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20 Motion to authorize the City Manager to sign an irrevocable standby letter of credit for $393,520.00CITY COUNCIL AGENDA ITEM BRIEFING SHEET Submittal Date: Originating Department: Presented By: Agenda Item No.; 5-6-2008 Council Date: Finance Gene Anderson 20• 5-12 2008 RECOMMENDED MOTION: Motion to authorize the City Manager to sign an irrevocable standby letter of credit for $393,520,00. POLICY ISSUE~S~: Fiscal Management. BACKGROUND: The City of Paris was awarded Contract No. 719068 by the Office of Rural Community Affairs (ORCA) on September 10, 1999 granting $393,520 for infrastructure construction to support 38 homes in the Eastgate subdivision. Because less than 51% of the 35 homes actually built were sold to low-to-moderate owner-occupants, the City is in non- compliance with this contract requirement. The City has been given until December 31, 2008 to correct this problem. However, ORCA is also requiring, as a condition of this extension, that the City of Paris execute an irrevocable standby letter of credit in the amount of $393,520 payable to ORCA guaranteeing repayment if the non-compliance issue is not settled by the deadline given. As part of that letter of credit process, Liberty National Bank requires a note (loan document) for the same amount to be in place in order for them to recover the money they will pay to ORCA. If the deadline is not met, ORCA will exercise its right under the letter of credit, and Liberty National Bank will pay the $393,520 to ORCA. At that time, Liberty National Bank will ask the City if it wishes enter into the loan agreement or if it wishes to make a lump sum payment to Liberty National Bank to cover the letter of credit. BOARD~COMMISSION RECOMMENDATION: NONE. EXHIBITS: Resolution, Letter of Credit and Loan Agreement from Liberty National Bank. ACTION: BUDGE'T INFO: ❑ Financial Report ❑ Minute Order Expense~ $N/A ❑ Department Report ~ Resolution Budgeted Amt. $N/A ❑ Presentation ❑ Ordinance y'I'D Actual $N/A ❑ Public Hearing ❑ Other Acct. Name N/A Acct. Number N/A FISCAL NOTES: None. REVIEWED AND APPROVED BY: ~ Administration ~ City Clerk ❑ Community Development ❑ EMS/IT ~ Finance ❑ Fire ❑ Municipal Court ~ Legal ❑ Library ❑ Police ❑ Eng./Public Works ❑ Utilities City of Paris ~ Revised 2/04/08 DRAFT Attorney\reswork\current\Letter of Credit -[nfrastructure Eastgate Res RESOLUTION NO. A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PARIS, TEXAS, AUTHORIZING THE CITY MANAGER TO EXECUTE AN IRREVOCABLE STANDBY LETTER OF CREDIT TO THE OFFICE OF RURAL COMMUNITY AFFAIRS (ORCA); MAKING OTHER FINDINGS AND PROVISIONS RELATED TO THE SUBJECT; AND DECLARING AN EFFECTIVE DATE. WHEREAS, on September 10, 1999, the City of Paris was awarded Contract No. 719068 by the Office of Rural Community Affairs (ORCA) granting $399,520 for infrastructure construction to support 38 homes in the Eastgate subdivision; and, WHEREAS, because less than 51% of the 35 homes actually built were sold to low- to-moderate owner-occupants, the City is in non-compliance with this contract requirement; and, WHEREAS, the City has been given until December 31, 2008 to correct this problem and as a condition of this extension the City of Paris is to execute an irrevocable standby letter of credit in the amount of $393,520 payable to ORCA guaranteeing repayment if the non-compliance issue is not settled by the deadline given; and, WHEREAS, if deadline is not met, ORCO will exercise its right under the letter of credit, and Liberty National Bank will pay the $393,520 to ORCA; and, WHEREAS, it is deemed appropriate that the City of Paris execute an irrevocable standby letter of credit to ORCO in order to have time to attempt to correct this problem and the same should be approved. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF PARIS, THAT: Section 1. The findings set out in the preamble to this resolution are hereby in all things approved. Section 2. The City Council of the City of Paris approves and authorizes the Ciry Manager to execute on behalf of the City of Paris an Irrevocable Standby Letter of Credit payable to the Office of Rural Community Affairs in the amount of $393,520 in substantially the form of Exhibit A attached hereto. Section 3. This resolution shall be effective immediately upon passage. a 0 (9~6 PASSED AND APPROVED this 12th day of May, 2008. Jesse James Freelen, Mayor ATTESTED: Janice Ellis, Ciry Clerk APPROVED AS TO FORM: W. Kent McIlyar, City Attorney s 0 1)7 / E ~ IRREVOCABLE STANDBY LETTER OF CREDIT NO. 175 DATE: April 30, 2008 EXPIRATION DATE: January 30, 2009 BENEFICIARY: . Office of Rural Community Affairs 1700 Rcrth Cer.gress Avenue. Suite 220 Austin, TX 78701 Gentlemen: APPLICANT: City of Paris P. O. Box 9037 Paris, TX 75461-9037 We hereby issue our Irrevocable Standby Letter of Credit No. 175 in your favor up to the aggregate amount of US$393,520.00 (Three Hundred Ninety-Three Thousand Five Hundred Twenty and 00I100 U. S. Dollars) available by draft(s) drawn on us at sight, marked "Drawn under Irrevocable Standby Letter of Credit No. 175 of The Liberty National Bank in Paris, Texas. 1. Beneficiary's written statement purportedly signed by its authorized representative reading as follows: "Office of Rural Community Affairs ("Beneficiary") hereby certifies that City of Paris ("City") did not perform as requiced under its Housing Infrastructure Fund Contract No. 719068." 2. This original Letter of Credit and all amendments thereto (if any). In the event of a partial drawing the original Letter of Credit will be endorsed and returned to you, unless the Letter of Credit has expired or the amount available is reduced to zero. Special Conditions: Partial drawings permitted. We hereby engaae with you that documents drawn under and in compliance with the terms of this Irrevocable Standby Letter of Credit will be duly honored if presented for payment to The Liberty National Bank In Paris, Texas, 305 Lamar Avenue, Paris, Texas 75460, ATTN: Philip R. Cecil prior to 3:OOPM on January 30, 2009 Central time on or before the expiration date of this Letter of Credit. This Letter of Credit is subject to the International Standby Practices 1998, International Chamber of Commerce Publication No. 590 ("ISP98"), in effect on the date this Letter of Credit is issued, and as to matters not addressed by ISP98 is subject to and governed by Texas State Law and applicable U. S. Federal Law. The Liberty National Bank in Paris, TX Philip R. Cecil, Chairman of the Board EXHIBIT ~ m U 07 Is GTY OF PARIS PO BOX 9037 PARIS, TX 75461 BORROWER'S NAME AND ADDRESS includes each borrower ahove, jointly and severally. LIBERTY NATIONAL BANK 305 LAMAR AVE. P.O. BOX 919 PARIS.TX 75480 'S NAME AN4;i;ADDRESS lender, its sucGessors and assigns. SSq 75-6000635 Loan Number 400010238 Date 04-30-2008 Maturity Date ON DEMAND Loan Amount $393,520.00 Renewal Of CTILOILP PRC:CMR For value received, I promise to pay to you, or your order, at your address listed above the PRINCiPAL sum of THREE HUNDRED NINETY THREE THOUSAND FIVE HUNDREO TWENTY ANO N01100 Dollars $ 393.520.00 I Single Advance: I witl receive all ot this principal sum on 04-302008 . No additional advances are contemplated under this note. D Multiple Advance: The principal sum shown above is the maximum amount of principai I can borrow under this note. On I will receive the amount ot $ and future prmcipal advances are contemplated. Conditions: The conditions for future advances are ❑ Open End Credit: You and I agree that i may borrow up to the maximum amount of principal more than one time. This feature is subjeci to all other conditions and expires on ❑ Closed End Credit: You and I agree that 1 may borrow up to the maximum only one time Iand subject to all other conditionsl. INTEREST: I agree to pay interest on the outstanding principal balance from 0430-2008 at the rate of 5,000 % per year until DEMANO IS MAOE Ll Varia6le Rate: This rate may then change as stated below. , ❑ Index Rate: The future rate will be the following index rate: ❑ Ceiling Rate: The interest rate ceiling for this note is the ceiling rate announced by the Credit Commissioner from [ime to time. ❑ Frequency and Timing: The rate on this note may change as often as A change in the interest rate will take effect ❑ Limitations: During the term of this loan, the applicable annual interest rate will not