Resolution 4892 - Authorizing the Issuance of the Water System Revenue and Refunding BondsRESOLUTION NO.4892
RESOLUTION RELATING TO $1,840,000 WATER SYSTEM REVENUE AND
REFUNDING BONDS, SERIES 2004; AUTHORIZING THE ISSUANCE AND FIXING
THE TERMS AND CONDITIONS THEREOF AND THE SECURITY THEREFOR.
BE IT RESOLVED by the City Council (the "Council") of the City of Kalispell,
Montana (the "City"), as follows:
Section 1. Authorization and Recitals.
1.01 Authorization. The City pursuant to authority conferred by Montana Code
Annotated, Title 7, Chapter 7, Parts 44 and 45, as amended (the "Act"), and other laws of the
State of Montana, has established and presently owns and operates a municipal water system (the
"System"). Under the provisions of 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 the System and to refund its
revenue bonds issued for such purpose; provided that the bonds and the interest thereon are to be
payable solely out of the net income and revenues to be derived from rates, fees and charges for
the services, facilities and commodities furnished by the undertaking, and are not to create any
obligation for the payment of which taxes may be levied except to pay for services provided by
the System to the City.
1.02 Outstanding Bonds: Definitions. In accordance with the authorization described
in Section 1.01, the City has issued and there are outstanding its Water System Revenue Bonds,
Series 1996 (the "Series 1996 Bonds"), outstanding in the principal amount of $670,000 (the
"Refunded Bonds"), its Water System Revenue Bond (DNRC Drinking Water Revolving Loan
Program), Series 2001 (the "Series 2001 Bond"), outstanding in the principal amount of
$681,000, and its Water System Revenue Bond, Series 2003 (the "Series 2003 Bond"),
outstanding in the principal amount of $876,457, issued to finance or refinance the costs of
certain improvements to the System, pursuant to Resolution No. 4273, adopted by this Council
on June 17, 1996, as amended and supplemented by Resolution Nos. 4603 and 4758, adopted by
this Council on March 5, 2001 and December 2, 2002 (as so amended and supplemented, the
`Resolution"). Apart from the Series 1996 Bonds, Series 2001 Bond and Series 2003 Bond,
there are no other bonds or indebtedness of the City outstanding that are payable in whole or in
part from or secured by revenues of the System.
Terms which are defined in the Resolution shall have the same meanings when used
herein, unless such terms are also defined in this Supplemental Resolution.
1.03 The Refunding. Pursuant to the authority recited in Section 1.01, the City has
determined it to be in the best interests of the City to refund the Refunded Bonds. The total costs
of refunding the Series 1996 Bonds, excluding accrued interest, are estimated to be as follows:
Deposit to Escrow Account $700,274
Deposit to Debt Service Reserve 60,000
Costs of Issuance (Including Underwriter's Discount) 19.264
Total $779,538
The refunding portion of the Series 2004 Bonds totals $600,000 (exclusive of net original issue
premium and accrued interest). As set forth more particularly in Sections 3.01 and 3.02, the City
will apply a portion of the net proceeds of the Series 2004 Bonds to the acquisition of certain
securities to be applied to the refunding of the Refunded Bonds and the balance of such net
proceeds to costs of issuance and of the refunding (excluding underwriter's discount). As set
forth more particularly in Section 3.03, amounts in the Debt Service Account and the Reserve
Account allocated to the Refunded Bonds shall be appropriated to the payment of certain
securities to be applied to refunding the Refunded Bonds and to establishing the Reserve
Requirement allocated to the refunding portion of the Series 2004 Bonds.
The debt service savings to result from the refunding of the Refunded Bonds is presently
estimated to be $26,452.50, calculated on a net present value basis, and using a discount rate of
4.202% (the approximate yield of the Series 2004 Bonds) over the term of the Refunded Bonds.
The refunding portion of the Series 2004 Bonds bears interest at an average annual interest rate
of 3.240%, which is more than 318ths of one percent less than the average annual rate on the
Refunded Bonds (5.572%).
1.04. The 2004 Project. The City has also determined the necessity of upgrading the
System by acquisition, construction and installation of various improvements to the System,
including installation of approximately 3.48 miles of water main piping, 11.08 tons of
pipefittings, 76 water valves, 30 fire hydrants, and appurtenances along U.S. Highway 93 South,
and related improvements (the "2004 Project"). The estimated costs of the 2004 Project,
including engineering costs and costs of issuance but excluding accrued interest, are presently
estimated to be $1,242,041, and consist of the following items:
Construction
Construction Engineering
Deposit to Reserve Account
$960,794
127,185
124,000
Costs of Issuance (Including Underwriter's Discount) 30,062
Total: $1,242,041
The portion of the principal amount of Series 2004 Bonds to pay the costs of the 2004
Project totals $1,240,000, and the net original issue premium is estimated to total $2,041.
1.05 Parity Bonds. In Section 6.01 of the Resolution, the City reserved the right to
issue Additional Bonds upon certain terms and conditions, including (i) for Additional Bonds
issued to finance a project, obtaining a certificate or report from an Independent Consultant
(which includes an Independent Accountant) stating that the Net Revenues in the Fiscal Year
immediately preceding the issuance of such Additional Bonds were at least 125% of the
maximum Principal and Interest Requirements for any complete Fiscal Year during the term of
the Series 2001 Bond and Series 2003 Bond (collectively, the "Outstanding Bonds") with respect
to the Outstanding Bonds and the Series 2004 Bonds (as hereinafter defined), and (ii) for
Additional Bonds to refund any Bonds then outstanding, a report of an Independent Accountant
to the effect that the proceeds of the Additional Bonds plus moneys withdrawn from the Debt
Service Account or Reserve Account will be sufficient to achieve the refunding and a copy of the
irrevocable instructions to the escrow agent to redeem the Bonds to be redeemed on the date
specified in the instructions.
