HomeMy WebLinkAboutStaff Report 4.C-3 08/01/20054. C. 3.
CITY OF PETALUMA, CALIFORNIA 2005
AGENDA BILI, August �,
Agenda Title: Resolution Authorizing the Borrowing of Funds in Meetine Date: August 1, 2005
the Amount of Not To Exceed $100,000,000 Under Two Separate
Lines Of Credit To Finance Ellis Creek Water Recycling Facility
Construction and Related Expenses, and Authorizing Official Meetine Time: 0 3:00 PM
Actions Related Thereto ❑ 7:00 PM
Department:
Director: Contact Person:
Phone Number:
Water Resources &
Michael $ n, P.E. Michael Ban, P.E.
778-4304
Conservation
Steven Carmichael Steven Carmichael
778-4323
Administrative Services
Department
Cost of Proposal: Financing costs of approximately $2.2 million
Account Number:
for loan of $25 million.
Total cost is dependent on final amount of
C500402
loan.
Name of Fund:
Proiect Budeet: Total appropriations through FY 05-06 are $53 Wastewater Enterprise Fund
million.
Attachments to Aeenda Packet Item:
Resolution
Attachment A — State Water Resources Staff Report for July 21, 2005
Attachment B — Revolving Credit Agreement With Zions Bank
Attachment C — Revolving Credit Agreement With BNP — Paribas
Summary Statement:
Interim financing provided by the line of credit is a cost-effective tool that allows the City to proceed with
construction of the Ellis Creek Water Recycling Facility Project, does not impact SRF funding, and bridges
the time period from start of construction to the date of receipt of SRF loan financing. The SRF loan will
be used to pay funds drawn from the line of credit.
Recommended Citv Council Action/Suggested Motion:
City Management recommends the City Council approve the resolution authorizing the borrowing of funds
in the amount of not too exceed $100,000,000 under two separate lines of credit to finance the Ellis Creels
Water Recycling Facility construction and related expenses, and authorizing official actions related thereto.
eviewed by Finance Director:
AD kat'21
Todav's Date:
July 21, 2005
Reviewed by City Attornev:
Date:
Revision # and Date Revised:
#
A r Citv Manager:
Date:
FlleCode: S:hwater resources &
conservation\Wastewater\9012\phase 3 -
construction\City Council\August 1, 2005\interim
financing\Award Agenda Bill and CC Report 8-I-
05.doc
CITY OF PETALUMA, CALIFORNIA
AUGUST 1, 2005
AGENDA REPORT
FOR
RESOLUTION AUTHORIZING THE BORROWING OF FUNDS IN THE AMOUNT OF NOT
TO EXCEED $10090009000 UNDER TWO SEPARATE LINES OF CREDIT TO
FINANCE ELLIS CREEK WATER RECYCLING FACILITY CONSTRUCTION AND
RELATED EXPENSES, AND AUTHORIZING OFFICIAL ACTIONS RELATED THERETO
1. EXECUTIVE SUMMARY:
Interim financing provided by the line of credit is a cost-effective tool that allows the City to
proceed with construction of the Ellis Creek Water Recycling Facility Project, does not impact
SRF funding, and bridges the time period from start of construction to the date of receipt of SRF
loan financing. The SRF loan will be used to pay funds drawn from the line of credit.
City Management recommends the City Council approve the resolution authorizing the
borrowing of funds in the amount of not to exceed $100,000,000 under two separate lines of
credit to finance Ellis Creels Water Recycling Facility construction and related expenses, and
authorizing official actions related thereto.
2. BACKGROUND:
State Revolving Fund Program
The Federal Clean Water Act provides for the creation of a State Revolving Fund (SRF) Loan
Program. In California, the SRF Loan Program is administered by the California State Water
Resources Control Board (Board). The primary purpose of the SRF Loan Program is to assist in
the financing of wastewater treatment facilities necessary to prevent water pollution and thereby
protect and promote the health, safety, and welfare of the inhabitants of the State of California.
The SRF Loan Program provides the following key benefits:
Low interest rates, typically around 2.7%; and
The first payment is not due until one year following the completion of construction
date.
The City of Petaluma has been working with the State Water Resources Control Board since
2002 to secure an SRF Loan for the Ellis Creek Water Recycling Facility Project. In support of
the loan application, Petaluma has submitted all the documents required by the State, including:
Project Report
Environmental Documentation
Water Conservation Program Information
Revenue Program Documentation
Value Engineering Report
Project Plans and Specifications
The Need for Interim Financing — Revolving Credit
The Board ceased issuing new SRF loans in July 2003 because of a low cash balance and limited
staffing. The Finance Division made a decision to shift staff away from the SRF program and
focus on Proposition 40 and 50 programs. In November 2004, Board staff anticipated
reassigning staff to the SRF Program and informed Petaluma that the SRF program would likely
begin funding projects in Spring 2005. In Spring 2005, Board staff informed Petaluma that they
were not issuing SRF loans and did not know when the program would begin issuing loans
again.
The City evaluated financing options that would allow the project to proceed on schedule and not
impact the SRF loan. These options included issuing revenue bonds or securing a line of credit.
It was determined that any project expenditures funded by tax-exempt revenue bonds could not
be reimbursed by an SRF loan. The Board staff agreed that using a line of credit for interim
financing was the more advantageous approach.
The City then began working with its financial team to establish a Line of Credit that could be
used to finance construction of the Ellis Creek Water Recycling Facility Project until funding
from the SRF program becomes available. This action demonstrated to the contractors bidding
on the project that the City had a plan to finance the project until SRF funding became available.
Without this assurance, it is likely that one or more of the contractors would have dropped out of
the bidding process.
Meanwhile, in May, Michael Ban and Margaret Orr met with Peter Silva, Board Member, and
Barbara Evoy, Chief of the Finance Division, to discuss the Ellis Creek project and impress upon
them the need to issue an SRF loan for this project. In July, Assemblymember Joe Nation's staff
also contacted Ms. Evoy on behalf of Petaluma. Mr. Nation personally contacted Board Member
Richard Katz on behalf of Petaluma. Mr. Katz informed Mr. Nation that the Board was going
discuss the status of the SRF program on July 21", that the Board was going to make a bond sale
this Fall to fund the SRF program, and that Petaluma was at the top of the Board's SRF priority
list. A copy of the staff report for the July 2151 meeting is provided in Attachment A. At the July
21" meeting, the Board supported the Board staff's plan to begin issuing SRF loans again and to
conduct a bond sale to finance the SRF program. In September the Board will consider a
resolution authorizing the bond sale.
In May, the City solicited proposals for aline of credit of $100,000,000. The line of credit
financing will allow Petaluma to have the resources to be able to approve a contract for the
construction of the Ellis Creek Water Recycling Facility pending receipt of Rinds from the SRF
Loan Program. The line of credit Request For Proposals stated the line of credit would be on
parity with the outstanding Series 2000 wastewater bonds, and that the City anticipated receipt of
SRF funds within 2 years. The City received proposals from Bank of America, BNP -Paribas,
and Zions Bank. The last bidder, Zions Bank, submitted a bid for a $25million line of credit.
The City's financial advisors, Bartle Wells Associates, reviewed the proposals. Based on interest
rates and loan terms, it is recommended the City accept the proposals from Zions Bank for $25
million and the proposal from BNP -Paribas for $75 million. This gives the City access to the full
line of credit. For the first $50 million of the line of credit, the City will split its draw 50/50
between Zions Bank and BNP -Paribas. A summary of the terms for the two lines of credit is
provided in Table 1.
Item
Amount of Loan
Set-up Costs
Annual Fee
Current Interest Rate
Notes on Interest Rate
Prepayment
Table 1
Letter of Credit Proposals
Zions Bank
$25,000,000
$75,000
None
3.88%
Fixed rate of 3.88% for 1 year. After
1 year, variable option based on
91.03% of the 1 year FHLB rate.
Callable at any time with no call
premium.
BNP -Paribas
$75,000,000
$45,000
30 basis points on unused
credit
4.19%
Based on 6 month LIBOR' plus
50 basis points.
Callable at any time with no call
premium after year 1.
The City's bond counsel, Jones Hall of San Francisco, has prepared draft Revolving Credit
Agreements between Petaluma and Zions Bank and BNP -Paribas. These are provided in
Attachments B and C, respectively.
ALTERNATIVES:
Alternatives available for this action include:
Alternative 1 — Reject line of credit proposals. This approach will delay the project as
the City would not be able to award the construction contract. This will also increase
the cost of the project.
Alternative 2 — Take other action as directed by the City Council.
' LIBOR stands for "London Inter -Bank Offered Rate." It is based on rates that contributor banks in London offer
each other for inter -bank deposits. From a bank's perspective, deposits are simply funds that are loaned to them.
So, in effect, a LIBOR is a rate at which a fellow London bank can borrow money from other banks. The most
recent 6 -month LIBOR rate was 3.69%.
El
Alternative 3 — Adopt the resolution.
4. FINANCIAL IMPACTS:
The total estimated expenditures in support of the Ellis Creek Water Recycling Facility for the
next 5 fiscal years (FY 05/06 through FY 09/10) are approximately $141,483,000. As illustrated
in Table 2, this includes construction, engineering services during construction, construction
management, environmental services, contingencies and General Fund overhead.
Table 2
Summary of Ellis Creels Water Recycling Facility Project
Estimated Costs For FY 05/06 through FY 09/10
Item
Estimated Cost
Construction
$110,329,000
Administration
$83,000
Planning & Environmental Services
$1,678,000
Engineering Services
$4,383,000
Legal Counsel
155,000
Construction Management Services
$10.241,000
Subtotal
$126,869,000.00
General Fund Overhead
$6,339,000
Contingency
$8,275,000
Total
$141,483,000
In addition to the Ellis Creek Water Recycling Facility, there are several other capital
improvement projects for the wastewater and water recycling utilities that will occur over the
next five fiscal years, plus annual maintenance projects to repair and upgrade the wastewater
collection system. It is estimated these other CIP and maintenance projects will incur
approximately $26,433,000 in expenditures. These projects are shown in Table 3.
Table 3
Summary of Wastewater Utility Capital Improvement and
Maintenance Projects for FY 05/06 through FY 09/10
Project
Control and Data Acquisition System for Ellis
Creels Water Recycling Facility
Wilmington Pump Station Upgrade
C Street Pump Station Upgrade
Phase 11 Recycled Water Improvements
Lakeville Highway Improvements (for
entrance to Ellis Creek)
Oxidation Pond Dike Repair
Decommissioning of Hopper Street Facility
Maintenance — Sewer Main Repairs
Total
Estimated Cost
$1,674,794
$197,000
$2,284,000
$12,725,000
$714,000
$234,000
$658,000
$7,945,963
$26,432,757.00
The estimated total expenditures in FY 05/06 through FY 09/10 in support of capital and
maintenance improvements for the wastewater utility are approximately $168,000,000.
Funding for this work will comprise a combination of revolving credit (Line of Credit), a State
Revolving Fund loan, wastewater rate revenue, and revenue bonds. As part of the water
resources financial management plan and rate study, Bartle Wells Associates conducted a
financial analysis, which included the following:
Interim Financing — Revolving Credit. Securing interim financing in the form of a
line of credit in the amount of $100,000,000. It is estimated the City will utilize
approximately $87,000,000. The total amount utilized is dependent on timing and
amount of the SRF loan.
State Revolving Fund Loan. A conservative assumption was made that SRF funds
would not be available for the first fiscal year'. Thereafter annual SRF funding in the
amount of $25,000,000 would be provided for the next five fiscal years, for a total
SRF loan amount of $125,000,000. The City's SRF loan application requested a loan
amount of over $140,000,000, but the financial analysis has conservatively assumed
a loan amount of $125,000,000.
Revenue Bonds. The draft financial plan includes using revenue bonds to bridge the
gap between the SRF loan amount of $125,000,000 and the necessary capital
improvement expenditure amount of $168,000,000. It is anticipated that in the year
2010/2011, the City would sell approximately $40,000,000 in revenue bonds. This
amount is dependent on project expenditures and the amount of the SRF loan. If the
' The State Board is scheduled to sell bonds to fund the SRF program in September/October 2005, and will begin
funding SRF loans shortly thereafter. It is more than likely that the City will begin to receive SRF funds prior to
June 30, 2006. But the financial analysis conservatively assumed that SRF funds will not be available until after
June 30, 2006.
City is able to secure an SRF loan greater than $125 million, the size of the revenue
bond sale will decrease accordingly 3.
The current wastewater utility fees are not sufficient to support construction of the Ellis Creek
Recycling Facility, costs for operation and maintenance of the water recycling facilities, and to
support other needed capital improvements to the wastewater utility. An increase in wastewater
utility rates and fees will be necessary. The current rate program is effective through January
2006. The anticipated utility rates for an average single family residential customer are shown in
Table 4.
How Do the Preliminary Rates Compare With Other Cities?
Like Petaluma, other Sonoma County communities are upgrading or expanding their wastewater
treatment facilities. Santa Rosa recently completed construction of their $200 million Geysers
Project, and are in the early planning phase of an upgrade to their wastewater treatment facility.
Because they operate a subregional system, their projects affect their subregional partners. On
July 11, the Healdsburg City Council approved a $30million upgrade to their wastewater
treatment plant. Table 5 compares Petaluma's rates with nearby communities for the monthly
charge for an average single family residential customer using 9 hcFmonth.
' If the State decides not to issue an SRF loan to Petaluma, the entire project would be financed through revenue
bonds. The rates under this scenario would be about 16 —18% higher than are shown in Table 4.
7
Table 4
Estimated Monthly Wastewater Rate For Average Single
Family Residential Customer
City of Petaluma
Year
Estimated Rate Change
Estimated Monthly
Wastewater Charge For
Average Single Family
Residential Customer
2005 (current rate)
N/A
$43.30
2006 (current rate)
10.8%
$47.98
2007
9.5%
$52.54
2008
9.5%
$57.53
2009
9.5%
$62.99
2010
9.5%
$68.97
2011
9.5%
$75.52
2012
9.5%
$82.69
2013
9.5%
$90.54
How Do the Preliminary Rates Compare With Other Cities?
Like Petaluma, other Sonoma County communities are upgrading or expanding their wastewater
treatment facilities. Santa Rosa recently completed construction of their $200 million Geysers
Project, and are in the early planning phase of an upgrade to their wastewater treatment facility.
Because they operate a subregional system, their projects affect their subregional partners. On
July 11, the Healdsburg City Council approved a $30million upgrade to their wastewater
treatment plant. Table 5 compares Petaluma's rates with nearby communities for the monthly
charge for an average single family residential customer using 9 hcFmonth.
' If the State decides not to issue an SRF loan to Petaluma, the entire project would be financed through revenue
bonds. The rates under this scenario would be about 16 —18% higher than are shown in Table 4.
7
Table 5
Comparison of Monthly Wastewater Charges for Average Single
Family Residential Customer
Agency
Estimated Monthly Wastewater
Effective Date
Charge for Average Single Family
Residential Customer
City of Windsor
$43.06
July 1, 2004
City of Santa Rosa
$60.23
January 1, 2005
City of Healdsburg
$48.80
January 2005
$50.27
April 2005
$51.77
July 2005
$53.33
October 2005
$54.93
January 2006
$56.57
April 2006
Sonoma Valley County
$40.50
July 2004
Sanitation District
City of Rohnert Park
$50.22
April 2005
(proposed)
$62.95
April 2006
$72.23
April 2007
City of Petaluma
$43.30
January 2005
(scheduled)
$47.98
January 2006
City of Petaluma
$52.54
January 2007
(preliminary estimate)
$57.53
January 2008
$62.99
January 2009
5. CONCLUSION:
Interim financing provided by the line of credit is a cost-effective tool that allows the City to
proceed with construction of the Ellis Creek Water Recycling Facility Project, does not impact
SRF funding, and bridges the time period from start of construction to the date of receipt of SRF
loan financing. The SRF loan will be used to pay funds drawn from the line of credit.
6. OUTCOMES OR PERFORMANCE MEASUREMENTS THAT WILL IDENTIFY SUCCESSOR
COMPLETION:
Timely construction of the Ellis Creek Water Recycling Facility.
7. RECOMMENDATION:
City Management recommends the City Council approve the resolution authorizing the
borrowing of fiords in the amount not to exceed $100,000,000 Linder two separate lines of credit
to finance Ellis Creek Water Recycling Facility construction and related expenses, and
authorizing official actions related thereto.
0
RESOLUTION
0
RESOLUTION NO.
RESOLUTION OF THE COUNCIL OF THE CITY OF PETALUMA AUTHORIZING
THE BORROWING OF FUNDS IN THE AMOUNT OF NOT TO EXCEED $100,000,000
UNDER TWO SEPARATE LINES OF CREDIT TO FINANCE ELLIS CREEK WATER
RECYCLING FACILITY CONSTRUCTION AND RELATED EXPENSES, AND
AUTHORIZING OFFICIAL ACTIONS RELATED THERETO
10 The Council of the City of Petaluma does RESOLVE as follows:
11
12 SECTION 1. AuthoritV. The City is a chartered city and municipal corporation organized and
13 existing under the constitution and laws of the State of California, and is duly empowered as a
14 chartered city to exercise the powers reserved to it under said constitution with respect to
15 municipal affairs.
16
17 SECTION 2. Bond Law. As an exercise of such powers, the City has heretofore adopted the
18 provisions of Chapter 4.08 (commencing with Section 4.08.010) of the Petaluma Municipal
19 Code (the 'Bond Law") which authorize the City, when the public interest and necessity require,
20 by resolution, to issue its revenue bonds or notes for the purpose of financing or refinancing the
21 acquisition, construction, extension or improvement of any sewer enterprise system or facility of
22 the City.
23
24 SECTION 3. ProDosed Financing. The City, after due investigation and deliberation, has
25 determined it is in the public interest of the City at this time to construct the Ellis Creek Water
26 Recycling Facility (the "Project"). The City intends to finance the Project on a long term basis
27 with loans from the State of California known as State Revolving Fund ("SRF") Loans. SRF
28 Loans are not immediately available at this time, but the City has determined that construction of
29 the Project must commence as soon as practically possible. In the interim, the City has received
30 bids from banks to provide interim financing as a revolving line of credit to begin construction of
31 the Project. It is the intention of the City to repay the lines of credit with SRF Loans, or, if such
32 loans are not available for whatever reason, with long term bond financing. The City received
33 proposals from several banks offering revolving line of credit financing for the Project, and the
34 City has decided to accept the proposals of BNP Paribas, San Francisco Branch ("BNP") for a
35 revolving line of credit loan (the "BNP Loan"), pursuant to BNP's proposal to the City dated
36 June 3, 2005, in the amount of up to $75,000,000; Zions Bank ("Zion"), for a revolving line of
37 credit loan (the "Zions Loan"), pursuant to Zions' proposal to the City dated May 27, 2005, in
38 the amount of up to $25,000,000. The BNP Loan and the Zions Loan are referred to herein
39 collectively as the `Bank Loans".
40
41 SECTION 4. Revolving Line of Credit Agreements. The Bank Loans shall be entered into
42 under the Bond Law and pursuant to two separate Revolving Credit Agreements, dated as of
43 August 1, 2005 (the "Revolving Credit Agreements"), between the City and BNP and Zions,
44 respectively. The Revolving Credit Agreements, in substantially the form on file with the City
45 Manager, are hereby approved and the City Manager and the Administrative Services Director
46 (each, an "Authorized Official") is hereby authorized to execute the Revolving Credit
10
9
6
7
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
Agreements when finalized, and the City Cleric is hereby authorized and directed to attest said
Authorized Official's signature.
SECTION 5. Severabilitv. All portions of this resolution are severable. Should any individual
component of this resolution be adjudged to be invalid and unenforceable by a body of
competent jurisdiction, then the remaining resolution portions shall be and continue in full force
and effect, except as to those resolution portions that have been adjudged invalid. The City
Council of the City of Petaluma hereby declares that it would have adopted this resolution and
each section, subsection, clause, sentence, phrase and other portion thereof, irrespective of the
fact that one or more section, subsection, clause, sentence, phrase or other portion may be held
invalid or unconstitutional.
SECTION 6. Execution of Documents. The City Manager is authorized and directed in the
name and on behalf of the City to make any and all certificates, requisitions, agreements, notices,
consents, warrants and other documents, which they or any of them might deem necessary or
appropriate in order to consummate the delivery of the Revolving Credit Agreements.
SECTION 7. Effective Date. This resolution shall be effective upon the date of its adoption.
11
ATTACHMENT A - STATE WATER RESOURCES STAFF
REPORT FOR JULY 219 2005
12
STATE WATER RESOURCES CONTROL BOARD
BOARD MEETING SESSION—DIVISION OF FINANCIAL ASSISTANCE
July 21, 2005
Item 12
Current Status and Upcoming Actions
SRF Program Background
❑ The State Revolving Fund (SRF) Program is a joint Federal/State funded program that makes
loans for wastewater system improvements, correction of non -point source pollution
problems, and implementation of estuary enhancement programs.
❑ Since 1989 the Program has made 278 loans for a total loan balance of about $3 billion. The
Program has received about $1.6 billion in capitalization grants from the United States
Environmental Protection Agency (USEPA). Additional funds have come from State bond
measures and the sale of $300 million of revenue bonds in 2002.
❑ State Water Resources Control Board (State Water Board) stopped making new loan
commitments in November 2003.
° Cash balance prevented further loan commitments.
° Staffing shifted to handle Proposition 40 and 50 programs.
❑ The State Water Board had committed an average of $272 million per year, over the five
years, prior to suspending the Program.
a
0
c E
0 vi
LL 0
0
y Ea
L0 E
0
0
Funding Commitment Levels per Fiscal Year Prior to
Suspending SRF Program
$450
$400
$350
$300
$250
$200
$150
$100
$50
$0
98-99 99-00 00-01
Fiscal Year
Page 1 of 3
13
777771
- Z'�19:
:371
01-02 02-03
STATE WATER RESOURCES CONTROL BOARD
BOARD MEETING SESSION—DIVISION OF FINANCIAL ASSISTANCE
July 21, 2005
Item 12
SRF Current Status
❑ Some funds are now available to the SRF Program. These include:
• Repayments from existing loans.
• Capitalization grants from US EPA.
• Funds deobligated from projects that did not use all of their funding commitment.
❑ Sufficient funds are available to make loan commitments to projects for disadvantaged
communities that receive Small Community Wastewater Grants (SCWG) [Prop. 40 and 50
Funds], and the State Water Board has already committed itself to providing SRF loan funds
to these disadvantaged communities [Resolution 2005-0045, June 16, 2005].
❑ Staff has identified about $1 billion in pending project costs that could be funded over about
the next four years.
v
d
d
Z
m
e
c
U.
