CITY OF DELAND FLORIDA. REQUEST FOR COMMISSION ACTION July X Loan Amendment

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1 Department Finance CITY OF DELAND FLORIDA REQUEST FOR COMMISSION ACTION July Attachments SUBJECT Consideration of Debt X Resolution Amendment Airport Access Road X Commitment Letter Wells Fargo X Loan Amendment W Prepared by Approved by W C Z CD Department Head City Manager W Z SUMMARYHIGHLIGHT In Fiscal Year 2009 budget the City financed for the construction of the North Access Road at the Airport Funding for this project was from FDOT from the County and the balance from debt Due to the credit crisis and related problems that existed at the time staff had negotiated a 3 year loan at 304 with payments calculated on a 20year term with a large balloon payment due on remains outstanding to date Staff has been working with City s Bond Counsel and Financial Advisor for approximately 6 months to determine the best course of action to refinance the outstanding debt prior to the balloon payment deadline of 12l11 Due to the complexities involved current market rates and the continued difficulties in the market place staff and the City s Bond Counsel and Financial Advisor determined that the best course of action would be to amend the existing loan agreements with Wells Fargo formerly Wachovia to change the term of the agreement and also modify the interest rate to reflect current market conditions As a result staff has requested and received a proposal from Wells Fargo to amend the existing note by changing the interest rate and due date Wells Fargo also asked to add some additional standard covenants normally used by the new bank Wells Fargo Wells Fargo has provided a 3 year sample indicative rate as follows 3 year loan 168 including premium for no prepayment penalty in the 3 year Currently 3 year loan 304 During the course of the last several months Wells Fargo had also offered the following indicative rates 5 year loan 25 including premium for noprepayment penalty in the 5th year 7 year loan 309including premium for noprepayment penalty in the 7th year Current short term interest rates are extremely favorable with longerterm rates increasing rapidly Most deals that are being done at this point in time continue to be done where there is a preexisting banking relationship such as we have with Wells Fargo and for much shorter periods of time than normal Staff is proposing to amend the existing loan to extend the maturity through 614 based on a 15 year term total term reduced by two years due to reduction in interest rates The actual rate of interest will not be locked until July 5 and updated information will be provided at the Commission meeting on 7611 FISCAL IMPACT Funds are budgeted for the debt service payments for this debt however a budget amendment will be needed to provide for the issuance costs for this debt and will be included in the 3 quarter budget amendments presented to the Commission in another agenda item at this meeting

2 Page 2 of SUBJECT Consideration of Debt Amendment Airport Access Road RECOMMENDATION It is recommended that the City Commission award the debt amendment to Wells Fargo Bank and authorize staff and the Mayor to complete and execute documents necessary to close on the loan BACKGROUND DISCUSSION Financing for municipal purposes has improved since the original issuance of this note in 2008 however longer term financing over 10 years continues to be extremely difficult given the protracted recession the economy has been mired in In addition the City would also be looking to refinance the outstanding Water Sewer issue done at the same time In the current market obtaining financing on subordinate status debt is even more difficult Overall the market has stabilized some and longerterm deals up to 10 years are getting done but at significantly higher rates The City has retained the services of Sandy MacLennan of Squire Sanders Dempsey as Bond Counsel and Mitch Owens of RBC Capital Markets as Financial Advisor Both have served the City in similar capacities for over 20 years All documents have been prepared by the City s Bond Counsel reviewed by the Bank s Bond Counsel and the City Attorney They are presented to the City Commission in substantially final form but may require minor corrections should errors or deficiencies be discovered The proposed debt issue continues to carry risk both in terms of market and interest rates however these risks can be managed somewhat The market risk should be relatively minor The City s Financial Advisor Bond Counsel and bank representative have all advised the City that it is extremely unlikely that the City would not be able to refinance this debt prior to the next balloon payment coming due In terms of the interest rate risk there is virtually no way to predict what the interest rates will be in three years as they are economically driven Historically the City has been able to issue debt under 45 While the interest rate the City may pay on the re finance may be higher than normal andor higher than the current proposal that risk can be managed In addition staff and the City s Financial Advisor will continue to monitor the environment and ultimately look for refinancing opportunities at anytime up through and including the maturity date of the proposed debt The City s Bond Counsel anticipates completing a re finance prior to the proposed maturity date Staff has also attempted to mitigate this risk by not refinancing the remaining outstanding notes in the Water Sewer Fund The City s Financial Advisor recommended against refinancing this debt at this time as doing so would only magnify the City s exposure and increase the amount of debt that must be refinanced in three years when the balloon payment on the proposed note comes due Basically the proposed loan will function as a second bridge loan for the City The threeyear maturity would allow the credit markets to stabilize and return to a state of normalcy while at the same time maximizing the flexibility for the City to refinance and maintaining the lowest interest rate possible At or prior to the completion of the proposed three year term staff would look to refinance this debt again into a longerterm vehicle Debt service on the proposed debt would begin December and would be payable every six months thereafter until June when the balloon would be due The cost of issuance for the Airport debt issue is as follows Bond Counsel for the City 7500 Financial Advisor for the City 2500 Bond Counsel for the Bank for the Airport Note 2000 Total combined issuance cost of note