be more than % or less than The rate may not change more than % each EfTect oi Variable Rate: A change in the interest ra[e will have the following effect on the payments: ❑ The amount of each scheduled payment will change. ❑ The amount of the final payment will change. ❑ ACCRUAL METHOD: Interest wiil be calculated on a ACTUALI365 basis. POST MATURITY RATE: I agree m pay_interest on the unpaid balance of this note owmg after maturity, and until paid in full, as stated below: ~ on the same fixed or variable rate basis in effect before maturity (as indicated a6ove). ❑ at a rate equal to 1_1 LATE CHARGE: If a payment is made more than days after it is due, I agree to pay a late charge of i:. ADDITIONAL CHARGES: In addition to inierest, I agree to pay the following charges which LJ are ❑ are not included in the pnncipal amount above: PAYMENTS: I agree to pay this note as follows: ON DEMANO WITH SEMIANNUAL INTEREST PAYMENTS BEGINNING 01-30-2009. ADDITIONAL TERMS: THIS WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. Siynature for Lender PHILIP CECIL, CHAIRMAN ❑ SECURITY: This note is separately secured by (describe separate documem by type and date): lThis senion is tor your internal use. Failure to Iisi a separaie security Aocument tloes not ean ihe agraement will not secure ihls nole.~ FURPOSE: The purpose of this loan is FUND LETTER DF CREDIT q175 SIGNATURES: I AGREE TO THE TERMS OF THIS NOTE (INCLUDING THOSE ON PAGE 21. I have received a copy on today's date. CITY OF PARIS UNIVERSAL NOTE ` ~~rLlo lc~1984, 1991 Bankers Systems, Inc., St. Clo~d. MN Form UN-TX 7(7/2007. n ( i I{ I`1 ~ (Ndye 1 0/ 2/ DEFINITIONS: As used on page t, "fN " means the terms that apply to this loan. "I," "me" or "my" means each Borrower who signs this note and each other person or legal entity (including guarantors, endorsers, and sureties) who agrees to pay this note (together referred to as "us"). "You" or "your" means the Lender and its successors and assigns. APPUCABLE LAW: The law of the state of Texas wil4.;govem this,,note. Any term of this note which is contrary to applicab3e~ l~w wtk"hCt be effective, uniess the law permits you and me to agree<to such a~i:✓aristjon. If any provision of this agreement cannot be enforaed according tG; fts terms, this fact wili not affect the enforceability of t},ie retnaindCr ot:;ihis agreement. No modification of this agreement may be,;mp& wiA.out;:Your express written consent Time is of the essence in this~agl`eemenYF,~::ii%' COMMISSIONS OR OTHER REMUNERATION: I understand and agree that any insurance premiums paid to insurance companies as part of this note will involve money retained by you or paid back to you as commissions or other remuneration. In addition, I understand and agree that some other payments to third parties as part of this note may also involve money retained by you or paid back to you as commissions or other remuneration. PAYMENTS: Each payment I make on this note wili first reduce the amount I owe you for charges which are nerther interest nor principal. The remainder of each payment will then reduce acerued unpaid interest, and then unpaid principal. If you and I agree to a different appiication of payments, we will describe our agreement on this note. I may prepay a part of, or the entire balance of this loan without penaliy, unless we specify to the contrary on this note. Any partial prepayment will no[ excuse or reduce any later scheduled paymem until this note fs paid in full lunless, when I make the prepayment, You and I agree in writing to the contraryl. INTEREST: Interest accrues on the pnncipal remaining unpaid from time to time, until paid in full. If I receive the principal in more than one advance, each advance will start to earn interest only when I receive the advance. The interest rate in effect on this note at any given time will apply to the entire principal advanced at that time. Notwithstanding anything to the contrary, I do not agree to pay and you do not intend to charge any rate of interest that is higher than the maximum rate of interest you could charge under applicable law tor the extension of credit that is agreed to here (erther before or after maturity). If any notice of