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HomeMy WebLinkAboutApprove Resolution 4462, Reduction of interest rates on Sewer System Revenue Bonds Commission Memorandum REPORT TO: Honorable Mayor and City Commission FROM: Anna Rosenberry, Administrative Services Director Carolyn Murray, Accountant SUBJECT: RESOLUTION NO. 4462 - . RESOLUTION RELATING TO FIRST AMENDED AND RESTATED SEWER SYSTEM REVENUE BONDS (DNRC WATER POLLUTION CONTROL STATE REVOLVING LOAN PROGRAM); AMENDING AUTHORIZING RESOLUTIONS ADOPTED JANUARY 19, 2010, FEBRUARY 16, 2010, MAY 3, 2010, AND NOVEMBER 1, 2010 AND BONDS MEETING DATE: August 5, 2013 AGENDA ITEM TYPE: Consent RECOMMENDATION: Adopt Resolution No. 4462 BACKGROUND: The City has outstanding Wastewater System loans with the Montana Department of Natural Resources and Conservation (DNRC) to finance to construction of the Water Reclamation Facility. These loans were originally issued with a 3.75% interest rate. Due to interest rate conditions, the DNRC is agreeing to an interest rate reduction to 3.00%. By completion of the project, we anticipate a total of $22.7 Million borrowed from DNRC for the project. UNRESOLVED ISSUES: None ALTERNATIVES: Do not approve the interest rate reduction; continue making interest payments at the higher interest rate (higher cost to the utility) FISCAL EFFECTS: This interest rate reduction will save the Wastewater Fund an average of $99,047 per year, totaling $1,782,853 over the remaining life of the loan. Attachments: Resolution 4462 Report compiled on: July 24, 2013 87 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. 4462 entitled: “RESOLUTION RELATING TO FIRST AMENDED AND RESTATED SEWER SYSTEM REVENUE BONDS (DNRC WATER POLLUTION CONTROL STATE REVOLVING LOAN PROGRAM); AMENDING AUTHORIZING RESOLUTIONS ADOPTED JANUARY 19, 2010, FEBRUARY 16, 2010, MAY 3, 2010, AND NOVEMBER 1, 2010 AND BONDS” (the “Resolution”), on file in the original records of the City in my legal custody; that the Resolution was duly adopted by the City Commission of the City at a meeting on August 5, 2013, 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 August, 2013. City Clerk RESOLUTION NO. 4462 RESOLUTION RELATING TO FIRST AMENDED AND RESTATED SEWER SYSTEM REVENUE BONDS (DNRC WATER POLLUTION CONTROL STATE REVOLVING LOAN PROGRAM); AMENDING AUTHORIZING RESOLUTIONS ADOPTED JANUARY 19, 2010, FEBRUARY 16, 2010, MAY 3, 2010, AND NOVEMBER 1, 2010 AND BONDS BE IT RESOLVED by the City Commission of the City of Bozeman, Montana (the “Issuer”), as follows: Section 1. Recitals. 1.01. Issuance of Bonds. Pursuant to Resolution No. 4220 of the Issuer adopted by the City Commission on November 16, 2009 (the “Original Resolution”), as amended and supplemented by Resolution Nos. 4234 (the “2010ABC Resolution”), 4245 (the “2010D Resolution”), 4254 (the “2010EFG Resolution”), and 4299 (the “2010H Resolution”), adopted by the City Commission on January 19, 2010, February 16, 2010, May 3, 2010, and November 1, 2010, respectively (the Original Resolution, as so amended and supplemented, the “Prior Resolutions”), the Issuer authorized, as the Original Resolution were then in effect, the issuance of, respectively, its Sewer System Revenue Bond (DNRC Water Pollution Control State Revolving Loan Program), Series 2010C (the “Series 2010C Bond”), issued in the maximum principal amount of $1,223,000, its Sewer System Revenue Bond (DNRC Water Pollution Control State Revolving Loan Program), Series 2010D (the “Series 2010D Bond”), issued in the maximum principal amount of $9,500,000, its Sewer System Revenue Bond (DNRC Water Pollution Control State Revolving Loan Program), Series 2010F (the “Series 2010F Bond”), issued in the maximum principal amount of $816,000, its Sewer System Revenue Bond (DNRC Water Pollution Control State Revolving Loan Program), Series 2010G (the “Series 2010G Bond”), issued in the maximum principal amount of $3,903,000, and its Sewer System Revenue Bond (DNRC Water Pollution Control State Revolving Loan Program), Series 2010H (the “Series 2010H Bond”), issued in the maximum principal amount of $9,573,000 to finance improvements consisting of the acquisition, construction and installation of various improvements of the municipal sewer system and related improvements (the “Projects”) as part of the municipal sewer system of the Issuer (the “System”), as more particularly described in the Original Resolution. The Series 2010C Bond, the Series 2010D Bond, the Series 2010F Bond, the Series 2010G Bond, and the Series 2010H Bond (collectively, the “Prior Bonds”) were purchased and are currently held by the Department of Natural Resources and Conservation of the State of Montana (the “DNRC”). There are no other bonds or indebtedness of the Issuer that are outstanding and payable from Net Revenues of the System, except its Sewer System Revenue Bond (DNRC Water Pollution Control State Revolving Loan Program), Series 2010B (the “Series 2010B Bond”), issued in the maximum principal amount of $359,300, which is held by the DNRC. Terms with initial capital letters used but not defined herein have the meanings given them in the Original Resolution. 1.02. Interest Rate Reduction. Pursuant to the Intended Use Plan for fiscal year 2013- 2014 (the “IUP”) for the Water Pollution Control State Revolving Loan Program (the -2- “Program”), the DNRC and the Department of Environmental Quality of the State of Montana have determined that it is in the best interests of borrowers of loans made under the Program and the Program to reduce the interest rates available under the Program. 1.03. Reduction in Interest Rate on Prior Bonds. It is proposed that debt service on the Prior Bonds be reduced in accordance with the interest rate reduction proposal under the IUP, thereby reducing the interest rate on (i) the Series 2010C Bond from three and three-quarters percent (3.75%) per annum to three percent (3.00%) per annum from and after the date of delivery of the First Amended and Restated Series 2010C Bond; (ii) the Series 2010D Bond from three and three-quarters percent (3.75%) per annum to three percent (3.00%) per annum from and after the date of delivery of the First Amended and Restated Series 2010D Bond; (iii) the Series 2010F Bond from three and three-quarters percent (3.75%) per annum to three percent (3.00%) per annum from and after the date of delivery of the First Amended and Restated Series 2010F Bond; (iv) the Series 2010G Bond from three and three-quarters percent (3.75%) per annum to three percent (3.00%) per annum from and after the date of delivery of the First Amended and Restated Series 2010G Bond; and (v) the Series 2010H Bond from three and three-quarters percent (3.75%) per annum to three percent (3.00%) per annum from and after the date of delivery of the First Amended and Restated Series 2010H Bond. Section 2. Amendment of Original Resolution. 2.01. Authorization. The Issuer, in Section 13.4 of the 2010ABC Resolution, Section 12.4 of the 2010D Resolution, Section 13.4 of the 2010EFG Resolution, and Section 12.4 of the 2010H Resolution, reserved the right to amend such resolutions upon notice to and with the consent of the DNRC. 2.02. Consent of DNRC. The DNRC has agreed to the amendment of certain provisions of such resolutions in connection with the determination to reduce certain interest rates under the Program. 2.03. Amendment of Original Resolution. Pursuant to the authority cited in Sections 2.01 and 2.02 of this resolution, (a) The 2010ABC Resolution is hereby amended effective as of the date of delivery of the First Amended and Restated Series 2010C Bond (as hereinafter defined) to read as follows: (i) all references to the aggregate interest rate, or that interest rate that includes the interest rate and all surcharges, on the Series 2010C Bond are hereby amended to read 3.00% per annum, instead of 3.75% per annum; (ii) the interest rate on the Series 2010C Bond exclusive of any surcharges will continue in effect at 2.00% per annum; (iii) the administrative expense surcharge on the Series 2010C Bond will continue in effect at 0.75% per annum; and (iv) all references to the loan loss reserve surcharge on the Series 2010C Bond are hereby amended to read 0.25% per annum, instead of 1.00% per annum; and (ii) the total principal amount of the First Amended and Restated Series 2010C Bond is $885,081. -3- (b) The 2010D Resolution is hereby amended effective as of the date of delivery of the First Amended and Restated Series 2010D Bond (as hereinafter defined) to read as follows: (i) all references to the aggregate interest rate, or that interest rate that includes the interest rate and all surcharges, on the Series 2010D Bond are hereby amended to read 3.00% per annum, instead of 3.75% per annum; (ii) the interest rate on the Series 2010D Bond exclusive of any surcharges will continue in effect at 2.00% per annum; (iii) the administrative expense surcharge on the Series 2010D Bond will continue in effect at 0.75% per annum; and (iv) all references to the loan loss reserve surcharge on the Series 2010D Bond are hereby amended to read 0.25% per annum, instead of 1.00% per annum; and (ii) the total principal amount of the First Amended and Restated Series 2010D Bond is $8,308,000. (c) The 2010EFG Resolution is hereby amended effective as of the date of delivery of the First Amended and Restated Series 2010F Bond (as hereinafter defined) to read as follows: (i) all references to the aggregate interest rate, or that interest rate that includes the interest rate and all surcharges, on the Series 2010F Bond are hereby amended to read 3.00% per annum, instead