072313 lakeport city council special meeting

7/27/2019 072313 Lakeport City Council Special Meeting

http://slidepdf.com/reader/full/072313-lakeport-city-council-special-meeting 1/66

TO THE MEMBERS OF THE CITY COUNCIL OF THE CITY OF LAKEPORT:

NOTICE IS HEREBY GIVEN that a Special Meeting of the Lakeport City Council is hereby called to be held

on Tuesday, June 23, 2013, at 5:30 p.m. in the Council Chambers located at 225 Park Street, Lakeport,

California, for the purpose of discussing and acting on the following:

CLOSED SESSION: 5:30 p.m. - CLOSED SESSION ITEM:

Pursuant to Government Code §54956.8 (Conference

with Real Property Negotiator): Negotiator: City

Manager; regarding property at 1025 Martin Street,

Space 6, Lakeport, specifically, price and payment

terms.

1. APPLICATION 2013-003 – ADDENDUM: 6:00 p.m. – OPEN SESSION ITEMS

Approve addendum to Application No. 2013-003 for

the LMSA’s Shipwreck Days Event.

2. REJECTION OF CLAIM: Reject claim of Jessica King upon advice of REMIF

and Interim City Attorney.

3. OFFICER COMMENDATION: Adopt a Proclamation honoring Police Officer

Stephanie Green.

4. PROPERTY TRANSFER: Adopt a resolution ratifying and approving the

transfer of the mobile home located at 1400 South

Main Street, Unit 12B, in Lakeport, California to an

income-qualified disabled individual.

5. INDEPENDENT BOND COUNSEL: Consider options for bridge financing for USDA loan

as presented by Independent Bond Counsel

Cameron Weist.

Dated: July 22, 2013

____________________________________

Hilary Britton, Acting Deputy City Clerk

AGENDANOTICE AND CALL OF SPECIAL MEETING

OF THE LAKEPORT CITY COUNCIL

Tuesday, June 23, 2013, 5:30 p.m.

City Council Chambers, 225 Park Street, Lakeport, California 95453



From: Andrew Britton

To: Janel Chapman

Cc: Hilary Britton

Subject: RE: Addendum to Application 2013-003 - Shipwreck Days

Date: Wednesday, July 17, 2013 5:15:47 PM

Hi Hilary-

Standard comments/conditions regarding the relocation of the vendors to Library Park. :

· Commercial vendors must have a City business license prior to the event.

· Vendors selling merchandise are required to collect sales tax and submit the

collected taxes to the State. The current sales tax rate in Lakeport is 8.0%

Thanks for the opportunity to comment.

Andrew BrittonCDD/Planning

From: Janel ChapmanSent: Friday, July 12, 2013 3:43 PMTo: Andrew Britton ([email protected]); Brad Rasmussen ([email protected]);Dan Buffalo ([email protected]); Kelly Buendia ([email protected]); MargaretSilveira; Mark Brannigan; Scott Harter ([email protected])Subject: Addendum to Application 2013-003 - Shipwreck Days

Please find attached an addendum to Application 2013-003 for the LMSA Shipwreck Days inSeptember.

I would like to get this on the first Council meeting after July 16,2013, so please have your

comments back to me by July 18, 2013.

Thanks,

Hilary Britton,

On behalf of:

Janel Chapman, City Clerk

City of Lakeport

225 Park Street

Lakeport, CA 95453

Phone: (707) 263-5615, Ext. 12

Fax: (707) 263-8584

[email protected]

mailto:/O=LAKEPORT/OU=FIRST%20ADMINISTRATIVE%20GROUP/CN=RECIPIENTS/CN=ABRITTON

mailto:[email protected]






mailto:/O=LAKEPORT/OU=FIRST%20ADMINISTRATIVE%20GROUP/CN=RECIPIENTS/CN=ABRITTON



From: Police Chief

To: Janel Chapman

Cc: LPD Sworn

Subject: Re: Addendum to Application 2013-003 - Shipwreck Days

Date: Wednesday, July 17, 2013 8:22:16 PM

Police Concerns:

Vendor needs to apply for Lakeport Police Department and California AlcoholicBeverage Control alcohol sales permit.

No known additional fiscal impact for Police Department.

Brad RasmussenChief of PoliceCity of Lakeport

Sent from my iPad

On Jul 12, 2013, at 3:42 PM, "Janel Chapman" < [email protected]>wrote:

<image001.gif>Please find attached an addendum to Application 2013-003 for the LMSA

Shipwreck Days in September.

I would like to get this on the first Council meeting after July 16,2013, so please

have your comments back to me by July 18, 2013.

Thanks,

Hilary Britton,

On behalf of:

Janel Chapman, City Clerk

City of Lakeport

225 Park Street

Lakeport, CA 95453

Phone: (707) 263-5615, Ext. 12Fax: (707) 263-8584

[email protected]

<App 2013-003 - Addend 3.pdf>

mailto:/O=LAKEPORT/OU=FIRST%20ADMINISTRATIVE%20GROUP/CN=RECIPIENTS/CN=POLICECHIEF


mailto:[email protected],[email protected],[email protected],[email protected],[email protected],[email protected],[email protected],[email protected],[email protected],[email protected],[email protected],[email protected],[email protected]





mailto:[email protected],[email protected],[email protected],[email protected],[email protected],[email protected],[email protected],[email protected],[email protected],[email protected],[email protected],[email protected],[email protected]


mailto:/O=LAKEPORT/OU=FIRST%20ADMINISTRATIVE%20GROUP/CN=RECIPIENTS/CN=POLICECHIEF



Proclamation

OF THE CITY COUNCIL

OF THE CITY OF LAKEPORT

WHEREAS, Officer Stephanie Green began her career in law enforcement in

1993 as a reserve officer for the Stanislaus County Sheriff’s office. Continuing her

career as police officer in the Cities of Ripon and Pleasanton, before arriving as an

officer for the Lakeport Police Department in 2009; and

WHEREAS, during her tenure in Lakeport Police Department, Officer Green has

worked in patrol, investigations, and as a school resource officer. She also taught

several D.A.R.E. courses and became involved in other programs in the community;and

WHEREAS, on July 9, 2013 Officer Green while working on street patrol was

dispatched to a possible drowning at the Regency Inn Motel swimming pool. Officer

Green was the first to arrive on the scene, as she was approaching the pool, she saw

a male subject lying at the bottom of the pool in 8 ft. of water. Without hesitation,

Officer Green jumped into the pool with full duty gear and grabbed the male subject

to pull him to safety, where Lakeport Fire personnel continued the lifesaving efforts;

and

WHEREAS, Officer Green’s act of heroism in putting another’s life before her

own is a continuum of her everyday actions to protect and serve this community.

NOW, THEREFORE, BE IT RESOLVED on July 23, 2013, the City of Lakeport City Council

acknowledges and thanks Officer Stephanie Green for her commitment to the City of

Lakeport and the residents of this City and recognize her for her act of bravery in her

attempt of saving the life of Shaun Rudd, on July 9, 2013.

I have hereunto set my hand and caused the Seal of the City of Lakeport to be affixed

this 23rdday of July, 2013.

______________________________

THOMAS ENGSTROM, Mayor



119392.1

RESOLUTION NO. ____ (2013)

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OFLAKEPORT IN ITS ROLE AS HOUSING SUCCESSOR AGENCY

RATIFYING AND APPROVING THE TRANSFER OF THE MOBILE

HOME LOCATED AT 1400 SOUTH MAIN STREET, UNIT 12B, INLAKEPORT, CALIFORNIA TO AN INCOME-QUALIFIED DISABLED

INDIVIDUAL

WHEREAS, in 2010, the City of Lakeport Redevelopment Agency, acting through the Housing Rehabilitation Loan Committee (“Loan Committee”), approved Redevelopment Agency financing for thepurchase and rehabilitation of Unit 12B at the Clear Lake Marina Mobile Home Park, 1400 South MainStreet, Lakeport, California (“Unit 12B”) for a low-income, disabled individual using monies from the low-and moderate- income housing (“LMIH”) fund;

WHEREAS, the Loan Committee approved $17,564 in financing for the purchase of Unit 12B, a 1976

manufactured home valued in 2010 at $10,500, and improvement to Unit 12B;

WHEREAS, the financing agreement was in practical effect a grant to the low-income, disabled borrowerbecause the Loan Committee did not require the borrower to make any payments for thirty (30) years and theCity had no intention of receiving repayment for the loan;

WHEREAS, in May 2013, the borrower abandoned the mobile home and defaulted on the loan from theLoan Committee;

WHEREAS, because of the intervening dissolution of the Redevelopment Agency, and under the terms of the financing agreement, the City of Lakeport, in its capacity as the Housing Successor Agency under Healthand Safety Code section 34176, was entitled to enter the premises, take possession and re-sell Unit 12B upon

the borrower’s default;

WHEREAS, because of the dissolution of redevelopment agencies under AB 1484 and AB 1x26, the Stateof California has no additional LMIH funds to finance new loans or fund the cost to the City to administerthem;

WHEREAS, the City included the loan related to Unit 12B on its approved Housing Asset Transfer formsubmitted to the Department of Finance and the County Auditor-Controller and received a finding of completion related to its housing due diligence review under the Redevelopment Dissolution Law, which alsodisclosed the loan regarding Unit 12B;

WHEREAS, based on the sale of comparable mobile homes in the area, the value of the Unit 12B upon theborrower’s default was approximately $2,000 to $3,000;

WHEREAS, the City Council wishes to dispose of Unit 12B for a public purpose and in furtherance of thepurposes for which LMIH fund monies were intended under Health and Safety Code sections 34201 and33334.2;

WHEREAS, consistent with the past practices of the Loan Committee, the City undertook to identify another low-income and disabled individual who could benefit from housing in Unit 12B;



Resolution No. ____ (2013) Page 2119392.1

WHEREAS, though the assistance of People Services, Inc., a local non-profit organization serving individuals with developmental disabilities, the City identified a qualifying individual in need of housing, whointends to permanently reside in Unit 12B;

WHEREAS, unlike real property, mobile homes, including Unit 12B, have limited life spans and require theon-going payment of rent and other carrying costs;

WHEREAS, the City desires to grant or donate Unit 12B to a qualifying low-income, disabled individual who intends to reside in the unit, as it originally intended with the original 2010 loan, and avoid current orfuture payments of rent and other carrying costs for Unit 12B in light of the lack of future LMIH fundmonies;

WHEREAS, pursuant to article 4, chapter 4 of the Community Redevelopment Law (Health & Saf. Code,§ 33330 et seq.), the City Council of the City of Lakeport, acting as the Governing Board of the Housing Successor Agency, may use low and moderate income housing fund monies to maintain the community’ssupply of mobile home and to donate monies to qualifying individuals; and

WHEREAS, pursuant to Government Code section 37350, the City may control and dispose of real orpersonal property for the common benefit.

NOW, THEREFORE, BE IT RESOLVED THAT:

The City Council of the City of Lakeport, sitting as the governing body of the Housing Successor Agency,hereby ratifies and approves the sale and transfer of the personal property of a manufactured home located at1400 South Main Street, Sp. 12B, Lakeport CA 95453, Decal AAT8578, Serial No. S4849; Hud Label/Insignia No. 233256, to Paul Louden, a qualifying low-income individual, for one dollar ($1.00) inconsideration, and hereby directs City staff to perfect this sale and transfer.

The City Council’s approval of this sale and transfer is exempt from the requirements of the CaliforniaEnvironmental Quality Act under title 14 of the California Code of Regulations sections 15312, for the sale of surplus government property, and 15061(b)(3), because there is no potential for causing a significant effect on

the environment.

AYES:NOES: ABSTAINING: ABSENT:

_________________________________ TOM ENGSTROM, Mayor/Chairman

ATTEST: APPROVED AS TO FORM:

____________________________________ _________________________________ KELLY BUENDIA DAVID J. RUDERMANDeputy City Clerk/Acting Secretary Interim City Attorney



Meeting Date: 7/23/2013 Page 1 Agenda Item #5.

CITY OF LAKEPORT

City CouncilCity of Lakeport Municipal Sewer District

STAFF REPORT

RE: Consider a Resolution Authorizing Two Separate Loan Agreements and Providing for the Issuance of Series 2013 Water Revenue Notes

MEETING DATE: 7/23/2013

SUBMITTED BY: Margaret Silveira

PURPOSE OF REPORT: Information only Discussion Action Item

WHAT IS BEING ASKED OF THE CITY COUNCIL/BOARD:

Staff recommends that the City Council adopt Resolution No. ____ (2013) authorizing and directing theexecution of Series 2013B Water Revenue Notes in a principal amount not to exceed $7,675,000; appointing certain financial consultants in connection therewith; and providing for other matters properly relatedthereto.

BACKGROUND:

Certain capital projects associated with the City’s Water Enterprise need to be completed in a timely manner in order to keep the Water System functioning and meet mandated water regulatory requirements. Anumber of presentations have been made to the public and the Council regarding the needs of the WaterEnterprise related to water supply, infrastructure maintenance, and the mandatory implementation of watermeters. A brief description of each of these projects is as follows:

• Acquisition and Installation of Water Meters

• Acquisition and Installation of a Supervisory Control and Data Acquisition System (SCADA) radiocommunication system

• Well Relocation and protection for Existing City Wells Located in Scotts Creek

• Extension, Construction and Looping the Existing 14-inch Water Mains on Parallel Drive and SouthMain Street (the “Loop Line Project”)

The City has been approved for long-term take-out financing by United Sates Department of Agriculture

(the “USDA”), which is anticipated to take place within the next three years; however, short-term cash flow requirements necessary to ready these projects for USDA financing creates the necessity for the issuance of the subject Series 2013 Water Revenue Notes in a principal amount not to exceed $7,675,000 (the “Notes”).