inteiesi accrual is sent and is in erroL we mutually agree to correct it, and if you actually collect more interest than allowed 6y law and this agreement, you agree to refund it to me. INDEX RATE: The index will serve only as a device for setting the rate on this note. You do not guarantee by selecting this index, or the margin, that the rate on this note will be the same rate you charge on any other loans or class of loans to me or other borrowers. ACCRUAL METHOD: The amount of interest that I will pay on this loan will be calculated using the interest rate and accrual method stated on page 1 of this note. For the purpose of interest calculation, the accrual method will determine the number of days in a"year." It no accrual method is stated, then you may use any reasonable accrual method for calculating interest. POST MATURITY RATE: For purposes of deciding when the "Post Maturity Rate" Ishown on page 11 applies, the term "maturity" means the date of the last scheduled payment indicated on page 1 of this note or the date you accelerate payment on the note, whichever is earlier. SINGLE ADVANCE LOANS: If [his is a single advance loan, you and I expect that you will make only one advance of principal. However, you may add: other amounts to the principal if you make any payments described in the "PAYMENTS BY LENDER" paragraph below. MULTIPLE ADVANCE LOANS: If this is a multiple advance loan, you and I expect that you wfll make more than one advance of principal. If this is closed end credit, repaying a part of the principal will not entitle me to additional credit. PAYMENTS BY LENDER: It you are authorized to pay, on my behalf, charges I am obligated to pay (such as property insurance premiums), then you may treat those payments made by you as advances and add them to the unpaid. principal under this note, or you may demand immediate payment of the charges. SET-OFF: I agree that you may set off any amount due and payable under this note agamst any right I have to receive money from you. "Right to receive money from you" means: (1) any deposit account balance I have with you; (2) any money owed to me on an item presented to you or in you possession for collection or exchange; and 131 any repurchase agreement or other nondeposit obligation. "Any amount due and payable under this note" means the total amount of which you are entitled to demand payment under the terms o this note at the time you set oft. This total includes any balance the du date for which you properly accelerate under this note. If my right to receive money from you is also owned 6y someone wh has not agreed to pay this note, your right of set-off will apply to m interest in the obligation and to any other amounts I could withdraw o my sole request or endorsement. Your right of set-off does not apply t an account of other obligation where my rights are only as a representative. It also does not apply to any Individual Retirement Account or other tax-deferred retirement account. You will not be liable for the dishonor of any checl< when the dishonor occurs because you set off this debt against any of my accounts. lagree to hold you harmless from any such claims arising as a resuh of your exercise of your right of set-off. REAL ESTATE OR RESIDENCE SECURITY: Ii this note is secured by real ....estateor a;;{,esidence that is personal property, the existence of a defaWt ~end yoUr xC'medies for such a default will be deterrnined by applicable ii> laV✓, by~ th~e terms of any separate instrument creating the security nd, to the extem not prohibited by law and not contrary to the ::>"'terms o{; the separate security instrument; by the "DefaWY" and "RemediiRS" paragraphs herein. DEFAULT: I will be in detault on this loan and any agreement securing this loan if any one or more of the following occurs: (1) I fail to perform any obligation which I have undertaken in this note or any agreement securing this note; (2) you, in good faith, believe that the prospect of payment or the prospect of my performance of any other of my obligations under this note or any agreement securing this note is impaired; or (3) I fail to pay, or keep any promise, on any debt or agreement I have with you unless otherwise prohibited by law. If any of us are in default on ihis note or any security agreement, you may exercise your remedies against any or all of us REMEDIES: If I am in default on this note you have, 6ut are not limited to, the following remedies: (1) You may demand immediate payment of my debt under this note (principai, accrued unpaid interest and other accrued charges). (2) You may set off this debt against any right I have to the paymeni of money from you, subject to the terms of the "Set-Off" paragraph herein. 