staff report - granicuscms6ftp.visioninternet.com/novato/agendas/pdfstaff... · no. 1994-1...

Novato City Council Agenda Staff Report Date: ______________ File No. ____________

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STAFF REPORT MEETING DATE: May 13, 2014 TO: City Council FROM: Michael Frank, City Manager

Cathy Capriola, Assistant City Manager Brian Cochran, Finance Manager SUBJECT: AUTHORIZE THE BORROWING OF FUNDS TO REFUND 2004 REFUNDING

SPECIAL TAX BONDS RELATING TO COMMUNITY FACILITIES DISTRICT NO. 1994-1 (HAMILTON FIELD), AND APPROVE AND AUTHORIZE RELATED DOCUMENTS AND ACTIONS AND THE RETENTION OF BOND COUNSEL AND FINANCIAL ADVISOR

REQUEST Consider approving a resolution and the actions outlined below to allow the City to refinance the 2004 Hamilton Community Facilities District Refunding Bonds with a loan from Bank of Marin. RECOMMENDATION Staff recommends the following actions to be approved by the Council: Adopt Resolution authorizing the execution and delivery of a loan agreement with Bank of

Marin to refinance the outstanding Hamilton CFD bonds and authorizing actions related thereto.

Approve and authorize the City Manager and Authorized Officers to execute the following agreements and instructions and to make minor modifications to the documents, following Council general direction, in order to complete the refinancing initiative.

o Approve a Loan Agreement between the City and Bank of Marin in an amount to provide for the refinancing of the 2004 Hamilton CFD bonds and to pay related financing costs.

922 Machin Avenue Novato, CA 94945

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o Approve Irrevocable Refunding Instructions between the City and U.S. Bank National Association for the redemption of the existing 2004 Hamilton CFD bonds.

o Approve the First Supplemental Fiscal Agent Agreement between the City

and U.S. Bank National Association

Authorize the City Manager to approve agreements for professional services with the firms of Jones Hall (as bond counsel) and Public Financial Management Inc (as financial advisor) and other miscellaneous payments of the estimated expenses as outlined within this staff report.

DISCUSSION The City created the Hamilton Community Facilities District (“the CFD”) in 1994 under the terms of of the Mello-Roos Community Facility Act of 1982, as amended. On behalf of the CFD, the City issued bonds in 1995 to finance certain public facilities that were constructed in and around the boundaries of the CFD, as outlined in the original documents that formed the CFD. Furthermore, the City authorized the levy of special taxes upon the property contained within the CFD in order to repay the bonds that were issued. Subsequent to the initial bond issuance, in 2004 the City refunded those 1995 bonds with its 2004 Refunding Special Tax Bonds (“the Bonds”). Based on the very low interest rate that currently exists, and based on some initial interest that was expressed by one or more banks to potentially refinance the Bonds, the City began a process to analyze the potential savings that could be generated by a refinancing. City staff has been working with Jones Hall (bond counsel) and Public Financial Management Inc (financial advisor) to review and prepare the appropriate documentation for the proposed refinancing. As part of this analysis, the City evaluated the issuance of traditional publicly offered bonds versus a private placement with a single investor (bank). The proposed structure is similar to the City’s recent loan to refinance the Marin Valley Mobile Country Club bonds as well as the refunding of most of the City’s General Obligation Bonds with a bank loan. The refinancing through a private placement with Bank of Marin will reduce the financing costs that improve the total savings to the district. Bank of Marin will also be requiring a relatively small reserve fund as compared to a public bond offering, thus reducing the amount of debt that needs to be issued. Through this proposed financing, there will be no rating fee, official statement preparation or ongoing public continuing disclosure filings required. An RFP was issued in February 2014 soliciting proposals from banks to issue a loan for the refinancing of the bonds. The City received three competitive proposals, with interest rates ranging from 2.805% to 3.5%. With a proposed interest rate of 2.805% (the lowest of the three proposals), the City selected Bank of Marin to move forward.

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Financing Details

Refinanced Bonds – total principal amount of $15,030,000 Average Interest Rate – 4.456% Current Reserve Fund on Deposit - $1,643,857 Final Maturity Date – 9/1/2025 2013 Refunding Bonds with Bank of Marin Loan - $13,096,359 Average Interest Rate – 2.805% Reserve Fund Required - $450,000 Final Maturity Date – 9/1/2025 Present Value Savings - $990,000 or 6.6% of the refunded bonds Annual Savings - $227,308 per year

Below is a list of the implementation documents that are attached and a brief description of their contents.

1. Loan Agreement between the City and Bank of Marin, whereby the bank agrees to make a loan (the “Loan”) to the City in an amount which is sufficient to provide for the refinancing of the Bonds and to pay related financing costs, and the City agrees to repay the Loan from the special property taxes collected by the County each year from properties within the CFD boundaries. There is no obligation of the City to make payments from the general fund or any other source other than the special taxes.

2. Irrevocable Refunding Instructions given by the City to the paying agent for the

Bonds, whereby the paying agent agrees to establish an irrevocable escrow fund to be held and invested for the purpose of paying the principal and interest on the 2004 Refunding Special Tax Bonds on the redemption date (estimated June 23, 2014).

3. First Supplemental Fiscal Agent Agreement corrects a minor inconsistency in the original 2004 bond documents with respect to the allowable redemption dates (i.e. when the bonds can be refunded or prepaid).

4. Professional Services Agreements for Bond Counsel and Financial Advisor - Also attached are professional services agreement and scopes of services for Jones Hall (bond counsel) and Public Financial Management Inc (Financial Advisor). The resolution authorizes the City Manager to execute these agreements on behalf of the City.

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FISCAL IMPACT The refinancing will have fiscal impacts that have been outlined above. Overall, the new loan will create cost savings due to the lower interest rate and the lower reserve fund. Below are the estimated costs of refinancing the bonds and Loan with Bank of Marin.

Jones Hall (Bond Counsel) $40,000 Jones Hall (Expenses – not to exceed) 1,500 PFM Inc (Financial Advisor) 40,000 PFM Inc (Expenses – not to exceed) 1,000 Walter & Pistole (City Attorney) 3,000 City staff time 5,000 Bank Counsel 12,500 U.S. Bank (Escrow Agent) 2,000 Verification Agent 1,500 Miscellaneous 10,000 $116,500 Bank of Marin Loan Fee (0.25% of Par) $37,525

While the annual debt service will be reduced with this refinancing transaction, due to the ongoing and unanticipated levee & drainage repair projects required in Hamilton, staff does not recommend any reduction in the annual tax levy to property owners at this time. The tax levy is re-visited annually, and could be reduced at some future point when all repairs and capital improvements have been completed. ALTERNATIVES 1. Choose to not to refinance and continue to pay the higher interest rate on the existing Hamilton

CFD bonds. ATTACHMENTS 1. Final Sources and Uses (Refunding Analysis) 2. Resolution 3. Loan Agreement 4. Irrevocable Refunding Instructions 5. First Supplemental Fiscal Agent Agreement 6. Professional Services Agreement with Jones Hall 7. Professional Services Agreement with Public Financial Management Inc

Prepared by Public Financial Management, Inc.

TABLE OF CONTENTS

City of NovatoCFD No.1994-1 (Hamilton Field) 2014 Refinancing

*Preliminary*

Report Page

Sources and Uses of Funds ............................ 1

Summary of Refunding Results ........................... 2

Savings .................................... 3

Bond Summary Statistics ............................. 4

Bond Debt Service ................................ 5

Prior Bond Debt Service ............................. 7

Net Debt Service ................................ 8

Bond Pricing .................................. 9

Summary of Bonds Refunded ........................... 10

Escrow Requirements .............................. 11

Escrow Cost .................................. 12

Escrow Sufficiency ............................... 13

Cost of Issuance ................................. 14

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Prepared by Public Financial Management, Inc. Page 1

SOURCES AND USES OF FUNDS


*Preliminary*

Sources:

Bond Proceeds:Par Amount 13,096,359.00

Other Sources of Funds:Prior Reserve Fund 1,643,806.73Prior Bond Fund 0.56Special Tax Revenues 1,240,000.00

2,883,807.29

15,980,166.29

Uses:

Refunding Escrow Deposits:Cash Deposit 0.18SLGS Purchases 15,377,591.00

15,377,591.18

Other Fund Deposits:Debt Service Reserve Fund 450,000.00

Delivery Date Expenses:Cost of Issuance 115,000.11Loan Fee 37,575.00

152,575.11

15,980,166.29


SUMMARY OF REFUNDING RESULTS


*Preliminary*

Dated Date 05/22/2014Delivery Date 05/22/2014Arbitrage yield 2.895537%Escrow yield 0.020407%Value of Negative Arbitrage 35,317.91

Bond Par Amount 13,096,359.00True Interest Cost 2.846524%Net Interest Cost 2.847913%Average Coupon 2.847913%Average Life 6.598

Par amount of refunded bonds 15,030,000.00Average coupon of refunded bonds 4.456788%Average life of refunded bonds 6.271

PV of prior debt to 05/22/2014 @ 2.895537% 16,472,126.84Net PV Savings 989,916.10Percentage savings of refunded bonds 6.586268%Percentage savings of refunding bonds 7.558712%


SAVINGS


*Preliminary*

Present ValuePrior Prior Prior Refunding to 05/22/2014

Date Debt Service Receipts Net Cash Flow Debt Service Savings @ 2.8955369%

09/01/2014 1,318,253.75 1,318,253.7509/01/2015 1,639,195.00 1,639,195.00 1,411,886.30 227,308.70 219,348.6609/01/2016 1,639,282.50 1,639,282.50 1,411,974.63 227,307.87 214,438.7709/01/2017 1,641,482.50 1,641,482.50 1,414,174.01 227,308.49 208,290.9109/01/2018 1,641,882.50 1,641,882.50 1,414,573.91 227,308.59 202,301.2109/01/2019 1,643,742.50 1,643,742.50 1,416,433.87 227,308.63 196,467.1909/01/2020 1,642,317.50 1,642,317.50 1,415,008.94 227,308.56 190,779.9609/01/2021 1,642,507.50 1,642,507.50 1,415,199.61 227,307.89 185,256.1709/01/2022 1,639,647.50 1,639,647.50 1,412,339.13 227,308.37 179,874.4909/01/2023 1,642,997.50 1,642,997.50 1,415,689.08 227,308.42 174,632.7409/01/2024 1,641,987.50 1,641,987.50 1,414,679.23 227,308.27 169,523.6709/01/2025 1,642,612.50 1,642,612.50 1,415,304.62 227,307.88 164,555.85

19,375,908.75 1,318,253.75 18,057,655.00 15,557,263.33 2,500,391.67 2,105,469.64

Savings Summary

PV of savings from cash flow 2,105,469.64Less: Prior funds on hand -1,565,553.54Plus: Refunding funds on hand 450,000.00

Net PV Savings 989,916.10


BOND SUMMARY STATISTICS


*Preliminary*

Dated Date 05/22/2014Delivery Date 05/22/2014Last Maturity 09/01/2025

Arbitrage Yield 2.895537%True Interest Cost (TIC) 2.846524%Net Interest Cost (NIC) 2.847913%All-In TIC 3.046753%Average Coupon 2.847913%

Average Life (years) 6.598Duration of Issue (years) 5.949

Par Amount 13,096,359.00Bond Proceeds 13,096,359.00Total Interest 2,460,904.33Net Interest 2,460,904.33Total Debt Service 15,557,263.33Maximum Annual Debt Service 1,416,433.87Average Annual Debt Service 1,379,801.63

Underwriter's Fees (per $1000) Average Takedown Other Fee

Total Underwriter's Discount

Bid Price 100.000000

Par Average AverageBond Component Value Price Coupon Life

Serial Bonds 13,096,359.00 100.000 2.848% 6.598

13,096,359.00 6.598

All-In ArbitrageTIC TIC Yield

Par Value 13,096,359.00 13,096,359.00 13,096,359.00 + Accrued Interest + Premium (Discount) - Underwriter's Discount - Cost of Issuance Expense -115,000.11 - Other Amounts -37,575.00 -37,575.00

Target Value 13,096,359.00 12,943,783.89 13,058,784.00

Target Date 05/22/2014 05/22/2014 05/22/2014Yield 2.846524% 3.046753% 2.895537%


BOND DEBT SERVICE


*Preliminary*

Dated Date 05/22/2014Delivery Date 05/22/2014

PeriodEnding Principal Coupon Interest Debt Service

09/01/2015 935,348 2.805% 476,538.30 1,411,886.3009/01/2016 1,065,173 2.805% 346,801.63 1,411,974.6309/01/2017 1,098,613 2.805% 315,561.01 1,414,174.0109/01/2018 1,130,257 2.805% 284,316.91 1,414,573.9109/01/2019 1,164,261 2.805% 252,172.87 1,416,433.8709/01/2020 1,195,347 2.805% 219,661.94 1,415,008.9409/01/2021 1,230,133 2.805% 185,066.61 1,415,199.6109/01/2022 1,262,257 2.805% 150,082.13 1,412,339.1309/01/2023 1,301,505 2.805% 114,184.08 1,415,689.0809/01/2024 1,337,298 2.805% 77,381.23 1,414,679.2309/01/2025 1,376,167 2.805% 39,137.62 1,415,304.62

13,096,359 2,460,904.33 15,557,263.33


BOND DEBT SERVICE


*Preliminary*

Dated Date 05/22/2014Delivery Date 05/22/2014

Period AnnualEnding Principal Coupon Interest Debt Service Debt Service

03/01/2015 288,780.17 288,780.1709/01/2015 935,348 2.805% 187,758.13 1,123,106.13 1,411,886.3003/01/2016 172,453.27 172,453.2709/01/2016 1,065,173 2.805% 174,348.36 1,239,521.36 1,411,974.6303/01/2017 156,483.68 156,483.6809/01/2017 1,098,613 2.805% 159,077.33 1,257,690.33 1,414,174.0103/01/2018 140,990.03 140,990.0309/01/2018 1,130,257 2.805% 143,326.88 1,273,583.88 1,414,573.9103/01/2019 125,050.11 125,050.1109/01/2019 1,164,261 2.805% 127,122.76 1,291,383.76 1,416,433.8703/01/2020 109,230.80 109,230.8009/01/2020 1,195,347 2.805% 110,431.14 1,305,778.14 1,415,008.9403/01/2021 91,772.76 91,772.7609/01/2021 1,230,133 2.805% 93,293.85 1,323,426.85 1,415,199.6103/01/2022 74,424.29 74,424.2909/01/2022 1,262,257 2.805% 75,657.84 1,337,914.84 1,412,339.1303/01/2023 56,622.79 56,622.7909/01/2023 1,301,505 2.805% 57,561.29 1,359,066.29 1,415,689.0803/01/2024 38,479.19 38,479.1909/01/2024 1,337,298 2.805% 38,902.04 1,376,200.04 1,414,679.2303/01/2025 19,407.97 19,407.9709/01/2025 1,376,167 2.805% 19,729.65 1,395,896.65 1,415,304.62

13,096,359 2,460,904.33 15,557,263.33 15,557,263.33


PRIOR BOND DEBT SERVICE


*Preliminary*

PeriodEnding Principal Coupon Interest Debt Service

09/01/2014 995,000 3.750% 323,253.75 1,318,253.7509/01/2015 1,030,000 3.875% 609,195.00 1,639,195.0009/01/2016 1,070,000 4.000% 569,282.50 1,639,282.5009/01/2017 1,115,000 4.000% 526,482.50 1,641,482.5009/01/2018 1,160,000 4.150% 481,882.50 1,641,882.5009/01/2019 1,210,000 4.250% 433,742.50 1,643,742.5009/01/2020 1,260,000 4.350% 382,317.50 1,642,317.5009/01/2021 1,315,000 4.400% 327,507.50 1,642,507.5009/01/2022 1,370,000 4.500% 269,647.50 1,639,647.5009/01/2023 1,435,000 4.600% 207,997.50 1,642,997.5009/01/2024 1,500,000 4.625% 141,987.50 1,641,987.5009/01/2025 1,570,000 4.625% 72,612.50 1,642,612.50

15,030,000 4,345,908.75 19,375,908.75


NET DEBT SERVICE


*Preliminary*

Period Total Debt Service NetEnding Debt Service Reserve Fund Debt Service

09/01/2015 1,411,886.30 1,411,886.3009/01/2016 1,411,974.63 1,411,974.6309/01/2017 1,414,174.01 1,414,174.0109/01/2018 1,414,573.91 1,414,573.9109/01/2019 1,416,433.87 1,416,433.8709/01/2020 1,415,008.94 1,415,008.9409/01/2021 1,415,199.61 1,415,199.6109/01/2022 1,412,339.13 1,412,339.1309/01/2023 1,415,689.08 1,415,689.0809/01/2024 1,414,679.23 1,414,679.2309/01/2025 1,415,304.62 450,000 965,304.62

15,557,263.33 450,000 15,107,263.33


BOND PRICING


*Preliminary*

MaturityBond Component Date Amount Rate Yield Price

Serial Bonds:09/01/2014 2.805% 2.805% 100.00009/01/2015 935,348 2.805% 2.805% 100.00009/01/2016 1,065,173 2.805% 2.805% 100.00009/01/2017 1,098,613 2.805% 2.805% 100.00009/01/2018 1,130,257 2.805% 2.805% 100.00009/01/2019 1,164,261 2.805% 2.805% 100.00009/01/2020 1,195,347 2.805% 2.805% 100.00009/01/2021 1,230,133 2.805% 2.805% 100.00009/01/2022 1,262,257 2.805% 2.805% 100.00009/01/2023 1,301,505 2.805% 2.805% 100.00009/01/2024 1,337,298 2.805% 2.805% 100.00009/01/2025 1,376,167 2.805% 2.805% 100.000

13,096,359

Dated Date 05/22/2014Delivery Date 05/22/2014First Coupon 03/01/2015

Par Amount 13,096,359.00Original Issue Discount

Production 13,096,359.00 100.000000%Underwriter's Discount

Purchase Price 13,096,359.00 100.000000%Accrued Interest

Net Proceeds 13,096,359.00


SUMMARY OF BONDS REFUNDED


*Preliminary*

Maturity Interest Par Call CallBond Date Rate Amount Date Price

City of Novato, CFD No.1994-1 (Hamilton Field) 2004 Refunding Speical Tax Bonds:BOND 09/01/2014 3.750% 995,000.00 06/21/2014 101.000

09/01/2015 3.875% 1,030,000.00 06/21/2014 101.00009/01/2016 4.000% 1,070,000.00 06/21/2014 101.00009/01/2017 4.000% 1,115,000.00 06/21/2014 101.00009/01/2018 4.150% 1,160,000.00 06/21/2014 101.00009/01/2019 4.250% 1,210,000.00 06/21/2014 101.00009/01/2020 4.350% 1,260,000.00 06/21/2014 101.00009/01/2021 4.400% 1,315,000.00 06/21/2014 101.00009/01/2022 4.500% 1,370,000.00 06/21/2014 101.00009/01/2023 4.600% 1,435,000.00 06/21/2014 101.00009/01/2024 4.625% 1,500,000.00 06/21/2014 101.00009/01/2025 4.625% 1,570,000.00 06/21/2014 101.000

