and applicable State and County public health orders. 3. The Borrower agrees to repay all un-forgiven principal of the Forgivable Loan in five (5) equal annual installments due on the first, second, third, fourth and fifth anniversary of the Completion Date [See No. 8 Info Page] (each, an “Anniversary Date”) unless the loan is otherwise forgiven in accordance with the conditions hereinafter set forth in Section B.2. The Borrower hereby acknowledges and agrees to the loan repayment forgiveness conditions set forth in Section B.2 of this Agreement. The Borrower 4 reserves the right to prepay such principal in any amount at any time without penalty. Payment of principal on the Forgivable Loan shall be made to the City of Palm Desert Finance Department 73-510 Fred Waring Drive, Palm Desert, CA 92260 (the “City Finance Office”) by 4:00 p.m. on each Anniversary Date, as set forth herein. The Borrower shall execute a promissory note in favor of the City to evidence its obligations with respect to the Forgivable Loan. The promissory note shall be in substantially the form as set forth on Exhibit A hereto. 4. The Borrower agrees to submit an annual report to the City not less than 30 days before each Anniversary Date demonstrating to the satisfaction of the City that the Borrower continues to maintain ownership of the Business, is operating the Business in accordance with its Regular Operations and that the funds have been used for the Expenses. The Annual Report shall include such information, documentation, and/or records as the City may require, in City’s sole and absolute discretion, which information, documents, and/or records are listed on [See No. 9 Info Page]. 5. To induce the City to enter into this Agreement and make the Forgivable Loan, Borrower represents that the following are true as of the effective date of this Agreement and will remain true until the Loan has been paid in full: i. Borrower does business from a physical location within the City limits of the City of Palm Desert. ii. Borrower has the power to execute, deliver, and perform the Forgivable Loan, and the promissory note identified in Section A.3 herein. iii. Borrower’s making and performance of the Forgivable Loan does not violate any provision of federal or state law, or city ordinance, or result in a breach of or constitute a default under any agreement, indenture, or other instrument to which Borrower is a party or by which Borrower may be bound. iv. Borrower, nor any of Borrower’s employees, affiliates, or agents are in any way employed by, is a consultant to, or a contracting party with, and has no other financial relationship with the City. 6. Before the closing of the Forgivable Loan, and as conditions of such closing: i. Borrower shall certify to City in a form acceptable to City that the statements made by Borrower in the application for the Forgivable Loan were correct as of the date of the application and are correct as of the closing of the Forgivable Loan. ii. Borrower shall provide evidence satisfactory to the City that the representations in Section 5 are true. 7. Borrower shall pay when due all indebted obligations, assessments, taxes real and personal, including federal and state payroll and income taxes, except those that Borrower in good faith contests or as to which a bona fide dispute exists. For those obligations, assessments, or taxes that Borrower in good faith contests or as to which a bona fide dispute exists, Borrower must pay them if the federal or state government, or a court with jurisdiction, determines that they are an obligation of Borrower. 5 8. Borrower shall promptly notify the City of any litigation pending or threatened against Borrower in excess of $25,000. 9. Borrower shall defend, hold harmless and indemnify the City, its officers and employees, and each and every one of them, from and against any and all actions, damages, costs, liabilities, claims, demands, losses, judgments, penalties, costs and expenses of every type and description, including, but not limited to, any fees and/or costs reasonably incurred by the City’s staff attorneys or outside attorneys and any fees and expenses incurred in enforcing this provision (collectively, “Liabilities”), including but not limited to Liabilities arising from contractual or other economic damages, or regulatory penalties, arising out of or in any way connected with Borrower’s breach of this Agreement, Borrower’s use of the Forgivable Loan proceeds, or Borrower’s performance or failure to perform this Agreement, including, without limitation, against any claim for damages, compensation, fines, penalties or other amounts arising out of the failure or alleged failure of any person or entity (including Tenant, or its contractors or subcontractors) to pay prevailing wages as determined pursuant to Labor Code Sections 1720 et seq., to