HomeMy WebLinkAboutAgenda Report - July 19, 2006 K-06AGENDA ITEM K' 6
CITY OF LORI
COUNCIL COMMUNICATION
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AGENDA TITLE: Adopt Resolution approving line of credit with Farmers and Merchants Bank
{$3,004,000} for the Lodi Electric Utility
MEETING DATE: July 19, 2006
PREPAWD BY: Deputy City Manager
RECOMMENDED ACTION: City Council adopt Resolution approving the line of credit with
Farmers and Merchants Bank for $3,000,000.
BACKGROUND INFORMATION: The Lodi Electric Utility has the need to secure a short-term line of
credit in order to provide cash reserves in the event that current
cash reserves are insufficient to meet operating needs. It is
not anticipated that the line of credit will be needed. However, as stated by Fitch Ratings, procuring the
line of credit is necessary in order to prevent possible further negative ratings action by Fitch Ratings.
Farmers and Merchants Bank provides the City of Lodi with all of its banking services and has approved
the line of credit to be used for Electric Utility operations and other emergency needs should they arise.
The line of credit is secured with the 9.1 acre property located on Guild Street, which was previously
planned to be used as the Electric Utility Department offices. This and all other potential surplus
properties will be reviewed with Council at an upcoming meeting.
FISCAL IMPACT: It is anticipated that the costs (including attorney costs and costs to be paid for
establishing the line of credit with the Farmers and Merchants Bank) will be the only costs of the line of
credit. It is not anticipated that the line of credit will be utilized, but if it is, there will be a short term
interest cost associated with the amount and for the time the line of credit is utilized.
FUNDING AVAILABLE: The costs for the line of credit have not been determined at this time but will be
provided to the City Council at the time of the meeting.
�R�.r
Deputy City Manager
APPROVED:
Blai , City Manager
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RESOLUTION NO. 2006-
A RESOLUTION OF THE LODI CITY COUNCIL AUTHORIZING AND
APPROVING THE EXECUTION AND DELIVERY OF A LOAN
AGREEMENT TO FARMERS & MERCHANTS BANK OF CENTRAL
CALIFORNIA AND THE BORROWING OF FUNDS THEREUNDER
WHEREAS, Farmers & Merchants. Bank of Central California (the "Bank") has
offered to provide a revolving line of credit to the City of Lodi (the "City") in the amount of
three million dollars ($3,000,000) to be available through June 30, 2007, pursuant to a
loan agreement between the City and the Bank (the "Loan Agreement") which is
attached hereto and incorporated herein by reference; and
WHEREAS, Government Code Sections 53850 et M. authorize the City to
borrow money by the issuance of temporary notes under the Loan Agreement; and
WHEREAS, in order to make best use of the credit facility provided by the Bank,
it is desirable to delegate to the Deputy City Manager the authority
to make borrowings under the line of credit.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Lodi as
follows:
1. Recitals. The City Council hereby finds and determines that the foregoing
recitals are true and correct.
2. Approval of Loan Agreement. The proposed form of the Loan Agreement
between the Bank and the City, including the form of promissory notes to be delivered by
the City thereunder, as presented to this meeting, is hereby approved in substantially
final form. The Mayof and the Oireeter ei Finanee City Manager of the City aye is
hereby authorized, for and on behalf of the City Council, to execute and deliver to the
Bank the Loan Agreement in substantially said form, with such changes therein as such
officer, with the advice of the City Attorney, may require or approve, such approval to be
conclusively evidenced by the execution and delivery thereof.
3. Delegation of Authority to Make Borrowings Under Loan Agreement. The
City Council hereby authorizes the Difeetef ef Finamee Deputy City Manager of the City,
for and on behalf of the City Council, to execute and deliver to the Bank promissory
notes representing borrowings under the Loan Agreement; provided that such additional
borrowings are made in conformance with the terms, conditions, and limitations of the
Loan Agreement and the temporary borrowing provisions of Government Code Sections
53850 et seq., all as determined by the Dire.`,._ fFinanee Deputy City Manager.
Such promissory notes shall be issued in substantially the form attached to the Loan
Agreement as Exhibit B, with interest thereon, determined in accordance with the
provisions of the Loan Agreement, with such changes therein as such officer, with the
advice of the City Attorney, may require or approve, such approval to be conclusively
evidenced by the execution and delivery thereof.
4. Authorisation to Execute Documents. City officials and staff are hereby
authorized and directod, jointly and severally, to do any and all things and to execute
and deliver any and aft documents that they may deem necessary or advisable in order
to proceed with the borrowings authorized hereby and otherwise carry out, give effect to,
and comply with the terms and intent of this Resolution. Such actions already taken by
such officials and staff are hereby ratified, confirmed, and approved.
Dated: July 19, 2006
I hereby certify that Resolution No. 2006- was passed and adopted by the
City Council of the City of Lodi in a regular meeting held July 19, 2006, by the following
vote:
AYES: COUNCIL MEMBERS —
NOES: COUNCIL MEMBERS —
ABSENT: COUNCIL MEMBERS —
ABSTAIN: COUNCIL MEMBERS —
JENNIFER M. PERRIN
Interim City Clerk
2006-
LOAN AGREEMENT
This Agreement dated as of July 1, 2006, is between Farmers and Merchants
Bank (the "Bank") and the City of Lodi, California (the "Borrower").
1 _ LINE OF CREDIT AMOUNT AND TERMS
1.1 Line of Crg4it Amount.
(a) During the availability period described below, the Bank will provide a
line of credit to the Borrower. The amount of the line of credit (the "Commitment") is Three
Million Dollars ($3,000,000).
(b) This is a revolving line of credit. During the availability period, the
Borrower may repay principal amounts and reborrow them.
1.2 Availability Period. The line of credit is available between the date of this
Agreement and June 30, 2007 (the "Expiration Date") unless the Borrower is in default.
1.3 Interest Ram.
(a) The interest rate amount and calculation is described in Exhibit A attached
hereto and incorporated herein by reference.
1.4 Repayment Terms.
(a) The Borrower will pay interest on the first day of each month until
payment in full of any principal outstanding under this line of credit.
(b) Each advance made under this line of credit will be repaid in full on the
last day of the fiscal year of the Borrower during which the advance is made.
(c) There shall be no prepayment penalty.
1.5 Maximum Interest Rate. In the event that the interest rate which would be
applicable to any advance under any of the terms of this Agreement would exceed any maximum
interest rate imposed by law, then the interest rate applicable to such advance shall be reduced to
such maximum interest rate; provided, however, that upon demand by the Bank, the Borrower
shall repay to the Bank all advances to which a reduction in interest rate under this paragraph
applies.
1.6 Pledge of Funds. To secure the.payment of the obligations of the Borrower under
this Agreement, the Borrower hereby pledges, and grants to the Bank a lien and charge against, a
certificate of deposit ("CD Deposit") placed with the Bank in the amount of $3,000,000 and all
834300.2 1123331
unrestricted revenues of the Borrower, including, but not limited to, any revenue received from
the State of California or the Federal government, or instrumentality of the foregoing, with
respect to projects financed by an advance under this line of credit. The lien shall have first
priority with respect to the CD Deposit, and the Borrower shall not create, permit or suffer to
exist any other security interest or lien against the CD Fund. The term "unrestricted revenues"
shall include, but not be limited to, all taxes, income, revenue, cash receipts, and other monies of
the Borrower which are generally available for the payment of current expenses and other
obligations of the Borrower. The obligations of the Borrower under this Agreement are payable
from all taxes, income, revenue, cash receipts and monies of the Borrower which are lawfully
available for such payments ("Available Funds"), whether or not such funds are pledged to the
Bank under this paragraph.
1.7 Mandatory Prepayment. The Borrower shall, on demand by the Bank,
immediately prepay all amounts outstanding under this Agreement, and no further advances shall
be available under this Agreement, upon the occurrence of any of the following:
(a) Any judgments or arbitration awards are entered against the Borrower
(except for judgments or arbitration awards which have been stayed pending appeal), or the
Borrower enters into any settlement agreements with respect to any litigation or arbitration, in an
aggregate amount of One Million Dollars ($1,000,000) or more in excess of any insurance
coverage. The Borrower will not be obligated to prepay the credit if, before the expiration of
thirty (30) days after the entry of the judgment or arbitration award, the Borrower makes
arrangements for the payment of the judgment or arbitration award which are satisfactory to the
Bank in its discretion; provided, however, that the Bank will not be obligated to extend any
additional credit to the Borrower during the thirty (30) day period.
(b) Any government authority takes action that the Bank believes materially
adversely affects the Borrower's financial condition or ability to repay.
(c) A material adverse change occurs in the Borrower's financial condition,
properties or prospects, or ability to repay the loan.
2. FEES AND EXPENSES
2.1 Expenses. The Borrower agrees to reimburse the Bank for any expenses it incurs
in the preparation of this Agreement and any agreement or instrument required by this
Agreement. Expenses include, but are not limited to, reasonable attorneys' fees, including any
allocated costs of the Bank's in-house counsel; provided that such attorneys' fees shall not exceed
Two Thousand Five Hundred Dollars ($2,500).
3. DISBURSEMENTS, PAYMENTS AND COSTS
3.1 Requests for Credit. Each request for an extension of credit will be made in
writing in a manner acceptable to the Bank, or by another means. acceptable to the Bank.
3.2 Disbursements and Payments. Each disbursement by the Bank and each payment
834300.2 11233.31 2
by the Borrower will be:
(a) made at the Bank's branch (or other location) selected by the Bank from
time to time;
(b) made in immediately available funds, or such other type of funds selected
by the Bank;
(c) evidenced by records kept by the Bank. In addition, the Bank may, at its
discretion, require the Borrower to sign one or more promissory notes.
