BY COUNCILOR HOGG:

BE IT RESOLVED, by the city council of the city of Duluth, Minnesota, as follows:

Section 1. Definitions; Recitals; Purpose.

1.01 Definitions. For purposes of this Resolution, the following terms have the meanings given unless the context hereof clearly requires otherwise:
"Act" means Minnesota Statutes, Sections 471.15 through 471.191, as the same may be amended.
"Agreement" shall mean the Use and Management Agreement dated the date of original issuance of the Bonds between the Issuer and the Authority.
"Authority" means the Spirit Mountain Recreation Area Authority, an authority created pursuant to the Recreation Area Act.
"Board" shall mean the Board of Directors of the Authority.
"Bonds" means the Gross Revenue Recreation Facility Bond (Spirit Mountain Recreation Area), Series 2003, the form of which is set forth in Section 5 hereof.
"City Council" means the governing body of the Issuer, and any successor to its functions.
"Code" means the Internal Revenue Code of 1986, as amended.
"Debt Service" means the principal installment of the Bonds and interest on the Bonds and any service charge or premium, if any, due thereunder.
"Debt Service Fund" means the 2003 Revenue Bond Account created in Section 6.02A hereof.
"Fiscal Year" shall mean the twelve-month period beginning on May 1 of the one year and ending on April 30 of the next year.
"Fund" means the Issuer's Spirit Mountain Recreation Area Fund created in Section 6.01 hereof.
"Gross Revenues" shall mean the gross revenues generated from the Project. All gross revenues (before reduction for costs of goods sold), income and receipts, rents, issues, profits, reversions, royalties, bonuses, commissions, sales, Tourism Taxes pledged pursuant to Section 6.02B, rights and benefits due, payable or accruing (including all deposits of money as advanced rent or for security) from the operation of the Project and any part thereof, from services and facilities furnished or made available to any person, and from any and all leases, subleases, concessions or renewals thereof, with respect to any part of the Project, and all earnings on the investments thereof.
"Installment Payment Date" means June 1 and December 1, commencing December 1, 2003, the dates on which a payment of principal of or interest on the Bonds is due and payable.
"Issuer" means the City of Duluth, St. Louis County, Minnesota, a home rule charter city and political subdivision of the State of Minnesota.
"Lease" means the Lease-Purchase Agreement between the Purchaser and the Authority dated April 2, 2001.
"Operating Expense" shall mean those items of cost which under accepted accounting practice are normal, reasonable, current and necessary expenses of the operation and maintenance of the Project.
"Prepayment Account" shall mean the account established within the Fund, pursuant to Section 6.01B hereof.
"Primary Lease" means the Primary Lease between the Authority and the Purchaser dated as of April 2, 2001.
"Project" or "Recreation Facility" shall mean the Recreation Area and the buildings, improvements and equipment now or hereafter part of or located in the Recreation Area and any part thereof.
"Purchaser" shall mean Wells Fargo Bank Minnesota, National Association or the registered assigns of the Bonds registered as to principal and interest.
"Recreation Area" shall mean the tracts of land used by the City and managed by the Authority and described on Exhibit A hereto.
"Recreation Area Act" shall mean Minnesota Laws 1973, Chapter 327 as amended by Minnesota Laws 1974, Chapter 345; Minnesota Laws 1979, Chapters 88 and 270; Minnesota Laws 1984, Chapter 390; and Minnesota Laws 1992, Chapter 476, Section 13, as may be further amended from time to time.
"Registrar" or "Bond Registrar" has the meaning given in Section 4.01 of this Resolution.
"Spirit Mountain Operating Fund" shall mean such fund maintained by the City Treasurer, pursuant to the Recreation Area Act and referred to in Section 6.01B hereof.
"State" shall mean the State of Minnesota.
"Tourism Taxes" shall mean 1% of the sales tax imposed by the Issuer pursuant to Laws of Minnesota 1980, Chapter 511, Section 1, Subd. 2, and Section 2, as amended, and implementing ordinances, on gross receipts on sales of certain food and beverage and on lodging in hotels and motels within the City of Duluth (excluded therefrom, however, other sales tax including the additional one-half percent tax authorized by Laws of Minnesota 1998, Chapter 389, Article 8, Sections 25 and 26).

1.02 Pursuant to the Act, the Issuer operates a program of public recreation, of which the Spirit Mountain Recreation Area and the buildings, fixtures and equipment thereon are a part.