hire apprentices in accordance with Labor Code Sections 1777.5 et seq., or to comply with the other applicable provisions of Labor Code Sections 1720 et seq., 1725.5, 1771, 1771.1, 1771.4, 1776, 1777.5 et seq., 1810-1815 and the implementing regulations of the Department of Industrial Relations for all such Labor Code sections, whether or not (i) such Liabilities are caused in part by a party indemnified hereunder or (ii) such Liabilities are litigated, settled or reduced to judgment; provided that the foregoing indemnity does not apply to liability for any damage or expense for death or bodily injury to persons or damage to property to the extent arising from the sole negligence or willful misconduct of the City, its agents, servants, or independent contractors who are directly responsible to the City. B. City’s Obligations 1. The City hereby agrees to deliver to the Borrower proceeds of the Forgivable Loan within 30 days of the satisfaction of the closing conditions set forth in Section A.6 on the date hereof. 2. Subject to the adequate demonstration (as set forth in Section A.4 above) by the Borrower, the City agrees to forgive the full amount of Forgivable Loan if the Borrower continues to own and operate the Business as covenanted in Section A.2 above until the second Anniversary Date, the Forgivable Loan would be entirely forgiven. 3. Promptly following discharge of the Borrower’s obligations under the Forgivable Loan, whether by repayment as set forth in Section A.3. above, forgiveness as set forth in Section B.2. above, or a combination of repayment and forgiveness, the City agrees to cooperate with Borrower to return the promissory note. 6 C. Events of Default, Remedies & Offset. 1. The occurrence of any of the following shall constitute an Event of Default: i. The Borrower shall fail to fund the Expenses as agreed upon. ii. The Borrower shall cease to own or operate the Business as covenanted in Section A.2 above. iii. The Borrower shall fail to make when due, whether by acceleration or otherwise, any payment the Forgivable Loan. iv. Borrower defaults under the terms of any agreement or instrument pursuant to which Borrower has borrowed money from any person or entity that results in the acceleration of the maturity of the indebtedness under the agreement or instrument. v. Borrower is adjudicated as bankrupt or insolvent, or consents to or applies for the appointment of a receiver, trustee, or liquidator of itself or any of its property, or admits in writing its inability to pay its debts generally as they become due, or makes a general assessment for the benefit of creditors, or files a voluntary petition in bankruptcy or a voluntary petition or an answer seeking reorganization or arrangement in a proceeding under any bankruptcy law, or borrower or its directors or majority stockholders take action looking into the dissolution, liquidation, or reorganization of Borrower. vi. Borrower fails to pay any federal, state, or local tax or other debt unless Borrower is contesting the same in good faith. vii. Borrower uses the proceeds of the Forgivable Loan to construct capital improvements or for any other purpose not authorized herein. viii. Borrower assigns the Forgivable Loan or this Agreement without City’s express written consent. 2. If any Event of Default described in Section C.1 shall occur and be continuing for a period of five (5) days after notice of such Event of Default has been given to the Borrower, then the City may declare the outstanding unpaid principal balance of the Forgivable Loan to be forthwith due and payable, whereupon the Forgivable Loan shall immediately become due and payable, in each case without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived, anything in this Agreement to the contrary notwithstanding. 7 D. Administrative Provisions 1. The City or its designated representative may inspect, audit, and copy Borrower’s records and books related to the Forgivable Loan at any time during normal business after providing Borrower with reasonable notice. 2. This Agreement may not be amended or assigned by either party without the written consent of the other party. 3. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of the parties. 4. This Agreement shall be deemed to be a contract made under the laws of the State of California and for all purposes shall be governed by and construed in accordance with laws of the State of California. 5. The City makes no representations as to the tax implications of the Program. The Borrower under the Program will receive an IRS Form 1099, if applicable, reporting the amount of payments as taxable income for federal and state income tax. The Borrower must provide a completed IRS Form W-9 showing the Borrower’s social security number or federal taxpayer identification number before the Forgivable Loan can be made. The City is unable to provide legal or tax advice to businesses and encourages you to seek appropriate professional advice on the federal and state tax implications of any funds received from the City under this Program. 