HomeMy WebLinkAboutRequest of Idaho Independent Bank~ " ~. ~
0 C Y - 4 1999
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M E M O R A N D U M
To: Mayor Robert D. Come an Council
cc G~~C
From: Wm. F. Gigray, III
Subject: Request of Idaho Independent Bank -Cherry Lane Recreation, Inc. -City of
Meridian Matter
Date: October 4, 1999
I am enclosing, for your consideration, a request that has been made
directly to the City, by the Idaho Independent Banlc, regarding the above referenced
matter. The enclosed documents include the letter addressed to me from Mr.
Edward J. Anson, dated September 30, 1999, and an attached Agreement. This item
is the one I mentioned in the Chronology, which was anticipated as an additional
requirement of the bank.
As I advised, and as is acknowledged in the letter from Mr. Anson, the
City is not legally obligated to enter into this agreement. There is no doubt that the
true date of the agreement is October 3, 1978. The question is whether or not the
City Council wishes to bind the City to give 30 days notice of default to the Bank,
and to give 90 days notice to the Bank of the effective date of any modification of
the Lease Agreement. It is a matter of the discretion of the Mayor, and Council,
and considering the public interest whether you would grant the request or not. If
you determine to grant the request, I recommend that the Agreement specify the
address to which notice is to be given to the Banlc, and that the Agreement provide
notice by facsimile transmission, and that the City put into place, within the
reasonably foreseeable future, a Management Plan for the Agreement of Lease.
As an alternative, the Council could consider conditioning its approval
of entering into the Agreement, proposed by the Banlc, that the Banlc issue the Letter
of Credit to Cherry Lane Recreation, Inc., as required in the conditional use permit,
and that Cherry Lane Recreation, Inc., agree that the proceeds from the loan, which
is secured by the "Leasehold Deed of Trust", be used exclusively for operation,
maintenance, and for improvements to Cherry Lane Golf Course. You may consider
obtaining verbal assurances, which could be recorded in the minutes of the Council
meeting, from authorized agents of Cherry Lane Recreation, Inc., and the Bank, as to
these points as an inducement to enter the agreement proposed by the Banlc.
File
Page 2
October 4, 1999
{My concern, as I have pointed out before, is that the latest draft copy
of the "Leasehold Deed of Trust" provides that up to $1,800,000.00 could be
advanced against the lien, and there is a reference to two principal amount credit
lines of a total of $900,000.00. What assurance does the City have that all of these
funds will be used for improvements upon the golf course rather than securing other
corporation purposes? }
msg/Z:\Worlc\M\Meridian 15360M\CherrvLane Land Exchange\MayorCounci1100499.Mem
WITHERSPOON, KELLEY, DAVENPORT
A PROFESSIONAL SERVICE CORPORATION
ATTORNEYS & COUNSELORS
COEUR D'ALFNE OFFICE
EDWARD 1. ANSON+-~
DENNIS M. DAVIS++
MARK A. ELLWGSI?J^•
IOELP.HAZF1-
SPOKANE OFFICE
ROBERT L MAGNUSON
NED M. BARNES
WILLIAM D. SYMMES••
ROBERT K LAMP
K THOMAS CONNOLLY
THOMAS D. COC2DLAN
DUANE M. SWIMON
IOSEPH K WFSSMAN
IEFFREY L SUPDJGER•
DONALD I. LUKFS+2
LESLIE R w fUTHFAFF~AD•
MICHAEL D. CURRIN
R MAX ETTER 1R
STANLEY R SCITULTZ
MICHAEL P. M@1STEDT•
JOF4/ M. R1LEY [D
F. 1. DULLANTY. JR
DANIEL E FD1PiEY
MARY R GuNMrn•j
TIMOTHY M. IAWIAR
WILLIAM M SYAONFS
ROBERT S. MAGNUSON
DAVID M. KMJ'CSON
JODY M. McCORMICK
PAUL C SW AJNSTON
ERIC 1. BOTH
SHEIIEY N. 5 W ANSON
THE SPOKESMAN REVIEW BUILDING
608 NORTHWEST BOULEVARD, SUITE 40l
COEUR D'ALENE, IDAHO 83814-2146
Telephone: (208) 667000
Telecopier. (208) 667-8470
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SPOKANE OFFICE
1100 U.S. SANK BUfLDMG
i23 WEST RIVERSIDE
SPOKANE WASHRJGTON 99701-0]02
(50916745365
September 30, 1999 DF COUNSEL
WM. A. DAVENPORT
IOFRI E HEATH. JR
ALL1N K TOOLP
WILLIAM V. YFf t Fv
KARL K KAOGUE
Wm F. Gigray, III Via U.S. Mail and
White, Peterson, Pruss, Facsimile: (208) 288-2501
Morrow & Gigray, P.A.
