10. Resolution 5238 - Water BondsCity of Kalispell
Post Office Box. 1.997 - Kalispell, Montana 59903-1997 - Telephone (406)758-7700 Fax (406)758-7758
REPORT TO: Mayor Kennedy and City Council Members
FROM: Amy Robertson, Finance Director
Jim Patrick, City Manager
SUBJECT: 2007BWater Bonds
MEETING DATE: September 4, 2007
BACKGROUND: Last June the City refinanced several Board of Investment loan. ':: ith
DNRC 3.75% money — the 2007A bonds. The 2007B are for new
money for the Upper Storage Zone Water Reservoir Project. The
amount of the bond issue is $1,500,000 for 20 years at a fixed rate of
3.75%. Plant investment fees will fund a portion of the project. The
fiscal affects are positive since city funds are invested at 5.35%
currently. It makes sense to use State funds for this project.
RECOMMENDATION: Adoption of Bond Resolution.
Amy Robertson
Finance Director
Report compiled: August 29, 2007
im Patn
City Manager
RESOLI.UTION NO.523S
RESOLUTION RELATING To $1,500,000 WATER SYSTEM REVENUE BOND (DNRC
DRINKING WATER STATE REVOLVING LOAN PROGRAM), SERIES 2007B;
AUTHORIZING THE ISSUANCE AND FIXING THE TERMS AND CONDITIONS
THEREOF
WHEREAS, pursuant to the Drinking Water State Revolving Fund Act, Montana Code
Annotated, Title 75, Chapter 6, Part 2, as amended (the "State Act"), the State of Montana (the
"State") has established a revolving loan program (the "Program") to be administered by the
Department of Natural Resources and Conservation of the State of Montana, an agency of the
State (the "DNRC"), and by the Department of Environmental Quality of the State of Montana,
an agency of the State (the "DEQ"), and has provided that a drinking water state revolving fund
(the "Revolving Fund") be created Within the state treasury and all federal, state and other funds
for use in the Program be deposited into the Revolving Fund, including, but not limited to, all
federal grants for capitalization of a state drinking water revolving fund under the federal Safe
Drinking Water Act (the "Safe Drinking Water Act"), all repayments of assistance awarded from
the Revolving Fund, interest on investments made on money in the Revolving Fund and
payments of principal of and interest on loans made from the Revolving Fund; and
WHEREAS, the State Act provides that funds from the Program shall be disbursed and
administered for the purposes set forth in the Safe Drinking Water Act and according to rules
adopted by the DEQ and the DNRC; and
WHEREAS, the City of Kalispell, Flathead County, Montana (the "City") has applied to
the DNRC for a loan (the "2007B Loan") from the Revolving Fund to enable the City to finance,
refinance or reimburse itself for the costs of the 2007B Project (as hereinafter defined) which
will carry out the purposes of the Safe Drinking Water Act; and
WHEREAS, the City is authorized under applicable laws, ordinances and regulations to
adopt this Resolution and to issue the Series 2007B Bond (as hereinafter defined) to evidence the
2007B Loan for the purposes set forth herein; and
WHEREAS, the DNRC will fund the Loan in part, directly or indirectly, with proceeds of
the State's General Obligation Bonds (Drinking Water State Revolving Fund Program) (the
"State Bonds") and in part, directly or indirectly, with funds provided by the United States
Environmental Protection Agency.
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY
OF KALISPELL, MONTANA, AS FOLLOWS:
ARTICLE I
DEFINITIONS, RULES OF CONSTRUCTION AND APPENDICES
Section 1.1. Definitions. Unless a different meaning clearly appears from the context,
terms used with initial capital letters but undefined in this Supplemental Resolution shall have
the meanings given there in the Resolution or as follows:
"Accountant" or "Accountants" means an independent certified public accountant or a
firm of independent certified public accountants satisfactory to the DNRC.
"Additional Bonds" means any Bonds issued pursuant to Section 6.01 of the Original
Resolution.
"Administrative Expense Surcharge" means a surcharge on the 2007B Loan charged by
the DNRC to the City equal to (seventy-five hundredths of one percent) 0.75 % per annum on the
outstanding principal amount of the 2007B Loan, payable by the City on the same dates that
payments of interest on the 2007E Loan are due.
"Authorized DNRC Officer" means the Director of the DNRC or his or her designee.
"Bond Counsel" means any Counsel nationally recognized as experienced in matters
relating to the issuance by states or political subdivisions of tax-exempt obligations selected by
the City and acceptable to the DNRC.
"Bonds" means the Series 2001 Bond, Series 2004 Bonds, Series 2007A Bond, Series
2007B Bond and any Additional Bonds.
"Borrower" means the City or any permitted successor or assign.
"Business Day" means any day which is not a Saturday or Sunday, a legal holiday in the
State or a day on which banks in Montana are authorized or required by law to close.
"City" means the City of Kalispell, Montana.
"Closing" means the date of delivery of the Series 2007B Bond to the DNRC.
"Collateral Documents" means any security agreement, guaranty or other document or
agreement delivered to the DNRC securing the obligations of the City under this Supplemental
Resolution and the Series 2007E Bond. If no Collateral Documents secure such obligations, any
reference to Collateral Documents in this Supplemental Resolution shall be without effect.
"Committed Amount" means the amount of the 2007E Loan committed to be lent by the
DNRC to the City pursuant to Section 4.1 of this Supplemental Resolution, as such amount may
be reduced pursuant to Sections 3.2 and 3.4 of this Supplemental Resolution.
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"Construction Account" means the account created in the Water System Fund pursuant to
Section 7.02 of the original Resolution.
"Consultant" means a nationally recognized consultant or firm of consultants, or an
independent engineer or firm of independent engineers, or an Accountant, which in any case is
qualified and has skill and experience in the preparation of financial feasibility studies or
projections for facilities similar to the System or the Project, selected by the City and satisfactory
to the DNRC.
"Council" means the City Council of the City of Kalispell, Montana.
"Counsel" means an attorney duly admitted to practice law before the highest court of
any state and satisfactory to the DNRC.
"Debt" means, without duplication, (1) indebtedness of the City for borrowed money or
for the deferred purchase price of property or services; (2) the obligation of the City as lessee
under leases which should be recorded as capital leases under generally accepted accounting
principles; and (3) obligations of the City under direct or indirect guarantees in respect of, and
obligations (contingent or otherwise) to purchase or otherwise acquire, or otherwise to assure a
creditor against loss in respect of, indebtedness or obligations of others of the kinds referred to in
clause (1) or (2) above.
"Debt Service Account" means the account created in the Water System Fund pursuant to
Section 7.04 of the original Resolution.
"DEQ" means the Department of Environmental Quality of the State of Montana, an
agency of the State, or any successor to its powers, duties and obligations under the State Act or
the EPA Agreements.
"DNRC" means the Department of Natural Resources and Conservation of the State of
Montana, an agency of the State, and any successor to its powers, duties and obligations under
the State Act.
"Enabling Act" means Montana Code Annotated, Title 7, Chapter 7, Parts 44 and 45, as
amended, which authorizes the Borrower to own and operate the System, and to issue the Series
2007E Bond.
"EPA" means the Environmental Protection Agency, an agency of the United States of
America, and any successor to its functions under the Safe Drinking Water Act.
"EPA Agreements" means all capitalization grant agreements and other Written
agreements between the DEQ, DNRC and the EPA concerning the Program.
"EPA Capitalization Grant" means a grant of funds to the State by the EPA under Section
1452 of the Safe Drinking Water Act.
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"Fund" means the Water System Fund established pursuant to Section 7.01 of the
Original Resolution.
"Governmental Unit" means governmental unit as such term is used in Section 145 (a) of
the Code.
"Indenture" means the Indenture of Trust, dated as of May 1, 1998, between the Board of
Examiners of the State and the Trustee, as such may be supplemented or amended from time to
time in accordance with the provisions thereof, pursuant to which, among other things, the State
Bonds are to be or have been issued.
"Loan Loss Reserve Surcharge" means a fee equal to one percent (1.00%) per annum on
the outstanding principal amount of the 2007B Loan, payable on the same dates that payments of
interest on the 2007B Loan are due.
"Net Revenues" means the Revenues for a specified period less the Operating Expenses
for the same period.
"Operating Account" means the account created in the Water System Fund pursuant to
Section 7.03 of the Original Resolution.
"Original Resolution" means Resolution No. 4273, adopted by this Council on June 17,
1996, as amended and supplemented by Resolution Nos. 4603, 4592, and 5206, adopted by this
Council on March 5, 2001, May 17, 2004, and June 4, 2007.
"Person" means any individual, corporation, partnership, joint venture, limited liability
company, limited liability partnership, association, joint stock company, trust, unincorporated
organization or government or any agency or political subdivision thereof.
"Program" means the Drinking Water State Revolving Fund Program established by the
State Act.
"Public Entity" means a State agency, town, municipality, irrigation district, county water
and sewer district, a soil conservation district or other public body established by State law or an
Indian tribe that has a federally recognized governing body carrying out substantial
governmental duties and powers over any area.
"Rebate Account" means the account created in the Water System Fund pursuant to
Section 7.09 of the Original Resolution.
"Regulations"' means the Treasury Department, Income Tax Regulations, as amended or
any successor regulation thereto, promulgated under the Code or otherwise applicable to the
Series 2007B Bond.
"Repair and Replacement Account" means the Account created in the Water System
Fund pursuant to Section 7.07 of the Original Resolution.
"Reserve Account" means the account created in the Water System Fund pursuant to
Section 7.05 of the Resolution.
"Reserve Requirement" means, as of the date of calculation, an amount equal to the lesser
of: (i) 10% of the original principal amount of all series of Bonds then outstanding, or (ii) an
amount equal to the maximum principal of and interest payable on outstanding Bonds in the
current or any future fiscal year (giving effect to mandatory sinking fund redemption, if any).
"Resolution" means the Original Resolution as amended and supplemented by this
Supplemental Resolution and other Supplemental Resolutions.
"Safe Drinking Water Act" means Title XIV of the Public Health Service Act, commonly
known as the Safe Drinking Water Act, 42 U.S.C. §§300f et seq., as amended, and all
regulations, rules and interpretations issued by the EPA thereunder.
"Series 2001 Bond" means the $761,000 Water System Revenue Bond (DNRC Drinking
Water Revolving Loan Program), Series 2001, issued pursuant to the Resolution as then in
effect, to finance all or a portion of the project identified on Appendix A to Resolution No. 4603
and pay other associated costs.