6. Any notices to the City shall be to the City of Palm Desert, Finance Department, 73-510 Fred Waring Drive, Palm Desert, CA 92260and any notices to Borrower shall be to the Borrower’s Address listed in item 10 of the info page. 8 IN WITNESS WHEREOF, the parties hereto have executed this instrument as of the day and year first above written. CITY: CITY OF PALM DESERT, a California municipal corporation By: GINA NESTANDE MAYOR ATTEST: APPROVED AS TO LEGAL FORM: BEST BEST & KRIEGER LLP GRACE L. ROCHA ACTING CITY CLERK ROBERT W. HARGREAVES CITY ATTORNEY BORROWER: ________________________ ________________________ By: Its: 9 10 EXHIBIT A – FORM OF PROMISSORY NOTE PRINCIPAL AMOUNT: $ __________________ Dated: ___________________(the “Borrower”) for value received, promises to pay, to the City of Palm Desert, California (the “City”), its successors or assigns, the principal sum of ($ ), in lawful money of the United States of America, in five equal annual installments on in each of the years 20__ to 20__, inclusive. 1. Loan. The City has made a loan to the Borrower in the principal amount of $ (the “Loan”) under this Promissory Note (the “Note”) and under a certain Forgivable Loan Agreement (the “Loan Agreement”) between the City and the Borrower dated , 20__, and reference is hereby made to the Agreement for a more complete description of the rights and obligations of the parties. The Loan and Loan Agreement have been extended to Borrower pursuant to and in compliance with all laws applicable to the City, and in particular, the provisions of Unite Palm Desert Economic Relief Program (the “Program”) approved on May 14, 2020, to help local businesses and economic sectors alleviate business interruption impacts resulting from the COVID-19 pandemic. 2. Loan Forgiveness. The Loan shall be forgiven by the City in accordance with the terms and schedule set forth in the Agreement if the Borrower meets the requirements of the Agreement. 3. Interest Rate. a. Except as provided in Subsection 3(b), below, this is a non- interest bearing Note. b. If Borrower fails to make an annual payment, within five (5) days after the due date, then the unpaid principal balance will begin to accrue simple interest at a rate of five percent (5%) per annum calculated on a three hundred sixty-five (365) day basis until the principal balance is paid in full. 4. Payments. Payment of principal of the Loan shall be made in five equal installment payments to the City of Palm Desert, Finance Department, 73-510 Fred Waring Drive, Palm Desert, CA 92260 at 4:00 p.m. on each of the years 20__ to 20__, unless sooner forgiven in accordance with the Agreement. Payments under this note shall be as follows: Payment Date Payment Amount ______________, 2023 ______________, 2024 11 ______________, 2025 ______________, 2026 ______________, 2027 5. Prepayment. The Borrower reserves the right to prepay principal of this Note, in whole or in part, without penalty, at any time prior to maturity. 6. Events of Default. The occurrence of one or more of the following events is an “Event of Default” and, at the option of the City, makes this note immediately due and payable without notice, presentment, or demand, all of which Borrower hereby waives: a) The Borrower shall fail to fund the Expenses as agreed upon. b) The Borrower shall cease to own or operate the Business as covenanted in the Loan Agreement. c) The Borrower shall fail to make when due, whether by acceleration or otherwise, any payment the Loan. d) Borrower defaults under the terms of any agreement or instrument pursuant to which Borrower has borrowed money from any person or entity that results in the acceleration of the maturity of the indebtedness under the agreement or instrument. e) Borrower is adjudicated as bankrupt or insolvent, or consents to or applies for the appointment of a receiver, trustee, or liquidator of itself or any of its property, or admits in writing its inability to pay its debts generally as they become due, or makes a general assessment for the benefit of creditors, or files a voluntary petition in bankruptcy or a voluntary petition or an answer seeking reorganization or arrangement in a proceeding under any bankruptcy law, or borrower or its directors or majority stockholders take action looking into the dissolution, liquidation, or reorganization of Borrower. f) Borrower fails to pay any federal, state, or local tax or other debt unless Borrower is contesting the same in good faith. g) Borrower uses the proceeds of the Loan to construct capital improvements or for any other purpose not authorized herein. h) Borrower assigns the Forgivable Loan or this Agreement without City’s express written consent. 