15,030,000.00


ESCROW REQUIREMENTS


*Preliminary*

Period Principal RedemptionEnding Interest Redeemed Premium Total

06/21/2014 197,543.96 15,030,000.00 150,300.00 15,377,843.96

197,543.96 15,030,000.00 150,300.00 15,377,843.96


ESCROW COST


*Preliminary*

Type of Maturity Par TotalSecurity Date Amount Rate Cost

SLGS 06/21/2014 15,377,591 0.020% 15,377,591.00

15,377,591 15,377,591.00

Purchase Cost of Cash TotalDate Securities Deposit Escrow Cost Yield

05/22/2014 15,377,591 0.18 15,377,591.18 0.020407%

15,377,591 0.18 15,377,591.18


ESCROW SUFFICIENCY


*Preliminary*

Escrow Net Escrow Excess ExcessDate Requirement Receipts Receipts Balance

05/22/2014 0.18 0.18 0.1806/21/2014 15,377,843.96 15,377,843.78 -0.18

15,377,843.96 15,377,843.96 0.00


COST OF ISSUANCE


*Preliminary*

Cost of Issuance $/1000 Amount

Additional Proceeds 0.00001 0.11City Staff 0.38179 5,000.00PFM 3.13064 41,000.00Jones Hall 3.05428 40,000.00Walter & Pistole 0.22907 3,000.00Bank Counsel 0.95446 12,500.00US Bank - Trustee and Escrow A 0.15271 2,000.00Verification Agent 0.11454 1,500.00Miscellaneous 0.76357 10,000.00

8.78107 115,000.11

RES/4679 5/8/2014 1

CITY COUNCIL OF THE CITY OF NOVATO

RESOLUTION NO. ________

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF NOVATO AUTHORIZING THE BORROWING OF FUNDS TO REFUND 2004 REFUNDING SPECIAL TAX BONDS RELATING TO COMMUNITY FACILITIES DISTRICT NO. 1994-1 (HAMILTON FIELD), AND APPROVING AND AUTHORIZING RELATED DOCUMENTS AND ACTIONS AND THE RETENTION OF BOND COUNSEL

WHEREAS, the City has conducted proceedings under and pursuant to the Mello-Roos Community Facility Act of 1982, as amended, Chapter 2.5 of Part 1 of Division 2 of Title 5, commencing at Section 53311 of the California Government Code (the “Act”), to form Community Facilities District No. 1994-1 (Hamilton Field) (the “CFD”), and, on behalf of the CFD, the City has previously authorized the levy of special taxes upon the land within the CFD, and has issued bonds (the “1995 Bonds”) secured by such special taxes the proceeds of which were used to finance certain public facilities (the “Facilities”), all as described in those proceedings; and

WHEREAS, the City heretofore authorized, issued, sold and delivered its $22,665,000

City of Novato Community Facilities District No. 1994-1 (Hamilton Field) 2004 Refunding Special Tax Bonds, dated as of September 2, 2004 (the “2004 Bonds”) in order to refund, on an advance basis, the 1995 Bonds; and

WHEREAS, the City now wishes to borrow funds from the Bank of Marin (the

“Lender”) for the purpose of providing funds to refund the 2004 Bonds on a current basis, and to issue a promissory note under the Act which evidences such loan; and

WHEREAS, the City has previously executed a Fiscal Agent Agreement, by and

between the City and U.S. Bank National Association, as fiscal agent, dated as of August 1, 2004 (the “2004 Fiscal Agent Agreement”) pursuant to which the 2004 Bonds were issued; and

WHEREAS, the City now wishes to amend certain redemption provisions in the 2004

Fiscal Agent Agreement to reflect the redemption provisions of the 2004 Bonds that were provided to the bidders for and the purchasers of the 2004 Bonds; and

WHEREAS, all conditions, things and acts required to exist, to have happened and to

have been performed precedent to and in connection with the making of such loan and the

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issuance of such promissory note, and the levy of the special taxes as contemplated by this resolution and the documents referred to herein exist, have happened and have been performed in due time, form and manner as required by the laws of the State of California, including the Act;

NOW, THEREFORE, BE IT RESOLVED, by the City Council of the City of Novato

as follows: Section 1. Applicable Law. For the purposes of these proceedings in and for the CFD,

the Act shall be the authority for the loan and the issuance of the promissory note that evidences the loan.

Section 2. Approval of Loan Agreement. The proposed form of Loan Agreement by

and between the City and the Bank of Marin, a banking corporation duly organized and existing under the laws of the State of California, as lender (the "Lender"), which is on file with the City Clerk (the "Loan Agreement") is hereby approved, and the Mayor, the Mayor Pro Tem, the City Manager and the Assistant City Manager (collectively, the "Authorized Officers"), each acting alone, are hereby authorized and directed, for and in the name and on behalf of the City, to execute and deliver the Loan Agreement in substantially said form, with said additions thereto (including the insertion of the maturity dates, principal amounts and interest rate(s) of the Note) and changes therein as the Authorized Officers, each acting alone, may approve, such approval to be conclusively evidenced by the execution and delivery thereof. The City Clerk shall attest the Loan Agreement as provided therein.

Section 3. Approval of Form of Note. The form of Note set forth in the form of Loan

Agreement is hereby approved, and the Mayor of the City and the City Clerk are hereby authorized and directed to execute the Note in the name and on behalf of the City and to cause the delivery thereof as provided for below. The City hereby finds that the Note constitutes “refunding bonds” within the meaning of the Act because the proceeds thereof will be used to refund the 2004 Bonds.

Section 4. Approval of First Supplemental Fiscal Agent Agreement. The proposed

First Supplement to the 2004 Fiscal Agent Agreement (the “First Supplemental Fiscal Agent Agreement”) by and between the City and U.S. Bank National Association, as fiscal agent (the “2004 Fiscal Agent”) which is on file with the City Clerk is hereby approved, and the Authorized Officers, each acting alone, are hereby authorized and directed, for and in the name and on behalf of the City, to execute and deliver the First Supplemental Fiscal Agent Agreement in substantial said form.

Section 5. Conditions to Issuance of Note and Execution and Delivery of Loan

Agreement. The issuance of the Note and the execution and delivery of the Loan Agreement is subject to the following conditions:

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(a) the principal amount of the Note shall not exceed $15,000,000; (b) the final maturity date of the Note shall not be later than September 1,

2025; and (c) the debt service savings realized from the refunding of the 2004 Bonds

shall be not less than five percent (5%) on a net present value basis; (d) the value of the real property subject to special taxes levied in the CFD

will be at least three times the principal amount of the Note and the principal amount of all bonds that will be outstanding following issuance of the Note that are secured by a special tax levied pursuant to the Act on property with the CFD or a special assessment levied on property within the CFD; and

(e) the total net interest cost to maturity of the Note plus the principal amount

of the Note is less than the total net interest cost of the 2004 Bonds (from the date of delivery of Note) plus the outstanding principal amount of the 2004 Bonds.

In order to achieve the debt service savings specified in the preceding paragraph, the City

Manager and the Assistant City Manager may determine to refund less than all of the 2004 Bonds.

Section 6. Engagement of Professional Services. The firm of Jones Hall, A

Professional Law Corporation, is hereby retained as bond counsel to the City, and the firm of Public Financial Management, Inc., as financial advisor, in connection with the execution and delivery of the Loan Agreement and the issuance of the Note, and all matters relating thereto. The City Manager is hereby authorized and directed on behalf of the City to execute an agreement with each of said firms, in the form on file with the City Clerk.

Section 7. General Authority. The officers of the City are hereby authorized and

directed, jointly and severally, to do any and all things and to execute and deliver any and all documents which they may deem necessary or advisable in order to consummate the transactions described herein or to otherwise effectuate the purposes of this resolution, including preparing and executing refunding instructions relating to the refunding of the 2004 Bonds. Any such actions previously taken by such officers are hereby ratified and confirmed.

Section 8. Effective Date. This Resolution shall take effect from and after the date of its

passage and adoption. * * * * * *

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I HEREBY CERTIFY that the foregoing resolution was duly and regularly adopted by the City Council of the City of Novato, Marin County, California, at a meeting thereof, held on the ____ day of ___________________, by the following vote, to wit:

AYES: Councilmembers NOES: Councilmembers ABSTAIN: Councilmembers ABSENT: Councilmembers Sheri Hartz, City Clerk Approved as to form: City Attorney of the City of Novato

20411-33 SM:MMB 01/15/14 03/31/14 04/17/14 04/28/14

LOAN AGREEMENT

Dated as of May 1, 2014

by and between the

CITY OF NOVATO

and

BANK OF MARIN as Lender

Relating to

City of Novato

Community Facilities District No. 1994-1 (Hamilton Field)

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TABLE OF CONTENTS

ARTICLE I AUTHORITY AND DEFINITIONS

Section 1.01. Authority for this Loan Agreement ................................................................................ 2 Section 1.02. Definitions ..................................................................................................................... 2

ARTICLE II

THE LOAN; ISSUANCE OF THE NOTE Section 2.01. Principal Amount; Designation ...................................................................................... 7 Section 2.02. Term .............................................................................................................................. 8 Section 2.03. Loan Repayments ......................................................................................................... 8 Section 2.04. Prepayment ................................................................................................................... 9 Section 2.05. No Acceleration ........................................................................................................... 10 Section 2.06. Issuance of Note; Form of Note .................................................................................. 10 Section 2.07. Issuance and Delivery of Note .................................................................................... 10 Section 2.08. Transfer or Exchange of Lender’s Rights ................................................................... 11 Section 2.09. Budget and Appropriation of Loan Repayments ......................................................... 11 Section 2.10. Late Charges ............................................................................................................... 11

ARTICLE III

APPLICATION OF LOAN PROCEEDS Section 3.01. Application of Proceeds of Loan and Other Moneys .................................................. 11 Section 3.02. Special Tax Fund ........................................................................................................ 12 Section 3.03. Administrative Expense Fund ..................................................................................... 13 Section 3.04. Reserve Fund .............................................................................................................. 13

ARTICLE IV

SECURITY FOR THE LOAN; COVENANTS Section 4.01. Pledge of Special Taxes ............................................................................................. 14 Section 4.02. Limited Obligations...................................................................................................... 14 Section 4.03. Collection of Special Taxes ......................................................................................... 14 Section 4.04. Covenant to Foreclose ................................................................................................ 15 Section 4.05. Punctual Payment ....................................................................................................... 15 Section 4.06. Against Encumbrances ............................................................................................... 15 Section 4.07. Books and Records ..................................................................................................... 15 Section 4.08. Protection of Security and Rights of Lender ............................................................... 15 Section 4.09. Amendment of this Loan Agreement .......................................................................... 16 Section 4.10. Tax Covenants ............................................................................................................ 16 Section 4.11. Further Assurances ..................................................................................................... 16

ARTICLE V

INVESTMENTS; LIABILITY OF THE CITY Section 5.01. Deposit and Investment of Moneys in Funds .............................................................. 17 Section 5.02. Liability of City ............................................................................................................. 18 Section 5.03. Employment of Agents by City .................................................................................... 18 Section 5.04. Events of Default Defined ........................................................................................... 18 Section 5.05. Remedies on Default................................................................................................... 19 Section 5.06. Agreement to Pay Attorneys' Fees and Expenses ..................................................... 19 Section 5.07. No Additional Waiver Implied by One Waiver ............................................................. 19

ARTICLE VI

MISCELLANEOUS Section 6.01. Benefits of Agreement Limited to Parties ................................................................... 20 Section 6.02. Successor and Predecessor ....................................................................................... 20 Section 6.03. Discharge of Agreement ............................................................................................. 20

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Section 6.04. Execution of Documents ............................................................................................. 20 Section 6.05. Waiver of Personal Liability ......................................................................................... 21 Section 6.06. Notices to and Demands on City and Lender ............................................................. 21 Section 6.07. Partial Invalidity ........................................................................................................... 21 Section 6.08. Applicable Law ............................................................................................................ 21 Section 6.09. Conflict with Act ........................................................................................................... 21 Section 6.10. Payment on Business Day .......................................................................................... 21 Section 6.11. Reporting Requirements ............................................................................................. 22 Section 6.12. Lender Representations .............................................................................................. 22 Section 6.13. Assignment by the Lender .......................................................................................... 23 Section 6.14. Dispute Resolution ...................................................................................................... 23 Section 6.15. Counterparts ............................................................................................................... 25

ARTICLE VII

REPRESENTATIONS, COVENANTS AND WARRANTIES OF THE CITY

Section 7.01. Representations, Warranties and Covenants of the City ................................................ 25 EXHIBIT A – FORM OF NOTE EXHIBIT B – SCHEDULE OF LOAN PAYMENTS

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LOAN AGREEMENT

This LOAN AGREEMENT (this “Loan Agreement”) is made and entered into as of [May 1], 2014, by and between the CITY OF NOVATO, a general law city and municipal corporation duly organized and existing under the laws of the State of California (the “City”) for and on behalf of the City’s Community Facilities District No. 1994-1 (Hamilton Field) (the “CFD”), and BANK OF MARIN, a banking corporation duly organized and existing under the laws of the State of California (the “Lender”).

W I T N E S S E T H :

WHEREAS, the City has formed the CFD under the provisions of the Mello-Roos Community Facilities Act of 1982, as amended, constituting Sections 53311 et seq. of the California Government Code (the “Act”);

WHEREAS, the City Council of the City, as the legislative body with respect to the CFD,

is authorized under the Act to levy special taxes to pay for the costs of facilities within the CFD and to incur debt secured by said special taxes under the Act;

WHEREAS, under the provisions of the Act, the City, on behalf of the CFD, has

previously issued its bonds designated the “City of Novato Community Facilities District No. 1994-1 (Hamilton Field) 2004 Refunding Special Tax Bonds” dated September 2, 2004, in the aggregate original principal amount of $22,665,000 (the “2004 Bonds”) in order to refinance the City of Novato, Community Facilities District No. 1994-1 (Hamilton Field) Special Tax Bonds;

WHEREAS, the City has determined that it is in the public interest and for the benefit of

the City, the CFD and the property owners responsible for the payment of special taxes that the City borrow funds from the Lender for the purpose of providing funds to refund and discharge the 2004 Bonds and thereby realize substantial interest rate savings, and in order to specify the terms and conditions of such loan and to provide for the security thereof, the City and the Lender wish to enter into this Loan Agreement and issue the Note (as defined herein); and

WHEREAS, under the provisions of the Act, on May __, 2014, the City adopted its

Resolution (the “Resolution”), which resolution, among other matters, authorized the execution and delivery of this Loan Agreement and the issuance of a promissory note evidencing the obligations of the City under this Loan Agreement (the “Note”), all for the purpose of providing moneys to current refund and discharge the 2004 Bonds, provided that such issuance is in accordance with the Act and this Loan Agreement;

WHEREAS, the City has agreed that it will not issue any additional indebtedness or

incur any other obligation payable from Special Taxes on a basis senior to or on parity with the Note or the other amounts due under this Loan Agreement without the written consent of the Lender;

NOW, THEREFORE, in consideration of the covenants and provisions herein set forth

and for other valuable consideration the receipt and sufficiency of which is hereby acknowledged, the parties hereto do hereby agree as follows:

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ARTICLE I

AUTHORITY AND DEFINITIONS

SECTION 1.01. Authority for this Loan Agreement. This Loan Agreement is entered into

under the Act and the Resolution. SECTION 1.02. Definitions. Unless the context otherwise requires, the terms defined in

this Section 1.02 shall, for all purposes of this Loan Agreement, of any Supplemental Agreement, and of any certificate, opinion or other document herein mentioned, have the meanings herein specified. All references herein to “Articles,” “Sections” and other subdivisions are to the corresponding Articles, Sections or subdivisions of this Loan Agreement, and the words “herein,” “hereof,” “hereunder” and other words of similar import refer to this Loan Agreement as a whole and not to any particular Article, Section or subdivision hereof.

“Act” means the Mello-Roos Community Facilities Act of 1982, as amended, being

Sections 53311 et seq. of the California Government Code. “Administrative Expenses” means costs directly related to the administration of the CFD

including but not limited to the following: (a) the actual costs of computing the Special Taxes and preparing the annual Special Tax collection schedules (whether by a City employee or consultant or both) and the actual costs of collecting the Special Taxes (whether by the County or otherwise); (b) the actual costs of the City related to any challenge to the validity of the proceedings to levy or collect the Special Taxes; (c) any amounts required to be rebated to the federal government; and (d) an allocable share of the salaries of the City staff directly related to the foregoing and a proportionate amount of City general administrative overhead related thereto. Administrative Expenses shall also include amounts advanced by the City for any administrative purpose of the CFD, including costs related to prepayments of Special Taxes, recordings related to such prepayments and satisfaction of Special Taxes, amounts advanced to ensure maintenance of tax exemption, and the costs of prosecuting foreclosure of delinquent Special Taxes, which amounts advanced are subject to reimbursement from other sources, including proceeds of foreclosure.

“Administrative Expense Fund” means the fund by that name established and held by

the City under Section 3.03. "Affiliate" means, with respect to a specified Person, another Person that directly, or

indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified.

"Applicable Law" means (i) all applicable common law and principles of equity and (ii) all

applicable provisions of all (A) constitutions, statutes, rules, regulations, directives, codes, ordinances and orders of all Governmental Authorities, and including without limitation all Environmental Laws and, (B) Governmental Approvals, and (C) orders, decisions, judgments and decrees of all courts (whether at law or in equity) and arbitrators.

“Auditor” means the auditor/controller of the County, or such other official at the County

who is responsible for preparing property tax bills.

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“Authorized Officer” means the Mayor, the City Manager, the Assistant City Manager, the Finance Manager and the City Clerk of the City, or any other officer or employee authorized by the City or by an Authorized Officer to undertake the action referenced in this Loan Agreement as required to be undertaken by an Authorized Officer.

“Bond Counsel” means Jones Hall, A Professional Law Corporation, or any attorney or

firm of attorneys acceptable to the City and the Lender and nationally recognized for expertise in rendering opinions as to the legality and tax-exempt status of securities issued by public entities.

“Business Day” means any day other than (i) a Saturday or a Sunday or (ii) a day on

which banking institutions in the state in which the Lender has its principal office are authorized or obligated by law or executive order to be closed.

“CDIAC” means the California Debt and Investment Advisory Commission of the Office

of the State Treasurer of California, or any successor agency, board or commission. “CFD” means the Community Facilities District No. 1994-1 (Hamilton Field) established

by the City under the Act and the Resolution of Formation. “City” means the City of Novato, a general law city and municipal corporation duly

organized and existing under the laws of the State, and its successors and assigns. “Closing Date” means [May __], 2014, being the date upon which the Loan is funded by

the Lender and the net proceeds thereof are deposited with the Escrow Bank. "Control" means the possession, directly or indirectly, of the power to direct or cause the

direction of the management or policies of a Person whether through the ability to exercise voting power, by contract or otherwise. "Controlled" shall have meaning correlative thereto.

“Costs of Issuance” means items of expense payable or reimbursable directly or

indirectly by the City and related to the authorization, sale, delivery and issuance of the Note and the refunding of the 2004 Bonds, which items of expense shall include, but not be limited to: the costs of preparing this Loan Agreement and the Note; printing costs; costs of reproducing and binding documents; closing costs; appraisal costs; filing and recording fees; fees and expenses of counsel to the City; fees and charges of the Escrow Bank, including its legal fees and charges, including the allocated costs of in-house attorneys; fees and expenses of the Lender, including Lender’s counsel; expenses incurred by the City in connection with the issuance of the Note; fees and charges for professional services, including Bond Counsel, Financial Advisor and verification agent; environmental assessments (if any); and other costs, charges and fees in connection with the foregoing.

“County” means the County of Marin, California. “Debt Service” means, for any period of time, the sum of (a) the interest due on the Loan

and the Note in such period, assuming that the Loan and the Note are retired as scheduled, and (b) the principal amount of the Loan and the Note coming due in such period.

“Default Rate” means, as of any date, a rate of interest equal to the interest rate then in

effect with respect to the Loan and the Note plus 5.0%.