3 L Page 3 of SUBJECT Consideration of Debt Amendment Airport Access Road Working with the City s Financial Advisor Bond Counsel and the Wells Fargo representative staff has looked at a variety of options for this financing Starting with the long term debt RFP through various maturities and in the final analysis the City s Financial Advisor Bond Counsel and staff recommend the three year term with payments calculated based on a fifteen year amortization as the best vehicle at this point in time given the state of the credit markets to refinance the debt This debt would continue to utilize a covenant to budget and appropriate This basically requires the City to budget from all legally available revenues sufficient to meet the debt service An additional consideration that staff has considered in relation to this debt issue is the effect of prepayment penalties The commitment letter provided to the City by Wells Fargo for the proposed debt issue does include a prepayment penalty during the entire three year term of the loan However Wells Fargo has also provided the City with an option to buy down the prepayment penalty in essence eliminating all prepayment penalties during the final year of the loan Once the City approves the loan Wells Fargo will commit funds and likely have swap arrangements set behind the scenes to internally finance the debt Should the City prepay the debt the bank would be in a position of having to unwind that swap arrangement and would be subject to a significant cost in doing so Hence the need for the prepayment penalty Eliminating the prepayment penalty in the third year of the loan does have a slight interest rate cost of 4 basis points but staff feels that this is a very cheap insurance policy to provide maximum flexibility to the City and allow the City to seek refinance opportunities without concern of the prepayment penalties As discussed earlier the proposed loan would be structured with a three year maturity with payments based on a fifteenyear amortization and with no prepayment penalty in the third year The interest rate on the proposed loan is based on an indicative rate plus addon for no prepayment penalty in 3rd year The indicative rate is as follows 67 of the 3 Year US Dollar Swap Offering Rate plus 96 basis points plus 4 basis points for the reduction in prepayment penalty As of June the 3 Year US Dollar Swap Offering Rate was 102 Based on that rate the indicative rate would be for a total of 168 In addition an additional note for the Water Sewer Note refinance will also be brought to the City Commission on a separate RCA at the July meeting for closing on or about July The actual rate of interest will not be locked until July 5 and updated information will be provided at the Commission meeting on 7611

4 RESOLUTION NO 2011 A RESOLUTION OF THE CITY COMMISSION OF THE CITY OF DELAND FLORIDA APPROVING THE ADJUSTMENT TO THE INTEREST RATE AND EXTENSION OF THE MATURITY DATE OF THE CITY S REVENUE NOTE SERIES 2008A AUTHORIZING AN AMENDMENT TO THE LOAN AGREEMENT ENTERED INTO IN CONNECTION WITH THE ISSUANCE OF THE NOTE TO REFLECT SUCH MATURITY EXTENSION AND ADJUSMENT TO INTEREST RATE AUTHORIZING FURTHER OFFICIAL ACTION IN CONNECTION WITH THE EXTENSION OF THE MATURITY OF SUCH NOTE AND PROVIDING AN EFFECTIVE DATE BE IT RESOLVED BY THE CITY COMMISSION OF THE CITY OF DELAND FLORIDA SECTION 1 AUTHORITY FOR THIS RESOLUTION This resolution is adopted pursuant to the provisions of Chapter 166 Part II Florida Statutes and other applicable provisions of law the Act and Section 18 of the Loan Agreement dated December the Loan Agreement between the City and Wells Fargo Bank National Association as successor to Wachovia Bank National Association the Lender SECTION 2 DEFINITIONS Capitalized terms used and not defined herein shall have the meanings set forth in the Loan Agreement unless the context clearly requires otherwise Words importing singular numbers shall include the plural number in each case and vice versa and words importing persons shall include firms and corporations SECTION 3 FINDINGS It is hereby found declared and determined by the Commission that A The City has previously issued the Note which Note has a stated maturity date of December B Because of continued uncertainty in the longterm municipal debt markets it is necessary desirable and in the best interests of the City and its citizens that the City negotiate an extension to the maturity date of the Note C The Lender has agreed to an extension of the maturity date of the Note in exchange for an adjustment to the interest rate on the Note to a current market rate as described in the Lender s Proposal a copy of which is attached hereto as ExhibitB D The Note as amended the Amended Note shall not be or constitute a general obligation or an indebtedness of the City as bonds within the meaning of the Constitution of Florida but shall be payable and secured solely as provided in the Resolution and the Loan Agreement No holder of the Note shall ever have the right to compel the exercise of the ad valorem taxing power of the City or taxation in any form on real property therein to pay such principal and interest from any other funds of the City other than in the manner provided in the Resolution and the Loan Agreement 1

