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HomeMy WebLinkAbout1998-04-27 98-194 ORDERCOUNCIL ACTION Item NO. 98-194 Date Anil 27. 1998 Item/Subject: Authorizing Execution of a Credit Enhancement Agree- ment with Bank of America, S.B., for Vision Care of Maine - Bangor, LLC (VCOM) -- Stillwater Avenue Project Responsible Department: Legal This item would authorize execution of a "Credit Enhancement Agreement" with Bank of America, S.B. relative to the Vision Care of Maine - Bangor, LLC (VCOM) project on Stillwater Avenue. Under the terms of the agreement, the City of Bangor would create and maintain a $500.000 security fund, for a period of five (5) years. to assure VCOM's repayment of project financing to the Bank of America When complete, the VCOM project will create 30 to 35 new jobs and will generate approximately $200,000 in new real estate and personal property taxes per year. The City's assistance in providing the $500.000 security fund is intended to allow the project to go forward, in order t0 secure the project's economic and tax benefits. (continued on next page) � DEp99-He� manager's rsonmit•'(1 _ B^-aa� - G Citi- y Manage Associated Information: Credit enhancement Agreement Budget Approval: �p Pin Legal Approval:A 9obtfj�J� VWaien %LII$ i'/Pm < �f On fle IyUsJN9S. CS VP/ifan CiZtJyk/S(olicitor $LaIJILI hC !'ndP�iNi�(y �OUsj'.nored. Introduced For x Passage First Reading Referral Page 1 of 14_ 98-196 Aeeigned m Councilor Tyler April 29, 1998 pp CITY OF BANGOR (TTLLE) (prbri Authorizing_. Execution of a Credit Enhancement Agreement with Bank of America, B.B. for Vision Care of Maine - Bangor, LLC (VCOM) -- Stillwater Avenue Project . _------- _ _ ...._....... ......... _..._ ......... _.. BY aw Cly Cuuuwt Ofdw Cit of BO -, ORDERED, THAT the City Manager is hereby authorized, on behalf of the City of Bangor, to execute and deliver a "Credit Enhancement Agreement" with Bank of America, S.B., in the form attached, to provide financial assurances in connection with Vision Care of Maine - Bangor, LLC's proposed development project on Stillwater Avenue, as set out in the Credit Enhancement Agreement. Upon execution of the Credit Enhancement Agreement byboth parties, and appropriation of necessary funds by the City Council, the City Finance Director is hereby authorized to establish, hold, invest, administer and expand the "security fund" inaccordance with the Credit Enhancement Agreement. IN CITY COUNCIL April 27, 1998 Notion To Tabel Until the Next Regularly Scheduled Meeting of the City Council Motion Passed Order Tabled 111 uutm IN CITY COUNCIL may 11, 1998 Read and Considered Under New Business Notion for Passage Made and Seconded. Rod Mckay, Community A Economic Development Director, gave the details of this order. Public Consumers: Dr. Young, Principle[Vision Care of Bangor, outlined his project for the Council. Norm Ledwya. of B.M.H.C., refuted some of Dr. Young'sents. Opponents of this project. Including many area opthamoligists and optometrists, also Voiced Meir opinions and observations regarding this order. Motion for Passage withdrawn Motion to Indefinitely Postpone Made and Seconded Motion Passed Indefinitely Postponed 98-196 ORDER Title, Authorizing Execution of a Credit Enhancement Agreement with Bank of America B.B. for Vision Care of Maine - Ban&or, LLC'TME) ' Rtlll'waee' A'veu4'e'Pibjecc Aaigned to UUU VVV Councilmen 98-194 REVISED DRAFT 04/21/98 THIS AGREEMENT, made and entered into as of the 1st day of May, 1998, by and between the CITY OF BANGOR, a municipal corporation .organized and existing under and by virtue of the laws of the State of Maine, located at Bangor. Penobscot County, Maine, and BANK OF AMERICA, E.B., a federal savings bank regularly doing business 1n the State of Maine (hereinafter "Bank of America"), N E $ $ E 1 if: Recitals 1. Bank of America is the principal lender to vision Care of Maine - Bangor, LLC (hereinafter "VCOM"), a Maine limited liability company, which seeks to construct a 24,DD0 square foot ophthalmo- logical care center in Bangor, Maine, at a total project cost of $5.8 Million for site acquisition, project construction and related costs. Bank of America's financing commitment for VCOM's Bangor project amounts to $4.29 million of the $4.5 million project financing.. Copies of Bank of America's loan commitment letter and other documents previously executed or to be executed, evidencing the loan transaction between Hank of America and VCOM, are attached to this Agreement and are incorporated herein by reference (hereinafter "Loan Documents"). 2. In addition to amounts invested or financed for site acquisition and construction, VCOM plans to lease $4 million of taxable personal property for use in the Bangor facility, when completed. 3. VCOM's Bangor project will provide 50 jobs, 30 to 35 of which will be new positions. In addition, VCOM's Bangor project will 98-194 increase the City of Bangor's real estate tax base by an estimated $5.375 million, thereby generating an estimated $125,500 per year in new tax revenues, at current property tax rates, plus additional taxes on VCOM's leased personal property. 4. In order t0 allow VCOM's Bangor project to go forward, VCOM and the Bank of America have requested certain assurances from the City of Bangor, as set out further below, in connection with the planned project financing. 