"Series 2004 Bonds" means the $1,840,000 Water System Revenue and Refunding
Bonds, Series 2004, issued pursuant to the Resolution as then in effect, to finance all or a portion
of the 2004 Project described therein and effect the refunding described therein and pay other
associated costs.
"Series 2007A Bond" means the $1,253,159 Water System Revenue Refunding Bond
(DNRC Drinking Water State Revolving Loan Program.), Series 2007A, issued pursuant to the
Resolution as then in effect to implement the refunding described therein.
"Series 2007B Bond" means the $ l .5001,000 Water System Revenue Bond (DNRC
Drinking Water State Revolving Loan Program), Series 2007B, issued to the DNRC to evidence
the 2007B Loan.
"State" means the State of Montana.
"State Bonds" means the State's General obligation Bonds (Drinking Water State
Revolving Fund Program), issued or to be issued pursuant to the Indenture.
"State Act" means Montana Code Annotated, Title 75, Part 6, Chapter 2, as amended
from time to time.
"Supplemental Resolution" means this Resolution No. , of the City adopted on
September 4, 2007.
"Surplus Account" means the account created in the Water System Fund pursuant to
Section 7.08 of the Original Resolution.
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"System" means the water system of the City and all extensions, improvements and
betterments thereof heretofore or hereafter constructed and acquired.
"Trustee" means U.S. Bank National Association, in Seattle, Washington, or any
successor trustee under the Indenture.
"2007B Loan" means the loan made to the City by the DNRC pursuant to the Program in
the maximum amount of the Committed Amount to provide funds to pay all or a portion of the
costs of the 2007B Project and to fund a deposit to the Reserve Account.
"2007B Project" means the costs of the facilities, improvements and activities financed,
refinanced or the cost of which is being reimbursed to the City with proceeds of the 2007E Loan,
a described in Exhibit A to this Supplemental Resolution.
"Water Debt" means Debt incurred to acquire, construct, extend, improve, add to or
otherwise pay expenses of or related to the System, without regard to the source of payment and
security for such Debt (i.e., without regard to whether it is general obligation or revenue Debt),
or Debt payable from, or secured by, in whole or in part, any Water Revenues.
"Water Debt Service" means, for the period of determination, all required payments of
principal. and interest (including mandatory sinking fund redemptions) on all Water Revenue
Debt of the City.
"Water Revenue Debt" means all Debt of the City which is secured solely or partly by the
Water Revenues.
"Water Revenues" means revenues (gross or net) received by the Borrower from or in
connection with the operation of the System.
"Water System Fund" means the fund created by Section 7.01 of the original Resolution.
Section 1.2. other Rules of Construction. For all purposes of this Supplemental
Resolution, except where the context clearly indicates otherwise:
(a) All accounting terms not otherwise defined herein have the meanings
assigned to them in accordance with generally accepted government accounting
standards.
(b) Terms in the singular include the plural and vice versa.
(c) All references to time shall refer to Helena, Montana time, unless otherwise
provided herein.
(d) All references to mail shall refer to first-class mail postage prepaid.
(e) Words of the masculine gender shall be deemed and construed to include
correlative words of the feminine and neuter genders.
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(f) "Or" is not exclusive, but is intended to permit or encompass one, more or
all of the alternatives conjoined.
Section 1.3. Appendices. Attached to this Resolution and hereby made a part hereof are
the following Appendices:
Appendix A: a description of the 2007E Project;
Appendix B: the form of the Series 20078 Bond; and
Appendix wC: additional agreements and representations of the City.
ARTICLE II
AUTHORIZATION, FINDINGS, REPRESENTATIONS AND COVENANTS
Section 2.1. Authorization and Findings.
(a) Authorization. Under the provisions of the Enabling Act, the City is authorized to
issue and sell its revenue bonds payable during a term not exceeding forty years from their date
of issue, to provide funds for the reconstruction, improvement, betterment and extension of the
System or to refund its revenue bonds issued for such purpose; provided that the bonds and the
interest thereon are to be payable solely out of the net income and revenues to be derived from
rates, fees and charges for the services, facilities and commodities furnished by the undertaking,
and are not to create any obligation for the payment of which taxes may be levied except to pay
for services provided by the undertaking to the City.
(b) The System.. The City, pursuant to the Enabling Act and other laws of the State has
established and presently owns and operates the System.
(c) The 2007B Project. After investigation of the facts and as authorized by the Enabling
Act, this Council has determined it to be necessary and desirable and in the best interests of the
City to acquire and construct the 2007B Project.
(d) Outstanding Bonds. Pursuant to the Enabling Act and the original Resolution, the
City has issued and there are outstanding its Series 2001 Bond, Series 2004 Bonds, and Series
2007A Bond. The Series 2001 Bond, Series 2004 Bonds, and Series 2007A Bond are payable
from Net Revenues of the System, and no other bonds or indebtedness are outstanding that are
payable from or secured by revenues of the System.
(e) Additional Bonds. The City reserved the right under Section 6.01 of the Original
Resolution to issue Additional Bonds to finance the cost or estimated cost of providing any
further improvement, extension or rehabilitation of the System; provided that if the Additional
Bonds are issued to finance a Project, a certificate is to be signed by an Independent Consultant
stating that the Net Revenues in the Fiscal Year immediately preceding the issuance of such
Additional Bonds were at least equal to 125% of the maximum Principal and Interest
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Requirements for any complete future Fiscal Year (during the term of the then outstanding
Bonds) with respect to the outstanding Bonds and the Additional Bonds proposed to be issued.
Based on a certificate executed or to be executed by the Independent Consultant, it is hereby
determined that the City is authorized to issue $1,500,000 in aggregate principal amount of
Additional Bonds pursuant to Section 6.01 of the original Resolution payable from and secured
by the Net Revenues on a parity with the outstanding Series 2001 Bond, Series 2004 Bonds, and
Series 2007A Bond.
Section 2.2. Representations. The City represents as follows:
(a) Organization and Aut. The City:
(1) is duly organized and validly existing as a municipal corporation of the
State;
(11) has all requisite power and authority and all necessary licenses and permits
required as of the date hereof to oven and operate the System and to carry on its current
activities with respect to the System, to adopt this Supplemental Resolution and to enter
into the Collateral Documents and to issue the Series 2007B Bond and to carry out and
consummate all transactions contemplated by the Resolution, the Series 2007B Bond and
the Collateral Documents;
(111) is a Governmental Unit and a Public Entity; and
(iv) has taken all proper action to authorize the execution, delivery and
performance of its obligations under this Supplemental Resolution, the Series 2007B
Bond and the Collateral Documents and the incurrence of the Debt evidenced by the
Series 2007B Bond in the maximum amount of the Committed Amount.
(b) Litigation. There is no litigation or proceeding pending, or to the knowledge of the
City threatened, against or affecting the City in any court or before or by any governmental
authority or arbitration board or tribunal that, if adversely determined, would materially and
adversely affect the existence, corporate or otherwise, of the City, or the ability of the City to
make all payments and otherwise perform its obligations under the Resolution, the Series 2007B
Bond and the Collateral Documents, or the financial condition of the City, or the transactions
contemplated by the Resolution, the Series 2007B Bond and the Collateral Documents or the
validity and enforceability of the Resolution, the Series 2007B Bond and the Collateral
Documents. No referendum petition has been filed with respect to any resolution or other action
of the City relating to the 2007B Project, the Series 2007B Bond or any Collateral Documents
and the period for filing any such petition will have expired before issuance of the Series 2007B
Bond.
(c) Borrowinggal and Authorized. The adoption of this Supplemental Resolution, the
execution and delivery of the Series 2007B Bond and the Collateral Documents and the
consummation of the transactions provided for in this Supplemental Resolution, the Series
2007B Bond and the Collateral Documents and compliance by the City with the provisions of the
Resolution, the Series 2007B Bond and the Collateral Documents:
(i) are within the powers of the City and have been duly authorized by all
necessary action on the part of the City; and
(ii) do not and will not result in any breach of any of the terms, conditions or
provisions of, or constitute a default under, or result in the creation or imposition of any
lien., charge or encumbrance upon any property or assets of the City pursuant to any
resolution, indenture, loan agreement or other agreement or instrument (other than the
Resolution and any Collateral Documents) to which the City is a party or by which the
City or its property may be bound, nor will such action result in any violation of the
provisions of any laws, ordinances, governmental rules or regulations or court or other
governmental orders to which the City, its properties or operations are subject.
(d) No Defaults. No event has occurred and no condition exists that, upon execution and
delivery of the Series 2007B Bond and the Collateral Documents, would constitute a default
under the Resolution or the Collateral Documents. The City is not in violation of any term of
any agreement, bond resolution, trust indenture, charter or other instrument to which it is a party
or by which it or its property may be bound which violation would materially and adversely
affect the transactions contemplated hereby or the compliance by the City with the terms hereof
or of the Series 2007B Bond and the Collateral Documents.
(e) Governmental Consent. The City has obtained or made all permits, findings and
approvals required to the date of adoption of this Supplemental Resolution by any governmental
body or officer for the making and performance by the City of its obligations under this
Supplemental Resolution, the Series 2007B Bond and the Collateral Documents (including any
necessary water rate increase) or for the 2007B Project, the financing or refinancing thereof or
the reimbursement of the City for the costs thereof. No consent, approval or authorization of, or
filing, registration or qualification with, any governmental authority (other than those, if any,
already obtained) is required on the part of the City as a condition to adopting this Supplemental
Resolution, issuing the Series 2007E Bond or entering into the Collateral Documents and the
performance of the City's obligations hereunder and thereunder.
(f) Binding.„Obligation. The Resolution, the Series 2007B Bond and any Collateral
Document to which the City is a party are the valid and binding special, limited obligations and
agreements of the City, enforceable against the City in accordance with their terms, except to the
extent that the enforceability thereof may be limited by laws relating to bankruptcy, moratorium,
reorganization, insolvency or similar laws affecting creditors' rights and general principles of
equity.
(g) The 2007B Pro' ect. The 2007E Project consists and will consist of the facilities,
improvements and activities described in Appendix A, as such Appendix A may be amended
from time to time in accordance with the provision of Article III of this Supplemental
Resolution. The 2007B Project comprises facilities of a type that, as determined by the EPA,
will facilitate compliance with the national primary drinking water regulations applicable to the
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System or will otherwise significantly further the health protection objectives of the Safe
Drinking Water Act.