LL
c
0 0
a
m
0
c
O
E
$400
$350
$300
$250
$200
$150
$100
$50
Potential Funding Needs by Fiscal Year
Costs 05-06 Costs 06-07 Costs 07-08 Costs 08-09
Fiscal Year
❑ The additional funds available for new commitments are not enough to sustain continuous
operation of the program considering the current demand. Furthermore, US EPA
Capitalization Grants are expected to decrease in the future, and may be eliminated. With the
current expected cash flow, the SRF Program would go into intermittent operation for several
years and would not be able to maintain continuous availability of funds.
Page 2 of 3
14
STATE WATER RESOURCES CONTROL BOARD
BOARD MEETING SESSION—DIVISION OF FINANCIAL ASSISTANCE
July 21, 2005
Item 12
Future SRF Considerations
❑ Another revenue bond sale will make SRF funding more consistent and more available.
• State Water Board staff has initiated revenue bond planning; a kick-off meeting was held
May 31, 2005.
• Staff is currently working with Infrastructure and Economic Development Bank and other
financial advisors to determine size and timing of the proposed bond sale(s); likely one or
two sales between $200 to $300 million each.
• Best timing for bond sale likely in Fall 2005; staff will work with all involved parties to
determine the best timing.
• Staff will present a resolution approving bond sale for State Water Board consideration at
the September 2005 Workshop and Board Meeting.
• If the Board approves the bond sale, staff will begin administratively processing
applications in advance of the revenue bond sale in order to have projects ready for bond
sale proceeds.
❑ Incorporating Sustainability into the SRF Policy is important to the long-range goals of the
State Water Board.
• State Water Board identified Sustainability as a Core Value on January 20, 2005
(Resolution 2005-0006).
• Staff analyzed ways to incorporate Sustainability into the SRF Program and developed a
series of recommendations.
• Staff is preparing draft SRF Policy changes for management and public review.
• Draft Policy revisions will be released in late July 2005 for 30 -day public comment period.
• Draft Policy revisions will be presented to State Water Board at September 2005 Workshop
and Board Meeting.
Page 3 of 3
15
ATTACHMENT REVOLVINGi
WITH ZIONS BANK
16
REvoLVING CREDIT AGREEMENT
DATED AS OF
AUGUST 1, 2005
BETWEEN
CITY OF PETALUMA
0
ZIONS FIRST NATIONAL BANK
Revolv LC K(Zlons).doc 17
TABLE OF CONTENTS
SECTION
DESCRIPTION
PAGE
Section1.
The Credits.....................................................................................................1
SECTION 1.1.
REVOLVING CREDIT....................................................................................1
SECTION 1.2.
REVOLVING CREDIT LOANS.......................................................................3
SECTION 1.3.
MANNER AND DISBURSEMENT OF LOANS.............................................3
Section 2.
Interest and Change In Circumstances......................................................5
SECTION 2.1,
INTEREST RATE OPTIONS...........................................................................5
SECTION 2.2.
MINIMUM AMOUNTS..................................................................................6
SECTION 2.3.
COMPUTATION OF INTEREST.....................................................................7
SECTION 2.4.
MANNER OF RATE SELECTION..................................................................7
SECTION 2.5.
CHANGE OF LAW.........................................................................................7
SECTION 2.6.
UNAVAILABILITY OF DEPOSITS OR INABILITY TO
SECTION 6.6.
ASCERTAIN VARIABLE RATE.....................................................................8
SECTION 2.7.
TAXES AND INCREASED COSTS.................................................................9
SECTION 2.8.
CHANGE IN CAPITAL ADEQUACY REQUIREMENTS ............................11
SECTION 2.9.
FUNDING INDEMNITY...............................................................................12
SECTION 2.10.
LENDING BRANCH.....................................................................................13
SECTION 2.11.
DISCRETION OF BANK AS TO MANNER OF FUNDING .........................
14
SECTION 2.12.
MAXIMUM RATE........................................................................................14
Section 3.
Fees, Prepayments and Terminations......................................................15
SECTION3.1. FEES...............................................................................................................15
SECTION 3.2. VOLUNTARY PREPAYMENTS...................................................................15
SECTION 3.3. PLACE AND APPLICATION OF PAYMENTS............................................16
SECTION3.5. NOTATIONS.................................................................................................17
Section 4.
Pledged Revenue; Limited Obligation....................................................18
SECTION 4.1.
PLEDGED REVENUES; LIMITED OBLIGATION.......................................18
SECTION 4.2.
FURTHER ASSURANCES............................................................................19
Section 5.
Definitions; Interpretation.........................................................................19
SECTION5.1.
DEFINITIONS...............................................................................................19
SECTION 5.2.
INTERPRETATION.......................................................................................32
Section 6.
Representations and Warranties..............................................................33
SECTION 6.1.
ORGANIZATION AND POWERS................................................................33
SECTION 6.2.
AUTHORIZATION, CONTRAVENTION....................................................33
SECTION 6.3.
GOVERNMENTAL CONSENT OR APPROVAL.........................................34
SECTION 6.4.
BINDING EFFECT........................................................................................34
SECTION 6.5.
USE OF PROCEEDS; MARGIN STOCK.......................................................34
SECTION 6.6.
FINANCIAL REPORTS.................................................................................35
SECTION 6.7.
NO MATERIAL ADVERSE CHANGE.........................................................35
-1- 18
SECTION 6.8.
FULL DISCLOSURE......................................................................................36
SECTION 7.1.
SECTION 6.9.
GOOD TITLE................................................................................................36
INITIAL ADVANCE ...........................................
SECTION 6.10.
LITIGATION AND OTHER CONTROVERSIES..........................................36
SECTION 6.11.
APPROVALS.................................................................................................37
INSPECTION.................................................................................................45
SECTION 6.12.
OTHER AGREEMENTS................................................................................37
SECTION6.13.
NO DEFAULT...............................................................................................37
PARITY OBLIGATIONS...............................................................................47
SECTION 6.14.
NO SOVEREIGN IMMUNITY......................................................................37
SECTION 6.15.
NO MAXIMUM RATE.................................................................................38
COMPLIANCE WITH LAWS.......................................................................52
Section 7.
Conditions Precedent .......................................
SECTION 7.1.
ALL ADVANCES ................................................
SECTION 7.2.
INITIAL ADVANCE ...........................................
Section 8.
SECTION 8.1.
SECTION 8.2.
SECTION 8.3.
SECTION 8.4.
SECTION 8.5.
SECTION 8.6.
SECTION 8.7.
SECTION 8.8.
SECTION 8.9.
SECTION 8.10.
SECTION 8.11.
SECTION 8.12.
SECTION 8.13.
SECTION 8.14.
SECTION 8.15.
SECTION 8.16.
SECTION 8.17.
..................................38
..................................38
..................................39
Covenants....................................................................................................41
MAINTENANCE OF EXISTENCE...............................................................41
MAINTENANCE OF PROPERTIES..............................................................41
EVENTS OF DEFAULT.................................................................................54
TAXES AND ASSESSMENTS.......................................................................41
SECTION 9.2.
INSURANCE.................................................................................................42
FINANCIALREPORTS.................................................................................42
BANKRUPTCY DEFAULTS.........................................................................58
INSPECTION.................................................................................................45
Section10.
BORROWINGS AND GUARANTIES...........................................................45
LIENS; CLOSING OFF LIEN OF 2000 INDENTURE...................................46
NON -BUSINESS DAY..................................................................................59
PARITY OBLIGATIONS...............................................................................47
SECTION 10.2.
STATELOANS..............................................................................................50
RATECOVENANT.......................................................................................50
AMENDMENTS, ETC...................................................................................60
COMPLIANCE WITH LAWS.......................................................................52
SECTION 10.4.
USEOF PROCEEDS......................................................................................52
PROCEEDS OF LOANS................................................................................53
DOCUMENTARY TAXES.............................................................................62
NO AMENDMENT OF CERTAIN CONTRACTS OR
SECTION 10.6.
ORDINANCES..............................................................................................53
TAXES AND LIABILITIES............................................................................53
SURVIVAL OF INDEMNITIES.....................................................................62
SUPPLEMENTAL ORDINANCES AND FURTHER
SECTION10.8.
ASSURANCES..............................................................................................53
Section 9.
Events of Default and Remedies..............................................................54
SECTION 9.1.
EVENTS OF DEFAULT.................................................................................54
SECTION 9.2.
NON -BANKRUPTCY DEFAULTS...............................................................58
SECTION 9.3.
BANKRUPTCY DEFAULTS.........................................................................58
Section10.
Miscellaneous..............................................................................................59
SECTION 10.1.
NON -BUSINESS DAY..................................................................................59
SECTION 10.2.
NO WAIVER, CUMULATIVE REMEDIES..................................................59
SECTION 10.3.
AMENDMENTS, ETC...................................................................................60
SECTION 10.4.
COSTS AND EXPENSES; INDEMNIFICATION..........................................60
SECTION 10.5.
DOCUMENTARY TAXES.............................................................................62
SECTION 10.6.
SURVIVAL OF REPRESENTATIONS...........................................................62
SECTION 10.7.
SURVIVAL OF INDEMNITIES.....................................................................62
SECTION10.8.
NOTICES.......................................................................................................63
-ii- 19
SECTION 10.9.
SECTION 10.10.
SECTION 10.11.
SECTION 10.12.
SECTION 10.13.
SECTION 10.14.
SIGNATURE
CONSTRUCTION.................................................................
HEADINGS...........................................................................
SEVERABILITY OF PROVISIONS ........................................
COUNTERPARTS.................................................................
BINDING NATURE, GOVERNING LAW, ETC ..................
SUBMISSION TO JURISDICTION; WAIVER OF JURY
TRIAL....................................................................................
Exhibit A — Revolving Note
WIM
WI.V.
........................ 65
........................65
........................ 65
....................... 66
....................... 68
CREDIT AGREEMENT
Zions First National Bank
One South Main Street, Suite 1660
Salt Lake City, Utah 84111
Ladies and Gentlemen:
The undersigned, City of Petaluma, a charter city duly organized and existing under the
laws of the State of California (the "City'), applies to you (the `Bank') for your commitment,
subject to the terms and conditions hereof and on the basis of the representations and warranties
hereinafter set forth, to extend credit to the City, all as more fully hereinafter set forth. All
capitalized terms used herein without definition shall have the same meanings herein as such
terms are defined in Section 5.1 hereof.
SECTION 1. THE CREDITS.
Section 1.1. Revolving Credit. Subject to the terms and conditions hereof, the Bank
agrees to extend a revolving credit (the `Revolving Credit ") to the City which may be availed of
by the City from time to time during the period from and including the date hereof to but not
including the Termination Date, at which time the commitment of the Bank to extend credit
under the Revolving Credit shall expire. The Revolving Credit may be utilized by the City in the
form of Loans and Letters of Credit, all as more fully hereinafter set forth, provided that the
aggregate principal amount of Loans and Letters of Credit outstanding at any one time shall not
exceed $25,000,000 (the "Commitment", as such amount may be reduced pursuant to the terms
hereof). During the period from and including the date hereof to but not including the
Termination Date, the City may use the Commitment by borrowing, repaying, and reborrowing
Loans in whole or in part and/or by having the Bank issue Letters of Credit, having such Letters
of Credit expire or otherwise terminate without having been drawn upon or, if drawn upon,
reimbursing the Bank for each such drawing, and having the Bank issue new Letters of Credit, all
in accordance with the terms and conditions of this Agreement.
The Bank acknowledges that simultaneous with the execution and delivery of this
Agreement, the City is entering into a Revolving Credit Agreement with BNP Paribas, acting
through its San Francisco Branch (`BNP Paribas"), dated as of August 1, 2005, under which
BNP Paribas commits a revolving line of credit to the City in an amount up to $75,000,000 (the
"BNP Paribas Revolving Credit Agreement"). Under the BNP Paribas Revolving Credit
Agreement, BNP Paribas will have a lien on Pledged Revenues on a parity with the Bank's lien
on Pledged Revenues hereunder.
Section 1.2. Revolving Credit Loans. Subject to the terms and conditions hereof, the
Revolving Credit may be availed of by the City in the form of loans (individually a "Loan " and
collectively the "Loans"). Each Loan shall be in a minimum amount of $100,000; provided,
however, that any Variable Rate Portion of the Loans shall be in such greater amount as is
required by Section 2 hereof. The Loans shall be made against and evidenced by a single
21
promissory note of the City in the form (with appropriate insertions) attached hereto as Exhibit A
(the "Note'). The Note shall be dated the date of issuance thereof and be expressed to bear
interest as set forth in Section 2 hereof The Note, and all Loans evidenced thereby, shall mature
and become due and payable in full on the Termination Date. Without regard to the principal
amount of the Note stated on its face, the actual principal amount at any time outstanding and
owing by the City on account of the Note shall be the sum of all Loans made hereunder less all
payments of principal actually received by the Bank.
Section 1.3. Manner and Disbursement of Loans. The City shall give written or
telephonic notice to the Bank (which notice shall be irrevocable once given and, if given by
telephone, shall be promptly confirmed in writing) by no later than 11:00 a.m. (San Francisco
time) on the date the City requests the Bank to make a Loan hereunder. Each such notice shall
specify the date of the Loan requested (which must be a Business Day) and the amount of such
Loan. Each Loan shall initially constitute part of the Fixed Rate Portion except to the extent the
City has otherwise timely elected that such Loan, or any part thereof, constitute part of a Variable
Rate Portion as provided in Section 2 hereof. The City agrees that the Bank may rely upon any
written or telephonic notice given by any person the Bank in good faith believes is an Authorized
Representative without the necessity of independent investigation and, in the event any
telephonic notice conflicts with the written confirmation, such telephonic notice shall govem if
the Bank has acted in reliance thereon. Subject to the provisions of Section 7 hereof, the
proceeds of each Loan shall be made available to the City at the principal office of Wells Fargo
Bank, in immediately available funds, in the case of the initial Loans made hereunder, in
accordance with the terms of the written disbursement instructions of the City and, in the case of
each subsequent Loan, by deposit to the City's operating account no. 4950037267 and ABA
121000248 maintained with Wells Fargo Bank or as otherwise agreed upon by the City and the
Bank.
SECTION 2. INTEREST AND CHANGE IN CIRCUMSTANCES.
Section 2.1. Interest Rate Options. (a) Generally. The outstanding principal balance of
the Loans (all of the indebtedness evidenced by the Note bearing interest at the same rate for the
same period of time being hereinafter referred to as a "Portion') shall bear interest with
reference to either the Fixed Rate (the Fixed Rate Portion') or with reference to a Variable
Rate ("Variable Rate Portions'). All of the indebtedness evidenced by the Note which bears
interest with reference to a particular Variable Rate for a particular Interest Period shall constitute
a single Variable Rate Portion, and all of the indebtedness evidenced by the Note which is not
part of a Variable Rate Portion shall constitute a single Fixed Rate Portion. Anything contained
herein to the contrary notwithstanding, the obligation of the Bank to create, continue or effect by
conversion any Variable Rate Portion shall be conditioned upon the fact that at the time no
Default or Event of Default shall have occurred and be continuing. The City hereby promises to
pay interest on each Portion of the Note at the rates and times specified in this Section 2.
(b) Fixed Rate Portion. The Fixed Rate Portion is only available for Loans originated
during the First Year. The Fixed Rate Portion shall bear interest at the Fixed Rate, provided that
if the Fixed Rate Portion or any part thereof is not paid when due (whether by lapse of time,
acceleration, or otherwise), or at the election of the Bank upon notice to the City during the
-2- 22
existence of any other Event of Default, such Portion shall bear interest, whether before or after
judgment until payment in full thereof, at the rate per annum determined by adding 2% to the
interest rate which would otherwise be applicable thereto from time to time. Interest on the
Fixed Rate Portion shall be payable semi-annually in arrears on the first day of each September
and March in each year (commencing on the first such date occurring after the date hereoi) and at
maturity of the Note, and interest after maturity (whether by lapse of time, acceleration, or
otherwise) shall be due and payable upon demand.
(c) Variable Rate Portions. Each Variable Rate Portion shall bear interest for each
Interest Period selected therefor at a rate per annum equal to the Variable Rate for such Interest
Period. Interest on each Variable Rate Portion shall be due and payable semi-annually in arrears
on the first day of each September and March in each year (commencing on the fust such date
occurring after the date hereof) and at maturity of the Note, and interest after maturity (whether
by lapse of time, acceleration, or otherwise) shall be due and payable upon demand.
Section 2.2. Minimum An:otnits. Each Variable Rate Portion shall be in an amount equal
to $100,000 or such greater amount which is an integral multiple of $50,000.
Section 2.3. Computation of Interest. All interest on the Note shall be computed on the
basis of a year of 360 days for the actual number of days elapsed.
Section 2.4. Manner of Rate Selection. The City shall notify the Bank by 11:00 a.m.
(San Francisco time) at least 3 Business Days prior to the date upon which the City requests that
any Variable Rate Portion be created (each such notice to specify in each instance the amount
thereof. All requests for the creation of Portions under this Agreement shall be irrevocable. Such
requests may be written or oral, and the Bank is hereby authorized to honor telephonic requests
for creations received by it from any person the Bank in good faith believes to be an Authorized
Representative without the necessity of independent investigation, the City hereby indemnifying
the Bank from any liability or loss ensuing from so acting.
Section 2.5. Change of Law. Notwithstanding any other provisions of this Agreement or
the Note, if at any time the Bank shall determine that any change in applicable laws, treaties, or
regulations, or in the interpretation thereof, makes it unlawful for the Bank to create or continue
to maintain any Variable Rate Portion, it shall promptly so notify the City and the obligation of
the Bank to create, continue, or maintain any such Variable Rate Portion under this Agreement
shall be suspended until it is no longer unlawful for the Bank to create, continue, or maintain
such Variable Rate Portion. If the continued maintenance of any such Variable Rate Portion is
unlawful, the City shall prepay on demand to the Bank the outstanding principal amount of the
affected Variable Rate Portion together with all interest accrued thereon and all other amounts
payable to the Bank with respect thereto under this Agreement; provided, however, the City may
elect to convert the principal amount of the affected Portion into another type of Portion available
hereunder, subject to the terms and conditions of this Agreement (including, without limitation,
Section 2.9 hereof).
Section 2.6. Unavailability of Deposits or Inability to Ascertain Variable Rate.
Notwithstanding any other provision of this Agreement or the Note, if the Bank shall determine
-3- 23
prior to the commencement of any Interest Period that deposits in the amount of any Variable
Rate Portion scheduled to be outstanding during such Interest Period are not readily available to
the Bank in the relevant market or, by reason of circumstances affecting the relevant market,
adequate and reasonable means do not exist for ascertaining Variable Rate, then the Bank shall
promptly give notice thereof to the City and the obligations of the Bank to create, continue, or
effect by conversion any such Variable Rate Portion in such amount and for such Interest Period
shall be suspended until deposits in such amount and for the interest Period selected by the City
shall again be readily available in the relevant market and adequate and reasonable means exist
for ascertaining Variable Rate.
Section 2.7. Taxes and Increased Costs. With respect to any Variable Rate Portion, if
the Bank shall determine that any change in any applicable law, treaty, regulation, or guideline
(including, without limitation, Regulation D of the Board of Governors of the Federal Reserve
System), or any new law, treaty, regulation, or guideline, or any interpretation of any of the
foregoing, by any governmental authority charged with the administration thereof or any central
bank or other fiscal, monetary, or other authority having jurisdiction over the Bank or its lending
branch or the Variable Rate Portions contemplated by this Agreement (whether or not having the
force of law), shall:
(i) impose, increase, or deem applicable any reserve, special deposit, or
similar requirement against assets held by, or deposits in or for the account of, or loans
by, or any other acquisition of funds or disbursements by, the Bank which is not in any
instance already accounted for in computing the interest rate applicable to such Variable
Rate Portion;
(ii) subject the Bank, any Variable Rate Portion or the Note to the extent it
evidences a Variable Rate Portion to any tax (including, without limitation, any United
States interest equalization tax or similar tax however named applicable to the acquisition
or holding of debt obligations and any interest or penalties with respect thereto), duty,
charge, stamp tax, fee, deduction, or withholding in respect of this Agreement, any
Variable Rate Portion or the Note to the extent it evidences a Variable Rate Portion,
except such taxes as may be measured by the overall net income or gross receipts of the
Bank or its lending branches and imposed by the jurisdiction, or any political subdivision
or taxing authority thereof, in which the Bank's principal executive office or its lending
branch is located;
(iii) change the basis of taxation of payments of principal and interest due from
the City to the Bank hereunder or under the Note to the extent it evidences any Variable
Rate Portion (other than by a change in taxation of the overall net income or gross
receipts of the Bank); or
(iv) impose on the Bank any penalty with respect to the foregoing or any other
condition regarding this Agreement, any Variable Rate Portion, or its disbursement, or the
Note to the extent it evidences any Variable Rate Portion;
-4- 24
and the Bank shall determine that the result of any of the foregoing is to increase the cost
(whether by incurring a cost or adding to a cost) to the Bank of creating or maintaining any
Variable Rate Portion hereunder or to reduce the amount of principal or interest received or
receivable by the Bank (without benefit of, or credit for, any proration, exemption, credits, or
other offsets available under any such laws, treaties, regulations, guidelines, or interpretations
thereof), then the City shall pay on demand to the Bank from time to time as specified by the
Bank such additional amounts as the Bank shall reasonably determine are sufficient to
compensate and indemnify it for such increased cost or reduced amount. If the Bank makes such
a claim for compensation, it shall provide to the City a certificate setting forth the computation of
the increased cost or reduced amount as a result of any event mentioned herein in reasonable
detail and such certificate shall be conclusive if reasonably determined.
Section 2.8. Change in Capital Adequacy Requirements. If the Bank shall determine
that the adoption after the date hereof of any applicable law, rule, or regulation regarding capital
adequacy, or any change in any existing law, rule, or regulation, or any change in the
interpretation or administration thereof by any governmental authority, central bank, or
comparable agency charged with the interpretation or administration thereof, or compliance by
the Bank (or any of its branches) with any request or directive regarding capital adequacy
(whether or not having the force of law) of any such authority, central bank, or comparable
agency, has or would have the effect of reducing the rate of return on the Bank's capital as a
consequence of its obligations hereunder or for the credit which is the subject matter hereof to a
level below that which the Bank could have achieved but for such adoption, change, or
compliance (taking into consideration the Bank's policies with respect to liquidity and capital
adequacy) by an amount deemed by the Bank to be material, then from time to time, within
30 days after demand by the Bank, the City shall pay to the Bank such additional amount or
amounts reasonably determined by the Bank as will compensate the Bank for such reduction.