5. The City Council of the City of Bangor has authorized execution of this Agreement on the City's behalf, by passage of City Council Order 98-_ on April 27, 1998. THEREFORE, in consideration of the economic benefits and tax base enhancement of VCOM's Bangor project to the City of Bangor, and as an inducement to Bank of America to extend financing to VCOM for the Bangor project, and in consideration of the mutual promises and covenants hereinafter contained, and. pursuant to Bangor City Council Order 98-_, the City of Bangor and Bank of America hereby agree as follows: Agreement 1. Security Fund. The City of Bangor agrees to create and fund a security fund in the amount of $500,000, as partial security for VCOM's repayment of amounts financed by Bank of America for the Bangor project under the Wan Documents. The security fund shall be created no later than May 15, 1998 by an appropriation of $500,000 cash or U.S. Treasury securities of equal market value from the City of Bangor's existing reserves. The City of Bangor shall provide Baca of America with evidence of the City's appropriation to the security fund. The security fund shall be held by the City of Bangor, unless 98-194 drawn upon by Bank of America as provided below. Bank of America shall be entitled on request to review any securities held in the security fund, to verify their market value. Bank of America may require the City of Bangor to supplement the security fund. only to the extent that changes in the market value of any securities held in the security fund may reduce the fund's value below $500,000. Unless drawn upon as provided below, all funds and securities held in the security fund shall remain the sole property Of the City of Bangor, and shall not be subject to attachment or execution by Bank of America, VCOM, or their respective creditors, receivers, or trustees. The security fund shall not serve as security or collateral for any obligation of VCOM or any other person, other than VCOM's repayment obligation to Bank of America under the Loan Documents. 2. -rant of Collatergl SQcmritv Interest. For the purpose of securing VCOM's repayment to Bank of America in accordance with the Loan Documents, the City of Bangor hereby grants Bank of America a collateral security interest in the security fund to be created under paragraph 1 above. Bank of America's security interest shall be subject to and limited by the provisions of this Agreement, other provisions of law relating to the creation and enforcement of security interests notwithstanding. 3. Time Limit for Exercise of Collateral Bights. The security fund shall not serve as security or collateral for any default of VCOM's repayment obligations under the Loan Documents occurring on or after May 15, 2003. With respect to any default of VCOM's repayment obligation occurring prior to May 15, 2003, all interests of the Bank of America in the security fund shall terminate 3 98-194 as of ,lune 15, 2003, unless notice of default has been sent in accordance with, and within the time required, under paragraph 5(d) below. 6. Other Limitations. The security fund shall not serve as collateral or security for any default by VCOM of its loan obligations, other than a default of VCOM's repayment obligations, as provided in the Loan Documents. For example, the security fund may not be used to satisfy VCOM's obligations in respect to payment of any taxes; to maintain any insurance; to remove any encumbrances; or to restore any impairment of the value of other collateral. The security fund may be used to satisfy defaults by VCOM in respect to payment of loan interest as well as principal, but may not be used to satisfy any obligation of VCOM in respect to late fees, penalties, legal expenses, collection fees, or other costs. The maximum aggregate amount that may be drawn from the security fund in satis- faction of VCOM's repayment obligations shall not exceed $500,000, notwithstanding any default or defaults by VCOM in excess Of that amount. The City of Bangor shall have no obligation to replenish the security fund beyond the original $500,000 amount. The security fund shall be available to satisfy defaults by VCM of its repayment obligations in accordance with the original repayment schedule provided in the Loan Documents, but shall not be available to satisfy defaults arising from any acceleration of the original payment schedule. all interest amounts earned on funds or securities held by the City Of Bangor within the security fund shall accrue to and remain the sole property of the City of Bangor, and shall not be available to cure defaults under this Agreement. 