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Section 7.4. Guaranty of Tax Increment Shortfall. The <br />parties reasonably expect that the annual Tax Increments to be <br />derived from the Development Property in any calendar year after <br />1990 and prior to the Maturity Date will exceed the minimum <br />amount needed to pay when due all principal and interest maturing <br />in that year on that portion of the Tax Increment Bonds issued in <br />connection with the Project. Commencing in 1998, the Developer <br />agrees that if for any reason such Tax Increments in any calendar <br />year are less than the total debt service payments on the bonds <br />for that year, <br />then the Developer shall pay, upon demand by the City, to the <br />City the difference between the Tax Increment actually derived <br />and the total debt service payments for that year. "51,675. Said <br />obligation shall remain in effect until all of the Tax Increment <br />Bonds associated with this proiiect have been retired. <br />Prior to thc ioouancc of thc Dondo, The Developer shall <br />deliver to the City a guaranty in the form attached hereto as <br />Exhibit I fully executed by the Developer Lorcn E. Drucggcmann, <br />William T. Buticr, and David Phillipo, Cr., and guaranteeing <br />performance of the Developer's obligation to pay any shortfall in <br />Tax Increments as provided in this Section 7.4. <br />As security for the guaranty under this Section 7.4 and as <br />security for the performance of the obligations of the Developer <br />contained in this Agreement, the Developer shall simultaneously <br />with the execution of this Agreement deliver to the City an <br />irrevocable letter of credit issued by a financial institution <br />and in a form satisfactory to the City in the amount of $54,675. <br />The letter of credit shall expire on January 2, 2000 1991 and on <br />January 2 of each year thereafter and the Developer must replace <br />or renew the letter of credit in a form satisfactory not less <br />than 60 days prior to its expiration. At the discretion of the <br />City Council the letter of credit may be reduced at a future date <br />but the City Council is under no obligation to do this. <br />Page 38 <br />