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HomeMy WebLinkAbout06-15-20 City Commission Packet Materials - A2. Res 5183 Terms and Conditions Bonds for Davis Ln LS and Norton E Ranch Interceptor Commission Memorandum REPORT TO: Honorable Mayor and City Commission FROM: Kristin Donald, Finance Director SUBJECT: Commission Resolution No. 5183 – Fixing Terms and Conditions Sewer System Revenue Bonds for funding the Davis Lane Lift Station and Norton East Ranch Interceptor MEETING DATE: June 15, 2020 AGENDA ITEM TYPE: Action RECOMMENDATION: Approve Resolution No. 5183- Fixing Terms and Conditions Sewer System Revenue Bonds for funding the Davis Lane Lift Station and Norton East Ranch Interceptor STRATEGIC PLAN: 4.3 Strategic Infrastructure Choices- b) Increase Capacity of Sewer Pipes to Accommodate Development Projects - Projects include: North Frontage Road sewer project, Front Street sewer project and Davis Lane. BACKGROUND: The City has applied for and received a Loan Commitment from the State Revolving Loan Program to fund the construction and financing costs of the Davis Lane Lift Station and the Norton East Ranch Interceptor. Both projects have been planned for several fiscal years in the Capital Improvement Plan and then included in the FY20 budget. The project consists of the installation of approximately 13,000 linear feet of new 27- to 30-inch sanitary sewer main from Baxter Lane to East Valley Center Road via Cattail Street and Davis Lane, approximately 700 linear feet of 30-inch sanitary sewer installed by micro-tunneling, a new lift station north of the Interstate (I-90) Frontage Road, and dual 18-inch force mains from the lift station to the water reclamation facility. Approximately 2,200 linear feet of new 12-inch water main will also be installed on Davis Lane, as well as approximately 700 linear feet of 16-inch water main installed with the sanitary sewer in the casing under I-90, the associated frontage roads, and the MRL railroad track. The next step is to formally adopt the bond resolution and close on the loan. This resolution will allow the city to close on the loan in mid-July and draw-down our loan proceeds for project costs related to the financing and constructing the system. The project will be financed with the loan proceeds and cash-on-hand in the Wastewater Impact Fee Fund. 194 Securing the Loan: The portion of the project being financed project was identified as 100% capacity-adding, payable from Wastewater Impact Fees. However, because of the uncertainty of wastewater impact fee revenues, the City’s Wastewater Fund must secure the loan and have rates in place to make any debt service payments that the impact fee fund is unable to make. Annual Payments: The loan is to be repaid over 20 years with interest accruing at 2.5%. Loan payments are planned to be made from the Wastewater Impact Fee fund. UNRESOLVED ISSUES: None ALTERNATIVES: As suggested by the Commission FISCAL EFFECTS: The City will borrow up to $15,149,000 for the construction and financing of the Davis Lane Lift Station and the Norton East Ranch Interceptor. Debt service payments are planned to come from the Wastewater Impact Fee Fund. Our current wastewater rates anticipated debt service payments and revenue coverage requirements for this borrowing. No rate increase is required for this borrowing. Attachments: Resolution No. 5183 Report compiled on: 06/04/2020 Administrative / Finance Costs Source: Wastewater Impact Fees $942,848 Source: SRF A Loan $300,000 Source: SRF B Loan $7,786,000 20 YR @ 2.5% Source: SRF C Loan $7,063,000 20 YR @ 2.5% Total: Debt Service Reserve - - 248,557 225,500 474,057 Bond Counsel & Related costs - - 20,000 20,000 40,000 ADMIN/FINANCE COSTS:- - 268,557 245,500 514,057 Engineering-Design Services 942,848 - - - 942,848 Engineering-Construction Eng Services - - 1,100,000 - 1,100,000 Construction 300,000 6,417,443 5,771,557 12,489,000 Contingency - - - 1,045,943 1,045,943 ACTIVITY COSTS 942,848 300,000 7,517,443 6,817,500 15,577,791 - TOTAL PROJECT COSTS 942,848 300,000 7,786,000 7,063,000 16,091,848 195 RESOLUTION NO. 5183 RESOLUTION RELATING TO $15,149,000 SEWER SYSTEM REVENUE BONDS (DNRC WATER POLLUTION CONTROL STATE REVOLVING LOAN PROGRAM), CONSISTING OF $300,000 SUBORDINATE LIEN TAXABLE SERIES 2020A BOND, $7,786,000 SERIES 2020B BOND, AND $7,063,000 SERIES C BOND; AUTHORIZING THE ISSUANCE AND FIXING THE TERMS AND CONDITIONS THEREOF RECITALS: WHEREAS, pursuant to the Water Pollution Control State Revolving Fund Act, Montana Code Annotated, Title 75, Chapter 5, Part 11, as amended (the “Act”), the State of Montana (the “State”) has established a revolving loan program (the “Program”) to be administered by the Department of Natural Resources and Conservation of the State of Montana, an agency of the State (the “DNRC”), and by the Department of Environmental Quality of the State of Montana, an agency of the State (the “DEQ”), and has provided that a water pollution control state revolving fund (the “Revolving Fund”) be created within the state treasury and all federal, state and other funds for use in the Program be deposited into the Revolving Fund, including, but not limited to, all federal grants for capitalization of a state water pollution control revolving fund under the Federal Water Pollution Control Act (the “Clean Water Act”), all repayments of assistance awarded from the Revolving Fund, interest on investments made on money in the Revolving Fund and payments of principal of and interest on loans made from the Revolving Fund; and WHEREAS, the Act provides that funds from the Program shall be disbursed and administered for the purposes set forth in the Clean Water Act and according to rules adopted by the DEQ and the DNRC; and WHEREAS, the current EPA Capitalization Grant (as hereinafter defined) requires that loans under the Program funded in whole or in part by such grant in the aggregate and not on a 196 2 loan-by-loan basis be structured in such a way that a percentage of the total proceeds of such grant be subject to loan forgiveness; and WHEREAS, the City of Bozeman, Montana (the “Borrower”) has applied to the DNRC for the Davis and Norton ABC Loans (as hereinafter defined) from the Revolving Fund to enable the Borrower to finance, refinance or reimburse itself for the costs of the Davis Lift Station and Norton East Project (as hereinafter defined) which will carry out the purposes of the Clean Water Act, to fund the Reserve Account to the Reserve Requirement, and to pay costs of issuance of the Series ABC Bonds (as hereinafter defined); and WHEREAS, the DNRC offered to make loans in the total principal amount of $15,149,000 available to the Borrower, with one loan in the amount of $300,000 contemplated to be forgiven in the event the Borrower satisfies certain conditions; and WHEREAS, the Borrower contemplates issuing bonds in three series, one a Series 2020A Bond in the maximum principal amount of $300,000 (the “Series 2020A Bond”), the second a Series 2020B Bond in the maximum principal amount of $7,786,000 (the “Series 2020B Bond”), and the third a Series C Bond in the maximum principal amount of $7,063,000 (the “Series C Bond”); and WHEREAS, provided that the Borrower complies with certain conditions for principal forgiveness, the Borrower’s obligation to repay the Series 2020A Bond will be forgiven; and WHEREAS, the Borrower is authorized under applicable laws, ordinances and regulations to adopt this Supplemental Resolution and to issue the Series ABC Bonds (as hereinafter defined) to evidence the Davis and Norton ABC Loans (as hereinafter defined) for the purposes set forth herein; and WHEREAS, the DNRC will fund: (i) the 2020A Loan (as hereinafter defined) entirely from proceeds of the EPA Capitalization Grant, (ii) the 2020B Loan and the 20__C Loan (each, as hereinafter defined) in part, directly or indirectly, from proceeds of the EPA Capitalization Grant; in part, directly or indirectly, with proceeds of the State’s General Obligation Bonds (Water 197 3 Pollution Control State Revolving Fund Program); and in part, directly or indirectly, with proceeds of Recycled Money (as hereinafter defined). NOW, THEREFORE, BE IT RESOLVED BY THE CITY COMMISSION OF THE CITY OF BOZEMAN, MONTANA, AS FOLLOWS: ARTICLE I DEFINITIONS, RULES OF CONSTRUCTION AND APPENDICES Section 1.1 Definitions. In this Supplemental Resolution, unless a different meaning clearly appears from the context, the following terms shall have the following meanings: “Accountant” or “Accountants” means an independent certified public accountant or a firm of independent certified public accountants satisfactory to the DNRC. “Acquisition and Construction Account” means the account created in the Sewer System Fund established pursuant to Sections 11.1 and 11.2 of the Original Resolution. “Act” or “State Act” means Montana Code Annotated, Title 75, Chapter 5, Part 11, as amended from time to time. “Administrative Expense Surcharge” has the meaning given such term under the Indenture. “Authorized DNRC Officer” means the Director of the DNRC or his or her designee. “Bond Counsel” means any Counsel nationally recognized as experienced in matters relating to the issuance by states or political subdivisions of tax-exempt obligations selected by the Borrower and acceptable to the DNRC. “Bonds” means the Series 2010B Bond, the Series 2010C Bond, the Series 2010D Bond, the Series 2010F Bond, the Series 2010G Bond, the Series 2010H Bond, the Series 2020B Bond, the Series C Bond, and any additional Bonds to be issued on a parity therewith pursuant to Article X of the Original Resolution, excluding Section 10.4 thereof. “Bonds” does not include the Series 2020A Bond. 198 4 “Borrower” means the City. “Business Day” means any day which is not a Saturday or Sunday, a legal holiday in the State or a day on which banks in the State are authorized or required by law to close. “City” means the City of Bozeman, Montana and its permitted successors or assigns hereunder. “Clean Water Act” means the Federal Water Pollution Control Act, 33 U.S.C. §§ 1251- 1387, as amended, and all regulations, rules and interpretations issued by the EPA thereunder. “Closing” or “Closings” means the date of delivery of the Series 2020A Bond, the Series 2020B Bond, and the Series C Bond to the DNRC. The Borrower expects to deliver the Series 2020A Bond and Series 2020B Bond on the same Closing date, and to deliver the Series C Bond at a later Closing date, following the advance of the full principal amount of the 2020A Loan and the 2020B Loan. “Code” means the Internal Revenue Code of 1986, as amended. “Collateral Documents” means any security agreement, guaranty or other document or agreement delivered to the DNRC securing the obligations of the Borrower under this Supplemental Resolution and the Series ABC Bonds. If no Collateral Documents secure such obligations, any reference to Collateral Documents in this Supplemental Resolution shall be without effect. “Commission” means the City Commission of the City of Bozeman, Montana. “Committed Amount” means the aggregate amount of the Davis and Norton ABC Loans committed to be lent by the DNRC to the Borrower pursuant to Section 4.1 of this Supplemental Resolution, as such amount may be reduced pursuant to Sections 3.2 and 3.4 of this Supplemental Resolution. “Compliance Certificate and Request” means the certificate and request substantially in the form of the attached Appendix D delivered to the DNRC by the Borrower following the final 199 5 advance of principal of the 2020A Loan, to be completed, executed and delivered by the Borrower to the DNRC pursuant to Section 5.1.2 of this Supplemental Resolution. “Consultant” means a nationally recognized consultant or firm of consultants, or an independent engineer or firm of independent engineers, or an Accountant, which in any case is qualified and has skill and experience in the preparation of financial feasibility studies or projections for facilities similar to the System or the applicable Project, selected by the Borrower and satisfactory to the DNRC. “Counsel” means an attorney duly admitted to practice law before the highest court of any state and satisfactory to the DNRC. “Davis and Norton ABC Loans” or “Loan” means, collectively, the 2020A Loan, the 2020B Loan, and the 20__C Loan made to the Borrower by the DNRC pursuant to the Program in the maximum amount of the Committed Amount to provide funds to pay all or a portion of the costs of the Davis Lift Station and Norton East Project, to fund the Reserve Account to the Reserve Requirement, and to pay costs of issuance of the Series ABC Bonds. “Davis Lift Station and Norton East Project” means the designing, engineering, and construction of the facilities, improvements and activities financed, refinanced or the cost of which is being financed by or reimbursed to the Borrower with proceeds of the Davis and Norton ABC Loans, described in Appendix A hereto. “Debt” means, without duplication, in respect of the System, (1) indebtedness of the Borrower for borrowed money or for the deferred purchase price of property or services; (2) the obligation of the Borrower as lessee under leases which should be recorded as capital leases under generally accepted accounting principles; and (3) obligations of the Borrower under direct or indirect guarantees in respect of, and obligations (contingent or otherwise) to purchase or otherwise acquire, or otherwise to assure a creditor against loss in respect of, indebtedness or obligations of others of the kinds referred to in clause (1) or (2) above. 200 6 “DEQ” means the Department of Environmental Quality of the State of Montana, an agency of the State, or any successor to its powers, duties and obligations under the Act or the EPA Agreements. “Determination Statement” means a Forgiveness Statement or a Noncompliance Statement. “DNRC” means the Department of Natural Resources and Conservation of the State of Montana, an agency of the State, and any successor to its powers, duties and obligations under the State Act. “Enabling Act” means Montana Code Annotated, Title 7, Chapter 7, Parts 44 and 45, as heretofore and hereafter amended or supplemented. “EPA” means the Environmental Protection Agency, an agency of the United States of America, and any successor to its functions under the Clean Water Act. “EPA Agreements” means all capitalization grant agreements and other written agreements between the DEQ, the DNRC and the EPA concerning the Program. “EPA Capitalization Grant” means a grant of funds to the State by the EPA under Title VI of the Clean Water Act and any grant made available by the EPA for deposit in the Revolving Fund pursuant to Section 205(m) of the Clean Water Act. “Estimated Completion Date” means June 30, 2021, the date by which it is estimated by the Borrower that the Davis Lift Station and Norton East Project will be substantially completed. “Forgiveness Statement” means a written statement delivered to the Borrower by the DNRC in response to a Compliance Certificate and Request that the Borrower’s obligation to repay the principal of the Series 2020A Bond is forgiven. “Fund” means the Sewer System Fund established pursuant to Section 11.1 of the Original Resolution. 201 7 “Governmental Unit” means governmental unit as such term is used in Section 145(a) of the Code. “Indenture” means the Indenture of Trust, dated as of June 1, 1991, between the Board of Examiners of the State and the Trustee, as such may be supplemented or amended from time to time in accordance with the provisions thereof, pursuant to which, among other things, the State Bonds are to be or have been issued. “Loan Loss Reserve Surcharge” has the meaning given such term under the Indenture. “Loan Repayments” means periodic installments of principal and interest by Borrower in repayment of the Series 2020B Bond and Series C Bond, and, if the DNRC delivers a Noncompliance Statement, of the Series 2020A Bond, at the rates and times specified in Article V. “Net Revenues” means the entire amount of the gross revenues of the System (as described in Section 11.1 of the Original Resolution) remaining upon each such monthly apportionment, after crediting to the Operating Account the amount required by the Resolution, including sums required to maintain the Operating Reserve in the minimum amount required by Section 11.3 of the Original Resolution. “Noncompliance Statement” means a written statement delivered to the Borrower by the DNRC that the Borrower’s obligation to repay the principal of the Series 2020A Bond is not forgiven. “Operating Account” means the account created in the Sewer System Fund established pursuant to Sections 11.1 and 11.3 of the Original Resolution. “Opinion of Bond Counsel” means a written opinion of Bond Counsel. “Original Resolution” means Resolution No. 4220 of the Borrower adopted on November 16, 2009. “Payment Date” means, with respect the 2020B Loan and the 20__C Loan, each January 1 and July 1 during the term of the 2020B Loan and the 20__C Loan on which a payment of interest 202 8 or principal and interest is due, as determined under this Supplemental Resolution, and, if a Noncompliance Statement is delivered with respect to the 2020A Loan, each January 1 and July 1 during the term of the 2020A Loan on which a payment of interest or principal and interest is due, as determined under this Supplemental Resolution. “Person” means any Private Person or Public Entity. “Private Person” means an individual, corporation, partnership, association, joint venture, joint stock company or unincorporated organization, except a Public Entity. “Program” means the Water Pollution Control State Revolving Fund Program established by the State Act. “Project” means an improvement, betterment, reconstruction or extension of the System, including the Davis Lift Station and Norton East Project. “Public Entity” means a State agency, city, town, county, irrigation district, drainage district, county water and sewer district, a soil conservation district, political or administrative subdivision of State government or other public body established by State law or an Indian tribe that has a federally recognized governing body carrying out substantial governmental duties and powers over any area. “Recycled Money” means payments and prepayments of principal of loans made under the Program, and any other amounts transferred to the Principal Subaccount in the Revenue Subaccount in the State Allocation Account (as such terms are defined in the Indenture). “Registrar” means, with respect to the Series ABC Bonds, the City Finance Director or any successor appointed pursuant to this Supplemental Resolution, and, with respect to any other series of Bonds, the Person or Persons designated by or pursuant to this Supplemental Resolution or a Supplemental Resolution to receive and disburse the principal of, premium, if any, and interest on the Bonds on behalf of the Borrower and to hold and maintain the Bond Register. 203 9 “Regulations” means the Treasury Department, Income Tax Regulations, as amended or any successor regulation thereto, promulgated under the Code or otherwise applicable to the Series ABC Bonds. “Replacement and Depreciation Account” means the account created in the Sewer System Fund established pursuant to Sections 11.1 and 11.6 of the Original Resolution. “Reserve Account” means the account created in the Sewer System Fund established pursuant to Sections 11.1 and 11.5 of the Original Resolution. “Reserve Requirement” means, as of the date of calculation, an amount equal to one-half the sum of the highest amount of principal and interest payable on all outstanding Bonds in any one future fiscal year (giving effect to mandatory sinking fund redemption, if any). “Resolution” means the Original Resolution, as amended and supplemented by Resolution Nos. 4234, 4245, 4254, 4299, and 4462, adopted on January 19, 2010, February 16, 2010, May 3, 2010, November 1, 2010, and August 5, 2013, respectively; as further amended and supplemented by this Supplemental Resolution; and as it may be further amended and supplemented. “Revenue Bond Account” means the account created in the Sewer System Fund established pursuant to Sections 11.1 and 11.4 of the Original Resolution. “Revolving Fund” shall have the meaning set forth in the recitals hereof. “Series 2010B Bond” means the Borrower’s Sewer System Revenue Bond (DNRC Water Pollution Control State Revolving Loan Program), Series 2010B, issued to the DNRC pursuant to the Resolution, as then in effect. “Series 2010C Bond” means the Borrower’s First Amended and Restated Sewer System Revenue Bond (DNRC Water Pollution Control State Revolving Loan Program), Series 2010C, issued to the DNRC pursuant to the Resolution, as then in effect. “Series 2010D Bond” means the Borrower’s First Amended and Restated Sewer System Revenue Bond (DNRC Water Pollution Control State Revolving Loan Program), Series 2010D, issued to the DNRC pursuant to the Resolution, as then in effect. 