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5.2. & 5.3. SR 11-30-1998ity of Item #5.2. & 5.3. River TO: MEMORANDUM Mayor and City Council FROM: Lori Johnson, Finance Director DATE: November 30, 1998 SUBJECT: Resolutions Providing for the Issuance and Sale of the City $1,375,000 General Obligation Improvement Bonds Series 1998A and $820,000 General Obligation Water Revenue Bonds, Series 1998B On Monday, the Council will be asked to award the 1998 Improvement and the 1998 Water Revenue bonds. Dave MacGillivray of Springsted will be present Monday evening to provide the results of this sale. The General Obligation Improvement Bonds fund the 1998 Overlay, Railroad Drive, Boston, Business Center Drive, Lake Orono, and Guardian Angels projects. The Water Revenue Bonds fund well No. 6 and the related treatment facilities. Attached is a copy of the official statement used in this bond transaction. The official statement provides economic, demographic, financial, and other information regarding the city. Also attached is the credit rating review from Moody's. The city has maintained its Baal rating with a positive outlook. Moody's looked very favorably upon the improved financial condition of the city and the growth in the General Fund balance. However, the large amount of debt (direct and overlapping) was certainly a concern to Moody's. A large part of this debt is the school's debt over which the city has no control. The city's continuing needed to finance future growth through debt issuance was also considered when determining the rating. Action Requested Following a presentation by Dave MacGillivray on the results of the proposals received for the two bond issues, the City Council is asked to approve two resolutions; a resolution providing for the issuance and sale of the city's $1,375,000 General Obligation Improvement Bonds Series 1998A, and a second resolution providing for the issuance and sale of the city's $820,000 General Obligation Water Revenue Bonds Series 1998B. X\elkriverXsys\shrdoc\councilXbonds.doc 13065 Orono Parkway * P.O. Box 490 · Elk River, MN 55330 · TDD & Phone: (612) 441-7420 · Fax: (612) 441-7425 11-/24/98 12:35 ET REF: ATTN: Lori Johnson City of Elk River NOOD1228.0001 FR:MOODYS T0:6124417425 Page 1 of 2 MOODY'S ASSIGNS BAA1 RATING TO ELK RIVER'S (MN) SERIES 1998 G.O. BONDS $20 MILLION DEBT AFFECTED Elk River (City of) MN Municipality Minnesota Moody's Rating Issue Rating General Obligation Improvement Bonds, Series 1998A Sale Amount $1,375,000.00 Expected Sale Date 11/30/98 Rating Description General Obligation Baal General Obligation Water Revenue Bonds, Series 1998B Sale Amount $820,000.00 Expected Sale Date 11/30/98 Rating Description General Obligation Baal NEW YORK, November 24, 1998 -- Moody's has assigned a Baal rating with a positive outlook to the City of Elk River (MN) $1,375,000 General Obligation ~ rovement Bonds, Series 1998A and $820,000 General Obligation Water Revenue B~.~ds, Series 1998B. The Baal rating assignment with a positive outlook reflects Moody's expectation that the city will maintain a sound financial position, experience continued tax base and population growth, and manage the high debt burden with extremely high debt service expenditures. IMPROVED FINANCIAL POSITION DESPITE PRESSURES OF RAPID GROWTH; Moody's expects continued financial stability due to attention to careful planning and conservative budgeting. Flexibility is afforded in meeting growth-related pressures through the continued monitoring of capital, personnel, and service needs. General Fund balance has grown steadily over the last four years. In fiscal 1997 the General Fund balance was 41.2% of General Fund revenues. Officials hope to maintain this level and utilize any surpluses generated in future years to build up reserves in other funds. The city had $250,000 of margin within the legislatively imposed tax levy cap for the current year. HIGH DEBT LEVELS REFLECT GROWING COPSMUNITY. Moody's believes Elk River's high debt burden, at 7.1%, is manageable due to continued tax base and population growth and rapidly retired principal. The high debt burden is primarily attributable to the significant issuance by the overlapping school district, reflecting increased enrollment needs. Due to growth pressures Moody's expects on-going debt issuance over the next several years. Officials anticipate future borrowing of $5 million within the next two rs for water and sewer extension. Support from special assessments, utility e~cerprise revenues, and tax increments for most of the city's outstanding general obligation debt alleviates pressure on the property tax rate. 11/24/98 12:3S ET NOOD1228.000! FR:#OODYS T0:6124417425 Page 2 of 2 Principal amortization is rapid with 80.2~ retired in ten years. Debt service is extremely high at 40Z of operating expenditures. P' ~XIMITY TO THE TWIN CITY PXETRO AREA FOSTERS GROWTH Moody's anticipates continued tax base and population growth due to favorable location between Minneapolis-St. Paul. and St. Cloud. While the majority of the growth is residential, ~-ith 180 new homes constructed in 1997, the city is experiencing economic diversification ~ith a number of new ~mall manufacturin~ facilities. Additional growth is expected since the city remains almost two-thirds undeveloped. Resident income levels and housing values are above those of the state in general, the unemployment rate in Sherburne County (1.7%) was lower than the state average (2.1%) in July 1998. ANALYSTS: Edward Damutz, Analyst, Public Finance Group, Moody's Investors Service Dianne Golub, Backup Analyst, Public Finance Group, Moody's Investors Service Linda Lipnick, Senior Credit Officer, Public Finance Group, Moody's Investors Service CONTACTS: Journalists: (212) 553-0376 Research Clients: (212) 553-1625 EXTRACT OF MINUTES OF A MEETING OF THE CITY COUNCIL OF THE CITY OF ELK RIVER, MINNESOTA Pursuant to due call and notice thereof, a regular or special meeting of the City Council of the City of Elk River, Minnesota, was duly held in the Elk River City Hall on November 30, 1998, commencing at 6:00 P.M., C.T., in part for the purpose of considering the offers which had been received for the purchase of the City's $1,375,000 General Obligation Improvement Bonds, Series 1998A. The following Councilmembers were present: and the following were absent: There was then presented a tabulation of the offers which had been received in the manner specified in the Terms of Proposal for the Bonds. The offers were as follows: 999191.1 then introduced the following Resolution and moved its adoption: RESOLUTION NO. RESOLUTION PROVIDING FOR THE ISSUANCE AND SALE OF THE CITY'S $1,375,000 GENERAL OBLIGATION IMPROVEMENT BONDS, SERIES 1998A BE IT RESOLVED by the City Council (the "Council") of the City of Elk River, Minnesota (the "City"), as follows: 1. Recitals. It is hereby determined: (a) That the assessable public improvements (the "Improvements") described in the Council's resolution of November 9, 1998, relating to these Bonds have been duly ordered by the City and have been constructed by the City or will be constructed under contracts which the City has or will let therefor, all pursuant to and in accordance with the applicable provisions of Minnesota Statutes, Chapter 429. (b) That is it necessary and expedient to the sound financial management of the affairs of the City that the City issue its bonds pursuant to Minnesota Statutes, Chapters 429 and 475, to provide financing for the Improvements. (c) The Improvements and all their components have been ordered on or prior to the date hereof, after a hearing thereon (except where not required by law) for which mailed and published notice was duly given as required by law describing the Improvements and all their components by general nature, estimated cost, and area to be assessed. (d) The Council desires that the Bonds be issued initially in "Book Entry Only Form" (as hereinafter described). 2. Acceptance of Offer; Book Entry Bonds. (a) The offer of (the "Purchaser") to purchase the City's $1,375,000 General Obligation Improvement Bonds, Series 1998A (the "Bonds"), at the rates of interest and upon the other terms set forth in this Resolution, and to pay therefor the sum of $ plus interest accrued to settlement, is hereby accepted. (b) Book Entry Only System. The Depository Trust Company, a limited purpose trust company organized under the laws of the State of New York, or any of its successors to 999191.1 2 (iv) The City and the Bond Registrar may treat as and deem the Depository to be the absolute owner of the Bonds for the purpose of payment of the principal of and premium, if any, and interest on the Bonds, for the purpose of giving notices of redemption and other matters with respect to the Bonds, for the purpose of obtaining any consent or other action to be taken by Holders for the purpose of registering transfers with respect to such Bonds, and for all purpose whatsoever. The Bond Registrar, as paying agent hereunder, shall pay all principal of and premium, if any, and interest on the Bonds only to or upon the Holder or the Holders of the Bonds, as shown on the Bond Registrar's bond register, and all such payments shall be valid and effective to fully satisfy and discharge the City's obligations with respect to the principal of and premium, if any, and interest on the Bonds to the extent of the sum or sums so paid. (v) Upon delivery by the Depository to the Bond Registrar of written notice to the effect that the Depository has determined to substitute a new Nominee in place of the existing Nominee, and subject to the transfer provisions in paragraph 11 hereof, references to the Nominee hereunder shall refer to such new Nominee. (vi) So long as any Bond is registered in the name of a Nominee, all payments with respect to the principal of and premium, if any, and interest on such Bond and all notices with respect to such Bond shall be made and given, respectively, by the Bond Registrar or the City, as the case may be, to the Depository as provided in the Blanket Letter of Representations required by the Depository as a condition to its acting as book-entry Depository for the Bonds (said Blanket Letter of Representations, together with any replacement thereof or amendment or substitute thereto, including any standard procedures or policies referenced therein or applicable thereto respecting the procedures and other matters relating to. the Depository's role as book-entry Depository for the Bonds, are collectively hereinafter referred to as the "Blanket Letter of Representations"). (vii) Ail transfers of beneficial ownership interests in each Bond issued in book-entry form shall be limited in principal amount to authorized denominations and shall be effected by the Depository with the Participants for recording and transferring the ownership of beneficial interests in such Bonds. 999191.1 4 its functions hereunder (the "Depository',), will act as securities depository for the Bonds, and to this end: (i) The Bonds shall be initially issued and, so long as they remain in book entry form only (the "Book Entry Only Period"), shall at all times be.in the form of a separate single fully registered Bond for each maturity of the Bonds; and for purposes of complying with this requirement under paragraph 11 of this Resolution, authorized denominations for each maturity of Bonds shall be deemed to be limited during the Book Entry Only Period to the outstanding principal amount of that maturity. While in such book entry form, the Bonds are sometimes hereinafter referred to as being in "Book Entry Only Form." (ii) Upon initial issuance, ownership of the Bonds shall be registered in a bond register maintained by the Bond Registrar appointed pursuant to paragr-~ph 7 of this Resolution in the name of CEDE & CO., as the nominee (it or any nominee of the existing or a successor Depository, the "Nominee"). (iii) With respect to the Bonds, neither the City nor the Bond Registrar shall have any responsibility or obligation to any broker, dealer, bank, or any other financial institution for which the Depository holds Bonds as securities depository (the "Participant") or to the person for which a Participant holds an interest in the Bonds shown on the books and records of the Participant (the "Beneficial Owner"). Without limiting the immediately preceding sentence, neither the City, nor the Bond Registrar, shall have any such responsibility or obligation with respect to (A) the accuracy of the records of the Depository, the Nominee or any Participant with respect to any ownership interest in the Bonds, or (B) the delivery to any Participant, any Beneficial Owner or any other person, other than the Depository, of any notice with respect to the Bonds, including any notice of redemption, or (C) the payment to any Participant, any Beneficial Owner or any other person, other than the Depository, of any amount with respect to the principal of or premium, if any, or interest on the Bonds, or (D) the consent given or other action taken by the Depository as the registered owner of any Bonds (the "Holder"). For purposes of securing the vote or consent of any Holder under this Resolution, the City may, however, rely upon an omnibus proxy under which the Depository assigns its consenting or voting rights to certain Participants to whose accounts the Bonds are credited on the record date identified in a listing attached to the omnibus proxy. 