(h) The System. The System is a "community water system" within the meaning of the
State Act and the Safe Drinking Water Act in that it is a public water system, comprising
collection, treatment, storage and distribution facilities for the provision to the public of water for
human consumption, that serves not less than 15 service connections used by year-round
residents of the area served by the System or regularly serves not less than ZS year-round
residents.
(i) Full Disclosure. There is no fact that the City has not specifically disclosed in
writing to the DNRC that materially and adversely affects or (so far as the City can now foresee),
except for pending or proposed legislation or regulations that are a matter of general public
information, that will materially and adversely affect the properties, operations and finances of
the System, the City's status as a Public Entity and Governmental Unit, its ability to own and
operate the System in the manner it is currently operated or the City's ability to perform its
obligations under the Resolution, the Series 2007B Bond and the Collateral Documents and to
pledge any revenues or other property pledged to the payment of the Series 2007E Bond.
0) Compliance With Law. The City:
M is in compliance with all laws, ordinances, governmental rules and
regulations and court or other governmental orders, judgments and decrees to which it is
subject and which are material to the properties, operations and finances of the System or
its status as a Public Entity and Governmental Unit; and
(2) has obtained all licenses, permits, franchises or other governmental
authorizations necessary to the ownership of the System and the operation thereof and
agrees to obtain all such licenses, permits, franchises or other governmental
authorizations as may be required in the future for the System and the operation thereof,
which failure to obtain might materially and adversely affect the ability of the City to
conduct the operation of the System as presently conducted or the condition (financial or
otherwise) of the System or the City" s ability to perform its obligations under the
Resolution, the Series 2007B Bond and the Collateral Documents.
Section 2.3. Covenants.
(a) Insurance. In addition to the requirements of the Original Resolution, the City at all
times shall keep and maintain with respect to the System property and casualty insurance and
liability insurance with financially sound and reputable insurers, or self-insurance as authorized
by State law, against such risks and in such amounts, and with such deductible provisions, as are
customary in the State in the case of entities of the same size and type as the City and similarly
situated and shall carry and maintain, or cause to be carried and maintained, and pay or cause to
be paid timely the premiums for all such insurance. Each policy must provide that it cannot be
cancelled by the insurer without giving the City and the DNRC 30 days" prior written notice.
The City shall give the DNRC prompt notice of each insurance policy it obtains or maintains to
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comply with this Section 2.3(a) and of each renewal, replacement, change in coverage or
deductible under or amount of or cancellation of each such insurance policy and the amount and
coverage and deductibles and carrier of each new or replacement policy. Such notice shall
specifically note any adverse change as being an adverse change. The City shall deliver to the
DNRC at Closing a certificate providing the information required by this Section 2.3(a).
(b) Right of Inspection and Notice of Change of Location. The DNRC, the DECK and the
EPA and their designated agents shall have the right at all reasonable times during normal
business hours and upon reasonable notice to enter into and upon the property of the City for the
purpose of inspecting the System or any or all books and records of the City relating to the
System.
(c) Further Assurance. The City shall execute and deliver to the DNRC all such
documents and instruments and do all such other acts and things as may be necessary or required
by the DNRC to enable the DNRC to exercise and enforce its rights under the Resolution, the
Series 2007B Bond and the Collateral Documents and to realize thereon, and record and file and
re-record and refile all such documents and instruments, at such time or times, in such manner
and at such place or places, all as may be necessary or required by the DNRC to validate,
preserve and protect the position of the DNRC under the Resolution, the Series 2007B Bond and
the Collateral Documents.
(d) Maintenance of Security, if Any; Recordation of Interest.
(i) The City shall, at its expense, take all necessary action to maintain and
preserve the lien and security interest of the Resolution and the Collateral Documents so
long as any amount is owing under the Resolution or the Series 2007B Bond;
(ii) The City shall forthwith, after the execution and delivery of the Series
2007B Bond and thereafter from time to time, cause the Resolution and any Collateral
Documents granting a security interest in revenues or real or personal property and any
financing statements or other notices or documents relating thereto to be filed, registered
and recorded in such manner and in such places as may be required by law in order to
perfect and protect fully the lien and security interest hereof and thereof and the security
interest in them granted by the Resolution and, from time to time, shall perform or cause
to be performed any other act required by law, including executing or causing to be
executed any and all required continuation statements and shall execute or cause to be
executed any further instruments that may be requested by the DNRC for such perfection
and protection; and
(Iii) Except to the extent it is exempt therefrom, the City shall pay or cause to
be paid all filing, registration and recording fees incident to such filing, registration and
recording, and all expenses incident to the preparation, execution and acknowledgment of
the documents described in subparagraph (ii), and all federal or state fees and other
similar fees, duties, imposts, assessments and charges arising out of or in connection with
the execution and delivery of the Series 2007B Bond and the Collateral Documents and
the documents described in subparagraph (11).
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(e) Additional Agreements. The City covenants to comply with all representations,
covenants, conditions and agreements, if any, set forth in Appendix C hereto.
(f) Financial Information. This Section 2.3(f) supplements, and is not intended to limit,
the requirements in Section 8.06 of the original Resolution. The City agrees that for each fiscal
year it shall. furnish to the DNRC and the DEQ, promptly when available:
(1) the preliminary budget for the System, with items for the 2007E Project
shown separately; and
(2) when adopted, the final budget for the System, with items for the 2007E
Project shown separately.
The City will cause proper and adequate books of record and account to be kept showing
complete and correct entries of all receipts, disbursements and other transactions relating to the
System, the monthly gross revenues derived from its operation, and the segregation and
application of the gross revenues in accordance with the Resolution, in such reasonable detail as
may be determined by the City in accordance with generally accepted governmental accounting
practice and principles. It will cause such books to be maintained on the basis of the same fiscal
year as that utilized by the City. The City shall, within 270 days after the close of each fiscal
year, cause to be prepared and supply to the DNRC a financial report with respect to the System
for such fiscal year. The report shall be prepared at the direction of the financial officer of the
City in accordance with applicable generally accepted governmental accounting principles and,
in addition to whatever matters may be thought proper by the financial officer to be included
therein, shall include the following:
(A) A statement in detail of the income and expenditures of the System for the
fiscal year, identifying capital expenditures and separating them from operating
expenditures;
(B) A balance sheet as of the end of the fiscal year;
(C) The number of premises connected to the System at the end of the fiscal
year;
(D) The amount on hand in each account of the Fund at the end of the fiscal
year;
(E) A list of the insurance policies and fidelity bonds in force at the end of the
fiscal year, setting out as to each the amount thereof, the risks covered thereby, the name
of the insurer or surety and the expiration date of the policy or bond; and
(F) A determination that the report shows full compliance by the City with the
provisions of the Resolution during the fiscal year covered thereby, including proper
segregation of the capital expenditures from operating expenses, maintenance of the
required balance in the Reserve Account, and receipt of Net Revenues during each fiscal
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year at least equal to 125 % of the maximum amount of principal and interest payable on
Outstanding Parity Bonds in any subsequent fiscal year, or, if the report should reveal
that the revenues have been insufficient for compliance with the Resolution, or that the
methods used in accounting for such revenues were contrary to any provision of the
Resolution, the report shall include a full explanation thereof, together with
recommendations for such change in rates or accounting, practices or in the operation of
the System as may be required.
The City shall also have prepared and supplied to the DNRC and the DEQ, within 270 days of
the close of every other fiscal year, an audit report prepared by an independent certified public
accountant or an agency of the state in accordance with generally accepted governmental
accounting principles and practice with respect to the financial statements and records of the
System. The audit report shall include an analysis of the City's compliance with the provisions
of the Resolution.
(g) Project Accounts. The City shall maintain Project accounts in accordance with
generally accepted government accounting standards.
N Records. After reasonable notice from the EPA or the DNRC, the City shall make
available to the EPA or the DNRC such records as the EPA or the DNRC reasonably requires to
review and determine compliance with the Safe Drinking Water Act, as provided in Section 75-
6-224(1)(h) of the State Act.
(i) Compliance with Safe Drinkin Water Act. The City has complied and shall comply
with all conditions and requirements of the Safe Drinking Water Act pertaining to the 2007E
Loan and the 2007E Project, and shall maintain sufficient financial, managerial and technical
capability to continue to effect such compliance.
0) Compliance with DEQ Requirements. The City shall comply with plan, specification
and other requirements for public water systems established by the DEQ, as required by Section
756-224(1)(h).
Section 2.4. Covenants Relatiniz to the Tax-Exem t Status of the State Bonds.
(a) The City covenants and agrees that it will not use or permit to be used any of the
proceeds of the Series 2007B Bond or any other funds of the City in respect of the 2007B Project
or the Series 2007B Bond, directly or indirectly, in a manner that would cause, or take any other
action that would cause, any State Bond to be an `arbitrage bond's within the meaning of Section
148 of the Code or would otherwise cause the interest on the State Bonds to be included in gross
income for purposes of federal income taxation.
(b) The City agrees that it will not enter into, or allow any "related person" (as defined in
Section 147(a)(2) of the Code) to enter into, any arrangement, formal or informal, for the
purchase of the State Bonds or any other obligations of the DNRC in an amount related to the
amount of the 2007B Loan or the portion of the 2407B Loan derived directly or indirectly from
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proceeds of the State Bonds or that would otherwise cause any State Bond to be an `arbitrage
bond" within the meaning of Section 148 of the Code.
(c) The City shall not use or permit the use of the 2007B Project directly or indirectly in
any trade or business carried on by any Person who is not a Governmental Unit. For the purpose
of this subparagraph, use as a member of the general public (within the meaning of the
Regulations) shall not be taken into account and any activity carried on by a Person other than a
natural person shall be treated as a trade or business.
(d) Any portion of the 2007E Project being refinanced or the cost of which is being
reimbursed was acquired by and is now and shall, during the term of the 2007E Loan, be owned
by the City and not by any other Person. Any portion of the 2007B Project being financed shall
be acquired by and shall, during the term of the 2007B Loan, be owned by the City and not by
any other Person. Notwithstanding the previous two sentences, the City may transfer the 2007E
Project or a portion thereof to another Governmental Unit which is also a Public Entity if such
transfer is otherwise permitted under the Resolution and if such organization agrees with the
DNRC to comply with Sections 2.2(h), 2.2(i) and 2.4 of this Supplemental Resolution and if the
DNRC receives an Opinion of Bond Counsel that such transfer will not violate the State Act or
the Safe Drinking Water Act or adversely affect the exclusion of interest on the State Bonds from
gross income or purposes of federal income taxation. In addition, except as otherwise provided
in the Resolution or in any Collateral Documents, the City may sell or otherwise dispose of any
portion of the 2007E Project which has become obsolete or outmoded or is being replaced or for
other reasons is not needed by the City or beneficial to the general public or necessary to carry
out the purposes of the Safe Drinking Water Act.
