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Home My WebLink About8B - General Obligation Bonds CITY COUNCIL AGENDA REPORT October 7, 2002 8B Frank Boyles, City Manager AGENDA ITEM: CONSIDER APPROVAL OF A RESOLUTION AUTHORIZING THE ISSUANCE OF $1,050,000 GENERAL OBLIGATION IMPROVEMENT BONDS OF 2002. DISCUSSION: History: At the September 16, 2002 meeting, the City Council authorized the negotiated sale of $1,050,000 General Obligation Improvement Bonds.A special meeting was scheduled for September 30, 3003. At the meeting, Steve Mattson announced that while a negotiated sale had been completed. it could not be approved since he was no longer associated with the firm of Juran & Moody. Assuming that the City Council has authorized Northland Securities to provide fiscal consultant services, then it would be appropriate to consider this agenda item. ISSUES: ALTERNATIVES: RECOMMENDED MOTION: Current Circumstances: Steve will be prepared to review the terms of the negotiated sale and an appropriately formatted approving resolution with the City Council. A copy of the September 16, 2002 agenda report on this subject is attached for Council information as is a copy of the material Steve distributed on September 30th. The staff has received confirmation from the City's bond approving attorney Briggs & Morgan that they will be processing all the required bond documents associated with the pending issuance of the City of Prior Lake's $1,050,000 General Obligation Improvement Bonds of 2002. Briggs & Morgan has assured us that the legal documentation required to be prepared in concert with Northland Securities is relatively seamless and will provide no problem with respect to the formal bond issuance. Attached for Council information is a bond analysis indicating the bond structure and application of funds. Also included is a list of 10-year bond sales that occurred during the past week. The column to the far right indicates the interest rate in year 2009 of all the respective bond issues to show their relative correlation. The City Attorney has not had an opportunity to review this agenda item and may therefore have additional suggestions at the October 7th meeting. (1) Motion and Second to approve a Resolution Authorizing the Sale of $1,050,000 General Obligation Improvement Bonds of 2002. (2) Take no action. Alternative (1). 16200 Eagle Creek Ave. S.E., Prior Lake, Minnesota 55372-1714 / Ph. (952) 447-4230 / Fax (952) 447-4245 1:\COUNCIL\AGNRPTS\2002\NEG BOND SAl.JW~L OPPORTUNITY EMPLOYER H:\BONDSIA02bonds.DOC DISCUSSION: STAFF AGENDA REPORT SEPTEMBER 16, 2002 9A RALPH TESCHNER, FINANCE DIRECTOR CONSIDER MPROV AL OF A RESOLUTION AUTHORIZING NEGOTIATED SALE OF $1,050,000 GENERAL OBLIGATION IMPROVEMENT BONDS OF 2002 Introduction The City's bond and fiscal consultant Steve Mattson from Juran & Moody will be present during the Council meeting to request Council approval to negotiate the sale of general obligation bonds in the amount of $1,050,000 to finance improvements associated with the Pixie Point street reconstruction project (Project 02-11). History The City Council approved Resolution 02-84 on April 15,2002 that accepted the feasibility report for the reconstruction of various streets within the Pixie Point area during 2002 that would be financed by a combination of general obligation bonds, trunk, enterprise and water quality fund appropriations. A summary of those improvements and their costs in round numbers are listed below: Project Description Project Financin2 1. Pixie Point street reconstruction G.O. Bonds ... Trunk Reserve ... Enterprise Fund. . . Water Quality... Project Total... $1,050,000.00 $220,000.00 $419,000.00 $80,000.00 $1,769,000.00 Subsequently, the public hearing for these 2002 improvement projects was conducted on March 18, 2002 and Resolution 02-55 ordering the improvement was approved. Current Circumstances In previous sales the Council has authorized a negotiated bond sale directly from Juran & Moody. Staff would propose a similar process for this sale. The advantage of the negotiated sale method versus public sale is the flexibility it affords the City because our fiscal consultant, Steve Mattson would attempt to time the sale of bonds with the market in an effort to obtain the lowest interest rate possible. Also, the City saves itself the fiscal fee of$13,500.00. 16200 Eagle Creek Ave. S.E.. Prior Lake, Minnesota 55372-1714 / Ph. (952) 447-4230 / Fax (952) 447-4245 AN EQUAL OPPORTUNITY EMPLOYER H:\BONDSIA02bonds.DOC ALTERNATIVES: RECOMMENDED MOTION: REVIEWED BY: Attachments: Attached is a worksheet from Juran & Moody that provides additional detail with respect to debt service principal/interest payments, projected assessment stream and annual special tax levies necessary to amortize this bond issue. The second page lists the estimated coupon and net effective interest rates for this bond issue plus it identifies the financing costs and other miscellaneous information. Financial Impact The estimated special tax levy calculation associated with this bond issue has already been factored in along with the City's proposed general fund operating budget levy, revolving equipment fund levy and other special debt levies for payable 2003 property taxes. The following alternatives are available to the City Council: 1. Approve a Resolution Authorizing Negotiated Sale of $1,050,000 General Obligation Improvement Bonds of 2002. 2. Delay financing to a future time as determined by the City Council. Motion and second to approve a Resolution Authorizing Negotiated Sale of $1,050,000 General Obligation Improvement Bonds of 2002. Steve Mattson will be present at the meeting to discuss the resolution and answ r any questions the Council may have with respect to the bo d. uance process. 1. Reso ution Authorizing Negotiated Sale of $1,050,000 General Obligation Improvement Bonds of 2002 2. Juran & Moody Bond Analysis RESOLUTION 02-XX IfrI^,NESO~'l'- RESOLUTION AUTHORIZING NEGOTIATED SALE OF $1,050,000 GENERAL OBLIGATION IMPROVEMENT BONDS OF 2002 MOTION BY: SECOND BY: WHEREAS, The City of Prior Lake has conducted the appropriate public hearings to consider comments regarding those public improvement projects deemed necessary for construction in 2002; and WHEREAS, The City Council has determined that such construction projects scheduled for 2002 are consistent with the City's Capital Improvement Plan (CIP); and WHEREAS, The City of Prior Lake has complied with all requirements of Chapter 429 of Minnesota State Statutes with respect to special assessment improvement projects; and WHEREAS, The City of Prior Lake has awarded the construction bids for Project 02-11 Pixie Point for street reconstruction; and WHEREAS, It is necessary to issue general obligation bonds for the purpose of financing these construction improvements. NOW THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF PRIOR LAKE, that it has determined it is in the best interest of the City of Prior Lake to enter into a negotiated sale with Juran & Moody, in an effort to obtain the lowest interest rate possible, for the issuance of $1,050,000 of general obligation improvement bonds, and the City Manager is hereby authorized to convene a special meeting to approve the bond sale pursuant to the procedural requirements of State law. Passed and adopted this 16th day of September, 2002. YES NO Haugen Gundlach LeMair Petersen Joe Zieska Haugen Gundlach LeMair Petersen Joe Zieska {Seal} City Manager City of Prior Lake 16200 Eagle Creek Ave. S.E., Prior Lake, Minnesota 55372-1714 / Ph. 