999191.1 3 (viii) In connection with any notice or other communication to be provided to the Holders pursuant to this Resolution by the City or the Bond Registrar with respect to any consent or other action to be taken by Holders, the Depository shall consider the date of receipt of notice requesting such consent or other action as the record date for such consent or other action; provided, that the City or the Bond Registrar may establish a special record date for such consent or other action. The City or the Bond Registrar shall, to the extent possible, give the Depository notice of such special record date not less than 15 calendar days in advance thereof to the extent possible. (ix) Any successor Bond Registrar, in its written acceptance of its duties under this Resolution and any paying agency registrar agreement, shall agree to take any actions necessary from time to time to comply with the requirements of the Blanket Letter of -- Representations. (c) Termination of Book-Entry Only System. Discontinuance of a particular Depository's services and termination of the book-entry only system may be effected as follows: (i) The Depository may determine to discontinue providing its services with respect to the Bonds at any time by giving written notice to the City and discharging its responsibilities with respect thereto under applicable law. The City may terminate the services of the Depository with respect to the Bonds if the City determines that the Depository is no longer able to carry out its functions as securities depository or the continuanion of the system of book- entry transfers through the Depository is not in the best interests of the City. (ii) Upon termination of the services of the Depository as provided in the preceding paragraph, and if no substitute securities depository is willing to undertake the functions of the Depository hereunder can be found which, in the opinion of the City, is willing and able to assume such functions upon reasonable or customary terms, or if the City determines that it is in the best interests of the City that the Beneficial Owners be issued certificates for the Bonds, the Bonds shall no longer be registered in the name of the Nominee, but may be registered in whatever name or names the Holder of the Bonds shall designate at that time, in accordance with paragraph 11 hereof. To the extent that the Beneficial Owners are designated as the transferee by the Holders, in accordance with paragraph 11 hereof, the Bonds will be delivered to the Beneficial Owners. 999191,1 5 (iii) Nothing in this subparagraph (c) shall limit or restrict the provisions of paragraph 11 hereof. (d) Blanket Letter of Representations. The City's execution of the City the Blanket Letter.of Representations in substantially the form on file in the offices of the City has heretofore been authorized and is hereby ratified. The provisions in the Blanket Letter of Representations are incorporated herein by reference and made fully a part of this Resolution to the same extent as if set forth in full herein~' and if and to the extent that any provisions of this Resolution are inconsistent or in conflict with the provisions of the Blanket Letter of Representations, the provisions in the Blanket Letter of Representations shall control. 3. Title; Oriqinal Issue Date; Denominations; Maturities. The Bonds shall be titled "General Obligation - Improvement Bonds, Series 1998A," shall be dated December 1, 1998, as the date of original issue and shall be issued forthwith on or after such date as fully registered bonds. The Bonds shall be numbered from R-1 upward in the denomination of $5,000 each or in any integral multiple thereof of a single maturity. The Bonds shall mature on February 1 in the years and amounts as follows: Years Amounts years Amounts 2000 $200,000 2005 $80,000 2001 200,000 2006 80,000 2002 200,000 2007 70,000 2003 200,000 2008 70,000 2004 200,000 2009 75,000 As may be requested by the Purchaser, one or more term Bonds may be issued having mandatory sinking fund redemption and final maturity amounts conforming to the foregoing principal repayment schedule, and corresponding additions may be made to the provisions of the applicable Bond(s). 4. Purpose. The Bonds shall provide funds to finance the Improvements. The total cost of the Improvements, which shall include all costs enumerated in Minnesota Statutes, Section 475.65, is estimated to be at least equal to the amount of the Bonds. Work on the Improvements shall proceed with due diligence to completion. 5. Interest. The Bonds shall bear interest payable semiannually on February 1 and August 1 of each year (each, an "Interest Payment Date"), commencing August 1, 1999, calculated on the basis of a 360-day year consisting of twelve 30-day months, at the respective rates per annum set forth opposite the maturity years, as follows: Maturity Interest Maturity Interest Year Rate Year Rate 2000 % 2005 2001 2006 2002 2007 2003 2008 2004 2009 6. Redemption. Ail Bonds maturing after February 1, 2006, shall be subject-to redemption and prepayment at the option of the City on said date and on any date thereafter at a price of par plus accrued interest to date of redemption. Redemption may be in whole or in part of the Bonds subject to prepayment. If redemption is in part, the City shall determine the amount of Bonds of each maturity to be prepaid; and if only part of the Bonds having a common maturity date are called for prepayment, the specific Bonds to be prepaid shall be chosen by lot by the Bond Registrar. Bonds or portions thereof called for redemption shall be due and payable on the redemption date, and interest thereon shall cease to accrue from and after the redemption date. Published notice of redemption shall in each case be given if and to the extent required by applicable law, and mailed notice of redemption shall be given to the paying agent and to each affected registered owner of the Bonds. To effect a partial redemption of Bonds having a common maturity date, the Bond Registrar, prior to giving notice of redemption, shall assign to each Bond of that maturity a distinctive number for each $5,000 of the principal amount of such Bond. The Bond Registrar shall then select by lot, using such method of selection as it shall deem proper in its discretion, from the numbers so assigned to such Bonds, as many numbers as, at $5,000 for each number, shall equal the principal amount of such Bonds to be redeemed. The Bonds to be redeemed shall be the Bonds to which were assigned numbers so selected; provided, however, that only so much of the principal amount of each such Bond of a denomination of more than $5,000 shall be redeemed as shall equal $5,000 for each number assigned to it and so selected. If a Bond is to be redeemed only in part, it shall be surrendered to the Bond Registrar (with, if .the. City or Bond Registrar so requires, a written instrument of transfer in form satisfactory to the City or Bond Registrar duly executed by the registered owner thereof or by the registered owner's attorney, duly authorized in writing) and the City shall execute.(if necessary) and the Bond Registrar shall authenticate and deliver to the registered owner of such Bond, without service charge, a new Bond or Bonds of the same series having the same stated maturity and interest rate and of any authorized denomination or denominations, as requested by such registered owner, in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Bond so surrendered. 999191.1 7 7. Bond Reqistrar. , in , , is appointed to act as bond registrar and transfer agent with respect to the Bonds (the "Bond Registrar"), and shall do so unless and until a successor Bond Registrar is duly appointed, all pursuant to any contract the City and Bond Registrar shall execute which is consistent herewith. The Bond Registrar shall also serve as paying agent unless and until a successor paying agent is duly appointed. The principal of and interest on the Bonds shall be paid to the registered owners (or record owners) of the Bonds in the manner set forth in the form of Bond and paragraph 13 of this Resolution. 8. Form of Bond. The Bonds, together with the Bond Registrar's Certificate of Authentication, the form of Assignment and the registration information thereon, shall be in substantially the following form: UNITED STATES OF AMERICA STATE OF MINNESOTA COUNTY OF SHERBURNE CITY OF ELK RIVER R- $ GENERAL OBLIGATION IMPROVEMENT BOND, SERIES 1998A INTEREST MATURITY DATE OF R_ATE DATE ORIGINAL ISSUE ~USIP REGISTERED OWNER: PRINCIPAL AMOUNT: DOLLARS -- The City of Elk River, Sherburne County, Minnesota (the "City"), hereby acknowledges itself to be indebted and, for value received, promises to pay to the registered owner specified above, or registered assigns, in the manner hereinafter set forth, the principal amount specified above on the maturity date specified above, unless duly called for earlier redemption, and to pay interest thereon semiannually on February 1 and August 1 of each year (each, an "Interest Payment Date"), commencing August 1, 1999, at the rate per annum specified above (calculated on the basis of a 360-day year consisting of twelve 30-day months) until the principal sum is paid or has been provided for. This Bond will bear interest from the most recent Interest Payment Date to which interest has been paid or, if no interest has been paid, from the date of original issue hereof. The principal of and premium, if any, on this Bond are payable upon presentation and surrender hereof at the principal office of in (the "Bond Registrar"), acting as paying agent, or at the principal office of any successor paying agent duly appointed by the City. Interest on this Bond will be paid on each Interest Payment Date by check or .draft mailed to the person in whose name this Bond is registered (the "Registered Owner") on the registration books of the City maintained by the Bond Registrar and at the address appearing thereon at the close of business on'the fifteenth day of the calendar month preceding such Interest Payment Date (the "Regular Record Date"). Any interest not so timely paid shall cease to be payable to the person who is the Registered Owner hereof as of the Regular Record Date, and shall be payable to the person who is the Registered Owner hereof at the close of business on a date (the "Special Record Date") fixed by the Bond Registrar whenever money becomes available for payment of the defaulted interest. Notice of the Special Record Date shall be given to Registered Owners not less than ten days prior to the Special Record Date. The 999191.1 9 principal of and premium, if any, and interest on this Bond are payable in lawful money of the United States of America. REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS BOND SET FORTH ON THE REVERSE HEREOF, WHICH PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS IF SET FORTH HERE. IT IS HEREBY CERTIFIED AND RECITED that all acts, c©nditions and.things required by the Constitution and laws of the State Of Minnesota to be done, to have happened and to be performed, precedent to.and in the issuance of this Bond, have been done, have happened and have been performed in regular and due form, time and manner as required by law, and that this Bond, together with all other indebtedness of the City outstanding on the date of original issue hereof and the date of its actual issuance and delivery to the original purchaser, does not exceed any constitutional or statutory limitation of indebtedness. IN WITNESS WHEREOF, the City of Elk River, Sherbur-ne County, Minnesota, by its City Council, has caused this Bond to be executed on its behalf by the facsimile signatures of its Mayor and its City Administrator; has caused the corporate seal of the City to be intentionally omitted herefrom, as permitted by law; and has caused this Bond to be executed manually by the Bond Registrar, acting as the City's duly appointed authenticating agent for the Bonds. 999~9~.~ 10 Date of Registration: Registrable by: Payable at: BOND REGISTRAR'S CERTIFICATE OF AUTHENTICATION This Bond is one of the Bonds described in the Resolution mentioned within. CITY OF ELK RIVER, SHERBURNE COUNTY, MINNESOTA Mayor Bond Registrar City Administrator By. Authorized Signature Redemption. Ail Bonds of this issue maturing after February 1, 2006, are subject to redemption and prepayment at the option of the City on said date and on any date thereafter at a price of par plus accrued interest to date of redemption. Redemption may be in whole or in part of the Bonds subject to prepayment. If redemption is in part, the City shall determine the amount of Bonds of each maturity to be prepaid; and if only part of the Bonds having a common maturity date are called for prepayment, the Bonds of that maturity to be prepaid shall be chosen by lot by the Bond Registrar. Bonds or portions thereof called for redemption shall be due and payable on the redemption date, and interest thereon shall cease to accrue from and after the redemption date. Published notice of redemption shall in each case be given if and to the extent required by applicable law, and mailed notice of redemption shall be given to the paying agent and to each affected registered owner of the Bonds. Issuance; Purpose; General Obliqation. This Bond is one of an issue in the total principal amount of $1,375,000~ all of like date of original issue and tenor, except as to registra- tion number, maturity, interest rate, denomination and redemption privilege, which Bond has been issued pursuant to and in full conformity with the Constitution and laws of the State of Minnesota and pursuant to a resolution adopted by the City Council on November 30, 1998 (the "Resolution"), for the purpose of providing money to finance certain costs of assessable public improvements within the City. This Bond constitutes a general obligation of the City, and to provide moneys for the prompt and full payment of its principal, premium, if any, and interest when the same become due, the full faith and credit and taxing powers of the City have been and are hereby irrevocably pledged. Each capitalized term which is used but not otherwise defined in this Bond shall have the meaning given to that term in the Resolution. [For Bonds in Book Entry Only Form, the following paragraph shall be added, and this Bond form (1) may be rearranged so that the signature blocks hereof appear at the end of the main text of this form or (2) may otherwise be a~nended to conform to book entry requirements and the Blanket Letter of Representations.] Book Entry Only Form; Blanket Letter of Representations. Pursuant to the Resolution, the Bonds may be issued in Book Entry Only Form, and during any period in which Bonds are in such form, the provisions applicable to the Bonds pursuant to the Blanket Letter of Representations shall apply, notwithstanding'any contrary or inconsistent provision herein or in the Resolution. Denominations; Exchanqe; Resolution. The Bonds are issuable solely as fully registered bonds in the denominations of $5,000 and integral multiples thereof of a single maturity and are exchangeable for fully registered bonds of other authorized denominations in equal aggregate principal amounts at the 999~9~.