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Resolution 4022 - Sewer Revenue Bonds2 4�0 CERTIFICATE AS TO RESOLUTION I, the undersigned, being the duly qualified and acting recording officer of the City of Kalispell, Montana (the "City") , hereby certify that the attached resolution is a true copy of Resolution No. 4022, entitled: "RESOLUTION RELATING TO $4,717,000 SEWERAGE SYSTEM REVENUE BONDS (DNRC REVOLVING LOAN PROGRAM), SERIES 1991A; AUTHORIZING THE ISSUANCE AND FIXING THE TERMS AND CONDITIONS THEREOF" (the "Resolution"), on file in the original records of the City in my legal custody; that the Resolution was duly adopted by the City Council of the City at a meeting on November 4, 1991, and that the meeting was duly held by the City Council and was attended throughout by a quorum, pursuant to call and notice of such meeting given as required by law; and that the Resolution has not as of the date hereof been amended or repealed. WITNESS my hand officially this 4th day of November, 1991. Finance Director 1 CERTIFICATE AS TO RESOLUTION I, the undersigned, being the duly qualified and acting recording officer of the City of Kalispell, Montana (the "City") , hereby certify that the attached resolution is a true copy of Resolution No. 4022, entitled: "RESOLUTION RELATING TO $4,717,000 SEWERAGE SYSTEM REVENUE BONDS (DNRC REVOLVING LOAN PROGRAM), SERIES 1991 A; AUTHORIZING THE ISSUANCE AND FIXING THE TERMS AND CONDITIONS THEREOF' (the "Resolution"), on file in the original records of the City in my legal custody; that the Resolution was duly adopted by the City Council of the City at a meeting on November 4,1991, and that the meeting was duly held by the City Council and was attended throughout by a quorum, pursuant to call and notice of such meeting given as required by law; and that the Resolution has not as of the date hereof been amended or repealed. WITNESS my hand officially this 4th day of November, 1991. Finance Director BOND RESOLUTION Relating to $4,717,000 SEWERAGE SYSTEM REVENUE BOND (DNRC REVOLVING LOAN PROGRAM), SERIES 1991A CITY OF KALISPELL Adopted: November 4, 1991 1 I TABLE OF CONTENTS EA&e Recitals................................................................ 1 ARTICLE I DEFINITIONS, RULES OF CONSTRUCTION AND APPENDICES Section 1.1. Definitions ............................................. 2 Section 1.2. Other Rules of Construction ............................ 7 Section 1.3. Appendices ......:.................................... 8 Section 1.4. Outstanding Bonds .................................... 8 ARTICLE II REPRESENTATIONS AND COVENANTS Section 2.1. Representations ....................................... 8 Section 2.2. Covenants ............................................ 11 ARTICLE III USE OF PROCEEDS; THE PROJECT Section 3.1. Use of Proceeds ........................................ 15 Section 3.2. The Project ............................................. 15 Section 3.3. Project Representations and Covenants .................. 17 Section 3.4. Completion or Cancellation or Reduction of Costs of the Project ...................................... 17 ARTICLE IV THE LOAN Section 4.1. The Loan; Disbursement of Loan ........................ 18 Section 4.2. Commencement of Loan Term ......................... 20 Section 4.3. Termination of Loan Term ............................. 20 Section 4.4. Loan Closing Submissions ................................ 21 -i- ARTICLE V REPAYMENT OF LOAN Section 5.1. Repayment of Loan .................................... 21 Section 5.2. Additional Payments .................................... 22 Section 5.3. Prepayments .......................................... 23 Section 5.4. Obligations of Borrower Unconditional .................. 23 Section 5.5. Limited Liability ....................................... 23 ARTICLE VI OTHER AGREEMENTS OF BORROWER Section 6.1. Maintenance of Existence; Merger, Consolidation, Etc.; Disposition of Assets ................ 24 Section 6.2. Covenants Relating to the Tax -Exempt Status of the State Bonds ............................... 25 ARTICLE VII INDEMNIFICATION OF DNRC, DHSS AND TRUSTEE .................. 28 ARTICLE VIII ASSIGNMENT Section 8.1. Assignment by Borrower ............................... 28 Section 8.2. Assignment by DNRC................................... 28 Section 8.3. State Refunding Bonds .................................. 28 ARTICLE IX THE SERIES 1991A BOND Section 9.1. Authorization .......................................... 29 Section 9.2. Outstanding Wastewater Debt .......................... 29 Section 9.3. Sources of Funding .................................... 29 Section 9.4. Issuance as Parity Bond .................................. 29 Section 9.5. Net Revenues Available ............................... 29 Section 9.6. Section 9.7. Issuance and Sale of the Series 1991 A Bond .............. Terms ................................................ 30 30 Section 9.8. Negotiability, Transfer and Registration ................. 30 I Section 9.9. Execution and Delivery ................................ 31 Section 9.10. Form ................................................. 31 ARTICLE X APPROPRIATION OF PROCEEDS OF THE SERIES 1991A BONDS.. 31 ARTICLE XI SECURITY FOR THE SERIES 1991A BONDS Section 11.1 Parity Bond ........................................... 31 Section 11.2 Funding of Reserve ..................................... 32 ARTICLE XII TAX MATTERS Section 12.1. Use of Project ......................................... 33 Section 12.2, General Covenant ..................................... 33 Section 12.3. Arbitrage Certification ................................. 33 Section 12.4. Arbitrage Rebate ...................................... 33 Section 12.5. Information Reporting .................................. 34 ARTICLE XIII MISCELLANEOUS Section 13.1. Notices ............................................... 35 Section 13.2. Binding Effect ......................................... 35 Section 13.3. Severability........................................... 35 Section 13.4. Amendments ......................................... 35 Section 13.5. Applicable Law ........................................ 35 Section 13.6. Captions; References to Sections ........................ 35 Section 13.7. No Liability of Individual Officers, Directors or Trustees.... 35 Section 13.8. Payments Due on Holidays ............................. 35 Section 13.9. Right of Others To Perform Borrower's Covenants ....... 36 Section 13.10. Authentication of Transcript ........................... 36 Section 13.11. Effective Date ........ . ............................... 36 APPENDIX A --Description APPENDIX B—Farm of the Project of Series 1991A Bond APPENDIX C--Additional Representations and Covenants RESOLUTION NO. 4022 RESOLUTION RELATING TO $4,717,000 SEWERAGE SYSTEM REVENUE BONDS (DNRC REVOLVING LOAN PROGRAM), SERIES 1991A; AUTHORIZING THE ISSUANCE AND FIXING THE TERMS AND CONDITIONS THEREOF WHEREAS, pursuant to the Montana Wastewater Treatment Revolving Fund Act, Montana Code Annotated, Title 75, Chapter 5, Part 11, as amended (the "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 Health and Environmental Sciences of the State of Montana, an agency of the State (the "DHES"), and has provided that a revolving wastewater treatment works 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 water pollution control revolving fund under the Federal Water Pollution Control Act (also known as the Clean Water Act) (the "Clean 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 Act provides that funds from the Program shall be disbursed and administered for the purposes set forth in the Clean Water Act and according to rules adopted by the Board of Health and Environmental Sciences and the Board of Natural Resources and Conservation; and WHEREAS, the City of Kalispell, Flathead County, Montana (the "Borrower"), has applied to the DNRC for a Ioan (the "Loan") from the Revolving Fund to enable the Borrower to finance, refinance or reimburse itself for the costs of the Project (as hereinafter defined) which will carry out the purposes of the Clean Water Act; and WHEREAS, the Borrower is authorized under applicable laws, ordinances and regulations to adopt this Resolution and to issue the Series 1991A Bond (as hereinafter defined) to evidence the 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 $2,595,000 General Obligation Bonds (Wastewater Treatment Works Revolving Fund) Bonds, Series 1991AB (the "State Bonds") and in part, directly or indirectly, with funds provided by the United States Environmental Protection Agency. -1- NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE BORROWER AS FOLLOWS: ARTICLE I DEFINITIONS, RULES OF CONSTRUCTION AND APPENDICES Section 1.1. Definitions. In this Resolution, unless a different meaning clearly appears from the context: "Accountant" or "Accountants" means an independent certified public accountant or a firm of independent certified public accountants satisfactory to the DNRC. "Acquisition and Construction Account" means the account within the Fund established pursuant to Sections 12.1 and 12.2. "Act" means Montana Code Annotated, Title 75, Part 5, Chapter 11, as amended from time to time. "Administrative Expense Surcharge" means a surcharge on the Loan charged by the DNRC to the Borrower equal to seventy-five hundredths of one percent (0.75%) per annum on the outstanding principal amount of the Loan, payable by the Borrower on the same dates that payments of interest on the Loan are due. "Administrative Fee" means a fee equal to .00575% of the initial Committed Amount, $27,781 retained by the DNRC from the proceeds of the Loan at Closing. "Authorized DNRC Officer" means the Director or Deputy Director of the DNRC, and, when used with reference to an act or document, also means any other individual authorized by resolution of the Board of Natural Resources