3.12 Authorizing the First Supplemental Indenture of Trust Conduit Bond
Request for
City Council Action
DEPARTMENT INFORMATION
ORIGINATING DEPARTMENT REQUESTOR: MEETING DATE:
Administration City Administrator/Finance Director Flaherty June 27, 2022
PRESENTER(s) REVIEWED BY: ITEM #:
Consent Taft Law, Bond Counsel 3.12 – Conduit Bond
STRATEGIC VISION
MEETS: THE CITY OF OTSEGO:
X Is a strong organization that is committed to leading the community through innovative
communication.
Has proactively expanded infrastructure to responsibly provide core services.
Is committed to delivery of quality emergency service responsive to community needs and
expectations in a cost-effective manner.
Is a social community with diverse housing, service options, and employment opportunities.
Is a distinctive, connected community known for its beauty and natural surroundings.
AGENDA ITEM DETAILS
RECOMMENDATION:
City staff is recommending that the City Council adopt a resolution related to a conduit bond issue.
ARE YOU SEEKING APPROVAL OF A CONTRACT? IS A PUBLIC HEARING REQUIRED?
No No
BACKGROUND/JUSTIFICATION:
In 2014, the City of Otsego was the Issuer of the Charter School Lease Revenue Bonds, Series 2014A and
Series 2014B for the Kaleidoscope Charter School Project. The School desires to replace the original
Depository (Wells Fargo Bank N.A.) with the Bank of Elk River. In order to do so, the City as the Issuer has
been requested to approve a First Supplemental Indenture of Trust and respective resolution.
Conduit bond issues are limited obligation revenue bonds for the express purpose of providing capital
financing for a specific third party, and although they bear the name of the City, the City has no obligation
for such debt, and are not recorded as liabilities in the financial statements of the City. The documents
included in the packet have been drafted by Taft Law, the City’s bond counsel.
SUPPORTING DOCUMENTS ATTACHED:
• First Supplemental Indenture of Trust
• Resolution 2022-60
POSSIBLE MOTION
PLEASE WORD MOTION AS YOU WOULD LIKE IT TO APPEAR IN THE MINUTES:
Motion to approve Resolution 2022-60; authorizing the first supplemental indenture and amendment of a
trust indenture related to the financing of the Kaleidoscope Charter School.
BUDGET INFORMATION
FUNDING: BUDGETED:
N/A N/A
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FIRST SUPPLEMENTAL INDENTURE OF TRUST
between
CITY OF OTSEGO, MINNESOTA
as Issuer
and
WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Trustee
Dated as of June [29], 2022
Relating To
$15,615,000
City Of Otsego, Minnesota
Charter School Lease Revenue Bonds
(Kaleidoscope Charter School Project),
Series 2014A
$385,000
City Of Otsego, Minnesota
Taxable Charter School Lease Revenue Bonds
(Kaleidoscope Charter School Project),
Series 2014B
Taft Stettinius & Hollister LLP (DEA)
2200 IDS Center
80 South Eighth Street
Minneapolis, Minnesota 55402
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FIRST SUPPLEMENTAL INDENTURE OF TRUST
THIS FIRST SUPPLEMENTAL INDENTURE OF TRUST, dated as of June [29], 2022, is made
by and between the City of Otsego, Minnesota, a municipal corporation organized and existing under the
laws of the State of Minnesota (the “Issuer” or the “City”), and Wells Fargo Bank, National Association,
a national banking association organized and existing under and by virtue of the laws of the United States
of America, with its designated trust office located in Minneapolis, Minnesota, as trustee (the “Trustee”).