~ 12 principal office of the Bond Registrar, but only in the manner and subject to the limitations provided in the Resolution. Reference is hereby made to the Resolution for a description of the rights and duties of the Bond Registrar. Copies of the Resolution are on file in the principal office of the Bond Registrar. Transfer. This Bond is transferable by the Registered Owner in person or by the Registered Owner's attorney duly authorized in writing at the principal office of the Bond Registrar upon presentation and surrender hereof to the Bond Registrar, all subject to the terms and conditions provided in the Resolution and to reasonable regulations of the City contained in any agreement with the Bond Registrar. Thereupon the City shall execute and the Bond Registrar shall authenticate and deliver, in exchange for this Bond, one or more new fully registered Bonds in the name of the transferee (but not registered in blank or to "bearer" or similar designation), of an authorized denomination or denominations, in aggregate princ~ipal amount equal to the principal amount of this Bond, of the same maturity and bearing interest at the same rate. Fees upon Transfer or Loss. The Bond Registrar may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection with the transfer or exchange of this Bond and any legal or unusual costs regarding transfers and lost Bonds. Treatment of Reqistered Owners. The City and Bond Registrar may treat the person in whose name this Bond is registered as the owner hereof for the purpose of receiving payment as herein provided (except as otherwise provided on the reverse side hereof with respect to the Record Date) and for all other purposes, whether or not this Bond shall be overdue, and neither the City nor the Bond Registrar shall be affected by notice to the contrary. Authentication. This Bond shall not be valid or become obligatory for any purpose or be entitled to any security unless the Certificate of Authentication hereon shall have been executed by the Bond Registrar. No Desiqnation of Bonds as Qualified Tax-Exempt Obliqations. The Bonds have not been designated by the City as "qualified tax-exempt obligations" for purposes of Section 265(b) 3) of the Internal Revenue Code of 1986, as amended. 999191.~ 13 ABBREVIATIONS The following abbreviations, when used in the inscription on the face of this Bond, shall be construed as though they were written.out in full according to applicable laws or regulations: TEN COM - as tenants in common TEN ENT - as tenants by the entireties JT TEN - as joint tenants with right of survivorship and not as tenants in common UTMA - as custodian for (Cust) (Minor) under the Uniform (State) Transfers to Minors Act Additional abbreviations may also be used though not in the above list. 999191.~ 14 ASSIGNMENT For value received, the undersigned hereby sells, assigns and transfers unto the within Bond and does hereby irrevocably constitute and appoint as attorney to transfer the Bond on the books kept for the registration thereof, with full power of substitution in the premises. Dated: Notice: Signature Guaranteed: 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 whatever.- Signature(s) must be guaranteed by a national bank or trust company, by a brokerage firm having a membership in one of the major stock exchanges or by any other "Eligible Guarantor Institution" as defined in 17 CFR 240.17 Ad-15(a) (2). The Bond Registrar will not effect transfer of this Bond unless the information concerning the transferee requested below is provided. Name and Address: (Include information for all joint owners if the Bond is held by joint account.) 999191.1 15 9. Execution; Temporary Bonds. The Bonds shall be executed on behalf of the City by the signatures of its Mayor and City Administrator and be sealed with the seal of the City; provided, however, that the seal of the City may be a printed facsimile; and provided further that both of such signatures may be printed facsimiles and the corporate seal may be omitted on the Bonds as permitted by law. In the event of disability or resignation or other absence of either such officer, the Bonds may be signed by the manual or facsimile signature of that officer who may act on behalf of such absent or disabled officer. In case either such officer Whose signature or facsimile of whose signature shall appear on the Bonds shall cease to be such officer before the delivery of the Bonds, such signature or facsimile shall nevertheless be valid and sufficient for all purposes, the same as if he or she had remained in office until delivery. The City may elect to deliver, in lieu of printed definitive bonds, one or more typewritten temporary bonds in substantially the form set forth above, with such changes as may be necessary to reflect more than one maturity in a single - temporary bond. Such temporary bonds shall, upon the printing of the definitive bonds and the execution thereof, be exchanged therefor and cancelled. 10. Authentication. No Bond shall be valid or obligatory for any purpose or be entitled to any security or benefit under this Resolution unless a Certificate of Authenti- cation on such Bond, substantially in the form hereinabove set forth, shall have been duly executed by an authorized representa- tive of the Bond Registrar. Certificates of Authentication on different Bonds need not be signed by the same person. The Bond Registrar shall authenticate the signatures of officers of the City on each Bond by execution of the Certificate of Authenti- cation on the Bond and by inserting as the date of registration in the space provided the date on which the Bond is authenti- cated, except that for purposes of delivering the original Bonds to the Purchaser, the Bond Registrar shall insert as a date of registration the date of original issue, which date is December 1, 1998. The Certificate of Authentication so executed on each Bond shall be conclusive evidence that it has been authenticated and delivered under this Resolution. 11. Reqistration; Transfer; Exchanqe. The City will cause to be kept at the principal office of the Bond Registrar a bond register in which, subject to such reasonable regulations as the Bond Registrar may prescribe, the Bond Registrar shall provide for the registration of Bonds and the registration of transfers of Bonds entitled to be registered or transferred as herein provided. Upon surrender for transfer of any Bond at the principal office of the Bond Registrar, the City shall execute (if necessary), and the Bond Registrar shall authenticate, insert the date of registration (as provided in paragraph 10) of, and deliver, in the name of the designated transferee or transferees, one or more new Bonds of any authorized denomination or 999~9~.~ 16 denominations of a like aggregate principal amount, having the same stated maturity and interest rate, as requested by the transferor; provided, however, that no Bond may be registered in blank or in the name of "bearer" or similar designation. At the option of the registered owner thereof, Bonds may be exchanged for Bonds of any authorized denomination or denominations of a like aggregate principal amount and stated maturity, upon surrender of the Bonds to be exchanged at the principal office of the Bond Registrar. Whenever any Bonds are so surrendered for exchange, the City shall execute (if necessary), and the Bond Registrar shall authenticate, insert the date of registration of, and deliver the Bonds which the registered owner making the exchange is entitled to receive. Ail Bonds surrendered upon any exchange or transfer provided for in this Resolution shall be promptly cancelled by the Bond Registrar and thereafter disposed of as directed by the City. - Ail Bonds delivered in exchange for or upon transfer of Bonds shall be valid obligations of the City evidencing the same debt, and entitled to the same benefits under this Resolution, as the Bonds surrendered for such exchange or transfer. Every Bond presented or surrendered for transfer or exchange shall be duly endorsed or be accompanied by a written instrument of transfer, in form satisfactory to the Bond Registrar, duly executed by the registered owner thereof or the registered owner's attorney duly authorized in writing. The Bond Registrar may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection with the transfer or exchange of any Bond and any legal or unusual costs regarding transfers and lost Bonds. Transfers shall also be subject to reasonable regula- tions of the City contained in any agreement with the Bond Registrar, including regulations which permit the Bond Registrar to close its transfer books between record dates and payment dates. 12. Riqhts Upon Transfer or Exchanqe. Each Bond delivered upon transfer of or in exchange for or in lieu of any other Bond shall carry all the rights to interest accrued and unpaid, and to accrue, which were carried by such other Bond. 13. Interest Payment~ Record Date. Interest on any Bond shall be paid on each Interest Payment Date by check or draft mailed to the person in whose name the Bond is registered on the registration books of the City maintained by the Bond Registrar and at the address appearing thereon at the close of business on the fifteenth (15th) day of the calendar month preceding such Interest Payment Date (the "Regular Record Date"). Any such interest not so timely paid shall cease to be payable to 999~9~.~ 17 the person who is the registered owner thereof as of the Regular Record Date, and shall be payable to the person who is the registered owner thereof at the close of business on a date (the "Special Record Date") fixed by the Bond Registrar whenever money becomes available for payment of the defaulted interest. Notice of the Special Record Date shall be given by the Bond Registrar to the registered owners not less than ten (10) days prior to the Special Record Date. 14. Treatment of Registered Owner. The City and Bond Registrar may treat the person in whose name any Bond is registered as the owner of such Bond for the purpose of receiving payment of principal of and premium, if any, and interest (subject to the payment provisions in paragraph 13 above) on, such Bond and for all other purposes whatsoever whether or not such Bond shall be overdue, and neither the CitY nor the Bond Registrar shall be affected by notice to the contrary. 15. Delivery; Application of Proceeds. The Bond~ when so prepared and executed shall be delivered by the City Finance Director to the Purchaser upon receipt of the purchase price, and the Purchaser shall not be obliged to see to the proper application thereof. 16. Fund and Accounts. There is hereby created a special fund of the City designated the "$1,375,000 General Obligation Improvement Bonds, Series 1998A Fund" (the "Fund") to be held and administered by the City as a bookkeeping account separate and apart from all other funds maintained in the official financial records of the City. The Fund shall continue to be maintained in the manner herein specified until all of the Bonds herein authorized and all other bonds payable from said Fund and the interest thereon have been fully paid. There shall be maintained in the Fund two (2) separate accounts, to be designated the "Capital Account" and "Debt Service Account", respectively. (i) Capital Account. To the Capital Account there shall be credited the proceeds of the sale of the Bonds, less such amounts thereof as may be directed for deposit into the Debt Service Account in paragraph 16(ii) below, plus any special assessments levied with respect to the Improvements and collected prior to completion of the Improvements and payment of the costs thereof. From the Capital Account there shall be paid all costs and expenses of making the Improvements, including the cost of any construction contracts heretofore let and all other costs incurred and to be incurred of the kind authorized in Minnesota Statutes, Section 475.65; and the moneys in said account shall be used for no other purpose except as otherwise provided by law; provided that the proceeds of the Bonds may also be used to the extent necessary to pay interest on the Bonds due prior to the anticipated date of commencement of the collection of taxes or special assessments levied or covenanted to be levied; and provided further that if upon completion of the Improvements there shall remain any unexpended balance in the Capital Account, 999~91.