2
It is hereby determined, declared and found that the City is authorized, based on the
covenants made in this Supplemental Resolution and the clarification set forth in Section 6 of
Resolution No. 4758, to issue $1,840,000 in aggregate principal amount of Bonds to finance
costs of the 2004 Project and refunding the Series 1996 Bonds under Section 6.01 of the
Resolution (the "Series 2004 Bonds"). The City has obtained or shall obtain a certificate or
certificate of an Independent Accountant in accordance with the previous paragraph of this
Section and Section 6.01 of the Resolution. The Series 2004 Bonds are Additional Bonds under
the Resolution, and shall be and are hereby declared to be secured by a lien on the Net Revenues
on a parity with the Series 2001 Bond, the Series 2003 Bond and any Additional Bonds hereafter
issued.
1.06 Net Revenues Available. The City is authorized to charge just and equitable
rates, charges and rentals for all services directly or indirectly furnished by the System, and to
pledge and appropriate to the Series 2001 Bond, Series 2003 Bond, and the Series 2004 Bonds
the Net Revenues to be derived from the operation of the System, including improvements,
betterments or extensions thereof hereafter constructed or acquired. The Net Revenues to be
produced by such rates, charges and rentals, as most recently increased, during the tern of the
Series 2004 Bonds and the useful life of the improvements financed thereby, are estimated to be
more than sufficient to pay the principal and interest when due on the Series 2001 Bond, Series
2003 Bond and the Series 2004 Bonds, and to create and maintain reasonable reserves therefor
and to provide an allowance for replacement and depreciation, as prescribed by the Resolution.
Section 2. Issuance and Sale of the Series 2004 Bonds.
2.01 Ratification of Issuance and Sale of Series 2004 Bonds. Advertisements for bids
for the purchase of the Series 2004 Bonds were published in accordance with the provisions of
Montana Code Annotated, Section 7-7-4433. By a resolution adopted on May 3, 2004, this
Council determined the bid submitted by D.A. Davidson & Co., of Great Falls, Montana (the
"Purchaser"), to purchase the Series 2004 Bonds, bearing interest at the rates set forth in Section
2.01 hereof, at a price of $1,828,500 plus interest accrued thereon from the date of original issue
of the Bonds, to be the most advantageous to the City and authorized the City to enter into a
contract with the Purchaser. Such purchase price and interest rates result in a true interest cost of
4.3245% per annum and a total interest dollar cost of $744,051.51 on the Series 2004 Bonds.
2.02 Official Statement. The Official Statement relating to the Series 2004 Bonds is
hereby approved and the determination of the City Manager that the Official Statement is
deemed final for purposes of SEC Rule 15c2-12 is ratified and confirmed. The officers of the
City are hereby authorized and directed to execute such certificates as may be appropriate
concerning the accuracy, completeness and sufficiency of the Official Statement and to deliver to
the Purchaser within seven business days after the date of adoption of this resolution copies of
the Official Statement in a reasonable quantity as requested by the Purchaser.
2.03 Denominations Maturities Interest. The Water System Revenue and Refunding
Bonds, Series 2004, to be issued hereunder, in the aggregate principal amount of $1,840,000,
shall be issued in fully registered form only, in denominations of $5,000 or any integral multiple
thereof of single maturities, shall mature on July 1 in the following respective years and
amounts, and Series 2004 Bonds maturing in such years and principal amounts shall bear interest
from the date of original issue until paid or duly called for redemption at the rates per annum set
forth opposite such years and amounts, respectively (the Series 2004 Bond with a stated maturity
in 2024 shall be a term bond), provided that S600,000 of the principal amount of the Series 2004
Bonds representing proceeds attributable to refunding the Series 1996 Bonds shall be payable in
the years 2005 through 2011, and shall bear interest from May 15, 2004 to their respective
maturities or prior dates upon which they have been duly called for redemption at the rates per
annum set forth opposite such years and amounts, as follows:
Interest
Year Amount Rate
2005
$120,000
2.50%
2006
125,000
2.50
2007
130,000
2.50
2008
135,000
3.00
2009
140,000
3.25
2010
140,000
3.50
2011
145,000
3.75
2012
55,000
4.00
2013
55,000
4.00
2014
60,000
4.20
2015
60,000
4.30
2016
65,000
4.40
2017
65,000
4.45
2018
70,000
4.50
2019
70,000
4.50
2024
405,000
4.85
Interest shall be calculated on the basis of a 360-day year composed of twelve 30-day
months. The Series 2004 Bonds maturing in 2024 are term bonds and are subject to mandatory
sinking fund redemption as provided in Section 2.09 below.
2.04 Payment. The Series 2004 Bonds shall be issuable only in fully registered form,
and the ownership of the Series 2004 Bonds shall be transferred only upon the bond register of
the City hereinafter described. Interest on the Series 2004 Bonds shall be payable on January 1
and July 1 in each year, commencing January 1, 2005, to the owners of record of the Series 2004
Bonds as such appear on the bond register as of the close of business on the fifteenth day of the
immediately preceding month, whether or not such day is a business day. The interest on, and,
upon presentation and surrender thereof, the principal of, each Series 2004 Bond, the amount
payable with respect thereto, shall be payable in lawful money of the United States of America
by check or draft issued by the Registrar described herein.
2.05 Dating of the Bonds. Each Series 2004 Bond shall be dated, as originally issued,
as of May 15, 2004. Upon the original delivery of the Series 2004 Bonds pursuant to Section
2.10 or upon the delivery of a Series 2004 Bond upon an exchange or transfer pursuant to
Section 2.06, the Registrar shall date each Series 2004 Bond so delivered as of the date of its
authentication.
2.06 System of Re ig_stration, The City shall appoint, and shall maintain, a bond
registrar, transfer agent and paying agent for the Bonds (the "Registrar"). This Section 2.06 shall
establish a system of registration for the Series 2004 Bonds as defined in the Model Public
Obligations Registration Act of Montana. The effect of registration and the rights and duties of
the City and the Registrar with respect thereto shall be as follows:
(a) Bond Register. The Registrar shall keep at its principal office a Bond Register
in which the Registrar shall provide for the registration of ownership of Series 2004
Bonds and the registration of transfers and exchanges of Series 2004 Bonds entitled to be
registered, transferred or exchanged.