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N. ociii ll:lzQ .. oo ll:l I- .. oo [j::EU~z ~~~~~~ z<~cb~ ~~"'U...lOO '" <I-...lll:l ",12zz~12 ll:l-Oll:l",< 12~ll:l~15o~ <ll:ll-...l...l ~~~~<~~ ~I-I-t'" ..( zOO2; Cl oElffi 1-< l:2 ~fil!;~~~ <~~~~CI) MINNESOTA BOND ISSUES SOLD LAST WEEK OF SEPTEMBER 2002 (20 YEAR SCHOOL BONDS EXCLUDED) RATE IN THE CORRESPONDING DATE SOLD PAR AMOUNT MUNICIPALITY YEAR FOR 2009 9/23/02 1,805,000 ALEXANDRIA GO 3.300% 9/23/02 10,095,000 ST. CLOUD GO 3.200% 9/23/02 920,000 ST. CLOUD GO 3.200% 9/23/02 1,040,000 ST. CLOUD GO 3.200% 9/24/02 2,150,000 HUTCHINSON GO 3.200% 9/24/02 850,000 HUTCHINSON GO 3.200% 10/1102 515,000 SWIFT COUNTY GO 3.400% 10/1/02 1,055,000 COON RAPIDS GO 3.200% 10/7/02 1,050,000 PRIOR LAKE GO 3.200% (WORST CASE) EXTRACT OF MINUTES OF A MEETING OF THE CITY COUNCIL OF THE CITY OF PRIOR LAKE, MINNESOTA HELD: October 7,2002 pursuant to due call and notice thereof, a regular meeting of the City Council of the City of Prior Lake, Scott County, Minnesota, was duly held at the Fire Hall in said City on Monday, the 7th day of October, 2002, at _ o'clock _.M., for the purpose, in part, of authorizing the issuance of, and awarding the sale of, $1,050,000 General Obligation Improvement Bonds of 2002 of the City. The following members were present: and the following were absent: Member introduced the following resolution and moved its adoption: Resolution Number 02-_ RESOLUTION PROVIDING FOR ISSUANCE AND SALE OF $1,050,000 GENERAL OBLIGATION IMPROVEMENT BONDS OF 2002, AND LEVYING A TAX FOR THE PAYMENT THEREOF A. WHEREAS, the City Council of the City of Prior Lake, Minnesota (the "City"), has heretofore determined and declared that it is necessary and expedient to issue $1,050,000 General Obligation Improvement Bonds of 2002 (the "Bonds") ofthe City, pursuant to Minnesota Statutes, Chapters 429 and 475, to finance the construction of various improvements in the City (the. "Improvements"); and B. WHEREAS, the Improvements and all their components have been ordered prior to the date hereof, after a hearing thereon for which notice was given describing the Improvements or all their components by general nature, estimated cost, and area to be assessed; and E. WHEREAS, it is in the best interests of the City that the Bonds be issued in book-entry form as hereinafter provided; and NOW, THEREFORE, BE IT RESOLVED by the Council of the City of Prior Lake, Minnesota, as follows: 1. Acceptance of Offer. The offer of Northland Securities, Inc. (the "purchaser"), to purchase the Bonds of the City (or individually, a "Bond"), in accordance with the terms established therefor and at the rates of interest hereinafter set forth, and to pay therefor the sum of $ , plus interest accrued to settlement, is hereby accepted. 1447787vl 2. Bond Terms. (a) Title; Original Issue Date; Denominations; Maturities; Term Bond Option. The Bonds shall be titled "General Obligation Improvement Bonds of2002", shall be dated October 1, 2002, 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-l upward in the denomination of $5,000 each or in any integral multiple thereof of a single maturity (the "Authorized Denominations"). The Bonds shall mature on December 1 in the years and amounts as follows: Year Amount 2003-2011 2012 $100,000 150,000 All dates are inclusive. 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 Bonds(s). (b) Book Entry Only System. The Depository Trust Company, a limited purpose trust company organized under the laws ofthe State of New York or any of its successors or 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 of a separate single fully registered Bond for each maturity ofthe Bonds; and for purposes of complying with this requirement under paragraphs 5 and 10 Authorized Denominations for any Bond shall be deemed to be limited during the Book Entry Only Period to the outstanding principal amount of that Bond. (ii) Upon initial issuance, ownership of the Bonds shall be registered in a bond register maintained by the Bond Registrar (as hereinafter defined) 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 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 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 1447787vl 2 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 Holder 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 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 the Holder or the Holders ofthe Bonds as shown on the 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 ofthe existing Nominee, and subject to the transfer provisions in paragraph 10 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 City, as the case may be, to the Depository as provided in the Letter of Representations to the Depository required by the Depository as a condition to its acting as book-entry Depository for the Bonds (said 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, collectively hereinafter referred to as the "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 procedures 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 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 of such special record date. 1447787vl 3 __> >w_.~~_,..~"~ "________-.........-.-.......--~~-.------.-.---.~.....,..,-.~-..--,.-"~..--.~",-.."' ,.._...._.._...,.~,~--_..-,_._"-,..."."