Section 2.9. Funding Indemnity. In the event the Bank shall incur any loss, cost, or
expense (including, without limitation, any loss, cost, or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired or contracted to be acquired by
the Bank to fund or maintain any Variable Rate Portion or the relending or reinvesting of such
deposits or other funds or amounts paid or prepaid to the Bank) as a result of:
(i) any payment of a Variable Rate Portion on a date other than the last day of
the then applicable Interest Period for any reason, whether before or after default, and
whether or not such payment is required by any provision of this Agreement; or
(ii) any failure by the City to create, borrow, continue, or effect by conversion
a Variable Rate Portion on the date specified in a notice given pursuant to this
Agreement;
then upon the demand of the Bank, the City shall pay to the Bank such amount as will reimburse
the Bank for such loss, cost, or expense. If the Bank requests such a reimbursement, it shall
provide to the City a certificate setting forth the computation of the loss, cost, or expense giving
rise to the request for reimbursement in reasonable detail and such certificate shall be conclusive
if reasonably determined.
-5- 25
Section 2. 10. Lending Branch. The Bank may, at its option, elect to make, fund or
maintain Portions of the Loans hereunder at such of its branches or offices as the Bank may from
time to time elect. To the extent reasonably possible, the Bank shall designate an alternate
branch or funding office with respect to the Variable Rate Portions to reduce any liability of the
City to the Bank under Section 2.7 hereof or to avoid the unavailability of an interest rate option
under Section 2.6 hereof, so long as such designation is not otherwise disadvantageous to the
Bank.
Section 2.11. Discretion of Bank as to Manner of Funding. Notwithstanding any
provision of this Agreement to the contrary, the Bank shall be entitled to fund and maintain its
funding of all or any part of the Note in any manner it sees fit, it being understood, however, that
for the purposes of this Agreement all determinations hereunder (including, without limitation,
determinations under Sections 2.6, 2.7, and 2.9 hereof) shall be made as if the Bank had actually
funded and maintained each Variable Rate Portion during each Interest Period applicable thereto
through the purchase of deposits in the relevant market in the amount of such Variable Rate
Portion, having a maturity corresponding to such Interest Period, and, in the case of any Variable
Rate Portion, bearing an interest rate equal to the LIBOR for such Interest Period.
Section 2.12. Maxinuon Rate. If at any time the rate of interest payable hereunder shall
exceed the Maximum Rate for any period for which interest is payable, then (i) interest at the
Maximum Rate shall be due and payable with respect to such interest period and (ii) interest at
the rate equal to the difference between (A) the rate of interest calculated in accordance with the
terms hereof and (B) the Maximum Rate (the "Excess Interest "), shall be deferred until such date
as the rate of interest calculated in accordance with the terms hereof ceases to exceed the
Maximum Rate, at which time the City shall pay to the Bank, with respect to amounts then
payable to the Bank, that are required to accrue interest hereunder, such portion of the deferred
Excess Interest as will cause the rate of interest then paid to the Bank, to equal the Maximum
Rate, which payments of deferred Excess Interest shall continue to apply to such unpaid amounts
hereunder until all deferred Excess Interest is fully paid to the Bank. Upon the termination of
this Agreement, in consideration for the limitation of the rate of interest otherwise payable
hereunder, to the extent permitted by law, the City shall pay to the Bank a fee equal to the unpaid
amount of all unpaid deferred Excess Interest.
SECTION 3. FEES, PREPAYMENTS AND TERMWAMNS.
Section 3.1. Fees.
(a) Origination Fee. For the period from and including the date hereof to but not
including the Termination Date, the City shall pay to the Bank a one-time origination fee equal to
.30% of the Commitment. Such commitment fee shall be payable on the Closing Date.
Section 3.2. Volnnta?y Prepayments. The City shall have the privilege of prepaying the
Loans in whole or in part (but, if in part, then (i) if such Loan or Loans constitutes part of the
Fixed Rate Portion, in an amount not less than $100,000, (ii) if such Loan or Loans constitutes
part of a Variable Rate Portion, in an amount not less than $100,000, and (iii) in each case, in an
amount such that the minimum amount required for a Loan pursuant to Sections 1.2 and 2.2
-6- 26
hereof remain outstanding) at any time upon prior notice to the Bank (such notice if received
subsequent to 11:00 a.m. (San Francisco time) on a given day to be treated as though received at
the opening of business on the next Business Day) by paying to the Bank the principal amount to
be prepaid and (i) if such a prepayment prepays the Note in full and is accompanied by the
termination of the Commitment in whole, accrued interest thereon to the date of prepayment, and
(ii) in the case of any prepayment of a Variable Rate Portion of the Loans, accrued interest
thereon to the date of prepayment plus any amounts due the Bank under Section 2.9 hereof.
Section 3.3. Place and Application of Payments. All payments of principal, interest,
fees, and all other Obligations payable under the Loan Documents shall be made to the Bank at
its office at (or at such other place as the Bank may specify) no
later than 3:00 p.m. (San Francisco time) on the date any such payment is due and payable.
Payments received by the Bank after 3:00 p.m. (San Francisco time) shall be deemed received as
of the opening of business on the next Business Day. All such payments shall be made in lawful
money of the United States of America, in immediately available funds at the place of payment,
without set-off or counterclaim and without reduction for, and free from, any and all present or
future taxes, levies, imposts, duties, fees, charges, deductions, withholdings, restrictions, and
conditions of any nature imposed by any government or any political subdivision or taxing
authority thereof (but excluding any taxes imposed on or measured by the net income of the
Bank). Unless the City otherwise directs, principal payments shall be applied first to the, Fixed
Rate Portion until payment in full thereof, with any balance applied to the Variable Rate Portions
in the order in which their Interest Periods expire.
Section 3.5. Notations. All Loans made against the Note, the status of all amounts
evidenced by the Note as constituting part of the Fixed Rate Portion or a Variable Rate Portion,
and, in the case of any Variable Rate Portion, the rates of interest and Interest Periods applicable
to such Portions shall be recorded by the Bank on its books and records or, at its option in any
instance, endorsed on a schedule to the Note and the unpaid principal balance and status, rates
and Interest Periods so recorded or endorsed by the Bank shall be prima facie evidence in any
court or other proceeding brought to enforce the Note of the principal amount remaining unpaid
thereon, the status of the Loans evidenced thereby and the interest rates and Interest Periods
applicable thereto; provided that the failure of the Bank to record any of the foregoing shall not
limit or otherwise affect the obligation of the City to repay the principal amount of the Note
together with accrued interest thereon. Prior to any negotiation of the Note, the Bank shall record
on a schedule thereto the status of all amounts evidenced thereby as constituting part of the Fixed
Rate Portion or a Variable Rate Portion and, in the case of any Variable Rate Portion, the rates of
interest and the Interest Periods applicable thereto.
SEmoN 4. PLEDGED REVENUES; LIMITED OBLIGATION
Section 4.L Pledged Revenues; Limited Obligation.
(a) Pledged Revenues. The Loans, the Note and the Obligations of the
City hereunder are secured by an irrevocable lien on and pledge of, and are payable from
the Pledged Revenues; and such lien and pledge of the Pledged Revenues shall be prior in
-7- 27
right and claim as to any other indebtedness, liability or obligation of the City payable
from the Pledged Revenues.
(b) Limited Obligation. The general fund of the City is not liable and
the credit or taxing power of the City is not pledged for the payment of the Loans, the
Note and the Obligations of the City hereunder . The Bank shall not compel the exercise
of the taxing power by the City or the forfeiture of its property. The Loans, the Note and
the Obligations of the City hereunder are not a debt of the City, nor a legal or equitable
pledge, charge, lien or encumbrance, upon any of its property, or upon any of its income,
receipts, or revenues except the Pledged Revenues of the Wastewater System.
Section 4.2. Further Assurances. The City agrees that it shall execute and deliver such
documents and do such acts and things as the Bank may from time to time request in order to
provide for or perfect or protect the Bank's Lien on Pledged Revenues.
SECTION 5. DEFINITIONS; INTERPRETATION.
Section 5.1. Definitions. The following terms when used herein shall have the following
meanings:
"Agreement" means this Credit Agreement, as the same may be amended, modified, or
restated from time to time in accordance with the terms hereof.
"Authorized Representative" means those persons shown on the list of officers provided
by the City pursuant to Section 7.2 hereof or on any update of any such list provided by the City
to the Bank, or any further or different officer of the City so named by any Authorized
Representative of the City in a written notice to the Bank.
"Bank" is defined in the introductory paragraph hereof.
"BNP Paribas" is defined in Section 1.1.
"BNP Paribas Revolving Credit Agreement" is defined in Section l.1.
"Bond Law" means the charter of the City and the provisions of Chapter 4.08
(commencing with Section 4.08.010), of the Petaluma Municipal Code, as in effect on the date
hereof, or as hereafter amended.
"Business Day" means any day other than a Saturday or Sunday on which the Bank is not
authorized or required to close in San Francisco, California.
"Charges" means fees, tolls, assessments, rates and charges prescribed under the Bond
Law or any other law of the State by the Council for the services and facilities of the Wastewater
System famished by the City.
" Cih," is defined in the introductory paragraph hereof.
-8- 28
Closing Date" means the date on this Agreement is fully executed by BNP Paribas and
the City, and the City is entitled to draw funds on the Commitment.
thereto.
"Code" means the Internal Revenue Code of 1986, as amended, and any successor statute
"Connnitment" is defined in Section 1.1 hereof.
"Debt Service" means, during any period of computation, the amount obtained for such
period, calculated as follows:
(a) Debt Service shall include the principal amount of all Wastewater System Obligations
payable by their terms in such period; and
(b) Debt Service shall include the interest which would be due during such period on the
aggregate principal amount of Wastewater System Obligations which would be
Outstanding in such period if the Wastewater System Obligations are paid or redeemed as
scheduled.
For purposes of this definition, it shall be assumed that any Parity Obligations which bear
a variable interest rate bear interest at a fixed rate, calculated as follows:
(i) If the Panty Obligations are issued on a tax-exempt basis, the interest rate on
such Parity Obligations shall be deemed to be equal to the greater of (A) the
most recently published Bond Buyer 25 Bond Revenue Index (or comparable
index if no longer published); or (B) the average variable rate of interest home by
such Parity Obligations during the preceding 36 months;
(ii) If the Parity Obligations are issued on a taxable basis, the interest rate on
such Parity Obligations shall be deemed to be the greater of (A) the rate of
interest home by U.S Treasury Bonds of a 30 -year maturity, as published in a
financial publication or electronically disseminated as of the date of calculation,
plus 75 basis points; or (B) the average of the actual interest rate home by such
Parity Obligations over a 36 -month period occurring immediately prior to the date
of calculation;
(iii) If an interest rate "cap" (or similar instrument) has been purchased for such
Parity Obligations, neither of the formulas set in (i) or (ii) above shall produce an
interest rate in excess of said cap for the period that such interest rate cap is in
effect; and
(iv) If the City has entered into a "Swap" agreement (a "Swap Agreement"), the
interest rate home by the Wastewater System Obligation during the term of such
Swap Agreement shall be considered to be the interest rate payable by the City
under such Swap Agreement (as to those Parity Obligations equal in principal
amount to the notional amount of such Swap Agreement).
-9- 29
(c) During the Interim Funding Period, Debt Service shall not include the principal
amount of Loans outstanding under this Agreement or the BNP Paribas Revolving Credit
Agreement.
"Default" means any event or condition the occurrence of which would, with the passage
of time or the giving of notice, or both, constitute an Event of Default.
"Event of Default"means any event or condition identified as such in Section 9.1 hereof.
"First Year" means the period commencing 30 days after the Notice to Proceed has been
delivered to the party to whom the City has awarded the construction contract for the Project, or
November 1, 2005, whichever occurs first, and terminating on that same day in 2006.
"Fitch " means Fitch Ratings, and its successors.
"Fixed Rate" means a per annum rate of interest equal to 3.88%.
Fixed Rate Portion " is defined in Section 2.1 herein.
"GAAP" means generally accepted accounting principles set forth from time to time in
the opinions and pronouncements of the Accounting Principles Board and the American Institute
of Certified Public Accountants and statements and pronouncements of the Financial Accounting
Standards Board (or agencies with similar functions of comparable stature and authority within
the U.S. accounting profession), which are applicable to the circumstances as of the date of
determination.
"Gross Revenues" means, for any period of computation, all gross charges received for,
and all other gross income and revenues derived by the City from, the ownership or operation of
the Wastewater System or otherwise arising from the Wastewater System during such period,
including but not limited to (a) all Charges received by the City for use of the Wastewater
System, (b) transfers from (but .exclusive of any transfers to) any rate stabilization reserve
accounts, and (c) all moneys received by the City from other public entities whose inhabitants are
served pursuant to contracts with the City.
'Indebtedness for Borrowed Money" means for any Person (without duplication) (a) all
indebtedness created, assumed or incurred in any manner by such Person representing money
borrowed (including by the issuance of debt securities), (b) all indebtedness for the deferred
purchase price of property or services (other than trade accounts payable arising in the ordinary
course of business which are not more than sixty (60) days past due), (c) all indebtedness secured
by any Lien upon Property of such Person, whether or not such Person has assumed or become
liable for the payment of such indebtedness, (d) all Capitalized Lease Obligations of such Person,
and (e) all obligations of such Person on or with respect to letters of credit, bankers' acceptances
and other extensions of credit whether or not representing obligations for borrowed money.
"Interest Period" means, with respect to (a) any Variable Rate Portion, the period
commencing on, as the case may be, the creation, continuation or conversion date with respect to
-10- 30
such Variable Rate Portion and ending 1, 2, 3, 6 or 12 months thereafter as selected by the City in
its notice as provided herein; provided that all of the foregoing provisions relating to Interest
Periods are subject to the following:
(i) if any Interest Period would otherwise end on a day which is not a
Business Day, that Interest Period shall be extended to the next succeeding Business Day,
unless in the case of an Interest Period for a Variable Rate Portion the result of such
extension would be to carry such Interest Period into another calendar month in which
event such Interest Period shall end on the immediately preceding Business Day;
(ii) no Interest Period may extend beyond the final maturity date of the Note;
(iii) the interest rate to be applicable to each Portion for each Interest Period
shall apply from and including the first day of such Interest Period to but excluding the
last day thereof; and
(iv) no Interest Period may be selected if after giving effect thereto the City
will be unable to make a principal payment scheduled to be made during such Interest
Period without paying part of a Variable Rate Portion on a date other than the last day of
the Interest Period applicable thereto.
For purposes of determining an Interest Period, a month means a period starting on one day in a
calendar month and ending on a numerically corresponding day in the next calendar month,
provided, however, if an Interest Period begins on the last day of a month or if there is no
numerically corresponding day in the month in which an Interest Period is to end, then such
Interest Period shall end on the last Business Day of such month.
`Interim Funding Period' means the period commencing on the Closing Date and
continuing so long as either this Agreement or the BNP Paribas Revolving Credit Agreement is
in effect.
"Letters of Credit" is defined in Section 1.1 hereof.
"Lien" means any mortgage, lien, security interest, pledge, charge, or encumbrance of
any kind in respect of any Property, including the interests of a vendor or lessor under any
conditional sale, Capital Lease or other title retention arrangement.
"Loan " and "Loans" each is defined in Section 1.2 hereof.
"Loan Documents" means this Agreement, the Note, and each other instrument or
document to be delivered hereunder or thereunder or otherwise in connection therewith.
"Maintenance and Operation Costs "means the reasonable and necessary costs spent or
incurred by the City for maintaining and operating the Wastewater System, calculated in
accordance with sound accounting principles, and all reasonable and necessary expenses of
management and repair and other expenses to maintain and preserve the Wastewater System in
good repair and working order, and including all reasonable and necessary administrative costs of
the City attributable to the Wastewater System, such as salaries and wages and the necessary
contribution to retirement of employees, overhead, insurance, taxes (if any, and fees of auditors,
accountants, attorneys or engineers, and including all other reasonable and necessary costs of the
City or charges required to be paid by it to comply with the terms of the Loans or this Agreement,
but excluding depreciation, replacement and obsolescence charges or reserves therefor and
amortization of intangibles or other bookkeeping entries of a similar nature.
"Material Adverse Effect" means (a) a material adverse change in, or material adverse
effect upon, the operations, business, Property, condition (financial or otherwise) or prospects of
the City or of the City and its Subsidiaries taken as a whole, (b) a material impairment of the
ability of the City to perform its obligations under any Loan Document, or (c) a material adverse
effect upon (i) the legality, validity, binding effect or enforceability against the City of any Loan
Document or the rights and remedies of the Bank thereunder or (ii) the perfection or priority of
any Lien granted hereunder.
"Maximus: Annual Debt Service" means, as of the date of calculation, the maximum
amount of Debt Service for the current or any future Fiscal Year.
Loans.
"Maximum Rate" means the maximum legal rate of interest payable by the City on the
Moody's"means Moody's Investors Service, Inc.
`Net Revenues means, with respect to the Wastewater System, for any period of
computation, the amount of the Gross Revenues received from the Wastewater System during
such period, less the amount of Maintenance and Operation Costs of the Wastewater System
becoming payable during such period.
"Note" is defined in Section 1.2 hereof.
"Obligations" means all obligations of the City to pay principal and interest on the
Loans, all fees and charges payable hereunder, and all other payment obligations of the City
arising under or in relation to any Loan Document, in each case whether now existing or
hereafter arising, due or to become due, direct or indirect, absolute or contingent, and howsoever
evidenced, held, or acquired.
"Parity Obligations"means all bonds, loans, notes or other obligations (including without
limitation long-term contracts, loans, sub -leases or other legal financing arrangements) of the
City payable from and secured by a pledge of and lien upon any of the Pledged Revenues issued
or incurred pursuant to Section 8.9 or 8.10.
"Parity Obligations Instrument" means the resolution, agreement, trust indenture or
installment sale agreement adopted, entered into or executed and delivered by the City, and under
which Panty Obligations are issued.
-12- 32
`Person" means an individual, partnership, corporation, limited liability company,
association, trust, unincorporated organization, or any other entity or organization, including a
government or agency or political subdivision thereof.
"Pledged Revenues" means Net Revenues, less payment of debt service on the 2000
"Portion" is defined in Section 2.1(a) hereof.
"Property" means any interest in any kind of property or asset, whether real, personal or
mixed, or tangible or intangible.
"Revolving Credit" is defined in Section 1.1 hereof.
"S&P" means Standard & Poor's Ratings Services, or its successors.
"State Loans" means any loans advanced to the City by the State pursuant to Section
ow
"Termination Date" means August 1, 2011, or such earlier date on which the
Commitment is terminated in whole pursuant to Section 3.3, 9.2 or 9.3 hereof
"2000 Bonds" means the City's Wastewater Revenue Bonds, Series 2000, issued on May
3, 2000 in the original principal amount of $8,895,000 pursuant to the 2000 Indenture.
"2000 Indenture" means that certain Indenture of Trust, dated as of May 1, 2000,
between the City and Norwest Bank Minnesota, N.A., relating to the 2000 Bonds.
"Variable Rate Portions" is defined in Section 2.1(a) hereof.
"Variable Rate" means a rate of interest equal to 91.03% of the 1 year Federal Home
Loan Bank Rate.
"Wastewater System "means the sanitary sewerage and sewage disposal system of the
City, comprising all facilities for the collection, treatment or disposal of sewage and waste.
"Wastewater System Obligations" means, collectively, the Loans and any Parity
Obligations issued and at any time Outstanding hereunder and under a Parity Obligations
Instrument.
Section 5.2. brteipretation. The foregoing definitions are equally applicable to both the
singular and plural forms of the terms defined. The words "hereof', `herein ", and "hereunder"
and words of like import when used in this Agreement shall refer to this Agreement as a whole
and not to any particular provision of this Agreement. All references to time of day herein are
references to San Francisco, California time unless otherwise specifically provided. Where the
character or amount of any asset or liability or item of income or expense is required to be
-13- 33
determined or any consolidation or other accounting computation is required to be made for the
purposes of this Agreement, it shall be done in accordance with GAAP except where such
principles are inconsistent with the specific provisions of this Agreement.
SECTION 6. REPRESENTATIONS AND WARRAN'T'IES.
The City represents and warrants to the Bank as follows:
Section 6.1. Organization and Powers. The City (a) is duly established and validly
existing under the laws of the State of California under and pursuant to the Constitution of the
State of California and is a charter city; (b) has all corporate powers and all material
governmental licenses, authorizations, consents, and approvals required to carry on its business
as now conducted; (c) has full power and authority to operate the Wastewater System and to
acquire, construct finance, and operate the Wastewater System; and (d) has full power and
authority to adopt the Bond Law; to execute, deliver, and perform this Agreement and the Loan
Documents; and to borrow and repay hereunder.
Section 6.2. Authorization; Contravention. The execution, delivery, and performance by
the City of this Agreement, and the Loan Documents and the making of payments of principal
and interest on any Loans have been duly authorized by all necessary action by the City and do
not contravene, or result in the violation of, or constitute a default under, any provision of
applicable law or regulation, or any order, rule, or regulation of any court governmental agency,
or instrumentality or any agreement, resolution, or instrument to which the City is a party or by
which its or any of its property is bound.
Section 6.3. Governmental Consent or Approval. As of the date hereof, no
authorization, consent, approval, permit, license, or exemption of, or filing or registration with,
any court or governmental department, commission, board, bureau, agency, or instrumentality
that has not been obtained or issued is or will be necessary for the valid adoption, execution,
delivery or performance by the City of the Loan Documents and this Agreement.
Section 6.4. Binding Effect. This Agreement and the Loan Documents constitute valid
and binding obligations of the City enforceable against the City in accordance with their
respective terms, except as such enforceability may be limited by the City's bankruptcy,
insolvency, reorganization, moratorium, or other laws or equitable principles relating to or
limiting creditor's rights generally.
Section 6.5. Use of Proceeds; Margin Stock. The City shall use the proceeds of the
Loans and other extensions of credit made available hereunder for interim financing for the
construction of Wastewater System capital improvements, and for such other legal and proper
purposes as are consistent with all applicable laws. The City is not engaged in the business of
extending credit for the purpose of purchasing or carrying margin stock (within the meaning of
Regulation U of the Board of Governors of the Federal Reserve System), and no part of the
proceeds of any extension of credit made hereunder will be used to purchase or cavy any such
margin stock or to extend credit to others for the purpose of purchasing or carrying any such
margin stock.
-14- 34
Section 6.6. Financial Reports. The financial statements of the City as of June 30, 2004,
and accompanying notes thereto, which financial statements are accompanied by the audit report
of Caporicci & Larson, independent public accountants, and the unaudited interim consolidated
of the City as of July 15, 2005, fairly present the financial condition of the City as at said dates
and the results of its operations and cash flows for the periods then ended in conformity with
GAAP applied on a consistent basis. The City has no contingent liabilities which are material to
it other than as indicated on such financial statements or, with respect to future periods, on the
financial statements famished pursuant to Section 8.5 hereof.