7. Waiver. Borrower, every guarantor and endorser of this Note, and every person who assumes the obligations of this Note, waives presentment, demand, protest, and notice of dishonor, notice of protest, notice of nonpayment, and notice of any kind with respect to this Note or any guarantee of it. 12 8. Covenant to Perform. Borrower agrees to perform all of its obligations under the Loan Agreement. 9. Acceleration. If an event of default under the Loan Agreement occurs, Lender may, in its sole discretion, declare the entire unpaid principal balance of this Note, together with all other amounts due under this Note, immediately due and payable without prior notice or demand. 10. Costs of Enforcement. If this Note is not paid when due, including a due date that is accelerated under this note, Borrower, and every guarantor and endorser of this Note, and every person who assumes the obligations of this Note, agrees to pay all costs of collection when incurred, including, without limitation, reasonable attorney’s fees, whether or not suit is filed. Additionally, the holder of this note will be entitled to reimbursement for all attorney’s fees and costs incurred in enforcing any judgment arising from or out of this Note. These fees and costs do not merge into the judgment and may be added to the judgment and substantiated by supplemental cost bill. 11. Amendment. This Note may not be changed or terminated orally, but only by an agreement in writing signed by the party against whose enforcement of the change or termination is sought. No alteration, amendment or waiver of any provision of this Note, or the Loan Agreement made by agreement of the holder of this Note or any other person or party, shall constitute a waiver of any other term of this Note, or otherwise release or discharge the liability of Borrower under this Note. 12. Governing Law. The validity, construction, and enforceability of this Note shall be governed by the internal laws of the State of California without giving effect to the conflict of laws principles thereof. 13. Electronic Signatures. The parties agree that this note may be electronically signed. The parties agree that the electronic signatures appearing on this Agreement are the same as handwritten signatures for the purposes of validity, enforceability, and admissibility. __________________________, BORROWER 1 UNITE PALM DESERT ECONOMIC RELIEF PROGRAM FORGIVABLE LOAN AGREEMENT INFO PAGE 1. Date of Agreement ___________________________________ 2. Borrower Name ___________________________________ 3. Business (or DBA)___________________________________ 4. Forgivable Loan Amount ___________________________________ 5. Expenses ___________________________________ 6. Regular Operations ___________________________________ 7. Completion Date ___________________________________ 8. Anniversary Dates ___________________________________ 9. Annual Report ___________________________________ 10. Borrower’s Address ___________________________________ Replacement- Old Bus-Item A June 11, 2020 2 LOAN DISCLOSURES/SUMMARY Total Amount of Funds Provided Total Dollar Cost of Financing Term or Estimated Term Method or Frequency and Amount of Payments Description of Prepayment Policies Total Cost of Financing (Expressed as Annualized Rate)  The City makes no representations as to the tax implications of the loan program  The businesses under the Program will receive an IRS Form 1099, if applicable, reporting the amount of payments as taxable income for federal and state income tax  The business must provide a completed IRS Form W -9 showing the business social security number or federal taxpayer identification number before the loan payments can be made  The City is unable to provide legal or tax advice to businesses and encourages you to seek appropriate professional advice on the federal and state tax implications of any funds received from the City under this program 3 UNITE PALM DESERT ECONOMIC RELIEF PROGRAM FORGIVABLE LOAN AGREEMENT This Forgivable Loan Agreement (“Agreement”) is entered into as of the date listed on the Informational Page [See. No. 1], attached hereto and incorporated herein by this reference (the “Info Page”) among the City of Palm Desert (the “City”) and [See No. 2 Info Page] (the “Borrower”) who owns and operates [See No. 3 Info Page] (the “Business”). WHEREAS, the City, pursuant to and in compliance with all laws applicable to the City, and in particular the provisions of Unite Palm Desert Economic Relief Program (the “Program”) approved on May 14, 2020 to help local businesses and economic sectors alleviate business interruption impacts resulting from the COVID -19 pandemic; and WHEREAS, the Program includes the funding of forgivable economic relief loans to private entities for the