5 E The City does not expect to issue more than in taxexempt obligations during the calendar year ending December SECTION 4 RESOLUTION TO CONSTITUTE CONTRACT In consideration of the consent of the modifications to the Amended Note by the Lender this Resolution shall be deemed to be and shall constitute a contract between the City and the Lender The covenants and agreements set forth therein and herein to be performed by the City shall be solely for the benefit protection and security of the Lender SECTION 5 DESIGNATION UNDER THE CODE To the extent the extension of the maturity of the Note requires a new designation the Amended Note is hereby designated as a qualified tax exempt obligation pursuant to Section 265 b3b of the Code The City hereby represents that it does not expect to issue more than in principal amount of tax exempt obligations in calendar year 2011 SECTION 6 APPROVAL OF FORM OF FIRST AMENDMENT TO LOAN AGREEMENT AND AMENDED NOTE The First Amendment to Loan Agreement and the Amended Note attached hereto and incorporated herein by this reference in substantially the form attached hereto as Exhibit A is hereby approved and the Mayor and Clerk are hereby authorized to execute and deliver such documents and to take such other actions as shall be necessary to consummate the extension of the maturity of the Note SECTION 7 DELIVERY OF AMENDED NOTE The delivery of the Amended Note to the Lender is hereby authorized The Mayor the Clerk the City Manager the Finance Director and the City Attorney are each designated agents of the City in connection with the execution and delivery of the Amended Note and are authorized and empowered collectively or individually to take all action and steps to execute and deliver any and all instruments documents or contracts on behalf of the City which are necessary or desirable in connection with the execution and delivery of the Amended Note to the Bank SECTION 8 SEVERABILITY If any one or more of the covenants agreements or provisions of this resolution should be held contrary to any express provision of law or contrary to the policy of express law though not expressly prohibited or against public policy or shall for any reason whatsoever be held invalid then such covenants agreements or provisions shall be null and void and shall be deemed separate from the remaining covenants agreements or provisions and in no way affect the validity of all other provisions of this resolution or of the Amended Note delivered hereunder SECTION 9 MODIFICATION AND AMENDMENT So long as the Amended Note is outstanding no material modification or amendment of this resolution or of any resolution amendatory hereof or supplemental hereto may be made without the consent in writing of the Lender SECTION 10 REPEAL OF INCONSISTENT PROVISIONS All resolutions or parts thereof in conflict with this resolution are hereby repealed to the extent of such conflict SECTION 11 EFFECTIVE DATE This resolution shall take effect immediately upon its adoption 2

6 held Passed and Adopted this 6 day of July 2011 at a regular meeting duly called and SEAL CITY OF DELAND FLORIDA ATTEST Robert F Apgar MayorCommissioner Julie A Hennessy City Clerk Auditor APPROVED AS TO FORM AND LEGALITY Darren J Elkind City Attorney 3

7 Together we ll go far V Wells Fargo Bank NA Government and Institutional Banking 800 N Magnolia Ave 7 Floor FL2810 Orlando FL June Mr Kevin Lewis Finance Director City of DeLand 120 South Florida Avenue DeLand Florida Dear Mr Lewis Wells Fargo National Association the Bank is pleased to submit the Commitment described below to the City subject to the following terms and conditions Borrower City of DeLand the City Amount No tot exceed Facility Amendment to Term Loan dated December Term The loan will mature June Principal and Interest will be due and payable semi annually commencing December and each June 1 and December 1 thereafter through maturity Principal will be amortized based on a fifteen year amortization Interest on the outstanding balance of the loan will be calculated on a 30 day month360 day year basis Interest Rate The City must indicate a closing date and Option chosen at the time of acceptance Bank Qualified Fixed Rate 164 The above fixed rate is an indication rate subject to change based on market conditions The above rate approximates the 67 of the 3year US Dollar Swap Offering Rate plus 96 basis points The Bank will set the rate two days prior to funding date 3Year US Dollar Swap Rate as of June was 102

8 Prepayment Should the City prepay during the life of the loan the City may incur a breakage fee as outlined in Exhibit A attached Should partial prepayments be made a new amortization will be created based on a revised principal amount and level debt service The City can choose to select an option that will allow the City to prepay on any interest payment date 12 month prior to the Loan s maturity date of the Note The cost of this option is 4 basis points which will be added to the interest rate Conditions 1 The City by official action shall approve entering into this commitment and the loan facility described herein it shall cause any borrowing under this facility to be designated as a Qualified Tax Exempt Obligation pursuant to Section 265 b3b Internal Revenue Code of 1986 as amended 2 This Commitment shall remain in full force and effect through 300 pm local time July at which time if not accepted by execution of the acceptance clause below and mailed to the Bank at its 800 N Magnolia Ave 7 Floor Orlando FL office to my attention this Commitment shall expire and shall not be enforceable by either the Bank or the City unless extended by the Bank in writing Unless extended by the Bank in writing this facility must close on or prior to July after which this commitment shall expire 3 The City represents and agrees that all information provided to the Bank is correct and complete No material adverse change may occur in the business condition operations or performance of the City nor may any adverse circumstance be discovered as to the financial condition of the City prior to closing The Bank s obligations under this Commitment are conditioned on the fulfillment to the Bank s sole satisfaction of each term and condition referenced by this Commitment No change may occur in any law rule or regulation or their interpretation or administration that in each case may adversely affect the consummation of the transaction to be determined in the Bank s sole discretion 4 This Commitment supersedes all prior Commitments and proposals with respect to this transaction whether written or oral including any previous loan proposals made by the Bank or anyone acting within its authorization No modification shall be valid unless in writing and signed by an authorized Officer of the Bank This Commitment is not assignable and no entity other than the City shall be entitled to rely on this Commitment 5 The amendment of the Note shall be evidenced by the delivery of an Amended Revenue Note Series 2008 of the City incorporating the terms as described herein All other provisions of the 2008 Note and the restated Loan Agreement dated December shall remain in effect Wells Fargo Bank National Association appreciates the opportunity to submit this Commitment to you and looks forward to your favorable response Should you have any questions please City of DeLand Loan Commitment for CBA Note 2