The Water Enterprise has two outstanding long-term debt obligations for which it is presently responsible,being: (i) the 2000 USDA Bonds, originally issued on August 15, 2000 at a rate of 4.75%, in the initialamount of $3,050,000, which are paid semiannually each February and August, with a final maturity on August 1, 2039 (the “USDA Loan”), and (ii) the West America Bank, Series 2002 Water Loan, originally issued on May 30, 2002 at a rate of 5.10%, in the initial amount of $873,577.18, which is scheduled tomature on November 1, 2017 (the “2002 West America Loan”). The 2002 West America Loan is being




refinanced with proceeds of the Notes (and will be fully paid off within three years), and the 2000 USDABonds will remain outstanding on parity with the Notes and the Bonds.

DISCUSSION:

As part of the budget process (and to ensure compliance with certain outstanding bond covenants andadditional parity bonds tests), staff, in conjunction with the financing team, has prepared a projection of theCity’s water net revenue cash flow analysis, a copy of which has been included with this report (the “CashFlow Analysis”). The Cash Flow Analysis demonstrates that there will be sufficient existing and future “net

revenues” (i.e., water revenues remaining after deducting all water maintenance and operation costs) to: (i)meet current obligations, (ii) pay for the annual costs of the Notes (which includes the refinancing of the2002 West America Loan).

Expenses of issuing the Loan will be paid from Note proceeds and are contingent on the Notes being issued.

As mentioned above, the financing proposal includes a refinancing and complete pay-off of the City’s 2002 West America Loan, which is presently outstanding in the principal amount of approximately $325,000. This

refinancing is being recommended in order to (i) eliminate certain restrictive covenants contained in the2002 West America Loan documents that limit the City’s ability to issue short-term obligations with aballoon payment, and (ii) provide additional cash flow savings to the Water Enterprise to offset some of thecosts of issuance associated with the issuance of the Notes.

The parameters established for the sale of the Notes are as follows:

1. The principal amount of the Notes will not exceed $7.675 million.

2. The interest rate on the Notes will not exceed 2.25%.

3. The total costs of issuance for both the Notes will not exceed $45 thousand.

The Weist Law Firm has been appointed Bond Counsel for this refinancing and will be available to review with the Council the solicitation and selection process, the documents included with this Agenda item,provide a report on other necessary Council actions and the anticipated sequence of events should theCouncil decide to move ahead with this Refunding.

The resolution being recommended for adoption essentially authorizes and approves the form of Loan Agreements necessary to provide for the successful delivery of the proposed Notes, as well as the fullprepayment and defeasance of the 2002 West America Loan. The general description of the Loan Agreements is as follows:

Note Loan Agreement: this agreement provides for all of the terms and conditions of the proposedLoan to the City from Bank of Nevada, secured by the Notes, including, but not limited to, closing conditions, prepayment provisions, insurance requirements, and the pledge of net revenues of the WaterEnterprise commensurate with the scheduled debt service on the Notes.

OPTIONS:




Use the Line of Credit (i.e., the Notes), which would have a lower rate of interest and would not accrueinterest until needed, but would be required to either be paid off or refinanced at the end of the three yearterm of the Notes to the extent of any remaining balance at maturity.

FISCAL IMPACT:

None $ Account Number: Comments: The Notes willbear interest at a rate that is presently expected to be less than 2%, but will not begin to accrue interestunless and until draws have been made thereon. The total costs of issuance are fully contingent, and are not

expected to exceed $45k. The Loan Agreements pledge water net revenues sufficient to pay debt service andmeet all coverage requirements--and the Cash Flow Analysis demonstrates compliance with theserequirements.

SUGGESTED MOTIONS:

Move to adopt Resolution No. ____ (2013) authorizing and directing the execution of Series 2013B WaterRevenue Notes in a principal amount not to exceed $7,675,000; appointing certain financial consultants inconnection therewith; and providing for other matters properly related thereto.

Attachments: 1. Note Loan Agreement2. Cash Flow Analysis

3. Resolution ____ (2013) (proposed)



NOTE LOAN AGREEMENT

Dated as of August 1, 2013

By and between the

BANK OF NEVADA

And the

CITY OF LAKEPORT

Providing for the

$________ (Not to Exceed)CITY OF LAKEPORT

SERIES 2013B WATER REVENUE NOTES(SERIES 2013B WATER ENTERPRISE PROJECT)



LAKEPORT _WATER _NOTE _LOAN _AGREEMENT _[DRAFT _07-18-13]-i-

TABLE OF CONTENTS

ARTICLE I

DEFINITIONS; RULES OF INTERPRETATION

Section 1.1. Definitions....................................................................................................................2Section 1.2. Interpretation ................................................................................................................7Section 1.3. Liability of City Limited to Net Revenues ..................................................................7Section 1.4. Benefits of Note Loan Agreement Limited to Parties .................................................8Section 1.5. Successor Is Deemed Included in all References to Predecessor ................................8Section 1.6. Waiver of Personal Liability ........................................................................................8

Section 1.7. Partial Invalidity...........................................................................................................8

ARTICLE II:

THE LOAN; ISSUANCE OF THE NOTES

Section 2.1. Principal Amount; Designation.................................................................................10Section 2.2. Terms of Loan and Note; Advances .........................................................................10Section 2.3. Issuance of Note; Form of Note. ...............................................................................11Section 2.4. Issuance and Delivery of Note ..................................................................................11Section 2.5. Transfer or Exchange of Lender’s Rights .................................................................11

ARTICLE III

APPLICATION OF LOAN PROCEEDS; CREATION OF FUNDS

Section 3.1. Deposit of and Application of Funds .........................................................................11Section 3.2. Payment of Note. ......................................................................................................12

Section 3.03. Project Fund ............................................................................................................12Section 3.4. Assignment Agreement by the Lender ......................................................................13

ARTICLE IV

SECURITY FOR THE LOAN

Section 4.1. Payment of the Loan Payments.................................................................................14Section 4.1. Pledge of Net Revenues and Other Funds; Revenue Fund .......................................14Section 4.3. Receipt and Deposit of Revenues .............................................................................14Section 4.4. Rates, Fees, and Charges ..........................................................................................15Section 4.5. Additional Parity Obligations ...................................................................................16

Section 4.6. Covenant to Obtain Take-Out Financing ..................................................................17

ARTICLE V

REPRESENTATIONS, COVENANTS AND WARRANTIES

Section 5.1. Compliance with Loan ...............................................................................................18Section 5.2. Against Encumbrances ...............................................................................................18Section 5.3. Against Sale or Other Disposition of Property ..........................................................18



LAKEPORT _WATER _NOTE _LOAN _AGREEMENT _[DRAFT _07-18-13]-ii-

Section 5.4. Against Competitive Facilities ...................................................................................18Section 5.5. Tax Covenants ...........................................................................................................19Section 5.6. Prompt Acquisition ....................................................................................................19Section 5.7. Maintenance and Operation of the Enterprise ...........................................................19Section 5.8. Payment of Claims .....................................................................................................19

Section 5.9. Insurance ....................................................................................................................19Section 5.10. Books and Accounts; Financial Statements .............................................................20Section 5.11. Protection of Security and Rights of Lender ............................................................21Section 5.12. Payment of Taxes and Compliance with Governmental Regulations .....................21Section 5.13. Operation of Enterprise; Collection of Rates and Charges ......................................21Section 5.14. Eminent Domain Proceeds .......................................................................................21Section 5.15. Further Assurances...................................................................................................22Section 5.16. Release and Indemnification Covenants ..................................................................22Section 5.17. Notices .....................................................................................................................23Section 5.18. Amendment of Note Loan Agreement .....................................................................23

ARTICLE VIEVENTS OF DEFAULT AND REMEDIES

Section 6.1. Events of Default Defined .........................................................................................23Section 6.2. Remedies on Default ..................................................................................................24Section 6.3. Other Remedies of the Lender ...................................................................................24Section 6.4. No Remedy Exclusive................................................................................................25Section 6.5. Agreement to Pay Attorneys’ Fees and Expenses .....................................................25Section 6.6. No Additional Waiver Implied by One Waiver .........................................................25

ARTICLE VII

PREPAYMENT OF LEASE PAYMENTS

Section 7.1. Optional Prepayment .................................................................................................25Section 7.2. Mandatory Prepayment From Net Proceeds of Insurance or Eminent Domain ........26

ARTICLE VIII

COVENANTS, REPRESENTATIONS AND WARRANTIES

Section 8.1. Covenants, Representations and Warranties of the City ............................................26Section 8.2. Covenants, Representations and Warranties of the Lender .......................................28Section 8.3. Closing Conditions ....................................................................................................28

ARTICLE IX

MISCELLANEOUS

Section 9.1. Notices .......................................................................................................................31Section 9.2. Binding Effect ............................................................................................................31Section 9.3. Severability ................................................................................................................31Section 9.4. Net-Net-Net contract ..................................................................................................31



LAKEPORT _WATER _NOTE _LOAN _AGREEMENT _[DRAFT _07-18-13]-iii-

Section 9.5. Further Assurances and Corrective Instruments ........................................................31Section 9.6. Waiver of Personal Liability ......................................................................................32Section 9.7. Execution in Counterparts ..........................................................................................32Section 9.8. Applicable Law ..........................................................................................................32Section 9.9. Captions .....................................................................................................................32

EXHIBIT A FORM OF NOTEEXHIBIT B COMPONENTS OF THE PROJECT



LAKEPORT _WATER _NOTE _LOAN _AGREEMENT _[DRAFT _07-18-13]

NOTE LOAN AGREEMENT

THIS NOTE LOAN AGREEMENT (this “Note Loan Agreement”), dated as of August 1,2013, is between the BANK OF NEVADA, a Nevada corporation, as lender (the “Lender”), and

the CITY OF LAKEPORT, a municipal corporation and general law city organized and existingunder and by virtue of the laws of the State of California, as lessee (the “City”);

W I T N E S S E T H :

WHEREAS, the City presently owns and operates certain facilities and property for itsdomestic water system (the “Enterprise”), and in order to finance the acquisition andconstruction of various capital improvements to the Enterprise (the “Project”), the City proposesto accept from the Lender a tax-exempt loan (the “Loan”), secured by this Note Loan Agreementand a note, with an aggregate principal component in the amount of not-to-exceed $__________,hereby designated the “City of Lakeport, Series 2013 Water Revenue Notes (Series 2013B Water

Enterprise Project)”

(the “Note”); and

WHEREAS, the principal of and interest and redemption premium (if any) on the Note,and any bonds or other obligations issued on a parity therewith as provided herein, will be payable from and secured by a pledge of and lien on the Net Revenues derived from theEnterprise, as expressly set forth in this Note Loan Agreement; and

WHEREAS, in order to provide for the execution and delivery of this Note LoanAgreement, to establish and declare the terms and conditions upon which the Loan is to be madeand secured, and to secure the payment of the principal thereof, premium (if any) and interestthereon, the City has authorized the execution and delivery of this Note Loan Agreement; and

WHEREAS, all things necessary to make the Note when issued, executed and delivered,the valid and binding obligation of the City, and to constitute this Note Loan Agreement as avalid pledge of the revenues herein pledged to the payment of the principal of, prepayment premium, if any, and interest on the Note have been done and performed, as required by law, andthe City is now fully authorized to enter into this Note Loan Agreement, subject to the termshereof;

A G R E E M E N T :

NOW, THEREFORE, in order to secure the payment of the principal of and the interestand premium (if any) on the Loan at any time outstanding under this Note Loan Agreement, andto secure the performance and observance of all the covenants and conditions therein and hereinset forth, and to declare the terms and conditions upon and subject to which the Loan is premised, and in consideration of the premises and of the mutual covenants herein contained andof the making of the Loan by the Lender, and for other good and valuable consideration, thereceipt whereof is hereby acknowledged, the parties hereto hereby formally covenant, agree and bind themselves as follows:



LAKEPORT _WATER _NOTE _LOAN _AGREEMENT _[DRAFT _07-18-13]-2-

ARTICLE I

DEFINITIONS; RULES OF INTERPRETATION

Section 1.1. Definitions. Unless the context otherwise requires, the terms defined in this

section shall for all purposes hereof and of any amendment hereof or supplement hereto and of any report or other document mentioned herein or therein have the meanings defined herein, thefollowing definitions to be equally applicable to both the singular and plural forms of any of theterms defined herein.

“Acquisition,” “Acquire” or “Acquisition and Construction” means, with respect to any portion of the Project, the acquisition, construction, improvement, equipping, renovation,remodeling or reconstruction thereof.

“Additional Revenues” means, with respect to the issuance of any Parity Obligations, anallowance for Net Revenues (i) arising from any increase in the charges made for service from

the Enterprise, adopted prior to the incurring of such Parity Obligations and effective withineighteen (18) months following the date of incurring such Parity Obligations, in an amount equalto the total amount by which the Net Revenues for the Enterprise would have been increased if such increase in charges had been in effect during the whole of the most recent completed FiscalYear or during any more recent twelve (12) month period selected by the City, and (ii) arisingfrom any increase in service connections to the Enterprise, prior to the incurring of such ParityObligations, in an amount equal to the total amount by which the Net Revenues for theEnterprise would have been increased if such connections had been in existence during the wholeof the most recent complete Fiscal Year or during any more recent twelve (12) month periodselected by the City, all as shown by the certificate or opinion of an Independent FinancialConsultant.

“Advance” means any advance of the proceeds Loan made by the Lender to the Cityunder the terms of Section 2.2.

“Alternate Project” means an alternate project designated by the City pursuant to Section3.3 hereof.