and Conservation to perform such act or sign such document. If authorized by a resolution of the Board of Natural Resources and Conservation, an Authorized DNRC Officer may delegate all or a portion of his authority as an Authorized DNRC Officer to another individual and such individual shall be deemed an Authorized DNRC Officer for purposes of exercising such authority. "Bond Counsel" means any Counsel acceptable to the DNRC which is nationally recognized as bond counsel. Counsel is nationally recognized as bond counsel if it has rendered a legal opinion as to the validity and enforceability of state or municipal bonds and as to the exclusion of interest thereon from gross income -2- for federal income tax purposes (short-term issues excluded) during the two-year period preceding the date of determination. "Bonds" means the Outstanding Bonds, the Series 1991A Bond and any additional bonds to be issued on a parity therewith pursuant to the Ordinance. "Borrower" means the City of Kalispell, Montana. "Business Day" means any day which is not a Saturday or Sunday and is not a day on which banks in Montana are authorized or required by law to close. "Clean Water Act" means the Federal Water Pollution Control Act, 33 U.S.C. §§ 1251-1387, as amended, and all regulations, rules and interpretations issued by the EPA thereunder. "Closing" means the date of delivery of the Bond to the DNRC. "Code" means the Internal Revenue Code of 1986, as amended. "Collateral Documents" means any security agreement, guaranty or other document or agreement delivered to the DNRC securing the obligations of the Borrower under this Resolution and the Series 1991A Bond. If no Collateral Documents secure such obligations, any reference to Collateral Documents in this Resolution shall be without effect. "Committed Amount" means the amount of the Loan committed to be lent by the DNRC to the Borrower pursuant to Section 4.1, as such amount may be reduced pursuant to Sections 3.2(b), 3.4 and 9.2. "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 Borrower and satisfactory to the DNRC. "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 Borrower for borrowed money or for the deferred purchase price of property or services; (2) the obligation of the Borrower as lessee under leases which should be recorded as capital leases under generally accepted accounting principles; and (3) obligations of the Borrower under direct or indirect guarantees in respect of, and obligations (contingent or otherwise) to purchase or otherwise acquire, or otherwise to assure a N creditor against loss in respect of, indebtedness or obligations of others of the kinds referred to in clause (1) or (2) above. "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 Act. "DHES" means the Department of Health and Environmental Sciences of the State of Montana, an agency of the State, or any successor to its powers, duties and obligations under the Act or the EPA Agreements. "Enabling Act" means Montana Code Annotated, Title 7, Chapter 7, Part 44, as amended, which authorizes the Borrower to own and operate the System, to undertake the Project and to issue the Series 1991A Bond to finance a portion of the costs of the Project. "EPA" means the Environmental Protection Agency, an agency of the United States of America, and any successor to its functions under the Clean Water Act. "EPA Agreements" means all capitalization grant agreements and other written agreements between the Department of Health and Environmental Sciences of the State and the EPA concerning the Program. "EPA Capitalization Grant" means a grant of funds to the State by the EPA under Title VI of the Clean Water Act and any grant made available by the EPA for deposit in the Revolving Fund pursuant to Section 245(m) of the Clean Water Act. "Event of Default" means any event described in Section 9.1 hereof. "Fund" means the Sewage System Fund established pursuant to Section 3 of the Ordinance. "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 June 1, 1991, 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. -4- "Loan" means the Loan made to the Borrower 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 Project, the Origination Fee and the Administrative Fee payable under the Program and to fund a deposit to the Reserve Account. "Loan Loss Reserve Surcharge" means a fee equal to one percent (1.00%) per annum on the outstanding principal amount of the Loan, payable on the same dates that payments of interest on the Loan are due. "Net Revenues" means the entire amount of the gross revenues of the System (as described in Section 3.01 of the Ordinance) remaining upon each such monthly apportionment, after crediting to the Operating Account the amount required hereby, including sums required to maintain the Operating Reserve in the minimum amount required by the Ordinance. "Operating Account" means the account within the Fund established pursuant to Section 3.03 of the Ordinance. "Operating Expenses" means those expenses of the System defined as such in Section 3.03 of the Ordinance. "Operating Reserve" means the reserve to be maintained in the Operating Account as required by Section 3.03 of the Ordinance. "Opinion of Counsel means a written opinion of Counsel. "Ordinance" means Ordinance No. 859 as it may from time to time be amended or supplemented in accordance with its terms, including supplements by Ordinance No. 1011, Resolution Nos. 2861, 3649 and 3980 and this Resolution. "Origination Fee" means $33,144, which represents the Borrower's pro rata share of the costs of issuance of the State Bonds. "Outstanding Bonds" shall have the meaning assigned in Section 1.4. "Person" means any Private Person or Public Entity. "Private Person" means an individual, corporation, partnership, association, joint venture, joint stock company or unincorporated organization, except a Public Entity. "Program" means the State Wastewater Treatment Works Revolving Loan Program established by the Act. -5- "Project" means the facilities, improvements and activities financed, refinanced or the cost of which is being reimbursed to the Borrower in part with proceeds of the Loan, described in Exhibit A hereto. "Public Entity" means a municipality, town, county, school district, political or administrative subdivision of State government, irrigation district, drainage district or other public body established by State law. "Regulations" means the Treasury Regulations, whether final, temporary or proposed, promulgated under the Code or otherwise applicable to the Series 1991A Bond. "Replacement and Depreciation Account" means the account within the Fund established pursuant to Section 3.05 of the Ordinance. "Reserve" means the reserve established in the Revene Bond Account pursuant to Section 3.04 of the Ordinance. "Reserve Requirement" means, as of the date of calculation, an amount equal to the maximum amount of principal and interest payable on the Bonds in any future fiscal year (giving effect to mandatory sinking fund redemption, if any). "Reserved Amounts" means any undisbursed Committed Amount which will or may be required to pay any remaining costs of the Project upon completion thereof as provided in Section 3.4(a). "Revenue Bond Account" means the account within the Fund established pursuant to Section 3.04 of the Ordinance. "Series 1991A Bond" means the $4,717,000 Sewerage System Revenue Bond (DNRC Revolving Loan Program), Series 1991 A, issued to the DNRC to evidence the Loan. "State" means the State of Montana. "State Bonds" means the State's General Obligation Bonds (Wastewater Treatment Works Revolving Fund Program), Series 1991E issued pursuant to the Indenture. "Surplus Account" means the account within the Fund established pursuant to Section 3.06 of the Ordinance. 0 "Surplus Net Revenues" shall mean that portion of the Net Revenues in excess of the current requirements of the Operating Account, the Revenue Bond Account and the Reserve. "System" means the existing sewerage system of the Borrower and all extensions, improvements and betterments thereof hereafter constructed and acquired, including the Project. "Trustee" means First Trust Company of Montana National Association, in Billings, Montana, or any successor trustee under the Indenture. "Sewerage" means sewage, sewage sludge, industrial wastes, stormwater, other wastes or any combination thereof. "Sewerage Debt" means all Bonds and any other 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). "Sewerage Debt Service" means, for the period of determination, all required payments of principal and interest (including mandatory sinking fund redemptions) on all Sewerage Revenue Debt of the Borrower. "Sewerage Revenue Debt" means all Debt of the Borrower which is secured solely or partly by the Wastewater Revenues. "Sewerage Revenues" means revenues (gross or net) received by the Borrower from or in connection with the operation of the System. Section 1.2. Other Rules of Construction. For all purposes of this 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. -7- (e) Words of the masculine gender shall be deemed and construed to include correlative words of the feminine and neuter genders. (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 Project; Appendix B: the form of the Series 1991A Bond; and Appendix C: additional agreements and representations of the Borrower. Section 1.4. Outstanding Bonds. In accordance with the authorization described in Section 1 and pursuant to Ordinance Nos. 859 and 1011 and Resolution Nos. 2861, 3649 and 3980, the City has issued and sold the following bonds which are currently outstanding: Sewerage System Revenue Bonds, dated as of January 1, 1972; Sewerage System Revenue Bonds, dated as of July 1, 1976; its Sewerage System Revenue Bonds, Series .1986, dated, as originally issued, as of June 1, 1986; and its Sewerage System Revenue Bonds, Series 1989, dated, as originally