9 do not hesitate to contact me at Best Regards WELLS FARGO BANK NATIONAL ASSOCIATION T44 mwv Todd Morley CFA Senior Vice President Government Banking ACCEPTANCE The above Commitment is hereby accepted on the terms and conditions outlined therein by authority of the Governing Board of the City Closing Date By Date Its City of Deland Loan Commitment for CBA Note 3

10 Exhibit A In addition to principal interest and any other amounts due under this Note Borrower shall on demand pay to Bank any Breakage Fee due hereunder for each Break Event Break Evenf means any voluntary or mandatory prepayment or acceleration in whole or in part of principal of this Note occurring prior to the date such principal would but for that prepayment or acceleration have become due Scheduled Due Date For each date on which a Break Event occurs Break Date a Breakage Fee shall be due only if the rate under A below exceeds the rate under B below and shall be determined as follows Breakage Fee the Present Value of ABxC LIBOR Breakage where A B C The rate per annum equal to the sum ofithe bond equivalent yield bid side of the US Treasury security with a maturity closest to the Maturity Date as reported by the Wall Street Journal or other published source on the date the Interest Rate of this Note was set Lock in Date plus ii the corresponding swap spread of Bank on the Lock in Date for a fixed rate payor to pay Bank the fixed rate side of an interest rate swap of that maturity plus iii 25 A rate per annum equal to the sum ofithe bond equivalent yield bid side of the US Treasury security with a maturity closest to the Maturity Date as reported by the Wall Street Journal or other published source on the Break Date luaus ii the corresponding swap spread that Bank determines another swap dealer would quote to Bank on the Break Date for paying to Bank the fixed rate side of an interest rate swap of the maturity The sum of the products of i each Affected Principal Amount for each Affected Principal Period times ii the number of days in that Affected Principal Period divided by 360 if this Note uses the Actual360 Computation or the actual number of days in the year if this Note uses the Actual Computation Affected Principal Amount for an Affected Principal Period is the principal amount of this Note scheduled to be outstanding during that Affected Principal Period determined as of the relevant Break Date before giving effect to the Break Event on that Break Date and for any prepayment multiplying each such principal amount times the Prepayment Fraction Affected Principal Period is each period from and including a Scheduled Due Date to but excluding the next succeeding Scheduled Due Date provided that the first such period shall begin on and includes the Break Date LIBOR Breakage is any additional loss cost or expense that Bank may incur with respect to any hedge for the fixed rate of this Note based on the difference between the London interbank offered rate for US dollar deposits of the relevant maturity available in the London interbank market at the beginning of the interest period in which the Break Date occurs and that which is available in that market on the Break Date Maturity Date is the date on which the final payment of principal of this Note would but for any Break Event have become due Prepayment Fraction is a fraction equal to the principal amount being prepaid over the principal amount of this Note outstanding immediately prior to that prepayment on the Break Date Present Value is determined as of the Break Date using B above as the discount rate In addition a Break Event shall be deemed to occur hereunder if on any date Borrowing Date after the date hereof but prior to any acceleration of this Note any advance of principal under this Note is scheduled to be made and that advance fails to be made on that Borrowing Date whether due to Borrower s default Borrower s failure to borrow the termination of any loan commitment any unsatisfied condition precedent or otherwise in which case that Borrowing Date shall be a Break Date the Affected Principal Amount for that Break Event shall be based on the amount of the failed advance and the Borrower shall on demand pay to the Bank any Breakage Fee due hereunder for that Break Event Breakage Fees are payable as liquidated damages are a reasonable pre estimate of the losses costs and expenses Bank would incur in the event of any prepayment or acceleration of this Note are not a penalty will not require claim for or proof of actual damages and Bank s determination thereof shall be conclusive and binding in the absence of manifest error For any Break Event hereunder the foregoing Breakage Fee provisions supersede any breakage compensation agreement that Borrower and Bank may have executed with respect to this Note City of DeLand Loan Commitment for CBA Note 4

11 FIRST AMENDMENT TO LOAN AGREEMENT between CITY OF DELAND FLORIDA and WELLS FARGO BANK NATIONAL ASSOCIATION Dated July Relating to City of DeLand Florida Amended Revenue Note Series 2008A TAMPA

