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Resolution 4273 - Water System Revenue Bonds1 3,5 0 CERTIFICATE AS TO RESOLUTION 1, 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. 4273 entitled: "RESOLUTION RELATING TO $1,060,000 WATER SYSTEM REVENUE BONDS, SERIES 1996; AUTHORIZING THE ISSUANCE AND FPXiNG THE TERMS AND CONDITIONS THEREOF AND CREATING SPECIAL FUNDS AND ACCOUNTS AND PLEDGING CERTAIN REVENUES AS SECURITY FOR SUCH BONDS AND ANY ADDITIONAL BONDS" (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 June 17, 1996, and that the meeting was duty 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notice of such meeting given as required by law; and that the Resolution has not as of the date hereof been amended or repealed. I further certify that, upon vote being taken on the Resolution at said meeting, the following Council members voted in favor thereof. Donahue, Granmo Larson, stul Atkinson . Collins an;tvoagaIn it&% same: abstained from voting thereon: : or were absent: WITNESS my hand officially this 1 7th day of June, 1996. `'- City Clerk of Cott5CV Pot �Ab. Haarr, Kennedy, 1 1 t351 TABLE OF CONTENTS (Not a part of the Resolution and not to be used in the interpretation of any provision thereof) Pace SECTION 1 Definitions Authorizations and Findings 1.01. Definitions ............................................ 1 1:02. Rules of Interpretation ..................................... 7 1.03. Authorization ........................................... 7 1.04. The 1996 Project ........................................ 7 1.05. Findings and Determinations ................................ 8 SECTION 2 The Bonds 2.01. General Title ......................................... 8 2.02. General Limitations: Issuable in Series .......................... 8 2.03. Terms of Particular Series .................................. 9 2.04. Form and Denominations of Particular Series ..................... 9 2.05. Execution and Authentication ................................ 9 2.06. Temporary Bonds ........................................ 10 SECTION 3 Issuance and Sale of the Series 1996 Bands 3.01. Ratification of Issuance and Sale .............................. 10 3.02. Official Statement ........................................ 10 SECTION 4 The Series 1996 Bonds 4.01. Form of Series 1996 Bonds ................................. 11 4.02. Certificate as to Legal Opinion ............................... 17 4.03 , Denominations, Stated Maturities, Interest Rates ................... 17 4.04. Redemption ............................................. 17 4.05. Execution and Delivery .................................... 18 4.06. Application of Proceeds of Series 1996 Bonds ..................... 19 4.07, Transcript Certification .................................... 19 . ]R�;'Sr .is�r R..w,;+4�IPIl�,rs. . •�` _ * _ `6v'N .,- F L. 1352 • SECTION 5 registration and Anointment of Registrar for the Series 1996 Bonds 5.01. System of Registration ........................... 19 5.02. Registrar for the Series 1996 Bonds ............................. 21 SECTION 6 Additional Bonds and Subordinate Obligations 6.01. Additional Bonds ....... 21 6.02. Subordinate Obligations Permitted ............................. 23 SECTION 7 Water System Fund 7.01. Bond Proceeds and Revenues Pledged and Appropriated .............. 23 7.02. Construction Account ..................................... 23 7.03. Operating Account ....................................... 24 7.04. Debt Service Account ..................................... 24 7.05. Reserve Account ...................................... I . 24 7.06. Subordinate Obligations Account .............................. 25 7.07. Repair and Replacement Account .............................. 25 7.08. Surplus Account ................................. I ....... 26 7.09. Rebate Account ......................................... 26 7.10. Deposit and Investment of Funds ............................. 26 SECTION 8 Cgvenants 8.01. General ............................................. 27 8.02. Competing Service ....................................... 27 8.03. Property Insurance ....................................... 27 8.04. Liability Insurance and Surety Bonds ........................... 27 8.05. Disposition of Property .................................... 28 8.06. Books and Records ........................................ 28 8.07. Cost of Insurance and Accounting ........ ...................... 29 8.08. Handling of Funds ....................................... 29 8.09. Rates and Charges ....................................... 29 8.10. Appointment of Superintendent ............................... 30 8.11. Bondholders' Rights .................................. . ... 30 r��,y m ~ . ..Ka - 1 :. 1 1 a M 1353 1.1 SECTION 9 Supplemental Resolutions 9.01. General ............. 9.02. Consent of Bondholders ................................... 9.03. Notice ............................................. 9.04. Manner of Consent ....................................... SECTION 10 Defeasance 10.01. General ............................................. 10.02. Maturity ............................................. 10.03. Redemption ....................................... . . 10.04. Escrow ............................................. 10.05. Deposits in Trust ........................................ SECTION 11 Tax Matters 11.01 The Project ............................................ 11.02. General Covenant ........................................ 11.03. Certification ........................................... . 11.04. Arbitrage Rebate ........................................ 11.05. Information Reporting ..................................... SECTION 12 Continuing Disclosure ................. SECTION 13 Effective Date: Repeals ................. 30 31 31 31 32 32 32 32 32 32 32 33 33 33 ON 37 1354 RESOLUTION NO. 4273 RESOLUTION RELATING TO $1,060,000 WATER SYSTEM REVENUE BONDS, SERIES 1996; AUTHORIZING THE ISSUANCE AND FIXING THE TERMS AND CONDITIONS THEREOF AND CREATING SPECIAL FUNDS AND ACCOUNTS AND PLEDGING CERTAIN REVENUES AS SECURITY FOR SUCH BONDS AND ANY ADDITIONAL BONDS BE IT RESOLVED by the City Council of the City of Kalispell, Montana, as follows: Section 1. Definitions Authorizations and Findings. 1.01. Definitions. The terms defined in this Section 1.01 shall for all purposes of this Resolution have the meanings herein specified, unless the context clearly otherwise requires: Acc, ogntant shall mean a Person engaged in the practice of accounting as a certified public accountant, whether or not employed by the City. _ Act shall mean Montana Code Annotated, Title 7, Chapter 7, Parts 44 and 45, and Sections 7-13-4304 through 7-134314, as heretofore and hereafter amended or supplemented. Additional Bonds shall mean any Bonds issued pursuant to Section 6, excluding Subordinate Obligations. Bonds shall mean the Series 1996 Bonds and any Additional Bonds. Bond Counsel shall mean any firm of nationally recognized bond counsel experienced in matters relating to tax-exempt financing, selected by the City. Bondholder shall mean the Person in whose name a Bond is registered in the Bond Register. Bond Register shall mean the register maintained by the Registrar pursuant to Section 5. Business Dot shall mean any day other than a Saturday, Sunday or other day on which the Registrar is not open for business. !Qt shall mean the City of Kalispell, Montana, or its successors. City Resolution shall mean a resolution, ordinance or other appropriate enactment by the Council certified by the City Clerk of Council to have been duly adopted and to be in full force and effect. Code shall mean the Internal Revenue Code of 1986, as amended. Construction Account shall mean the account created by Section 7.02. Consultant shall mean a licensed, professional engineer duly qualified to practice in the State of Montana or an Accountant, retained by the City and of favorable reputation. Council shall mean the governing body of the City. -1- 1355 s Debt Service Account shall mean the account created by Section 7.03. Eligible Investments shall mean any of the following, to the extent authorized by State law: (1) Government Obligations; (2) Direct obligations and fully guaranteed certificates of beneficial interest of the Export -Import Bank of the United States; consolidated debt obligations and letter of credit - backed issues of the Federal Home Loan Banks; participation certificates and senior debt obligations of the Federal Home Loan Mortgage Corporation ("FHLMCs"); debentures of the Federal Housing Administration; mortgage -backed securities (except stripped mortgage securities which are valued greater than par on the portion of unpaid principal) and senior debt obligations of the Federal National Mortgage Association ("FNMAs"); participation certificates of the General Services Administration; guaranteed mortgage -backed securities and guaranteed participation certificates of the Government National Mortgage Association ("GNMAs"); guaranteed participation certificates and guaranteed pool certificates of the Small Business Administration; debt obligations and letter of credit -backed issues of the Student Loan Marketing Association; local authority bonds of the U.S. Department of Housing & Urban Development; guaranteed Title XI financings of the U.S. Maritime Administration; guaranteed transit bonds of the Washington Metropolitan Area Transit Authority; Resolution Funding Corporation securities; (3) Direct obligations of any state of the United States of America or any subdivision or agency thereof whose unsecured, uninsured and unguaranteed general obligation debt is rated, at the time of purchase, "A" or better by Moody's Investors Service and "A" or better by Standard & Poor's Ratings Group, or any obligation fully and unconditionally guaranteed by any state, subdivision or agency whose unsecured, uninsured and unguaranteed general obligation debt is rated, at the time of purchase, "A" or better by Moody's Investors Service and "A" or better by Standard & Poor's Ratings Group; (4) Commercial paper (having original maturities of not more than 270 days) rated, at the time of purchase, "P-1" by Moody's Investors Service and "A- I" or better by Standard & Poor's Ratings Group; (5) Federal funds, unsecured certificates of deposit, time deposits or bankers acceptances (in each case having maturities of not more than 365 days) of any domestic bank including a branch office of a foreign bank which branch office is located in the United States, provided legal opinions are received to the effect that full and timely payment of such deposit or similar obligation is enforceable against the principal office or any branch of such bank, which, at the time of purchase, has a short-term "Bank Deposit" rating of "P-1" by Moody's and a "Short -Term CD" rating of "A-1" or better by S&P; (6) Deposits of any bank or savings and loan association which has combined capital, surplus and undivided profits of not less than $3 Million, provided such deposits are continuously and fully insured by the Bank insurance Fund or the Savings Association Insurance Fund of the Federal Deposit Insurance Corporation; 356' (7) investments in money-market funds rated "AAAm" or "AAAm-G" by Standard & Poor's Ratings Oroup; (8) The Montana Short Term Investment Pool. (9) Repurchase agreements collateralized by Direct Obligations, GNMAs, FNMAs or FHLMCs with any registered broker/dealer subject to the Securities Investors' Protection Corporation jurisdiction or any commercial bank insured by the FDIC, if such broker/dealer or bank has an uninsured, unsecured and unguaranteed obligation rated "P-1" or "A3" or better by Moody's Investors Service, and "A-1" or "A-" or better by Standard & Poor's Ratings Group provided: (a) a master repurchase agreement or specific written repurchase agreement governs the transaction; and (b) the securities are held free and clear of any lien by the Trustee or an independent third party acting solely as agent ("Agent") for the Trustee, and such third party is (i) a Federal Reserve Bank, (ii) a bank which is a member of the Federal Deposit Insurance Corporation and which has combined capital, surplus and undivided profits of not less than $50 Million or (iii) a bank approved in writing for such purpose by Financial Guaranty Insurance Company, and the Trustee shall have received written confirmation from such third party that it holds such securities, free and clear of any lien, as agent for the Trustee; and (c) a perfected first security interest under the Uniform Commercial Code, or book entry procedures prescribed at 31 C.F.R. 306.1 et seq. or 31 C.F.R. 350.0 et sect. in such securities is created for the benefit of the Trustee; and (d) the repurchase agreement has a term of 180 days or less, and the Trustee or the Agent will value the collateral securities no less frequently than weekly and will liquidate the collateral securities if any deficiency in the required collateral percentage is not restored within two business days of such valuation; and (e) the fair market value of the securities in relation to the amount of the repurchase obligation, including principal and interest, is equal to at least 103%. Such investments shall be valued as frequently as deemed necessary by the Bond Insurer, but not less often than annually, at the market value thereof, exclusive of accrued interest. Deficiencies in the amount on deposit in any fund or account resulting from a decline in market value shall be restored no later than the succeeding valuation date. Investments purchased with funds on deposit in the Reserve Account shall have a term to maturity not greater than five years. Fiscal Year shall mean the period commencing on the first day of July of any year and ending on the last day of June of the next year, or any other specified twelve-month period, authorized by law and specified by the Council as the City's fiscal year. Government Obligations shall mean direct obligations of or obligations the principal of and the interest on which are fully and unconditionally guaranteed as to payment by, the United States of America. -3- 5 C 135 Holder shall mean a Bondholder. Independent shall mean, when used with respect to any specified Person, such a Person who (i) is in fact independent; (ii) does not have any direct financial interest or any material indirect financial interest in the City, other than the payment to be received under a contract for services to be performed by such Person; and (iii) is not connected with the City as an officer, employee, promoter, trustee, partner, director, underwriter or person performing similar functions. Whenever it is herein provided that any Independent Person's opinion or certificate shall be furnished, such Person shall be appointed by the Council and such opinion or certificate shall state that the signer has read this definition and that the signer is Independent within the meaning hereof. Interest Payment Date shall mean the Stated Maturity of an installment of interest on any of the Bonds. Mg.Wft shall mean, when used with respect to any Bond, the date on which the principal of such Bond becomes due and payable as therein or herein provided, whether at its Stated Maturity or by declaration of acceleration, call for redemption or otherwise... Net Revenues shall mean the Revenues for a specified period less the Operating Expenses for the same period. 