-,.,---"- (ix) Any successor Bond Registrar in its written acceptance of its duties under this Resolution and any paying agencylbond registrar agreement, shall agree to take any actions necessary from time to time to comply with the requirements of the Letter of Representations. (x) In the case of a partial prepayment of a Bond, the Holder may, in lieu of surrendering the Bonds for a Bond of a lesser denomination as provided in paragraph 5 hereof, make a notation of the reduction in principal amount on the panel provided on the Bond stating the amount so redeemed. (c) Termination of Book-Entrv 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 Bond if it 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 or the Beneficial Owners. (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 or the Beneficial Owners of the Bond that the Beneficial Owners be able to obtain certificates for the Bonds, the Bonds shall no longer be registered as being registered in the bond register 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 10 hereof. To the extent that the Beneficial Owners are designated as the transferee by the Holders, in accordance with paragraph 10 hereof, the Bonds will be delivered to the Beneficial Owners. (iii) Nothing in this subparagraph (c) shall limit or restrict the provisions of paragraph 10 hereof. (d) Letter of Representations. The provisions in the Letter of Representations are incorporated herein by reference and made a part of this resolution, and if and to the extent any such provisions are inconsistent with the other provisions of this resolution, the provisions in the Letter of Representations shall control. 3. 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. The City covenants that it shall do all things and perform all acts required of it to assure that work on the Improvements proceeds with due diligence to completion and that any and all permits and studies required under law for the Improvements are obtained. 1447787vl 4 ". " ",,__',"~>__'''_'__'''''"_''''''''''''''_'_''.''''''__.'''_____~'k"_<<>'_"_~~~.'_'~'.~'_"~'_'__'"'_'__'~_-'~____"_~_O"_._> . ,_ ...._--.-.._w___._._~_ 4. Interest. The Bonds shall bear interest payable semiannually on June 1 and December I of each year (each, an "Interest Payment Date"), commencing June 1, 2003, calculated on the basis of a 360-day year 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 2003 % 2008 % 2004 2009 2005 2010 2006 2011 2007 2012 5. Redemption. All Bonds maturing in the years 2009 to 2012, both inclusive, shall be subject to redemption and prepayment at the option ofthe City on December 1, 2008, and on any date thereafter at a price of par plus accrued interest. Redemption may be in whole or in part ofthe Bonds subject to prepayment. If redemption is in part, those Bonds remaining unpaid which have the latest maturity date shall be prepaid first; 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. Mailed notice of redemption shall be given to the paying agent and to each affected registered holder of the Bonds at least thirty (30) days prior to the date fixed for redemption. 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 having a common maturity date 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 and Bond Registrar duly executed by the Holder thereof or the Holder's attorney duly authorized in writing) and the City shall execute (if necessary) and the Bond Registrar shall authenticate and deliver to the Holder of the Bond, without service charge, a new Bond or Bonds having the same stated maturity and interest rate and of any Authorized Denomination or Denominations, as requested by the Holder, in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Bond so surrendered. 6. Bond Registrar. The Finance Director of the City 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. Principal l<<n~vl 5 and interest on the Bonds shall be paid to the registered holders (or record holders) ofthe Bonds in the manner set forth in the form of Bond and paragraph 12 of this resolution. 7. 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: 1 447787vl 6 _' _~.......,_"..._.,^.___~.__,......-....._o-___~_~.____,~,___...__~~~_____""__~H___~~__~~"_'__""_'~"'_"'_." -_.~.__._--~--"_.,.._._-----~-~~~--" UNITED STATES OF AMERICA STATE OF MINNESOTA SCOTT COUNTY CITY OF PRIOR LAKE R- $ GENERAL OBLIGATION IMPROVEMENT BOND OF 2002 _% MATURITY DATE DECEMBER 1,20_ DATE OF ORIGINAL ISSUE OCTOBER 1, 2002 CUSIP INTEREST RATE REGISTERED OWNER: PRINCIP AL AMOUNT: DOLLARS KNOW ALL PERSONS BY THESE PRESENTS that the City of Prior Lake, Scott County, Minnesota (the "Issuer"), certifies that it is 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 called for earlier redemption, and to pay interest thereon semiannually on June 1 and December 1 of each year (each, an "Interest Payment Date"), commencing June 1, 2003, at the rate per annum specified above (calculated on the basis of a 360-day year 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 the Finance Director ofthe Issuer (the "Bond Registrar"), acting as paying agent, or any successor paying agent duly appointed by the Issuer. 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 "Holder" or "Bondholder") on the registration books of the Issuer maintained by the Bond Registrar and at the address appearing thereon at the close of business on the fifteenth day of the calendar month next 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 Holder hereof as of the Regular Record Date, and shall be payable to the person who is the Holder 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 Bondholders 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. [So long as this Bond is registered in the name of the Depository or its Nominee as provided in the Resolution hereinafter described, and as those terms are defined therein, payment of principal of, premium, if any, and interest on this Bond and notice with respect thereto shall be made as provided in the Letter of Representations, as defined in the Resolution, and surrender of this Bond shall not be required for payment of the redemption price upon a partial redemption of this Bond. Until termination of the book- 1447787vl 7 "...",_.,~.~__.~~..._....._,",~_'"~""'~"."'''''~'.'___..*~_V'~_"__"_"";''''_'''_'__''_'_,'_~,'_,''4_'.''''_' ,.,._.,o.-"",___~,,""_' .""_,""-""",,_~,,,,,__,.,"',^.."____,o>__....-,..._~.~,,___.,---,~ entry only system pursuant to the Resolution, Bonds may only be registered in the name of the Depository or its Nominee.( 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 happen 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 debts of the Issuer outstanding on the date of original issue hereof and the date of its issuance and delivery to the original purchaser, does not exceed any constitutional or statutory limitation of indebtedness. IN WITNESS WHEREOF. the City of Prior Lake, Scott 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 Manager, the corporate seal ofthe Issuer having been intentionally omitted as permitted by law. * Include only until termination of the book-entry only system under paragraph 2 hereof. 1 447787vl 8 " ... ,_,__,~~__".'''_--''__''_'"_'.'__'_''_'M_~''''''___''__''''~_~___..~.~__._...M"_'__'"_~~""<'_"_"_"'.~____' ..-.- Date of Registration: Registrable by: THE FINANCE DIRECTOR OF THE CITY OF PRIOR LAKE, MINNESOTA Payable at: OFFICE OF THE FINANCE DIRECTOR OF THE CITY OF PRIOR LAKE, MINNESOTA BOND REGISTRAR'S CERTIFICATE OF AUTHENTICATION CITY OF PRIOR LAKE, SCOTT COUNTY, MINNESOTA This Bond is one of the Bonds described in the Resolution mentioned within. /s/ Facsimile Mayor /s/ Facsimile Manager THE CITY OF PRIOR LAKE, MINNESOTA Bond Registrar By Authorized Signature 1 447787vl 9 ...