204 10 “Series 2010F Bond” means the Borrower’s First Amended and Restated Sewer System Revenue Bond (DNRC Water Pollution Control State Revolving Loan Program), Series 2010F, issued to the DNRC pursuant to the Resolution, as then in effect. “Series 2010G Bond” means the Borrower’s First Amended and Restated Sewer System Revenue Bond (DNRC Water Pollution Control State Revolving Loan Program), Series 2010G, issued to the DNRC pursuant to the Resolution, as then in effect. “Series 2010H Bond” means the Borrower’s First Amended and Restated Sewer System Revenue Bond (DNRC Water Pollution Control State Revolving Loan Program), Series 2010H, issued to the DNRC pursuant to the Resolution, as then in effect. “Series 2020A Bond” means the $300,000 Subordinate Lien Sewer System Revenue Bond (DNRC Water Pollution Control State Revolving Loan Program), Taxable Series 2020A, issued to the DNRC to evidence the 2020A Loan. “Series 2020B Bond” means the $7,786,000 Sewer System Revenue Bond (DNRC Water Pollution Control State Revolving Loan Program), Series 2020B, issued to the DNRC to evidence the 2020B Loan. “Series C Bond” means the $7,063,000 Sewer System Revenue Bond (DNRC Water Pollution Control State Revolving Loan Program), Series C, to be issued to the DNRC to evidence the 20__C Loan. The series designation for the Series C Bond shall be completed with the calendar year in which the Series C Bond is issued, expected to be late in calendar year 2020 or early in calendar year 2021, may or may not contain a “C,” and the final designation will be set forth on the face page of the form of the Series C Bond. “Series ABC Bonds” means, collectively, the Series 2020A Bond, the Series 2020B Bond, and the Series C Bond. “Sewer System Fund” means the fund created by Section 11.1 of the Original Resolution. “State” means the State of Montana. 205 11 “State Bonds” means the State’s General Obligation Bonds (Water Pollution Control State Revolving Fund Program), issued or to be issued pursuant to the Indenture. “Subordinate Obligations” means the Series 2020A Bond, and any other subordinate obligations issued under Section 10.4 of the Original Resolution “Supplemental Resolution” means this Resolution No. _____ of the Borrower adopted on June 15, 2020. “Surplus Account” means the account created in the Sewer System Fund established pursuant to Sections 11.1 and 11.7 of the Original Resolution. “Surplus Net Revenues” means that portion of the Net Revenues in excess of the current requirements of the Operating Account, the Revenue Bond Account and the Reserve Account. “System” means the existing sewer system of the Borrower and all extensions, improvements and betterments thereof hereafter constructed and acquired, including, without limitation, the Davis Lift Station and Norton East Project. “Trustee” means U.S. Bank National Association, in Seattle, Washington, or any successor trustee under the Indenture. “2020A Committed Amount” means the amount of the 2020A Loan committed to be lent by the DNRC to the Borrower pursuant to Section 4.1 of this Supplemental Resolution, as such amount may be reduced pursuant to Section 3.2 and Section 3.4 of this Supplemental Resolution. “2020B Committed Amount” means the amount of the 2020B Loan committed to be lent by the DNRC to the Borrower pursuant to Section 4.1 of this Supplemental Resolution, as such amount may be reduced pursuant to Section 3.2 and Section 3.4 of this Supplemental Resolution. “20__C Committed Amount” means the amount of the 20__C Loan committed to be lent by the DNRC to the Borrower pursuant to Section 4.1 of this Supplemental Resolution, as such amount may be reduced pursuant to Section 3.2 and Section 3.4 of this Supplemental Resolution. 206 12 “2020B First Advance” means the first advance of funds of the Davis and Norton ABC Loans from the proceeds of the 2020B Loan by the DNRC to the Borrower in an amount of at least $50,001. “20__C First Advance” means the first advance of funds of the 20__C Loan by the DNRC to the Borrower in an amount of at least $50,001. “2020A Loan” means the loan made to the Borrower by the DNRC pursuant to the Program in the maximum amount of the 2020A Committed Amount to provide funds to pay a portion of the costs of the Davis Lift Station and Norton East Project payable under the Program. “2020B Loan” means the loan made to the Borrower by the DNRC pursuant to the Program in the maximum amount of the 2020B Committed Amount to provide funds to pay a portion of the costs of the Davis Lift Station and Norton East Project payable under the Program, to fund deposits to the Reserve Account, and to pay a portion of the costs of issuance of the Series ABC Bonds. “20__C Loan” means the loan made to the Borrower by the DNRC pursuant to the Program in the maximum amount of the 20__C Committed Amount to provide funds to pay a portion of the costs of the Davis Lift Station and Norton East Project payable under the Program, to fund deposits to the Reserve Account, and to pay a portion of the costs of issuance of the Series ABC Bonds. “Undisbursed Committed Amount” means any undisbursed Committed Amount which is not required to pay costs of the Davis Lift Station and Norton East Project as provided in Section 3.4 of this Supplemental Resolution. Section 1.2 Other Rules of Construction. For all purposes of this Supplemental Resolution, except where the context clearly indicates otherwise: (a) All accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted government accounting standards. (b) Terms in the singular include the plural and vice versa. (c) All references to time shall refer to Helena, Montana time, unless otherwise provided herein. 207 13 (d) All references to mail shall refer to first-class mail postage prepaid. (e) Words of the masculine gender shall be deemed and construed to include correlative words of the feminine and neuter genders. (f) “Or” is not exclusive, but is intended to permit or encompass one, more or all of the alternatives conjoined. Section 1.3 Appendices. Attached to this Supplemental Resolution and hereby made a part hereof are the following Appendices: Appendix A: a description of the Davis Lift Station and Norton East Project and estimated budget for the Davis Lift Station and Norton East Project; Appendix B-1: the form of the Series 2020A Bond; Appendix B-2: the form of the Series 2020B Bond; Appendix B-3: the form of the Series C Bond; Appendix C: additional agreements and representations of the Borrower; and Appendix D: Compliance Certificate and Request. ARTICLE II AUTHORIZATION, FINDINGS, REPRESENTATIONS AND COVENANTS Section 2.1 Authorization and Findings. (a) Authorization. Under the provisions of the Enabling Act, the Borrower is authorized to issue and sell its revenue bonds payable during a term not exceeding forty years from their date of issue, to provide funds for the reconstruction, improvement, betterment and extension of the System or to refund its revenue bonds issued for such purpose; provided that the bonds and the interest thereon are to be payable solely out of the net income and revenues to be derived from rates, fees and charges for the services, facilities and commodities furnished by the undertaking, 208 14 and are not to create any obligation for the payment of which taxes may be levied except to pay for services provided by the undertaking to the Borrower. (b) The System. The Borrower, pursuant to the Enabling Act and other laws of the State, has established and presently owns and operates the System. (c) The Davis Lift Station and Norton East Project. After investigation of the facts and as authorized by the Enabling Act, this Commission has determined it to be necessary and desirable and in the best interests of the Borrower to acquire and construct the Davis Lift Station and Norton East Project. (d) Outstanding Bonds. Pursuant to the Enabling Act and the Resolution, the Borrower has issued, and has outstanding its Series 2010B Bond, Series 2010C Bond, Series 2010D Bond, Series 2010F Bond, Series 2010G Bond, and Series 2010H Bond. The Series 2010B Bond, the Series 2010C Bond, the Series 2010D Bond, the Series 2010F Bond, the Series 2010G Bond, and the Series 2010H Bond are parity bonds payable from Net Revenues of the System. No other bonds or indebtedness are outstanding that are payable from or secured by revenues of the System. (e) Additional Bonds. The Borrower reserved the right under Section 10.3 of the Original Resolution, as amended by this Supplemental Resolution, to issue additional Bonds payable from the Revenue Bond Account of the Fund on a parity as to both principal and interest with the outstanding Bonds, if the Net Revenues of the System for the last complete fiscal year preceding the date of issuance of such additional Bonds have equaled at least 110% of the maximum amount of principal and interest payable from the Revenue Bond Account in any subsequent fiscal year during the term of the outstanding Bonds, on all Bonds then outstanding and on the additional Bonds proposed to be issued. For the purpose of the foregoing computation, the Net Revenues for the fiscal year preceding the issuance of the additional Bonds shall be those shown by the financial reports caused to be prepared by the Borrower pursuant to the Original Resolution, except that if the rates and charges for services provided by the System or finally authorized to go into effect within 60 days after the issuance of the additional Bonds have been changed since the beginning of such preceding fiscal year, then the rates and charges in effect at the time of issuance of the additional Bonds (or within 60 days thereafter) shall be applied to the quantities of service actually rendered and made available during such preceding 209 15 fiscal year to ascertain the gross revenues, from which there shall be deducted to determine the Net Revenues, the actual operation and maintenance cost plus any additional annual costs of operation and maintenance the Consultant estimates will be incurred because of the improvement or extension of the System to be constructed from the proceeds of the additional Bonds proposed to be issued. In no event shall any additional Bonds be issued and made payable from the Revenue Bond Account if the Borrower is then in default in any payment of principal of or interest on any outstanding Bonds payable therefrom, or if there then exists any deficiency in the balances required by the Original Resolution to be maintained in any of the accounts of the Fund, which will not be cured or restored upon the issuance of the additional Bonds. It is hereby determined that the Borrower is authorized to issue $14,849,000 in aggregate principal amount of additional Bonds pursuant to Section 10.3 of the Original Resolution, as amended, payable from and secured by the Net Revenues on a parity with the outstanding Series 2010B Bond, Series 2010C Bond, Series 2010D Bond, Series 2010F Bond, Series 2010G Bond, and Series 2010H Bond, , and the Mayor, City Manager and City Finance Director are authorized and directed to sign a certificate confirming such determination. For purposes of the foregoing computations, principal of and interest on the 2020A Loan are disregarded. The Borrower acknowledges and agrees that if a Noncompliance Certificate is delivered, then principal and interest will become due and owing on the Series 2020A Bond as provided in Section 5.1 of this Supplemental Resolution, and the Borrower shall thereupon, and in any event no later than three (3) months after delivery of a Noncompliance Statement, to the extent required by Section 6.7 of the Original Resolution, as amended by this Supplemental Resolution, adjust its schedule of fees, rates, and charges applicable to the System to cause Net Revenues and Surplus Net Revenues to be produced in an amount at least equal to that required by this Supplemental Resolution. (f) No Administrative Expense Surcharge or Loan Loss Reserve Surcharge. The DNRC has determined that in connection with the sound and prudent management of the Program, there is no need for an Administrative Expense Surcharge or Loan Loss Reserve Surcharge, and that instead of such surcharges, the interest rate on the Davis and Norton ABC Loans is 2.50% per annum. 210 16 Section 2.2 Representations. The Borrower represents as follows: (a) Organization and Authority. The Borrower: (1) is duly organized and validly existing as a municipal corporation and political subdivision of the State; (2) has all requisite power and authority and all necessary licenses and permits required as of the date hereof to own and operate the System and to carry on its current activities with respect to the System, to adopt this Supplemental Resolution and to enter into the Collateral Documents and to issue the Series ABC Bonds and to carry out and consummate all transactions contemplated by this Supplemental Resolution, the Series ABC Bonds and the Collateral Documents; (3) is a Governmental Unit and a Public Entity; and (4) has taken all proper action to authorize the execution, delivery and performance of its obligations under this Supplemental Resolution, the Series ABC Bonds and the Collateral Documents and the incurrence of the Debt evidenced by the Series ABC Bonds in the maximum amount of the Committed Amount. (b) Litigation. There is no litigation or proceeding pending, or to the knowledge of the Borrower threatened, against or affecting the Borrower in any court or before or by any governmental authority or arbitration board or tribunal that, if adversely determined, would materially and adversely affect the existence, corporate or otherwise, of the Borrower, or the ability of the Borrower to make all payments and otherwise perform its obligations under this Supplemental Resolution, the Series ABC Bonds and the Collateral Documents, or the financial condition of the Borrower, or the transactions contemplated by this Supplemental Resolution, the Series ABC Bonds and the Collateral Documents or the validity and enforceability of this Supplemental Resolution, the Series ABC Bonds and the Collateral Documents. No referendum petition has been filed with respect to any resolution or other action of the Borrower relating to the Davis Lift Station and Norton East Project, the Series ABC Bonds or any Collateral Documents 211 17 and the period for filing any such petition will have expired before issuance of the Series ABC Bonds. (c) Borrowing Legal and Authorized. The adoption of this Supplemental Resolution, the execution and delivery of the Series ABC Bonds and the Collateral Documents and the consummation of the transactions provided for in this Supplemental Resolution, the Series ABC Bonds and the Collateral Documents and compliance by the Borrower with the provisions of this Supplemental Resolution, the Series ABC Bonds and the Collateral Documents: (1) are within the powers of the Borrower and have been duly authorized by all necessary action on the part of the Borrower; and (2) do not and will not result in any breach of any of the terms, conditions or provisions of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Borrower pursuant to any ordinance, resolution, indenture, loan agreement or other agreement or instrument (other than this Supplemental Resolution and any Collateral Documents) to which the Borrower is a party or by which the Borrower or its property may be bound, nor will such action result in any violation of the provisions of any charter or similar document, if applicable, any laws, ordinances, governmental rules or regulations or court or other governmental orders to which the Borrower, its properties or operations are subject. (d) No Defaults. No event has occurred and no condition exists that, upon execution and delivery of the Series ABC Bonds and the Collateral Documents, would constitute a default under this Supplemental Resolution or the Collateral Documents. The Borrower is not in violation of any term of any agreement, bond resolution, trust indenture, charter or other instrument to which it is a party or by which it or its property may be bound which violation would materially and adversely affect the transactions contemplated hereby or the compliance by the Borrower with the terms hereof or of the Series ABC Bonds and the Collateral Documents. (e) Governmental Consent. The Borrower has obtained or made all permits, findings and approvals required to the date of adoption of this Supplemental Resolution by any governmental body or officer for the making and performance by the Borrower of its obligations under this 212 18 Supplemental Resolution, the Series ABC Bonds and the Collateral Documents (including any necessary sewer rate increase) or for the Davis Lift Station and Norton East Project, the financing or refinancing thereof or the reimbursement of the Borrower for costs thereof. No consent, approval or authorization of, or filing, registration or qualification with, any governmental authority (other than those, if any, already obtained) is required on the part of the Borrower as a condition to adopting this Supplemental Resolution, issuing the Series ABC Bonds or entering into the Collateral Documents and the performance of the Borrower’s obligations hereunder and thereunder. (f) Binding Obligation. This Supplemental Resolution, the Series ABC Bonds and any Collateral Documents to which the Borrower is a party are the valid and binding special, limited obligations and agreements of the Borrower, enforceable against the Borrower in accordance with their terms, except to the extent that the enforceability thereof may be limited by laws relating to bankruptcy, moratorium, reorganization, insolvency or similar laws affecting creditors’ rights and general principles of equity. (g) The Davis Lift Station and Norton East Project. The Davis Lift Station and Norton East Project consists and will consist of the facilities, improvements and activities described in Appendix A, as such Appendix A may be amended from time to time in accordance with Article III of this Supplemental Resolution. (h) Full Disclosure. There is no fact that the Borrower has not specifically disclosed in writing to the DNRC that materially and adversely affects or (so far as the Borrower can now foresee), except for pending or proposed legislation or regulations that are a matter of general public information, that will materially and adversely affect the properties, operations and finances of the System, the Borrower’s status as a Public Entity and Governmental Unit, its ability to own and operate the System in the manner currently operated or the Borrower’s ability to perform its obligations under this Supplemental Resolution, the Series ABC Bonds and the Collateral Documents and to pledge any revenues or other property pledged to the payment of the Series ABC Bonds. (i) Compliance With Law. The Borrower: 213 19 (1) is in compliance with all laws, ordinances, governmental rules and regulations and court or other governmental orders, judgments and decrees to which it is subject and which are material to the properties, operations and finances of the System or its status as a Public Entity and Governmental Unit; and (2) has obtained all licenses, permits, franchises or other governmental authorizations necessary to the ownership of the System and the operation thereof and agrees to obtain all such licenses, permits, franchises or other governmental authorizations as may be required in the future for the System and the operation thereof, which failure to obtain might materially and adversely affect the ability of the Borrower to conduct the operation of the System as presently conducted or the condition (financial or otherwise) of the System or the Borrower’s ability to perform its obligations under this Supplemental Resolution, the Series ABC Bonds and the Collateral Documents. Section 2.3 Covenants. (a) Insurance. In addition to the requirements of Section 2.2 of the Original Resolution, the Borrower at all times shall keep and maintain with respect to the System property and casualty insurance and liability insurance with financially sound and reputable insurers, or self-insurance as authorized by State law, against such risks and in such amounts, and with such deductible provisions, as are customary in the State in the case of entities of the same size and type as the Borrower and similarly situated and shall carry and maintain, or cause to be carried and maintained, and pay or cause to be paid timely the premiums for all such insurance. All such insurance policies shall name the DNRC as an additional insured to the extent permitted under the policy or program of insurance of the Borrower. Each policy must provide that it cannot be cancelled by the insurer without giving the Borrower and the DNRC 30 days’ prior written notice. The Borrower shall give the DNRC prompt notice of each insurance policy it obtains or maintains to comply with this Section 2.3(a) and of each renewal, replacement, change in coverage or deductible under or amount of or cancellation of each such insurance policy and the amount and coverage and deductibles and carrier of each new or replacement policy. Such notice shall specifically note any adverse change as being an adverse change. The Borrower shall deliver to the DNRC at Closing a certificate providing the information required by this Section 2.3(a). 