1996 Project shall mean the improvements to the System described in Section 1.04. Qperating. Expenses shall mean the current expenses, paid or accrued, of operation, maintenance and minor repair of the System, excluding interest on the Bonds and depreciation, as calculated in accordance with generally accepted accounting principles, and shall include, without limitation, administrative expenses of the City relating solely to the System, premiums for insurance on the properties thereof, labor and the cost of materials and supplies used for current operation and for maintenance, and charges for the accumulation of appropriate reserves for current expenses which are not recurrent regularly but may reasonably be expected to be incurred. . Opinion of Counsel shall mean a written opinion of counsel, who may (except as otherwise expressly provided in this Resolution) be counsel for the City. Original Purchaser shall mean, with respect to any series of Bonds, the original purchaser or underwriter of such series of Bonds. The Original Purchaser of the Series 1996 Bonds is D. A. Davidson & Co., of Great Falls, Montana OuL qmdiniz shall mean, when used with reference to Bonds, as of the date of determination, all Bonds theretofore issued except: (i) Bonds theretofore canceled by the City or delivered to the City canceled or for cancellation; (ii) Bonds and portions of Bonds for whose payment or redemption money or Government Obligations (as provided in Section 10) shall have been theretofore deposited in trust for the Holders of such Bonds; provided, however, that if such Bonds are to be redeemed, notice of such redemption shall have been duly given pursuant to this Resolution or irrevocable instructions to call such Bonds for redemption at a stated Redemption Date shall have been given to the City; and -4- 358 (iii) Bonds in exchange for or in lieu of which other Bonds shall have been issued and delivered pursuant to this Resolution; provided, however, that in determining whether the Holders of the requisite principal amount of Outstanding Bonds have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Bonds owned by the City shall be disregarded and deemed not to be Outstanding. Person shall mean any individual, corporation, partnership, joint venture, association, joint stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. Principal and Interest EgQuirements shall mean, with respect to any Outstanding Bonds and for any Fiscal Year, the amount of principal of and interest on such Bonds due and payable during such Fiscal Year, assuming that Outstanding Serial Bonds are paid at their Stated Maturities and Outstanding Term Bonds are paid on Sinking Fund Payment Dates according to the mandatory redemption requirements established by the Resolution; provided that if. Additional Bonds are issued to refund any Outstanding Bonds and a crossover refunding escrow is established from proceeds thereof as contemplated in Section 6.01(E)(1), then such Additional Bonds shall not be deemed Outstanding for purposes of calculating the Principal and Interest Requirements until the Crossover Date (as defined in Section 6.01(E)(1)). PrincipW Pa ment Date shall mean the Stated Maturity of principal of any Serial Bond and the Sinking Fund Payment Date for any Term Bond. loject shall mean an improvement, betterment, reconstruction or extension of the System, including, without limitation,.the 1996 Project. Rehate Certificate means, with respect to a series of Bonds, a certificate delivered by the City on the day of issuance of such Bonds pursuant to which the City represents and covenants to segregate funds, calculate amounts, report and pay to the United States Department of Treasury any rebatable arbitrage relating to the Bonds of any series in accordance with the requirements of Section 148 of the Code and the regulations promulgated thereunder. Redemption Date when used with respect to any Bond to be redeemed shall mean the date on which it is to be redeemed pursuant hereto. Redernptiort Price when used with respect to any Bond to be redeemed shall mean the price at which it is to be redeemed pursuant hereto. Reg's shall mean the Person or Persons designated by or pursuant to this Resolution to receive and disburse the principal of, premium, if any, and interest on the Bonds on behalf of the City and to hold and maintain the Bond Register in accordance with Section 5. e air and Replacement Account shall mean the account created by Section 7.07. Reserve Account shall mean the account created by Section 7.03. F&Serye R uirement shall mean, as of the date of reference, an amount equal to the lesser of ten percent (10%) of the original principal amount of the Outstanding Bond or the maximum amount of Principal and Interest Requirements on all Outstanding Bonds in the then -5- 17 a a p t 13 5-'9 1 current or any future Fiscal Year; for purpose of this calculation, Principal and Interest Requirements shall be determined by including each July 1 payment in the immediately preceding Fiscal Year; provided that if Additional Bonds are issued to refund any Outstanding Bonds and a crossover refunding escrow is established from proceeds thereof as contemplated in Section 6.01(E)(1), then such Additional Bonds shall not be deemed Outstanding for purposes of the Reserve Requirement until the Crossover Date (as defined in Section 6.01(E)(1)). Resolution shall mean this Resolution, as amended and supplemented by any Supplemental Resolution. Revenues shall mean all revenues and receipts from rates, fees, charges and rentals imposed for the availability, benefit and use of the System, and from penalties and interest thereon, and from any sales of property which is a part of the System and all income received from the investment of such revenues and receipts, including interest earnings on the Reserve Account and the Operating Account, but excluding interest earnings on the Construction Account, Repair and Replacement Account and Surplus Account, and excluding any special assessments or taxes levied for construction of any part of the System and the proceeds of any grant or loan from the State or the United States, and any investment income thereon, to the extent such exclusion is a condition to such grant or loan. Serial Bonds shall mean Bonds which are not Term Bonds. Series 1996 Bonds shall mean the City's Water System Revenue Bonds, Series 1996, issued in the original principal amount of $1,060,000 pursuant to this Resolution. Sinking Fund Payment Date shall mean one of the dates set forth in any applicable provisions of a Supplemental Indenture (as to any series of Additional Bonds) for the making of mandatory principal payments for Additional Bonds which are Term Bonds. Stated Maturity when used with respect to any Bond or any installment of interest thereon shall mean the date specified in such Bond as the fixed date on which the principal of such Bond or such installment of interest is due and payable. Subordinate Obligations shall mean bonds or other obligations of the City payable from the Subordinate Obligations Account and issued in accordance with the provisions of Section 6.02. Subordinate -Obligations Account shall mean the account so named created by Section 7.06. Suppl&mental Resolution shall mean any City Resolution amendatory of or supplemental to this Resolution adopted pursuant to Section 9 or authorizing the issuance of Additional Bonds or Subordinate Obligations pursuant to Section 6. System shall mean the City's municipal water system, as it may at any time exist, including any replacement, expansion and improvement thereof. Term Bond shall mean any Bond for the payment of the principal of which mandatory payments are required by the Resolution to be made at times and in amounts sufficient to redeem all or a portion of such Bond prior to its Stated Maturity. -6- cto y• �.y. T -i I 3 xl j F riEF,'.,i I4YF 9;,�y 360 Water System Fund shall mean the fund created in Section 7.01 of this Resolution. " 1.02. Rules of Interpretation. A. All references in this Resolution to designated "Sections" and other subdivisions are to the designated Sections and other subdivisions of this Resolution as originally adopted. B. The words "herein", "hereof' and "hereunder" and other words of similar import without reference to any particular Section or subdivision refer to this Resolution as a whole and not to any particular Section or other subdivision unless the context clearly indicates otherwise. C. The terms defined in this Section 1 shall include the plural as well as the singular. D. All accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles applicable to governmental entities. E. All computations provided herein shall be made in accordance with generally accepted accounting principles applicable to governmental entities consistently applied. 1.03. Autho izatio . Under the Act, the City is authorized to issue and sell its revenue bonds payable during a term not exceeding forty years from their date of issue, to provide funds for the reconstruction, improvement, betterment and extension of a water system; provided that the bonds and the interest thereon are to be payable solely out of the income and revenues to be derived from rates, fees and charges for the services, facilities and commodities fumished by such water system, and are not to create any obligation of the City for the payment of which taxes may be levied except to pay for services provided by the water system to the City. 1.04. The 1996 Project. The City, with the assistance of Thomas, Dean & Hoskins, Inc., of Kalispell, Montana, Consulting Engineers (the "Consulting Engineer") has developed a capital improvements plan for the City's water system (the "System"). The City has determined it necessary and desirable to make certain expansions and improvements of the System during 1996 (the "1996 Project"). The 1996 Project consists of engineering, designing, constructing, and installing certain improvements to the existing water system, consisting of: (i) water main extension on Two Mile Drive from Glenwood to Hawthorn; (ii) water main looping on 14th Street East from 6th Avenue East to 7th Avenue Fast; (iii) water main looping in upper service zone and increase water pressure between Liberty Street and Three Mile Drive; (iv) water main looping on South Woodland from Kelly Road to Woodland Court; and (v) construction of the north side water well. The costs of the 1996 Project and costs incidental to the issuance and sale of the 1996 Bonds, is presently estimated to be $1,060,000.00 and consist of the following items: V3:.6 1 I 1 IV Construction of Water Main Improvements $ 373,000.00 Construction of North side Water Well 415,000.00 Engineering and Construction Contingencies 145,000.00 Deposit to Debt Service Reserve Account 106,000.00 Miscellaneous Contingency 2,500.00 Costs of Issuance 18.500.00 $1,060,000.00 1.05. Findings and Determinations. It is hereby found, determined and declared by this Council as follows: (a) The City is authorized under the Act to charge just and equitable rates, charges and rentals for all services directly or indirectly furnished by the System, and to pledge and appropriate to the Bonds the revenues to be derived from the operation of the System, including improvements, betterments or extensions thereof hereafter constructed or acquired; - (b) The Net Revenues to be produced by such rates, charges and rentals during the term of the Series 1996 Bonds will be sufficient to pay the principal of and interest when due on the Series 1996 Bonds, to create and maintain reasonable reserves therefor, to pay the reasonable and ordinary costs of operating and maintaining the System and to provide min adequate allowance for replacement and repair, as herein prescribed; and (c) it is in the best interests of the City and its residents to issue and sell the Series 1996 Bonds as provided in the Resolution. Section 2. The Bonds 2.01. General Title. The general title of the Bonds of all series shall be "Water System Revenue Bonds." Bonds of each series shall be titled so as to distinguish them from Bonds of all other series. 2.02. General Limitations: Issuable in Series. The aggregate principal amount of Bonds that may be authenticated and delivered and Outstanding under this Resolution is not limited, except as provided in Sections 3 and 6 and except as may be limited by law. The Bonds may be issued in series as from time to time authorized by the Council. With respect to the Bonds of any particular series, the City may incorporate in or add to the general title of such Bonds any words, letters or fixtures designed to distinguish that series. The Bonds shall be special, limited obligations of the City. Principal of, premium, if any, and interest on the Bonds shall be payable solely from the Net Revenues (other than to the extent payable out of proceeds of the Bonds) and funds on deposit in the Water System Fund, as provided in Section 7. The Bonds shall not be or constitute a pledge of the general credit or taxing powers of the City of any kind whatsoever. Neither the Bonds nor any of the agreements or obligations of the City contained herein shall be construed to constitute an indebtedness of the State of Montana or the City within the meaning of any constitutional or statutory provisions whatsoever. N 77- �_ . �.. •�--- - - - - - 362 If the Stated Maturity for the payment of any interest on or principal of any Bond or if any Redemption Date or Sinking Fund Payment Date shall be a day which is not a Business Day, then such payment may be made on the next succeeding Business Day, with the same force and effect as if made on such Stated Maturity, Redemption Date or Sinking Fund Payment Date (whether or not such next succeeding Business Day occurs in a succeeding month). 2.03. Terms of Particular Series. Each series of Bonds (except the Series 1996 Bonds, which are created by Section 4) shall be created by a Supplemental Resolution. The Bonds of each series (other than the Series 1996 Bonds, as to which specific provision is made in this Resolution) shall bear such date or dates, shall be payable at such place or places, shall have such Stated Maturities and Redemption Dates, shall bear interest at such rate or rates, from such date or dates, shall be payable in such 'installments and on such dates and at such place or places, and may be redeemable at such price or prices and. upon such terms (in addition to the prices and terms herein specified for redemption of all Bonds) as shall be provided in the Supplemental Resolution creating that series, all upon such terms as the City may determine. The City may, at the time of the creation of any series of Bonds or at any time thereafter, make, and the Bonds of that series may contain provision for: A. a sinking, amortization, improvement or other analogous fund; B. limiting the aggregate principal amount of the Bonds of that series and of Additional Bonds thereafter to be issued; C. exchanging Bonds of that series, at the option of the Holders thereof, for other Bonds of the same series of the same aggregate principal amount of a different authorized kind or authorized denomination or denominations; or D. registration, transfer and delivery. 2.04. Form g@d Denominations of Particular Series. The form of the Bonds of each series (other than the Series 1996 Bonds, as to which specific provisions are made in Section 4.01) shall be established by the provisions of the Supplemental Resolution creating such series. The Bonds of each series shall be distinguished from the Bonds of other series in such manner as the Council may determine. The Bonds of each series shall be in such denominations as shall be provided in the Supplemental Resolution creating such series (other than the Series 1996 Bonds, as to which specific provisions are made in this Resolution). In the absence of any such provision with respect to the Bonds of any particular series, the Bonds of such series shall be in the denomination of $5,000 or any integral multiple thereof of single maturities. 