--..........-..~-...,,"_...,--"-~-~-~...~--~..,~.._~-............,~,.~-_.__...,.,-~_.._..._."...~_..",-,.._..,,,,..~...,._~.~~,-_."._."."^,,,-,,-- ON REVERSE OF BOND Redemption. All Bonds of this issue (the "Bonds") maturing in the years 2009 to 2012, both inclusive, are subject to redemption and prepayment at the option of the Issuer on December 1, 2008, and on any date thereafter at a price of par plus accrued interest. Redemption may be in whole or in part of the Bonds subject to prepayment. If redemption is in part, those Bonds remaining unpaid which have the latest maturity date shall be prepaid first; 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. Mailed notice of redemption shall be given to the paying agent and to each affected Holder of the Bonds at least thirty (30) days prior to the date fixed for redemption. 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 having a common maturity date 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 the Bonds to be redeemed. The Bonds to be redeemed shall bethe Bonds to which were assigned numbers so selected; provided, however, that only so much of the principal amount of 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 Issuer or Bond Registrar so requires, a written instrument of transfer in form satisfactory to the Issuer and Bond Registrar duly executed by the Holder thereof or the Holder's attorney duly authorized in writing) and the Issuer shall execute (if necessary) and the Bond Registrar shall authenticate and deliver to the Holder of the Bond, without service charge, a new Bond or Bonds having the same stated maturity and interest rate and of any Authorized Denomination or Denominations, as requested by the Holder, 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 $1 ,050,000, all oflike date of original issue and tenor, except as to number, maturity, interest rate, redemption privilege and denomination 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 of the Issuer on September 30,2002 (the "Resolution"), for the purpose of providing money to finance the construction of various improvements within the jurisdiction of the Issuer. This Bond is payable out of the General Obligation Improvement Bonds of 2002 Fund of the Issuer. This Bond constitutes a general obligation of the Issuer, 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 Issuer have been and are hereby irrevocably pledged. Denominations; Exchange; Resolution. The Bonds are issuable solely as fully registered bonds in Authorized Denominations (as defined in the Resolution) 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 1447787vl 10 subject to the limitations provided in the Resolution. Reference is hereby made to the Resolution for a description of the rights and duties ofthe Bond Registrar. Copies of the Resolution are on file in the principal office of the Bond Registrar. Transfer. This Bond is transferable by the Holder in person or by his, her or its 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 Issuer contained in any agreement with the Bond Registrar. Thereupon the Issuer 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 Issuer 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 Issuer 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. Qualified Tax-Exempt Obligation. This Bond has been designated by the Issuer as a "qualified tax -exempt obligation" for purposes of Section 265(b )(3) of the Internal Revenue Code of 1986, as amended. 1447787vl 11 ',. ..", -~"",--",~----'--"'_._'~"'-'-'~'-~""""""""-~"-~'"~"'-~-_.~_.._----_.,.,,--,_.,- ~",,' ,,,~,",-+----_.,--,-,-,.,,,,,-,--","'-'-."--""-'.'---"--~'""---"'-" 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 (Minor) Uniform (State) Transfers to Minors Act Additional abbreviations may also be used though not in the above list. 1447787vl 12 ASSIGNMENT For value received, the undersigned hereby sells, assigns and transfers unto the within Bond and does hereby irrevocably constitute and appoint attorney to transfer the Bond on the books kept for the registration thereof, with full power of substitution in the premises. Dated: Notice: The assignor's signature to this assignment must correspond with the name as it appears upon the face of the within Bond in every particular, without alteration or any change whatever. Signature Guaranteed: Signature(s) must be guaranteed by a national bank or trust company or by a brokerage firm having a membership in one of the major stock exchanges or 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.) 1 447787vl 13 8. Execution; Temporary Bonds. The Bonds shall be printed (or, at the request of the Purchaser, typewritten) and shall be executed on behalf of the City by the signatures of its Mayor and Manager and be sealed with the seal ofthe City; provided, however, that the seal of the City may be a printed (or, at the request ofthe Purchaser, photocopied) facsimile; and provided further that both of such signatures may be printed (or, at the request of the Purchaser, photocopied) 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 ifhe 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 may be executed with photocopied facsimile signatures ofthe Mayor and Manager. Such temporary bonds shall, upon the printing of the definitive bonds and the execution thereof, be exchanged therefor and canceled. 9. 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 ofthe 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 October 1, 2002. The Certificate of Authentication so executed on each Bond shall be conclusive evidence that it has been authenticated and delivered under this resolution. 10. 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 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 9) of, and deliver, in the name ofthe 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 registerera in blank or in the name of "bearer" or similar designation. At the option of the Holder, 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 1 447787vl 14 ~._.~..~._,~......___.._~~~..._....""..,,~_'_,,~,,'___'.,_,"_~__~,_"",_,____~_,~___~_,_____,,,,,",~~'_'"~~'_~___--'____,_...__.._....~.,_W"MM."~_._.,_~_,__.~_.~.~_"_______'''"~ ,.. necessary), and the Bond Registrar shall authenticate, insert the date of registration of, and deliver the Bonds which the Holder making the exchange is entitled to receive. All Bonds surrendered upon any exchange or transfer provided for in this resolution shall be promptly canceled 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 general 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 Holder thereof or his, her or its 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. The Manager is hereby authorized to negotiate and execute the terms of said agreement. 