issued, as of April 15, 1991 (the "Series 1991 Bonds") (collectively, the "Outstanding Bonds"), for the purpose of financing part of the costs of construction of improvements to the System, including, as to a portion of the Series 1991 Bonds, the Project. No other bonds or indebtedness are outstanding that are payable from revenues of the System. The Outstanding Bonds are outstanding in the aggregate principal amount of $4,240,000. ARTICLE II REPRESENTATIONS AND COVENANTS Section 2.1. Representations. The Borrower represents as follows: (a) Or anization and Authority. The Borrower: (i) is duly organized and validly existing as a municipal corporation and political subdivision of the State; (H) has all requisite power and authority and all necessary licenses and permits required as of the date hereof to own and operate the System and to carry on its current activities with respect to the System, to adopt this Resolution and to enter into the Collateral Documents and to issue the Series 1991A Bond and to carry out and consummate all transactions contemplated by the Ordinance, this Resolution, the Bond and the Collateral Documents; (iii) 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 Resolution, the Series 1991A Bond and the Collateral Documents and the incurrence of the Debt evidenced by the Series 1991A Bond in the maximum amount of the Committed Amount. (b) Pending Litigation. There is no litigation or proceeding pending, or to the knowledge of the Borrower threatened, against or affecting the Borrower 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 Borrower, or the ability of the Borrower to make all payments and otherwise perform its obligations under the Ordinance, this Resolution, the Series 1991A Bond and the Collateral Documents, or the financial condition of the Borrower, or the transactions contemplated by the Ordinance, this Resolution, the Bond and the Collateral Documents or the validity and enforceability of the Ordinance, this Resolution, the Series 1991A Bond and the Collateral Documents. No referendum petition has been filed with respect to any resolution or other action of the Borrower relating to the Project, the Series 1991A Bond or any Collateral Documents and the period for filing any such petition will have expired before issuance of the Bond. (c) Borrowing Legal and Authorized. The adoption of this Resolution, the execution and delivery of the Series 1991A Bond and the Collateral Documents and the consummation of the transactions provided for in this Resolution, the Series 1991A Bond and the Collateral Documents and compliance by the Borrower with the provisions of the Ordinance, this Resolution, the Series 1991A Bond and the Collateral Documents: (i) are within the powers of the Borrower and have been duly authorized by all necessary action on the part of the Borrower; 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 Borrower pursuant to any ordinance, resolution, indenture, 0 loan agreement or other agreement or instrument (other than this Resolution and any Collateral Documents) to which the Borrower is a party or by which the Borrower 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 Borrower, its properties or operations are subject. (d) No Defaults. No event has occurred and no condition exists that, upon execution and delivery of the Bond and the Collateral Documents, would constitute a default under the Ordinance, this Resolution or the Collateral Documents. The Borrower 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 Borrower with the terms hereof or of the Series 1991A Bond and the Collateral Documents. (e) Governmental Consent. The Borrower has obtained or made all permits, findings and approvals required to the date of adoption of this Resolution by any governmental body or officer for the making and performance by the Borrower of its obligations under the Ordinance, this Resolution, the Bond and the Collateral Documents (including any necessary sewerage rate increase) or for the Project, the financing or refinancing thereof or the reimbursement of the Borrower 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 Borrower as a condition to adopting this Resolution, issuing the Series 1991A Bond or entering into the Collateral Documents and the performance of the Borrower's obligations hereunder and thereunder. If a utility board or commission manages or controls the System, such board or commission has agreed with the DNRC to abide by the terms of this Resolution and the Collateral Documents, including approving any necessary wastewater rate increases. (f) Binding Obligation. The Ordinance, this Resolution, the Series 1991A Bond and any Collateral Document to which the Borrower is a party are the valid and binding obligations and agreements of the Borrower, enforceable against the Borrower 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 Project. The Project consists and will consist of the facilities, improvements and activities described in Appendix A, as such Appendix A may be -1 a- amended from time to time in accordance with the provision of Article III of this Resolution. (h) Full Disclosure. There is no fact that the Borrower has not specifically disclosed in writing to the DNRC that materially and adversely affects or (so far as the Borrower 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 Borrower'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 Borrower's ability to perform its obligations under the Ordinance, this Resolution, the Series 1991A Bond and the Collateral Documents and to pledge any revenues or other property pledged to the payment of the Bond. (i) Compliance With Law. The Borrower: (1) 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 Borrower to conduct the operation of the System as presently conducted or the condition (financial or otherwise) of the System or the Borrower's ability to perform its obligations under the Ordinance, this Resolution, the Series 1991A Bond and the Collateral Documents. Section 2.2. Covenants. (a) Insurance. The Borrower at all times shall keep and maintain with respect to the System property and casualty insurance and liability insurance as required by Sections 5.03 and 5.04 of the Ordinance. All such insurance policies shall name the DNRC as an additional insured. Each policy must provide that it cannot be cancelled by the insurer without giving the Borrower and the DNRC 30 days' prior written notice. The Borrower shall give the DNRC prompt notice of each insurance policy it obtains or maintains to comply with this Section 2.2(a) and of it 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 -11- deductibles and carrier of each new or replacement policy. Such notice shall specifically note any adverse change as being an adverse change. The Borrower shall deliver to the DNRC at Closing a certificate providing the information required by this Section 2.2(a). (b) Right of Insl2ection and Notice of Change of Location. The DNRC, the DHES 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 Borrower for the purpose of inspecting the System or any or all books and records of the Borrower relating to the System. (c) Further Assurance. The Borrower 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 Ordinance, this Resolution, the Series 1991A 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 this Resolution, the Series 1991A Bond and the Collateral Documents. (d) Maintenance of Security, if An • Recordation of Interest. (i) The Borrower shall, at its expense, take all necessary action to maintain and preserve the Iien and security interest of the Ordinance, this Resolution and the Collateral Documents so long as any amount is owing under this Resolution or the Series 1991A Bond; (ii) The Borrower shall forthwith, after the execution and delivery of the Series 1991A Bond and thereafter from time to time, cause the Ordinance, this 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 Ordinance 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 Borrower shall pay or cause to be paid all filing, registration and recording fees incident to such -12- I 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 1991A Bond and the Collateral Documents and the documents described in subparagraph (ii). (e) Additional Agreements. The Borrower covenants to comply with all representations, covenants, conditions and agreements, if any, set forth in Appendix C hereto. (f) Financial Information. The Borrower agrees that for each fiscal year it shall furnish to the DNRC and the DHES, promptly when available: (1) the preliminary budget for the System, with items for the Project shown separately; and (2) when adopted, the final budget for the System, with items for the Project shown separately. The Borrower will cause proper and adequate books of record and account to be kept showing complete and correct entries of all receipts, disburse- ments and other transactions relating to the System as required by Section 5.06 of the Ordinance. It will cause such books to be maintained on the basis of the same fiscal year as that utilized by the Borrower. The Borrower shall, within 180 days after the close of each fiscal year, cause to be prepared and supply to the DNRC the financial report required by Section 5.06 of the Ordinance with respect to the System for such fiscal year. (g) Project Accounts. The Borrower shall maintain Project accounts in accordance with generally accepted government accounting standards, and as separate accounts, as required by Section 602(b)(9) of the Clean Water Act. (h) Records. After reasonable notice from the EPA, the Borrower shall make available to the EPA such records as the EPA reasonably requires to review and determine compliance with Title VI of the Clean Water Act, as provided in Section 606(e) of the Clean Water Act. (i) Compliance with Clean Water Act. The Borrower has complied and shall comply with all conditions