(e) At the Closing of the 2007B Loan, the DNRC will, if necessary to obtain the Opinion
of Bond Counsel described in Section 7.05(a) of the Indenture, deliver to the City instructions
concerning compliance by the City with the arbitrage rebate requirements of Section 148 of the
Code (the "Arbitrage Rebate Instructions"). The City shall comply with the Arbitrage Rebate
Instructions, if any, delivered to it by the DNRC at Closing, as such Instructions may be
amended or replaced by the DNRC from time to time. The Arbitrage Rebate Instructions may be
amended or replaced by new Arbitrage Rebate instructions delivered by the DNRC and
accompanied by an Opinion of Bond Counsel to the effect that the use of said amended or new
Arbitrage Rebate Instructions will not adversely affect the excludability of interest on the State
Bonds or any Additional State Bonds (except State Bonds the interest on which the State did not
intend to be excluded from gross income for federal income tax purposes) from gross income of
the recipients thereof for federal income tax purposes.
(f) The City agrees that during the 2007B Loan term it will not contract with or permit
any Private Person to manage the 2007B Project or any portion thereof except according to a
written management contract and upon delivery to the DNRC of an opinion of Bond Counsel to
the effect that the execution and delivery of such management contract will not violate the State
Act or the Safe Drinking Water Act or adversely affect the exclusion of interest on State Bonds
from gross income or purposes of federal income taxation.
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(g) The City may not lease the 2007B Project or any portion thereof to any Person other
than a Nonexempt Person which agrees in writing with the City and the State not to cause any
default to occur under the Resolution; provided the City may lease all or any portion of the
2007B Project to a Nonexempt Person pursuant to a lease which in the opinion of Bond Counsel
delivered to the DNRC will not cause the interest on the State Bonds to be included in gross
income for purposes of federal income taxation.
(h) The City shall not change the use or nature of the 2007E Project if (1) such change
will violate the Safe Drinking Water Act, or (ii) so long as the State Bonds are outstanding
unless, in the opinion of Bond Counsel delivered to the DNRC, such change will not result in
the inclusion in gross income of interest on the State Bonds for federal income tax purposes.
Section 2.5. Maintenance of System; Liens. The City shall maintain the System,
including the 2007B Project, in good condition and make all necessary renewals, replacements,
additions, betterments and improvements thereto. The City shall not grant or permit to exist any
lien on the 2007B Project or any other property making up part of the System, other than liens
securing Debt where a parity or senior lien secures the Series 2007B Bond; provided that this
Section 2.5 shall not be deemed to be violated if a mechanic's or contractor's lien is filed against
any such property so long as the City uses its best efforts to obtain the discharge of such lien and
promptly reports to the DNRC the filing of such lien and the steps it plans to take and does take
to discharge of such lien.
Section 2.6. Maintenance of Existence • Mer er,_ Consolidation Etc. • Disposition of
Assets. The City shall maintain its corporate existence, except that it may consolidate with or
merge into another Governmental Unit or permit one or more Governmental Units to consolidate
with or merge into it or may transfer all or substantially all of its assets to another Governmental
Unit and then dissolve if the surviving, resulting or transferee entity (if other than the City) (1) is
a Public Entity and (ii) assumes in writing all of the obligations of the City under the Resolution,
the Series 2007B Bond and the Collateral Documents, and (a) such action does not result in any
default in the performance or observance of any of the terms, covenants or agreements of the
City under the Resolution, the Series 2007E Bond and the Collateral Documents, (b) such action
does not violate the State Act or the Safe Drinking water Act and does not adversely affect the
exclusion of interest on the Series 2007B Bond or the State Bonds from gross income for federal
income tax purposes and (c) the City delivers to the DNRC on the date of such action an opinion
of Bond Counsel that such action complies with this Section 2.6.
Other than pursuant to the preceding paragraph, the City shall not transfer the System or
any portion thereof to any other Person, except for property which is obsolete, outmoded, worn
out, is being replaced or otherwise is not needed for the operation of the System, unless the
provisions of (a) and (b) of the preceding paragraph are satisfied and the City delivers to the
DNRC an Opinion of Bond Counsel to that effect and, In addition, the DNRC consents to such
transfer.
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ARTICLE III
USE OF PROCEEDS; THE 2007E PROJECT
Section 3.1. Use of Proceeds. The City shall apply the proceeds of the 2007B Loan from
the DNRC solely as follows:
(a) The City shall apply the proceeds of the 2007B Loan solely to the financing,
refinancing or reimbursement of the costs of the 2007E Project as set forth in Appendix
A hereto and this Section 3.1. The 2007E Loan will be disbursed in accordance with
Article Iv hereof and Article VII of the Indenture. If the 2007B Project has not been
completed prior to Closing, the City shall, as quickly as reasonably possible, complete the
2007B Project and expend proceeds of the Series 2007B Bond to pay the costs of
completing the 2007B Project.
(b) No portion of the proceeds of the 2007B Loan shall be used to reimburse
the City for costs paid prior to the date of adoption of this Supplemental Resolution of a
Project the construction or acquisition of which occurred or began earlier than June 1,
1993. In addition, if any proceeds of the 2007E Loan are to be used to reimburse the City
for 2007E Project costs paid prior to the date of adoption of this Supplemental
Resolution, the City shall have complied with Section 1.150-2 of the Regulations in
respect of such costs.
(c) Any Debt to be refinanced with proceeds of the 2007E Loan was incurred
after June 1, 1993 for a Project the construction or acquisition of which began after June
111 1993. No proceeds of the 2007B Loan shall be used for the purpose of refinancing an
obligation the interest on which is exempt from federal income tax or excludable from
gross income for purposes of federal income taxation unless the DNRC has received an
Opinion of Bond Counsel, satisfactory to it, to the effect that such refinancing will not
adversely affect the exclusion of interest on the State Bonds from gross income for
purposes of federal income taxation.
Section 3.2. The 2007B Project. Set forth in Appendix A to this Supplemental
Resolution is a description of the 2007B Project, which describes the property which has been or
is to be acquired, installed, constructed or improved and the other activities, if any to be funded
from the 2007B Loan (the 2007B Project may consist of more than one facility or activity). The
2007E Project may be changed and the description thereof in Appendix A. may be amended from
time to time by the City but only after delivery to the DNRC of the following:
(a) A certificate of the City setting forth the amendment to Appendix A and
stating the reason therefor, including statements whether the amendment would cause an
increase or decrease in the cost of the 2007B Project, an increase or decrease in the
amount of 2007B Loan proceeds which will be required to complete the 2007B Project
and whether the change will materially accelerate or delay the construction schedule for
the 2007B Project,
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(b) A. written consent to such change in the 2007B Project by an Authorized
DNRC Officer;
(c) An opinion or Opinions of Bond Counsel stating that the 2007B Project, as
constituted after such amendment, is, and was at the time the State Bonds were issued,
eligible for financing under the State Act and is, and was at the time the Series 2007E
Bond was issued, eligible for financing under the Enabling Act, such amendment will not
violate the State Act or the Enabling Act and such amendment will not adversely affect
the exclusion of interest on the State Bonds or the Series 2007B Bond from gross income
for purposes of federal income taxation. Such an opinion of Bond Counsel shall not be
required for amendments which do not affect the type of facility to be constructed or
activity to be financed.
The City acknowledges and agrees that an increase in the principal amount of the 2007B
Loan may be made only upon an application to the DEQ, the DNRC and the Trustee, in such
form as the DEQ shall specify, which is approved by the DEQ and the DNRC, in their sole and
absolute discretion, and adoption by the governing body of the City of a resolution amendatory
of or supplementary to the Resolution authorizing the additional loan and delivery of written
certifications by officers of the City to the DEQ, the DNRC and the Trustee to the effect that all
representations and covenants contained in the resolution as it may be so amended or
supplemented are true as of the date of closing of the additional loan and compliance with
applicable tests for the incurrence of such Debt. No assurance can be given that any additional
loan funds will be available under the Program at the time of any such application or thereafter.
The City acknowledges and agrees that neither the DEQ, the DNRC, the Trustee nor any of their
agents, employees or representatives shall have any liability to the City and have made no
representations to the City as to the sufficiency of the 2007B Loan to pay 2007B Project costs or
as to the availability of additional funds under the Program to increase the principal amount of
the 2007B Loan.
Section 3.3. 2007B Project Representations and Covenants. The City hereby represents
to and covenants with the DNRC that:
(a) all construction of the 2007B Project has complied and will comply with all
federal and state standards, including, without limitation, EPA regulations and standards;
(b) all future construction of the 2007E Project will be done only pursuant to
fixed price construction contracts. The City shall obtain a performance and payment
bond from the contractor for each construction contract in the amount of 100% of the
construction price and ensure that such bond is maintained until construction is
completed to the City's, the DNRC's and the DEC's satisfaction;
(c) all future construction will be done in accordance with plans and
specifications on file with the DNRC and the DEQ, provided that changes may be made
in such plans and specifications with the written consent of an Authorized DNRC officer
and the DEQ; and
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(d) the 2007B Project is a project of the type permitted to be financed under the
Enabling Act, the State Act and the Program and Section 1452 of the Safe Drinking
Water Act.
Section 3.4. Completion or Cancellation or Reduction of Costs of the 2007E Project.
(a) Upon completion of the 2007B Project, the City shall deliver to the DNRC a
certificate stating that the 20078 Project is complete, stating the amount, if any, of the
Reserved Amounts, and releasing the remaining amount, if any, of the Committed
Amount. If any Reserved Amount is not later needed, the City shall so inform the DNRC
and release such amount. If Appendix A describes two or more separate projects as
making up the 2007B Project, a separate completion certificate shall be delivered for
each.
(b) If all or any portion of the 2007B Project is cancelled or cut back or its costs
are reduced or for any other reason the City will not require the full Committed Amount,
the City shall promptly notify the DNRC in writing of such fact and release the portion of
the Committed Amount which will not be needed.