RECITALS:
A. In connection with the issuance by the Issuer of its $15,615,000 Charter School Lease
Revenue Bonds (Kaleidoscope Charter School Project) Series 2014A (the “Series 2014A Bonds”), and
$385,000 Taxable Charter School Lease Revenue Bonds (Kaleidoscope Charter School Project) Series
2014B (together with the Series 2014A Bonds, the “Bonds”), for the benefit of KCS Building Company, a
Minnesota nonprofit corporation (the “Company”), the Issuer and the Company previously entered into an
Indenture of Trust dated as of February 1, 2014 (the "Original Indenture"), pursuant to which the Issuer
issued the Bonds, and a Loan Agreement dated as of February 1, 2014 (the "Original L oan Agreement")
whereby, among other things, the Company agreed to pay the principal and interest and premium due on
the Bonds; and
B. The Company used the proceeds of the Bonds to: (i) advance refund the City of Falcon
Heights, Minnesota’s Lease Revenue Bonds (Kaleidoscope Charter School Project), Series 2007A, the
proceeds of which were used, in part, to finance the acquisition, construction and equipping of an
approximately 42,700 square foot kindergarten through grade eight education facility located at
7525 Kalland Avenue N.E. in the City, (ii) acquire, construct, and equip an approximately 29,000-square-
foot grade nine through grade twelve addition to the existing education facility, consisting of a one -story
building with nine classrooms, special education, administration offices, serving kitchen and cafeteria, to
be located in the City, all to be owned by the Company and leased to Kaleidoscope Charter School, a
Minnesota nonprofit corporation and public (charter) school (the “School”); (iii) fund a debt service
reserve fund; (iv) pay a portion of the interest on the Bonds; and (v) pay the costs of issuing the Bonds
(collectively, the “Project”); and
C. The Company and the School have previously entered into an Amended and Restated
Lease Agreement, dated as of September 1, 2014 (the “Lease”), pursuant to which the School agreed to
make lease payments in the amounts and at such times as shall be necessary to pay the amounts due from
the Company under the Loan Agreement, which amounts are calculated to be sufficient to pay principal
and interest when due on the Bonds; and
D. As additional security for the timely payments of amounts due under the Lease and on the
Bonds, the School agreed to pledge pursuant to a Pledge and Covenant Agreement dated as of September
1, 2014, by the School for the benefit of the Trustee (the “Original Pledge Agreement”), certain “Adjusted
Pledged Revenues” (as defined in the Original Pledge Agreement) of the School, and made certain
additional covenants pursuant to the First Amendment to Pledge and Covenant Agreement dated
August 22, 2019, between the School and the Trustee (together with the Original Pledge Agreement, the
“Pledge Agreement”); and
E. Pursuant to the Pledge Agreement, the Trustee, the School, and Wells Fargo Bank,
National Association, as depository bank (the “Original Depository”), entered into an Account Control
Agreement dated as of September 10, 2014 (the “Original Account Control Agreement”), that permitted
the Trustee to perfect a security interest in funds of the School deposited in a bank account held by the
Original Depository; and
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F. The School desires to replace the Original Depository with The Bank of Elk River, a
Minnesota banking corporation with an office in Elk River, Minnesota (the “Replacement Depository”),
by amending the Pledge Agreement and the Indenture, terminating the Original Account Control
Agreement, and entering into a new Account Control Agreement dated as of the date hereof between the
Trustee, the School, and the Replacement Depository, which amendments and other agreements will not
materially prejudice the Trustee or Registered Owners of the Bonds; and
G. The Issuer and the Trustee are permitted under Section 11.01 of the Indenture to enter
into an indenture supplemental to the Indenture to amend any provisions of the Indenture, and under
Section 12.01 of the Indenture to amend the Security Agreements, without the consent of or notice to the
Registered Owners of the Bonds, but only if the amendments do not materially prejudice the Trustee or
the Registered Owners of the Bonds.
NOW, THEREFORE, for good and valuable consideration the receipt and sufficiency of which is
hereby acknowledged, the parties hereto agree as follows:
Section 1.01 Definitions. Section 1.01 of the Original Indenture is hereby amended to add or
amend, as appropriate, the definitions set forth below:
“Account Control Agreement” means the Account Control Agreement, dated as of September 1,
2014 between the Trustee, the School, and Wells Fargo Bank, National Association, Rogers, Minnesota;
the Account Control Agreement, dated as of June __, 2022 between the Trustee, the School, and The
Bank of Elk River, Elk River, Minnesota; or any similar agreement entered into by the Trustee, the
School, and a depository bank pursuant to the Pledge Agreement.