funding of the day -to-day operating expenses of the business and to recover from documented losses due to COVID -19; and WHEREAS, this Agreement has been prepared to facilitate the funding of a forgivable economic relief loan in the maximum amount of $ [See No. 4 Info Page] (the “Forgivable Loan”) from the City to the Borrower in connection with certain expenses to be undertaken by the Borrower (the “Expenses”), which Expenses are described on [See No. 5 Info Page]; and WHEREAS, the Expenses are for the benefit of the Borrower’s Business, which Business and the regular operations thereof are described on [See No. 6 Info Page] (“Regular Operations”) NOW THEREFORE, the parties hereto agree as follows: A. Borrower’s Covenants 1. The Borrower a grees to undertake and complete the Expenses by [See No. 7 Info Page] (the “Completion Date”), subject to any extensions granted to the Borrower by the City, and to use the proceeds of the Forgivable Loan solely in connection therewith. All Expenses must be completed by the second anniversary of the origination of the loan. 2. The Borrower agrees that it will own and operate the Business throughout the term of the Forgivable Loan, in substantially the same manner as historically operated, subject to interruptions occasioned by COVID-19 and applicable State and County public health orders. 3. The Borrower agrees to repay all un-forgiven principal of the Forgivable Loan in five (5) equal annual installments due on the first, second, third, fourth and fifth anniversary of the Completion Date [See No. 8 Info Page] (each, an “Anniversary Date”), unless the loan is otherwise forgiven in accordance with the conditions hereinafter set 4 forth in Section B.2. The Borrower hereby acknowledges and agrees to the loan repayment forgiveness conditions set forth in Section B.2 of this Agreement. The Borrower reserves the right to prepay such principal in any amount at any time without penalty. Payment of principal on the Forgivable Loan shall be made to the City of Palm Desert Finance Department 73-510 Fred Waring Drive, Palm Desert, CA 92260 (the “City Finance Office”) by 4:00 p.m. on each Anniversary Date, as set forth herein. The Borrower shall execute a promissory note in favor of the City to evidence its obligations with respe ct to the Forgivable Loan. The promissory note shall be in substantially the form as set forth on Exhibit A hereto. 4. The Borrower agrees to submit an annual report to the City not less than 30 days before each Anniversary Date demonstrating to the satisfaction of the City that the Borrower continues to maintain ownership of the Business, is operating the Business in accordance with its Regular Operations and that the funds have been used for the Expenses. The Annual Report shall include such information, documentation and/or records as the City may require, in City’s sole and absolute discretion, which information, documents and/or records are listed on [See No. 9 Info Page]. 5. To induce the City to enter into this Agreement and make the Forgivable Loan, Borrower represents that the following are true as of the effective date of this Agreement and will remain true until the Loan has been paid in full: i. Borrower does business from a physical location within the City limits of the City of Palm Desert. ii. Borrower has the power to execute, deliver, and perform the Forgivable Loan, and the promissory note identified in Section A.3 h erein. iii. Borrower’s making and performance of the Forgivable Loan does not violate any provision of federal or state law, or city ordinance, or result in a breach of or constitute a default under any agreement, indenture, or other instrument to which Borrower is a party or by which Borrower may be bound. iv. Borrower, nor any of Borrower’s employees, affiliates, immediate family members, or agents are in any way an employee, member, officer or consultant that is subject to the disclosure requirements of the City’s Conflict of Interest Code, Chapter 2.56 et seq. Borrower may be a vendor to the City, so long as they are not covered under the City’s Conflict of Interest Code. 6. Before the closing of the Forgivable Loan, and as conditions of such closing: i. Borrower shall certify to City in a form acceptable to City that the statements made by Borrower in the application for the Forgivable Loan were correct as of the date of the application and are correct as of the closing of the Forgivable Loan. ii. Borrower shall provide evidence satisfactory to the City that the representations in Section 5 are true. 5 6. Borrower shall pay when due all indebted obligations, assessments, taxes real and personal, including federal and state payroll and income taxes, except those that Borrower in good faith contests or as to which a bona fide dispute exists. For those obligations, assessments, or taxes that Borrower in good faith contests or as to which a bona fide dispute exists, Borrower must pay them if the federal or state gove rnment, or a court with jurisdiction, determines that they are an obligation of Borrower. 