“Bond Counsel” means (a) The Weist Law Firm, or (b) any other attorney or firm of attorneys of nationally recognized expertise with respect to legal matters relating to obligationsthe interest on which is excludable from gross income under Section 103 of the Tax Code.

“Business Day” means a day other than a Saturday, Sunday or legal holiday, on which banking institutions are not closed in the State.

“Certificate,” “Request” and “Requisition” of the City means a written certificate, requestor requisition signed in the name of the City by its Authorized Representative. Any suchinstrument and supporting opinions or representations, if any, may, but need not, be combined ina single instrument with any other instrument, opinion or representation, and the two or more socombined shall be read and construed as a single instrument.




“City” means the City of Lakeport, a municipal corporation and general law cityorganized and existing under the laws of the State.

“City Manager” means the City Manager of the City, or any other person designated by

the City Manager to act on behalf of the City Manager.

“City Representative” means the Mayor, Mayor Pro Tem, City Manager, FinanceDirector or the designee of any such official, or any other person authorized by resolutiondelivered to the Lender to act on behalf of the City under or with respect to this Note LoanAgreement.

“Closing Date” means the date on which the Loan is funded by the Lender.

“Council” means the City Council of the City.

“Debt Service” means, for any Fiscal Year, the sum of (l) the interest falling due duringsuch Fiscal Year on all Parity Obligations (that are outstanding under the documents or agreements pursuant to which they were issued), assuming that all outstanding serial ParityObligations are retired as scheduled and that all outstanding term Parity Obligations areredeemed from sinking fund payments as scheduled (except to the extent that such interest has been fully capitalized and is invested in Federal Securities that mature at times and in suchamounts as are necessary to pay the interest to which such amounts are pledged), (2) the principal amount of all serial Parity Obligations (that are outstanding under the documents or agreements pursuant to which they were issued) falling due by their terms during such FiscalYear, and (3) the minimum amount of term Parity Obligations (that are outstanding under thedocuments or agreements pursuant to which they were issued) required to be paid or called andredeemed during such Fiscal Year, together with the redemption premiums, if any, thereon; provided that (A) whenever any Parity Obligation (as is the case for the Notes) is scheduled to

not fully amortize and therefor matures with a balloon payment, such principal and interest shall be imputed at a rate of six percent (6%), fully amortized over a twenty (20) year period, beginning from the date upon which such balloon payment is due, (B) whenever interest asdescribed herein accrues at other than a fixed rate, such interest shall be assumed to be a rateequal to the greater of (i) the actual rate on the date of calculation, or if the Parity Obligations arenot yet outstanding, the initial rate (if established and binding), (ii) if the Parity Obligations have been outstanding for at least twelve months, the average rate over the twelve monthsimmediately preceding the date of calculation, and (iii) (x) if interest on the Parity Obligations isexcludable from gross income under the applicable provisions of the Code, the most recently published The Bond Buyer Bond Revenue Index (or comparable index if no longer published) plus one hundred fifty (150) basis points, or (y) if interest is not so excludable, the interest rateon direct U.S. Treasury Obligations with comparable maturities, plus one hundred fifty (150) basis points.

“Default Rate” means 6.00% plus the interest rate equal to the interest component of Loan Payments.




“Enterprise” means, collectively, the entire water collection, storage, treatment,transmission and distribution system now owned or operated by the City, and all other properties,structures or works hereafter acquired and constructed by the City and determined to be a part of the water Enterprise, including all facilities, works, properties, structures and assets, real and personal, tangible and intangible, of the City, now or hereafter existing, used or pertaining to the

collection, storage, treatment, transmission and distribution of potable and non-potable water,including all contractual rights to water supplies, transmission capacity supply, easements,rights-of-way and other works, property or structures necessary or convenient for such facilities,together with all additions, betterments, extension and improvements to such facilities or any part thereof hereafter acquired or constructed.

“Event of Default” means any of the events of default as defined in Section 8.1.

“Federal Securities” means any direct general non-callable obligations of the UnitedStates of America (including obligations issued or held in book entry form on the books of theDepartment of the Treasury of the United States of America), or obligations the timely payment

of principal of and interest on which are fully and unconditionally guaranteed by the UnitedStates of America.

“Fiscal Year” means each twelve-month period during the Term of this Note LoanAgreement commencing on July 1 in any calendar year and ending on June 30 in the nextsucceeding calendar year, or any other twelve-month period selected by the City as its fiscal year period.

“Generally Accepted Accounting Principles” means the generally accepted accounting principles as presented and recommended by the American Institute of Certified PublicAccountants or its successor, or by any other generally accepted authority on such procedures,and includes, as applicable, the standards set forth by the Governmental Accounting StandardsBoard or its successor.

“Governmental Authority” means any governmental or quasi-governmental entity,including any court, department, commission, board, bureau, agency, administration, central bank, service, district or other instrumentality of any governmental entity or other entityexercising executive, legislative, judicial, taxing, regulatory, fiscal, monetary or administrative powers or functions of or pertaining to government, or any arbitrator, mediator or other personwith authority to bind a party at law.

“Insurance Consultant” means any nationally recognized independent actuary, insurancecompany or broker that has actuarial personnel knowledgeable with respect to insurance carried, by, required for and available to special districts operating facilities similar to the Enterprise,including a pooled self-insurance program in which premiums are established on the basis of therecommendation of an actuary of national reputation.

“Interest Component” means the portion of each Loan Payment designated as InterestComponent.




“Lender” means (a) initially, the Bank of Nevada, a Nevada corporation, as owner of the Note, and (b) any other entity to whom the rights of the Lender hereunder are assigned, includingsubsequent assignees of the Lender, as provided in Section 3.4.

“Loan” means the loan made hereunder by the Lender to the City in the aggregate

principal amount of not-to-exceed $__________, for the purpose of providing funds to deposit inthe Project Fund.

“Loan Payment Date” means February 1 and August 1 in each year, commencingFebruary 1, 2014, and continuing to and including the date on which the Loan Payments are paidin full.

“Loan Payments” means the payments of principal and interest to be paid by the City onthe Note, as set forth herein.

“Maintenance and Operation Costs” of the Enterprise means the reasonable and

necessary costs and expenses paid by the City for maintaining and operating the Enterprise, asdetermined in accordance with Generally Accepted Accounting Principles, including but notlimited to (a) costs of acquisition of water, including all associated treatment and delivery costs,to be used by the Enterprise, (b) costs of electricity and other forms of energy supplied to theEnterprise, (c) the reasonable expenses of management and repair and other costs and expensesnecessary to maintain and preserve the Enterprise in good repair and working order, (d) thereasonable administrative costs of the City attributable to the operation and maintenance of theEnterprise, such as salaries and wages of employees, overhead, taxes (if any) and insurance premiums, and (e) all other reasonable and necessary costs of the City or charges required to be paid by it to comply with the terms hereof or of any resolution authorizing the issuance of anyParity Obligations or of such Parity Obligations, such as compensation, reimbursement andindemnification of the trustee for any such Parity Obligations and fees and expenses of Independent Certified Public Accountants and independent engineers, but in all cases excluding(i) debt service payable on obligations incurred by the City with respect to the Enterprise, (ii)depreciation, replacement and obsolescence charges or reserves therefor, and (iii) amortization of intangibles or other bookkeeping entries of a similar nature.

“Maximum Annual Debt Service” means the greatest amount of Debt Service withrespect to the Parity Obligations to which reference is made coming due in any Fiscal Year including the Fiscal Year in which the calculation is made or any subsequent Fiscal Year.

“Material Adverse Effect” means an event or occurrence which adversely affects in amaterial manner (a) the assets, liabilities, condition (financial or otherwise), business, facilities or operations of the City, (b) the ability of the City to carry out its business in the manner conductedas of the date of this Note Loan Agreement or to meet or perform its obligations under this NoteLoan Agreement on a timely basis, (c) the validity or enforceability of this Note LoanAgreement, or (d) the exclusion of the interest component of the Loan Payments from grossincome for federal income tax purposes or the exemption of such interest for state income tax purposes.




“Material Litigation” means any action, suit, proceeding, inquiry or investigation againstthe City in any court or before any arbitrator of any kind or before or by any GovernmentalAuthority, (i) if determined adversely to the City, may have a Material Adverse Effect, (ii) seek to restrain or enjoin any of the transactions contemplated by this Note Loan Agreement, or (iii)may adversely affect (A) the exclusion of the interest component of the Loan Payments from

gross income for federal income tax purposes or the exemption of such interest for state incometax purposes or (B) the ability of the City to perform its obligations under this Note LoanAgreement.

“Maximum Annual Debt Service” means the greatest amount of Debt Service withrespect to the Parity Obligations to which reference is made coming due in any Fiscal Year including the Fiscal Year in which the calculation is made or any subsequent Fiscal Year.

“Net Proceeds” means any insurance or eminent domain award (including any proceedsof sale to a governmental entity under threat of the exercise of eminent domain powers), paidwith respect to the Property, to the extent remaining after payment therefrom of all expenses

incurred in the collection thereof.

“Net Revenues” means, for any period, all of the Revenues during such period less all of the Maintenance and Operation Costs during such period. For purposes of securing repaymentof the Loan only, Net Revenues shall also include proceeds from a State Safe Drinking Water Revolving Fund Loan from the State Department of Public Health received by the City to provide funds to refund all or a portion of the Loan.

“Note” or “Notes” means the tax-exempt note executed and delivered by the Cityhereunder evidencing the obligations of the City under this Note Loan Agreement, in the formattached hereto as Exhibit A.

“Note Loan Agreement” means this Note Loan Agreement, dated as of August 1, 2013, between the Lender and the City.

“Parity Obligations” means the 2000 USDA Bonds, the Notes, the Bonds and all other bonds, notes, loan agreements, installment sale agreements, leases or other obligations of theCity, payable from and secured by a pledge of and lien upon any of the Net Revenues incurredon parity with the payment of the Loan Payments pursuant to Section 4.5.

“Parity Payments” means all Debt Service payments scheduled to be paid by the Cityunder Parity Obligations.

“Principal Amount” means the aggregate principal amount of the Loan, in an amount not-to-exceed $___________.

“Principal Component” means the portion of each Loan Payment designated as PrincipalComponent.




“Take-Out Financing Proceeds” means the proceeds of a Take-Out Financing used for the prepayment or payment of outstanding Loan Payments or applied to the refunding of all or a portion of the Note.

“Tax Code” means the Internal Revenue Code of 1986 as in effect on the Closing Date or (except as otherwise referenced herein) as it may be amended to apply to obligations issued onthe Closing Date, together with applicable proposed, temporary and final regulations promulgated, and applicable official public guidance published, under the Tax Code.

“Term of this Note Loan Agreement” or “Term” means the time during which this NoteLoan Agreement is in effect, as provided in Section 2.2.

“Treasurer” means the Finance Director or City Manager of the City.

“2000 USDA Bonds” means the $3,050,000 Certificates of Participation (1998 Water

Project-Series 2000) originally sold to USDA on August 15, 2000 at a rate of 4.75%, in theinitial amount of $3,050,000, which are paid semiannually each February and August, with afinal maturity on August 1, 2039.

“Water Service” means the water service made available or provided by the Enterprise.

“2000 West America Loan” means the West America Bank, Series 2002 Water Loan,originally issued on May 30, 2002 at a rate of 5.10%, in the initial amount of $873,577.18, whichis scheduled to mature on November 1, 2017.

Section 1.2. Interpretation.

(a) Unless the context otherwise indicates, words expressed in the singular include the plural and vice versa and the use of the neuter, masculine, or feminine gender is for convenienceonly and include the neuter, masculine or feminine gender, as appropriate.

(b) Headings of articles and sections herein and the table of contents hereof are solely for convenience of reference, do not constitute a part hereof and do not affect the meaning,construction or effect hereof.

(c) All references herein to “Articles,” “Sections” and other subdivisions are to thecorresponding Articles, Sections or subdivisions of this Note Loan Agreement; the words“herein,” “hereof,” “hereby,” “hereunder” and other words of similar import refer to this NoteLoan Agreement as a whole and not to any particular Article, Section or subdivision hereof.

Section 1.3. Liability of City Limited to Net Revenues.

Notwithstanding anything to the contrary contained in this Note Loan Agreement, theCity shall not be required to advance any money derived from the proceeds of any taxescollected for the use and benefit of the City, or from any source of income other than the Net




Revenues, for the payment of the principal of or interest or prepayment premiums, if any, on theLoan or for the performance of any covenants herein contained, nor for the maintenance andoperation of the Enterprise from any source of income other than the Revenues. The City may,however, advance funds for any such purpose so long as such funds are derived from a sourcelegally available for such purpose without incurring any indebtedness. The Loan shall be payable

exclusively from the Net Revenues as in this Note Loan Agreement provided. The credit or taxing power of the City is not pledged for the payment of the Loan or its interest. The Lender shall never have the right to compel the exercise of the taxing power of the City. The principalof and interest on the Loan and any prepayment premiums upon the prepayment thereof shall not be a debt of the City, nor a legal or equitable pledge of, or charge, lien or encumbrance upon, anyof the property of the City or any of its income, receipts, or revenues, except the Net Revenues pledged to the payment thereof as provided in this Note Loan Agreement.

Section 1.4. Benefits of Note Loan Agreement Limited to Parties. Nothing containedherein, expressed or implied, is intended to give to any person other than the City and the Lender any right, remedy or claim under or pursuant hereto. Any agreement or covenant required herein

to be performed by or on behalf of the City shall be for the sole and exclusive benefit of theLender.