200 East Carlton Avenue, Suite 31
Post Office Box 1150
Meridian, ID 83680-1150
Re: Idaho Independent Bank -Cherry Lane Recreation, Inc. -City of Meridian
Dear Mr. Gigray
'Alto admitted io Idaho
~Alao admiu<d io Ner York Pursuant to our recent telephone conversation I have prepared, and enclose
-~Admiueu io Idaho Doty
Alaoa~'u~m`aI'`om" herewith, a proposed agreement between the City and Idaho Independent Bank regarding
:Alw admdfed ~ ofebee
.A4o •dmiftd~ Waahiogtoo the leasehold Deed of Trust to be granted by Cherry Lane Recreation, Inc. to the Bank aS
^ALto admitted u Meeum
part of the financing arrangements pertaining to improvements to the golf course.
As we discussed, from a bank's perspective, taking a security interest in a lessee's
interest under a lease is not the most desirable of collateral. The Bank will be willing to
do so and move forward with this loan application provided that the City agree, in addition
to its statement of September 7, 1999 and consent dated September 21, 1999, to give the
Bank advance notice of any default and notice of any intention to modify the lease.
While the City may not be under any obligation to enter into this agreement, I am
hopeful that the City will consider doing so. The notice of default provision uses the same
30 day provision as in the underlying lease. The notice of an intention to modify uses a
90 day provision. While you indicated to me that these provisions may place some extra
administrative duties upon the City, I am hopeful that the City will not find them to be
unduly burdensome. If, by some oversight, the City neglected to furnish such notices, the
only disadvantage to the City would be that any default or modification could not become
effective until such notice was given. In the event of any default under the lease, in all
probability the Bank, if given notice, would cure the default. As for modification, it does
not appear that any are contemplated.
September 30, 1999
Page 2
To meet its lending criteria, the bank will require the City's agreement to these
provisions. Would you kindly present this proposed agreement to the City. If you have
any questions regarding this matter please do not hesitate to contact me.
I appreciate your cooperation and consideration in connect with this matter.
Sincerely,
By:
WITHERSPOON, KELLEY,
D?~VEiti'~FORT ~, TOvLE.~.
EJA/tam
cc: Idaho Independent Bank
AGREEMENT
THIS AGREEMENT is made effective the _ day of October, 1999, by and between Idaho
Independent Bank (henceforth "Bank") and the City of Meridian, Idaho (henceforth "City").
I.
Cherry Lane Recreation, Inc. (henceforth "Cherry Lane") has requested loans and other
financial accommodations from Bank. Bank may grant such loan requests upon obtaining security
interests in various collateral, including but not limited to a leasehold Deed of Trust upon Cherry
Lanes' lessees' interests in a parcel of real property operated by Cherry Lane as an eighteen hole golf
course in Meridian, Idaho, under that certain Agreement of Lease dated October 3, 1978, by and
between the City as Lessor and Cherry Lane as Lessee, provided that the City enter into certain
agreements with the Bank pertaining to the Citys' rights as Lessor in said lease.
II.
On or about September 7, 1999 the City executed a Lessor's Statement Concerning
Agreement of Lease dated October 30, 1978. The city hereto agrees that the identification of the
date of the lease between the City and Cherry Lane as set forth in said September 7, 1999 statement
as being October 30, 1978 is in error, and t'~at the correct date of said lease is October 3, 1978, aad
that said statement is herewith amended accordingly.
III.
On or about September 21,1999 Bank requested the City to execute an Acceptance of Lessor
to the leasehold deed of trust to be granted by Cherry Lane in favor of Bank, in a form prepared by
AGREEMENT -Page 1
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Bank. In lieu of executing such acceptance, on or about September 21, 1999 the City executed a
Consent to Lessee Assignment with right or reassignment by Deed of Trust.