7. Borrower shall promptly notify the City of any litigation pending or threatened against Borrower in excess of $25,000. 9. Borrower shall defend, hold harmless and indemnify the City, its officers and employees, and each and every one of them, from and against any and all actions, damages, costs, liabilities, claims, demands, losses, judgments, penalties, costs and expenses of every type and description, including, but not limited to, any fees and/or costs reasonably incurred by the City’s staff attorneys or outside attorneys and any fees and expenses incurred in enforcing this provision (collectively, “Liabilities”), including but not limited to Liabilities arising from contractual or other economic damages, or regulatory penalties, arising out of or in any way connected with Borrower’s breach of this Agreement, Borrower’s use of the Forgivable Loan proceeds, or Borrower’s performance or failure to perform this Agreement, including, without limitation, against any claim for damages, compensation, fines, penalties or other amounts arising out of the failure or alleged failure of any person or entity (including Tenant, or its contractors or subcontractors) to pay prevailing wages as determined pursuant to Labor Code Sections 1720 et seq., to hire apprentices in accordance with Labor Code Sections 1777.5 et seq., or to comply with the other applicable provisions of Labor Code Sections 1720 et seq., 1725.5, 1771, 1771.1, 1771.4, 1776, 1777.5 et seq., 1810 -1815 and the implementing regulations of the Department of Industrial Relations for all such Labor Code sections, whether or not (i) such Liabilities are caused in part by a party indemnified hereunder or (ii) such Liabilities are litigated, settled or reduced to judgment; provided that the foregoing indemnity does not apply to liability for any damage or expense for death or bodily injury to persons or damage to property to the extent arising from the sol e negligence or willful misconduct of the City, its agents, servants, or independent contractors who are directly responsible to the City. B. City’s Obligations 1. The City hereby agrees to deliver to the Borrower proceeds of the Forgivable Loan within 30 days of the satisfaction of the closing conditions set forth in Section A.6 on the date hereof. 2. Subject to the adequate demonstration (as set forth in Section A.4 above) by the Borrower, the City agrees to forgive the full amount of Forgivable Loan if the Bor rower continues to own and operate the Business as covenanted in Section A.2 above until the second Anniversary Date , the Forgivable Loan would be entirely forgiven. 6 3. Promptly following discharge of the Borrower’s obligations under the Forgivable Loan, whether by repayment as set forth in Section A.3. above, forgiveness as set forth in Section B.2. above, or a combination of repayment and forgiveness, the City agrees to cooperate with Borrower to return the promissory note. C. Events of Default, Remedies & Offset. 1. The occurrence of any of the following shall constitute an Event of Default: i. The Borrower shall fail to fund the Expenses as agreed upon. ii. The Borrower shall cease to own or operate the Business as covenanted in Section A.2 above. iii. The Borrower shall fail to make when due, whether by acceleration or otherwise, any payment the Forgivable Loan. iv. Borrower defaults under the terms of any agreement or instrument pursuant to which Borrower has borrowed money from any person or entity that results in the acceleration of the maturity of the indebtedness under the agreement or instrument. v. Borrower is adjudicated as bankrupt or insolvent, or consents to or applies for the appointment of a receiver, trustee, or liquidator of itself or any of its property, or admits in writing its inability to pay its debts generally as they become due, or makes a general assessment for the benefit of creditors, or files a voluntary petition in bankruptcy or a voluntary petition or an answer seeking reorganization or arrangement in a proceeding under any bankruptcy law, or borrower or its directors or majority stockholders take action looking into the dissolution, liquidation, or reorganization of Borrower. vi. Borrower fails to pay any federal, state, or local tax or other debt unless Borrower is contesting the same in good faith. vii. Borrower uses the proceeds of the Forgivable Loan to construct capital improvements or for any other purpose not authorized herein. viii. Borrower assigns the Forgivable Loan or this Agreement without City’s express written consent. 