~ 18 the balance (other than any special assessments) may be transferred by the Council to the fund of any other improvement instituted pursuant to Minnesota Statutes, Chapter 429; and provided further that any special assessments credited to the Capital Account shall only be applied towards payment of the costs of the Improvements upon adoption of a resolution by the City Council determining that the application of the special assessments for such purpose will not cause the City to no longer be in compliance with Minnesota Statutes, Section 475.61, Subdivision 1. (ii) Debt Service Account. There are hereby irrevocably appropriated and pledged to, and there shall be credited to, the Debt Service Account: (a) all collections of special assessments herein covenanted to be levied with respect to the Improvements and either initially credited to the Capital Account and not already spent as permitted above and required to pay any principal and interest due on the Bonds or collected subsequent to the completion of the Improvements and payment of the co~ts thereof; (b) the accrued interest received upon delivery of the Bonds plus $ of other proceeds of the Bonds, all to be used to pay the interest first coming due thereon; (c) any collections of all taxes herein or hereafter levied for the payment of the Bonds and interest thereon; (d) all funds remaining in the Capital Account after completion of the Improvements and payment of the costs thereof, not so transferred to the account of another improvement; (e) all investment earnings on funds held in the Debt Service Account; and (f) any and all other moneys which are properly available and are appropriated by the Council to the Debt Service Account. The Debt Service Account shall be used solely to pay the principal and interest and any premiums for redemption of the Bonds and any other general obligation bonds of the City hereafter issued by the City and made payable from said account as provided by law. No portion of the proceeds of the Bonds shall be used directly or indirectly to acquire higher yielding investments or to replace funds which were used directly or indirectly to acquire higher yielding investments, except (1) for a reasonable temporary period until such proceeds are needed for the purpose for which the Bonds were issued and (2) in addition to the above in an amount not greater than the lesser of five percent (5%) of the "Sale Proceeds" of the Bonds (being the "issue price" of the Bonds less accrued interest). To this effect, any proceeds of the Bonds and any sums from time to time held in the Capital Account or Debt Service Account in excess of amounts which under then-applicable federal arbitrage regulations may be invested without regard to yield shall not be invested at a yield in excess of the applicable yield restrictions imposed by said arbitrage regulations on such investments after taking into account any applicable "temporary periods" or "minor portion" made available under the federal arbitrage regulations. Money in the Fund shall not be invested in obligations or deposits issued by, guaranteed by or insured by the United States or any agency or instrumentality thereof if and to the extent that such 999~9~.~ 19 investment would cause the Bonds to be "federally guaranteed" within the meaning of Section 149(b) of the federal Internal Revenue Code of 1986, as amended (the "Code"). 17. Assessments. It is hereby determined that no less than twenty percent (20%) of the cost to the City of the Improvements financed hereunder within the meaning of Minnesota Statutes, Section 475.58, Subdivision 1(3), shall be paid by special assessments heretofore levied or to be levied hereafter against every assessable lot, piece and parcel of land benefitted by any of the Improvements. The City hereby covenants and agrees that it will let all construction contracts not heretofore let within one (1) year after ordering each Improvements financed hereunder unless the resolution ordering said Improvement specifies a different time limit for the letting of construction contracts. The City hereby further covenants and agrees that it will do and perform as soon as they may be done, all acts and things necessary for the final and valid levy of such special assessments, and in the event that any such assessment be a~ any time held invalid with respect to any lot, piece or parcel of land due to any error, defect, or irregularity in any action or proceedings taken or to be taken by the City or the Council or any of the City officers or employees, either in the making of the assessments or in the performance of any condition precedent thereto, the City and the Council will forthwith do all further acts and take all further proceedings as may be required by law to make the assessments a valid and binding lien upon such property. At the time all of the assessments are in fact levied the Council shall, based on the then-current estimated col- lections of the assessments, make any adjustments in any ad valorem taxes required to be levied in order to assure that the City continues to be in compliance with Minnesota Statutes, Section 475.61, Subdivision 1. 18. 105% Debt Service Coveraqe. It is hereby determined and reasonably anticipated that the estimated collections of special assessments relating to the Improvements and the other revenues available to the Debt Service Account will produce at least 5% in excess of the amount needed, to meet, when due, the principal of and interest on the Bonds. The City Clerk is directed to file a certified copy of this Resolution with the County Auditor of Sherburne County and to obtain the certificate of said official required by Minnesota Statutes, Section 475.63. 19. General Obligation Pledqe. The full faith and credit and taxing powers of the City are hereby pledged to the payment of the principal of and interest on the Bonds, and in the event of any current or anticipated deficiency of funds in the Debt Service Account of amounts needed to make any such payment, when due, the Council shall levy ad valorem taxes on all taxable property in the City in the amount of such deficiency. If the balance in the Debt Service Account is ever insufficient to pay all principal and interest then due on the Bonds and any other 999~9~.1 20 bonds payable therefrom, the deficiency shall be promptly paid out of any other funds of the City which are available for such purpose, and such other funds may be reimbursed with or without interest from the Debt Service Account when a sufficient balance is available therein. 20. Records and Certificates. The officers of the City are hereby authorized and directed to prepare and furnish to the Purchaser, and to the attorneys approving the legality of the issuance of the Bonds, certified copies of all proceedings and records of the City relating to the Bonds and to the financial condition and affairs of the City, and such other affidavits, certificates and information as are required to show the facts relating to the legality and marketability of the Bonds as the same appear from the books and records under their custody and control or as otherwise known to them, and all such certified copies, certificates and affidavits, including any heretofore furnished, shall be deemed representations of the City as to the facts recited therein. - 21. Neqative Covenant as to Use of Improvements. The City hereby covenants not to use the Improvements or to cause or permit the Improvements to be used, or to enter into any deferred payment arrangements for the cost of the Improvements, in such a manner as (or to take any action or permit any other circumstance to exist or any action to be taken, the effect to which would be) to cause the Bonds to be "private activity bonds" within the meaning of Sections 103 and 141 through 150 of the Code. In particular, but without limitation, the City covenants to forebear the implementation, effectuation or enforcement of any and all contracts or other agreements respecting the Improvements or any property benefitted thereby or assessed with respect thereto, which it may now or in the future have with developers, contractors, owners or any other person or parties to the extent that such implementation, effectuation or enforcement would (individually or in the aggregate) cause the Bonds to become such "private activity bonds," and to said limited extent the City would and hereby does (solely for the benefit of the owners of the Bonds) disavow any and all such provisions, entitlements and enforcements which would or could become so offending. 22. Tax-Exempt Status of the Bonds; Rebate. The City shall comply with requirements necessary under the Code to establish and maintain the exclusion from gross income under Section 103 of the Code of the interest on the Bonds, including without limitation (1) requirements relating to temporary periods for investments, (2) limitations on amounts invested at a yield greater than the yield on the Bonds, and (3) the rebate of excess investment earnings to the United States if the Bonds (together with other obligations reasonably expected to be issued and outstanding at one time in this calendar year) exceed the small-issuer exception amount of $5,000,000. For purposes of qualifying for the small issuer exception to the federal arbitrage rebate requirements, the City hereby finds, determines and declares that (1) the Bonds are issued by a governmental unit 999191.1 21 with general taxing powers, (2) no Bond is a private activity bond, (3) ninety-five percent (95%) or more of the net proceeds of the Bonds are to be used for local governmental activities of the City (or of a governmental unit the jurisdiction of which is entirely within the jurisdiction of the City), and (4) the aggregate face amount of all tax-exempt obligations (other than private activity bonds) issued by the City (and all entities subordinate to, or treated as one issuer with, the City) during the 1998 calendar year is not reasonably expected to exceed $5,000,000, all within the meaning of Section 148(f) (4) (D) of the Code. 23. No Desiqnation of Bonds as Qualified Tax-Exempt Obliqations. The City is not designating the Bonds as "qualified tax-exempt obligations" within the meaning of Section 265(b) (3) of the Code. 24. Defeasance. When any obligation of a Bond has been discharged as provided in this paragraph, all pledges,- covenants and other rights granted by this Resolution to the registered owner of that Bond (with respect to the obligation thereof so defeased) shall, to the extent permitted by law, cease. The City may at any time discharge any or all of such obligation(s) with respect to any Bond, subject to the provisions of law now or hereafter authorizing or regulating such action, by depositing irrevocably in escrow, with a suitable institution qualified by law as an escrow agent for this purpose, cash or securities which are backed by the full faith and credit of the United States of America, bearing interest payable at such times and at such rates and maturing on such dates and in such amounts as shall be required and sufficient, subject to sale and/or reinvestment in like securities, to pay said obligation(s), which may include any interest payment on such Bond and/or principal amount due thereon at a stated maturity (or if irrevocable provision shall have been made for permitted prior redemption of such principal amount, at such earlier redemption date). 25. Compliance With Reimbursement Bond Regulations. With respect to the Improvements, the City has complied and will continue to comply with the "Reimbursement Regulations" provided in United States Treasury Regulations Section 1.150-2. In particular, except where the following may not be required by said Regulations (e.g., with respect to certain "preliminary expenditures"), to the extent that any of .the proceeds of the Bonds will be used to reimburse the City for a cost of the Improvements theretofore paid and temporarily financed by the City out of other City funds, prior to the initial payment thereof' (or within applicable time limits thereafter) the City has made or will have made a duly qualifying statement of its official intent to bond for such costs (and the City will also make the written "reimbursement allocation" required by the Reimbursement Regulations); otherwise, the proceeds of the Bonds are to be used for initial payment, and not for such reimbursement, of costs of the Improvements. 999~9~.~ 22 26. Continuinq Disclosure Undertakinq. The Council hereby acknowledges that the Bonds are subject to continuing disclosure requirements under Rule 15c2-12(b) (5) (the "Rule") of the Securities and Exchange Commission. Consequently, on the date of actual issuance and delivery of the Bonds, the City will execute and deliver a Continuing Disclosure Undertaking (the "Undertaking") whereunder the City will covenant to provide, or cause to be provided, annual financial information, including audited financial statements of the City, and notices of certain material events, as specified in the Undertaking. The proposed form of the Undertaking'which has been submitted to the City for the Council's consideration is hereby approved, and the officers of the City are hereby authorized to execute and deliver that Undertaking in the proposed form or in such final form thereof reflecting such modifications thereof as are consistent with the Rule, requested by the original purchaser of the Bonds and acceptable to the City officials who shall execute the Undertaking (which consent shall be conclusively evidenced by their execution and delivery thereof). The Undertaking, as ~o executed and delivered by the City, shall be as much a part of this Resolution as if set forth in full herein and shall be for the benefit of the owners from time to time of the Bonds. 27. Severability. If any section, paragraph or provision of this Resolution shall be held to be invalid or unenforceable for any reason, the invalidity or unenforceability of such section, paragraph or provision shall not affect any of the remaining provisions of this Resolution. 