Section 6.7. No Material Adverse Change. Since June 30, 2004, there has been no
change in the condition (financial or otherwise) or business prospects of the City.
Section 6.8. Full Disclosure. The statements and information famished to the Bank in
connection with the negotiation of this Agreement and the other Loan Documents and the
commitment by the Bank to provide all or part of the financing contemplated hereby do not
contain any untrue statements of a material fact or omit a material fact necessary to make the
material statements contained herein or therein not misleading, the Bank acknowledging that, as
to any projections furnished to the Bank, the City only represents that the same were prepared on
the basis of information and estimates the City believed to be reasonable.
Section 6.9. Good Title. The City has good and defensible title (or valid leasehold
interests) to its assets as reflected on the most recent financial statements of the City furnished to
the Bank, subject to no Liens other than such thereof as are permitted by Section 8.8 hereof.
Section 6.10. Litigation and Other Controversies. There is no litigation or governmental
or arbitration proceeding or labor controversy pending, nor to the knowledge of the City
threatened, against the City or any of its Property which if adversely determined could reasonably
be expected to have a Material Adverse Effect.
Section 6.11. Approvals. No authorization, consent, license, or exemption from, or filing
or registration with, any court or governmental department, agency, or instrumentality, nor any
approval or consent of any other Person, is or will be necessary to the valid execution, delivery,
or performance by the City of any Loan Document, except for such approvals which have been
obtained prior to the date of this Agreement and remain in full force and effect.
Section 6.12. Other Agreements. The City is not in default under the terms of any
covenant, indenture or agreement of or affecting the City or any of its Property, which default if
uncured could reasonably be expected to have a Material Adverse Effect.
Section: 6.13. No Default. No Default or Event of Default has occurred and is continuing.
Section 6.14. No Sovereign Immunity. The defense of sovereign immunity is not
available to the City in any proceeding by the Bank to enforce the obligations of the City under
this Agreement and the Note, and the City hereby consents to the initiation of any such
proceedings in any court of competent jurisdiction.
-15- 35
Section 6.15. No Maxinuun Rate. Under current law, the interest rate payable on Loans or
any Obligations of the City is not subject to limitation under the laws of the State of California.
SECTION 7. CONDITIONS PRECEDENT.
The obligation of the Bank to make any Loan under this Agreement is subject to the
following conditions precedent:
Section 7.1. All Advances. As of the time of the making of each extension of credit
(including the initial extension of credit) hereunder:
(a) each of the representations and warranties set forth in Section 6 hereof and
in the other Loan Documents shall be true and correct as of such time, except to the
extent the same expressly relate to an earlier date;
(b) no Default or Event of Default shall have occurred and be continuing or
would occur as a result of malting such extension of credit;
(c) such extension of credit shall not violate any order, judgment, or decree of
any court or other authority or any provision of law or regulation applicable to the Bank
(including, without limitation, Regulation U of the Board of Governors of the Federal
Reserve System) as then in effect.
The City's request for any Loan shall constitute its warranty as to the facts specified in
subsections (a) through (c), both inclusive, above.
Section 7.2. Initial Advance. At or prior to the making of the initial extension of credit
hereunder, the following conditions precedent shall also have been satisfied:
(a) the Bank shall have received the following (and, with respect to all
documents, each to be properly executed and completed) and the same shall have been
approved as to form and substance by the Bank:
(i) the Note;
(ii) copies (executed or certified as may be appropriate) of resolutions
of the City Council of the City authorizing the execution, delivery, and
performance of the Loan Documents;
(iii) articles of incorporation (or equivalent organizational document) of
the City certified by the appropriate governmental office of the state of its
organization;
(iv) by-laws (or equivalent organizational document) for the City
certified by an appropriate officer of such Person acceptable to the Bank;
-16- 36
(v) an incumbency certificate containing the name, title and genuine
signature of the City's Authorized Representatives;
(b) the Bank shall have received the initial fees called for hereby;
(c) legal matters incident to the execution and delivery of the Loan
Documents and to the transactions contemplated hereby shall be satisfactory to the Bank
and its counsel; and the Bank shall have received the favorable written opinion of counsel
for the City in form and substance satisfactory to the Bank and its counsel;
(d) the Bank shall have received such other agreements, instruments,
documents, certificates and opinions as the Bank may reasonably request;
SECTION 8. COVENANTS.
The City agrees that, so long as any credit is available to or in use by the City hereunder,
except to the extent compliance in any case or cases is waived in writing by the Bank:
Section 8.1. Maintenance of Existence. The City shall preserve and maintain its
existence. The City shall preserve and keep in force and effect all licenses, permits and
approvals necessary to the proper conduct of its business.
Section 8.2. Maintenance of Properties. The City shall maintain, preserve, and keep its
property, plant, and equipment in good repair, working order and condition (ordinary wear and
tear excepted) and shall from time to time make all needful and proper repairs, renewals,
replacements, additions, and betterments thereto so that at all times the efficiency thereof shall be
fully preserved and maintained.
Section 8.3. Taxes and Assessments. The City shall duly pay and discharge, all taxes,
rates, assessments, fees, and governmental charges upon or against it or its Property, in each case
before the same become delinquent and before penalties accrue thereon, unless and to the extent
that the same are being contested in good faith and by appropriate proceedings which prevent
enforcement of the matter under contest and adequate reserves are provided therefor.
Section 8.4. Insurance. The City shall insure and keep insured with good and
responsible insurance companies, all insurable Property owned by it which is of a character
usually insured by Persons similarly situated and operating like Properties against loss or damage
from such hazards and risks, and in such amounts, as are insured by Persons similarly situated
and operating like Properties; and the City shall insure, such other hazards and risks (including
employers' and public liability risks) with good and responsible insurance companies and to the
extent usually insured by Persons similarly situated and conducting similar business. The City
shall upon request furnish to the Bank a certificate setting forth in summary form the nature and
extent of the insurance maintained pursuant to this Section.
Section 8.5. Financial Reports. The City shall maintain a standard system of accounting
in accordance with GAAP and shall famish to the Bank and its duly authorized representatives
-17- 37
such information respecting the business and financial condition of the City as the Bank may
reasonably request; and without any request, shall furnish to the Bank:
(a) as soon as available, and in any event within 180 days after the close of
each fiscal year of the City, a copy of the balance sheet of the City as of the close of such
period and the statements of income, retained earnings, and cash flows of the City for
such period, and accompanying notes thereto, each in reasonable detail showing in
comparative form the figures for the previous fiscal year, accompanied by an unqualified
opinion thereon of Caporicci & Larson or another firm of independent public accountants
of recognized national standing, selected by the City and satisfactory to the Bank, to the
effect that the financial statements have been prepared in accordance with GAAP and
present fairly in accordance with GAAP the consolidated financial condition of the City
as of the close of such fiscal year and the results of its operations and cash flows for the
fiscal year then ended and that an examination of such accounts in connection with such
financial statements has been made in accordance with generally accepted auditing
standards and, accordingly, such examination included such tests of the accounting
records and such other auditing procedures as were considered necessary in the
circumstances;
(b) within the period provided in subsection (c) above, the written statement
of an Authorized Representative that they have obtained no knowledge of any Default or
Event of Default, or, if such accountants have obtained knowledge of any such Default or
Event of Default, they shall disclose in such statement the nature and period of the
existence thereof,
(c) promptly after receipt thereof, any additional written reports, management
letters or other detailed information contained in writing concerning significant aspects of
the City's operations and financial affairs given to it by its independent public
accountants;
(d) as soon as practicable but in any event within 30 days after the issuance
thereof, copies of any prospectus, official statement, offering circular, placement
memorandum, or similar or corresponding document, and any supplements thereto and
updates and amendments thereof, that the City makes available in connection with the
offering for sale of any securities issued by the City secured by a pledge of revenues of
the Wastewater System, including State Loans, and, on request, copies of such other
financial reports that the City shall customarily and regularly provide to the public;
(e) [additional reporting requirements to be determined including
additional debt test and debt service requirements]; and
(f) promptly after knowledge thereof shall have come to the attention of any
responsible officer of the City, written notice of (i) any threatened or pending litigation or
governmental or arbitration proceeding or labor controversy against the City or any of its
Property which, if adversely determined, could reasonably be expected to have a Material
Adverse Effect or (ii) the occurrence of any Default or Event of Default hereunder.
-18- 38
Section 8.6. Inspection. The City shall permit the Bank and its duly authorized
representatives and agents to visit and inspect any of the Properties, corporate books and
financial records of the City, to examine and make copies of the books of accounts and other
financial records of the City, and to discuss the affairs, finances and accounts of the City with
and to be advised as to the same by, its officers, employees, and independent public accountants
(and by this provision the City hereby authorizes such accountants to discuss with the Bank the
finances and affairs of the City) at such reasonable tunes and reasonable intervals as the Bank
may designate.
Section 8.7. Borrowings and Guaranties. The City shall not issue, incur, assume, create,
or have outstanding any Indebtedness for Borrowed Money, or be or become liable as endorser,
guarantor, surety, or otherwise for any debt, obligation, or undertaking of any other Person, or
otherwise agree to provide funds for payment of the obligations of another, or supply funds
thereto or invest therein or otherwise assure a creditor of another against Ioss, or apply for or
become liable to the issuer of a letter of credit which supports an obligation of another, or
subordinate any claim or demand it may have to the claim or demand of any other Person;
provided, however, that the foregoing shall not restrict nor operate to prevent the City from
issuing Parity Obligations pursuant to Section 8.9 hereof.
Section 8.8. Liens; Closing off Lien of 2000 Indenture.
(a) The 2000 Bonds are secured by a first hen on Net Revenues, and therefore have a lien
which is senior to the Bank's lien on Pledged Revenues.
(b) Other than as provided in Section 8.9, the City shall not create, incur or permit to exist
any Lien of any kind on Pledged Revenues, other than the Lien granted to the Bank pursuant to
Section 4.1 hereof, and the lien on Pledged Revenues granted to BNP Paribas under the BNP
Paribas Revolving Credit Agreement.
(c) The City hereby covenants that it will not issue any obligations pursuant to Section
3.06 of the 2000 Indenture, and any Wastewater System Obligations issued to refund the 2000
Bonds shall be issued as Parity Obligations under Section 8.9, or as Wastewater System
Obligations which are subordinate to the Loans.
Section 8.9. Parity Obligations.
In addition to the Loan, the City may, by Parity Obligations Instrument, issue or incur
other loans, advances or indebtedness payable from Pledged Revenues to be derived from the
Wastewater System, to provide financing for the Wastewater System, in such principal amount as
shall be determined by the City. The City may issue or incur any such Parity Obligations subject
to the following specific conditions which are hereby made conditions precedent to the issuance
and delivery of such Parity Obligations:
(a) The City shall be in compliance with all covenants set forth in this Agreement.
-19- 39
(b) The Pledged Revenues of the Wastewater System, calculated on sound accounting
principles, as shown by the books of the City for the latest Fiscal Year or any more recent
twelve (12) month period selected by the City ending not more than sixty (60) days prior
to the adoption of the Parity Obligations Instrument pursuant to which such Parity
Obligations are issued, as shown by the books of the City, plus, at the option of the City,
any or all of the items hereinafter in this paragraph designated (i) and (ii), shall at least
equal One Hundred Twenty -Five percent (125%) of Maximum Annual Debt Service,
with Maximum Annual Debt Service calculated on all Wastewater System Obligations to
be Outstanding immediately subsequent to the issuance of such Parity Obligations which
have a lien on Pledged Revenues of the Wastewater System. The items any or all of
which may be added to such Pledged Revenues for the purpose of issuing or incurring
Parity Obligations hereunder are the following:
(i) An allowance for Pledged Revenues from any additions to or improvements
or extensions of the System to be made with the proceeds of such Parity
Obligations, and also for Pledged Revenues from any such additions,
improvements or extensions which have been made from moneys from any source
but in any case which, during all or any part of such Fiscal Year or such twelve
(12) month period, were not in service, all in an amount equal to ninety percent
(90%) of the estimated additional average annual Pledged Revenues to be derived
from such additions, improvements and extensions for the first thirty-six (36)
month period in which each addition, improvement or extension is respectively to
be in operation, all as shown in the written report of an Independent Consultant
engaged by the City; and
(ii) An allowance for earnings arising from any increase in the Charges which
has become effective prior to the incurring of such additional indebtedness but
which, during all or any part of such Fiscal Year or such twelve (12) month
period, was not in effect, in an amount equal to the amount by which the Pledged
Revenues would have been increased if such increase in Charges bad been in
effect during the whole of such Fiscal Year or such twelve (12) month period, all
as shown in the written report of an Independent Consultant engaged by the City.
(c) The Parity Obligations Instrument providing for the issuance of such Parity
Obligations under this Section 8.9 shall provide that the proceeds of such Parity Obligations shall
be applied to the acquisition, construction, improvement, financing or refinancing of additional
facilities, improvements or extensions of existing facilities within the Wastewater System, or
otherwise for facilities, improvements or property which the City determines are of benefit to the
Wastewater System, or for the purpose of refunding any Wastewater System Obligations in
whole or in part, including all costs (including costs of issuing such Parity Obligations and
including capitalized interest on such Parity Obligations during any period which the City deems
necessary or advisable) relating thereto.
Section 8.10. State Lomas.
-20- 40
The City may borrow money from the State to finance improvements to the Wastewater
System, and the obligation of the City to make payments to the State under the loan agreement
memorializing said loan (the "State Loan") may be treated as Parity Obligations for purposes of
this Agreement; provided that the City shall not make a payment on such State Loan (except as
hereinafter expressly permitted) to the extent it would have the effect of causing the City to fail
to make a timely payment on the Loan. In the event the City's Wastewater Fund does not contain
sufficient funds to make the full amount of payments on the Loan and such State Loan, the City
shall make payments on the Loan and such State Loan on a pro rata basis.
Section 8.11. Rate Covenant
(a) The City shall fix, prescribe, revise and collect Charges for the Wastewater System
during each Fiscal Year which are at least sufficient, after making allowances for contingencies
and error in the estimates, to pay the following amounts in the following order:
(i) all Maintenance and Operation Costs of the Wastewater System
estimated by the City to become due and payable in such Fiscal Year;
(ii) the Debt Service on the 2000 Bonds, the Loan, and State Loans;
(iii) all other payments required for compliance with this Agreement and
the instruments pursuant to which any Panty Obligations relating to the Wastewater
System shall have been issued; and
(iv) all payments required to meet any other obligations of the City which
are charges, liens, encumbrances upon or payable from the Gross Revenues of the
Wastewater System or the Pledged Revenues of the Wastewater System.
(b) In addition, the City shall fix, prescribe, revise and collect Charges for the
Wastewater System (exclusive of connection fees and transfers to the Wastewater Fund from a
rate stabilization fund, should one be established) during each Fiscal Year which are sufficient to
yield Pledged Revenues of the Wastewater System at least equal to one hundred percent (100%)
of the amounts payable under the preceding clause (a)(ii) in such Fiscal Year for Loan which
have a lien on such Pledged Revenues.
(c) In addition, the City shall fix, prescribe, revise and collect Charges for the
Wastewater System during each Fiscal Year which are sufficient to yield Pledged Revenues of
the Wastewater System at least equal to one hundred twenty-five percent (125%) of the amounts
payable under the preceding clause (a)(ii) in such Fiscal Year for Loan which have a lien on such
Pledged Revenues.
Section 8.12. Connpliance with Laws. The City shall comply in all respects with the
requirements of all federal, state, local, and foreign laws, rules, regulations, ordinances and
orders applicable to or pertaining to its Property or business operations, where any such
non-compliance, individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect or result in a Lien upon any of its Property.
-21- 41
Section 8.13. Use of Proceeds. The City shall use the credit extended under this
Agreement solely for the purposes set forth in, or otherwise permitted by, Section 6.4 hereof.
Section: 8.14. Proceeds of Loans. The proceeds of the Loans will be used by the City
solely for the purposes described in the Bond Law, and specifically for improvements to the
Wastewater System.
Section 8.15. No Amendment of Certain Contracts or Ordinances. The City will not
consent to any amendment to or modification or waiver of any of the provisions of the Bond Law
without the prior written consent of the Bank.
Section 8.16. Taxes and Liabilities. The City will pay all of its debts promptly and in
accordance with its terms and pay and discharge or cause to be paid and discharged promptly all
taxes, assessments, and governmental charges or levies imposed upon the Wastewater System or
upon the Wastewater System's income and profits, or upon any of the Wastewater System's
property, real, personal, or mixed, or upon any part thereof, before the same shall become in
default, except for any such debt, taxes or other obligation which the City reasonably may be
contesting in good faith.
Section 8.17. Supplemental Ordinances and Further Assurances. The City will not adopt
any supplemental ordinances, pursuant to the Bond Law or otherwise, which would adversely
affect the ability of the City to make payments on the Loans when due; provided, however, that
as long as the City complies with its covenants in Section 8.7 hereof, nothing herein shall prevent
the City from issuing Parity Debt, as provided in Section 8.9 and the Ordinance.
SECTION 9. EVENTS OF DEFAULT AND REMEDIES.
Section: 9.1. Events of Default. Any one or more of the following shall constitute an
`Event of Default"hereunder:
(a) default in the payment when due of all or any part of any Obligation
payable by the City hereunder or under any other Loan Document (whether at the stated
maturity thereof or at any other time provided for in this Agreement), or default shall
occur in the payment when due of any other indebtedness or obligation (whether direct,
contingent or otherwise) of the City owing to the Bank; or
(b) default in the observance or performance of any covenant set forth in
Sections 8; or
(c) default in the observance or performance of any other provision hereof or
of any other Loan Document which is not remedied within thirty (30) days after the
earlier of (i) the date on which such failure shall first become known to any officer of the
City or (ii) written notice thereof is given to the City by the Bank; or
(d) any representation or warranty made by the City herein or in any other
Loan Document, or in any statement or certificate furnished by it pursuant hereto or
-22- 42
thereto, or in connection with any extension of credit made hereunder, proves untrue in
any material respect as of the date of the issuance or making thereof, or
(e) any event occurs or condition exists (other than those described in
subsections (a) through (d) above) which is specified as an event of default under any of
the other Loan Documents, or any of the Loan Documents shall for any reason not be or
shall cease to be in full force and effect, or any of the Loan Documents is declared to be
null and void, or this Agreement shall for any reason fail to create a valid and perfected
first priority Lien in favor of the Bank in Pledged Revenues; or
(1) default shall occur under any Indebtedness for Borrowed Money issued;
assumed or guaranteed by the City aggregating more than $500,000, or under any
indenture, agreement or other instrument under which the same may be issued, and such
default shall continue for a period of time sufficient to permit the acceleration of the
maturity of any such Indebtedness for Borrowed Money (whether or not such maturity is
in fact accelerated), or any such Indebtedness for Borrowed Money shall not be paid
when due (whether by lapse of time, acceleration or otherwise); or
(g) any judgment or judgments, writ or writs, or warrant or warrants of
attachment, or any similar process or processes in an aggregate amount in excess of
$2,000,000 shall be entered or filed against the City or against any of their Property and
which remains unvacated, unbonded, unstayed or unsatisfied for a period of 30 days; or
(h) dissolution or termination of the existence of the City; or
(i) the City shall make a general assignment for the benefit of creditors, or
declare a moratorium with respect to any of its debts, or shall fail generally to pay its
debts as they become due, or shall take any action to authorize any of the foregoing;
0) the City shall (i) have entered involuntarily against it an order for relief
under the United States Bankruptcy Code, as amended, (ii) not pay, or admit in writing its
inability to pay, its debts generally as they become due, (iii) make an assignment for the
benefit of creditors, (iv) apply for, seek, consent to, or acquiesce in, the appointment of a
receiver, custodian, trustee, examiner, liquidator or similar official for it or any
substantial part of its Property, (v) institute any proceeding seeking to have entered
against it an order for relief under the United States Bankruptcy Code, as amended, to
adjudicate it insolvent, or seeking dissolution, winding up, liquidation, reorganization,
arrangement, adjustment or composition of it or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors or fail to file an answer or
other pleading denying the material allegations of any such proceeding filed against it,
(vi) take any corporate action in furtherance of any matter described in parts (i) through
(v) above, or (vii) fail to contest in good faith any appointment or proceeding described in
Section 9.1(1) hereof, or
(k) a custodian, receiver, trustee, examiner, liquidator or similar official shall
be appointed for the City or any substantial part of any of their Property, or a proceeding
-23- 43
described in Section 9.1(k)(v) shall be instituted against the City, and such appointment
continues undischarged or such proceeding continues undismissed or unstayed for a
period of 60 days.
Section 9.2. Non -Bankruptcy Defaults. When any Event of Default described in
subsection (a) through 6), both inclusive, of Section 9.1 has occurred and is continuing, the Bank
may, by notice to the City, take one or more of the following actions:
(a) terminate the obligation of the Bank to extend any further credit hereunder
on the date (which may be the date thereof) stated in such notice;
(b) declare the principal of and the accrued interest on the Note to be
forthwith due and payable and thereupon the Note, including both principal and interest
and all fees, charges and other Obligations payable hereunder and under the other Loan
Documents, shall be and become immediately due and payable without further demand,
presentment, protest or notice of any kind; and
(c) enforce any and all rights and remedies available to it under the Loan
Documents or applicable law.
Section 9.3. Bankruptcy Defaults. When any Event of Default described in
subsection (k) or (1) of Section 9.1 has occurred and is continuing, then the Note, including both
principal and interest, and all fees, charges and other Obligations payable hereunder and under
the other Loan Documents, shall immediately become due and payable without presentment,
demand, protest or notice of any kind, and the obligation of the Bank to extend further credit
pursuant to any of the terms hereof shall immediately terminate. In addition, the Bank may
exercise any and all remedies available to it under the Loan Documents or applicable law.
SECTION 10. MISCELLANEOUS.
Section 10.1. Non -Business Day. If any payment hereunder becomes due and payable on
a day which is not a Business Day, the due date of such payment shall be extended to the next
succeeding Business Day on which date such payment shall be due and payable. In the case of
any payment of principal falling due on a day which is not a Business Day, interest on such
principal amount shall continue to accrue during such extension at the rate per annum then in
effect, which accrued amount shall be due and payable on the next scheduled date for the
payment of interest.