2. If any Event of Default described in Section C.1 shall occur and be continuing for a period of five (5) days after notice of such Event of Default has been given to the Borrower, then the City may declare the outstanding unpaid principal balance of the Forgivable Loan to be forthwith due and payable, whereupon the Forgivable Loan shall immediately become due and payable, in each case without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived, anything in this Agreement to the contrary notwithstanding. 7 E. Administrative Provisions 1. The City or its designated representative may inspect, audit, and copy Borrower’s records and books related to the Forgivable Loan at any time during normal business after providing Borrower with reasonable notice. 2. This Agreement may not be amended or assigned by either party without the written consent of the other party. 3. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of the parties. 4. This Agreement shall be deemed to be a contract made under the laws of the State of California and for all purposes shall be governed by and construed in accordance with laws of the State of California. 5. The City makes no representations as to the tax implications of the Program. The Borrower under the Program will receive an IRS Form 1099, if applicable, reporting the amount of payments as taxable income for federal and state income tax. The Borrower must provide a completed IRS Form W -9 showing the Borrower’s social security number or federal taxpayer identification number before the Forgivable Loan can be made. The City is unable to provide legal or tax advice to businesses and encourages you to seek appropriate professional advice on the federal and state tax implications of any funds received from the City under this Program. 6. Any notices to the City shall be to City of Palm Desert, Finance Department, 73-510 Fred Waring Drive, Palm Desert, CA 92260 and any notices to Borrower shall be to the Borrower’s Address listed in item 10 of the info page. 7. This Agreement has been negotiated at arm’s length and between Persons sophisticated and knowledgeable in the matters dealt with herein. In addition, each Pa rty has been represented by, or had the chance to have reviewed by, experienced and knowledgeable legal counsel. Accordingly, any rule of law (including California Civil Code Section 1654) or legal decision that would require interpretation of any ambiguities in this Agreement against the Party that has drafted it, is not applicable and is waived. The provisions of this Agreement shall be interpreted in a reasonable manner to effect the purposes of this Agreement. 8 IN WITNESS WHEREOF, the parties hereto have executed this instrument as of the day and year first above written. CITY: CITY OF PALM DESERT, a California municipal corporation By: Gina Nestande, Mayor ATTEST: APPROVED AS TO LEGAL FORM: BEST BEST & KRIEGER LLP Grace L. Rocha, Acting City Clerk Robert W. Hargreaves, City Attorney BORROWER: ______________________________ ______________________________ By: Its: 9 10 EXHIBIT A – FORM OF PROMISSORY NOTE PRINCIPAL AMOUNT: $ __________________ Dated: ___________________ (the “Borrower”) for value received, promises to pay, to the City of Palm Desert, California (the “City”), its successors or assigns, the principal sum of ($ ), in lawful money of the United States of America, in five equal annual installments on in each of the years 20__ to 20__, inclusive. 1. Loan. The City has made a loan to the Borrower in the principal amount of $ (the “Loan”) under this Promissory Note (the “Note”) and under a certain Forgivable Loan Agreement (the “Loan Agreement”) between the City and the Borrower dated , 20__, and reference is hereby made to the Agreement for a more complete description of the rights and obligations of the parties. 2. Loan Forgiveness. The Loan shall be forgiven by the City in accordance with the terms and schedule set forth in the Agreement if the Borrower meets the requirements of the Agreement. 3. Interest Rate. a. Except as provided in Subsection 3(b), below, this is a non - interest bearing Note. b. If Borrower fails to make an annual payment, within five (5) days after the due date, then the unpaid principal balance will begin to accrue simple interest at a rate of five percent (5%) per annum calculated on a three hundred sixty-five (365) day basis until the principal balance is paid in full. 4. Payments. Payment of principal of the Loan shall be made in five equal installment payments to the City of Palm Desert, Finance Department, 73 -510 Fred Waring Drive, Palm Desert, CA 92260 at 4:00 p.m. on each of the years 20__ to 20__, unless sooner forgiven in accordance with the Agreement. Payments under this note shall be as follows: Payment Date Payment Amount ______________, 2023 ______________, 2024 ______________, 2025 ______________, 2026 ______________, 2027 11 5. Prepayment. The Borrower reserves the right to prepay principal of this Note, in whole or in part, without penalty, at any time prior to maturity. 