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HomeMy WebLinkAboutResolution 4461 Water System Revenue Bond RESOLUTION NO. 4461 RESOLUTION RELATING TO FIRST AMENDED, AND RESTATED WATER SYSTEM REVENUE BONDS (DNRC DRINKING WATER STATE REVOLVING LOAN PROGRAM); AMENDING AUTHORIZING RESOLUTION ADOPTED AUGUST 29, 201 1 AND BONDS BE IT RESOLVED by the City Corni-riission of the City of Bozernan, Montana (the "Issuer"). as follows: Section 1. Recitals. 1.01. Issuance of Bonds. Pursuant to Resolution No. 4333, of the Issuer adopted by the City Commission on August 29, 2011 (the *'Original Resolution"), the Issuer authorized, as the Original Resolution were then in effect,the issuance of, respectively, its Water System Revenue Bond (DNRC Drinking Water State Revolving Loan Program), Series 201 ]A (the "Series 201 IA Bond"), issued in the maximum principal amount of$10,000,000, and its Water Systern Revenue Bond (DNRC Drinking Water State Revolving Loan Program), Series 2011 B (the "Series 2011 B Bond"), issued in the maximum principal amount of$9,552,000 to finance improvements consisting of the acquisition, construction and installation of various improvements of the municipal water system and related improvements (the"Project") as part of the municipal water system of the Issuer(the "System"), as more particularly described in the Original Resolution. The Series 2011A Bond and the Series 2011'B Bond (together, 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 frorn Net Revenues ofthe System. 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 1UP-) for the Drinking Water State Revolving Loan Program (the "Prograrn"), 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 Prograrn. 1,03). Reduction in Interest Rate oil Prior,Bonds. It is proposed that debt service oil 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 2011 A Bond frorn three and three-quarters percent (3.75%)per annum to three percent (3.00%) per annurn frorn and after the date of delivery of the First Amended and Restated Series 2011 A Bond; and (ii)the Series 2011 B Bond frorn three and three-quarters percent (3.75%) per annurn to three percent (3.00%) per annurn frorn and after the date of deliver), of the First Amended and Restated Series 2011 B Bond, Section 2. Amendment of Original Resolution. 2.01. Authorization. The Issuer, in Section 16.4 of the Original 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 Original Resolution is hereby amended effective as of the date of deliver), of the First Amended and Restated Series 2011 A 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 2011A Bond are hereby amended to read 3.00%per annum, instead of 3.75%per annum; (ii)the interest rate on the Series 2011 A Bond exclusive of any surcharges will continue in effect at 2.00%per annum; (iii) the administrative expense surcharge on the Series 2011 A Bond will continue in effect at 0.75%per annum; and (iv) all references to the loan loss reserve surcharge on the Series 2011 A 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 2011 A Bond is $9,491,000. (b) The Original Resolution is hereby further amended effective as of the date of delivery of the First Amended and Restated Series 2011 B 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 2011 B Bond are hereby amended to read 3.00%per annum, instead of 3.75% per annum; (ii)the interest rate on the Series 2011B Bond exclusive of any surcharges will continue in effect at 2.00%per annum; (iii)the ,administrative expense surcharge on the Series 2011 B Bond will continue in effect at 0.75%per annum; and (iv) all references to the loan loss reserve surcharge on the Series 2011 B 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 2011 B Bond is $9,400,000. (c) 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 2011 A Bond attached as Appendix B-1 to the Original Resolution is hereby amended and restated in its entirety substantially as set forth on the attached A endix A M (the"First Amended and Restated Series 2011A Bond"), and the Series 20118 Bond attached as Appendix B-2 to the Original Resolution is hereby amended and restated in its entirety -2- substantially osSet forth oil the attached Appendix B (the "First Amended and Restated Series 2011 BBond-)^ 2.05. Effect of Amendments. Except ss amended bv Sections 2.O3 and 2.04ufthis resolution, the Original Resolution shall rco/aim uomaleoded 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 os amended hy Sections 2.USand 2.04of this resolution for the benefit o[the holders from time to time of the First Amended and Restated Bonds, and ally additional Bonds that may be issued thereunder. Section 3. Preparation and DeliveLy of First Amended and Restated Bonds. The First Amended and Restated Series 2011 A Bond and the First Amended and Restated Series 2011 B Bond (together, the "First Amended and Restated Bonds") shall be prepared under the direction of the City Clerk of the Issuer and shall be executed oil behalf of the Issuer by the signatures of the .,^,y~^, ,.