12 TABLE OF CONTENTS Page SECTION 1 DEFINITIONS 1 SECTION 2 INTERPRETATION 1 SECTION 3 AMENDMENTS TO THE LOAN AGREEMENT 1 SECTION 4 FORM OF AMENDED NOTE 3 SECTION 5 NO OTHER CHANGES 3 SECTION 6 CONSTRUCTION SEVERABILITY 3 SECTION 7 EXECUTION IN COUNTERPARTS 3 SECTION 8 APPLICABLE LAW 3 TAMPA

13 This FIRST AMENDMENT TO LOAN AGREEMENT is made and entered into as of July the Amendment by and between the CITY OF DELAND FLORIDA the City and Wells Fargo Bank National Association as successor to Wachovia Bank National Association Orlando Florida the Bank WITNESSETH WHEREAS the City and the Bank have previously entered into that certain Loan Agreement dated December the Agreement pursuant to which the City issued and delivered to the Bank the City s Revenue Note Series 2008A in the original principal amount of of which remains outstanding the Note WHEREAS the Note matures December and the City and the Bank have agreed to an extension of the maturity of the Note and an adjustment to the interest rate on the Note NOW THEREFORE in consideration of the premises and the mutual covenants herein set forth and other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged the City and the Bank do hereby agree as follows SECTION 1 DEFINITIONS Capitalized terms used herein shall have the meanings set forth in the Loan Agreement unless the text otherwise expressly requires SECTION 2 INTERPRETATION Unless the context clearly requires otherwise words of masculine gender shall be construed to include correlative words of the feminine and neuter genders and vice versa and words of the singular number shall be construed to include correlative words of the plural number and vice versa The Agreement this Amendment and all the terms and provisions thereof and hereof a have been negotiated in an arm slength manner between the City and the Bank b have been reviewed by counsel for the City and the Bank c shall not be construed strictly in favor of or against either party hereto and d shall be construed to effectuate the purposes set forth herein and to sustain the validity hereof SECTION 3 AMENDMENTS TO THE LOAN AGREEMENT follows a The definition of Default Rate in the Agreement is hereby amended to read as Default Rate means the greater ofi the then current interest rate on the Note plus an additional three percent 3 per annum and ii the Prime Rate plus three percent 3 per annum b to read as follows The definition of Maturity Date contained in the Agreement is hereby amended Maturity Date means the date on which all outstanding principal of and interest on the Note is due as shown on Exhibit A hereto as amended from time to time c Section 10 of the Agreement is herby amended to add the following provisions TAMPA I

14 G Credit Facilities In the event that the City enters into an agreement or arrangement with another lender or credit provider including any amendment or supplement to any existing agreement or arrangement each an Other Credit Facility and collectively the Other Credit Facilities the City obligations under which are secured by the Covenant or a covenant substantially similar to the Covenant which Other Credit Facility provides such lender or credit provider more restrictive covenants and or greater rights and remedies with respect to the NonAd Valorem Revenues than are provided to the Bank in this Agreement such more restrictive covenants and or greater rights and remedies shall automatically be deemed to be incorporated into this Agreement and the Bank shall have the benefits of such more restrictive covenants and or such greater rights and remedies as if specifically set forth herein The City shall provide the Bank with a copy of each such agreement or amendment thereto which provides such more restrictive covenants and or greater rights and remedies and if requested by the Bank the City shall promptly acknowledge that such more restrictive covenants and or greater rights or remedies have been incorporated herein provided that the Bank shall maintain the benefit of such more restrictive covenants andor greater rights and remedies even if the City fails to provide such acknowledgement Nothing herein shall i require the City to pledge additional security to the Bank for the Note or ii provide to the Bank any special or superior status with respect to the Covenant over any other debt of the City secured by a covenant similar in nature to the Covenant H Derivative Agreements The City will not enter into any Derivative Agreement without the Bank s consent Derivative Agreement means without limitation i any contract known as or referred to or which performs the function of an interest rate swap or exchange agreement currency swap agreement forward payment conversion agreement or futures contract ii any contract providing for payments based on levels of or changes or differences in interest rates currency exchange rates or stock or other indices iii any contract to exchange cash flows or payments or series of payments iv any type of contract called or designed to perform the function of interest rate floors or caps options puts or calls to hedge or minimize any type of financial risk including without limitation payment currency rate or other financial risk and v any other type of contract or arrangement that is to be used or is intended to be used to manage or reduce the cost of debt to convert any element of debt from one form to another to maximize or increase investment return to minimize investment return risk or to protect against any type of financial risk or uncertainty I Use of Proceeds Federal Reserve Regulations The City will not use or permit any part of the proceeds of the Note to be used for the purpose whether immediate incidental or ultimate to purchase or carry any margin stock within the meaning of Regulation U of the Board of Governors of the Federal Reserve System as amended from time to time or to extend credit to others for the purpose of purchasing or carrying any margin stock The City will not use or permit any part of the proceeds of the Note to be used for any speculative derivative transactions J Usury The Bank shall not be entitled to receive payment of interest hereunder or under the Note in excess of the maximum rate permitted by applicable law If the Bank receives less interest during any period than it would be entitled to receive hereunder and under the Note but for the applicability of a maximum legal rate of interest during any subsequent period in which the rate of interest to which the Bank is otherwise entitled hereunder TAMPA