and requirements of the Clean Water Act pertaining to the Loan and the Project. (j) Program Covenant. The Borrower agrees that neither it nor any "related person" to the Borrower (within the meaning of Section 147(a)(2) of the -13- I Code) shall, whether pursuant to a formal or informal arrangement, acquire bonds issued by the State under the Indenture in an amount related to the amount of the Series 1991A Bond. ARTICLE III USE OF PROCEEDS, THE PROJECT Section 3.1. Use of Proceeds. The Borrower shall apply the proceeds of the Loan from the DNRC solely as follows: (a) The Borrower shall apply the proceeds of the Loan solely to the financing, refinancing or reimbursement of the costs of the Project as set forth in Appendix A hereto and this Section 3.1. The Loan will be disbursed in accordance with Article IV hereof and Article VII of the Indenture. If the Project has not been completed prior to Closing, the Borrower shall, as quickly as reasonably possible, complete the Project and expend proceeds of the Series 1991A Bond to pay the costs of completing the Project. (b) No portion of the proceeds of the Loan shall be used to reimburse the Borrower for costs paid prior to the date of adoption of this Resolution of a Project the construction or acquisition of which occurred or began earlier than March 7, 1985. In addition, if any proceeds of the Loan are to be used to reimburse the Borrower for Project costs paid prior to the date of adoption of this.Resolution and in a prior fiscal year of the Borrower, the Borrower represents that at the time it incurred such costs it intended to finance them with tax-exempt debt or a loan under a state revolving fund program such as the Program. (c) Any Debt to be refinanced with proceeds of the Loan was incurred after March 7, 1985 for a Project the construction or acquisition of which began after March 7,1985. No proceeds of the 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 Project. Set forth in Appendix A to this Resolution is a description of the 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 Loan (the Project may consist of more than one facility or activity). -14- The Project may be changed and the description thereof in Appendix A may be amended from time to time by the Borrower but only after delivery to the DNRC of the following: (a) A certificate of the Borrower 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 Project, an increase or decrease in the amount of Loan proceeds which will be required to complete the Project and whether the change will materially accelerate or delay the construction schedule for the Project, (b) A written consent to such change in the Project by an Authorized DNRC Officer, (c) An Opinion or Opinions of Bond Counsel stating that the Project, as constituted after such amendment, is, and was at the time the State Bonds were issued, eligible for financing under the Act and is, and was at the time the Series 1991A Bond was issued, eligible for financing under the Enabling Act, such amendment will not violate the Act or the Enabling Act and such amendment will not adversely affect the exclusion of interest on the State Bonds or the Series 1991A 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 Borrower acknowledges and agrees that an increase in the principal amount of the Loan may be made only upon an application to the DHES, the DNRC and the Trustee, in such form as the DHES shall specify, which is approved by the DHES and the DNRC, in their sole and absolute discretion, and adoption by the governing body of the Borrower of a resolution amendatory of or supplementary to this resolution authorizing the additional loan and delivery of written certifications by officers of the Borrower to the DHES, the DNRC and the Trustee to the effect that all representations and covenants contained in this resolution as it may be so amended or supplemented are true as of the date of closing of the additional loan. No assurance can be given that any additional loan funds will be available udder the Program at the time of any such application or thereafter. The Borrower acknowledges and agrees that neither the DHES, the DNRC, the Trustee' nor any of their agents, employees or representatives shall have any liability to the Borrower and have made no representations to the Borrower as to the sufficiency of the Loan to pay Project Costs or as to the availability of additional funds under the Program to increase the principal amount of the Loan. Section 3.3. Project Rel2resentations and Covenants. The Borrower hereby represents to and covenants with the DNRC that: -15- (a) all construction of the 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 Project will be done only pursuant to fixed price construction contracts. The Borrower 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 Borrower's, the DNRC's and the DHES's satisfaction; (c) all future construction will be done in accordance with plans and specifications on file with the DNRC and the DHES, provided that changes may be made in such plans and specifications with the written consent of an Authorized DNRC Officer and the DHES; (d) the Project is a project of the type permitted to be financed under the Enabling Act, the Act and the Program and Title VI of the Clean Water Act, and (e) the Borrower will undertake the Project promptly after the Closing Date and will cause the Project to be completed as promptly as practicable with all reasonable dispatch, except only as completion may be delayed by a cause or event not reasonably within the control of the Borrower; it is estimated by the Borrower that the Project will be substantially completed by September 1, 1991 (the Estimated Completion Date.) Section 3.4. Completion or Cancellation or Reduction of Costs of the Project. (a) Upon completion of the Project, the Borrower shall deliver to the DNRC a certificate stating that the 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 Borrower shall so inform the DNRC and release such amount. If Appendix A describes two or more separate projects as making up the Project, a separate completion certificate shall be delivered for each. (b) If all or any portion of the Project is cancelled or cut back or its costs are reduced or for any other reason the Borrower will not require the full Committed Amount, the Borrower shall promptly notify the DNRC in writing of such fact and release the portion of the Committed Amount which will not be needed. -16- ARTICLE IV THE LOAN Section 4.1. The Loan; Disbursement of Loan. The DNRC has agreed to lend to the Borrower, from time to time as the requirements of this Section 4.1 are met, an amount up to $4,717,000 (the "Committed Amount") for the purposes of financing, refinancing or reimbursing the Borrower for a portion of the costs of the Project; provided the DNRC shall not be required to loan any proceeds of the State Bonds to the Borrower after 360 days of the Estimated Completion Date. The Committed Amount may be reduced as provided in Sections 3.2(b), 3.4 and 9.2. The Loan shall be disbursed as provided in this Section 4.1. The DNRC intends to disburse the Loan through the Trustee. (a) In consideration of the issuance of the Series 1991A Bond by the Borrower, the DNRC shall make, or cause the Trustee to make, a disbursement of all or a portion, of the Loan upon receipt of the following documents: (1) an Opinion of Bond Counsel as to the validity and enforceability of the Series 1991A Bond and the security therefor and stating in effect that interest on the Series 1991A Bond is not includable in gross income of the owner thereof for purposes of federal income taxation, in form and substance satisfactory to the DNRC; (2) the Series 1991A Bond, fully executed and authenticated; (3) a certified copy of this Resolution; (4) any other security instruments or documents required by the DNRC or DHES as a condition to their approval of the Loan; (5) if all or part of a Loan is being made to refinance a Project or reimburse the Borrower 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 March 7, 1985 or the debt was incurred no earlier than March 7, 1985, (B) of the Borrower's title to the Project, (C) of the costs of such Project and that such costs have been paid by the Borrower and (D) if such costs were paid in a previous fiscal year of the Borrower, that the Borrower intended at the time it incurred such costs to finance them with tax-exempt debt or a loan under a state revolving fund program such as the Program; -17- (b) the items required by the Indenture for the portion of the Loan to be disbursed at Closing; (7) payment or provision for payment of the Administrative Fee and the Origination Fee; and (8) such other certificates, documents and other information as the DNRC, the DHES 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 Loan to pay costs of the Project, the Borrower 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 Borrower may obtain disbursements only for costs which have been legally incurred and are due and payable. All Loan disbursements will be made to the Borrower only upon proof that cost was incurred. (c) On the date of Closing, the Trustee is authorized to make an initial disbursement of the Loan in an amount sufficient to pay the Administration Fee and the Origination Fee. The DNRC will retain, and not physically advance to the Borrower, an amount equal to the sum of Administration Fee and the Origination Fee, and the Borrower acknowledges and agrees that such retainage constitutes a disbursement of proceeds of the Loan in an amount equal to the amount retained by the DNRC. (d) For refinancings, a disbursement schedule complying with the requirements of the Clean Water Act shall be established by the DNRC and the Borrower at Closing. The Trustee shall disburse Loan amounts directly to the holder of the debt being refinanced according to such schedule. If the Borrower should