214 20 (b) Right of Inspection and Notice of Change of Location. The DNRC, the DEQ and the EPA and their designated agents shall have the right at all reasonable times during normal business hours and upon reasonable notice to enter into and upon the property of the Borrower for the purpose of inspecting the System or any or all books and records of the Borrower relating to the System. (c) Further Assurance. The Borrower shall execute and deliver to the DNRC all such documents and instruments and do all such other acts and things as may be necessary or required by the DNRC to enable the DNRC to exercise and enforce its rights under this Supplemental Resolution, the Series ABC Bonds and the Collateral Documents and to realize thereon, and record and file and re-record and refile all such documents and instruments, at such time or times, in such manner and at such place or places, all as may be necessary or required by the DNRC to validate, preserve and protect the position of the DNRC under this Supplemental Resolution, the Series ABC Bonds and the Collateral Documents. (d) Maintenance of Security, if Any; Recordation of Interest. (1) The Borrower shall, at its expense, take all necessary action to maintain and preserve the lien and security interest of this Supplemental Resolution and the Collateral Documents so long as any amount is owing under this Supplemental Resolution or the Series ABC Bonds; (2) The Borrower shall forthwith, after the execution and delivery of the Series ABC Bonds and thereafter from time to time, cause this Supplemental Resolution and any Collateral Documents granting a security interest in revenues or real or personal property and any financing statements or other notices or documents relating thereto to be filed, registered and recorded in such manner and in such places as may be required by law in order to perfect and protect fully the lien and security interest hereof and thereof and the security interest in them granted by this Supplemental Resolution and, from time to time, shall perform or cause to be performed any other act required by law, including executing or causing to be executed any and all required continuation statements and shall execute or cause to be executed any further instruments that may be requested by the DNRC for such perfection and protection; and 215 21 (3) Except to the extent it is exempt therefrom, the Borrower shall pay or cause to be paid all filing, registration and recording fees incident to such filing, registration and recording, and all expenses incident to the preparation, execution and acknowledgment of the documents described in subparagraph (2), and all federal or state fees and other similar fees, duties, imposts, assessments and charges arising out of or in connection with the execution and delivery of the Series ABC Bonds and the Collateral Documents and the documents described in subparagraph (2). (e) Additional Agreements. The Borrower covenants to comply with all representations, covenants, conditions and agreements, if any, set forth in Appendix C hereto. (f) Financial Information. This Section 2.3(f) supplements, and is not intended to limit, the requirements in Section 2.2(f) of the Original Resolution, as amended by this Supplemental Resolution. The Borrower agrees that for each fiscal year it shall furnish to the DNRC and the DEQ, promptly when available: (1) the preliminary budget for the System, with items for the Davis Lift Station and Norton East Project shown separately; and (2) when adopted, the final budget for the System, with items for the Davis Lift Station and Norton East Project shown separately. (g) Project Accounts. The Borrower shall maintain Davis Lift Station and Norton East Project accounts in accordance with generally accepted government accounting standards, and as separate accounts, as required by Section 602(b)(9) of the Clean Water Act. (h) Records. After reasonable notice from the EPA or the DNRC, the Borrower shall make available to the EPA or the DNRC such records as the EPA or the DNRC reasonably requires to review and determine compliance with the Clean Water Act, as provided in Section 606(e) of the Clean Water Act. (i) Compliance with Clean Water Act. The Borrower has complied and shall comply with all conditions and requirements of the Clean Water Act pertaining to the Davis and Norton ABC Loans and the Davis Lift Station and Norton East Project. 216 22 (j) Program Covenant. The Borrower agrees that neither it nor any “related person” to the Borrower (within the meaning of Section 147(a)(2) of the Code) shall, whether pursuant to a formal or informal arrangement, acquire bonds issued by the State under the Indenture in an amount related to the amount of the Series ABC Bonds. Section 2.4 Covenants Relating to the Tax-Exempt Status of the State Bonds. (a) The Borrower covenants and agrees that it will not use or permit to be used any of the proceeds of the Series ABC Bonds or any other funds of the Borrower in respect of the Davis Lift Station and Norton East Project or the Series ABC Bonds, directly or indirectly, in a manner that would cause, or take any other action that would cause, any State Bond to be an “arbitrage bond” within the meaning of Section 148 of the Code or would otherwise cause the interest on the State Bonds to be included in gross income for purposes of federal income taxation. (b) The Borrower agrees that it will not enter into, or allow any “related person” (as defined in Section 147(a)(2) of the Code) to enter into, any arrangement, formal or informal, for the purchase of the State Bonds or any other obligations of the DNRC in an amount related to the amount of the Davis and Norton ABC Loans or the portion of the Davis and Norton ABC Loans derived directly or indirectly from proceeds of the State Bonds or that would otherwise cause any State Bond to be an “arbitrage bond” within the meaning of Section 148 of the Code. (c) The Borrower shall not use or permit the use of the Davis Lift Station and Norton East Project directly or indirectly in any trade or business carried on by any Person who is not a Governmental Unit. For the purpose of this subparagraph, use as a member of the general public (within the meaning of the Regulations) shall not be taken into account and any activity carried on by a Person other than a natural person shall be treated as a trade or business. (d) Any portion of the Davis Lift Station and Norton East Project being refinanced or the cost of which is being reimbursed was acquired by and is now and shall, during the term of the Davis and Norton ABC Loans, be owned by the Borrower and not by any other Person. Any portion of the Davis Lift Station and Norton East Project being financed shall be acquired by and shall, during the term of the Davis and Norton ABC Loans, be owned by the Borrower and not by any other Person. Notwithstanding the previous two sentences, the Borrower may transfer the 217 23 Davis Lift Station and Norton East Project or a portion thereof to another Governmental Unit which is also a Public Entity if such transfer is otherwise permitted under the Resolution and if such organization agrees with the DNRC to comply with Section 2.3(h), Section 2.3(i) and Section 2.4 of this Supplemental Resolution and if the DNRC receives an Opinion of Bond Counsel that such transfer will not violate the Act or the Clean Water Act or adversely affect the exclusion of interest on the State Bonds from gross income or purposes of federal income taxation. In addition, except as otherwise provided in the Resolution or in any Collateral Documents, the Borrower may sell or otherwise dispose of any portion of the Davis Lift Station and Norton East Project which has become obsolete or outmoded or is being replaced or for other reasons is not needed by the Borrower or beneficial to the general public or necessary to carry out the purposes of the Clean Water Act. (e) At the Closing of the Davis and Norton ABC Loans, the DNRC will, if necessary to obtain the Opinion of Bond Counsel described in Section 7.05(a) of the Indenture, deliver to the Borrower instructions concerning compliance by the Borrower with the arbitrage rebate requirements of Section 148 of the Code (the “Arbitrage Rebate Instructions”). The Borrower shall comply with the Arbitrage Rebate Instructions, if any, delivered to it by the DNRC at Closing, as such Instructions may be amended or replaced by the DNRC from time to time. The Arbitrage Rebate Instructions may be amended or replaced by new Arbitrage Rebate Instructions delivered by the DNRC and accompanied by an Opinion of Bond Counsel to the effect that the use of said amended or new Arbitrage Rebate Instructions will not adversely affect the excludability of interest on the State Bonds or any Additional State Bonds (except State Bonds the interest on which the State did not intend to be excluded from gross income for federal income tax purposes) from gross income of the recipients thereof for federal income tax purposes. (f) The Borrower agrees that during the term of the Davis and Norton ABC Loans it will not contract with or permit any Private Person to manage the Davis Lift Station and Norton East Project or any portion thereof except according to a written management contract and upon delivery to the DNRC of an Opinion of Bond Counsel to the effect that the execution and delivery of such management contract will not violate the State Act or the Clean Water Act or adversely affect the exclusion of interest on State Bonds from gross income or purposes of federal income taxation. 218 24 (g) The Borrower may not lease the Davis Lift Station and Norton East Project or any portion thereof to any Person other than a Nonexempt Person which agrees in writing with the Borrower and the State not to cause any default to occur under the Resolution; provided the Borrower may lease all or any portion of the Davis Lift Station and Norton East Project to a Nonexempt Person pursuant to a lease which in the Opinion of Bond Counsel delivered to the DNRC will not cause the interest on the State Bonds to be included in gross income for purposes of federal income taxation. (h) The Borrower shall not change the use or nature of the Davis Lift Station and Norton East Project if (i) such change will violate the Clean Water Act, or (ii) so long as the State Bonds are outstanding unless, in the Opinion of Bond Counsel delivered to the DNRC, such change will not result in the inclusion in gross income of interest on the State Bonds for federal income tax purposes. (i) In the event the State Bonds are refunded by bonds which are not State Bonds, all references in this Supplemental Resolution to State Bonds shall be deemed to refer to such refunding bonds (together, the “Refunding Bonds”) or, in the case of a crossover refunding, to the State Bonds and the Refunding Bonds. In the event the State Bonds are refunded by an issue of Additional State Bonds, all references in the Resolution to the State Bonds shall be deemed to refer to such Additional State Bonds or, in the case of a crossover refunding, both the State Bonds and such Additional State Bonds. Section 2.5 Maintenance of System; Liens. The Borrower shall maintain the System, including the Davis Lift Station and Norton East Project, in good condition and make all necessary renewals, replacements, additions, betterments and improvements thereto. The Borrower shall not grant or permit to exist any lien on the Davis Lift Station and Norton East Project or any other property making up part of the System, other than liens securing Debt where a parity or senior lien secures the Series ABC Bonds; provided that this Section 2.5 shall not be deemed to be violated if a mechanic’s or contractor’s lien is filed against any such property so long as the Borrower uses its best efforts to obtain the discharge of such lien and promptly reports to the DNRC the filing of such lien and the steps it plans to take and does take to discharge of such lien. 219 25 Section 2.6 Maintenance of Existence; Merger, Consolidation, Etc.; Disposition of Assets. The Borrower shall maintain its corporate existence, except that it may consolidate with or merge into another Governmental Unit or permit one or more Governmental Units to consolidate with or merge into it or may transfer all or substantially all of its assets to another Governmental Unit and then dissolve if the surviving, resulting or transferee entity (if other than the Borrower) (i) is a Public Entity and (ii) assumes in writing all of the obligations of the Borrower under the Resolution, the Series ABC Bonds and the Collateral Documents, and (a) such action does not result in any default in the performance or observance of any of the terms, covenants or agreements of the Borrower under the Resolution, the Series ABC Bonds and the Collateral Documents, (b) such action does not violate the State Act or the Clean Water Act and does not adversely affect the exclusion of interest on the Series ABC Bonds or the State Bonds from gross income for federal income tax purposes and (c) the Borrower delivers to the DNRC on the date of such action an Opinion of Bond Counsel that such action complies with this Section 2.6. Other than pursuant to the preceding paragraph, the Borrower shall not transfer the System or any portion thereof to any other Person, except for property which is obsolete, outmoded, worn out, is being replaced or otherwise is not needed for the operation of the System, unless the provisions of (a) and (b) of the preceding paragraph are satisfied and the Borrower delivers to the DNRC an Opinion of Bond Counsel to that effect and, in addition, the DNRC consents to such transfer. ARTICLE III USE OF PROCEEDS; THE 2020 DAVIS LIFT STATION AND NORTON EAST PROJECTS Section 3.1 Use of Proceeds. The Borrower shall apply the proceeds of the Davis and Norton ABC Loans from the DNRC solely as follows: (a) The Borrower shall apply the proceeds of the Davis and Norton ABC Loans solely to the financing, refinancing or reimbursement of costs of the Davis Lift Station and Norton East Project, to fund deposits to the Reserve Account, and to pay costs of issuance of the Series ABC Bonds as set forth in Appendix A hereto and this Section 3.1. The Davis and Norton ABC Loans will be disbursed in accordance with Article IV hereof and Article VII of the Indenture. If the 220 26 Davis Lift Station and Norton East Project has not been completed prior to Closing, the Borrower shall, as quickly as reasonably possible, complete the Davis Lift Station and Norton East Project and expend proceeds of the Davis and Norton ABC Loans to pay costs of completing the Davis Lift Station and Norton East Project. (b) No portion of the proceeds of the Davis and Norton ABC Loans shall be used to reimburse the Borrower for costs paid prior to the date of adoption of this Supplemental Resolution of a Project the construction or acquisition of which occurred or began earlier than March 7, 1985. In addition, if any proceeds of the Davis and Norton ABC Loans are to be used to reimburse the Borrower for costs of the Davis Lift Station and Norton East Project paid prior to the date of adoption of this Supplemental Resolution, the Borrower shall have complied with Section 1.150- 2 of the Regulations in respect of such costs. (c) Any Debt to be refinanced with proceeds of the Davis and Norton ABC Loans was incurred after March 7, 1985, or with respect to a Project the construction or acquisition of which began after March 7, 1985. No proceeds of the Davis and Norton ABC Loans shall be used for the purpose of refinancing an obligation the interest on which is exempt from federal income tax or excludable from gross income for purposes of federal income taxation unless the DNRC has received an Opinion of Bond Counsel, satisfactory to it, to the effect that such refinancing will not adversely affect the exclusion of interest on the State Bonds from gross income for purposes of federal income taxation. Section 3.2 The Davis Lift Station and Norton East Project. Set forth in Appendix A to this Supplemental Resolution is a description of the Davis Lift Station and Norton East Project, which describes the property which has been or is to be acquired, installed, constructed or improved and the other activities, if any to be funded from the Davis and Norton ABC Loans (the Davis Lift Station and Norton East Project may consist of more than one facility or activity), and an estimated budget relating to the Davis Lift Station and Norton East Project. The Davis Lift Station and Norton East Project may be changed and the description thereof in Appendix A may be amended from time to time by the Borrower but only after delivery to the DNRC of the following: 221 27 (a) A certificate of the Borrower setting forth the amendment to Appendix A and stating the reason therefor, including statements as to whether the amendment would cause an increase or decrease in the cost of the Davis Lift Station and Norton East Project or an increase or decrease in the amount of proceeds of the Davis and Norton ABC Loans which will be required to complete the Davis Lift Station and Norton East Project and whether the change will materially accelerate or delay the construction schedule for the Davis Lift Station and Norton East Project; (b) A written consent to such change in the Davis Lift Station and Norton East Project by an Authorized DNRC Officer; and (c) An Opinion of Bond Counsel stating that the Davis Lift Station and Norton East Project, as constituted after such amendment, is, and was at the time the State Bonds were issued, eligible for financing under the Act and is, and was at the time the Series ABC Bonds were issued, eligible for financing under the Enabling Act, such amendment will not violate the Act or the Enabling Act and such amendment will not adversely affect the exclusion of interest on the State Bonds or the Series ABC Bonds from gross income for purposes of federal income taxation. Such an Opinion of Bond Counsel shall not be required for amendments which do not affect the type of facility to be constructed or activity to be financed. The Borrower acknowledges and agrees that an increase in the principal amount of the Davis and Norton ABC Loans may be made only upon an application to the DEQ, the DNRC and the Trustee, in such form as the DEQ shall specify, which is approved by the DEQ and the DNRC, in their sole and absolute discretion, and adoption by the governing body of the Borrower of a Supplemental Resolution authorizing the additional loan and delivery of written certifications by officers of the Borrower to the DEQ, the DNRC and the Trustee to the effect that all representations and covenants contained in this Supplemental Resolution as it may be so amended or supplemented are true as of the date of closing of the additional loan and compliance with applicable tests for the incurrence of such debt. No assurance can be given that any additional loan funds will be available under the Program at the time of any such application. The Borrower acknowledges and agrees that neither the DEQ, the DNRC, the Trustee nor any of their agents, employees or representatives shall have any liability to the Borrower and have made no representations to the Borrower as to the sufficiency of the Davis and Norton ABC Loans to pay costs of the Davis Lift Station and 222 28 Norton East Project or as to the availability of additional funds under the Program to increase the principal amount of the Davis and Norton ABC Loans. Section 3.3 Davis Lift Station and Norton East Project Representations and Covenants. The Borrower hereby represents to and covenants with the DNRC that: (a) all construction of the Davis Lift Station and Norton East Project has complied and will comply with all federal and state standards, including, without limitation, EPA regulations; (b) all future construction of the Davis Lift Station and Norton East Project will be done only pursuant to fixed price construction contracts. The Borrower shall obtain a performance and payment bond from the contractor for each construction contract in the amount of 100% of the construction price and ensure that such bond is maintained until construction is completed to the Borrower’s, the DNRC’s and the DEQ’s satisfaction; (c) all future construction of the Davis Lift Station and Norton East Project will be done in accordance with plans and specifications on file with the DNRC and the DEQ, provided that changes may be made in such plans and specifications with the written consent of an Authorized DNRC Officer and the DEQ; (d) all laborers and mechanics employed by contractors and subcontractors on the Davis Lift Station and Norton East Project have been and will be paid wages at rates not less than those prevailing on projects of a character similar in the locality as determined by the