Section 10.2. No Waiver, Cumulative Remedies. No delay or failure on the part of the
Bank or on the part of the holder of the Obligations in the exercise of any power or right shall
operate as a waiver thereof or as an acquiescence in any default, nor shall any single or partial
exercise of any power or right preclude any other or further exercise thereof or the exercise of
any other power or right. The rights and remedies hereunder of the Bank and of the holder of the
Obligations are cumulative to, and not exclusive of, any rights or remedies which any of them
would otherwise have.
-24- 44
Section 10.3. Amendments, Etc. No amendment, modification, termination or waiver of
any provision of this Agreement or of any other Loan Document, nor consent to any departure by
the City therefrom, shall in any event be effective unless the same shall be in writing and signed
by the Bank. No notice to or demand on the City in any case shall entitle the City to any other or
further notice or demand in similar or other circumstances.
Section 10.4. Costs and Expenses; Indemnification. The City agrees to pay on demand
the costs and expenses of the Bank in connection with the negotiation, preparation, execution and
delivery of this Agreement, the other Loan Documents and the other instruments and documents
to be delivered hereunder or thereunder, and in connection with the recording or filing of any of
the foregoing, and in connection with the transactions contemplated hereby or thereby, and in
connection with any consents hereunder or waivers or amendments hereto or thereto, including
the fees and expenses of counsel for the Bank with respect to all of the foregoing (whether or not
the transactions contemplated hereby are consummated). The City further agrees to pay to the
Bank or any other holder of the Obligations all costs and expenses (including court costs and
attorneys' fees), if any, incurred or paid by the Bank or any other holder of the Obligations in
connection with any Default or Event of Default or in connection with the enforcement of this
Agreement or any of the other Loan Documents or any other instrument or document delivered
hereunder or thereunder (including, without limitation, all such costs and expenses incurred in
connection with any proceeding under the United States Bankruptcy Code involving the City or
any guarantor). The City further agrees to indemnify the Bank, and any security trustee, and their
respective directors, officers and employees, against all losses, claims, damages, penalties,
judgments, liabilities and expenses (including, without limitation, all expenses of litigation or
preparation therefor, whether or not the indemnified Person is a party thereto) which any of them
may pay or incur arising out of or relating to any Loan Document or any of the transactions
contemplated thereby or the direct or indirect application or proposed application of the proceeds
of any extension of credit made available hereunder, other than those which arise from the gross
negligence or willful misconduct of the party claiming indemnification. The City, upon demand
by the Bank at any time, shall reimburse the Bank for any legal or other expenses incurred in
connection with investigating or defending against any of the foregoing except if the same is
directly due to the gross negligence or willful misconduct of the party to be indemnified. The
obligations of the City under this Section shall survive the termination of this Agreement.
Section 10.5. Documentary Tares. The City agrees to pay on demand any documentary,
stamp or similar taxes payable in respect of this Agreement or any other Loan Document,
including interest and penalties, in the event any such taxes are assessed, irrespective of when
such assessment is made and whether or not any credit is then in use or available hereunder.
Section 10.6. Survival of Representations. All representations and warranties made
herein or in any of the other Loan Documents or in certificates given pursuant hereto or thereto
shall survive the execution and delivery of this Agreement and the other Loan Documents, and
shall continue in full force and effect with respect to the date as of which they were made as long
as any credit is in use or available hereunder.
Section 10.7. Survival of Indemnities. All indemnities and other provisions relative to
reimbursement to the Bank of amounts sufficient to protect the yield of the Bank with respect to
-25- 45
the Loans, including, but not limited to, Sections 2.7 and 2.9 hereof, shall survive the termination
of this Agreement and the payment of the Note.
Section 10.8. Notices. Except as otherwise specified herein, all notices hereunder shall be
in writing (including, without limitation, notice by telecopy) and shall be given to the relevant
party at its address or telecopier number set forth below, or such other address or telecopier
number as such party may hereafter specify by notice to the other given by courier, by United
States certified or registered mail, by telecopy or by other telecommunication device capable of
creating a written record of such notice and its receipt. Notices hereunder shall be addressed:
to the City at:
City of Petaluma
11 English Street
Attention: Steve Carmichael,
Administrative Services Director
Telephone: (707)778-4323
Telecopy: (707) 778-4428
to the Bank at:
Zions First National Bank
One South Main Street, Suite 1660
Salt Lake City, Utah 84111
Attention: Robert Howell
Telephone: (801) 524-8691
Telecopy: (801) 575-8070
such notice, request or other communication shall be effective (i) if given by telecopier, when
such telecopy is transmitted to the telecopier number specified in this Section and a confirmation
of such telecopy has been received by the sender, (ii) if given by mail, five (5) days after such
communication is deposited in the mail, certified or registered with return receipt requested,
addressed as aforesaid or (iii) if given by any other means, when delivered at the addresses
specified in this Section; provided that any notice given pursuant to Section 1 or Section 2 hereof
shall be effective only upon receipt.
Section 10.9. Construction. The provisions of this Agreement relating to Subsidiaries
shall only apply during such times as the City has one or more Subsidiaries. NOTHING
CONTAINED HEREIN SHALL BE DEEMED OR CONSTRUED TO PERMIT ANY ACT OR OMISSION
WHICH IS PROHIBITED BY THE TERMS OF ANY OF THE OTHER LOAN DOCUMENTS, THE
COVENANTS AND AGREEMENTS CONTAINED HEREIN BEING IN ADDITION TO AND NOT IN
SUBSTITUTION FOR THE COVENANTS AND AGREEMENTS CONTAINED IN THE OTHER LOAN
DOCUMENTS.
Section 10.10. Headings. Section headings used in this Agreement are for convenience of
reference only and are not a part of this Agreement for any other purpose.
Section 10.11. Severability of Provisions. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the
extent of such prohibition or unenforceability without invalidating the remaining provisions
hereof or affecting the validity or enforceability of such provision in any other jurisdiction.
Section 10.12. Counterparts. This Agreement may be executed in any number of
counterparts, and by different parties hereto on separate counterpart signature pages, and all such
counterparts taken together shall be deemed to constitute one and the same instrument.
-26- 46
Section 10.13. Binding Nature, Governing Law, Etc. This Agreement shall be binding
upon the City and its successors and assigns, and shall inure to the benefit of the Bank and the
benefit of its successors and assigns, including any subsequent holder of the Obligations. The
City may not assign its rights hereunder without the written consent of the Bank. This
Agreement constitutes the entire understanding of the parties with respect to the subject matter
hereof and any prior agreements, whether written or oral, with respect thereto are superseded
hereby. THIS AGREEMENT AND THE RIGHTS AND DUTIES OF THE PARTIES HERETO SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE
OF CALIFORNIA WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
Section 10.14. Submission to Jurisdiction; Waiver of Jiuy Trial. The City hereby submits
to the nonexclusive jurisdiction of the United States District Court for the
District of California and of any California State court sitting in the City of San Francisco for
purposes of all legal proceedings arising out of or relating to this Agreement, the other Loan
Documents or the transactions contemplated hereby or thereby. Should either party to this
Agreement bring legal action against the other, the case shall be handled in the Superior Court of
the State of California in the County of Sonoma. The City irrevocably waives, to the fullest
extent permitted by law, any objection which it may now or hereafter have to the laying of the
venue of any such proceeding brought in such a court and any claim that any such proceeding
brought in such a court has been brought in an inconvenient forum. THE CITY AND THE BANK
EACH HEREBY IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENT OR THE TRANSACTIONS
CONTEMPLATED THEREBY.
[SIGNATURE PAGE TO FOLLOW]
-27- 47
Upon your acceptance hereof in the manner hereinafter set forth, this Agreement shall
constitute a contract between us for the uses and purposes hereinabove set forth.
-28- 48
Dated as of this
It is hereby executed this
CITY OF PETALUMA
City Manager
ATTEST:
Citv Clerk
APPROVED AS TO FORM:
Citv Attomev
day of .2005.
THE CITY OF PETALUMA
day of 2005.
CONSULTANT
COMPLETED AND APPROVED:
Director of Water Resources & Conservation
APPROVED:
Risk Manaeer
Finance Director
By
Name
Title
Address
City State Zin
Accepted and agreed to at San Francisco, California, as of the day and year last above
written.
ZIONS FIRST NATIONAL BANK
-29- 49
By
Name
Title
IZ
Name
Title
_30_ 50
EIT A
REVOLVING NOTE
On the Termination Date, for value received, the undersigned, City of Petaluma, a charter
city duly organized and existing under the laws of the State of California (the "City"), hereby
promises to pay to the order of ZToNs FIRST NATIONAL BANK (the 'Bank") at its office at
. Salt Lake City, Utah, the principal sum of (i) Twenty -Five Million and no/100
DOLLARS ($25,000,000), or (ii) such lesser amount as may at the time of the maturity hereof,
whether by acceleration or otherwise, be the aggregate unpaid principal amount of all Loans
owing from the City to the Bank under the Revolving Credit provided for in the Credit
Agreement hereinafter mentioned.
This Note evidences Loans made and to be made to the City by the Bank under the
Revolving Credit provided for under that certain Revolving Credit Agreement dated as of August
1, 2005, between the City and the Bank (said Revolving Credit Agreement, as the same may be
amended, modified or restated from time to time, being referred to herein as the "Credit
Agreement "), and the City hereby promises to pay interest at the office described above on such
Loans evidenced hereby at the rates and at the times and in the manner specified therefor in the
Credit Agreement.
This Note is issued by the City under the terms and provisions of the Credit Agreement
and is secured by, among other things, the Pledged Revenues, and this Note and the holder hereof
are entitled to all of the benefits and security provided for thereby or referred to therein, to which
reference is hereby made for a statement thereof. This Note may be declared to be, or be and
become, due prior to its expressed maturity, voluntary prepayments may be made hereon, all in
the events, on the terms and with the effects provided in the Credit Agreement. All capitalized
terms used herein without definition shall have the same meanings herein as such terms are
defined in the Credit Agreement.
Neither the faith and credit nor the taxing power of the City of Petaluma is pledged to
the payment of the principal of or interest on this Note.
The City hereby promises to pay all costs and expenses (including attorneys' fees)
suffered or incurred by the holder hereof in collecting this Note or enforcing any rights in any
collateral therefor. The City hereby waives presentment for payment and demand. THIS NOTE
SHALL BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE IN'T'ERNAL LAWS OF
THE STATE OF CALIFORNIA WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
51
THE CITY OF PETALUMA
By
Name
Title
-2- 52
■ l ,
53
REVOLVING CREDIT AGREEMENT
DATED AS OF
AUGUST 1, 2005
BETWEEN
CITY OF PETALUMA
/:W
BNP PARIBAS,
acting through its San Francisco Branch
Revoly LC K(BNP).doc 54
TABLE OF CONTENTS
SECTION
DESCRIPTION
PAGE
SECTION 1.
THE CREDITS.................................................................................................1
SECTION 1.1.
REVOLVING CREDIT....................................................................................1
SECTION 1.2.
REVOLVING CREDIT LOANS.......................................................................1
SECTION 1.3.
MANNER AND DISBURSEMENT OF LOANS.............................................2
SECTION 2.
INTEREST AND CHANGE IN CIRCUMSTANCES......................................2
SECTION 2.1.
INTEREST RATE OPTIONS...........................................................................2
SECTION 2.2.
MINIMUM AMOUNTS..................................................................................3
SECTION 2.3.
COMPUTATION OF INTEREST.....................................................................3
SECTION 2.4.
MANNER OF RATE SELECTION..................................................................3
SECTION 2.5.
CHANGE OF LAW.........................................................................................4
SECTION 2.6.
UNAVAILABILITY OF DEPOSITS OR INABILITY TO
ASCERTAIN ADJUSTED LIBOR...................................................................4
SECTION 2.7.
TAXES AND INCREASED COSTS.................................................................4
SECTION 2.8.
CHANGE IN CAPITAL ADEQUACY REQUIREMENTS ..............................5
SECTION 2.9.
FUNDING INDEMNITY .................................................................................5
SECTION 2.10.
LENDING BRANCH.......................................................................................6
SECTION 2.11.
DISCRETION OF BANK AS TO MANNER OF FUNDING ...........................6
SECTION 2.12.
MAXIMUM RATE..........................................................................................6
SECTION 3.
FEES, PREPAYMENTS AND TERMINATIONS............................................7
SECTION3.1.
FEES.................................................................................................................7
SECTION 3.2.
VOLUNTARY PREPAYMENTS.....................................................................7
SECTION 3.3.
TERMINATIONS............................................................................................7
SECTION 3.4.
PLACE AND APPLICATION OF PAYMENTS..............................................7
SECTION 3.5.
NOTATIONS...................................................................................................8
SECTION 4.
PLEDGED REVENUE; LIMITED OBLIGATION..........................................8
SECTION 4.1.
PLEDGED REVENUES; LIMITED OBLIGATION.........................................8
SECTION 4.2.
FURTHER ASSURANCES..............................................................................8
SECTION 5.
DEFINITIONS; INTERPRETATION...............................................................8
SECTION 5.1.
DEFINITIONS .................................................................................................8
SECTION 5.2.
INTERPRETATION.......................................................................................15
SECTION 6.
REPRESENTATIONS AND WARRANTIES.................................................15
SECTION 6.1.
ORGANIZATION AND POWERS................................................................15
SECTION 6.2.
AUTHORIZATION, CONTRAVENTION....................................................15
SECTION 6.3.
GOVERNMENTAL CONSENT OR APPROVAL.........................................16
SECTION 6.4.
BINDING EFFECT........................................................................................16
SECTION 6.5.
USE OF PROCEEDS; MARGIN STOCK.......................................................16
SECTION 6.6.
FINANCIAL REPORTS.................................................................................16
SECTION 6.7.
NO MATERIAL ADVERSE CHANGE.........................................................16
-1- 55
SECTION 6.8.
FULL DISCLOSURE......................................................................................16
SECTION6.9.
GOOD TITLE................................................................................................16
SECTION 6.10.
LITIGATION AND OTHER CONTROVERSIES..........................................17
SECTION6.11.
APPROVALS.................................................................................................17
SECTION 6.12.
OTHER AGREEMENTS................................................................................17
SECTION6.13.
NO DEFAULT...............................................................................................17
SECTION 6.14.
NO SOVEREIGN IMMUNITY ......................................................................17
SECTION 6.15.
NO NL XEvIUM RATE.................................................................................17
SECTION 7.
CONDITIONS PRECEDENT........................................................................17
SECTION7.1.
ALL ADVANCES..........................................................................................17
SECTION 7.2.
INITIAL ADVANCE.....................................................................................18
SECTION8.
COVENANTS................................................................................................18
SECTION 8.1.
MAINTENANCE OF EXISTENCE...............................................................18
SECTION 8.2.
MAINTENANCE OF PROPERTIES..............................................................19
SECTION 8.3.
TAXES AND ASSESSMENTS.......................................................................19
SECTION8.4.
INSURANCE.................................................................................................19
SECTION 8.5.
FINANCIAL REPORTS.................................................................................19
SECTION8.6.
INSPECTION.................................................................................................20
SECTION 8.7.
BORROWINGS AND GUARANTIES...........................................................20
SECTION 8.8.
LIENS; CLOSING OFF LIEN OF 2000 INDENTURE...................................20
SECTION 8.9.
PARITY OBLIGATIONS...............................................................................21
SECTION8.10.
STATE LOANS.............................................................................................22
SECTION 8.11.
RATE COVENANT.......................................................................................22
SECTION 8.12.
COMPLIANCE WITH LAWS......................................................................23
SECTION 8.13.
USE OF PROCEEDS......................................................................................23
SECTION 8.14.
PROCEEDS OF LOANS................................................................................23
SECTION 8.15.
NO AMENDMENT OF CERTAIN CONTRACTS OR
ORDINANCES..............................................................................................23
SECTION 8.16.
TAXES AND LIABILITIES............................................................................23
SECTION 8.17.
SUPPLEMENTAL ORDINANCES AND FURTHER
ASSURANCES..............................................................................................23
SECTION 9.
EVENTS OF DEFAULT AND REMEDIES....................................................24
SECTION 9.1.
EVENTS OF DEFAULT.................................................................................24
SECTION 9.2.
NON -BANKRUPTCY DEFAULTS...............................................................25
SECTION 9.3.
BANKRUPTCY DEFAULTS.........................................................................25
SECTION 10.
MISCELLANEOUS.......................................................................................26
SECTION 10.1.
NON -BUSINESS DAY..................................................................................26
SECTION 10.2.
NO WAIVER, CUMULATIVE REMEDIES..................................................26
SECTION 10.3.
AMENDMENTS, ETC...................................................................................26
SECTION 10.4.
COSTS AND EXPENSES; INDEMNIFICATION..........................................26
SECTION 10.5.
DOCUMENTARY TAXES.............................................................................27
SECTION 10.6.
SURVIVAL OF REPRESENTATIONS...........................................................27
SECTION 10.7.
SURVIVAL OF INDEMNITIES.....................................................................27
SECTION10.8.
NOTICES.......................................................................................................27
ii- 56
SECTION 10.9.
SECTION 10.10.
SECTION 10.11.
SECTION 10.12.
SECTION 10.13.
SECTION 10.14.
SIGNATURE ........
CONSTRUCTION.........................................................................................28
HEADINGS...................................................................................................28
SEVERABILITY OF PROVISIONS................................................................28
COUNTERPARTS.........................................................................................28
BINDING NATURE, GOVERNING LAW, ETC..........................................28
SUBNIISSION TO JURISDICTION; WAIVER OF JURY
TRIAL............................................................................................................28
................................................................................................................. 30
Exhibit A — Revolving Note
CREDIT AGREEMENT
BNP Paribas, acting through
its San Francisco Branch
San Francisco, California
Ladies and Gentlemen:
The undersigned, City of Petaluma, a charter city duly organized and existing under the
laws of the State of California (the "City"), applies to you (the `Bank") for your commitment,
subject to the terms and conditions hereof and on the basis of the representations and warranties
hereinafter set forth, to extend credit to the City, all as more fully hereinafter set forth. All
capitalized terms used herein without definition shall have the same meanings herein as such
terms are defined in Section 5.1 hereof.
SECTION 1. THE CREDITS.
Section 1.1. Revolving Credit. Subject to the terms and conditions hereof, the Bank
agrees to extend a revolving credit (the "Revolving Credit') to the City which may be availed of
by the City from time to time during the period from and including the date hereof to but not
including the Termination Date, at which time the commitment of the Bank to extend credit
under the Revolving Credit shall expire. The Revolving Credit may be utilized by the City in the
form of Loans and Letters of Credit, all as more fully hereinafter set forth, provided that the
aggregate principal amount of Loans and Letters of Credit outstanding at any one time shall not
exceed $75,000,000 (the "Conunitnnent", as such amount may be reduced pursuant to the terms
hereof). During the period from and including the date hereof to but not including the
Termination Date, the City may use the Commitment by borrowing, repaying, and reborrowing
Loans in whole or in part and/or by having the Bank issue Letters of Credit, having such Letters
of Credit expire or otherwise terminate without having been drawn upon or, if drawn upon,
reimbursing the Bank for each such drawing, and having the Bank issue new Letters of Credit, all
in accordance with the terms and conditions of this Agreement.
The Bank acknowledges that simultaneous with the execution and delivery of this
Agreement, the City is entering into a Revolving Credit Agreement with Zions First National
Bank ("Zion"), dated as of August 1, 2005, under which Zions commits a revolving line of
credit to the City in an amount up to $25,000,000 (the "Zions Revolving Credit Agreement").
Under the Zions Revolving Credit Agreement, Zions will have alien on Pledged Revenues on a
parity with the Bank's lien on Pledged Revenues hereunder.
Section 1.2. Revolving Credit Loans. Subject to the terms and conditions hereof, the
Revolving Credit may be availed of by the City in the form of loans (individually a 'Loan " and
collectively the "Loans"). Each Loan shall be in a minimum amount of $100;000; provided,
however, that any LIBOR Portion of the Loans shall be in such greater amount as is required by
Section 2 hereof. The Loans shall be made against and evidenced by a single promissory note of
the City in the form (with appropriate insertions) attached hereto as Exhibit A (the "Note"). The
70
Note shall be dated the date of issuance thereof and be expressed to bear interest as set forth in
Section 2 hereof. The Note, and all Loans evidenced thereby, shall mature and become due and
payable in full on the Termination Date. Without regard to the principal amount of the Note
stated on its face, the actual principal amount at any time outstanding and owing by the City on
account of the Note shall be the sum of all Loans made hereunder less all payments of principal
actually received by the Bank.
Section 1.3. Manner and Disbursement of Loans. The City shall give written or
telephonic notice to the Bank (which notice shall be irrevocable once given and, if given by
telephone, shall be promptly confirmed in writing) by no later than 11:00 a.m. (San Francisco
time) on the date the City requests the Bank to make a Loan hereunder. Each such notice shall
specify the date of the Loan requested (which must be a Business Day) and the amount of such
Loan. Each Loan shall initially constitute part of the Base Rate Portion except to the extent the
City has otherwise timely elected that such Loan, or any part thereof, constitute part of a LIBOR
Portion as provided in Section 2 hereof. The City agrees that the Bank may rely upon any written
or telephonic notice given by any person the Bank in good faith believes is an Authorized
Representative without the necessity of independent investigation and, in the event any
telephonic notice conflicts with the written confirmation, such telephonic notice shall govern if
the Bank has acted in reliance thereon. Subject to the provisions of Section 7 hereof, the
proceeds of each Loan shall be made available to the City at the principal office Wells Fargo, in
immediately available funds, in the case of the initial Loans made hereunder, in accordance with
the terms of the written disbursement instructions of the City and, in the case of each subsequent
Loan, by deposit to the City's operating account no. 4950037267 and ABA 121000248
maintained with Wells Fargo Bank or as otherwise agreed upon by the City and the Bank.
SECTION 2. INTEREST AND CHANGE IN CIRCUMSTANCES.
Section 2.1. Interest Rate Options. (a) Generally. The outstanding principal balance of
the Loans (all of the indebtedness evidenced by the Note bearing interest at the same rate for the
same period of time being hereinafter referred to as a "Portion') shall bear interest with
reference to the Base Rate (the `Base Rate Portion ") or, at the option of the City and subject to
the terms and conditions hereof, with reference to an Adjusted LIBOR ("LIBOR Portions "). All
of the indebtedness evidenced by the Note which bears interest with reference to a particular
Adjusted LIBOR for a particular Interest Period shall constitute a single LIBOR Portion, and all
of the indebtedness evidenced by the Note which is not part of a LIBOR Portion shall constitute a
single Base Rate Portion. There shall not be more than _ LIBOR Portions applicable to the
Note outstanding at any one time. Anything contained herein to the contrary notwithstanding,
the obligation of the Bank to create, continue or effect by conversion any L113OR Portion shall be
conditioned upon the fact that at the time no Default or Event of Default shall have occurred and
be continuing. The City hereby promises to pay interest on each Portion of the Note at the rates
and times specified in this Section 2.