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"Determination of Taxability" means a determination that the interest payable on the Loan or the Note does not qualify as interest which is excludable from gross income of the recipient thereof for federal income tax purposes under Section 103 of the Tax Code ("Exempt Interest") for any reason, which determination shall be deemed to have been made upon the first to occur of any of the following:

(a) the date on which (i) the Internal Revenue Service issues a proposed or

final determination of taxability, a Notice of Proposed Issue (IRS Form 5701-TEB), a notice of deficiency or similar notice, or any other notice, determination or decision, in each case, to the effect that the interest payable on the Loan or the Note or any portion thereof does not qualify as Exempt Interest, or (ii) a court of competent jurisdiction has rendered any final ruling or decision to the effect that the interest payable on the Loan or the Note or any portion thereof does not qualify as Exempt Interest;

(b) the date when the City files any statement, supplemental statement, or

other tax schedule, return or document, which is in any respect inconsistent with interest payable on the Loan or the Note or any portion thereof continuing to qualify as Exempt Interest;

(c) upon sale, lease or other deliberate action within the meaning of Treas.

Reg. § 1.141-2(d), the failure of the City to deliver to the Lender an unqualified opinion of Bond Counsel to the effect that such action will not cause interest on the Loan or the Note to become includable in the gross income of the recipient for federal income tax purposes; or

(d) (i) the circumstances relating to the City or any portion thereof have

occurred or changed, or any federal tax law or regulation, or any public or private final ruling, technical advice memorandum or any other written communication by the Internal Revenue Service is adopted or issued, or any final ruling or decision of a court of competent jurisdiction is rendered or any other set of circumstances has occurred, in any such case, which may adversely affect the excludability of the Exempt Interest from the gross income of the recipient for federal income tax purposes; and thereafter (ii) Bond Counsel is notified by the Lender in writing, with a copy to the City, or by the City, with a copy to the Lender, that Bond Counsel is requested to deliver within 45 days an updated approving opinion relating to the treatment of the interest on the Loan or the Note as Exempt Interest in form and substance acceptable to the Lender in its sole discretion ("Approving Opinion") and is assured as to the payment by the City of its fees and expenses for such services; and (iii) within 45 days after such notice has been received by Bond Counsel, either (A) the Lender and the City have received written communication from Bond Counsel to the effect that, based upon an analysis of the facts and applicable law, it is unable to render an updated Approving Opinion, or (B) Bond Counsel has not delivered an Approving Opinion. “Escrow Bank” means U.S. Bank National Association, as fiscal agent for the 2004

Bonds and as holder of the Escrow Fund under the Irrevocable Refunding Instructions. “Escrow Fund” means the fund by that name established and administered under the

Irrevocable Refunding Instructions.

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"Federal Securities" means: (a) any direct non-callable general obligations of the United States of America (including obligations issued or held in book entry form on the books of the Department of the Treasury of the United States of America), for which the full faith and credit of the United States of America are pledged; (b) obligations of any agency, department or instrumentality of the United States of America, the timely payment of principal and interest on which are directly or indirectly secured or guaranteed by the full faith and credit of the United States of America.

“Fiscal Year” means the twelve-month period extending from July 1 in a calendar year to

June 30 of the succeeding year, both dates inclusive. "Governmental Authority" means any national, supra -national, state or local government

(whether domestic or foreign), any political subdivision thereof or any other governmental, quasi -governmental, judicial, administrative, public or statutory instrumentality, authority, body, agency, department, commission, bureau, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory, fiscal, monetary or administrative powers or functions of or pertaining to government, or any arbitrator, mediator or other Person with authority to bind a party at law.

“Irrevocable Refunding Instructions” means the Irrevocable Refunding Instructions dated as of the Closing Date, by and between the Escrow Bank and the City, providing for the defeasance of the 2004 Bonds.

“Lender” means the Bank of Marin, a banking corporation duly organized and existing

under the laws of the State of California, and its successors and assigns. “Loan” means the loan made hereunder by the Lender to the City in the aggregate

principal amount of $[___________] for the purpose of providing funds to refund and discharge the outstanding 2004 Bonds.

“Loan Agreement” means this Loan Agreement, as it may be amended or supplemented

from time to time by any Supplemental Agreement adopted pursuant to the provisions hereof. "Loan Repayment Date" means each of the dates set forth in Exhibit B hereto, on which

installments of principal of and interest on the Loan come due and payable. "Loan Repayments" means all payments required to be paid by the City under Section

2.03, including any prepayment thereof under Section 2.04. "Material Adverse Effect" means an event or occurrence which adversely affects in a

material manner (a) the validity or enforceability of this Loan Agreement, or (b) the rights of or benefits available to the Lender under this Loan Agreement or (c) the exclusion of interest with respect to the Loan Repayments from gross income 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 against

the CFD in any court or before any arbitrator of any kind or before or by any Governmental Authority, of which the City has notice or knowledge and which, (i) if determined adversely to the CFD, may have a Material Adverse Effect, (ii) seek to restrain or enjoin any of the transactions contemplated hereby or by this Loan Agreement, or (iii) may adversely affect (A) the exclusion of interest with respect to the Loan Repayments from gross income for federal income tax

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purposes or the exemption of such interest for state income tax purposes or (B) the ability of the City, on behalf of the CFD, to perform its obligations under this Loan Agreement.

“Note” means the note issued by the City hereunder evidencing the obligations of the

City under this Loan Agreement, in the form attached hereto as Exhibit A. “Officer’s Certificate” means a written certificate of the City signed by an Authorized

Officer of the City. “Ordinance” means any ordinance or resolution of the City levying the Special Taxes. "Other Taxes" means any and all present or future stamp or documentary taxes or any

other excise or property taxes, charges or similar levies arising from any payment made hereunder or from the execution, delivery or enforcement of, or otherwise with respect to, this Loan Agreement.

"Permitted Investments" means any of the following:

(a) Interest and non-interest bearing deposit accounts with the Lender; (b) Interest bearing savings accounts with the Lender; (c) Certificates of deposit issued by the Lender; (d) Money market funds available through the Lender; and (e) Any other investments which are authorized for the investment of City funds

under the laws of the State of California for which the City receives written approval from the Lender. "Person" means any natural or legal person, corporation, limited liability company, trust,

joint venture, association, company, partnership, Governmental Authority or other entity. “Principal Amount” means the aggregate principal amount of the Loan which is

$15,000,000. “Project” means those items described as the “Facilities” in the Resolution of Formation. “Reserve Fund” means the fund by that name established and held by the Lender under

Section 3.04. “Reserve Requirement” means $450,000. “Resolution” means the resolution adopted by the City on May __, 2014, authorizing the

execution and delivery of this Loan Agreement and the issuance of the Note. “Resolution of Formation” means Resolution No. 79-95, adopted by the City Council of

the City on June 27, 1995.

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“Special Tax Fund” means the special fund by that name established and held by the City under Section 3.02.

“Special Taxes” means the Capital Facilities Special Tax, as described in the Rate and

Method of Apportionment of Special Tax adopted in connection with the proceedings for the CFD, and levied within the CFD pursuant to the Act, the Ordinance, and this Agreement.

“State” means the State of California. “Supplemental Agreement” means an agreement the execution of which is authorized by

a resolution which has been duly adopted by the City Council of the City under the Act and which agreement is amendatory of or supplemental to this Loan Agreement, but only if and to the extent that such agreement is specifically authorized hereunder.

“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 on the Closing Date, together with applicable proposed, temporary and final regulations promulgated, and applicable official guidance published, under the Tax Code.

“Taxable Rate” means, from and after the occurrence of a Determination of Taxability,

4.25%. “2004 Bonds” means the bonds heretofore issued by the City for the CFD and

designated “City of Novato Community Facilities District No. 1994-1 (Hamilton Field) 2004 Refunding Special Tax Bonds” dated September 2, 2004, and issued in the original principal amount of $22,665,000 under and pursuant to the 2004 Fiscal Agent Agreement.

“2004 Fiscal Agent Agreement” means the Fiscal Agent Agreement, dated as of August

1, 2004, by and between the City and U.S. Bank National Association, as fiscal agent, as supplemented by a First Supplemental Fiscal Agent Agreement, dated as of May 1, 2014, by and between the City and U.S. Bank National Association, as fiscal agent.

“2004 Fiscal Agent” means U.S. Bank National Association

ARTICLE II

THE LOAN; ISSUANCE OF THE NOTE

SECTION 2.01. Principal Amount; Designation. The Lender hereby agrees to make the

Loan to the City in the aggregate principal amount of [$___________], and the City hereby agrees to borrow such amount from the Lender. The Loan shall be evidenced by a note which shall constitute a “refunding bond” under the Act, which shall be issued by the City in the form of the Note in the aggregate principal amount of [$___________]. The Loan and the Note are authorized to be entered into and issued by the City, acting on behalf of the CFD, under and subject to the terms of the Act, the Resolution, this 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 Loan Agreement on the Closing Date in funds which are immediately available to the City and the Escrow Bank.

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SECTION 2.02. Term. The term of this Loan Agreement commences on the Closing Date, and ends on September 1, 2025, or sooner if provision for such payment is made as provided herein.

SECTION 2.03. Loan Repayments. (a) Obligation to Pay. The City hereby agrees to repay the Loan and the Note in the

aggregate principal amount of [$___________] together with interest on the unpaid principal balance thereof at the rate of 2.805%, payable in semi-annual payments (the “Loan Repayments”) in the respective amounts and on the respective Loan Repayment Dates specified in Exhibit B. The portion of the Loan Repayments representing interest shall be calculated at the rate of 2.805% per annum on a 365/360 basis (that is, by applying the ratio of the interest rate over a year of 360 days, multiplied by the outstanding principal balance, multiplied by the actual number of days the principal balance is outstanding). All interest payable under this Loan Agreement shall be computed using this method. In the event that a Determination of Taxability occurs, the Loan and the Note will bear interest, from and after the date of such Determination of Taxability, at the Taxable Rate, and the Lender shall provide the City a revised Exhibit B recalculated to amortize the remaining term of the Loan and the Note on a level debt service basis at the Taxable Rate. In addition, the City shall make, within 30 days of receiving a demand of the Lender, a payment to the Lender sufficient to indemnify the Lender and supplement the interest component of prior Loan Repayments to an interest rate equal to the Taxable Rate to the extent such prior interest amounts are determined to be taxable, and such obligation shall survive the termination of this Loan Agreement.

(b) Effect of Prepayment. If the City prepays the Loan Repayments in full under

Section 2.04, and all payments required to be made to the Lender pursuant to Section 2.03(c) hereof have been made, the City’s obligations under this Loan Agreement shall thereupon cease and terminate, including but not limited to the City’s obligation to pay Loan Repayments under this Section 2.03.

(c) Rate on Defaulted Payments. If the City fails to make any of the payments

required in Section 2.03(a) and (b), and such failure continues until such time as an Event of Default occurs, the payment in default shall continue as an obligation of the City until the amount in default has been fully paid, and the City agrees to pay the same with interest thereon, to the extent permitted by law, from the Loan Repayment Date to the applicable date of payment at the Default Rate.

(d) Additional Payments. (i) The City, on behalf of the CFD, agrees to pay the reasonable out-of-pocket

expenses and disbursements of the Lender and the necessary and reasonable fees, expenses and disbursements of counsel to the Lender in connection with (A) obtaining any waiver or consent under this Loan Agreement (whether or not the transactions contemplated thereby shall be consummated) or any Event of Default or alleged Event of Default hereunder, (B) the preparation, execution, delivery, administration and enforcement or preservation of rights in connection with a workout, restructuring or waiver with respect to this Loan Agreement and (C) the occurrence of an Event of Default and collection and other enforcement proceedings resulting therefrom.

(ii) Any and all payments to the Lender by the City hereunder shall be made free

and clear of, and without deduction for, any and all taxes, levies, imposts, deductions, charges

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or withholdings imposed, including but not limited to as a result of a change in, law, rule, treaty, or regulation, or any policy, guideline, or directive of, or any change in the interpretation, implementation, or administration thereof by, any Governmental Authority, and all liabilities with respect thereto, excluding taxes imposed on or measured by the net income or capital of the Lender by any jurisdiction or any political subdivision or taxing authority thereof or therein solely as a result of a connection between the Lender and such jurisdiction or political subdivision, other than a connection resulting solely from executing, delivering or performing its obligations or receiving a payment under, or enforcing, this Loan Agreement (all such non excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "Taxes").

(iii) In addition, the City, on behalf of the CFD, shall pay or cause to be paid on

demand, any present or future stamp, recording, or Other Taxes and fees payable or determined to be payable under Applicable Law in connection with the execution, delivery, filing and recording of this Loan Agreement and agrees to save the Lender harmless from and against any and all liabilities with respect to or resulting from any delay in paying or omission to pay such taxes and fees.

(iv) The obligation of the City, on behalf of the CFD, to make the payments set forth

in this Section 2.03(d) is limited to amounts received from the levy of the Special Taxes, and the City will, to the extent permitted by law, levy the Special Taxes in the amount necessary to pay all amounts to be paid under this Section 2,03(d).

SECTION 2.04. Prepayment. (a) Optional Prepayment. The City may prepay the unpaid principal components of

the Loan Repayments in whole or in part, on the first Business Day of any month by paying a prepayment price equal to the principal components of the Loan Repayments to be prepaid, together with the interest required to be paid on such Business Day, with a premium (calculated on the basis of the principal amount of the Loan to be prepaid) as set forth below:

Prepayment Period

(dates inclusive)

Prepayment Premium 5% 4% 3% 2% 1% 0%

Notwithstanding the foregoing, the City may, on the first Business Day of any month,

prepay up to twenty percent (20%) of the principal amount of the Loan outstanding during any one year period from [______] of one year through and including [______], of the next year without incurring any prepayment penalty. The amount received by the Lender shall be applied to reduce Loan Repayments proportionally.

(b) Mandatory Prepayment. The City shall prepay the unpaid principal components of

the Loan Repayments in whole or in part, on the first Business Day of any month by paying, but solely from amounts received by the City representing the prepayment of Special Taxes from the property owners within the CFD, a prepayment price equal to the principal components of

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the Loan Repayments to be prepaid, together with the interest required to be paid on such Business Day, with a premium (calculated on the basis of the principal amount of the Loan to be prepaid) as set forth below:

Prepayment Period (dates inclusive)

Prepayment Premium

5% 4% 3% 2% 1% 0%

Notwithstanding the foregoing, the Loan may, on the first Business Day of any month, be

prepaid from the prepayment of Special Taxes by the property owners in an amount up to twenty percent (20%) of the principal amount of the Loan outstanding during any one year period from [______] of one year through and including [______], of the next year without incurring any prepayment penalty. The amount received by the Lender shall be applied to reduce Loan Repayments proportionally.

(c) Notice of Prepayment. The City shall give the Lender written notice of its intention

to prepay the Loan under this Section 2.03 not less than thirty (30) days prior to the prepayment date and shall specify the principal amount to be prepaid. In the event the Loan is prepaid in part but not in whole, the principal amount to be prepaid shall be allocated among the respective principal payment dates on a pro rata basis; provided, however, that in the event of prepayment from prepaid Special Taxes, the principal installments to be prepaid shall be determined such that the remaining Special Taxes correspond in time and amount to the remaining schedule of Debt Service payments on the Loan.

SECTION 2.05. No Acceleration. The principal of the Loan and the Note shall not be

subject to acceleration hereunder. SECTION 2.06. 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 shall be substantially in the form set forth in Exhibit A attached hereto and by this reference incorporated herein, with necessary or appropriate variations, omissions and insertions, as permitted or required by this Loan Agreement, the Resolution and the Act.

The Note shall be executed on behalf of the City by the manual or facsimile signature of

the Mayor and such signature shall be attested by the manual signature of the City Clerk. If any officer whose signature appears on the Note ceases to be such officer before delivery of the Note to the Lender, such signature shall nevertheless be as effective as if the officer had remained in office until the delivery of the Note to the Lender. The Note may be signed and attested on behalf of the City by such persons as at the actual 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 2.07. Issuance and Delivery of Note. The City shall issue the Note on the

Closing Date and thereupon deliver the Note to the Lender. The Authorized Officers of the City

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are hereby authorized and directed to execute and deliver any and all documents and instruments necessary to cause the issuance of the Note in accordance with the provisions of the Act, the Resolution and this Loan Agreement, and to do and cause to be done any and all acts and things necessary or convenient for the timely delivery of the Note to the Lender.

SECTION 2.08. Transfer or Exchange of Lender’s Rights. The Lender may assign its

rights hereunder, and may transfer the Note, subject to the requirements of Section 6.13 herein, but only upon surrender of the Note to the City for cancellation, accompanied by delivery of a duly written instrument of transfer in a form acceptable to the City. Whenever the Note shall be surrendered for transfer, the City shall execute, authenticate and deliver a new Note to the transferee.

SECTION 2.09. Budget and Appropriation of Loan Repayments. During the term of this

Loan Agreement, the City, on behalf of the CFD, shall adopt all necessary budgets and make all necessary appropriations of the Loan Repayments from the Special Taxes. The covenants on the part of the City contained in this Section 2.09 shall be deemed to be and shall be construed to be duties imposed by law and it shall be the duty of each and every public official of the City to take such actions and do such things as are required by law in the performance of the official duty of such officials to enable the City, on behalf of the CFD, to carry out and perform the covenants and agreements in this section 2.09.

SECTION 2.10. Late Charges. If the City, on behalf of the CFD, fails to make any Loan

Repayment and such failure results in the untimely payment of principal and interest on the Loan, or if the City fails to make any other payment when due, in each case, taking into account the grace period allowed for such payment pursuant to Section 5.04(a), the City shall pay to the Lender a late charge equal to 5.00% of the past due payment. The late charge shall apply only if the Lender is not charging the Default Rate pursuant to Section 2.03(c).

ARTICLE III

APPLICATION OF LOAN PROCEEDS

SECTION 3.01. Application of Proceeds of Loan and Other Moneys. (a) Proceeds of Loan. The proceeds of the Loan payable by the Lender in the amount

of $[______] shall be applied on the Closing Date as follows:

(i) $[______] shall be transferred by the Lender to the City to pay all Costs of Issuance, which amount shall be deemed expended on the Closing Date;

(ii) $450,000 shall be deposited by the Lender into the

Reserve Fund which shall be held by the Lender; and (iii) $[______] shall be transferred by the Lender to the Escrow

Bank pursuant to the Irrevocable Refunding Instructions, for deposit into the Escrow Fund.

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(b) Other Funds. In addition to the foregoing deposits of proceeds, the City shall cause the following amounts to be deposited into the Escrow Fund on the Closing Date:

(i) $[_____] from the reserve fund established for the 2004

Bonds; (ii) $[____] from the bond fund established for the 2004

Bonds; and (iii) $[_____] representing Special Taxes held by the City on

the Closing Date. SECTION 3.02. Special Tax Fund. (a) Establishment of Special Tax Fund. The Special Tax Fund is hereby established as

a separate fund to be held by the City, acting on behalf of the CFD, to the credit of which the City, acting on behalf of the CFD, shall deposit all Special Taxes immediately upon receipt by the City. Amounts in the Special Tax Fund shall be held in trust by the City for the benefit of the Lender, shall be disbursed as provided below and, pending any disbursement, are hereby pledged to the payment of the Loan for the benefit of the Lender.

(b) Disbursements. Amounts on deposit in the Special Tax Fund shall be disbursed by

the City at the following times and in the following order of priority:

(i) The City shall transfer to the Administrative Expense Fund an amount required to pay Administrative Expenses when and as the same become due and payable, provided that the amount so transferred in any Fiscal Year shall not exceed $75,000.