United States Secretary of Labor in accordance with subchapter IV of chapter 31 of title 40, United States Code; (e) the iron and steel products used in the Davis Lift Station and Norton East Project comply with the “American Iron and Steel” requirements of Section 436 of the Consolidated Appropriations Act of 2014 (P.L. 113-76), as those requirements are further interpreted by applicable EPA guidance; (f) the Davis Lift Station and Norton East Project are a project of the type permitted to be financed under the Enabling Act, the Act and the Program and Title VI of the Clean Water Act; and 223 29 (g) the Borrower will undertake the Davis Lift Station and Norton East Project promptly after the Closing and will cause the Davis Lift Station and Norton East Project to be completed as promptly as practicable with all reasonable dispatch, except only as completion may be delayed by a cause or event not reasonably within the control of the Borrower; it is estimated by the Borrower that the Davis Lift Station and Norton East Project will be substantially completed by the Estimated Completion Date. Section 3.4 Completion or Cancellation or Reduction of Costs of the Davis Lift Station and Norton East Project. (a) Upon completion of the Davis Lift Station and Norton East Project, the Borrower shall deliver to the DNRC a certificate stating that the Davis Lift Station and Norton East Project is complete and stating the amount, if any, of the Undisbursed Committed Amount. If Appendix A describes two or more separate projects as making up the Davis Lift Station and Norton East Project, a separate completion certificate shall be delivered for each. (b) If all or any portion of the Davis Lift Station and Norton East Project is cancelled or cut back or its costs are reduced or for any other reason the Borrower will not require the full Committed Amounts, the Borrower shall promptly notify the DNRC in writing of such fact and the amount of the Undisbursed Committed Amount. ARTICLE IV THE 2020ABC LOANS Section 4.1 The Davis and Norton ABC Loans; Disbursement of Davis and Norton ABC Loans. (a) The DNRC has agreed to lend to the Borrower, from time to time as the requirements of this Section 4.1 are met, an amount up to (i) $300,000 (the “2020A Committed Amount”), (ii) $7,786,000 (the “2020B Committed Amount”), and (iii) $7,063,000 (the “20__C Committed Amount”) for the purposes of financing, refinancing or reimbursing the Borrower for a portion of the costs of the Davis Lift Station and Norton East Project, funding deposits to the Reserve Account, and paying costs of issuance of the Series ABC Bonds; provided the DNRC shall not be 224 30 required to disburse any proceeds of the Davis and Norton ABC Loans to the Borrower after the Estimated Completion Date. The Committed Amount may be reduced as provided in Section 3.2 and Section 3.4 of this Supplemental Resolution. (b) The DNRC intends to disburse the Davis and Norton ABC Loans through the Trustee. In consideration of the issuance of the Series ABC Bonds by the Borrower, the DNRC shall make, or cause the Trustee to make, a disbursement of all or a portion of the 2020A Loan, 2020B Loan and 20__C Loan, as applicable, upon receipt of the following documents: (1) an Opinion of Bond Counsel as to the Series 2020A Bond and an opinion of Bond Counsel as to the validity and enforceability of the Series 2020B Bond and C Bond and the security therefor and stating in effect that interest on the Series 2020B Bond and the Series C Bond is not includable in gross income of the owner thereof for purposes of federal income taxation, in form and substance satisfactory to the DNRC; (2) the Series 2020A Bond, the Series 2020B Bond, and the Series C Bond, fully executed and authenticated; (3) a certified copy of the Original Resolution, as amended to date, and this Supplemental Resolution; (4) any other security instruments or documents required by the DNRC or DEQ as a condition to their approval of the Davis and Norton ABC Loans; (5) if all or part of any Davis and Norton ABC Loan is being made to reimburse the Borrower for the costs of the Davis Lift Station and Norton East Project paid prior to the applicable Closing, evidence, satisfactory to the DNRC and the Bond Counsel referred to in subparagraph (1) above, (A) that the acquisition or construction of the Project was begun no earlier than March 7, 1985 or the debt was incurred no earlier than March 7, 1985, (B) of the Borrower’s title to the Project, (C) of costs of the Davis Lift Station and Norton East Project and that such costs have been paid by the Borrower, and (D) for the 2020B Loan and the 20__C Loan, if such costs were paid prior to the adoption of this Supplemental Resolution, that the Borrower has complied with Section 1.150-2 of the Regulations; 225 31 (6) the items required by the Indenture for the portion of the Davis and Norton ABC Loans to be disbursed at the applicable Closing; and (7) such other certificates, documents and other information as the DNRC, the DEQ or the Opinion of Bond Counsel referred to in subparagraph (1) may require (including any necessary arbitrage rebate instructions). (c) In order to obtain a disbursement of a portion of the Davis and Norton ABC Loans to pay costs of the Davis Lift Station and Norton East Project, the Borrower shall submit to the DNRC and the Trustee a signed request for disbursement on the form prescribed by the DNRC, with all attachments required by such form. The Borrower may obtain disbursements only for costs which have been legally incurred and are due and payable. All Loan disbursements will be made to the Borrower only upon proof that cost was incurred. (d) From and after the 2020B First Advance, the Davis and Norton ABC Loans shall be disbursed, subject to the other terms and conditions of this Supplemental Resolution, in the following order: (1) First, at Closing on the Series 2020A Bond and Series 2020B Bond, the initial advance of the 2020A Loan and the 2020B First Advance will be disbursed to the Borrower, after which each advance will be split equally between the 2020A Loan and the 2020B Loan, until the entire amount of the 2020A Loan is advanced. (2) Second, after the 2020A Loan is advanced in full, the entire amount of the 2020B Loan will be disbursed to the Borrower as and when needed. (3) Third, after the entire principal amount of the 2020B Loan has been disbursed to the Borrower, at Closing on the Series C Bond, the 20__C First Advance will be disbursed to the Borrower, after which the remaining amount of the 20__C Loan will be disbursed to the Borrower as and when needed. (e) The Borrower shall not be entitled to, and the DNRC shall have no obligation to make, the 2020B First Advance or the 20__C First Advance or any subsequent advance of any amounts 226 32 under the 2020B Loan or the 20__C Loan until such time as the Borrower shall have funded the Reserve Account in an amount then required to satisfy the Reserve Requirement. (f) The Borrower shall submit the requests for the 2020B First Advance and the 20__C First Advance in the form required by the DNRC so that it is received in sufficient time for the DNRC to process the information by the date desired by the Borrower for the making of the 2020B First Advance and the 20__C First Advance, respectively. (g) If all or a portion of the Davis and Norton ABC Loans is made to reimburse a Borrower for Project costs paid by it prior to Closing, the Borrower shall present at the applicable Closing the items required by Section 4.1(b) relating to such costs. The Trustee shall disburse such amounts to the Borrower pursuant to a disbursement schedule complying with the requirements of the Clean Water Act established by the DNRC and the Borrower at the Closing. (h) Notwithstanding anything herein to the contrary, the Trustee shall not be obligated to disburse the Davis and Norton ABC Loans any faster or to any greater extent than it has available EPA Capitalization Grants, Bond proceeds and other amounts available therefor in the Revolving Fund. The DNRC shall not be required to do “overmatching” pursuant to Section 5.04(b) of the Indenture, but may do so in its discretion. The Borrower acknowledges that if 2020 Davis Lift Station and Norton East Project costs are incurred faster than the Borrower projected at the applicable Closing, there may be delays in making disbursements of the applicable Loans for such costs because of the schedule under which EPA makes EPA Capitalization Grant money available to the DNRC. The DNRC will use its reasonable best efforts to obtain an acceleration of such schedule if necessary. (i) Upon making each 2020A Loan disbursement, 2020B Loan disbursement, and 20__C Loan Disbursement, the Trustee shall note such disbursement on Schedule A to the Series 2020A Bond, Series 2020B Bond, and the Series C Bond, respectively. At the respective Closings, Schedule A to the Series 2020B Bond shall note the 2020B First Advance and Schedule A to the Series C Bond shall note the 20__C First Advance. (j) The Borrower agrees that it will deposit in the Reserve Account upon receipt thereof, on the dates of the 2020B First Advance and 20__C First Advance and any subsequent 227 33 disbursement dates, any proceeds of the 2020B Loan and the 20__C Loan, as applicable, borrowed for the purpose of increasing the balance in the Reserve Account to the Reserve Requirement. The Borrower further acknowledges and agrees that any portions of the Davis and Norton ABC Loans representing capitalized interest shall be advanced only on Payment Dates and shall be transferred by the Trustee on the Payment Date directly to the Revenue Bond Account. The amount of any such transfer shall be a credit against the interest payments due on the Series ABC Bonds and interest thereon shall accrue only from the date of transfer. (k) Compliance by the Borrower with its representations, covenants and agreements contained in the Resolution, including this Supplemental Resolution and the Collateral Documents shall be a further condition precedent to the disbursement of the Davis and Norton ABC Loans in whole or in part. The DNRC and the Trustee, in their sole and absolute discretion, may make one or more disbursements, in whole or in part, notwithstanding such noncompliance, and without liability to make any subsequent disbursement of the Davis and Norton ABC Loans. Section 4.2 Commencement of Loan Term. The Borrower’s obligations under this Supplemental Resolution and the Collateral Documents shall commence on the date hereof unless otherwise provided in this Supplemental Resolution. However, the obligation to make payments under Article V hereof shall commence only upon the first disbursement by the Trustee of the 2020B First Advance. Section 4.3 Termination of Loan Term. The Borrower’s obligations under this Supplemental Resolution and the Collateral Documents in respect of the Series ABC Bonds shall terminate upon payment in full of all amounts due under the Series ABC Bonds and this Supplemental Resolution; provided, however, that the covenants and obligations provided in Article VI of this Supplemental Resolution shall survive the termination of the Resolution. Section 4.4 Loan Closing Submissions. On or prior to the Closing, the Borrower will have delivered to the DNRC and the Trustee the closing submissions required by Section 7.05 of the Indenture. 228 34 ARTICLE V REPAYMENT OF 2020ABC LOANS Section 5.1 Repayment of Davis and Norton ABC Loans. The Borrower shall repay the amounts borrowed by it pursuant to Section 4.1 in accordance with this Section 5.1. 5.1.1. Interest. Until a Determination Statement is delivered by the DNRC to the Borrower and so long as the Borrower’s obligation to repay the principal of the 2020A Loan is forgiven as provided in Section 5.1.2 below, amounts disbursed by the DNRC under Section 4.1 hereof that are evidenced by the Series 2020A Bond bear interest at the rate of zero percent (0.00%) per annum from the date of each advance; provided, however, if the DNRC delivers to the Borrower a Noncompliance Statement, then all principal of the Series 2020A Bond advanced by the DNRC shall be payable and amounts disbursed by the DNRC under Section 4.1 hereof that are evidenced by the Series 2020A Bond shall bear interest at the rate of two and one-half percent (2.50%) per annum from the date of each advance under the Series 2020A Bond. The 2020B Loan and the 20__C Loan shall each bear interest at the rate of two and one-half percent (2.50%) per annum. The Borrower shall pay all Loan Repayments in lawful money of the United States of America to the DNRC. Interest shall be calculated on the basis of a year of 360 days comprising 12 months of 30 days each. 5.1.2. Repayment of 2020A Loan; Principal Forgiveness. (a) The Borrower is obligated to repay the principal of and interest on the 2020A Loan, unless the DNRC forgives the Borrower’s obligation to repay the principal of the 2020A Loan as provided in Section 5.1.2(b). Subject to the provisions of Section 5.1.2(b), the Loan Repayments on the 2020A Loan shall be due on each Payment Date, following the date of delivery by the DNRC of a Noncompliance Statement and concluding on July 1, 2040, and the amount of each principal payment shall be calculated on the basis of a substantially level debt service at the rate of 2.50% per annum; provided that principal of the 2020A Loan is payable only in amounts that are multiples of $1,000. (b) Notwithstanding Section 5.1.2(a), so long as the Borrower is proceeding diligently to completion of the Davis Lift Station and Norton East Project and the Borrower has executed and 229 35 delivered the Compliance Certificate and Request to the DNRC in form and substance satisfactory to the DNRC and the DEQ in their sole and absolute discretion within thirty (30) days after the date that the Compliance Certificate and Request is provided to the Borrower by the DNRC, the DNRC will, following review and approval of the Compliance Certificate and Request, deliver to the Borrower a Forgiveness Statement and the Borrower will thereafter have no obligation to repay amounts advanced under the Series 2020A Bond or interest thereon and the Series 2020A Bond will be marked “CANCELLED” and returned by the DNRC to the Borrower. However, in the event the Borrower fails to deliver timely the Compliance Certificate and Request, or the Borrower cannot submit the Compliance Certificate and Request because it cannot make the certifications required therein, or the Compliance Certificate and Request is delivered in a form that deviates materially from that attached hereto as Appendix D as determined in the sole and absolute discretion of the DNRC and the DEQ, or the DNRC or the DEQ determines at any time that the Davis Lift Station and Norton East Project or any portion thereof or of the work relating thereto fails to comply with Program requirements, then the DNRC will deliver to the Borrower a Noncompliance Statement. Upon delivery of a Noncompliance Statement by the DNRC to the Borrower, all principal advanced or to be advanced under the Series 2020A Bond, together with interest thereon from the date of each advance, shall be payable as provided in Section 5.1.2 (a). (c) In addition, in the event the DNRC delivers a Noncompliance Statement (i) the Series 2020A Bond will continue in effect as a Subordinate Obligation, and (ii) the Borrower will forthwith comply with the rate covenant set forth in Section 6.7 of the Original Resolution, as amended by this Supplemental Resolution, and, if necessary, increase the rates and charges of the System to satisfy such rate covenant as soon as practicable and in any event no later than three (3) months after the date of delivery to the Borrower by the DNRC of a Noncompliance Statement. 5.1.3. Repayment of 2020B Loan and 20__C Loan. The Loan Repayments on the 2020B Loan and the 20__C Loan required by this Section 5.1 shall be due in the amounts and on the dates as set forth in Schedule B to the Series 2020B Bond and Series C Bond, respectively, as such Schedule B may be modified from time to time as described below. The amount of each principal payment with respect to each of the 2020B Loan and 20__C Loan shall be calculated on the basis of a substantially level debt service at the rate of 2.50% per annum over a term of 230 36 approximately 20 years, or 40 semiannual payments of principal and interest, provided that principal shall be payable only in amounts that are multiples of $1,000. 5.1.4. Details Regarding 2020ABC Loan Repayments. Upon each disbursement of the Davis and Norton ABC Loans to the Borrower pursuant to Section 4.1 hereof, the Trustee shall enter or cause to be entered the amount advanced on Schedule A to the Series 2020A Bond, the Series 2020B Bond, and the Series C Bond, as applicable, under “Advances” and the total amount advanced under Section 4.1, including such disbursement, under “Total Amount Advanced.” Loan Repayments on the 2020B Loan and the 20__C Loan and, if applicable, on the 2020A Loan, accrue on each such advance from the date of disbursement and shall be due and payable on the dates and in the amounts shown in Schedule B to the Series 2020A Bond, the Series 2020B Bond, and the Series C Bond, as such Schedule B shall be modified from time to time as provided below. The portion of each payment consisting of principal and of interest shall be set forth in Schedule B to the applicable Bond on and after Closing on such Bond. Once the entire principal amount of the Series ABC Bonds has been drawn, or the completion certificate for the Davis Lift Station and Norton East Project has been delivered to the DNRC, the Trustee shall revise Schedule B to the applicable Series ABC Bond or Bonds in accordance with this Section 5.1 and the Trustee shall send a copy of each such Schedule B to the Borrower. If the DNRC shall have delivered a Noncompliance Statement, then Schedule B to the Series 2020A Bond shall continue to reflect interest on amounts advanced under the Series 2020A Bond at the rate of 2.50% per annum. If the DNRC delivers a Forgiveness Statement, Schedule B to the Series 2020A Bond will be disregarded and of no effect. Past-due Loan Repayments shall bear interest at the rate of ten percent (10.00%) per annum, until paid. Any payment of principal and interest as to the 2020B Loan, 20__C Loan, and, if applicable, the 2020A Loan under this Section 5.1 shall be credited against the same payment obligation under each of the Series 2020B Bond, the Series C Bond, and, as applicable, the Series 2020A Bond. 231 37 Section 5.2 Additional Payments. The Borrower shall also pay, within 30 days after receipt of a bill therefor, from any legally available funds therefor, including proceeds of the Davis and Norton ABC Loans, all reasonable expenses of the DNRC and the Trustee in connection with the Davis and Norton ABC Loans, the Collateral Documents and the Series ABC Bonds, including, but not limited to: (a) the cost of reproducing this Supplemental Resolution, the Collateral Documents and the Series ABC Bonds; (b) the fees and disbursements of Bond Counsel and other Counsel utilized by the DNRC and the Trustee in connection with the Davis and Norton ABC Loans, this Supplemental Resolution, the Collateral Documents and the Series ABC Bonds and the enforcement thereof; and (c) all taxes and other governmental charges in connection with the execution and delivery of the Collateral Documents or the Series ABC Bonds, whether or not the Series ABC Bonds are then outstanding, including all recording and filing fees relating to the Collateral Documents and the pledge of the State’s right, title and interest in and to the Series ABC Bonds, the Collateral Documents and this Supplemental Resolution (and with the exceptions noted therein) and all expenses, including attorneys’ fees, relating to any amendments, waivers, consents or collection or enforcement proceedings pursuant to the provisions hereof or thereof. Section 5.3 Prepayments. The Borrower may not prepay all or any part of the outstanding principal amount of the Series 2020B Bond, the Series C Bond, and, if applicable, the Series 2020A Bond, unless (i) a Determination Statement has been delivered, (ii) it obtains the prior written consent of the DNRC thereto, and (iii) no Loan Repayment is then delinquent. Any prepayment permitted by the DNRC must be accompanied by payment of accrued interest to the date of prepayment on the amount of principal prepaid. If the Series ABC Bonds are prepaid in part pursuant to this Section 5.3, such prepayments shall be applied to principal payments in inverse order of maturity or as otherwise determined by the DNRC. Section 5.4 Obligations of Borrower Unconditional. The obligations of the Borrower to make the payments required by this Supplemental Resolution and the Series ABC Bonds and to perform its other agreements contained in this Supplemental Resolution, the Series ABC Bonds 232 38 and Collateral Documents shall be absolute and unconditional, except as otherwise provided herein or in such documents. The Borrower (a) shall not suspend or discontinue any payments provided for in this Supplemental Resolution and the Series ABC Bonds, (b) shall perform all its other agreements in this Supplemental Resolution, the Series ABC Bonds and the Collateral Documents and (c) shall not terminate this Supplemental Resolution, the Series ABC Bonds or the Collateral Documents for any cause, including any acts or circumstances that may constitute failure of consideration, destruction of or damage to the Davis Lift Station and Norton East Project or the System, commercial frustration of purpose, any dispute with the DNRC or the EPA, any change in the laws of the United States or of the State or any political subdivision thereof or any failure of the DNRC to perform any of its agreements, whether express or implied, or any duty, liability or obligation arising from or connected with this Supplemental Resolution. Section 5.5 Limited Liability. All payments of principal of and interest on the Davis and Norton ABC Loans and other payment obligations of the Borrower hereunder and under the Series ABC Bonds shall be special, limited obligations of the Borrower payable with respect to the Series 2020B Bond and the Series C Bond solely out of the Net Revenues or, with respect to the Series 2020A Bond, solely out of Surplus Net Revenues, and shall not, except at the option of the Borrower and as permitted by law, be payable out of any other revenues of the Borrower. The obligations of the Borrower under this Supplemental Resolution and the Series ABC Bonds shall never constitute an indebtedness of the Borrower within the meaning of any State constitutional provision or statutory or charter limitation and shall never constitute or give rise to a pecuniary liability of the Borrower or a charge against its general credit or taxing power. The taxing powers of the Borrower may not be used to pay principal of or interest on the Series ABC Bonds, no funds or property of the Borrower other than the Net Revenues may be required to be used to pay principal of or interest on the Series 2020B Bond and the Series C Bond, and no funds or property of the Borrower other than the Surplus Net Revenues may be required to be used to pay principal of or interest, if any, on the Series 2020A Bond. 233 39 ARTICLE VI INDEMNIFICATION OF DNRC AND DEQ The Borrower shall, to the extent permitted by law, indemnify and save harmless the DNRC and the DEQ and their officers, employees and agents (each an "Indemnified Party" or, collectively, the “Indemnified Parties") against and from any and all claims, damages, demands, expenses, liabilities and losses of every kind asserted by or on behalf of any Person arising out of the acts or omissions of the Borrower or its employees, officers, agents, contractors, subcontractors, or consultants in connection with or with regard or in any way relating to the condition, use, possession, conduct, management, planning, design, acquisition, construction, installation or financing of the Davis Lift Station and Norton East Project. The Borrower shall, to the extent permitted by law, also indemnify and save harmless the Indemnified Parties against and from all costs, reasonable attorneys’ fees, expenses and liabilities incurred in any action or proceeding brought by reason of any such claim or demand. If any proceeding is brought against an Indemnified Party by reason of such claim or demand, the Borrower shall, upon notice from an Indemnified Party, defend such proceeding on behalf of the Indemnified Party. ARTICLE VII ASSIGNMENT Section 7.1 Assignment by Borrower. The Borrower may not assign its rights and obligations under this Supplemental Resolution or the Series ABC Bonds. Section 7.2 Assignment by DNRC. The DNRC will pledge its rights under and interest in this Supplemental Resolution, the Series ABC Bonds and the Collateral Documents (except to the extent otherwise provided in the Indenture) as security for the payment of the State Bonds and may further assign such interests to the extent permitted by the Indenture, without the consent of the Borrower. 234 40 ARTICLE VIII THE SERIES ABC BONDS Section 8.1 Net Revenues Available. The Borrower 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 2010B Bond, the Series 2010C Bond, the Series 2010D Bond, the Series 2010F Bond, the Series 2010G Bond, the Series 2010H Bond, the Series 2020B Bond and the Series C Bond the Net Revenues (and in respect of the Series 2020A Bond, if necessary, the Surplus Net Revenues) to be derived from the operation of the System, including improvements, betterments or extensions thereof hereafter constructed or acquired. The Net Revenues to be produced by such rates, charges and rentals during the term of the Series 2010B Bond, the Series 2010C Bond, the Series 2010D Bond, the Series 2010F Bond, the Series 2010G Bond, the Series 2010H Bond, Series 2020B Bond, and Series C Bond are expected to be more than sufficient to pay the principal and interest when due on such Bonds, and to create and maintain reasonable reserves therefor and to provide an adequate allowance for replacement and depreciation, as prescribed herein. For purposes of the foregoing statement, principal of and interest on the 2020A Loan are disregarded. The Borrower acknowledges and agrees that if the DNRC delivers a Noncompliance Statement to the Borrower as determined in the sole and complete discretion of the DNRC and DEQ, then principal and interest will become due and owing on the 2020A Loan evidenced by the Series 2020A Bond as provided in Section 5.1.2 and the Borrower shall thereupon, and no later than three months after delivery of such Noncompliance Statement, to the extent required by Section 6.7 of the Original Resolution, as amended, adjust its schedule of fees, rates, and charges applicable to the System to cause Net Revenues and Surplus Net Revenues to be produced in an amount at least equal to that required by the Resolution. Section 8.2 Issuance and Sale of the Series ABC Bonds. The Commission has investigated the facts necessary and hereby finds, determines and declares it to be necessary and desirable for the Borrower to issue the Series ABC Bonds to evidence the Davis and Norton ABC Loans. The Series ABC Bonds are issued to the DNRC without public sale pursuant to Montana Code Annotated, Section 7-7-4433. 235 41 Section 8.3 Terms. The Series 2020A Bond, the Series 2020B Bond, and the Series C Bond shall be in the maximum principal amount equal to the original 2020A Committed Amount, 2020B Committed Amount, and 20__C Committed Amount, respectively, shall each be issued as a single, fully registered bond numbered R-1; shall be dated as of their respective dates of delivery to the DNRC; and shall bear interest at the rate charged by the DNRC on the 2020A Loan, 2020B Loan, and 20__C Loan, respectively. The series designation for the Series C Bond shall be completed with the calendar year in which the Series C Bond is issued, expected to be 20__, such designation may or may not include the letter “C,” and the designation provided on the face page of the final Series C Bond shall be conclusive. The principal of and interest on the Series 2020B Bond and the Series C Bond, and, if applicable, the principal of and interest on the Series 2020A Bond shall be payable on the same dates and in the same amounts as Loan Repayments are payable. Advances of principal of the Series 2020A Bond or Series 2020B Bond or Series C Bond shall be deemed made when advances of the 2020A Loan or 2020B Loan or 20__C Loan, respectively, are made under Section 4.1, and such advances shall be payable in accordance with Schedule B to the Series 2020B Bond, the Series C Bond, and, if applicable, the Series 2020A Bond, as it may be revised by the DNRC from time to time in accordance with Section 5.1. The Series 2020A Bond is a Subordinate Obligation payable only from the Surplus Net Revenues available in the Replacement and Depreciation Account or the Surplus Account. The Borrower may prepay the Series ABC Bonds, in whole or in part, only upon the terms and conditions under which it can prepay the Davis and Norton ABC Loans under Section 5.3. Section 8.4 Negotiability, Transfer and Registration. The Series ABC Bonds shall be fully registered as to both principal and interest, and shall be initially registered in the name of and payable to the DNRC. While so registered, principal of and interest on the Series ABC Bonds shall be payable to the DNRC at the Office of the Department of Natural Resources and Conservation, 1539 Eleventh Avenue, Helena, Montana 59620 or such other place as may be designated by the DNRC in writing and delivered to the Borrower. The Series ABC Bonds shall be negotiable, subject to the provisions for registration and transfer contained in this Section 8.4. No transfer of the Series ABC Bonds shall be valid unless and until (1) the holder, or its duly authorized attorney or legal representative, has executed the form of assignment appearing on the Series ABC Bonds, and (2) the City Finance Director of the Borrower, as bond registrar (the 236 42 “Registrar”), has duly noted the transfer on the Series ABC Bonds and recorded the transfer on the registration books of the Registrar. The Registrar may, prior to noting and recording the transfer, require appropriate proof of the transferor’s authority and the genuineness of the transferor’s signature. The Borrower shall be entitled to deem and treat the Person in whose name the Series ABC Bonds is registered as the absolute owner of the Series ABC Bonds for all purposes, notwithstanding any notice to the contrary, and all payments to the registered holder shall be valid and effectual to satisfy and discharge the Borrower’s liability upon such Bond to the extent of the sum or sums so paid. Section 8.5 Execution and Delivery. The Series ABC Bonds shall be executed on behalf of the Borrower by the manual signatures of the Mayor, the City Manager, and the City Clerk. Any or all of such signatures may be affixed at or prior to the date of delivery of the Series ABC Bonds. In the event that any of the officers who shall have signed the Series ABC Bonds shall cease to be officers of the Borrower before the Series ABC Bonds are issued or delivered, their signatures shall remain binding upon the Borrower. Conversely, the Series ABC Bonds may be signed by an authorized official who did not hold such office on the date of adoption of this Supplemental Resolution. The Series ABC Bonds shall be delivered to the DNRC, or its attorney or legal representative. Section 8.6 Forms. The Series 2020A Bond shall be prepared in substantially the form attached as Appendix B-1, the Series 2020B Bond shall be prepared in substantially the form attached as Appendix B-2, and the Series C Bond shall be prepared in substantially the form attached as Appendix B-3, in each case, with such changes thereto as may be necessary or desirable and are approved by the City Manager and the DNRC. Without limitation of the meaning of the foregoing, the Series C Bond may be changed to reflect the applicable designation based on the year in which and date on which it is issued. ARTICLE IX SECURITY FOR THE SERIES ABC BONDS The Series 2020B Bond and the Series C Bond are issued as additional Bonds under Section 10.3 of the Original Resolution, as amended hereby, and shall, with the Series 2010B Bond, the Series 2010C Bond, the Series 2010D Bond, the Series 2010F Bond, the Series 2010G Bond, the 237 43 Series 2010H Bond, and any other additional Bonds issued under the provisions of Article X of the Original Resolution, excluding Section 10.4 thereof, be equally and ratably secured by the provisions of the Resolution and payable out of the Net Revenues appropriated to the Revenue Bond Account of the Sewer System Fund, without preference or priority, all as provided in the Resolution, and secured by the Reserve Account, as further provided in Section 11.5 of the Original Resolution and in the following sentence. Upon each advance of principal of the Series 2020B Bond and the Series C Bond, the City Finance Director of the Borrower shall transfer from proceeds of the Series 2020B Bond and the Series C Bond such amount or amounts to the Reserve Account to cause the balance therein to equal the Reserve Requirement, treating such principal amount as outstanding. Upon each advance of the Series 2020B Bond and the Series C Bond, the deposit to the Reserve Account shall be sufficient to cause the balance in the Reserve Account to equal the Reserve Requirement in respect of the Series 2010B Bond, the Series 2010C Bond, the Series 2010D Bond, the Series 2010F Bond, the Series 2010G Bond, the Series 2010H Bond, and the principal of the Series 2020B Bond and the principal of the Series C Bond so advanced. The Series 2020A Bond is a Subordinate Obligation issued under Section 10.4 of the Original Resolution and payable from the Surplus Net Revenues that are available in the Replacement and Depreciation Account or the Surplus Account after required credits to the Operating Account, the Revenue Bond Account, and the Reserve Account. No payment of principal or interest shall be made on any Subordinate Obligation, including the Series 2020A Bond, if the Borrower is then in default in the payment of principal of or interest on any Bond or if there is a deficiency in the Operating Account or the Revenue Bond Account or the balance in the Reserve Account is less than the Reserve Requirement. In the event the principal of and interest become payable under the Series 2020A Bond, the Borrower shall cause rates and charges to be increased to produce Surplus Net Revenues at least equal to the amount required under Section 6.7 of the Original Resolution, as amended, within three (3) months following delivery of a Noncompliance Statement. The Borrower shall keep, perform and observe each and every one of its covenants and undertakings set forth in the Resolution for the benefit of the registered holders from time to time of the Series ABC Bonds. 238 44 ARTICLE X TAX MATTERS Section 10.1 Use of Project and System. The Davis Lift Station and Norton East Project and the System will be owned and operated by the Borrower and available for use by members of the general public on a substantially equal basis. The Borrower shall not enter into any lease, use or other agreement with any non-governmental person relating to the use of the Davis Lift Station and Norton East Project or the System or security for the payment of the Series 2020B Bond and the Series C Bond which might cause the Series 2020B Bond or the Series C Bond, or either of them, to be considered a “private activity bond” or “private loan bond” within the meaning of Section 141 of the Code. Section 10.2 General Covenant. The Borrower covenants and agrees with the owners from time to time of the Series 2020B Bond and the Series C Bond that it will not take or permit to be taken by any of its officers, employees or agents any action which would cause the interest on the Series 2020B Bond and the Series C Bond to become includable in gross income for federal income tax purposes under the Code and the Regulations, and covenants to take any and all actions within its powers to ensure that the interest on the Series 2020B Bond and the Series C Bond will not become includable in gross income for federal income tax purposes under the Code and the Regulations. Section 10.3 Arbitrage Certification. The Mayor, the City Manager, and the City Finance Director are authorized and directed to execute and deliver to the DNRC a certificate in accordance with the provisions of Section 148 of the Code, and Section 1.148-2(b) of the Regulations, stating that on the basis of facts, estimates and circumstances in existence on the date of issue and delivery of the Series 2020B Bond and the Series C Bond, it is reasonably expected that the proceeds of the Series 2020B Bond and the Series C Bond will be used in a manner that would not cause the Series 2020B Bond or the Series C Bond to be an “arbitrage bond” within the meaning of Section 148 of the Code and the Regulations. Section 10.4 Arbitrage Rebate. The Borrower acknowledges that the Series 2020B Bond and the Series C Bond are subject to the rebate requirements of Section 148(f) of the Code. The Borrower covenants and agrees to retain such records, make such determinations, file such reports 239 45 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 2020B Bond and the Series C Bond from gross income for federal income tax purposes, unless the Series 2020B Bond and the Series C Bond qualify for the exception from the rebate requirement under Section 148(f)(4)(B) of the Code and no “gross proceeds” of the Series 2020B Bond and the Series C Bond (other than amounts constituting a “bona fide debt service fund”) arise during or after the expenditure of the original proceeds thereof. In furtherance of the foregoing, the Mayor, the City Manager, and the City Finance Director are hereby authorized and directed to execute a Rebate Certificate, substantially in the form to be prepared by Bond Counsel, and the Borrower hereby covenants and agrees to observe and perform the covenants and agreements contained therein, unless amended or terminated in accordance with the provisions thereof. Section 10.5 Information Reporting. The Borrower shall file with the Secretary of the Treasury, not later than the applicable deadline, a statement concerning each of the Series 2020B Bond and the Series C Bond containing the information required by Section 149(e) of the Code. ARTICLE XI AMENDMENTS Section 11.1 Authorization. Pursuant to Section 14.4 of the Original Resolution, the Borrower reserved the right to amend the Resolution with the written consent of the DNRC. Section 11.2 Consent of DNRC. The DNRC has consented in writing to the amendments of the provisions of the Original Resolution set forth herein. Section 11.3 Amendments. (a) Section 1.1. The definition of “Reserve Requirement” in Section 1.1 of the Original Resolution is hereby amended in its entirety to read as follows in its entirety: “‘Reserve Requirement’ means, as of the date of calculation, an amount equal to one-half the sum of the highest cumulative amount of principal of and interest payable on all outstanding Bonds in any one future fiscal year (giving effect to mandatory sinking fund redemption, if any).” 