(b) Base Rate Portion. The Base Rate Portion shall bear interest at the rate per annum
determined by adding .50% to the Base Rate as in effect from time to time, provided that if the
Base Rate Portion or any part thereof is not paid when due (whether by lapse of time,
acceleration, or otherwise), or at the election of the Bank upon notice to the City during the
-2- 71
existence of any other Event of Default, such Portion shall bear interest, whether before or after
judgment until payment in full thereof, at the rate per annum determined by adding 2% to the
interest rate which would otherwise be applicable thereto from time to time. Interest on the Base
Rate Portion shall be payable quarterly in arrears on the first day of each September and March in
each year (commencing on the first such date occurring after the date hereof) and at maturity of
the Note, and interest after maturity (whether by lapse of time, acceleration, or otherwise) shall
be due and payable upon demand. Any change in the interest rate on the Base Rate Portion
resulting from a change in the Base Rate shall be effective on the date of the relevant change in
the Base Rate.
(c) LIBOR Portions. Each LIBOR Portion shall bear interest for each Interest Period
selected therefor at a rate per annum determined by adding .50% to the Adjusted LIBOR for such
Interest Period, provided that if any LIBOR Portion is not paid when due (whether by lapse of
time, acceleration, or otherwise), or at the election of the Bank upon notice to the City during the
existence of any other Event of Default, such Portion shall bear interest, whether before or after
judgment until payment in full thereof, through the end of the Interest Period then applicable
thereto at the rate per annum determined by adding .50% to the interest rate which would
otherwise be applicable thereto, and effective at the end of such Interest Period such LIBOR
Portion shall automatically be converted into and added to the Base Rate Portion and shall
thereafter bear interest at the interest rate applicable to the Base Rate Portion after default.
Interest on each LIBOR Portion shall be due and payable on the last day of each Interest Period
applicable thereto and, with respect to any Interest Period applicable to a LIBOR Portion in
excess of 3 months, on the date occurring every 3 months after the date such Interest Period
began and at the end of such Interest Period, and interest after maturity (whether by lapse of time,
acceleration, or otherwise) shall be due and payable upon demand. The City shall notify the
Bank on or before 11:00 a.m. (San Francisco time) on the third Business Day preceding the end
of an Interest Period applicable to a LIBOR Portion whether such LIBOR Portion is to continue
as a LIBOR Portion, in which event the City shall notify the Bank of the new Interest Period
selected therefor; and in the event the City shall fail to so notify the Bank, such LIBOR Portion
shall automatically be converted into and added to the Base Rate Portion as of and on the last day
of such Interest Period.
Section 2.2. Mininmmz Amounts. Each LIBOR Portion shall be in an amount equal to
$100,000 or such greater amount which is an integral multiple of $50,000.
Section 2.3. Computation oflnterest. All interest on the Note shall be computed on the
basis of a year of 360 days for the actual number of days elapsed.
Section 2.4. Manner of Rate Selection. The City shall notify the Bank by 11:00 a.m.
(San Francisco time) at least 3 Business Days prior to the date upon which the City requests that
any LIBOR Portion be created or that any part of the Base Rate Portion be converted into a
LIBOR Portion (each such notice to specify in each instance the amount thereof and the Interest
Period selected therefor). If any request is made to convert a LIBOR Portion into another type of
Portion available hereunder, such conversion shall only be made so as to become effective as of
the last day of the Interest Period applicable thereto. All requests for the creation, continuance,
and conversion of Portions under this Agreement shall be irrevocable. Such requests may be
-3- 72
written or oral and the Bank is hereby authorized to honor telephonic requests for creations,
continuances, and conversions received by it from any person the Bank in good faith believes to
be an Authorized Representative without the necessity of independent investigation, the City
hereby indemnifying the Bank from any liability or loss ensuing from so acting.
Section 2.5. Change of Law. Notwithstanding any other provisions of this Agreement or
the Note, if at any time the Bank shall determine that any change in applicable laws, treaties, or
regulations, or in the interpretation thereof, makes it unlawful for the Bank to create or continue
to maintain any LIBOR Portion, it shall promptly so notify the City and the obligation of the
Bank to create, continue, or maintain any such LIBOR Portion under this Agreement shall be
suspended until it is no longer unlawful for the Bank to create, continue, or maintain such LIBOR
Portion. If the continued maintenance of any such LIBOR Portion is unlawful, the City shall
prepay on demand to the Bank the outstanding principal amount of the affected LIBOR Portion
together with all interest accrued thereon and all other amounts payable to the Bank with respect
thereto under this Agreement; provided, however, the City may elect to convert the principal
amount of the affected Portion into another type of Portion available hereunder, subject to the
terms and conditions of this Agreement (including, without limitation, Section 2.9 hereof).
Section 2.6. Unavailability of Deposits or Inability to Ascertain Adjusted LIBOR.
Notwithstanding any other provision of this Agreement or the Note, if the Bank shall determine
prior to the commencement of any Interest Period that deposits in the amount of any LIBOR
Portion scheduled to be outstanding during such Interest Period are not readily available to the
Bank in the relevant market or, by reason of circumstances affecting the relevant market,
adequate and reasonable means do not exist for ascertaining Adjusted LIBOR, then the Bank
shall promptly give notice thereof to the City and the obligations of the Bank to create, continue,
or effect by conversion any such LIBOR Portion in such amount and for such Interest Period
shall be suspended until deposits in such amount and for the Interest Period selected by the City
shall again be readily available in the relevant market and adequate and reasonable means exist
for ascertaining Adjusted LIBOR.
Section 2.7. Taxes and Increased Costs. With respect to any LIBOR Portion, if the Bank
shall determine that any change in any applicable law, treaty, regulation, or guideline (including,
without limitation, Regulation D of the Board of Governors of the Federal Reserve System), or
any new law, treaty, regulation, or guideline, or any interpretation of any of the foregoing, by any
governmental authority charged with the administration thereof or any central bank or other
fiscal, monetary, or other authority having jurisdiction over the Bank or its lending branch or the
LIBOR Portions contemplated by this Agreement (whether or not having the force of law), shall:
(i) impose, increase, or deem applicable any reserve, special deposit, or
similar requirement against assets held by, or deposits in or for the account of, or loans
by, or any other acquisition of funds or disbursements by, the Bank which is not in any
instance already accounted for in computing the interest rate applicable to such LIBOR
Portion;
(ii) subject the Bank, any L113OR Portion or the Note to the extent it evidences
a LIBOR Portion to any tax (including, without limitation, any United States interest
-4- 73
equalization tax or similar tax however named applicable to the acquisition or holding of
debt obligations and any interest or penalties with respect thereto), duty, charge, stamp
tax, fee, deduction, or withholding in respect of this Agreement, any LIBOR Portion or
the Note to the extent it evidences a LIBOR Portion, except such taxes as may be
measured by the overall net income or gross receipts of the Bank or its lending branches
and imposed by the jurisdiction, or any political subdivision or taxing authority thereof, in
which the Bank's principal executive office or its lending branch is located;
(iii) change the basis of taxation of payments of principal and interest due from
the City to the Bank hereunder or under the Note to the extent it evidences any LIBOR
Portion (other than by a change in taxation of the overall net income or gross receipts of
the Bank); or
(iv) impose on the Bank any penalty with respect to the foregoing or any other
condition regarding this Agreement, any LIBOR Portion, or its disbursement, or the Note
to the extent it evidences any LIBOR Portion;
and the Bank shall determine that the result of any of the foregoing is to increase the cost
(whether by incurring a cost or adding to a cost) to the Bank of creating or maintaining any
LIBOR Portion hereunder or to reduce the amount of principal or interest received or receivable
by the Bank (without benefit of, or credit for, any proration, exemption, credits, or other offsets
available under any such laws, treaties, regulations, guidelines, or interpretations thereof), then
the City shall pay on demand to the Bank from time to time as specified by the Bank such
additional amounts as the Bank shall reasonably determine are sufficient to compensate and
indemnify it for such increased cost or reduced amount. If the Bank makes such a claim for
compensation, it shall provide to the City a certificate setting forth the computation of the
increased cost or reduced amount as a result of any event mentioned herein in reasonable detail
and such certificate shall be conclusive if reasonably determined.
Section 2.8. Change in Capital 4dequacy Requirements. If the Bank shall determine
that the adoption after the date hereof of any applicable law, rule, or regulation regarding capital
adequacy, or any change in any existing law, rule, or regulation, or any change in the
interpretation or administration thereof by any governmental authority, central bank, or
comparable agency charged with the interpretation or administration thereof, or compliance by
the Bank (or any of its branches) with any request or directive regarding capital adequacy
(whether or not having the force of law) of any such authority, central bank, or comparable
agency, has or would have the effect of reducing the rate of return on the Bank's capital as a
consequence of its obligations hereunder or for the credit which is the subject matter hereof to a
level below that which the Bank could have achieved but for such adoption, change, or
compliance (taking into consideration the Bank's policies with respect to liquidity and capital
adequacy) by an amount deemed by the Bank to be material, then from time to time, within
30 days after demand by the Bank, the City shall pay to the Bank such additional amount or
amounts reasonably determined by the Bank as will compensate the Bank for such reduction.
Section 2.9. Funding Indenmity. In the event the Bank shall incur any loss, cost, or
expense (including, without limitation, any loss, cost, or expense incurred by reason of the
-5- 74
liquidation or reemployment of deposits or other funds acquired or contracted to be acquired by
the Bank to fund or maintain any LIBOR Portion or the relending or reinvesting of such deposits
or other funds or amounts paid or prepaid to the Bank) as a result of:
(i) any payment of a LIBOR Portion on a date other than the last day of the
then applicable Interest Period for any reason, whether before or after default, and
whether or not such payment is required by any provision of this Agreement; or
(ii) any failure by the City to create, borrow, continue, or effect by conversion
a LIBOR Portion on the date specified in a notice given pursuant to this Agreement;
then upon the demand of the Bank, the City shall pay to the Bank such amount as will reimburse
the Bank for such loss, cost, or expense. If the Bank requests such a reimbursement, it shall
provide to the City a certificate setting forth the computation of the loss, cost, or expense giving
rise to the request for reimbursement in reasonable detail and such certificate shall be conclusive
if reasonably determined.
Section 2.10. Lending Branch. The Bank may, at its option, elect to make, fund or
maintain Portions of the Loans hereunder at such of its branches or offices as the Bank may from
time to time elect. To the extent reasonably possible, the Bank shall designate an alternate
branch or funding office with respect to the LIBOR Portions to reduce any liability of the City to
the Bank under Section 2.7 hereof or to avoid the unavailability of an interest rate option under
Section 2.6 hereof, so long as such designation is not otherwise disadvantageous to the Bank.
Section 2.11. Discretion of Bank as to Manner of Funding. Notwithstanding any
provision of this Agreement to the contrary, the Bank shall be entitled to fund and maintain its
funding of all or any part of the Note in any manner it sees fit, it being understood, however, that
for the purposes of this Agreement all determinations hereunder (including, without limitation,
determinations under Sections 2.6, 2.7, and 2.9 hereof) shall be made as if the Bank had actually
funded and maintained each LIBOR Portion during each Interest Period applicable thereto
through the purchase of deposits in the relevant market in the amount of such LIBOR Portion,
having a maturity corresponding to such Interest Period, and, in the case of any LIBOR Portion,
bearing an interest rate equal to the LIBOR for such Interest Period.
Section 2.12. Maxinnan Rate. If at any time the rate of interest payable hereunder shall
exceed the Maximum Rate for any period for which interest is payable, then (i) interest at the
Maximum Rate shall be due and payable with respect to such interest period and (ii) interest at
the rate equal to the difference between (A) the rate of interest calculated in accordance with the
terms hereof and (B) the Maximum Rate (the `Excess Interest"), shall be deferred until such date
as the rate of interest calculated in accordance with the terms hereof ceases to exceed the
Maximum Rate, at which time the City shall pay to the Bank, with respect to amounts then
payable to the Bank, that are required to accrue interest hereunder, such portion of the deferred
Excess Interest as will cause the rate of interest then paid to the Bank, to equal the Maximum
Rate, which payments of deferred Excess Interest shall continue to apply to such unpaid amounts
hereunder until all deferred Excess Interest is fully paid to the Bank. Upon the termination of
this Agreement, in consideration for the limitation of the rate of interest otherwise payable
-6- 75
hereunder, to the extent permitted by law, the City shall pay to the Bank a fee equal to the unpaid
amount of all unpaid deferred Excess Interest.
SECTION 3. FEES, PREPAYMENTS AND TERMINATIONS.
Section 3.1. Fees.
(a) Commitment Fee. For the period from and including the date hereof to but not
including the Termination Date, the City shall pay to the Bank a commitment fee at the rate of
.20% per annum (computed on the basis of a year of 360 days for the actual number of days
elapsed) on the average daily unused portion of the Commitment. Such commitment fee shall be
payable quarterly in arrears on the _ day of each ,
and in each year (commencing on the first such date
occurring after the date hereof) and on the Termination Date.
Section 3.2. Yolmntary Prepayments. The City shall have the privilege of prepaying the
Loans in whole or in part (but, if in part, then (i) if such Loan or Loans constitutes part of the
Base Rate Portion, in an amount not less than $100,000, (ii) if such Loan or Loans constitutes
part of a LIBOR Portion, in an amount not less than $100,000, and (iii) in each case, in an
amount such that the minimum amount required for a Loan pursuant to Sections 1.2 and 2.2
hereof remain outstanding) at any time upon prior notice to the Bank (such notice if received
subsequent to 11:00 a.m. (San Francisco time) on a given day to be treated as though received at
the opening of business on the next Business Day) by paying to the Bank the principal amount to
be prepaid and (i) if such a prepayment prepays the Note in full and is accompanied by the
termination of the Commitment in whole, accrued interest thereon to the date of prepayment, and
(ii) in the case of any prepayment of a LIBOR Portion of the Loans, accred interest thereon to
the date of prepayment plus any amounts due the Bank under Section 2.9 hereof.
Section 3.3. Terminations. The City shall have the right, at any time and from time to
time, upon 3 Business Days prior notice to the Bank, to terminate without premium or penalty
and in whole or in part (but if in part, then in an amount not less than $ ) the
Commitment, provided that the Commitment may not be reduced to an amount less than the
aggregate principal amount of the Loans then outstanding. Any termination of the Commitment
pursuant to this Section may not be reinstated.
Section 3.4. Place and Application of Payments. All payments of principal, interest,
fees, and all other Obligations payable under the Loan Documents shall be made to the Bank at
its office at (or at such other place as the Bank may specify) no
later than 3:00 p.m. (San Francisco time) on the date any such payment is due and payable.
Payments received by the Bank after 3:00 p.m. (San Francisco time) shall be deemed received as
of the opening of business on the next Business Day. All such payments shall be made in lawful
money of the United States of America, in immediately available funds at the place of payment,
without set-off or counterclaim and without reduction for, and free from, any and all present or
future taxes, levies, imposts, duties, fees, charges, deductions, withholdings, restrictions, and
conditions of any nature imposed by any government or any political subdivision or taxing
authority thereof (but excluding any taxes imposed on or measured by the net income of the
-7- 76
Bank). Unless the City otherwise directs, principal payments shall be applied first to the Base
Rate Portion until payment in full thereof, with any balance applied to the LIBOR Portions in the
order in which their Interest Periods expire.
Section 3.5. Notations. All Loans made against the Note, the status of all amounts
evidenced by the Note as constituting part of the Base Rate Portion or a LIBOR Portion, and, in
the case of any LIBOR Portion, the rates of interest and Interest Periods applicable to such
Portions shall be recorded by the Bank on its books and records or, at its option in any instance,
endorsed on a schedule to the Note and the unpaid principal balance and status, rates and Interest
Periods so recorded or endorsed by the Bank shall be prima facie evidence in any court or other
proceeding brought to enforce the Note of the principal amount remaining unpaid thereon, the
status of the Loans evidenced thereby and the interest rates and Interest Periods applicable
thereto; provided that the failure of the Bank to record any of the foregoing shall not limit or
otherwise affect the obligation of the City to repay the principal amount of the Note together with
accrued interest thereon. Prior to any negotiation of the Note, the Bank shall record on a
schedule thereto the status of all amounts evidenced thereby as constituting part of the Base Rate
Portion or a LIBOR Portion and, in the case of any LIBOR Portion, the rates of interest and the
Interest Periods applicable thereto.
SECTION 4. PLEDGED REvENUEs; LIMITED OBLIGATION
Section 4.1. Pledged Revenues; Limited Obligation.
(a) Pledged Revenues. The Loans, the Note and the Obligations of the
City hereunder are secured by an irrevocable lien on and pledge of, and are payable from
the Pledged Revenues; and such lien and pledge of the Pledged Revenues shall be prior in
right and claim as to any other indebtedness, liability or obligation of the City payable
from the Pledged Revenues.
(b) Limited Obligation. The general fund of the City is not liable and
the credit or taxing power of the City is not pledged for the payment of the Loans, the
Note and the Obligations of the City hereunder. The Bank shall not compel the exercise
of the taxing power by the City or the forfeiture of its property. The Loans, the Note and
the Obligations of the City hereunder are not a debt of the City, nor a legal or equitable
pledge, charge; lien or encumbrance, upon any of its property, or upon any of its income,
receipts, or revenues except the Pledged Revenues of the Wastewater System.
Section 4.2. Further Assurances. The City agrees that it shall execute and deliver such
documents and do such acts and things as the Bank may from time to time request in order to
provide for or perfect or protect the Bank's Lien on Pledged Revenues.
SECTION 5. DEFINITIONS; INTERPRETATION.
Section 5.1. Definitions. The following terms when used herein shall have the following
meanings:
-8- 77
"Adjusted LIBOR" means a rate per annum determined by the Bank in accordance with
the following formula:
Adjusted LIBOR = LIBOR
100% -Reserve Percentage
"Reserve Percentage" means, for the purpose of computing Adjusted LIBOR, the maximum
rate of all reserve requirements (including, without limitation, any marginal, emergency,
supplemental or other special reserves) imposed by the Board of Governors of the Federal
Reserve System (or any successor) under Regulation D on Eurocurrency liabilities (as such term
is defined in Regulation D) for the applicable Interest Period as of the first day of such Interest
Period, but subject to any amendments to such reserve requirement by such Board or its
successor, and taking into account any transitional adjustments thereto becoming effective during
such Interest Period. For purposes of this definition, LIBOR Portions shall be. deemed to be
Eurocurrency liabilities as defined in Regulation D without benefit of or credit for prorations,
exemptions or offsets under Regulation D. "LIBOR" means, for each Interest Period, (a) the
LIBOR Index Rate for such Interest Period, if such rate is available, and (b) if the LIBOR Index
Rate cannot be determined, the arithmetic average of the rates of interest per annum (rounded
upward, if necessary, to the nearest 1/100th of 11/o) at which deposits in U.S. Dollars in
immediately available funds are offered to the Bank at 11:00 a.m. (London, England time) 2
Business Days before the beginning of such Interest Period by 3 or more major banks in the
interbank eurodollar market selected by the Bank for a period equal to such Interest Period and in
an amount equal or comparable to the applicable LIBOR Portion scheduled to be outstanding
from the Bank during such Interest Period. "LIBOR Index Rate" means, for any Interest Period,
the rate per annum (rounded upwards, if necessary, to the next higher one hundred -thousandth of
a percentage point) for deposits in U.S. Dollars for a period equal to such Interest Period which
appears on the Telerate Page 3750 as of 11:00 a.m. (London, England time) on the date 2
Business Days before the commencement of such Interest Period. "Telerate Page 3750" means
the display designated as "Page 3750" on the Telerate Service (or such other page as may replace
Page 3750 on that service or such other service as may be nominated by the British Bankers'
Association as the information vendor for the purpose of displaying British Bankers' Association
Interest Settlement Rates for U.S. Dollar deposits). Each determination of LIBOR made by the
Bank shall be conclusive and binding absent manifest error.
`Agreement" means this Credit Agreement, as the same may be amended, modified, or
restated from time to time in accordance with the terms hereof.
"Authorized Representative" means those persons shown on the list of officers provided
by the City pursuant to Section 7.2 hereof or on any update of any such list provided by the City
to the Bank, or any further or different officer of the City so named by any Authorized
Representative of the City in a written notice to the Bank.
`Bank" is defined in the introductory paragraph hereof.
"Base Rate" means, for any day, the greater of (a) the rate of interest announced by the
Bank from time to time as its prime commercial rate, as in effect on such day (it being
-9- 78
understood and agreed that such rate may not be the Bank's best or lowest rate), and (b) the sum
of (i) the rate determined by the Bank to be the average (rounded upwards, if necessary, to the
next higher 1/100 of 1%) of the rates per annum quoted to the Bank at approximately 10:00 a.m.
(San Francisco time) (or as soon thereafter as is practicable) on such day (or, if such day is not a
Business Day, on the immediately preceding Business Day) by two or more Federal funds
brokers selected by the Bank for the sale to the Bank at face value of Federal funds in an amount
equal or comparable to the principal amount owed to the Bank for which such rate is being
determined, phis (ii) 1/2 of 1%.
"Base Rate Portion" is defined in Section 2.1(a) hereof.
"Bond Law" means the charter of the City and the provisions of Chapter 4.08
(commencing with Section 4.08.010), of the Petaluma Municipal Code, as in effect on the date
hereof, or as hereafter amended.
Business Day" means any day other than a Saturday or Sunday on which the Bank is not
authorized or required to close in San Francisco, California.
"Charges" means fees, tolls, assessments, rates and charges prescribed under the Bond
Law or any other law of the State by the Council for the services and facilities of the Wastewater
System furnished by the City.
"City" is defined in the introductory paragraph hereof.
"Business Day" means any day other than a Saturday or Sunday on which the Bank is not
authorized or required to close in San Francisco, California.
"Code" means the Internal Revenue Code of 1986, as amended, and any successor
statute thereto.
"Connnitment" is defined in Section 1.1 hereof.
Closing Date" means the date on this Agreement is fully executed by BNP Paribas and
the City, and the City is entitled to draw funds on the Commitment.
"Debt Service" means, during any period of computation, the amount obtained for such
period, calculated as follows:
(a) Debt Service shall include the principal amount of all Wastewater System
Obligations payable by their terms in such period; and
(b) Debt Service shall include the interest which would be due during such period on the
aggregate principal amount of Wastewater System Obligations which would be
Outstanding in such period if the Wastewater System Obligations are paid or redeemed as
scheduled.