Section 1.5. Successor Is Deemed Included in all References to Predecessor. Whenever the City is named or referred to herein, such reference shall be deemed to include the successor to the powers, duties and functions that are presently vested in the City, and all agreements andcovenants required hereby to be performed by or on behalf of the City shall bind and inure to the benefit of the successors thereof whether so expressed or not.

Section 1.6. Waiver of Personal Liability. No member of the Council and no officer,agent, or employee of the City, or of any department or agency thereof, shall be individually or personally liable for the payment of the principal of or interest on the Loan, but nothingcontained herein shall relieve any such member, officer, agent or employee from the performance of any official duty provided by law or hereby.

Section 1.7. Partial Invalidity. If any one or more of the agreements or covenants or portions thereof required hereby to be performed by or on the part of the City shall be contrary tolaw, then such agreement or agreements, such covenant or covenants or such portions thereof shall be null and void and shall be deemed separable from the remaining agreements andcovenants or portions thereof and shall in no way affect the validity hereof or the Loan; but theLender shall retain all the rights and benefits accorded to it under any applicable provisions of law. The City hereby declares that it would have adopted this Note Loan Agreement and eachand every other article, section, paragraph, subdivision, sentence, clause and phrase hereof irrespective of the fact that any one or more articles, sections, paragraphs, subdivisions,sentences, clauses or phrases hereof or the application thereof to any person or circumstance may be held to be unconstitutional, unenforceable or invalid.




ARTICLE II

THE LOAN; ISSUANCE OF THE NOTES

Section 2.1. Principal Amount; Designation. The Lender hereby agrees to make the

Loan to the City in the aggregate principal amount not-to-exceed $__________, and the Cityhereby agrees to borrow such amount from the Lender. The Loan shall be evidenced by the Note, the form of which is set forth in Exhibit A hereto, in the aggregate principal amount not-to-exceed $_________. Notwithstanding the provisions hereof, the principal amount of the Loanshall equal the sum of the Advances (less any prepayments of principal amount of the Loan).The Loan and the Note are authorized to be entered into and issued by the City under and subjectto the terms of this Note Loan Agreement and other applicable laws of the State. The Loan shall be funded by the Lender subject to the terms and conditions of this Note Loan Agreement on theClosing Date in funds which are immediately available to the City.

Section 2.2. Terms of Loan and Note; Advances. The Note shall be dated as of the

Closing Date. Principal of the Loan and the Note shall mature and become payable on February1, 2016. Interest on the unpaid principal balance of the Note shall accrue from the Closing Datewith respect to the initial Advance described below, and shall accrue from the date of eachsubsequent Advance, at the rate of _______% per annum. The Note is subject to prepayment asset forth in Article VII hereof.

Interest on the unpaid principal balance of the Loan and the Note shall be payable oneach of the Loan Payment Dates. Interest shall be calculated on the basis of a 360-day year composed of twelve 30-day months. The principal of and interest and premium (if any) on theLoan shall be payable to the Lender in lawful money of the United States of America.

Advances on the Loan, to the total amount of the principal sum set forth in Section 2.1above, may be made by Lender upon the written or telephonic request of a City Representative, promptly confirmed in writing to the Lender. Except for the initial Advance on the ClosingDate, the City shall not request an Advance in an amount less than $100,000, and such requestsshall not occur more frequently than [bi-monthly, quarterly]. The City covenants to inform theLender in writing promptly following any change in the City Representatives. The final date for an Advance shall be ____________ 1, 201__. An Advance may be made on the day the requestfor Advance is received by the Lender; provided, however, that if the Lender shall not havereceived the request at or before 2:00 p.m. on the day such Advance is requested to be made,such Advance may, at the Lender’s option, be made on the next Business Day. The books andrecords of the Lender shall be the best evidence of the principal and unpaid interest componentsof the Loan Payments owing at any time under this Note Loan Agreement.

The obligation of the Lender to make each Advance requested by City hereunder shall besubject to the fulfillment, to the Lender's satisfaction, of each of the following conditions:

(a) Compliance. The representations and warranties contained herein shall betrue on the date of each Advance by the Lender pursuant hereto, with the same effect as thoughsuch representations and warranties had been made on and as of each such date, and on each




such date, no Event of Default as defined herein, and no condition, event or act which with thegiving of notice or the passage of time or both would constitute such an Event of Default, shallhave occurred and be continuing or shall exist.

(b) Documentation. The Lender shall have received all additional documents

which may be required in connection with such Advance.

Section 2.3. Issuance of Note; Form of Note. The Loan shall be evidenced by the Note,all of the terms and provisions of which shall reflect the terms and provisions of the Loan. The Note and the City’s certificate of authentication to appear thereon shall be substantially in theform set forth in Exhibit A attached hereto and by this reference incorporated herein, withnecessary or appropriate variations, omissions and insertions, as permitted or required by this Note Loan Agreement.

The Note shall be executed on behalf of the City by the manual signature of an CityRepresentative who is in office on the date of execution of this Note Loan Agreement or at any

time thereafter, including the City Manager. If any officer whose signature appears on the Noteceases to be such officer before delivery of the Note to the Lender, such signature shallnevertheless be as effective as if the officer had remained in office until the delivery of the Noteto the Lender. The Note may be signed on behalf of the City by such persons as of the date of the execution of the Note shall be the proper officers of the City although at the nominal date of the Note any such person shall not have been such officer of the City.

Section 2.4. Issuance and Delivery of Note. The City shall issue the Note on the ClosingDate and thereupon deliver the Note to the Lender. The City Representatives of the City arehereby authorized and directed to execute and deliver any and all documents and instrumentsnecessary to cause the issuance of the Note in accordance with the provisions of the Resolutionand this Note Loan Agreement, and to do and cause to be done any and all acts and thingsnecessary or convenient for the timely delivery of the Note to the Lender.

Section 2.5. Transfer or Exchange of Lender’s Rights. The Lender may assign its rightshereunder, and may transfer the Note, subject to the requirements of Section 3.4 herein, but onlyupon surrender of the Note to the City for cancellation, accompanied by delivery of a dulywritten instrument of transfer in a form acceptable to the City. Whenever the Note shall besurrendered for transfer, the City shall execute, authenticate and deliver a new Note to thetransferee.

ARTICLE III

APPLICATION OF LOAN PROCEEDS; CREATION OF FUNDS

Section 3.1. Deposit of and Application of Funds. The proceeds of the Loan payable bythe Lender in an amount not-to-exceed $____________ shall be transferred to the City, uponreceipt of each Advance, for deposit in the Project Fund. The initial Advance on the ClosingDate shall be $__________, of which $________ is to be deposited in the Project Fund. Fromsuch initial Advance a portion of the proceeds of the Loan (including amounts retained by the




Lender for its fees) shall be applied by the Lender, at the request of the City, to pay financingcosts of the transaction in the amount of $_________. To the extent any portion of such retainedamount remains unpaid as of October 1, 2013, the Lender shall apply such amount as a credit tothe Loan Payment of the City due February 1, 2014. Any financing costs in excess of $___________ shall be paid by the City.

Section 3.2. Payment of Note. No later than each Loan Payment Date, the City shalltransfer to the Lender, from Net Revenues and any other available funds of the City (includingamounts on deposit in the Project Fund), the principal of and interest coming due on the Loan onsuch Loan Payment Date. If at any time it appears to the Lender that the City may be unable to pay such payment on the Loan in a timely manner, the Lender shall report such fact in writing tothe City. The City covenants to use all available funds to cure any deficiencies in payment of principal of and interest on the Note.

Overdue principal and, to the extent permitted by law, overdue interest on the Loan shall bear interest at the Default Rate.

The Lender hereby directs the City, and the City hereby agrees, to pay to the Lender (or to its assignees as directed pursuant to Section 3.4 hereof) all payments payable by the City withrespect to the Note. Payments shall be paid to the Lender as follows:

Payments by check (by overnight delivery only to this address): _____________ _____________ ___________, ________ _____ Re: City of LakeportLoan No. ____________

Payments by wire: ___________________ ABA No.: ________________ Account Name: _______________ Account Number: _______________ For Further Credit to: City of LakeportLoan No. ____________ Attn: _______________

Section 3.3. Project Fund.

(a) Establishment of Project Fund. The Project Fund is hereby established as aseparate fund to be held by the City. Amounts in the Project Fund shall be held in trust by theCity for the benefit of the City and the Lender.

(b) Amount on Deposit in Project Fund; Disbursements. The City hereby agrees toestablish and maintain the Project Fund until the completion of the Project. All money in theProject Fund shall be held by the City in trust and shall be applied by the City, along with certain




other funds of the City, for the payment of Project Costs and the expenses incidental thereto(including reimbursement to the City for any such costs or expenses theretofore paid by it for theaccount of the City whether or not paid prior to the date hereof). The City shall not make any payment of Project Costs if it has received a stop notice or any other notice of any lien, right tolien or attachment upon, or claim affecting the right to receive payment of, any of the money to

be so paid which has not been released or will not be released simultaneously with such payment, other than materialmen’s or mechanics’ liens accruing by mere operation of law.

The City may change the specifications of the Project, so long as such change does notsubstantially alter the nature of the Project; provided, however, that the City, in its solediscretion, may designate an Alternate Project. In the event an Alternate Project is designated,the City shall certify in writing to the Lender that Project Costs shall not materially increase as aresult from such change. In the event Project Costs shall materially increase as a result of thedesignation of an Alternate Project, prior to designating such Alternate Project, the City shalleither deposit in the Project Fund an amount sufficient to pay such increase, or shall certify inwriting to the Lender that funds sufficient to pay such increase in Project Costs are otherwise

available to the City.

When the Project has been completed to the satisfaction of the City or when the Citydetermines that a portion of the Project will not be completed, the City shall notify the Lender inwriting stating the fact and date of the completion of such improvements, and stating that all theProject Costs being funded with the Loan and the expenses incidental thereto have beendetermined and paid (or that such claims and expenses have been paid less specified claimswhich are subject to dispute and for which a retention in the Project Fund is to be maintained inthe full amount of such claims until such dispute is resolved). Thereafter all remaining moneysin the Project Fund shall be used by the City for the payment of principal of and interest on the Note as provided herein. In the event the Project Fund has not been depleted by the date whichis three years after the Closing Date, the City shall provide the Lender with an opinion of nationally recognized bond counsel to the effect that the investment of such remaining fundsshall not adversely affect the tax-exempt status of the Note.

Section 3.4. Assignment by the Lender. The Lender may make additional assignments of its rights, title and interests herein; provided such assignment is to (i) an “accredited investor”within the meaning of Regulation D promulgated under the Securities Act of 1933, or (ii) a“qualified institutional buyer” within the meaning of Rule 144A promulgated under theSecurities Act of 1933, as amended, and is in compliance with all applicable securities laws, butno such assignment will be effective as against the City unless and until the Lender has filed withthe City at least five (5) Business Days’ prior written notice thereof and an executed copy of aninvestor’s letter addressed to the City substantially in the form of the letter delivered by theLender on the Closing Date. The City shall pay all Loan Payments hereunder to the Lender, as provided in Section 3.2 hereof, or under the written direction of the assignee named in the mostrecent assignment or notice of assignment filed with the City. During the Term of this NoteLoan Agreement, the City will keep a complete and accurate record of all such notices of assignment.




ARTICLE IV

SECURITY FOR THE LOAN

Section 4.1. Payment of the Loan Payments. The total principal amount of the Loan

Payments owed and to be paid by the City to the Lender hereunder is not-to-exceed$___________, plus interest thereon. The Loan Payments shall, subject to any rights of prepayment of the City provided in Article VII, be due in installments in the amounts and on thedates described in Exhibit A attached hereto.

Each Loan Payment shall be payable to the Lender in accordance with the terms hereof and at the times required by Section 3.21 hereof in lawful money of the United States of America. In the event the City fails to make any of the payments required to be made by it under this Section 4.1, such payment shall continue as an obligation of the City until such amount shallhave been fully paid and the City agrees to pay the same with the stated interest thereon at therate set forth in Exhibit A hereto. In the event a Loan Payment is insufficient to make the

payments of principal and interest on the next succeeding Loan Payment Date, for any reason,the City shall immediately pay to the Lender upon notice therefrom additional amounts to curesuch insufficiency.

The obligation of the City to make the Loan Payments is absolute and unconditional,whether or not the Project shall be completed, and until such time as all Loan Payments shallhave been fully paid and the Note is no longer Outstanding, the City will not, under anycircumstances, discontinue, abate or suspend any Loan Payments required to be made by it under this Section 4.1 when due, whether or not the Enterprise or any part thereof is operating or operable or has been completed, or whether or not the Enterprise is condemned, damaged,destroyed or seized or its use is suspended, interfered with, reduced or curtailed or terminated inwhole or in part, and such payments shall not be subject to reduction whether by offset,counterclaim, defense, recoupment, abatement, suspension, deferment or otherwise and shall not be conditional upon the performance or nonperformance by any party of any agreement or covenant contained herein for any cause whatsoever.

Section 4.2. Pledge of Net Revenues and Other Funds; Revenue Fund. The City herebyirrevocably pledges all of the Net Revenues to the punctual payment of the Loan Payments andsuch Net Revenues, except as otherwise permitted herein, shall not be used for any other purposewhile the Note remains outstanding. This pledge shall constitute a first lien on the Net Revenuesfor the payment of the Loan Payments.

Section 4.3. Receipt and Deposit of Revenues. The City covenants and agrees that allRevenues, when and as received, will be received and held by the City in trust hereunder andwill be deposited by the City with the Treasurer in the Revenue Fund, which the City herebyagrees to establish and maintain, and will be accounted for through and held in trust in theRevenue Fund; provided, that the City may withdraw such amounts in the Revenue Fund as may be necessary to make refunds for amounts paid in advance for services provided by theEnterprise, which such service was not thereafter made available or provided. All Net Revenues,whether held by the City or deposited with the Treasurer, shall nevertheless be disbursed,




allocated and applied solely to the uses and purposes hereinafter in this Article IV set forth, andshall be accounted for separately and apart from all other money, funds, accounts or other resources of the City.