2.05. Execution and Authentication. The Bonds shall be executed on behalf of the City by the manual or facsimile signatures of the Mayor, City Manager and City Finance Director (or other officers of the City authorized by proceedings of the Council), and shall have the official seal of the City affixed, imprinted or reproduced thereon; provided, that if required by applicable laws, one such signature on each Bond shall be a manual signature. Any Bond bearing the manual or facsimile signature of an individual who was at any time an appropriate officer of the City shall be valid and sufficient for all purposes, regardless of whether such individual held such office as of the date of sale, issue or delivery of such Bond. No Bond shall be valid or obligatory for any purpose or be entitled to any security or benefit under this Resolution unless and until a certificate of authentication on such Bond has been duly executed by the manual signature of an authorized in 1363 representative of the Registrar. Certificates of authentication on each Bond need not be signed by the same representative. The executed certificate of authentication on each Bond shall be conclusive evidence that it has been authenticated and delivered under this Resolution and in accordance with the provisions hereof. 2.06. TemporM Bonds. Pending the preparation of definitive Bonds, the City, if authorized by law, may execute and deliver temporary Bonds which are printed, lithographed, typewritten, mimeographed or otherwise produced, in any denomination, substantially of the tenor of the definitive Bonds in lieu of which they are issued, with such appropriate insertions, omissions, substitutions and other variations as the officers of the City executing such Bonds may determine, as evidenced by their signing of such Bonds. ' If temporary Bonds are issued, the City will cause definitive Bonds to be prepared without unreasonable delay. After the preparation of definitive Bonds, the temporary Bonds shall be exchangeable for definitive Bonds upon surrender of the temporary Bonds, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Bonds the City shall execute and deliver in exchange therefor a like principal amount of definitive Bonds of authorized denominations. Until so exchanged the temporary Bonds shall in all respects be entitled to the same security and benefits under this Resolution as definitive Bonds. Section 3. Issuance and Sale of the Series 1996 Bonds. 3.01. Ratification of Issuance and Sale. Advertisements for bids for the purchase of $1,060,000 Water System Revenue Bonds were published in accordance with the provisions of Montana Code Annotated, Sections 7-7-4433 and 17-5-106. D. A. Davidson &Co., of Great Falls, Montana (the "Purchaser"), submitted a bid to purchase from the City $1,060,000 of Water System Revenue Bonds at a purchase price of $1,060,000 plus interest accrued thereon to the date of delivery from the date of original issue of the Bonds, which resulted in the net effective interest rate of 5.5367% and the lowest net effective cost for the Bonds. The bid of the Purchaser is hereby accepted and the sale of the Bonds is hereby awarded to the Purchaser. Based on the findings made in Section 1, it is hereby ratified and confirmed that the City is authorized, and this Council hereby ratifies and confirms it to be in the best interest of the City and to be necessary and expedient for the City, to issue its $1,060,000 Water System Revenue Bonds, Series 1996, for the purpose of providing funds to construct the 1996 Project. 3.02. Official Statement. The Series 1996 Bonds will be offered for sale by the Original Purchaser by means of an Official Statement, dated June 19, 1996, which amends the Preliminary Official Statement, dated May 31, 1996, as to the aggregate principal amount of the Bonds and maturity schedule related thereto, which has been filed in the office of the City Clerk of Council (the "Official Statement"). This Council hereby approves the Official Statement and authorizes it to be executed on behalf of the City by the Mayor and City Finance Director, or in their absence or disability, the acting Mayor and City Finance Director in substantially the form presented to this Council, with such additions, deletions and modifications as such officer and the City Attorney may approve. Execution of the Official Statement by the appropriate officer of the City shall be conclusive as to the approval thereof by this Council. The City hereby consents to the distribution of the Official Statement to prospective purchasers of the Series 1996 Bonds and this Council hereby authorizes and directs the Mayor and the City Finance Director to execute such certificates relating to the accuracy and completeness of the Official Statement as may be appropriate. The determination of the City Finance Director that the Preliminary Official Statement was "final" as of its date for purposes of Rule 15c2-12 under the Securities Exchange Act of 1934 is hereby ratified and confirmed. -10- Section 4. The Series 1996 Bonds. 4.01. Form of Series 1996 Bonds. The Series 1996 Bonds shall be prepared in substantially the following form, with such appropriate variations, omissions and insertions as are permitted or required by this Resolution: 1 Ii 1 1365 [Face of the Series 1996 Bonds] UNITED STATES OF AMERICA STATE OF MONTANA COUNTY OF FLATHEAD CITY OF KALISPELL WATER SYSTEM REVENUE BOND SERIES 1996 No. Interest Principal Date of Rate Maturity Date Original Issue CUSI June 15, 1996 REGISTERED HOLDER: SEE REVERSE FOR CERTAIN PRINCIPAL ,MOLD': DEFINITIONS FOR VALUE RECEIVED, the City of Kalispell {the "City"), a municipal corporation duly organized and validly existing under the laws of the State of Montana, hereby acknowledges itself to be specially indebted and hereby promises to pay to the registered holder identified above or registered assigns, solely from the Debt Service Account of its Water System Fund, the principal amount specified above on the Principal Maturity Date specified above, or, if this Bond is redeemable as stated below, on an earlier date on which it shall have been duly called for redemption, upon presentation and surrender hereof at the operations center, in Minneapolis, Minnesota, of the Registrar hereinafter named, with interest thereon, from June 15, 1996, or from such later date to which interest has been paid or duly provided for until the principal amount hereof is paid or until this Bond, if redeemable, has been duly called for redemption, at the annual interest rate specified above, Interest -is payable semiannually on January 1 and July 1 in each year, commencing January 1, 1997, to the registered holder of this Bond as such appears of record in the bond register as of the close of business on the 15th day (whether or not a business day) of the immediately preceding month. Interest is payable by check or draft mailed by Norwest Bank Montana, N. A., as Bond Registrar, Transfer Agent and Paying Agent, or its successor designated under the resolution described herein (the "Registrar"), at its operations center in Minneapolis, Minnesota The principal of and interest on this Bond are payable in lawful money of the United States of America. Additional provisions of this Bond are contained on the reverse hereof and such provisions shall for all purposes have the same effect as though fully set forth hereon. This Bond shall not be valid or obligatory for any purpose or be entitled to any security or benefit under the Resolution unless the Certificate of Authentication hereon shall have been executed by the Registrar by the manual signature of one of its authorized representatives. -12- _.%L 366 IN WITNESS WHEREOF, the City of Kalispell, Montana, by its City Council, has caused this Bond and the certificate on the reverse side hereof to be executed by the facsimile signatures of its Mayor, City Manager and City Finance Director, and has caused a facsimile of the official seal of the City to be imprinted hereon. (Facsimile Signature) Mayor (Facsimile Seal) (Facsimile Signature) (Facsimile Signature) City Manager City Finance Director CERTIFICATE OF AUTHENTICATION This Bond is one of the Water System Revenue Bonds, Series 1996 delivered pursuant to the Resolution mentioned within. NORWEST BANK MONTANA, N. A. as Bond Registrar, Transfer Agent and Paying Agent M Authorized Representative [Reverse of the Series 1996 Bonds] This Bond is one of a duly authorized issue of Bonds of the City designated as "Water System Revenue Bonds" (collectively, the `Bonds"), issued and to be issued in one or more series under, and all equally and ratably secured by, a resolution adopted by the City Council on June 17, 1996 (the "Resolution"), to which Resolution, copies of which are on file with the City, reference is hereby made for a description of the nature and extent of the security, the conditions under which Additional Bonds may be issued on a parity with the Series 1996 Bonds, the conditions under which the Resolution may be amended, the rights of the.Holders of the Bonds and other matters. As provided in the Resolution, the Bonds are issuable in series which may vary as in the Resolution provided or permitted. This Bond is one of the series specified in its title, issued in the aggregate principal amount of $1,060,000 (the "Series 1996 Bonds"), all of like date of original issue and tenor except as to serial number, denomination, date, interest rate, maturity date and redemption privilege. The Series 1996 Bonds are issued by the City for the purpose of providing funds to be used with other available funds of the City to finance a portion of the costs of certain improvements of the City's municipal water system (the "System," which term includes all improvements, betterments, extensions and alterations of the System as it exists at any time). The Series 1996 Bonds are issued pursuant to and in full compliance with the Constitution and laws of the State of Montana, particularly Montana Code Annotated, Title 7, Chapter 7, Parts 44 and 45, and as amended (the "Act"), and pursuant to the Resolution. The Bonds are payable solely, and equally and ratably, from the net revenues pledged to the payment thereof. -13- C 1 1 13-6 1 u The Bonds are not general obligations of the City and the City's general credit and taxing powers are not pledged to the payment of the Bonds or the premium, if any, or interest thereon. The Bonds do not constitute an indebtedness of the City within the meaning of any constitutional or statutory provisions. The Series 1996 Bonds maturing in the years 1997 through 2003 are not subject to redemption, but Series 1996 Bonds having stated maturities in 2004 and later years are each subject to redemption at the option of the City, in whole or in part, and in $5,000 principal amounts selected by lot or other manner deemed fair by the Registrar within a maturity, on January 1, 2004 and on any business day thereafter, at a redemption price equal to the principal amount thereof to be redeemed plus interest accrued to the date of redemption, plus a premium thereon according to the following schedule: Redemption Date Redemption Price January 1, 2004 through December 31, 2004 102% January 1, 2005 through December 31, 2005 101 % January 1, 2006 and any business day thereafter 100% Notice of redemption is to be mailed, not less than 30 days nor more than 60 days before the date fixed for redemption, to the Registrar and to the registered holder of each Series 1996 Bond to be redeemed; provided that any defect in or failure to give such mailed notice shall not affect the validity of proceedings for the redemption of any Series 1996 Bond not affected thereby. Series 1996 Bonds in a denomination greater than $5,000 may be redeemed in part, in integral multiples of $5,000. Upon partial redemption of any Series 1996 Bond, one or more new Series 1996 Bond or Bonds will be delivered to the registered holder without charge, representing the unredeemed principal amount outstanding. This Bond is a negotiable investment security as provided in the Montana Uniform Commercial Code. As provided in the Resolution and subject to certain limitations set forth therein, this Bond is transferable upon the books of the Registrar at its operations center in Minneapolis, Minnesota, by the registered holder hereof in person or by his attorney duly authorized in writing, upon surrender hereof together with a written instrument of transfer satisfactory to the Registrar, duly executed by the registered holder or his attorney; and may also be surrendered in exchange for Series 1996 Bonds of other authorized denominations. Upon such transfer or exchange, the City will cause one or more new Series 1996 Bond or Bonds to be issued in the name of the transferee or registered holder, of the same aggregate principal amount, bearing interest at the same rate and maturing on the same date, subject to reimbursement for any tax, fee or governmental charge required to be paid with respect to such transfer or exchange. The City and the Registrar may deem and treat the person in whose name this Bond is registered as the absolute owner hereof, whether this Bond is overdue or not, for the purpose of receiving payment and for all other purposes, and neither the City nor the Registrar shall be affected by any notice to the contrary. IT IS HEREBY CERTIFIED, RECITED, COVENANTED AND AGREED that the City will construct and complete the 1996 Project as defined in the Resolution, will prescribe and collect reasonable rates and charges for all services and facilities afforded by the System, and has created a special Water System Fund into which the Revenues (as defined in the Resolution) of the System will be paid, and a separate and special Debt Service Account in that Fund, into which will be paid -14- 1368 monthly, from and as a first and prior lien on the Net Revenues of the System then on hand (the gross revenues remaining after the payment of operating expenses of the System) an amount not less than one -sixth of the interest due on all Outstanding Bonds within the next six months and one -twelfth of the principal on all Outstanding Bonds due within the next twelve months; that the City has credited to the Reserve Account of the Water System Fund from the proceeds of the Series 1996 Bonds the sum of $106,000 and the City has agreed thereafter to credit monthly to the Reserve Account, from the Net Revenues (Revenues less Operating Expenses, as defined in the Resolution) such additional amounts as may be necessary to maintain a balance therein at least equal to the lesser of ten percent (10%) of the original principal amount of the Outstanding Bond or maximum amount of principal and interest payable on the Series 1996 Bonds and any Additional Bonds in the current and any future fiscal year (the "Reserve Requirement"); that the Debt Service Account and the Reserve Account will be used only to pay the principal of, premium, if any, and interest on the Bonds; that the rates and charges for the System will from time to time be made and kept sufficient to provide Net Revenues for each fiscal year commencing after June 30, 1996, at least equal to 125% of the maximum of the principal of and interest on the Series 1996 Bonds and any Additional Bonds to become due in all full fiscal years commencing after June 30, 1996, to establish and maintain the Reserve Requirement, to pay promptly the reasonable and current expenses of operating and maintaining the System, to pay principal of.and interest -on any subordinate obligations issued under the Resolution and to provide reserves for the repair and replacement of the System; that Additional Bonds may be issued and made payable from the Water System Fund on a parity with the Series 1996 Bonds upon certain conditions set forth in the Resolution, but no obligation will be otherwise incurred and made payable from the Net Revenues, 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 Series 1996 Bonds on such Net Revenues; that all provisions for the security of the holder of this Bond set forth in the Resolution will be punctually and faithfully performed as therein stipulated; that all acts, conditions and things required by the Constitution and laws of the State of Montana and the ordinances and resolutions of the City to be done, to exist, to happen and to be performed in order to make this 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 Bond and the interest and premium, if any, hereon are payable solely from the Net Revenues of the System pledged and appropriated to the Debt Service Account and do not constitute a debt of the City within the meaning of any constitutional or statutory limitation or provision and the issuance of the Series 1996 Bonds does not cause either the general or the special indebtedness of the City to exceed any constitutional or statutory limitation. As- 1 1- 3 6 9 1 The following abbreviations, when used in the inscription on the face of this Bond, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM -- as tenants in common TEN ENT -- as tenants by the entireties JT TEN -- as joint tenants with right of survivorship and not as tenants in common UTMA......... Custodian (Cust) (Minor) under Uniform Gifts to Minors Act.............