1.03 Under and pursuant to the provisions of Minnesota Statutes, Chapter 475 and Section 471.191, the City charter and other laws thereunto enabling, the Issuer is authorized to issue its revenue bonds payable solely from the income of land, buildings and facilities and secured by a pledge of all income and revenues of whatsoever nature derived from any such land, buildings and facilities as a first charge on the gross revenues thereof to the extent necessary to pay bonds and the interest thereon when due and to accumulate and maintain additional reserves for that purpose.

1.04 The Authority, as the operator of the Spirit Mountain Recreation Area and the buildings, fixtures and equipment thereon, and the Issuer deem it necessary and in the best interest of the Issuer and the Authority and for the fulfillment of the objections of the legislation authorizing the creation of Recreation Facility, to refinance certain obligations of the Authority, the proceeds of which were used to construct, acquire and improve Recreation Facility.

1.05 The Issuer shall enter into a Use and Management Agreement with the Authority regarding the use and management of Recreation Area, and the Bonds shall be issued pursuant to this Resolution.

1.06 A form of the Agreement proposed to be made and entered into between the Issuer and the Authority is on file in the office of the City Clerk (Public Document No. ________).

1.07 The City Council hereby determines that it is necessary, expedient and in the best interests of its residents that the Issuer issue and sell the Bonds, the proceeds of which, along with other available funds of the Issuer and the Authority, will be used to prepay the Lease and refinance the obligations thereunder.

Section 2. Authorization and Sale of the Bonds.

2.01 The Bonds. The sale of the Bonds is hereby authorized.

2.02 Limited Obligation. The Bonds and the interest accruing thereon are payable solely from the Gross Revenues and do not give rise to a charge against the general credit or taxing powers of the Issuer and neither the full faith and credit nor the taxing powers of the Issuer are pledged for the payment of the Bonds or interest thereon.

2.03 Sale. The offer of the Purchaser to purchase the Bonds at a cash price equal to the stated principal amount of the Bonds, upon the terms and conditions hereinafter specified, is hereby accepted.

2.04 Use and Management Agreement. The Agreement is hereby approved. The Mayor and the City Clerk are hereby authorized and directed to execute and deliver the Agreement, substantially in the form now on file with the City Clerk, with such necessary and appropriate omissions, modifications, insertions and additions as do not materially affect the substance of the transaction, consistent with the Act and with the Recreation Area Act, as the Mayor in his discretion shall determine. The execution of the Agreement by the Mayor, with the advice of the City Attorney, shall be conclusive evidence of such determination. All of the provisions of the Agreement, when executed and delivered as authorized herein, shall be deemed to be a part of this Resolution as fully and to the same extent as if incorporated herein and shall be in full force and effect from the date of execution and delivery thereof.

Section 3. Terms of the Bonds.

3.01 The Bonds.

A. Terms. The Bonds shall be dated as of the date of its execution and delivery, shall be issued as a single bond in the denomination of $1,646,749.70, in fully registered form and lettered and numbered R-1. The Bonds shall mature in installments as set forth in the Bond, with a final installment on December 1, 2012, and shall bear interest at the annual rate of 4.50 percent from the date of the first advance thereunder until the principal amount of the Bonds is fully paid or the payment thereof has been duly provided.

B. Installment Payment Dates. Interest on the Bonds will be payable commencing December 1, 2003, and semiannually thereafter on June 1 and December 1 through and including December 1, 2012. Principal of the Bonds will be payable in installments commencing June 1, 2004, and semiannually thereafter on June 1 and December 1 through and including December 1, 2012. Interest will be computed upon the basis of a year of 360 days composed of twelve 30-day months and actual days elapsed and rounded according to the rules of the Municipal Securities Rulemaking Board.

3.02 Prepayment.

A. Prepayment. The Issuer may prepay the Bonds in whole or in part without penalty on any business day.

B. Notice of Prepayment. All prepayments are subject to 30 days' prior notice to the Purchaser as provided in the Bonds and Section 4.02D of this Resolution (provided that the Purchaser may waive or shorten such notice requirement).

C. Optional Call by Purchaser. The Purchaser may, at its option, require the Issuer to prepay and redeem the outstanding Bonds on October 1, 2006; provided, however, the Purchaser shall provide the Issuer with at least six (6) months written notice of such election to call the Bonds for prepayment. Such prepayment shall be at par plus accrued interest to such redemption date.

