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HomeMy WebLinkAboutResolution No. 650-04 ,t.a.. � 7i/ �� I•��' fit. � - 77 777 l _ RESOLUTION BE IT RESOLVED by. the Common Council of the City of Rochester that the Common Council concurs in the resolution of the Rochester Public Utility Board appended hereto, which resolution requests approval for the City to consent to'the issuance of Electric Utility Revenues Note, Series 2005A and the Execution of a Project Loan Agreement in connection with the Minnesota Municipal Utilities Association. The Mayor and the City Clerk are authorized and directed to execute said agreements on behalf of the City. PASSED AND ADOPTED BY THE COMMON COUNCIL OF THE CITY OF ROCHESTER, MINNESOTA, THIS ZOTN DAY OF , 2004. tRtSIDENT OF 8AID COMMON COUNCIL 4TTEST: CIV CLERK APPROVED THIS 2-jl5T DAY OF' 12004. MAYOR OF SAID CITY (Seal of the City of Rochester, Minnesota) res.p u\M M UA.elect.n o to 2 005 A r r , CITY OF ROCHESTER COUNTY OF OLMSTED • STATE OF MINNESOTA RESOLUTION NO. 5 -0 RESOLUTION RELATING TO ELECTRIC UTILITY REVENUE NOTE, SERIES 2005A; AUTHORIZING THE ISSUANCE THEREOF IN CONNECTION WITH THE MINNESOTA MUNICIPAL UTILITIES ASSOCIATION FINANCING PROGRAM; PROVIDING FOR THE EXECUTION AND DELIVERY OF A PROJECT LOAN AGREEMENT AND RELATED DOCUMENTS; AND AUTHORIZING CERTAIN FURTHER ACTIONS BE IT RESOLVED by the Common Council of the City of Rochester, Minnesota (the "City"), as follows: SECTION 1 RECITALS. This Council has investigated the facts necessary to determine and does hereby find and declare: 1.01 Electric System. The City, in cooperation with the Rochester Public Utilities Board (the "Public Utility Board") established pursuant to the City's Home Rule Charter, has heretofore duly authorized the establishment and operation of a municipal electric system for the • generation and distribution of electricity to the residents of the City and the surrounding area. The municipal electric system as now or hereafter improved is hereinafter referred to as the Electric Utility. 1.02 Project; Defined Terms. It is necessary and in the best interests of the City and its residents that the City make various improvements to the Electric Utility (the "Project"). Any capitalized terms used herein which are not required by proper grammar to be capitalized shall have the meanings given such terms in the Project Loan Agreement (as that document is hereinafter defined). 1.03 Financing Program, Necessity of Issuance of Series 2005A Note. After considering various financial alternatives for providing for the Project, the City has determined, upon the advice of Springsted Incorporated, the City's independent financial adviser, that it is in the City's best financial interest to provide for the acquisition, construction and installation of the Project by participating in the Minnesota Municipal Utilities Association Financing Program (the "Program"). Under the Program, the City is a member of the Midwest Consortium of Municipal Utilities ("MCMU"), a joint venture by utilities and a Minnesota nonprofit corporation which is an affiliate of the Minnesota Municipal Utilities Association. MCMU has issued or will issue revenue bonds (the "MCMU Bonds") and will loan a portion of the proceeds of the MCMU Bonds to the City(the "Loan")to finance acquisition, construction and installation of the Project. Accordingly, to provide funds for payment of the cost of the Project, it is necessary for the City to issue its Electric Utility Revenue Note, Series 2005A (the "Series 2005A Note"), pursuant to i 1714279v6 the applicable provisions of Minnesota Statutes, Section 453.55 and Chapter 475, the City's Home Rule Charter, and a concurring resolution of the Public Utility Board. MCMU will purchase the Series 2005A Note to evidence and secure the Loan. Costs of the Project in excess of the Loan, if any, will be paid from funds on hand which have been generated from the operation of the Electric Utility and are available to be used for this purpose. 1.04 Sufficiency of Net Revenues. This Council reasonably anticipates that the gross revenues to be received from the operation of the Electric Utility during the period for which the Series 2005A Note will be outstanding will be more than sufficient to pay all costs of the operation and maintenance thereof and to provide Net Revenues (as hereinafter defined) adequate to pay the principal of and interest on the Series 2005A Note and other outstanding obligations payable from the Net Revenues of the Electric Utility when due. It is in the best interests of the City that the Series 2005A Note be made payable solely from the Net Revenues. 1.05 Prior Resolutions; Parity Lien. This Council has previously adopted Resolution No. 871-00, on December 18, 2000, and Resolution No. 465-02, on July 15, 2002 (the "Prior Resolutions") pursuant to which the City's Electric Utility Revenue Bonds, Series 2000, and Electric Utility Revenue Bonds, Series 2002A are currently outstanding (the "Outstanding Parity Bonds"). Under the Prior Resolutions the City reserved the right, under certain conditions, to issue additional obligations payable from the Net Revenues on a parity as to both principal and interest with the Outstanding Parity Bonds (the "Additional Parity Bonds"), as long as the following conditions are met: (a) The annual average of the Net Revenues of the Electric Utility for the two fiscal years immediately preceding the issuance of such Additional Parity Bonds shall not have been less than 115% of the average of the unpaid annual debt service requirements on the Outstanding Parity Bonds and the Additional Parity Bonds. (b) The payments required to be made into the funds enumerated in paragraphs 15 and 16 of the Prior Resolutions (including the Reserve Account)must have been provided for. (c) The Additional Parity Bonds must have principal maturing on December 1 of each year and interest falling due on June 1 and December 1 of each year. (d) The proceeds of the Additional Parity Bonds must be used for providing extensions or improvements to the Electric Utility or refunding obligations issued for such purpose. The Common Council hereby finds and determines as follows: (a) The annual average of the Net Revenues of the Electric Utility for fiscal years 2002 and 2003 were $16,924,506,which is not less than 115% of the average of the unpaid annual debt service requirements on the Outstanding Parity Bonds and the Series 2005A Note, assuming the Series 2005A Note is issued in the principal amount of $5,775,000 and bears interest (as measured for this purpose by the Cost of Funds Component as more fully described in Section 2.03 and in the form of the Series 2005A 1714279v6 2 Note set out in Section 4 hereof) at a maximum interest rate of eleven percent (11%) per annum. (b) All payments required to be made into the funds enumerated in paragraphs 15 and 16 of the Prior Resolutions (including the Reserve Account) have been provided for. (c) The Series 2005A Note will either have principal maturing on December 1 of each year and interest falling due on June 1 and December 1 of each year or the City will comply with the covenant set forth in Section 6.08 hereof with respect to payment frequency of the Outstanding Parity Bonds; and Utility.(d) The Series 2005A Note is issued to provide improvements to the Electric Therefore, the Common Council hereby finds, determines and declares that the parity bond covenants under the Prior Resolutions have been satisfied and the Net Revenues shall be pledged to the payment of the Series 2005A Note on a parity with the pledge to the Outstanding Parity Bonds. 1.06 Borrower Documents. In connection with the Program and the issuance of the Series 2005A Note, the following documents have been prepared and presented at this meeting (items (a), (b) and (c), together with the Series 2005A Note are sometimes hereinafter collectively referred to as the 'Borrower Documents"): (a) a Project Loan Agreement (Utility Net Revenues) ("Project Loan Agreement") to be entered into between MCMU and the City which, together with the Series 2005A Note, will secure repayment of the Loan; (b) a Tax Exemption Agreement ("Tax Exemption Agreement") to be entered into between MCMU and the City, which sets forth certain representations, expectations and conditions relating to the use and investment of proceeds of the Loan to establish and maintain the exclusion of the interest portion of the Loan repayments from gross income for federal income tax purposes and to provide guidance for complying with the arbitrage rebate provisions of the Internal Revenue Code; and (c) a Borrower Escrow Reserve Agreement ("Escrow Reserve Agreement")to be entered into between the City and U.S. Bank National Association, as escrow agent, which establishes a Borrower Escrow Reserve Account into which certain proceeds of the Loan together with certain other funds of the City will be deposited to satisfy the requirements described in subparagraphs (b) of Section 1.05 above with respect to the issuance of the Series 2005A Note. (d) a Trust Indenture ("Indenture") between MCMU and U.S. Bank National Association, as Trustee,providing for the issuance of and securing the MCMU Bonds. 