(b) Transfer of Series 2004 Bonds. Upon surrender for transfer of any Series
2004 Bond duly endorsed by the registered owner thereof or accompanied by a written
instrument of transfer, in form satisfactory to the Registrar, duly executed by the
registered owner thereof or by an attorney duly authorized by the registered owner in
writing, the Registrar shall authenticate and deliver, in the name of the designated
transferee or transferees, one or more new Series 2004 Bonds of a like aggregate
principal amount and maturity, as requested by the transferor. The Registrar may,
however, close the books for registration of the transfer of a Series 2004 Bond or portion
thereof selected for redemption.
(c) Exchange of Series 2004 Bonds. Whenever any Series 2004 Bonds are
surrendered by the registered owner for exchange, the Registrar shall authenticate and
deliver one or more new Series 2004 Bonds of a like aggregate principal amount and
maturity as requested by the registered owner or the owner's attorney in writing,
(d) Cancellation. All Series 2004 Bonds surrendered upon any transfer or
exchange shall be promptly canceled by the Registrar and thereafter disposed of as
directed by the City.
(e) Improper or Unauthorized Transfer. When any Series 2004 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 2004 Bond or separate instrument of
transfer is legally authorized. The Registrar shall incur no liability for its refusal, in good
faith, to make transfers which it, in its judgment, deems improper or unauthorized.
(f) Persons Deemed Owners. The City and the Registrar may treat the person in
whose name any Series 2004 Bond is at any time registered in the Bond Register as the
absolute owner of such Series 2004 Bond, whether such Series 2004 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 2004 Bond and for all other purposes, and
all such payments so made to any such registered owner or upon the owner's order shall
be valid and effectual to satisfy and discharge the liability of the City upon such Series
2004 Bond to the extent of the sum or sums to paid.
(g) Taxes, Fees and Charges. For every transfer or exchange of a Series 2004
Bond (except for an exchange upon a partial redemption of any Series 2004 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 2004 Bonds. In case any Series
2004 Bond shall become mutilated or be lost, stolen or destroyed, the Registrar shall
deliver a new Series 2004 Bond of like amount, number, maturity date and tenor in
exchange and substitution for and upon cancellation of any such mutilated Series 2004
Bond or in lieu of and in substitution for any such Series 2004 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 2004 Bond lost, stolen or destroyed,
upon receipt by the Registrar of evidence satisfactory to it that such Series 2004 Bond
was lost, stolen or destroyed, and of the ownership thereof, and upon receipt by the
Registrar of an appropriate bond of indemnity in form, substance and amount satisfactory
to it, in which both the City and the Registrar shall be named as obligees. All Series 2004
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
2004 Bond has already matured or such Series 2004 Bond has been called for redemption
in accordance with its terms, it shall not be necessary to issue a new Series 2004 Bond
before payment.
2.07 Initial Re ig strar. The City hereby appoints U.S. Bank National Association, of
Seattle, Washington, as the initial Registrar. The Mayor, City Manager and Finance Director are
hereby authorized to execute and deliver, on behalf of the City, a contract with U.S. Bank
National Association, of Seattle, Washington, as Registrar. 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. 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 Series 2004 Bonds in its possession to the
successor Registrar and shall deliver the Bond Register to the successor Registrar. On or before
each principal or interest due date, without further order of this Council, the Finance Director
shall transmit to the Registrar, solely from moneys in the Debt Service Account of the Water
System Fund available therefor, moneys sufficient for the payment of all principal, premium, if
any, and interest then due on the Series 2004 Bonds.
2.08 Optional Redemption. Bonds with stated maturities in the years 2005 through
2014 shall not be subject to optional redemption prior to their stated maturities. Bonds maturing
July 1, 2015 and later years shall be subject to redemption at the option of the City on July 1,
2014, and on any date thereafter at a price equal to the principal amount being redeemed plus
accrued interest to the date of redemption, without premium. Such Bonds shall be selected for
redemption from such stated maturities and principal amounts as the City may designate and,
within a maturity, in $5,000 principal amounts selected by lot or other manner deemed fair by the
Registrar. Bonds in denominations larger than $5,000 may be redeemed in part in any integral
multiple of $5,000. The holder of any Bond redeemed in part shall receive one or more new
Bonds in authorized denominations equal in principal amount to the unredeemed portion of the
Bond so surrendered.
no
Notice of redemption of any Series 2004 Bond shall be mailed by or at the direction of
the Finance Director, at least 30 days before the redemption date, by first-class mail to the
Registrar and the owner thereof at his address appearing in the Bond Register; provided that any
failure to give or any defect in such notice shall not affect the validity of proceedings for the
redemption of any Series 2004 Bond not affected thereby. The notice of redemption shall
specify the redemption date, redemption price, the numbers, interest rates and CUSIP numbers of
the Series 2004 Bonds to be redeemed and the place at which the Series 2004 Bonds are to be
surrendered for payment, which is the principal office of the Registrar. Official notice of
redemption having been given as aforesaid, the Series 2004 Bonds or portions thereof so to be
redeemed shall, on the redemption date, become due and payable at the redemption price therein
specified and from and after such date (unless the City shall default in the payment of the
redemption price) such Series 2004 Bonds or portions thereof shall cease to bear interest.
In addition to the notice prescribed by the preceding paragraph, the Finance Director shall
also give, or cause to be given, notice of the redemption of any Series 2004 Bond or Bonds or
portions thereof at least 35 days before the redemption date by certified mail or telecopy to the
Purchaser and all registered securities depositories then in the business of holding substantial
amounts of obligations of the character of the Series 2004 Bonds (such depositories now being
The Depository Trust Company, of New York, New York) and 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 2004 Bond or portion
thereof.