3.3 Telephone and Telefax Authorization.
(a) The Bank may honor telephone or telefax instructions for repayments or
for the designation of fixed interest rates given by any one of the individuals authorized to sign
loan agreements on behalf of the Borrower, or any other individual designated by any one of
such authorized signers. In addition, the Bank may make advances to the Borrower on the basis
of telefaxed copies of the duly executed documents required by paragraph 4.3 below; the
Borrower shall promptly deliver to the Bank the executed originals of such documents.
(b) Advances will be deposited in and repayments will be withdrawn from the
Borrower's account number , or such other of the Borrower's accounts with the
Bank as designated in writing by the Borrower.
(c) The Borrower will provide written confirmation to the Bank of any
telephone or telefax instructions within 5 days. If there is a discrepancy and the Bank has
already acted on the instructions, the telephone or telefax instructions will prevail over the
written confirmation.
(d) The Borrower indemnifies and excuses the Bank (including its officers,
employees, and agents) from all liability, loss, and costs in connection with any act resulting
from telephone or telefax instructions it reasonably believes are made by any individual
authorized by the Borrower to give such instructions. This indemnity and excuse will survive
this Agreement's termination.
3.4 Direct Debi .
(a) The Borrower agrees that interest and principal payments and any fees
will be deducted automatically on the due date from the Borrower's account number , or
such other of the Borrower's accounts with the Bank as designated in writing by the Borrower.
(b) The Bank will debit the account on the dates the payments become due. If
a due date does not fail on a banking day, the Bank will debit the account on the first banking
day following the due date.
(c) The Borrower will maintain sufficient funds in the account on the dates
834300.2 11233-31 3
the Bank enters debits authorized by this Agreement. If there are insufficient funds in the
account on the date the Bank enters any debit authorized by this Agreement, the debit will be
reversed.
3.5 Banking Da s. Unless otherwise provided in this Agreement, a banking day is a
day other than a Saturday or a Sunday on which the Bank is open for business in California. All
payments and disbursements which would be due on a day which is not a banking day will be
due on the next banking day. All payments received on a day which is not a banking day will be
applied to the credit on the next banking day.
3.6 Additional Costs. The Borrower will pay the Bank for the Bank's costs or losses
arising from any statute or regulation, or any request or requirement of a regulatory agency
which is applicable to all national banks or a class of all national banks. The costs and losses
will be allocated to the loan in a manner determined by the Bank, using any reasonable method.
The costs will be paid by the Borrower within 10 days after the last day of each quarter in
arrears. The Bank shall provide to the Borrower at least 30 days' written notice of its demand for
compensation under this paragraph, and shall describe in reasonable detail the basis for the
demand and the method used to calculate the amount demanded. The costs include the
following:
(a) any reserve or deposit requirements; and
(b) any capital requirements relating to the Bank's assets and commitments for
credit.
3.7 Interest Cll.culation. Except as otherwise stated in this Agreement, all interest and
fees, if any, will be computed on the basis of a 360 -day year and the actual number of days
elapsed. This results in more interest or a higher fee than if a 365 -day year is used.
3.8 Interest on Late Payments. At the Bank's sole option in each instance, any
amount not paid when due under this Agreement (including interest) shall bear interest from the
due date at the Bank's Base Rate (adjusted, as applicable, as provided in paragraph 1.6 above).
This may result in compounding of interest.
3.9 Default R#te. Upon the occurrence and during the continuation of any default
under this Agreement, advances under this Agreement will at the option of the Bank bear interest
at a rate per annum which is 2.0 percentage points higher than the rate of interest otherwise
provided under this Agreement. This will not constitute a waiver of any default.
4. CONDITIONS
The Bank must receive the following items, in form and content acceptable to the Bank,
before it is required to extend any credit to the Borrower under this Agreement:
4.1 Authoriz#ans. A Resolution of the City Council of the Borrower authorizing the
execution of this Agreement.
834300.2 11233.31
4.2 Legal Opi. A written opinion from the Borrower's legal counsel, covering the
authorization of the Borrower to enter into this Agreement and to pledge the assets as required by
paragraph 1.6 above, and that the Agreement and such pledge are legal, binding and enforceable
against the Borrower, and such other matters as the Bank may reasonably require. The legal
counsel and the terms of the opinion must be acceptable to the Bank.
4.3 Conditions to Each Advance. At least one business day before each extension of
credit, including the first:
(a) A promissory note evidencing the advance, executed by the Borrower,
substantially in the form attached as Exhibit B;
(b) A copy of the resolution of the City Council authorizing the advance, if
not previously provided to the Bank;
(c) An opinion from the Borrower's counsel stating that the advance has been
duly authorized and is in compliance with all applicable legal requirements, and such other
matters as the Bank may reasonably require. The legal counsel and the terms of the opinion must
be acceptable to the Bank.
4.4 Other Items. Any other items that the Bank reasonably requires.
5. REPRESENTATIONS AND WARRANTIES
When the Borrower signs this Agreement, and until the Bank is repaid in full, the
Borrower makes the following representations and warranties. Each request for an extension of
credit constitutes a renewed representation:
5.1 Authorization. This Agreement, and any instrument or agreement required
hereunder, are within the Borrower's powers and have been duly authorized.
5.2 Enforcea, e Agreement. This Agreement is a legal, valid and binding agreement
of the Borrower, enforceable against the Borrower in accordance with its terms, and any
instrument or agreement required hereunder, when executed and delivered, will be similarly
legal, valid, binding and enforceable, subject, in each case, to bankruptcy, insolvency, and other
laws that affect creditors' rights generally.
5.3 No Conflicts. This Agreement does not breach any agreement by which the
Borrower is bound, except for agreements which do not involve payments by the Borrower in
excess of $100,000 in any one year, and this Agreement does not violate any law or regulation.
5.4 Financial Information. All financial and other information that has been or will
be supplied to the Bank, including the Borrower's financial statement dated as of June 30, 2006,
is:
(a) sufficiently complete to give the Bank accurate knowledge of the
834300.2 11233.31 5
Borrower's financial condition.
(b) in compliance with all government regulations that apply.
Since the date of the financial statement specified above, there has been no material adverse
change in the assets or the financial condition of the Borrower.
5.5 Lawsuits. There is no lawsuit, tax claim or other dispute pending or threatened
against the Borrower which, if lost, would impair the Borrower's financial condition or ability to
repay the loan, except as have been disclosed in writing to the Bank.
5.6 Other Obligations. The Borrower is not in default on any obligation for borrowed
money, any purchase money obligation or any other material lease, commitment, contract,
instrument or obligation; except for agreements which do not involve payments by the Borrower
in excess of $100,000 in any one year.
5.7 No Event of Default. There is no event which is, or with notice or lapse of time
or both would be, a default under this Agreement.
5.8. Bank -Qualified Loans. If the advance will be Bank -Qualified, Borrower
represents that:
(a) Borrower has no reasonable anticipation of incurring more than
$10,000,000 in tax-exempt obligations, other than obligations described in Internal Revenue
Code Section 265 (b)(3)(c)(ii), in the calendar year in which the advance is made; and
(b) Borrower will not designate more than $10,000,000 of obligations as
Bank -Qualified during the calendar year in which the advance is made.
6. COVENANTS
The Borrower agrees, so long as credit is available under this Agreement and until the
Bank is repaid in full:
6.1 Use of Proceeds. To use the proceeds of the credit only for purposes authorized
by the Lodi City Council.
6.2 Financial Information. To provide the following financial information and
statements and such additional information as requested by the Bank from time to time:
(a) Within 30 days of the date when completed, copies of the Borrower's
annual financial statements, certified and dated by an authorized financial officer of the
Borrower. These financial statements must be audited (with an unqualified opinion) by a
Certified Public Accountant ("CPA") acceptable to the Bank.
(b) Within 30 days of adoption by the Borrower, a copy of the Borrower's
8343001.2 11233.31 6
budget, which shall be a balanced budget.
(c) Within 30 days after each quarter end, a report of the Borrower's Available
Funds in the (to be determined) Fund. This report shall include a summary of how the funds are
invested.
6.3 Reserved.
6.4 Limitation on indebtedness. Not to have outstanding or incur indebtedness in
excess of any applicable statutory maximum. In particular, the amount borrowed by the
Borrower in any fiscal year pursuant to Government Code section 53850 et. seq. shall not exceed
85% of the estimated amount of the then uncollected Available Funds of the Borrower which
will be available for the payment of such indebtedness, as required by Government Code section
53858.
6.5 Other Liens. Not to create, assume, or allow any security interest or lien
(including judicial liens) on the Borrower's CD Deposit, except the security interest in favor of
the Bank.
6.6 Notices to .Bank. To promptly notify the Bank in writing of:
(a) any lawsuit against the Borrower in an amount of One Million Dollars
($1,000,000) or more.
(b) any failure to comply with this Agreement.
(c) any material adverse change in the Borrower's financial condition or
operations.
(d) any additional indebtedness or liens incurred by the Borrower after the
date of this Agreement.
(e) any change in the Borrower's investment policy.
(f) any actual contingent liabilities of the Borrower and any such information
or representations.
6.7 Books and Records. To maintain adequate books and records.
6.8 Audits. To allow the Bank and its agents to examine, audit and make copies of
books and records at any reasonable time for any reasonable purpose related to this Agreement.
If any of the Borrower's books or records are in the possession of a third party, the Borrower
authorizes that third party to permit the Bank or its agents to have access to perform audits and to
respond to the Bank's requests for information concerning such books and records.