1.07 Delegation of Certain Authority. It is necessary and appropriate for this Council to delegate to the Mayor, City Clerk and City Finance Director (sometimes collectively referred • I 1714279v6 3 to hereinafter as the "Authorized Officials") the power and authority to make any further, final decisions concerning revisions, modifications or supplements to the Borrower Documents, . including the power and authority to make final decisions as to the principal amount of and interest to be borne by the Series 2005A Note, the final maturity and payment schedule for the Series 2005A Note, prepayment terms and other terms and conditions of the Series 2005A Note and other Borrower Documents or any other documents approved hereby (subject to the modification and revision thereof as herein authorized);provided that this delegation of authority is expressly made subject to the limits set forth in Section 2.03 below. SECTION 2. AUTHORIZATION OF BORROWER DOCUMENTS; APPROVAL OF INDENTURE. 2.01 Conditions Precedent To Issuance of Series 2005A Note. All acts, conditions and things which are required by the Constitution, City Charter, and laws of the State of Minnesota to be done, to exist, to happen and to be performed precedent to and in the valid issuance of the Series 2005A Note have been done, do exist, have happened and have been performed, in due form, time and manner as required by law. 2.02 Authorization. Pursuant to Minnesota Statutes, Section 453.55, Subdivision 7, the requirements as to public sale do not apply to the issuance of the Series 2005A Note. MCMU will purchase the Series 2005A Note, when, as and if issued on the further terms and conditions hereinafter set forth. 2.03 Authorization of Series 2005A Note. For the purpose of financing the Project there is hereby authorized the issuance of the Series 2005A Note. The Series 2005A Note and • the interest coming due thereon shall be payable solely from the Net Revenues of the Electric Utility on a parity with the Outstanding Parity Bonds; however the Series 2005A Note shall not constitute a lien on the property comprising the Electric Utility. The Series 2005A Note shall not constitute a general obligation of the City, and the full faith and credit and taxing powers of the City are not pledged for the payment of the Series 2005A Note and interest thereon, and no person shall ever have the right to compel the application of City moneys (other than Net Revenues) or the levy of ad valorem taxes for the payment of such principal and interest. The Series 2005A Note shall be issued in an original principal amount not to exceed $6,000,000, shall bear interest such that the maximum interest rate does not exceed eleven percent (11%) per annum, shall be payable on a parity with the Outstanding Parity Bonds and Additional Parity Bonds to the extent that the Cost of Funds Component as described in Section 4.9 of the Project Loan Agreement does not cause the interest rate on the Note exceed eleven percent (11%) per annum, and shall finally mature no later than December 1, 2014 and shall be subject to mandatory prepayment or redemption prior to the stated maturity date, all as shall be . determined by the Authorized Officials as authorized herein. Any two of the Authorized Officials, or any other officers or members designated by the Mayor may negotiate and agree upon the principal amount, stated, maximum or assumed interest rates, mandatory prepayment or redemption provisions and such other terms of the Series 2005A Note within the parameters set forth in this Resolution and, upon conclusion of such • 1714279v6 4 negotiations, shall cause the Series 2005A Note to be revised to reflect such terms prior to executing and delivering such Series 2005A Note as herein provided. • The determination of any two of the Authorized Officials, or such other officers or members as designated by the Mayor as to the principal amount, stated, maximum or assumed interest rates, mandatory prepayment or redemption provisions, annual debt service requirements, and other terms with respect to the Series 2005A Note, within the parameters set forth in this Resolution, shall be conclusive thereof and shall bind the City to all matters relating thereto. 2.04 Approval of Project Loan Agreement. To provide for the Loan, the City has determined it is necessary and advisable to enter into the Project Loan Agreement in substantially the form 'as has been presented to this meeting. The form of Project Loan Agreement in substantially the form presented to this meeting is hereby approved and any two of the Authorized Officials or such other officers or members designated by the Mayor are hereby authorized and directed to execute and deliver the Project Loan Agreement in the name and on behalf of the City in substantially the form on file as of this date, and with such other or further changes in the Project Loan Agreement as may be approved by such Authorized Officials (or other officers or members of the City) executing the same. The Project Loan Agreement shall be executed on behalf of the Authority by the manual signatures of any two of the Authorized Officials or such other members or officers designated by the Mayor. Such execution thereof shall constitute conclusive evidence of approval by such officers or members and of the City's approval of any and all such changes from the form of the Project Loan Agreement presented to this,meeting and approved hereby. • 2.05 Approval of Tax Exemption Agreement. The form of the Tax Exemption Agreement presented to this meeting, as hereafter revised or supplemented as permitted hereunder, is hereby approved, and any two of the Authorized Officials or such other officers or members designated by the Mayor are hereby authorized and directed to executed and deliver the Tax Exemption Agreement in the name and on behalf of the City in substantially the form of the Tax Exemption Agreement presented to this meeting, such changes as may be approved by such officers or members executing the same, such execution and delivery thereof to constitute conclusive evidence of approval by such officers or members and of the City's approval of any and all such changes therein from the form of the Tax Exemption Agreement presented to this meeting and approved hereby. 2.06 _Approval of Escrow Reserve Agreement. The form of the Escrow Reserve Agreement presented to this meeting, as hereafter revised or supplemented as permitted hereunder, is hereby approved, and any two of the Authorized Officials or such other officers or members designated by the Mayor are hereby authorized and directed to executed and deliver the Escrow Reserve Agreement in the name and on behalf of the City in substantially the form of the Escrow Reserve Agreement presented to this meeting, such changes as may be approved by such officers or members executing the same, such execution and delivery thereof to constitute conclusive evidence of approval by such officers or members and of the City's approval of any and all such changes therein from the form of the Escrow Reserve Agreement presented to this meeting and approved hereby. 1714279v6 5 2.07 Approval of Indenture• Application of Note Proceeds. The form of Indenture in substantially the form presented to this meeting is hereby approved. The proceeds of the sale of the Series 2005A Note shall be deposited with, held and disbursed by the Trustee as provided under the Indenture, the Project Loan Agreement and the Escrow Reserve Agreement. SECTION 3. SERIES 2005A NOTE TERMS EXECUTION AND DELIVERY. 3.01 Terms. City shall forthwith issue and deliver the Series 2005A Note, which shall be dated originally as of the date of its issuance, shall be payable as to principal and interest on the dates and in the amounts, and shall bear interest from the date of original issue until paid or duly prepaid at the rates per annum, as determined pursuant to Sections 1.07 and 2.03. The Series 2005A Note shall be issuable only in fully registered form. The interest thereon and principal thereof shall be payable by check or draft issued by the Registrar described herein. 3.02 Authentication Dates and Payment Dates. Upon initial delivery of the Series 2005A Note pursuant to Section 3.06 and upon any subsequent transfer or exchange pursuant to Section 3.05, the date of authentication shall be noted on each Series 2005A Note so delivered, exchanged or transferred. Principal of the Series 2005A Note shall be payable on December 1 of each year, and interest shall be paid on June 1 and December 1 of each year, each such date being referred to herein as a Payment Date, commencing June 1, 2005, to the person in whose name the Series 2005A Note is registered on the Bond Register, as hereinafter defined, at the Registrar's close of business on the fifteenth day of the calendar month next preceding such Payment Date, whether or not such day is a business day. Interest shall be computed on the basis of a 365 day year and the actual number of days elapsed. In the event the Series 2005A Note bears interest at a variable rate, the principal and interest on the Series 2005A Note may be due more frequently than set forth above if the covenants set forth in Section 6.08 are complied with to protect the parity provisions relating to the Outstanding Parity Bonds. 3.03 Prepayment. The Series 2005A Note is subject to prepayment in whole at the option of the City at the "Optional Prepayment Price" with 60 days prior written notice to the MCMU, the "Bond Trustee" and the "Credit Provider" as those terms are defined and as further provided for in the Project Loan Agreement. 