Series 2004 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 2004 Bond redeemed in part shall receive,
upon surrender of such Series 2004 Bond to the Registrar, one or more new Series 2004 Bonds in
authorized denominations equal in principal amount to the unredeemed portion of the Series
2004 Bond so surrendered. All selections of Series 2004 Bonds for redemption by lot or other
manner deemed fair by the Registrar shall be made in $5,000 principal amounts
2.09 Mandatory Sinking Fund Redemption. The Series 2004 Bonds having a stated
maturity in the year 2024 are subject to redemption and, if not previously purchased by the City
in the open market or optionally redeemed, shall be redeemed on July 1 (a "Sinking Fund
Payment Date"), commencing in 2020 and concluding in 2023 in the amounts set forth below, in
$5,000 principal amounts selected by the Bond Registrar, by lot or other manner deemed fair, at
a redemption price equal to the principal amount thereof to be redeemed plus interest accrued to
the redemption date, without premium:
Year
Amount
2020
$75,000
2021
75,000
2022
80,000
2023
85,000
If the Series 2004 Bonds with a stated maturity of 2024 are not otherwise prepaid, $90,000 in
principal amount would remain to mature in 2024.
The principal amount of Series 2004 Bonds required to be redeemed on any Sinking Fund
Payment Date shall be reduced by the principal amount of any Series 2004 Bond having a stated
maturity in 2024 and theretofore redeemed under Section 2.08 and not previously applied to
reduce the principal amount of Series 2004 Bonds required to be redeemed on a Sinking Fund
Payment Date.
2.10 Form of the Series 2004 Bonds. The Series 2004 Bonds shall be prepared in
substantially the form set forth in Exhibit A hereto (which is hereby incorporated by reference
and made a part hereof) with such appropriate variations, omissions and insertions as are
permitted or required by the Resolution.
2.11 Execution and Delivery. The Series 2004 Bonds shall be executed in the name of
the City by the signatures of the Mayor, City Manager and Finance Director, and shall be sealed
with the official seal of the City, provided that said signatures and the seal may be printed,
engraved or lithographed facsimiles thereof. In case any officer whose signature or a facsimile
of whose signature shall appear on the Series 2004 Bonds shall cease to be such officer before
the delivery of any Series 2004 Bonds, such signature or facsimile shall nevertheless be valid and
sufficient for all purposes, the same as if such officer had remained in office until delivery.
Notwithstanding such execution, no Series 2004 Bond shall be valid or obligatory for any
purpose or be entitled to any security or benefit under the Resolution unless and until a certificate
of authentication on such Series 2004 Bond has been duly executed by the manual signature of
an authorized representative of the Registrar. Certificates of authentication on different Series
2004 Bonds need not be signed by the same representative. The executed certificate of
authentication on a Series 2004 Bond shall be conclusive evidence that it has been authenticated
and delivered under the Resolution. When the Series 2004 Bonds have been fully executed and
authenticated, they shall be delivered by the Registrar to the Purchaser 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.
2.12 Securities Depository.
(a) For purposes of this Section 2.12, the following terms shall have the following
meanings:
"Beneficial Owner" shall mean, whenever used with respect to a Bond, the
person in whose name such Bond is recorded as the beneficial owner of such
Bond by a Participant on the records of such Participant, or such person's
subrogee.
"Cede & Co." shall mean Cede & Co., the nominee of DTC, and any
successor nominee of DTC with respect to the Bonds.
"DTC" shall mean The Depository Trust Company of New York,
New York.
"Participant" shall mean any broker -dealer, bank or other financial
institution for which DTC holds Bonds as securities depository.
"Representation Letter" shall mean the Blanket Issuer Letter of
Representations executed by the City to DTC pursuant to which the City agrees to
comply with DTC's Operational Arrangements.
(b) The Series 2004 Bonds shall be initially issued as separately authenticated
fully registered bonds, and one Series 2004 Bond shall be issued in the principal amount
of each Stated Maturity of the Series 2004 Bonds. Upon initial issuance, the ownership
of such Series 2004 Bonds shall be registered in the Bond Register in the name of Cede
& Co., as nominee of DTC. The Bond Registrar, Paying Agent and the City may treat
DTC (or its nominee) as the sole and exclusive owner of the Series 2004 Bonds
registered in its name for the purposes of payment of the principal of or interest on the
Series 2004 Bonds, selecting the Series 2004 Bonds or portions thereof to be redeemed, if
any, giving any notice permitted or required to be given to registered owners of Series
2004 Bonds under this resolution, registering the transfer of Series 2004 Bonds, and for
all other purposes whatsoever; and neither the Bond Registrar, Paying Agent nor the City
shall be affected by any notice to the contrary. Neither the Bond Registrar, Paying Agent
nor the City shall have any responsibility or obligation to any Participant, any person
claiming a beneficial ownership interest in the Series 2004 Bonds under or through DTC
or any Participant, or any other person which is not shown on the Bond Register as being
a registered owner of any Series 2004 Bonds, with respect to the accuracy of any records
maintained by DTC or any Participant, with respect to the payment by DTC or any
Participant of any amount with respect to the principal of or interest on the Series 2004
Bonds, with respect to any notice which is permitted or required to be given to owners of
Series 2004 Bonds under this resolution, with respect to the selection by DTC or any
Participant of any person to receive payment in the event of a partial redemption of the
Series 2004 Bonds, or with respect to any consent given or other action taken by DTC as
registered owner of the Series 2004 Bonds. So long as any Series 2004 Bond is
registered in the name of Cede & Co., as nominee of DTC, the Paying Agent shall pay all
principal of and interest on such Series 2004 Bond, and shall give all notices with respect
to such Series 2004 Bond, only to Cede & Co. in accordance with DTC's Operational
Arrangements, and all such payments shall be valid and effective to fully satisfy and
discharge the City's obligations with respect to the principal of and interest on the Series
2004 Bonds to the extent of the sum or sums so paid. No Person other than DTC shall
receive an authenticated Series 2004 Bond for each separate stated maturity evidencing
the obligation of the City to make payments of principal and interest. Upon delivery by
DTC to the Bond Registrar of written notice to the effect that DTC has determined to
substitute a new nominee in place of Cede & Co., the Series 2004 Bonds will be
transferable to such new nominee in accordance with paragraph (d) hereof.