(State) Additional abbreviations may also be used. FOR VALUED RECEIVED the undersigned hereby sells, assigns and transfers unto the within Bond and all rights thereunder, and hereby irrevocably constitutes and appoints attorney to transfer the within Bond on the books kept for registration thereof, with full power of substitution in the premises. Date: PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE: SIGNATURE GUARANTEE Signature(s) must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Registrar, which requirements include membership or participation in STAW or such other "signature guaranty program" as may be determined by the Registrar in addition to or in substitution for STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. 11 -16- NOTICE: The signature to this assignment must correspond with the name as it appears upon the face of the within bond in every particular, without alteration, enlargement or any change whatsoever. 1370 4.02. Certificate as to Legal Opinion. The following certificate shall be printed on the reverse side of each Series 1996 Bond, following a true copy of the text of the legal opinion given at the time of delivery of the Series 1996 Bonds: We certify that the above is a full, true and correct copy of the legal opinion on the series of Bonds of the City of Kalispell, Montana which includes the within Bond, dated as of the date of delivery of and payment for the Bonds of such series. (Facsimile Signature) (Facsimile Signature) (Facsimile Signature) Mayor City Manager City Finance Director 4.03. Denominations Stated Maturities Interest Rates. The Water System Revenue Bonds, Series 1996, to be issued hereunder, in the aggregate principal amount of $1,060,000, shall be issued in fully registered form only, in the denomination of $5,000 each or any integral multiple thereof of a single maturity. The Stated Maturities of the Series 1996 Serial Bonds shall be on July 1 in the years 1997 to 2011, inclusive. The Series 1996 Bonds shall bear interest from June 15, 1996, until paid or discharged at the annual rates set forth opposite the Stated Maturity of each Series 1996 Bond as follows: Maturity Principal Interest Maturity Principal Interest (July 11 Amount _ Rate (JU 11 oun Rate 1997 $45,000 7.50% 2005 $75,000 5.20% 1998 50,000 7.50 2006 75,000 5.30 1999 55,000 7.00 2007 80,000 5.40 2000 55,000 6.50 2008 85,000 5.50 2001 60,000 5.75 2009 90,000 5.60 2002 60,000 4.90 2010 95,000 5.65 2003 65,000 5.00 2011 100,000 5.70 2004 70,000 5.10 Ownership of the Series 1996 Bonds shall be transferred only upon the bond register of the City hereinafter described. Principal of and interest on the Series 1996 Bonds are payable in lawful money of the United States of America. Principal and premium, if any, shall be payable by check or draft drawn on the Registrar hereinafter described upon presentation and surrender of the Series 1996 Bonds at maturity or upon redemption at the operations center of the Registrar. Interest on the Series 1996 Bonds shall be payable on January 1 and July 1 in each year, commencing January 1, 1997, by check or draft of the Registrar mailed to the owners of record thereof as such appear in the bond register as of the close of business on the 15th day of the immediately preceding month, whether or not such day is a business day. Each Series 1996 Bond shall bear an original issue date as of June 15, 1996. Upon delivery of the Series 1996 Bonds to the Original Purchaser thereof pursuant to Section 4.05 or upon the delivery of Series 1996 Bonds upon a transfer or exchange pursuant to Section 5.01, the Registrar shall date each such Series 1996 Bond so delivered as of the date of its authentication. 4.04. Redemption. (a) Optional Redemption. The Series 1996 Bonds with Stated Maturities in the years 1997 through 2003 shall not be subject to redemption. Series 1996 Bonds with Stated Maturities in 2004 and later years shall each be subject to redemption at the option of the City, in whole or in -1.7- PA, tZ 71 part, in inverse order of maturities and in $5,000 principal amounts selected by the Registrar by lot - or other manner deemed fair within a maturity, on January 1, 2004, and any business day thereafter, at a redemption price equal to the principal amount of such Bonds to be redeemed, together with interest accrued on the principal amount to be redeemed to the date fixed for redemption, plus a premium thereon according to the following schedule: Redemption Date Redemption Price January 1, 2004 through December 31, 2004 102% January 1, 2005 through December 31, 2005 101 % January 1, 2006 and any business day thereafter 100% (b) Notice of Redemption. Notice of redemption, stating the amount, the serial numbers, the maturities, the CUSIP numbers and the interest rates of the Series 1996 Bonds or portions thereof called for redemption, shall be mailed by the City Finance Director to the Registrar, if it is other than the City Finance Director, and to the registered owner of each Series 1996 Bond to be redeemed at his address shown in the bond register, not less than thirty (30) days nor more than sixty (60) days before the redemption date therefor; provided that any defect in or failure to give such mailed notice shall not affect the validity of proceedings for the redemption of any Series 1996 Bond not affected thereby. Notice of the call of any Series 1996 Bond for redemption having been mailed as herein provided, and funds sufficient for the payment thereof with accrued interest having been deposited with the Registrar on or before the redemption date, interest on such Series 1996 Bond shall cease to accrue on said date, and the Holder shall have no further rights with respect thereto or under the Resolution except to receive the redemption price so deposited. Notice of redemption of the Series 1996 Bonds, other than mandatory sinking fund redemption or notice of Series 1996 Bonds subject to an advance refunding, shall not be given, mailed or published unless funds sufficient to pay the redemption price of the Series 1996 Bonds to be redeemed have been deposited with the Paying Agent. In addition to the notice prescribed by the preceding paragraph, the City Finance Director shall also give, or cause the Registrar to give, notice of the redemption of any Series 1996 Bond or Bonds or portions thereof at least 35 days before the redemption date by certified mail, telecopy or express delivery service to the Original Purchaser of the Series 1996 Bonds and all registered securities depositories then in the business of holding substantial amounts of obligations of the character of the Bonds (such depositories now being The Depository Trust Company, of Garden City, New York; Midwest Securities Trust Company, of Chicago, Illinois; and Philadelphia Depository Trust Company, of Philadelphia, Pennsylvania) and the one or more national information services that disseminate information regarding municipal bond redemptions; provided that any defect in or any failure to give any notice of redemption prescribed by this paragraph shall not affect the validity of the proceedings for the redemption of any Series 1996 Bond or portion thereof. Series 1996 Bonds in a denomination larger than $5,000 may be redeemed in part in any integral multiple of $5,000. The owner of any Series 1996 Bond redeemed in part shall receive, upon surrender of such Bond to the Registrar, one or more new Series 1996 Bonds in authorized denominations equal in principal amount to the unredeemed portion of the Bond so surrendered. 4.05. Execution and Delivery.. The Series 1996 Bonds shall be forthwith prepared for execution under the direction of the City Clerk of Council, at the expense of the City, and shall be executed on behalf of the City by the signatures of the Mayor, the City Manager and the City Finance Director; provided that said signatures may be printed, engraved or lithographed facsimiles -18- M-11 :37Z thereof. The Series 1996 Bonds shall be sealed with the official seal of the City; provided that such seal may be a printed, engraved or lithographed facsimile thereof. On the reverse of each Series 1996 Bond shall be printed a copy of the legal opinion to be rendered by Bond Counsel, certified by the facsimile signatures of the Mayor, the City Manager and the City Finance Director, as provided in Section 4.02. When the Series 1996 Bonds have been fully executed and authenticated, they shall be delivered by the Registrar to the Original Purchaser thereof upon payment of the purchase price in accordance with the contract of sale heretofore made and executed, and the Purchaser shall not be obligated to see to the application of the purchase price. 4.06. Application of Proceeds of Serics 1996 Bonds. The City shall deposit the proceeds of the sale of the Series 1996 Bonds as follows: (a) Deposit to the credit of the Debt Service Account the amount of accrued interest, if any, paid by the Original Purchaser to the date of delivery of the Series 1996 Bonds; (b) Deposit to the credit of the Reserve Account the amount of $106,000; and (c) Deposit the balance of the proceeds of the Series 1996 Bonds in the Construction Account to be used to pay costs of issuance of the Series 1996 Bonds and the costs of the 1996 Project. 4.07. Transcript Certification. The officers of the City are directed to furnish to the Original Purchaser of the Series 1996 Bonds certified copies of all proceedings and information in their official records relevant to the authorization, sale, execution and issuance of the Series 1996 Bonds, and such certificates and affidavits as to other matters appearing in their official records or otherwise known to them as may be reasonably required to evidence the validity and security of the Series 1996 Bonds, and all such certified copies, certificates and affidavits, including any heretofore furnished, shall constitute representations and recitals of the City as to the correctness of all facts stated therein and the completion of all proceedings stated therein to have been taken. Section 5. Registration and Appointment of Registrar for the Series 1926 Bonds. 5.01. System of Registration. The City shall cause a register (the `Bond Register") for registration of Series 1996 Bonds and transfers of Series 1996 Bonds to be kept by the Registrar. This Section 5.01 shall establish a system of registration for the Series 1996 Bonds as defined in the Model Public Obligations Registration Act of Montana, and shall govern in the event provisions of the Resolution relating to registration, transfer or exchange of Series 1996 Bonds are inconsistent herewith. The effect of registration and the rights and duties of the City and the Registrar with respect thereto shall be as follows: (a) a 'stray. The Registrar shall keeps at its operations center the Bond Register in which the Registrar shall provide for the registration of ownership of the Series 1996 Bonds and the registration of transfers and exchanges of the Series 1996 Bonds entitled to be registered, transferred or exchanged- (b) Transfer. Upon surrender for transfer of any Series 1996 Bond duly endorsed by the Holder thereof or accompanied by a written instrument of transfer, in form satisfactory to the Registrar, duly executed by the Holder thereof or by an attorney duly authorized by the Holder in writing, the Registrar shall authenticate and deliver, in -19- 1373 the name of the designated transferee or transferees, one or more new Series 1996 Bonds of the same series of a like aggregate principal amount and Stated Maturity as requested by the transferor. The Registrar is not required (i) to transfer or exchange any Series 1996 Bond during the period of fifteen days immediately preceding any selection of Series 1996 Bonds and Stated Maturity for redemption, or (ii) to transfer or exchange any Series 1996 Bond which has been selected for redemption. (c) Exchange. Whenever any Series 1996 Bond is surrendered by the Holder for exchange, the Registrar shall authenticate and deliver one or more new Series 1996 Bonds of a like aggregate principal amount, interest rate and maturity, as requested by the Holder or the Holder's attorney in writing. (d) Cancellation. All Series 1996 Bonds surrendered upon any transfer or exchange shall be promptly canceled by the Registrar and thereafter disposed of as directed by the City. (e) Imnropgr or Unauthorized Transfer. When any Series 1996 Bond is presented to the Registrar for transfer, the Registrar may refuse to transfer the same until it is satisfied that the endorsement on such Series 1996 Bond or separate instrument of transfer is legally authorized. The Registrar shall incur no liability for the refusal, in good faith, to make transfers which it, in its judgment, deems improper or unauthorized. (f) Persons,Deemed Ownerg. The City and the Registrar may treat the Person in whose name any Series 1996 Bond is at any time registered in the Bond Register as the absolute owner of such Series 1996 Bond, whether such Series 1996 Bond shall be overdue or not, for the purpose of receiving payment of, or on account of, the principal of, premium, if any, and interest on such Series 1996 Bond and for all other purposes, and all such payments so made to such Person shall be valid and effectual to satisfy and discharge the liability of the City upon such Series 1996 Bond to the extent of the sum or sums to be paid. (g) Taxes. Fees and Charges. For every transfer or exchange of Series 1996 Bonds (except upon a partial redemption of a Series 1996 Bond), the Registrar may impose a charge upon the owner thereof sufficient to reimburse the Registrar for any tax, fee or other governmental charge required to be paid with respect to such transfer or exchange. (h) Mutilated. Lost. Stolen or Destroyed Series 1M Bonds. In case any Series 1996 Bond shall become mutilated or be lost, stolen or destroyed, the Registrar shall deliver a new Series 1996 Bond, of like amount, number, Stated Maturity and tenor in exchange and substitution for and upon cancellation of any such mutilated Series 1996 Bond or in lieu of and in substitution for any such Series 1996 Bond lost, stolen or destroyed, upon the payment of the reasonable expenses and charges of the Registrar in connection therewith; and, in the case of a Series 1996 Bond lost, stolen or destroyed, upon filing with the Registrar of evidence satisfactory to it that such Series 1996 Bond was lost, stolen or destroyed, and of the ownership thereof, and upon furnishing to the Registrar of an appropriate bond or indemnity in form, substance and amount satisfactory to it, in which both the City and the Registrar shall be named as obligees. All Series 1996 Bonds so surrendered to the Registrar shall be canceled by it and evidence of such cancellation shall be given to the City. If the mutilated, lost, stolen or destroyed Series -20- �t R 374 1996 Bond has already matured or has been called for redemption in accordance with its terms, it shall not be necessary to issue a new Series 1996 Bond prior to payment. 