6.9 Compliance with Laws. To comply with the laws, regulations, and orders of any
834300.2 11233.31 7
government body with authority over the Borrower.
6.10 Perfection of Liens. To help the Bank perfect and protect its security interests and
liens, and reimburse it for related costs it incurs to protect its security interests and liens.
6.11 Cooperation. To take any action requested by the Bank to carry out the intent of
this Agreement.
6.12 Insurance. To maintain insurance as is usual for the Borrower.
7. DEFAULT
If any of the following events occur, the Bank may do one or more of the following:
declare the Borrower in default, stop making any additional credit available to the Borrower, and
require the Borrower to repay its entire debt immediately and without prior notice. If an event of
default occurs under the paragraph entitled "Bankruptcy," below, with respect to the Borrower,
then the entire debt outstanding under this Agreement will automatically be due immediately.
7.1 Failure to _Pay. The Borrower fails to make a payment under this Agreement
within 7 days after the date when due.
7.2 Lien Priority. The Bank fails to have an enforceable lien on or security interest in
any property given as security for this loan, with the priority required by this Agreement.
7.3 False Information. The Borrower has given the Bank false or misleading
information or representation.
7.4 Bankruptcy. The Borrower files a bankruptcy petition, a bankruptcy petition is
filed against the Borrower, or the Borrower makes a general assignment for the benefit of
creditors,
7.5 Receivers. A receiver or similar official is appointed for the Borrower.
7.6 Cross -default. Any default occurs under any agreement in connection with any
credit the Borrower has obtained from anyone else or which the Borrower has guaranteed in the
amount of One Million Dollars ($1,000,000) or more in the aggregate.
7.7 Other Bank Agreements. The Borrower falls to meet the conditions of, or fails to
perform any obligation under any other agreement the Borrower has with the Bank or any
affiliate of the Bank. If, in the Bank's opinion, the breach is capable of being remedied, the
breach will not be considered an event of default under this Agreement for a period of thirty (30)
days after the date on which the Bank gives written notice of the breach to the Borrower,
provided, however, that the Bank will not be obligated to extend any additional credit to the
Borrower during that period.
834300.2 11233.31 8
7.8 Other Breaph Under Agreement. The Borrower fails to meet the conditions of, or
fails to perform any obligation under, any term of this Agreement not specifically referred to in
this Article. If, in the Bank's opinion, the breach is capable of being remedied, the breach will
not be considered an event of default under this Agreement for a period of thirty (30) days after
the date on which the Bank gives written notice of the breach to the Borrower; provided,
however, that the Bank will not be obligated to extend any additional credit to the Borrower
during that period.
8. ENFORCING TINS AGREEMENT; MISCELLANEOUS
8.1 GAAP. Except as otherwise stated in this Agreement, all financial information
provided to the Bank and all financial covenants will be made under generally accepted
accounting principles, consistently applied.
8.2 California Law. This Agreement is governed by California law.
8.3 Successors and Assigns. This Agreement is binding on the Borrower's and the
Bank's successors and assignees. The Borrower agrees that it may not assign this Agreement
without the Bank's prior consent. The Bank may sell participations in or assign this loan, and
may exchange financial information about the Borrower with actual or potential participants or
assignees. If a participation is sold or the loan is assigned, the purchaser will have the right of
set-off against the Borrower.
8.4 Reserved.
8.5 Severability; Waivers. If any part of this Agreement is not enforceable, the rest of
the Agreement may be enforced. The Bank retains all rights, even if it makes a loan after
default. If the Bank waives a default, it may enforce a later default. Any consent or waiver
under this Agreement must be in writing.
8.6 Attomeys' Fees. The Borrower shall reimburse the Bank for any reasonable costs
and attorneys' fees incurred by the Bank in connection with the enforcement or preservation of
any rights or remedies under this Agreement and any other documents executed in connection
with this Agreement, and including any amendment, waiver, "workout" or restructuring under
this Agreement. In the event of a lawsuit or arbitration proceeding, the prevailing party is
entitled to recover costs and reasonable attorneys' fees incurred in connection with the lawsuit or
arbitration proceeding, as determined by the court or arbitrator. In the event that any case is
commenced by or against the Borrower under the Bankruptcy Code (Title 11, United States
Code) or any similar or successor statute, the Bank is entitled to recover costs and reasonable
attorneys' fees incurred by the Bank related to the preservation, protection, or enforcement of any
rights of the Bank in such a case. As used in this paragraph, "attorneys' fees" includes the
allocated costs of the Bank's in-house counsel.
8.7 One Agregment. This Agreement and any related security or other agreements
required by this Agreement, collectively:
834300.2 11233-31 9
(a) represent the sum of the understandings and agreements between the Bank
and the Borrower concerning this credit;
(b) replace any prior oral or written agreements between the Bank and the
Borrower concerning this credit; and
(c) are intended by the Bank and the Borrower as the final, complete and
exclusive statement of the terms agreed to by them.
In the event of any conflict between this Agreement and any other agreements required by this
Agreement, this Agreement will prevail.
8.8 Notices. All notices required under this Agreement shall be personally delivered
or sent by first class mail, postage prepaid, or by overnight courier, to the addresses on the
signature page of this Agreement, or sent by facsimile to the fax numbers listed on the signature
page, or to such other addresses as the Bank and the Borrower may specify from time to time in
writing. Notices sent by first class mail shall be deemed delivered on the earlier of actual receipt
or on the fourth business day after deposit in the U.S. mail.
8.9 Headings. Article and paragraph headings are for reference only and shall not
affect the interpretation or meaning of any provisions of this Agreement.
8.10 Counterparts. This Agreement may be executed in as many counterparts as
necessary or convenient, and by the different parties on separate counterparts each of which,
when so executed, shall be deemed an original but all such counterparts shall constitute but one
and the same agreement.
This Agreement is executed as of the date stated at the top of the first page.
834300,2 11233.31 10
EXHIBIT A
Harmers and Merchants Bank -07119106
Credit C m itme t
Borrower: City of Lodi — Electric Department.
Amount: $3,000,000.
Type: Unsecured (Option 1)/Secured (Option 2), Revolving Line of Credit.
Purpose: The Electric Department's short term operating capital needs.
Maturity: June 30, 2007.
Interest Rate: Option 1 - Unsecured: The interest rate will be set at the time of each
advance & be equal to the 30 -day London Interbank Offer Rate (LIBOR)
plus 1.50%. If that rate were set today, it would be 6.88% based on the
current 30 -day LIBOR rate of 5.38% plus 1.50%. The rate for each
advance will be reset every 30 days based on the then 30 -day LIBOR rate
plus 1.50%. Advances will be limited to amounts of $500,000 or greater.
Interest will be calculated on the basis of an actual/360-day year. (Any tax
advantaged cost that can be obtained by the Bank related to this credit
commitment will be passed on to the Borrower in the form of a reduced
interest rate.)
Option 2 — Secured: The interest rate will be set at the time of each
advance & be equal to 1.35% over the F&M rate paid for cash collateral as
defined below ("Collateral"), Interest will be calculated on the basis of an
actual/360-day year. (Any tax advantaged cost that can be obtained by the
Bank related to this credit commitment will be passed on to the Borrower
in the form of a reduced interest rate.)
Pre -Payment
Penalty: There will be no pre -payment penalty.
Fees: None. All outside legal cost to be paid by Borrower. (See condition #7
below.)
Collateral: Optjop I - Unsecured. Option 2 - Secured: City of Lodi cash deposits in
an F&M Bank, segregated & bank controlled account equal to or greater
than the amount drawn under the line of credit.
Guarantors: None.
Other
Conditions: (1) This credit commitment is subject to the City Council approval of a
resolution authorizing the borrowing, repayment & terms of the credit
Page 4 7/19/2006
Harmers and Merchants Bank 07/19/06
commitment as well as authorizing either one of the following to make
draw requests under the line of credit; the City Manager or the Deputy
City Manager.
(2) This credit commitment is subject to the City of Lodi providing an
opinion letter from the City's outside attorney stating the City has the
authority to borrower & repay the credit, and has properly authorized
all the terms & repayment of the credit. The outside attorney is also to
review all the loan documentation & provide an opinion that the
documents are binding & legally enforceable under the laws of the
state of California.
(3) The City of Lodi agrees to provide the 2006 Comprehensive Annual
Financial Report, including the CPA audited financial statements,
within 180 days of FYE.
(4) Within 30 days of each quarter end, the City of Lodi agrees to provide
to the Bank the quarterly bond rating agencies reports submitted to the
Fitch, and Standard & Poor's rating agencies.
(5) Draw requests under the line of credit will be signed by either one of
the following; the City Manager or the Deputy City Manager, and are
to be accompanied by a statement of the use of funds, and the total of
Cash & Marketable Securities held by the Electric Department after
the draw request.
(6) The City of Lodi will maintain all rating agency, bond ratings of a
BBB- or above. Any bond rating of lower than a BBB- will be
considered a default of the line of credit, the Bank will have the right
to terminate all advances under the line of credit, and demand the
outstanding balance of the line of credit be paid immediately.
(7) The City of Lodi agrees to pay the cost of any outside legal council
used by the Bank to review or prepare loan documentation.
You will be required to execute documentation that is in a form and in substance
satisfactory to the Bank, otherwise this credit commitment will expire on August 30,
2006. Subsequent documentation may include terms and conditions that are different
from or in addition to those that are stated in this letter. For example, these terms may
include various warranties, representations and covenants regarding financial conditions.