Section 4.4. Rates, Fees, and Charges.

(a) The City will, at all times while the Loan remains outstanding, fix, prescribe andcollect rates, fees and charges in connection with the Enterprise so as to yield Revenues at leastsufficient, after making reasonable allowances for contingencies and errors in the estimates, to pay the following amounts in the order set forth below:

(1) All Maintenance and Operation Costs of the Enterprise (includingamounts reasonably required to be set aside in contingency reserves for Maintenance andOperation Costs of the Enterprise, the payment of which is not then immediatelyrequired);

(2) The Debt Service payments and all other payments (including paymentsunder reimbursement agreements) with respect to all Parity Obligations as they becomedue and payable;

(3) All amounts, if any, required to restore the balance in any reserve accountsestablished for Parity Obligations in accordance with the terms of such ParityObligations, without preference or priority; and

(4) All payments required to meet any other obligations of the City that arecharges, liens, encumbrances upon, or which are otherwise payable from the Revenuesduring such Fiscal Year.

(b) Furthermore, the City shall fix, prescribe, revise and collect rates, fees andcharges for the services and facilities furnished by the Enterprise during each Fiscal Year whichare sufficient to yield estimated Net Revenues which are at least equal to one hundred twenty percent (120%) of the aggregate amount of Debt Service on all Parity Obligations payable from Net Revenues coming due and payable during such Fiscal Year. The City may makeadjustments, from time to time, in its rates, fees and charges as it deems necessary, but shall notreduce its rates, fees and charges below those in effect unless the Net Revenues resulting fromsuch reduced rates, fees and charges shall at all times be sufficient to meet the requirements setforth in this paragraph.

(c) If the City violates the covenants set forth in subsections (a) or (b) hereof, suchviolation shall not, in and of itself, be a default under this Loan Agreement and shall not give riseto a declaration of an Event of Default so long as (i) Net Revenues (calculated without takinginto account any amounts transferred into the Revenue Fund from the Rate Stabilization Fund pursuant to subsection (d) below), are at least equal to the Maximum Annual Debt Servicecoming due and payable during such Fiscal Year, and (ii) within 120 days after the date suchviolation is discovered, the City either (y) transfers enough moneys from the Rate StabilizationFund sufficient to yield estimated Net Revenues which are at least equal to one hundred twenty




percent (120%) of the aggregate amount of Debt Service on all Parity Obligations payable from Net Revenues coming due and payable during such Fiscal Year in compliance with subsection(b) hereof, or (z) hires an Independent Financial Consultant to review the revenues and expensesof the Enterprise, and abides by such consultant’s recommendations to revise the schedule of rates, fees, expenses and charges, and to revise any Maintenance and Operation Costs insofar as

practicable, and to take such other actions as are necessary so as to produce Net Revenues to curesuch violation for future compliance; provided, however , that, if the City does not, or can not,transfer from the Rate Stabilization Fund the amount necessary to comply with subsection (b)hereof, or otherwise cure such violation within twelve (12) months after the date such violation isdiscovered, an Event of Default shall be deemed to have occurred under Section 6.1(b) hereof.

(d) There is hereby created a separate fund to be known as the “Rate StabilizationFund,” to be held and maintained by the City. The Rate Stabilization Fund is not pledged tosecure payment of the Loan Payments. Amounts in the Rate Stabilization Fund shall be appliedsolely for the uses and purposes set forth in this subsection (d). The City shall have the right todeposit into the Rate Stabilization Fund from time to time any amount of funds which are legally

available therefor; provided that deposits for each Fiscal Year may be made until (but not after)one hundred twenty (120) days following the end of such Fiscal Year.

For the purpose of computing the amount of Revenues for any Fiscal Year for purposesof the preceding subsection (a), or the amount of Net Revenues for any Fiscal Year for purposesof the preceding subsection (b), the City shall be permitted to transfer amounts on deposit in theRate Stabilization Fund to the Revenue Fund, such transfers to be made until (but not after) onehundred twenty (120) days after the end of such Fiscal Year. In addition, the City shall be permitted to withdraw amounts on deposit in the Rate Stabilization Fund for any other lawful purpose. The Rate Stabilization Fund is not pledged to secure payment of the Loan Payments.

(e) All Net Revenues remaining after paying all of the sums required to be paidhereunder by the Treasurer by the provisions of Sections 4.4 (a) through (d) hereof, or inconnection with any Parity Obligation, may be withdrawn by the Treasurer for expenditure for any lawful purpose of the City.

Section 4.5. Additional Parity Obligations.

(a) So long as the Loan is outstanding, the City shall not issue or incur anyobligations payable from Revenues or Net Revenues senior or superior to the payment of DebtService on the Note. The City may, with the prior consent of the Lender (which will notunreasonably be withheld), at any time issue Parity Obligations payable from Net Revenues on a parity with Debt Service on the Note to provide financing or refinancing for the Enterprise insuch principal amount as shall be determined by the City. The City may issue or incur any suchParity Obligations subject to the following specific conditions, which are hereby madeconditions precedent to the issuance and delivery of such Parity Obligations:

(1) No Event of Default shall have occurred and be continuing;




(2) The Net Revenues (calculated without taking into account any amountstransferred into the Revenue Fund from the Rate Stabilization Fund pursuant to Section 4.4(d)hereof), calculated in accordance with Generally Accepted Accounting Principles, either (i) asshown by the books of the City for the latest Fiscal Year, as verified by a certificate of anAuthorized Representative of the City, or (ii) as shown by the books of the City for any more

recent twelve (12) month period selected by the City, as verified by a certificate or opinion of anIndependent Certified Public Accountant employed by the City, plus in either case (at the optionof the City) the Additional Revenues, shall be at least equal to one hundred twenty percent(120%) of the amount of Maximum Annual Debt Service on all outstanding Parity Obligationsand the Parity Obligations to be issued; and

(3) Except with respect to the Loan, and at the City’s sole discretion, there shall beestablished from the proceeds of such Parity Obligations a reserve fund for the security of suchParity Obligations, in an amount equal to the lesser of (i) the maximum amount of debt servicerequired to be paid by the City with respect to such Parity Obligations during any Fiscal Year and (ii) the maximum amount then permitted under the Code, in either event as certified in

writing by the City.

The provisions of subsection (2) of this Section shall not apply to any Parity Obligationsif, and to the extent that (i) all of the proceeds of such Parity Obligations (other than proceedsapplied to pay costs of issuing such Parity Obligations and to make the reserve fund depositrequired pursuant to subsection (3) of this Section) shall be deposited in an irrevocable escrowheld in cash or invested in Federal Securities for the purpose of paying the principal of andinterest and premium (if any) on such outstanding Parity Obligations, and (ii) at the time of theincurring of such Parity Obligations, the City certifies in writing that maximum annual debtservice on such Parity Obligations will not exceed Maximum Annual Debt Service on theoutstanding Parity Obligations being refunded, and (iii) the final maturity of such ParityObligations is not later than the final maturity of the Parity Obligations being refunded.

(b) In order to maintain the parity relationship of debt service payments on all ParityObligations permitted hereunder, the City covenants that all payments in the nature of principaland interest or reserve account replenishment with respect to any Parity Obligations, will bestructured to occur on the Loan Payment Dates, in each year as such payments are due withrespect to the Debt Service payments, and reserve account replenishment, if any, with respect toany Parity Obligations will be structured to occur within one year, and to otherwise structure theterms of such Parity Obligations to ensure that they are in all respects payable on a parity withthe Debt Service payments on the Loan and all Parity Obligations, and not prior thereto.

(c) The City may at any time execute contracts or issue bonds or other indebtedness payable from Net Revenues or the Revenue Fund payable on a subordinated basis to the paymentof the Debt Service payments on Parity Obligations.

Section 4.6. Covenant to Obtain Take-Out Financing. The City covenants to take allactions required to obtain financing from the United States Department of Agriculture and/or anyother available financing source, to provide funds to refund all or a portion of the Loan prior tomaturity; and further covenants that, to the extent that any portion of the Loan remains




Outstanding hereunder on February 1, 2016, the City will use its best efforts initiate proceedingsfor Take-Out Financings, as necessary to authorize, sell, and issue, on or before August 1, 2016,obligations in an aggregate principal amount which is sufficient to pay the principal and intereston the Note coming due and payable at maturity, to the extent not otherwise paid from NetRevenues.

ARTICLE V

REPRESENTATIONS, COVENANTS AND WARRANTIES

Section 5.1. Compliance with Note Loan Agreement. The City will punctually pay theLoan Payments in strict conformity with the terms hereof, and will faithfully observe and perform all the agreements, conditions, covenants and terms contained herein required to beobserved and performed by it, and will not terminate this Note Loan Agreement for any causewhatsoever, including, without limiting the generality of the foregoing, any acts or circumstancesthat may constitute failure of consideration, destruction of or damage to the Project,

condemnation of the Project by any governmental entity, commercial frustration of purpose, anychange in the tax or other laws of the United States of America or of the State of California or any political subdivision of either or any failure of the Lender to observe or perform anyagreement, condition, covenant or term required to be observed and performed by it containedherein, whether express or implied, or any duty, liability or obligation arising out of or connectedwith this Note Loan Agreement.

Section 5.2. Against Encumbrances. The City hereby covenants that there is no pledge of or lien on Net Revenues senior to the pledge and lien securing the Loan Payments. The City willnot make any further pledge of or place any lien on the Net Revenues, provided that the Citymay at any time, or from time to time, pledge or encumber the Net Revenues in connection with

the issuance or execution of Parity Obligations or other obligations permitted by Section 4.5hereof, or subordinate to the pledge of Net Revenues herein.

Section 5.3. Against Sale or Other Disposition of Property. The City will not sell, lease,encumber or otherwise dispose of the Enterprise or any part thereof in excess of one-half of one percent of the book value of the Enterprise in any Fiscal Year, unless a Treasurer certifies thatsuch sale, lease, encumbrance or disposition will not materially adversely affect the operation of the Enterprise or the Net Revenues; provided however, any real or personal property which has become nonoperative or which is not needed for the efficient and proper operation of theEnterprise, or any material or equipment which has become worn out, may be sold or exchangedat not less than the fair market value thereof and the proceeds (if any) of such sale or exchange

shall be deposited in the Revenue Fund.

The City will not enter into any agreement or lease which would impair the ability of theCity to pay Loan Payments or which would otherwise materially impair the rights of the Lender or the operation of the Enterprise.

Section 5.4. Against Competitive Facilities. The City will not, to the extent permitted bylaw, acquire, maintain or operate and will not, to the extent permitted by law and its current




contractual rights and obligations and within the reasonable scope of its powers, permit any other public or private agency, corporation, district or political subdivision or any person whomsoever to acquire, maintain or operate within the City any utility system competitive with the Enterprise.

Section 5.5. Tax Covenants. The City shall not take any action or permit to be taken any

action within its control which would cause or which, with the passage of time if not curedwould cause, the interest on the Note to become includable in gross income for federal incometax purposes. To that end, the City hereby makes the following specific covenants:

(a) The City hereby covenants that it shall not make or permit any use of the proceeds of the Note that may cause the Note to be “arbitrage bonds” within the meaning of Section 148 of the Internal Revenue Code of 1986, as amended.

(b) The City covenants that the proceeds of the Note will not be used as tocause the proceeds on the Note to satisfy the private business tests of Section 141(b) of the Codeor the private loan financing test of Section 141(c) of the Code.

(c) The City covenants not to take any action or permit or suffer any action to be taken if the result of the same would be to cause the Note to be “federally guaranteed” withinthe meaning of Section 149(b) of the Code.

Section 5.6. Prompt Acquisition. The City will complete the Project with all practicabledispatch and in an expeditious manner and in conformity with law so as to complete the same assoon as possible.

Section 5.7. Maintenance and Operation of the Enterprise. The City will maintain and preserve the Enterprise in good repair and working order at all times and will operate theEnterprise in an efficient and economical manner and will pay all Maintenance and OperationCosts of the Enterprise as they become due and payable.

Section 5.8. Payment of Claims. The City will pay and discharge any and all lawfulclaims for labor, materials or supplies which, if unpaid, might become a lien on the NetRevenues or any part thereof or on any funds in the control of the City prior or superior to thelien of the Loan Payments or which might impair the security of the Loan Payments.

Section 5.9. Insurance. (a) The City will procure and maintain insurance on theEnterprise with commercial insurers or through participation in a joint powers insuranceauthority, in such amounts, with such deductibles and against such risks (including accident to or destruction of the Enterprise) as are usually insurable in connection with similar enterprises.

In the event of any damage to or destruction of the Enterprise caused by the perilscovered by such insurance, the proceeds of such insurance shall be applied either (i) to the repair,reconstruction or replacement of the damaged or destroyed portion of the Enterprise or, (ii) if therepair, reconstruction or replacement of the damaged or destroyed portion of the Enterprise is notessential to the efficient operation of the Enterprise and the maintenance of Net Revenues, to prepay the Note and any outstanding Parity Obligations. The City shall cause such repair,




reconstruction or replacement to begin promptly after such damage or destruction shall occur andto continue and to be properly completed as expeditiously as possible, and shall pay out of the proceeds of such insurance all costs and expenses in connection with such repair, reconstructionor replacement so that the same shall be completed and the Enterprise shall be free and clear of all liens and claims. If the proceeds received by reason of any such loss shall exceed the costs of

such repair, reconstruction or replacement, the excess shall be applied to the prepayment of LoanPayments as provided in Article VII.