of 3.75% per annum; (ii) the interest rate on the Series 2010F Bond exclusive of any surcharges will continue in effect at 2.00% per annum; (iii) the administrative expense surcharge on the Series 2010F Bond will continue in effect at 0.75% per annum; and (iv) all references to the loan loss reserve surcharge on the Series 2010F Bond are hereby amended to read 0.25% per annum, instead of 1.00% per annum; and (ii) the total principal amount of the First Amended and Restated Series 2010F Bond is $729,000. (d) The 2010EFG Resolution is hereby further amended effective as of the date of delivery of the First Amended and Restated Series 2010G Bond (as hereinafter defined) to read as follows: (i) all references to the aggregate interest rate, or that interest rate that includes the interest rate and all surcharges, on the Series 2010G Bond are hereby amended to read 3.00% per annum, instead of 3.75% per annum; (ii) the interest rate on the Series 2010G Bond exclusive of any surcharges will continue in effect at 2.00% per annum; (iii) the administrative expense surcharge on the Series 2010G Bond will continue in effect at 0.75% per annum; and (iv) all references to the loan loss reserve surcharge on the Series 2010G Bond are hereby amended to read 0.25% per annum, instead of 1.00% per annum; and (ii) the total principal amount of the First Amended and Restated Series 2010G Bond is $3,558,000. (e) The 2010H Resolution is hereby amended effective as of the date of delivery of the First Amended and Restated Series 2010H Bond (as hereinafter defined) to read as follows: -4- (i) all references to the aggregate interest rate, or that interest rate that includes the interest rate and all surcharges, on the Series 2010H Bond are hereby amended to read 3.00% per annum, instead of 3.75% per annum; (ii) the interest rate on the Series 2010H Bond exclusive of any surcharges will continue in effect at 2.00% per annum; (iii) the administrative expense surcharge on the Series 2010H Bond will continue in effect at 0.75% per annum; and (iv) all references to the loan loss reserve surcharge on the Series 2010H Bond are hereby amended to read 0.25% per annum, instead of 1.00% per annum; and (ii) the total principal amount of the First Amended and Restated Series 2010H Bond is $8,692,000. (f) Except as expressly noted herein, other interest rates or surcharges are not adjusted, including, without limitation, interest on past due amounts. 2.04. Amendment of Forms of Bonds. Pursuant to the authority cited in Sections 2.01 and 2.02 of this resolution, effective as of the date of delivery of each series of amended and restated bonds, the Series 2010C Bond attached as Appendix B-3 to the 2010ABC Resolution is hereby amended and restated in its entirety substantially as set forth on the attached Appendix A (the “First Amended and Restated Series 2010C Bond”), the Series 2010D Bond attached as Appendix B to the 2010D Resolution is hereby amended and restated in its entirety substantially as set forth on the attached Appendix B (the “First Amended and Restated Series 2010D Bond”), the Series 2010F Bond attached as Appendix B-2 to the 2010EFG Resolution is hereby amended and restated in its entirety substantially as set forth on the attached Appendix C (the “First Amended and Restated Series 2010F Bond”), the Series 2010G Bond attached as Appendix B-3 to the 2010EFG Resolution is hereby amended and restated in its entirety substantially as set forth on the attached Appendix D (the “First Amended and Restated Series 2010G Bond”), and the Series 2010H Bond attached as Appendix B to the 2010H Resolution is hereby amended and restated in its entirety substantially as set forth on the attached Appendix E (the “First Amended and Restated Series 2010H Bond”). 2.05. Effect of Amendments. Except as amended by Sections 2.03 and 2.04 of this resolution, the Original Resolution shall remain unamended and, from and after the date of delivery of the First Amended and Restated Bonds (as hereinafter defined), shall continue in full force and effect as amended by Sections 2.03 and 2.04 of this resolution for the benefit of the holders from time to time of the First Amended and Restated Bonds, the Series 2010B Bond, and any additional Bonds that may be issued thereunder. Section 3. Preparation and Delivery of First Amended and Restated Bonds. The First Amended and Restated Series 2010C Bond, the First Amended and Restated Series 2010D Bond, the First Amended and Restated Series 2010F Bond, the First Amended and Restated Series 2010G Bond, and the First Amended and Restated Series 2010H Bond (collectively, the “First Amended and Restated Bonds”) shall be prepared under the direction of the City Finance Director of the Issuer and shall be executed on behalf of the Issuer by the signatures of the Mayor, the City Finance Director, and the City Clerk of the Issuer and sealed with the official corporate seal of the Issuer. When the First Amended and Restated Bonds have been executed, the City Finance Director of the Issuer shall cause them to be dated as of the date of delivery and -5- delivered to the DNRC, as purchaser thereof, in anticipation of the surrender of the corresponding Prior Bond. The City Finance Director is authorized and directed to act as bond registrar in connection with the First Amended and Restated Bonds. Section 4. Revenue Bond Account; Reserve Account. The City Finance Director of the Issuer is authorized and directed to transfer amounts in the Revenue Bond Account to pay interest owing on the Prior Bonds as of the date of delivery of the First Amended and Restated Bonds. The City Finance Director of the Issuer is further authorized and directed to transfer amounts made available in the Reserve Account because of the foregoing interest rate adjustments to the Revenue Bond Account to prepay any one or more Prior Bonds as of the date of delivery of the First Amended and Restated Bonds, to transfer amounts to the Revenue Bond Account to pay interest on the First Amended and Restated Bonds on January 1, 2014, to pay costs of issuance of the First Amended and Restated Bonds, or to any other eligible fund or account or for any other eligible purpose, as described more particularly in certificates or documents delivered in conjunction with the delivery of the First Amended and Restated Bonds. Section 5. Tax Matters. 5.01. General Covenants. The Issuer covenants and agrees with the owners from time to time of the First Amended and Restated Bonds that it will not take or permit to be taken by any of its officers, employees or agents any action which would cause the interest on the First Amended and Restated Bonds to become includable in gross income for federal income tax purposes under the Internal Revenue Code of 1986, as amended (the “Code”), and applicable Treasury Regulations (the “Regulations”), and covenants to take any and all actions within its powers to ensure that the interest on the First Amended and Restated Bonds will not become includable in gross income for federal income tax purposes under the Code and the Regulations. The Projects and the System are each owned and maintained by the Issuer and available for use by members of the general public on a substantially equal basis. The Issuer agrees not to enter into any lease, use or other agreement with any non-governmental person relating to the use of the Projects or the System or security for the payment of the First Amended and Restated Bonds which might cause the First Amended and Restated Bonds to be considered “private activity bonds” or “private loan bonds” within the meaning of Section 141 of the Code. 5.02. Arbitrage Rebate. The City acknowledges that the First Amended and Restated Bonds are subject to the rebate requirements of Section 148(f) of the Code. The City covenants and agrees to retain such records, make such determinations, file such reports and documents and pay such amounts at such times as are required under said Section 148(f) and applicable Treasury Regulations to preserve the exclusion of interest on the First Amended and Restated Bonds from gross income for federal income tax purposes. In furtherance of the foregoing, the Mayor, the City Finance Director, and the City Clerk are hereby authorized and directed to execute a Rebate Certificate, substantially in the form of the Rebate Certificate prepared by Bond Counsel and the City hereby covenants and agrees to observe and perform the covenants and agreements contained therein, unless amended or terminated in accordance with the provisions thereof. 5.03. Certification. The Mayor, the City Finance Director, and the City Clerk of the Issuer, being the officers of the Issuer charged with the responsibility for issuing the First -6- Amended and Restated Bonds pursuant to this resolution, are authorized and directed to execute and deliver to the DNRC certifications to satisfy the provisions of Sections 1.148-2(b) of the Treasury Regulations relating to a reasonable expectation that the proceeds of the First Amended and Restated Bonds will be used in a manner that will not cause them to be arbitrage bonds. 