(ii) On or before each Loan Repayment Date, but in any event on such

date as is necessary to ensure that the Lender is in receipt of each payment due hereunder on each Loan Repayment Date, the City shall apply amounts in the Special Tax Fund to pay to the Lender the full amount of Debt Service coming due on the Loan and the Note on such Loan Repayment Date. In the event that there are insufficient funds in the Special Tax Fund to make any such payment in full when due, the Lender shall apply amounts received on such Loan Repayment Date first to the payment of interest on the Loan, then to the payment of principal due on the Loan.

(iii) Any amount in the Special Tax Fund in excess of the amount

required to make the foregoing transfers shall, subject to the proviso below, be held in the Special Tax Fund and applied by the City as a credit towards the amount of Special Taxes to be levied in the next Fiscal Year; provided, however, that in the event such amount exceeds one-twelfth (1/12th) of the aggregate amount of debt service coming due on the Loan in the current Fiscal Year, such excess shall be transferred to the Administrative Expense Fund.

If at any time it appears to the City that there is a danger of deficiency in the Special Tax

Fund and that the City may be unable to pay Debt Service on the Loan in a timely manner, the City shall report such fact to the Lender. The City covenants to increase the levy of the Special

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Taxes in the next Fiscal Year (subject to the maximum amount authorized by the Resolution of Formation) in accordance with the procedures set forth in the Act for the purpose of curing Special Tax Fund deficiencies.

SECTION 3.03. Administrative Expense Fund. (a) Establishment of Administrative Expense Fund. The Administrative Expense Fund

is hereby established as a separate fund to be held by the City. Amounts in the Administrative Expense Fund shall be held by the City, and shall be disbursed as provided below.

(b) Disbursement. Amounts in the Administrative Expense Fund shall be withdrawn by

the City and applied to pay or reimburse payment of Administrative Expenses. The City shall withdraw from the Administrative Expense Fund and transfer to the Special Tax Fund, from time to time, any amount not required to pay any Administrative Expenses.

SECTION 3.04. Reserve Fund.

(a) The Reserve Fund shall be fully funded on the Closing Date by the City in an amount equal to the Reserve Requirement. The City covenants and agrees to make or cause to be made deposits to the Reserve Fund sufficient to maintain the Reserve Fund at the Reserve Requirement. The City hereby grants the Lender a first lien and security interest in the Reserve Fund and all amounts on deposit therein.

(b) All interest earnings or other income received from the investment of amounts in the Reserve Fund shall initially be deposited in and held in the Reserve Fund, subject to the provisions of this Section 3.04. Money in the Reserve Fund may be invested upon the written direction of the City in Permitted Investments. Absent receipt of written direction, money in the Reserve Fund shall be invested in the investment identified in clause (d) of the definition of Permitted Investments.

(c) The Lender shall determine the value of the Reserve Fund investments no less frequently than semi-annually on each February 15 and August 15, and monthly from the date of any Reserve Fund Deficiency (as defined below) in the Reserve Fund until such Reserve Fund Deficiency is cured. If the value of the cash and investments in the Reserve Fund on any valuation date is less than the Reserve Requirement on such valuation date, the Lender shall, within 10 days of such valuation, notify the City in writing of the amount of such deficiency (the “Reserve Fund Deficiency”). In the event of a Reserve Fund Deficiency, the City covenants and agrees to deposit or cause to be deposited into the Reserve Fund the amount of the Reserve Fund Deficiency no later than 30 days following the valuation date on which the Reserve Fund Deficiency occurred, subject to the availability of Special Taxes. So long as no Event of Default has occurred and is continuing, amounts in the Reserve Fund in excess of the Reserve Requirement on any valuation date, may be withdrawn from the Reserve Fund by Lender at the direction of the City and applied to pay principal and interest on the Loan.

(d) All money in the Reserve Fund shall be first used and withdrawn by the Lender solely for the purpose of paying the interest or principal, or prepayment premium, if any, with respect to the Loan, in the event that no other money is available therefor. The Lender shall be entitled to the benefit and security provided by the amounts to be paid by the City to replenish the Reserve Fund as provided herein prior to the application of any such amounts to payment of principal or interest with respect to the Loan.

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ARTICLE IV

SECURITY FOR THE LOAN; COVENANTS

SECTION 4.01. Pledge of Special Taxes. The Loan shall be secured by a first pledge (which pledge shall be effected in the manner and to the extent herein provided) of all of the Special Taxes and all moneys deposited in the Loan Repayment Fund and the Special Tax Fund. The Special Taxes and all moneys deposited into such funds (except as otherwise provided herein) are hereby dedicated to the payment of Debt Service on the Loan as provided herein and in the Act until payment in full of the Loan or the discharge of the Loan under Section 6.03. The City covenants and agrees that it will not issue any additional indebtedness or incur any other obligation payable from Special Taxes on a basis senior to or on parity with the Note or the other amounts due under this Loan Agreement without the written consent of the Lender.

SECTION 4.02. Limited Obligations. All obligations of the City under this Loan

Agreement and the Note shall not be general obligations of the City, but shall be limited obligations, payable solely from the Special Taxes and the funds pledged therefore hereunder. Neither the faith and credit of the City nor of the State or any political subdivision thereof is pledged to the payment of the Loan and the Note.

SECTION 4.03. Collection of Special Taxes. The City shall comply with all requirements

of the Act so as to assure the timely collection of Special Taxes, including without limitation, the enforcement of delinquent Special Taxes.

(a) Processing. On or within five (5) Business Days of each June 1, the

City, acting on behalf of the CFD, shall determine the amount of Special Taxes needed to be levied under the Ordinance as necessary to provide for annual Debt Service and Administrative Expenses, taking into account the amount then on deposit in the Loan Repayment Fund. Upon such determination, the City, acting on behalf of the CFD, shall communicate with the Auditor to ascertain the relevant parcels on which the Special Taxes are to be levied, taking into account any parcel splits or combinations during the preceding and then current year.

(b) Levy. The City, acting on behalf of the CFD, shall effect the levy of

the Special Taxes each Fiscal Year in accordance with the Ordinance by each September 2 that the Loan remains unpaid, or otherwise such that the computation of the levy is complete before the final date on which the Auditor will accept the transmission of the Special Tax amounts for the parcels within the CFD for inclusion on the next real property tax roll. Upon the completion of the computation of the amounts of the levy, the City, acting on behalf of the CFD, shall prepare or cause to be prepared, and shall transmit to the Auditor, such data as the Auditor requires to include the levy of the Special Taxes on the next real property tax roll.

(c) Computation. The City, acting on behalf of the CFD, shall fix and

levy the amount of Special Taxes within the CFD required for the payment of Debt Service coming due and payable during the ensuing calendar year, including (i) an amount estimated to be sufficient to pay the Administrative

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Expenses during such calendar year, and (ii) amounts necessary to discharge any rebate obligation, during such year, taking into account the balances in such funds and in the Special Tax Fund. The Special Taxes so levied shall not exceed the authorized amounts as provided in the proceedings under the Resolution of Formation.

(d) Collection. The Special Taxes shall be payable and be collected in

the same manner and at the same time and in the same installment as the general taxes on real property are payable, and have the same priority, become delinquent at the same time and in the same proportionate amounts and bear the same proportionate penalties and interest after delinquency as do the ad valorem taxes on real property. SECTION 4.04. Covenant to Foreclose. Under the Act, the City hereby covenants with

and for the benefit of the Lender that it will order, and cause to be commenced as hereinafter provided, and thereafter diligently prosecute to judgment (unless such delinquency is theretofore brought current), an action in the superior court to foreclose the lien of any Special Tax or installment thereof not paid when due as provided in the following paragraph. The City shall notify the City Attorney of any such delinquency of which the City is aware, and the City Attorney shall commence, or cause to be commenced, such proceedings.

On or about March 30 and June 30 of each Fiscal Year, the City shall compare the

amount of Special Taxes theretofore levied in the CFD to the amount of Special Taxes theretofore received by the City. If the City determines that the total amount of delinquent Special Taxes for the prior Fiscal Year for the entire CFD exceeds 5% of the total Special Taxes due and payable for the prior Fiscal Year, the City shall notify or cause to be notified property owners who are then delinquent in the payment of Special Taxes (and demand immediate payment of the delinquency) within 60 days of such determination, and shall commence foreclosure proceedings within 120 days of such determination against each parcel of land in the CFD with a Special Taxes delinquency.

SECTION 4.05. Punctual Payment. The City will punctually pay or cause to be paid the

Debt Service on the Loan when and as due in strict conformity with the terms hereof and thereof, and it will faithfully observe and perform all of the conditions covenants and requirements of this Loan Agreement and all Supplemental Agreements and of the Note.

SECTION 4.06. Against Encumbrances. The City will not encumber, pledge or place any

charge or lien upon any of the Special Taxes or other amounts pledged to the Loan superior to or on a parity with the pledge and lien herein created for the benefit of the Lender, except as permitted by this Loan Agreement.

SECTION 4.07. Books and Records. The City will keep, or cause to be kept, proper

books of record and accounts, separate from all other records and accounts of the City, in which complete and correct entries are made of all transactions relating to the expenditure of amounts disbursed from the Administrative Expense Fund and the Special Tax Fund and to the Special Taxes. Such books of record and accounts shall at all times during business hours be subject to the inspection of the Lender or its representatives duly authorized in writing.

SECTION 4.08. Protection of Security and Rights of Lender. The City will preserve and

protect the security of the Loan and the rights of the Lender, and will warrant and defend their

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rights against all claims and demands of all persons. From and after the delivery of this Loan Agreement and the Note by the City, the Loan and the Note shall be incontestable by the City.

SECTION 4.09. Amendment of this Loan Agreement. This Loan Agreement and the

rights and obligations of the City and of the Lender may be modified or amended at any time by a Supplemental Agreement. Prior to the execution and delivery of any Supplemental Agreement, the City shall at its expense (which expense shall constitute an Administrative Expense) obtain an opinion of Bond Counsel stating whether such modification or amendment will have the effect of causing interest on the Loan to become includable in gross income under the Tax Code, which opinion shall be filed with the Lender.

SECTION 4.10. Tax Covenants. (a) Private Activity Bond Limitations. The City shall assure that the proceeds of the

Loan are not so used as to cause the Loan to satisfy the private business tests of Section 141(b) of the Tax Code or the private loan financing test of Section 141(c) of the Tax Code.

(b) Federal Guarantee Prohibition. The City shall not take any action or permit or suffer

any action to be taken if the result of the same would be to cause the Loan to be “federally guaranteed” within the meaning of Section 149(b) of the Tax Code.

(c) Rebate Requirement The City shall take any and all actions necessary to assure

compliance with Section 148(f) of the Tax Code, relating to the rebate of excess investment earnings, if any, to the federal government, to the extent that such Section is applicable to the Loan.

(d) No Arbitrage. The City shall not take, or permit or suffer to be taken by the Lender

or otherwise, any action with respect to the proceeds of the Note which, if such action had been reasonably expected to have been taken, or had been deliberately and intentionally taken, on the date of issuance of the Note would have caused the Note to be “arbitrage bonds” within the meaning of Section 148 of the Tax Code.

(e) Maintenance of Tax-Exemption. The City shall take all actions necessary to assure

the exclusion of interest on the Note from the gross income of the Lender to the same extent as such interest is permitted to be excluded from gross income under the Tax Code as in effect on the date of issuance of the Note. The City shall indemnify and hold harmless the Lender, its Affiliates, and their officers, agents, employees, successors and assigns from and against all claims, losses and damages, including legal fees and expenses, arising out of any income taxes paid by the Lender as a result of a Determination of Taxability for any period prior to the effective date of the Taxable Rate, with regards to the Special Taxes.

SECTION 4.11. Further Assurances. The City will adopt, make, execute and deliver any and all such further resolutions, instruments and assurances as may be reasonably necessary or proper to carry out the intention or to facilitate the performance of this Loan Agreement, and for the better assuring and confirming unto the Lender of the rights and benefits provided in this Loan Agreement.

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ARTICLE V

INVESTMENTS; LIABILITY OF THE CITY

SECTION 5.01. Deposit and Investment of Moneys in Funds. (a) General. Moneys in any fund or account created or established by this Loan

Agreement and held by the City shall be invested by the City in any investments which are authorized for the investment of City funds under the laws of the State, which in any event by their terms mature prior to the date on which such moneys are required to be paid out hereunder. Moneys on deposit in the Reserve Fund held by the Lender shall be invested in Permitted Investments as provided in Section 3.04. Obligations purchased as an investment of moneys in any fund shall be deemed to be part of such fund or account.

Except as otherwise provided in the next sentence, all investments of amounts

deposited in any fund or account created by or pursuant to this Loan Agreement, or otherwise containing gross proceeds of the Loan (within the meaning of Section 148 of the Tax Code) shall be acquired, disposed of, and valued (as of the date that valuation is required by this Loan Agreement or the Tax Code) at Fair Market Value (as defined below). Investments in funds or accounts (or portions thereof) that are subject to a yield restriction under the applicable provisions of the Tax Code shall be valued at their present value (within the meaning of Section 148 of the Tax Code).

(b) Definition of Fair Market Value. For purposes of this Section 5.01, the term “Fair

Market Value” shall mean the price at which a willing buyer would purchase the investment from a willing seller in a bona fide, arm’s length transaction (determined as of the date the contract to purchase or sell the investment becomes binding) if the investment is traded on an established securities market (within the meaning of Section 1273 of the Tax Code) and, otherwise, the term “Fair Market Value” means the acquisition price in a bona fide arm’s length transaction (as referenced above) if (i) the investment is a certificate of deposit that is acquired in accordance with applicable regulations under the Tax Code, (ii) the investment is an agreement with specifically negotiated withdrawal or reinvestment provisions and a specifically negotiated interest rate (for example, a guaranteed investment contract, a forward supply contract or other investment agreement) that is acquired in accordance with applicable regulations under the Tax Code, (iii) the investment is a United States Treasury Security – State and Local Government Series that is acquired in accordance with applicable regulations of the United States Bureau of Public Debt, or (iv) any commingled investment fund in which the City and any related parties do not own more than a ten percent (10%) beneficial interest therein if the return paid by the fund is without regard to the source of the investment.

(c) Commingled Money. Investments in any and all funds and accounts may be

commingled in a separate fund or funds for purposes of making, holding and disposing of investments, notwithstanding provisions herein for transfer to or holding in or to the credit of particular funds or accounts of amounts received or held by the City hereunder.

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SECTION 5.02. Liability of City. (a) General. The City shall not incur any responsibility in respect of the Loan, the Note

or this Loan Agreement other than in connection with the duties or obligations explicitly herein or therein assigned to or imposed upon it.

(b) Reliance. In the absence of bad faith, the City may conclusively rely, as to the truth

of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the City by Bond Counsel or by an independent financial consultant and conforming to the requirements of this Loan Agreement. The City shall not be liable for any error of judgment made in good faith unless it shall be proved that it was negligent in ascertaining the pertinent facts. The City may rely and shall be protected in acting or refraining from acting upon any notice, resolution, request, consent, order, certificate, report, warrant, bond or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or proper parties. The City may consult with counsel, who may be the City Attorney, with regard to legal questions, and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered by it hereunder in good faith and in accordance therewith.

(c) No General Liability. No provision of this Loan Agreement shall require the City to

expend or risk its own general funds or otherwise incur any financial liability (other than with respect to the Special Taxes) in the performance of any of its obligations hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it.

SECTION 5.03. Employment of Agents by City. In order to perform its duties and

obligations hereunder, the City may employ such persons or entities as it deems necessary or advisable. The City shall not be liable for any of the acts or omissions of such persons or entities employed by it in good faith hereunder, and shall be entitled to rely, and shall be fully protected in doing so, upon the opinions, calculations, determinations and directions of such persons or entities.

SECTION 5.04. Events of Default Defined. The following are Events of Default under this

Loan Agreement:

(a) Failure by the City, on behalf of the CFD, to pay any Loan Repayment or other payment required hereunder within ten (10) days of the due date thereof.

(b) Failure by the City, on behalf of the CFD, to observe and perform any

covenant, condition or agreement on its part to be observed or performed hereunder, other than as referred to in the preceding clause (a) of this Section, for a period of 30 days after written notice specifying such failure and requesting that it be remedied has been given to the City, on behalf of the CFD, by the Lender.

(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 an agreement of composition with creditors, or the approval by a court of competent jurisdiction of a petition applicable to the City in any proceedings instituted

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under the provisions of the Federal Bankruptcy Code, as amended, or under any similar acts which may hereafter be enacted.

(d) Any statement, representation or warranty made or deemed to be made

by or on behalf of the City, on its own behalf or on behalf of the CFD, in this Loan Agreement or in any certificate, financial or other statement furnished by or on behalf of the City, on its own behalf or on behalf of the CFD, to the Lender pursuant hereto or thereto shall prove to have been inaccurate, misleading or incomplete in any material respect when made or deemed to have been made.

(e) This Loan Agreement or any material provision of this Loan Agreement

shall at any time for any reason cease to be the legal, valid and binding obligation of the City, on behalf of the CFD, or shall cease to be in full force and effect, or shall be declared to be unenforceable, invalid or void, or the validity or enforceability thereof shall be contested by the City, on behalf of the CFD, or the City, on behalf of the CFD, shall renounce the same or deny that it has any further liability hereunder.

(f) The dissolution, termination of existence, insolvency or business failure of

the City. (g) If any court of competent jurisdiction with jurisdiction to rule on the validity

of any provision of this Loan Agreement shall find or rule that this Loan Agreement is not valid or not binding on the City, on behalf of the CFD.

(h) Any Material Adverse Effect shall exist.

SECTION 5.05. Remedies on Default. Upon the occurrence and during the continuation

of an Event of Default, the Lender may, at its option and without any further demand or notice, take whatever action at law or in equity may appear necessary or desirable to collect the Loan Repayments then due or thereafter to become due during the term of this Loan Agreement, or enforce performance and observance of any obligation, agreement or covenant of the City under this Loan Agreement.

SECTION 5.06. Agreement to Pay Attorneys' Fees and Expenses. If either party to this

Loan Agreement defaults under any of the provisions hereof and the nondefaulting party employs attorneys (including in-house counsel) or incurs 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 will on demand therefor pay to the nondefaulting party the reasonable fees of such attorneys (including those of inhouse counsel) and such other expenses so incurred by the nondefaulting party.

SECTION 5.07. No Additional Waiver Implied by One Waiver. If any agreement contained

in this Loan Agreement is breached by either party and thereafter waived by the other party, such waiver shall be limited to the particular breach so waived and shall not be deemed to waive any other breach hereunder.

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ARTICLE VI

MISCELLANEOUS

SECTION 6.01. Benefits of Agreement Limited to Parties. Nothing in this Loan Agreement, expressed or implied, is intended to give to any person other than the City and the Lender any right, remedy, claim under or by reason of this Loan Agreement. Any covenants, stipulations, promises or agreements in this Loan Agreement contained by and on behalf of the City shall be for the sole and exclusive benefit of the Lender.

SECTION 6.02. Successor and Predecessor. Whenever in this Loan Agreement or any

Supplemental Agreement either the City or the Lender is named or referred to, such reference shall be deemed to include the successors or assigns thereof, and all the covenants and agreements in this Loan Agreement contained by or on behalf of the City or the Lender shall bind and inure to the benefit of the respective successors and assigns thereof whether so expressed or not.