28. Headinqs. Headings in this Resolution are included for convenience of reference only and shall not limit or define the meaning of any provision hereof. Council. Adopted on November 30, 1998, by the Elk River City The motion for the adoption of the foregoing resolution was duly seconded by Councilmember and upon a vote being taken thereon, the following voted in favor thereof: and the following voted against the same: Whereupon said resolution was declared duly passed and adopted. 999~9~.~ 23 STATE OF MINNESOTA CITY OF ELK RIVER I, the undersigned, being the duly qualified and acting City Clerk of the City of Elk River, Minnesota, DO HEREBY CERTIFY that I have carefully compared the attached and foregoing extract of minutes with the original minutes of a meeting of the City Council duly called and held on the date therein indicated, which are on file and of record in my office, and the same is a full, true and complete transcript therefrom insofar as the same relates to awarding the sale of the City's $1,375,000 General Obligation Improvement Bonds, Series 1998A. WITNESS my hand as such City Clerk and the official seal of the City this day of , 1998. (SEAL) City Clerk 999191.1 EXTRACT OF MINUTES OF A MEETING OF THE CITY COUNCIL OF THE CITY OF ELK RIVER, MINNESOTA Pursuant to due call and notice thereof, a regular or special meeting of the City Council of the City of Elk River, Minnesota, was duly held in the Elk River City Hall on November 30, 1998, commencing at 6:00 P.M., C.T., in part for the purpose of considering the offers which had been received for the purchase of the City's $820,000 General Obligation Water Revenue Bonds, Series 1998B. The following Councilmembers were present: - and the following were absent: There was then presented a tabulation of the offers which had been received in the manner specified in the Terms of Proposal for the Bonds. The offers were as follows: 998543.1 adoption: then introduced the following Resolution and moved its RESOLUTION NO. RESOLUTION PROVIDING FOR THE ISSUANCE AND SALE OF THE CITY'S $820,000 GENERAL OBLIGATION WATER REVENUE BONDS, SERIES 1998B BE IT RESOLVED by the City Council (the "Council") of the City of Elk River, Minnesota (the "City"), as follows: 1. Recitals. It is hereby determined: (a) That the improvements (the "Improvements") to the City's municipal water system described in the Council's resolution of November 9, 1998, relating to these Bonds have been duly ordered by the City and have been constructed by the City or will be constructed under contracts which the City has or will let therefor, all pursuant to and in accordance with the applicable provisions of Minnesota Statutes, Section 444.075. (b) That is it necessary and expedient to the sound financial management of the affairs of the City that the City issue its bonds pursuant to Minnesota Statutes, Chapter 475 and Section 444.075, to provide financing for the Improvements. (c) The Council desires that the Bonds be issued initially in "Book Entry Only Form" (as hereinafter described). 2. Acceptance of Offer; Book Entry_ Bonds. (a) The offer of (the "Purchaser") to purchase the City's $820,000 General Obligation Water Revenue Bonds, Series 1998B (the "Bonds"), at the rates of interest and upon the other terms set forth in this Resolution, and to pay therefor the sum of $ plus interest accrued to settlement, is hereby accepted. (b) Book Entry_ Only System. The Depository Trust Company, a limited purpose trust company organized under the laws of the State of New York, or any of its successors to its functions hereunder (the "Depository"), will act as securities depository for the Bonds, and to this end: (i) The Bonds shall be initially issued and, so long as they remain in book entry form only (the "Book Entry Only Period"), shall at all times be in the form 998543.1 2 of a separate single fully registered Bond for each maturity of the Bonds; and for purposes of complying with this requirement under paragraphs 6 and 11 of this Resolution, authorized denominations for each maturity of Bonds shall be deemed to be limited during the Book Entry Only Period to the outstanding principal amount of that maturity. While in such book entry form, the Bonds are sometimes hereinafter referred to as being in "Book Entry Only Form." (ii) Upon initial issuance, ownership of the Bonds shall be registered in a bond register maintained'by the Bond Registrar appointed pursuant to paragraph 7 of this Resolution in the name of CEDE & CO., as the nominee (it or any nominee of the existing or a successor Depository, the "Nominee"). (iii) With respect to the Bonds, neither the City nor the Bond Registrar shall have any responsibility or obligation to any broker, dealer, bank, or any other financial institution for which the Depository holds Bonds as securities depository (the "Participant") or to the person for which a Participant holds-an interest in the Bonds shown on the books and records of the Participant (the "Beneficial Owner"). Without limiting the immediately preceding sentence, neither the City, nor the Bond Registrar, shall have any such responsibility or obligation with respect to (A) the accuracy of the records of the Depository, the Nominee or any Participant with respect to any ownership interest in the Bonds, or (B) the delivery to any Participant, any Beneficial Owner or any other person, other than the Depository, of any notice with respect to the Bonds, including any notice of redemption, or (C) the payment to any Participant, any Beneficial Owner or any other person, other than the Depository, of any amount with respect to the principal of or premium, if any, or interest on the Bonds, or (D) the consent given or other action taken by the Depository as the registered owner of any Bonds (the "Holder"). For purposes of securing the vote or consent of any Holder under this Resolution, the City may, however, rely upon an omnibus proxy under which the Depository assigns its consenting or voting rights to certain Participants to whose accounts the Bonds are credited on the record date identified in a listing attached to the omnibus proxy. (iv) The City and the Bond Registrar may treat as an.d deem the Depository to be the absolute owner of the Bonds for the purpose of payment of the principal of and premium, if any, and interest on the Bonds, for the purpose of giving notices of redemption and c, ther matters with respect to the Bonds, for the purpose of obtaining any consent or other action to be taken by Holders for the purpose of registering transfers with respect to such Bonds, and for all purpose whatsoever. The Bond Registrar, as paying agent hereunder, shall pay all principal of and premium, if any, and interest on the Bonds only to or upon the Holder or the Holders of the Bonds, as shown on the Bond Registrar's bond register, and all such payments shall be valid and effective to fully satisfy and discharge the City's obligations with respect to the principal of and premium, if any, and interest on the Bonds to the extent of the sum or sums so paid. 998543.1 3 (v) Upon delivery by the Depository to the Bond Registrar of written notice to the effect that the Depository has determined to substitute a new Nominee in place of the existing Nominee, and subject to the transfer provisions in paragraph 11 hereof, references to the Nominee hereunder shall refer to such new Nominee. (vi) So long as any Bond is registered in the name of a Nominee, all payments with respect to the principal of and premium, if any, and interest on such Bond and all notices with respect to such Bond shall be made and given, respectively, by the Bond Registrar or the City, as the case may be, to the Depository as provided in the Blanket Letter of Representations required by the Depository as a condition to its acting as book-entry Depository for the Bonds (said Blanket Letter of Representations, together with any replacement thereof or amendment or substitute thereto, including any standard procedures or policies referenced therein or applicable thereto respecting the procedures and other matters relating to the Depository's role as book-entry Depository for the B~onds, are collectively hereinafter referred to as the "Blanket Letter of Representations"). (vii) All transfers of beneficial ownership interests in each Bond issued in book-entry form shall be limited in principal amount to authorized denominations and shall be effected by the Depository with the Participants for recording and transferring the ownership of beneficial interests in such Bonds. (viii) In connection with any notice or other communication to be provided to the Holders pursuant to this Resolution by the City or the Bond Registrar with respect to any consent or other action to be taken by Holders, the Depository shall consider the date of receipt of notice requesting such consent or other action as the record date for such consent or other action; provided, that the City or the Bond Registrar may establish a special record date for such consent or other action. The City or the Bond Registrar shall, to the extent possible, give the Depository notice of such special record date not less than 15 calendar days in advance thereof to the extent possible. (ix) Any successor Bond Registrar, in its written acc. eptance of its duties under this Resolution and any paying agency registrar agreement, shall agree to take any actions necessary from time to time to comply with the requirements of the Blanket Letter of Representations. (x) In the case of a partial prepayment of a Bond, the Holder may, in lieu of surrendering the Bond for a Bond of a lesser denomination as provided in paragraph 6 hereof, make a notation of the reduction in principal amount on the panel provided on the Bond stating the amount so redeemed. 998543.1 4 (c) Termination of Book-Entry Only System. Discontinuance of a particular Depository's services and termination of the book-entry only system may be effected as follows: (i) The Depository may determine to discontinue providing its services with respect to the Bonds at any time by giving written notice to the City and discharging its responsibilities with respect thereto under applicable law. The City may terminate the services of the Depository with respect to the Bonds if the City determines that the Depository is no longer able to carry out its functions as securities depository or the continuation of the system of book-entry transfers through the Depository is not in the best interests of the City. (ii) Upon termination of the services of the Depository as provided in the preceding paragraph, and if no substitute securities depository is willing to undertake the functions of the Depository hereunder can be found which, in the opinion of the City, is willing and able to assume such functions upon reasonable or customary terms, or if the City determines that it is in the best interests of the City that the Beneficial Owners be issued certificates for the Bonds, the Bonds shall no longer be registered in the name of the Nominee, but may be registered in whatever name or names the Holder of the Bonds shall designate at that time, in accordance with paragraph 11 hereof. To the extent that the Beneficial Owners are designated as the transferee by the Holders, in accordance with paragraph 11 hereof, the Bonds will be delivered to the Beneficial Owners. (iii) Nothing in this subparagraph (c) shall limit or restrict the provisions of paragraph 11 hereof. (d) Blanket Letter of Representations. The City's execution of the City the Blanket Letter of Representations in substantially the form on file in the offices of the City has heretofore been authorized and is hereby ratified. The provisions in the Blanket Letter of Representations are incorporated herein by reference and made fully a part of this Resolution to the same extent as if set forth in full herein, and if and to the extent that any provisions of this Resolution are inconsistent or in conflict with the provisions of the Blanket Letter of Representations, the provisions in the Blanket Letter of Representations shall control. 3. Title; Original Issue Date; Denominations; Maturities. The Bonds shall be titled "General Obligation Water Revenue Bonds, Series 1998B," shall be dated December 1, 1998, as the date of original issue and shall be issued forthwith on or after such date as fully registered bonds. The Bonds shall be numbered from R-1 upward in the denomination of $5,000 998543.1 5 each or in any integral multiple thereofofa single maturity. The Bonds shall mature on February 1 in the years and amounts as follows: Years Amounts Years. Amounts 2000 $35,000 2008 $55,000 2001 40,000 2009 60,000 2002 45,000 2010 60,000 2003 45,000 2011 65,000 2004 50,000 2012 65,000 2005 50,000 2013 70,000 2006 50,000 2014 75,000 2007 55,000 As may be requested by the Purchaser, one or more term Bonds may be issued having mandatory sinking fund redemption and final maturity amounts conforming to the foregoing principal repayment schedule, and corresponding additions may be made to the provisions of the applicable Bond (s). 4. purpose. The Bonds shall provide funds to finance the Improvements. The total cost of the Improvements, which shall include all costs enumerated in Minnesota Statutes, Section 475.65, is estimated to be at least equal to the amount of the Bonds. Work on the Improvements shall proceed with due diligence to completion. 