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HomeMy WebLinkAboutIssuance of Revenue Bonds for Roycemore SchoolORDINANCE NO.60-0-11 AN ORDINANCE APPROVING AND AUTHORIZING THE ISSUANCE AND SALE OF A NOT TO EXCEED $16,000,000 AGGREGATE PRINCIPAL AMOUNT OF EDUCATIONAL FACILITY REVENUE BONDS, SERIES 2011 (ROYCEMORE SCHOOL PROJECT) OF THE CITY OF EVANSTON; THE EXECUTION OF A LOAN AGREEMENT AND OTHER DOCUMENTS RELATED THERETO; AUTHORIZING THE SALE OF SAID BONDS TO THE PURCHASER THEREOF; AND RELATED MATTERS THERETO. WHEREAS, pursuant to the provisions of Section 6(a) of Article VII of the 1970 Constitution of the State of Illinois, the City of Evanston, a municipality and home rule unit of the State of Illinois (the "City"), is authorized and empowered to exercise any power or perform any function pertaining to its government or affairs, including the issuance of revenue bonds to finance projects within the territorial limits of the City or to refund bonds issued to finance said projects, and may authorize the issuance of such bonds by ordinance of the City; WHEREAS, Roycemore School, an Illinois not for profit corporation (the "Borrower"), has requested that the City Council of the City approve the issuance by the City of qualified 501(c)(3) revenue bonds under Section 145 of the Internal Revenue Code of 1986, as amended (the "Code"), the proceeds of which bonds will be used, together with other available funds to finance and refinance (i) the acquisition of approximately 2.4 acres of land located at 1200 Davis Street, Evanston, Illinois 60201 (the "Campus") with an existing three level, 66,000 square foot building (the "Facility" and together with the Campus, the "School Facility"); (ii) the renovation, remodeling, improvement, and equipping of said School Facility; (iii) the construction and equipping of a gymnasium on the Campus (collectively, the "Project'); (iv) fund certain working capital; (v) pay capitalized interest with respect to certain portions of the Project; (vi) fund a debt service reserve fund, if deemed necessary or advisable by the Corporation; and (vii) pay certain costs incurred in connection with the issuance of the Bonds (collectively, the "Financing Purposes"); WHEREAS, the City wishes to provide financing to the Borrower for the foregoing purposes through the issuance and sale of its Educational Facility Revenue Bonds, Series 2011 (Roycemore School Project) (the `Bonds") and the loan of the proceeds of the sale of the Bonds pursuant to a Loan Agreement (the "Loan Agreement') between the City and the Borrower, and in accordance with this Ordinance authorizing the Bonds; WHEREAS, the City proposes to issue a not to exceed $16,000,000 aggregate principal amount of the Bonds pursuant to a Trust Indenture (the "Indenture") between the City and a trustee as yet to be determined by the Borrower (the "Trustee"); WHEREAS, the financing of the Project will be beneficial economically to the Borrower and will enable the Borrower to offer more of its services to the City's residents thereby promoting the well being of the residents of the City and will enhance the quality of life of the residents of the City and therefore is for a proper public purpose; WHEREAS, in connection with the issuance of the Bonds, the following additional documents will be executed and delivered by parties other than the City (collectively, the "Additional Transaction Documents"): (a) Promissory Note of the Borrower (the "Promissory Note"), which will be pledged as security for the Bonds, in a principal amount equal to the aggregate principal amount of the Bonds and with prepayment, maturity and interest rate provisions similar to the Bonds; and (b) Mortgage, Security Agreement and Assignment of Rents and Leases between the Corporation, as mortgagor, and the Trustee, as mortgagee (the "Mortgage"). WHEREAS, forms of the Loan Agreement, the Placement Agreement (as hereinafter defined), the Indenture, the Mortgage, the Promissory Note, the Tax Compliance Agreement (as hereinafter defined) and the Private Placement Memorandum (as hereinafter defined) have been prepared and presented to this meeting; WHEREAS, the Bonds shall be limited obligations of the City, payable solely from the revenues and income pursuant to the Loan Agreement, and the Bonds shall not constitute an indebtedness of the City within the meaning of any constitutional or statutory provision; and no holder of any Bond shall have the right to compel any exercise of the taxing power of the City to pay the principal of the Bonds or the interest or premium, if any, thereon; WHEREAS, the Borrower has requested the City to sell the Bonds on a negotiated basis; WHEREAS, pursuant to the provisions of Section 147(f) of the Internal Revenue Code of 1986, as amended, (the "Code") a public hearing on the proposed plan of financing the Project and the issuance of the Bonds was held by the Mayor and the City Council on July 11, 2011, pursuant to notice published at least 14 days prior to such public gearing in The Evanston Review, a newspaper of general circulation in the City, on June 23, 2011; and WHEREAS, the funding of the Financing Purposes through the issuance of the Bonds and entering into the transactions contemplated by this Ordinance is for a proper public purpose of the City, pertains to the affairs of the City and is in the public interest. NOW, THEREFORE, BE IT ORDAINED by the City Council of the City of Evanston, Illinois, as follows: 60SW88_6_344497 00002 Section 1. All of the recitals contained in the preambles to this Ordinance are true, correct and complete and are hereby incorporated by reference thereto and are made a part hereof. Section 2. The Financing Purposes are hereby authorized and determined to be in the public interest and in furtherance of the public purposes of the City. In order to provide for the Financing Purposes, there shall be and there is hereby authorized to be issued by the City its Educational Facility Revenue Bonds, Series 2011 (Roycemore School Project), in the aggregate principal amount not to exceed $16,000,000, dated the date of issuance thereof. The Bonds shall be initially issuable in the aggregate principal amount established in the Placement Agreement and the Indenture; shall mature no later than July 1, 2041; shall bear interest at the rate or rates as set forth in the Placement Agreement and the Indenture which rate or rates shall not exceed 10% per annum (exclusive of any original premium or discount), shall be dated, executed and authenticated in the manner set forth in the Indenture; and shall be subject to redemption prior to maturity at the times, under the circumstances, in the manner and at the redemption prices or purchase price set forth in the Indenture, as executed and delivered. The Bonds are issued in the exercise of the City's powers as a home rule unit of government under the provisions of Article VII, Section 6(a) of the 1970 Constitution of the State of Illinois and this Ordinance and do not and shall never constitute an indebtedness or obligation of the City, the State or any political subdivision thereof within the purview of any constitutional limitation or statutory provision, or a charge against the credit or general taxing powers, if any, of the State, the City, or any other political subdivision thereof. The Bonds are special, limited obligations of the City, payable solely out of the revenues and income of the City derived pursuant to the Loan Agreement. No owner of the Bonds shall have the right to compel any exercise of the taxing power of the City, the State or any other political subdivision thereof to pay the Bonds or the interest or premium, if any, thereon. No recourse shall be had for the payment of the principal of, premium, if any, or the interest on the Bonds or for any claim based thereon or upon any obligation, covenant or agreement in the Loan Agreement against any past, present or future member, officer, alderman, agent, employee or official of the City. No covenant, stipulation, promise, agreement or obligation contained in the Bonds, the Loan Agreement or any other document executed in connection therewith shall be deemed to be the covenant, stipulation, promise, agreement or obligation of any present or future official, officer, alderman, agent or employee of the City in his or her individual capacity and neither any official of the City nor any officers executing the Bonds shall be liable personally on the Bonds or be subject to any personal liability or accountability by reason of the issuance of the Bonds. _3.. 60886488_6_344497_00002 Section 3. The Bonds shall be executed on behalf of the City with the official manual or facsimile signatures of the Mayor and attested with the official manual or facsimile signature of its City Clerk and shall have printed thereon a facsimile of its corporate seal or impressed thereon manually its corporate seal. In case any officer who shall have signed (whether manually or in facsimile) any of the Bonds shall cease to be such officer of the City before the Bonds have been delivered or sold, such Bonds with the signatures thereto affixed may nevertheless be delivered and may be sold by the City as though the person or persons who signed such Bonds had remained in office. Section 4. The form, terms and provisions of the Loan Agreement, the Indenture and the Tax Compliance Agreement dated the date of delivery of the Bonds (the "Tax Compliance Agreement"), between the City and the Borrower are hereby in all respects approved, and the Mayor is hereby authorized, empowered and directed to execute and deliver the Loan Agreement, the Indenture and the Tax Compliance Agreement in the name and on behalf of the City. The Loan Agreement, as executed and delivered, shall be in substantially the form now before this meeting and hereby approved, or with such changes therein as shall be approved by the officer of the City executing the same, and the Tax Compliance Agreement, as executed and delivered, shall be in substantially the form approved by Bond Counsel. Execution of the Loan Agreement, the Indenture and the Tax Compliance Agreement constitute conclusive evidence of such officer's approval of any and all changes or revisions therein from the form of the Loan Agreement or the Indenture now before this meeting and of the approval of the Tax Compliance Agreement provided by Bond Counsel; and from and after the execution and delivery of the Loan Agreement, the Indenture and the Tax Compliance Agreement, the officers, agents and employees of the City are hereby authorized, empowered and directed to do all such acts and things and to execute and approve all such documents as may be necessary to carry out the intent and accomplish the purposes of this Ordinance, the Indenture and the Loan Agreement, including the approval of a mortgage or other security interests granted by the Borrower to secure the Bonds, and to comply with and make effective the provisions of the Loan Agreement, the Indenture and the Tax Compliance Agreement, as executed. Section s. The sale of the Bonds to Oppenheimer & Co. Inc., as the placement agent named in the hereinafter described placement agreement (the "Placement Agent"), at a price not less than 98 percent of the principal amount thereof, pursuant to a placement agreement (the "Placement Agreement"), to be entered into among the City, the Placement Agent and the Borrower, is hereby approved, and the Mayor is hereby authorized, empowered and directed to execute and deliver the Placement Agreement in the name and on behalf of the City. The Placement Agreement, as executed and delivered, shall be in such form thereof now before this meeting or with such changes as shall be approved by the Mayor executing the same, their execution thereof to constitute conclusive evidence of their approval thereof; and from and after the execution and delivery of the Placement Agreement, the officers, agents and employees of the City are hereby authorized, empowered and directed to do all such acts and things to execute all such documents as may be necessary to carry out the intent and accomplish the purposes of this Ordinance and to comply with and _q _ 60886488_6_344497_00002 make effective the provisions of the Placement Agreement as executed. In connection with the sale of the Bonds, it is contemplated that a Preliminary Private Placement Memorandum and a Final Private Placement Memorandum (collectively, the "Private Placement Memorandum") will be distributed and the City hereby approves the distribution of the Private Placement Memorandum by the Placement Agent in connection with the sale of the Bonds. Section b. From and after the execution and delivery of the foregoing documents, the proper officials, agents and employees of the City are hereby authorized, empowered and directed to do all such acts and things and to