repay all or a portion of the debt to be refinanced from other sources or should otherwise not need any portion of the 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. (e) If all or a portion of a Loan is made to reimburse a Borrower for Project costs paid by it prior to Closing, the Borrower shall present at Closing the items required by Section 4.1(b) relating to such costs. The Trustee shall disburse such amounts to the Borrower pursuant to a disbursement schedule -18- complying with the requirements of the Clean Water Act established by the DNRC and the Borrower at the Closing. (f) Notwithstanding anything else provided herein, the Trustee shall not be obligated to disburse the 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 Indenture, but may do so in its discretion. The Borrower acknowledges that if Project costs are incurred faster than the Borrower projected at Closing, there may be delays in making 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. (g) Upon making each Loan disbursement, the Trustee shall note such disbursement on Schedule A to the Series 1991A Bond. (h) The Borrower agrees that it will deposit in the Reserve upon receipt thereof, either on the Closing Date of the Loan or upon any disbursement date, any proceeds of the Loan borrowed for the purpose of increasing the balance in the Reserve to the Reserve Requirement. The Borrower further acknowledges and agrees that any portions of the 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 1991A Bond and interest thereon shall accrue only from the date of transfer. Section 4.2. Commencement of Loan Term. The Borrower's obligations under this Resolution and the Collateral Documents shall commence on the date hereof unless otherwise provided in this Resolution. However, the obligation to make payments under Article V hereof shall commence only upon the first disbursement by the Trustee of Loan proceeds. Section 4.3. Termination of Loan Term. The Borrower's obligations under this Resolution and the Collateral Documents shall terminate upon payment in full of all amounts due under the Series 1991A Bond and this Resolution; provided, however, that the covenants and obligations provided in Article VII and Section 12.4 shall survive the termination of this Resolution. Section 4.4. Loan_ Closing Submissions. Borrower will have delivered to the DNRC and the required by Section 7.05 of the Indenture. -19- On or prior to the Closing, the Trustee the closing submissions ARTICLE V REPAYMENT OF LOAN Section 5.1. Repayment of Loan. The Borrower 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 and twenty-five hundredths of one percent (2.25%) per annum, in semiannual Loan Repayments. In addition, the Borrower shall pay an Administrative Expense Surcharge on the outstanding principal amount of the Loan at the rate of seventy-five hundredths of one percent (0.75%) per annum and a Loan Loss Reserve Surcharge equal to one percent (1.00%) per annum on the outstanding principal amount of the Loan. The Borrower shall pay all Loan Repayments and Administrative Expense Surcharges and Loan Loss Reserve Surcharge in lawful money of the United States of America to the DNRC. Interest and Administrative Expense Surcharges 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, commencing January 1, 1992, (the "Payment Dates"), as follows: (1) interest and Administrative Expense Surcharge and Loan Loss Reserve Surcharge on the outstanding principal balance of the Loan shall be payable on each January 1 and July 1, beginning on the first Payment Date after the closing of the Loan (unless the Loan is closed within 30 days of the first Payment Date in which case payments shall begin on the next succeeding Payment Date); and (2) the principal of the Loan shall be repayable on July 3, 1993 and the amount of each principal payment shall be calculated on the basis of level debt service at an interest rate of 4% per annum. The payments of principal of and interest and Administrative Expense Surcharge and Loan Loss Reserve Surcharge on the Loan shall be due on the dates and in the amounts shown in Schedule B to the Series 1991A 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 1991A Bond. Upon each disbursement of Loan amounts to the Borrower pursuant to Section 4.1 hereof, the Trustee shall enter or cause to be entered the amount advanced on Schedule A to the Series 1991A Bond under "Advances" and the total -20- amount advanced under Section 4.1, including such disbursement, under "Total Amount Advanced." If the advance was made to pay costs of the Project pursuant to Section 4.1(b), interest and Administrative Expense Surcharge and Loan Loss Reserve Surcharge on such advance shall accrue from the date the advance is made and shall be payable on each Payment Date thereafter. Once the completion certificate for a Project has been delivered to the DNRC, the Trustee shall revise Schedule B to the Series 1991A Bond in accordance with this Section 5.1 and the Trustee shall send a copy of such Schedule B to the Borrower within one month after delivery of the completion certificate. Past -due payments of principal and interest and Administrative Expense Surcharges 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 1991A Bond. Section 5.2. Additional Payments. The Borrower shall also pay, within 30 days after receipt of a bill therefor, from any legally available funds therefor, including proceeds of the Loan, if the Borrower so chooses, all reasonable expenses of the DNRC and the Trustee in connection with the Loan, the Collateral Documents and the Series 1991A Bond, including, but not limited to: (1) the cost of reproducing this Resolution, the Collateral Documents and the Series 1991A Bond; (2) the fees and disbursements of Bond Counsel and other Counsel utilized by the DNRC and the Trustee in connection with the Loan, this Resolution, the Collateral Documents and the Series 1991A 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 1991A Bond, whether or not the Series 1991A 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 1991A Bond, the Collateral Documents and this 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. -21- 11 Section 5.3. Prepayments. The Borrower may not prepay all or any part of the outstanding principal amount of the Series 1991A Bond unless (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 1991A Bond is prepaid in part pursuant to this Section 5.3, such prepayments shall be applied to principal payments in inverse order of maturity. Section 5.4. Obligations of Borrower Unconditional. The obligations of the Borrower to make the payments required by this Resolution and the Series 1991A Bond and to perform its other agreements contained in the Ordinance, this Resolution, the Series 1991A Bond and Collateral Documents shall be absolute and unconditional, except as otherwise provided herein or in such documents. The Borrower (a) shall not suspend or discontinue any payments provided for in this Resolution and the Series 1991A Bond, (b) shall perform all its other agreements in the Ordinance, this Resolution, the Series 1991A Bond and the Collateral Documents and (c) shall not terminate the Ordinance, this Resolution, the Series 1991A 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 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 this Resolution. Section 5.5. Limited -Li ability. All payments of principal of and interest on the Loan and other payment obligations of the Borrower hereunder and under the Series 1991A Bond shall be special, limited obligations of the Borrower payable solely out of the Net Revenues or out of the Revenue Bond Account and shall not be payable out of any other funds or revenues of the Borrower. The obligations of the Borrower under the Ordinance, this Resolution and the Series 1991A Bond shall never constitute an indebtedness of the Borrower within the meaning of any state constitutional provision or statutory limitation and shall never constitute or give rise to a pecuniary liability of the Borrower or a charge against its general credit or taxing power. The taxing powers of the Borrower may not be used to pay principal of or interest on the Series 1991A Bond, and no funds or property of the Borrower other than the Net Revenues or funds on deposit in the Revenue Bond Account may be used to pay principal of or interest on the Series 1991 A Bond. -22- ARTICLE VI OTHER AGREEMENTS OF BORROWER Section 6.1. Maintenance of Existence• Mer er Consolidation Etc.; Disposition of Assets. The Borrower 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 Borrower) 0) is a Public Entity and (ii) assumes in writing all of the obligations of the Borrower under the Ordinance, this Resolution, the Series 1991A 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 Borrower under the Ordinance, this Resolution, the Bond and the Collateral Documents, (b) such action does not violate the Act or the Clean Water Act and does not adversely affect the exclusion of interest on the Series 1991A Bond or the State Bonds from gross income for federal income tax purposes and (c) the Borrower delivers to the DNRC on the date of such action an Opinion of Bond Counsel that such action complies with this Section 6.2. Other than pursuant to the preceding paragraph, the Borrower shall not transfer the System or any portion thereof to any other Person, except as permitted by Section 5.05 of the Ordinance. Section 6.2. Covenants Relating to the Tax -Exempt Status of the State Bonds. (a) The Borrower covenants and agrees that it will not use or permit to be used any of the proceeds of the Series 1991A Bond or any other funds of the Borrower, 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" 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. In addition, the Borrower 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 Loan or the portion of the Loan derived directly or