3.03 Application of Payments. Payments on the Bonds and the proceeds and avails of any remedy exercised by the Purchaser shall be applied as follows:

A. First, to the payment of all costs and proper expenses (including reasonable attorneys' fees as provided herein or as otherwise permitted by law), liabilities incurred or advances made hereunder by the Purchaser;

B. Second, to the payment to the Purchaser of the amount then owing or unpaid for interest due on the Bonds;

C. Third, to the payment to the Purchaser, of the amount then owing or unpaid for principal due on the Bonds and then to the installments of principal last coming due on the Bonds;

D. Fourth, provided that all other amounts owing under the Bonds have been paid, to the payment of any excess to the Issuer, its successors and assigns, or to whomsoever may be lawfully entitled to receive the same.

3.04 Preparation. The Bonds shall be prepared for execution in accordance with the approved form and shall be signed by the manual signature of the Mayor and attested by the manual signature of the Clerk. The corporate seal of the Issuer need not be used. The legal opinion of bond counsel shall be attached to the Bonds. In case any officer whose signature shall appear on the Bonds shall cease to be an officer before delivery of the Bonds, such signature shall nevertheless be valid and sufficient for all purposes, the same as if he or she had remained in office until delivery.

3.05 Delivery. Delivery of the Bonds and payment of the purchase price shall be made at a place mutually satisfactory to the Issuer and the Purchaser. A typewritten and executed Bonds shall be furnished by the Issuer without cost to the Purchaser. The Bonds when prepared in accordance with this Resolution and executed shall be delivered by or under the direction of the Treasurer of the Issuer to the Purchaser.

Section 4. Registration and Payment.

4.01 Designation of Bond Registrar. The City Council hereby appoints the City Treasurer as bond registrar, paying agent and transfer agent for the Bonds (the "Registrar").

4.02 Registration and Transfer.

A. Bond Register. The Issuer shall cause to be kept at the principal office of the Registrar, a register in which, subject to such reasonable regulations as it may prescribe, the Issuer shall provide for the registration of transfers of ownership of the Bonds as herein provided.

B. Registration. The Bonds shall be initially registered in the name of the Purchaser and the Bonds, or any portion thereof, shall be transferable upon the bond register by the Purchaser in person or by its agent duly authorized in writing, upon surrender of the Bonds together with a written instrument of transfer, in form satisfactory to the Registrar, duly executed by the Purchaser or its duly authorized agent. Upon such transfer the Registrar shall note the date of registration and the name and address of the new holder in the bond register and in the registration blank appearing on the Bonds.

C. Exchange or Transfer. All bonds issued in exchange for or upon transfer of the Bonds shall be valid obligations of the Issuer evidencing the same debt and entitled to the same benefits under this Resolution as the Bonds surrendered for such exchange or transfer.

D. Notice of Redemption. In the event the Bonds are called for redemption, notice thereof will be given by the Registrar by mailing a copy of the redemption notice by first class mail, postage prepaid, not less than 30 days prior to the date fixed for redemption to the registered owner of the Bonds at the address shown on the registration books kept by the Registrar, provided that the registered holder of the Bonds may waive or shorten such notice.

4.03 Ownership. The Issuer and the Registrar may treat the person in whose name any Bonds is registered as the owner of such Bonds for the purpose of receiving payment of principal of and interest on the Bonds, and for all other purposes whatsoever, whether or not such Bonds be overdue and neither the Issuer nor the Registrar shall be affected by any notice to the contrary.

4.04 Payment; Record Date.

A. The principal of and interest on the Bonds shall be payable by the Registrar as paying agent in such funds as are legal tender for the payment of debts due the United States of America. Principal and interest shall be payable at the principal office of the Purchaser, or at such other place as the Purchaser may designate in writing.

B. Interest on the Bonds which is payable, and is punctually paid or duly provided for, on any Installment Payment Date shall be paid to the person in whose name the Bonds is registered at the close of business on the 15^th day of the month preceding such Installment Payment Date.

Section 5. Form of Bonds. The Bonds shall be typewritten in substantially the form set forth as follows:

UNITED STATES OF AMERICA
STATE OF MINNESOTA
COUNTY OF ST. LOUIS

CITY OF DULUTH, MINNESOTA
GROSS REVENUE RECREATION FACILITY BOND
(SPIRIT MOUNTAIN RECREATION AREA), SERIES 2003

THIS BOND HAS NOT BEEN REGISTERED UNDER THE FEDERAL SECURITIES ACT OF 1933, AS AMENDED AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF FOR VALUE, OR TRANSFERRED, WITHOUT (i) AN OPINION OF COUNSEL APPROVED BY THE ISSUER THAT SUCH SALE, DISPOSITION OR TRANSFER MAY LAWFULLY BE MADE WITHOUT REGISTRATION UNDER THE FEDERAL SECURITIES ACT OF 1933, AS AMENDED AND UNDER APPLICABLE STATE SECURITIES LAWS, OR (ii) SUCH REGISTRATION. THE TRANSFERABILITY OF THIS BOND IS SUBJECT TO RESTRICTIONS REQUIRED BY (1) FEDERAL AND STATE SECURITIES LAWS GOVERNING UNREGISTERED SECURITIES; (2) THE RULES, REGULATIONS, AND INTERPRETATIONS OF THE GOVERNMENTAL AGENCIES ADMINISTERING SUCH LAWS; AND (3) THE PROCEDURE ESTABLISHED BY THE ISSUER TO EFFECT COMPLIANCE THEREWITH AND AGREED TO BY THE OWNER OF SUCH SECURITIES.

THIS BOND HAS NOT BEEN REGISTERED UNDER CHAPTER 80A OF THE MINNESOTA SECURITIES LAWS OR APPLICABLE STATE BLUE SKY LAWS AND MAY NOT BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF FOR VALUE EXCEPT PURSUANT TO REGISTRATION OR OPERATION OF LAW.

REGISTERED OWNER: WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION

PRINCIPAL AMOUNT: ONE MILLION SIX HUNDRED FORTY-SIX THOUSAND SEVEN HUNDRED FORTY-NINE AND 70/100 DOLLARS

The CITY OF DULUTH, MINNESOTA, in St. Louis County, Minnesota (the "Issuer") for value received promises to pay to the registered owner specified above or registered assigns (hereinafter called the "Purchaser"), the principal amount specified above or a lesser amount which is advanced and outstanding hereunder, with interest on the outstanding principal balance as set forth below or so much thereof as remains unpaid and outstanding hereunder from time to time (the "Principal Balance"), and to pay interest on said Principal Balance to the registered owner hereof from the date of original issue set forth above, or from the most recent Installment Payment Date to which interest has been paid or duly provided for, until the principal amount is paid or discharged at the annual rate set forth above. The principal and interest must be paid in any coin or currency which at the time or times of payment is legal tender for the payment of public and private debts in the United States of America. This Bond is payable in the amounts and at the times described below.

A. Schedule of Payments.

Payments of principal and interest at the rate set forth above on the outstanding principal amount hereof will be payable on the dates and in the amounts set forth below. (Any date on which an installment of principal and/or interest is due and payable is referred to herein as an "Installment Payment Date.")

The entire outstanding Principal Balance and interest, if not sooner paid, must be paid in full on the final Installment Payment Date set forth above.

B. Calculation of Interest.

Interest will be computed upon the basis of a year of 360 days composed of twelve, 30-day months and actual days elapsed and rounded according to the rules of the Municipal Securities Rulemaking Board.

C. Application of Payments.

Payments will be applied in accordance with Section 3.03 of the Resolution described below.

D. Prepayment.

The Issuer may prepay the Bond in whole or in part without penalty on any business day, upon notice as provided in the Resolution.

The registered owner of the Bond may, at its option, require the Issuer to prepay and redeem the Bond on October 1, 2006, upon written notice provided to the Issuer at least six months prior to the redemption date as provided in this Resolution.

Payment; Record Date. Both the principal thereof and the interest thereon are payable in lawful money of the United States of America on each Installment Payment Date in the amount necessary to pay Debt Service due on such Installment Payment Date or by check or draft by the City Treasurer as registrar, paying agent and transfer agent (the "Registrar"). The Registrar shall make all principal and interest payments with respect to this Bond directly to the registered owner hereof shown on the registration records maintained on behalf of the Issuer by the Registrar at the close of business on the 15^th day of the month next preceding the Installment Payment Date (whether or not a business day) at such owner's address shown on said registration records without presentation or surrender of this Bond, and all such payments shall discharge the obligation of the Issuer to the extent of the payments so made.

Purpose. This Bond is issued as a single, fully registered bond in the amount of $1,646,749.70, pursuant to and in full compliance with the Constitution and laws of the State of Minnesota, including Minnesota Statutes, Sections 471.15 through 471.191, and pursuant to a resolution duly adopted by the City Council of the Issuer on March 20, 2003 (the "Resolution"). This Bond is issued for the purpose of refinancing certain obligations incurred in connection with the Spirit Mountain Recreation Area, the proceeds of which were used to construct, acquire and improve the various recreational buildings, facilities and equipment within such Recreation Area. The use of the Spirit Mountain Recreation Area, its management and the improvement thereof are provided for in a Use and Management Agreement, dated as of March 28, 2003, by and between the Issuer and the Spirit Mountain Recreation Area Authority.