execute all such documents, including a Letter of Representations with The Depository Trust Company, as may be necessary to carry out and comply with the provisions of said documents as executed, and to further the purposes and intent of this Ordinance, including the preambles hereto. Section 7. The Mayor and the City Council hereby acknowledge that a Public Hearing was held on July 11, 2011 and hereby approves the Project, the plan of financing and the Financing Purposes. Section 8. All acts and doings of the officials of the City that are in conformity with the purposes and intent of this Ordinance and in furtherance of the issuance of the Bonds be, and the same are hereby in all respects, approved and confirmed. The City hereby covenants that it will take no action or fail to take any action that would cause the Bonds to become invalid. Section 9. The provisions of this Ordinance are hereby declared to be separable and if any section, phrase or provision shall for any reason be declared by a court of competent jurisdiction to be invalid or unenforceable, such declaration shall not affect the validity or enforceability of the remainder of the sections, phrases and provisions hereof. Section 10. All ordinances, orders and resolutions and parts thereof in conflict herewith are to the extent of such conflict hereby repealed. Section 11. A copy of this Ordinance shall be filed in the office of the City Clerk and shall be made available for public inspection in the manner required by law. Section 12. That this Ordinance 50-0-11 shall be in full force and effect from and after its passage, approval, and publication in the manner provided by law. -5- 60886488_6_3A4497_00002 Introduced Adopted o 7 , 2011 Approved: l 2011 El�Oeth B. Tisdahl, Mayor Attest: Approved as to form: Rodney G 7116, City Clerk W. Grant Farrar, Corporation ounsel 60886488_6_344497_00002 EXHIBIT D PLACEMENT AGENT'S CERTIFICATE Re: City of Evanston, Illinois (the "Issuer") [$16,000,000] Educational Facility Revenue Bonds Series 2011 (Rovicemore School Proiect) (the "Bonds") The undersigned hereby certifies as follows: We have been asked to calculate the weighted average maturity from the date hereof of the Bonds in the following manner: divide (a) the sum of the products determined by taking the issue price of each maturity times the number of years from the date thereof to the date of such maturity, by (b) the aggregate issue price of the Bonds, as appropriate. Based solely on these calculations, the weighted average maturity from the date hereof of the Bonds is years. The CUSIP number for the final maturity of the Bonds is We have also been asked to calculate the arbitrage yield of the Bonds by determining the discount rate that, when used in computing the present value as of this date of all unconditionally payable payments of principal, interest, and fees for qualified guarantees on the Bonds, produces an amount equal to the present value, using the same discount rate, of the aggregate Issue Price of Bonds, plus accrued interest, as of this date. The funding of a Debt Service Reserve Fund in the amount of the Reserve Fund Deposit and the funding of an Operating Reserve Fund are necessary in order to obtain the rates achieved for the Bonds. All terms not defined herein shall have the same meanings as in the Tax Compliance Agreement to which this Certificate is attached. It is understood by the undersigned that the certifications contained in this letter will be relied upon by the Issuer and Bond Counsel in determining that the Bonds are tax-exempt under Section 103 of the Internal Revenue Code of 1986. Dated: July 19, 2011 OPPENHEIMER & CO. INC., as Placement Agent for the Bonds am D-1 EXHIBIT E BOND PURCHASER'S CERTIFICATE Re: City of Evanston, Illinois (the "Issuer") [$16,000,000] Educational Facility Revenue Bonds Series 2011 (Roveemore School Proiect) (the "Bonds") The undersigned hereby certifies as follows: We have computed the aggregate Issue Price of the Bonds to be $ which is the sum of the Issue Prices of each maturity. On the date hereof, the undersigned is purchasing the Bonds at a price equal to the principal amount thereof, without accrued interest. The purchase price of the Bonds was negotiated at arms length with the Borrower and no portion of the purchase price reflects payment for any service rendered or a concession for any service received. The purchase of the Bonds by the undersigned is for its own account for the purpose of investment and not with a view toward distribution or resale. All terms not defined herein shall have the same meanings as in the Tax Compliance Agreement to which this Certificate is attached. It is understood by the undersigned that the certifications contained in this letter will be relied upon by the Issuer and Bond Counsel in determining that the Bonds are tax-exempt under Section 103 of the Internal Revenue Code of 1986. Dated: July 19, 2011 NUVEEN ASSET MANAGEMENT, as Purchaser of the Bonds E-1 EXHIBIT F FORM 8038 EXHIBIT G FORM OF EXCESS EARNINGS REPORT Report No. Rebate Determination Date (1): , 1. Bond Yield (21: % 2. Net Excess Earnings by Fund: Future Value of Nonpurpose Fund or Account Receipts (3) Future Value of Nonpurpose Net Excess Payments (4) Earnings (5) Project $ $ Expense Debt Service (if created) (6) TOTAL $ $ $ 3. Rebate Amount (7) $ G-1 Notes and Instructions A Rebate Determination Date is (a) July 19, 2016, and every fifth July 19t" thereafter (unless the Borrower elects otherwise in accordance with the Regulations) and (b) the earlier of the scheduled final maturity date of the Bonds or any date prior thereto on which all outstanding Bonds are paid or retired. 2. The Bond Yield shall be computed in accordance with Regulations Section 1.148-4. 3. "Future Value of Nonpurpose Receipts" means, in general terms, the future value, as of the Rebate Detennination Date, of all amounts received on or before the Rebate Determination Date with respect to Nonpurpose Investments allocated to the Bonds. All calculations necessary to determine the Future Value of Nonpurpose Receipts must be made in compliance with the rules set forth in Regulations Section 1.148-3 and the Regulations cited therein. 