11. 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. 12. 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 (the "Holder") 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 next 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 Holder thereof as of the Regular Record Date, and shall be payable to the person who is the Holder 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 Holders not less than ten (10) days prior to the Special Record Date. 13. 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 12 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. 1447787vl 15 14. Delivery; Application of Proceeds. The Bonds when so prepared and executed shall be delivered by the 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. 15. Fund and Accounts. There is hereby created a special fund to be designated the "General Obligation Improvement Bonds of 2002 Fund" (the "Fund") to be administered and maintained by the Finance Director as a bookkeeping account separate and apart from all other funds maintained in the official financial records of the City. The Fund shall be maintained in the manner herein specified until all of the Bonds and the interest thereon have been fully paid. There shall be maintained in the Fund two (2) separate accounts, to be designated the "Construction Account" and "Debt Service Account", respectively. (a) Construction Account. To the Construction Account there shall be credited the proceeds of the sale of the Bonds, less accrued interest received thereon, 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 Construction Account there shall be paid all costs and expenses of making the Improvements listed in paragraph 16, 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 herein levied or covenanted to be levied; and provided further that if upon completion of the Improvements there shall remain any unexpended balance in the Construction Account, 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 Construction 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. (b) Debt Service Account. There are hereby irrevocably appropriated and pledged to, and there shall be credited to, the Debt Service Account: (i) all collections of special assessments herein covenanted to be levied with respect to the Improvements and either initially credited to the Construction 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 costs thereof; (ii) all accrued interest received upon delivery of the Bonds; (iii) any collections of all taxes herein or hereafter levied for the payment of the Bonds and interest thereon; (iv) all funds remaining in the Construction Account after completion of the Improvements and payment of the costs thereof, not so transferred to the account of another improvement; (v) all investment earnings on funds held in the Debt Service Account; and (vi) any and all other moneys which are properly available and are appropriated by the governing body of the City 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 1447787vl 16 ~.M..".,_~.__,_'''_'''~'_~__'''~'''"''_''_'~~_~' ._.._",<,_..~__"___;_~~~M"""_"_'___~______~_____"'"____",."______,_~~_..____.._."".,."...~..,,',,..~.._~..__.~_~_.,........__.____________.,_~v___'" 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 proceeds of the Bonds or $100,000. To this effect, any proceeds of the Bonds and any sums from time to time held in the Construction Account or Debt Service Account (or any other City account which will be used to pay principal or interest to become due on the bonds payable therefrom) 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 Internal Revenue Code of 1986, as amended (the "Code"). 16. Assessments. It is hereby determined that no less than twenty percent (20%) of the cost to the City of each Improvement financed hereunder within the meaning of Minnesota Statutes, Section 475.58, Subdivision 1(3), shall be paid by special assessments to be levied 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 Improvement financed hereunder unless the resolution ordering the 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 at any time held invalid with respect to any lot, piece or parcel ofland due to any error, defect, or irregularity in any action or proceedings taken or to be taken by the City or the City Councilor 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 City 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. The special assessments have not heretofore been authorized, and accordingly, for purposes of Minnesota Statutes, Section 475.55, Subdivision 3, the special assessments are hereby authorized. Subject to such adjustments as are required by the conditions in existence at the time the assessments are levied, it is hereby determined that the assessments shall be payable in equal, consecutive, annual installments, with general taxes for the years shown below and with interest on the declining balance of all such assessments at a rate per annum not greater than the maximum permitted by law and not less than the rate per annum set forth opposite the collection years specified below: Improvement Designation 2002 Improvement Project Amount $424,000 Levy Years 2002-2011 Collection Years 2003-2012 Rate 8.00% At the time the assessments are in fact levied the City Council shall, based on the then-current estimated collections 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. 1447787vl 17 _."_";""'_>"'__'~__'_"__'"'~"".' ,_'. " _..,~...,-,.._,.,".",,_..__..__~.._,.__.__,_,__--....~_..---........__~___".--,...___..__.....-.-........-.-..,......-..._...4.-.-..-_0_--~,-"._---_._-~--_._~..~---_.~,.._"-.-.._"...~ 17. Tax Levy; Coverage Test. To provide moneys for payment of the principal and interest on the Bonds there is hereby levied upon all of the taxable property in the City a direct annual ad valorem tax which shall be spread upon the tax rolls and collected with and as part of other general property taxes in the City for the years and in the amounts as follows: Year of Tax Year of Tax ~ Collection Amount 2002 2003 69,000 2003 2004 69,000 2004 2005 69,000 2005 2006 69,000 2006 2007 69,000 2007 2008 69,000 2008 2009 69,000 2009 2010 69,000 2010 2011 69,000 2011 2012 69,000 The tax levies are such that if collected in full they, together with estimated collections of special assessments and other revenues herein pledged for the payment of the Bonds, will produce at least five percent (5%) in excess ofthe amount needed to meet when due the principal and interest payments on the Bonds. The tax levies shall be irrepealable so long as any of the Bonds are outstanding and unpaid, provided that the City reserves the right and power to reduce the levies in the manner and to the extent permitted by Minnesota Statutes, Section 475.61, Subdivision 3. 