HomeMy WebLinkAboutResolutions - No. 2006-142RESOLUTION NO. 2006-142
A RESOLUTION OF THE LODI CITY COUNCIL AUTHORIZING AND
APPROVINGTHE EXECUTIONAND DELIVERYOFA 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 seg. 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 herebyfinds and determinesthat 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 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. Delegation of Authoritv to Make Borrowings Under Loan Agreement. The
City Council hereby authorizes the Deputy City Manager cf 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 seg., 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. Authorization to Execute Documents. 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
1 414`NIF�EERRIN
Interim City Clerk
2006-142
I E X RH-1 -BffA�
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 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 ($3,000,000).
(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 Rate.
(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 11233.31
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 Teleyhone 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 te.lefaxed 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
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 Bankinp, Days. 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 Calculation. 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 Pavments. 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 Rate. 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.
634300.2 11233.31 4
4.2 Legal Opinion. 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 Enforceable 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.
represents that:
Bank-Oualified Loans.
If the advance will be Bank -Qualified, Borrower
(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
834300.2 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 an)' 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.
(c) any change in the Borrower's investment policy.
(9 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
634300.2 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 l oan, 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 BankruptcX. 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 1 l 233.31 8
7.8 Other Breach 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 he 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.
S. 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 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 At_tomeys' 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 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 Countemarts. 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
Farmers and Merchants Rank 07/19/06
Credit Commitment
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 07
below.)
Collateral: Option 1 - 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
Confidential 11aae 4 7/19/2006
Farmers and Merchants Bank
0711.9106
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 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 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.
S. 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