-10- 79
For purposes of this definition, it shall be assumed that any Parity Obligations which bear
a variable interest rate bear interest at a fixed rate, calculated as follows:
(i) If the Parity Obligations are issued on a tax-exempt basis, the interest rate on such
Parity Obligations shall be deemed to be equal to the greater of: (A) the most recently
published Bond Buyer 25 Bond Revenue Index (or comparable index if no longer
published); or (B) the average variable rate of interest home by such Parity Obligations
during the preceding 36 months;
(ii) If the Parity Obligations are issued on a taxable basis, the interest rate on such Parity
Obligations shall be deemed to be the greater of: (A) the rate of interest borne by U.S
Treasury Bonds of a 30 -year maturity, as published in a financial publication or
electronically disseminated as of the date of calculation, plus 75 basis points; or (B) the
average of the actual interest rate home by such Parity Obligations over a 36 -month
period occurring immediately prior to the date of calculation;
(iii) If an interest rate 'bap" (or similar instrument) has been purchased for such Parity
Obligations, neither of the formulas set in (i) or (ii) above shall produce an interest rate in
excess of said cap for the period that such interest rate cap is in effect; and
(iv) If the City has entered into a "Swap" agreement (a "Swap Agreement"), the interest
rate home by the Wastewater System Obligation during the term of such Swap
Agreement shall be considered to be the interest rate payable by the City under such
Swap Agreement (as to those Parity Obligations equal in principal amount to the
notional amount of such Swap Agreement).
(c) During the Interim Funding Period, Debt Service shall not include the principal
amount of Loans outstanding under this Agreement or the Zions Revolving Credit Agreement.
"Default" means any event or condition the occurrence of which would, with the passage
of time or the giving of notice, or both, constitute an Event of Default.
"Event of Default" means any event or condition identified as such in Section 9.1 hereof.
"Fitch "means Fitch Ratings, and its successors.
"GAAP" means generally accepted accounting principles set forth from time to time in
the opinions and pronouncements of the Accounting Principles Board and the American Institute
of Certified Public Accountants and statements and pronouncements of the Financial Accounting
Standards Board (or agencies with similar functions of comparable stature and authority within
the U.S. accounting profession), which are applicable to the circumstances as of the date of
determination.
"Gross Revenues" means, for any period of computation, all gross charges received for,
and all other gross income and revenues derived by the City from, the ownership or operation of
the Wastewater System or otherwise arising from the Wastewater System during such period,
-11- 80
including but not limited to (a) all Charges received by the City for use of the Wastewater
System, (b) transfers from (but exclusive of any transfers to) any rate stabilization reserve
accounts, and (c) all moneys received by the City from other public entities whose inhabitants are
served pursuant to contracts with the City.
"Bidebtedness for Borrowed Money" means for any Person (without duplication) (a) all
indebtedness created, assumed or incurred in any manner by such Person representing money
borrowed (including by the issuance of debt securities), (b) all indebtedness for the deferred
purchase price of property or services (other than trade accounts payable arising in the ordinary
course of business which are not more than sixty (60) days past due), (c) all indebtedness secured
by any Lien upon Property of such Person, whether or not such Person has assumed or become
liable for the payment of such indebtedness, (d) all Capitalized Lease Obligations of such Person,
and (e) all obligations of such Person on or with respect to letters of credit, bankers' acceptances
and other extensions of credit whether or not representing obligations for borrowed money.
"Interest Period" means, with respect to (a) any LIBOR Portion, the period commencing
on, as the case may be, the creation, continuation or conversion date with respect to such LIBOR
Portion and ending 1, 2, 3, 6 or 12 months thereafter as selected by the City in its notice as
provided herein; provided that all of the foregoing provisions relating to Interest Periods are
subject to the following:
(i) if any Interest Period would otherwise end on a day which is not a
Business Day, that Interest Period shall be extended to the next succeeding Business Day,
unless in the case of an Interest Period for a LIBOR Portion the result of such extension
would be to carry such Interest Period into another calendar month in which event such
Interest Period shall end on the immediately preceding Business Day;
(ii) no Interest Period may extend beyond the final maturity date of the Note;
(iii) the interest rate to be applicable to each Portion for each Interest Period
shall apply from and including the first day of such Interest Period to but excluding the
last day thereof; and
(iv) no Interest Period may be selected if after giving effect thereto the City
will be unable to make a principal payment scheduled to be made during such Interest
Period without paying part of a LIBOR Portion on a date other than the last day of the
Interest Period applicable thereto.
For purposes of determining an Interest Period, a month means a period starting on one day in a
calendar month and ending on a numerically corresponding day in the next calendar month,
provided, however, if an Interest Period begins on the last day of a month or if there is no
numerically corresponding day in the month in which an Interest Period is to end, then such
Interest Period shall end on the last Business Day of such month.
"Interim Funding Period" means the period commencing on the Closing Date and
continuing so long as either this Agreement or the Zions Revolving Credit Agreement is in
effect.
"Letters of Credit" is defined in Section 1.1 hereof.
"LIBOR Portions " is defined in Section 2.1(a) hereof.
"Lien" means any mortgage, lien, security interest, pledge, charge, or encumbrance of
any kind in respect of any Property, including the interests of a vendor or lessor under any
conditional sale, Capital Lease or other title retention arrangement.
"Loan" and "Loans" each is defined in Section 1.2 hereof.
"Loan Documents" means this Agreement, the Note, and each other instrument or
document to be delivered hereunder or thereunder or otherwise in connection therewith.
"Maintenance and Operation Costs" means the reasonable and necessary costs spent or
incurred by the City for maintaining and operating the Wastewater System, calculated in
accordance with sound accounting principles, and all reasonable and necessary expenses of
management and repair and other expenses to maintain and preserve the Wastewater System in
good repair and working order, and including all reasonable and necessary administrative costs of
the City attributable to the Wastewater System, such as salaries and wages and the necessary
contribution to retirement of employees, overhead, insurance, taxes (if any, and fees of auditors,
accountants, attorneys or engineers, and including all other reasonable and necessary costs of the
City or charges required to be paid by it to comply with the terms of the Loans or this Agreement,
but excluding depreciation, replacement and obsolescence charges or reserves therefor and
amortization of intangibles or other bookkeeping entries of a similar nature.
"Material Adverse Effect" means (a) a material adverse change in, or material adverse
effect upon, the operations, business, Property, condition (financial or otherwise) or prospects of
the City or of the City and its Subsidiaries taken as a whole, (b) a material impairment of the
ability of the City to perform its obligations under any Loan Document, or (c) a material adverse
effect upon (i) the legality, validity, binding effect or enforceability against the City of any Loan
Document or the rights and remedies of the Bank thereunder or (ii) the perfection or priority of
any Lien granted hereunder.
"Maxinurm Annual Debt Service" means, as of the date of calculation, the maximum
amount of Debt Service for the current or any future Fiscal Year.
Loans.
"Maximum Rate" means the maximum legal rate of interest payable by the City on the
"Moody's " means Moody's Investors Service, Inc.
-13- 82
`Net Revenues means, with respect to the Wastewater System, for any period of
computation, the amount of the Gross Revenues received from the Wastewater System during
such period, less the amount of Maintenance and Operation Costs of the Wastewater System
becoming payable during such period.
"Note" is defined in Section 1.2 hereof.
"Obligations" means all obligations of the City to pay principal and interest on the
Loans, all fees and charges payable hereunder, and all other payment obligations of the City
arising under or in relation to any Loan Document, in each case whether now existing or
hereafter arising, due or to become due, direct or indirect, absolute or contingent, and howsoever
evidenced, held, or acquired.
"Parity Obligations" means all bonds, loans, notes or other obligations (including without
limitation long-term contracts, loans, sub -leases or other legal financing arrangements) of the
City payable from and secured by a pledge of and lien upon any of the Pledged Revenues issued
or incurred pursuant to Section 8.9 or 8.10.
"Parity Obligations Instrument" means the resolution, agreement, trust indenture or
installment sale agreement adopted, entered into or executed and delivered by the City, and under
which Panty Obligations are issued.
Person" means an individual, partnership, corporation, limited liability company,
association, trust, unincorporated organization, or any other entity or organization, including a
government or agency or political subdivision thereof.
: "
"Pledged Revenues" means Net Revenues, less payment of debt service on the 2000
"Portion" is defined in Section 2.1(a) hereof.
"Property" means any interest in any kind of property or asset, whether real, personal or
mixed, or tangible or intangible.
"Revolving Credit" is defined in Section 1.1 hereof.
"S&P" means Standard & Poor's Ratings Services, or its successors.
"State Loans" means any loans advanced to the City by the State pursuant to Section
am
"Termination Date" means August 1, 2010, or such earlier date on which the
Commitment is terminated in whole pursuant to Section 3.3, 9.2 or 9.3 hereof.
"2000 Bonds" means the City's Wastewater Revenue Bonds, Series 2000, issued on May
3, 2000 in the original principal amount of $8,895,000 pursuant to the 2000 Indenture.
-14- 83
"2000 Indenture" means that certain Indenture of Trust, dated as of May 1, 2000,
between the City and Norwest Bank Minnesota, N.A., relating to the 2000 Bonds.
"Wastewater System"means the sanitary sewerage and sewage disposal system of the
City, comprising all facilities for the collection, treatment or disposal of sewage and waste.
"Wastewater System Obligations" means, collectively, the Loans and any Panty
Obligations issued and at any time Outstanding hereunder and under a Panty Obligations
Instrument.
"Zion" is defined in Section 1.1.
"lions Revolving Credit Agreement" is defined in Section 1.1.
Section: 5.2. Interpretation. The foregoing definitions are equally applicable to both the
singular and plural forms of the terms defined. The words "hereof ', "herein ", and "hereunder "
and words of like import when used in this Agreement sball refer to this Agreement as a whole
and not to any particular provision of this Agreement. All references to time of day herein are
references to San Francisco, California time unless otherwise specifically provided. Where the
character or amount of any asset or liability or item of income or expense is required to be
determined or any consolidation or other accounting computation is required to be made for the
purposes of this Agreement, it shall be done in accordance with GAAP except where such
principles are inconsistent with the specific provisions of this Agreement.
SECTION 6. REPRESENTATIONS AND WARRANTIES.
The City represents and warrants to the Bank as follows:
Section 6.1. Organization and Powers. The City (a) is duly established and validly
existing under the laws of the State of California under and pursuant to the Constitution of the
State of California and is a charter city; (b) has all corporate powers and all material
governmental licenses, authorizations, consents, and approvals required to carry on its business
as now conducted; (c) has full power and authority to operate the Wastewater System and to
acquire, construct finance, and operate the Wastewater System; and (d) has full power and
authority to adopt the Bond Law; to execute, deliver, and perform this Agreement and the Loan
Documents; and to borrow and repay hereunder.
Section 6.2. Authorization; Contravention. The execution, delivery, and performance by
the City of this Agreement, and the Loan Documents and the making of payments of principal
and interest on any Loans have been duly authorized by all necessary action by the City and do
not contravene, or result in the violation of, or constitute a default under, any provision of
applicable law or regulation, or any order, rule, or regulation of any court governmental agency,
or instrumentality or any agreement, resolution, or instrument to which the City is a party or by
which its or any of its property is bound.
-15- 84
Section 6.3. Governmental Consent or Approval. As of the date hereof, no
authorization, consent, approval, permit, license, or exemption of, or filing or registration with,
any court or governmental department, commission, board, bureau, agency, or instrumentality
that has not been obtained or issued is or will be necessary for the valid adoption, execution,
delivery or performance by the City of the Loan Documents and this Agreement.
Section 6.4. Bidding Effect. This Agreement and the Loan Documents constitute valid
and binding obligations of the City enforceable against the City in accordance with their
respective terms, except as such enforceability may be limited by the City's bankruptcy,
insolvency, reorganization, moratorium, or other laws or equitable principles relating to or
limiting creditor's rights generally.
Section 6.5. Use of Proceeds; Margin Stock. The City shall use the proceeds of the
Loans and other extensions of credit made available hereunder for interim financing for the
construction of Wastewater System capital improvements, and for such other legal and proper
purposes as are consistent with all applicable laws. The City is not engaged in the business of
extending credit for the purpose of purchasing or carrying margin stock (within the meaning of
Regulation U of the Board of Governors of the Federal Reserve System), and no part of the
proceeds of any extension of credit made hereunder will be used to purchase or carry any such
margin stock or to extend credit to others for the purpose of purchasing or carrying any such
margin stock.
Section 6.6. Financial Reports. The financial statements of the City as of June 30, 2004,
and accompanying notes thereto, which financial statements are accompanied by the audit report
of Caporieei & Larson, independent public accountants, and the unaudited interim consolidated
of the City as of July 15, 2005, fairly present the financial condition of the City as at said dates
and the results of its operations and cash flows for the periods then ended in conformity with
GAAP applied on a consistent basis. The City has no contingent liabilities which are material to
it other than as indicated on such financial statements or, with respect to future periods, on the
financial statements furnished pursuant to Section 8.5 hereof.
Section 6.7. No Material Adverse Change. Since June 30, 2004, there has been no
change in the condition (financial or otherwise) or business prospects of the City.
Section 6.8. Full Disclosure. The statements and information furnished to the Bank in
connection with the negotiation of this Agreement and the other Loan Documents and the
commitment by the Bank to provide all or part of the financing contemplated hereby do not
contain any untrue statements of a material fact or omit a material fact necessary to make the
material statements contained herein or therein not misleading, the Bank acknowledging that, as
to any projections furnished to the Bank, the City only represents that the same were prepared on
the basis of information and estimates the City believed to be reasonable.
Section 6.9. Good Title. The City has good and defensible title (or valid leasehold
interests) to its assets as reflected on the most recent financial statements of the City furnished to
the Bank, subject to no Liens other than such thereof as are permitted by Section 8.8 hereof.
-16- 85
Section 6.10. Litigation and Other Controversies. There is no litigation or governmental
or arbitration proceeding or labor controversy pending, nor to the knowledge of the City
threatened, against the City or any of its Property which if adversely determined could reasonably
be expected to have a Material Adverse Effect.
Section 6.11. Approvals. No authorization, consent, license, or exemption from, or filing
or registration with, any court or governmental department, agency, or instrumentality, nor any
approval or consent of any other Person, is or will be necessary to the valid execution, delivery,
or performance by the City of any Loan Document, except for such approvals which have been
obtained prior to the date of this Agreement and remain in full force and effect.
Section 6.12. Other Agreements. The City is not in default under the terms of any
covenant, indenture or agreement of or affecting the City or any of its Property, which default if
uncured could reasonably be expected to have a Material Adverse Effect.
Section 6.13. No Default. No Default or Event of Default has occurred and is continuing.
Section 6.14. No Sovereign Immunity. The defense of sovereign immunity is not
available to the City in any proceeding by the Bank to enforce the obligations of the City under
this Agreement and the Note, and the City hereby consents to the initiation of any such
proceedings in any court of competent jurisdiction.
Section 6.15. No Maxinuon Rate. Under current law, the interest rate payable on Loans or
any Obligations of the City is not subject to limitation under the laws of the State of California.
SECTION 7. CONDITIONS PRECEDENT.
The obligation of the Bank to make any Loan under this Agreement is subject to the
following conditions precedent:
Section 7.1. All Advances. As of the time of the making of each extension of credit
(including the initial extension of credit) hereunder:
(a) each of the representations and warranties set forth in Section 6 hereof and
in the other Loan Documents shall be true and correct as of such time, except to the
extent the same expressly relate to an earlier date;
(b) no Default or Event of Default shall have occurred and be continuing or
would occur as a result of making such extension of credit;
(c) such extension of credit shall not violate any order, judgment, or decree of
any court or other authority or any provision of law or regulation applicable to the Bank
(including, without limitation, Regulation U of the Board of Governors of the Federal
Reserve System) as then in effect.
-17- 86
The City's request for any Loan shall constitute its warranty as to the facts specified in
subsections (a) through (c), both inclusive, above.
Section 7.2. Initial Advance. At or prior to the making or the initial extension of credit
hereunder, the following conditions precedent shall also have been satisfied:
(a) the Bank shall have received the following (and, with respect to all
documents, each to be properly executed and completed) and the same shall have been
approved as to form and substance by the Bank:
(i) the Note;
(ii) copies (executed or certified as may be appropriate) of resolutions
of the City Council of the City authorizing the execution, delivery, and
performance of the Loan Documents;
(iii) articles of incorporation (or equivalent organizational document) of
the City certified by the appropriate governmental office of the state of its
organization;
(iv) by-laws (or equivalent organizational document) for the City
certified by an appropriate officer of such Person acceptable to the Bank;
(v) an incumbency certificate containing the name, title and genuine
signature of the City's Authorized Representatives;
(b) the Bank shall have received the initial fees called for hereby;
(c) legal matters incident to the execution and delivery of the Loan
Documents and to the transactions contemplated hereby shall be satisfactory to the Bank
and its counsel; and the Bank shall have received the favorable written opinion of counsel
for the City in form and substance satisfactory to the Bank and its counsel;
(d) the Bank shall have received such other agreements, instruments,
documents, certificates and opinions as the Bank may reasonably request;
SECTIONT8. COVENANTS.
The City agrees that, so long as any credit is available to or in use by the City hereunder,
except to the extent compliance in any case or cases is waived in writing by the Bank:
Section 8.1. Maintenance of Existence. The City shall preserve and maintain its
existence. The City shall preserve and keep in force and effect all licenses, permits and
approvals necessary to the proper conduct of its business.
-18- 97
Section: 8.2. Maintenance of Properties. The City shall maintain, preserve, and keep its
property, plant, and equipment in good repair, working order and condition (ordinary wear and
tear excepted) and shall from time to time make all needful and proper repairs, renewals,
replacements, additions, and betterments thereto so that at all times the efficiency thereof shall be
fully preserved and maintained.
Section 8.3. Taxes and Assessments. The City shall duly pay and discharge, all taxes,
rates, assessments, fees, and governmental charges upon or against it or its Property, in each case
before the same become delinquent and before penalties accrue thereon, unless and to the extent
that the same are being contested in good faith and by appropriate proceedings which prevent
enforcement of the matter under contest and adequate reserves are provided therefor.
Section 8.4. Insurance. The City shall insure and keep insured with good and
responsible insurance companies, all insurable Property owned by it which is of a character
usually insured by Persons similarly situated and operating like Properties against loss or damage
from such hazards and risks, and in such amounts, as are insured by Persons similarly situated
and operating like Properties; and the City shall insure, such other hazards and risks (including
employers' and public liability risks) with good and responsible insurance companies and to the
extent usually insured by Persons similarly situated and conducting similar business. The City
shall upon request furnish to the Bank a certificate setting forth in summary form the nature and
extent of the insurance maintained pursuant to this Section.
Section U. Financial Reports. The City shall maintain a standard system of accounting
in accordance with GAAP and shall fa nish to the Bank and its duly authorized representatives
such information respecting the business and financial condition of the City as the Bank may
reasonably request; and without any request, shall furnish to, the Bank:
(a) as soon as available, and in any event within 180 days after the close of
each fiscal year of the City, a copy of the balance sheet of the City as of the close of such
period and the statements of income, retained earnings, and cash flows of the City for
such period, and accompanying notes thereto, each in reasonable detail showing in
comparative form the figures for the previous fiscal year, accompanied by an unqualified
opinion thereon of Caporicci & Larson or another fine of independent public accountants
of recognized national standing, selected by the City and satisfactory to the Bank, to the
effect that the financial statements have been prepared in accordance with GAAP and
present fairly in accordance with GAAP the consolidated financial condition of the City
as of the close of such fiscal year and the results of its operations and cash flows for the
fiscal year then ended and that an examination of such accounts in connection with such
financial statements has been made in accordance with generally accepted auditing
standards and, accordingly, such examination included such tests of the accounting
records and such other auditing procedures as were considered necessary in the
circumstances;
(b) within the period provided in subsection (c) above, the written statement
of an Authorized Representative that they have obtained no knowledge of any Default or
Event of Default, or, if such accountants have obtained knowledge of any such Default or
Event of Default, they shall disclose in such statement the nature and period of the
existence thereof;
(c) promptly after receipt thereof, any additional written reports, management
letters or other detailed information contained in writing concerning significant aspects of
the City's operations and financial affairs given to it by its independent public
accountants;
(d) as soon as practicable but in any event within 30 days after the issuance
thereof, copies of any prospectus, official statement, offering circular, placement
memorandum, or similar or corresponding document, and any supplements thereto and
updates and amendments thereof, that the City makes available in connection with the
offering for sale of any securities issued by the City secured by a pledge of revenues of
the Wastewater System, including State Loans, and, on request, copies of such other
financial reports that the City shall customarily and regularly provide to the public;
(e) [additional reporting requirements to be determined including
additional debt test and debt service requirements]; and
(f) promptly after knowledge thereof shall have come to the attention of any
responsible officer of the City, written notice of (i) any threatened or pending litigation or
governmental or arbitration proceeding or labor controversy against the City or any of its
Property which, if adversely determined, could reasonably be expected to have a Material
Adverse Effect or (ii) the occurrence of any Default or Event of Default hereunder.
Section 8.6. Inspection. The City shall permit the Bank and its duly authorized
representatives and agents to visit and inspect any of the Properties, corporate books and
financial records of the City, to examine and make copies of the books of accounts and other
financial records of the City, and to discuss the affairs, finances and accounts of the City with
and to be advised as to the same by, its officers, employees, and independent public accountants
(and by this provision the City hereby authorizes such accountants to discuss with the Bank the
finances and affairs of the City) at such reasonable times and reasonable intervals as the Bank
may designate.
Section 8.7. Borrowings and Cniaranties. The City shall not issue, incur, assume, create,
or have outstanding any Indebtedness for Borrowed Money, or be or become liable as endorser,
guarantor, surety, or otherwise for any debt, obligation, or undertaking of any other Person, or
otherwise agree to provide funds for payment of the obligations of another, or supply funds
thereto or invest therein or otherwise assure a creditor of another against loss, or apply for or
become liable to the issuer of a letter of credit which supports an obligation of another, or
subordinate any claim or demand it may have to the claim or demand of any other Person;
provided, however, that the foregoing shall not restrict nor operate to prevent the City from
issuing Parity Obligations pursuant to Section 8.9 hereof.
Section 8.8. Liens; Closing offLien of 2000Indenture.
1 :'
(a) The 2000 Bonds are secured by a first lien on Net Revenues, and therefore have a lien
which is senior to the Bank's lien on Pledged Revenues.
(b) Other than as provided in Section 8.9, the City shall not create, incur or permit to exist
any Lien of any kind on Pledged Revenues, other than the Lien granted to the Bank pursuant to
Section 4.1 hereof, the lien on Pledged Revenues granted to Zions under the Zions Revolving
Credit Agreement, and the lien on Pledged Revenues granted to the owners of Panty Obligations.