18. Defeasance. When all Bonds have been discharged as provided in this paragraph, all pledges, covenants and other rights granted by this resolution to the registered holders of the Bonds shall, to the extent permitted by law, cease. The City may discharge its obligations with respect to any Bonds which are due on any date by irrevocably depositing with the Bond Registrar on or before that date a sum sufficient for the payment thereof in full; or if any Bond should not be paid when due, it may nevertheless be discharged by depositing with the Bond 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 Bonds, subject to the provisions of law now or hereafter authorizing and regulating such action, by depositing irrevocably in escrow, with a suitable banking institution qualified by law as an escrow agent for this purpose, cash or securities described in Minnesota Statutes, Section 475.67, Subdivision 8, bearing interest payable at such times and at such rates and maturing on such dates as shall be required, without regard to sale and/or reinvestment, to pay all amounts to become due thereon to maturity or, if notice of redemption as herein required has been duly provided for, to such earlier redemption date. 19. Compliance With Reimbursement Bond Regulations. The provisions of this paragraph are intended to establish and provide for the City's compliance with United States Treasury Regulations Section 1.150-2 (the "Reimbursement Regulations") applicable to the "reimbursement proceeds" of the Bonds, being those portions thereof which will be used by the 1447787vl 18 ..,,, ..."..""."~.__~_-......o.-___,_~~~~",'''''~"~~'.'~~''---_''''."'''_'---""'""--' .- ~.,,--""-"--'. _..__....-._._----.~-,_.._.._--,------_.__._-~ City to reimburse itself for any expenditure which the City paid or will have paid prior to the Closing Date (a "Reimbursement Expenditure"). The City hereby certifies and/or covenants as follows: ( a) Not later than 60 days after the date of payment of a Reimbursement Expenditure, the City (or person designated to do so on behalf of the City) has made or will have made a written declaration of the City's official intent (a "Declaration") which effectively (i) states the City's reasonable expectation to reimburse itself for the payment of the Reimbursement Expenditure out of the proceeds of a subsequent borrowing; (ii) gives a general and functional description of the property, project or program to which the Declaration relates and for which the Reimbursement Expenditure is paid, or identifies a specific fund or account of the City and the general functional purpose thereof from which the Reimbursement Expenditure was to be paid (collectively the "Project"); and (iii) states the maximum principal amount of debt expected to be issued by the City for the purpose of financing the Project; provided, however, that no such Declaration shall necessarily have been made with respect to: (i) "preliminary expenditures" for the Project, defined in the Reimbursement Regulations to include engineering or architectural, surveying and soil testing expenses and similar prefatory costs, which in the aggregate do not exceed 20% of the "issue price" of the Bonds, and (ii) a de minimis amount of Reimbursement Expenditures not in excess of the lesser of$lOO,OOO or 5% of the proceeds of the Bonds. (b) Each Reimbursement Expenditure is a capital expenditure or a cost of issuance of the Bonds or any of the other types of expenditures described in Section 1.150- 2(d)(3) of the Reimbursement Regulations. (c) The "reimbursement allocation" described in the Reimbursement Regulations for each Reimbursement Expenditure shall and will be made forthwith following (but not prior to) the issuance of the Bonds and in all events within the period ending on the date which is the later of three years after payment of the Reimbursement Expenditure or one year after the date on which the Project to which the Reimbursement Expenditure relates is first placed in service. (d) Each such reimbursement allocation will be made in a writing that evidences the City's use of Bond proceeds to reimburse the Reimbursement Expenditure and, if made within 30 days after the Bonds are issued, shall be treated as made on the day the Bonds are issued. Provided, however, that the City may take action contrary to any of the foregoing covenants in this paragraph 19 upon receipt of an opinion of its Bond Counsel for the Bonds stating in effect that such action will not impair the tax-exempt status of the Bonds. 20. Continuing Disclosure. The City is the sole obligated person with respect to the Bonds. The City hereby agrees, in accordance with the provisions of Rule 15c2-12 (the "Rule"), promulgated by the Securities and Exchange Commission (the "Commission") pursuant to the Securities Exchange Act of 1934, as amended, and a Continuing Disclosure Undertaking (the "Undertaking") hereinafter described to: (a) Provide or cause to be provided to each nationally recognized municipal securities information repository ("NRMSIR") and to the appropriate state information 1447787vl 19 , .. ,..... ,_._,--,..._-",--,+_..-~~....",-,.-..._"..~.-'~~'_,-,,~~,"-"---"-_.~~"~~""'^'-'''''--'~-'''_.+''-''>-'''---''' depository ("SID"), if any, for the State of Minnesota, in each case as designated by the Commission in accordance with the Rule, certain annual financial information and operating data in accordance with the Undertaking. The City reserves the right to modify from time to time the terms of the Undertaking as provided therein. (b) Provide or cause to be provided, in a timely manner, to (i) each NRMSIR or to the Municipal Securities Rulemaking Board ("MSRB") and (ii) the SID, notice of the occurrence of certain material events with respect to the Bonds in accordance with the Undertaking. (c) Provide or cause to be provided, in a timely manner, to (i) each NRMSIR or to the MSRB and (ii) the SID, notice of a failure by the City to provide the annual financial information with respect to the City described in the Undertaking. (d) The City agrees that its covenants pursuant to the Rule set forth in this paragraph 20 and in the Undertaking is intended to be for the benefit of the Holders of the Bonds and shall be enforceable on behalf of such Holders; provided that the right to enforce the provisions of these covenants shall be limited to a right to obtain specific enforcement of the City's obligations under the covenants. The Mayor and Manager ofthe City, or any other officer of the City authorized to act in their place with "Officers" are hereby authorized and directed to execute on behalf of the City the Undertaking in substantially the form presented to the City Council subject to such modifications thereof or additions thereto as are (i) consistent with the requirements under the Rule, (ii) required by the Purchaser of the Bonds, and (iii) acceptable to the Officers. 