4. "Future Value of Nonpurpose Payments" means, in general terms, the future value, as of the Rebate Determination Date, of all amounts paid on or before the Rebate Determination Date with respect to Nonpurpose Investments allocated to the Bonds, including computation credits, if any. All calculations necessary to determine the Future Value of Nonpurpose Payments shall be made in compliance with the rules set forth in Regulations Section 1.148-3 and the Regulations cited therein. 5. Calculate the difference between Future Value of Nonpurpose Receipts and Future Value of Nonpurpose Payments for each Fund. Net Excess Earnings for any Fund may be a negative number. 6. Future Values of Nonpurpose Receipts and Payments allocable to any bona fide debt service fund are not to be taken into account in computing the amount due to the United States because the average annual debt service on the Bonds is not expected to exceed $2,500,000. 7. On or before the 60th day following each Rebate Determination Date other than the final one, an amount not less than 90% of the amount set forth in Line 3 must be remitted to the Internal Revenue Service. In addition, on or before the 60th day following retirement of the Bonds, 100% of such amount must be remitted to the Internal Revenue Service. For mailing instructions, see the Tax Compliance Agreement relating to the Bonds. G-2 EXHIBIT H-1 FORM OF INVESTMENT CERTIFICATE: BORROWER EMPLOYEE OR AGENT For purposes of this Certificate, the following terms have the meanings specified: Bonds: City of Evanston, Illinois Educational Facility Revenue Bonds, Series 2011 (Roycemore School Project) Investment: Issuer: City of Evanston, Illinois or Roycemore School Project The undersigned hereby certifies as follows: (A) The undersigned made a bona fide solicitation for the purchase of the Investment that satisfies all of the following requirements: (1) The bid specifications were in writing and were timely forwarded to potential providers. (2) The bid specifications included all material terms of the bid. A term is material if it may directly or indirectly affect the yield or the cost of the Investment. (3) The bid specifications included a statement notifying potential providers that submission of a bid is a representation that the potential provider did not consult with any other potential provider about its bid, that the bid was determined without regard to any other formal or informal agreement that the potential provider has with the Issuer or any other person (whether or not in connection with the Bonds), and that the bid is not being submitted solely as a courtesy to the Issuer or any other person for purposes of satisfying the requirements of paragraph (B) below. (4) The terms of the bid specifications are commercially reasonable. A term is commercially reasonable if there is a legitimate business purpose for the terra other than to increase the purchase price or reduce the yield of the Investment. [Add for solicitations of investments for a yield restricted defeasance escrow]: For example, the hold firm period is no longer than the Issuer reasonably requires, (5) [For purchases of guaranteed investment contracts only]: The terms of the solicitation take into account the reasonably expected deposit and drawdown schedule for the amounts to be invested. (6) All potential providers had an equal opportunity to bid. For example, no potential provider was given the opportunity to review other bids (i.e., a last look) before providing a bid. H-1-1 (7) At least three reasonably competitive providers were solicited for bids. A reasonably competitive provider is a provider that has an established industry reputation as a competitive provider of the type of investments being purchased. (B) The bids received by us meet all of the following requirements: (1) We received at least three bids from providers that we solicited under a bona fide solicitation meeting the requirements of paragraph (A) above and that do not have a material financial interest in the Bonds. A lead underwriter (if the Bonds are sold in a negotiated underwriting transaction) is deemed to have a material financial interest in the Bonds until 15 days after the date of issuance thereof. In addition, any entity acting as a financial advisor with respect to the purchase of the Investment at the time the bid specifications are forwarded to potential providers has a material financial interest in the Bonds. A provider that is a related party to a provider that has a material financial interest in the Bonds is deemed to have a material financial interest in the Bonds. (2) At least one of the three bids described in the preceding paragraph is from a reasonably competitive provider, within the meaning of paragraph (A)(7) above. (3) We did not bid to provide the Investment. (C) The winning bid meets the following requirements: [Alternative (a) -- Guaranteed investment contracts:] it is the highest yielding bona f de bid (determined net of any broker's fees). [Alternative (b) -- Other investments:] (1) The winning bid is the lowest cost bona fide bid (including any broker's fees). The lowest cost bid is either the lowest cost bid for the portfolio or the aggregate cost of a portfolio comprised of the lowest cost bid for each investment. Any payment received by the Issuer from a provider at the time a guaranteed investment contract is purchased (e.g., an escrow float contract) for a yield restricted defeasance escrow under a bidding procedure meeting the requirements of the Arbitrage Regulations is taken into account in determining the lowest cost bid. (2) The lowest cost bona fide bid (including any broker's fees) is not greater than the cost of the most efficient portfolio comprised exclusively of State and Local Government Series Securities from the United States Department of the Treasury, Bureau of Public Debt. The cost of the most efficient portfolio of State and Local Government Series Securities was determined at the time that bids were required to be submitted pursuant to the terms of the bid specifications. Note: [This naravranh may be omitted if SLGS are not available on the date of the bid deadline; see Reis. §1.148-5/d/6/iii/C/2/iii.] Attached to this Certificate are copies of the following: (1) [For guaranteed investment contracts:] The contract. [For other Investments:] The purchase agreement or confirmation. H-1-2 Dated: (2) The receipt for the amount actually paid by the Issuer, including a record of any administrative costs (such as our fees) paid by the Issuer. (3) A chart showing for each bid received: the name of the person and entity submitting the bid, the time and date of the bid