(c) The City hereby covenants that it will not issue any obligations pursuant to Section
3.06 of the 2000 Indenture, and any Wastewater System Obligations issued to refund the 2000
Bonds shall be issued as Panty Obligations under Section 8.9, or as Wastewater System
Obligations which are subordinate to the Loans.
Section 8.9. Parity Obligations.
In addition to the Loan, the City may, by Panty Obligations Instrument, issue or incur
other loans, advances or indebtedness payable from Pledged Revenues to be derived from the
Wastewater System, to provide financing for the Wastewater System, in such principal amount as
shall be determined by the City. The City may issue or incur any such Panty Obligations subject
to the following specific conditions which are hereby made conditions precedent to the issuance
and delivery of such Panty Obligations:
(a) The City shall be in compliance with all covenants set forth in this Agreement.
(b) The Pledged Revenues of the Wastewater System, calculated on sound accounting
principles, as shown by the books of the City for the latest Fiscal Year or any more recent
twelve (12) month period selected by the City ending not more than sixty (60) days prior
to the adoption of the Panty Obligations Instrument pursuant to which such Parity
Obligations are issued, as shown by the books of the City, plus, at the option of the City,
any or all of the items hereinafter in this paragraph designated (i) and (ii), shall at least
equal One Hundred Twenty -Five percent (125%) of Maximum Annual Debt Service,
with Maximum Annual Debt Service calculated on all Wastewater System Obligations to
be Outstanding immediately subsequent to the issuance of such Panty Obligations which
have a lien on Pledged Revenues of the Wastewater System. The items any or all of
which may be added to such Pledged Revenues for the purpose of issuing or incurring
Panty Obligations hereunder are the following:
(i) An allowance for Pledged Revenues from any additions to or improvements
or extensions of the System to be made with the proceeds of such Panty
Obligations, and also for Pledged Revenues from any such additions,
improvements or extensions which have been made from moneys from any source
but in any case which, during all or any part of such Fiscal Year or such twelve
(12) month period, were not in service, all in an amount equal to ninety percent
(901/o) of the estimated additional average annual Pledged Revenues to be derived
from such additions, improvements and extensions for the first thirty-six (36)
month period in which each addition, improvement or extension is respectively to
-21- 90
be in operation, all as shown in the written report of an Independent Consultant
engaged by the City; and
(ii) An allowance for earnings arising from any increase in the Charges which
has become effective prior to the incurring of such additional indebtedness but
which, during all or any part of such Fiscal Year or such twelve (12) month
period, was not in effect, in an amount equal to the amount by which the Pledged
Revenues would have been increased if such increase in Charges had been in
effect during the whole of such Fiscal Year or such twelve (12) month period, all
as shown in the written report of an Independent Consultant engaged by the City.
(c) The Parity Obligations Instrument providing for the issuance of such Parity
Obligations under this Section 8.9 shall provide that the proceeds of such Panty Obligations shall
be applied to the acquisition, construction, improvement, financing or refinancing of additional
facilities, improvements or extensions of existing facilities within the Wastewater System, or
otherwise for facilities, improvements or property which the City determines are of benefit to the
Wastewater System, or for the purpose of refunding any Wastewater System Obligations in
whole or in part, including all costs (including costs of issuing such Parity Obligations and
including capitalized interest on such Parity Obligations during any period which the City deems
necessary or advisable) relating thereto.
Section 8.10. State Loans.
The City may borrow money from the State to finance improvements to the Wastewater
System, and the obligation of the City to make payments to the State under the loan agreement
memorializing said loan (the "State Loan") maybe treated as Panty Obligations for purposes of
this Agreement; provided that the City shall not make a payment on such State Loan (except as
hereinafter expressly pemutted) to the extent it would have the effect of causing the City to fail
to make a timely payment on the Loan. In the event the City's Wastewater Fund does not contain
sufficient funds to make the full amount of payments on the Loan and such State Loan, the City
shall make payments on the Loan and such State Loan on a pro rata basis.
Section 8.11. Rate Covenant
(a) The City shall fix, prescribe, revise and collect Charges for the Wastewater System
during each Fiscal Year which are at least sufficient, after making allowances for contingencies
and error in the estimates, to pay the following amounts in the following order:
(i) all Maintenance and Operation Costs of the Wastewater System
estimated by the City to become due and payable in such Fiscal Year;
(ii) the Debt Service on the 2000 Bonds, the Loan, and State Loans;
(iii) all other payments required for compliance with this Agreement and
the instruments pursuant to which any Parity Obligations relating to the Wastewater
System shall have been issued; and
-22- 91
(iv) all payments required to meet any other obligations of the City which
are charges, liens, encumbrances upon or payable from the Gross Revenues of the
Wastewater System or the Pledged Revenues of the Wastewater System.
(b) In addition, the City shall fix, prescribe, revise and collect Charges for the
Wastewater System (exclusive of connection fees and transfers to the Wastewater Fund from a
rate stabilization fund, should one be established) during each Fiscal Year which are sufficient to
yield Pledged Revenues of the Wastewater System at least equal to one hundred percent (100%)
of the amounts payable under the preceding clause (a)(ii) in such Fiscal Year for Loan which
have a lien on such Pledged Revenues.
(c) In addition, the City shall fix, prescribe, revise and collect Charges for the
Wastewater System during each Fiscal Year which are sufficient to yield Pledged Revenues of
the Wastewater System at least equal to one hundred twenty-five percent (125%) of the amounts
payable under the preceding clause (a)(ii) in such Fiscal Year for Loan which have a lien on such
Pledged Revenues.
Section 8.12. Compliance with Laws. The City shall comply in all respects with the
requirements of all federal, state, local, and foreign laws, rules, regulations, ordinances and
orders applicable to or pertaining to its Property or business operations, where any such
non-compliance, individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect or result in a Lien upon any of its Property.
Section 8.13. Use of Proceeds. The City shall use the credit extended under this
Agreement solely for the purposes set forth in, or otherwise permitted by, Section 6.4 hereof.
Section: 8.14. Proceeds of Loans. The proceeds of the Loans will be used by the City
solely for the purposes described in the Bond Law, and specifically for improvements to the
Wastewater System.
Section 8.15. No Amendment of Certain Contracts or Ordinances. The City will not
consent to any amendment to or modification or waiver of any of the provisions of the Bond Law
without the prior written consent of the Bank.
Section 8.16. Taxes and Liabilities. The City will pay all of its debts promptly and in
accordance with its terms and pay and discharge or cause to be paid and discharged promptly all
taxes, assessments, and governmental charges or levies imposed upon the Wastewater System or
upon the Wastewater System's income and profits, or upon any of the Wastewater System's
property, real, personal, or mixed, or upon any part thereof, before the same shall become in
default, except for any such debt, taxes or other obligation which the City reasonably may be
contesting in good faith.
Section 8.17. Supplemental Ordinances and Fzzrther Assurances. The City will not adopt
any supplemental ordinances, pursuant to the Bond Law or otherwise, which would adversely
affect the ability of the City to make payments on the Loans when due; provided, however, that
-23- 92
as long as the City complies with its covenants in Section 8.7 hereof, nothing herein shall prevent
the City from issuing Panty Debt, as provided in Section 8.9 and the Ordinance.
SECTION 9. EVENTS OF DEFAULT AND REMEDIES.
Section 9.1. Events of Default. Any one or more of the following shall constitute an
"Event of Default"hereunder:
(a) default in the payment when due of all or any part of any Obligation
payable by the City hereunder or under any other Loan Document (whether at the stated
maturity thereof or at any other time provided for in this Agreement), or default shall
occur in the payment when due of any other indebtedness or obligation (whether direct,
contingent or otherwise) of the City owing to the Bank; or
(b) default in the observance or performance of any covenant set forth in
Sections 8; or
(c) default in the observance or performance of any other provision hereof or
of any other Loan Document which is not remedied within thirty (30) days after the
earlier of (i) the date on which such failure shall first become known to any officer of the
City or (ii) written notice thereof is given to the City by the Bank; or
(d) any representation or warranty made by the City herein or in any other
Loan Document, or in any statement or certificate furnished by it pursuant hereto or
thereto, or in connection with any extension of credit made hereunder, proves untrue in
any material respect as of the date of the issuance or making thereof, or
(e) any event occurs or condition exists (other than those described in
subsections (a) through (d) above) which is specified as an event of default under any of
the other Loan Documents, or any of the Loan Documents shall for any reason not be or
shall cease to be in full force and effect, or any of the Loan Documents is declared to be
null and void, or this Agreement shall for any reason fail to create a valid and perfected
first priority Lien in favor of the Bank in Pledged Revenues; or
(f) default shall occur under any Indebtedness for Borrowed Money issued,
assumed or guaranteed by the City aggregating more than $500,000, or under any
indenture, agreement or other instrument under which the same may be issued, and such
default shall continue for a period of time sufficient to permit the acceleration of the
maturity of any such Indebtedness for Borrowed Money (whether or not such maturity is
in fact accelerated), or any such Indebtedness for Borrowed Money shall not be paid
when due (whether by lapse of time, acceleration or otherwise); or
(g) any judgment or judgments, writ or writs, or warrant or warrants of
attachment, or any similar process or processes in an aggregate amount in excess of
$2,000,000 shall be entered or filed against the City or against any of their Property and
which remains unvacated, unbonded, unstayed or unsatisfied for a period of 30 days; or
-24- 93
(h) dissolution or termination of the existence of the City; or
(i) the City shall make a general assignment for the benefit of creditors, or
declare a moratorium with respect to any of its debts, or shall fail generally to pay its
debts as they become due, or shall take any action to authorize any of the foregoing;
0) the City shall (i) have entered involuntarily against it an order for relief
under the United States Bankruptcy Code, as amended, (ii) not pay, or admit in writing its
inability to pay, its debts generally as they become due, (iii) make an assignment for the
benefit of creditors, (iv) apply for, seek, consent to, or acquiesce in, the appointment of a
receiver, custodian, trustee, examiner, liquidator or similar official for it or any
substantial part of its Property, (v) institute any proceeding seeking to have entered
against it an order for relief under the United States Bankruptcy Code, as amended, to
adjudicate it insolvent, or seeking dissolution, winding up, liquidation, reorganization,
arrangement, adjustment or composition of it or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors or fail to file an answer or
other pleading denying the material allegations of any such proceeding filed against it,
(vi) take any corporate action in furtherance of any matter described in parts (i) through
(v) above, or (vii) fail to contest in good faith any appointment or proceeding described in
Section 9.1(1) hereof; or
(k) a custodian, receiver, trustee, examiner, liquidator or similar official shall
be appointed for the City or any substantial part of any of their Property, or a proceeding
described in Section 9.1(k)(v) shall be instituted against the City, and such appointment
continues undischarged or such proceeding continues undismissed or unstayed for a
period of 60 days.
Section 9.2. Non-Banlnuptcy Defaults. When any Event of Default described in
subsection (a) through 6), both inclusive, of Section 9.1 has occurred and is continuing, the Bank
may, by notice to the City, take one or more of the following actions:
(a) terminate the obligation of the Bank to extend any further credit hereunder
on the date (which may be the date thereof) stated in such notice;
(b) declare the principal of and the accrued interest on the Note to be
forthwith due and payable and thereupon the Note, including both principal and interest
and all fees, charges and other Obligations payable hereunder and under the other Loan
Documents, shall be and become immediately due and payable without further demand,
presentment, protest or notice of any kind; and
(c) enforce any and all rights and remedies available to it under the Loan
Documents or applicable law.
Section 9.3. Bankruptcy Defaults. When any Event of Default described in
subsection (k) or (1) of Section 9.1 has occurred and is continuing, then the Note, including both
principal and interest, and all fees, charges and other Obligations payable hereunder and under
-25- 94
the other Loan Documents, shall immediately become due and payable without presentment,
demand, protest or notice of any kind, and the obligation of the Bank to extend further credit
pursuant to any of the terms hereof shall immediately terminate. In addition, the Bank may
exercise any and all remedies available to it under the Loan Documents or applicable law.
SECTION 10. MISCELLANEOUS.
Section 10.1. Non -Business Day. If any payment hereunder becomes due and payable on
a day which is not a Business Day, the due date of such payment shall be extended to the next
succeeding Business Day on which date such payment shall be due and payable. In the case of
any payment of principal falling due on a day which is not a Business Day, interest on such
principal amount shall continue to accrue during such extension at the rate per annum then in
effect, which accrued amount shall be due and payable on the next scheduled date for the
payment of interest.
Section 10.2. No Waiver, Cumulative Remedies. No delay or failure on the part of the
Bank or on the part of the holder of the Obligations in the exercise of any power or right shall
operate as a waiver thereof or as an acquiescence in any default, nor shall any single or partial
exercise of any power or right preclude any other or further exercise thereof or the exercise of
any other power or right. The rights and remedies hereunder of the Bank and of the holder of the
Obligations are cumulative to, and not exclusive of, any rights or remedies which any of them
would otherwise have.
Section 10.3. Amendments, Etc. No amendment, modification, termination or waiver of
any provision of this Agreement or of any other Loan Document, nor consent to any departure by
the City therefrom, shall in any event be effective unless the same shall be in writing and signed
by the Bank. No notice to or demand on the City in any case shall entitle the City to any other or
further notice or demand in similar or other circumstances.
Section 10.4. Costs and Expenses; Indemnification. The City agrees to pay on demand
the costs and expenses of the Bank in connection with the negotiation, preparation, execution and
delivery of this Agreement, the other Loan Documents and the other instruments and documents
to be delivered hereunder or thereunder, and in connection with the recording or filing of any of
the foregoing, and in connection with the transactions contemplated hereby or thereby, and in
connection with any consents hereunder or waivers or amendments hereto or thereto, including
the fees and expenses of counsel for the Bank with respect to all of the foregoing (whether or not
the transactions contemplated hereby are consummated). The City further agrees to pay to the
Bank or any other holder of the Obligations all costs and expenses (including court costs and
attorneys' fees), if any, incurred or paid by the Bank or any other holder of the Obligations in
connection with any Default or Event of Default or in connection with the enforcement of this
Agreement or any of the other Loan Documents or any other instrument or document delivered
hereunder or thereunder (including, without limitation, all such costs and expenses incurred in
connection with any proceeding under the United States Bankruptcy Code involving the City or
any guarantor). The City further agrees to indemnify the Bank, and any security trustee, and their
respective directors, officers and employees, against all losses, claims, damages, penalties,
judgments, liabilities and expenses (including, without limitation, all expenses of litigation or
-26- 95
preparation therefor, whether or not the indemnified Person is a party thereto) which any of them
may pay or incur arising out of or relating to any Loan Document or any of the transactions
contemplated thereby or the direct or indirect application or proposed application of the proceeds
of any extension of credit made available hereunder, other than those which arise from the gross
negligence or willful misconduct of the party claiming indemnification. The City, upon demand
by the Bank at any time, shall reimburse the Bank for any legal or other expenses incurred in
connection with investigating or defending against any of the foregoing except if the same is
directly due to the gross negligence or willful misconduct of the party to be indemnified. The
obligations of the City under this Section shall survive the termination of this Agreement.
Section 10.5. Documentary Taxes. The City agrees to pay on demand any documentary,
stamp or similar taxes payable in respect of this Agreement or any other Loan Document,
including interest and penalties, in the event any such taxes are assessed, irrespective of when
such assessment is made and whether or not any credit is then in use or available hereunder.
Section 10.6. Survival of Representations. All representations and warranties made
herein or in any of the other Loan Documents or in certificates given pursuant hereto or thereto
shall survive the execution and delivery of this Agreement and the other Loan Documents, and
shall continue in full force and effect with respect to the date as of which they were made as long
as any credit is in use or available hereunder.
Section 10.7. Survival of Indenmities. All indemnities and other provisions relative to
reimbursement to the Bank of amounts sufficient to protect the yield of the Bank with respect to
the Loans, including, but not limited to, Sections 2.7 and 2.9 hereof, shall survive the termination
of this Agreement and the payment of the Note.
Section 10.8. Notices. Except as otherwise specified herein, all notices hereunder shall be
in writing (including, without limitation, notice by telecopy) and shall be given to the relevant
party at its address or telecopier number set forth below, or such other address or telecopier
number as such party may hereafter specify by notice to the other given by courier, by United
States certified or registered mail, by telecopy or by other telecommunication device capable of
creating a written record of such notice and its receipt. Notices hereunder shall be addressed:
to the City at:
City of Petaluma
11 English Street
Attention: Steve Carmichael,
Administrative Services Director
Telephone: (707)778-4323
Telecopy: (707) 778-4428
to the Bank at:
M -1139 -no IT -M
Attention:
Telephone: ( )
Telecopy: ( )
Each such notice, request or other communication shall be effective (i) if given by telecopier,
when such telecopy is transmitted to the telecopier number specified in this Section and a
confirmation of such telecopy has been received by the sender, (ii) if given by mail, five (5) days
after such communication is deposited in the mail, certified or registered with return receipt
-27- 96
requested, addressed as aforesaid or (iii) if given by any other means, when delivered at the
addresses specified in this Section; provided that any notice given pursuant to Section 1 or
Section 2 hereof shall be effective only upon receipt.
Section 10.9. Construction. The provisions of this Agreement relating to Subsidiaries
shall only apply during such times as the City has one or more Subsidiaries. NOTHING
CONTAINED HEREIN SHALL BE DEEMED OR CONSTRUED TO PERMIT ANY ACT OR OMISSION
WHICH IS PROHIBITED BY THE TERMS OF ANY OF THE OTHER LOAN DOCUMENTS, THE
COVENANTS AND AGREEMENTS CONTAINED HEREIN BEING IN ADDITION TO AND NOT IN
SUBSTITUTION FOR THE COVENANTS AND AGREEMENTS CONTAINED IN THE OTHER LOAN
DOCUMENTS.
Section 10.10. Headings. Section headings used in this Agreement are for convenience of
reference only and are not a part of this Agreement for any other purpose.
Section 10.11. Severability of Provisions. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the
extent of such prohibition or unenforceability without invalidating the remaining provisions
hereof or affecting the validity or enforceability of such provision in any other jurisdiction.
Section 10.12. Counterparts. This Agreement may be executed in any number of
counterparts, and by different parties hereto on separate counterpart signature pages, and all such
counterparts taken together shall be deemed to constitute one and the same instrument.
Section 10.13. Binding Nature, Governing Law, Etc. This Agreement shall be binding
upon the City and its successors and assigns, and shall inure to the benefit of the Bank and the
benefit of its successors and assigns, including any subsequent holder of the Obligations. The
City may not assign its rights hereunder without the written consent of the Bank. This
Agreement constitutes the entire understanding of the parties with respect to the subject matter
hereof and any prior agreements, whether written or oral, with respect thereto are superseded
hereby. THIS AGREEMENT AND THE RIGHTS AND DUTIES OF THE PARTIES HERETO SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE
OF CALIFORNIA WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
Section 10.14. Submission to Jurisdiction; Waiver of Jany Trial. The City hereby submits
to the nonexclusive jurisdiction of the United States District Court for the
District of California and of any California State court sitting in the City of San Francisco for
purposes of all legal proceedings arising out of or relating to this Agreement, the other Loan
Documents or the transactions contemplated hereby or thereby. Should either party to this
Agreement bring legal action against the other, the case shall be handled in the Superior Court of
the State of,California in the County of Sonoma. The City irrevocably waives, to the fullest
extent permitted by law, any objection which it may now or hereafter have to the laying of the
venue of any such proceeding brought in such a court and any claim that any such proceeding
brought in such a court has been brought in an inconvenient forum. THE CITY AND THE BANK
EACH HEREBY IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
-28- 97
PROCEEDING ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENT OR THE TRANSACTIONS
CONTEMPLATED THEREBY.
[SIGNATURE PAGE TO FOLLOW]
-29- 98
Upon your acceptance hereof in the manner hereinafter set forth, this Agreement shall
constitute a contract between us for the uses and purposes hereinabove set forth.
Dated as of this day of 2005.
THE CITY OF PETALUMA
By
Name
Title
Accepted and agreed to at San Francisco, California, as of the day and year last above
written.
BNP PARIBAS, acting through its San Francisco
office
By
Name
Title
By
Name
Title
-30- 99
EXHIBIT A
REVOLVING NOTE
San Francisco, California
On the Termination Date, for value received, the undersigned, City of Petaluma, a charter
city duly organized and existing under the laws of the State of California (the "City'), hereby
promises to pay to the order of BNP PARIBAS, acting through its San Francisco Branch (the
"Batik") at its office at , San Francisco, California, the principal sum of (i)
Seventy -Five Million and no/100 DOLLARS ($75,000,000), or (ii) such lesser amount as may at
the time of the maturity hereof, whether by acceleration or otherwise, be the aggregate unpaid
principal amount of all Loans owing from the City to the Bank under the Revolving Credit
provided for in the Credit Agreement hereinafter mentioned.
This Note evidences Loans made and to be made to the City by the Bank under the
Revolving Credit provided for under that certain Revolving Credit Agreement dated as of August
1, 2005, between the City and the Bank (said Revolving Credit Agreement, as the same may be
amended, modified or restated from time to time, being referred to herein as the "Credit
Agreement'), and the City hereby promises to pay interest at the office described above on such
Loans evidenced hereby at the rates and at the times and in the manner specified therefor in the
Credit Agreement.
This Note is issued by the City under the terms and provisions of the Credit Agreement
and is secured by, among other things, the Pledged Revenues, and this Note and the holder hereof
are entitled to all of the benefits and security provided for thereby or referred to therein, to which
reference is hereby made for a statement thereof. This Note may be declared to be, or be and
become, due prior to its expressed maturity, voluntary prepayments may be made hereon, all in
the events, on the terms and with the effects provided in the Credit Agreement. All capitalized
terms used herein without definition shall have the same meanings herein as such terms are
defined in the Credit Agreement.
Neither the faith and credit nor the taxing power of the City of Petaluma is pledged to
the payment of the principal of or interest on this Note.
The City hereby promises to pay all costs and expenses (including attorneys' fees)
suffered or incurred by the holder hereof in collecting this Note or enforcing any rights in any
collateral therefor. The City hereby waives presentment for payment and demand. THIS NOTE
SHALL BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE INTERNAL LAWS OF
THE STATE OF CALIFORNIA WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
IMI
THE CITY OF PETALUMA
It is hereby executed this _ day of 2005.
CITY OF PETALi. MA. CONSULTANT
By
City Manager Name
ATTEST:
Title
Citv Clerk
APPROVED AS TO FORM:
Citv Attornev
COMPLETED AND APPROVED:
Director of Water Resources & Conservation
Risk Manager
Finance Director
F41MI M
Citv
-2- 101
State ZiD