5. Bank's Exercise of Collateral Rights. The Bank of 4 98-194 America's collateral rights in the security fund shall be exercised as follows: a. Noticeof Default. whenever VCOM shall fail to make any scheduled loan repayment as required in the Loan Documents, Bank of America shall send a written notice of default to the City of Bangor. The notice of default must be sent by certified mail, return receipt requested, to the City of Bangor's agent at the address listed below, and must be mailed within thirty (30) calendar days after the due date for the payment concerned. A copy of any written notice of default sent to VCOM shall be sufficient for this purpose, if sent in the manner and within the time provided in this subparagraph. No claim may be made against the security fund with regard to say required repayment, unless a notice of default has first been sent with respect to the repayment concerned, in accordance with, this subparagraph. b. Notice of Claim. Not less than sixty (60) nor more than 120 calendar days after the scheduled due date for the payment concerned, Back of America shall send a notice of claim to the City of Bangor, reciting that VCOM has failed to make the scheduled payment when due: that a notice of default was previously sent to the City of Bangor as required by paragraph 5(a) above: and that the defaulted repayment or a stated amount thereof remains unpaid. The notice of claim shall be signed and verified by an officer of the Bank of America, and shall be sent to the City of Bangor's agent by certified mail, return receipt requested. Failure to send a notice of claim in accordance with this subparagraph with 5 98-194 respect to any scheduled repayment shall bar any claims against the security fund with respect to the repayment concerned. c. Payment of Claims. Within thirty (30) calendar days after receipt of a notice of claim in proper form as provided in paragraph 5(b) above, the City of Bangor shall pay to Bank of America the amount stated in the notice Of claim. Upon receipt of the City of Bangor's payment, Bank of America shall execute and deliver to the City of Bangor a partial assignment Of its claims against VCOM and against any personal signatory or guarantor of VCOM's debt under the Loan Documents, in the amount of the payment concerned. Bank of America's assignment shall be in the form attached to this Agreement. The Bank of America's written assignment shall not be deemed to Include an assignment or partial assignment of collateral interests under any mortgage or security agreement, including this Agreement. Bank of America shall reasonably cooperate with any efforts by the City of Bangor to obtain personal judgments against VCOM Or its personal signatories or guarantors, pursuant to Bank of America's written assignment. Amounts recovered by the City of Bangor pursuant to Bank of America's written assignment shall not be added to the security fund. 6. Limited obligation. The City of Bangor's obligations under this Agreement shall be limited obligations, payable solely from the $500,000 to be appropriated for this purpose by the Bangor City Council. In the event the Bangor City Council shall fail to appropriate the necessary funds or securities as provided herein, this Agreement shall be void. The City of Bangor's Obligations under 0 98-194 this Agreement shall not constitute a general debt or a general Obligation or charge against the City. This Agreement does not constitute a pledge Of the City's faith, credit, or taxing power. By execution of this Agreement, the City of Bangor does not assume any obligation or liability except as expressly provided herein. 7. No Trust Created. All rights and remedies of the parties to this Agreement shall be deemed to be contractual in nature. Nothing in this Agreement shall be deemed to create or impose any agency, trust, or fiduciary obligation on the City of Bangor or its officers or employees, with respect to the Bank of America, VCOM, or any other person. 8. Remedies. In the event of a breach or default of this Agreement by the City of Bangor, or a claimed breach or default, the Bank of America's sole remedy shall be a Civil action for payment of amounts due hereunder, to be paid solely from the security fund or cash proceeds thereof. The benefits of this Agreement shall be deemed personal to the Bank of America, Its successors and assigns. This Agreement shall not be construed to confer any rights, benefits or remedies on VCOM, its co-signatories, guarantors, successors, assigns, creditors, receivers or trustees. Any failure by Back of America to preserve or present a claim against the security fund shall not be a basis for claims by any other person. 9. effective Date. This Agreement shall be deemed effective as of May 1, 1998. It shall terminate as provided in paragraph 3 above: provided that claims against the security fund for which a notice of default was properly given prior to June 15, 2003 may be made within the time provided in paragraph 5(b). lo. Access to Books and Records. Bank of America shall 98-194 provide the City of Bangor with reasonable access to all books and records relating to VCOM's loan account, as necessary to verify VCOM's payment history and claims made against the security fund. 11. B bse tient Recoveries. In the event the Bank of America shall subsequently recover any amount paid to the Bank of America by the City of Bangor from the security fund, by civil action, foreclosure, or otherwise, the net amount so recovered, after satisfaction of prior claims and payment of all expenses related to the recovery, shall be reimbursed to the City of Bangor. In any foreclosure action or other recovery action filed by the Bank of America against VCOM, its co -signatories or guarantors, Bank Of America shall include in its claim all amounts paid by the City of Bangor from the security fund, that have not been separately recovered by the City of Bangor pursuant to the Bank's assignment under paragraph 5(c) above. 