15 and under the Note is less than such maximum legal rate of interest the Bank shall instead receive interest at a rate equal to the maximum legal rate of interest until the Bank has received in the aggregate the amount of interest due the Bank hereunder and under the Note In addition to the extent permitted by applicable law if the principal amount of the Note comes due or is prepaid and the Bank has not received in the aggregate the amount of interest due the Bank hereunder and under the Note the City shall pay the Bank upon the coming due or prepayment of such principal amount the amount of interest due the Bank hereunder and under the Note and not otherwise paid hereunder or thereunder SECTION 4 FORM OF AMENDED NOTE The Note as amended the Amended Note shall be in substantially the form of Exhibit A hereto including the Schedules thereto with such variations omissions and insertions as may be necessary desirable and authorized or permitted by this Amendment and approved by the persons executing the Amended Note such approval to be presumed by their execution thereof SECTION 5 NO OTHER CHANGES Except as modified herein the parties agree that the Agreement remains in full force and effect and shall continue in full force and effect until the payment of the Amended Note and satisfaction of all other obligations of the City under the Agreement SECTION 6 CONSTRUCTION SEVERABILITY The provisions of this Amendment shall be construed so as to give effect to the intent of the parties hereto as expressed in the preambles and to all of the provisions of this Amendment the Agreement and of the Amended Note In the event any provision of this Amendment the Agreement or the Amended Note shall be held invalid or unenforceable by any court of competent jurisdiction such holding shall not invalidate or render ineffective or unenforceable any other provision hereof or thereof SECTION 7 EXECUTION IN COUNTERPARTS This Amendment may be simultaneously executed in counterparts each of which shall be an original and both of which shall constitute but one and the same instrument SECTION 8 APPLICABLE LAW This Amendment shall be governed by and construed in accordance with the laws of the State Remainder of Page Intentionally Left Blank TAMPA

16 IN WITNESS WHEREOF the parties hereto have duly executed this Agreement as of the date first above written SEAL CITY OF DELAND FLORIDA ATTEST City ClerkAuditor By Mayor Commissioner WELLS FARGO BANK NATIONAL ASSOCIATION By Todd Morley Senior Vice President TAMPA

17 I EXHIBIT A FORM OF AMENDED NOTE No R2 CITY OF DELAND FLORIDA REVENUE NOTE SERIES 2008A RATE OF INTEREST MATURITY DATES DATE OF ISSUE per annum See Attachment A December as adjusted on July 6 Final December as Amended as of July amended REGISTERED OWNER PRINCIPAL AMOUNT Dollars Wells Fargo National Association One Million Four Hundred Forty Eight Two Hundred FortyFour KNOW ALL MEN BY THESE PRESENTS that the City of DeLand Florida the City for value received hereby promises to pay to the Registered Owner designated above or registered assigns solely from the special funds hereinafter mentioned the Principal Amount shown above in the installments shown on Attachment A to Schedule 1 hereto and to pay solely from such funds interest on the Principal Amount outstanding from time to time from the date of this Note or from the most recent date to which interest has been paid whichever is applicable until payment of such Principal Amount at the Rate of Interest shown above such interest being payable semi annually in arrears on December and on each June 1 and December 1 thereafter an Interest Payment Date until maturity by wire transfer or other medium acceptable to the City and to such Registered Owner On December the entire unpaid principal amount hereof and all accrued interest thereon shall be paid by the City to the Registered Owner from the sources herein described The principal of and interest on this Note are payable in lawful money of the United States of America Interest shall be calculated on the basis of twelve 30day months and a 360 day year All payments by the City pursuant to this Note shall apply first to accrued interest and the balance thereof shall apply to principal This Note is issued to finance the costs of the acquisition construction and equipping of certain capital projects of the City as further described in the Agreement hereinafter referred to the Project under the authority of and in full compliance with the Constitution and Statutes of the State of Florida including particularly Chapter 166 Florida Statutes and other applicable provisions of law and Resolution No duly adopted on December the Resolution and a Loan Agreement between the City and the Registered Owner dated December as amended by the First Amendment to Loan Agreement dated July collectively the Agreement to which reference should be made to ascertain those terms and conditions Capitalized terms not otherwise defined herein shall have the same meanings set forth in the Agreement TAMPA A1