5.02. Registrar for the Series 1996 Bonds. The City hereby appoints Norwest Bank Montana, N. A., in Billings, Montana, as the Registrar for the Series 1996 Bonds. The City reserves the right to appoint a suitable bank, trust company or financial institution, whether within or without the State of Montana or the City Finance Director of the City as successor Registrar. In such event, upon merger or consolidation of the Registrar with another corporation, if the resulting corporation is a bank or trust company authorized by law to conduct such business, such corporation shall be authorized to act as successor Registrar; provided that (i) any successor Registrar must have combined capital, surplus and undivided profits of at least $50 Million, and (ii) no resignation or removal of the Registrar shall become effective until a successor has been appointed and has accepted the duties of Registrar. The City agrees to pay the reasonable and customary charges of the Registrar for the services performed. The City reserves the right to remove any Registrar upon 30 days" notice and upon the appointment of a successor Registrar, in which event the predecessor Registrar shall deliver all cash and Bonds in its possession to the successor Registrar and shall deliver the Bond Register to the successor Registrar. On or before each Principal Payment Date and Interest Payment Date, without further order of the Council, the City Finance Director shall transmit to the Registrar, if other than the City Finance Director, solely from money in the Debt Service Account, money sufficient for the payment of all principal and interest then due on the Bonds. Section 6. Additional Bonds and Suba dinate Qbligations. 6.01. Additional Bonds. In addition to the Series 1996 Bonds, whose issuance and delivery is provided for in Section 4, Additional Bonds may at any time and from time to time be issued, sold and delivered by the City but only upon the filing with the City Clerk of Council of the following: A. A Supplemental Resolution creating the designated series of Additional Bonds and authorizing the issuance and the sale thereof to the Original Purchaser or Purchasers named therein for the purchase price set forth therein; B. An Opinion of Bond Counsel stating in effect: (1) that all conditions precedent provided for in this Resolution relating to the issuance and delivery of such Additional Bonds have been complied with, including any conditions precedent specified in this Section 6.01; (2) that the series of Additional Bonds when issued and delivered by the City,will be valid and binding special obligations of the City in accordance with their terms and entitled to the benefits of and secured by this Resolution; and (3) that the issuance of such Additional Bonds will not adversely affect the exclusion from gross income for purposes of federal income taxation of the interest on any Bonds then Outstanding; and C. A certificate signed by the Mayor and City Clerk of Council stating that the City is not then in default under this Resolution or that, upon issuance of such Additional Bonds and application of the proceeds thereof on the date of such issuance, no default would then be existing under this Resolution, and that on the date of issuance of such �. 1375' Additional Bonds the balance in the Reserve Account equals the Reserve Requirement, calculated assuming the issuance of such Additional Bonds (and the defeasance of any Bonds to be defeased by application of the proceeds of the Additional Bonds on the date of issuance thereof). D. If the Additional Bonds are issued to finance a Project or to refund any Subordinate Obligations, a certificate or report from an Independent Consultant stating that the Net Revenues in the Fiscal Year immediately preceding the issuance -of such Additional Bonds were at least equal to 125% of the maximum Principal and Interest Requirements for any complete future Fiscal Year (during the term of the then Outstanding Bonds) with respect to the Outstanding Bonds and the Additional Bonds proposed to be issued. In determining the Net Revenues available, if the City has increased the rates, fees, charges and rentals for the benefit and availability of the System or added land to the City since the beginning of the preceding Fiscal Year which is benefttted by the System, the Independent Consultant may adjust the historical Net Revenues of the System for the preceding Fiscal Year to include Net Revenues which, in the opinion of the Independent Consultant would have been received had such increased rates, fees, charges and rentals been in effect or had such additional land`been in the City throughout the preceding Fiscal Year. E. If the Additional Bonds are issued to refund any Bonds then Outstanding, the following documents: (1) a report of an Independent Accountant to the effect that (a) the proceeds (excluding accrued interest but including any premium) of the Additional Bonds plus any moneys to be withdrawn from the Debt Service Account or the Reserve Account for such be less purpose, together with any other funds deposited for such purpose will not than an amount sufficient to pay the principal of and redemption premium, if any, on the Outstanding Bonds to be refunded and the interest which will become due and payable on and before the Redemption Dates or Stated Maturities of the Bonds to be refunded, or (b) (i) provision has been made for the payment of such Bonds by the deposit of cash sufficient, or of Government Obligations, the payments of interest on and principal of which are sufficient, to pay the principal amount of and premium, if any, on such Bonds with interest to the Stated Maturities thereof or to any prior Redemption Date or Dates on which they are prepayable, and have been called for redemption or provision has been irrevocably made for their redemption, on such date or dates; or (ii) provision has been made for the payment of such Bonds by the deposit with an escrow agent of Government Obligations, the principal of and interest on which, together with the moneys, if any, deposited with the escrow agent at such time, will be sufficient, if paid timely and in full, to pay when due the interest on and the principal, if any, of the refunding Bonds to be issued until a date designated at the time of deposit, which shall be a date on which the Bonds to be refunded are subject to redemption (the "Crossover Date") and to pay the applicable redemption price of the Bonds to be refunded on the Crossover Date, which Government Obligations and moneys shall be held by the escrow agent. (2) If the refunded Bonds are to be deemed defeased under Section 10 upon the date of issuance of the refunding Bonds, a copy of irrevocable instructions which have been delivered to the escrow agent or the Registrar, to redeem all the Bonds to be redeemed on such date or dates specified in such instructions. -22- 376 (3) An Opinion of Bond Counsel stating in effect that the issuance of the Bonds and the establishment of the escrow, if any, referred to in clause (1)(b) of this Section 6.05(E) will not adversely affect the exclusion of interest on the Bonds to be refunded from gross income for purposes of federal income taxation. (4) If the average Principal and Interest Requirements on the Additional Bonds exceeds the average Principal and Interest Requirements on the Outstanding Bonds to be refunded, during the remaining term of the Outstanding Bonds which are not being refunded, a certificate or report of an Independent Consultant as would be required under the preceding paragraph D of this Section. 6.02. Subordinate Obligations Permitted. Nothing herein prevents the City from issuing Subordinate Obligations having a lien on the Net Revenues subordinate to the lien thereon of the Bonds under this Resolution and payable solely from the Subordinate Obligations Account. Each Subordinate Bond shall include in its title a word or phrase such as "subordinate" or "junior" or "second lien" and a clear statement that the lien thereof on Net Revenues is subordinate to the lien of all Bonds on the Net Revenues. No payment of principal or interest shall be m6de on any Subordinate Obligation if the City is then in default in the payment of principal of or interest on any Bond. Section 7. Water System Fund. 7.01. B9nd Proceeds and Revenues Plgdged and . A special Water System Fund is hereby created and shall be maintained as a separate bookkeeping account on the official books of the City until all Bonds and interest and redemption premiums due thereon have been fully paid, or the City's obligations with reference to such Bonds has been discharged as provided in Section 10. All proceeds of Bonds and all other funds presently on hand derived from the operation of the System are irrevocably pledged and appropriated to the Water System Fund. In addition, there is hereby irrevocably pledged and appropriated to the Water System Fund all Revenues and all investment earnings on all funds and accounts within the Fund. Within the Water System Fund shall be separate accounts designated and described in Sections 7.02 through 7.09, to segregate income and expenses received, paid and accrued for the respective purposes described in those sections. The Revenues received in the Fund shall be apportioned monthly, commencing no later than June 1, 1996. 7.02. Construction Account. The Construction Account is hereby established as a separate account within the Water System Fund. Upon delivery of the Series 1996 Bonds, the City shall credit to the Construction Account, from the proceeds of the Series 1996 Bonds, the sum specified in clause (c) of Section 4.06. The Construction Account shall be used only to pay as incurred and allowed Project costs which under accepted accounting practice are capital costs of Projects authorized in ,accordance with law, including but not limited to payments due for work and materials performed and delivered under construction contracts, architectural, engineering, inspection, supervision, fiscal and legal expenses, the cost of lands and easements, interest accruing on Bonds during the period of construction of facilities financed thereby and for six months thereafter, if and to the extent that the Debt Service Account is not sufficient for payment of such interest, reimbursement of any advances made from other City funds, and all other expenses incurred in connection with the construction and financing of such Projects including the costs of issuance of the Bonds. To the Construction Account shall be credited as received all proceeds of Bonds issued to finance Projects and any other funds appropriated by the City for an improvement, betterment or extension to the System, and all income received from the investment of the -23- 11� Construction Account. In the event there are insufficient funds in the Debt Service Account to pay principal of and interest on the Bonds, when due, after the transfer of funds to the Debt Service Account required in Section 7.03, any moneys then remaining in the Construction Account shall be transferred to the Debt Service Account for that purpose. Upon completion of a Project, the balance remaining in the Construction Account net of any amounts required to be transferred to the Rebate Account as provided in Section 7.09, may be used to pay the cost of other capital improvements to the System but if and to the extent not so used shall be transferred to the Reserve Account to the extent required to establish the Reserve Requirement therein and, to the extent not so required, to the Debt Service Account. 7.03. ftrating Account. The Operating Account is hereby established as a separate account within the Water System Fund. On each monthly apportionment there shall be set aside and credited to the Operating Account, as a first charge on the Revenues, such amount as may be required over and above the balance then held in the Operating Account to pay the reasonable and necessary Operating Expenses of the System which are then due and payable, or are to be paid prior to the next monthly apportionment. Operating Expenses shall not include any allowance for interest expense or depreciation, renewals or replacements of capital assets of the System and shall not include any portion of the salaries or wages paid to any officer or employee of the City, except such portion as shall represent reasonable compensation for the performance of duties necessary to the operation of the System. An operating reserve within the Operating Account is to be accumulated and maintained in an amount equal to the average monthly Operating Expenses for the preceding Fiscal Year or for another period selected by the Council and containing not less than six consecutive months during the immediately preceding eighteen months. Money in the Operating Account shall be used solely for the payment of current Operating Expenses of the System. 7.04. Debt Service Account. The Debt Service Account is hereby established as a separate account within the Water System Fund. Upon delivery of the Series 1996 Bonds, the City shall credit to the Debt Service Account, from the proceeds of the Series 1996 Bonds, the sum specified in clause (a) of Section 4.06. Upon each monthly apportionment there shall be credited to the Debt Service Account out of the Net Revenues remaining after the credit to the Operating Account an amount equal to not less than one -sixth of the interest due within the next six months on all Bonds then Outstanding and one -twelfth of the principal, if any, to become due within the next twelve months on all Outstanding Bonds (whether due at Stated Maturity, upon mandatory sinking fund redemption of Term Bonds or otherwise); provided that the City shall be entitled to reduce a monthly apportionment by the amount of any surplus previously credited and then on hand in the Debt Service Account. Except as provided in Section 7.09, money from time to time held in the Debt Service Account shall be disbursed only to meet payments of principal of and interest on the Bonds as such payments become due, -provided that on any date when the amount then on hand in the Debt Service Account, plus the amount in the Reserve Account allocable to a series of Bonds, is sufficient with other moneys available for the purpose to pay or discharge all Bonds of that series and the interest accrued thereon in full, it may be used for that purpose. If any payment of principal or interest becomes due when money in the Debt Service Account is temporarily insufficient therefor, to the extent of such deficiency funds shall be advanced to the Debt Service Account out of any revenues theretofore segregated and then on hand in the Reserve Account, the Repair and Replacement Account or the Surplus Account, in that order. 