(c) In the event the City determines that it is in the best interest of the Beneficial
Owners that they be able to obtain Series 2004 Bonds in the form of bond certificates, the
City may notify DTC and the Bond Registrar and Paying Agent, whereupon DTC shall
notify the Participants of the availability through DTC of Series 2004 Bonds in the form
of certificates. In such event, the Series 2004 Bonds will be transferable in accordance
with paragraph (d) hereof. DTC may determine to discontinue providing its services with
respect to the Series 2004 Bonds at any time by giving notice to the City, the Paying
Agent and the Bond Registrar and discharging its responsibilities with respect thereto
9
under applicable law. In such event the Series 2004 Bonds will be transferable in
accordance with paragraph (d) hereof.
(d) In the event that any transfer or exchange of Series 2004 Bonds is permitted
under paragraph (b) or (c) hereof, such transfer or exchange shall be accomplished upon
receipt by the Bond Registrar of the Series 2004 Bonds to be transferred or exchanged
and appropriate instruments of transfer to the permitted transferee in accordance with the
provisions of this resolution. In the event Series 2004 Bonds in the form of certificates
are issued to owners other than Cede & Co., its successor as nominee for DTC as owner
of all the Series 2004 Bonds, or another securities depository as owner of all the Series
2004 Bonds, the provisions of this resolution shall also apply to all matters relating
thereto, including, without limitation, the printing of such Series 2004 Bonds in the form
of bond certificates and the method of payment of principal of and interest on such Series
2004 Bonds in the form of bond certificates.
Section 3. Appropriation of Bond Proceeds and Refunding of Series 1996 Bonds
3.01 Appropriation of Bond Proceeds. The net proceeds of the Series 2004 Bonds,
which, exclusive of accrued interest and net original issue premium, total $1,828,500.00
(reflecting an underwriter's discount of $11,500.00), are appropriated to the Water System Fund
created by the Resolution and are to be deposited or applied in the amounts estimated to be as
follows:
(a) Any accrued interest on the Series 2004 Bonds shall be credited to the Debt
Service Account;
(b) Any net original issue premium shall go toward underwriter's compensation;
(c) $523,757.92 of the net proceeds of the Series 2004 Bonds shall be deposited
with the Escrow Agent pursuant to the Escrow Agreement as provided for in Section
3.02;
(d) $1,087,979.25 of the net proceeds of the Series 2004 Bonds shall be credited
to the Construction Account to pay costs of the 2004 Project;
(e) $184,000.00 of the net proceeds of the Series 2004 Bonds, together with the
amount identified in Section 3.03, shall be credited to the Reserve Account so that the
balance therein equals the Reserve Requirement, assuming the issuance of the Series
2004 Bonds and that the Series 1996 Bonds are no longer outstanding; and
(f) $32,762.83 of the net proceeds of the Series 2004 Bonds shall be credited to
the Construction Account to pay costs of issuance of the Series 2004 Bonds and of the
refunding of the Series 1996 Bonds.
3.02 Escrow. Simultaneously with the delivery of the Series 2004 Bonds, the Finance
Director shall deposit in an escrow account (the "Escrow Account") established with U.S. Bank
National Association, of Seattle, Washington: $523,757.92 of the proceeds of the Series 2004
Bonds, plus those amounts identified in Section 3.03. The Finance Director shall cause the
amount so deposited to be invested in securities of the type described in Montana Code
10
Annotated, Section 7-6-202, which amount is to be sufficient, without regard to investment
income thereon, to pay the principal of and the interest on the Refunded Bonds when due to
maturity or earlier redemption on July 1, 2004. The escrow account and all investments thereof
shall be held in safekeeping by said escrow agent, and said account and all income therefrom are
irrevocably appropriated for the purposes stated in this Section 3.02. At or before the time of
making said deposit and investment the Mayor, City Manager and Finance Director shall execute
on the part of the City an escrow agreement (the "Escrow Agreement") with said escrow agent,
in the form of such agreement which has been presented to this City Council at the meeting at
which this resolution was adopted, and is hereby approved. In accordance with the provisions of
Section 10.04 of the Resolution, upon the establishment of the escrow account pursuant to this
Section 3.02, the Refunded Bonds shall no longer be considered outstanding. In accordance with
the provisions of Section 4.04 of Resolution No. 4273 and the Escrow Agreement, the Series
1996 Bonds with stated maturities in the years 2005 through 2011 are hereby called for
redemption on July 1, 2004. The officers of the City are hereby authorized and directed to
subscribe for the purchase of United States Treasury Obligations — State and Local Government
Series as an investment for the Escrow Account and any prior subscription is hereby ratified and
confirmed.
3.03 Annronriation of Debt Service Account and Reserve Account Funds. Funds in
the Debt Service Account allocated to the Refunded Bonds in the amount of $70,515.83 are
hereby appropriated to the Escrow Account to be applied to the acquisition of securities to pay,
upon maturity, a portion of the cost of paying, refunding, and redeeming the Refunded Bonds.
Funds in the Reserve Account allocated to the Refunded Bonds in the amount of $106,000.00 are
hereby appropriated to the Escrow Account to be applied to the acquisition of securities to pay,
upon maturity, a portion of the cost of paying, refunding, and redeeming the Refunded Bonds.
Section 4. Security for the Series 2004 Bond. The Series 2004 Bonds are issued as
an Additional Bond under Section 6.01 of the Resolution and shall, with the Series 2001 Bond,
Series 2003 Bond, and any other Additional Bonds issued under the provisions of Section 6.01 of
the Resolution, be equally and ratably secured by the provisions of the Resolution and payable
out of the Net Revenues appropriated to the Debt Service Account of the Water System Fund,
without preference or priority, all as provided in the Resolution, and secured by the Reserve
Account, as further provided in Section 7.05 of the Resolution. Upon the issuance of the Series
2004 Bonds, the Finance Director shall deposit, from other available funds in the Water System
Fund, an amount in addition to $184,000 from the proceeds of the Series 2004 Bonds to cause
the amount in the Reserve Account to equal to the lesser of ten percent (10%) of the original
principal amount of the Outstanding Bonds and the Series 2004 Bonds or the maximum amount
of Principal and Interest Requirements on the Outstanding Bonds and the Series 2004 Bonds in
the current or any future Fiscal Year. The City shall keep, perform and observe each and every
one of its covenants and undertakings set forth in the Resolution and shall cause the 2004 Project
to be undertaken and completed expeditiously.