indirectly from 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. (b) The Borrower shall not use or permit the use of the Project directly or indirectly in any trade or business carried on by any Person who is not a -23- _V, Governmental Unit. For the purpose of this subparagraph, use as a member of the general public 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. (c) Any portion of the Project being refinanced or the cost of which is being reimbursed was acquired by and is now and shall, during the term of the Loan, be owned by the Borrower and not by any other Person. Any portion of the Project being financed shall be acquired by and shall, during the term of the Loan, be owned by the Borrower and not by any other Person. Notwithstanding the previous two sentences, the Borrower may transfer the Project or a portion thereof to another Governmental Unit which is also a Public Entity if such transfer is otherwise permitted hereunder and if such organization agrees with the DNRC to comply with Sections 2.2(h), 2.20) and 6.3 hereof and if the DNRC receive an Opinion of Bond Counsel that such transfer will not violate the Act or the Clean Water Act or adversely affect the exclusion of interest on the Bonds from gross income or purposes of federal income taxation. In addition, except as otherwise provided herein or in any Collateral Documents, the Borrower may sell or otherwise dispose of any portion of the Project which has become obsolete or outmoded or is being replaced or for other reasons is not needed by the Borrower or beneficial to the general public or necessary to carry out the purposes of the Clean Water Act. (d) At the Closing of the 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 Borrower instructions concerning compliance by the Borrower with the arbitrage rebate requirements of Section 148 of the Code (the "Arbitrage Rebate Instructions"). The Borrower 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 excludibility of interest on the State Bonds or any Additional State Bonds (except Additional 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. (e) The Borrower agrees that during the Loan Term it will not contract with or permit any Private Person to manage the Project or any portion thereof except according to a written management contract which _complies with the following provisions: (1) If any contract between the Borrower and the Private Person with respect to the Project provides for compensation based on a percentage of fees charged for services rendered by the Private Person, the contract may not -24- exceed a term of five years (including any renewal options). At Ieast 50% of the compensation to the Private Person must be based upon a periodic fixed fee. In addition, the Borrower must be able to cancel the contract without penalty or cause at the end of any three-year period of the contract term. The compensation must be reasonable, and it may not be based on a percentage of the net profits of the Project or the System or any portion thereof or any other division or activity of the Borrower. (2) If any contract between the Borrower and the Private Person with respect to the Project provides for compensation based on a periodic flat fee, the compensation must be reasonable and the contract may not exceed a term of five years (including any renewal options. In addition, the Borrower must be able to cancel the contract without penalty or cause at the end of any three-year period of the contract term. If the contract provides for automatic increases in the periodic flat fee, the increases may not exceed the percentage increases determined by particular external standards for computing such increases that are mutually agreed upon in the contract. The percentage increases reflected in the Consumer Price Index compiled by the Bureau of Labor Statistics, U.S. Department of Labor, or the actual percentage increases for services that result from the application of external criteria (for example, increases in rates paid by insurance companies) are illustrations of two external standards that may be used. (3) If a Private Person and the Borrower enter into a contract described in subparagraph (1) or (2) above and the governing body of the Borrower contains five or more members, no more than one member of the governing body of the Borrower may be the Private Person or a related person (as described in Section 144(a)(3) of the Code) (a "Related Person"), an employee of the Private Person or a Related Person, or a member of the governing body of the Private Person or a Related Person. However, such Private Person or a Related Person, employee of the Private Person or a Related Person or a member of the governing body of the Private Person or a Related Person may not serve as the chief executive of the Borrower. If a Private Person and the Borrower enter into a contract described in (1) or (2) above and the governing body contains less than five members, no member of the governing body may be the Private Person or a Related Person, an employee of the Private Person or a Related Person or a member of the governing body of the Private Person or a Related Person. (4) The Borrower may depart from any of its agreements contained in subparagraphs (1) through (3) if it delivers to the DNRC, at the Borrower's expense, an Opinion of Bond Counsel that to do so would not adversely affect the exclusion of interest on the State Bonds from gross income for purposes of federal income taxation. -25- (f) The Borrower may not lease the Project or any portion thereof to any Person other than a Nonexempt Person which agrees in writing with the Borrower and the State not to cause any Default to occur under this Resolution, provided the Borrower may lease all or any portion of the 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. (g) The Borrower shall not change the use or nature of the Project if (i) such change will violate the Clean 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. ARTICLE VII INDEMNIFICATION OF DNRC, DHSS AND TRUSTEE The Borrower shall indemnify and save harmless the DNRC, the DHSS, the Trustee 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, resulting from or in any way connected with 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 counsel 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 any such claim or demand, the Borrower shall, upon notice from the Indemnified Party, defend such proceeding on behalf of the Indemnified Party. Notwithstanding the foregoing, the Borrower shall not be obligated to indemnify an Indemnified Party or any of its officers, employees or agents or hold any of them harmless against or from or in respect of any claim, damage, demand, expense, liability or loss arising. from the intentional or willful misconduct or gross negligence of the Indemnified Parties. -26- ARTICLE VIII ASSIGNMENT Section 8.1. Assignment by Borrower. The Borrower may not assign its rights and obligations under this Resolution or the Series 1991A Bond, except as provided in Section 6.2. Section 8.2. Assignment by DNRC. The DNRC will pledge its rights under and interest in this Resolution, the Series 1991A Bond and the Collateral Documents (except to the extent otherwise provided in the Indenture) as security for the payment of the State Bonds. Section 8.3. State Refunding Bonds. In the event the State Bonds and Additional State Bonds are refunded by bonds which are not Additional State Bonds, all references in this 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 this 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 IX THE SERIES 1991A BOND Section 9.1. Authorization. Under the provisions of the Enabling Act, the Borrower 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 Borrower. - Section 9.2. Outstanding Sewerage Debt. Apart from the Outstanding Bonds, no bonds or indebtedness are outstanding that are payable from Sewerage Revenues of the System. -27- The Borrower may prepay the Series 1991A Bond, in whole or in part, only upon the terms and conditions under which it can prepay the Loan under Section 5.3. Section 9.8. Negotiability, Transfer and Registration. The Series 1991A 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 1991A Bond shall be payable to the DNRC at the Office of the Department of Natural Resources and Conservation, 1520 East Sixth Avenue, Helena, Montana 59620-2301 or such other place as may be designated by the DNRC in writing and delivered to the Borrower. The Series 1991A Bond shall be negotiable, subject to the provisions for registration and transfer contained in this section. No transfer of the Series 1991A 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 Bond, and (2) the Finance Director of the Borrower (the "Registrar"), as Bond Registrar, has duly noted the transfer on the Series 1991A 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 Borrower shall be entitled to deem and treat the person in whose name the Series 1991A Bond is registered as the absolute owner of the Series 1991A 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 Borrower's liability upon such Bond to the extent of the sum or sums so paid. Section 9.9. Execution and Delivery. The Series 1991A Bond shall be executed on behalf of the Borrower by the manual signatures of the Mayor and the Finance Director. Any or all of such signatures may be affixed at or prior to the date of delivery of the Series 1991A Bond. The Bond shall be sealed with the corporate seal of the Borrower. In the event that any of the officers who shall have signed the Series 1991 A Bond shall cease to be officers of the Borrower before the Bond is issued or delivered, their signatures shall remain binding upon the Borrower. Conversely, the Series 1991A 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 1991A Bond shall be delivered to the DNRC, or its attorney or legal representative. Section 9.10. Form. The Series 1991A