240 46 (b) Section 2.2(f). Section 2.2(f) of the Original Resolution is hereby amended to read as follows in its entirety: “(f) Financial Information. The Borrower agrees that for each fiscal year it shall furnish to the DNRC and the DEQ, promptly when available: (1) the preliminary budget for the System, with items for the Project shown separately; and (2) when adopted, the final budget for the System, with items for the Project shown separately. The Borrower will cause proper and adequate books of record and account to be kept showing complete and correct entries of all receipts, disbursements and other transactions relating to the System, the monthly gross revenues derived from its operation, and the segregation and application of the gross revenues in accordance with this Resolution, in such reasonable detail as may be determined by the Borrower in accordance with generally accepted governmental accounting practice and principles. It will cause such books to be maintained on the basis of the same fiscal year as that utilized by the Borrower. The Borrower shall, within 270 days after the close of each fiscal year, cause to be prepared and supply to the DNRC a financial report with respect to the System for such fiscal year. The report shall be prepared at the direction of the financial officer of the Borrower in accordance with applicable generally accepted governmental accounting principles and, in addition to whatever matters may be thought proper by the financial officer to be included therein, shall include the following: (A) A statement in detail of the income and expenditures of the System for the fiscal year, identifying capital expenditures and separating them from operating expenditures; (B) A balance sheet as of the end of the fiscal year; (C) The number of premises connected to the System at the end of the fiscal year; 241 47 (D) The amount on hand in each account of the Fund at the end of the fiscal year; (E) A list of the insurance policies and fidelity bonds in force at the end of the fiscal year, setting out as to each the amount thereof, the risks covered thereby, the name of the insurer or surety and the expiration date of the policy or bond; and (F) A determination that the report shows full compliance by the Borrower 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 required balance in the Revenue Bond Account and, pursuant to Section 6.7, receipt of Net Revenues during each fiscal year at least equal to 110% of the maximum annual principal and interest payable on any outstanding Bonds in the current or any future fiscal year and receipt of Surplus Net Revenues during each fiscal year sufficient to pay principal and interest on Subordinate Obligations as and when due, or, if the report should reveal that the revenues have been insufficient for purposes of compliance with this Resolution, or that the methods used in accounting for such revenues are 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. The Borrower shall also have prepared and supplied to the DNRC and the DEQ, within 270 days of the close of every other fiscal year, an audit report prepared by an independent certified public accountant or an agency of the state in accordance with generally accepted governmental accounting principles and practice with respect to the financial statements and records of the System. The audit report shall include an analysis of the Borrower’s compliance with the provisions of this Resolution.” (c) Section 6.7. Section 6.7 of the Original Resolution is hereby amended to read as follows in its entirety: 242 48 “Section 6.7. Rate Covenant. While any Bonds are outstanding and unpaid, the rates, charges and rentals for all services and facilities furnished and made available by the System to the Borrower and its inhabitants, and to all customers within or without the boundaries of the Borrower, 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 the proper and necessary allowances for the depreciation of the System, and no free service shall be provided to any person or corporation. It is covenanted and agreed that the rates, charges and rentals to be charged to all recipients of sewer services shall be maintained and shall be revised, whenever and as often as may be necessary, according to schedules such that the gross revenues for each fiscal year will be at least sufficient to pay the current expenses of operation and maintenance as herein defined, to maintain a balance in the Reserve Account equal to the Reserve Requirement, to provide reserves for the replacement and depreciation of the System, to maintain the Operating Reserve herein established, to produce Net Revenues during each fiscal year, commencing with the fiscal year ending June 30, 2010, not less than 110% of the maximum annual principal and interest payable on any outstanding Bonds in the current or any future fiscal year, and to produce Surplus Net Revenues sufficient to pay the principal of and interest on any Subordinate Obligations as and when due. “If at the close of any fiscal year the Net Revenues or Surplus Net Revenues actually received during such year have been less than required hereby, the Borrower will forthwith prepare a schedule of altered rates, charges and rentals which are just and equitable and sufficient to produce Net Revenues and Surplus Net Revenues in such amount, and will do all things necessary to the end that such schedule will be placed in operation at the earliest possible date.” (d) Section 10.3. Section 10.3 of the Original Resolution is hereby amended to read, in its entirety, as follows: “Section 10.3. Other Parity Bonds. The Borrower reserves the right to issue additional Bonds payable from the Revenue Bond Account of the Fund, on a parity as to 243 49 both principal and interest with the Series 2010B Bond, the Series 2010C Bond, the Series 2010D Bond, the Series 2010F Bond, the Series 2010G Bond, and the Series 2010H Bond, if the Net Revenues of the System for the last complete fiscal year preceding the date of issuance of such additional Bonds have equaled at least 110% of the maximum amount of principal and interest payable from said Revenue Bond Account in any subsequent fiscal year during the term of the outstanding Bonds, on all Bonds then outstanding and on the additional Bonds proposed to be issued, and so long as the DNRC is the holder of any Bonds, the written consent of the DNRC shall be obtained prior to the issuance of such additional Bonds. For the purpose of the foregoing computation, the Net Revenues for the fiscal year preceding the issuance of additional Bonds shall be those shown by the financial reports caused to be prepared by the Borrower pursuant to Section 2.2(f), as amended, except that if the rates and charges for services provided by the System have been changed since the beginning of such preceding fiscal year, then the rates and charges in effect at the time of issuance of the additional Bonds or finally authorized to go into effect within 60 days thereafter shall be applied to the quantities of service actually rendered and made available during such preceding fiscal year to ascertain the gross revenues, from which there shall be deducted to determine the Net Revenues, the actual operation and maintenance cost plus any additional annual costs of operation and maintenance which the Consultant estimates will be incurred because of the improvement or extension of the System to be constructed from the proceeds of the additional Bonds proposed to be issued. In no event shall any additional Bonds be issued and made payable from the Revenue Bond Account if the Borrower is then in default in any payment of principal of or interest on any outstanding Bonds payable therefrom or if there then exists any deficiency in the balances required by this Resolution to be maintained in any of the accounts of the Fund, which will not be cured or restored upon the issuance of the additional Bonds. In connection with the issuance of a series of additional Bonds, the Borrower shall cause the amount in the Reserve Account to be increased, from the proceeds of the additional Bonds or from Surplus Net Revenues or other legally available funds of the Borrower, to an amount equal to the Reserve Requirement during the term of the outstanding Bonds or so much thereof as will not cause the Borrower to violate the provisions of Section 12.2 hereof.” 244 50 Section 11.4 Effect of Amendments. The Original Resolution is amended and supplemented by the above provisions of Section 11.3 as of the date of this Supplemental Resolution, and the Original Resolution shall continue in full force and effect as so amended and supplemented. ARTICLE XII CONTINUING DISCLOSURE The Borrower understands and acknowledges that the DNRC is acquiring the Series ABC Bonds under the Program pursuant to which the State issues from time to time State Bonds to provide funds therefor. The Borrower covenants and agrees that, upon written request of the DNRC from time to time, the Borrower will promptly provide to the DNRC all information that the DNRC reasonably determines to be necessary or appropriate to offer and sell State Bonds or to provide continuing disclosure in respect of State Bonds, whether under Rule 15c2-12 (17 C.F.R. § 240.15c2-12) promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, or otherwise. Such information shall include, among other things and if so requested, financial statements of the Borrower prepared in accordance with generally accepted accounting principles promulgated by the Financial Accounting Standards Board as modified in accordance with the governmental accounting standards promulgated by the Governmental Accounting Standards Board or as otherwise provided under Montana law, as in effect from time to time (such financial statements to relate to a fiscal year or any period therein for which they are customarily prepared by the Borrower, and, if for a fiscal year and so requested by the DNRC, subject to an audit report and opinion of an accountant or government auditor, as permitted or required by the laws of the State). The Borrower will also provide, with any information so furnished to the DNRC, a certificate of the City Manager and the City Finance Director of the Borrower to the effect that, to the best of their knowledge, such information does not include any untrue statement of a material fact or omit to state any material fact required to be stated therein to make the statements made, in light of the circumstances under which they are made, not misleading. 245 51 ARTICLE XIII MISCELLANEOUS Section 13.1 Notices. All notices or other communications hereunder shall be sufficiently sent or given and shall be deemed sent or given when delivered or mailed by certified mail, postage prepaid, to the parties at the following addresses: DNRC: Department of Natural Resources and Conservation 1539 Eleventh Avenue P. O. Box 201601 Helena, Montana 59620-1601 Attn: Conservation and Resource Development Division Trustee: U.S. Bank National Association c/o Corporate Trust Services 1420 Fifth Avenue, 7th Floor Seattle, Washington 98101 Borrower: City of Bozeman P.O. Box 1230 Bozeman, Montana 59771-1230 Attn: City Finance Director Any of the above parties may, by notice in writing given to the others, designate any further or different addresses to which subsequent notices or other communications shall be sent. Section 13.2 Binding Effect. This Supplemental Resolution shall inure to the benefit of and shall be binding upon the DNRC, the Borrower and their respective permitted successors and assigns. Section 13.3 Severability. If any provision of this Supplemental Resolution shall be determined to be unenforceable at any time, it shall not affect any other provision of the Resolution or the enforceability of that provision at any other time. Section 13.4 Amendments. This Supplemental Resolution may not be effectively amended without the written consent of the DNRC. 246 52 Section 13.5 Applicable Law. This Supplemental Resolution shall be governed by and construed in accordance with the laws of the State. Section 13.6 Captions; References to Sections. The captions in this Supplemental Resolution are for convenience only and do not define or limit the scope or intent of any provisions or Sections of this Supplemental Resolution. References to Articles and Sections are to the Articles and Sections of this Supplemental Resolution, unless the context otherwise requires. Section 13.7 No Liability of Individual Officers, Directors, Trustees, or Commissioners. No recourse under or upon any obligation, covenant or agreement contained in this Supplemental Resolution shall be had against any director, officer or employee, as such, past, present or future, of the DNRC, the DEQ or the Trustee, either directly or through the DNRC, the DEQ or the Trustee, or against any officer, or member of the governing body or employee of the Borrower, past, present or future, as an individual so long as such individual was acting in good faith. Any and all personal liability of every nature, whether at common law or in equity, or by statute or by constitution or otherwise, of any such officer or member of the governing body or employee of the DNRC, the Trustee or the Borrower is hereby expressly waived and released by the Borrower and by the DNRC as a condition of and in consideration for the adoption of this Supplemental Resolution and the making of the Loan. Section 13.8 Payments Due on Holidays. If the date for making any payment or the last date for performance of any act or the exercise of any right, as provided in this Supplemental Resolution or the Series ABC Bonds, shall not be a Business Day, such payments may be made or act performed or right exercised on the next succeeding Business Day with the same force and effect as if done on the nominal date provided in this Supplemental Resolution or the Series ABC Bonds. Section 13.9 Right of Others to Perform Borrower’s Covenants. In the event the Borrower shall fail to make any payment or perform any act required to be performed hereunder, then and in each such case the DNRC or the provider of any Collateral Document may (but shall not be obligated to) remedy such default for the account of the Borrower and make advances for that purpose. No such performance or advance shall operate to release the Borrower from any such default and any sums so advanced by the DNRC or the provider of any Collateral Document 247 53 shall be paid immediately to the party making such advance and shall bear interest at the rate of ten percent (10.00%) per annum from the date of the advance until repaid. The DNRC and the provider of any Collateral Document shall have the right to enter the Davis Lift Station and Norton East Project or the facility or facilities of which the Davis Lift Station and Norton East Project is a part or any other facility which is a part of the System in order to effectuate the purposes of this Section. Section 13.10 Authentication of Transcript. The officers of the Borrower are hereby authorized and directed to furnish to the DNRC and to Bond Counsel certified copies of all proceedings relating to the issuance of the Series ABC Bonds and such other certificates and affidavits as may be required to show the right, power and authority of the Borrower to issue the Series ABC Bonds, and all statements contained in and shown by such instruments, including any heretofore furnished, shall constitute representations of the Borrower as to the truth of the statements of fact purported to be shown thereby. Section 13.11 Repeals and Effective Date. (a) Repeal. All provisions of other resolutions and other actions and proceedings of the Borrower and this Council that are in any way inconsistent with the terms and provisions of this Supplemental Resolution are repealed, amended and rescinded to the full extent necessary to give full force and effect to the provisions of this Supplemental Resolution. (b) Effective Date. This Supplemental Resolution shall take effect immediately. 248 54 PASSED, ADOPTED, AND APPROVED by the City Commission of the City of Bozeman, Montana, at a regular session thereof held on the 15th day of June, 2020. ___________________________________ CHRIS MEHL Mayor ATTEST: ___________________________________ MICHAEL MAAS City Clerk APPROVED AS TO FORM: ___________________________________ GREG SULLIVAN City Attorney 249 A-1 APPENDIX A DESCRIPTION OF THE 2020 DAVIS LIFT STATION AND NORTON EAST PROJECTS The Davis Lift Station and Norton East Project generally consists of construction and installation of one or more lift stations, force mains, sewer collection mains, associated lines and appurtenances, and related improvements. ESTIMATED 2020 DAVIS LIFT STATION AND NORTON EAST PROJECTS BUDGET City of Bozeman 2020A Loan 2020B Loan 20__C Loan Total: Debt Service Reserve - - $ 248,557 $ 225,888 $ 474,445 Bond Counsel & Related costs - - 20,000 20,000 40,000 Engineering-Design Services $942,848 - - - 942,848 Engineering-Construction Eng Services - - 1,100,000 - 1,100,000 Construction - $300,000 6,417,443 5,771,557 12,489,000 Contingency - - - 1,045,943 1,045,555 TOTAL PROJECT COSTS $942,848 $300,000 $7,786,000 $7,063,000 $16,091,848 250 B-1-1 APPENDIX B-1 [Form of the Series 2020A Bond] UNITED STATES OF AMERICA STATE OF MONTANA COUNTY OF GALLATIN CITY OF BOZEMAN SUBORDINATE LIEN SEWER SYSTEM REVENUE BOND (DNRC WATER POLLUTION CONTROL STATE REVOLVING LOAN PROGRAM) TAXABLE SERIES 2020A R-1 $300,000 FOR VALUE RECEIVED, CITY OF BOZEMAN, MONTANA (the “Borrower”), a duly organized municipal corporation and political subdivision of the State of Montana, acknowledges itself to be specially indebted and, for value received, hereby promises to pay to the Department of Natural Resources and Conservation of the State of Montana (the “DNRC”), or its registered assigns, solely out of available Surplus Net Revenues in the Replacement and Depreciation Account or the Surplus Account of its Sewer System Fund (the “Sewer System Fund”), the sum of the principal amounts entered on Schedule A attached hereto under “Total Amount Advanced,” with interest on each such amount from the date such amount is advanced hereunder at the rate of two and one-half percent (2.50%) per annum on the unpaid balance until paid, all subject to the effect of the immediately following paragraph. Principal and interest shall be payable in semiannual installments payable on each January 1 and July 1 (each a “Payment Date”) commencing with the Payment Date that is the first to occur following delivery by the DNRC to the Borrower of a statement that the Borrower’s obligation to repay the principal amount of the 2020A Loan is not forgiven and ending on July 1, 2040, all as described in the Resolution (as hereinafter defined), subject to earlier redemption. Each installment shall be in the amount set forth opposite its due date in Schedule B attached hereto under “Total Loan Payment.” The portion of each such payment consisting of principal and of interest shall be as set forth in Schedule B attached hereto. Upon each disbursement of the 2020A Loan, the DNRC shall enter (or cause to be entered) the principal amount advanced on Schedule A under “Advances” and the total amount advanced under the Resolution (as hereinafter defined), including such advance, under “Total Amount Advanced.” The DNRC shall prepare Schedule B and any revised Schedule B, or cause Schedule B and any revised Schedule B to be prepared, as provided in Section 5.1 of the Resolution authorizing the Bond, and the final Schedule B will reflect repayments under Section 5.1.4 of the Resolution. Schedule B shall be calculated and recalculated on a level debt service basis assuming an interest rate of two and one-half percent (2.50%) per annum. Past-due payments of principal and interest shall bear interest at the rate of ten percent (10.00%) per annum, until paid. Interest shall be calculated on the basis of a 360-day year comprising 12 months of 30 days each. All payments under this Bond shall be made to the registered holder of this Bond, at its address as it appears on the bond register, in lawful money of the United States of America. 251 B-1-2 NOTWITHSTANDING THE FOREGOING PROVISIONS OF THIS BOND, IN THE EVENT THAT THE BORROWER TIMELY DELIVERS A COMPLIANCE CERTIFICATE AND REQUEST (AS DEFINED IN THE RESOLUTION) IN FORM AND SUBSTANCE SATISFACTORY TO THE DNRC AND THE DNRC IN RESPONSE THERETO SUPPLIES TO THE BORROWER A FORGIVENESS STATEMENT, THEN THEREUPON INTEREST SHALL BE DEEMED TO ACCRUE ON THE PRINCIPAL OF THIS BOND FROM THE DATE OF EACH ADVANCE AT THE RATE OF ZERO PERCENT (0.00%) PER ANNUM AND THE BORROWER’S OBLIGATION TO REPAY PRINCIPAL ADVANCED HEREUNDER SHALL BE FORGIVEN, AND THE BORROWER SHALL HAVE NO OBLIGATION TO REPAY THE DNRC OR ITS REGISTERED ASSIGNS ANY AMOUNTS ADVANCED HEREUNDER OR INTEREST THEREON. THIS BOND SHALL THEREUPON BE MARKED “CANCELLED” AND RETURNED BY THE HOLDER TO THE BORROWER, AND THIS BOND SHALL NO LONGER CONSTITUTE AN OBLIGATION OF THE BORROWER OR OF THE SYSTEM (AS HEREINAFTER DEFINED). IN ADDITION, UNTIL THE DELIVERY OF A DETERMINATION STATEMENT BY THE DNRC TO THE BORROWER, THE OBLIGATION OF THE BORROWER TO REPAY THE OUTSTANDING PRINCIPAL AMOUNT HEREOF SHALL BE DEFERRED UNTIL THE PAYMENT DATE FIRST OCCURRING AFTER DELIVERY OF A NONCOMPLIANCE STATEMENT AND INTEREST SHALL BE DEEMED TO ACCRUE ON THE PRINCIPAL OF THIS BOND FROM THE DATE OF EACH ADVANCE UNTIL DELIVERY OF SUCH A NONCOMPLIANCE STATEMENT AT THE RATE OF ZERO PERCENT (0.00%) PER ANNUM. This Bond is one of an issue of Subordinate Lien Sewer System Revenue Bonds of the Borrower authorized to be issued in one or more series from time to time, and constitutes a series in the maximum authorized principal amount of $300,000 (the “Series 2020A Bond”). The Series 2020A Bond is issued to finance a portion of the costs of the construction of certain improvements to the sewer system of the Borrower (the “System”). The Series 2020A Bond is issued pursuant to and in full conformity with the Constitution and laws of the State of Montana thereunto enabling, including Montana Code Annotated, Title 7, Chapter 7, Part 44, as amended, and ordinances and resolutions duly adopted by the governing body of the Borrower, including Resolution No. 4220, adopted by the City Commission of the Borrower on November 16, 2009 (the “Original Resolution”), as amended and supplemented by Resolution Nos. 4234, 4245, 4254, 4299, 4462, and _____, adopted on January 19, 2010, February 16, 2010, May 3, 2010, November 1, 2010, August 5, 2013, and June 15, 2020, respectively (the Original Resolution, as so amended and supplemented, the “Resolution”). Terms used with initial capital letters but not defined herein have the meanings given to them in the Resolution. The Series 2020A Bond is issuable only as a single, fully registered bond. The Series 2020A Bond is issued as a Subordinate Obligation payable out of available Surplus Net Revenues in the Replacement and Depreciation Account or the Surplus Account in the Sewer System Fund. Simultaneously herewith, the Borrower is issuing its Sewer System Revenue Bond (DNRC Water Pollution Control State Revolving Loan Program), Series 2020B (the “Series 2020B Bond”) and will subsequently issue its Sewer System Revenue Bond (DNRC Water Pollution Control State Revolving Loan Program), Series C (the “Series C Bond”), both of which are or will be payable from the Revenue Bond Account in the Fund of the Borrower on a parity with the Borrower’s Sewer System Revenue Bond (DNRC Water Pollution Control State Revolving Loan Program), Series 2010B, its First Amended and Restated Sewer System Revenue Bond (DNRC Water Pollution Control State Revolving Loan Program), Series 252 B-1-3 2010C, its First Amended and Restated Sewer