13) You may demand security, additional security, or additional parties to be obligated to pay thfs note as a condition for not using any other remedy. (4) You may refuse to make advances to me or allow purchases on credit by me. - (5) You may use any remedy you have under state or federal law. By selecting any one or more of these remedies you do not give up your rigM to later use any other remedy. By waiving your right to declare an event to be a default, you do not waive your right to later consider the event as a default if it continues or happens again. COLLECTION COSTS AND ATTORNEY'S FEES: I agree to pay all costs of collection, replevin or any other or simiiar type of cost if I am in default. In addition, ff you hire an attomey to collect this note, I also agree to pay any fee you incur with such attomey plus court costs (except where prohibited by law). To the extent permitted by the United States 8ankruptcy Code, I also agree to pay the reasonable attorney's fees and costs you incur to collect this debt as awarded by any court exercising jurisdiction under the Bankruptcy Code. WAIVER: I give up my rights to require you to do certain things. i will not require you to: (1) demand payment of amounts due (presentment); (2) obtain official certification of nonpayment (protest); (3) give notice that amounts due have not been paid (notice of dishonor); - (4) give notfce of intent to accelerate; or (5) give notice of acceleration. I waive any defenses I have based on suretyship or impairmem oi collateraL OBLIGATIONS INDEPENDENT: I understand that I must pay this note even if someone else has also agreed to pay it (by, for exampie, signing this form or a separate guarantee or endorsement). You may sue me alone, or anyone else who is obligated on this note, or any number o1 us together, to collect this note. You may do so without any notice that it has not been paid (notice of dishonor). You may without notice release any party to this agreement without releasing any other party. If you give up any of your rights, with or without notice, it will not affect my duty to pay this note. Any extension of new credit to any of us, or renewal of this note by all or less than all of us will not release me from my duty to pay it IOf course, you are entitled to only one payment in full.) I agree that you may at your option extend this note or the debt represented by this note, or any portion of the note or debt, from time to time withoui limit or notice and for any term without atfeciing my liability tor payment of the note. I will not assign my obligation under this agreemenr withoui r your prior written approval. FINANCIAL INFORMATION: I agree to provide you, upon request, any financial statement or information you may deem necessary. 1 warrant that the financial statements and information I provide to you are or will f be accurate, correct and comptete. e NOTICE: Unless otherwise required 6y law, any notice to me shall be given by delivering it or by' mailing it by first class mail addressed to me o at my last known address. My current address is on page 1. I agree to y inform you in writing of any change in my address. I will give any notice n to you by mailing it first class to your address stated on page i of this o agreement, or to any other address that you have designated. DATE Of TRANSAC110N PRINCIPAL ADVANCE BORROWER'S INITIALS Inot required~ PRINCIPAL PAYMENTS PPINCIPAL BALANCE INTEREST RATE INTEREST PAVMENTS INTERE51 PAID THROUGH. $ $ S % $ $ $ $ % $ $ $ $ % $ $ $ $ % $ $ $ $ % $ $ $ $ % $ $ $ $ % $ 5 $ $ % $ $ $ $ °/a $ g S S % 5 S 5 S % $ (page 2 of 2) ?1 19Ba. 1991 Bankers Sysiems. Inc., St CIouA, MN Form UN-TX 317/2002