“Bond Counsel” means Taft Stettinius & Hollister LLP, or any other firm of nationally
recognized bond counsel acceptable to the Issuer and the Company.
“Pledge Agreement” means the Pledge and Covenant Agreement, dated as of September 1, 2014,
by and between the School and the Trustee, and any amendment thereof.
“Sweep Account” means the State Aid Revenues Account established and maintained at a
depository bank pursuant to the Pledge Agreement by the School and of which the Trustee has control
pursuant to the Account Control Agreement.
Section 1.02 Notices. Section 13.04 of the Original Indenture is hereby deleted and replaced
in its entirety with the following:
Any notice, request, complaint, demand, communication or other paper shall be sufficiently given
and shall be deemed given when delivered or mailed by registered or certified mail unless otherwise
indicated, postage prepaid, or by confirmed telecopy, addressed as follows:
If to the Issuer: City of Otsego, Minnesota
13400 90th Street N.E.
Otsego, Minnesota 55330-7259
Attn: Administrator and Finance Director
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If to the Trustee: Wells Fargo Bank, National Association
MAC: N9300-060
600 South 4th Street, 6th Floor
Minneapolis, MN 55415
Attn: Corporate Trust Services
If to the Company: KCS Building Company
c/o Kaleidoscope Charter School
7525 Kalland Avenue N.E.
Otsego, Minnesota 55301
Attn: President
With a copy to: John Cairns Law, P.A.
2751 Hennepin Avenue
Box 280
Minneapolis, Minnesota 55408
Attn: John Cairns
If to the Original Purchaser: Dougherty & Company LLC
90 South 7th Street, Suite 4400
Minneapolis, Minnesota 55402-4115
Attn: Public Finance
Copies of all notices sent hereunder shall be sent to the Majority Bondholder. The Issuer, the
Company, the Trustee, and the Original Purchaser, the Majority Bondholder may designate, by writing
delivered to the addresses stated in or pursuant to this Section 13.04, any further or different addresses to
which subsequent notices, certificates or other communications shall be sent.
Section 1.03 Opinion of Bond Counsel and Consents. This First Supplemental Indenture
shall not become effective unless and until: (a) Taft Stettinius & Hollister LLP, as bond counsel, has
delivered to the Trustee and the Issuer an Opinion of Bond Counsel stating that this First Supplemental
Indenture does not impair the tax-exempt status of the Series 2014A Bonds and an opinion of Counsel
that the supplement is authorized and permitted by this Indenture and is enforceable against the Issuer and
the Company; and (ii) will not adversely affect the exclusion from gross income for federal income tax
purposes of the interest on the Series 2014A Bonds; and (b) the Company and the Trustee have consented
to and approved this First Supplemental Indenture by executing the signature pages set forth at the end of
this First Supplemental Indenture.
Section 1.04 Effect of First Supplemental Indenture. Except as specifically amended by this
First Supplemental Indenture, the provisions of the Original Indenture remain in full force and effect. In
the event that any provisions of this First Supplemental Indenture and the Original Indenture conflict, the
provisions of this First Supplemental Indenture shall control.
Section 1.05 Counterparts. This First Supplemental Indenture may be executed in any
number of counterparts, each of which shall be deemed to be an original, but such counterparts shall,
together, constitute one and the same instrument.
Section 1.06 Electronic Signatures. This First Supplemental Indenture shall be valid,
binding, and enforceable against a party only when executed and delivered by an authorized individual on
behalf of the party by means of (i) any electronic signature permitted by the federal Electronic Signatures
in Global and National Commerce Act, state enactments of the Uniform Electronic Transactions Act,
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and/or any other relevant electronic signatures law, including relevant provisions of the Uniform
Commercial Code (“UCC”) (collectively, “Signature Law”); (ii) an original manual signature; or (iii) a
faxed, scanned, or photocopied manual signature. Each electronic signature or faxed, scanned, or
photocopied manual signature shall for all purposes have the same validity, legal effect, and admissibility
in evidence as an original manual signature. Each party hereto shall be entitled to conclusively rely upon,
and shall have no liability with respect to, any faxed, scanned, or photocopied manual signature, or other
electronic signature, of any party and shall have no duty to investigate, confirm or otherwise verify the
validity or authenticity thereof. For avoidance of doubt, original manual signatures shall be used for
execution or indorsement of writings when required under the UCC or other Signature Law due to the
character or intended character of the writings.