3.04 Appointment of Registrar. The City hereby appoints the Finance Director of the City as the initial bond registrar, transfer agent and paying agent (the "Registrar"). The City reserves the right to change or remove the Registrar, effective upon not less than thirty days' written notice and upon the appointment and acceptance of a successor Registrar, in which event the predecessor Registrar shall deliver all cash and Series 2005A Note in its possession to the successor Registrar and shall deliver the Bond Register to the successor Registrar. 3.05 Registration. The effect of registration and the rights and duties of the City and the Registrar with respect thereto shall be as follows: 1714279v6 6 (a) Re ig ster. The Registrar shall keep at its principal corporate trust office"a register (the 'Bond Register") in which the Registrar shall provide for the registration of ownership of Series 2005A Note and the registration of transfers and exchanges of Series 2005A Note entitled to be registered, transferred or exchanged. The term Holder or Bondholder as used herein shall mean the person (whether a natural person, corporation, association, partnership, trust, governmental unit, or other legal entity) in whose name the Series 2005A Note is registered in the Bond Register. (b) Transfer of Series 2005A Note. Upon surrender for transfer of the Series 2005A Note duly endorsed by the Holder thereof or accompanied by a written instrument of transfer, in form satisfactory to the Registrar, duly executed by the Holder thereof or by an attorney duly authorized by the Holder in writing, the Registrar shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Series 2005A Note of a like aggregate principal amount and maturity, as requested by the transferor. (c) Exchange of Series 2005A Note. At the option of the Holder of the Series 2005A Note, or in connection with an amendment of Exhibit B to the Project Loan Agreement as described in Section 4.2 of the Project Loan Agreement, the Series 2005A Note may be exchanged for another Series 2005A Note in a like aggregate principal amount, upon surrender of the Series 2005A Note to be exchanged at the office of the Registrar. Whenever any Series 2005A Note is so surrendered for exchange the City shall execute and the Registrar shall authenticate and deliver the Series 2005A Note which the Bondholder making the exchange is entitled to receive. (d) Cancellation. The Series 2005A Note when surrendered for payment, transfer or exchange shall be promptly canceled by the Registrar and thereafter disposed of. The Registrar shall furnish the City a certificate setting forth the particulars of any Series 2005A Note canceled or destroyed. (e) Improper or Unauthorized Transfer. When the Series 2005A Note is presented to the Registrar for transfer, the Registrar may refuse to transfer the same until it is satisfied that the endorsement on the Series 2005A Note or separate instrument of transfer is valid and genuine and that the requested transfer is legally authorized. The Registrar shall incur no liability for the refusal, in good faith, to make transfers which it, in its judgment, deems improper or unauthorized. (f) Persons Deemed Owners. The City and the Registrar may treat the person in whose name the Series 2005A Note is at any time registered in the Bond Register as the absolute owner of the Series 2005A Note, whether the Series 2005A Note shall be overdue or not, for the purpose of receiving payment of or on account of, the principal of and interest on the Series 2005A Note and for all other purposes; and all payments made to or upon the order of such • 1714279v6 7 Holder shall be valid and effectual to satisfy and discharge the liability upon such Series 2005A Note to the extent of the sum or sums so paid. • (g) Taxes, Fees and Charges. For every transfer or exchange of the Series 2005A Note (except for an exchange upon a partial prepayment or redemption of a Series 2005A Note), the Registrar may impose a charge upon the owner thereof sufficient to reimburse the Registrar for any tax, fee or other governmental charge required to be paid with respect to such transfer or exchange. (h) Mutilated, Lost, Stolen or Destroyed Series 2005A Note. In case the Series 2005A Note shall become mutilated or be destroyed, stolen or lost, the Registrar shall deliver a new Series 2005A Note of like amount, number, maturity date and tenor in exchange and substitution for and upon cancellation of any such mutilated Series 2005A Note or in lieu of and in substitution for any Series 2005A Note destroyed, stolen or lost, upon the payment of the reasonable expenses and charges of the Registrar in connection therewith; and, in the case of a Series 2005A Note destroyed, stolen or lost, upon filing with the Registrar of evidence satisfactory to it that the Series 2005A Note was destroyed, stolen or lost, and -of the ownership thereof, and upon furnishing to the Registrar of an appropriate bond or indemnity in form, substance and amount satisfactory to it, in which both the City and the Registrar shall be named as obligees. A Series 2005A Note so surrendered to the Registrar shall be canceled by it and evidence of such cancellation shall be given to the City. If the mutilated, destroyed, stolen or lost Series 2005A • Note has already matured or been called for redemption in accordance with its terms it shall not be necessary to issue a new Series 2005A Note prior to payment. (i) Authenticating Age . The Registrar is hereby designated authenticating agent for the Series 2005A Note, within the meaning of Minnesota Statutes, Section 475.55, Subdivision 1, as amended. (j) Valid Obligations. A Series 2005A Note issued upon any transfer or exchange of Series 2005A Note shall be the valid obligation of the City, evidencing the same debt, and entitled to the same benefits under this Resolution as the Series 2005A Note surrendered upon such transfer or exchange. 3.06 Execution, Authentication and Delivery. The Series 2005A Note shall be prepared under the direction of the Finance Director and shall be executed on behalf of the City by the signatures of the Mayor and the City Clerk, provided that the signatures may be printed, engraved or lithographed facsimiles of the originals. In case any officer whose signature or a facsimile of whose signature shall appear on any Series-2005A Note shall cease to be such officer before the delivery of such Series 2005A Note, such signature or facsimile shall nevertheless be valid and sufficient for all purposes, the same as if such officer had remained in office until the date of delivery of such Series 2005A Note. Notwithstanding such execution, no 1714279v6 8 Series 2005A Note shall be valid or obligatory for any purpose or entitled to any security or benefit under this Resolution unless and until a certificate of authentication on the Series 2005A • Note has been executed by the manual signature of an authorized representative of the Registrar. Certificates of authentication on different Series 2005A Note need not be signed by the same representative. The executed certificate of authentication on any Series 2005A Note shall be conclusive evidence that it has been duly authenticated and delivered under this Resolution. When the Series 2005A Note has been prepared, executed and authenticated, the City Clerk shall deliver it to MCMU in connection with the closing of the Loan. SECTION 4. FORM OF SERIES 2005A NOTE. The Series 2005A Note shall be prepared in substantially the following form, with appropriate variations, omissions and insertions as indicated by this resolution: 1714279v6 9 UNITED STATES OF AMERICA STATE OF MINNESOTA • OLMSTED COUNTY CITY OF ROCHESTER $ ELECTRIC UTILITY REVENUE NOTE, SERIES 2005A KNOW ALL PERSONS BY THESE PRESENTS, that the City of Rochester, Olmsted County, Minnesota (the "City"), certifies that it is indebted and for value received promises to pay to the Midwest Consortium of Municipal Utilities (the "Holder") or the registered assign, but solely from the revenue pledged therefor, the principal sum of Dollars ($ ), on December 1 of the years and in the installments as follows: Year Amount 2005 $. 2006 2007 2008 2009 2010 2011 • 2012 2013 2014 and to pay interest on so much of the principal amount of the debt as remains unpaid, from the date hereof until the principal amount hereof is paid or has been provided for, at a variable rate determined as described below but not to exceed eleven percent (11%) per annum, calculated on the basis of 365-day year and the actual number of days elapsed. From and after the date hereof interest on the Note is payable on each June 1 and December 1, commencing June 1, 2005. Capitalized terms used in this Note and not otherwise defined shall have the meanings given them in the Project Loan Agreement or the Indenture (hereinafter defined). Interest Rate; Principal and Interest Pa ents. This Note evidences and secures a Loan made on the date hereof by the Holder to the City under a Project Loan Agreement (the "Project Loan Agreement") dated the date hereof between the Holder and the City. The Loan is being made by the Holder from proceeds of the Midwest Consortium of Municipal Utilities Revenue Bonds (Minnesota Municipal Utilities Association Financing Program) Series 2004 (the "Bonds"), issued pursuant to a Trust Indenture (the "Indenture") dated as of December 1, 2004 between the Holder, as issuer, and U.S. Bank National Association, as trustee. The actual interest rate borne by this Note for any Interest Period shall be an interest rate equal to the Interest Rate established for the Weekly Rate Bonds for such Weekly Rate Period pursuant to the provisions of the Indenture. Interest shall be payable in accordance