System Revenue Bond (DNRC Water Pollution Control State Revolving Loan Program), Series 2010D, its First Amended and Restated Sewer System Revenue Bond (DNRC Water Pollution Control State Revolving Loan Program), Series 2010F, its First Amended and Restated Sewer System Revenue Bond (DNRC Water Pollution Control State Revolving Loan Program), Series 2010G, and its First Amended and Restated Sewer System Revenue Bond (DNRC Water Pollution Control State Revolving Loan Program), Series 2010H (all such Bonds, including the Series 2020B Bond, and, when issued, the Series C Bond, collectively, the “Outstanding Bonds”). Following the 2020B First Advance, the total amount of each advance will be split equally between the Series 2020A Bond and the Series 2020B Bond, until the entire amount of the Series 2020A Bond is advanced. After the Series 2020A Bond is advanced in full, all advances will be from only the Series 2020B Bond. Reference is made to the Resolution for a more complete statement of the terms and conditions upon which the Series 2020A Bond has been issued, the conditions upon which the Resolution may be amended, the rights, duties and obligations of the Borrower, and the rights of the owners of the Series 2020A Bond. The Borrower may prepay the principal of the Series 2020A Bond only if (i) a Determination Statement has been delivered, (ii) it obtains the prior written consent of the DNRC thereto, and (iii) no Loan Repayment is then delinquent. Any prepayment permitted by the DNRC must be accompanied by payment of accrued interest to the date of prepayment on the amount of principal prepaid. If the Series 2020A Bond is prepaid in part, such prepayments shall be applied to principal payments in inverse order of maturity or as otherwise determined by the DNRC. This Series 2020A Bond, including interest and any premium, is payable solely from the Surplus Net Revenues available for the payment hereof and does not constitute a debt of the Borrower within the meaning of any constitutional or statutory limitation or provision. The Borrower may deem and treat the person in whose name this Series 2020A Bond is registered as the absolute owner hereof, whether this Series 2020A Bond is overdue or not, for the purpose of receiving payment and for all other purposes, and the Borrower shall not be affected by any notice to the contrary. The Series 2020A Bond may be transferred as hereinafter provided. IT IS HEREBY CERTIFIED, RECITED, COVENANTED AND AGREED that the Borrower has duly authorized and will forthwith construct and complete the improvements to the System hereinabove described; that it will prescribe and collect reasonable rates and charges for all services and facilities afforded by the System, including all additions thereto and replacements and improvements thereof, and has created a special Sewer System Fund into which the gross revenues of the System will be paid, and a separate and special Replacement and Depreciation Account and Surplus Account in that Sewer System Fund, into which will be paid, subject to the prior lien thereon of the Operating Account, the Revenue Bond Account and the Reserve Account, Surplus Net Revenues; that the rates and charges for the System 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, to produce in each fiscal year Net Revenues in excess of such current expenses, equal to at least 110% of the maximum amount of 253 B-1-4 principal and interest payable from the Revenue Bond Account in any subsequent fiscal year and to maintain the balance in the Reserve Account at the Reserve Requirement and to produce in each fiscal year adequate Net Revenues to pay the principal of and interest on the Outstanding Bonds, as and when due; that additional Bonds issued may be issued and made payable from the Revenue Bond Account on a parity with the Outstanding Bonds and other parity 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 Outstanding Bonds and any additional Bonds on such Net Revenues and such obligations are payable only from Surplus Net Revenues (as is the case with this Series 2020A Bond); that all provisions for the security of the holder of this Series 2020A 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 Borrower to be done, to exist, to happen and to be performed in order to make this Series 2020A Bond a valid and binding special obligation of the Borrower according to its terms have been done, do exist, have happened and have been performed as so required; and that this Series 2020A Bond and the interest hereon are payable solely out of available Surplus Net Revenues in the Replacement and Depreciation Account or the Surplus Account of the Sewer System Fund and do not constitute a debt of the Borrower within the meaning of any constitutional or statutory limitation or provision and the issuance of the Series 2020A Bond does not cause either the general or the special indebtedness of the Borrower to exceed any constitutional or statutory limitation. IN WITNESS WHEREOF, the City of Bozeman, Montana, by its governing body, has caused this Bond to be executed by the signatures of the Mayor, the City Manager, and the City Clerk, and has caused the official seal of the Borrower to be affixed hereto, and has caused this Bond to be dated as of the day of _______, 2020. ______________________________________ Mayor (Seal) _______________________________________ City Manager _______________________________________ City Clerk 254 B-1-5 REGISTRATION AND TRANSFER This Bond shall be fully registered as to both principal and interest. No transfer of this Bond shall be valid unless and until (1) the registered holder of the Bond, or his duly authorized attorney or legal representative, executes the form of assignment appearing on this Bond, and (2) the City Finance Director as bond registrar (the “Registrar”), has duly noted the transfer on the Bond and recorded the transfer on the Registrar’s registration books. The Borrower shall be entitled to deem and treat the person in whose name this Bond is registered as absolute owner thereof for all purposes, notwithstanding any notice to the contrary. Payments on account of the Bond shall be made only to the order of the registered holder thereof, and all such payments shall be valid and effectual to satisfy and discharge the Borrower’s liability upon the Bond to the extent of the sum or sums so paid. REGISTER The ownership of the outstanding principal balance of this Bond and the interest accruing thereon is registered on the books of the City of Bozeman, Montana in the name of the registered holder appearing on the first page hereof or as last noted below: Date of Name and Address Signature of Registration of Registered Holder City Finance Director , 2020 Department of Natural Resources and Conservation 1539 Eleventh Avenue Helena, MT 59620 THE FOLLOWING ENTRIES ARE TO BE MADE ONLY BY THE BOND REGISTRAR UPON REGISTRATION OF EACH TRANSFER The City Finance Director of the City, acting as Bond Registrar, has transferred, on the books of the City, on the date last noted below, ownership of the principal amount of and the accrued interest on this Bond to the new registered holder noted next to such date, except for amounts of principal and interest theretofore paid. Date of Transfer Name of New Registered Holder Signature of Bond Registrar 255 B-1-6 FORM OF ASSIGNMENT For value received, this Bond is hereby transferred and assigned by the undersigned holder, without recourse, to on this day of , . By: (Authorized Signature) For: (Holder) 256 B-1-7 SCHEDULE A SCHEDULE OF AMOUNTS ADVANCED Date Advances Total Amount Advanced Notation Made By 257 B-1-8 SCHEDULE B Total Loan Date Principal Interest Payment 258 B-2-1 APPENDIX B-2 [Form of the Series 2020B Bond] UNITED STATES OF AMERICA STATE OF MONTANA COUNTY OF GALLATIN CITY OF BOZEMAN SEWER SYSTEM REVENUE BOND (DNRC WATER POLLUTION CONTROL STATE REVOLVING LOAN PROGRAM) SERIES 2020B R-1 $7,786,000 FOR VALUE RECEIVED, CITY OF BOZEMAN, MONTANA (the “Borrower”), a duly organized municipal corporation and political subdivision of the State of Montana, acknowledges itself to be specially indebted and, for value received, hereby promises to pay to the Department of Natural Resources and Conservation of the State of Montana (the “DNRC”), or its registered assigns, solely from the Revenue Bond Account of its Sewer System Fund, the principal sum equal to the sum of the amounts entered on Schedule A attached hereto under “Total Amount Advanced,” with interest on each such amount from the date such amount is advanced hereunder at the rate of two and one-half percent (2.50%) per annum on the unpaid balance until paid. Principal and interest shall be payable in semiannual installments payable on each January 1 and July 1 (each a “Loan Repayment Date”) commencing January 1, 2021 and concluding on July 1, 2040. The portion of each such payment consisting of principal and of interest shall be as set forth in Schedule B hereto. Upon each disbursement of 2020B Loan amounts to the Borrower pursuant to the Resolution (defined below), the DNRC shall enter (or cause to be entered) the amount advanced on Schedule A under “Advances” and the total amount advanced under the Resolution (as hereinafter defined), including such disbursement, under “Total Amount Advanced.” The DNRC shall prepare Schedule B and any revised Schedule B, or cause Schedule B and any revised Schedule B to be prepared, as provided in Section 5.1 of the Resolution, and the final Schedule B will reflect repayments under Section 5.1.4 of the Resolution. Schedule B shall be calculated and recalculated on a level debt service basis assuming an interest rate of 2.50% per annum. Past-due payments of principal and interest shall bear interest at the rate of ten percent (10.00%) per annum, until paid. Interest shall be calculated on the basis of a 360-day year comprising 12 months of 30 days each. All payments under this Bond shall be made to the registered holder of this Bond, at its address as it appears on the Bond register, in lawful money of the United States of America. This Bond is one of an issue of Sewer System Revenue Bonds of the Borrower authorized to be issued in one or more series from time to time, and constitutes a series in the maximum authorized principal amount of $7,786,000 (the “Series 2020B Bond”). The Series 2020B Bond is issued to finance a portion of the costs of the construction of certain improvements to the sewer system of the Borrower (the “System”), to fund deposits to the Reserve Account, and 259 B-2-2 to pay costs of issuance of the Series 2020B Bond. The Series 2020B Bond is issued pursuant to and in full conformity with the Constitution and laws of the State of Montana thereunto enabling, including Montana Code Annotated, Title 7, Chapter 7, Part 44, as amended, and ordinances and resolutions duly adopted by the governing body of the Borrower, including Resolution No. 4220 of the Borrower adopted on November 16, 2009 (the “Original Resolution”), as amended and supplemented by Resolution Nos. 4234, 4245, 4254, 4299, 4462, and _____, adopted on January 19, 2010, February 16, 2010, May 3, 2010, November 1, 2010, August 5, 2013, and June 15, 2020, respectively (the Original Resolution, as so amended and supplemented, the “Resolution”). Terms used with initial capital letters but not defined herein have the meanings given to them in the Resolution. The Series 2020B Bond is issuable only as a single, fully registered bond. The Series 2020B Bond is issued on a parity with the Borrower’s Sewer System Revenue Bond (DNRC Water Pollution Control State Revolving Loan Program), Series 2010B, its First Amended and Restated Sewer System Revenue Bond (DNRC Water Pollution Control State Revolving Loan Program), Series 2010C, its First Amended and Restated Sewer System Revenue Bond (DNRC Water Pollution Control State Revolving Loan Program), Series 2010D, its First Amended and Restated Sewer System Revenue Bond (DNRC Water Pollution Control State Revolving Loan Program), Series 2010F, its First Amended and Restated Sewer System Revenue Bond (DNRC Water Pollution Control State Revolving Loan Program), Series 2010G, and its First Amended and Restated Sewer System Revenue Bond (DNRC Water Pollution Control State Revolving Loan Program), Series 2010H (collectively the “Outstanding Bonds”). Simultaneously herewith, the Borrower is issuing its Subordinate Lien Sewer System Revenue Bond (DNRC Water Pollution Control State Revolving Loan Program), Taxable Series 2020A (the “Series 2020A Bond”). The 2020B First Advance is made as of the date hereof. The Borrower is also authorized, pursuant to the Resolution, to issue the Sewer System Revenue Bond (DNRC Water Pollution Control State Revolving Loan Program), Series C (the “Series C Bond”), which will be issued following disbursement in full of the principal amount of the Series 2020B Bond. Reference is made to the Resolution for a more complete statement of the terms and conditions upon which the Series 2020B Bond has been issued, the Net Revenues of the System pledged and appropriated for the payment and security thereof, the conditions upon which additional Bonds may be issued under the Resolution and made payable from such Net Revenues on a parity with the Outstanding Bonds, the Series 2020B Bond, and the Series C Bond, or otherwise, the conditions upon which the Resolution may be amended, the rights, duties and obligations of the Borrower, and the rights of the owners of the Series 2020B Bond. The Borrower may prepay the principal of the Series 2020B Bond only if (i) a Determination Statement has been delivered, (ii) it obtains the prior written consent of the DNRC thereto, and (iii) no Loan Repayment is then delinquent. Any prepayment permitted by the DNRC must be accompanied by payment of accrued interest to the date of prepayment on the amount of principal prepaid. If the Series 2020B Bond is prepaid in part, such prepayments shall be applied to principal payments in inverse order of maturity or otherwise determined by the DNRC. The Series 2020B Bond, including interest and premium, if any, is payable solely from the Net Revenues pledged for the payment thereof and does not constitute a debt of the Borrower within the meaning of any constitutional or statutory limitation or provision. 260 B-2-3 The Borrower may deem and treat the person in whose name this Series 2020B Bond is registered as the absolute owner hereof, whether this Series 2020B Bond is overdue or not, for the purpose of receiving payment and for all other purposes, and the Borrower shall not be affected by any notice to the contrary. The Series 2020B Bond may be transferred as hereinafter provided. IT IS HEREBY CERTIFIED, RECITED, COVENANTED AND AGREED that the Borrower will prescribe and collect reasonable rates and charges for all services and facilities afforded by the System, including all additions thereto and replacements and improvements thereof, and has created a special Sewer System Fund into which the gross revenues of the System will be paid, and a separate and special Revenue Bond Account in that Sewer System Fund, into which will be paid each month, from and as a first and prior lien on the Net Revenues then on hand, an amount equal to not less than the sum of one-sixth of the interest to become due within the next six months and one-twelfth of the principal to become due within the next twelve months with respect to all Bonds payable semiannually from the Revenue Bond Account; that the Borrower has created a Reserve Account in the Sewer System Fund into which shall be paid additional Net Revenues, after required credits to the Revenue Bond Account, sufficient to establish and maintain a reserve therein equal to, as of the date of calculation, the Reserve Requirement; that the Revenue Bond Account will be used only to pay the principal of, premium, if any, and interest on the Outstanding Bonds, the Series 2020B Bond, the Series C Bond, when issued, and any additional Bonds issued pursuant to the Resolution on a parity therewith; that the rates and charges for the System 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 equal to at least 110% of the maximum amount of principal and interest payable from the Revenue Bond Account in any subsequent fiscal year; that additional Bonds may be issued and made payable from the Revenue Bond Account on a parity with the Outstanding Bonds, the Series 2020B Bond, the Series C Bond, when issued, and other 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 Outstanding Bonds, the Series 2020B Bond, the Series C Bond, when issued, and additional Bonds on such Net Revenues and such obligations are payable only from Surplus Net Revenues (as is the case with the Series 2020A Bond); that all provisions for the security of the holder of this Series 2020B 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 Borrower to be done, to exist, to happen and to be performed in order to make this Series 2020B Bond a valid and binding special obligation of the Borrower according to its terms have been done, do exist, have happened and have been performed as so required; and that this Series 2020B Bond and the interest hereon are payable solely from the Net Revenues of the System pledged and appropriated to the Revenue Bond Account and do not constitute a debt of the Borrower within the meaning of any constitutional or statutory limitation or provision and the issuance of the Series 2020B Bond does not cause either the general or the special indebtedness of the Borrower to exceed any constitutional or statutory limitation. 261 B-2-4 IN WITNESS WHEREOF, the City of Bozeman, Montana, by its governing body, has caused this Bond to be executed by the signatures of the Mayor, the City Manager, and the City Clerk, and has caused the official seal of the Borrower to be affixed hereto, and has caused this Bond to be dated as of the day of ___________, 2020. ______________________________________ Mayor (Seal) _______________________________________ City Manager _______________________________________ City Clerk 262 B-2-5 REGISTRATION AND TRANSFER This Bond shall be fully registered as to both principal and interest. No transfer of this Bond shall be valid unless and until (1) the registered holder of the Bond, or his duly authorized attorney or legal representative, executes the form of assignment appearing on this Bond, and (2) the City Finance Director as bond registrar (the “Registrar”), has duly noted the transfer on the Bond and recorded the transfer on the Registrar’s registration books. The Borrower shall be entitled to deem and treat the person in whose name this Bond is registered as absolute owner thereof for all purposes, notwithstanding any notice to the contrary. Payments on account of the Bond shall be made only to the order of the registered holder thereof, and all such payments shall be valid and effectual to satisfy and discharge the Borrower’s liability upon the Bond to the extent of the sum or sums so paid. REGISTER The ownership of the outstanding principal balance of this Bond and the interest accruing thereon is registered on the books of the City of Bozeman, Montana in the name of the registered holder appearing on the first page hereof or as last noted below: Date of Name and Address Signature of Registration of Registered Holder City Finance Director , 2020 Department of Natural Resources and Conservation 1539 Eleventh Avenue Helena, MT 59620 THE FOLLOWING ENTRIES ARE TO BE MADE ONLY BY THE BOND REGISTRAR UPON REGISTRATION OF EACH TRANSFER The City Finance Director of the City, acting as Bond Registrar, has transferred, on the books of the City, on the date last noted below, ownership of the principal amount of and the accrued interest on this Bond to the new registered holder noted next to such date, except for amounts of principal and interest theretofore paid. Date of Transfer Name of New Registered Holder Signature of Bond Registrar 263 B-2-6 FORM OF ASSIGNMENT For value received, this Bond is hereby transferred and assigned by the undersigned holder, without recourse, to on this day of , . By: (Authorized Signature) For: (Holder) 264 B-2-7 SCHEDULE A SCHEDULE OF AMOUNTS ADVANCED Date Advances Total Amount Advanced Notation Made By 265 B-2-8 SCHEDULE B Total Loan Date Principal Interest Payment 266 B-3-1 APPENDIX B-3 [Form of the Series C Bond] UNITED STATES OF AMERICA STATE OF MONTANA COUNTY OF GALLATIN CITY OF BOZEMAN WATER SYSTEM REVENUE BOND (DNRC WATER POLLUTION CONTROL STATE REVOLVING LOAN PROGRAM) SERIES C [DESIGNATION TO BE FINALIZED UPON ISSUANCE] R-1 $7,063,000 FOR VALUE RECEIVED, CITY OF BOZEMAN, MONTANA (the “Borrower”), a duly organized municipal corporation and political subdivision of the State of Montana, acknowledges itself to be specially indebted and hereby promises to pay to the Department of Natural Resources and Conservation of the State of Montana (the “DNRC”), or its registered assigns, solely from the Revenue Bond Account of its Sewer System Fund, the principal sum equal to the sum of the amounts entered on Schedule A attached