and the bid results. (4) The bid solicitation form, including a statement explaining any deviation by the Investment from the form. [See Regs. & 1.148-5/d/6/iii/E/4 if there is any deviation. from the form..] (5) [For an escrow portfolio:] An analysis showing the cost of the most efficient SLGS portfolio as of the deadline for submitting bids under the bid solicitation. [ISSUER/AGENT] Its H-1-3 EXHIBIT H-2 FORM OF INVESTMENT CERTIFICATE: PROVIDER For purposes of this Certificate, the following terms have the meanings specified: Bonds: City of Evanston, Illinois, Educational Facility Revenue Bonds, Series 2011 (Roycemore School Project) Investment: Issuer: City of Evanston, Illinois or Roycemore School The undersigned is providing the Investment with respect to the Bonds following submission of our bid in response to a written solicitation received by us relating to the Investment. In connection with our bid to provide the Investment, we certify that we did not consult with any other potential provider about its bid, our bid was determined without regard to any other formal or informal agreement that we may have with or any person (whether or not in connection with the Bonds), and the bid was not submitted solely as a courtesy to any person for purposes of satisfying the requirements of the arbitrage regulations. We further certify that the administrative costs paid or expected to be paid by us to third parties in connection with supplying the Investment are as follows: AMOUNT PAYEE We further certify that we do not have a material financial interest in the Bonds and we are not a related party to any entity with such an interest (e.&, the lead underwriter for the Bonds until 15 days after the date of issuance thereof or a financial advisor with respect to the purchase of the Investment). H-2-1 Finally, we acknowledge receipt on this date of $ as the purchase price for the Investment. Dated: ]PROVIDER] By Its e&M EXHIBIT I PUBLISHER'S AFFIDAVIT REGARDING NOTICE OF HEARING AND TRANSCRIPT OF PUBLIC HEARING I-1 EXHIBIT J APPROVAL OF ELECTED REPRESENTATIVE Band Ordinance appears as Item j_]. J-i EXHIBIT K QUALIFIED 501(c)(3) BOND TESTS The following rules govern for purposes of applying the Qualified 501(c)(3) Bond Tests in Section 5.02 of the Tax Compliance Agreement to which this Exhibit is attached; a more complete statement of the rules is contained in Treasury Regulations Sections 1.141-0 through 1.141-15 and 1.145-0 through 1.145-2 and IRS Revenue Procedures 97-13 and 2007-47. A. General Rules 1. The Bonds may lose their status as tax-exempt "qualified 501(c)(3) bonds" if more than 5% of the Net Proceeds are used directly or indirectly in the trade or business of any person (a "Nonexempt Person") other than (i) a governmental unit or (ii) a 501(c)(3) Organization engaged in activities that do not constitute unrelated trade or business activities (see "Private Business Use Test" below) and more than 5% of the principal or interest on the Bonds is (a) secured directly or indirectly by any interest in or payment in respect of the property or borrowed money used, or to be used, in such nonexempt trade or business, or (b) to be derived from payments (whether or not to the Issuer or the Borrower) in respect of property, or borrowed money, used or to be used for a private business use (see "Private Security or Payment Test" below). In addition, the Bonds may lose their status as tax-exempt qualified 501(c)(3) bonds if any part of the Project is owned, under general Federal tax principles, by a Nonexempt Person or if more than 5% (or, if lower, [$100,0001) of the Net Proceeds are used (a) to make loans to Nonexempt Persons (see "Private Loan Financing Test" below) or (b) to acquire nongovernmental output property (see "Nongovernmental Output Property" below). 2. Whenever the Issuer or the Borrower states that it "reasonably expects" or "expects" something to occur or not to occur, the statement refers to the Issuer's or Borrower's reasonable expectations concerning events and actions over the entire stated term of the Bonds; provided, however, that an event or action is disregarded if the Bonds are subject to mandatory redemption within six months of the date of such event or action and the other conditions set forth in Regs. § 1. 141-2(d)(2)(ii) are satisfied. If an unexpected event or action that would cause the Bonds to lose their status as qualified 501(c)(3) bonds occurs during the term of the Bonds, the Bonds may become taxable unless an appropriate remedial action under Regs. § 1.141-12 is taken. 3. All governmental units and 501(c)(3) Organizations that are members of the same Controlled Group (as defined in the Regulations) are treated as one person and all persons and entities other than governmental units and 501(c)(3) Organizations that are related within the meaning of Section 144(a)(3) of the Code are treated as one person. K-1 B. Private Business Use Test 1. Any activity carried on by a Nonexempt Person that is not a natural person is treated as private business use. 2. Any use of the Project pursuant to a special legal entitlement conferred on a Nonexempt Person, such as a Loan Agreement, a management or incentive payment contract (except as provided in paragraph 6 below), certain research agreements or a take or pay or other output -type contract, is a private business use. 3. If the Project is not available for use by the general public, private business use may be established solely on the basis of a special economic benefit conferred on one or more Nonexempt Persons, even if those Nonexempt Persons have no special legal entitlements to use of the Project. 4. Use by an agent of the Issuer or the Borrower, use incidental to certain financing arrangements, use pursuant to a contract encompassing fewer than 180 days, temporary use by a developer, certain incidental uses (such as telephone booths) and certain qualified improvements are not treated as private business use if the conditions set forth in Regs. §1.141-3(d) are satisfied. 5. The amount of private business use of the Project is equal to the average annual private business use of the Project during the period beginning on the later of the Date of Issuance or the date the Project is placed in service, and ending on the earlier of the last date of the reasonably expected economic life of the Project or the latest maturity date (or mandatory redemption date) of the Bonds. 