6. Events of Default. The occurrence of one or more of the following events is an “Event of Default” and, at the option of the City, makes this note immediately due and payable without notice, presentment, or demand, all of which Borrower hereby waives: a) The Borrower shall fail to fund the Expenses as agreed upon. b) The Borrower shall cease to own or operate the Business as covenanted in the Loan Agreement. c) The Borrower shall fail to make when due, whether by acceleration or otherwise, any payment the Loan. d) Borrower defaults under the terms of any agreement or instrument pursuant to which Borrower has borrowed money from any person or entity that results in the acceleration of the maturity of the indebtedness under the agreement or instrument. e) Borrower is adjudicated as bankrupt or insolvent, or consents to or applies for the appointment of a receiver, trustee, or liquidator of itself or any of its property, or admits in writing its inability to pay its debts generally as they become due, or makes a general assessment for the benefit of creditors, or files a voluntary petition in bankruptcy or a voluntary petition or an answer seeking reorganization or arrangement in a proceeding under any bankruptcy law, or borrower or its directors or majority stockholders take action looking into the dissolution, liquidation, or reorganization of Borrower. f) Borrower fails to pay any federal, state, or local tax or other debt unless Borrower is contesting the same in good faith. g) Borrower uses the proceeds of the Loan to construct capital improvements or for any other purpose not authorize d herein. h) Borrower assigns the Forgivable Loan or this Agreement without City’s express written consent. 7. Waiver. Borrower, every guarantor and endorser of this Note, and every person who assumes the obligations of this Note, waives presentment, demand, protest, and notice of dishonor, notice of protest, notice of nonpayment, and notice of any kind with respect to this Note or any guarantee of it. 8. Covenant to Perform. Borrower agrees to perform all of its obligations under the Loan Agreement. 9. Acceleration. If an event of default under the Loan Agreement occurs, Lender may, in its sole discretion, declare the entire unpaid principal balance of this Note, 12 together with all other amounts due under this Note, immediately due and payable without prior notice or demand. 10. Costs of Enforcement. If this Note is not paid when due, including a due date that is accelerated under this note, Borrower, and every guarantor and endorser of this Note, and every person who assumes the obligations of this Note, agre es to pay all costs of collection when incurred, including, without limitation, reasonable attorney’s fees, whether or not suit is filed. Additionally, the holder of this note will be entitled to reimbursement for all attorney’s fees and costs incurred in enforcing any judgment arising from or out of this Note. These fees and costs do not merge into the judgment and may be added to the judgment and substantiated by supplemental cost bill. 11. Amendment. This Note may not be changed or terminated orally, but only by an agreement in writing signed by the party against who enforcement of the change or termination is sought. No alteration, amendment or waiver of any provision of this Note, or the Loan Agreement made by agreement of the holder of this Note or any other person or party, shall constitute a waiver of any other term of this Note, or otherwise release or discharge the liability of Borrower under this Note. 12. Governing Law. The validity, construction and enforceability of this Note shall be governed by the internal laws of the State of California without giving effect to the conflict of laws principles thereof. 13. Electronic Signatures. The parties agree that this note may be electronically signed. The parties agree that the electronic signatures appearing on this Agreement are the same as handwritten signatures for the purposes of validity, enforceability, and admissibility. 14. Interpretation. This Agreement has been negotiated at arm’s length and between Persons sophisticated and knowledgeable in the matters dealt with herein. In addition, each Party has been represented by, or had the chance to have reviewed by, experienced and knowledgeable legal counsel. Accordingly, any rule of law (including California Civil Code Section 1654) or legal decision that wo uld require interpretation of any ambiguities in this Note against the Party that has drafted it, is not applicable and is waived. The provisions of this Note shall be interpreted in a reasonable manner to effect the purposes of this Note. ________________________________ BORROWER ________________________________ BORROWER