Alternatively, if the proceeds of such insurance are sufficient to enable the City to retireall outstanding Parity Obligations and the Note and all other amounts due hereunder, the Citymay elect not to repair, reconstruct or replace the damaged or destroyed portion of theEnterprise, and thereupon such proceeds shall be applied to the prepayment of the LoanPayments as provided in Article VII and to the payment of all other amounts due hereunder, andas otherwise required by the documents pursuant to which such Parity Obligations were issued.

(b) The City will procure and maintain public liability insurance covering claims

against the City for bodily injury or death, or damage to property, occasioned by reason of theownership or operation of the Enterprise, such insurance to afford protection in such amountsand against such risks as are usually covered in connection with similar enterprises.

(c) The City will procure and maintain workers’ compensation insurance againstliability for compensation under the Workers’ Compensation Insurance and Safety Act of California, or any act hereafter enacted as an amendment or supplement or in lieu thereof, suchinsurance to cover all persons employed in connection with the Enterprise.

(d) All policies of insurance required to be maintained herein shall provide that theLender shall be given thirty (30) days’ written notice of any intended cancellation thereof or reduction of coverage provided thereby, provided, however, the Lender shall not be responsiblefor the sufficiency of any insurance herein required.

(e) The City shall pay or cause to be paid when due the premiums for all insurance policies required hereby.

Section 5.10. Books and Accounts; Financial Statements. (a) The City will keep proper books of record and accounts of the Enterprise, separate from all other records andaccounts of the City, in which complete and correct entries shall be made of all transactionsrelating to the Enterprise. Such books of record and accounts shall at all times during businesshours be subject to the inspection of the Lender or its representatives authorized in writing.

(b) The City will prepare and file with the Lender annually within two hundredseventy (270) days after the close of each Fiscal Year an audited financial statement for the City(prepared in accordance with Generally Accepted Accounting Principles) for the precedingFiscal Year, together with an accountant’s report thereon and along with a certificate of the Cityto the effect that no Event of Default has occurred, or if an Event of Default has occurred,specifying the nature thereof and, if the City has a right to cure pursuant to Article VI hereof,




stating in reasonable detail the measures, if any, being undertaken by the City to cure such Eventof Default.

(c) Within thirty (30) days of the end of each Fiscal Year, the City will provide theLender with a copy of its annual budget and any interim updates or modifications to such budget,

and within ninety (90) days following the end of each Fiscal Year, the City will provide theLender with a copy of its unaudited financial results for such Fiscal Year. The City herebyagrees to provide the Lender with such other information as may be reasonably requested by theLender.

Section 5.11. Protection of Security and Rights of Lender. The City will preserve and protect the security and the rights of the Lender to the Loan Payments hereunder and will warrantand defend such rights against all claims and demands of all persons.

Section 5.12. Payment of Taxes and Compliance with Governmental Regulations. TheCity will pay and discharge all taxes, assessments and other governmental charges, if any, which

may hereafter be lawfully imposed upon the Enterprise or any part thereof or upon the Revenueswhen the same shall become due. The City will duly observe and conform with all validregulations and requirements of any governmental authority relative to the operation of theEnterprise or any part thereof, but the City shall not be required to comply with any regulationsor requirements so long as the validity or application thereof shall be contested in good faith.

Section 5.13. Operation of Enterprise; Collection of Rates and Charges. The City willcontinue to operate the Enterprise and shall have in effect at all times, except as otherwise provided by law, rules and regulations requiring all users of the Enterprise provided by the Citythat is provided or made available to pay the rates, fees and charges applicable to the Enterprise provided or made available to such users, and providing for the billing thereof and for a due dateand a delinquency date for each bill. In each case where such bill remains unpaid in whole or in part after such bill becomes delinquent, the City, in accordance with law, may refuse to provideor make available the services provided by the Enterprise to such premises until all delinquentrates, fees and charges and penalties have been paid in full.

Except in connection with the receipt of federal or State funding, or as required by law or as a condition to the acquisition or operation of the Project or Enterprise, the City will not permitany part of the Enterprise, or any facility thereof, to be used, or taken advantage of, free of charge by any person, firm or corporation, or by any public agency (including the United Statesof America, the State of California and any public corporation, political subdivision, city, county,district or agency of any thereof), excepting only that the City may without charge use theservices and facilities of the Enterprise.

Section 5.14. Eminent Domain Proceeds. If all or any part of the Enterprise shall betaken by eminent domain proceedings, the Net Proceeds thereof shall be applied as follows:

(a) If (1) the City prepares a report showing (i) the estimated loss of annual NetRevenues, if any, suffered or to be suffered by the City by reason of such eminent domain proceedings, (ii) a general description of the additions, betterments, extensions or improvements




to the Enterprise proposed to be acquired by the City from any Net Proceeds, and (iii) anestimate of the additional annual Net Revenues to be derived from such additions, betterments,extensions or improvements, and (2) on the basis of such certificate, the City determines that theestimated additional annual Net Revenues will sufficiently offset the estimated loss of annual Net Revenues resulting from such eminent domain proceedings so that the ability of the City to

meet its obligations hereunder will not be substantially impaired (which determination shall befinal and conclusive); then the City shall promptly proceed with the acquisition of suchadditions, betterments, extensions or improvements substantially in accordance with such reportand such Net Proceeds shall be applied for the payment of the costs of such acquisition, and any balance of such Net Proceeds not required by the City for such purpose shall be applied to prepay the Loan Payments pursuant to Article VII hereof, and any Parity Obligations, on a prorata basis in the manner provided herein and in the instruments authorizing such ParityObligations.

(b) If the foregoing conditions are not met, then such Net Proceeds shall be applied tothe prepayment of Loan Payments as provided in Article VII hereof.

Section 5.15. Further Assurances. The City will adopt, deliver, execute and make anyand all further assurances, instruments and resolutions as may be reasonably necessary or proper to carry out the intention or to facilitate the performance hereof and for the better assuring andconfirming unto the Lender of the rights and benefits provided to it herein.

Section 5.16. Release and Indemnification Covenants. The City shall and hereby agreesto indemnify and save the Lender, its officers, directors, agents, employees, successors or assignsharmless from and against all claims, losses and damages, including legal fees and expenses,arising out of (i) the use, maintenance, condition or management of, or from any work or thingdone on, the Project by the City, (ii) any breach or default on the part of the City in the performance of any of the City’s obligations under the Note Loan Agreement, (iii) any act of negligence of the City or of any of its contractors, servants, employees or licensees with respectto the Project, (iv) any act of negligence of any assignee or sublessee of the City, or of anyagents, contractors, servants, employees or licensees of the assignee or sublessee of the City withrespect to the Project, or (v) the construction of the Project or authorization of payment of theProject Costs, to the extent permitted by law.

The City further covenants and agrees to indemnify and save the Lender harmless againstany claim, loss, expense, advance, and liabilities which they may incur arising out of or in theexercise and performance of their powers and duties hereunder, including the costs and expenses(including attorneys fees and disbursements) of defending against any claim of liability or enforcing any remedies, and which are not due to its negligence or willful misconduct. The Cityfurther covenants and agrees to advance to the Lender the amounts requested as the costs andexpenses of such defense. Any and all special obligations of the City under this Section shall beand remain valid and binding special obligations of the City notwithstanding the payment in fullof the Loan Payments and the termination of this Note Loan Agreement.




Section 5.17. Notices. During the Term of this Note Loan Agreement, the City shall provide to the Lender:

(a) immediate notice by telephone, promptly confirmed in writing, of any event,action or failure to take any action which constitutes an Event of Default under this Note Loan

Agreement, together with a detailed statement by a City Representative of the steps being taken by the City to cure the effect of such Event of Default.

(b) within ten (10) days of knowledge by the City written notice of any MaterialLitigation or Material Adverse Effect, or any investigation, inquiry or similar proceeding by anyGovernmental Authority.

(c) with reasonable promptness, such other information respecting the City, andthe operations, affairs and financial condition of the City as the Lender may from time to timereasonably request.

Section 5.18. Amendment of Note Loan Agreement. This Note Loan Agreement may beamended with the prior written consent of the Lender (at the Lender’s sole discretion) providedsuch amendment does not, in the Lender’s sole judgment, materially adversely affect the Lender.

ARTICLE VI

EVENTS OF DEFAULT AND REMEDIES

Section 6.1. Events of Default Defined. Any one or more of the following eventsconstitutes an Event of Default hereunder:

(a) Failure by the City to pay any Loan Payment or other payment required to be paidhereunder at the time specified herein, which failure is not cured within three (3) Business Daysof such time.

(b) Failure by the City to observe and perform any covenant, condition or agreement onits part to be observed or performed hereunder, other than as referred to in the preceding clause(a) of this Section, and other than the covenant of the City to provide the Lender with a copy of its annual budget and any interim updates or modifications to such budget as required by Section5.10 hereof, for a period of 30 days after written notice specifying such failure and requestingthat it be remedied has been given to the City by the Lender. However, if in the reasonableopinion of the City the failure stated in the notice can be corrected, but not within such 30-day

period, the Lender shall not unreasonably withhold their consent to an extension of such time(for a period not to exceed 60 days) if corrective action is instituted by the City within such 30-day period and diligently pursued until the default is corrected.

(c) The filing by the City of a voluntary petition in bankruptcy, or failure by the City promptly to lift any execution, garnishment or attachment, or adjudication of the City as a bankrupt, or assignment by the City for the benefit of creditors, or the entry by the City into anagreement of composition with creditors, or the approval by a court of competent jurisdiction of




a petition applicable to the City in any proceedings instituted under the provisions of the FederalBankruptcy Code, as amended, or under any similar federal or State act now existing or whichmay hereafter be enacted.

(d) Any statement, representation or warranty of a material nature made by the City in or

pursuant to this Note Loan Agreement or its execution, delivery or performance shall have beenfalse, incorrect, misleading or breached in any material respect on the date when made.

(e) Any default occurs under any other agreement for borrowing money, lease financingof property or otherwise receiving credit under which the City is an obligor, if such default (i)arises under any other agreement for borrowing money, lease financing of property or provisionof credit provided by the Lender or any affiliate of the Lender, or (ii) arises under any obligationunder which there is outstanding, owing or committed an aggregated amount in excess of $500,000.

(f) Any court of competent jurisdiction shall find or rule that this Note Loan Agreement

is not valid or binding against the City.

Section 6.2. Remedies on Default. Whenever any Event of Default has happened and iscontinuing, then and in each and every such case during the continuance of such Event of Default the Lender may, by notice in writing to the City declare the principal amount of theunpaid Loan Payments, and the accrued interest thereon to be due and payable immediately, andupon any such declaration the same shall become immediately due and payable, anythingcontained herein to the contrary notwithstanding.

This provision, however, is subject to the condition that, except with respect to an Eventof Default under subsection (c) above, if at any time after such principal amount of the unpaidLoan Payments and the accrued interest thereon shall have been so declared due and payable and before the acceleration date or the date of any judgment or decree for the payment of the moneydue shall have been obtained or entered, the City shall deposit with the Lender a sum sufficientto pay such unpaid principal amount of the Loan Payments due prior to such date and theaccrued interest thereon, with any interest due on such overdue installments, and the reasonableexpenses of the Lender, and any and all other defaults known to the Lender (other than in the payment of such principal amount of the unpaid Loan Payments and the accrued interest thereondue and payable solely by reason of such declaration) shall have been made good or cured to thesatisfaction of the Lender or provision deemed by the Lender to be adequate shall have beenmade therefor, then and in every such case the Lender may rescind and annul such declarationand its consequences; but no such rescission and annulment shall extend to or shall affect anysubsequent default or shall impair or exhaust any right or power consequent thereon.

Section 6.3. Other Remedies of the Lender. The Lender may--

(a) by mandamus or other action or proceeding or suit at law or in equity enforce itsrights against the City, or any board member, officer or employee thereof, and compel the Cityor any such board member, officer or employee to perform and carry out its or his duties under




applicable law and the agreements and covenants contained herein required to be performed by itor him;

(b) by suit in equity enjoin any acts or things which are unlawful or violate the rightsof the Lender;

(c) by suit in equity upon the happening of an Event of Default require the City andits board members, officers and employees to account as the trustee of an express trust;

(d) by suit in equity, to seek the appointment of a receiver or other third party tooperate the Enterprise and collect the Revenues; or

(e) immediately terminate the obligation, if any, of the Lender to make any further Advances hereunder.

Section 6.4. No Remedy Exclusive. No remedy herein conferred upon or reserved to the

Lender is intended to be exclusive and every such remedy shall be cumulative and shall be inaddition to every other remedy given under this Note Loan Agreement or now or hereafter existing at law or in equity. No delay or omission to exercise any right or power accruing uponthe occurrence of any Event of Default shall impair any such right or power or shall be construedto be a waiver thereof, but any such right and power may be exercised from time to time and asoften as may be deemed expedient. In order to entitle the Lender to exercise any remedyreserved to it in this Article VI it shall not be necessary to give any notice, other than such noticeas may be required in this Article VI or by law.

Section 6.5. Agreement to Pay Attorneys’ Fees and Expenses. If any party to this NoteLoan Agreement defaults under any of the provisions hereof and the non-defaulting party shouldemploy attorneys (including in-house legal counsel) or incur other expenses for the collection of moneys or the enforcement or performance or observance of any obligation or agreement on the part of the defaulting party herein contained, the defaulting party agrees that it will on demandtherefor pay to the non-defaulting party the reasonable fees of such attorneys (including allocablecosts and expenses of in-house legal counsel, if any) and such other expenses so incurred by thenon-defaulting party.