Bond shall be prepared in substantially the form attached as Appendix B. ARTICLE X -29- APPROPRIATION OF PROCEEDS OF THE SERIES 1991A BOND The proceeds of the Series 1991A Bond are appropriated to the Fund and are to be deposited or applied as follows: (a) Proceds shall be credited to the Reserve as provided in Section 11.2 hereof; (b) $60,925 shall be applied to pay the Administrative Fee and the Origination Fee; and (c) The balance of the proceeds of the Series 1991A Bond shall be credited to the Construction Account and applied to payment of costs of the Project. ARTICLE XI SECURITY FOR THE SERIES 1991A BOND Section 11.1. Parity -Bond. The Series 1991A Bond is issued under Section 4.03 of the Ordinance and shall, with the Outstanding Bonds and any other additional bonds issued under the provisions of said Section 4.03 or Section 4.02 of the Ordinance, be equally and ratably secured by the provisions of the Ordinance and this Resolution and payable out of the Net Revenues appropriated to the Revenue Bond Account of the Sewerage System Fund, without preference or priority, all as provided in the Ordinance, and secured by the Reserve established in the Revenue Bond Account. The City shall keep, perform and observe each and every one of its covenants and undertakings set forth in the Ordinance and this Resolution and shall cause the Project to be undertaken and completed expeditiously. Section 11.2. Funding of Reserve. On the Closing Date and on each date of disbursement of proceeds of the Series 1991A Bond thereafter until the final disbursement of such proceeds, the Borrower shall deposit in the Reserve, from proceeds of the Series 1991A Bond or, to the extent necessary, from other available funds of the Borrower, an amount equal to the product of W the Incremental Reserve Deposit (as hereinafter defined) times (ii) a fraction the numerator of which is the amount of proceeds of the Series 1991 A Bond to be disbursed on said date and the denominator of which is the Committed Amount of the Loan. As used herein, Incremental Reserve Deposit means the difference, calculated as of the Closing Date, between the Reserve Requirement based on the Committed Amount of the Loan ($770,905) and the balance then on deposit in the Reserve. On the date of the final disburserrient of proceeds of the Series 1991A Bond, the Borrower shall deposit in the Reserve, from proceeds of the Series 1991A Bond or, to the extent necessary, from other available funds of the Borrower, an amount necessary to cause -30- the balance in the Reserve to equal the Reserve Requirement, calculated as of that date and based on the actual principal amount of the Series 1991A Bond. ARTICLE XII TAX MATTERS Section 12.1. Use of Project and System. The Project and the System will be owned and operated by the Borrower and available for use by members of the general public on a substantially equal basis. The Borrower shall not enter into any lease, use or other agreement with any non -governmental person relating to the use of the Project or the System or security for the payment of the Series 1991 A Bond which might cause the Series 1991A Bond to be considered a "private activity bond" or "private loan bond" within the meaning of Section 141 of the Code. Section 12.2. General Covenant. The Borrower covenants and agrees with the owners from time to time of the Series 1991A 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 1991A 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 1991A Bond will not become includable in gross income for federal income tax purposes under the Code and the Regulations. Section 12.3. Arbitrage Certification. The Mayor and the City Clerk - Treasurer, being the officers of the Borrower charged with the responsibility for issuing the Series 1991A Bond pursuant to this 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 Sections 1.103-13, 1.103-14 and 1.103-15 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 1991A Bond, it is reasonably expected that the proceeds of the Series 1991A Bond will be used in a manner that would not cause the Series 1991A Bond to be an "arbitrage bond" within the meaning of Section 148 of the Code and the Regulations. Section 12.4. Arbitrage Rebate. The City acknowledges that the Series 1991A 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 1991A Bond from gross income for federal income tax purposes, unless the Bonds qualify for the exception from the rebate requirement under Section 148(f)(4)(B) of the Code and no "gross proceeds" of the Series 1991A Bond (other than amounts constituting a "bona fide debt service -31- 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 containing such covenants and agreements, 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 12.5. Information Reporting. The Borrower shall file with the Secretary of the Treasury, not later than February 15, 1992, a statement concerning the Series 1991A Bond containing the information required by Section 149(e) of the Code. ARTICLE XIII MISCELLANEOUS Section 13.1. 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 1520 East Sixth Avenue Helena, Montana 59620 Attention: Conservation and Resource Development Trustee: First Trust Company of Montana National Association 303 North Broadway P.O. Box 30678 Billings, Montana 59115 Borrower: City of Kalispell P.O. Box 1997 Kalispell, Montana 59903-1997 Attention: 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. -32- Section 13.2. Binding Effect. This Resolution shall inure to the benefit of and shall be binding upon the DNRC, the Borrower and their respective permitted successors and assigns. Section 13.3. Severability. If any provision of this Resolution shall be determined to be unenforceable at any time, it shall not affect any other provision of this Resolution or the enforceability of that provision at any other time. Section 13.4. Amendments. This Resolution may not be effectively amended without the written consent of the DNRC. Section 13.5. Applicable Law. This Resolution shall be governed by and construed in accordance with the laws of the State. Section 13.6. Captions; References to Sections. The captions in this Resolution are for convenience only and do not define or limit the scope or intent of any provisions or Sections of this Resolution. References to Articles and Sections are to the Articles and Sections of this Resolution, unless the context otherwise requires. Section 13.7. No Liability of Individual. Officers, Directors or Trustees. No recourse under or upon any obligation, covenant or agreement contained in the Ordinance or this Resolution shall be had against any director, officer or employee, as such, past, present or future, of the DNRC or the Trustee, either directly or through the DNRC or the Trustee, or against any officer, or member of the governing body or employee of the Borrower, 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 Borrower is hereby expressly waived and released by the Borrower and by the DNRC as a condition of and in consideration for the adoption of this Resolution and the making of the Loan. Section 13.8. Payments Due on Holidays. 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 the Ordinance, this Resolution or the Series 1991A 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 the Ordinance, this Resolution or the Series 1991A Bond. Section 13.9. Right of Others To Perform Borrower's Covenants. In the event the Borrower 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 -33- ccount of the Borrower and make advances for that purpose. No such performance or advance shall operate to release the Borrower 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 from the date of the advance until repaid. The DNRC and the provider of any Collateral Document shall have the right to enter the Project or the facility or facilities of which the 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 13.10. Authentication of Transcript. The officers of the Borrower 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 1991A Bond and such other certificates and affidavits as may be required to show the right, power and authority of the Borrower to issue the Series 1991A Bond, and all statements contained in and shown by such instruments, including any heretofore furnished, shall constitute representations of the Borrower as to the truth of the statements purported to be shown thereby. Section 13.11. Effective Date. This Resolution shall take effect immediately. PASSED AND ADOPTED by the City Council of the City of Kalispell, Montana, on this 4th day of November, 1991. Attest: Finance Director -34- 9 The motion for the adoption of the foregoing resolution was duly seconded by Atkinson and upon vote being taken thereon, the following voted in favor thereof: Collins, Nystul, Kennedy, Larson, Buck, Moses, Granmo Atkinson and Rauthe and the following voted against the same: whereupon said resolution was declared duly passed and adopted and was signed by the acting Mayor and attested by the Finance Director. I I I APPENDIX A Description of the Project The proposed project comprises the construction of a new wastewater treatment facility including pretreatment, grit removal, pumping, activated sludge secondary treatment process capable of removing phosphorus and nitrogen, clarification, filtration, ultraviolet disinfection, reaeration, and all necessary appurtenant structures described in the project plans and specifications approved by DHES on November 19, 1990. A-1 APPENDIX B [Form of the Bond] UNITED STATES OF AMERICA STATE OF MONTANA COUNTY OF FLATHEAD CITY OF KALISPELL SEWERAGE SYSTEM REVENUE BOND (DNRC REVOLVING LOAN PROJECT), SERIES 1991A No. R-1 $4,717,000 FOR VALUE RECEIVED, the City of Kalispell, Montana (the "Borrower"), 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 Revenue Bond Account of its Sewerage System Fund, the principal sum 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 2.25% per annum on the unpaid balance until paid. In addition, the Borrower shall pay, solely from said source, 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 (LOOM respectively, per annum. Interest and Administrative Expense Surcharge and Loan Loss Reserve Surcharge shall be payable in semiannual installments payable on each January 1 and July 1 (each a "Loan Repayment Date") commencing January 1, 1992. 