~ ..z Finance 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 Lhon to be dated as of the date of delivery and delivered To UheI}NRC, as purchaser thereof, in anticipation of the surrender ofthe corresponding Prior Bond. The City Finance Director is authorized and directed tn act unbond registrar in comonodom with the First/\nnc/)ded and Restated Bonds. Section 4 Issuer is authorized and directed to transfer arnounts 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 pay costs of issuance of the First Amended and Restated Bonds and undertake all other actions necessary or appropriate in connection with the issuance of the First Amended and Restated Bonds. Section 5. Tax Matters. 5.01. General Covenants, The Issuer covenants and agrees with the owners from tiroc 1m1izutofthe First Amended and Restated Bonds that it will not take or permit tmbe taken by any of its officers, employees or agents any action which would cause the interest on the First Amended and Restated Bonds to bcoo/nc |oc]odub|c in gross income for federal income tax purposes under the Internal Revenue Code ofl900" om amended (the "Codn^^\, and applicable Tnomour9 Regulations (the "Regulations"), and covenants to take any and 4U'clions within its powers to ensure that the interest on the First Amended and Restated Bonds will not become includable in gross inoorme for federal income tax purposes under the Code and the Regulations. The Project and the Sya1orn are each owned and ul4ioLmiond by the Issuer and available for use by members of the general public no umubotmo1iulTy equal basis. The Issuer ogn:ta not to enter into any lease, use nr other agreement with emymun-goveomroento1 person relating t0 the use of the Project or the System or security for the payment of the First Amended and Kamia1od Bonds which might cause the First Amended and Restated Bonds 1obe considered "private ac1lvitv bonds" mr"private |nmn bonds" v/ithiothe 000animgVfSection 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 -3- oodaorees to retain such records, make such dderrmioations, file such reports and documents and pay such amounts ctsuch times uo are required under said Section 148([) and applicable Treasury Regulations 10 preserve the exclusion nf interest omthe First Amended and Restated Bonds from gross income for federal lnoonme 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 forin of the Rebate Certificate prepared byBond Counsel and the City hereby covenants and agrees tV 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 vfthe Ianocr" being the officers of the lnaucr charged with the responsibility for issuing the First /\/onndcd and Restated Bonds pursuant to this resolution, are authorized and directed to execute and deliver to the 0NkCcertifications tn satisfy the provisions of Sections l.148-2(b) ofthe Treasury Regulations relating to a reasonable expectation that the proceeds of the First Amended and Restated Bonds will heused ioa manner that will not cause them tobc arbitrage bonds. 5.04. . The Issuer shall file with the Secretary mf the Treasury, not later than November 15, 2013, o stotc/meoT concerning the First Amended and |{cute1ed Bonds containing the information required by Section l49(e) nf the Code. 5,05. No Bank Qualification or Counting of Reissued Bonds Toward Qualified Small Status.Issuer ===� ^, the extent the First Amended and Restated Bonds constitute wze,00m«mceuf the Prior Bonds, such reisnuanmcimu 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(})(3)(C)/ii\(lll) of the Code, that portion of the First Amended and Restated Bonds that constitutes ureimmmunoe iw hereby not taken into account iodetermining the Issuer's status usa quz|ificdsmall issuer under Section 265(b)(3) nf the Code. The First Amended and Restated Bonds are not designated as "qualified tax-exempt obligations." Section 6. Program Covena Ilits. The Issuer agrees that (i) neither it nor any "related person"totile Issuer(within the meaning ofSection 147(o)(2) of the Code) shall,whether pursuant toa formal n/informal arrangement, acquire bonds issued hYthe State under the Trust indenture for the Program in an arnount 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 n:issumoccofthe Prior Bonds constitutes a `^dcnnned" refunding ufthe Prior Bonds effective amnf the date of delivery nfthe First Amended and Restated Bonds and, mmtmthat portion, the DNRC shall bc deemed 10 have relent the proceeds nf the Prior Bonds under the Pnngramo10 the Issuer effective umuf 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 DK|KC and to the attorneys rendering an opinion uwtwthe 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 o[tax-exempt interest, ur marketability oftile First Amended and Restated Bonds and all such certified copies, certificates and affidavits shall constitute representations of the Issuer axTn the truth o{all statements o[fact contained therein. 