5.04. Information Reporting. The Issuer shall file with the Secretary of the Treasury, not later than November 15, 2013, a statement concerning the First Amended and Restated Bonds containing the information required by Section 149(e) of the Code. 5.05. No Bank Qualification or Counting of Reissued Bonds Toward Qualified Small Issuer Status. To the extent the First Amended and Restated Bonds constitute a reissuance of the Prior Bonds, such reissuance is a deemed current refunding. The principal amount of the First Amended and Restated Bonds that constitutes a reissuance does not exceed the principal amount of the outstanding Prior Bonds being reissued. Accordingly, pursuant to Section 265(b)(3)(C)(ii)(III) of the Code, that portion of the First Amended and Restated Bonds that constitutes a reissuance is hereby not taken into account in determining the Issuer’s status as a qualified small issuer under Section 265(b)(3) of the Code. The First Amended and Restated Bonds are not designated as “qualified tax-exempt obligations.” Section 6. Program Covenants. The Issuer agrees that (i) neither it nor any “related person” to the Issuer (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 Trust Indenture for the Program in an amount related to the amount of the First Amended and Restated Bonds; and (ii) that portion of the issuance of the First Amended and Restated Bonds that is a reissuance of the Prior Bonds constitutes a “deemed” refunding of the Prior Bonds effective as of the date of delivery of the First Amended and Restated Bonds and, as to that portion, the DNRC shall be deemed to have relent the proceeds of the Prior Bonds under the Program to the Issuer effective as of such date. Section 7. Certification and Effective Date. 7.01. Certification. The officers of the Issuer are authorized and directed to prepare and furnish to the DNRC and to the attorneys rendering an opinion as to the legality of the First Amended and Restated Bonds, certified copies of all ordinances, resolutions and records and such other certificates, affidavits and other instruments as may be required to evidence the validity, status of tax-exempt interest, or marketability of the First Amended and Restated Bonds and all such certified copies, certificates and affidavits shall constitute representations of the Issuer as to the truth of all statements of fact contained therein. 7.02. Effective Date. This resolution shall be in full force and effect from and after its passage. The amendments to the First Amended and Restated Bonds noted herein, however, shall be effective only from and after the date of delivery of the First Amended and Restated Bonds. -7- Adopted by the City Commission of the City of Bozeman, Montana, on this 5th day of August, 2013. Mayor Attest: ___________________________ City Clerk (SEAL) A-1- APPENDIX A [FORM OF FIRST AMENDED AND RESTATED SERIES 2010C BOND] UNITED STATES OF AMERICA STATE OF MONTANA COUNTY OF GALLATIN CITY OF BOZEMAN FIRST AMENDED AND RESTATED SEWER SYSTEM REVENUE BOND (DNRC WATER POLLUTION CONTROL STATE REVOLVING LOAN PROGRAM) SERIES 2010C No. R-2 $885,081 FOR VALUE RECEIVED, T HE CITY OF BOZEMAN, MONTANA (the “City”), a duly organized municipal corporation and political subdivision of the State of Montana, acknowledges itself to be specially indebted and, for value received, hereby promises to pay to the Department of Natural Resources and Conservation of the State of Montana (the “DNRC”), or its registered assigns, solely from the Revenue Bond Account of its Sewer System Fund, the principal sum of $885,081, with interest on such amount from the date hereof at the rate of two percent (2.00%) per annum on the unpaid balance until paid. In addition, the City shall pay an Administrative Expense Surcharge and a Loan Loss Reserve Surcharge on t he outstanding principal amount of this Bond at the rates of seventy-five hundredths of one percent (0.75%) and twenty-five hundredths of one percent (0.25%), respectively, per annum. Interest and Administrative Expense Surcharge and Loan Loss Reserve Surcharge shall be payable in semiannual installments payable on each January 1 and July 1 (each a “Loan Repayment Date”) commencing January 1, 2014. Each installment shall reflect an interest rate of three percent (3.00%) per annum and shall be in the amount set forth opposite its due date in Schedule A hereto under “Total Loan Payment.” The portion of each such payment consisting of principal, the portion consisting of interest, the portion consisting of Administrative Expense Surcharge, and the portion consisting of Loan Loss Reserve Surcharge shall be as set forth in Schedule A hereto. Past-due payments of principal, interest, Administrative Expense Surcharge, and Loan Loss Reserve Surcharge shall bear interest at the rate of ten percent (10.00%) per annum, until paid. Interest, Administrative Expense Surcharge, and Loan Loss Reserve Surcharge shall be calculated on the basis of a 360-day year comprising 12 months of 30 days each. All payments under this Bond shall be made to the registered holder of this Bond, at its address as it appears on the Bond register, in lawful money of the United States of America. This Bond constitutes a series in the maximum authorized principal amount of $1,223,000 (the “Series 2010C Bond”), issued to finance a portion of the costs of construction of certain improvements to the sewer system of the City (the “System”), to fund the Reserve Account, and to pay costs of issuance of the Series 2010C Bond. The Series 2010C Bond is issued pursuant to and in full conformity with the Constitution and laws of the State of Montana thereunto enabling, including Montana Code Annotated, Title 7, Chapter 7, Part 44 and 45, as A-2- amended, and resolutions duly adopted by the governing body of the City, including Resolution No. 4220 duly enacted by the City Commission on November 16, 2009, a s amended and supplemented by Resolution Nos. 4234, 4245, 4 254, 4299, and 4462 adopted on January 19, 2010, February 16, 2010, May 3, 2010, November 1, 2010, and August 5, 2013, respectively (the Original Resolution, as so amended and supplemented, the “Resolution”). The Series 2010C Bond is issuable only as a single, fully registered bond. The Series 2010C Bond is issued on a parity and is equally and ratably secured by the Net Revenues of the System with the City’s outstanding $359,300 Sewer System Revenue Bond (DNRC Water Pollution Control State Revolving Loan Program), Series 2010B (the “Series 2010B Bond”), First Amended and Restated Sewer System Revenue Bond (DNRC Water Pollution Control State Revolving Loan Program), Series 2010D (the “Series 2010D Bond”), First Amended and Restated Sewer System Revenue Bond (DNRC Water Pollution Control State Revolving Loan Program), Series 2010F (the “Series 2010F Bond”), First Amended and Restated Sewer System Revenue Bond (DNRC Water Pollution Control State Revolving Loan Program), Series 2010G (the “Series 2010G Bond”), and First Amended and Restated Sewer System Revenue Bond (DNRC Water Pollution Control State Revolving Loan Program), Series 2010H (the “Series 2010H Bond”). The Series 2010D Bond, the Series 2010F Bond, the Series 2010G Bond, and the Series 2010H Bond are being issued simultaneously herewith. Reference is made to the Resolution for a more complete statement of the terms and conditions upon which the Series 2010C Bond has been issued, the Net Revenues of the System pledged and appropriated for the payment and security thereof, the conditions upon which additional bonds may be issued under the Resolution and made payable from such Net Revenues on a parity with the Series 2010B Bond, the Series 2010C Bond, the Series 2010D Bond, the Series 2010F Bond, the Series 2010G Bond, and the Series 2010H Bond (collectively, the “Bonds”) or otherwise, the conditions upon which the Resolution may be amended, the rights, duties and obligations of the City, and the rights of the owners of the Series 2010C Bond. The City may prepay the principal of the Series 2010C Bond only if (i) it obtains the prior written consent of the DNRC thereto, and (ii) no Loan Repayment or Administrative Expense Surcharge or Loan Loss Reserve Surcharge is then delinquent. A ny prepayment permitted by the DNRC must be accompanied by payment of accrued interest and Administrative Expense Surcharge and Loan Loss Reserve Surcharge to the date of prepayment on the amount of principal prepaid. If the Series 2010C Bond is prepaid in part, such prepayments shall be applied to principal payments in inverse order of maturity. The Bonds, including interest and any premium for the redemption thereof, are payable solely from the Net Revenues pledged for the payment thereof and do not constitute a debt of the City within the meaning of any constitutional, statutory or charter limitation or provision. The City may deem and treat the person in whose name this Series 2010C Bond is registered as the absolute owner hereof, whether this Series 2010C Bond is overdue or not, for the purpose of receiving payment and for all other purposes, and the City shall not be affected by any notice to the contrary. A-3- IT IS HEREBY CERTIFIED, RECITED, COVENANTED AND AGREED that the City has fixed and established and will collect reasonable rates and charges for the services and facilities afforded by the System, and has created a special Sewer System Fund into which the gross revenues of the System, including all additions thereto and replacements and improvements thereof, will be paid, and a separate and special Revenue Bond Account in that fund, into which will be paid each month, Net Revenues of the System then on hand (the gross revenues remaining after the payment of Operating Expenses of the System), in an amount equal to not less than the sum of one-sixth of the interest due within the next six months and one- twelfth of the principal due within the next twelve months with respect to all outstanding Bonds payable semi-annually from that account, and a Reserve Account (the “Reserve”) into which shall be paid additional Net Revenues sufficient to establish