Section 5. Arbitrage and Certification of Proceedings.
5.01 Use of Project and System. The project financed by the Series 1996 Bonds and
the 2004 Project and facilities of the System refinanced or financed in whole or in part with
proceeds of the Series 2004 Bonds are and will be owned and operated by the City and used by
the City to provide water services to members of the general public as part of the System. No
user of the System is granted any concession, license or special arrangement with respect to the
11
System or any part thereof. The City shall not enter into any lease, use or other agreement with
any non -governmental person relating to the use of the 2004 Project or the System or security for
the payment of the Series 2004 Bonds which might cause the Series 2004 Bonds to be considered
"private activity bonds" or "private loan bonds" within the meaning of Section 141 of the
Internal Revenue Code of 1986, as amended (the "Code").
5.02 Covenant. The City covenants and agrees with the owners from time to time of
the Series 2004 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 2004 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
powers to ensure that the interest on the Series 2004 Bonds will not become includable in gross
income for federal income tax purposes under the Code and the Regulations.
5.03 Certification, The Mayor, City Manager and Finance Director, being the officers
of the City charged with the responsibility for issuing the Series 2004 Bonds pursuant to this
resolution, are authorized and directed to execute and deliver to the Purchaser a certificate in
accordance with the provisions of Section 148 of the Code, and Sections 1.103-13, 1.103-14 and
1.103-15 of the Regulations, stating that on the basis of facts, estimates and circumstances in
existence on the date of issue and delivery of the Series 2004 Bonds, it is reasonably expected
that the proceeds of the Series 2004 Bonds will be used in a manner that would not cause the
Series 2004 Bonds to be "arbitrage bonds" within the meaning of Section 148 of the Code and
the Regulations.
5.04 Arbitrage Rebate. The City acknowledges that the Series 2004 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 2004 Bonds from gross income for federal
income tax purposes, unless the Series 2004 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 2004
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 Finance
Director is hereby authorized and directed to execute a Rebate Certificate, substantially in the
form of the Rebate Certificate prepared by Bond Counsel and the City hereby covenants and
agrees to observe and perform the covenants and agreements contained therein, unless amended
or terminated in accordance with the provisions thereof.
5.05 Information Reporting. The City shall file with the Secretary of the Treasury, not
later than August 15, 2004, a statement concerning the Series 2004 Bonds containing the
information required by Section 149(e) of the Code.
Section 6. Designation as Qualified Tax -Exempt Obligations. Pursuant to Section
265(b)(3)(B)(ii) of the Code, the City hereby designates the Series 2004 Bonds as "qualified
tax-exempt obligations" for purposes of Section 265(b)(3) of the Code. The City hereby
represents that it does not anticipate that obligations bearing interest not includable in gross
income for purposes of federal income taxation under Section 103 of the Code (including
refunding obligations as provided in Section 265(b)(3) of the Code and including "qualified
501(c)(3) bonds" but excluding other "private activity bonds," as defined in Sections 141(a) and
12
145(a) of the Code) will be issued by or on behalf of the City and all "subordinate entities" of the
City in 2004 in an amount greater than S 10,0007000.
Section 7. Authentication of Transcript. The officers of the City are hereby
authorized and directed to furnish to the Purchaser and to bond counsel certified copies of all
proceedings relating to the issuance of the Series 2004 Bonds and such other certificates and
affidavits as may be required to show the right, power and authority of the City to issue the
Series 2004 Bonds, and all statements contained in and shown by such instruments, including
any heretofore furnished, shall constitute representations of the City as to the truth of the
statements purported to be shown thereby.
Section 8. Continuing Disclosure.
(a) Purpose and Beneficiaries. To provide for the public availability of certain
information relating to the Bonds and the security therefor and to permit the original purchaser
and other participating underwriters in the primary offering of the Bonds to comply with
amendments to Rule 15e2-12 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 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 Bonds. The City is the only "obligated person" in respect of the Bonds within the
meaning of the Rule for purposes of identifying the entities in respect of which continuing
disclosure must be made. The City has complied in all material respects with any undertaking
previously entered into by it under the Rule.
If the City fails to comply with any provisions of this Section 8, any person aggrieved
thereby, including the Owners of any Outstanding 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 8, 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
to the contrary contained herein, in no event shall a default under this Section 8 constitute a
default under the Bonds or under any other provision of this resolution.
As used in this Section 8, "Owner" or `Bondowner" means, in respect of a 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 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 Bond (including persons or entities holding Bonds
through nominees, depositories or other intermediaries), or (b) is treated as the owner of the
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:
13
(1) on or before 270 days after the end of each fiscal year of the City, commencing with
the fiscal year ending June 30, 2004, 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, 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 fiscal officer of the City; and
(B) To the extent not included in the financial statements referred to
in paragraph (A) hereof, the information of the type set forth below contained
in the Official Statement, dated May 3, 2004, for such fiscal year or for the
period most recently available, which information may be unaudited, but is to
be certified as to accuracy and completeness in all material respects by the
City Fiscal Officer to the best of his or her knowledge which certification may
be based on the reliability of information obtained from third party sources:
(1) audited financial statements of the Water System Fund for the then most
recent completed fiscal year or if unavailable as of the date of request,
updated operating results for the Water System Fund for the then most
recent completed fiscal year;
(2) a description of any additional borrowing or future financing for the Water
System;
(3) updated figures for the number of Water System Connections for the then
current fiscal year in format similar to the table "Historical Water System
Connections" in the Official Statement;
(4) updated information of any changes in the user rates in a format similar to
the table "Current Water System Rate Structure" in the Official Statement;
(5) a fist of the Water System users for the then current fiscal year in format
similar to the table "Major Water System Users" in the Official Statement;
14
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 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 (3) 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 8 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;
(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
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
15
event that would be deemed "material' for purposes of the purchase, holding or sale of a 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 8 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 8
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 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
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 8 shall remain in effect so long as any
Bonds are Outstanding. Notwithstanding the preceding sentence, however, the obligations of the
City under this Section 8 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 8 will not cause participating underwriters in the primary
offering of the Bonds to be in violation of the Rule or other applicable requirements of the
16
Securities Exchange Act of 1934, as amended, or any statutes or laws suecessory thereto or
amendatory thereof.