Any pre-closing conditions (including but not limited to condition #1 & #2 above) stated
in the loan documents would have to be met prior to funding.
l'0111 idr11h;0 1's"c i 7/19/2006
Exhibit B - Form of Promissory Note
Lodi, California
1. For Value Received, the City of Lodi, California ('Borrower") promises to
pay to the order of Farmers and Merchants Bank ("Bank") at its office in Lodi, California, the
principal amount of Dollars ($ ) at the times and in the amounts
specified in the Loan Agreement referred to below. Borrower promises to pay interest on such
unpaid principal amount at the times and at the rates specified in the Loan Agreement
2. This Note is issued under the Loan Agreement between Borrower and
Bank dated July 1, 2006 (the "Loan Agreement"), and is subject, among other things, to
acceleration as provided therein. Capitalized terms defined in the Loan Agreement shall have
the same meaning in this Note.
3. The undersigned officers of the Borrower certify as follows:
(a) The undersigned have authority to execute this Note under
Resolution No. adopted by the Lodi City Council on . Such Resolution is
still in force and has not been modified or amended, except for any amendments which have
been provided to, and are acceptable to, the Bank.
(b) There has been no event of default under the Loan Agreement.
(c) The proceeds of this Note shall be used only for expenditures
approved by the Lodi City Council.
(d) The amount borrowed under this Note, together with all other
amounts previously borrowed by the Borrower during this fiscal year pursuant to Government
Code section 53850 et. seq., does not exceed 85% of the estimated amount of uncollected
Available Funds of the Borrower which will be available for the payment of such indebtedness,
as required by Government Code section 53858.
834300.2 11233.31 B-1
4. To secure the payment of the obligations of the Borrower under this Note,
the Borrower hereby pledges, and grants to the Bank a lien and charge against, the Borrower's
CD Deposit (need more informadon), and all unrestricted revenues of the Borrower, including,
but not limited to, any revenue received from the State of California or the Federal government,
or instrumentality of the foregoing, with respect to projects financed by an advance under under
the Agreement. The lien shall have first priority with respect to the CD Deposit, and the
Borrower shall not create, permit or suffer to exist any other security interest or lien against the
CD Deposit. The term "unrestricted revenues" shall include, but not be limited to, all taxes,
income, revenue, cash receipts, and other money of the Borrower which are generally available
for the payment of current expenses and other obligations of the Borrower. The obligations of
the Borrower under this Note are payable from all taxes, income, revenue, cash receipts and
moneys of the Borrower which are lawfully available for such payments, whether or not such
funds are pledged to the Bank under this paragraph.
5. This Note shall be governed by and construed under the laws of the State
of California
In Witness Whereof, the undersigned has caused this Note to be executed by its
officers thereunto duly authorized.
CITY OF LODI, CALIFORNIA
By:
Title:
By: -
Title:
834300.2 11233.31 B-2
FitchRatings
KNOW VR11R BRISK
Pudic Power/North America
Credit Analysis
Ratings
Security Current
Peviam pate
Clans Rating
Ratf g Changed
$7T6 MMilhon
Electric
System
Certificates of
Participation BBB-
BSB+ 616106
Rating Watch......... __ _...--------._
_-...... Negative
Rating Outlook ...........................................
None
Analysts
Kathy Masterson
y1 415 732-5622
kathy masterson[,fitchratings.c:om
Hirim Canto
-1 212 908-0371
h iran. cantuofitchratings.com
P10file
Lodi's electric utility provides retail electric
service to approximately 27,500 customers in
and around the city of Lodi, which is located
in the San Joaquin Valley of' California, 35
miles south of Sacramento. Revenues by
customer class are composed of residential
(33%) commercial (431%) and industrial (24%)
revenues. Income levels are below those of the
state and national levels.
Key Car ma 9ttawlils
• Improved power supply hedging
program.
• Management implementation of
more frequent reporting and internal
controls.
Key Credit Concerns
• Ability to fund ongoing maintenance
program.
• Limited rate -raising flexibility.
• Continued exposure to natural gas
and power price volatility.
K-40
Public Finance
Lodi, Calif.
Electric Utility
■ Rat'tkilg Radonale
On June 6, 2006, Fitch Ratings downgraded the rating on the city of
Lodi, Calif, electric system's certificates of participation notes to
`BSB—' from `BBB+' and placed the notes on Negative Rating Watch.
The downgrade reflects a significant deterioration of the utility's
projected fiscal -year 2006 (June 30) financial results from levels
indicated to Fitch in March 2006 and concerns regarding the
excentiMWIY thin level of lk uidi3v_at the utility. Absent additional
revenue -raising or cost-cutting efforts, the utility's financial position is
likely to remain under pressure through fiscal -year 2007. At present,
no additional rate increases are planned, and the utility has already
undergone substantial cost-cutting efforts. The Negative Rating Watch
reflects Fitch's view that without additional liquidity to support
ongoing operations and structural balance between the utility's
revenues and expenses, the rating may be further at risk.
The `BBB—' investment-grade rating is currently supported by a shift in
Lodi's power supply strategy, adopted in January 2006 by the city
council, which resulted in more than 95% of the utility's open power
supply position being hedged for the following fiscal year (2007)
compared to 0% in previous years. Further supporting the rating is a
17% rate increase implemented in December 2005. Fiscal -year 2007 will
be the first full fiscal year the utility will benefit from an additional $10
million generated by the rate increase. As a result of the rate increase,
lower purchased power costs and other cost-cutting measures, revenues
in fiscal -year 2007 are expected to be sufficient to meet the utility's
forecasted expenses in fiscal -year 2007, including the general fund
transfer. The rating reflects Fitch's view that Lodi will take the necessary
actions to achieve structural balance and improve its liquidity position.
e Recent Developments
Deterioration in Financial Position In Fiscal -Year 2006
In June 2006, the electric system revised its financial projections for
year-end (June 30) to indicate that the utility may end fiscal -year 2006
with only $1.7 million of available cash, which is approximately
$1.6 million less than indicated in a previous forecast provided to Fitch
in March 2006. The reduction in cash and operating margin in projected
fiscal -year 2006 results primarily from lower than forecasted retail
power sales and an additional $1.6 million in transmission costs.
Management attributes the reduction in revenues to rate elasticity
resulting from the 17% rate increase and customer uncertainty regarding
the size of the increase prior to its implementation. This trend may imply
limited future rate flexibility given the recent increase and the overall
tolerance level of the community. The additional cost increases are
primarily related to an unexpected increase in transmission costs charged
by the California Independent System Operator.
July 11, 2006
www.fitchratings.com
FitchRatimys
KNOW YOUR RISS
As a result, Lodi is currently .projecting to end fiscal -
year 2006 with a loss of $5.7 million after debt
service and transfers, as opposed to a $4 million loss,
which was projected a few months ago. Lodi will use
cash reserves from its rate -stabilization fund as well
as reserves held at the Northern California Power
Agency (NCPA) on behalf of Lodi to meet its
1.1 times (x) rate covenant and make the annual
required transfer payment to the city's general fund
($6 million in 2006). This is expected to leave the
electric system with only $I.7 million in cash
reserves at the end of the year, a level that represents
an exceptionally thin level at I I days cash. Lodi has
relied on cash reserves during four of the past five
years to fund its annual expewes.
0lpoing Liquidity Pressrlre In Fiscal -Year
2007
Due to hedged and lower purchased power costs,
management expects fiscal -year 2007 to result in a
balanced budget. However, little or no increase to
reserve levels is currently expected, _leUWg 1he-
utility with limited li uidi o tions in the event of
any unfavorable cost uncertainty or unforeseen
events. Eilo views the aaauisWaaL
ligWcity as a key step to maintaining the current
Latae. —
Increased Pressure from Debt Portfolio
Lodi's debt portfolio creates additional ongoing cost
pressure. Lodi's variable-rate debt exposure of
$42 million represents a large portion (45%) of the
utility's capital structure, and dwindling cash reserves
provide a limited hedge against rising interest rates.
Liquidity pressure could also arise from the utility's
swap portfolio, through the requirements for
collateral posting or if the utility receives below -
investment -grade ratings from either Fitch or
Standard & Poor's, a termination of the swaps would
be triggered, which may require a termination
payment from Lodi to the counterparty depending on
the fair market value of the swap.
Implementation of Powar-Hedging Program
Lodi adopted a new power supply strategy in January
2006 to hedge a greater portion of its open position.
Since January, Lodi hedged more than 95% of its
power supply for fiscal -year 2007. Lodi expects to
hedge most of its energy costs for fiscal -year 2008
over the next year. Fitch believes that this strategy
should introduce greater cost stability than past
energy procurement practices, although cost volatility
will not be entirely eliminated.
Lodi, Calif.
Public Finance
Concern Regarding Political Climate
In Lodi, a successful citizen initiative may prompt the
roll -back of a city council -approved water rate
increase that went into effect on Jan. 1, 2006.
Measure H has been placed on the Nov. 7, 2006
ballot, and voters will decide whether or not to
maintain the water rate increase, which was put in
place to pay for the required clean-up of
contaminated groundwater. Although water revenues
do not support the electric certificates, Fitch views
this development as a slight credit concern, as it may
indicate a generally resistant attitude in the
community toward electric rate increases that could
be necessary in the future.
■ Power Supply
Lodi does not own any generation assets but receives
power as part of its membership in the joint -action
agency, NCPA. Fitch rates two of NCPA's projects,
the geothermal and hydroelectric projects, at `A' with
Stable Rating Outlooks. Fitch does not rate the
combustion turbine project. NCPA's geothermal and
hydroelectric project ratings are unaffected by the
Lodi downgrade due to the strength of the underlying
take -or -pay power supply agreements that require a
25% step-up in the event of a participant default and
the favorable project economics of both projects that
provide low-cost renewable power.