5. Interest. The Bonds shall bear interest payable semiannually on February 1 and August 1 of each year (each, an "Interest Payment Date"), commencing August 1, 1999, calculated on the basis of a 360-day year consisting of twelve 30-day months, at the respective rates per annum set forth opposite the maturity years, as follows: Maturity Interest Maturity Interest Year Rate Year Rate 2000 % 2008 2001 2009 2002 2010 2003 2011 2004 2012 2005 2013 2006 2014 2007 6. Redemption. All Bonds maturing after February 1, 2007, shall be subject to redemption and prepayment at the option of the City on said date and on any date thereafter at a price of par plus accrued interest to date of redemption. Redemption may be in whole or in part of the Bonds subject to prepayment. If redemption is in part, the City shall determine the amount 998543.1 6 of Bonds of each maturity to be prepaid; and if only part of the Bonds having a common maturity date are called for prepayment, the specific Bonds to be prepaid shall be chosen by lot by the Bond Registrar. Bonds or portions thereof called for redemption shall be due and payable on the redemption date, and interest thereon shall cease to accrue from and after the redemption date. Published notice of redemption shall in each case be given if and to the extent required by applicable law, and mailed notice ofredemptlon shall be given to the paying agent and to each affected registered owner of the Bonds. To effect a partial redemption of Bonds having a common maturity date, the Bond Registrar, prior to giving notice of redemption, shall assign to each Bond of that maturity a distinctive number for each $5,000 of the principal amount of such Bond. The Bond Registrar shall then select by lot, using such method of selection as it shall deem proper in its discretion, from the numbers so assigned to such Bonds, as many numbers as, at $5,000 for each number, shall equal the principal amount of such Bonds to be redeemed. The Bonds to be redeemed shall be the Bonds to which were assigned numbers so selected; provided, however, that only so much of the principal amount of each such Bond of a denomination of more than $5,000 shall b~ redeemed as shall equal $5,000 for each number assigned to it and so selected. Ifa Bond is to be redeemed only in part, it shall be surrendered to the Bond Registrar (with, if the City or Bond Registrar so requires, a written instrument of transfer in form satisfactory to the City or Bond Registrar duly executed by the registered owner thereof or by the registered owner's attorney, duly authorized in writing) and the City shall execute (if necessary) and the Bond Registrar shall authenticate and deliver to the registered owner of such Bond, without service charge, a new Bond or Bonds of the same series having the same stated maturity and interest rate and of any authorized denomination or denominations, as requested by such registered owner, in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Bond so surrendered. 7. Bond Registrar. ., in ., , is appointed to act as bond registrar and transfer agent with respect to the Bonds (the "Bond Registrar"), and shall do so unless and until a successor Bond Registrar is duly appointed, all pursuant to any contract the City and Bond Registrar shall execute which is consistent herewith. The Bond Registrar shall also serve as paying agent unless and until a successor paying agent is duly appointed. The principal of and interest on the Bonds shall be paid to the registered owners (or record .owne. rs) of the Bonds in the manner set forth in the form of Bond and paragraph 13 of this Resolution. 8. Form of Bond. The Bonds, together with the Bond Registrar's Certificate of Authentication, the form of Assignment and the registration information thereon, shall be in substantially the following form: 998543.1 7 UNITED STATES OF AMERICA STATE OF MINNESOTA COUNTY OF SHERBURNE CITY OF ELK RIVER R- $ GENERAL OBLIGATION WATER REVENUE BOND, SERIES 1998B INTEREST MATURITY RATE DATE DATE OF ORIGINAL ISSUE CUSIP REGISTERED OWNER: PRINCIPAL AMOUNT: DOLLARS The City of Elk River, Sherbume County, Minnesota (the "City"), hereby acknowledges itself to be indebted and, for value received, promises to pay to the registered owner specified above, or registered assigns, in the manner hereinafter set forth, the principal amount specified above on the maturity date specified above, unless duly called for earlier redemption, and to pay interest thereon semiannually on February 1 and August 1 of each year (each, an "Interest Payment Date"), commencing August 1, 1999, at the rate per annum specified above (calculated on the basis of a 360-day year consisting of twelve 30-day months) until the principal sum is paid or has been provided for. This Bond will bear interest from the most recent Interest Payment Date to which interest has been paid or, if no interest has been paid, from the date of original issue hereof. The principal of and premium, if any, on this Bond are payable upon presentation and surrender hereof at the principal office of , in (the "Bond Registrar"), acting as paying agent, or at the principal office of any successor paying agent duly appointed by the City. Interest on this Bo. nd w. ill be paid on each Interest Payment Date by check or draft mailed to the person in whose name this Bond is registered (the "Registered Owner") on the registration books of the City maintained by the Bond Registrar and at the address appearing thereon at the close of business on the fifteenth day of the calendar month preceding such Inter~st Payment Date (the "Regular Record Date"). Any interest not so timely paid shall cease to be payable to the person who is the Registered Owner hereof as of the Regular Record Date, and shall be payable to the person who is the Registered Owner hereof at the close of business on a date (the "Special Record Date") fixed by the Bond Registrar whenever money becomes available for payment of the defaulted interest. Notice of the Special Record Date shall be given to Registered Owners not less than ten days prior to the Special Record Date. The principal of and premium, if any, and interest on this Bond are payable in lawful money of the United States of America. 998543.1 8 REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS BOND SET FORTH ON THE REVERSE HEREOF, WHICH PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS IF SET FORTH HERE. IT IS HEREBY CERTIFIED AND RECITED that all acts, conditions and things required by the Constitution and laws of the State of Minnesota to be done, to have happened and to be performed, precedent to and in the issuance of this Bond, have been done, have happened and have been performed in regular and due form, time and manner as required by law, and that this Bond, together with all other indebtedness of the City outstanding on the date of original issue hereof and the date of its actual issuance and delivery to the original purchaser, does not exceed any constitutional or statutory limitation of indebtedness. IN WITNESS WHEREOF, the City of Elk River, Sherburne County, Minnesota, by its City Council, has caused this Bond to be executed on its behalf by the facsimile signatures of its Mayor and its City Administrator; has caused the corporate seal of the City to be intentionally omitted herefrom, as permitted by law; and has caused this Bond to be exect~d manually by the Bond Registrar, acting as the City's duly appointed authenticating agent for the Bonds. 998543.1 Date of Registration: Registrable by: Payable at: BOND REGISTRAR'S CERTIFICATE OF AUTHENTICATION This Bond is one of the Bonds described in the Resolution mentioned within. Bond Registrar CITY OF ELK RIVER, SHERBURNE COUNTY, MINNESOTA Mayor City Administrator By. Authorized Signature 998543.1 10 Redemption. All Bonds of this issue maturing after February 1, 2007, are subject to redemption and prepayment at the option of the City on said date and on any date thereafter at a price of par plus accrued interest to date of redemption. Redemption may be in whole or in part of the Bonds subject to prepayment. If redemption is in part, the City shall determine the amount of Bonds of each maturity to be prepaid; and if only part of the Bonds having a common maturity date are called for prepayment, the Bonds of that maturity to be prepaid shall be chosen by lot by the Bond Registrar. Bonds or portions thereof called for redemption shall be due and payable on the redemption date, and interest thereon shall cease to accrue from and after the redemption date. Published notice of redemption shall in each case be given if and to the extent required by applicable law, and mailed notice of redemption shall be given to the paying agent and to each affected registered owner of the Bonds. Selection of Bonds for Redemption; Partial Redemption. To effect a partial redemption of Bonds having a common maturity date, the Bond Registrar shall assign to each Bond of that maturity a distinctive number for each $5,000 of the principal amount of such Bond. The Bond Registrar shall then select by lot, using such method of selection as it shall deem proper in its discretion, from the numbers assigned to the Bonds, as many numbers as, at $5,000 for each number, shall equal the principal amount of such Bonds to be redeemed. The Bonds to be redeemed shall be the Bonds to which were assigned numbers so selected; provided, however, that only so much of the principal amount of such Bond of a denomination of more than $5,000 shall be redeemed as shall equal $5,000 for each number assigned to it and so selected. If a Bond is to be redeemed only in part, it shall be surrendered to the Bond Registrar (with, if the City or Bond Registrar so requires, a written instrument of transfer in form satisfactory to the City or Bond Registrar duly executed by the registered owner thereof or the registered owner's attorney duly authorized in writing), and the City shall execute (if necessary) and the Bond Registrar shall authenticate and deliver to the registered owner of such Bond, without service charge, a new Bond or Bonds of the same series having the same stated maturity and interest rate and of any authorized denomination or denominations, as requested by such registered owner, in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Bond so surrendered. Issuance; Purpose; General Obligation. This Bond is one of an issue in the total principal amount of $820,000, all of like date of original issue and tenor, except as to registration number, maturity, interest rate, denomination and redemption privileg.e, which Bond has been issued pursuant to and in full conformity with the Constitution and laws of the State of Minnesota and pursuant to a resolution adopted by the City Council on November 30, 1998 (the "Resolution"), for the purpose of providing money to finance certain costs of improvements to the City's municipal water system and utility. This Bond constitutes a general obligation of the City, and to provide moneys for the prompt and full payment of its principal, premium, if any, and interest when the same become due, the full faith and credit and taxing powers of the City have been and are hereby irrevocably pledged. Each capitalized term which is used but not otherwise defined in this Bond shall have the meaning given to that term in the Resolution. [For Bonds in Book Entry Only Form, the following paragraph shall be added, and this Bond form (1) may be rearranged so that the signature blocks hereof appear at the end of 998543.1 1 1 the main text of this form or (2) may otherwise be amended to conform to book entry requirements and the Blanket Letter of Representations.] Book Entry Only Form; Blanket Letter of Representations. Pursuant to the Resolution, the Bonds may be issued in Book Entry Only Form, and during any period in which Bonds are in such form, the provisions applicable to the Bonds pursuant to the Blanket Letter of Representations shall apply, notwithstanding any contrary or inconsistent provision herein or in the Resolution. Denominations; Exchange; Resolution. The Bonds are issuable solely as fully registered bonds in the denominations of $5,000 and integral multiples thereof of a single maturity and are exchangeable for fully registered bonds of other authorized denominations in equal aggregate principal amounts at the principal office of the Bond Registrar, but only in the manner and subject to the limitations provided in the Resolution. Reference is hereby made to the Resolution for a description of the rights and duties of the Bond Registrar. Copies of the Resolution are on file in the principal office of the Bond Registrar. _ Transfer. This Bond is transferable by the Registered Owner in person or by the Registered Owner's attorney duly authorized in writing at the principal office of the Bond Registrar upon presentation and surrender hereof to the Bond Registrar, all subject to the terms and conditions provided in the Resolution and to reasonable regulations of the City contained in any agreement with the Bond Registrar. Thereupon the City shall execute and the Bond Registrar shall authenticate and deliver, in exchange for this Bond, one or more new fully registered Bonds in the name of the transferee (but not registered in blank or to "bearer" or similar designation), of an authorized denomination or denominations, in aggregate principal amount equal to the principal amount of this Bond, of the same maturity and bearing interest at the same rate. Fees upon Transfer or Loss. The Bond Registrar may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection with the transfer or exchange of this Bond and any legal or unusual costs regarding transfers and lost Bonds. Treatment of Registered Owners. The City and Bond Registrar may treat the person in whose name this Bond is registered as the owner hereof for the pu. rpose of receiving payment as herein provided (except as otherwise provided on the revel'se side hereof with respect to the Record Date) and for all other purposes, whether or not this Bond shall be overdue, and neither the City nor the Bond Registrar shall be affected by notice to the contrary. Authentication. This Bond shall not be valid or become obligatory for any purpose or be entitled to any security unless the Certificate of Authentication hereon shall have been executed by the Bond Registrar. No Qualification of Bonds as Tax-Exempt Obligations. The Bonds have not been designated by the City as "qualified tax-exempt obligations" for purposes of Section 265(b)(3) of the Internal Revenue Code of 1986, as amended. 