(2) This Section 8 (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 Bonds, 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 or the type of operations conducted by the
City, or (b) is required by, or better complies with, the provisions of paragraph (b)(5) of the Rule;
(ii) this Section 8 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 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 8 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.
Section 9. Effective Date. This resolution shall be in full force and effect from and
after its passage.
PASSED AND APPROVED BY THE CITY COUNCIL OF THE CITY OF KALISPELL, ON
THE 17TH DAY OF MAY, 2004.
ATTEST:
/f
Theresa White
City Clerk
17
EXHIBIT A
[Face of the Series 2004 Bonds]
UNITED STATES OF AMERICA
STATE OF MONTANA
COUNTY OF FLATHEAD
CITY OF KALISPELL
WATER SYSTEM REVENUE AND REFUNDING BOND
SERIES 2004
No.
S
Maturity Date of
Rate Date Original Issue CUSIP
July 1, May 15, 2004
REGISTERED OWNER: CEDE & CO.
PRINCIPAL AMOUNT: DOLLARS
FOR VALUE RECEIVED, THE CITY OF KALISPELL (the "City'), a duly organized
municipal corporation located in Flathead County, Montana, acknowledges itself to be specially
indebted and hereby promises to pay to the registered owner identified above or registered
assigns, solely from the Debt Service Account of its Water System Fund, the principal amount
specified above on the maturity date specified above, or, if this Bond is prepayable as stated
below, on an earlier date on which it shall have been duly called for redemption, upon
presentation and surrender hereof at the principal office of the Bond Registrar hereinafter named,
with interest thereon, from May 15, 2004, 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 prepayable,
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, 2005, to the
registered owner of this Bond as such appears of record in the bond register as of the close of
business on the fifteenth day (whether or not a business day) of the immediately preceding
month. Interest is payable by check or draft mailed by U.S. Bank National Association, of
Seattle, Washington as Bond Registrar, Transfer Agent and Paying Agent, or its successor
designated under the Resolution described herein (the "Bond Registrar").
Notwithstanding any other provisions of this Bond, so long as this Bond is registered in
the name of Cede & Co., as nominee of The Depository Trust Company, or in the name of any
other nominee of The Depository Trust Company or other securities depository, the Registrar
A-1
shall pay all principal of and interest on this Bond, and shall give all notices with respect to this
Bond, only to Cede & Co. or other nominee in accordance with the operational arrangements of
The Depository Trust Company or other securities depository as agreed to by the City.
This Bond is one of a series in the aggregate principal amount of $1,840,000 (the "Series
2004 Bonds"), all of like date of original issue and tenor except as to serial number, interest rate,
date, maturity date, denomination and redemption privilege, and issued for the purposes of
financing improvements to the City's municipal water system (the "System") and of refunding
the City's outstanding Water System Revenue Bonds, Series 1996 (the "Series 1996 Bonds"),
under authority of and in conformity with the Constitution and laws of the State of Montana and
the resolutions of the City, including Montana Code Annotated, as amended, Title 7, Chapter 7,
Parts 44 and 45, as amended, and Resolution No. 4273, adopted by the City Council of the City
on June 17, 1996, as amended and supplemented by Resolution Nos. 4603, 4758 and
adopted by the City Council on March 5, 2001, December 2, 2002, and May 17, 2004,
respectively (as so amended and supplemented, the "Resolution"). The Series 2004 Bonds are
issuable only as fully registered bonds of a single maturity, in denominations of $5,000 or any
integral multiple thereof. The Series 2004 Bonds are issued on a parity and are equally and
ratably secured by the net revenues of the System with the City's outstanding Water System
Revenue Bond (DNRC Drinking Water Revolving Loan Program), Series 2001 and Water
System Revenue Bond, Series 2003 (together, the "Outstanding Bonds"), and any additional
bonds issued on a parity therewith (collectively, the "Bonds").
Reference is made to the Resolution for a more complete statement of the terms and
conditions upon which the Series 2004 Bonds have been issued, the net revenues of the System
pledged and appropriated for the payment and security thereof, the conditions upon which
additional bonds may be issued under the Resolution and made payable from such net revenues
on a parity with the Outstanding Bonds and the Series 2004 Bonds or otherwise, the conditions
upon which the Resolution may be amended, the rights, duties and obligations of the City, and
the rights of the owners of the Series 2004 Bonds.
The Series 2004 Bonds maturing in the years 2005 through 2014 are not subject to
redemption before maturity, but Series 2004 Bonds having stated maturity dates in the years
2015 and later years are each subject to redemption at the option of the City, in whole or in part,
in inverse order of maturities and in $5,000 principal amounts selected by lot or any other
manner deemed fair by the Registrar, on July 1, 2014, and any date thereafter, at a redemption
price equal to the principal amount being redeemed, plus interest accrued to the date of
redemption, without premium.
Notice of the call for redemption of any Series 2004 Bond will be mailed, at least thirty
days before said redemption date, by first-class mail to the registered owner thereof at the
address appearing in the registration books maintained by the Registrar; provided that any failure
to give or any defect in such notice shall not affect the validity of proceedings for the redemption
of any Bond not affected thereby. Official notice of redemption having been given as aforesaid,
the Series 2004 Bonds or portions thereof so to be redeemed shall, on the redemption date,
become due and payable at the redemption price therein specified, and from and after such date
(unless the City shall default in the payment of the redemption price) such Series 2004 Bonds or
portions thereof shall cease to bear interest. Upon partial redemption of any Series 2004 Bond, a
A-2
new Series 2004 Bond or Bonds will be delivered to the owner without charge, representing the
remaining principal amount outstanding.