with the schedule attached as Exhibit B • 1714279v6 10 to the Project Loan Agreement. However, on each June 1 the aggregate amount of interest paid by payment of such scheduled interest payments over the preceding twelve months shall be • adjusted to reflect the actual interest borne by this Note during such period in accordance with Section 4.2(c) of the Project Loan Agreement. The principal installments shall be paid in the amounts scheduled above; provided, however, that if amounts are transferred from the Project Loan Disbursement Account as provided in Sections 5.5 or 5.7 of the Project Loan Agreement, the remaining principal payment schedule shall be reamortized to provide similarly level annual installments of total debt service payments. Principal, interest and any premium due under this Note will be paid on each payment date by wire payment, or by check or draft mailed for receipt on or prior to the payment date to the person in whose name this Note is registered, in any coin or currency of the United States of America which at the time of payment is legal tender for public and private debts. Scheduled Program Expenses; Additional Payments. This Note also evidences and secures the obligation of the City to pay Scheduled Program Expenses and Additional Payments (other than Subordinated Obligations). Redemption. This Note is subject to redemption and prepayment in whole at the option of the City as provided in the Project Loan Agreement. Purpose; Limited Obli ag tion. This Note has been issued pursuant to and in full conformity with the Constitution and laws of the State of Minnesota for the purpose of providing money to finance the construction of improvements to the City's municipal electric system and is payable out of the Electric Utility Revenue Bonds Debt Service Account of the City, to which • account have been pledged net revenues of the City's municipal electric system. The Note (other than payment of Subordinate Obligations) is issued on a parity with the City's Electric Utility Revenue Bonds, Series 2000, and Electric Utility Revenue Bonds, Series 2002A, and any other obligations hereafter issued on a parity therewith. This Note and the interest coming due thereon shall be payable solely from the Net Revenues of the Electric Utility; however the Series 2005A Note shall not constitute a lien on the property comprising the Electric Utility. The Series 2005A Note shall not constitute a general obligation of the City, and the full faith and credit and taxing powers of the City are not pledged for the payment of the Series 2005A Note and interest thereon, and no person shall ever have the right to compel the application of City moneys (other than Net Revenues) or the levy of ad valorem taxes for the payment of such principal and interest. Registration; Transfer. This Note shall be registered in the name of the Holder, or upon assignment by the Holder to the Trustee concurrently with the assignment of the Project Loan Agreement, in the name of the Trustee, pursuant to Section 10.1 of the Project Loan Agreement, on the books of the City by presenting this Note for registration to the City Finance Director, who will endorse his or her name and note the date of registration opposite the name of the Holder or the Trustee in the certificate of registration attached hereto. Thereafter, this Note may be transferred to the Credit Facility Provider in connection with an assignment of the Project Loan Agreement to the Credit Facility Provider in accordance with Section 10.1 of the Project Loan Agreement following an Event of Default, or may be transferred to a bona fide purchaser only by delivery with an assignment duly executed by the registered owner or a legal representative of the registered owner, and the City may treat the registered owner as the person • 1714279v6 1 1 exclusively entitled to exercise all the rights and powers of an owner until this Note is presented with such assignment for registration of transfer, accompanied by assurance of the nature • provided by law that the assignment is genuine and effective, and until such transfer is registered on said books and noted hereon by the City Finance Director. Fees Upon Transfer or Loss. The City Finance Director may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection with the transfer of this Note and any legal or unusual costs regarding transfers and lost notes. Project Loan Agreement. The terms and conditions of the Project Loan Agreement are incorporated herein by reference and made a part hereof. The Project Loan Agreement may be attached to this Note, and shall be attached to this Note if the Holder of this Note is any person other than the Midwest Consortium of Municipal Utilities or the Trustee. Tax-Exempt Obligation. The City intends that the interest on this Note will be excluded from gross income for United States income tax purposes and from both gross income and taxable net income for State of Minnesota income tax purposes. Not Qualified Tax-Exempt Obligation. This Note has not been designated by the City as a "qualified tax-exempt obligation" for purposes of Section 265(b)(3) of the federal Internal Revenue Code of 1986, as amended. IT IS HEREBY CERTIFIED AND RECITED that all acts, conditions and things required by the Constitution and laws of the State of Minnesota and Charter of the City to be done, to happen and to be performed, precedent to and in the issuance of this Note, have been • done, have happened and have been performed, in regular and due form, time and manner as required by law; that the City has covenanted and agreed with the Holder of this Note that it will impose and collect charges for the service,use and availability of and connection to its municipal electric system at the times and in amounts necessary to produce net revenues adequate, together with other moneys available therefore, to pay all principal and interest when due on this Note; and that this Note, together with all other debts of the City outstanding on the date hereof, being the date of its actual issuance and delivery, does not.exceed any constitutional or statutory limitation of indebtedness. • 1714279v6 12 IN WITNESS WHEREOF, the City of Rochester, Olmsted County, Minnesota, by its Common Council has caused this Note to be executed on its behalf by the signatures of its • Mayor and of its City Clerk, and the corporate seal of the City to be affixed hereto, all as of 2004. CITY OF ROCHESTER, OLMSTED COUNTY, MINNESOTA Mayor CityClerk" (SEAL) 1714279v6 13 CERTIFICATE OF REGISTRATION • The transfer of ownership of the principal amount of the attached Note may be made only by the registered owner or his,her or its legal representative last noted below. DATE OF SIGNATURE OF REGISTRATION REGISTERED OWNER CITY FINANCE DIRECTOR Midwest Consortium of Municipal Utilities Plymouth,Minnesota 200_ Federal EIN'41-6007162 200_ U.S.Bank National Association, as Trustee Saint Paul,Minnesota 1714279v6 14 SECTION 5. SECURITY PROVISIONS. 5.01 Income and Revenue Funds. Pursuant to and as required by Section 11.08 of the City's Home Rule Charter, the City has heretofore established, and shall continue to maintain as long as the Series 2005A Note, the Outstanding Parity Bonds, and any additional Parity Bonds (described in Section 6.04 hereof) are outstanding, a separate City fund for the Electric Utility (the "Electric Utility Fund"), into which all of the income and revenues from the operation of the Electric Utility are and shall continue to be deposited and segregated from all other City funds. As used in this Resolution, the term "Gross Revenues" of the Electric Utility means all income and revenue of any nature derived from the operation or use of the Electric Utility, investment earnings on funds held in the Electric Utility Fund (except ,to the extent explicitly reserved for other purposes in this Resolution) and all other funds specifically declared in this Resolution to constitute Gross Revenues, and the term "Net Revenues" of the Electric Utility means the Gross Revenues minus the Operation and Maintenance Expenses of the Electric Utility(defined in Section 5.01(a)below). (a) Gross Revenues of the Electric Utility shall first be used to make full and timely payment, when due, of the current "Operation and Maintenance Expenses" of the Electric Utility. As used in this Resolution, the term "Operation and Maintenance Expenses" means the reasonable and necessary costs of operating and maintaining the Electric Utility, including but not limited to salaries, wages, contractual and professional service costs, costs of materials and supplies, insurance and audits, costs of purchasing, producing and delivering electric power and energy, specifically including fuel costs, costs of transmission service, reserve service, interchange service and all other costs of purchased power; provided that Operation and Maintenance Expenses shall not include interest costs, depreciation, accumulations of reserves for capital replacements or the "contributions in lieu of taxes"paid to the City out of the Electric Utility Fund. (b) Net Revenues of the Electric Utility .in amounts sufficient to pay the principal of and the interest on the Outstanding Parity Bonds, the Series 2005A Note, and on any additional Parity Bonds, as and when due, shall next be set aside into the "Electric Utility Revenue Bond Debt Service Account" (the "Debt Service Account") heretofore created as a separate account within the Electric Utility Fund to be held and applied only to