998543.1 12 ABBREVIATIONS The following abbreviations, when used in the inscription on the face of this Bond, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM - as tenants in common TEN ENT - as tenants by the entireties JT TEN - as joint tenants with right of survivorship and not as tenants in common UTMA - as custodian for (Cust) under the (State) (Minor) Uniform Transfers to Minors Act Additional abbreviations may also be used though not in the above list. 998543.1 13 ASSIGNMENT For value received, the undersigned hereby sells, assigns and transfers unto the within Bond and does hereby irrevocably constitute and appoint as attorney to transfer the Bond on the books kept for the registration thereof, with full power of substitution in the premises. Dated: Notice: Signature Guaranteed: 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 whatever. Signature(s) must be guaranteed by a national bank or trust company, by a brokerage firm having a membership in one of the major stock exchanges or by any other "Eligible Guarantor Institution" as defined in 17 CFR 240.17 Ad- 15(a)(2). The Bond Registrar will not effect transfer of this Bond unless the information concerning the transferee requested below is provided. Name and Address: (Include information for all joint owners if the Bond is held by joint account.) 998543.1 14 9. Execution; Temporal_ Bonds. The Bonds shall be executed on behalf of the City by the signatures of its Mayor and City Administrator and be sealed with the seal of the City; provided, however, that the seal of the City may be a printed facsimile; and provided further that both of such signatures may be printed facsimiles and the corporate seal may be omitted on the Bonds as permitted by law. In the event of disability or resignation or other absence of either such officer, the Bonds may be signed by the manual or facsimile signature of that officer who may act on behalf of such absent or disabled officer. In case either such officer whose signature or facsimile of whose signature shall appear on the Bonds shall cease to be such officer before the delivery of the Bonds, such signature or facsimile shall nevertheless be valid and sufficient for all purposes, the same as if he or she had remained in office until delivery. The City may elect to deliver, in lieu of printed definitive bonds, one or more typewritten temporary bonds in substantially the form set forth above, with such changes as may be necessary to reflect more than one maturity in a single temporary bond. Such temporary bonds shall, upon the printing of the definitive bonds and the execution thereof, be exchanged therefor and cancelled. 10. Authentication. No Bond shall be valid or obligatory for any purpose or be entitled to any security or benefit under this Resolution unless a Certificate of Authentication on such Bond, substantially in the form hereinabove set forth, shall have been duly executed by an authorized representative of the Bond Registrar. Certificates of Authentication on different Bonds need not be signed by the same person. The Bond Registrar shall authenticate the signatures of officers of the City on each Bond by execution of the Certificate of Authentication on the Bond and by inserting as the date of registration in the space provided the date on which the Bond is authenticated, except that for purposes of delivering the original Bonds to the Purchaser, the Bond Registrar shall insert as a date of registration the date of original issue, which date is December 1, 1998. The Certificate of Authentication so executed on each Bond shall be conclusive evidence that it has been authenticated and delivered under this Resolution. 11. Registration; Transfer; Exchange. The City will cause to be kept at the principal office of the Bond Registrar a bond register in which, subject to such reasonable regulations as the Bond Registrar may prescribe, the Bond Registrar shall provide for the registration of Bonds and the registration of transfers of Bonds entitled to be registered or transferred as herein provided. Upon surrender for transfer of any Bond at the principa! office of the Bond Registrar, the City shall execute (if necessary), and the Bond Registrar shall authenticate, insert the date of registration (as provided in paragraph 10) of, and deliver, in the name of the designated transferee or transferees, one or more new Bonds of any authorized denomination or denominations of a like aggregate principal amount, having the same stated maturity and interest rate, as requested by the transferor; provided, however, that no Bond may be registered in blank or in the name of "bearer" or similar designation. At the option of the registered owner thereof, Bonds may be exchanged for Bonds of any authorized denomination or denominations of a like aggregate principal amount and stated maturity, upon surrender of the Bonds to be exchanged at the principal office of the Bond Registrar. Whenever any Bonds are so surrendered for exchange, the City shall execute (if 998543.1 necessary), and the Bond Registrar shall authenticate, insert the date of registration of, and deliver the Bonds which the registered owner making the exchange is entitled to receive. All Bonds surrendered upon any exchange or transfer provided for in this Resolution shall be promptly cancelled by the Bond Registrar and thereafter disposed of as directed by the City. All Bonds delivered in exchange for or upon transfer of Bonds shall be valid obligations of the City evidencihg the same debt, and entitled to the same benefits under this Resolution, as the Bonds surrendered for such exchange or transfer. Every Bond presented or surrendered for transfer or exchange shall be duly endorsed or be accompanied by a written instrument of transfer, in form satisfactory to the Bond Registrar, duly executed by the registered owner thereof or the registered owner's attorney duly authorized in writing. The Bond Registrar may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection with the transfer or exchange of any Bond and any legal or unusual costs regarding transfers and lost Bonds. Transfers shall also be subject to reasonable regulations of the City contained in any agreement with the Bond Registrar, including regulations which permit the Bond Registrar to close its transfer books between record dates and payment dates. 12. .Rights Upon Transfer or Exchange. Each Bond delivered upon transfer of or in exchange for or in lieu of any other Bond shall carry all the rights to interest accrued and unpaid, and to accrue, which were carried by such other Bond. 13. Interest Payment; Record Date. Interest on any Bond shall be paid on each Interest Payment Date by check or draft mailed to the person in whose name the Bond is registered on the registration books of the City maintained by the Bond Registrar and at the address appearing thereon at the close of business on the fifteenth (15th) day of the calendar month preceding such Interest Payment Date (the "Regular Record Date"). Any such interest not so timely paid shall cease to be payable to the person who is the regist.ered owner thereof as of the Regular Record Date, and shall be payable to the person who is the registered owner thereof at the close of business on a date (the "Special Record Date") fixed by the Bond Registrar whenever money becomes available for payment of the defaulted interest. Notice of the Special Record Date shall be given by the Bond Registrar to the registered owners not less than ten (10) days prior to the Special Record Date. 14. Treatment of Registered Owner. The City and Bond Registrar may treat the person in whose name any Bond is registered as the owner of such Bond for the purpose of receiving payment of principal of and premium, if any, and interest (subject to the payment provisions in paragraph 13 above) on, such Bond and for all other purposes whatsoever whether 998543.1 or not such Bond shall be overdue, and neither the City nor the Bond Registrar shall be affected by notice to the contrary. 15. Delivery_; Application of Proceeds. The Bonds when so prepared and executed shall be delivered by the City Finance Director to the Purchaser upon receipt of the purchase price, and the Purchaser shall not be obliged to see to the proper application thereof. 16. Fund and Accounts. There is hereby created a special fund of the City designated the "$820,000 General Obligation Water Revenue Bonds, Series 1998B Fund" (the "Fund") to be held and administered by the City as a bookkeeping account separate and apart from all other funds maintained in the official financial records of the City. The Fund shall continue to be maintained in the manner herein specified until all of the Bonds herein authorized and all other bonds payable from said Fund and the interest thereon have been fully paid. There shall be maintained in the Fund two (2) separate accounts, to be designated the "Capital Account" and "Debt Service Account", respectively. (i) Capital Account. To the Capital Account there shall be credited the proceeds of the sale of the Bonds, less such amounts thereof as shall be deposited into the Debt Service Account pursuant to paragraph 16(ii) below. From the Capital Account there shall be paid all costs and expenses of making the Improvements, including the cost of any construction contracts heretofore let, the costs of issuing the Bonds and all other costs incurred and to be incurred of the kind authorized in Minnesota Statutes, Section 475.65; and the moneys in said account shall be used for no other purpose except as otherwise provided by law. (ii) Debt Service Account. There are hereby irrevocably appropriated and pledged to, and there shall be credited to, the Debt Service Account: (a) the net revenues of the City's municipal water system and utility (as hereinafter described, the "Net Revenues"), but only in amounts and at such times as will be sufficient (together with other amounts in the Debt Service Account) to pay, when due, the principal of and interest on the Bonds; (b) all accrued interest received upon delivery of the Bonds and $ of additional proceeds of the Bonds, all to be used to pay the interest first coming due thereon; (c) all collections of any taxes hereafter levied for the payment of the Bonds and interest thereon; (d) all investment earnings on funds held in the Debt Service Account; and (e) any and all other moneys which are properly available and are appropriated by the Council to the Debt Service Account.. The Debt Service Account shall be used solely to pay the principal of and interest on the Bonds and any other general obligation bonds of the City hereafter issued by the City and made payable from said account as provided by law. As used in this Resolution, the term Net Revenues means the gross revenues derived by the City from the operation of its municipal water system and utility, including all charges for service, use, availability, and connection to said system, and all monies received from the sale of any facilities or equipment of said system or any by-products thereof, less all normal, reasonable, or current costs of owning, operating, and maintaining the system. If any payment of principal or interest on the Bonds shall become due when there are not sufficient funds in the Debt Service Account to pay the same, the City Finance Director shall pay such principal or 998543.1 17 interest from the general fund or other available fund of the City, and such fund shall be reimbursed for such advances from the proceeds of the Net Revenues or of any general ad valorem taxes hereafter levied for such purpose, when collected. The City hereby covenants that it will impose and collect charges for the service, use, and availability of and connection to the City's municipal water system and utility at the times and in the amounts required to produce Net Revenues adequate, together with other sources of funding available to the Debt Service Account, to pay all principal of and interest on the Bonds, when due. Nothing contained herein shall be deemed to preclude the City from making further pledges and appropriations of the Net Revenues of the City's municipal water system and utility for the payment of other or additional obligations of the City, provided that it has first been determined that the estimated Net Revenues will be sufficient, in addition to all other sources, for the payment of the Bonds and such additional obligations, and any such pledge and appropriation of said Net Revenues may be made superior or subordinate to, or on a parity with, the pledge and appropriation herein. With respect to all currently outstanding obligations of the City which are payable from the Net Revenues, the Council hereby determines that the estimated Net Revenues will be sufficient, in addition to all other sources available for such purposes, for the payment of the Bonds and all such other obligations. No portion of the proceeds of the Bonds shall be used directly or indirectly to acquire higher yielding investments or to replace funds which were used directly or indirectly to acquire higher yielding investments, except (1) for a reasonable temporary period until such proceeds are needed for the purpose for which the Bonds were issued and (2) in addition to the above in an amount not greater than the lesser of five percent (5%) of the "Sale Proceeds" of the Bonds (being the "issue price" of the Bonds less accrued interest). To this effect, any proceeds of the Bonds and any sums from time to time held in the Capital Account or Debt Service Account in excess of amounts which under then-applicable federal arbitrage regulations may be invested without regard to yield shall not be invested at a yield in excess of the applicable yield restrictions imposed by said arbitrage regulations on such investments after taking into account any applicable "temporary periods" or "minor portion" made available under the federal arbitrage regulations. Money in the Fund shall not be invested in obligations or deposits issued by, guaranteed by or insured by the United States or any agency or instrumentality thereof if and to the extent that such investment would cause the Bonds to be "federally guaranteed" within the meaning of Section 149(b) of the federal Internal Revenue Code of 19.86, as amended (the "Code"). 