and maintain a reserve therein equal to, as of the date of calculation, the Reserve Requirement; that the Revenue Bond Account and the Reserve will be used only to pay the principal of, premium, if any, and interest on the Bonds issued pursuant to the authority herein recited; that the rates and charges for the System will from time to time be made and kept sufficient to provide gross income and revenues adequate to pay promptly the reasonable and current expenses of operating and maintaining the System and to produce in each fiscal year Net Revenues in excess of such current expenses equal to 125% of the principal and interest payable from the Revenue Bond Account in any subsequent fiscal year, to maintain the balance in the Reserve at the Reserve Requirement, to pay promptly the reasonable and current expenses of operating and maintaining the System, to pay the principal of and interest on any Subordinate Obligations and to provide reserves for the replacement and depreciation of the System; that additional Bonds and refunding Bonds may be issued and made payable from the Revenue Bond Account on a parity with the Bonds upon certain conditions set forth in the Resolution but no obligation will be otherwise incurred and made payable from the Net Revenues, unless the lien thereof shall be expressly made subordinate to the lien of the Bonds and other additional Bonds on such Net Revenues; that all provisions for the security of this Series 2010C Bond set forth in the Resolution will be punctually and faithfully performed as therein stipulated; that all acts, conditions and things required by the Constitution and laws of the State of Montana and the ordinances and resolutions of the City to be done, to exist, to happen and to be performed in order to make this Series 2010C Bond a valid and binding special obligation of the City according to its terms have been done, do exist, have happened and have been performed as so required; and that this Series 2010C 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 City within the meaning of any constitutional, statutory or charter limitation or provision and the issuance of the Series 2010C Bond does not cause either the general or the special indebtedness of the City to exceed any constitutional, statutory or charter limitation. A-4- IN WITNESS WHEREOF, the City of Bozeman, Montana, by its governing body, has caused this Bond to be executed by the signatures of its signatures of the Mayor, the Finance Director and the City Clerk, and has caused the official seal of the City to be affixed hereto, and has caused this Bond to be dated as of the 21st day of August, 2013. Mayor (SEAL) City Finance Director City Clerk A-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 Issuer 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 Issuer’s liability upon the Bond to the extent of the sum or sums so paid. REGISTER The ownership of the unpaid Principal Balance of this Bond and the interest accruing thereon is registered on the books of the City of 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 August 21, 2013 Department of Natural Resources and Conservation 1625 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 of Bozeman, Montana, acting as Bond Registrar, has transferred, on the books of the Issuer, 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 A-6- FORM OF ASSIGNMENT For value received, the undersigned hereby sells, assigns and transfers unto the within Bond and does hereby irrevocably constitute and appoint_________________________________ attorney to transfer the Bond on the books kept for the registration thereof, with full power of substitution in the premises. Dated: Notice: The assignor’s signature to this assignment must correspond with the name as it appears upon the face of the within Bond in every particular, without alteration or any change whatsoever. A-7- SCHEDULE A Loan Loss Administrative Reserve Total Loan Date Principal Interest Expense Surcharge Surcharge Payment B-1- APPENDIX B [FORM OF FIRST AMENDED AND RESTATED SERIES 2010D BOND] UNITED STATES OF AMERICA STATE OF MONTANA COUNTY OF GALLATIN CITY OF BOZEMAN FIRST AMENDED AND RESTATED SEWER SYSTEM REVENUE BOND (DNRC WATER POLLUTION CONTROL STATE REVOLVING LOAN PROGRAM) SERIES 2010D No. R-2 $8,308,000 FOR VALUE RECEIVED, T HE CITY OF BOZEMAN, MONTANA (the “City”), a duly organized municipal corporation and political subdivision of the State of Montana, acknowledges itself to be specially indebted and, for value received, hereby promises to pay to the Department of Natural Resources and Conservation of the State of Montana (the “DNRC”), or its registered assigns, solely from the Revenue Bond Account of its Sewer System Fund, the principal sum of $8,308,000, with interest on such amount from the date hereof at the rate of two percent (2.00%) per annum on the unpaid balance until paid. In addition, the City shall pay an Administrative Expense Surcharge and a Loan Loss Reserve Surcharge on t he outstanding principal amount of this Bond at the rates of seventy-five hundredths of one percent (0.75%) and twenty-five hundredths of one percent (0.25%), respectively, per annum. Interest and Administrative Expense Surcharge and Loan Loss Reserve Surcharge shall be payable in semiannual installments payable on each January 1 and July 1 (each a “Loan Repayment Date”) commencing January 1, 2014. Each installment shall reflect an interest rate of three percent (3.00%) per annum and shall be in the amount set forth opposite its due date in Schedule A hereto under “Total Loan Payment.” The portion of each such payment consisting of principal, the portion consisting of interest, the portion consisting of Administrative Expense Surcharge, and the portion consisting of Loan Loss Reserve Surcharge shall be as set forth in Schedule A hereto. Past-due payments of principal, interest, Administrative Expense Surcharge, and Loan Loss Reserve Surcharge shall bear interest at the rate of ten percent (10.00%) per annum, until paid. Interest, Administrative Expense Surcharge, and Loan Loss Reserve Surcharge shall be calculated on the basis of a 360-day year comprising 12 months of 30 days each. All payments under this Bond shall be made to the registered holder of this Bond, at its address as it appears on the Bond register, in lawful money of the United States of America. This Bond constitutes a series in the maximum authorized principal amount of $9,500,000 (the “Series 2010D Bond”), issued to finance a portion of the costs of construction of certain improvements to the sewer system of the City (the “System”), to make a deposit to a reserve account for the Bonds and to pay costs of issuance of the Series 2010D Bond. The Series 2010D 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, B-2- Part 44 and 45, as amended, and resolutions duly adopted by the governing body of the City, including Resolution No. 4220 duly enacted by the City Commission 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 (the Original Resolution, as so amended and supplemented, the “Resolution”). The Series 2010C Bond is issuable only as a single, fully registered bond. The Series 2010D Bond is issued on a parity and is equally and ratably secured by the Net Revenues of the System with the City’s outstanding $359,300 Sewer System Revenue Bond (DNRC Water Pollution Control State Revolving Loan Program), Series 2010B (the “Series 2010B Bond”), First Amended and Restated Sewer System Revenue Bond (DNRC Water Pollution Control State Revolving Loan Program), Series 2010C (the “Series 2010C Bond”), First Amended and Restated Sewer System Revenue Bond (DNRC Water Pollution Control State Revolving Loan Program), Series 2010F (the “Series 2010F Bond”), First Amended and Restated Sewer System Revenue Bond (DNRC Water Pollution Control State Revolving Loan Program), Series 2010G (the “Series 2010G Bond”), and First Amended and Restated Sewer System Revenue Bond (DNRC Water Pollution Control State Revolving Loan Program), Series 2010H (the “Series 2010H Bond”). The Series 2010C Bond, the Series 2010F Bond, the Series 2010G Bond, and the Series 2010H Bond are being issued simultaneously herewith. Reference is made to the Resolution for a more complete statement of the terms and conditions upon which the Series 2010D Bond has been issued, the Net Revenues of the System pledged and appropriated for the payment and security thereof, the conditions upon which additional bonds may be issued under the Resolution and made payable from such Net Revenues on a parity with the Series 2010B Bond, the Series 2010C Bond, the Series 2010D Bond, the Series 2010F Bond, the Series 2010G Bond, and the Series 2010H Bond (collectively, the “Bonds”) or otherwise, the conditions upon which the Resolution may be amended, the rights, duties and obligations of the City, and the rights of the owners of the Series 2010D Bond. The City may prepay the principal of the Series 2010D Bond only if (i) it obtains the prior written consent of the DNRC thereto, and (ii) no Loan Repayment or Administrative Expense Surcharge or Loan Loss Reserve Surcharge is then delinquent. A ny prepayment permitted by the DNRC must be accompanied by payment of accrued interest and Administrative Expense Surcharge and Loan Loss Reserve Surcharge to the date of prepayment on the amount of principal prepaid. If the Series 2010D Bond is prepaid in part, such prepayments shall be applied to principal payments in inverse order of maturity. The Bonds, including interest and any premium for the redemption thereof, are payable solely from the Net Revenues pledged for the