6. A management, service or incentive payment contract with a Nonexempt Person with respect to the Project generally gives rise to private business use unless Bond Counsel advises the Borrower otherwise or: (a) The services are incidental to the primary function of the Project (such as janitorial, equipment repair and billing services); or (b) The contract grants admitting privileges to a doctor on an equal basis with other qualified doctors; or (c) The contract is for the operation of public utility property and limits compensation to reimbursement for the service provider's expenses (including overhead); or (d) The contract is for the provision of services and limits compensation to reimbursement for the service provider's expenses (not including overhead); or (e) The contract contains all of the following features: (i) The service provider receives not more than reasonable compensation for services rendered and reimbursement for expenses; and K-2 (ii) The service provider is not compensated (in whole or in part) on the basis of a share of net profits derived from the Project; and (iii) Not more than 20% of the voting power of the governing body of the governmental unit is vested in the service provider and its directors, officers, shareholders and employees, and any overlapping board members do not include the chief executive officers of the service provider or the governmental unit; and (iv) The governmental unit and the service provider are not related persons; and (v) The maximum term (including renewal options enforceable by the service provider) and cancellation protection are as set forth in the table below for the applicable type of compensation: 95% Fixed (including CPI adjustments and I Public Utility Property: No Provision predetermined incentive award) Lesser of 80% of project useful life and 20 years Other Property: Lesser of 80% of project useful life and 15 years 80% Fixed (including CPI adjustments and I Public Utility Property: No Provision predetermined incentive award) Lesser of 80% of project useful life and 20 years Other Property: Lesser of 80% of project useful life and 10 years 50% Fixed (including CPI adjustments) 5 years 3rd year Per Person or combination of Fixed and Per Person 5 years 3rd year (including CPI adjustments) Per Unit or combination of Fixed and Per Unit 3 years 2nd year (including CPI adjustments) Percentage of Fees or combination of Per Unit and 2 years Ist year Percentage of Revenue or Expense (including Percentage of Gross or Adjusted Gross Revenues or Expenses during startup period) Net Profits (including percentage of net revenues Not Permitted Not Permitted but not including certain predetermined productivity rewards) K-3 C. Private Security or Payment Test The security for, and payment of debt service on, the Bonds is determined from both the terms of the Bond documents and on the basis of any underlying arrangement between the Issuer or the Borrower and a Nonexempt Person. 2. In determining whether the Bonds meet the Private Security or Payment Test, the present value (at the Bond Yield or, in the case of variable rate Bonds, at the initial rate on the Bonds) of the payments or property taken into account under Regs. § 1.141-4(c) is compared to the present value of the debt service to be paid over the term of the Bonds, with the adjustments set forth in Regs. §1.141-4(b). Generally applicable taxes are not treated as private business payments as long as such taxes are not in the nature of fees for goods or services, have a uniform tax rate that is applied to all persons of the same classification in the appropriate jurisdiction and have a generally applicable manner of determination and collection. 4. Private business payments and security are allocated among different sources of funding for the same project in accordance with the provisions of Regs. §1.141- 4(c)(3). D. Private Loan Financing Test 1. Any transaction that is generally characterized as a loan for federal income tax purposes is a loan for purposes of the Private Loan Financing Test. In addition, a loan may arise from the direct lending of Proceeds or may arise from transactions in which indirect benefits that are the economic equivalent of a loan are conveyed. 2. In determining whether the Proceeds are used to make or finance loans, indirect, as well as direct, use of the Proceeds is taken into account, without discounting the amount loaned to reflect the present value of the loan repayments. 3. Prepayments, grants and tax assessment loans are not treated as loans for purposes of the Private Loan Financing Test if the conditions in Regs. § 1.141-5 (c) and (d) are satisfied. E. Nongovernmental Output Property The limitation on using Proceeds for Nongovernmental Output Property applies generally to the acquisition of existing energy facilities from a Nongovernmental Person. 2. Certain limited exceptions to this rule apply where the Issuer has historically supplied energy in the same service area (including certain annexed areas) as that served by the facilities to be purchased. I.RZii REIMBURSEMENT PROCEEDS A. Expenditures EXHIBIT L "Expenditures" are Current Law Expenditures, De Minimis Expenditures or Preliminary Expenditures (as defined below) that were ,paid prior to the Date of Issuance and will be financed with the proceeds of the Bonds. All Expenditures must satisfy the following requirements: (a) the Expenditures are capital expenditures, costs of issuance, extraordinary, nonrecurring working capital costs that are not customarily payable from current revenues, grants, qualified student loans, qualified mortgage loans or qualified veterans' mortgage loans; (b) the allocation of Proceeds to the Expenditures is not an abusive arbitrage device under Section 1.148-10 of the Regulations to avoid the arbitrage restrictions or to avoid the restrictions under Sections 142 through 147 of the Code; and (c) during the one-year period following an allocation of Proceeds to the Expenditures, the Issuer will not use funds corresponding to the proceeds of the reimbursement bond for which a reimbursement allocation was made in a manner that results in the creation of replacement proceeds (as defined in Section 1.148-1 of the Regulations) of any issue (e.g., by creating a sinking fund for an issue). B. Current Law Expenditures "Current Law Expenditures" are Expenditures that satisfy the following requirements in addition to those in Paragraph A above: (a) not later than 60 days after payment of any Current Law Expenditures, the Borrower adopted an official intent resolution for the Current Law Expenditures in a reasonable form generally describing the project for which the Current Law Expenditures were paid (or, by name and functional purpose, identifying the fund or account from which the Current Law Expenditures were originally paid) and stating the maximum principal amount of obligations expected to be issued for the Project (copy attached); (b) on the date of the Issuer's declaration of official intent, the Issuer had a reasonable expectation that it would reimburse the Current Law Expenditures with the Proceeds of the Bonds; the official intent was not declared as a matter of course or in an amount substantially in excess of the amounts expected to be necessary for the Project; and the Issuer has not established a pattern of failure to reimburse actual original expenditures covered by official intents (other than in extraordinary circumstances); and (c) the date that Proceeds are allocated to the Expenditure is no Later than 18 months after the later of (i) the date the Current Law Expenditures were originally paid, or (ii) the date the portion of the Project for which the Issuer is being reimbursed was L-1 placed in service or abandoned (but in no event more than three years after the Current Law Expenditures were originally paid). C. De Minimis Expenditures "De Minimis Expenditures" are Expenditures that constitute costs of issuance plus an amount not in excess of the lesser of $100,000 or S% of the Proceeds of the Capital Improvement Bonds and that satisfy the requirements in Paragraph A above. D. Preliminary Expenditures "Preliminary Expenditures" are Expenditures that constitute costs for architectural, engineering, surveying or soil testing services, costs of issuing the reimbursement portion of the Bonds, or similar costs that were paid prior to commencement of construction, rehabilitation, or acquisition of the New Money Project (other than land acquisition, site preparation, and similar costs incident to commencement of construction), up to an amount equal to 20% of the Issue Price of the Bonds allocable to the New Money Project, and that satisfy the requirements in Paragraph A above. L-2 EXHIBIT M REBATE ELECTIONS The following elections are made by the City of Evanston, Illinois {the "Issuer"), in connection with the issuance of its Educational Facility Revenue Bonds, Series 2011 (Roycemore School Project) (the "Bonds"), pursuant to the provisions of Section 148(f)(4)(C) of the Internal Revenue Code of 1986 (the "Code") and the Regulations promulgated thereunder. This schedule of Rebate Elections comprises a portion of the books and records maintained by the Issuer with respect to the Bonds. Each election made herein is irrevocable, has the force and effect contemplated by the provision of the Code and Regulations cited, and is made as of the Date of Issuance. Capitalized terms used herein and not otherwise defined have the meanings specified in the Tax Compliance Certificate of the Issuer relating to the Bonds. 1. Satisfaction of Construction Issue Tests on the Basis of Actual Facts. To satisfy, on the basis of actual facts (as opposed to the Issuer's reasonable expectations as of the Date of Issuance), the requirement that at least 75% of the Available Construction Proceeds of the Bonds (or the portion of the Bonds treated as a "construction subissue" pursuant to Election 3) are spent for "construction expenditures" (as defined in the Regulations) with respect to property owned by a governmental unit or a 501(c)(3) organization, including all related provisions of the Regulations that would otherwise apply based on the Issuer's reasonable expectations, in accordance with Section 1.148-7(f)(2) of the Regulations. If Election 4 is positive, this Election does not apply for purposes of determining whether the Bonds constitute a construction issue, which shall be determined on the basis of the Issuer's reasonable expectations. If this Election is negative, the Issuer hereby certifies that (a) it reasonably expects that at least 75% of the Available Construction Proceeds, including reasonably anticipated earnings, will be used for "construction expenditures" as defined in the Regulations (i.e., generally, capital expenditures that are properly chargeable to real property other than land, or to "constructed personal property") with respect to property owned by a governmental unit or a 501(c)(3) organization, (b) it will include in Available Construction Proceeds the amount of earnings that the Issuer reasonably expects, as of the Date of Issuance, to earn during the entire 24-month spending period (in lieu of including actual earnings and expected earnings as of the end of each spending period) for purposes of determining whether the spending requirements have been met as of the end of each of the first three spending periods, in accordance with Section 1.148-7(i)(3) of the Regulations, and (c) it reasonably expects the earnings includable in the Available Construction Proceeds during the 24-month period beginning on the Date of Issuance to be $ [see attached schedules]. IUTM "Available Construction Proceeds" means the amount in Line 4 below, as calculated from time to time as follows: 1. Issue Price of the Capital Improvement Bonds (or the construction subissue identified in Election 3) ................ $ 2. Plus: Anticipated Earnings on the Amount in 1 ............. $ 3. Less: Amount in 1 Used to Pay Costs of Issuance and Underwriting Discount .................................................... ($0) 4. Total Anticipated Available Construction Proceeds........ $ 5. 75% of Amount in 4........................................................ $ Election 1: Yes No X 2. Earnines on a Reasonably Reauired Reserve or Replacement Fund. To exclude from Available Construction Proceeds the earnings on any reasonably required reserve or replacement fund during the period beginning on the Date of Issuance and ending on the earlier of the date construction is "substantially completed" (within the meaning of the Regulations) or the date that is two years after the Date of Issuance, in accordance with Section 148(f)(4)(C)(vi)(IV) of the Code and Section 1.148-7(i)(2) of the Regulations. [Note: If this Election is affirmative, earnings on reasonably required reserve or replacement funds are subject to rebate beginning on the Date of Issuance; if this Election is negative, such earnings are subject to rebate only after the period described in the Election but must be included in Available Construction Proceeds during that period.) Election 2: Yes X No NIA 3. Separation of Construction Subissue. To treat the Bonds (other than the refunding portion thereof, if any) as two separate subissues, in accordance with Section 148(f)(4)(C)(v) of the Code and Section 1.148-70) of the Regulations. If this Election is positive, the Issuer hereby certifies that: (a) one of the subissues will meet the requirement that 75% of Available Construction Proceeds be used for "construction expenditures" (as defined in the Regulations) with respect to property owned by a governmental unit or a 501(c)(3) organization; (b) the Issuer reasonably expects as of the date hereof that the subissue described in (a) will finance all of the "construction expenditures" to be financed by the Bonds; and (c) the Issue Price of the subissue described in (a) is $ , determined as follows; M-2 1. Construction Expenditures to be Financed with Sale Proceeds (do not include amounts to be financed with Investment Proceeds) .............. ...................................... .$ 2. Amount in 1 divided by no less than .75 and no more than1.00.........................................................................$ 3. Total amount of Sale Proceeds not used for Costs of Issuance........... ............................................................... $ 4. Amount in 2 as a Percentage of Amount in 3 ............... �% 5. Issue Price of Issue Multiplied by Percentage in 4 (Issue Price of the Construction Subissue) ............ ........ $ Election 3: Yes No X 4. Penalty in Lieu of Rebate. To pay a penalty to the United States in lieu of the obligation to pay arbitrage rebate on Available Construction Proceeds, in the event that the Issuer fails to satisfy the periodic spending requirements to qualify the Bonds for the 24-month exception, in accordance with Section 148(f)(4)(C)(vii) of the Code and Section 1.148-7(k) of the Regulations. The Issuer acknowledges that the penalty described in this Election, if applicable, ceases to apply only after the expenditure of all Available Construction Proceeds or after the last maturity of the Bonds, including any obligations that refund the Bonds, unless the penalty is terminated earlier pursuant to an irrevocable, written election to be made by the Issuer and maintained among the Issuer's books and records pertaining to the Bonds, either: (a) after the initial temporary period for the Bonds (in accordance with Section 148(f)(4)(C)(viii) of the Code and Section 1.148-7(l)(1) of the Regulations) or (b) if earlier, after the substantial completion of the Project (in accordance with Section 148(f)(4)(C)(ix) of the Code and Section 1.148-7(1)(2) of the Regulations). If this Election is affirmative, it is 'intended to satisfy the requirements of Rev. Proc. 92-22. Therefore: (a) this Schedule will be retained by the Issuer until six years after the retirement of all of the Bonds as part of the official record of the issuance of the Bonds; and (b) notice of this Election will be given to the Internal Revenue Service on Form 8038-G for the Bonds as specified by Rev. Proc. 92-22. Any future Election to terminate the penalty (as described above) will be made only in compliance with the requirements of Rev. Proc. 92-22 or such successor authority as may exist at the time. Election 4: Yes No X M-3 5. Pooled Financing Bands. To determine the periods for the spending requirements applicable to each loan in the case of pooled financing bonds separately, beginning on the earlier of the date the loan is made or the date that is one year following the Date of Issuance, in accordance with Section 148(f)(4)(C)(xi) of the Code and Section 1.148-7(b)(6)(ii) of the Regulations. If this Election is affirmative, the Elections described above may be made separately for each loan on or before the date the loan is made (but not later than one year after the date hereof). Election 5: Yes No NIA X ITM EXHIBIT N PROJECTED DRAW DOWN SCHEDULE N-1 EXHIBIT O WEIGHTED AVERAGE ECONOMIC LIFE OF PROJECT The Borrower calculated the "weighted average reasonably expected economic life" of the assets (the "Project") being financed and refinanced with the proceeds of the City of Evanston, Illinois, Educational Facility Revenue Bonds, Series 2011 (Roycemore School Project) (the "Bonds"). This calculation will be relied on by Katten Muchin Rosenman LLP in rendering its opinion that interest on the Bonds is excluded from the gross income of the owners thereof for federal income tax purposes. Capitalized terms used herein and not otherwise defined shall have the respective meanings specified in the Tax Compliance Agreement relating to the Bonds. For purposes of this certificate, the following rules have been applied: (a) for structures, original reasonably expected economic life is as set forth in Revenue Procedure 62-21, 1962-2 C.B. 418; for assets other than structures, original reasonably expected economic life is equal to the applicable midpoint lives under the ADR system; in all cases, longer useful lives may be used if, on the basis of the facts and circumstances, the economic lives to the Borrower are greater than the lives established under the foregoing administrative guidelines; (b) the cost of any land is disregarded if less than 25% of the proceeds of the Bonds is to be used for such purpose; (c) if 25% or more of the proceeds of the Bonds is to be used to finance land, such land shall be treated as having an original economic life of 30 years; and (d) for property placed in service prior to the date hereof, only the remaining economic life as of the date hereof is taken into account. The attached schedules set forth information relating to the Project pertinent to the computation of the remaining weighted average reasonably expected economic life thereof. As shown on the attached schedules, the weighted average reasonably expected economic life of the assets financed with the Bonds is not less than years. O-1 CH102 60897556v2 344497-00002 7/11/2011 1:46 PM IN WITNESS WHEREOF, the undersigned has hereunto subscribed his or her respective official signature this day of July, 2011. CITY OF EVANSTON, ILLINOIS, as Issuer By: Its: Aut r'zed Signatory [Signature Page — Tax Compliance Agreement]