7.05. Reserve Account. The Reserve Account is hereby established as a separate account within the Water System Fund. Upon delivery of the Series 1996 Bonds, the City shall credit to the Reserve Account, from the proceeds of the Series 1996 Bonds, the sum specified in Clause (b) of Section 4.06. Upon each monthly apportionment, if the balance in the Reserve Account is less than the Reserve Requirement, all Net Revenues in the Water System Fund -24- A ft remaining after the required credit to the Debt Service Account shall be credited to the Reserve Account until the balance therein equals the Reserve Requirement. If on any Interest Payment Date there shall exist a deficiency in the Debt Service Account, the City shall transfer from the Reserve Account to the Debt Service Account an amount equal to such deficiency. If the City issues Additional Bonds the City shall, upon issuance of the additional Bond, increase the balance in the Reserve Account to the Reserve Requirement, calculated after giving effect to the issuance of such Additional Bonds. Except as provided in Section 7.09, money held in the Reserve Account shall be transferred to the Debt Service Account to be used only to pay maturing principal and interest when money within the Debt Service Account is insufficient therefor or to pay or defease a series of bonds as provided in Section 10. If the balance in the Reserve Account has not been restored to the Reserve Requirement from transfers of Net Revenues within six months after the balance falls below the Reserve Requirement, the City shall transfer to the Reserve Account from the Surplus Account and then the Repair and Replacement Account, an amount sufficient to restore the balance therein to the Reserve Account. If at any time (including, but not limited to, any Principal Payment Date and any Redemption Date), the balance in the Reserve Account net of any amounts required to be transferred to the Rebate Account as provided in Section 7.09, exceeds the Reserve Requirement, the City shall transfer such excess to the Debt Service Account to establish the required balance therein. 7.06. Subordinate Obligations Ac.,Qpunt. Upon the issuance of any Subordinate Obligations as permitted by Section 6.02, there shall be established a Subordinate Obligations Account within the Water System Fund. Upon each monthly apportionment date, there shall be credited to the Subordinate Obligations Account, from the Net Revenues remaining after the required credits to the Operating Account, the Debt Service Account and the Reserve Account, such amount as may be required to pay Subordinate Obligations, including reasonable reserves therefor, as provided by any Supplemental Resolution or other instrument. Money on hand in the Subordinate Obligations Account shall be transferred to the Debt Service Account, the Debt Service Reserve Account or the Operating Account if at any time the balance on hand in any such accounts, after any transfer elsewhere authorized is not sufficient to pay all costs payable therefrom. 7.07. Re d Replg &=nt Account The Repair and Replacement Account is hereby established as a separate account within the Water System Fund There shall be set aside and credited, upon each monthly apportionment, to the Repair and Replacement Account such portion of the Net Revenues, in excess of the current requirements of the Debt Service Account, the Reserve Account and the Subordinate Obligations Account (which portion of the Net Revenues is referred to herein as "surplus revenues"), as the City shall determine to be required for replacement or renewal of worn out, obsolete or damaged properties and equipment thereof. Money in the Repair and Replacement Account shall be used only for the purposes above stated or, if so directed by the Council to pay Operating Expenses, to redeem Bonds which are prepayable according to their terms, for transfer to the Debt Service Account for payment of principal or interest when due thereon as required in Section 7.04, to pay costs of improvements to the System or, if no default is 1379 subsisting under this Resolution to redeem Subordinate Obligations which are prepayable by their terms or to pay principal of or interest on Subordinate Obligations when due. 7.08. Surplus Account. The Surplus Account is hereby established as a separate account within the Water System Fund. Any amount of the surplus revenues from time to time remaining after the above required applications thereof shall be credited to the Surplus Account, and the moneys from time to time in that account, when not required to restore a current deficiency in the Debt Service Account or Reserve Account as provided in Sections 7.03 and 7.04, may be used for any of the following purposes and not otherwise: (a) To redeem Bonds when and as such Bonds become payable according to their terms; or (b) To purchase Bonds on the open market, whether or not the Bonds or other such Bonds may then be prepayable according to their terms; or (c) If no default is then subsisting under this Resolution, to redeem Subordinate Obligations when and as such Subordinate Obligations become payable according to their terms, or to purchase Subordinate Obligations on the open market, if no Bonds are then prepayable according to their terms; or (d) To be held as a reserve for redemption of Bonds or Subordinate Obligations which are not then but will later be prepayable according to their terms; or (e) To pay for repairs of or for the construction and installation of improvements or additions to the System; or (f) To pay Operating Expenses and to restore the operating reserve or increase the same when determined to be necessary by the Council. No money shall at any time be transferred from the Surplus Account or any other account of the Water System Fund to any other fund of the City, nor shall such moneys at any time be loaned to other City funds or invested in warrants, special improvement bonds or other obligations payable from other funds, except as provided in Section 7.10. 7.09. Rebate Account. The Rebate Account is hereby established as a separate account within the Water System Fund. The City shall make deposits to and disbursements from the Rebate Account or Subaccounts therein in accordance with the Rebate Certificate, and shall invest the money on hand in the Rebate Account pursuant to the requirements of the Rebate Certificate, and shall deposit income from such investments immediately upon receipt thereof in the Rebate Account. 7.10. Deposit and Investment of Nnds The City Finance Director shall cause all money pertaining to the Water System Fund to be deposited as received with one or more depository banks duly qualified in accordance with the provisions of Montana Code Annotated, Section 7-6-201, in a deposit account or accounts. The balance in such accounts, except such portion thereof as shall be guaranteed by federal deposit insurance, shall at all times be secured to its full amount by bonds or securities of the types set forth in said Section 7-6-201. Any such money not necessary for immediate use may be deposited with such depository banks in savings or time deposits. No money shall at any time be withdrawn from such deposit accounts except for the purposes of the Water System Fund as authorized in this Resolution; except that money from time -26- .r . -%« 1380 to time on hand in the Water System Fund may at any time, in the discretion of the Council, be deposited or invested in Eligible Investments, to the extent permitted by Montana law. Except as otherwise expressly provided herein, income received from the deposit or investment of money in said accounts shall be credited to the account from which the deposit was made or the investment was purchased, and handled and accounted for in the same manner as other money in that account. Section S. Covenants. 8.01. General. The City covenants and agrees with the Holders from time to time of all Bonds that the recitals contained in Section 1 are correct; and that until all Bonds are fully discharged as provided in this Resolution, it will continue to hold, maintain and operate the System as a public convenience, free from all liens thereon or on the income therefrom other than the liens herein granted or provided for, and will maintain, expend and account for its Water System Fund and the several accounts therein as provided in Section 7, and will not incur a further lien or charge on the income or revenues of the System except upon the conditions and in the manner prescribed in Section 6, and will perform and cause all officers and employees of the City to perform and enforce each and all of the additional covenants and agreements set forth in this Section 8. The City further covenants to cause the System to be properly maintained in good operating condition. 8.02. Competing Service. The City will not establish any other facilities in competition with the facilities of the System. 8.03. PropgM Injst rgace. The City will cause all buildings, properties, fixtures and equipment constituting a part of the System to be kept insured with a reputable insurance carrier or carriers, qualified under the laws of Montana, in such amounts as are ordinarily carried, and against loss or damage by such hazards and risks as are ordinarily insured against, by public bodies owning and operating properties of a similar character and size; provided that if at any time the City is unable to obtain insurance, it will obtain insurance in such amounts and against risks as are reasonably obtainable. The proceeds of all such insurance shall be available for the repair, replacement or reconstruction of damaged or destroyed property, and until paid out in making good such loss or damage, are pledged as security for the Outstanding Bonds. All insurance proceeds received in excess of the amount required for restoration of the loss or damage compensated thereby shall be and become part of the revenues appropriated to the Water System Fund. If for any reason insurance proceeds are insufficient for the repair, replacement and reconstruction of the insured property, the City shall supply the deficiency from revenues on hand in the Repair and Replacement Account and the Surplus Account. 8.04. Liability Insurance and SuM Bonds. The City will carry insurance against liability of the City and its employees for damage to persons and property resulting from the operation of the System in such amounts as the City determines from time to time to be necessary or advisable by reason of the character and extent of such operation. This covenant shall not preclude the City's ability to participate in the se f-insurance program established by the Montana Municipal Insurance Association. It will also cause all persons handling money and other assets of the Water System Fund to be adequately bonded for the faithful performance of their duties and to account for and pay over such money to the City. All amounts received under such insurance and bonds shall be applied to the payment of the loss or damage covered thereby. The premiums for all insurance and bonds required by this Section 8.04 and Section 8.03 constitute part of the Operating Expenses of the System, but no insurance liabilities of the City in excess of amounts received under such insurance and bonds shall constitute a lien or charge on revenues or any other assets herein or otherwise pledged to the Water System Fund. -27- 3 81 1 8.05. Disposition of Property. The City will not mortgage, lease, sell or otherwise dispose of any real or personal properties of the System, unless: (a) Prior to or simultaneous with such mortgage, lease, sale or other disposition, all of the Bonds then Outstanding shall be discharged as provided in Section 10; or (b) (i) The properties to be mortgaged, leased sold or otherwise disposed of are unserviceable, inadequate, obsolete or no longer required for use in connection with the System; and (ii) the mortgage, lease, sale or other disposition will not prevent the City from complying with the provisions of this Resolution; and (iii) all proceeds of the mortgage, lease, sale or other disposition of such properties are deposited into the Water System Fund. 8.06. Books and Records. The City will cause proper and adequate books of record and account to be kept showing complete and correct entries of all receipts, disbursements and other transactions relating to the System, the Net Revenues derived from its operation, and the segregation and application of the Net Revenues in accordance with this Resolution, in such reasonable detail as may be determined by the City in accordance with generally accepted accounting practice and principles. It will cause such books to be maintained on the basis of a Fiscal Year. The City shall, within 270 days after the close of each Fiscal Year, cause to be prepared and supply to the Original Purchasers of any series of Bonds then Outstanding, and the Registrar a financial report with respect to the System for such Fiscal Year. The report shall be prepared at the direction of the City Finance Director in accordance with applicable generally accepted accounting principles and, in addition to whatever matters may be thought proper by the City Finance Director to be included therein, shall include the following: (a) A statement in detail of the income and expenditures of the System for the Fiscal Year, identifying capital expenditures and separating them from operating expenditures; (b) A balance sheet as of the end of the Fiscal Year, (c) The amount on hand in each account of the Water System Fund at the end of the Fiscal Year; (d) A list of the insurance policies and fidelity bonds in force at the end of the Fiscal Year, setting out as to each the amount thereof, the risks covered thereby, the name of the insurer or surety and the expiration date of the policy or bond; and (e) A determination that the report shows full compliance by the City with the provisions of this Resolution during the Fiscal Year covered thereby, including proper segregation of the capital expenditures from Operating Expenses, maintenance of the Reserve Requirement in the Reserve Account, and receipt of Net Revenues during each Fiscal Year as herein required, or, if the report should reveal that the Net Revenues have been insufficient for compliance with this Resolution, or that the methods used in accounting for such revenues were contrary to any provision of this Resolution, the report shall include a full explanation thereof, together with recommendations for such change in rates or accounting practices or in the operation of the System as may be required. :[ . 382 s The City shall also have prepared and supplied to the Original Purchaser or Purchasers of any series of Bonds then Outstanding, the Registrar, within 270 days of the close of each Fiscal Year, an audit report prepared by an Independent certified public accountant or an agency of the state in accordance with generally accepted accounting principles and practice with respect to the financial statements and records of the System. The audit report shall include an analysis of the City's compliance with the provisions of this Resolution. 8.07. Cot of Insurance and Accounting. The insurance and fidelity bond premiums and the cost of the bookkeeping and audits herein provided for and of the billings and collection of the Net Revenues shall be payable from the Operating Account. 