(The remainder of this page is intentionally left blank.)
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IN WITNESS WHEREOF, the Issuer has caused this First Supplemental Indenture to be executed
in its corporate name and with its official seal being intentionally omitted as permitted by law and attested
by its duly authorized officials; and the Trustee has caused this First Supplemental Indenture to be
executed in its corporate name, both as of the date first above written.
CITY OF OTSEGO, MINNESOTA
By ______________________________________
Its Mayor
By ______________________________________
Its Administrator
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Execution page of the Trustee to the First Supplemental Indenture of Trust, dated as of the date
and year first written above.
WELLS FARGO BANK,
NATIONAL ASSOCIATION, by Computershare
Trust Company, National Association, as attorney-
in-fact, as Trustee
By _______________________________________
Its _______________________________________
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EXTRACT OF MINUTES OF A MEETING OF THE
CITY COUNCIL OF THE CITY OF
OTSEGO, MINNESOTA
Pursuant to due call and notice thereof, a regular or special meeting of the City Council
of the City of Otsego, Minnesota (the “City”), was duly held at the Otsego Prairie Center in said
City on Monday, June 27, 2022, at 7:00 P.M.
The following Council members were present:
and the following were absent:
Council member ___________________ introduced the following resolution and moved
its adoption:
RESOLUTION NO. 2022-60
A RESOLUTION AUTHORIZING THE FIRST SUPPLEMENTAL INDENTURE AND
AMENDMENT OF A TRUST INDENTURE RELATED
TO THE FINANCING OF THE KALEIDOSCOPE CHARTER SCHOOL
AND OTHER MATTERS RELATING THERETO
The motion for the adoption of the foregoing resolution was duly seconded by Council
member __________________, and upon 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.
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RESOLUTION NO. 2022-60
A RESOLUTION AUTHORIZING THE FIRST SUPPLEMENTAL INDENTURE AND
AMENDMENT OF A TRUST INDENTURE RELATED
TO THE FINANCING OF THE KALEIDOSCOPE CHARTER SCHOOL
AND OTHER MATTERS RELATING THERETO
WHEREAS, pursuant to Resolution No. 2014-56, adopted on August 11, 2014 (the
“Original Resolution”), by the City Council of the City of Otsego, Minnesota (the “Issuer”), the
Issuer issued its $15,615,000 Charter School Lease Revenue Bonds (Kaleidoscope Charter
School Project) Series 2014A (the “Series 2014A Bonds”), and $385,000 Taxable Charter
School Lease Revenue Bonds (Kaleidoscope Charter School Project) Series 2014B (together
with the Series 2014A Bonds, the “Series 2014 Bonds”), pursuant to an Indenture of Trust dated
as of February 1, 2014 (the "Original Indenture"), between the Issuer and Wells Fargo Bank,
National Association, as trustee (the “Trustee”), and loaned proceeds of the Series 2014 Bonds to
KCS Building Company, a Minnesota nonprofit corporation (the “Borrower”), pursuant to a
Loan Agreement dated as of February 1, 2014, between the Issuer and the Borrower; and
WHEREAS, the Issuer and the Trustee have agreed to certain modifications to the
Original Indenture and, to give effect thereto, have requested that the Issuer enter into a First
Supplemental Indenture of Trust (the “First Supplemental Indenture”) between the Issuer and the
Trustee; and
WHEREAS, the Original Indenture may be amended without the consent of or notice to
the Registered Owners (as defined in the Original Indenture) of the Series 2014 Bonds because,
as represented by the Borrower and not objected to by the Trustee, the amendments do not
materially prejudice the Trustee or the Registered Owners; and
WHEREAS, the City Council of the Issuer (the “Council”) has been informed by Taft
Stettinius & Hollister LLP, as bond counsel, that the First Supplemental Indenture is permitted
by and complies with the terms of the Original Indenture;
WHEREAS, the proposed form of the First Supplemental Indenture has been made
available to the Council; and
WHEREAS, based on the request of the Borrower, the Council has determined that the
First Supplemental Indenture is in the best interest of the Borrower and is in furtherance of the
Issuer’s public purpose as set forth in the Original Resolution;
NOW THEREFORE, BE IT RESOLVED by the City Council of the City of Otsego,
Minnesota, as follows:
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1. Approval and Execution of Documents. The proposed form of the First
Supplemental Indenture, as presented to this meeting, is hereby approved. The Mayor and the
City Administrator and Finance Director or any member of the Council (each an “Authorized
Signatory” and collectively, the “Authorized Signatories”) are hereby authorized and directed,
jointly and severally, to execute the First Supplemental Indenture in the name and on behalf of
the Issuer, in substantially the form on file, but with such changes and insertions therein as such
Authorized Signatory, with the advice of counsel to the Issuer, may approve, such approval to be
conclusively evidenced by the execution thereof and delivery to the Trustee. The Authorized
Signatories are authorized to do any and all things and take any and all actions which may be
necessary or advisable, in their discretion, to effectuate the actions which the Issuer has approved
in this Resolution and to consummate by the Issuer the transactions contemplated by the
documents approved hereby, including any subsequent amendments, waivers or consents entered
into or given in accordance with such documents. Modifications to the forms of documents to
which the City is not a party may be made at the discretion of the parties thereto.
2. Electronic Signatures. The facsimile, electronic or digital signature of any
Authorized Signatory shall be deemed to be the legal equivalent of a manual signatur e on
specified documents or on all documents and valid and binding for all purposes. If any
Authorized Signatory whose signature, countersignature or attestation appears on the First
Supplemental Indenture or any related document ceases to be an official before the execution and
delivery of the First Supplemental Indenture, his or her signature, countersignature or attestation
appearing on the First Supplemental Indenture and any related document (regardless of whether
any such related document is specifically identified in this Resolution) is valid and sufficient for
all purposes to the same extent as if he or she had remained in the office until the execution and
delivery of the First Supplemental Indenture.
3. No Liability of City. Nothing in this Resolution or in the documents prepared
pursuant hereto shall authorize the expenditure of any municipal funds other than the revenues
derived from the Project (as defined in the Original Indenture) or otherwise granted to the Issuer
for this purpose. The Series 2014 Bonds do not and shall not constitute a charge, lien, or
encumbrance, legal or equitable, upon any property or funds of the Issuer except the revenues
and proceeds pledged to the payment thereof, nor shall the Issuer be subject to any liability
thereon. The holders of the Series 2014 Bonds do not have the right to compel any exercise of
the taxing power of the Issuer to pay the outstanding principal on the Series 2014 Bonds or the
interest thereon, or to enforce payment thereof against any property of the Issuer. The
Series 2014 Bonds recite in substance that the Series 2014 Bonds, including interest thereon, are
payable solely from the revenue and proceeds pledged to the payment thereof. The Series 2014
Bonds do not and shall not constitute a debt of the Issuer within the meaning of any
constitutional or statutory limitation.
4. Effect of First Supplemental Indenture. Except to the extent modified by the First
Supplemental Indenture, all provisions of the Original Indenture are hereby confirmed in full
force and effect.
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5. Effective Date of Resolution. This Resolution shall take effect from and after its
adoption.
Adopted by the City Council of the City of Otsego, Minnesota, on June 27, 2022.
_______________________________________
Mayor
ATTEST:
_________________________________
City Administrator and Finance Director
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STATE OF MINNESOTA
COUNTY OF WRIGHT
CITY OF OTSEGO
I, the undersigned, being the duly qualified and acting City Administrator and Finance
Director of the City of Otsego, 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 a supplemental indenture for the Kaleidoscope Charter School.
WITNESS my hand and the seal of said City this ___ day of __________, 2022.
_______________________________________
City Administrator and Finance Director