payment thereof and do not constitute a debt of the City within the meaning of any constitutional, statutory or charter limitation or provision. The City may deem and treat the person in whose name this Series 2010D Bond is registered as the absolute owner hereof, whether this Series 2010D Bond is overdue or not, for the purpose of receiving payment and for all other purposes, and the City shall not be affected by any notice to the contrary. B-3- IT IS HEREBY CERTIFIED, RECITED, COVENANTED AND AGREED that the City has fixed and established and will collect reasonable rates and charges for the services and facilities afforded by the System, and has created a special Sewer System Fund into which the gross revenues of the System, including all additions thereto and replacements and improvements thereof, will be paid, and a separate and special Revenue Bond Account in that fund, into which will be paid each month, Net Revenues of the System then on hand (the gross revenues remaining after the payment of Operating Expenses of the System), in an amount equal to not less than the sum of one-sixth of the interest due within the next six months and one- twelfth of the principal due within the next twelve months with respect to all outstanding Bonds payable semi-annually from that account, and a Reserve Account (the “Reserve”) into which shall be paid additional Net Revenues sufficient to establish and maintain a reserve therein equal to, as of the date of calculation, the Reserve Requirement; that the Revenue Bond Account and the Reserve will be used only to pay the principal of, premium, if any, and interest on the Bonds issued pursuant to the authority herein recited; that the rates and charges for the System will from time to time be made and kept sufficient to provide gross income and revenues adequate to pay promptly the reasonable and current expenses of operating and maintaining the System and to produce in each fiscal year Net Revenues in excess of such current expenses equal to 125% of the principal and interest payable from the Revenue Bond Account in any subsequent fiscal year, to maintain the balance in the Reserve at the Reserve Requirement, to pay promptly the reasonable and current expenses of operating and maintaining the System, to pay the principal of and interest on any Subordinate Obligations and to provide reserves for the replacement and depreciation of the System; that additional Bonds and refunding Bonds may be issued and made payable from the Revenue Bond Account on a parity with the Bonds upon certain conditions set forth in the Resolution but no obligation will be otherwise incurred and made payable from the Net Revenues, unless the lien thereof shall be expressly made subordinate to the lien of the Bonds and other additional Bonds on such Net Revenues; that all provisions for the security of this Series 2010D Bond set forth in the Resolution will be punctually and faithfully performed as therein stipulated; that all acts, conditions and things required by the Constitution and laws of the State of Montana and the ordinances and resolutions of the City to be done, to exist, to happen and to be performed in order to make this Series 2010D Bond a valid and binding special obligation of the City according to its terms have been done, do exist, have happened and have been performed as so required; and that this Series 2010D 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 City within the meaning of any constitutional, statutory or charter limitation or provision and the issuance of the Series 2010D Bond does not cause either the general or the special indebtedness of the City to exceed any constitutional, statutory or charter limitation. B-4- IN WITNESS WHEREOF, the City of Bozeman, Montana, by its governing body, has caused this Bond to be executed by the signatures of its signatures of the Mayor, the City Finance Director, and the City Clerk, and has caused the official seal of the City to be affixed hereto, and has caused this Bond to be dated as of the 21st day of August, 2013. Mayor (SEAL) City Finance Director City Clerk B-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 Issuer 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 Issuer’s liability upon the Bond to the extent of the sum or sums so paid. REGISTER The ownership of the unpaid Principal Balance of this Bond and the interest accruing thereon is registered on the books of the City of 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 August 21, 2013 Department of Natural Resources and Conservation 1625 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 of Bozeman, Montana, acting as Bond Registrar, has transferred, on the books of the Issuer, 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 B-6- FORM OF ASSIGNMENT For value received, the undersigned hereby sells, assigns and transfers unto the within Bond and does hereby irrevocably constitute and appoint_________________________________ attorney to transfer the Bond on the books kept for the registration thereof, with full power of substitution in the premises. Dated: Notice: The assignor’s signature to this assignment must correspond with the name as it appears upon the face of the within Bond in every particular, without alteration or any change whatsoever. B-7- SCHEDULE A Loan Loss Administrative Reserve Total Loan Date Principal Interest Expense Surcharge Surcharge Payment C-1- APPENDIX C [FORM OF FIRST AMENDED AND RESTATED SERIES 2010F BOND] UNITED STATES OF AMERICA STATE OF MONTANA COUNTY OF GALLATIN CITY OF BOZEMAN FIRST AMENDED AND RESTATED SEWER SYSTEM REVENUE BOND (DNRC WATER POLLUTION CONTROL STATE REVOLVING LOAN PROGRAM) SERIES 2010F No. R-2 $729,000 FOR VALUE RECEIVED, T HE CITY OF BOZEMAN, MONTANA (the “City”), a duly organized municipal corporation and political subdivision of the State of Montana, acknowledges itself to be specially indebted and, for value received, hereby promises to pay to the Department of Natural Resources and Conservation of the State of Montana (the “DNRC”), or its registered assigns, solely from the Revenue Bond Account of its Sewer System Fund, the principal sum of $729,000, with interest on such amount from the date hereof at the rate of two percent (2.00%) per annum on the unpaid balance until paid. In addition, the City shall pay an Administrative Expense Surcharge and a Loan Loss Reserve Surcharge on t he outstanding principal amount of this Bond at the rates of seventy-five hundredths of one percent (0.75%) and twenty-five hundredths of one percent (0.25%), respectively, per annum. Interest and Administrative Expense Surcharge and Loan Loss Reserve Surcharge shall be payable in semiannual installments payable on each January 1 and July 1 (each a “Loan Repayment Date”) commencing January 1, 2014. Each installment shall reflect an interest rate of three percent (3.00%) per annum and shall be in the amount set forth opposite its due date in Schedule A hereto under “Total Loan Payment.” The portion of each such payment consisting of principal, the portion consisting of interest, the portion consisting of Administrative Expense Surcharge, and the portion consisting of Loan Loss Reserve Surcharge shall be as set forth in Schedule A hereto. Past-due payments of principal, interest, Administrative Expense Surcharge, and Loan Loss Reserve Surcharge shall bear interest at the rate of ten percent (10.00%) per annum, until paid. Interest, Administrative Expense Surcharge, and Loan Loss Reserve Surcharge shall be calculated on the basis of a 360-day year comprising 12 months of 30 days each. All payments under this Bond shall be made to the registered holder of this Bond, at its address as it appears on the Bond register, in lawful money of the United States of America. This Bond constitutes a series in the maximum authorized principal amount of $816,000 (the “Series 2010F Bond”), issued to finance a portion of the costs of construction of certain improvements to the sewer system of the City (the “System”), to make a deposit to a reserve account for the Bonds and to pay costs of issuance of the Series 2010F Bond. The Series 2010F 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, C-2- Part 44 and 45, as amended, and resolutions duly adopted by the governing body of the City, including Resolution No. 4220 duly enacted by the City Commission 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 (the Original Resolution, as so amended and supplemented, the “Resolution”). The Series 2010C Bond is issuable only as a single, fully registered bond. The Series 2010F Bond is issued on a parity and is equally and ratably secured by the Net Revenues of the System with the City’s outstanding $359,300 Sewer System Revenue Bond (DNRC Water Pollution Control State Revolving Loan Program), Series 2010B (the “Series 2010B Bond”), First Amended and Restated Sewer System Revenue Bond (DNRC Water Pollution Control State Revolving Loan Program), Series 2010C (the “Series 2010C Bond”), First Amended and Restated Sewer System Revenue Bond (DNRC Water Pollution Control State Revolving Loan Program), Series 2010D (the “Series 2010D Bond”), First Amended and Restated Sewer System Revenue Bond (DNRC Water Pollution Control State Revolving Loan Program), Series 2010G (the “Series 2010G Bond”), and First Amended and Restated Sewer System Revenue Bond (DNRC Water Pollution Control State Revolving Loan Program), Series 2010H (the “Series 2010H Bond”). The Series 2010C Bond, the Series 2010D Bond, the Series 2010G Bond, and the Series 2010H Bond are being issued simultaneously herewith. Reference is made to the Resolution