Historically, from April through September, Lodi
lacked 40%50% of its needs, and during October
through March, the system lacked 800/&--90% of its
needs. The electric system's net short power position
resulted from the city's load growth, the 2002
termination of a power purchase contract with
Calpine Corp., a long-term seasonal power exchange
agreement with Seattle City Light (expiring in 2014)
and a power supply strategy that intentionally kept
Lodi positioned to purchase its open position in the
short-term market since it was expected that it would
benefit in a deregulated California market, although
this did not materialize.
Recognizing the risk of its power supply strategy as
well as the utility's deteriorating financial profile, the
city and the electric system took steps in 2006 to
address its above-average power supply risk. These
steps included:
• Creating a risk oversight committee and a new
risk -management policy that among many
benefits sets hedging goals, counterparty credit
itc.tis
lt"w VOUR RIA
standards and a transparent process for risk
review.
Gaining the authorizatiop from the city council
to procure power beyond the city's current fiscal
year.
Modifying its power supply strategy to minimize
cost variability.
■ Ngmcwnwetl6ovaitnance
A five -member city council governs the electric
utility. City council members are elected citywide for
s ered four-year terms. The utility department is
ur*r the direction of the electric utility director, who
is oppointed by the city mWager. In the past two
yews, management of the *y and the utility have
ur*rgone significant char*es with a new city
m*ager, Bance director, and utility general
m>ikager.
■ Res
Lodi's electro rates (which do not include a fuel-
arstnieent tsechanism) are set by the city council.
To meet rising energy costs, in November, 2005, the
city council passed a 17% We increase raised the
average rates to 14 cents/kilowatt-hour (kwh) from
11:8 cents/kwh. It is importtlint to note that the rate
inwease was heavily weighoed to Lodi's industrial
cu*omers in order to move toward greater cost
recovery in each customer class. In the past, the
elatric system did not chargo the full cost of service
to its industrial customers.
After accounting for the recent rate adjustment,
Lodi's electric retail rates remain in line with
neighboring investor-owned utility, Pacific Gas &
E*ctric (PG&E). Lodi's resWential rates are slightly
hiter than PG&E rates, cootmercial rates are about
even and industrial rates are lower. PG&E's rates are
expected to increase over next year as it continues to
parts fuel cost increases to its customers.
■ Sorvictl Arae and $ustomme
Fitch views the Lodi service area and customers as
credit neutral. Lodi is located in California's Central
Valley, approximately 90 miles east of San
Francisco. The regional economy is based primarily
in agricultural products, in poticular, the wine grape
industry. Income levels are 721/o and 78% below state
and U.S. levels, although unemployment and poverty
levels are comparable to state and national averages.
Population and energy steles growth has been
moderate, averaging 1.6% and 3% over the past five
years.
Public Finance
Lodi serves the entire city, or approximately 27,500
customers. Revenues by customer class are diverse
and consist of residential (331/6) commercial (43%)
and industrial (24%) revenues. Lodi has minimal
customer concentration with the 10 largest customers
representing 11% of revenue, with the largest
General Mills, Inc. processing plant comprising 8%
of energy sales and 3.4% of revenues. Fitch also
notes that the largest utility customers have been part
of the community for several decades.
■ Securllty Fewturas
Rivsnw P#se1Re
Net revenues of electric system.
Rats Cove and
Electric system must set rates to equal l.lox annual
debt service. Net revenues include available funds
authorized for the electric fund, such as transfers
from the rate -stabilization fiord.
d--ivrvim Rare Fuad
Lessor of 10% of certificate of participation
proceeds, maximum annual debt service or 1.25x
average annual debt service.
AdOHn Bawds. Test
Additional parity obligations are permitted if net
revenues in the 12 consecutive months of the
previous 18 equal 1.10x maximum annual debt
service (MADS) for exiting and proposed debt or an
engineer's report certifies that adjusted net revenues
for the next five years equal 1.1 Ox MADS on existing
and proposed debt.
iltlitot C=W &mW to a i hnr: Rarthn
Acllbm?
• Realistic budget adjustments made to fully
recover costs and improve the utility's
finances.
• Demonstrated and sustainable trend of
positive operating results.
LV cnex&cted cost increases or capital needs
that result in additional pressure on Lodi's
financial position.
Lodi, Calif.
41.
FltchRatl - gs
KNOW YOUR RISK
Finalm gal Summary -- Lodi Electric System
(SMiL, Fiscal Year Ended June 30)
Gash Flaw
Debt -Service Coverage (x)•
A usted Debt -Service Coverage Including General Fund TransfeP`
DebtlFunds Avallable for Debt Service
L 14uiglky
Days Cashtrl.iquidity On Handl•
LaferAW
Equity/Capitalization (�)
011ier (%)
Goneral Fund Tra nsfer/Revenues
Gross Variabte•Rate Debt/Capitalizi tion
Variable -Rate Exposure/Capitalizabon$
1114leepd B41mme-8heet Items
Total Operating Revenues
Total Operating Expenses
Operating Income
AdIulstment to Operating Income for Debt -Service Coverage
Funds Available for Debt Service
GCneral Fund Transfer
Total Annual Debt Service
Unrestricted Funds
Restricted Funds
Total Cash
Total Debt
Equity and/or Retained Earnings
Public Finance
2005
2004
2003
2002
1.10
1.66
1.83
(6.93)
0.14
0.92
1.00
(8.07)
11.4
6.4
6.9
(3.2)
37
49
7
14
14.4
15.7
17.1
10,4
11.2
11.1
11.6
5.8
50.9
46.7
44.9
0.0
45.7
42.0
40.4
69.6
53,908
52,899
48,872
47,267
54,163
52,882
48,558
64,901
(255)
217
315
(17,635)
7,178
12,897
12,274
778
8,923
1$,114
12,589
(16,856)
6,059
5,865
5,672
2,758
6,274
7,880
8,897
2,431
41897
6,347
772
2,423
11,873
16,200
18,356
22,962
16,770
22,547
19,127
25,385
78,664
84,338
86,267
54,060
13,275
15,694
17,783
6,295
"Does not include transfers from rat"tabilization fund and other liquidity sources. "General fund transfer included as operating expense. toey
cash calculated based on unrestricted funds. $Includes interest rate swaps. Source: City of Lodi comprehensive annual financial reports.
Copyright C 2306 by Fitch, Inc, Fitch Ratings Lid and its subsidiaries. One Stats Street Phim NY, NY 10004,
Tekpkone: 1-800-753-4824, (212) 9D&4500. rpt: (212) 4804433. Repeaductim or retrutsmission in whole or in tart is prahibied except by pemtissim All rights reserved. All of the
mfpmation corrimped herein is based on inforrgmon obtained from issuers, other obligors, underwriters, and other sources which Fitch believes to be reliable Fitch does not audit or verify the
rni6 or accuracy of any such information_ As a result, the infomtation in this report is provided "m is" without any represu ation or warmly of any kind A Fitch rating is an opinion as to the
crrdlieworthiness of a security. 71he rating does tM address the risk of loss due to risks other than credit risk, Linkers such risk is specifically mentioned Fitch is not engaged in the offer or sale of
any security. A report providing a Fitch rating is neither a prospectus nor a substitute for the infomtarim assembled, verified and presented to investors by the issuer and its agents in oonnecoon
mth the sale of the securities. Ratings may he charged, suspended, or withdrawn at anytime for any reason in the We discretion of Fitch_ Fitch does not provide investment advice of any sort.
Ratings are not a recommendation to bury, sell, or hold any security, Ratings do not comment w the adequacy of market price, the suitability of any security for a particular investor, or the tax-
exerept mune or ta,eability of payments made m respect to any security. Fitch receives fees from issues, insurers, guaranmus, other obligors, and underwriters for rating securities. Such fees
genially very from US$1,000 to USS750,000 (err the applicable cu rnencv equivalent) per issue, In certain cases, Fitch will rate all or a number of issues issuedby a particular issuer, or insured or
guaranteed by a particular insurer or guarantor, for a single annual fee Such fees are expected to vary from usVo,040 in U$$1,500,000 (or tine applicable currency equivalent). 11te assignment,
Publication. or dissemination of a rating by Fitch shat[ not conslitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the LInited States
securities laws, the Financial Services and Marl" Act of 2000 of Creat Britain, or the securities laws of my particular juesdiction. Due to the relative efficiency of electronic publishing and
distribution, Fitch research may be available to electronic subs- hers up to three days eadier than to print subscriber.
Lodi, Calif.
RESOLUTION NO. 2006-142
A RESOLUTION OF THE LODI CITY COUNCIL AUTHORIZING AND
APPROVING THE EXECUTION AND DELIVERY OF A LOAN
AGREEMENT TO FARMERS & MERCHANTS BANK OF CENTRAL
CALWORNiA AND THE BORROWING OF FUNDS THEREUNDER
WHEREAS, Farmers & Merchants Bank of Central California (the "Bank") has
offered to provide a revolving line of credit to the City of Lodi (the "City") in the amount of
three million dollars ($3,000,000) to be available through June 30, 2007, pursuant to a
loan agreement between the City and the Bank (the "Loan Agreement") which is
altached hereto and incorporated herein by reference; and
WHEREAS, Government Code Sections 53850 -t M. authorize the City to
barrow money by the lssuance of temporary notes under the Loan Agreement; and
WHEREAS, in order to make best use of the credit facility provided by the Bank,
it is desirable to delegate to the Deputy City Manager the authority to make borrowings
under the line of credit.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Lodi as
follows:
1. R cita . The City Council hereby finds and determines that the foregoing
recitals are true and correct.