the payment of the principal of and interest on the Series 2005A Note, the Outstanding Parity Bonds, and on any additional Parity Bonds. Such monies required to be deposited into the Debt Service Account are hereby irrevocably pledged to the payment of the principal of and interest on the Outstanding Parity Bonds, Series 2005A Note and on any additional Parity Bonds,when due. (c) Net Revenues in excess of the amounts required to be maintained in the funds and accounts of the Electric Utility under this Resolution are not restricted by the terms hereof and may be used by the City for, among other things, payment of Additional Payments under Section 4.3 of the Project Loan Agreement, and for such other purposes and at such times as may be permitted by law. 1714279v6 J 15 It is the express intent and determination of the Council that the amount of the Net Revenues to be set aside and paid into the Debt Service Account (including the Reserve Account • therein) shall in any event be sufficient to pay the principal of and interest on the Outstanding Parity Bonds, Series 2005A Note and on any additional Parity Bonds, when due, and to meet reserve requirements, and the City Finance Director shall from time to time deposit sufficient Net Revenues in said funds for such purposes. The Debt Service Account shall be used for no purpose other than the payment of interest on and principal of the Outstanding Parity Bonds, Series 2005A Note and any additional Parity Bonds promptly as the same become due and payable or to pay redemption premiums, if any. 5.02 Reserve Account; Parity Bond Funding. There has heretofore been created and there shall continuously be maintained a separate subaccount-in the Debt Service Account known as the "Reserve Account," The City shall continue to maintain the Reserve Account as a separate and distinct subaccount within the Debt Service Account, and the Reserve Account shall secure the prompt and full payment of the principal of and the interest on the Outstanding Parity Bonds, Series 2005A Note (and any additional Parity Bonds), but only to the extent that the regular debt service amounts deposited in the Debt Service Account are otherwise insufficient for such purposes. The Reserve Account shall be maintained at the "Reserve Requirement" described in this Section 5.02. At the time of issuance of the Outstanding Parity Bonds, Series 2005A Note and any additional Parity Bonds (collectively,the "Secured Bonds"), the City shall cause the Reserve Account to be funded in the amount equal to the smallest of the following: . (a) The maximum of the unpaid annual debt service requirements of the outstanding Secured Bonds (including those then being issued); (b) 125% of the average of the unpaid annual debt service requirements of the outstanding Secured Bonds,(including those then being issued); and (c) an amount equal to the sum of the Reserve Requirement (if any)just prior to the issuance of additional Secured Bonds plus 10% of the "issue price" of the Secured Bonds at the time being issued (such issue price to be determined pursuant to Section 1273 of the Code,but without regard to accrued interest); provided,however, that pursuant to such instructions and opinions as the City may receive or request from its bond counsel, the Reserve Requirement, and the investment of funds in the Reserve Account, shall be subject to such restrictions and affirmative obligations as shall be necessary in order that none of the Secured Bonds shall (in the absence of compliance with any such restrictions or affirmative obligations)become generally subject to federal income taxation. The Series 2005A Note is being issued on a parity with the City's $37,290,000 (original principal amount) Electric Utility Revenue Bonds, Series 2000, dated as of December 1, 2000 (the "Series 2000 Bonds"), issued pursuant to the Council's Resolution No. 871-00, adopted on December 18, 2000 (the "Series 2000 Bond Resolution"), and the City's $11,275,000 (original principal amount) Electric Utility Revenue Bonds, Series 2002A, dated as of August 1, 2002 (the "Series 2002A Bonds"), issued pursuant to the Council's Resolution No. 465-02, adopted on July • 1714279v6 16 15, 2002 (the "Series 2002A Bond Resolution"). Pursuant to Paragraph 16 of the Series 2000 Bond Resolution, the Reserve Account was funded in the amount of $2,471,687.50 as the • "Reserve Requirement" respecting the Series 2000 Bonds, and pursuant to Paragraph 16 of the Series 2002A Bond Resolution, the Reserve Account was funded in the amount of$1,045,780 as the "Reserve Requirement" respecting the Series 2002A Bonds. The Series 2005A Note is being issued on a parity with the Series 2000 Bonds and the Series 2002A Bonds pursuant to the Series 2000 Bond Resolution and the Series 2002A Bond Resolution, respectively, including without limitation paragraph 22 thereof, and, as the context typically requires herein, references to Parity Bonds and "additional Parity Bonds" include the Series 2005A Note. Accordingly, the City will deposit an additional amount in the Reserve Account so that the "Reserve Requirement" is properly funded upon the issuance of the Series 2005A Note. The amount of the additional deposit will be determined prior to the issuance of the Series 2005A Note based on the principal amount of and maximum interest rate on the Series 2005A Note. The additional deposit in the Reserve Account shall be held in the Borrower Escrow Reserve Account under the Escrow Reserve Agreement. No portion of the proceeds of the Series 2005A Note 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 for an available and reasonable "temporary period" until such proceeds are needed for the purpose for which the Series 2005A Note were issued, and for any available "minor portion." To this effect, any proceeds of the Series 2005A Note and any sums from time to time held in the Construction Account or Debt Service Account or Reserve Account (or any other City account which will be used to pay principal of or interest on the Series 2005A Note) 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 the arbitrage regulations on such investments, after taking into account any applicable "temporary periods" or "minor portion" under the federal arbitrage regulations. In addition, the proceeds of the Series 2005A Note and the monies in the above referenced funds and accounts 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 Series 2005A Note to be "federally guaranteed" within the meaning of Section 149(b) of the Internal Revenue Code of 1986, as amended, and the regulations,rulings and decisions thereunder(the "Code"). SECTION 6. ADDITIONAL COVENANTS. 6.01 Operation of System; City Covenants. The City covenants and agrees with the registered owner of the Series 2005A Note that: (a) The City will faithfully and punctually perform all duties with reference to the Electric Utility required by the Constitution and laws of the State of Minnesota and the Home Rule Charter of the City, including the making and collecting of reasonable and sufficient rates lawfully established for services rendered by the Electric Utility, and the City will segregate and apply the revenues of the Electric Utility as provided herein; (b) The City will not mortgage, sell, lease, or in any manner dispose of the Electric Utility, including any part thereof or any additions or extensions that may be 1714279v6 17 made part thereto, except that the City shall have the right -to sell, lease or otherwise dispose of any property of the Electric Utility found by the City to be neither necessary • nor useful in the operation of the Electric Utility, provided the proceeds received from such sale, lease or disposal shall be applied to the acquisition or construction of such capital facilities as the City may reasonably determine to be necessary for the normal operation of the Electric Utility and, to the extent not needed for said purposes, such proceeds shall be treated as Gross Revenues of the Electric Utility; (c) The City will pay or cause to be paid all lawful taxes, assessments, governmental charges, and claims for labor, materials or supplies which if unpaid could become a lien upon the Electric Utility or its revenues or could impair the security of the Series 2005A Note; (d) The City will continue to operate the Electric Utility, will maintain it in good repair and condition and will establish, charge and collect such lawfully established rates and charges for the service rendered by the Electric Utility so that (1)the annual Net Revenues shall not be less than 120% of the average of the unpaid annual debt service requirements of the outstanding principal balance of the Series 2005A Note and any additional Parity Bonds; and (2) the Net Revenues of the Electric Utility herein agreed to be set aside to provide for the prompt and full payment, when due, of the principal of and interest on the Series 2005A Note and any additional Parity Bonds will be sufficient for such purposes (and will also be sufficient to restore any deficiency in the Reserve Account); • (e) The City will cause a budget for the Electric Utility to be prepared at least annually, and, in the event such budget indicates that Net Revenues for each year will not exceed debt service for each corresponding year by the proportion stated hereunder, the City will take any and all steps permitted by law to increase rates so that the aforementioned proportion of Net Revenues to debt service shall be accomplished as promptly as possible; and (f) The City will proceed with due diligence to obtain and retain in effect all state, federal and/or local permits, licenses, and/or other approvals necessary for the City's ownership, construction, maintenance and continued operation of the Electric Utility, including without limitation the Project. 