ARTICLE IV
THE 2007B LOAN
Section 4.1. The 2007B Loan; Disbursement of 2007B Loan. The DNRC has agreed to
lend to the City, from time to time as the requirements of this Section 4.1 are met, an amount up
to $1,5001,000 (the "Committed Amount") for the purposes of financing, refinancing or
reimbursing the City for the costs of the 2007B Project; provided the DNRC shall not be required
to loan any proceeds of the State Bonds to the City after December 31, 2005. The Committed
Amount may be reduced as provided in Sections 3.2(a) and 3.4 of this Supplemental Resolution.
The 2007B Loan shall be disbursed as provided in this Section 4.1. The DNRC intends to
disburse the 2007B Loan through the Trustee.
(a) In consideration of the issuance of the Series 2007B Bond by the City, the DNRC
shall make, or cause the Trustee to make, a disbursement of all or a portion of the 2007B Loan
upon receipt of the following documents:
(1) an Opinion of Bond Counsel as to the validity and enforceability of the Series
2007B Bond and the security therefor and stating in effect that interest on the Series
2007B Bond is not includable in gross income for purposes of federal income taxation, in
form and substance satisfactory to the DNRC;
(2) the Series 2007B Bond, fully executed and authenticated;
(3) a certified copy of the Resolution and this Supplemental Resolution;
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(4) any other security instruments or documents required by the DNRC or DEQ
as a condition to their approval of the 2007B Loan;
(5) if all or part of a loan is being made to refinance a Project or reimburse the
City for the costs of a Project paid prior to the Closing, evidence, satisfactory to the
DNRC and the Bond Counsel referred to in (1) above, (A) that the acquisition or
construction of the Project was begun no earlier than June 1, 1993 or the debt was
incurred no earlier than June 1, 1993, (B) of the City's title to the Project, (C) of the costs
of such Project and that such costs have been paid by the City and (D) if such costs were
paid before adoption of this Supplemental Resolution that the City has complied with
Section 1.150-2 of the Regulations;
(6) the items required by the Indenture for the portion of the 2007B Loan to be
disbursed at Closing; and
(7) such other certificates, documents and other information as the DNRC, the
DEQ or the Bond Counsel giving the opinion referred to in subparagraph (1) may require
(including any necessary arbitrage rebate instructions).
(b) In order to obtain a disbursement of a portion of the 2007E Loan to pay costs of the
2007B Project, the City shall submit to the DNRC and the Trustee a signed request for
disbursement on the form prescribed by the DNRC, with all attachments required by such form.
The City may obtain disbursements only for costs which have been legally incurred and are due
and payable. All 2007E Loan disbursements will be made to the City only upon proof that cost
was incurred.
(c) For refinancings, a disbursement schedule complying with the requirements of the
Safe Drinking water Act shall be established by the DNRC and the City at Closing. The Trustee
shall disburse 2007E Loan amounts directly to the holder of the debt being refinanced according
to such schedule. If the City should repay all or a portion of the debt to be refinanced from other
sources or should otherwise not need any portion of the 2007E Loan which was to have been
used to refinance such debt, it shall inform the DNRC and the Trustee of such fact pursuant to
Section 3.4(b) and a new disbursement schedule shall be drawn up by the DNRC. The DNRC
shall obtain a receipt from the holder of the debt being refinanced for each disbursement made to
pay or prepay a portion of such debt.
(d) If all or a portion of the 2007E Loan is made to reimburse a City for 2007E Project
costs paid by it prior to Closing, the City shall present at Closing the items required by Section
4.1(b) relating to such costs. The Trustee shall disburse such amounts to the City pursuant to a
disbursement schedule complying with the requirements of the Safe Drinking water Act
established by the DNRC and the City at the Closing.
(e) Notwithstanding anything else provided herein, the Trustee shall not be obligated to
disburse the 2007B Loan any faster or to any greater extent than it has available EPA
Capitalization Grants, Bond proceeds and other amounts available therefor in the Revolving
Fund. The DNRC shall not be required to do `overmatching" pursuant to Section 5.04(b) of the
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Indenture, but may do so in its discretion. The City acknowledges that if 2007E Project costs are
incurred faster than the City projected at Closing, there may be delays in making 2007B Loan
disbursements for such costs because of the schedule under which EPA makes EPA
Capitalization Grant money available to the DNRC. The DNRC will use its best efforts to obtain
an acceleration of such schedule if necessary.
(f) Upon making each 2007E Loan disbursement, the Trustee is to note such
disbursement on Schedule A to the Series 2007B Bond.
(g) The City agrees that it will deposit in the Reserve Account upon receipt any proceeds
of the 2007B Loan borrowed for the purpose of causing the balance in the Reserve Account
equal the Reserve Requirement, either on the Closing Date of the 2007B Loan or upon any
disbursement date. The City further acknowledges and agrees that any portions of the 2007E
Loan representing capitalized interest shall be advanced only on Payment Dates and shall be
transferred by the Trustee on the Payment Date directly to the Debt Service Account. The
amount of any such transfer shall be a credit against the interest payments due on the Series
2007B Bond and interest thereon shall accrue only from the date of transfer.
(h) Compliance by the City with its representations, covenants and agreements contained
in the Resolution, this Supplemental Resolution and the Collateral Documents shall be a further
condition precedent to the disbursement of the 2007B Loan in whole or in part. The DNRC and
the Trustee, in their sole and absolute discretion, may make one or more disbursements, in whole
or in part, notwithstanding such noncompliance, and without liability to make any subsequent
disbursement of the 2007E Loan.
Section 4.2. Commencement of 2007B Loan Term. The City's obligations under this
Supplemental Resolution and the Collateral Documents shall commence on the date hereof
unless otherwise provided in this Supplemental Resolution. However, the obligation to make
payments under Article V hereof shall commence only upon the first disbursement by the
Trustee of 2007B Loan proceeds.
Section 4.3. Termination of 2007B Loan Term. The City's obligations under the
Resolution and the Collateral Documents in respect of the Series 2007E Bonds shall terminate
upon payment in full of all amounts due under the Series 2007B Bond and the Resolution in
respect thereof; provided, however, that the covenants and obligations provided in Article VII
and Section 11.4 of this Supplemental Resolution shall survive the termination of the Resolution.
Section 4.4. 2007B Loan Closima Submissions. on or prior to the Closing, the City will
have delivered to the DNRC and the Trustee the closing submissions required by Section 7.05 of
the Indenture.
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ARTICLE v
REPAYMENT of 2007B LOAN
Section 5.1. Repayment of 2007E Loan. The City shall repay the amounts lent to it
pursuant to Section 4.1 hereof, plus interest on the unpaid amounts lent at the rate of two percent
(2.00%) per annum, in semiannual Loan Repayments. In addition, the City shall pay an
Administrative Expense Surcharge on the outstanding principal amount of the 2007B Loan at the
rate of seventy-five hundredths of one percent (0-75%) per annurn and a Loan Loss Reserve
Surcharge equal to one percent (1.00%) per annum on the outstanding principal amount of the
2007B Loan. For purposes of this Supplemental Resolution and the Program, the term "Interest
on the Loan" or "Interest on the 2007B Loan" shall include the Administrative Expense
Surcharge and the Loan Loss Reserve Surcharge. The City shall pay all Loan Repayments and
Administrative Expense Surcharge and Loan Loss Reserve Surcharge in lawful money of the
United States of America to the DNRC. Interest and Administrative Expense Surcharge and
Loan Loss Reserve Surcharge shall be calculated on the basis of a year of 360 days comprising
12 months of 30 days each.
The Loan Repayments required by this Section 5.1, and the Administrative Expense
Surcharge and the Loan Loss Reserve Surcharge, shall be due on each January 1 and July 1 (the
"Payment Dates"), as follows:
(a) interest and Administrative Expense Surcharge and Loan Loss Reserve
Surcharge on the outstanding principal balance of the 2007B Loan shall be payable on
each January 1 and July 1, beginning on January 1, 2005 and concluding on July 1, 2027;
and
(b) the principal of the 2007B Loan shall be repayable on each Payment Date,
beginning on January 1, 2008 and concluding on July 1, 2027, and the amount of each
principal payment shall be calculated on the basis of an interest rate of 3.75% per annum;
provided that principal of the 2007E Loan is payable only in amounts that are multiples
Of $1NO.
The payments of principal of and interest and Administrative Expense Surcharge and
Loan Loss Reserve Surcharge on the 2007B Loan shall be due on the dates and in the amounts
shown in Schedule B to the Series 2007E Bond, as such Schedule B shall be modified from time
to time as provided below. The portion of each such Loan Repayment consisting of principal
and the portion consisting of interest and the amount of each Administrative Expense Surcharge
and the amount of each Loan Loss Reserve Surcharge shall be set forth in Schedule B to the
Series 2007B Bond. Upon each disbursement of 2007B Loan amounts to the City pursuant to
Section 4.1 hereof, the Trustee shall enter or cause to be entered the amount advanced on
Schedule A to the Series 2007E Bond under "Advances" and the total amount advanced under
Section 4.17 including such disbursement, under "Total Amount Advanced."
If the advance was made to pay costs of the 2007B Project pursuant to Section 4.1(b),
interest and Administrative Expense Surcharge and Loan Loss Reserve Surcharge on such
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advance shall accrue from the date the advance is made and shall be payable on each Payment
Date thereafter. once the completion certificate for the 2007B Project has been delivered to the
DNRC, the Trustee shall revise Schedule B to the Series 2007B Bond in accordance with this
Section 5.1 and the Trustee shall send a copy of such Schedule B to the City within one month
after delivery of the completion certificate.
Past -due payments of principal and interest and Administrative Expense Surcharge and
Loan Loss Reserve Surcharge shall bear interest at the rate of ten percent (10.00%) per annum,
until paid.
Any payment of principal, interest or Administrative Expense Surcharge and Loan Loss
Reserve Surcharge under this Section 5.1 shall also be credited against the same payment
obligation under the Series 2007B Bond.