7.02. Effective Date. This resolution shall be in [o[l force and effect from and after its yumpuge. The o|oeod/-ncaty to the First Amended and Domtu1cd Bonds noted herein, |)uvvevec" sha|| hc effective md)' fimn and after the date o[delivery n[the First Amended and Restated Bonds. Adopted by the City Commission of the City of Bozernan, Montana, on this 5th day of August, 2013. ` 7L Mayor Attest: City herk ` B0 APPENDIX A [FORM OF FIRST AMENDED AND RESTATED SERIES 201 ]A BOND] UNITED STATES OF AMERICA STATE OF MONTANA COUNTY OF GALLATIN CITY OF BOZEMAN FIRST AMENDED AND RESTATED WATER SYSTEM REVENUE BOND (DNRC DRINKING WATER STATE REVOLVING LOAN PROGRAM) SERIES 201 ]A No. R-2 $9,491,000 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 Water System Fund, the principal surn of$9,491,000, 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 lie 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 Sul-charge shall be payable in semiannual installments payable on each January I and July I (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 arnount 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 annurn, 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 $10,000,000 (the "Series 2011 A Bond"), issued to finance a portion of the costs of construction of certain improvements to the water system of the City (the "System­), to fund the Reserve Account, and to pay costs of issuance of the Series 201 ]A Bond. The Series 201 ]A 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-]- amended, and resolutions duly adopted by the governing body of the City, including Resolution No. 4333, of'the City adopted on August 29, 2011 (the "Original Resolution"), as amended and supplemented by Resolution No. 4461 adopted by the City Commission on August 5, 2013 (the Original Resolution, as so amended and supplemented, the "Resolution"). T lie Series 201 ]A Bond is issuable only as a single, fully registered bond. The Series 201 IA Bond is issued on a parity and is equally and ratably secured by the Net Revenues of the System with the City's outstanding First Amended and Restated Water System Revenue Bond (DNRC Drinking Water State Revolving Loan Program), Series 2011 B (the "Series 2011 B Bond—), which is being issued simultaneously herewith. Reference is made to the Resolution for a more complete statement of the terms and conditions upon which the Series 201 ]A Bond has been issued, the Net Revenues of the Systern 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 2011A Bond and the Series 2011E 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 tile Series 2011 A Bond. The City may prepay the principal of the Series 201 ]A 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 201 ]A 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 firnitation or provision. The City may deem and treat the person in whose name this Series 2011A Bond is registered as the absolute owner hereof, whether this Series 2011 A 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. 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 Systern, and has created a special Water Systern 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 A-2- 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°x'© 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 201 JIA 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 20]]A 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 201 ]A 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 ]imitation or provision and the issuance of the Series 2011A Bond does not cause either the general or the special indebtedness of the City to exceed any constitutional, statutory or charter limitation, A-3- 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, IVIT 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 Bozernan, 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-5- 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-6- SCHEDUI..,E A Loan Loss Date Principal Interest A L dministrative Reserve Total- oan Expense Surcharge Surcharge —Payinent B-7- 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 sea] of the City to be affixed hereto, and has caused this Bond to be dated as of the 21 st day of August, 2013. Mayor 30 (SEAL) 4F-I J-N U Ci , Finance Dir or 'C4ity ClMerk A-4- REGISTRATION AND TRANSFER This Bond aho}] be fully registered as to both principal and interest. No transfer of this Bond shall be valid mo}«so and until (1) the registered holder nf the Bond, orhisdu|yauthorized attorney or legal representative, executes the form of assignment appearing uo this Bond. arid (2) the City Finance Director. as bond registrar (the ^ e»is1rof'), has duly noted the transfer on � ' Bond and recorded the transfer nn the Registrar's registration books. 