8.08. Handling of Funds. The employees of the City, under the direction and control of the City Finance Director, shall keep books of accounts and collect the rates, charges and rentals for the services and facilities provided by the System and for other money currently receivable on account thereof. All money collected with respect to the System shall be deposited as received with the City Finance Director. The City Finance Director shall be bonded at all times with a surety company authorized to do business in Montana, in the amount of at least $100,000, to assure the faithful carrying out of such duties. Any failure on the part of the City Finance Director to comply and to enforce compliance on the part of all officers and employees concerned with the keeping of books and accounts and the collection of rates, charges and rentals and the deposit thereof into the System Fund as provided in this resolution, shall constitute malfeasance for which the City Finance Director and the surety on his bond shall be personally liable. 8.09. Rags and Charges. While any Bonds are Outstanding, the rates, charges and rentals for all services and facilities furnished and made available by the System to the City and its inhabitants, and to all other customers shall be reasonable and just, taking into consideration the cost and value of the System and the cost of maintaining and operating it, and the amounts necessary for the payment of all Bonds and the interest accruing thereon and all Subordinate Obligations and the interest accruing thereon, and the proper and necessary allowances for the depreciation of the System. It is covenanted and agreed that the rates, charges and rentals to be charged to all users shall be maintained and shall be revised whenever and as often as may be necessary, according to schedules such that (i) Revenues for each Fiscal Year will be at least sufficient to pay the principal of and interest on all Bonds payable from the Revenues derived in such Fiscal Year, to establish and maintain the Reserve Requirement, to pay promptly the reasonable and current Operating Expenses, to pay the principal of and interest on any Subordinate Obligations and to provide reserves for the repair and replacement of the System, and (ii) Net Revenues for each Fiscal Year, commencing after June 30, 1996, will be at least equal to 125% of the maximum Principal and Interest Requirements for all future Fiscal Years during which any Bonds will be Outstanding. For the purpose of this calculation, Principal and Interest Requirements shall be determined by 'including each July 1 payment in the immediately preceding Fiscal Year. If at the close of any Fiscal Year, the Revenues and Net Revenues actually received during such Fiscal Year have been less than required hereby, the City will forthwith prepare a schedule of altered rates, charges and rentals which are just and equitable and sufficient to produce Revenues and Net Revenues in such amounts, and will do all things necessary to the end that such schedule will be placed in operation at the earliest possible date. The establishment of the percentage of Net Revenues contained in the first paragraph of this Section 8.09 has been deemed necessary in order to sell the Series 1996 Bonds upon terms most advantageous to the City. The excess of Net Revenues over the Principal and Interest -29- 1-383 Requirements and the Reserve Requirement may be used as authorized in Section 6. The Series 1996 Bonds may be redeemed according to their terms on and after July 1, 2004, and in the estimation of this Council any excess prior to that date of Net Revenues over Principal and interest Requirements and required maintenance of the Reserve Account will be needed to pay or to provide reserves for payment of replacements, renewals and improvement costs, in order to provide adequate service for the present population and the increase thereof seasonably to be expected; and after that date, any excess not required for such purposes in the judgment of the Council may be used to redeem Bonds and thereby reduce the interest cost thereon to the City and the persons served by the System. 8.10. Appointment of Superintendent. In the event of default on the part of the City in the prompt and full payment of principal of or interest on any Bond, and if such default shall continue for a period of 60 days, the Council will appoint a special superintendent for the System, with the power and responsibility to operate the System for the City, and to recommend to the Council such revisions of the rates and charges and operating policies as may be necessary to comply with this Resolution, and to assure that the Net Revenues will be sufficient to pay all principal of and interest on Bonds, and he shall in all things so operate the System as to comply fully with all the requirements and provisions of this Resolution. The sight of the Holders of the Bonds to require employment of such a superintendent shall not be exclusive, and in the event of default as herein outlined, such Holders shall have the right to proceed at law or in equity, in any form of action which shall to them seem appropriate. 8.11. Bondholders' Rights. No Holder of any Bond shall have the right to institute any proceeding, judicial or otherwise, for the enforcement of the covenants herein contained, without the written concurrence of the Holders of not less than 25% in aggregate principal amount of all such Bonds which are at the time Outstanding; but the Holders of such amount of Bonds may, either at law or in equity, by suit, action or other proceedings, protect and enforce the rights of all Holders of Bonds and compel the performance of any and all of the covenants required herein to be performed by the City and its officers and employees, including but not limited to the filing and maintaining of rates, fees and charges and the collection and proper segregation of the Revenues and the application and use thereof. The Holders of a majority in principal amount of Outstanding Bonds shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Bondholders or the exercise of any power conferred on them and the right to waive a default in the performance of any such covenant, and its consequences, except a default in the payment of the principal of or interest on any Bond when due. Nothing herein, however, shall impair the absolute and unconditional right of the Holder of each Bond to receive payment of the principal of, premium, if any, and interest on such Bond as such principal, premium and interest respectively become due, and to institute suit for any such payment. Any court having jurisdiction of the action may appoint a receiver to administer the System on behalf of the City with power to charge and collect rates, fees and charges sufficient to provide for the payment of any Bonds, and to apply the Net Revenues in conformity with this Resolution and the laws of the State of Montana. Section 9. Supplemental Resolutions. 9.01. General. The City reserves the right to adopt Supplemental Resolutions, from time to time and at any time, for the purpose of curing any ambiguity or of curing, correcting or supplementing any defective provision contained herein, or of making such provisions with regard to matters or questions arising hereunder as the City may deem necessary or desirable and not inconsistent with this Resolution, and which shall not adversely affect the interests or security of the Holders of Outstanding Bonds, or for the purpose of adding to the covenants and agreements 1 1 84 herein contained, or to the Net Revenues herein pledged, other covenants and agreements thereafter to be observed and additional revenues or income thereafter appropriated to the Water System Fund, or authorizing the issuance of Additional Bonds or Subordinate Obligations as provided in and subject to the conditions and requirements of Section 6. Any such Supplemental Resolution may be adopted without notice to or the consent of the Holder of any Bonds theretofore issued hereunder. 9.02. Consent of Bondholders. Except as provided in Section 9.01, with the consent of the Holders of two-thirds in principal amount of Outstanding Bonds as provided in Sections 9.03 and 9.04, the City may from time to time and at any time adopt a Supplemental Resolution for the purpose of amending this Resolution by adding any provisions hereto or changing in any mariner or eliminating any of the provisions hereof or of any Supplemental Resolution; provided, however, that no Supplemental Resolution shall be adopted at any time without the consent of the Holders of all Bonds issued hereunder and affected thereby, if it would extend the time of payment of interest thereon, would reduce the amount of the principal thereof, would give to any Bond or Bonds any privileges over any other Bond or Bonds, would reduce the sources of revenues or income appropriated to the Water System Fund, or would reduce the percentage in principal amount of such Bonds required to authorize or consent to any such Supplemental Resolution. 9.03. No o Notice of a Supplemental Resolution to be adopted pursuant to Section 9.02 shall be mailed by first-class mail to the Holders of all Outstanding Bonds at their addresses appearing in the Bond Register, and shall become effective only upon the filing of written consents with the City Clerk of Council, signed by the Holders of not less than two-thirds in principal amount of the Bonds then Outstanding. Any written consent to the Supplemental Resolution may be embodied in and evidenced by one or any number of concurrent written instruments of substantially similar tenor signed by Holders in person or by agent duly appointed in writing, and shall become effective when delivered to the City Clerk of Council. Any consent by the Holder of any Bond shall bind him and every future Holder of the same Bond with respect to any Supplemental Resolution adopted by the City pursuant to such consent; provided that any Holder may revoke his consent with reference to any Bond by written notice received by the City Clerk of Council before the Supplemental Resolution has become effective. in the event that unrevoked consents of the Holders of the required amount of Bonds have not been received by the City Clerk of Council within one year after the mailing of notice of the Supplemental Resolution, the Supplemental Resolution and all consents theretofore received shall be of no further force and effect. 9.04. Manner of Consent. Proof of the execution of any consent, or of a writing appointing any agent to execute the same, or of the ownership by any person of Bonds payable to bearer, shall be sufficient for any purpose of this Resolution and shall be conclusive in favor of the City if made in the manner provided in this Section 9.04. The fact and date of the execution by any Person of any such consent or appointment may be proved by the affidavit of a witness of such execution or by the certification of any notary public or other officer authorized by law to take acknowledgment of deeds, certifying that the Person signing it acknowledged to him the execution thereof. The fact and date of execution of any such consent may also be proved in any other manner which the City may deem sufficient; but the City may nevertheless, in its discretion, require further proof in cases where it deems further proof desirable. The ownership of Bonds shall be proved by the Bond Register. -31- 1 13:8 6 s Section 10. Defeasance. 10.01. General. When the liability of the City on all Bonds issued under and secured by this Resolution and all interest thereon has been discharged as provided in this section, all pledges, covenants and other rights granted by this Resolution to the Holders of such Bonds shall cease. 10.02. Maturity. The City may discharge its liability with reference to all Bonds and interest thereon which are due on any date by depositing with the Registrar for such Bonds on or before the date a sum sufficient for the payment thereof in full; or if any Bond or interest thereon shall not be paid when due, the City may nevertheless discharge its liability with reference thereto by depositing with the Registrar a sum sufficient for the payment thereof in full with interest accrued to the date of such deposit. 10.03. Redemption. The City may also discharge its liability with reference to any Bonds which are called for redemption on any date in accordance with their terms, by depositing with the Registrar on or before that date an amount equal to the principal, interest and redemption premium, if any, which are then due thereon, provided that notice of such redemption has been duly given as provided in this Resolution. 10.04. Escrow. The City may also at any time discharge its liability in its entirety with reference to any Bonds, subject to the provisions of law now or hereafter authorizing and regulating such action, by depositing irrevocably in escrow, with a bank qualified by law as an escrow agent for this purpose, cash or Government Obligations authorized by law to be so deposited, bearing interest payable at such times and at such rates and maturing on such dates as shall be required, without reinvestment, to provide funds sufficient to pay all principal, interest and redemption premiums, if any, to become due on such Bonds at their Stated Maturities or, if such Bonds are prepayable and notice of redemption thereof has been given or irrevocably provided for, to such earlier Redemption Date. 10.05. Deposits in Trust. For purposes of Section 10.01 to 10.03, if the Registrar is an officer of the City, such deposit shall be deemed to create a trust in favor of the Holders of the Bonds discharged thereby, and such funds shall be used only for the purpose of paying principal thereof and interest thereon. Section 11. Tax Matters. 11.01. The Project. The facilities of the System financed in whole or in part with proceeds of the Series 1996 Bonds (the "Project") are and will be owned and operated by the City and used by the City to provide water system services to members of the general public. No user of the System is granted any concession, license or special arrangement with respect to the System. The City 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 1996 Bonds which might cause the Series 1996 Bonds to be considered "private activity bonds" or "Private loan bonds" within the meaning of Section 141 of the Internal Revenue Code of 19116, as amended (the "Code"). 11.02. General Covenant. The City covenants and agrees with the Holders from time to time of the Series 1996 Bonds 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 1996 Bonds to become includable in gross income for federal income tax purposes under the Code and applicable Treasury Regulations (the "Regulations"), and covenants to take any and all actions within its -32- A 1386 W powers to ensure that the basic interest on the Series 1996 Bonds will not become includable in gross income for federal income tax purposes under the Code and the Regulations. 11.03. Certi�. The Mayor, the City Manager and the City Finance Director, being the officers of the City charged with the responsibility for issuing the Series 1996 Bonds pursuant to this Resolution are hereby authorized and directed to execute and deliver to the Original Purchaser thereof a certificate in accordance with the provisions of Section 148 of the Code, and Section 1.148-2(b) of the Regulations, stating that on the basis of facts, estimates and circumstances in existence on the date of issue and delivery of the Series 1996 Bonds, it is reasonably expected that the proceeds of the Series 1996 Bonds will be used in a manner that would not cause the Series 1996 Bonds to be "arbitrage bonds" within the meaning of Section 148 of the Code and the Regulations. 