SECTION 6.03. Discharge of Agreement. The City shall have the right to pay and

discharge the entire indebtedness on the Loan and the Note in any one or more of the following ways:

(a) by paying or causing to be paid the Debt Service on the Loan and

the Note as and when the same become due and payable; or (b) by depositing in trust for the benefit of the Lender with the Lender or

a bank or other fiduciary acceptable to the Lender, at or before final maturity, cash and/or Federal Securities in such amount as the City shall determine, together with the amounts transferred to the Lender or such bank or other fiduciary firm then on deposit in the Loan Repayment Fund, is fully sufficient to pay the Loan and the Note, including all Debt Service thereon coming due and payable to final maturity or to a date fixed for prepayment thereof, provided that the adequacy of such deposit shall be confirmed by an independent certified public accountant or by Lender.

In such event, the pledge of the Special Taxes and other funds provided for in this Loan

Agreement and all other obligations of the City under this Loan Agreement and under the Note shall cease and terminate, except only the obligations of the City to pay or cause to be paid to the Lender not so surrendered and paid all sums due thereon from amounts set aside for such purpose; and thereafter Special Taxes shall not be payable to the Lender.

SECTION 6.04. Execution of Documents. Any consent, request, declaration or other instrument which this Loan Agreement may require or permit to be executed by the Lender may be in one or more instruments of similar tenor, and shall be executed by an authorized officer of the Lender or by its attorneys appointed in writing.

Any consent, request, declaration or other instrument or writing of the Lender shall bind

all future successors and assigns of the Lender in respect of anything done or suffered to be done by the City in good faith and in accordance therewith.

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SECTION 6.05. Waiver of Personal Liability. No member, officer, agent or employee of the City shall be individually or personally liable for the payment of the principal of or interest or any premium on the Note; but nothing herein contained shall relieve any such member, officer, agent or employee from the performance of any official duty provided by law.

SECTION 6.06. Notices to and Demands on City and Lender. Any notice or demand

which by any provision of this Loan Agreement is required or permitted to be given or served by the Lender to or on the City may be given or served by being deposited postage prepaid in a post office letter box addressed (until another address is filed by the City with the Lender) as follows:

City of Novato

922 Machin Ave. Novato, California 94943

Attention: Assistant City Manager Telephone: (415) 899-8900

Fax: (415) 899-8213

Any notice or demand which by any provision of this Loan Agreement is required or permitted to be given or served by the City to or on the Lender may be given or served by being deposited postage prepaid in a post office letter box addressed (until another address is filed by the Lender with the City) as follows:

Bank of Marin

345 California Street, Suite 1150 San Francisco, California 94104

Attention: San Francisco Commercial Banking Telephone: (415) 403-5580

Fax: (415) 677-9141

SECTION 6.07. Partial Invalidity. If any Section, paragraph, sentence, clause or phrase of this Loan Agreement shall for any reason be held by a court of competent jurisdiction to be illegal or unenforceable, such holding shall not affect the validity of the remaining portions of this Loan Agreement. The City and the Lender hereby declare that they would have entered into this Loan Agreement and each and every other Section, paragraph, sentence, clause or phrase hereof and authorized the issuance of the Note pursuant thereto irrespective of the fact that any one or more Sections, paragraphs, sentences, clauses, or phrases of this Loan Agreement may be held illegal, invalid or unenforceable.

SECTION 6.08. Applicable Law. This Loan Agreement shall be governed by and

enforced in accordance with the laws of the State applicable to contracts made and performed in the State.

SECTION 6.09. Conflict with Act. In the event of a conflict between any provision of this

Loan Agreement with any provision of the Act as in effect on the Closing Date, the provision of the Act shall prevail over the conflicting provision of this Loan Agreement.

SECTION 6.10. Payment on Business Day. In any case where the date of the maturity of

interest or of principal (and premium, if any) of the Loan, or the date fixed for prepayment of the Loan, or the date any action is to be taken under this Loan Agreement, is other than a Business

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Day, the payment of interest or principal (and premium, if any) or the action need not be made on such date but may be made on the next succeeding day which is a Business Day with the same force and effect as if made on the date required and no interest shall accrue for the period from and after such date.

SECTION 6.11. Reporting Requirements. (a) Annual Reporting. Not later than October 30 of each calendar year, beginning with

the October 30 first succeeding the date of the Loan, and in each calendar year thereafter until the October 30 following the final maturity of the Loan, the City shall cause the following information to be supplied to CDIAC and the Lender: (i) the unpaid principal balance of the Loan; (ii) the number of parcels in the CFD which are delinquent in the payment of Special Taxes, the amount of each delinquency, the length of time delinquent and when foreclosure was commenced for each delinquent parcel; and (iii) the assessed value of all parcels in the CFD subject to the levy of the Special Taxes as shown in most recent equalized roll. The annual reporting shall be made using such form or forms as may be prescribed by CDIAC. The City shall promptly notify the Lender in writing of any Material Litigation, or any investigation, inquiry or similar proceeding by any Governmental Authority with respect to any matter that relates to or could impact the levying or collection of any of the Special Taxes. The City shall also provide the Lender with copies of the statements showing the activity in the Special Tax Fund for each Fiscal Year and such other information relating to the CFD as it may reasonably request.

(b) Other Reporting. If at any time the City fails to pay Debt Service when due, the City

shall notify CDIAC and the Lender of such failure within 10 days of such failure. (c) Amendment. The reporting requirements of this Section 6.11 shall be amended

from time to time, without action by the City or the Lender, to reflect any amendments to Section 53359.5(b) or Section 53359.5(c) of the Act.

(d) No Liability. None of the City and its officers, agents and employees or the Lender

shall be liable for any inadvertent error in reporting the information required by this Section 6.11. SECTION 6.12. Lender Representations. In connection with the Loan, the Lender hereby

represents, warrants and agrees that:

(a) The Lender has sufficient knowledge and experience in financial and business matters, including the purchase and ownership of tax-exempt securities and other investment vehicles similar in character to the Note, to be able to evaluate the risks and merits of the investment represented by the purchase of the Note.

(b) The Lender has been supplied with or has had access to

information relating to the City, the CFD and the Special Taxes has had the opportunity to ask questions and receive answers from knowledgeable individuals, concerning the City, its credit standing and the Note so that, as a sophisticated investor, the Lender has been able to make its decision to make the Loan as evidenced by the Note. The Lender understands that no financial information or statistical data in connection with this transaction was reviewed by Bond Counsel.

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(c) The Lender acknowledges that Bond Counsel has not made any representation regarding the quality, creditworthiness or liquidity of the Note.

(d) The Lender hereby acknowledges that the Note (a) is not being

registered under the Securities Act of 1933, as amended, and is not being registered or otherwise qualified for sale under the "Blue Sky" laws or regulations of any state, (b) will not be listed on any stock or other securities exchange, (c) will not carry a rating from any rating service, and (d) may not be readily marketable.

(e) The Lender is able to bear the economic risk of the investment

represented by the Note, including a total loss of the entire principal amount of it the Note.

(f) The Lender is acquiring the Note for its own account for

investment and not with a view to dividing its participation with others or with a view to, or for resale in connection with, a "distribution" (as that term is used in Securities Act of 1933, as amended, and Rules and Regulations of the Securities and Exchange Commission promulgated thereunder) of all or any portion thereof provided, however, that the disposition of the Note shall at all times be and remain within the Lender's control. The Lender has no present intention of selling, negotiating or otherwise disposing of the Note or any participation therein.

(g) The Lender shall not assign or offer the Note, or any participation

therein, for sale without complying with all applicable securities laws.

SECTION 6.13. Assignment by the Lender. The Lender has the right to assign any or all of its interests herein, but no such assignment will be effective as against the City unless and until the Lender files written notice thereof with the City. The City shall pay all Loan Repayments pursuant to the written direction of the Lender named in the most recent assignment or notice of assignment filed with the City. During the term of this Loan Agreement, the City will keep a complete and accurate record of all such notices of assignment. In connection with the assignment of any or all of its rights hereunder, the Lender may request the City to execute and deliver such documentation as is necessary, in the reasonable opinion of the Lender, to effectuate such assignment. The City understands and acknowledges that in connection with such an assignment, it may be required to make Loan Repayments to other than the Lender, or to provide the notices and other materials set forth in Section 6.11 hereof or otherwise required hereby to an assignee of the Lender, provided that the City shall not be required to make Loan Repayments to more than one Person at a time, or to send notices and other materials to more than one Person at a time. In such event, the Lender shall notify the City to which assignee the City should make Loan Repayments and send notices and other materials.

SECTION 6.14. Dispute Resolution. (a) Judicial Reference. In the event of any action, proceeding or hearing

(hereinafter, a "Claim") based upon or arising out of, directly or indirectly, this Loan Agreement or any of the related documents, any dealings between the City or the Lender relating to the subject matter of the transactions contemplated by this Loan Agreement or any related

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transactions, and/or the relationship that is being established between the City and the Lender, the City and the Lender hereby agree that each Claim shall be determined by a consensual general judicial reference (the "Reference") pursuant to the provisions of Section 638 et seq. of the California Code of Civil Procedure, as such statutes may be amended or modified from time to time. Upon a written request, or upon an appropriate motion by either the Lender or the City, as applicable, any pending action relating to any Claim and every Claim shall be heard by a single Referee (as defined below) who shall then try all issues (including any and all questions of law and questions of fact relating thereto), and issue findings of fact and conclusions of law and report a statement of decision. The Referee’s statement of decision will constitute the conclusive determination of the Claim. The City and the Lender agree that the Referee shall have the power to issue all legal and equitable relief appropriate under the circumstances before the Referee. The City and the Lender shall promptly and diligently cooperate with one another, as applicable, and the Referee, and shall perform such acts as may be necessary to obtain prompt and expeditious resolution of all Claims in accordance with the terms of this Section 6.14. Either the City or the Lender, as applicable, may file the Referee’s findings, conclusions and statement with the clerk or judge of any appropriate court, file a motion to confirm the Referee’s report and have judgment entered thereon. If the report is deemed incomplete by such court, the Referee may be required to complete the report and resubmit it. The City and the Lender, as applicable, will each have such rights to assert such objections as are set forth in Section 638 et seq. of the California Code of Civil Procedure and all proceedings shall be closed to the public and confidential, and all records relating to the Reference shall be permanently sealed when the order thereon becomes final.

(b) Selection of Referee; Powers. The parties to the Reference proceeding shall

select a single neutral referee (the "Referee"), who shall be a retired judge or justice of the courts of the State of California, or a federal court judge, in each case, with at least ten (10) years of judicial experience in civil matters. The Referee shall be appointed in accordance with Section 638 of the California Code of Civil Procedure (or pursuant to comparable provisions of federal law if the dispute falls within the exclusive jurisdiction of the federal courts). If within ten (10) days after the request or motion for the Reference, the parties to the Reference proceeding cannot agree upon a Referee, then any party to such proceeding may request or move that the Referee be appointed by the Presiding Judge of the Marin County Superior Court, or of the U.S. District Court for the Northern District of California. The Referee shall determine all issues relating to the applicability, interpretation, legality and enforceability of this Section 6.14(b).

(c) Provisional Remedies and Self Help. No provision of this Section 6.14 shall limit

the right of either the City or the Lender as the case may be, to (i) exercise such self-help remedies as might otherwise be available under applicable law, or (ii) obtain or oppose provisional or ancillary remedies, including without limitation injunctive relief, writs of possession, the appointment of a receiver, and/or additional or supplementary remedies from a court of competent jurisdiction before, after, or during the pendency of any Reference. The exercise of, or opposition to, any such remedy does not waive the right of the City or the Lender to the Reference pursuant to this Section 6.14(c).

(d) Costs and Fees. Promptly following the selection of the Referee, the parties to

such Reference proceeding shall each advance equal portions of the estimated fees and costs of the Referee. In the statement of decision issued by the Referee, the Referee shall award costs, including reasonable attorneys’ fees, to the prevailing party, if any, and may order the Referee’s fees to be paid or shared by the parties to such Reference proceeding in such manner as the Referee deems just.

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SECTION 6.15. Counterparts. This Loan Agreement may be executed in counterparts,

each of which shall be deemed an original.

ARTICLE VII

REPRESENTATIONS, COVENANTS AND WARRANTIES OF THE CITY SECTION 7.01. Representations, Warranties and Covenants of the City. The City

represents, covenants and warrants to the Lender as follows:

(a) Due Organization and Existence. The City is a municipal corporation and political subdivision of the State of California, duly organized and existing under the laws of the State of California.

(b) Authorization. The laws of the State of California, including the

Act, authorize the City, on behalf of the CFD, to enter into this Loan Agreement, to enter into the transactions contemplated hereby and to carry out its obligations hereunder, and the City Council of the City has duly authorized the execution and delivery of this Loan Agreement. This Loan Agreement constitutes the legal, valid and binding agreement of the City, on behalf of the CFD, enforceable against the City in accordance with its terms.

(c) No Violations. Neither the execution and delivery of this Loan

Agreement, nor the fulfillment of or compliance with the terms and conditions hereof, nor the consummation of the transactions contemplated hereby, conflicts with or results in a breach of the terms, conditions or provisions of any restriction or any agreement or instrument to which the City is now a party or by which the City is bound, or constitutes a default under any of the foregoing, or results in the creation or imposition of any lien, charge or encumbrance whatsoever upon any of the property or assets of the City, other than as set forth herein.

(d) Consents and Approvals. No consent or approval of any trustee or

holder of any indebtedness 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 in connection with the execution and delivery of this Loan Agreement, or the consummation of any transaction herein contemplated, except as have been obtained or made and as are in full force and effect.

(e) No Litigation. There is no action, suit, proceeding, inquiry or

investigation before or by any court or federal, state or other governmental authority pending or, to the knowledge of the City 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 Adverse Effect, 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 or other governmental authority, which default might have consequences that would

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materially and adversely affect the consummation of the transactions contemplated by this Loan Agreement or the financial conditions, assets, properties or operations of the City.

(f) No Prior Indebtedness. The City has not issued or incurred any obligations which are currently outstanding that are payable out of the Special Taxes on a senior or parity basis to or with the Loan Repayments.

(g) No Default. The City is not in default under the terms of any

agreement or instrument to which the City is a party or by which the City is bound, which default would have a Material Adverse Effect.

(h) Usury. The terms of this Loan Agreement regarding the

calculation, payment, collection and receipt of interest and fees do not violate any Applicable Usury Laws.

(i) Financial Statements. The statement of financial position of the

City as of June 30, 2013, 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 which have heretofore been furnished to the Lender, are complete and correct and fairly present the financial condition, changes in financial position and results of operations of the City at such date 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 a Material Adverse Effect and (ii) no material increase in the indebtedness of the City.

(j) 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 results of operations of the City that might reasonably be anticipated to cause a Material Adverse Effect.

(ii) The City has not incurred any obligations or liabilities that

might reasonably be anticipated to cause a Material Adverse Effect. (iii) The City has not (A) incurred any material indebtedness

payable from Special Taxes other than the Loan Repayments and trade accounts payable arising in the ordinary course of the City’s business and not past due, or (B), from Special Taxes, guaranteed the indebtedness of any other person. (k) 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 in all 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 entering into the transactions contemplated by this Loan Agreement. No fact is known to the City which has had or, so far as the City can now reasonably foresee, may in the future have a Material Adverse Effect, which has not been

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set forth in the financial statements previously furnished to the Bank or in other such information, reports, papers and data or otherwise disclosed 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 faith on the basis of the assumptions stated therein, which assumptions were fair and reasonable in light 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 best estimate 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 Loan Agreement contains or will contain any untrue statement of a material fact or omits or will omit to state (as of the date made or furnished) any material fact necessary in order to make the statements contained herein or therein, in light of the circumstances under which they were or will be made, not misleading.

(l) Anti-Terrorism Representation.

(i) The City is not in violation of any laws relating to terrorism or money laundering ("Anti Terrorism Laws"), including Executive Order No. 13224 on Terrorist Financing, effective September 24, 2001 (the "Executive Order"), and the USA Patriot Act, Title III of Pub. L. 107-56, 115 Stat. 272 (the "Patriot Act");

(ii) The City is not any of the following:

(A) a Person that is listed in the annex to, or is otherwise subject to the provisions of, the Executive Order;

(B) a Person owned or controlled by, or acting for or on

behalf of, any Person that is listed in the annex to, or is otherwise subject to the provisions of, the Executive Order;

(C) a Person with which the Lender is prohibited from

dealing or otherwise engaging in any transaction by any Anti Terrorism Law;

(D) a Person that commits, threatens or conspires to

commit or supports "terrorism" as defined in the Executive Order; or

(E) a Person that is named as a "specially designated

national and blocked person" on the most current list published by the Office of Foreign Asset Control ("OFAC") or any list of Persons issued by OFAC pursuant to the Executive Order at its official website or any replacement website or other replacement official publication of such list;

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(iii) The City does not (i) conduct any business or engages in making or receiving any contribution of funds, goods or services to or for the benefit of any Person described in subsection (ii)(B) above, (ii) deal in, or otherwise engages in any transaction relating to, any property or interests in property blocked pursuant to the Executive Order or (iii) engage in or conspires to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in any Anti Terrorism Law.

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IN WITNESS WHEREOF, the City and the Lender have caused this Loan Agreement to

be executed as of May 1, 2014.

CITY OF NOVATO, on behalf of the CFD By

City Manager [SEAL] Attest:

City Clerk

BANK OF MARIN, as Lender By

Authorized Officer

A-1

EXHIBIT A

FORM OF NOTE No. 1 ***$[_____]***

CITY OF NOVATO COMMUNITY FACILITIES DISTRICT NO. 1994-1 (HAMILTON FIELD)

2014 REFUNDING SPECIAL TAX NOTE

INTEREST RATE: 2.805% ISSUE DATE: May [__], 2014 PRINCIPAL REPAYMENT DATE: [September 1] as shown in Appendix A hereto REGISTERED OWNER: [________] PRINCIPAL AMOUNT:

The City of Novato (the “City”) for and on behalf of the City’s Community Facilities District No. 1994-1 (Hamilton Field) (the “CFD”), for value received, hereby promises to pay solely from the Special Taxes (as hereinafter defined) to be collected in the CFD or amounts in certain funds and accounts held under the Loan Agreement (as hereinafter defined), to the registered owner named above, or registered assigns (the “Owner”), on the Loan Repayment Dates set forth in Appendix A hereto and defined below, unless prepaid prior thereto as hereinafter provided, the principal amount set forth above, and to pay interest on such principal amount from the Issue Date set forth above, or from the most recent Loan Repayment Date (as hereinafter defined) to which interest has been paid or duly provided for. Interest on the unpaid principal balance of this Note shall be payable semiannually on each September 1 and March 1, commencing September 1, 2014 (each, a “Loan Repayment Date”), at the interest rate set forth above (calculated on a 365/360 basis), until the principal amount hereof is paid in full or provision for such payment has been made; provided, however, that if at the time of authentication of this Note, interest is in default on this Note, this Note shall bear interest from the Loan Repayment Date to which interest has previously been paid or made available for payment.

This Note evidences the obligations of the City under a Loan Agreement dated as of

[May 1], 2014 (the “Loan Agreement”), by and between the City and Bank of Marin, as lender (the “Lender”), under which the Lender has made a loan (the “Loan”) to the City for the purpose of refinancing outstanding bonds of the City relating to the CFD. The City is authorized to enter into the Loan Agreement and to issue this Note in the aggregate principal amount of [$___________] under a resolution adopted by the City Council of the City on May __, 2014 (the “Resolution”), and under the Mello-Roos Community Facilities Act of 1982, as amended, constituting Sections 53311, et seq., of the California Government Code (the “Act”). Reference is made to the Loan Agreement for the complete provisions thereof, and by acceptance hereof the registered owner of this Note assents to said terms and conditions. The Loan Agreement is authorized under, this Note is issued under and both are to be construed in accordance with,

A-2

the Act and other laws of the State of California. Capitalized terms used herein and not otherwise defined shall have the meanings assigned to them in the Loan Agreement.