2. Apgro*) of Doan Agreement. The proposed form of the Loan Agreement
between the Bank and the City, including the form of promissory notes to be delivered by
the City thereunder, as presented to this meeting, is hereby approved in substantially
final form. The City Manager of the City is hereby authorized, for and on behalf of the
City Council, to execute and deliver to the Bank the Loan Agreement in substantially
said form, with such changes therein as such officer, with the advice of the City Attorney,
may require or approve, such approval to be conclusively evidenced by the execution
and delivery thereof.
3. DeleggSion of Authority to Make ,Borrowings Under Loan Agreement. The
City Council hereby authorizes the Deputy City Manager of the City, for and on behalf of
the City Council, to execute and deliver to the Bank promissory notes representing
borrowings under the Loan Agreement; provided that such additional borrowings are
made in conformance with the terms, conditions, and limitations of the Loan Agreement
and the temporary borrowing provisions of Government Code Sections 53850 et sec.., all
as determined by the Deputy City Manager. Such promissory notes shall be issued in
substantially the form attached to the Loan Agreement as Exhibit B, with interest
thereon, determined in accordance with the provisions of the Loan Agreement, with such
changes therein as such officer, with the advice of the City Attorney, may require or
approve, such approval to be conclusively evidenced by the execution and delivery
thereof.
4. Authorigation_ to Execute Dgcuments. City officials and staff are hereby
authorized and directed, jointly and severally, to do any and all things and to execute
and deliver any and all documents that they may deem necessary or advisable in order
to proceed with the borrowings authorized hereby and otherwise carry out, give effect to,
and comply with the terms and intent of this Resolution. Such actions already taken by
such officials and staff are hereby ratified, confirmed, and approved.
Dated: July 19, 2006
I hereby certify that Resolution No. 2006-142 was passed and adopted by the
City Council of the City of Lodi in a regular meeting held July 19, 2006, by the following
vote:
AYES: COUNCIL MEMBERS — Beckman, Hansen, Johnson,
and Mayor Hitchcock
NOES: COUNCIL MEMBERS — Mounce
ABSENT: COUNCIL MEMBERS — None
ABSTAIN: COUNCIL MEMBERS — None
44/NIFE PERRIN
Interim City Clerk
2006-142
LOAN AGREEMENT
This Agreement dated as of July 1, 2005, is between Farmers and Merchants
Bank (the `Bank") and the City of Lodi, California (the "Borrower").
1. LINE OF CREDIT AMOUNT AND TERMS
1.1 Line of Credit Amount.
(a) During the availability period described below, the Bank will provide a
line of credit to the Borrower. The amount of the line of credit (the "Commitment") is Three
Million Dollars ($3,000,0170).
(b) This is a revolving line of credit. During the availability period, the
Borrower may repay principal amounts and reborrow them.
1.2 Avaiiabili Pernod. The line of credit is available between the date of this
Agreement and Tune 34, 2007 (the "Expiration Date") unless the Borrower is in default.
1.3 Interest Rite.
(a) The interest rate amount and calculation is described in Exhibit A attached
hereto and incorporated herein by reference.
1.4 Reoaymert Terms.
(a) The Borrower will pay interest on the first day of each month until
payment in full of any principal outstanding under this line of credit.
(b) Each advance made under this line of credit will be repaid in full on the
last day of the fiscal year of the Borrower during which the advance is made.
(c) There shall be no prepayment penalty.
1.5 Maximuin Interest Rate. In the event that the interest rate which would be
applicable to any advance under any of the terms of this Agreement would exceed any maximum
interest rate imposed by law, then the interest rate applicable to such advance shall be reduced to
such maximum interest rate; provided, however, that upon demand by the Bank, the Borrower
shall repay to the Bank all advances to which a reduction in interest rate under this paragraph
applies.
1.6 Pledge of Funds. To secure the payment of the obligations of the Borrower under
this Agreement, the Borrower hereby pledges, and grants to the Bank a lien and charge against, a
certificate of deposit ("CD Deposit") placed with the Bank in the amount of $3,000,000 and all
534300.2 11233.31 1
unrestricted revenues of the Borrower, including, but not Iimited to, any revenue received from
the State of California or the Federal government, or instrumentality of the foregoing, with
respect to projects financed by an advance under this line of credit. The lien shall have first
priority with respect to the CD Deposit, and the Borrower shall not create, permit or suffer to
exist any other security interest or lien against the CD Fund. The term "unrestricted revenues"
shall include, but not be limited to, all taxes, income, revenue, cash receipts, and other monies of
the Borrower which are generally available for the payment of current expenses and other
obligations of the Borrower. The obligations of the Borrower under this Agreement are payable
from all taxes, income, revenue, cash receipts and monies of the Borrower which are lawfully
available for such payments ("Available Funds"), whether or not such funds are pledged to the
Bank under this paragraph.
1.7 Mandatory Prepayment. The Borrower shall, on demand by the Bank,
immediately prepay all amounts outstanding under this Agreement, and no further advances shall
be available under this Agreement, upon the occurrence of any of the following:
(a) Any judgments or arbitration awards are entered against the Borrower
(except for judgments or arbitration awards which have been stayed pending appeal), or the
Borrower enters into any settlement agreements with respect to any litigation or arbitration, in an
aggregate amount of One Million Dollars ($1,000,000) or more in excess of any insurance
coverage. The Borrower will not be obligated to prepay the credit if, before the expiration of
thirty (30) days after the entry of the judgment or arbitration award, the Borrower makes
arrangements for the payment of the judgment or arbitration award which are satisfactory to the
Bank in its discretion; provided, however, that the Bank will not be obligated to extend any
additional credit to the Borrower during the thirty (30) day period.
(b) Any government authority takes action that the Bank believes materially
adversely affects the Borrower's financial condition or ability to repay.
(c) A material adverse change occurs in the Borrower's financial condition,
properties or prospects, or ability to repay the loan.
2. FEES AND EXPENSES
2.1 Expenses. The Borrower agrees to reimburse the Bank for any expenses it incurs
in the preparation of this Agreement and any agreement or instrument required by this
Agreement. Expenses include, but are not limited to, reasonable attorneys' fees, including any
allocated costs of the Bank's in-house counsel; provided that such attorneys' fees shall not exceed
Two Thousand Five Hundred Dollars ($2,500).
3. DISBURSEMENTS, PAYMENTS AND COSTS
3.1 Requests for Credit. Each request for an extension of credit will be made in
writing in a manner acceptable to the Bank, or by another means acceptable to the Bank.
3.2 Disbursements and Payments. Each disbursement by the Bank and each payment
834300.2 11233.31 2
by the Borrower will be:
(a) made at the Bank's branch (or other location) selected by the Bank from
time to time;
(b) made in immediately available funds, or such other type of funds selected
by the Bank;
(c) evidenced by records kept by the Bank. In addition, the Bank may, at its
discretion, require the Borrower to sign one or more promissory notes.
3.3 Telephone and Telefax Authorization.
(a) The Bank may honor telephone or telefax instructions for repayments or
for the designation of fixed interest rates given by any one of the individuals authorized to sign
loan agreements on behalf of the Borrower, or any other individual designated by any one of
such authorized signers. In addition, the Bank may make advances to the Borrower on the basis
of telefaxed copies of the duly executed documents required by paragraph 4.3 below; the
Borrower shall promptly deliver to the Bank the executed originals of such documents.
(b) Advances will be deposited in and repayments will be withdrawn from the
Borrower's account number , or such other of the Borrower's accounts with the
Bank as designated in writing by the Borrower.
(c) The Borrower will provide written confirmation to the Bank of any
telephone or telefax instructions within 5 days. If there is a discrepancy and the Bank has
already acted on the instructions, the telephone or telefax instructions will prevail over the
written confirmation.
(d) The Borrower indemnifies and excuses the Bank (including its officers,
employees, and agents) from all liability, loss, and costs in connection with any act resulting
from telephone or telefax instructions it reasonably believes are made by any individual
authorized by the Borrower to give such instructions. This indemnity and excuse will survive
this Agreement's termination.
3.4 Direct Debit.
(a) The Borrower agrees that interest and principal payments and any fees
will be deducted automatically on the due date from the Borrower's account number , or
such other of the Borrower's accounts with the Bank as designated in writing by the Borrower.
(b) The Bank will debit the account on the dates the payments become due. If
a due date does not fail on a banking day, the Bank will debit the account on the first banking
day following the due date.
(c) The Borrower will maintain sufficient funds in the account on the dates
83436Q.2 11233.31 3
the Bank enters debits authorized by this Agreement. If there are insufficient funds in the
account on the date the Bank enters any debit authorized by this Agreement, the debit will be
reversed.
3.5 Banking Da s. Unless otherwise provided in this Agreement, a banking day is a
day other than a Saturday or a Sunday on which the Bank is open for business in California. All
payments and disbursements which would be due on a day which is not a banking day will be
due on the next banking day. All payments received on a day which is not a banking day will be
applied to the credit on the next banking day.
3.6 Additional Costs. The Borrower will pay the Bank for the Bank's costs or losses
arising from any statute or regulation, or any request or requirement of a regulatory agency
which is applicable to all national banks or a class of all national banks. The costs and losses
will be allocated to the loan in a manner determined by the Bank, using any reasonable method.
The costs will be paid by the Borrower within 10 days after the last day of each quarter in
arrears. The Bank shall provide to the Borrower at least 30 days' written notice of its demand for
compensation under this paragraph, and shall describe in reasonable detail the basis for the
demand and the method used to calculate the amount demanded. The costs include the
following:
(a) any reserve or deposit requirements; and
(b) any capital requirements relating to the Bank's assets and commitments for
credit.