'The Issuer shall be entitled to deem and treat the person iowhose nanc this Bond ia registered os absolute owner thereof for- all yurT»wyew, ontwi<be1aodimgunyonticctVtheoontrnry. Payments on account "f the Bond shall be made only to the order of the registered holder thereof, arid all such payments o]zul} be valid and effectual To ouLiaf« arid discharge the ]wnusr`m liability upon the Bond to the extent of the murn or sums uopaid. REGISTER The ownership of the unpaid Principal 0uiuocc 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 firyTpage hereof orux last noted below: Date of Nu/uc and Address Signature of Re.u�istration 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 TUBE 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 rioted below, ownership of the principal amount of and the ncommmd imtenc*1 on this Bond to the new registered holder noted next 10 such date, except for amounts of principal and interest theretofore paid, Date of Transfer Narne of New R���.Holder Signature ofBond Registrar /\-5- 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-6- SCHEDULEA Loan Loss Administrative Reserve Total Loan Date Principal Interest Expense Surcharge Surcharge Payment A-7- APPENDIX B [FORM OF FIRST AMENDED AND RESTATED SERIES 2011 B BOND] UNITED STATES OF AMERICA STATE OF MONTANA COUNTY OF GALLATIN CITY OF BOZEMAN FIRST AMENDED AND RESTATED WATER SYSTEM REVENUE BOND (DNRC DRINKING WATER STATE REVOLVING LOAN PROGRAM) SERIES 2011B No, R-2 $9,400,000 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 Water Systern Fund, the principal sum of$9,400,000, 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 oil each January I and July I (each a "Loan Repayment Date") commencing January 1, 2014. Each installment shall reflect all 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 ill Schedule A hereto. Past-due payments of principal, interest, Administrative Expense Surcharge, and Loan Loss Reserve Surcharge shall bear interest at the rate often 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 maxii-num authorized principal amount of $9,552,000 (the "Series 2011 B Bond"), issued to finance a portion of the costs of construction of certain improvements to the water 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 201113 Bond. The Series 201113 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-1- Part 44 and 45, as amended, and resolutions duly adopted by the governing bode the City, including Resolution No. 4333, of the City adopted on A ugust 29, 2011 ( 'the "Original Resolution"), as amended and supplemented by Resolution No. 4461 adopted by the City Commission on August 5, 2013 (the Original Resolution, as so amended and supplemented, the "Resolution"). I'lie Series 2011 B Bond is issuable only as a single, fully registered bond. The Series 2011 B Bond is issued on a parity and is equally and ratably secured by the Net Revenues of the System with the City's outstanding First Amended and Restated Water System Revenue Bond (DNRC Revolving Loan Program), Series 2011A (the "Series 2011A Bond"), which is being issued simultaneously herewith. Reference is made to the Resolution for a more complete statement of the terms and conditions upon which the Series 2011 B 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 2011 A Bond and the Series 2011 B 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 2011 B Bond. The City may prepay the principal of the Series 2011 B 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 201113 Bond is prepaid in pall, such prepayments shall be applied to principal payments in inverse order of maturity. The Bonds, including interest and any prerniurn 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 2011 B Bond is registered as the absolute owner hereof, whether this Series 2011 B 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, IT IS "EREBY 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 Water System Fund into which the gross revenues of the System, including all additions thereto and replacernents 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 B-2- 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 tune 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 prompt])' the reasonable and current expenses of operating and maintaining the System, to pay the principal of and interest on a ny 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 2011B 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 2011 B 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 2011 B 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 2011 B Bond does not cause either the general or the special indebtedness of the City to exceed any constitutional, statutory or charter limitation. B-3- 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 at hereto, and has caused this Bond to be dated as of the 21 st day of August, 2013. Mayor (SEAL) Ci, Finance 'I ctor A* * TIIN CO City C erk B-4- CERTIFICATE AS TO RESOLUTION AND ADOPTING VOTE 1, the undersigned, being the duly qualified and acting recording officer of the City of Rozenian, Montana (the `"City"") hereby certify that the attached resolution is a true cop), of Resolution No. 4461 entitled "RESOLUTION RELATING TO FIRST AMENDER AND RESTATED WATER SYSTEM REVENUE BONDS (DNRC DRINKING WATER. STATE REVOLVING LOAN PROGRAM); AMENDING AUTHORIZING RESOLUTION ADOPTED AUGUST 29, 2011 AND BONDS" (the "Resolution"), on file in the original records of the City in my legal custody; that the Resolution tivas duly adopted by the City Commission of the City at a meeting on August 5, 20133. 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: Mqjo Ct� n ArJrms., ; voted against the same: ; abstained fi"om voting thereon: - ' or were absent: WITNESS my hand officially this ( day of August, 2013. Cl ° Cr p r City Cleric Tj1: CO