Pursuant to the Act, the Resolution and the Loan Agreement, the principal of and

interest on this Note are payable solely from the annual special tax authorized under the Act to be collected within the CFD (the “Special Taxes”) and certain funds held under the Loan Agreement. Any tax for the payment hereof shall be limited to the Special Taxes, except to the extent that provision for payment has voluntarily been made by the City, as may be permitted by law. This Note does not constitute an obligation of the City for which the City is obligated to levy or pledge, or has levied or pledged, general or special taxation other than described hereinabove. Neither the faith and credit nor the taxing power of the City (except to the limited extent set forth in the Loan Agreement) or the State of California or any political subdivision thereof is pledged to the payment of this Note.

The City may prepay the unpaid principal components of the Loan Repayments of this

Note in whole or in part, on the first Business Day of any month by paying a prepayment price equal to the principal components of the Loan Repayments to be prepaid, together with the interest required to be paid on such Business Day, with a premium as set forth below:

Prepayment Period

(dates inclusive)


Notwithstanding the foregoing, the City may, on the first Business Day of any month,

prepay up to twenty percent (20%) of the principal amount of the Note outstanding during any one year period from [______] of one year through and including [______], of the next year without incurring any prepayment penalty. The amount received by the Lender shall be applied to reduce Loan Repayments proportionally.

The City shall prepay the unpaid principal components of the Loan Repayments of this

Note in whole or in part, on the first Business Day of any month by paying, but solely from amounts received by the City representing the prepayment of Special Taxes from the property owners within the CFD, a prepayment price equal to the principal components of the Loan Repayments to be prepaid, together with the interest required to be paid on such Loan Repayment Date, with a premium as set forth below:

A-3

Prepayment Period

(dates inclusive)


Notwithstanding the foregoing, the Loan may, on the first Business Day of any month, be

prepaid from the prepayment of Special Taxes by the property owners in an amount up to twenty percent (20%) of the principal amount of the Loan outstanding during any one year period from [______] of one year through and including [______], of the next year without incurring any prepayment penalty. The amount received by the Lender shall be applied to reduce Loan Repayments proportionally.

As provided in the Loan Agreement, the City is required to give the Owner written notice

of its intention to prepay this Note not less than thirty (30) days prior to the prepayment date and to specify the principal amount to be prepaid. In the event this Note is prepaid in whole but not in part, the principal amount to be prepaid shall be allocated among the respective Loan Repayment Dates on a pro rata basis; provided, however, that in the event of prepayment from prepaid Special Taxes, the principal installments to be prepaid shall be determined such that the remaining Special Taxes correspond in time and amount to the remaining schedule of Loan Repayments on this Note.

This Note shall be registered in the name of the Owner hereof, as to both principal and

interest. Each registration and transfer of registration of this Note shall be entered by the City in books kept by it for this purpose.

The Loan Agreement and the rights and obligations of the City thereunder may be

modified or amended as set forth therein. The principal of this Note is not subject to acceleration upon a default under the Loan Agreement or any other document.

IT IS HEREBY CERTIFIED, RECITED AND DECLARED by the City that all acts,

conditions and things required by law to exist, happen and be performed precedent to and in the issuance of this Note have existed, happened and been performed in due time, form and manner as required by law, and that the amount of this Note, together with all other indebtedness of the City, does not exceed any debt limit prescribed by the laws or Constitution of the State of California.

A-4

IN WITNESS WHEREOF, the City of Novato, on behalf of the CFD, has caused this

Note to be dated the Issue Date shown first above, to be signed by the signature of its City Manager and countersigned by the signature of the City Clerk with the seal of the City imprinted hereon.

[S E A L] City Clerk Mayor

B-1

EXHIBIT B

SCHEDULE OF LOAN PAYMENTS

Principal of and interest on this Note shall be payable in installments on the dates, and in the amounts, as set forth in the following schedule:

Loan Repayment

Date

Principal Component

Interest Component

Total Loan Payment

Fiscal Year Total

$ $ $ $

Total $ $ $ $

* Based on the tax-exempt rate of 2.805%.

20411-33 SM:MMB 01/15/14 03/31/14

04/17/14

IRREVOCABLE REFUNDING INSTRUCTIONS

Relating to

$22,665,000 City of Novato


2004 Refunding Special Tax Bonds

These IRREVOCABLE REFUNDING INSTRUCTIONS (these “Instructions”), are dated [May

__], 2014 (the “Closing Date”), and are given by the CITY OF NOVATO, a municipal corporation organized and existing under the laws of the State of California (the “City”), to U.S. Bank National Association, a national banking association organized and existing under the laws of the United States of America, acting as fiscal agent (the “2004 Fiscal Agent”) for the 2004 Bonds described below.

B A C K G R O U N D :

1 In order to refinance outstanding obligations of the City relating to the City’s

Community Facilities District No. 1994-1 (Hamilton Field), the City on September 2, 2004 issued its $22,665,000 City of Novato, Community Facilities District No. 1994-1 (Hamilton Field) 2004 Refunding Special Tax Bonds (the “2004 Bonds”):

2. The 2004 Bonds are subject to optional redemption on any date between

September 1, 2013 and August 31, 2014, at a redemption price equal to 101% of the principal amount of the 2004 Bonds to be redeemed.

3. Concurrently herewith, the City has issued its City of Novato, Community Facilities

District No. 1994-1 (Hamilton Field) 2014 Refunding Special Tax Note, in the aggregate principal amount of $[15,030,000] (the “2014 Note”), under a Loan Agreement dated as of [April 1], 2014 (the “2014 Loan Agreement”) between the City and the Bank of Marin, as lender (the “Lender”), for the purpose (among others) of borrowing funds from the Lender to refund and discharge the outstanding 2004 Bonds.

4. U.S. Bank National Association currently serves as fiscal agent for the 2004 Bonds. 5. The City wishes to give these Instructions to the 2004 Fiscal Agent for the purpose

of establishing an irrevocable escrow fund to be funded, invested, held and administered for the purpose of providing for the payment in full of the principal of and interest and redemption premium on the 2004 Bonds on [ ], 2014.

I N S T R U C T I O N S : In order to provide for the payment and redemption of the 2004 Bonds, the City hereby

irrevocably directs the 2004 Fiscal Agent as follows:

shartz

Typewritten Text

I-9 4.

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SECTION 1. Establishment of Escrow Fund. The 2004 Fiscal Agent is directed to establish an escrow fund (the “Escrow Fund”) to be held by the 2004 Fiscal Agent in trust as an irrevocable escrow securing the payment of the 2004 Bonds as hereinafter set forth. All cash and securities in the Escrow Fund are hereby irrevocably pledged as a special fund for the payment of the principal of and interest and redemption premium on the 2004 Bonds in accordance with the Fiscal Agent Agreement executed in connection with the 2004 Bonds (the “2004 Fiscal Agent Agreement”). If at any time the 2004 Fiscal Agent receives actual knowledge that the cash and securities in the Escrow Fund will not be sufficient to make any payment required by Section 3 in respect of the 2004 Bonds, the 2004 Fiscal Agent shall notify the City of that fact and the City shall immediately cure the deficiency from any source of legally available funds.

SECTION 2. Deposit into Escrow Fund. The 2004 Fiscal Agent shall deposit the amount

of $[_____] in the Escrow Fund, to be derived from the following sources: (a) $[________] from the proceeds of the sale of the 2014 Note thereof on the Closing

Date; (b) $[________] from the Reserve Fund established and held by the 2004 Fiscal

Agent under Section 4.03(A) of the 2004 Fiscal Agent Agreement; and (c) $[_______] from special tax revenues held by the City with regard to the 2004

Bonds, which shall be transferred to the 2004 Fiscal Agent on or before the date of issuance of the 2014 Note.

SECTION 3. Investment of Amounts. On the Closing Date, the 2004 Fiscal Agent shall

invest $[________] of the moneys deposited into the Escrow Fund on the Closing Date in [______________], maturing in the amounts and at the times as set forth in Appendix A, and the 2004 Fiscal Agent shall hold the remaining amount of $[____] in cash, uninvested.

SECTION 4. Instructions as to Application of Deposit. The 2004 Fiscal Agent shall apply

the cash and securities held in the Escrow Fund for the sole purpose of paying the principal of and interest and redemption premium on the 2004 Bonds to and including [________], as set forth in Appendix B.

The Escrow Bank has no lien upon or right of set off against the securities and cash at

any time on deposit in the Escrow Fund. The 2004 Fiscal Agent is not liable for the accuracy of any calculations provided as to the sufficiency of the moneys and securities deposited with it to pay the principal interest or redemption premium on the 2004 Bonds.

The deposit made into the Escrow Fund under this Agreement constitutes an irrevocable

deposit for the payment and redemption of the 2004 Bonds in accordance with Section 4.01 of the 2004 Fiscal Agent Agreement. The City hereby elects that the pledge of the Special Tax Revenues and other funds provided for in the 2004 Fiscal Agent Agreement, and all other obligations of the 2004 Fiscal Agent and the City with respect to the 2004 Bonds, shall cease and terminate, with the effect and subject to the limitations set forth in the 2004 Fiscal Agent Agreement.

SECTION 5. Disposition of Excess Funds. Following payment and redemption in full of

all of the 2004 Bonds on [_______], the 2004 Fiscal Agent shall withdraw any amounts remaining on deposit in the Escrow Fund and transfer those amounts to the City, and the City will deposit those amounts in the Special Tax Fund established under the 2014 Loan

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Agreement, and applied to pay a portion of the interest coming due and payable on the 2014 Note on [September 1, 2014].

SECTION 6. Irrevocable Election to Redeem 2004 Bonds; Redemption Notice. The City

hereby irrevocably elects to redeem all of the outstanding 2004 Bonds on [________], 2014, under Section 2.03 of the 2004 Fiscal Agent Agreement. The 2004 Fiscal Agent shall give notice of redemption to the owners of the 2004 Bonds in accordance with the requirements of Section 2.03(C) of the 2004 Fiscal Agent Agreement at the expense of the City.

SECTION 7. Application of Certain Terms of 2004 Fiscal Agent Agreement. All of the

terms of the 2004 Fiscal Agent Agreement relating to the payment and redemption of principal of and interest and redemption premium on the 2004 Bonds, and the protections, immunities and limitations from liability afforded the 2004 Fiscal Agent as fiscal agent for the 2004 Bonds, are incorporated in these Instructions as if set forth in full herein.

SECTION 8. Compensation to 2004 Fiscal Agent. The City shall pay the 2004 Fiscal

Agent full compensation for its services under these Instructions, including out-of-pocket costs such as publication costs, redemption expenses, legal fees and other costs and expenses relating hereto and, in addition, all fees, costs and expenses relating to the purchase, substitution or withdrawal of any securities after the date hereof. Under no circumstances shall amounts deposited in or credited to the Escrow Fund be deemed to be available for said purposes. The 2004 Fiscal Agent has no lien upon or right of set off against the cash and securities at any time on deposit in the Escrow Fund.

CITY OF NOVATO By:

Assitant City Manager

ACCEPTED:

U.S. Bank National Association, as 2004 Fiscal Agent By

Authorized Officer

A-1

APPENDIX A

DESCRIPTION OF ESCROW SECURITIES

Type Maturity

Date Principal Amount

Interest Rate

Purchase Price

[SLGS] $ % $

[SLGS] $ % $

B-1

APPENDIX B

PAYMENT AND REDEMPTION SCHEDULE OF 2004 BONDS

Payment Date

Interest

Principal Amount

Premium

Total

20411-33 SM:MMB 01/15/14 03/31/14 04/17/14

FIRST SUPPLEMENTAL FISCAL AGENT AGREEMENT

By and Between the

CITY OF NOVATO

and

U.S. BANK NATIONAL ASSOCIATION, as Fiscal Agent

Relating to

$22,665,000 Principal Amount of City of Novato


2004 Refunding Special Tax Bonds

Dated as of [May 1], 2014

shartz

Typewritten Text

I-9 5.

1

FIRST SUPPLEMENTAL FISCAL AGENT AGREEMENT

THIS FIRST SUPPLEMENTAL FISCAL AGENT AGREEMENT, dated as of [May 1], 2014

(the “First Supplemental Fiscal Agent Agreement”), is by and between the CITY OF NOVATO, a general law city and municipal corporation duly organized and existing under the laws of the State of California (the “City”), and U.S. BANK NATIONAL ASSOCIATION, a national banking association organized and existing under the laws of the United States of America, as fiscal agent (the “Fiscal Agent”).

RECITALS WHEREAS, the City has conducted proceedings under and pursuant to the Mello-Roos

Community Facility Act of 1982, as amended, Chapter 2.5 of Part 1 of Division 2 of Title 5, commencing at Section 53311 of the California Government Code (the “Act”), to form Community Facilities District No. 1994-1 (Hamilton Field) (the “CFD”), and, on behalf of the CFD, the City has previously authorized the levy of special taxes upon the land within the CFD, and has issued bonds (the “1995 Bonds”) secured by such special taxes the proceeds of which were used to finance certain public facilities (the “Facilities”), all as described in those proceedings; and

WHEREAS, the City heretofore authorized, issued, sold and delivered its $22,665,000 City of

Novato Community Facilities District No. 1994-1 (Hamilton Field) 2004 Refunding Special Tax Bonds, dated as of September 2, 2004 (the “2004 Bonds”) in order to refund, on an advance basis, the 1995 Bonds; and

WHEREAS, the City has previously executed a Fiscal Agent Agreement, by and between the

City and U.S. Bank National Association, as fiscal agent, dated as of August 1, 2004 (the “2004 Fiscal Agent Agreement”) pursuant to which the 2004 Bonds were issued; and

WHEREAS, the City now wishes to amend certain redemption provisions in the 2004 Fiscal

Agent Agreement to reflect the redemption provisions of the 2004 Bonds that were provided to the bidders for and the purchasers of the 2004 Bonds; and

WHEREAS, the execution and delivery of this First Supplemental Fiscal Agent Agreement

have been in all respects duly and validly authorized by a resolution duly adopted by the City Council of the City; and

WHEREAS, the Fiscal Agent has the power and authority to enter into this First

Supplemental Fiscal Agent Agreement, and has joined in the execution hereof; NOW, THEREFORE, the parties hereto, in consideration of the premises and the mutual

covenants and commitments of the parties set forth herein, the receipt and sufficiency of which are hereby acknowledged by the parties hereto, hereby agree as follows:

2

AGREEMENT Section 1. Section 2.03(A)(i) of the of the 2004 Fiscal Agent Agreement is hereby amended

to read as follows: Section 2.03. Redemption. (A) Redemption Dates.

(i) Optional Redemption. The Bonds shall be subject to optional redemption from any source of available funds prior to maturity, in whole, or in part among maturities as shall be specified by an Officer's Certificate of the City and by lot within a maturity, on any date on or after September 1, 2012, at the following respective redemption prices (expressed as percentages of the principal amount of the Bonds to be redeemed), plus accrued interest thereon to the date of redemption:

Redemption Dates (Dates Inclusive)

Redemption Price

September 1, 2012 through August 31, 2013 102% September 1, 2013 through August 31, 2014 101 September 1, 2014 and thereafter 100

Section 2. The first two paragraphs of section 2.03(A)(ii) of the 2004 Fiscal Agent

Agreement are hereby amended to read as follows:

(ii) Mandatory Redemption From Prepayments. The Bonds shall be subject to mandatory redemption from Prepayments of the Special Tax by property owners, in whole or in part among maturities as shall be specified by the City and by lot within a maturity, on any date at the following respective redemption prices (expressed as percentages of the principal amount of the Bonds to be redeemed), plus accrued interest thereon the date of redemption:

Redemption Dates (Dates Inclusive)

Redemption Price

On or before August 31, 2013 102% September 1, 2013 through August 31, 2014 101 September 1, 2014 and thereafter 100

The proceeds of any such Prepayment shall be deposited in the Prepayment Account

of the Bond Fund and applied by the Fiscal Agent to pay the redemption price of the Bonds.

Section 3. All of the terms of the 2004 Fiscal Agent Agreement relating to the protections, immunities and limitations from liability afforded the 2004 Fiscal Agent as fiscal agent for the 2004 Bonds, including Section 7.05 of the 2004 Fiscal Agent Agreement, are incorporated in these Instructions as if set forth in full herein.

Section 4. This First Supplemental Fiscal Agent Agreement shall become effective upon the

execution and delivery of this First Supplemental Fiscal Agent Agreement by the parties hereto.

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Section 5. The City, by its execution hereof, is hereby requesting the Fiscal Agent to execute

and enter into this First Supplemental Fiscal Agent Agreement. The City represents that this First Supplemental Fiscal Agent Agreement is being executed and delivered pursuant to Section 8.01(C) of the 2004 Fiscal Agent Agreement, and that the execution and delivery of this First Supplemental Fiscal Agent Agreement does not require the consent of the owners of the 2004 Bonds.

Section 6. Except as otherwise amended hereby, the 2004 Fiscal Agent Agreement shall

remain in full force and effect. Section 7. This First Supplemental Fiscal Agent Agreement may be executed in

counterparts. IN WITNESS WHEREOF, the parties hereto have caused this First Supplemental Fiscal

Agent Agreement to be duly executed by their officers duly authorized as of the date first above written.

CITY OF NOVATO By:

City Manager

ATTEST:

City Clerk

U.S. BANK NATIONAL ASSOCIATION, as Fiscal Agent By:

Authorized Officer

LEGAL SERVICES AGREEMENT

BETWEEN THE CITY OF NOVATO AND JONES HALL, A PROFESSIONAL LAW CORPORATION, FOR BOND

COUNSEL SERVICES IN CONNECTION WITH THE REFUNDING OF CERTAIN OUTSTANDING SPECIAL

TAX (MELLO-ROOS) BONDS This AGREEMENT (this “Agreement”) is entered into as of this 1st day of April,

2014, between the CITY OF NOVATO, a municipal corporation organized and existing under the laws of the State of California (the “City”) and JONES HALL, A PROFESSIONAL LAW CORPORATION, San Francisco, California (“Attorneys”).

B A C K G R O U N D :

1. The City wishes to refund its City of Novato Community Facilities District No.

1994-1 (Hamilton Field) 2004 Refunding Special Tax Bonds (the “Existing Debt”) and in order to provide funds for such purposes the City wishes enter into a loan agreement with the Bank of Marin (the “Bank”).

2. In connection with such proceedings the City requires the advice and

assistance of nationally-recognized bond counsel to provide necessary legal services, and Attorneys are competent to provide such legal services and have previously represented the City in that capacity.

A G R E E M E N T : In consideration of the mutual covenants hereinafter contained, and for other

good and valuable consideration, the City and Attorneys hereby agree as follows: 1. Identification of City. Attorneys shall represent the City in connection with

the proceedings for the refinancing of the Existing Debt and the borrowing of funds (the “Loan”) from the Bank. Attorneys shall not represent, and shall owe no duties to, any other party than the City, including but not limited to the Bank or the trustee for the Existing Debt.

2. Duties of Attorneys. Attorneys shall perform all of the following services as

are necessary for the successful completion of the Loan to refinance the Existing Debt: Consultation and cooperation with the City staff and employees and

assisting in the formulation of a coordinated financing.

Preparation of all legal proceedings for the authorization of the Loan and the execution and delivery of the related loan documentation and documentation relating to the refinancing of the Existing Debt, including preparation of a Loan Agreement and Irrevocable Refunding Instructions; preparation of all resolutions of the City Council approving said documents; preparation of all documents required for the closing of the financing, and supervising such issuance; preparation of all other proceedings incidental or in connection with the making of the Loan and the refinancing of the Existing Debt.