for a more complete statement of the terms and conditions upon which the Series 2010F Bond has been issued, the Net Revenues of the System pledged and appropriated for the payment and security thereof, the conditions upon which additional bonds may be issued under the Resolution and made payable from such Net Revenues on a parity with the Series 2010B Bond, the Series 2010C Bond, the Series 2010D Bond, the Series 2010F Bond, the Series 2010G Bond, and the Series 2010H Bond (collectively, the “Bonds”) or otherwise, the conditions upon which the Resolution may be amended, the rights, duties and obligations of the City, and the rights of the owners of the Series 2010F Bond. The City may prepay the principal of the Series 2010F Bond only if (i) it obtains the prior written consent of the DNRC thereto, and (ii) no Loan Repayment or Administrative Expense Surcharge or Loan Loss Reserve Surcharge is then delinquent. A ny prepayment permitted by the DNRC must be accompanied by payment of accrued interest and Administrative Expense Surcharge and Loan Loss Reserve Surcharge to the date of prepayment on the amount of principal prepaid. If the Series 2010F Bond is prepaid in part, such prepayments shall be applied to principal payments in inverse order of maturity. The Bonds, including interest and any premium for the redemption thereof, are payable solely from the Net Revenues pledged for the payment thereof and do not constitute a debt of the City within the meaning of any constitutional, statutory or charter limitation or provision. The City may deem and treat the person in whose name this Series 2010F Bond is registered as the absolute owner hereof, whether this Series 2010F Bond is overdue or not, for the purpose of receiving payment and for all other purposes, and the City shall not be affected by any notice to the contrary. C-3- IT IS HEREBY CERTIFIED, RECITED, COVENANTED AND AGREED that the City has fixed and established and will collect reasonable rates and charges for the services and facilities afforded by the System, and has created a special Sewer System Fund into which the gross revenues of the System, including all additions thereto and replacements and improvements thereof, will be paid, and a separate and special Revenue Bond Account in that fund, into which will be paid each month, Net Revenues of the System then on hand (the gross revenues remaining after the payment of Operating Expenses of the System), in an amount equal to not less than the sum of one-sixth of the interest due within the next six months and one- twelfth of the principal due within the next twelve months with respect to all outstanding Bonds payable semi-annually from that account, and a Reserve Account (the “Reserve”) into which shall be paid additional Net Revenues sufficient to establish and maintain a reserve therein equal to, as of the date of calculation, the Reserve Requirement; that the Revenue Bond Account and the Reserve will be used only to pay the principal of, premium, if any, and interest on the Bonds issued pursuant to the authority herein recited; that the rates and charges for the System will from time to time be made and kept sufficient to provide gross income and revenues adequate to pay promptly the reasonable and current expenses of operating and maintaining the System and to produce in each fiscal year Net Revenues in excess of such current expenses equal to 125% of the principal and interest payable from the Revenue Bond Account in any subsequent fiscal year, to maintain the balance in the Reserve at the Reserve Requirement, to pay promptly the reasonable and current expenses of operating and maintaining the System, to pay the principal of and interest on any Subordinate Obligations and to provide reserves for the replacement and depreciation of the System; that additional Bonds and refunding Bonds may be issued and made payable from the Revenue Bond Account on a parity with the Bonds upon certain conditions set forth in the Resolution but no obligation will be otherwise incurred and made payable from the Net Revenues, unless the lien thereof shall be expressly made subordinate to the lien of the Bonds and other additional Bonds on such Net Revenues; that all provisions for the security of this Series 2010F Bond set forth in the Resolution will be punctually and faithfully performed as therein stipulated; that all acts, conditions and things required by the Constitution and laws of the State of Montana and the ordinances and resolutions of the City to be done, to exist, to happen and to be performed in order to make this Series 2010F Bond a valid and binding special obligation of the City according to its terms have been done, do exist, have happened and have been performed as so required; and that this Series 2010F 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 City within the meaning of any constitutional, statutory or charter limitation or provision and the issuance of the Series 2010F Bond does not cause either the general or the special indebtedness of the City to exceed any constitutional, statutory or charter limitation. C-4- IN WITNESS WHEREOF, the City of Bozeman, Montana, by its governing body, has caused this Bond to be executed by the signatures of its signatures of the Mayor, the City Finance Director, and the City Clerk, and has caused the official seal of the City to be affixed hereto, and has caused this Bond to be dated as of the 21st day of August, 2013. Mayor (SEAL) City Finance Director City Clerk C-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 Issuer 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 Issuer’s liability upon the Bond to the extent of the sum or sums so paid. REGISTER The ownership of the unpaid Principal Balance of this Bond and the interest accruing thereon is registered on the books of the City of 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 August 21, 2013 Department of Natural Resources and Conservation 1625 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 of Bozeman, Montana, acting as Bond Registrar, has transferred, on the books of the Issuer, 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 C-6- FORM OF ASSIGNMENT For value received, the undersigned hereby sells, assigns and transfers unto the within Bond and does hereby irrevocably constitute and appoint_________________________________ attorney to transfer the Bond on the books kept for the registration thereof, with full power of substitution in the premises. Dated: Notice: The assignor’s signature to this assignment must correspond with the name as it appears upon the face of the within Bond in every particular, without alteration or any change whatsoever. C-7- SCHEDULE A Loan Loss Administrative Reserve Total Loan Date Principal Interest Expense Surcharge Surcharge Payment D-1- APPENDIX D [FORM OF FIRST AMENDED AND RESTATED SERIES 2010G BOND] UNITED STATES OF AMERICA STATE OF MONTANA COUNTY OF GALLATIN CITY OF BOZEMAN FIRST AMENDED AND RESTATED SEWER SYSTEM REVENUE BOND (DNRC WATER POLLUTION CONTROL STATE REVOLVING LOAN PROGRAM) SERIES 2010G No. R-2 $3,558,000 FOR VALUE RECEIVED, T HE CITY OF BOZEMAN, MONTANA (the “City”), a duly organized municipal corporation and political subdivision of the State of Montana, acknowledges itself to be specially indebted and, for value received, hereby promises to pay to the Department of Natural Resources and Conservation of the State of Montana (the “DNRC”), or its registered assigns, solely from the Revenue Bond Account of its Sewer System Fund, the principal sum of $3,558,000, with interest on such amount from the date hereof at the rate of two percent (2.00%) per annum on the unpaid balance until paid. In addition, the City shall pay an Administrative Expense Surcharge and a Loan Loss Reserve Surcharge on t he outstanding principal amount of this Bond at the rates of seventy-five hundredths of one percent (0.75%) and twenty-five hundredths of one percent (0.25%), respectively, per annum. Interest and Administrative Expense Surcharge and Loan Loss Reserve Surcharge shall be payable in semiannual installments payable on each January 1 and July 1 (each a “Loan Repayment Date”) commencing January 1, 2014. Each installment shall reflect an interest rate of three percent (3.00%) per annum and shall be in the amount set forth opposite its due date in Schedule A hereto under “Total Loan Payment.” The portion of each such payment consisting of principal, the portion consisting of interest, the portion consisting of Administrative Expense Surcharge, and the portion consisting of Loan Loss Reserve Surcharge shall be as set forth in Schedule A hereto. Past-due payments of principal, interest, Administrative Expense Surcharge, and Loan Loss Reserve Surcharge shall bear interest at the rate of ten percent (10.00%) per annum, until paid. Interest, Administrative Expense Surcharge, and Loan Loss Reserve Surcharge shall be calculated on the basis of a 360-day year comprising 12 months of 30 days each. All payments under this Bond shall be made to the registered holder of this Bond, at its address as it appears on the Bond register, in lawful money of the United States of America. This Bond constitutes a series in the maximum authorized principal amount of $3,903,000 (the “Series 2010G Bond”), issued to finance a portion of the costs of construction of certain improvements to the sewer system of the City (the “System”), to make a deposit to a reserve account for the Bonds and to pay costs of issuance of the Series 2010G Bond. The Series 2010G 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, D-2- Part 44 and 45, as