21. General Obligation Pledge. For the prompt and full payment of the principal and interest on the Bonds, as the same respectively become due, the full faith, credit and taxing powers of the City shall be and are hereby irrevocably pledged. 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. 22. Certificate of Registration. The Manager is hereby directed to file a certified copy of this resolution with the County Auditor of Scott County, Minnesota, together with such other information as he or she shall require, and to obtain the County Auditor's certificate that the Bonds have been entered in the County Auditor's Bond Register, and that the tax levy required by law has been made. 23. 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 1447787vl 20 ,_ _.~,"....._".,,__,.....__,..........~.~_~_.....h"_M"'d._.....~,......_~"_.....~..,-",_____._.___~____^",",_w"""",__,_,,_,__,"A__k_'_"'~'_..,_._..__.,-,~...,.-.,_.__.".._._-~---.---~~-~.---~..._---->~~_....--_._,._- affidavits, including any heretofore furnished, shall be deemed representations of the City as to the facts recited therein. 24. Negative Covenant as to Use of Proceeds and Improvements. The City hereby covenants not to use the proceeds of the Bonds or to use the Improvements, or to cause or permit them to be used, or to enter into any deferred payment arrangements for the cost of the Improvements, in such a manner as to cause the Bonds to be "private activity bonds" within the meaning of Sections 103 and 141 through 150 of the Code. 25. 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 exception to the federal arbitrage rebate requirements for governmental units issuing $5,000,000 or less of bonds, 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 entirely within the jurisdiction of the City), and (4) the aggregate face amount of all tax -exempt bonds (other than private activity bonds) issued by the City (and all subordinate entities thereof, and all entities treated as one issuer with the City) during the calendar year in which the Bonds are issued and outstanding at one time is not reasonably expected to exceed $5,000,000, all within the meaning of Section 148(f)(4)(D) of the Code. 26. Designation of Qualified Tax-Exempt Obligations. In order to qualify the Bonds as "qualified tax-exempt obligations" within the meaning of Section 265(b)(3) of the Code, the City hereby makes the following factual statements and representations: (a) the Bonds are issued after August 7, 1986; (b) the Bonds are not "private activity bonds" as defined in Section 141 of the Code; (c) the City hereby designates the Bonds as "qualified tax-exempt obligations" for purposes of Section 265(b )(3) of the Code; (d) the reasonably anticipated amount of tax-exempt obligations (other than private activity bonds, treating qualified 501(c)(3) bonds as not being private activity bonds) which will be issued by the City (and all entities treated as one issuer with the City, and all subordinate entities whose obligations are treated as issued by the City) during this calendar year 2002 will not exceed $10,000,000; and (e) not more than $10,000,000 of obligations issued by the City during this calendar year 2002 have been designated for purposes of Section 265(b )(3) of the Code. 1447787vl 21 _..~.~_~__"~_.,,_.~"___~~,~.,,, _..."..__._..__.-......__"~_~.~_~__~_.__u_.,._.~..~..._,.~."'_.,___.,_.."._.._._......~,,_.._-<-___..._....__~.___."'".._~_._--~--....-.~._._-~-- The City shall use its best efforts to comply with any federal procedural requirements which may apply in order to effectuate the designation made by this paragraph. 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. Headings. Headings in this resolution are included for convenience of reference only and are not a part hereof, and shall not limit or define the meaning of any provision hereof. The motion for the adoption of the foregoing resolution was duly seconded by member and, after a full discussion thereof 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. 1447787vl 22 STATE OF MINNESOTA COUNTY OF SCOTT CITY OF PRIOR LAKE I, the undersigned, being the duly qualified and acting Manager of the City of Prior Lake, Minnesota, DO HEREBY CERTIFY that I have compared the attached and foregoing extract of minutes with the original thereof on file in my office, and that the same is a full, true and complete transcript of the minutes of a meeting of the City Council of said City, duly called and held on the date therein indicated, insofar as such minutes relate to authorizing the issuance of, and awarding the sale of, $1,050,000 General Obligation Improvement Bonds of 2002 of said City. WITNESS my hand this 7th day of October, 2002. Manager 1447787vl 23 MINNESOTA BOND ISSUES SOLD LAST WEEK OF SEPTEMBER 2002 (20 YEAR SCHOOL BONDS EXCLUDED) RATE IN THE RATE IN THE RATE IN THE CORRESPONDING I I CORRESPONDING I I CORRESPONDING DATE SOLD PAR AMOUNT MUNICIPALITY RATING YEAR FOR 2005 YEAR FOR 2009 YEAR FOR 2012 - 9/23/2002 1,805,000 ALEXANDRIA GO A 2.200% 3.300% 3.600% 9/23/2002 10,095,000 ST. CLOUD GO AA 2.150% 3.200% 9/24/2002 2,150,000 HUTCHINSON GO A 2.200% 3.200% 3.550% 10/1/2002 515,000 SWIFT COUNTY GO NR 2.400% 3.400% 10/1/2002 1,055,000 COON RAPIDS GO AA 2.150% 3.200% 3.550% 10/2/2002 4,185,000 COT AGE GROVE GO AAA 2.150% 3.150% 3.550% 10/7/2002 1,945,000 MOUNDS VIEW GO AAA 2.150% 3.200% 3.550% 1 on /2002 1,050,000 PRIOR LAKE GO A 2.250% 3.200% 3.550% FINAL ANALYSIS OCTOBER 1, 2002 DECEMBER 1,2003 THROUGH 2012 JUNE I, 2003 AND SEMlANNUALL Y THEREAFTER ON EACH JUNE I AND DECEMBER I, ALL BONDS MATURING IN THE YEARS 2009 THROUGH 2012 ARE CALLABLE @ THE OPTION OF THE CITY ON DECEMBER I, 2008 @ PAR 51,031,100 EST. AVERAGE COUPON RATE 3.1102% EST. NET EFFECTIVE RATE: 3.4163% CITY OF PRIOR LAKE, MINNESOTA GENERAL OBLIGA nON IMPROVEMENT BONDS OF 2002 PARAMOUNT: 51,050,000 BONDS DATED: BONDS'MA TURE: INTEREST: OPTION: PURCHASE PRICE: YEAR AMOUNT PAYING AGENT & REGISTRAR: CITY OF PRIOR LAKE BOND SALE DATE: OCTOBER 7, 2002 EST. BOND CLOSING DATE: OCTQBER 24, 2002 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 0 2017 0 2018 0 2019 0 2020 Q TOTAl $1,050,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 150,000 o o o 1,021,037.00 29,900.00 1,050,937.00 {I ,000.00) 1,049,937.00 $1,050,000.00 APPLICATION OF FUNDS (ESTIMATED COSTS) CONSTRUCTION BIDS (INCLUDING ENGINEERING & ADMIN. TOTAL CONSTRUCTION COSTS 1.547,015,00 ESTIMATED ENGINEERING 149,000.00 ESTIMATED ADMIN, 44,000.00 LESS: TRUNK RESERVES (220,400.00) ENTERPRISE FIND CONTRIBUTION (418,578.00) WATER QUALITY FUND (80.000.00) TOTAL EST. HARD COSTS ADD: (SOFT COSTS) ESTIMATED LEGAL OPINION 4,500.00 ESTIMATED OFFICIAL STATEMENT PRINl 500.00 EST. REGISTRATION (CITY) 0.00 CAPITAL INTEREST (0 MONTHS) 0.00 ESTIMATED FISCAL FEE 0.00 ESTIMATED BOND RATING FEE 6,000,00 ESTIMATED