18 This Note is payable from and secured solely by the covenant of the City the Covenant contained in Section 10A of the Agreement to annually budget and appropriate and pay to the Registered Owner hereof the portion of the Principal Amount maturing on each Maturity Date and the interest payable on this Note on each Interest Payment Date all in the manner provided in and subject to the terms and conditions of the Resolution and the Agreement The principal of and interest on this Note shall not constitute a general obligation or indebtedness of the City and the Registered Owner shall never have the right to require or compel the levy of taxes on any property of or in the City for the payment of the principal of and interest on this Note The principal of and interest on this Note shall not be secured by a lien upon the Project or upon any other property of or in the City but shall be secured solely by the Covenant and the moneys budgeted and appropriated pursuant thereto in the manner provided herein and in the Agreement Reference is made to the Agreement for the provisions relating to the security for payment of this Note and the duties and obligations of the City hereunder Upon the occurrence of an Event of Default as defined in the Loan Agreement the City shall also be obligated to pay but only from the Non AdValorem Revenues budgeted therefore as part of the indebtedness evidenced by this Note all costs of collection and enforcement hereof including such fees as may be incurred on appeal or incurred in any proceeding under bankruptcy laws as they now or hereafter exist including specifically but without limitation claims disputes and proceedings seeking adequate protection or relief from the automatic stay The City to the extent permitted by law hereby waives presentment demand protest and notice of dishonor This Note may be prepaid in whole or in part prior to its stated date of maturity at the option of the City at any time and such prepayments shall be applied to reduce the principal balance of the Note remaining outstanding and unpaid in the manner described in the Resolution If the Note is prepaid prior to 20 a prepayment penalty calculated in accordance with Schedule 1 hereto may be payable If prepaid on or after 20 no penalty or premium shall be payable This Note has been designated by the City as a qualified tax exempt obligation as defined in Section 265 b3b of the Internal Revenue Code of 1986 as amended This Note may be only transferred or assigned by the Registered Owner in the manner provided in the Agreement It is hereby certified and recited that all acts conditions and things required by the Constitution and laws of the State of Florida to be performed to exist and to happen precedent to and in connection with the issuance of this Note have been performed exist and have happened in regular and due form and time as so required Payments hereunder shall apply first to amounts due to the Registered Owner other than principal or interest then to interest and last to principal TAWA A2

19 II I IN WITNESS WHEREOF the City of DeLand Florida has caused this Note to be executed by its Mayor or Vice Mayor and attested by the City Clerk either manually or with their facsimile signatures and its seal or a facsimile thereof to be affixed impressed imprinted lithographed or reproduced hereon all as of the Date of Issue above SEAL CITY OF DELAND FLORIDA COUNTERSIGNED AND ATTESTED City Clerk Auditor By Mayor Commissioner TAWA A3

20 SCHEDULES TO CITY OF DELAND FLORIDA Amended Revenue Note Series 2008A Schedule I Terms of Note including Interest Rate Principal Amortization Schedule Prepayment Provisions TAMPA

21 SCHEDULE 1 TERMS OF NOTE AMORTIZATION SCHEDULE The Amortization Schedule for the payment of the principal of and interest on this Note shall be as shown on Attachment A hereto Notwithstanding anything herein to the contrary for purposes of calculating maximum annual debt service the Note shall be deemed to amortize in approximately equal annual payments over a period of 20 years PREPAYMENT PROVISIONS In addition to principal interest and any other amounts due under this Note the City shall on demand pay to Bank any Breakage Fee due hereunder for each Break Event occurring prior to 20 Break Event means any voluntary or mandatory prepayment or acceleration in whole or in part of principal of this Note occurring prior to the date such principal would but for that prepayment or acceleration have become due Scheduled Due Date For each date on which a Break Event occurs Break Date a Breakage Fee shall be due only if the rate under A below exceeds the rate under B below and shall be determined as follows Breakage Fee the Present Value of ABxQ LIBOR Breakage where A B C The rate per annum equal to the sum ofi the bond equivalent yield bid side of the US Treasury security with a maturity closest to the Maturity Date as reported by the Wall Street Journal or other published source on the date the Interest Rate of this Note was set Lock in Date lusii the corresponding swap spread of Bank on the Lock in Date for a fixed rate payor to pay Bank the fixed rate side of an interest rate swap of that maturity plus iii 25 A rate per annum equal to the sum ofi the bond equivalent yield bid side of the US Treasury security with a maturity closest to the Maturity Date as reported by the Wall Street Journal or other published source on the Break Date plus ii the corresponding swap spread that Bank determines another swap dealer would quote to Bank on the Break Date for paying to Bank the fixed rate side of an interest rate swap of the maturity The sum of the products ofi each Affected Principal Amount for each Affected Principal Period times ii the number of days in that Affected Principal Period divided by 360 if this Note uses the Actual360 Computation or the actual number of days in the year if this Note uses the ActualActual Computation Affected Principal Amount for an Affected Principal Period is the principal amount of this Note scheduled to be outstanding during that Affected Principal Period determined as of the relevant Break Date before giving effect to the Break Event on that Break Date and for any prepayment multiplying each such principal amount times the Prepayment Fraction TAMPA Schedule 1 Page 1