amended, and resolutions duly adopted by the governing body of the City, including Resolution No. 4220 duly enacted by the City Commission 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 (the Original Resolution, as so amended and supplemented, the “Resolution”). The Series 2010C Bond is issuable only as a single, fully registered bond. The Series 2010G Bond is issued on a parity and is equally and ratably secured by the Net Revenues of the System with the City’s outstanding $359,300 Sewer System Revenue Bond (DNRC Water Pollution Control State Revolving Loan Program), Series 2010B (the “Series 2010B Bond”), First Amended and Restated Sewer System Revenue Bond (DNRC Water Pollution Control State Revolving Loan Program), Series 2010C (the “Series 2010C Bond”), First Amended and Restated Sewer System Revenue Bond (DNRC Water Pollution Control State Revolving Loan Program), Series 2010D (the “Series 2010D Bond”), First Amended and Restated Sewer System Revenue Bond (DNRC Water Pollution Control State Revolving Loan Program), Series 2010F (the “Series 2010F Bond”), and First Amended and Restated Sewer System Revenue Bond (DNRC Water Pollution Control State Revolving Loan Program), Series 2010H (the “Series 2010H Bond”). The Series 2010C Bond, the Series 2010D Bond, the Series 2010F Bond, and the Series 2010H Bond are being issued simultaneously herewith. Reference is made to the Resolution for a more complete statement of the terms and conditions upon which the Series 2010G Bond has been issued, the Net Revenues of the System pledged and appropriated for the payment and security thereof, the conditions upon which additional bonds may be issued under the Resolution and made payable from such Net Revenues on a parity with the Series 2010B Bond, the Series 2010C Bond, the Series 2010D Bond, the Series 2010F Bond, the Series 2010G Bond, and the Series 2010H Bond (collectively, the “Bonds”) or otherwise, the conditions upon which the Resolution may be amended, the rights, duties and obligations of the City, and the rights of the owners of the Series 2010G Bond. The City may prepay the principal of the Series 2010G Bond only if (i) it obtains the prior written consent of the DNRC thereto, and (ii) no Loan Repayment or Administrative Expense Surcharge or Loan Loss Reserve Surcharge is then delinquent. A ny prepayment permitted by the DNRC must be accompanied by payment of accrued interest and Administrative Expense Surcharge and Loan Loss Reserve Surcharge to the date of prepayment on the amount of principal prepaid. If the Series 2010G Bond is prepaid in part, such prepayments shall be applied to principal payments in inverse order of maturity. The Bonds, including interest and any premium for the redemption thereof, are payable solely from the Net Revenues pledged for the payment thereof and do not constitute a debt of the City within the meaning of any constitutional, statutory or charter limitation or provision. The City may deem and treat the person in whose name this Series 2010G Bond is registered as the absolute owner hereof, whether this Series 2010G Bond is overdue or not, for the purpose of receiving payment and for all other purposes, and the City shall not be affected by any notice to the contrary. D-3- IT IS HEREBY CERTIFIED, RECITED, COVENANTED AND AGREED that the City has fixed and established and will collect reasonable rates and charges for the services and facilities afforded by the System, and has created a special Sewer System Fund into which the gross revenues of the System, including all additions thereto and replacements and improvements thereof, will be paid, and a separate and special Revenue Bond Account in that fund, into which will be paid each month, Net Revenues of the System then on hand (the gross revenues remaining after the payment of Operating Expenses of the System), in an amount equal to not less than the sum of one-sixth of the interest due within the next six months and one- twelfth of the principal due within the next twelve months with respect to all outstanding Bonds payable semi-annually from that account, and a Reserve Account (the “Reserve”) into which shall be paid additional Net Revenues sufficient to establish and maintain a reserve therein equal to, as of the date of calculation, the Reserve Requirement; that the Revenue Bond Account and the Reserve will be used only to pay the principal of, premium, if any, and interest on the Bonds issued pursuant to the authority herein recited; that the rates and charges for the System will from time to time be made and kept sufficient to provide gross income and revenues adequate to pay promptly the reasonable and current expenses of operating and maintaining the System and to produce in each fiscal year Net Revenues in excess of such current expenses equal to 125% of the principal and interest payable from the Revenue Bond Account in any subsequent fiscal year, to maintain the balance in the Reserve at the Reserve Requirement, to pay promptly the reasonable and current expenses of operating and maintaining the System, to pay the principal of and interest on any Subordinate Obligations and to provide reserves for the replacement and depreciation of the System; that additional Bonds and refunding Bonds may be issued and made payable from the Revenue Bond Account on a parity with the Bonds upon certain conditions set forth in the Resolution but no obligation will be otherwise incurred and made payable from the Net Revenues, unless the lien thereof shall be expressly made subordinate to the lien of the Bonds and other additional Bonds on such Net Revenues; that all provisions for the security of this Series 2010G Bond set forth in the Resolution will be punctually and faithfully performed as therein stipulated; that all acts, conditions and things required by the Constitution and laws of the State of Montana and the ordinances and resolutions of the City to be done, to exist, to happen and to be performed in order to make this Series 2010G Bond a valid and binding special obligation of the City according to its terms have been done, do exist, have happened and have been performed as so required; and that this Series 2010G 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 City within the meaning of any constitutional, statutory or charter limitation or provision and the issuance of the Series 2010G Bond does not cause either the general or the special indebtedness of the City to exceed any constitutional, statutory or charter limitation. D-4- IN WITNESS WHEREOF, the City of Bozeman, Montana, by its governing body, has caused this Bond to be executed by the signatures of its signatures of the Mayor, the City Finance Director, and the City Clerk, and has caused the official seal of the City to be affixed hereto, and has caused this Bond to be dated as of the 21st day of August, 2013. Mayor (SEAL) City Finance Director City Clerk D-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 Issuer 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 Issuer’s liability upon the Bond to the extent of the sum or sums so paid. REGISTER The ownership of the unpaid Principal Balance of this Bond and the interest accruing thereon is registered on the books of the City of 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 August 21, 2013 Department of Natural Resources and Conservation 1625 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 of Bozeman, Montana, acting as Bond Registrar, has transferred, on the books of the Issuer, 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 D-6- FORM OF ASSIGNMENT For value received, the undersigned hereby sells, assigns and transfers unto the within Bond and does hereby irrevocably constitute and appoint_________________________________ attorney to transfer the Bond on the books kept for the registration thereof, with full power of substitution in the premises. Dated: Notice: The assignor’s signature to this assignment must correspond with the name as it appears upon the face of the within Bond in every particular, without alteration or any change whatsoever. D-7- SCHEDULE A Loan Loss Administrative Reserve Total Loan Date Principal Interest Expense Surcharge Surcharge Payment E-1- APPENDIX E [FORM OF FIRST AMENDED AND RESTATED SERIES 2010H BOND] UNITED STATES OF AMERICA STATE OF MONTANA COUNTY OF GALLATIN CITY OF BOZEMAN FIRST AMENDED AND RESTATED SEWER SYSTEM REVENUE BOND (DNRC WATER POLLUTION CONTROL STATE REVOLVING LOAN PROGRAM) SERIES 2010H No. R-2 $8,692,000 FOR VALUE RECEIVED, T HE CITY OF BOZEMAN, MONTANA (the “City”), a duly organized municipal corporation and political subdivision of the State of Montana, acknowledges itself to be specially indebted and, for value received, hereby promises to pay to the Department of Natural Resources and Conservation of the State of Montana (the “DNRC”), or its registered assigns, solely from the Revenue Bond Account of its Sewer System Fund, the principal sum of $8,692,000, with interest on such amount from the date hereof at the rate of two percent (2.00%) per annum on the unpaid balance until paid. In addition, the City shall pay an Administrative Expense Surcharge and a Loan Loss Reserve Surcharge on t he outstanding principal amount of this Bond at the rates of seventy-five hundredths of one percent (0.75%) and twenty-five hundredths of one percent (0.25%), respectively, per annum. Interest and Administrative Expense Surcharge and Loan Loss Reserve Surcharge shall be payable in semiannual installments payable on each January 1 and July 1 (each a “Loan Repayment Date”) commencing January 1, 2014. Each installment