6.02 Books and Accounts; Inspection. The City will keep proper books and accounts relative to the Electric Utility separate from all other records of the City and will cause such books and accounts to be audited annually by a recognized independent firm of certified public accountants, including a balance sheet and a profit and loss statement of the Electric Utility as certified by such accountants. Each such audit, in addition to whatever matters may be deemed proper by the accountants to be included therein, shall include a statement in detail of the revenues and expenditures of the Electric Utility for the fiscal year and a balance sheet as of the end of such fiscal year. 1714279v6 18 The registered owner of the Series 2005A Note shall have at all reasonable times the right to inspect the Electric Utility and the records, accounts, accountants' reports and data of the City • relating thereto. 6.03 Insurance. So long as any principal of or interest on the Series 2005A Note remain outstanding the City will cause to be carried (a) adequate and customary casualty insurance on the Electric Utility; (b) adequate and customary insurance against loss of use and occupancy resulting from such casualties; (c) adequate and customary public liability insurance; and(d) insurance of the kinds and in the amounts normally carried by municipal utilities engaged in the operation of similar systems. All monies received for loss of use and occupancy shall be considered Gross Revenues of the Electric Utility. All money received for losses under any of such casualty policies, except those specified in (b) above, shall be used to the extent needed in repairing the damage or in replacing the property destroyed; provided that if the City shall find that it is inadvisable to repair such damage or replace such property and that the operation of the Electric Utility has not been impaired thereby, such money shall also be considered Gross Revenues of the Electric Utility. 6.04 Additional Bonds; Parity Bonds. No bonds or obligations payable out of the revenues of the Electric Utility may be issued in such manner as to enjoy priority over the Series 2005A Note and the Outstanding Parity Bonds. Additional obligations may be issued if their lien and pledge is junior and subordinate to that of the Series 2005A Note. Additional obligations may be issued on a parity as to pledge and lien with the Series 2005A Note and the Outstanding Parity Bonds (such additional parity obligations and the Series 2005A Note and Outstanding Parity Bonds being sometimes collectively referred to in this Resolution as the "Parity Bonds") if • all of the following conditions are met: (a) The annual average of the Net Revenues of the Electric Utility for the two fiscal years immediately preceding the issuance of such Parity Bonds shall not have been less than 115% of the average of the unpaid annual debt service requirements on the Series 2005A Note and any additional Parity Bonds (including those to be issued). (b) The payments required to be made into the funds enumerated in Sections 5.01 and 5.02 of the Resolution (including the Reserve Account) must have been provided for. (c) The additional Parity Bonds must have principal maturing on December 1 of each year and interest falling due on June 1 and December 1 of each year. (d) The proceeds of the additional Parity Bonds must be used for providing extensions or improvements to the Electric Utility or refunding obligations issued for such purpose. Upon payment or discharge of the Series 2000 Bonds and Series 2002A Bonds, any Parity Bonds that bear interest at a variable rate shall, for purposes of meeting the requirements of this Section 6.04 be deemed to bear interest at the average interest rate such variable rate bonds bore for the last 12 months, unless any rating agency requires a higher interest rate in • 1714279v6 19 order to maintain the ratings on the Outstanding Parity Bonds and the Additional Parity Bonds to be issued. • 6.05 Events of Default; Remedies. Events of Default. Each of the following events is an "Event of Default" under this Resolution: (a) Default by the City in the due and punctual payment of the principal of or premium, if any, on any Parity Bond (whether at maturity, upon acceleration, upon call for redemption, or otherwise); (b) Default by the City in the due and punctual payment of the interest on any Parity Bond; (c) Failure of the City to observe and perform any of its other covenants, conditions or agreements under this Resolution, the Project Loan Agreement, the Tax Exemption Agreement, the Series 2005A Note or in any other Parity Bonds for a period of 90 days after written notice from the Bondowners' Trustee or (whether or not a Bondowners' Trustee has been appointed) from the owners of 25% in aggregate principal amount of the Parity Bonds then outstanding, with said notice specifying such failure and requesting that it be remedied, or in the case of any such default that cannot with due diligence be cured within such 90-day period, failure of the City to proceed promptly to take such steps as may be required to effect a cure and thereafter to prosecute the curing • of such default with due diligence; (d) (i) Failure of the City generally to pay its debts as the same become due, (ii) commencement by the City of a voluntary case under the United States bankruptcy laws, as now or hereafter constituted, or any other applicable United States or state bankruptcy, insolvency or other similar law, or (iii) consent by the City to the appointment of a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official for the City, the Electric Utility or any substantial part of the City's property, or to the taking possession by any such official of the Electric Utility or any substantial part of the City's property; (e) The entry of any(i) decree or order for relief by a court having jurisdiction over the City or its property in an involuntary case under the United States bankruptcy laws, as now or hereafter constituted, or any other applicable United States or state bankruptcy, insolvency or other similar law, (ii) appointment of a receiver, liquidator, assignee, trustee, custodian, sequestrator or similar official for the City, the Electric Utility or any substantial part of the City's property, or (iii) order for the termination or liquidation of the City or its affairs; or (f) Failure of the City within 90 days after the commencement of any proceedings against it under the United States bankruptcy laws, as now or hereafter constituted, or any other applicable United States or state bankruptcy, insolvency or similar law,to have such proceedings dismissed or stayed. • 1714279v6 20 Appointment of Bondowners' Trustee. Upon the occurrence and continuation of an Event of Default, a bondowners' trustee (the "Bondowners' Trustee") may be appointed by the owners of not less than 25% in aggregate amount of the Parity Bonds then outstanding, by an instrument or concurrent instruments in writing signed and acknowledged by such owners or by their attorneys-in-fact duly authorized and delivered to such Bondowners' Trustee, with notification thereof being given to the City. Such appointment will become effective immediately upon acceptance thereof by the Bondowners' Trustee. The Bondowners' Trustee shall be an association or corporation organized and doing business under the laws of the United States or any State thereof, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least $75,000,000 and shall be subject to supervision or examination by federal or state authority. In the event that any Event of Default, in the sole judgment of the Bondowners' Trustee, is cured and the Bondowners' Trustee furnishes to the City a certificate so stating, that Event of Default will be conclusively deemed to be cured and the City, the Bondowners' Trustee and the owners of the Parity Bonds will be restored to the same rights, powers and position which they would have held if no Event of Default had occurred. Acceleration. Upon the occurrence and continuation of an Event of Default specified in subsections (a), (b), (d), (e) or (f) above, the Bondowners' Trustee or, if there is none, the owners of 25% in aggregate amount of the Parity Bonds then outstanding may, by written notice to the City, declare the entire unpaid principal of the Parity Bonds due and payable and, thereupon, the entire unpaid principal of the Parity Bonds will forthwith become due and payable. Upon any such declaration the City will forthwith pay to the owners of the Parity Bonds the entire unpaid • principal and premium, if any, and accrued interest on the Parity Bonds, but only from Net Revenues and other moneys specifically pledged in this Resolution for such purpose. If at any time after such declaration and before the entry of a final judgment or decree in any suit, action or proceeding instituted on account of such default or before the completion of the enforcement of any other remedy under this Resolution, the principal of all Parity Bonds that have matured or been called for redemption pursuant to any mandatory sinking fund redemption provision and all arrears of interest have been paid and any other Events of Default which may