Section 5.2. Additional Payments. The City shall also pay, within 30 days after receipt
of a bill therefor, from any legally available funds therefor, including proceeds of the 2007B
Loan, if the City so chooses, all reasonable expenses of the DNRC and the Trustee in connection
with the 2007E Loan, the Collateral Documents and the Series 2007B Bond, including, but not
limited to:
(1) the cost of reproducing this Supplemental Resolution, the Collateral
Documents and the Series 2007B Bond;
(2) the fees and disbursements of Bond Counsel and other Counsel utilized by
the DNRC and the Trustee in connection with the 2007E Loan, the Resolution, the
Collateral Documents and the Series 2007B Bond and the enforcement thereof; and
(3) all taxes and other governmental charges in connection with the execution
and delivery of the Collateral Documents or the Series 2007B Bond, whether or not the
Series 2007E Bond is then outstanding, including all recording and filing fees relating to
the Collateral Documents and the pledge of the State's right, title and interest in and to
the Series 2007B Bond, the Collateral Documents and the Resolution under the Board
Resolution (and with the exceptions noted therein) and all expenses, including attorneys'
fees, relating to any amendments, waivers, consents or collection or enforcement
proceedings pursuant to the provisions hereof or thereof.
Section 5.3. Prepayments. The City may not prepay all or any part of the outstanding
principal amount of the Series 2007B Bond unless (1) it obtains the prior written consent of the
DNRC thereto, and (11) no Loan Repayment or Administrative Expense Surcharge or Loan Loss
Reserve Surcharge is then delinquent. Any prepayment permitted by the DNRC must be
accompanied by payment of accrued interest and Administrative Expense Surcharge and Loan
Loss Reserve Surcharge to the date of prepayment on the amount of principal prepaid. If the
Series 2007E Bond is prepaid in part pursuant to this Section 5.3, such prepayments shall be
applied to principal payments in inverse order of maturity.
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Section 5.4. obligations of City Unconditional. The obligations of the City to make the
payments required by the Resolution and the Series 2007E Bond and to perform its other
agreements contained in the Resolution, the Series 2007E Bond and Collateral Documents shall
be absolute and unconditional, except as otherwise provided herein or in such documents. The
City (a) shall not suspend or discontinue any payments provided for in the Resolution and the
Series 2007B Bond, (b) shall perform all its other agreements in the Resolution, the Series
2007E Bond and the Collateral Documents and (c) shall not terminate the Resolution, the Series
2007E Bond or the Collateral Documents for any cause, including any acts or circumstances that
may constitute failure of consideration, destruction of or damage to the 2007B Project or the
System., commercial frustration of purpose, any dispute with the DNRC or the EPA, any change
in the laws of the United States or of the State or any political subdivision of either or any failure
of the DNRC to perform any of its agreements, whether express or implied, or any duty, liability
or obligation arising from or connected with the Resolution.
Section S.S. Limited Liability. All payments of principal of and interest on the 2007B
Loan and other payment obligations of the City hereunder and under the Series 2007E Bond
shall be special, limited obligations of the City payable solely out of the Net Revenues and shall
not, except at the option of the City and as permitted by law, be payable out of any other
revenues of the City. The obligations of the City under the Resolution and the Series 2007E
Bond shall never constitute an indebtedness of the City within the meaning of any state
constitutional provision or statutory or charter limitation and shall never constitute or give rise to
a pecuniary liability of the City or a charge against its general credit or taxing power. The taxing
powers of the City may not be used to pay principal of or interest on the Series 2007B Bond, and
no funds or property of the City other than the Net Revenues may be required to be used to pay
principal of or interest on the Series 2007E Bond.
ARTICLE VI
INDEMNIFICATION of DNRC AND DEQ
The Borrower shall indemnify and save harmless the DNRC, DEQ and their officers,
employees and agents (each an "Indemnified Party" or, collectively, the `Indemnified Parties")
against and from any and all claims, damages, demands, expenses, liabilities and losses of every
kind asserted by or on behalf of any Person arising out of the acts or omissions of the Borrower
or its employees, officers, agents, contractors, subcontractors, or consultants in connection with
or with regard or in any way relating to the condition, use, possession, conduct, management,
planning, design, acquisition, construction, installation or financing of the Project. The
Borrower shall also indemnify and save harmless the Indemnified Parties against and from all
costs, reasonable attorneys' fees, expenses and liabilities incurred in any action or proceeding
brought by reason of any such claim or demand. If any proceeding is brought against an
Indemnified Party by reason of such claim or demand, the Borrower shall, upon notice from an
Indemnified Party, defend such proceeding on behalf of the Indemnified Party.
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ARTICLE VII
ASSIGNMENT
Section 7.1. Assi- ent bv City. The City may not assign its rights and obligations
under the Resolution or the Series 2007E Bond.
Section 7.2. Assianin nt by DNRC. The DNRC will pledge its rights under and interest
in the Resolution, the Series 2007B Bond and the Collateral Documents (except to the extent
otherwise provided in the Indenture) as security for the payment of the State Bonds and may
further assign such interests to the extent permitted by the Indenture, without the consent of the
City.
Section 7.3. State Refundina Bonds. In the event the State Bonds and Additional State
Bonds are refunded by bonds which are not Additional State Bonds, all references in the
Resolution to State Bonds and Additional State Bonds shall be deemed to refer to the refunding
bonds and any bonds of the State on a parity with such refunding bonds (together, the
"Refunding Bonds") or, in the case of a crossover refunding, to the State Bonds and Additional
State Bonds and the Refunding Bonds. In the event the State Bonds are refunded by an issue of
Additional State Bonds, all references in the Resolution to the State Bonds shall be deemed to
refer to such Additional State Bonds or, in the case of a crossover refunding, both the State
Bonds and such Additional State Bonds.
ARTICLE VIII
THE SERIES 2007E BOND
Section 8.1. Net Revenues Available. The City is authorized to charge Just and equitable
rates, charges and rentals for all services directly or indirectly furnished by the System, and to
pledge and appropriate to the Series 2001 Bond, the Series 2004 Bonds, the Series 2007A Bond,
and the Series 2007E Bond the Net Revenues to be derived from the operation of the System,
including improvements, betterments or extensions thereof hereafter constructed or acquired.
The Net Revenues to be produced by such rates, charges and rentals during the term of the Series
2007B Bond will be more than sufficient to pay the principal and interest when due on the Series
2001 Bond, the Series 2004 Bonds, the Series 2007A Bond, and the Series 2007E Bond, and to
create and maintain reasonable reserves therefor and to provide an adequate allowance for
replacement and depreciation, as herein prescribed.
Section 8.2. Issuance and Sale of the Series 2007B Bond. The Council has investigated
the facts necessary and hereby finds, determines and declares it to be necessary and desirable for
the City to issue the Series 2007B Bond to evidence the 2007B Loan. The Series 2007E Bond is
issued to the DNRC without public sale pursuant to Montana Code Annotated, Section 7-7-
4433(2)(a).
Section 8.3. Terms. The Series 2007B Bond shall be in the maximum principal amount
equal to the original Committed Amount of the 2007B Loan, shall be issued as a single, fully
24
registered bond numbered R- 1, shall be dated as of the date of delivery to the DNRC, and shall
bear interest at the rate charged by the DNRC on the 2007B Loan. The principal of and interest
on the Series 2007B Bond shall be payable on the same dates and in the same amounts as
principal and interest of the Loan Repayments are payable. Advances of principal of the Series
2007B Bond shall be deemed made when advances of the 2007E Loan are made under Section
4.1, and such advances shall be payable in accordance with Schedule B to the Series 2007E
Bond, as it may be revised by the DNRC from time to time in accordance with Section 5.1.
The City may prepay the Series 2007E Bond, in whole or in part, only upon the terms
and conditions under which it can prepay the 2007E Loan under Section 5.3.
Section 5.4. Negotiability, Transfer and Registration. The Series 2007B Bond shall be
fully registered as to both principal and interest, and shall be initially registered in the name of
and payable to the DNRC. While so registered, principal of and interest on the Series 2007B
Bond shall be payable to the DNRC at the office of the Department of Natural Resources and
Conservation, 1625 Eleventh Avenue, Helena, Montana 59620-1601 or such other place as may
be designated by the DNRC in writing and delivered to the City. The Series 2007E Bond shall
be negotiable, subject to the provisions for registration and transfer contained in this Section. No
transfer of the Series 2007B Bond shall be valid unless and until (1) the holder, or his duly
authorized attorney or legal representative, has executed the form of assignment appearing on the
Series 2007B Bond, and (2) the Finance Director of the City (or successors, the "Registrar"), as
Bond Registrar, has duly noted the transfer on the Series 2007B Bond and recorded the transfer
on the registration books of the Registrar. The Registrar may, prior to noting and recording the
transfer, require appropriate proof of the transferor's authority and the genuineness of the
transferor's signature. The City shall be entitled to deem and treat the Person in whose name the
Series 2007B Bond is registered as the absolute owner of the Series 2007E Bond for all
purposes, notwithstanding any notice to the contrary, and all payments to the registered holder
shall be valid and effectual to satisfy and discharge the City's liability upon such Bond to the
extent of the sure or sums so paid.
Section 5.5. Execution and Deliver The Series 2007E Bond shall be executed on
behalf of the City by the manual signatures of the Mayor, City Manager and the City Finance
Director. Any or all of such signatures may be affixed at or prior to the date of delivery of the
Series 2007B Bond. The Series 2007B Bond shall be sealed with the corporate seal of the City.
In the event that any of the officers who shall have signed the Series 2007B Bond shall cease to
be officers of the City before the Series 2007E Bond is issued or delivered, their signatures shall
remain binding upon the City. Conversely, the Series 2007B Bond may be signed by an
authorized official who did not hold such office on the date of adoption of this Supplemental
Resolution. The Series 2007B Bond shall be delivered to the DNRC, or its attorney or legal
representative.
Section 8.6. Form. The Series 2007E Bond shall be prepared in substantially the form
attached as Appendix B.
25
ARTICLE Ix
SECURITY FOR THE SERIES 2007B BOND
The Series 2007E Bond is issued as an Additional Bond under Section 6.01 of the
Resolution and shall, with the Series 2001 Bond, the Series 2004 Bonds, the Series 2007A Bond,
and any other Additional Bonds issued under the provisions of Section 6.01 of the original
Resolution, be equally and ratably secured by the provisions of the Resolution and payable out of
the Net Revenues appropriated to the Debt Service Account of the water System Fund, without
preference or priority, all as provided in the Resolution, and secured by the Reserve Account, as
further provided in Sections 6 and 7.05 of the original Resolution. Upon advancement of
principal of the Series 2007B Bond, the Finance Director shall transfer from available funds of
the System or proceeds of the Series 2007E Bond such amount or amounts to the Reserve
Account to cause the balance therein to equal the Reserve Requirement, treating such principal
amount as outstanding. Upon the first advance of proceeds of the Series 2007B Bond, the
deposit to the Reserve Account shall be sufficient to cause the balance in the Reserve Account to
equal the Reserve Requirement in respect of the Series 2001 Bond, the Series 2004 Bonds, the
Series 2007A Bond, and the principal of the Series 2007B Bond so advanced. The City shall
keep, perform and observe each and every one of its covenants and undertakings set forth in the
Resolution for the benefit of the registered owners from time to time of the Series 2007E Bond.