17. 105% Debt Service Coverage. It is hereby determined and reasonably anticipated that the estimated collections of Net Revenues and the other revenues available to the Debt Service Account will produce at least 5% in excess of the amount needed to meet, when due, the principal of and interest on the Bonds. The City Clerk is directed to file a certified copy of this Resolution with the County Auditor of Sherburne County and to obtain the certificate of said official required by Minnesota Statutes, Section 475.63. 18. General Obligation Pledge. The full faith and credit and taxing powers of the City are hereby pledged to the payment of the principal of and interest on the Bonds, and in 998543.1 18 the event of any current or anticipated deficiency of funds in the Debt Service Account of amounts needed to make any such payment, when due, the Council shall levy ad valorem taxes on all taxable property in the City in the amount of such deficiency. If the balance in the Debt Service Account is ever insufficient to pay all principal and interest then due on the Bonds and any other bonds payable therefrom, the deficiency shall be promptly paid out of any other funds of the City which are available for such purpose, and such other funds may be reimbursed with or without interest from the Debt Service Account when a sufficient balance is available therein. 19. Records and Certificates. The officers of the City are hereby authorized and directed to prepare and furnish to the Purchaser, and to the attorneys approving the legality of the issuance of the Bonds, certified copies of all proceedings and records of the City relating to the Bonds and to the financial condition and affairs of the City, and such other affidavits, certificates and information as are required to show the facts relating to the legality and marketability of the Bonds as the same appear from the books and records under their custody and control or as otherwise known to them, and all such certified copies, certificates and affidavits, including any heretofore furnished, shall be deemed representations of the City-as to the facts recited therein. 20. Negative Covenant as to Use of Improvements. The City hereby covenants not to use the Improvements or to cause or permit the Improvements to be used, or to enter into any deferred payment arrangements for the cost of the Improvements, in such a manner as (or to take any action or permit any other circumstance to exist or any action to be taken, the effect to which would be) to cause the Bonds to be "private activity bonds" within the meaning of Sections 103 and 141 through 150 of the Code. In particular, but without limitation, the City covenants to forebear the implementation, effectuation or enforcement of any and all contracts or other agreements respecting the Improvements or any property benefitted thereby or assessed with respect thereto, which it may now or in the future have with developers, contractors, owners or any other person or parties to the extent that such implementation, effectuation or enforcement would (individually or in the aggregate) cause the Bonds to become such "private activity bonds," and to said limited extent the City would and hereby does (solely for the benefit of the owners of the Bonds) disavow any and all such provisions, entitlements and enforcement which would or could become so offending. 21. Tax-Exempt Status of the Bonds; Rebate. The City s. hall comply with requirements necessary under the Code to establish and maintain the exclusion from gross income under Section 103 of the Code of the interest on the Bonds, including without limitation (1) requirements relating to temporary periods for investments, (2) limitations on amounts invested at a yield greater than the yield on the Bonds, and (3) the rebate of excess investment earnings to the United States if the Bonds (together with other obligations reasonably expected to be issued and outstanding at one time in this calendar year) exceed the small-issuer exception amount of $5,000,000. For purposes of qualifying for the small issuer exception to the federal arbitrage rebate requirements, the City hereby finds, determines and declares that (1) the Bonds are issued by a governmental unit with general taxing powers, (2) no Bond is a private activity bond, (3) ninety-five percent (95%) or more of the net proceeds of the Bonds are to be used for local governmental activities of the City (or of a governmental unit the jurisdiction of which is 998543.1 19 entirely within the jurisdiction of the City), and (4) the aggregate face amount of all tax-exempt obligations (other than private activity bonds) issued by the City (and all entities subordinate to, or treated as one issuer with, the City) during the 1998 calendar year is not reasonably expected to exceed $5,000,000, all within the meaning of Section 148(f)(4)(D) of the Code. 22. No Designation of Bonds as Qualified Tax-Exempt Obligations. The City is not designating the Bonds as "qualified tax-exempt obligations" within the meaning of Section 265(b)(3) of the Code. 23. Defeasance. When any obligation of a Bond has been discharged as provided in this paragraph, all pledges, covenants and other rights granted by this Resolution to the registered owner of that Bond (with respect to the obligation thereof so defeased) shall, to the extent permitted by law, cease. The City may at any time discharge any or all of such obligation(s) with respect to any Bond, subject to the provisions of law now or hereafter authorizing or regulating such action, by depositing irrevocably in escrow, with a suitable institution qualified by law as an escrow agent for this purpose, cash or securities which are backed by the full faith and credit of the United States of America, bearing interest payable at such times and at such rates and maturing on such dates and in such amounts as shall be required and sufficient, subject to sale and/or reinvestment in like securities, to pay said obligation(s), which may include any interest payment on such Bond and/or principal amount due thereon at a stated maturity (or if irrevocable provision shall have been made for permitted prior redemption of such principal amount, at such earlier redemption date). 24. Compliance With Reimbursement Bond Regulations. With respect to the Improvements, the City has complied and will continue to comply with the "Reimbursement Regulations" provided in United States Treasury Regulations Section 1.150-2. In particular, except where the following may not be required by said Regulations (e.g., with respect to certain "preliminary expenditures"), to the extent that any of the proceeds of the Bonds will be used to reimburse the City for a cost of the Improvements theretofore paid and temporarily financed by the City out of other City funds, prior to the initial payment thereof (or within applicable time limits thereafter) the City has made or will have made a duly qualifying statement of its official intent to bond for such costs (and the City will also make the written "reimbursement allocation" required by the Reimbursement Regulations); otherwise, the proceeds of the Bonds are to be used for initial payment, and not for such reimbursement, of costs of the Improvements. 25. Continuing Disclosure Undertaking. With respect to continuing disclosure under Rule 15c2-12(b)(5) (the "Rule"), on the date of actual issuance and delivery of the Bonds, the City will execute and deliver a Continuing Disclosure Undertaking (the "Undertaking") whereunder the City will covenant to provide, or cause to be provided, annual financial information, including audited financial statements of the City, and notices of certain material events, as specified in the Undertaking. The proposed form of the Undertaking which has been submitted to the City for the Council's consideration is hereby approved, and the officers of the City are hereby authorized to execute and deliver that Undertaking in the proposed form or in such final form thereof reflecting such modifications thereof as are consistent with the Rule, requested by the original purchaser of the Bonds and acceptable to the City officials who shall 998543.1 20 execute the Undertaking (which consent shall be conclusively evidenced by their execution and delivery thereof). The Undertaking, as so executed and delivered by the City, shall be as much a part of this Resolution as if set forth in full herein and shall be for the benefit of the owners from time to time of the Bonds. 26. Severability. If any section, paragraph or provision of this Resolution shall be held to be invalid or unenforceable for any reason, the invalidity or unenforceability of such section, paragraph or provision shall not affect any of the remaining provisions of this Resolution. 27. Headings. Headings in this Resolution are included for convenience of reference only and shall not limit or define the meaning of any provision hereof. Adopted on November 30, 1998, by the Elk River City Council. The motion for the adoption of the foregoing resolution was duly seconded by - Councilmember and upon a vote being taken thereon, the following voted in favor thereof: and the following voted against the same: Whereupon said resolution was declared duly passed and adopted. 998543.1 21 STATE OF MINNESOTA CITY OF ELK RIVER I, the undersigned, being the duly qualified and acting City Clerk of the City of Elk River, Minnesota, DO HEREBY CERTIFY that I have carefully compared the attached and foregoing extract of minutes with the original minutes of a meeting of the City Council duly called and held on the date therein indicated, which are on file and of record in my office, and the same is a full, true and complete transcript therefrom insofar as the same relates to awarding the sale of the City's $820,000 General Obligation Water Revenue Bonds, Series 1998B. - WITNESS my hand as such City Clerk and the official seal of the City this ~ day of ~, 1998. (SEAL) City Clerk 998543.1 85 E. SEVENTH PLACE, SUITE 100 SAINT PAUL, MN 55101-2887 651-223-3000 FAX: 651-223-3002 SPRINGSTED Public Finance Advisors $1,375,000 CITY OF ELK RIVER, MINNESOTA GENERAL OBLIGATION IMPROVEMENT BONDS, SERIES 1998A (BOOK ENTRY ONLY) AWARD: PIPER JAFFRAY INC. JALE: November 30, 1998 Moody's Rating: Aaa MBIA Insured Interest Net Interest True Interest Bidder Rates Price Cost Rate PIPER JAFFRAY INC. NORWEST INVESTMENT SERVICES, INC. CRONIN & COMPANY, INCORPORATED SALOMON SMITH BARNEY 3.55% 2OOO 4.00% 2001-2005 4.05% 2006 4.10% 2O07 4.20% 2008 4.30% 2009 3.875% 2000-2003 4.00% 2004-2005 4.10% 20O6 4.20% 2007 4.25% 2008 4.30% 20O9 3.20% 2000 4.00% 2001-2002 4.10% 2003-2007 4.20% 2O08 4.30% 2009 $1,360,690.50 $266,055.33 4.3091% $1,359,875.00 $266,433.33 4.3155% $1,360,173.05 $268,402.78 4.3476% (Continued) SAINT PAUL, MN · MINNEAPOLIS, MN . BROOKFIELD, WI · OVERLAND PARK, KS . WASHINGTON, DC · DES MOINES, IA Interest Net Interest True Interest Bidder Rates Price Cost Rate DAIN RAUSCHER INCORPORATED BERNARDI SECURITIES, INCORPORATED 3.60% 2000 3.80% 2001 3.90% 2002 4.00% 2003 4.10% 2004 4.20% 2005 4.25% 2006 4.35% 2007 4.45% 2008 4.55% 2009 3.70% 2000 3.8O% 2001 3.90% 2002 4.00% 2003 4.10% 2OO4 4.20% 2005 4.30% 2006 4.35% 2007 4.45% 2008 4.55% 2009 $1,359,875.00 $273,593.75 4.4260" $1,360,301.25 $273,687.50 4.4268% REOFFERING SCHEDULE OF THE PURCHASER Rate Year Yield 3.55% 2000 3.55% 4.00% 2001 3.60% 4.00% 2002 3.70% 4.00% 2003 3.80% 4.00% 2004 3.90% 4.00% 2005 Par 4.05% 2006 Par 4.10% 2007 Par 4.20% 2008 Par 4.30% 2009 Par BBI: 5.01% Average Maturity: Years 85 E. SEVENTH PLACE, SUITE 100 SAINT PAUL, MN 55101-2887 651-223-3000 FRX: 651-223-3002 SPRINGSTED Public Finance Advisors $820,000 CITY OF ELK RIVER, MINNESOTA GENERAL OBLIGATION WATER REVENUE BONDS, SERIES 1998B (BOOK ENTRY ONLY) AWARD: NORWEST INVESTMENT SERVICES, INC. .~ALE: November 30, 1998 Moody's Rating: Baal Interest Net Interest True Interest Bidder Rates Price Cost Rate NORWEST INVESTMENT SERVICES, INC. 4.10% 2000-2004 4.20% 2005 4.25% 2006 4.30% 2007 4.40% 2008 4.50% 2009 4.60% 2010 4.70% 2011 4.80% 2012 4.90% 2013 5.00% 2014 $809,340.00 $351,671.67 4.7755% (Continued) SAINT PAUL, MN . MINNEAPOLIS, MN · BROOKFIELD, WI . OVERLAND PARK, KS · WASHINGTON, DC · DES MOINES, IA Interest Net Interest True Interest Bidder Rates Price Cost Rate DAIN RAUSCHER INCORPORATED BERNARDI SECURITIES, INCORPORATED CRONIN & COMPANY, INCORPORATED 3.60% 2000 3.80% 2001 3.90% 2002 4.00% 2003 4.10% 2004 4.20% 2005 4.25% 2006 4.35% 2007 4.45% 2008 4.55% 2009 4.65% 2010 4.75% 2011 4.85% 2012 4.95% 2013 5.00% 2014 4.25% 4.35% 4.375% 4.45% 4.55% 4.65% 4.75% 4.80% 4.90% 5.00% 3.75% 3.90% 4.00% 4.25% 4.40% 4.60% 4.80% 5.00% 2OOO 2001-2003 2004-2007 2008 2009 2010 2011 2012 2013 2014 2000 2001 2002 2003-2004 2005-2006 2007-2008 2009-2010 2011-2014 $809,340.00 $353,170.83 4.7928 $809,347.35 $356,089.52 4.8412% $811,185.00 $361,792.50 4.9058% (Continued) REOFFERING SCHEDULE OF THE PURCHASER Rate Year Yield 4.10% 2000 3.60% 4.10% 2001 3.80% 4.10% 2002 3.90% 4.10% 2003 4.00% 4.10% 2004 Par 4.20% 2005 Par 4.25% 2006 Par 4.30% 2007 Par 4.40% 2008 Par 4.50% 2009 Par 4.60% 2010 Par 4.70% 2011 Par 4.80% 2012 Par 4.90% 2013 Par 5.00% 2014 Par BBI: 5.01% Average Maturity: 9.01 Years