have occurred have been remedied, then the Bondowners' Trustee or, if there is none, the owners of 25% in aggregate amount of the Parity Bonds then outstanding may, by written notice to the City, rescind or annul such declaration and its consequences. No such rescission or annulment will extend to or affect any subsequent default or impair any right consequent thereon. Actions by Bondowners' Trustee. Any action, suit or other proceedings instituted by the Bondowners' Trustee under this Resolution must be brought in its name as trustee for the owners of the Parity Bonds, without the necessity of joining the owners of the Parity Bonds as parties thereto, and all such rights of action upon or under any of the Parity Bonds or the provisions of this Resolution may be enforced by the Bondowners' Trustee without the possession of any of the Parity Bonds and without the production of the same at any trial or proceedings relative thereto, except where otherwise required by law. Any such suit, action or proceeding.instituted by the Bondowners' Trustee will be brought for the ratable benefit of all of the owners of the Parity Bonds, subject to the provisions of this Resolution. The respective owners of the Parity Bonds, by taking and holding the same, shall be conclusively deemed irrevocably to appoint the Bondowners' Trustee the true and lawful trustee of the respective owners of those Parity Bonds, • 1714279v6 21 with authority to institute any such action,suit or proceeding; to receive as trustee and deposit in trust any sums becoming distributable on account of those Parity Bonds; to execute any paper or • documents for the receipt of money; and to do all acts with respect thereto that the owners might have done on their own behalf. Nothing in this Resolution shall be deemed to authorize or empower the Bondowners' Trustee to consent to accept or adopt, on behalf of any owners of the Parity Bonds, any plan of reorganization or adjustment affecting the Parity Bonds or any right of any owners thereof, or to authorize or empower the Bondowners' Trustee to vote the claims of the owners thereof in any receivership, insolvency, liquidation, bankruptcy, reorganization or other proceeding to which the City is a party. Application of Money Collected by Bondowners' Trustee. Any money collected by the Bondowners' Trustee at any time pursuant to this Resolution will be applied in the following order of priority: (a) First, to the payment of the charges, expenses, advances and compensation of the Bondowners' Trustee and the charges, expenses, counsel fees, disbursements and compensation of its agents and attorneys; and (b) Second, to the payment to the persons entitled thereto of all installments of interest then due on the Parity Bonds in the order of the due dates of such installments and, if the amount available will not be sufficient to pay in full any installment or installments maturing on the same date, then to the payment thereof ratably, according to the amounts due thereon to the persons entitled thereto, without any discrimination or preference; and (c) Third, to the payment to the persons entitled thereto of the unpaid principal of any Parity Bonds which will have become due (other than Parity Bonds previously called for redemption for the payment of which money is held pursuant to the provisions of this Resolution), whether at maturity or by proceedings for redemption or otherwise, in the order of their due dates and, if the amount available will not be sufficient to pay in full the principal due on the same date, then to the payment thereof ratably, according to the principal due thereon to the persons entitled thereto,without any discrimination or preference. Other Remedies; Restrictions Thereon. Upon the occurrence and continuation of an Event of Default, the Bondowners' Trustee may, and upon the written request of the owners of not less than 25% in aggregate amount of the Parity Bonds then outstanding, shall proceed to protect and enforce their rights by mandamus or other suit, action or proceeding at law or in equity, including an action for specific performance of any covenant or agreement contained in this Resolution. Nothing in this Resolution shall affect or impair the right of any owner of Parity Bonds to enforce,by action at law or in equity,payment, when due, of the principal of,premium, if any, or interest on any Bond owned by said owner. If an Event of Default shall have occurred and be continuing, and if there shall have been appointed a Bondowners' Trustee, no owner of Parity Bonds shall have any right to institute any action, suit or proceeding at law or in equity respecting said Event of Default (except insofar as the same pertains to an Event of Default described in (a) or (b) above respecting said owner's Parity Bonds) unless (a) such owner shall previously have given to the Bondowners' Trustee written notice of the Event of Default on account of which such suit, action or proceeding is proposed to be instituted; and (b) the owners of 25% in aggregate amount of the Parity Bonds then outstanding, after the occurrence of such Event of Default, have made written request of the Bondowners' Trustee and have afforded the Bondowners' Trustee a reasonable opportunity to 1714279v6 22 institute such suit, action or proceeding; and (c) there have been offered to the Bondowners' Trustee security and indemnity satisfactory to it against the costs, expenses and liabilities to be • incurred therein or thereby; and (d) the Bondowners' Trustee has refused or neglected to comply with such request within a reasonable time. Certain Rights of Trustee and Credit Facility Provider for Series 2005A Note. Notwithstanding the foregoing, certain rights and remedies are conferred on the Trustee and the Credit Facility Provider under the Indenture and the Project Loan Agreement with respect to the Series 2005A Note, which shall prevail as against any of the foregoing provisions to the extent inconsistent therewith. Notwithstanding the foregoing, in no event shall any rights or remedies be conferred on the Trustee or Credit Provider that would give them rights greater than those granted to the holders of the Outstanding Parity Bonds. 6.06 Limitation; Bonds not Debt. The Series 2005A Note shall not constitute in any manner indebtedness,bonds or certificates of indebtedness of the City within the meaning of any provision of state law limiting the amount or method of incurring such indebtedness, and shall be payable solely from the Net Revenues of the Electric Utility which are pledged and appropriated for that purpose in this Resolution, and the taxing powers of the City are not pledged in any manner for the payment thereof, except as may be needed for the payment of reasonable charges for Electric Utility service and benefits rendered and available to the City. 6.07 Competing Service. To the extent permitted by law, the City will not grant a franchise for, establish or authorize the establishment of any other system for the public supply of service or services in competition with any or all of the services supplied by the Electric • Utility. 6.08 Payment Frequency Covenant. In the event any Parity Bond requires that principal or interest be paid on dates other than, or more frequently than those dates allowed under Section 6.04 hereof, the City shall irrevocably transfer to the Debt Service Account established for any other Outstanding Parity Bonds, the amount of principal or interest that would have been due on such other Parity Bonds if the principal or interest, as the case may be, of the other Parity Bonds were payable on the same dates. SECTION 7. PRIORITIES AND ADDITIONAL BONDS. 7.01 Refunding Bonds. In addition to Parity Bonds authorized by Section 6.04, the City reserves the right to issue one or more series of Additional Bonds to refund any or all of the Bonds then outstanding. Any Additional Bonds issued for refunding purposes may be made payable from the Net Revenues on a parity as to principal and interest with all then outstanding Parity Bonds, provided that (1) the maturity of each refunding revenue bond shall be subsequent to the last maturity of any then outstanding Parity Bonds which are not refunded or otherwise discharged in accordance with Section 9 hereof, and (2) no bondholder shall be required to accept a refunding revenue bond in exchange for any Bond owned by the bondholder. Until the discharge of the Series 2000 Bonds and the Series 2002A Bonds, the issuance of any refunding bonds under this Section 7.01 must also satisfy the requirements of Paragraphs 22 of the Prior Resolutions. • 1714279v6 23 7.02 Subordinate Lien Bonds. Notwithstanding the above provisions of Section 7, nothing contained in this Resolution or in the Bonds shall be construed to preclude the City from • issuing Additional Bonds when necessary for the enlargement, improvement or extension of the Electric Utility; provided such Additional Bonds,whether constituting a general obligation of the City or payable solely from revenues of the Electric Utility, are expressly made a charge on and are payable only from amounts described in Section 5.01(c) hereof, and are not superior to or on a parity with Bonds payable from the Debt Service Account. SECTION 8. AMENDMENTS. . 