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 shall be as set forth in Schedule B hereto. Upon each disbursement of Loan amounts to the Borrower 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 B-1 4% 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 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 is one of an issue of Sewerage System Revenue Bonds of the City authorized to be issued from time to time, and constitutes a series in the maximum authorized principal amount of $4,717,000 (the "Series 1991A Bond"). The Series 1991A Bond is issued to finance a portion of the costs of the construction of certain improvements to the sewerage system of the Borrower (the "System"), to make a deposit to a reserve fund for the Bonds and to pay costs of issuance of the Series 1991A Bond. The Series 199IA 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, as amended, and ordinances and resolutions duly adopted by the governing body of the Borrower, including Montana Code Annotated, as amended, Title 7, Chapter 7, Parts 44 and 45, as amended, and Ordinance No. 859 and Resolution No. 4022 duly enacted by the City Council (collectively, the "Ordinance"). The Series 1991A Bond is issuable only as a single, fully registered bond. The Series 1991A Bond is issued on a parity and is equally and ratably secured by the Net Revenues of the System with outstanding sewerage system revenue bonds of the City, Series 1972, Series 1976, Series 1986 and Series 1989, dated as of January 1,1972, July 1,1976, June 1, 1986, and April 15, 1991, respectively (the "Outstanding Bonds"). Reference is made to the Ordinance for a more complete statement of the terms and conditions upon which the Series 1991A 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 Ordinance and made payable from such net revenues on a parity with the Outstanding Bonds and the Series 1991A Bond (collectively, the "Bonds") or otherwise, the conditions upon which the Ordinance may be amended, the rights, duties and obligations of the City, and the rights of the owners of the Series 1991A Bond. The Borrower may prepay the principal of the Series 1991A Bond only if W it obtains the prior written consent of the DNRC thereto, and 00 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 M the Series 1991A 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 Borrower within the meaning of any constitutional or statutory limitation or provision. The Borrower may deem and treat the person in whose name this Series 1991A Bond is registered as the absolute owner hereof, whether this Series 1991A Bond is overdue or not, for the purpose of receiving payment and for all other purposes, and the Borrower shall not be affected by any notice to the contrary. The Series 1991A Bond may be transferred hereinafter as provided. IT IS CERTIFIED, RECITED, COVENANTED AND AGREED that the City has duly authorized and will forthwith construct and complete 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 Sewerage System Fund into which the gross revenues of the System, including all additions thereto and replacements and improvements thereof, will be paid, and a separate and special Revenue Bond Account in that fund, into which will be paid each month, from and as a first and prior lien on the Net Revenues of the System then on hand, 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 Bonds secured by the Ordinance and payable from that Account, and in which shall be established and maintained a reserve balance equal to the maximum amount of principal and interest to become due on the Series 1991A Bond and all other Bonds in any subsequent fiscal year; that the Revenue Bond Account will be used only to pay the principal of, premium, if any, and interest on the Series 1991A Bond, the Outstanding Bonds and any other additional Bonds issued pursuant to and secured by the Ordinance on a parity therewith, and such rates and charges will from time to time be made and kept sufficient, subject to regulations of the Montana Public Service Commission, to provide gross income and revenues adequate to pay promptly the reasonable and current expenses of operating and maintaining the System and to produce in each fiscal year Net Revenues in excess of such current expenses, equal to 125% of the maximum amount of principal and interest payable from the Revenue Bond Account in any subsequent fiscal year; that additional Bonds and refunding Bonds may be issued and made payable from the Revenue Bond Account on a parity with the Series 1991A Bond and Outstanding Bonds, upon certain conditions set forth in the Ordinance, but no obligation will be otherwise incurred and made payable from the Net Revenues of the System, whether or not such obligation shall also constitute a general obligation and indebtedness of the City, unless the lien thereof shall be expressly made subordinate to the lien of the B-3 Series 1991A Bond, the Outstanding Bonds and additional parity Bonds on such Net Revenues; that all provisions for the security of the holder of this Bond set forth in the Ordinance 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 1991A 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 1991A Bond and the interest hereon are payable solely from the Net Revenues of the System pledged and appropriated to the Revenue Bond Account and do not constitute a debt of the City within the meaning of any constitutional or statutory limitation or provision and the issuance of the Series 1991A Bond does not cause either the general or the special indebtedness of the City to exceed any constitutional or statutory limitation. IlV WITNESS WHEREOF, the City of Kalispell, Montana, by its governing body, has caused this Bond to be executed by the signatures of the Mayor and the Finance Director, and has caused the official seal of the Borrower to be affixed hereto, and has caused this Bond to be dated as of the day of 1991. Seal) Mayor 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 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 Borrower 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 Borrower's liability upon the Bond to the extent of the sum or sums so paid. THE FOLLOWING ENTRIES ARE TO BE MADE ONLY BY THE BOND REGISTRAR UPON REGISTRATION OF EACH TRANSFER The Finance Director of the City of Kalispell, Montana, acting as Bond Registrar, has transferred, on the books of the Borrower, 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. Name of New Signature of Date of Transfer Registered Holder Bond Registrar FORM OF ASSIGNMENT For value received, this Bond is hereby transferred and assigned by the undersigned holder, without recourse, to on this day of By: (authorized signature) For: (Holder) IM Date SCHEDULE A SCHEDULE OF AMOUNTS ADVANCED Total Amount Advances Advanced Notation MLde By I SCHEDULE B Administrative Date Principal interest Ex nse Surchar e "ATTACHED" B-7 Loan Loss Reserve Surchar e Total Loan Payment .r City of Kalispell SCLEDUU 8 LOU L..A$ Aanlnie-n " Reserve TOW LWte Principal Intoregrt Upewm SkIrcbarge S,rch',.6 Pap went `-- 7/ 1/93 70,000.00 53066.25 17,688.75 - Y 23,585.00 ,172,340.00 1/ 1/94 50,000.00 52,188.75 17,396.25 23,195.00 172,780.DO 7/ 1/94 61,000.00 51,288.75 17,096.25 22,715.00 172,180.00 1/ 1/95 83,000.00 50,377.50 16,192,50 22,350.00 172,560.00 7/ 1/95 85,000.D0 49,443.75 16,461.25 21 975.00 172,900.00 1/ 1/% 86,ow.00 481*487.50 16,162.50 21,550.00 172,200.00 7/ V96 68,000.00 47,520.00 15,840.00 21,120.00 172,480.00 1/ 1/97 90,000.D0 46,530.00 15,510.D0 20,680.00 172,720.00 7/ 1/97 92,000.00 45,517.50 13,172.50 20,230.00 172,920.00 1/ 3/98 93,000.00 44,482.50 14,OZ7.50 19,770.00 172,080.00 7/ 1/98 95,000.00 43,436.25 14,478.75 19,305.00 172,220.00 1/ 1/99 97,000.00 42,MI.50 14,122.50 18,830,00 172,320.00 7/ 1/99 99,000.00 41,275.25 13,758.75 16,345.00 172,380.00 k/ 1/ 0 101,000.00 40,162.50 13,387.50 17,850.00 172,400.00 7/ 1/ 0 103,000.00 39,U25.26 13,008.75 17,345.00 172,380,d0 Y/ 1/ 1 105,000.00 37,867.50 12,622.50 16,830.00 172,320.00 7/ 1/ 1 107,000.00 36,688.25 12,228.75 16,305.00 172,220.o0 l/ 1/ 2 , 109,000.00 35,4a2.5a 11,827.50 15,770.00 172,080.00 7/ 1/ 2 112,000.00 34,256.25 11,43.a.75 15,225.00 172,900.00 l/ 1/ 3 114,000.00 32,996.25 10,9%.75 14,665.00 172,M.00 7/ 1/ 3 116,000.00 31,713.75 10,571.25 14,095.00 172,380.00 1/ 1/ 4 118,000.00 30,AM. 75 10,138.25 13,515.00 172,060.DO 7/ 1/ 4 121,000.00 29,081.25 9,693.75 12,9z.00 172,700.00 1/ 1/ 5 123,000.00 27,720.00 9,240.00 12,=.OQ 177,280.00 7/ 1/ 5 1r6,000.D0 26,336.25 8,778.75 11,705.00 172,820.00 1/ 1/ 6 128,000.00 24,918.75 8,306.25 11,075.00 172,300.00 7/ 1/ 6 131,000.00 23,478.75 7,825.25 10,435.00 172,740.00 1/ 1/ 7 133,000.00 22,005.00 7,335.00 9,790.00 172,120,00 7/ 1/ 7 136,000.09 20,508.75 6,836.25 9,115.00 172,460.00 1/ 1/ a 139,D00.00 18,978.75 6,324.25 8,435.00 172,740.00 7/ 1/ 8 141,000.00 17,415.00 5,805.00 7,740.00 171,960.00 1/ 1/ 9 144,000.00 15,828.75 5,176.25 7,015.DO 172,140.00 7/ 11 9 147,MO. 00 14,208.75 4,736.25 5,315.00 172,260.00 1/ 1/10 150,D00.00 12,555.00 4,185,00 5,580.00 172,320.00 7/ 1/10 153,OW. Do 10,867.50 3,622.50 4,630.00 172,320.Do A/ 1/11 156,000.00 9,146.25 3,04a.75 4'065.00 172,260.00 7/ 1/11 159,000.Oo 7,391.25 2,463.75 31205.00 172,140.00 1/ 1/12 163,000.00 5,602.50 1,367.50 2,490.00 172,960.00 7J 1/12 166,000.00 3,766.75 1,256.25 1,675.00 172,700.00 1/ 1/17 169,00o.00 1,901.25 633.75 645.00 172,380.00 6 I APPENDIX C ADDITIONAL REPRESENTATIONS AND COVENANTS "NONE" C-1