The Series 2004 Bonds having a stated maturity in the year 2024 are subject to
redemption on July 1 from mandatory sinking fund payments required by the Resolution, in the
years and principal amounts set forth below (subject to reduction as provided in the Resolution),
at the principal amount to be redeemed plus interest accrued to the date of redemption, without
premium:
Year
Amount
2020
$75,000
2021
75,000
2022
80,000
2023
85,000
If the Series 2004 Bonds with a stated maturity of 2024 are not otherwise prepaid,
$90,000 in principal amount would remain to mature in 2024.
The Series 2004 Bonds have been designated by the City as "qualified tax-exempt
obligations" pursuant to Section 265 of the Internal Revenue Code of 1986, as amended
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 City at the principal office of the Bond
Registrar, by the registered owner hereof in person or by his attorney duly authorized in writing,
upon surrender hereof together with a written instrument of transfer satisfactory to the Bond
Registrar, duly executed by the registered owner or his attorney; and may also be surrendered in
exchange for Series 2004 Bonds of other authorized denominations. Upon such transfer or
exchange, the City will cause a new Series 2004 Bond or Bonds to be issued in the name of the
transferee or registered owner, 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 Bond 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 Bond Registrar shall
be affected by any notice to the contrary.
IT IS CERTIFIED, RECITED, COVENANTED AND AGREED that the City has fixed
and established and will collect reasonable rates and charges for the services and facilities
afforded by the System, subject to applicable law, and has created a special Water System Fund
into which the gross revenues of the System, including all additions thereto and replacements
and improvements thereof subsequently constructed or acquired, will be paid, and a separate and
special Debt Service Account in that fund, into which will be paid each month, from and as a
first and prior lien on the net revenues of the System then on hand, an amount equal to not less
than the sum of one -sixth of the interest due within the next six months and one -twelfth of the
principal due within the next twelve months with respect to all Bonds secured by the Resolution
A-3
and payable from that Account, and a Reserve Account in that fund into which will be deposited
amounts equal to the lesser of (i) 10% of the original principal amount of all Bonds outstanding
or (ii) the maximum amount of principal and interest to become due on the Series 2004 Bonds
and all other Bonds outstanding in the current or any subsequent fiscal year; except for payments
to the Rebate Account, that the Debt Service Account will be used only to pay the principal of,
premium, if any, and interest on the Series 2004 Bonds, the Outstanding Bonds and any other
additional Bonds issued pursuant to and secured by the Resolution on a parity therewith; that
rates and charges will from time to time be made and kept sufficient to provide gross income and
revenues adequate to pay promptly the reasonable and current expenses of operating and
maintaining the System and to produce in each fiscal year net revenues in excess of such current
expenses, equal to at least 125% of the maximum amount of principal and interest payable from
the Debt Service Account in the current or any subsequent fiscal year; that additional Bonds and
refunding Bonds may be issued and made payable from the Debt Service Account on a parity
with the Series 2004 Bonds and Outstanding Bonds, upon certain conditions set forth in the
Resolution, but no obligation will be otherwise incurred and made payable from the net revenues
of the System, unless the lien thereof shall be expressly made subordinate to the lien of the Series
2004 Bonds, the Outstanding Bonds and additional parity Bonds on such net revenues; that all
provisions for the security of the holder of this Bond set forth in the 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 resolutions of the City to
be done, to exist, to happen and to be performed in order to make this Series 2004 Bond a valid
and binding special obligation of the City according to its terms have been done, do exist, have
happened and have been perfonmed as so required; and that this Bond and the interest hereon are
payable solely from the Net Revenues of the System pledged and appropriated to the Debt
Service Account and do not constitute a debt of the City within the meaning of any constitutional
or statutory limitation or provision and the issuance of the Series 2004 Bonds does not cause
either the general or the special indebtedness of the City to exceed any constitutional or statutory
limitation; and that the opinion attached hereto is a true copy of the legal opinion given by Bond
Counsel with reference to the Series 2004 Bonds, dated the date of issuance and delivery of the
Series 2004 Bonds.
This Bond shall not be valid or become obligatory for any purpose or be entitled to any
security or benefit under the Resolution until the Certificate of Authentication hereon shall have
been executed by the Bond Registrar by the manual signature of one of its authorized
representatives.
A-4
IN WITNESS WHEREOF, the City of Kalispell, Flathead County, Montana, by its City
Council, has caused this Bond and the certificate hereof to be executed by the facsimile
signatures of the Mayor, City Manager and Finance Director and has caused a facsimile of the
official seal of the City to be imprinted hereon.
(Facsimile Seal)
Date:
(Facsimile Signature)
Mayor
(Facsimile Signature)
City Manager
(Facsimile Signature)
Finance Director
CERTIFICATE OF AUTHENTICATION
This is one of the Water System Revenue and Refunding Bonds, Series 2004 delivered
pursuant to the Resolution mentioned within.
U.S. BANK NATIONAL ASSOCIATION,
as Bond Registrar, Transfer Agent
and Paying Agent
By
Authorized Representative
A-5
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 UTMA............ Custodian .....................
in common (Cost) (Minor)
TEN ENT -- as tenants
by the entireties
under Uniform Gifts to
JT TEN -- as joint tenants Minor Act ............................................
with right of (State)
survivorship and
not as tenants in
common
Additional abbreviations may also be used.
ASSIGNMENT
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 Bond Registrar,
which requirements include membership
or participation in STAMP or such other
"signature guaranty program" as may be
determined by the Bond Registrar in
addition to or in substitution for STAMP,
all in accordance with the Securities
Exchange Act of 1934, as amended.
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.
A-6