N.
For the Bank to proceed with Cherry Lane's loan application, Bank requires that the City
enter into certain agreements pertaining to the rights of the City under the said October 3, 19781ease
between it and Cherry Lane in addition to the terms set forth in the City's September 7, 1999
statement and September 21, 1999 consent. In consideration of the accommodations to be made by
Bank to Cherry Lane, the City agrees as follows:
The City agrees that during the term of the leasehold deed of trust to be granted by
Cherry Lane to Bank, no modifications of the above described October 3, 19781ease between the
City and Cherry Lane shall be undertaken without the City first notifying Bank, in writing at least
90 days prior to the effective date of any modification, of the City's intention to modify the said
lease.
2. In the event of a default by Cherry Lane under the terms of the October 3, 19781ease,
the City agrees to notify Bank of such default in writing at least 30 days prior to taking any action
to enforce any of the City's :~ghts under the lease. Du*ing this 30 day period, Bark shall have the
option to cure the default or take such other action as maybe necessary to protect Bank's security
interest in the lease or under any other agreement between Bank and Cherry Lane.
3. City acknowledges that it will benefit as a result of the financial accommodations
extended by Bank to Cherry Lane and that by making such financial accommodations, Bank is
relying upon this agreement as well as the above referenced statement by the City dated September
AGREEMENT -Page Z
C: \O FFiC E1 W P W QJ\ W YDGCSIFJAU IBIAGREEMEN
7, 1999 and consent to lease the assignment with right or reassignment by Deed of Trust made by
the City on September 21, 1999.
IN WITNESS WHEREOF, the parties hereto have executed this agreement effective as of
the day and year first above written.
The City of Meridian
By:
Attest:
Idaho Independent Bank
By:
Vice President
AGREEMENT -Page 3
C:10 FFICE~ W P W INS W P DOCS~FJAUIBUG REEMEN
** TX CONFIRMATION REPORT *~ AS OF OCT 05 '99 09 52 PAGE.01
CITY OF MERIDIAN
DATE TIME TDiFROM MODE MINiSEC PGS CMDq STATUS
03 10105 09 51 PUBLIC WORKS OF--S 01'35" 007 054 OK
R~~~~D
0 C T - 4 ~ggg
in teroffi c e cY~ of n~~a~rAly
ME MORAND U M
__
To: Mayor Robert D. Come an Council
From: Wm. F. Gi;ray, III ~fj~ "
Subject: Request of Idaho Independent Bank -Cherry bane Recreation, inc. - City of
Meridian Matter
Dute: October 4, 1999
I am enclosing, for your consideration, a request that has been made
directly to the City, by the Idaho Independent Banlc, regarding the above referenced
matter. The enclosed documents include the letter addressed to me from ,Mr.
Ldward J. Anson, dated September 3U, 1999, and an attached Agreement. This item
is the one !mentioned in the Chronology, which was anticipated as an additional
requirement of the bank.
As I advised, and as is acknowledged in the letter from Mr. Anson, the
City is not legally obligated to enter into this agreement. There is no doubt. that the
true date of the agreement is October 3, 1978. The question is whether or not the
City Council wishes r,o hind the City to give 30 days notice of default to the Banlc,
and to grive 9U days notice to the Banlc of the effective date of any modification of
the .Cease Agreement. It is a matter of the discretion of the Mayor, and Council,
and considering the public interest whether ybu would ;rant the request or not. If
you determine to grant the request, I recommend that the Agreement specify the
address to which notice is co be given to the Bank, and that the Agreement provide
notice by facsimile transmission, and that the City put into place, within the
reasonably foreseeable future, a Management Plan for the Agreement of Lease.
As an alternative, the Council could consider conditioning its approval
of entering into the Agreement, proposed by the Bank, that the lianlc issue the Letter
of Credit to Cherry Lane Recreation, Inc., as required in the conditional use permit,
and that Cherry Lane Recreation, lnc., agree that the proceeds from the loan, which
is secured by the "Leasehold Deed of Trust", be used ceclusively for operation,
maintenance, and for improvements to Cllerty Lane Golf Couxse. You maY consider
obtaining verbal assurances, which could be recorded in the minutes oC the Council
meeting, froth authorised agents of Cherry Lane Recreation, .(nc., and the Banlc, as to
these points as an inducement to enter the agreement proposed by the Bank.