22 Affected Principal Period is each period from and including a Scheduled Due Date to but excluding the next succeeding Scheduled Due Date provided that the first such period shall begin on and includes the Break Date LIBOR Breakage is any additional loss cost or expense that Bank may incur with respect to any hedge for the fixed rate of this Note based on the difference between the London interbank offered rate for US dollar deposits of the relevant maturity available in the London interbank market at the beginning of the interest period in which the Break Date occurs and that which is available in that market on the Break Date Maturity Date is the date on which the final payment of principal of this Note would but for any Break Event have become due Prepayment Fraction is a fraction equal to the principal amount being prepaid over the principal amount of this Note outstandingg immediate Ypprior to that prepaymentp py a on the Break Date Present Value is determined as of the Break Date using B above as the discount rate In addition a Break Event shall be deemed to occur hereunder if on any date Borrowing Date after the date hereof but prior to any acceleration of this Note any advance of principal under this Note is scheduled to be made and that advance fails to be made on that Borrowing Date whether due to the City s default the City s failure to borrow the termination of any loan commitment any unsatisfied condition precedent or otherwise in which case that Borrowing Date shall be a Break Date the Affected Principal Amount for that Break Event shall be based on the amount of the failed advance and the City shall on demand pay to the Bank any Breakage Fee due hereunder for that Break Event Breakage Fees are payable as liquidated damages are a reasonable preestimate of the losses costs and expenses Bank would incur in the event of any prepayment or acceleration of this Note are not a penalty will not require claim for or proof of actual damages and Bank s determination thereof shall be conclusive and binding in the absence of manifest error For any Break Event hereunder the foregoing Breakage Fee provisions supersede any breakage compensation agreement that the City and Bank may have executed with respect to this Note ADJUSTMENT TO INTEREST RATE Adjustment to Tax Exempt Interest Rate a Change in Maximum Corporate Tax Rate If the maximum federal corporate income tax rate for the Bank during any period in which interest is accruing shall be other than 35 then the interest on the Note during such period shall be modified by multiplying the interest on the Note as adjusted by a fraction equal to 1A65 where A equals the maximum marginalg corporate income tax rate then in effect b Loss of Deduction Under Section 265 b3b of Internal Revenue Code In the event the Note is determined not to be a qualified tax exempt obligation within the meaning of TAMPA Schedule 1 Page 2

23 i I Section 265 b3b of the Internal Revenue Code then the original interest rate on the Note shall be adjusted to c Other Change in Tax Laws If the tax laws or regulations are amended to cause the interest on the Note to be taxable to be subject to a minimum tax or an alternative minimum tax or to otherwise change the after tax yield on the Note to the Owner directly or indirectly other than a change described in a through b above or because of a Determination of Taxability then the interest rate on the Note shall be adjusted to cause the yield on the Note after payment of any increase in tax to equal what the yield on the Note would have been in the absence of such change or amendment in the tax laws or regulations The above adjustments shall be cumulative but in no event shall the interest on the Note exceed the lesser of the maximum permitted by law or the Taxable Rate set forth below The above adjustments to the interest rate on the Note shall be effective on the effective date of the applicable change in the tax laws or regulations All tax rates and interest rates are expressed as annual rates However proper partial adjustment shall be made if the tax law change is effective after the first day of the Owner s tax year or if the interest on the Note does not accrue for the entire tax year of the Owner Adjustments which create a circular calculation because the interest on the Note is affected by the calculation shall be carried out sequentially adjusting the interest on the Note accordingly in each successive calculation using as the new value the adjusted interest rate on the Note until the change on the interest rate on the Note caused by the next successive calculation of the adjustment is de minimis If more than one of paragraphs a through c apply then the interest on the Note shall be adjusted in the order in which listed above Taxable Rate Notwithstanding the foregoing in the event of i a Determination of Taxability as hereinafter defined orii state or federal tax laws or regulations are amended to cause the interest on the Note to be taxable to be subject to a minimum tax or an alternative minimum tax or decrease the after tax yield on the Note to the Registered Owner the interest rate on the Note shall be adjusted to cause the yield on the Note after payment of an increase in tax to equal what the yield on the Note would have been in the absence of such Determination of Taxability or change or amendment in tax laws or regulations but in no event higher than the Taxable Rate from and after and retroactively to the date as of such event and the Owner shall be entitled to such additional interest on this Note For purposes hereof Determination of Taxability means the circumstance of the interest on the Note becoming includable for federal income tax purposes in the gross income of the Owner as a consequence of any act omission or event whatsoever and regardless of whether the same was within or beyond the control of the City A Determination of Taxability will be deemed to have occurred upon i the receipt by the City or the Owner of an original or a copy of an Internal Revenue Service Technical Advice Memorandum or Statutory Notice of Deficiency which holds that the interest on the Note is includable in the gross income of the Owner ii the issuance of any public or private ruling of the Internal Revenue Service that the interest on the Note is includable in the gross income of the Owner or iii receipt by the City or Owner of an opinion of a Bond Counsel that the interest on the Note has become includable in the gross income of the Owner for federal income tax TAMPA Schedule 1 Page 3

24 purposes For all purposes of this definition a Determination of Taxability will be deemed to occur on the date as of which the interest on the Note is deemed includable in the gross income of the Owner In no event however shall interest be charged or paid in an amount in excess of the maximum interest rate permitted to be paid under applicable law TAMPA Schedule 1 Page 4

25 ATTACHMENT A AMORTIZATION SCHEDULE Principal Outstanding Rate Payment Date Interes Principal Payme Total Payment TAMPA