3.7 Interest Callculation. Except as otherwise stated in this Agreement, all interest and
fees, if any, will be computed on the basis of a 360 -day year and the actual number of days
elapsed. This results in more interest or a higher fee than if a 365 -day year is used.
3.8 Interest on Late Payments. At the Bank's sole option in each instance, any
amount not paid when due under this Agreement (including interest) shall bear interest from the
due date at the Bank's Base Rate (adjusted, as applicable, as provided in paragraph 1.6 above).
This may result in compounding of interest.
3.9 Default R#te. Upon the occurrence and during the continuation of any default
under this Agreement, advances under this Agreement will at the option of the Bank bear interest
at a rate per annum which is 2.0 percentage points higher than the rate of interest otherwise
provided under this Agreement. This will not constitute a waiver of any default.
4. CONDITIONS
The Bank must receive the following items, in form and content acceptable to the Bank,
before it is required to extend any credit to the Borrower under this Agreement:
4.1 Authorizations. A Resolution of the City Council of the Borrower authorizing the
execution of this Agreement.
834300.2 11233.31 4
4.2 U al Qpi�ton. A written opinion from the Borrower's legal counsel, covering the
authorization of the Borrower to enter into this Agreement and to pledge the assets as required by
paragraph 1.6 above, and that the Agreement and such pledge are legal, binding and enforceable
against the Borrower, and such other matters as the Bank may reasonably require. The legal
counsel and the terms of the opinion must be acceptable to the Bank.
4.3 Conditiontto Each Advance. At least one business day before each extension of
credit, including the first:
(a) A promissory note evidencing the advance, executed by the Borrower,
substantially in the form attached as Exhibit B;
(b) A copy of the resolution of the City Council authorizing the advance, if
not previously provided to the Bank;
(c) An opinion from the Borrower's counsel stating that the advance has been
duly authorized and is in compliance with all applicable legal requirements, and such other
matters as the Bank may reasonably require. The legal counsel and the terms of the opinion must
be acceptable to the Bank.
4.4 Other Items. Any other items that the Bank reasonably requires.
5. REPRESENTATIONS AND WARRANTIES
When the Borrower signs this Agreement, and until the Bank is repaid in full, the
Borrower makes the following representations and warranties. Each request for an extension of
credit constitutes a renewed representation:
5.1 Authoriz*on. This Agreement, and any instrument or agreement required
hereunder, are within the Borrower's powers and have been duly authorized.
5.2 Enforceable A eement. This Agreement is a legal, valid and binding agreement
of the Borrower, enforceable against the Borrower in accordance with its terms, and any
inMment or agreement required hereunder, when executed and delivered, will be similarly
legal, valid, binding and enforceable, subject, in each case, to bankruptcy, insolvency, and other
laws that affect creditors'rights generally.
5.3 No Conflicts. This Agreement does not breach any agreement by which the
Borrower is bound, except for agreements which do not involve payments by the Borrower in
excess of $100,000 in any one year, and this Agreement does not violate any law or regulation.
5.4 Financial Information. All financial and other information that has been or will
be supplied to the Bank, including the Borrower's financial statement dated as of June 30, 2006,
is:
(a) sufficiently complete to give the Bank accurate knowledge of the
8343(10.2 11233.31
Borrower's financial condition.
(b) in compliance with all government regulations that apply.
Since the date of the financial statement specified above, there has been no material adverse
change in the assets or the financial condition of the Borrower.
5.5 Lawsuits. There is no lawsuit, tax claim or other dispute pending or threatened
against the Borrower which, if lost, would impair the Borrower's financial condition or ability to
repay the loan, except as have been disclosed in writing to the Bank.
5.6 Other Obligations. The Borrower is not in default on any obligation for borrowed
money, any purchase money obligation or any other material lease, commitment, contract,
instrument or obligation; except for agreements which do not involve payments by the Borrower
in excess of $100,000 in any one year.
5.7 No Event of Default. There is no event which is, or with notice or lapse of time
or both would be, a default under this Agreement.
5.8. Bank- u ified Loans. If the advance will be Bank -Qualified, Borrower
represents that:
(a) Borrower has no reasonable anticipation of incurring more than
$10,000,000 in tax-exempt obligations, other than obligations described in internal Revenue
Code Section 265 (b)(3)(c)(ii), in the calendar year in which the advance is made; and
(b) Borrower will not designate more than $1.0,000,000 of obligations as
Bank -Qualified during the calendar year in which the advance is made.
6. COVENANTS
The Borrower agrees, so long as credit is available under this Agreement and until the
Bank is repaid in full:
6.1 Use of PrMeeds. To use the proceeds of the credit only for purposes authorized
by the Lodi City Council.
6.2 Financial Information. To provide the following financial information and
statements and such additional information as requested by the Bank from time to time:
(a) Within 30 days of the date when completed, copies of the Borrower's
annual financial statements, certified and dated by an authorized financial officer of the
Borrower. These financial statements must be audited (with an unqualified opinion) by a
Certified Public Accountant ("CPA") acceptable to the Bank.
(b) Within 30 days of adoption by the Borrower, a copy of the Borrower's
834300.2 11233.31 6
buds, which shall be a balanced budget.
(c) Within 30 days after each quarter end, a report of the Borrower's Available
]Funds in the (to be determined) Fund. This report shall include a summary of how the funds are
invemed.
6.3 Re rued.
6.4 Limitation on indebtedness. Not to have outstanding or incur indebtedness in
excess of any applicable statutory maximum. In particular, the amount borrowed by the
Borrower in any fiscal year pursuant to Government Code section 53850 et. seq. shall not exceed
85% of the estimated amount of the then uncollected Available Funds of the Borrower which
will be available for the payment of such indebtedness, as required by Govemment Code section
53858.
6.5 Other Liens. Not to create, assume, or allow any security interest or lien
(including judicial liens) on the Borrower's CD Deposit, except the security interest in favor of
the Bank.
6.6 Notices to Bank. To promptly notify the Bank in writing of:
(a) any lawsuit against the Borrower in an amount of One Million Dollars
($1,600,000) or more.
(b) any failure to comply with this Agreement.
(c) any material adverse change in the Borrower's financial condition or
operations.
(d) any additional indebtedness or liens incurred by the Borrower after the
date of this Agreement.
(e) any change in the Borrower's investment policy.
(f) any actual contingent liabilities of the Borrower and any such information
or representations.
6.7 Books and -Records. To maintain adequate books and records.
6.8 Au 'ts. To allow the Bank and its agents to examine, audit and make copies of
books and records at any reasonable time for any reasonable purpose related to this Agreement.
If any of the Borrower's books or records are in the possession of a third party, the Borrower
authorizes that third party to permit the Bank or its agents to have access to perform audits and to
respond to the Bank's requests for information concerning such books and records.
6.9 Com lian a with Laws. To comply with the laws, regulations, and orders of any
834300.2 11233.31 7
government body with authority over the Borrower.
6.10 Perfection of Lens. To help the Bank perfect and protect its security interests and
liens, and reimburse it for related costs it incurs to protect its security interests and liens.
6.11 Cooperation. To take any action requested by the Bank to carry out the intent of
this Agreement.
6.12 Insurance. To maintain insurance as is usual for the Borrower.
7. DEFAULT
If any of the following events occur, the Bank may do one or more of the following:
declare the Borrower in default, stop making any additional credit available to the Borrower, and
require the Borrower to repay its entire debt immediately and without prior notice. If an event of
default occurs under the paragraph entitled "Bankruptcy," below, with respect to the Borrower,
then the entire debt outstanding under this Agreement will automatically be due immediately.
7.1 Failure to PqY. The Borrower fails to make a payment under this Agreement
within 7 days after the date when due.
7.2 Lien Priority. The Bank fails to have an enforceable lien on or security interest in
any property given as security for this loan, with the priority required by this Agreement.
7.3 False Info ation. The Borrower has given the Bank false or misleading
information or representation.
7.4 Bankruptcy. The Borrower files a bankruptcy petition, a bankruptcy petition is
filed against the Borrower, or the Borrower makes a general assignment for the benefit of
creditors,
7.5 Receivers. A receiver or similar official is appointed for the Borrower.
7.6 Cross -defer. Any default occurs under any agreement in connection with any
credit the Borrower has obtained from anyone else or which the Borrower has guaranteed in the
amount of One Million Dollars ($1,000,000) or more in the aggregate.
7.7 Other Bank Agreements. The Borrower falls to meet the conditions of, or fails to
perform any obligation under any other agreement the Borrower has with the Bank or any
affiliate of the Bank. If, in the Bank's opinion, the breach is capable of being remedied, the
breach will not be considered an event of default under this Agreement for a period of thirty (30)
days after the date on which the Bank gives written notice of the breach to the Borrower,
provided, however, that the Bank will not be obligated to extend any additional credit to the
Borrower during that period.
834300.2 11233-31 8
7.8 Other BrejGh Under Agreement. The Borrower fails to meet the conditions of, or
fails to perform any obligation under, any term of this Agreement not specifically referred to in
this Article. If, in the Bank's opinion, the breach is capable of being remedied, the breach will
not be considered an event of default under this Agreement for a period of thirty (30) days after
the date on which the Bank gives written notice of the breach to the Borrower; provided,
however, that the Bank will not be obligated to extend any additional credit to the Borrower
during that period.
8. ENFORCING THIS AGREEMENT; MISCELLANEOUS
8.1 GAAP. Except as otherwise stated in this Agreement, all financial information
provided to the Bank and all financial covenants will be made under generally accepted
accounting principles, consistently applied.