11.04. Arbitrage Rebate. The City acknowledges that the Series 1996 Bonds are 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 1996 Bonds from gross income fo?federal income tax purposes, unless the Series 1996 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 1996 Bonds (other than amounts constituting a "bona fide debt service fund' } arise during or after the expenditure of the original proceeds thereof. in furtherance of the foregoing, the City Finance Director is hereby authorized and directed to execute a Rebate Certificate, substantially in the form of the Rebate Certificate currently on file in the office of the City Clerk of Council, 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. 11.05. Information Reporting. The City shall file with the Secretary of the Treasury, not later than August 15, 1996, a statement concerning the Series 1996 Bonds containing the information required by Section 149(e) of the Code. Section 12. Continuing Disclosure. (a) Pu=&e and Be eficiari . To provide for the public availability of certain information relating to the Series 1996 Bonds and the security therefor and to permit the original purchaser and other participating underwriters in the primary offering of the Series 1996 Bonds to comply with amendments to Rule 15c2-12 promulgated by the Securities and Exchange Commission (the "SEC") under the Securities Exchange Act of 1934 (17 C.F.R. § 240.15c2-12), relating to continuing disclosure (as in effect and interpreted from time to time, the "Rule"), which will enhance the marketability of the Series 1996 Bonds, the City hereby makes the following covenants and agreements for the benefit of the Owners (as hereinafter defined) from time to time of the outstanding Series 1996 Bonds. The City's System is the only `obligated person" in respect of the Series 1996 Bonds within the meaning of the Rule for purposes of identifying the entities to respect of which continuing disclosure must be made. If the City fails to comply with any provisions of this Section 12, any person aggrieved thereby, including the Owners of any outstanding Series 1996 Bonds, may take whatever action at law or in equity may appear necessary or appropriate to enforce performance and observance of any agreement or covenant contained in this Section 12, including an action for a writ of mandamus or specific performance. Direct, indirect, consequential and punitive damages shall not be recoverable for any default hereunder to the extent permitted by law. Notwithstanding anything -33- _,o to the contrary contained herein, in no event shall a default under this Section 12 constitute a default under the Series 1996 Bonds or under any other provision of this resolution. As used in this Section 12, "Owner" or "Bondowner" means, in respect of a Series 1996 Bond, the registered owner or owners thereof appearing in the bond register maintained by the Registrar or any "Beneficial Owner" (as hereinafter defined) thereof, if such Beneficial Owner provides to the Registrar evidence of such beneficial ownership in form and substance reasonably satisfactory to the Registrar. As used herein, "Beneficial Owner" means, in respect of a Series 1996 Bond, any person or entity which (i) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, such Series 1996 Bond (including persons or entities holding Series 1996 Bonds through nominees, depositories or other intermediaries), or (b) is treated as the owner of the Series 1996 Bond for federal income tax purposes. (b) Information To Be Disclosed. The City will provide, in the manner set forth in subsection (c) hereof, either directly or indirectly through an agent designated by the City, the following information at the following times: (1) on or before 270 days after the end of each fiscal year of the City's System, commencing with the fiscal year ending June 30, 1996, the following financial information and operating data in respect of the City (the "Disclosure Information"): (A) the audited financial statements of the City for such fiscal year, accompanied by the audit report and opinion of the accountant or government auditor relating thereto, as permitted or required by the laws of the State of Montana, containing balance sheets as of the end of such fiscal year and a statement of operations, changes in fund balances and cash flows for the fiscal year then ended, showing in comparative form such figures for the preceding fiscal year of the City's System, prepared in accordance with generally accepted accounting principles promulgated by the Financial Accounting Standards Board as modified in accordance with the governmental accounting standards promulgated by the Governmental Accounting Standards Board or as otherwise provided under Montana law, as in effect from time to time, or, if and to the extent such financial statements have not been prepared in accordance with such generally accepted accounting principles for reasons beyond the reasonable control of the City, noting the discrepancies therefrom and the effect thereof, and certified as to accuracy and completeness in all material respects by the City Finance Director of the City; and (B) To the extent not included in the financial statements referred to in paragraph (A) hereof, information of the type set forth below, which information may be unaudited, but is to be certified as to accuracy and completeness in all material respects by the City's financial officer to the best of his or her knowledge, which certification may be based on the reliability of information obtained from governmental or other third party sources: 1. Information, for such fiscal year, relating to System connections, of the type contained in the table under the caption "Historical Water System Connections and Debt Per Connection" in the Official Statement; 2. Information, for such fiscal year, relating to the City's water system rate schedule, if water rate changes have been -34- implemented, of the type contained in the tables under the caption "Current Water System Rate Structure" in the Official Statement; 3. Information, for such fiscal year, listing the ten largest users of the System, of the type contained in the table under the caption "Major Water System Users" in the Official Statement; 4. Information, for such fiscal year, updating the operating results of the System, of the type contained in the table under the caption "Historical and Projected Financial Operating Results" in the Official Statement; and 5. A description of any additional borrowing related to the System. Notwithstanding the foregoing paragraph, if the audited financial statements are not available by the date specified, the City shall provide on or before such date unaudited financial statements in the format required for the audited financial statements as part of the Disclosure Information and, within 10 days after the receipt thereof, the City shall provide the audited financial statements. Any or all of the Disclosure Information may be incorporated by reference, if it is updated as required hereby, from other documents, including official statements, which have been submitted to each of the repositories hereinafter referred to under subsection (c) or the SEC. If the document incorporated by reference is a final official statement, it must be available from the Municipal Securities Rulemaking Board. The City shall clearly identify in the Disclosure Information each document so incorporated by reference. If any part of the Disclosure information can no longer be generated because the operations of the City's System have materially changed or been discontinued, such Disclosure Information need no longer be provided if the City includes in the Disclosure Information a statement to such effect; provided, however, if such operations have been replaced by other City operations in respect of which data is not included in the Disclosure Information and the City determines that certain specified data regarding such replacement operations would be a Material Fact (as defined in paragraph (2) hereof), then, from and after such determination, the Disclosure Information shall include such additional specified data regarding the replacement operations. If the Disclosure information is changed or this Section 12 is amended as permitted by this paragraph (b)(1) or subsection (d), then the City shall include in the next Disclosure Information to be delivered hereunder, to the extent necessary, an explanation of the reasons for the amendment and the effect of any change in the type of financial information or operating data provided. (2) In a timely manner, notice of the occurrence of any of the following events which is a Material Fact (as hereinafter defined): (A) Principal and interest payment delinquencies; (B) Non-payment related defaults; (C) Unscheduled draws on debt service reserves reflecting financial difficulties; (D) Unscheduled draws on credit enhancements reflecting financial difficulties; -35- 17 Jff7r: 113 & 9 11 (E) Substitution of credit or liquidity providers, or their failure to perform; (F) Adverse tax opinions or events affecting the tax-exempt status of the security; (G) Modifications to rights of security holders; (H) Bond calls; (1) Defeasances; (J) Release, substitution, or sale of property securing repayment of the securities; and (K) Rating changes. As used herein, a "Material Fact" is a fact as to which a substantial likelihood exists that a reasonably prudent investor would attach importance thereto in deciding to buy, hold or sell a Series 1996 Bond or, if not disclosed, would significantly alter the total information otherwise available to an investor from the Official Statement, information disclosed hereunder or information generally available to the public. Notwithstanding the foregoing sentence, a "Material Fact" is also an event that would be deemed "material" for purposes of the purchase, holding or sale of a Series 1996 Bond within the meaning of applicable federal securities laws, as interpreted at the time of discovery of the occurrence of the event. (3) In a timely manner, notice of the occurrence of any of the following events or conditions: (A) the failure of the City to provide the Disclosure Information required under paragraph (b)(1) at the time specified thereunder, (B) the amendment or supplementing of this Section 12 pursuant to subsection (d), together with a copy of such amendment or supplement and any explanation provided by the City under subsection (d)(2); (C) the termination of the obligations of the City under this Section 12 pursuant to subsection (d); (D) any change in the accounting principles pursuant to which the financial statements constituting a portion of the Disclosure Information are prepared; and (E) any change in the fiscal year of the City. (c) Manner of Disclosure. The City agrees to make available the information described in subsection (b) to the following entities by telecopy, overnight delivery, mail or other means, as appropriate: (1) the information described in paragraph (1) of subsection (b), to each then nationally recognized municipal securities information repository under the Rule and to any state information depository then designated or operated by the State of Montana as contemplated by the Rule (the "State Depository"), if any; (2) the information described in paragraphs (2) and (3) of subsection (b), to the Municipal Securities Rulemaking Board and to the State Depository, if any; and (3) the information described in subsection (b), to any rating agency then maintaining a rating of the Series 1996 Bonds and, at the expense of such Bondowner, to any Bondowner who requests in writing such information, at the time of transmission under paragraphs (1) or (2) of this ., r: mo 1390 subsection (c), as the case may be, or, if such information is transmitted with a subsequent time of release, at the time such information is to be released. (d) Term: Amendments: Interpretation. (1) The covenants of the City in this Section 12 shall remain in effect so long as any Series 1996 Bonds are outstanding. Notwithstanding the preceding sentence, however, the obligations of the City under this Section 12 shall terminate and be without further effect as of any date on which the City delivers to the Registrar an opinion of Bond Counsel to the effect that, because of legislative action or final judicial or administrative actions or proceedings, the failure of the City to comply with the requirements of this Section 12 will not cause participating underwriters in the primary offering of the Series 1996 Bonds to be in violation of the Rule or other applicable requirements of the Securities Exchange Act of 1934, as amended, or any statutes or laws successory thereto or amendatory thereof. (2) This Section 12 (and the form and requirements of the Disclosure Information) may be amended or supplemented by the City from time to time, without notice to (except as provided in paragraph (c)(3) hereof) or the consent of the Owners of any Series 1996 Bond, by a resolution of this Council filed in the office of the recording officer of the City accompanied by an opinion of Bond Counsel, who may rely on certificates of the City and others and the opinion may be subject to customary qualifications, to the effect that: (i) such amendment or supplement (a) is made in connection with a change in circumstances that arises from a change in law or regulation or a change in the identity, nature or status of the City's System or the type of operations conducted by the City's System, or (b) is required by, or better complies with, the provisions of paragraph (b)(5) of the Rule; (ii) this Section 12 as so amended or supplemented would have complied with the requirements of paragraph (b)(5) of the Rule at the time of the primary offering of the Series 1996 Bonds, giving effect to any change in circumstances applicable under clause (i)(a) and assuming that the Rule as in effect and interpreted at the time of the amendment or supplement was in effect at the time of the primary offering; and (iii) such amendment or supplement does not materially impair the interests of the Bondowners under the Rule. If the Disclosure Information is so amended, the City agrees to provide, contemporaneously with the effectiveness of such amendment, an explanation of the reasons for the amendment and the effect, if any, of the change in the type of financial information or operating data being provided hereunder. (3) This Section 12 is entered into to comply with the continuing disclosure provisions of the Rule and should be construed so as to satisfy the requirements of paragraph (b)(5) of the Rule. (e) Further Liatatign of Liabili1yof Ci1y. In and to the extent the limitations of liability contained in subsection (a) are not effective, anything contained in this Section 12 to the contrary notwithstanding, in making the agreements, provisions and covenants set forth in this Section 12, the City has not obligated itself except with respect to the revenues. None of the agreements or obligations of the City contained herein shaU be construed to constitute an indebtedness of the City within the meaning of any constitutional or statutory provisions whatsoever or constitute a pledge of the general credit or taxing powers of the City. Section 13. Effective Date' a als. This Resolution shall become effective upon passage and all provisions of ordinances, resolutions and other actions and proceedings of the City which are in any way inconsistent with the terms and provisions of this Resolution are repealed, -37- 3 91 I I amended and rescinded to the full extent necessary to give full force and effect to the provisions of this Resolution. PASSED by the City Council of the City of Kalispell, Montana, this 17th day of June, 1996. Mayor Attest: City cierk(ojOAficil Approved as to farm: i Attorney 1 A l a