ARTICLE x
TAX MATTERS
Section 10.1. Use of 2007B-Project. The 2007E Project will be owned and operated by
the City and available for use by members of the general public on a substantially equal basis.
The City shall not enter into any lease, use or other agreement with any non -governmental
person relating to the use of the 2007B Project or the System or security for the payment of the
Series 2007B Bond which might cause the Series 2007B Bond to be considered a "private
activity bond" or "private loan bond" within the meaning of Section 141 of the Code.
Section 10.2. General Covenant. The City covenants and agrees with the owners from
time to time of the Series 2007B Bond that it will not take or permit to be taken by any of its
officers, employees or agents any action which would cause the interest on the Series 2007B
Bond to become includable in gross income for federal income tax purposes under the Code and
the Regulations, and covenants to take any and all actions within its powers to ensure that the
interest on the Series 2007B Bond will not become includable in gross income for federal
income tax purposes under the Code and the Regulations.
Section 10.3. Arbitrage,Certification. The Mayor, City Manager and the City Finance
Director, being the officers of the City charged with the responsibility for issuing the Series
2007B Bond pursuant to the Resolution, are authorized and directed to execute and deliver to the
DNRC a certificate in accordance with the provisions of Section 148 of the Code, and Section
1.148-2(b) of the Regulations, stating that on the basis of facts, estimates and circumstances in
existence on the date of issue and delivery of the Series 2007B Bond, it is reasonably expected
26
that the proceeds of the Series 2007B Bond will be used in a manner that would not cause the
Series 2007B :Bond to be an `sarbitrage bond"' within the meaning of Section 148 of the Code and
the Regulations.
Section 10.4. Arbitrage_ Rebate. The City acknowledges that the Series 2007B Bond is
subject to the rebate requirements of Section 148(f) of the Code. The City covenants and agrees
to retain such records, make such determinations, file such reports and documents and pay such
amounts at such times as are required under said Section 148(f) and applicable Treasury
Regulations to preserve the exclusion of interest on the Series 2007E Bond from gross income
for federal income tax purposes, unless the Series 2007B Bond qualifies for the exception from
the rebate requirement under Section. 148(f)(4)(B) of the Code and no "gross proceeds" of the
Series 2007B Bond (other than amounts constituting a "bona fide debt service fund") arise
during or after the expenditure of the original proceeds thereof. In furtherance of the foregoing,
the Finance Director is hereby authorized and directed to execute a Rebate Certificate,
substantially in the form of the Rebate Certificate prepared by Bond Counsel and the City hereby
covenants and agrees to observe and perform the covenants and agreements contained therein,
unless amended or terminated in accordance with the provisions thereof.
Section 10.5. Information Reporting. The City shall file with the Secretary of the
Treasury, not later than February 15, 2008, a statement concerning the Series 2007E Bond
containing the information required by Section 149(e) of the Code.
ARTICLE xI
CONTINUING DISCLOSURE
The City understands and acknowledges that the DNRC is acquiring the Series 2007E
Bond under the Program pursuant to which the State issues from time to time State Bonds to
provide funds therefor. The City covenants and agrees that, upon written request of the DNRC
from time to time, the City will promptly provide to the DNRC all information that the DNRC
reasonably determines to be necessary or appropriate to offer and sell State Bonds or to provide
continuing disclosure in respect of State Bonds, whether under Rule 15c2-12 (17 C.F.R. §
240.15c2- 12) promulgated by the Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended, or otherwise. Such information shall include, among other
things and if so requested, financial statements of the City prepared in accordance with generally
accepted accounting principles promulgated by the Financial Accounting Standards Board as
modified in accordance with the governmental accounting standards promulgated by the
Governmental Accounting Standards Board or as otherwise provided under Montana law, as in
effect from time to time (such financial statements to relate to a fiscal year or any period therein
for which they are customarily prepared by the City, and, if for a fiscal year and so requested by
the DNRC, subject to an audit report and opinion of an accountant or government auditor, as
permitted or required by the laws of the State). The City will also provide, with any information
so furnished to the DNRC, a certificate of the Mayor, the City Manager and the City Finance
Director of the City to the effect that, to the best of their knowledge, such information does not
include any untrue statement of a material fact or omit to state any material fact required to be
27
stated therein to make the statements made, in light of the circumstances under which they are
made, not misleading.
ARTICLE X11
MISCELLANEOUS
Section 12.1. Notices. All notices or other communications hereunder shall be
sufficiently sent or given and shall be deemed sent or given when delivered or mailed by
certified mail, postage prepaid, to the parties at the following addresses:
DNRC-- Department of Natural Resources and Conservation
1625 Eleventh Avenue
P. O. Box 201601
Helena, Montana 59620-1601
Attn: Conservation and Resource
Development Division
Trustee: U.S. Bank National Association
c/o Corporate Trust Services
Two Union Square
601 Union Street, Suite 2120
Seattle, Washington 98 101
City: City of Kalispell
312 1" Avenue East
P.O. Box 1997
Kalispell, Montana 59903
Attn: City Finance Director
Any of the above parties may, by notice in writing given to the others, designate any further or
different addresses to which subsequent notices or other communications shall be sent.
Section 12.2. Binding Effect. This Supplemental Resolution shall inure to the benefit of
and shall be binding upon the DNRC, the City and their respective successors and assigns.
Section 12.3. Severabilit . If any provision of this Supplemental Resolution shall be
determined to be unenforceable at any time, it shall not affect any other provision of the
Resolution or the enforceability of that provision at any other time.
Section 12.4. Amendments. This Supplemental Resolution may not be effectively
amended without the written consent of the DNRC.
Section 12.5. A licable Law. This Supplemental Resolution shall be governed by and
construed in accordance with the internal laws of the State.
Section 12.6. Captions; References to Sections. The captions in this Supplemental
Resolution are for convenience only and do not define or limit the scope or intent of any
provisions or Sections of this Supplemental Resolution.
Section 12.7. No Liabilit of Individual officers Directors or Trustees. No recourse
under or upon any obligation, covenant or agreement contained in this Supplemental Resolution
shall be had against any director, officer or employee, as such, past, present or future, of the
DNRC, the DEQ or the Trustee, either directly or through the DNRC, the DEQ or the Trustee, or
against any officer, or member of the governing body or employee of the City, past, present or
future, as an individual so long as such individual was acting in good faith. Any and all personal
liability of every nature, whether at common law or in equity, or by statute or by constitution or
otherwise, of any such officer or member of the governing body or employee of the DNRC, the
Trustee or the City is hereby expressly waived and released by the City and by the DNRC as a
condition of and in consideration for the adoption of this Resolution and the making of the
2007B Loan.
Section 12.8. Pam nts Due on Holida s. If the date for making any payment or the last
date for performance of any act or the exercise of any right, as provided in this Supplemental
Resolution or the Series 2007B Bond, shall not be Business Day, such payments may be made or
act performed or right exercised on the next succeeding Business Day with the same force and
effect as if done on the nominal date provided in this Supplemental Resolution or the Series
2007B Bond.
Section 12.9. Rif4ht of others To Perform Ci 's Covenants. In the event the City shall
fail to make any payment or perform any act required to be performed hereunder, then and in
each such case the DNRC or the provider of any Collateral Document may (but shall not be
obligated to) remedy such default for the account of the City and make advances for that
purpose. No such performance or advance shall operate to release the City from any such default
and any sums so advanced by the DNRC or the provider of any Collateral Document shall be
paid immediately to the party making such advance and shall bear interest at the rate of ten
percent (10.00%) per annum from the date of the advance until repaid. The DNRC and the
provider of any Collateral Document shall have the right to enter the 2007B Project or the
facility or facilities of which the 2007B Project is a part or any other facility which is a part of
the System in order to effectuate the purposes of this Section.
Section 12.10. Authentication of Transcript. The officers of the City are hereby
authorized and directed to furnish to the DNRC and to Bond Counsel certified copies of all
proceedings relating to the issuance of the Series 2007B Bond and such other certificates and
affidavits as may be required to show the right, power and authority of the City to issue the
Series 2007E Bond, and all statements contained in and shown by such instruments, including
any heretofore furnished, shall constitute representations of the City as to the truth of the
statements of fact purported to be shown thereby.
29
Section 12.11. Effective Date. This Supplemental Resolution shall take effect
immediately.
Adopted by the City Council of the City of Kalispell, Montana, on this 4th day of
September, 2007.
Attest:
City Clerk
30
(SEAL)
Mayor
APPENDIX A
Description of the 2007E Project
The cost of designing and engineering upgrades and improvements to the water system,
including installing a water tank and associated piping and related improvements.