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Upon completion of proceedings to the satisfaction of Attorneys,

providing a legal opinion to the City and the Bank which approves in all regards the legality of all proceedings for the authorization of the Loan and related agreements, which opinion will further state that the interest on the Loan is exempt from federal and state personal income taxation (subject to certain necessary qualifications under federal tax law), which opinion will inure to the benefit of the Bank.

Attending all meetings as requested by City staff.

Such other and further services as are normally performed by bond

counsel in connection with similar tax-exempt financings, including but not limited to answering any and all questions concerning the financing and the financing documents at any time following the closing of the Loan.

3. Excluded Services. Our duties in this engagement are limited to those

expressly set forth above in Section 2, except as expressly set forth in a written amendment to this Agreement. Among other things, our duties do not include:

Preparing requests for tax rulings from the Internal Revenue Service. Pursuing test cases or other litigation, such as contested validation

proceedings, except as set forth above. Making an investigation or expressing any view as to the

creditworthiness of the City or the Loan. Representing the City in Internal Revenue Service examinations,

audits. After closing, unless specifically requested to do so by City, and

agreed to by Attorneys, providing continuing advice to the City or any other party concerning any actions that need to be taken regarding the Loan; e.g., actions necessary to assure that interest paid on the Loan will continue to be excludable from gross income for federal income tax purposes (e.g., our engagement does not include rebate calculations for the Loan).

Reviewing or opining on the business terms of, validity, or federal

consequences of any investment agreement that the City may choose as an investment vehicle for the proceeds of the Loan, unless the City and Attorneys agree on the terms of such review and compensation for such review.

Addressing any other matter not specifically set forth above that is not

required to render our bond opinion and any other opinions given pursuant to 2 above.

4. Compensation. For the legal services of Attorneys listed in Section 2, the City will pay Attorneys a flat fee of $40,000, plus disbursements, which shall be capped at $1,500. Payment of said fees is entirely contingent upon the successful closing of the Loan by the City, and shall be paid from the proceeds of the Loan. If the Loan is not closed by the City for any reason, Attorneys are not entitled to compensation whatsoever from the City for their services under this Agreement.

5. Responsibilities of the City. The City shall cooperate with Attorneys and

shall furnish Attorneys with certified copies of all proceedings taken by the City, or other deemed necessary by Attorneys to render an opinion upon the validity of such proceedings. All costs and expenses incurred incidental to the actual execution and delivery of the loan agreement, all printing costs and publication costs, costs of other attorneys and professionals, and any other expenses incurred in connection with the Loan, shall be paid from the Loan proceeds.

6. Independent Contractor. Attorneys will act as an independent contractor in

performing the services required under this Agreement, and under no circumstances will Attorneys be considered an agent, partner, or employee of the City.

7. Liability Insurance. Attorneys shall maintain at their own expense at all

times during the term of this Agreement policies of insurance, acceptable to the City, covering its workers’ compensation injuries, public liability and professional liability.

8. Assignment. Attorneys may not assign their rights or delegate their

obligations under this Agreement, in whole or in part, except with the prior written consent of the City.

9. Termination of Agreement. This Agreement may be terminated by the City

at any time by giving written notice to Attorneys with or without cause. Additionally, this Agreement may be terminated by Attorneys upon 15 days' written notice to City if City fails to follow written legal advice given by Attorneys. In the event of termination, all finished and unfinished documents, exhibits, project data, reports, and evidence shall, at the option of City, become its property and shall be delivered to it by Attorneys.

IN WITNESS WHEREOF, the City and Attorneys have executed this Agreement

as of the date first above written.

CITY OF NOVATO By

City Manager JONES HALL, A PROFESSIONAL LAW CORPORATION By

Vice President

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CONSULTANT SERVICES AGREEMENT THIS AGREEMENT is entered into as of the 14th day of May, 2014, by and between the CITY OF NOVATO, a municipal corporation (hereinafter referred to as “City”) and PUBLIC FINANCIAL MANAGEMENT, INC. (hereiafter referred to as “Consultant”). WHEREAS, City desires to obtain professional services in connection with Hamilton Community Facilities District Bond Refunding; and WHEREAS, Consultant hereby warrants to the City that Consultant is skilled and able to competently provide such services described in Section 1 of this Agreement; and WHEREAS, City desires to retain Consultant pursuant to this Agreement to provide the services described in Section 1 of this Agreement. NOW, THEREFORE, THE PARTIES HERETO AGREE AS FOLLOWS: Section 1. Scope of Services. Subject to such policy direction and approvals as the City through its staff may determine from time to time, Consultant shall perform the services set out in the “Scope of Services” attached hereto as Exhibit A and incorporated herein by reference. Consultant shall not commence any work exceeding the Scope of Services without prior written authorization from City. Section 2. Time of Performance. Subsections 2.A. and 2.B. are in the alternative. For purposes of this Agreement, Subsection 2.A. [ X ] 2.B. [ ] applies. (Check ONE box only.) A. [Non Cost-Covered Services] The services of Consultant are to commence upon the execution of this Agreement and shall be undertaken and completed within the time limits set forth in Exhibit A. Such time limits may be amended by mutual agreement between the City and Consultant. B. [Cost-Covered Services] Execution of this Agreement does not constitute authorization to proceed with the work described in the Scope of Services. Consultant shall not begin the work described in Exhibit A until after the City has issued a written Notice to Start Work, following verification by City staff that the project sponsor has deposited with the City adequate funds to pay for completion of the work described in Exhibit A. City and Consultant understand that it is the City’s policy for routine projects to obtain full payment from development applicants prior to execution of any consultant services agreements relating to the processing of development applications. In unusual circumstances (such as large, complex projects and projects where the City is serving as the applicant), City may allow deposit of processing costs in phases. In such cases, Consultant shall not begin work on any of the tasks described in Exhibit A until after the City has issued a written Notice to Start Work for that particular task. Each Notice to Start Work will specify the task authorized to be undertaken and

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I-9 7.

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will be issued only following verification by the City that the project sponsor has deposited with the City (or the City has budgeted) adequate funds to pay for the completion of the authorized task. For all projects, following issuance of a Notice to Start Work, the services of Consultant shall be undertaken and completed within applicable time limits set forth in Exhibit A. Such time limits may be amended by mutual agreement between the City and Consultant. Consultant shall not commence any work exceeding the Scope of Services without prior written authorization from City. Section 3. Compensation and Method of Payment. A. Compensation. Consultant shall charge for services performed in accordance with the compensation schedule incorporated in Exhibit A, not to exceed a total amount of $40,000 plus out-of-pocket expenses not to exceed $1,000. B. Method of Payment. Subsections 3.B.(1) and 3.B.(2) are in the alternative. For purposes of this Agreement, Subsection 3.B.(1) [ X ] 3.B.(2) [ ] applies. (Check ONE box only.) (1) Monthly Statements. [Contract Planners, etc.] As a condition precedent to any payment to Consultant under this Agreement, Consultant shall submit monthly to the City a statement of account which clearly describes the work for which the billing is submitted. (2) Statements Following Completion of Work Tasks. [EIR Consultants, etc.] As a condition precedent to any payment under this Agreement, Consultant shall submit to the City a detailed statement of account which clearly sets forth the designated work tasks for which the billing is submitted. Payments shall be made following completion of each of the individual work tasks described in the Scope of Services. No payments shall be made for tasks which have not been satisfactorily completed. C. Payment. City shall review Consultant’s statements and pay Consultant for services rendered hereunder at the rates and in the amounts provided hereunder in accordance with the approved statements. Section 4. Standard of Quality. All work performed by Consultant under this Agreement shall be in accordance with all applicable legal requirements and shall meet the standard of quality ordinarily expected of competent professionals in Consultant’s field of expertise. Section 5. Ownership of Documents. All plans, studies, documents and other writings prepared by and for Consultant, its officers, employees and agents in the course of implementing this Agreement this shall become the sole property of the City upon payment to the Consultant for such work, and the City shall have the exclusive right to use such materials in its sole discretion without further compensation to Consultant or to any other party.

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Section 6. Retention of Other Consultants, Specialists or Experts. Consultant will not retain or otherwise incur an obligation to pay other consultants, specialists or experts for services in connection with this Agreement without the prior written approval of the City. In addition, the persons who shall provide the services agreed to be performed hereunder by Consultant are identified below. No other person may provide services under this agreement on behalf of Consultant without the prior, written consent of the City. Names of Persons Permitted to Perform Under this Agreement Sarah Hollenbeck, Managing Director Kevin Dong, Analyst Section 7. Interest of Consultant. Consultant (including principals, associates and professional employees) covenants and represents that it does not now have and shall not acquire any investment or interest, direct or indirect, in real property which is located within the area covered by this Agreement. Consultant further covenants and represents that it does not now have and shall not acquire any source of income, business entity, interest in real property or investment which would be affected in any manner or degree by the performance of Consultant’s services hereunder. Consultant further covenants and represents that no person having any such investment or interest shall perform any services under this Agreement. Consultant shall comply with the City’s conflict of interest code and all other conflict of interest laws, including but not limited to the Political Reform Act of 1974 and the regulations promulgated thereunder. Without limiting the generality of the foregoing and in the event that the Consultant is a “consultant” as defined in 2 Cal. Code Regs. § 18701(a)(2) or its successor regulation and is otherwise required by the City’s conflict of interest code to complete and execute the economic disclosure statement required under the City’s conflict of interest code, as a condition to commencing the work described herein, Consultant shall complete, execute and deliver to the City said economic disclosure statement. Section 8. Interest of Members and Employees of City. No member of the City Council and no other officer, employee or agent of the City who exercises any function or responsibility in connection with the review, approval or carrying out of any project to which this Agreement pertains shall have any personal interest, direct or indirect, in this Agreement, nor shall any such person participate in any decision relating to this Agreement which affects his/her personal interest or the interest of any corporation, partnership, association, or other legal entity in which he/she is directly or indirectly interested. If Consultant learns of any such interest, he/she shall promptly disclose such interest in writing to the City Manager. Section 9. Liability of Members and Employees of City. No member of the City Council and no other officer, employee or agent of the City shall be personally liable to Consultant or otherwise in the event of any default or breach of the City, or for any amount which may become due to Consultant or any successor in interest, or for any obligations directly or indirectly incurred under the terms of this Agreement.

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Section 10. Indemnification of City. Consultant hereby agrees to defend, indemnify and hold harmless the City from and against any and all claims arising out of Consultant’s breach of this Agreement and/or the willful or negligent acts, errors or omissions of Consultant relating to this Agreement. The City has no liability or responsibility for any accident, loss or damage to any work performed under this Agreement whether prior to its completion and acceptance or otherwise. Section 11. Consultant Not an Agent of City. Consultant is not an agent of the City, and the City retains all rights of approval and discretion with respect to the projects and undertakings contemplated by this Agreement. Consultant, its officers, employees and agents shall not have any power to bind or commit the City to any decision or course of action, and Consultant, its officers, employees and agents shall not represent to any person or party that it or they are acting as agents of the City or that it or they have the power to bind or commit the City. Section 12. Compliance with Laws. A. General. Consultant shall comply with all applicable federal, state and local laws, code, ordinances and regulations. Consultant represents and warrants to City that it has all licenses, permits, qualifications, insurance and approvals of whatsoever nature which are legally required for Consultant to practice its profession. Consultant represents and warrants to City that Consultant shall, at its sole cost and expense, keep in effect or obtain at all times during the term of this Agreement any licenses, permits, insurance and approvals which are legally required for Consultant to practice its profession. Consultant shall, at all times during the term of this Agreement and for one year thereafter, provide written proof of such licenses, permits, insurance and approvals upon request by the City. B. Novato Business License. Unless otherwise exempt, Consultant will maintain a valid City of Novato business license pursuant to Chapter VIII of the Novato Municipal Code during the term of this Agreement. Concurrently with execution of this Agreement, and upon request of City thereafter, Consultant will submit proof of compliance with this Subsection. C. Workers’ Compensation. Consultant shall take out and maintain at all times during the life of this agreement, up to the date of acceptance of the work by the City, workers’ compensation insurance as required by the Labor Code of the State of California. The Consultant shall require all subconsultants similarly to provide such insurance for all of subconsultants’ employees. The amount of said insurance shall be $1 million per accident. Consultant certifies that it is aware of the provision of the California Labor Code which requires every employee to be insured against liability for workers’ compensation or to undertake self-insurance in accordance with the provisions of that Code, and Consultant certifies that it will comply with such provisions before commencing performance of this Agreement. D. Injury and Illness Prevention Program. Consultant certifies that it is aware of and has complied with the provisions of California Labor Code Section 6401.7, which requires every employer to adopt a written injury and illness prevention program.

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E. City Not Responsible. The City is not responsible or liable for Consultant’s failure to comply with any and all of said requirements. Section 13. Insurance. A. Minimum Scope of Insurance (1a) Consultant agrees to have and maintain, for the duration of the Agreement, a Commercial General Liability insurance policy insuring him/her and his/her firm to an amount not less than One Million Dollars ($1,000,000) combined single limit per occurrence for bodily injury, personal injury and property damage. At the time the Agreement is entered into the City may require higher limits depending on the nature of the services being provided by the Consultant. Such determination shall be made by the City’s Risk Manager. (1b) In lieu of commercial general liability insurance, the Consultant may secure and maintain a minimum of One Million Dollars ($1,000,000) of excess limit (umbrella) coverage on his/her homeowner’s or renter’s insurance policy. (2) Consultant agrees to have and maintain for the duration of the Agreement an Automobile Liability insurance policy insuring him/her and his/her staff to an amount not less than Five Hundred Thousand Dollars ($500,000) combined single limit per accident for bodily injury and property damage. At the time the Agreement is entered into the City may require higher limits depending on the nature of the service being provided by the Consultant. Such determination shall be made by the City’s Risk Manager. (3) Consultants shall have and maintain a Professional Liability insurance policy insuring him/her and his/her staff to an amount not less than One Million Dollars ($1,000,000) for injuries arising out of the rendering of services or the failure to render services under this Agreement. (4) Consultant shall provide to the City all certificates of insurance with original endorsements reflecting coverage required by this section. Certificates of such insurance shall be filed with the City on or before commencement or performance of this Agreement. The City reserves the right to require complete, certified copies of all required insurance policies at any time. (5) Any Consultant utilizing the services of a secondary consultant in the performance of this Agreement shall either provide the required insurance(s) for the type of service being provided by the secondary consultant or provide evidence acceptable to the City demonstrating that the secondary consultant has in effect the required insurance(s).

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B. General Liability. (1) The City, its officers, officials, employees, and volunteers are to be covered as insureds as respects: liability arising out of activities performed by or on behalf of Consultant; products and completed operations of Consultant; premises owned or used by Consultant; or automobiles owned, leased, hired or borrowed by Consultant. (2) Consultant’s insurance coverage shall be primary insurance as respects the City, its officers, officials, employees and volunteers. Any insurance or self-insurance maintained by the City, its officers, officials, employees or volunteers shall be in excess of Consultant’s insurance and shall not contribute with it. (3) Any failure to comply with reporting provisions of the policies shall not affect coverage provided to the City, its officers, officials, employees or volunteers. (4) Consultant’s insurance shall apply separately to each insured against whom a claim is made or suit is brought, except with respect to the limits of the insurer’s liability. C. All Coverages. Each insurance policy required in this item shall be endorsed to state that coverage shall not be suspended, voided, canceled, or reduced in coverage or in limits except after thirty (30) days’ prior written notice by certified mail, return receipt requested, has been given to the City. Current certification of such insurance shall be kept on file with the City Clerk at all times during the term of this Agreement. D. Deductibles and Self-Insured Retentions. Any deductibles or self-insured retentions must be declared to and approved by the City. At the option of the City, either the insurer shall reduce or eliminate such deductibles or self-insured retentions as respects the City, its officers, officials, employees and volunteers, or Consultant shall procure a bond guaranteeing payment of losses and related investigations, claim administration and defense expenses. E. Acceptability of Insurers. Insurance is to be placed with insurers with a Best’s rating of no less than A:VII. Section 14. Assignment Prohibited. Consultant shall not assign any right or obligation pursuant to this Agreement without the City’s prior written consent. Any attempted or purported assignment of any right or obligation hereunder shall be void and of no effect. Section 15. Expiration and Termination of Agreement. Unless extended by mutual agreement or terminated pursuant to this section, this Agreement shall expire upon Consultant’s satisfactory and timely completion of the services contracted for hereunder. This Agreement and all obligations hereunder may be terminated at any time, with or without cause, by the City within its sole discretion upon written notice to the Consultant. Consultant may terminate this Agreement upon thirty (30) days’ written notice to the City only for good cause, including without limitation, serious illness or material breach of this Agreement by City. Consultant’s

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written notice of termination shall contain a full explanation of the facts and circumstances constituting good cause. Upon termination, all finished and unfinished documents, project data and reports shall, at the option of the City, become its sole property and shall, at Consultant’s expense, be delivered to the City or to any party the City may so designate. In the event of termination by the Consultant, the Consultant shall only be compensated for all work Consultant satisfactorily performs prior to the time Consultant delivers to the City the termination notice, unless other arrangements are agreed to by the City. In the event of termination by the City, the Consultant shall be compensated for all work satisfactorily performed prior to the time Consultant receives the termination notice, and shall be compensated for materials ordered by the Consultant, and services of others ordered by the Consultant prior to receipt of the City’s termination notice whether or not such materials or instruments of services of others have actually been delivered to Consultant or to the City, provided that the Consultant is not able to cancel such orders for materials or services of others. In the event this agreement is terminated pursuant to this section, Consultant shall not be entitled to any additional compensation over that provided herein; nor shall Consultant be entitled to payment for any alleged damages or injuries (including lost opportunity damages) purportedly caused by the termination of this agreement by the City pursuant to this section. Section 16. Entire Agreement; Amendment. This Agreement, including Exhibit A and any other exhibits or attachments made a part hereof constitutes the complete and exclusive expression of the understanding and agreement between the parties with respect to the subject matter hereof. All memoranda, and representations, are superseded in total by this Agreement. This Agreement may be amended or extended from time to time by written agreement of the parties hereto. Section 17. Litigation Costs. If either party commences any legal action against the other party arising out of this Agreement or the performance thereof, the prevailing party in such action shall be entitled to recover its reasonable litigation expenses, including court costs, expert witness fees, discovery expenses, and attorneys’ fees. In any action seeking recovery of monetary damages, the plaintiff shall not be considered to be the prevailing party unless it recovers at least sixty-six percent (66%) of the dollar amount requested in the complaint’s prayer for relief. Section 18. Remedies. In addition to any other available rights and remedies, either party may institute legal action to cure, correct or remedy any default, enforce any covenant herein, or enforce by specific performance the rights and obligation of the parties hereto. Section 19. Time of the Essence. It is understood and agreed by City and Consultant that time is of the essence in the completion of the work tasks described in the Scope of Services. Section 20. Interpretation of Agreement. This Agreement shall be interpreted and enforced in accordance with the laws of the State of California and the City of Novato. Section 21. Written Notification. Any notice, demand, request, consent, approval or communication that either party desires or is required to give to the other party shall be in

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writing and either served personally or sent by prepaid, first class mail. Any such notice, demand, etc. shall be addressed to the other party at the address set forth herein below. Either party may change its address by notifying the other party of the change of address. Notice shall be deemed communicated within two business days from the time of mailing if mailed within the State of California as provided in this Section. If to City: City of Novato 922 Machin Ave Novato, CA 94945-5054 If to Consultant: Public Financial Management, Inc. 50 California Street, Suite 2300 San Francisco, CA 94111 Section 22. Waiver. No failure on the part of either party to exercise any right or remedy hereunder shall operate as a waiver of any other right or remedy that party may have hereunder. Section 23. Execution. This Agreement may be executed in several original counterparts, each of which shall constitute one and the same instrument and shall become binding upon the parties when at least one copy hereof shall have been signed by both parties hereto. In approving this Agreement, it shall not be necessary to produce or account for more than one such counterpart. Section 24. Further Assurances. Each party to this agreement undertakes the obligation that the other’s expectation of receiving due performance will not be impaired. When reasonable grounds for insecurity arise with respect to the performance of either party, the other may in writing demand adequate assurance of due performance and until such assurance is received may, if commercially reasonable, suspend any performance for which the agreed return has not been received. After receipt of a demand for assurance, either party’s failure to provide, within a reasonable time, but not exceeding 30 days, such assurance of due performance as is adequate under the circumstances is a repudiation of this agreement by that party. Acceptance of any improper delivery of service or payment does not prejudice the aggrieved party’s right to demand adequate assurance of future performance.