8.01 Amendments Without Bondholder Consent. The City reserves the right to amend this Resolution from time to time and at any time, for the purpose of curing any ambiguity or of curing, correcting or supplementing any defective provision contained herein, or of making such provision with regard to matters or questions arising hereunder as the City Council may deem necessary or desirable and not inconsistent with this Resolution, and which shall not adversely affect the interests of the holder of the Series 2005A Note issued hereunder, or for the purpose of adding to the covenants and agreements herein contained, or to the Gross Revenues herein pledged, other covenants and agreements thereafter to be observed and additional Gross Revenues thereafter appropriated to the Electric Fund, for the purpose of surrendering any right or power herein reserved to or conferred upon the City or for the purpose of authorizing the issuance of Additional Bonds in the manner and subject to the terms and conditions prescribed in Section 6.04 or Section 7. Any such amendment may be adopted by resolution, without the consent of the holder of any of the Series 2005A Note. • 8.02 Amendments With Bondholder Consent. With the consent of the holder of the Series 2005A Note as provided in Section 8.03, the City may from time to time and at any time amend this Resolution by adding any provisions hereto or changing in any manner or eliminating any of the provisions hereof, or of any amending resolution, except that no amendment shall be adopted at any time without the consent of the holder of the Series 2005A Note, if it would extend the maturity of the Series 2005A Note, would reduce the rate or extend the time of payment of interest thereon, would reduce the amount or extend the time of payment of the principal thereof, would give to any Parity Bond or Bonds any privileges over any other Panty Bond or Bonds, would reduce the sources of Gross Revenues appropriated to the Electric Fund, would authorize the creation of a pledge of said Gross Revenues prior to or on a parity with the Parity Bonds (except as is authorized by Section 6.04 or Section 7), or would reduce the percentage in principal amount of Bonds required to authorize or consent to any such amendment. 8.03 Notice and Consent. Any amendment adopted pursuant to Section 8.02 shall be made by resolution duly adopted and shall become effective only upon the filing of written consents with the Finance Director, signed by the holders of not less than a majority in principal amount of the Bonds then outstanding or, in the case of an amendment not affecting all outstanding Bonds, by the holders of not less than a majority in aggregate principal amount of the Bonds affected by such amendment. Any-written consent to an amendment may be embodied in and evidenced by one or any number of concurrent written instruments of substantially similar tenor signed by bondholders in person or by agent duly appointed in writing, and shall become effective when delivered to the Finance Director. Any consent by the • 1714279v6 24 holder of any Bond shall bind the holder and every future holder of the same Bond with respect to any amendment adopted by the City pursuant to such consent: Notwithstanding the foregoing, • the Trustee and the Credit Facility Provider are afforded certain rights of consent and approval under the Indenture and the Project Loan Agreement with respect to the Series 2005A Note, which shall prevail as against any of the foregoing provisions to the extent inconsistent therewith. 8.04 Proof. Proof of the execution of any consent, or of a writing appointing any agent to execute the same, or of the ownership by any person of Bonds, shall be sufficient for any purpose of this resolution and shall be conclusive in favor of the City if made in the manner provided in this Section 8.04. The fact and date of the execution by any person of any such consent or appointment may be proved by the affidavit of a witness of such execution or by the certificate of any notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the person signing it acknowledged the execution thereof. The amount of Bonds held by any person by or for whom a consent is given, and the distinguishing numbers of such Bonds, and the date of the holder's holding the same, shall be proved by the bond register. The fact and date of execution of any such consent and the amount and distinguishing numbers of Bonds held by the person executing the same may also be proved in any other manner which the City may deem sufficient; but the City may nevertheless, in its discretion, require further proof in cases where it deems further proof desirable. SECTION 9. DEFEASANCE. When all of the Parity Bonds have been discharged as provided in this Section 9, all pledges, covenants and other rights granted by this resolution to the holders of the Parity Bonds shall cease. The City may discharge its obligations with respect to any Parity • Bonds which are due on any date by irrevocably depositing with the Registrar on or before that date a sum sufficient for the payment thereof in full; or, if any Parity Bond should not be paid when due, it may nevertheless be discharged by depositing with the Registrar a sum sufficient for the payment thereof in full with interest accrued to the date of such deposit. The City may also at any time discharge its obligations with respect to any Parity Bonds, subject to the provisions of law now or hereafter authorizing and regulating such action, by depositing irrevocably in escrow, with a bank qualified by law as an escrow agent for this purpose, cash or securities which are general obligations of the United States or securities of United States agencies which are authorized by law to be so deposited, bearing interest payable at such time and at such rates and maturing on such dates as shall be required, without reinvestment, to pay all principal and interest to become due thereon to maturity or earlier designated redemption date. SECTION 10. TAX COVENANTS; ARBITRAGE MATTERS. 10.01 Certification of Proceedings. The officers of the City are hereby authorized and directed to prepare and furnish to MCMU and to Bond Counsel, certified copies of all proceedings and records of the City, and such other affidavits, certificates and information as may be required to show the facts relating to the legality and marketability of the Series 2005A Note 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. 1714279v6 25 10.02 General Tax Covenant. The City covenants and agrees with the holder from time to time of the Series 2005A Note that it will not take or permit to be taken by any of its officers, • employees or agents any action which would cause the interest on the Series 2005A Note to become includable in gross income under the Internal Revenue Code of 1986, as amended (the Code), and applicable Treasury Regulations (the Regulations), and covenants to take any and all actions within its powers to ensure that the interest on the Series 2005A Note will not become includable in gross income under the Code and the Regulations. The City covenants that so long as any Parity Bonds are outstanding, it will continue to own and operate the Electric Utility as a public utility available on a substantially equal basis to all members of the general public. The City will not enter into any lease, management agreement, capacity agreement, output contract or other agreement which would cause the Bonds to be considered "private activity bonds" or "private Than bonds"pursuant to Section 141 of the Code. 10.03 Arbitrage Rebate. The City acknowledges that the Series 2005A Note will be subject to the rebate requirements of Section 148(f) of the Code. The City covenants and agrees to retain such records, make such determinations, file such reports and documents and pay such amounts at such times as are required under Section 148(f) and applicable Regulations to preserve the exclusion of interest on the Series 2005A Note from gross income for federal income tax purposes. • 1714279v6 26 PASSED AND ADOPTED BY THE COMMON COUNCIL OF THE CITY OF ROCHESTER, MINNESOTA, THIS Aam DAY OF 2004. SIDENT OF SAM COMMON COUNCIL ATTEST: vCIT CL RK Approved this Zf 5T day of 7)CdQg ra*R 2004 MAYOR (Seal of the City of . Rochester, Minnesota) • 1714279v6 27 CERTIFICATION I, the undersigned City Clerk of the City of Rochester, Minnesota, do hereby certify the following: The foregoing is true and correct copy of a Resolution on file and of record in the offices of the City, which Resolution relates to the issuance by the City of its Electric Utility Revenue Note, Series 2005A. Said Resolution was duly adopted by the Rochester Common Council at a regular or special meeting of the Council held on December 20, 2004. Said meeting was duly called and regularly held and was open to the public and was held at the place at which meetings of the Council are regularly held, a quorum of the Council being present and acting throughout. Councilmember Hanson moved the adoption.of the Resolution,which motion was seconded by Councilmember . Nowi cki . A vote being taken on the motion, the following members of the Council voted in favor of the Resolution: _ President John Hunziker, Couhcilmembers Dennis Hanson, Marcia Marcoux, Jean McConnell , Sandra Means, Bob Nowicki , Walter Stobaugh. . and the following voted against the same: None Whereupon said Resolution was declared duly passed and adopted. The Resolution is in full force and effect and no action has been taken by the Council which would in any way alter or amend the Resolution. WITNESS MY HAND officially as the"City Clerk of the City of Rochester, Minnesota, this 22nd-day'of Dec , 2004. GZ City lerk City of Rochester,Minnesota (SEAL) ! 1714279v6