A-1
�41 9_9_00 i Ma ■
[Form of the Series 2007B Bond]
UNITED STATES OF AMERICA
STATE OF M ONTANA
COUNTY OF FLATHEAD
CITY OF KALISPELL
WATER SYSTEM REVENUE BOND
(DNRC DRINKING WATER STATE REVOLVING LOAN PROGRAM)
SERIES 2007B
$1,500,000
FOR VALUE RECEIVED, THE CITY OF KALISPELL, MONTANA (the "City"'}, a
duly organized municipal corporation and political subdivision of the State of Montana,
acknowledges itself to be specially indebted and, for value received, hereby promises to pay to
the Department of Natural Resources and Conservation of the State of Montana (the "DNRC"),
or its registered assigns, solely from the Debt Service Account of its Water System Fund, the
principal suns equal to the sum of the amounts entered on Schedule A hereto under "Total
Amount Advanced," with interest on each such amount from the date such amount is advanced
hereunder at the rate of two percent (2.00%) per annum on the unpaid balance until paid. In
addition, the City shall pay an Administrative Expense Surcharge and a Loan Loss Reserve
Surcharge on the outstanding principal amount of this Bond at the rates of seventy-five
hundredths of one percent (0.75%) and one percent (1.00%), respectively, per annum. Interest
and Administrative Expense Surcharge and Loan Loss Reserve Surcharge shall be payable in
semiannual installments payable on each January I and July I (each a "Loan Repayment Date")
commencing January 1, 2008. Principal shall be payable on the dates set forth in Schedule B
hereto. Each installment shall be in the amount set forth opposite its due date in Schedule B
hereto under "Total Loan Payment."' The portion of each such payment consisting of principal,
the portion consisting of interest and the portion consisting of Administrative Expense Surcharge
and the portion consisting of Loan Loss Reserve Surcharge shall be as set forth in Schedule B
hereto. Upon each disbursement of 2007E Loan amounts to the City pursuant to the Resolution
described below, the DNRC shall enter (or cause to be entered) the amount advanced on
Schedule A under "Advances" and the total amount advanced under the Resolution (as
hereinafter defined), including such disbursement, under "Total Amount Advanced." The
DNRC shall prepare Schedule B and revised Schedules B, or cause Schedule B and revised
Schedules B to be prepared, as provided in Section 5.1 of the Resolution. Schedule B shall be
calculated and recalculated on a level debt service basis assuming an interest rate of three and
seventy-five hundredths percent (3.75%) per annum. Past -due payments of principal and
interest, Administrative Expense Surcharge and Loan Loss Reserve Surcharge shall bear interest
at the rate of ten percent (10-00%) per annum, until paid. Interest and Administrative Expense
IM
Surcharge and Loan Loss Reserve Surcharge shall be calculated on the basis of a 360-day year
comprising 12 months of 30 days each. All payments under this Bond shall be made to the
registered holder of this Bond, at its address as it appears on the Bond register, in lawful money
of the United States of America.
This Bond constitutes a series in the maximum authorized principal amount of
$1,500,000 (the "Series 2007B Bond"), issued to finance costs of designing and engineering of
certain improvements to the water system of the City (the "System") and to make a deposit to a
reserve fund for the Bonds. The Series 2OO7B Bond is issued pursuant to and in full conformity
with the Constitution and laws of the State of Montana thereunto enabling, including Montana
Code Annotated, Title 7, Chapter 7, Part 44 and 45, as amended, and ordinances and resolutions
duly adopted by the governing body of the City, including Resolution No. 4273, adopted by this
Council on June 17, 1996, as amended and supplemented by Resolution Nos. 4603, 4592, and
52051, adopted by this Council on March 5, 2001, May 17, 2004, and June 4, 2007, respectively
(collectively, the "original Resolution"), as amended and supplemented by Resolution No.
(the "Supplemental Resolution"), adopted September 4, 2007 (as so amended and supplemented,
collectively, the "Resolution"). The Series 2007B Bond is issuable only as a single, fully
registered bond. The Series 2OO7B Bond is issued on a parity and is equally and ratably secured
by the Net Revenues of the System with the City's outstanding Water System Revenue Bond
(DNRC Drinking 'Water Revolving Loan Program), Series 2001 (the "Series 2001 Bond"), its
Water System Revenue and Refunding Bonds, Series 2004 (the "Series 2004 Bonds"), and its
Water System Revenue Refunding Bond (DNRC Drinking Water State Revolving Loan
Program), Series 2007A (the "Series 2007A Bond").
Reference is made to the Resolution for a more complete statement of the terms and
conditions upon which the Series 2O07B Bond has been issued, the Net Revenues of the System
pledged and appropriated for the payment and security thereof, the conditions upon which
additional bonds may be issued under the Resolution and made payable from such Net Revenues
on a parity with the Series 2001 Bond, the Series 2004 Bonds, the Series 20O7A Bond, and the
Series 2007E Bond (collectively, the "Bonds") or otherwise, the conditions upon which the
Resolution may be amended, the rights, duties and obligations of the City, and the rights of the
owners of the Series 2OO7B Bond.
The City may prepay the principal of the Series 2OO7B Bond only if (i) it obtains the
prior written consent of the DNRC thereto, and (ii) no Loan Repayment or Administrative
Expense Surcharge or Loan Loss Reserve Surcharge is then delinquent. Any prepayment
permitted by the DNRC must be accompanied by payment of accrued interest and
Administrative Expense Surcharge and Loan Loss Reserve Surcharge to the date of prepayment
on the amount of principal prepaid. If the Series 2OO7B Bond is prepaid in part, such
prepayments shall be applied to principal payments in inverse order of maturity.
The Bonds, including interest and any premium for the redemption thereof, are payable
solely from the Net Revenues pledged for the payment thereof and do not constitute a debt of the
City within the meaning of any constitutional, statutory or charter limitation or provision.
The City may deem and treat the person in whose name this Series 2007E Bond is
registered as the absolute owner hereof, whether this Series 2007E Bond is overdue or not, for
the purpose of receiving payment and for all other purposes, and the City shall not be affected by
any notice to the contrary.
IT IS HEREBY CERTIFIED, RECITED, COVENANTED AND AGREED that the City
has duly authorized and will forthwith undertake the improvements to the System hereinabove
described, has fixed and established and will collect reasonable rates and charges for the services
and facilities afforded by the System, and has created a special Water System Fund into which
the Revenues (as defined in the Resolution) of the System, including all additions thereto and
replacements and improvements thereof, will be paid, and a separate and special Debt Service
Account in that fund, into which will be paid each month, Net Revenues of the System then on
hand (the gross revenues remaining after the payment of operating expenses of the System), an
amount equal to not less than the sum of one -sixth of the interest due within the next six months
and one -twelfth of the principal due within the next twelve months with respect to all
outstanding Bonds payable from that account, and a Reserve Account in that fund into which
shall be paid additional Net Revenues sufficient to establish and maintain a reserve therein equal
to, as of the date of calculation, the maximum amount of Principal and Interest Requirements on
all Outstanding Bonds in the current or any future Fiscal Year (giving effect to any mandatory
sinking fund redemption); that the Debt Service Account and the Reserve Account will be used
only to pay the principal of, premium., if any, and interest on the Bonds issued pursuant to the
authority herein recited; that the rates and charges for the System will from time to time be made
and kept sufficient to provide Net Revenues (Revenues less Operating Expenses, as defined in
the Resolution) for each Fiscal Year at least equal to 125% of the principal and interest payable
from the Debt Service Account in any subsequent fiscal year, to maintain the balance in the
Reserve Account at the Reserve Requirement, to pay promptly the reasonable and current
expenses of operating and maintaining the System, to pay the principal of and interest on any
Subordinate Obligations and to provide reserves for the replacement and depreciation of the
System.; that Additional Bonds may be issued and made payable from the Debt Service Account
on a parity with the Series 2001 Bond, the Series 2004 Bonds, the Series 2007A Bond, and the
Series 2007B Bond upon certain conditions set forth in the Resolution but no obligation will be
otherwise incurred and made payable from the Net Revenues, unless the lien thereof shall be
expressly made subordinate to the lien of the Series 2001 Bond, the Series 2004 Bonds, the
Series 2007A Bond, the Series 2007B Bond, and other Additional Bonds on such Net Revenues;
that all provisions for the security of this Series 2007E Bond set forth in the Resolution will be
punctually and faithfully performed as therein stipulated; that all acts, conditions and things
required by the Constitution and laws of the State of Montana and the ordinances and resolutions
of the City to be done, to exist, to happen and to be performed in order to make this Series 2007E
Bond a valid and binding special obligation of the City according to its terms have been done, do
exist, have happened and have been performed as so required; and that this Series 2007B Bond
and the premium, if any, and interest hereon are payable solely from the Net Revenues of the
System pledged and appropriated to the Debt Service Account and do not constitute a debt of the
City within the meaning of any constitutional, statutory or charter limitation or provision and the
issuance of the Series 2007E Bond does not cause either the general or the special indebtedness
of the City to exceed any constitutional, statutory or charter limitation.
IN WITNESS WHEREOF, the City of Kalispell, Montana, by its governing body, has
caused this Bond to be executed by the signatures of its Mayor, City Manager and City Finance
Director, and has caused the official seal of the City to be affixed hereto, and has caused this
Bond to be dated as of the day of , 2007.
(SEAL)
Mayor
City Manager
City Finance Director
REGISTRATION AND TRANSFER
This Bond shall be fully registered as to both principal and interest. No transfer of this
Bond shall be valid unless and until (1) the registered holder of the Bond, or his duly authorized
attorney or legal representative, executes the form of assignment appearing on this Bond, and (2)
the City Finance Director as bond registrar (the "Registrar"), has duly noted the transfer on the
Bond and recorded the transfer on the Registrar's registration books. The City shall be entitled
to deem and treat the person in whose name this Bond is registered as absolute owner thereof for
all purposes, notwithstanding any notice to the contrary. Payments on account of the Bond shall
be made only to the order of the registered holder thereof, and all such payments shall be valid
and effectual to satisfy and discharge the City's liability upon the Bond to the extent of the sum
or sums so paid.
REGISTER.
The ownership of the unpaid Principal Balance of this Bond and the interest accruing
thereon is registered on the books of the City of Kalispell, Montana in the name of the registered
holder appearing on the first page hereof or as last noted below:
Date of Name and Address
Registration of Re stered Holder
007 Department of Natural
Resources and Conservation
1625 Eleventh Avenue
Helena.,MT 59620
Signature of
Citv Finance Director
THE FOLLOWING ENTRIES ARE TO BE MADE ONLY BY THE BOND
REGISTRAR UPON REGISTRATION OF EACH TRANSFER
The City Finance Director of the City of Kalispell, Montana, acting as Bond Registrar,
has transferred, on the books of the City, on the date last noted below, ownership of the principal
amount of and the accrued interest on this Bond to the new registered holder noted next to such
date, except for amounts of principal and interest theretofore paid.
Date of Transfer
Name of New Signature of
Reizistered Holder Bond Re&,istrar
FORM of ASSIGNMENT
For value received, the undersigned hereby sells, assigns and transfers unto
the within Bond and does hereby
irrevocably constitute and appoint attorney to transfer
the Bond on the books kept for the registration thereof, with full power of substitution in the
premises.
Dated:
Notice: The assignor's signature to this assignment must correspond with the name as it appears
upon the face of the within Bond in every particular, without alteration or any change
whatsoever.
I: •
SCHEDULE A
SCHEDULE of AMOUNTS ADVANCED
Total Amount
Date Advances Advanced
I
Notation Made By
Date Principal Interest
SCHEDULE B
Administrative
Expense Surcharge
Loan Loss
Reserve
Surohare
Total Loan
Payment
None
EXHIBIT C
ADDITIONAL REPRESENTATIONS AND COVENANTS
C- 1