Section 6.6. No Additional Waiver Implied by One Waiver. If any agreement containedin this Note Loan Agreement is breached by either party and thereafter waived by the other party, such waiver is limited to the particular breach so waived and will not be deemed to waiveany other breach hereunder.

ARTICLE VII

PREPAYMENT OF LOAN PAYMENTS

Section 7.1. Optional Prepayment. The City may prepay, on any date on or after August2, 2014, all or any portion of the Loan Payments, at a prepayment amount equal to the principal




amount of Loan Payments to be prepaid, together accrued interest to the date fixed for prepayment, without premium.

Section 7.2. Mandatory Prepayment From Net Proceeds of Insurance or EminentDomain. The City shall be obligated to prepay the unpaid principal components of the Loan

Payments in whole or in part in such order of prepayment as shall be selected by the City on anydate, together with any accrued and unpaid interest, a prepayment premium, if applicable, andany other costs related to such prepayment, from and to the extent of any proceeds of insuranceaward or condemnation award to be used for such purpose under Sections 5.9 or 5.14. The Cityand the Lender hereby agree that such proceeds, to the extent remaining after payment of anydelinquent Loan Payments, shall be credited towards the City’s obligations under this Section7.2.

ARTICLE VIII

COVENANTS, REPRESENTATIONS AND WARRANTIES

Section 8.1. Covenants, Representations and Warranties of the City. The City makes thefollowing covenants, representations and warranties to the Lender as of the date of the executionand delivery of this Note Loan Agreement:

(a) Due Organization and Existence. The City is a municipal corporation and general lawcity, organized and existing under and by virtue of the laws of the State, has full legal right, power and authority under the laws of the State to enter into the this Note Loan Agreement andto carry out and consummate all transactions on its part contemplated hereby and thereby, and by proper action the City has duly authorized the execution and delivery by the City of this NoteLoan Agreement.

(b) Due Execution. The representative of the City executing this Note Loan Agreementhas been fully authorized to execute the same by Resolution of the City Counsel of the City.

(c) Valid, Binding and Enforceable Obligations. This Note Loan Agreement has beenduly authorized, executed and delivered by the City and along with the Note constitutes the legal,valid and binding agreement of the City enforceable against the City in accordance with itsterms.

(d) No Conflicts. The execution and delivery of this Note Loan Agreement, theconsummation of the transactions therein contemplated and the fulfillment of or compliance with

the terms and conditions hereof, do not and will not conflict with or constitute a materialviolation or breach of or default (with due notice or the passage of time or both) under anyapplicable law or administrative rule or regulation, or any applicable court or administrativedecree or order, or any indenture, mortgage, deed of trust, lease, contract or other agreement or instrument to which the City is a party or by which it or its properties are otherwise subject or bound, or result in the creation or imposition of any prohibited lien, charge or encumbrance of any nature whatsoever upon any of the property or assets of the City, which conflict, violation, breach, default, lien, charge or encumbrance would have consequences that would materially and




adversely affect the consummation of the transactions contemplated by this Note LoanAgreement or the financial condition, assets, properties or operations of the City.

(e) Consents and Approvals. No consent or approval of any trustee or holder of anyindebtedness of the City or of the voters of the City, and no consent, permission, authorization,

order or license of, or filing or registration with, any Governmental Authority is necessary inconnection with the execution and delivery of this Note Loan Agreement, or the consummationof any transaction therein and herein contemplated, except as have been obtained or made and asare in full force and effect.

(f) No Litigation. To the best knowledge of the City, there is no action, suit, proceeding,inquiry or investigation before or by any court or federal, state, municipal or other GovernmentalAuthority pending and notice of which has been served on the City or, to the knowledge of theCity after reasonable investigation, threatened against or affecting the City or the assets, properties or operations of the City which, if determined adversely to the City or its interests,would have a material and adverse effect upon the consummation of the transactions

contemplated by or the validity of this Note Loan Agreement or upon the financial condition,assets, properties or operations of the City, and the City is not in default with respect to any order or decree of any court or any order, regulation or demand of any federal, state, municipal or other Governmental Authority, which default might have consequences that would materially andadversely affect the consummation of the transactions contemplated by this Note LoanAgreement, or the financial condition, assets, properties or operations of the City.

(g) Sufficient Funds. The City reasonably believes that sufficient funds can be obtainedto make all Loan Payments and all other amounts required to be paid pursuant to this Note LoanAgreement.

(h) No Defaults. Since 2008, the City has never non-appropriated or materially defaultedunder any of its payment or performance obligations or covenants, either under any financinglease of the same general nature as this Note Loan Agreement, or under any of its bonds, notes,or other debt obligations.

(i) Change in Financial Condition. The City has experienced no material change in itsfinancial condition since June 30, 2012.

(j) Financial Statements. The statement of financial position of the City as of June 30,2012, and the related statement of activities and statement of cash flows and changes in financial position for the year then ended and the auditors’ reports with respect thereto, copies of whichhave heretofore been furnished to the Lender, are complete and correct and fairly present thefinancial condition, changes in financial position and results of operations of the City at suchdate and for such period, and were prepared in accordance with generally accepted accounting principles. Since the period of such statements, there has been no (i) change which would have aMaterial Adverse Effect, and (ii) no material increase in the indebtedness of the City.




(k) No Material Adverse Change. Since the most current date of the information,financial or otherwise, supplied by the City to the Lender:

(i) There has been no change in the assets, liabilities, financial position or resultsof operations of the City which might reasonably be anticipated to cause a Material

Adverse Effect.

(ii) The City has not incurred any obligations or liabilities which might reasonably be anticipated to cause a Material Adverse Effect.

(iii) The City has not (A) incurred any material indebtedness on, or leaseobligations payable from, its general fund, other than the Loan Payments, and tradeaccounts payable arising in the ordinary course of the City’s business and not past due, or (B) guaranteed the indebtedness of any other person.

(l) Accuracy of Information. All information, reports and other papers and data furnished

by the City to the Lender were, at the time the same were so furnished, complete and accurate inall material respects and insofar as necessary to give the Lender a true and accurate knowledge of the subject matter and were provided in expectation of the Lender’s reliance thereon in enteringinto the transactions contemplated by this Note Loan Agreement. No fact is known to the Citywhich has had or, so far as the City can now reasonably foresee, may in the future have aMaterial Adverse Effect, which has not been set forth in the financial statements previouslyfurnished to the Lender or in other such information, reports, papers and data or otherwisedisclosed in writing to the Lender prior to the Closing Date. Any financial, budget and other projections furnished to the Lender by the City or its or their agents were prepared in good faithon the basis of the assumptions stated therein, which assumptions were fair and reasonable inlight of the conditions existing at the time of delivery of such financial, budget or other projections, and represented, and as of the date of this representation, represent the City’s bestestimate of its future financial performance. No document furnished nor any representation,warranty or other written statement made to the Lender in connection with the negotiation, preparation or execution of this Note Loan Agreement contains or will contain any untruestatement of a material fact or omits or will omit to state (as of the date made or furnished) anymaterial fact necessary in order to make the statements contained herein or therein, in light of thecircumstances under which they were or will be made, not misleading.

Section 8.2. Covenants, Representations and Warranties of the Lender. The Lender makes the following covenants, representations and warranties to the City as of the date of theexecution and delivery of this Note Loan Agreement:

(a) Due Organization and Existence. The Lender is a corporation duly organized andexisting under the laws of Nevada, has full legal right, power and authority to enter into this NoteLoan Agreement and to carry out and consummate all transactions on its part contemplatedhereby, and by proper action the Lender has duly authorized the execution and delivery by theLender of this Note Loan Agreement.




(b) Valid, Binding and Enforceable Obligations. This Note Loan Agreement has beenduly authorized, executed and delivered by the Lender and constitutes the legal, valid and binding agreement of the Lender, enforceable against the Lender in accordance with its terms.

Section 8.3. Closing Conditions. The Lender has entered into this Loan Agreement in

reliance upon the representations and warranties of the City contained in this Loan Agreementand to be contained in the documents and instruments to be delivered on the Closing Date andupon the performance by the City of the obligations of the City pursuant to this Loan Agreementat or prior to the Closing Date. Accordingly, the obligation of Lender to consummate the Loanand execute this Loan Agreement is subject to the fulfillment to the reasonable satisfaction of theLender of the following conditions:

(a) On the Closing Date, the Resolution and this Loan Agreement shall be in fullforce and effect and shall not have been amended, modified or supplemented, except as mayhave been agreed to in writing by the Lender.

(b) On the Closing Date, the City will have adopted and there will be in full force andeffect such resolutions as in the opinion of Bond Counsel and counsel to the Lender shall benecessary in connection with the transactions contemplated by this Loan Agreement, and allnecessary action of the City relating to the issuance of the Loan will have been taken, will be infull force and effect and will not have been amended, modified or supplemented, except as mayhave been agreed to in writing by the Lender.

(c) At or prior to the Closing Date, the Lender will have received the followingdocuments:

(i) the approving opinions, dated the Closing Date and addressed to theLender, of Bond Counsel in form and content satisfactory to the Lender and its counsel,(I) addressing the tax-exempt status of the interest on the Loan, and (II) the LoanAgreement has been duly authorized, executed and delivered by the City and are legal,valid and binding obligations of the City, enforceable in accordance with its terms subjectto customary exceptions for bankruptcy and judicial discretion, and (III) the 2002 WestAmerica Loan has been legally defeased;

(ii) a certificate or certificates, dated the date of the Closing and signed on behalf of the City by a City Representative, to the effect that (I) the representations andwarranties contained in this Loan Agreement are true and correct in all material respectson and as of the date of the Closing with the same effect as if made on the Closing Date;(II) no litigation of any nature is then pending or, to his or her knowledge, threatened,seeking to restrain or enjoin the issuance and delivery of the Loan or the levy or collection of revenues to pay the principal thereof and interest thereon, questioning the proceedings and authority by which such pledge is made, affecting the validity of theLoan or contesting the existence or boundaries of the City or the title of the presentofficers to their respective offices; (III) no authority or proceedings for the issuance of theLoan has been repealed, revoked or rescinded and no petition or petitions to revoke or alter the authorization to issue the Loan has been filed with or received by the City; and




(IV) the City has complied with all the agreements and covenants and satisfied all theconditions on its part to be performed or satisfied at or prior to, and to the extent possible before, the Closing Date;

(iii) an opinion issued by the City Attorney on the date of delivery of the Loan,

to the effect that (i) the City is a municipal corporation and general law city dulyorganized and existing under the laws of the State of California; (ii) this Loan Agreementand the corresponding Note was duly approved at a meeting of the Council that wascalled and held pursuant to law and with all public notice required by law and at which aquorum was present and acting throughout; (iii) there is no action, suit, proceeding or investigation at law or in equity before or by any court, public board or body, pending or,to the best knowledge of such counsel after reasonable investigation, threatened againstor affecting the City, to restrain or enjoin the execution and delivery of this LoanAgreement or the Note, or in any way contesting or affecting the validity of this Loan

Agreement or the Note; and (iv) the adoption of this Loan Agreement and compliance bythe City with the provisions hereof, under the circumstances contemplated hereby, do not

and will not constitute on the part of the City a breach or default under any agreement or other instrument to which the City is a party or by which it is bound (that are known tothe City Attorney) or any existing law, regulation, court order or consent decree to whichthe City is subject;

(iv) a certified copy of the Resolution;

(v) the items required by the Resolution as conditions for execution anddelivery of the Loan;

(vi) a non-arbitrage tax certificate of the City, in form and substance

satisfactory to Bond Counsel;

(vii) the filing copy of the Information Return Form 8038-G; and

(viii) such additional legal opinions, certificates, instruments and other documents as the Lender or its counsel may reasonably request to evidence the truth andaccuracy, as of the date of this Loan Agreement and as of the Closing Date, of therepresentations, warranties, agreements and covenants of the City contained herein andthe due performance or satisfaction by the City at or prior to the Closing Date of allagreements then to be performed and all conditions then to be satisfied by the City.




ARTICLE IX

MISCELLANEOUS

Section 9.1. Notices. Any notice, request, complaint, demand or other communicationunder this Note Loan Agreement shall be given by first class mail or personal delivery to the party entitled thereto at its address set forth below, or by facsimile transmission or other form of telecommunication, at its number set forth below. Notice shall be effective either (a) upontransmission by facsimile transmission or other form of telecommunication, (b) 48 hours after deposit in the United States of America first class mail, postage prepaid, or (c) in the case of personal delivery to any person, upon actual receipt. The City and the Lender may, by writtennotice to the other parties, from time to time modify the address or number to whichcommunications are to be given hereunder.

If to the City: City of Lakeport

225 Park StreetLakeport, CA 95453Phone: (707) 263-5615 x 32Fax: (707) ___________ Attention: City Manager

If to the Lender: Bank of NevadaOne East Washington Street, Suite 1400Phoenix, Arizona 85004Attention: James Sult Jr.Phone: (602) 797-3634

Fax: (602) __________

Section 9.2. Binding Effect. This Note Loan Agreement inures to the benefit of and is binding upon the Lender, the City and their respective successors and assigns.

Section 9.3. Severability. If any provision of this Note Loan Agreement is held invalid or unenforceable by any court of competent jurisdiction, such holding will not invalidate or render unenforceable any other provision hereof.

Section 9.4. Net-Net-Net Contract. This Note Loan Agreement is a “net-net-net contract”and the City hereby agrees that the Loan Payments are an absolute net return to the Lender, free

and clear of any expenses, charges or set-offs whatsoever.