'Mi ~'.. . ~ ., .,
i n te roff i c e ~~~ ~~ 1'~~ ~s_. ~ ~~~~~
M E MO RAN D U NI
To: Mayor Robert D. Corrie and Council
-r
From: `Vm. F. Gi~ray, III ~~
G~
Subject: Request of Idaho Independent Bank -Cherry Lane Recreation, Inc.
Date: 10-13-99
Date: October 19, 1999
Mayor Corrie and Council:
Due to the unusual nature of the above referenced requests before the
Council, and due to the fact that there is some confusion regarding the terms and
conditions of the subject Leasehold Deed of Trust the Banlc is requesting as security
for a loan to Cherry Lane Recreation, Inc.; I offer the following overview of the legal
rights of the Banlc, as provided in the Leasehold Deed of Trust, in the event there is a
default which is not cured by Cherry Lane Recreation, Inc.
• (References are to the Leasehold Deed of Trust unless otherwise
noted. )
Point No. 1 This instrument is an agreement tivhich is designed to
provide the Banlc a secured interest in Cherry Lane
Recreation, Inc. Leasehold interest in the golf course.
{Opening paragraph, also see letter from Edward J. Anson
bank counsel to ine dated September 30, 1999.}
Point No. 2 The Trustee "Pioneer Title Company of Ada County" has
the power to sell, and the right of entry and possession,
until payment in full has been received. This power of sale
and reentry must be accomplished as provided in the
agreement. {see opening paragraph}
Point No. 3 The initial amount appears to be 5900,000 with potential
for advances during the entire period of the le~ise of up to
X1,800,000. [section 1 Obligations]
File
p~~e •~
October I9, I999
Point No. 4 The Leasehold Deed of Trust provides that Cherry Lane
Recreation will exercise all renewals of the lease. That
means they would be in default of the Leasehold Deed of
Trust if they do not. {section 2 g Representations
Warranties and Covenants;
Point No. 5 The events of default include such items as:
A. Failure to pay obligation to lender
B. Failure to perfornl any obligation or warranty provided
in the agreement
C. Destroys or damage to the property
D. Seeks to revise or limit its liability to the lender
E. Files bankruptcy
F. Becomes insolvent or the corporation is rio longer
authorized to do business in the State of Idaho
G. Conducts illegal operations regarding the storage of
property upon the property (transport of illegal
goods)
H. Allows or assigns its obligations to another party
without consent of the bank
I. If events occur such as the value of the property
significantly declines, or otherwise, and the Banlc
deems itself insecure.
{See Section I7 Events of Default}
File
Page 3
October f 9. (999
Point No. 6 The Banlc, upon default, can enter and take
possession of the property, and the bank has the
right to appoint a managing agent of the property
and it could let the same, either in the trustee's
name or in the name of the bank. and rent the
property and apply the rental payments to the
balance of the obligation plus expenses. {See Section
1 ~ Rights of Lender on Event of Default}
Point No. 7 The Banlc, through the trustee, most likely would
follow the foreclosure procedures as set out in
Chapter 1 ~ of Title 45 Idaho Code. This includes a
120 day notice prior to the date set for the trustees'
sale. {Tlte City slloccld, CIS CI CU11CI1tiUll, request notice of
sale pursuant to I. C. § ~S-1 S11 as ~rovi~ted in I. C. ~
45- 1506(x). } At the sale any person may bid. The
bid is awarded to the person offering the highest
bid. The purchaser, after payment, receives a deed
which conveys all of the grantor's (Cherry Lane
Recreation, Inc.,'s) interest in and to the lease, and
the purchaser will then be entitled to the lease rights
and possession of the golf course.
Point No. 8 I do not see any provision that would prohibit the
Banlc from assigning its interest to a new lender.
I hope this memo is of assistance to you in your deliberations on the
request of the Banlc and Cherry Lane Recreation, Inc.
ms~Z:\worlc\wi\t~4Cridi~n 15360h~1\cherrvLane Land Eechange\CherrvLaneRec101999.N1em