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IN WITNESS WHEREOF, the City and Consultant have executed this Agreement as of the date first above written. CITY OF NOVATO PUBLIC FINANCIAL

MANAGEMENT, INC. By: __________________________ By: __________________________ Michael S. Frank, City Manager Sarah Hollenbeck, Managing Director By: __________________________ Sheri Hartz, City Clerk Approved as to form: ________________________________ City Attorney

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CERTIFICATE OF MAILING [Use for Agreements to be funded through Cost Recovery Program] A true and correct copy of the attached Consultant Services Agreement between the City of Novato and __________________________________________________, dated __________________________, was transmitted to the applicant/authorized agent by certified mail, return receipt requested. Name Applicant/Authorized Agent: ____________________________________ Address: ____________________________________ ____________________________________ Dated: __________________________ ____________________________________ City Clerk

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Schedule A Professional Liability Insurance Requirements for Consultants

Category I - $1,000,000

Design Services (Architects, Engineers)

Geotechnical Consultants

Special Testing and Inspection (concrete and asphalt testing, seismic and welding inspection)

Traffic Engineers

Building Inspection for City Projects

Engineering Inspection for City Projects

Financial/Fiscal Analysis

Real Estate Economics

Category II - $250,000

Aerial Mapping

Surveyors

5/8/14

Exhibit “B” Issue Date (MM/DD/YY)

General Liability Endorsement (the “City”)

POLICY INFORMATION Insurance Company: Policy No.: Policy Period (from) (to) Endorsement Effective Date: Named Insured: Limit of Liability Any One Occurrence/Aggregate:

$ Deductible or Self-Insured Retention

(Nil unless otherwise specified): $

Coverage is equivalent to (check one): 9 Comprehensive General Liability Form GL0002 (Ed 1/73) 9 Commercial General Liability “occurrence” Form CG0001 1185 9 Commercial General Liability “Claims Made” Form CG0002 0286 General Liability Aggregate (check one): 9 Applies per Location/Project 9 Is Twice the Occurrence Limit

Bodily Injury and Property Damage Coverage is (check one):9 “occurrence” 9 “claims made”

Note: The City’s standard insurance requirements specify “occurrence” coverage. “Claims-made” coverage requires special approval. If commercial general liability form or equivalent is used, the general aggregate must apply separately to this location/project or the general aggregate must be twice the occurrence limit.

POLICY AMENDMENTS This endorsement is issued in consideration of the policy premium. Notwithstanding any inconsistent statement in the policy to which this endorsement is attached or any other endorsement attached thereto, it is agreed as follows: INSURED: The City, its elected or appointed officers, officials, employees and volunteers are included as insureds with regard to damages and defense of claims arising from: (a) activities performed by or on behalf of the Named Insured, including the insured’s general supervision of the Named Insured, (b) products and completed operations of the Named Insured, or (c) premises owned, leased or used by the Named Insured. CONTRIBUTIONS NOT REQUIRED. As respects: (a) work performed by the Named Insured for or on behalf of the City; or (b) products sold by the Named Insured to the City; or (c) premises leased by the Named Insured from the City, the insurance afforded by this policy shall be primary insurance as respects the City, its elected or appointed officers, officials, employees or volunteers; or stand in an unbroken chain of coverage excess of the Named Insured’s scheduled underlying primary coverage. In either event, any other insurance maintained by the City, its elected or appointed officers, officials, employees or volunteers shall be in excess of this insurance and shall not contribute with it. SCOPE OF COVERAGE. This policy, if primary, affords coverage at least as broad as:(1) Insurance services office form number GL 0002 (Ed. 1/73), Comprehensive General Liability Insurance and Insurance Services

Office Form Number GL 0404 Broad Form Comprehensive General Liability endorsement; or (2) Insurance Services Office Commercial General Liability Coverage, “occurrence” form CG 0001 or “claims-made” form CG 0002;

or (3) If excess, affords coverage which is at least as broad as the primary insurance forms referenced in the preceding Sections (1)

and (2). SEVERABILITY OF INTEREST. The insurance afforded by this policy applies separately to each insured who is seeking coverage or against whom a claim is made or a suit is brought, except with respect to the company’s limit of liability. PROVISIONS REGARDING INSURED’S DUTIES AFTER ACCIDENT OR LOSS. Any failure to comply with reporting provisions of the policy shall not affect coverage provided to the City, its elected or appointed officers, officials, employees or volunteers.CANCELLATION NOTICE. The insurance afforded by this policy shall not be suspended, voided, cancelled, reduced in coverage orin limits except after thirty (30) days’ prior written notice by certified mail return receipt requested has been given to the City. Such notice shall be addressed as shown in the heading of this endorsement.

INCIDENT AND CLAIM REPORTING PROCEDURE Incidents and claims are to be reported to the insurer at: ATTN:

(Title) (Department) (Company) (Street Address) (City) (Telephone Number)

AUTHORIZED REPRESENTATIVE I warrant that I have authority to bind the above-listed insurance company and by my signature hereon does so bind this company. SIGNATURE: TYPE/PRINT NAME: TITLE: PHONE NO. Original signature of authorized representative or insurer is required on endorsement furnished to the City.

5/8/14

Exhibit “C”

Automobile Liability Special Endorsement for (the “City”)

Submit in Duplicate Endorsement No.

Issue Date (MM/DD/YY)

Producer Policy Information:Insurance Company: Policy No.: Policy Period: (from) (to) Loss Adjustment Expense 9 Included in Limits

9 In Addition to Limits

Telephone: 9 Deductible 9 Self-Insured Retention (check which) of $__________

Named Insured Applicability. This insurance pertains to the operation and/or tenancy of the named insured under all written agreements and permits in force with the City unless checked here 9 in which case only the following specific agreements and permits with the City are covered: City Agreements/Permits

Type of Insurance 9 Commercial Auto Policy 9 Business Auto Policy 9 Other

Other Provisions

Limits of Liability $ per accident for bodily injury and property

damage

Claims: Underwriter’s representative for claims pursuant to this insurance. Name: Address: Telephone: (

In consideration of the premium charged and notwithstanding any inconsistent statement in the policy to which this endorsement is attached or any endorsement now or hereafter attached thereto, it is agreed as follows: 1. Insured. The City, its officers, officials, employees and volunteers are included as insureds with regard to damages and defense

of claims arising from: the ownership, operation, maintenance, use, loading or unloading of any auto owned, leased, hired, or borrowed by the Named Insured, or for which the Named Insured is responsible.

2. Contribution Not Required. As respects work performed by the Named Insured for or on behalf of the City, the insurance afforded by this policy shall: (a) be primary insurance as respects the City, its officers, officials, employees and volunteers; or (b) stand in an unbroken chain of coverage excess of the Named Insured’s primary coverage. Any insurance or self-insurance maintained by the City, its officers, officials, employees and volunteers shall be excess of the Named Insured’s insurance and not contribute with it.

3. Cancellation Notice. With respect to the interests of the City, this insurance shall not be cancelled, except after thirty (30) days prior written notice by receipted delivery has been given to the City.

4. Scope of Coverage. This policy affords coverage at least as broad as: (1) If primary, Insurance Services Office Form Number CA0001 (Ed. 1/87), Code 1 (“any auto”); or (2) If excess, affords coverage which is at least as broad as the primary insurance forms referenced in the preceding Section (1).

Except as stated above, nothing herein shall be held to waive, alter, or extend any of the limits conditions, agreements, or exclusions of the policy to which this endorsement is attached. Endorsement Holder City

Authorized Representative 9 Broker/Agent 9 Underwriter I, ________________________________ (print/type name), warrant that I have authority to bind the above-mentioned insurance company and by my signature hereon do so bind this company to this endorsement. Signature

(original signature required) Telephone: ( )

5/8/14

Exhibit “D”

Workers’ Compensation and Employer’s Liability Special Endorsement for (the “City”)

Submit in Duplicate Endorsement No.


Producer Telephone:

Policy Information:Insurance Company: Policy No.: Policy Period: (from) (to)

Named Insured

Other Provisions

Claims: Underwriter’s representative for claims pursuant to this insurance. Name: Address:

Telephone: ( )

Employer’s Liability Limits$ (Each Accident) $ (Disease - Policy Limit) $ (Disease - Each Employee)

In consideration of the premium charged and notwithstanding any inconsistent statement in the policy to which this endorsement is attached or any endorsement now or hereafter attached thereto, it is agreed as follows: 1. Cancellation Notice. This insurance shall not be cancelled, except after thirty (30) days prior written notice by receipted delivery

has been given to the City. 2. Waiver of Subrogation. This Insurance Company agrees to waive all rights of subrogation against the City, its officers, officials,

employees and volunteers for losses paid under the terms of this policy which arise from the work performed by the Named Insured for the City.

Except as stated above, nothing herein shall be held to waive, alter, or extend any of the limits conditions, agreements, or exclusions of the policy to which this endorsement is attached.

Endorsement Holder City

Authorized Representative

9 Broker/Agent 9 Underwriter I, ________________________________ (print/type name), warrant that I have authority to bind the above-mentioned insurance company and by my signature hereon do so bind this company to this endorsement. Signature

(original signature required) Telephone: ( )

Consultant Services Agreement Public Financial Management Inc 05-13-2014.doc 5/8/14

Exhibit “E”

Acknowledgement of No Workers’ Compensation Insurance and Release

The undersigned, [all general partners in the California general partnership entitled _________________________________; the

sole shareholder of the corporation called _______________________________________________________________;

______________________________________________] ("Company"), agree, represent and warrant as follows:

1. That Company has been determined to be the lowest responsible bidder and has conditionally been awarded the

construction contract for the City of _____________________________ ("City") project entitled “_________________________________” ("Project"). A condition to said contract for the construction of said Project is the provision, by Company, of workers' compensation insurance for the Company's employees performing work on and for the Project.

2. That neither the Company nor any of its partners, shareholders, directors or principals shall ever use, retain, employ or

obtain the assistance of any person hired by the Company as an employee to perform work on or in connection with the Project.

3. That because the Company and all of its partners shall not retain employees to perform work on or in connection with

the Project, the Company and all of its partners do not intend to secure workers' compensation insurance for said Project.

4. That if at any time during the performance of the work required to complete the Project the Company or any of its

partners employ and employee to perform any or all of said work, the undersigned and the Company shall, in writing, immediately notify the City of said employment, and with said notification, the Company shall supply to the City satisfactory evidence of workers' compensation insurance.

5. That the Company and each of its partners, shareholders, principals and/or owners indemnify, release and hold the City

harmless from any and all injuries, damages, costs, attorneys fees, expenses and liabilities of any sort caused to persons or property arising out of the work performed on or in connection with the Project, including but not limited to injuries caused to persons working on the Project, excluding the City's sole or active negligence.

6. That the undersigned are all the general partners [shareholders, principals, owners, etc.] of said Company and are

authorized to make this agreement and warranty on behalf of themselves and the partnership.

7. That the undersigned personally guarantee the obligations contained hereinabove.

[I] [We] declare under penalty of perjury under the laws of the State of California that the foregoing is true and correct.

General Partner/Owner/Shareholder Date

General Partner/Owner/Shareholder Date


Exhibit “F” Issue Date (MM/DD/YY)

Certificate of Insurance

(the “City”) Producer

This Certificate of Insurance is not an insurance policy and does not amend, extend, or alter the coverage afforded by the policies below.

Best’s Companies Rating

Company Letter Company Letter Company Letter Company Letter

Insured

This is to certify that the policies of insurance listed below have been issued to the Insured Named above for the policy period indicated, notwithstanding any requirement, term or condition of any contract or other document with respect to which this certificate may be issued or may pertain, the insurance afforded by the policies described herein subject to all the terms, exclusions, and conditions of such policies. Limits shown may have been reduced by paid claims.The following provisions apply: 1. None of the above-described policies will be cancelled until after 30 days written notice has been given to the City at the address

indicated below. 2. The City, its officials, officers, employees and volunteers and added as insureds on all liability insurance policies listed above. 3. It is agreed that any insurance or self-insurance maintained by the City will apply in excess of and not to contribute with the

insurance described above. 4. The City is named a loss payee on the property insurance policies described above, if any. 5. All rights of subrogation under the property insurance policy listed above have been waived against the City. 6. The Workers’ Compensation insurer named above, if any, agrees to waive all rights of subrogation against the City for injuries to

employees of the insured resulting from work for the City or use of the City’s premises or facilities.

Type of Insurance Policy Number

PolicyEffective Date

PolicyExpiration Date All Units in Thousands

General Liability 9 Commercial General Liability

9 Claims Made 9 Occur. 9 Owner’s & Contractor’s Prot. 9 Owner

General Aggregate Products Comp/OPS Aggregate Personal & Advertising Injury Each Occurrence Fire Damage (Any One Fire) Medical Expense (Any One Person)

$ $ $ $ $ $

Automobile Liability 9 Any Auto 9 All Owned Autos 9 Scheduled Autos 9 Hired Autos 9 Non-owned Autos 9 Garage Liability

Combined Single Limit Bodily Injury (Per Person) Bodily Injury (Per Accident) Property Damage

$ $ $ $

Excess Liability 9 Umbrella 9 Other Than Umbrella Form

Each Occurrence Aggregate

$ $

9 Worker’s Compensation and Employer’s Liability

9 Statutory Each Accident Disease - Policy Limit Disease - Each Employee

$ $ $

Property Insurance 9 Course of Construction

Amount of Insurance $

Certificate Holder/Additional Insured Authorized RepresentativeSignature:Title:Phone No.:


Exhibit “G”

UNDERWRITER/BROKER/AGENT’S CERTIFICATION

City:

City Project Identification:

Entity Providing Contractual Services:

Insurer(s):

Best Rating(s):

Name and Title of Underwriter, Broker or Agent completing Certification:

I, the undersigned insurance underwriter, broker or insurance agent, do hereby certify that I have examined the insurance specifications prepared by the City for the above-referenced project and have attached herewith company certificates of insurance and all endorsements specified in the insurance specifications. I further certify that the coverages provided to the Contractor and described in the certificates of insurance and endorsements conform in all respects to the requirements set forth in the insurance specifications, including, but not limited to, the following considerations: 1. The scope of insurance is at least as broad as the minimum requirements identified in the insurance specifications; 2. The minimum occurrence limits and aggregate limits of insurance are consistent with those set forth in the

insurance specifications; 3. All deductibles and/or self-insured retentions have been declared; 4. All required endorsements identified in the insurance specifications have been provided and copies have been

attached to the appropriate certificate of insurance. 5. All policies of insurance have been placed with insurers with a current rating from the A.M. Best Company of not

less than A:VII; 6. All endorsements have been signed by a person authorized by the insurer to bind coverage on its behalf. I understand that the City will not authorize the Contractor to initiated work on behalf of the City until this certification has been fully executed and returned to the City.

Name of Company Signature of Broker

Business Address Date

Business Phone


Exhibit “H”


Certificate of Professional Liability Insurance

(the “City”)

Producer

This Certificate of Insurance is not an insurance policy and does not amend, extend, or alter the coverage afforded by the policies below.

Best’s Companies Rating

Company Letter Company Letter Company Letter Company Letter Company Letter

Insured

This is to certify that the policies of insurance listed below have been issued to the Insured Named above for the policy period indicated, notwithstanding any requirement, term or condition of any contract or other document with respect to which this certificate may be issued or may pertain, the insurance afforded by the policies described herein subject to all the terms, exclusions, and conditions of such policies. Limits shown may have been reduced by paid claims.

Co Ltr Type of Insurance Policy Number

PolicyEffective Date (mm/dd/yy)

PolicyExpiration Date (mm/dd/yy) All Units in Thousands

Professional Liability Errors and Omissions Insurance

9 Claims Made

9 Occurrence

Each Occurrence Aggregate Combined Single Limit

$ $ $

Description of Operations/Locations/Vehicles/Restrictions/Special Items

The following Provisions Apply: 1. None of the above-described policies will be cancelled until after 30 days written notice has been given to the City at the address

indicated below. 2. It is agreed that any insurance or self-insurance maintained by the City will apply in excess of and not to contribute with the

insurance described above. 3. It is hereby certified the above policy provides insurance as required by the applicable agreement between the City and the

insured.

Certificate Holder/Additional Insured Authorized Representative Signature: Title: Phone No.:

50 California Street Suite 2300 San Francisco, CA 94111

415-982-5544 415-982-4513 fax www.pfm.com

Public Financial Management, Inc. PFM Asset Management LLC PFM Advisors

April 29, 2014 Mr. Brian Cochran Finance Manager City of Novato 922 Machin Avenue Novato, CA 94945 Dear Brian: Public Financial Management, Inc. (“PFM”) is pleased to present this scope of services and fee proposal in connection with the refinancing of the City of Novato’s outstanding Hamilton Field CFD Special Tax Bonds, Series 2004 through a direct placement with a lender. As the City’s financial advisor on this transaction, PFM will be an effective advocate for the City as well as a strategic partner in identifying prospective lenders, evaluating proposed terms for the refinancing, and negotiating the transaction to best suit the needs of the City.

Scope of Services PFM’s role on this transaction includes, but is not limited to, the following services/deliverables:

Coordinate a request for proposal (“RFP”) process for the lender and advise the City on its selection of the most strategic financial partner and borrowing structure. Key characteristics reviewed in this process include, but not be limited to, the borrowing rates offered, repayment terms (maturities, scheduled annual payments, and prepayment flexibility), covenants (reporting requirements and debt service and liquidity requirements), security, and other requirements (additional required banking business, minimum treasury account balances). As part of the RFP process, PFM also serves as liaison to potential lenders, answering questions about the Hamilton CFD credit, providing supplemental information in response to lenders’ questions, and interfacing with the District Administrator as needed to obtain historical data requested by various lenders as part of their credit analysis.

Manage the transaction calendar and timely execution of events, including the initial RFP process to select the lender and the preparation and review of transaction documents. PFM leads organizational conference calls and document review calls on the City’s behalf and communicates with all parties to the transaction to coordinate the activities necessary to carry out the refinancing.

Mr. Brian Cochran City of Novato Page 2

Participate in City meetings and prepare and present financial material to staff and the City Council, as requested, on subjects related to financing alternatives and recommended financial strategies.

Prepare a closing memorandum and prepare a post transaction summary for the City’s records that outlines the steps and rationale taken in the transaction process.

Fee Proposal For PFM’s services providing independent financial advice as described above on this engagement, we propose a fixed transaction fee of $40,000, plus out-of-pocket expenses up to a cap of $1,000. Expenses will be billed based on actual costs incurred and appropriate documentation will be provided.

PFM appreciates this opportunity to continue to serve the City. Thank you again for your consideration and please feel free to contact us if you have any questions about our proposal or services. Sincerely, Sarah Hollenbeck Managing Director