shall reflect an interest rate of three percent (3.00%) per annum and shall be in the amount set forth opposite its due date in Schedule A hereto under “Total Loan Payment.” The portion of each such payment consisting of principal, the portion consisting of interest, the portion consisting of Administrative Expense Surcharge, and the portion consisting of Loan Loss Reserve Surcharge shall be as set forth in Schedule A hereto. Past-due payments of principal, interest, Administrative Expense Surcharge, and Loan Loss Reserve Surcharge shall bear interest at the rate of ten percent (10.00%) per annum, until paid. Interest, Administrative Expense Surcharge, and Loan Loss Reserve Surcharge shall be calculated on the basis of a 360-day year comprising 12 months of 30 days each. All payments under this Bond shall be made to the registered holder of this Bond, at its address as it appears on the Bond register, in lawful money of the United States of America. This Bond constitutes a series in the maximum authorized principal amount of $9,573,000 (the “Series 2010H Bond”), issued to finance a portion of the costs of construction of certain improvements to the sewer system of the City (the “System”), to make a deposit to a reserve account for the Bonds and to pay costs of issuance of the Series 2010H Bond. The Series 2010H 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, E-2- Part 44 and 45, as amended, and resolutions duly adopted by the governing body of the City, including Resolution No. 4220 duly enacted by the City Commission 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 (the Original Resolution, as so amended and supplemented, the “Resolution”). The Series 2010C Bond is issuable only as a single, fully registered bond. The Series 2010H Bond is issued on a parity and is equally and ratably secured by the Net Revenues of the System with the City’s outstanding $359,300 Sewer System Revenue Bond (DNRC Water Pollution Control State Revolving Loan Program), Series 2010B (the “Series 2010B Bond”), First Amended and Restated Sewer System Revenue Bond (DNRC Water Pollution Control State Revolving Loan Program), Series 2010C (the “Series 2010C Bond”), First Amended and Restated Sewer System Revenue Bond (DNRC Water Pollution Control State Revolving Loan Program), Series 2010D (the “Series 2010D Bond”), First Amended and Restated Sewer System Revenue Bond (DNRC Water Pollution Control State Revolving Loan Program), Series 2010F (the “Series 2010F Bond”), and First Amended and Restated Sewer System Revenue Bond (DNRC Water Pollution Control State Revolving Loan Program), Series 2010G (the “Series 2010G Bond”). The Series 2010C Bond, the Series 2010D Bond, the Series 2010F Bond, and the Series 2010G Bond are being issued simultaneously herewith. Reference is made to the Resolution for a more complete statement of the terms and conditions upon which the Series 2010H Bond has been issued, the Net Revenues of the System pledged and appropriated for the payment and security thereof, the conditions upon which additional bonds may be issued under the Resolution and made payable from such Net Revenues on a parity with the Series 2010B Bond, the Series 2010C Bond, the Series 2010D Bond, the Series 2010F Bond, the Series 2010G Bond, and the Series 2010H Bond (collectively, the “Bonds”) or otherwise, the conditions upon which the Resolution may be amended, the rights, duties and obligations of the City, and the rights of the owners of the Series 2010H Bond. The City may prepay the principal of the Series 2010H Bond only if (i) it obtains the prior written consent of the DNRC thereto, and (ii) no Loan Repayment or Administrative Expense Surcharge or Loan Loss Reserve Surcharge is then delinquent. A ny prepayment permitted by the DNRC must be accompanied by payment of accrued interest and Administrative Expense Surcharge and Loan Loss Reserve Surcharge to the date of prepayment on the amount of principal prepaid. If the Series 2010H Bond is prepaid in part, such prepayments shall be applied to principal payments in inverse order of maturity. The Bonds, including interest and any premium for the redemption thereof, are payable solely from the Net Revenues pledged for the payment thereof and do not constitute a debt of the City within the meaning of any constitutional, statutory or charter limitation or provision. The City may deem and treat the person in whose name this Series 2010H Bond is registered as the absolute owner hereof, whether this Series 2010H Bond is overdue or not, for the purpose of receiving payment and for all other purposes, and the City shall not be affected by any notice to the contrary. E-3- IT IS HEREBY CERTIFIED, RECITED, COVENANTED AND AGREED that the City has fixed and established and will collect reasonable rates and charges for the services and facilities afforded by the System, and has created a special Sewer System Fund into which the gross revenues of the System, including all additions thereto and replacements and improvements thereof, will be paid, and a separate and special Revenue Bond Account in that fund, into which will be paid each month, Net Revenues of the System then on hand (the gross revenues remaining after the payment of Operating Expenses of the System), in an amount equal to not less than the sum of one-sixth of the interest due within the next six months and one- twelfth of the principal due within the next twelve months with respect to all outstanding Bonds payable semi-annually from that account, and a Reserve Account (the “Reserve”) into which shall be paid additional Net Revenues sufficient to establish and maintain a reserve therein equal to, as of the date of calculation, the Reserve Requirement; that the Revenue Bond Account and the Reserve will be used only to pay the principal of, premium, if any, and interest on the Bonds issued pursuant to the authority herein recited; that the rates and charges for the System will from time to time be made and kept sufficient to provide gross income and revenues adequate to pay promptly the reasonable and current expenses of operating and maintaining the System and to produce in each fiscal year Net Revenues in excess of such current expenses equal to 125% of the principal and interest payable from the Revenue Bond Account in any subsequent fiscal year, to maintain the balance in the Reserve at the Reserve Requirement, to pay promptly the reasonable and current expenses of operating and maintaining the System, to pay the principal of and interest on any Subordinate Obligations and to provide reserves for the replacement and depreciation of the System; that additional Bonds and refunding Bonds may be issued and made payable from the Revenue Bond Account on a parity with the Bonds upon certain conditions set forth in the Resolution but no obligation will be otherwise incurred and made payable from the Net Revenues, unless the lien thereof shall be expressly made subordinate to the lien of the Bonds and other additional Bonds on such Net Revenues; that all provisions for the security of this Series 2010H Bond set forth in the Resolution will be punctually and faithfully performed as therein stipulated; that all acts, conditions and things required by the Constitution and laws of the State of Montana and the ordinances and resolutions of the City to be done, to exist, to happen and to be performed in order to make this Series 2010H Bond a valid and binding special obligation of the City according to its terms have been done, do exist, have happened and have been performed as so required; and that this Series 2010H 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 City within the meaning of any constitutional, statutory or charter limitation or provision and the issuance of the Series 2010H Bond does not cause either the general or the special indebtedness of the City to exceed any constitutional, statutory or charter limitation. E-4- IN WITNESS WHEREOF, the City of Bozeman, Montana, by its governing body, has caused this Bond to be executed by the signatures of its signatures of the Mayor, the City Finance Director, and the City Clerk, and has caused the official seal of the City to be affixed hereto, and has caused this Bond to be dated as of the 21st day of August, 2013. Mayor (SEAL) City Finance Director City Clerk E-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 Issuer 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 Issuer’s liability upon the Bond to the extent of the sum or sums so paid. REGISTER The ownership of the unpaid Principal Balance of this Bond and the interest accruing thereon is registered on the books of the City of 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 August 21, 2013 Department of Natural Resources and Conservation 1625 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 of Bozeman, Montana, acting as Bond Registrar, has transferred, on the books of the Issuer, 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 E-6- FORM OF ASSIGNMENT For value received, the undersigned hereby sells, assigns and transfers unto the within Bond and does hereby irrevocably constitute and appoint_________________________________ attorney to transfer the Bond on the books kept for the registration thereof, with full power of substitution in the premises. Dated: Notice: The assignor’s signature to this assignment must correspond with the name as it appears upon the face of the within Bond in every particular, without alteration or any change whatsoever. E-7- SCHEDULE A Loan Loss Administrative Reserve Total Loan Date Principal Interest Expense Surcharge Surcharge Payment