12. Assignment and Succession. This Agreement shall bind and be for the benefit of the Bank of America, the City of Bangor, and their respective successors and assigns. Bank of America shall not assign its interest$ in this Agreement to any person, except to a bank or other financial institution, without the prior written consent of the City of Bangor 13. No Personal LiabilitV of Officials of the City. No covenant, stipulation, obligation or agreement of the City contained herein shall be deemed to be a covenant, stipulation or obligation of any present or future elected or appointed official, officer, agent, servant or employee of the City in his individual capacity and neither the members of the City Council of the City nor any official, officer, employee or agent of the City shall be liable personally 0 98-194 with respect to this Agreement or be sublect to any personal liability or accountability by reason hereof. 14. Counterparts. This Agreement may be executed in any number of counterparts, each of which, when so executed and delivered, shall be an original, but such counterparts shall together constitute but one and the same Agreement. 15. Governing Law. The laws of the State of Maine shall govern the construction and enforcement of this Agreement. 16. Venue for Sults. Any action to enforce the terms of this Agreement shall be brought in the Superior Court for Penobscot County, Maine. The parties mutually consent to dismissal of suits brought in any other forum 17. NNotices. All notices, certificates, requests, requisitions or other communications by the City and Bank of America pursuant to this Agreement shall be in writing and shall be sufficiently given and shall deemed given when mailed by first class mail, postage prepaid, addressed as follows: If to the City: City Manager, City of Bangor, 73 Harlow Street, Bangor, Maine 04401. If to Bank of America: Each of the parties may, by notice given to the other, designate any further or different addresses to which subsequent notices, certificates, requests or other communications shall be sent hereunder. 18. Amendment= This Agreement may be amended only with the concurring written consent of all of the parties hereto. 19. Net Agreement. This Agreement shall be deemed and 0 98-194 construed to be a "net agreement", and the City shall pay absolutely net during the term hereof all payments required hereunder, free of any deductions, and without abatement, deductions or setoffs. 20. Invalidity. In the event a court of competent jurisdiction shall for any reason determine this Agreement to be invalid, then this Agreement shall be deemed void, without further recourse by either party. 21. Integration. This Agreement completely and fully supersedes all other prior or contemporaneous understandings or agreements, both written and oral, between the parties, relating to the specific subject matter of this Agreement and the transactions contemplated hereby. 22. Seal. This Agreement shall not be deemed to be an instrument under seal. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers as of May 1, 1998. CITY OF BANGOR BANK OF AMERICA (BY) Witness (Its) Rol STATE OF MAINE PENOBSCOT, as. April _, 1998 Then personally appeared the above-named EDWARD A. BARRETT, City Manager, and acknowledged the foregoing instrument to be his free act and deed in his said capacity, and the free act and deed of said body corporate. Before me, Notary Public/Attorney-at-Law Printed Name: STATE OF as. April , 1998 Then personally appeared the above-named in his capacity as of Bank of America,and acknowledged the foregoing instrument to be his free act and deed in his said Capacity, and the free act and deed Of said corporation. Before me, Notary Public/Attorney-at-Law Printed Name: 11 98-194 FL4Y�lGL�4Y-YSHNYIMCYII�]i�L1�YfLJ The BANK OF AMERICA, S.B., holder of a certain Note dated given by Vision Care of Maine, Inc. - Bangor, LLC, land (guaranteed by ), for consideration paid by the City of Bangor, Maine, in respect CO a certain repayment due under said Note on in the amount of S which repayment is now in default, hereby assigns to the CITY OF BANGOR all claims of the Bank of America, S.B., under said Note in regard t0 the repayment due This assignment shall not be deemed to include an assignment or partial assignment Of any interests of the Bank of America, S.B., arising under the separate mortgage and security agreement or ([other security instrument] dated (and ). Given at this day of 1998. STATE OF (By) BANK OF AMERICA, S.B. thereurno duly authorized as. April _, 1998 Then personally appeared the above-named in his capacity as of Earth of America, S.B., and acknowledged the foregoing instrument to be his free act and deed in his said capacity, and the free act and deed of said corporation. Before me, Notary Public/Attorney-at-Law Printed Name: 98-194 A prior draft of the Credit Enhancement Agreement was circulated t0 the City Council on April 13, 1998. The version attached to this Council Order includes a number of changes requested by the Bank of America, most of which do not affect the substance of the agreement. The one substantive change consists of additional language in paragraph 1 on page 2-3 of the agreement, requiring the City to supplement the security fund to the extent that the value of the fund may fall below $500,000 due to changes in the market value of any securities held in the fund. Because the Credit Enhancement Agreement provides that the security fund will consist of cash or U.S. Treasury securities, it is expected that any market value fluctuations will be minor.