FAIRNESS OPINION 0.00 EST, DISCOUNT FACTOR (1.80% OF PAR) 18,900.00 TOTAL SOFT COSTS OF ISSUANCE SUB TOTAL LESS: INVESTMENT INCOME GRAND TOTAL ROUNDED FOR ISSUANCE Name ofIssuer CITY OF PRIOR LAKE, MINNESOTA Type ofBond GENERAL OBLIGATION IMPROVEMENT BONDS OF 2002 PARAMOUNT. $1,050,000 DATE OF ANALYSIS: Oct-7-2002 DATED DATE OF BOND ISSUE: Oct-I-2002 FILE: PRIOR LAKE 429 2002 D II FINAL (12-1) INTEREST YEAR PRINCIPAL RATES INTEREST CUMULATIVE BALANCE ANNUAL SURPLUS /DEFICIT TAX LEVY TOTAL STATUATORY CAPITALIZED ASSESSMENTS DEBT COVERAGE INTEREST 'ASSESSMENT INTEREST @ASSESSMENT SERVICE' 105.00% 0 MONTHS PRINCIPAL 8.00% INCOME 0.00 8,881.87 16,803.62 23,223.37 28,561.12 33,131.87 37,250.62 41,127.37 44,972.12 48,942.37 643.12 643.12 643.12 643.12 643.12 643.12 643.12 643.12 643.12 0.00 8,881.87 7,921.75 6,419.75 5,337.75 4,570.75 4,118.75 3,876.75 3,844.75 3.970.25 (48,299.25) 0.00 0.00 0.00 0,00 0.00 0.00 0,00 0.00 $643.12 69,000,00 69,000.00 69,000.00 69,000.00 69.000.00 69,000.00 69.000.00 69,000.00 69,000.00 69,000.00 0.00 0,00 0.00 0,00 0.00 0.00 0.00 $80.560.00 72,928.00 69,536.00 66,144.00 62,752.00 59,360.00 55,968,00 52,576.00 49,184.00 45,792.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 $38,160.00 30,528.00 27,136.00 23,744.00 20,352.00 16,960.00 13,568.00 10,176.00 6,784.00 3,392.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Q:QQ. 190,800.00 $42,400.00 42,400.00 42,400,00 42,400.00 42,400.00 42,400.00 42,400.00 42,400.00 42,400.00 42,400.00 0.00 0.00 0.00 0.00 0.00 0,00 0.00 0.00 424,000.00 140,678.13 134,006.25 132,116.25 129,806.25 127,181.25 124,241.25 121,091.25 117,731.25 114,213.75 163,091.25 0.00 0.00 0.00 0,00 0.00 0,00 0.00 0.00 133,979.17 127,625.00 125,825.00 123,625.00 121,125.00 118.325.00 115,325.00 112,125.00 108,775.00 155,325.00 0.00 0.00 0,00 0.00 0,00 0.00 0.00 0.00 1,242,054.17 33,979.17 27,625.00 25.825.00 23.625.00 21,125.00 18,325.00 15,325.00 12,125.00 8,775.00 5,325.00 0.00 0.00 0.00 0.00 0.00 0.00 1.50% 1.80% 2.20% 2.50%, 2.80% 3.00% 3.20% 3.35% 3.45% 3.55% 0.00% 0.00% 0,00% 0,00% 0.00% 0.00% 0.00% 0,00% 100,000.00 100,000.00 100,000.00 100,000.00 100,000.00 100,000.00 100,000,00 100,000.00 100,000,00 150,000.00 0.00 0.00 0.00 0.00 0.00 0.00 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 0.00 0.00 192,054.17 0.00 0.00 1,050.000.00 0.00 $690,000.00 (+) NORTHLAND SECURITIES INC. STEVEN J. MATISON MANAGING DIRECTOR 612-851-5919 ' 800-851-2750 0.00 614,800.00 (+) 0.00 (+) 1,304,156.88 (- $424,000,00 40.38% 8.00% 2003 10 11115/2002 AMOUNT OF ASSESSMENTS: PERCENTAGE OF ISSUE ASSESSED: INTEREST RATE ON ASSESSMENTS: FIRST INSTALLMENT COLLECTION: # OF ANNUAL INSTALLMENTS: START DATE OF ASSESSMENTS: CORPORATE RESOLUTION FOR BROKERAGE INVESTMENT ACCOUNT Account Number: Office Registered Rep.'s Name: Registered Rep.'s Number: Name for Filing EXTRACT OF MINUTES OF A MEETING OF THE CITY COUNCIL OF THE CITY OF NUNNESOTA HELD: Pursuant to due call and notice thereof, a regular meeting of the City Council (the Council) of the City of Prior Lake (the City), County, Minnesota, was duly called and held at the City Hall in the City on October 7, 2002, at _ The following members were present: and the following were absent: Member introduced the following resolution and moved its adoption: RESOLUTION NO._ RESOLUTION AUTHORIZING AN INVESTMENT ACCOUNT WITH BNY CLEARING SERVICES, LLC BE IT RESOLVED by the City Council (the "Council") of the City of Prior Lake. Minnesota, (the "City") as follows: Section 1. Recitals. 1.01. The City, pursuant to Minnesota Statutes, Sections 118A.OI through 118A.08, has authority to invest "Public Funds" as defined in Minnesota Statutes, Section l18A.Ol(4) 1.02. Public Funds may be invested in the manner and in the securities detailed in Minnesota Statutes, Sections l18A.04 and l18A.OS. 1.03. Minnesota Statutes, Section 118A.02(1) permits the City Council to authorize the treasurer or chief financial officer to make investments. PriorLake Page 1 . ..........-...-..--T.......--.-...........----.--.--.--.....-...,.'''' 1.04. The City of Prior Lake is a "Government Entity" as defined in Minnesota Statutes, Section l18A.Ol(2). 1.05. Subject to compliance with Minnesota Statutes, Section l18A.04(9), the treasurer or chief financial officer may purchase securities through a broker-dealer. Section 2. Approval of Account/Investments. 2.01. The Finance Director, who is the City's "treasurer or chief financial officer", is authorized to open and maintain an investment account with BNY Clearing Services, LLC, a Bank of New York Company ("BNY") through Northland Securities, Inc. ("NSI"), and any BNY or NSI affiliate, subsidiary, or successor corporation, for the purpose of buying and selling such securities as may be permitted by Minnesota Statutes, Sections l18A.0 1 through l18A.08. The trading of options, trading on margin, and selling short is not authorized. 2.02. The Finance Director or any duly appointed deputy thereto are authorized to act on behalf of the City with respect to the BNY INSI investment accounts without any limitations. This authority includes, but is not limited to, the authority to open and close investment accounts, to execute documents on behalf of the City, to order securities transactions, to order assignment or transfer of securities and distribution of proceeds, and to otherwise make investment decisions on behalf of the City with respect to any investments or investment accounts. 2.03. That BNYINSI and all transfer agents are authorized to rely upon the oral or written instructions of the Finance Director without further inquiry into that person's authority to act on behalf of the City. Furthermore, BNYINSI and all transfer agents may continue to exercise such reliance until the City provides BNY INSI with a certified copy of a resolution of the City revoking or modifying this resolution. PriorLake Page 2 - _'_MOO__________________._____ The motion for the adoption of the foregoing resolution was duly seconded by Member , and upon voted 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 on October 7,2002. STATE OF MINNESOTA COUNTY OF SWIFT) ) )SS I, the undersigned, being the duly qualified and acting City Manager of the City of Prior Lake, Swift County, Minnesota, DO HEREBY CERTIFY, that I have carefully compared the preceding extract of minutes of a meeting of the City Council of said City held on the date therein indicated with the original minutes thereof on file in my office and that the same is a full, true and correct transcript thereof insofar as said minutes relate to the topic described in the title of the resolution set forth in the extract. WITNESS my hand officially and the official seal of the City on October 7, 2002. City Manager (SEAL) PriorLake Page 3 "_'~~""_W"W~WW_""'W"__WW'W_'"_"_'"""""___'_"__W'W"_T___~"_'__'_''''_______'_''''