hereto under “Total Amount Advanced,” with interest on each such amount from the date such amount is advanced hereunder at the rate of two and one-half percent (2.50%) per annum on the unpaid balance until paid. Principal and interest shall be payable in semiannual installments payable on each January 1 and July 1 (each a “Loan Repayment Date”) commencing on the date first set forth in the column headed “Date” or “Payment Date” on Schedule B attached hereto (i.e., _________, 20__) and concluding on _________ 1, 20__. The portion of each such payment consisting of principal and of interest shall be as set forth in Schedule B hereto. Upon each disbursement of Loan amounts to the Borrower, the DNRC shall enter (or cause to be entered) the amount advanced on Schedule A under “Advances” and the total amount advanced under the Resolution (as hereinafter defined), including such disbursement, under “Total Amount Advanced.” The DNRC shall prepare Schedule B and any revised Schedule B, or cause Schedule B and any revised Schedule B to be prepared, as provided in Section 5.1 of the Resolution, and the final Schedule B will reflect repayments under Section 5.1.4 of the Resolution. Schedule B shall be calculated and recalculated on a level debt service basis assuming an interest rate of 2.50% per annum. Past-due payments of principal and interest shall bear interest at the rate of ten percent (10.00%) per annum, until paid. Interest shall be calculated on the basis of a 360-day year comprising 12 months of 30 days each. All payments under this Bond shall be made to the registered holder of this Bond, at its address as it appears on the Bond register, in lawful money of the United States of America. This Bond is one of an issue of Sewer System Revenue Bonds of the Borrower authorized to be issued in one or more series from time to time, and constitutes a series in the maximum authorized principal amount of $7,063,000 (the “Series C Bond” [or other final designation]). The Series C Bond is issued to finance a portion of the costs of the construction of 267 B-3-2 certain improvements to the sewer system of the Borrower (the “System”), to fund deposits to the Reserve Account, and to pay costs of issuance of the Series C Bond. The Series C Bond is issued pursuant to and in full conformity with the Constitution and laws of the State of Montana thereunto enabling, including Montana Code Annotated, Title 7, Chapter 7, Part 44, as amended, and ordinances and resolutions duly adopted by the governing body of the Borrower, including Resolution No. 4220 of the Borrower adopted on November 16, 2009 (the “Original Resolution”), as amended and supplemented by Resolution Nos. 4234, 4245, 4254, 4299, 4462, and _____, adopted on January 19, 2010, February 16, 2010, May 3, 2010, November 1, 2010, August 5, 2013, and June 15, 2020, respectively (the Original Resolution, as so amended and supplemented, the “Resolution”). Terms used with initial capital letters but not defined herein have the meanings given to them in the Resolution. The Series C Bond is issuable only as a single, fully registered bond. The Series C Bond is issued on a parity with the Borrower’s Sewer System Revenue Bond (DNRC Water Pollution Control State Revolving Loan Program), Series 2010B, its First Amended and Restated Sewer System Revenue Bond (DNRC Water Pollution Control State Revolving Loan Program), Series 2010C, its First Amended and Restated Sewer System Revenue Bond (DNRC Water Pollution Control State Revolving Loan Program), Series 2010D, its First Amended and Restated Sewer System Revenue Bond (DNRC Water Pollution Control State Revolving Loan Program), Series 2010F, its First Amended and Restated Sewer System Revenue Bond (DNRC Water Pollution Control State Revolving Loan Program), Series 2010G, its First Amended and Restated Sewer System Revenue Bond (DNRC Water Pollution Control State Revolving Loan Program), Series 2010H, and its Sewer System Revenue Bond (DNRC Water Pollution Control State Revolving Loan Program), Series 2020B (the “Series 2020B Bond”) (collectively, the “Outstanding Bonds”). Reference is made to the Resolution for a more complete statement of the terms and conditions upon which the Series C Bond has been issued, the Net Revenues of the System pledged and appropriated for the payment and security thereof, the conditions upon which additional Bonds may be issued under the Resolution and made payable from such Net Revenues on a parity with the Outstanding Bonds, the Series 2020B Bond, the Series C Bond and any other parity Bond (collectively, the “Bonds”) or otherwise, the conditions upon which the Resolution may be amended, the rights, duties and obligations of the Borrower, and the rights of the owners of the Series C Bond. The Borrower may prepay the principal of the Series C Bond only if (i) a Determination Statement has been delivered, (ii) it obtains the prior written consent of the DNRC thereto, and (iii) no Loan Repayment is then delinquent. Any prepayment permitted by the DNRC must be accompanied by payment of accrued interest to the date of prepayment on the amount of principal prepaid. If the Series C Bond is prepaid in part, such prepayments shall be applied to principal payments in inverse order of maturity or otherwise determined by the DNRC. The Series C Bond, including interest and premium, if any, is payable solely from the Net Revenues pledged for the payment hereof and does not constitute a debt of the Borrower within the meaning of any constitutional or statutory limitation or provision. The Borrower may deem and treat the person in whose name this Series C Bond is registered as the absolute owner hereof, whether this Series C Bond is overdue or not, for the 268 B-3-3 purpose of receiving payment and for all other purposes, and the Borrower shall not be affected by any notice to the contrary. The Series C Bond may be transferred as hereinafter provided. IT IS HEREBY CERTIFIED, RECITED, COVENANTED AND AGREED that the Borrower will prescribe and collect reasonable rates and charges for all services and facilities afforded by the System, including all additions thereto and replacements and improvements thereof, and has created a special Sewer System Fund into which the gross revenues of the System will be paid, and a separate and special Revenue Bond Account in that Sewer System Fund, into which will be paid each month, from and as a first and prior lien on the Net Revenues then on hand, an amount equal to not less than the sum of one-sixth of the interest to become due within the next six months and one-twelfth of the principal to become due within the next twelve months with respect to all Bonds payable semiannually from the Revenue Bond Account; that the Borrower has created a Reserve Account in the Sewer System Fund into which shall be paid additional Net Revenues, after required credits to the Revenue Bond Account, sufficient to establish and maintain a reserve therein equal to, as of the date of calculation, the Reserve Requirement; that the Revenue Bond Account will be used only to pay the principal of, premium, if any, and interest on the Outstanding Bonds, the Series C Bond, and any additional Bonds issued pursuant to the Resolution on a parity therewith; that the rates and charges for the System 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 equal to at least 110% of the maximum amount of principal and interest payable from the Revenue Bond Account in any subsequent fiscal year; that additional Bonds may be issued and made payable from the Revenue Bond Account on a parity with the Outstanding Bonds, the Series C Bond, and other 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 made subordinate to the lien of the Outstanding Bonds, the Series C Bond, and additional parity Bonds on such Net Revenues and such obligations are payable only from Surplus Net Revenues; that all provisions for the security of the holder of this Series C 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 Borrower to be done, to exist, to happen and to be performed in order to make this Series C Bond a valid and binding special obligation of the Borrower according to its terms have been done, do exist, have happened and have been performed as so required; and that this Series C Bond and the premium, if any, and interest hereon are payable solely from the Net Revenues of the System pledged and appropriated to the Revenue Bond Account and do not constitute a debt of the Borrower within the meaning of any constitutional or statutory limitation or provision and the issuance of the Series C Bond does not cause either the general or the special indebtedness of the Borrower to exceed any constitutional or statutory limitation. 269 B-3-4 IN WITNESS WHEREOF, the City of Bozeman, Montana, by its governing body, has caused this Bond to be executed by the signatures of the Mayor, the City Manager, and the City Clerk, and has caused the official seal of the Borrower to be affixed hereto, and has caused this Bond to be dated as of the day of ___________, 2020. ______________________________________ Mayor (Seal) _______________________________________ City Manager _______________________________________ City Clerk 270 B-3-5 REGISTRATION AND TRANSFER This Bond shall be fully registered as to both principal and interest. No transfer of this Bond shall be valid unless and until (1) the registered holder of the Bond, or his duly authorized attorney or legal representative, executes the form of assignment appearing on this Bond, and (2) the City Finance Director as bond registrar (the “Registrar”), has duly noted the transfer on the Bond and recorded the transfer on the Registrar’s registration books. The Borrower shall be entitled to deem and treat the person in whose name this Bond is registered as absolute owner thereof for all purposes, notwithstanding any notice to the contrary. Payments on account of the Bond shall be made only to the order of the registered holder thereof, and all such payments shall be valid and effectual to satisfy and discharge the Borrower’s liability upon the Bond to the extent of the sum or sums so paid. REGISTER The ownership of the outstanding principal balance of this Bond and the interest accruing thereon is registered on the books of the City of Bozeman, Montana in the name of the registered holder appearing on the first page hereof or as last noted below: Date of Name and Address Signature of Registration of Registered Holder City Finance Director , 2020 Department of Natural Resources and Conservation 1539 Eleventh Avenue Helena, MT 59620 THE FOLLOWING ENTRIES ARE TO BE MADE ONLY BY THE BOND REGISTRAR UPON REGISTRATION OF EACH TRANSFER The City Finance Director of the City, acting as Bond Registrar, has transferred, on the books of the City, on the date last noted below, ownership of the principal amount of and the accrued interest on this Bond to the new registered holder noted next to such date, except for amounts of principal and interest theretofore paid. Date of Transfer Name of New Registered Holder Signature of Bond Registrar 271 B-3-6 FORM OF ASSIGNMENT For value received, this Bond is hereby transferred and assigned by the undersigned holder, without recourse, to on this day of , . By: (Authorized Signature) For: (Holder) 272 B-3-7 SCHEDULE A SCHEDULE OF AMOUNTS ADVANCED Date Advances Total Amount Advanced Notation Made By 273 B-3-8 SCHEDULE B Total Loan Date Principal Interest Payment 274 C-1 APPENDIX C ADDITIONAL AGREEMENTS, REPRESENTATIONS AND COVENANTS NONE 275 D-1 APPENDIX D $15,149,000 Sewer System Revenue Bonds (DNRC Water Pollution Control State Revolving Loan Program) consisting of $300,000 Subordinate Lien Taxable Series 2020A Bond $7,786,000 Series 2020B Bond and $7,063,000 Series C Bond City of Bozeman, Montana COMPLIANCE CERTIFICATE AND REQUEST We, ___________________, ____________________, and ____________, hereby certify that we are on the date hereof the duly qualified and acting Mayor, the City Finance Director, and the City Clerk, respectively, of the City of Bozeman, Montana (the “Borrower”), and that: 1. Pursuant to Resolution No. 4220 of the Borrower adopted on November 16, 2009, as amended and supplemented by Resolution Nos. 4234, 4245, 4254, 4299, and 4462, adopted on January 19, 2010, February 16, 2010, May 3, 2010, November 1, 2010, and August 5, 2013, respectively (as so amended and supplemented, the “Original Resolution”), and as further amended and supplemented by Resolution No. ____, adopted on June 15, 2020, entitled “Resolution Relating to $15,149,000 Sewer System Revenue Bonds (DNRC Water Pollution Control State Revolving Loan Program), Consisting of $300,000 Subordinate Lien Taxable Series 2020A Bond, $7,786,000 Series 2020B Bond and $7,063,000 Series C Bond; Authorizing the Issuance and Fixing the Terms and Conditions Thereof” (the “Supplemental Resolution”), the Borrower issued its Subordinate Lien Sewer System Revenue Bond (DNRC Water Pollution Control State Revolving Loan Program), Taxable Series 2020A, dated, as originally issued, as of __________, 2020, in the maximum aggregate principal amount of $300,000 (the “Series 2020A Bond”), and its Sewer System Revenue Bond (DNRC Water Pollution Control State Revolving Loan Program), Series 2020B, dated, as originally issued, as of __________, 2020, in the maximum aggregate principal amount of $7,786,000 (the “Series 2020B Bond”), and the Borrower is authorized to issue its Sewer System Revenue Bond (DNRC Water Pollution Control State Revolving Loan Program), Series C, dated, as originally issued, as of __________, 2020, in the maximum aggregate principal amount of $7,063,000 (the “Series C Bond”). The Borrower has reviewed the Supplemental Resolution, including, without limitation, Articles II and III thereof, and the definitions relating thereto. The Borrower acknowledges and agrees that the Series 2020A Bond evidences a loan made to the Borrower from the DNRC from funds made available to the DNRC from the EPA Capitalization Grant, and that this Certificate is being relied upon by the DNRC for ensuring compliance with requirements applicable to the Borrower, the DNRC, and the Davis Lift Station and Norton East Project. Capitalized terms used herein without definition shall have the meanings given them in the Original Resolution or the Supplemental Resolution. 2. The Series 2020A Bond is issued to finance a portion of the costs of construction and installation of various improvements to the System, generally described as the Davis Lift Station and Norton East Project (the “Davis Lift Station and Norton East Project”) in the 276 D-2 Supplemental Resolution. Construction of the Davis Lift Station and Norton East Project has complied with all federal and state standards, including, without limitation, EPA regulations and standards. The Davis Lift Station and Norton East Project is expected to be completed and placed in service on or about _________, 20__. 3. Costs of the Davis Lift Station and Norton East Project in the amount of $___________ have been paid as of the date of delivery of this Certificate. The Borrower hereby waives its right to any remaining 2020A Committed Amount not advanced or to be advanced upon delivery hereof. The Borrower specifically confirms and agrees that any remaining amounts of the Davis and Norton ABC Loans to be lent to the Borrower, if any, shall be evidenced by the Series 2020B Bond and the Series C Bond. 4. As of the date hereof, the Borrower has spent the following amounts in connection with the Davis Lift Station and Norton East Project and costs related thereto: Debt Service Reserve Bond Counsel & Related Costs Engineering - Design Services Engineering – Construction Eng Services Construction Contingency TOTAL PROJECT COSTS Of such amounts, $__________ were paid from advances of proceeds of the Series 2020A Bond. 5. The Trustee has delivered to the Borrower a copy of Schedule B to be attached to the Series 2020A Bond, which reflects the amortization of all advances made or to be made on the date hereof of proceeds of the Series 2020A Bond (i.e., $________). The Borrower hereby acknowledges and agrees that Schedule B has been calculated in accordance with the provisions of the Resolution and the Indenture, and that the Series 2020A Bond, with said Schedule B attached thereto, has been duly issued pursuant to the Resolution and is a valid and binding obligation of the Borrower in accordance with its terms and the terms of the Resolution; provided, however, if the DNRC delivers a Forgiveness Statement, the Borrower’s obligation to repay the principal of the Series 2020A Bond and interest thereon is thereupon forgiven, and if the DNRC delivers a Noncompliance Certificate, amounts advanced under the 2020A Loan evidenced by the Series 2020A Bond shall bear interest from and after the first advance of principal of the Series 2020A Bond at the rate of two and one-half percent (2.50%) per annum, all as described in Section 5.1.2 of the Supplemental Resolution authorizing the Series 2020A Bond. 6. The representations of the Borrower contained in Articles II and III of the Supplemental Resolution are true and complete as of the date hereof as if made on this date, 277 D-3 except to the extent that the Borrower has specifically advised the DEQ and the DNRC otherwise in writing. 7. No default in any covenant or agreement on the part of the Borrower contained in the Resolution has occurred and is continuing. 8. The Borrower is delivering this Certificate to the DNRC, in part, to ensure compliance with EPA regulations and standards. The Borrower certifies that all laborers and mechanics employed by contractors and subcontractors on the Davis Lift Station and Norton East Project have been and will be paid wages at rates not less than those prevailing on projects of a character similar in the locality as determined by the United States Secretary of Labor in accordance with Subchapter IV of Chapter 31 of Title 40, United States Code, and that the iron and steel products used in the 2019 Project comply with the “American Iron and Steel” requirements of Section 436 of the Consolidated Appropriations Act of 2014 (P.L. 113-76), as those requirements are further interpreted by applicable EPA guidance. 9. The Borrower acknowledges and agrees that this Certificate completed by the Borrower in form satisfactory to the DNRC must be executed and delivered to the DNRC by the date that is 30 days after receipt of the form of this Certificate from the DNRC. By submitting this Certificate, the Borrower requests that the DNRC forgive the obligation of the Borrower to repay the principal of the Series 2020A Bond, together with interest thereon. The Borrower acknowledges and agrees that (i) the forgiveness of principal of and interest on the Series 2020A Bond by the DNRC is contingent on the timely delivery of this Certificate by the Borrower in satisfactory form as determined in the DNRC’s sole and complete discretion, (ii) the DNRC has no obligation to grant such forgiveness; and (iii) if the DNRC delivers to the Borrower a Noncompliance Certificate, (a) the obligation of the Borrower to repay the principal of the Series 2020A Bond plus interest thereon shall continue in full force and effect until the principal of the Series 2020A Bond advanced and interest thereon are paid in full, as set forth in Schedule B delivered pursuant to paragraph 5 above, and as provided in the Series 2020A Bond and the Supplemental Resolution, and (b) the Borrower shall, as necessary, within the 3-month period specified in the Supplemental Resolution, adjust its rates and charges to produce Net Revenues and Surplus Net Revenues required by the rate covenant in the Supplemental Resolution. 278 D-4 WITNESS our hands on behalf of the Borrower as of this _____ day of __________, 2020. CITY OF BOZEMAN, MONTANA By ________________________________ Mayor By ________________________________ City Finance Director By ________________________________ City Clerk 279 CERTIFICATE AS TO RESOLUTION AND ADOPTING VOTE I, the undersigned, being the duly qualified and acting recording officer of the City of Bozeman, Montana (the “City”), hereby certify that the attached resolution is a true copy of Resolution No. ________, entitled: “RESOLUTION RELATING TO $15,149,000 SEWER SYSTEM REVENUE BONDS (DNRC WATER POLLUTION CONTROL STATE REVOLVING LOAN PROGRAM), CONSISTING OF $300,000 SUBORDINATE LIEN TAXABLE SERIES 2020A BOND, $7,786,000 SERIES 2020B BOND, AND $7,063,000 SERIES C BOND; AUTHORIZING THE ISSUANCE AND FIXING THE TERMS AND CONDITIONS THEREOF” (the “Resolution”), on file in the original records of the City in my legal custody; that the Resolution was duly adopted by the City Commission of the City at its regular meeting on June 15, 2020, and that the meeting was duly held by the City Commission 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 Commissioners voted in favor thereof: ; voted against the same: ; abstained from voting thereon: ; or were absent: . WITNESS my hand officially this _____ day of June, 2020. MICHAEL MAAS City Clerk 280