8.2 California Law. This Agreement is governed by California law.
8.3 Successqu and Assigns. This Agreement is binding on the Borrower's and the
Bank's successors and assignees. The Borrower agrees that it may not assign this Agreement
without the Bank's prior consent. The Bank may sell participations in or assign this loan, and
may exchange financial information about the Borrower with actual or potential participants or
assignees. If a participation is sold or the loan is assigned, the purchaser will have the right of
set-off against the Borrower.
8A Reserved.
8.5 Severabill y; Waivers. If any part of this Agreement is not enforceable, the rest of
the Agreement may be enforced. The Bank retains all rights, even if it ]:Hakes a loan after
default. If the Bank waives a default, it may enforce a later default. Any consent or waiver
under this Agreement must be in writing.
8.6 Attomeys' Fees. The Borrower shall reimburse the Bank for any reasonable costs
and attorneys' fees incurred by the Bank in connection with the enforcement or preservation of
any rights or remedies under this Agreement and any other documents executed in connection
with this Agreement, and including any amendment, waiver, "workout" or restructuring under
this Agreement. In the event of a lawsuit or arbitration proceeding, the prevailing party is
entitled to recover costs and reasonable attorneys' fees incurred in connection with the lawsuit or
arbitration proceeding, as determined by the court or arbitrator. In the event that any case is
commenced by or against the Borrower under the Bankruptcy Code (Title 11, United States
Code) or any similar or successor statute, the Bank is entitled to recover costs and reasonable
attorneys' fees incurred by the Bank related to the preservation, protection, or enforcement of any
rights of the Bank in such a case. As used in this paragraph, "attorneys' fees" includes the
allocated costs of the Bank's in-house counsel.
8.7 One Agreement. This Agreement and any related security or other agreements
required by this Agreement, collectively:
834300.2 11233.31 9
(a) represent the sum of the understandings and agreements between the Bank
and the Borrower concerning this credit;
(b) replace any prior oral or written agreements between the Bank and the
Borrower concerning this credit; and
(c) are intended by the Bank and the Borrower as the final, complete and
exclusive statement of the terms agreed to by them.
In the event of any conflict between this Agreement and any other agreements required by this
Agreement, this Agreement will prevail.
8.8 Notices. All notices required under this Agreement shall be personally delivered
or sent by first class mart, postage prepaid, or by overnight courier, to the addresses on the
signature page of this Agreement, or sent by facsimile to the fax numbers listed on the signature
page, or to such other addresses as the Bank and the Borrower may specify from time to time in
writing. Notices sent by first class mail shall be deemed delivered on the earlier of actual receipt
or on the fourth business day after deposit in the U.S. mail.
8.9 Headings. Article and paragraph headings are for reference only and shall not
affect the interpretation or meaning of any provisions of this Agreement.
8.14 Counterparts. This Agreement may be executed in as many counterparts as
necessary or convenient, and by the different parties on separate counterparts each of which,
when so executed; shall be deemed an original but all such counterparts shall constitute but one
and the same agreement.
This Agreement is executed as of the date stated at the top of the first page.
834300111233.31 10
EXHIBIT A
Farmers and Merchapts Bank 07/19/06
g& Com �e1 91
Borrower: City of Lodi — Electric Department.
A,nount: $3,000,000.
Type: Unsecured (Option 1)/Secured (Option 2), Revolving Line of Credit.
Purpose: The Electric Department's short term operating capital needs.
Maturity: June 30,-2007.
Interest Rate: Option I - Unsecured: The interest rate will be set at the time of each
advance & be equal to the 30 -day London Interbank Offer Rate (LIBOR)
plus 1.50%. If that rate were set today, it would be 6.88% based on the
current 30 -day LIBOR rate of 5.38% plus 1.50%. The rate for each
advance will be reset every 30 days based on the then 30 -day LIBOR rate
plus 1.50%. Advances will be limited to amounts of 5500,000 or greater.
Interest will be calculated on the basis of an actual/360-day year. (Any tax
advantaged cost that can be obtained by the Bank related to this credit
commitment will be passed on to the Borrower in the form of a reduced
interest rate.)
Option 2 — Secured: The interest rate will be set at the time of each
advance & be equal to 1.35% over the F&M rate paid for cash collateral as
defined below ("Collateral"). Interest will be calculated on the basis of an
actual/360-day year. (Any tax advantaged cost that can be obtained by the
Bank related to this credit commitment will be passed on to the Borrower
in the form of a reduced interest rate.)
Pre -Payment
Penalty: There will be no pre -payment penalty.
Fees: None. All outside legal cost to be paid by Borrower. (See condition #7
below.)
Collateral: Option - Unsecured. Option 2 - Secured: City of Lodi cash deposits in
an F&M Bank, segregated & bank controlled account equal to or greater
than the amount drawn under the line of credit.
Guarantors: None.
Other
Conditions: (1) This credit commitment is subject to the City Council approval of a
resolution authorizing the borrowing, repayment & terms of the credit
Colifidential N.ee 4 7/19/2006
Farmers and Merch is Bank 07/19/06
commitment as well as authorizing either one of the following to make
draw requests under the line of credit; the City Manager or the Deputy
City Manager.
(2) This credit commitment is subject to the City of Lodi providing an
opinion letter from the City's outside attorney stating the City has the
authority to borrower & repay the credit, and has properly authorized
all the terms & repayment of the credit. The outside attorney is also to
review all the loan documentation & provide an opinion that the
documents are binding & legally enforceable under the laws of the
state of California.
(3) The City of Lodi agrees to provide the 2006 Comprehensive Annual
Financial Report, including the CPA audited financial statements,
within 180 days of FYE.
(4) Within 30 days of each quarter end, the City of Lodi agrees to provide
to the Bank the quarterly bond rating agencies reports submitted to the
Fitch, and Standard & Poor's rating agencies.
(5) Draw requests under the line of credit will be signed by either one of
the following; the City Manager or the Deputy City Manager, and are
to be accompanied by a statement of the use of funds, and the total of
Cash & Marketable Securities held by the Electric Department after
the draw request.
(6) The City of Lodi will maintain all rating agency, bond ratings of a
BBB- or above. Any bond rating of lower than a BBB- will be
considered a default of the line of credit, the Bank will have the right
to terminate all advances under the line of credit, and demand the
outstanding balance of the line of credit be paid immediately.
(7) The City of Lodi agrees to pay the cost of any outside legal council
used by the Bank to review or prepare loan documentation.
You will be required to execute documentation that is in a form and in substance
satisfactory to the Bank, otherwise this credit commitment will expire on August 30,
2006. Subsequent documentation may include terms and conditions that are different
from or in addition to those that are stated in this letter. For example, these terms may
include various warranties, representations and covenants regarding financial conditions.
Any pre-closing conditions (including but not limited to condition #1 & #2 above) stated
in the loan documents would have to be met prior to funding.
Confidential Page 5 7/19/2006
Exhibit B - Form of Promissory Note
$ Lodi, California
1. For Value Received, the City of Lodi, California ("Borrower") promises to
pay to the order of Farrnars and Merchants Bank ('Bank") at its office in Lodi, California, the
principal amount of Dollars ($ ) at the times and in the amounts
specified in the Loan Agreement referred to below. Borrower promises to pay interest on such
unpaid principal amount at the times and at the rates specified in the Loan Agreement
2. This Note is issued under the Loan Agreement between Borrower and
Bank dated July 1, 20015 (the "Loan Agreement"), and is subject, among other things, to
acceleration as provided therein. Capitalized terms defined in the Loan Agreement shall have
the sine meaning in this Note.
3. The undersigned officers of the Borrower certify as follows:
(a) The undersigned have authority to execute this Note under
Resolution No. adopted by the Lodi City Council on . Such Resolution is
still in force and has not been modified or amended, except for any amendments which have
been provided to, and are acceptable to, the Bank.
(b) There has been no event of default under the Loan Agreement.
(c) The proceeds of this Note shall be used only for expenditures
approved by the Lodi City Council.
(d) The amount borrowed under this Note, together with all other
amounts previously borrowed by the Borrower during this fiscal year pursuant to Government
Code section 53850 et. seq., does not exceed 85% of the estimated amount of uncollected
Available Funds of the Borrower which will be available for the payment of such indebtedness,
as required by Government Code section 53858.
834300.2 1123331 B-1
4. To secure the payment of the obligations of the Borrower under this Note,
the Borrower hereby pledges, and grants to the Bank a lien and charge against, the Borrower's
CD Deposit (need more information), and all unrestricted revenues of the Borrower, including,
but not limited to, any revenue received from the State of California or the Federal. government,
or instrumentality of the foregoing, with respect to projects financed by an advance under under
the Agreement. The lien shall have first priority with respect to the CD Deposit, and the
Borrower shall not create, permit or suffer to exist any other security interest or lien against the
CD Deposit. The term "unrestricted revenues" shall include, but not be limited to, all taxes,
income, revenue, cash receipts, and other money of the Borrower which are generally available
for the payment of current expenses and other obligations of the Borrower. The obligations of
the Borrower under this Note are payable from all taxes, income, revenue, cash receipts and
moneys of the Borrower which are lawfully available for such payments, whether or not such
funds are pledged to the Bank under this paragraph.
5. This Note shall be governed by and construed under the laws of the State
of California
In Witness Whereof, the undersigned has caused this Note to be executed by its
officers thereunto duly authorized.
CITY OF LODI, CALIFORNIA
By: -
Title:
By: -
Title:
834300.2 11233.31 B-2