Section 9.5. Further Assurances and Corrective Instruments. The Lender and the Cityagree that they will, from time to time, execute, acknowledge and deliver, or cause to beexecuted, acknowledged and delivered, such supplements hereto and such further instruments asmay reasonably be required for correcting any inadequate or incorrect description of the Propertyhereby leased or intended so to be or for carrying out the expressed intention of this Note LoanAgreement.




Section 9.6. Waiver of Personal Liability. No member, officer, agent or employee of theCity or the Lender shall be individually or personally liable for the payment of Loan Payments; but nothing herein contained shall relieve any such member, officer, agent or employee from the performance of any official duly provided by law.

Section 9.7. Execution in Counterparts. This Note Loan Agreement may be executed inseveral counterparts, each of which is an original and all of which constitutes one and the sameinstrument.

Section 9.8. Applicable Law. This Note Loan Agreement is governed by and construedin accordance with the laws of the State.

Section 9.9. Captions. The captions or headings in this Note Loan Agreement are for convenience only and in no way define, limit or describe the scope or intent of any provisions or section of this Note Loan Agreement.

IN WITNESS WHEREOF, the Lender and the City have caused this Note LoanAgreement to be executed in their respective names by their duly authorized officers, all as of thedate first above written.

BANK OF NEVADA, a Nevadacorporation,

By: ________________________________ Authorized Representative

CITY OF LAKEPORT

By: ________________________________ City Manager



A-1

EXHIBIT A

FORM OF NOTE



B-1

EXHIBIT B

COMPONENTS OF THE PROJECT

The Project consists of the following:

Component Estimated Cost



WATER FUND

Actual Actual Actual Projected Projected Projected

FY2010 (1) FY2011 (1) FY2012 (1) FY2013 (2) FY2014 (2) FY2015 (3)

OPERATING REVENUE

Charges for service 1,241,256 1,175,759 1,439,407 1,444,020 1,588,422 1,588,422

Other operating income - 131,108 77,285 91,071 91,940 91,940

TOTAL OPERATING REVENUE 1,241,256 1,306,867 1,516,692 1,535,091 1,680,362 1,680,362

OPERATING EXPENSES

O&M expense - - - (1,186,420) (1,229,492) (1,229,492)

Salaries and benefits (637,074) (676,241) (625,176) - - - Utility costs (131,159) - - - - -

Materials, supplies and service costs (252,225) (399,296) (400,327) - - -

Travel and training (5,794) - - - - -

Other operating costs (18,176) (16,307) (177,596) - - -

Depreciation and amortization (143,205) (143,205) (197,998) - - -

TOTAL OPERATING EXPENSES (1,187,633) (1,235,049) (1,401,097) (1,186,420) (1,229,492) (1,229,492)

ADD BACK

Depreciation and amortization 143,205 143,205 197,998 - - -

NET OPERATING INCOME 196,828 215,023 313,593 348,671 450,870 450,870

DEBT SERVICE

2002 WestAmerica Bank Loan 82,220 82,220 82,220 82,220 82,220 82,220

2002 USDA COP 171,473 171,473 171,473 171,473 171,473 171,473

2013 Bridge Loan - - - - 50,232 107,003

TOTAL DEBT SERVICE 253,693 253,693 253,693 253,693 303,925 360,696

DEBT SERVICE COVERAGE 0.78 0.85 1.24 1.37 1.48 1.25

(1) From City Financial Statements

(2) From July 2012 Rate Study

(3) Revenues and expenses carried over from FY2014



SEWER FUND

Actual Actual Actual Projected Projected Projected

FY2010 (1) FY2011 (1) FY2012 (1) FY2013 (2) FY2014 (2) FY2015 (3)

OPERATING REVENUE

Charges for service 1,694,573 1,623,268 1,934,271 1,805,520 1,968,017 1,968,017

Other operating income 21,543 78,744 26,825 193,710 193,799 193,799

TOTAL OPERATING REVENUE 1,716,116 1,702,012 1,961,096 1,999,230 2,161,816 2,161,816

OPERATING EXPENSES

O&M expense - - - (1,526,496) (1,582,311) (1,582,311)

Salaries and benefits (836,804) (771,313) (633,953) - - - Utility costs (121,354) - - - - -

Materials, supplies and service costs (540,787) (234,042) (485,032) - - -

Travel and training (6,538) - - - - -

Other operating costs (4,190) (295,891) (316,336) - - -

Depreciation and amortization (631,208) (649,679) (553,957) - - -

TOTAL OPERATING EXPENSES (2,140,881) (1,950,925) (1,989,278) (1,526,496) (1,582,311) (1,582,311)

ADD BACK

Depreciation and amortization 631,208 649,679 553,957 - - -

NET OPERATING INCOME 206,443 400,766 525,775 472,734 579,505 579,505

DEBT SERVICE

2007A CSCDA 186,560 189,460 187,260 189,960 187,560 187,560

2013 Bridge Loan 48,788 103,928

TOTAL DEBT SERVICE 186,560 189,460 187,260 189,960 236,348 291,488

DEBT SERVICE COVERAGE 1.11 2.12 2.81 2.49 2.45 1.99

(1) From City Financial Statements

(2) From July 2012 Rate Study

(3) Revenues and expenses carried over from FY2014



RESOLUTION NO. _____ (2013)

A RESOLUTION OF CITY COUNCIL OF THE CITY OF LAKEPORT

APPROVING THE FORM OF AND AUTHORIZING AND DIRECTING

EXECUTION AND DELIVERY OF A LOAN AGREEMENTS PROVIDING FOR

THE ISSUANCE OF SERIES 2013 WATER REVENUE NOTES; APPOINTING

CERTAIN FINANCIAL CONSULTANTS IN CONNECTION THEREWITH; AND

PROVIDING FOR OTHER MATTERS PROPERLY RELATED THERETO

WHEREAS, the City Council, after due investigation and deliberation, has determined that it is in

the public interests of the City at this time to provide for the financing for the (i) new water meters

(the “Water Meter Project”), (i) a Supervisory Control and Data Acquisition System (SCADA) radio

communication system (the “SCADA Project”), well relocation and protection for existing City

wells located in Scotts Creek (the “Scotts Creek Project,”) and looping existing 14-inch water mains

on Parallel Drive and South Main Street (the “Loop Line Project”), the Water Meter Project and the

SCADA Project, the “Project”); and

WHEREAS, for the purpose of providing financing for the Scotts Creek Project, the Water Meter

Project and the SCADA Project, the Loop Line Project, the Bank of Nevada (the “Lender”) has

proposed to make a three year line of credit style tax-exempt loan, ( “the Loan”) and together with

the 10-Year Loan, the “Loan”) to the City pursuant to terms and conditions of a Note Loan

Agreement, dated as of August 1, 2013, by and between the Lender and the City (the “Note Loan

Agreement,” ), and secured by a note, with an aggregate principal component in an amount not-to-

exceed $7,675,000, designated the “City of Lakeport, Series 2013 Water Revenue Notes (Series

2013 Water Enterprise Project)” (the “Note”), a copy of which has been presented at this meeting

and is on file with the City Clerk; and

WHEREAS, pursuant to the Note Loan Agreement, the City will make loan payments (the “LoanPayments”) from the net revenues of its water enterprise (the “Water Enterprise”) operations,

sufficient in amount to pay back a certain portion of the debt service on Loan from the Lender, with

any residual balance projected to be paid from the United Sates Department of Agriculture (the

“USDA”) and other take-out sources of financing, as more particularly set forth in the Note Loan

Agreement; and

WHEREAS, the City Council desires and intends to use a portion of the Note proceeds to refund

and fully defease its outstanding West America Bank , Series 2002 Water Loan, originally issued on

May 30, 2002 in the aggregate amount of $873,577.18, and scheduled to mature on November 1,

2017 (the “2002 West America Loan”); and

WHEREAS, the City Council, with the aid of its staff, has reviewed the Note Loan Agreement, the

form of which is on file with the City Clerk, and the Council wishes at this time to approve the

foregoing document as being within the public interests of the City; and

WHEREAS, in order to efficiently accomplish the procurement of the and Notes, and the execution

and delivery of each corresponding Loan Agreement, the City desires to appoint Southwest

Securities as Placement Agent and The Weist Law Firm as Bond Counsel to provide the necessary

professional services in connection therewith; and



WHEREAS, the City Council desires to designate the Notes as a “Qualified Tax-Exempt

Obligation” for purposes of Paragraph (3) of Section 265(b) of the Internal Revenue Code of 1986

(the “Code”); and

WHEREAS, the City Council wishes at this time to authorize all actions and proceedings relating

to the procurement of the Notes, the execution and delivery of each corresponding Loan Agreement,

and the corresponding acquisition and construction of each Project; and

WHEREAS, all acts, conditions and things required by the laws of the State of California to exist,

to have happened and to have been performed precedent to and in connection with the

consummation of such financing authorized hereby do exist, have happened and have been

performed in regular and due time, form and manner as required by law, and the City is now duly

authorized and empowered, pursuant to each and every requirement of law, to consummate such

financing for the purpose, in the manner and upon the terms herein provided.

NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Lakeport, asfollows:

Section 1. The foregoing Findings are adopted as findings of the City Council as though set

forth fully herein.

Section 2. The Mayor, Mayor Pro Tem, City Manager, Finance Director, City Clerk and any

other person authorized by the Council to act on behalf of the City shall each be an “Authorized

Representative” of the City for the purposes of structuring and providing for the execution of the

Loan Agreements and the corresponding issuance and delivery of the Notes, as well as the refunding

of the 2002 West America Loan, and are hereby authorized, jointly and severally, for and in the

name of and on behalf of the City, to execute and deliver any and all documents and certificates thatmay be required to be executed in connection with the execution and delivery of the Notes, as well

as the refunding of the 2002 West America Loan, and to do any and all things and take any and all

actions which may be necessary or advisable, in their discretion, to effectuate the actions which the

Council has intended with the adoption of this Resolution.

Section 3. The Council hereby authorizes and approves the Notes from the Lender to the City

pursuant to the terms and conditions of the Note Loan Agreement. The Council hereby approves the

Note Loan Agreement in substantially the form on file with the City Clerk, together with any

additions thereto or changes therein (including, but not limited to, the final rate and amount of the

Notes, the final debt service payment schedule, and prepayment and parity bond provisions) deemed

necessary or advisable by an Authorized Representative of the City. Any Authorized Representativeof the City is hereby authorized and directed to execute, and the City Clerk is hereby authorized and

directed to attest and affix the seal of the City to, the final form of the Note Loan Agreement for and

in the name and on behalf of the City, and the execution thereof shall be conclusive evidence of the

Council’s approval of any such additions and changes. The Council hereby authorizes the delivery

and performance of the Note Loan Agreement.

Section 4. The City Council hereby appoints The Weist Law Firm as Bond Counsel, and

Southwest Securities as Placement Agent in connection with the financing described in this



Resolution. An Authorized Representative is authorized and directed to execute an agreement with

each of such firms in the respective forms on file with the City Clerk. As provided in such

agreements compensation payable to Placement Agent and Bond Counsel is entirely contingent

upon the successful completion of the financing proceedings and shall be paid from a portion of the

proceeds of the Loan pursuant to the Costs of Issuance set forth in the Loan Agreement, which is

approved herein.

Section 5. The City Council hereby designates the Notes for purposes of Paragraph (3) of

Section 265(b) of the Code as a “Qualified Tax-Exempt Obligation” and covenants that the Notes

do not constitute a private activity bond as defined in Section 141 of the Code and that the aggregate

face amount of all tax-exempt obligations issued by the City (including all subordinate entities of

the City and all entities which may issue obligations on behalf of the City) during the calendar year

2013 is not reasonably expected to exceed $10,000,000, excluding, however, private activity bonds,

as defined in Section 141 of the Code (other than qualified 501(c)(3) bonds as defined in Section

145 of the Code) and current refunding obligations having a principal amount not in excess of the

refunded obligation.

Section 6. The Mayor, Mayor Pro Tem, City Manager, Finance Director, City Clerk and all

other officers of the City are each authorized and directed in the name and on behalf of the City to

make any and all assignments, certificates, requisitions, agreements, notices, consents, instruments

of conveyance, warrants and other documents which they or any of them might deem necessary or

appropriate in order to consummate any of the transactions contemplated by this Resolution and

each of the Loan Agreements. Whenever any officer of the City is authorized to execute or

countersign any document or take any action contemplated by this Resolution and the Note Loan

Agreement, such execution, countersigning or action may be taken on behalf of such officer by any

person designated by such officer to act on his or her behalf in the case such officer is absent or

unavailable.

Section 7. The Council hereby finds and determines that it has taken all of the foregoing

actions, and made all of the foregoing findings, in full compliance with the law, and that all prior

proceedings taken with respect to the Project were duly considered, and are hereby considered valid

and in conformity with the requirements of law.

Section 8. This Resolution shall take effect from and after the date of its passage and adoption.

Passed and adopted at a Special Meeting of the City Council of the City of Lakeport held on

the 23rd day of July, 2013 by the following vote:

AYES:

NOES:

ABSTAINING:

ABSENT:



APPROVED:

____________________________

THOMAS ENGSTROM, Mayor

ATTEST:

______________________________

KELLY BUENDIA, Deputy City Clerk/Acting Secretary

CERTIFICATE

STATE OF CALIFORNIA )

COUNTY OF LAKE ) ss.CITY OF LAKEPORT )

I, Kelly Buendia, Deputy City Clerk of the City of Lakeport, do hereby certify the foregoing

Resolution of the City Council of the City of Lakeport was duly passed and adopted at a Special

Meeting of the City Council held on July 23, 2013.

DATED: July 23, 2013

_______________________

KELLY BUENDIA, Deputy City Clerk

072313 lakeport city council special meeting

Documents