Security. This Bond, along with other bonds similarly issued, is payable solely from gross revenues to be derived by the Issuer from the operation of the Recreation Facility (the "Gross Revenues") and from certain other funds of the Issuer described in the Resolution.

Transfer and Exchange. As provided in the Resolution and subject to certain limitations set forth therein, this Bond, or any portion thereof, shall be transferable upon the books of the Issuer at the office of the Registrar, by the registered owner hereof in person or by its agent duly authorized in writing, at the owner's expense, upon surrender hereof together with a written instrument of transfer satisfactory to the Registrar, duly executed by the registered owner or its duly authorized agent. Upon such transfer the Registrar will note the date of registration and the name and address of the new registered owner in the resignation blank appearing below. The Issuer may deem and treat the person in whose name this Bond is last registered upon the books of the Issuer with such registration noted on this Bond, as the absolute owner hereof, whether or not overdue, for the purpose of receiving payment of or on the account, of the Principal Balance, redemption price or interest and for all other purposes, and all such payments so made to the registered owner or upon its order shall be valid and effective to satisfy and discharge the liability upon this Bond to the extent of the sum or sums so paid, and the Issuer shall not be affected by any notice to the contrary.

Limited Obligation. This Bond is a special limited obligation of the Issuer payable solely from the Gross Revenues. This Bond and the interest hereon shall not be deemed to constitute a general obligation of the State of Minnesota or any political subdivision thereof, including, without limitation, the Issuer, and neither the full faith and credit, the assets, nor the taxing power of the State of Minnesota, or any political subdivision thereof, including, without limitation, the Issuer are pledged to payment of principal of or interest on this Bond, or other costs incident hereto.

IT IS HEREBY FURTHER CERTIFIED AND RECITED that all conditions, acts and things required by the Constitution and the laws of the State of Minnesota to be done, to exist, to happen and to be performed precedent to or in the issuance of this Bond have been done, do exist, have happened and have been performed in regular and due form as required by law, and that the issuance of this Bond does not cause the indebtedness of the Issuer to exceed any constitutional or statutory limitation of indebtedness.

IN WITNESS WHEREOF, the Issuer has caused this Bond to be duly executed in its name by the manual signatures of the Mayor and Clerk, and has caused this Bond to be dated as of the date of original issue set forth above.

CITY OF DULUTH, MINNESOTA

______________________________
Mayor

ATTEST:

__________________________________
Clerk

PROVISIONS AS TO REGISTRATION

The ownership of the unpaid principal balance of this Bond and the interest accruing thereon is registered on the books of the City of Duluth, St. Louis County, Minnesota, in the name of the holder last noted below.

FOR VALUE RECEIVED, the undersigned sells, assigns and transfers unto ___________________________________________________________________________________
___________________________________________________________________________________
(Name and Address of Assignee)

____________________________ (Social Security or Other Identifying Number of Assignee) the within Bond and all rights thereunder and does hereby irrevocably constitute and appoint _____________________________________ attorney to transfer the said Bond on the books kept for registration thereof with full power of substitution in the premises.

Dated: ____________________

______________________________

NOTICE: The signature to this assignment must correspond with the name of the registered owner as it appears upon the face of the within Bond with every particular, without alteration or enlargement or any change whatsoever.

Signature Guaranteed:

______________________________
(Bank, Trust Company, member of
National Securities Exchange)

Section 6. Disposition of Bonds Proceeds; Covenants, Accounts and Representations.

6.01 Spirit Mountain Recreation Area Fund.

A. Pursuant to Section 471.191 of the Act, the Issuer covenants with the Purchaser that, until the Bonds are fully paid or discharged as provided in this Resolution, it will establish and continue to maintain on its official books and records the separate and special Spirit Mountain Recreation Area Fund (the "Fund"), into which it will pay as received all Gross Revenues, and will maintain separate and accurate bookkeeping accounts in this Fund to record all receipts and disbursements for the acquisition, betterment, operation, maintenance and financing of the Recreation Facilities, as provided in this Section.

B. As long as any portion of the Bonds is outstanding and unpaid either as to principal or as to interest, or until all of the Bonds then outstanding have been discharged and satisfied in the manner provided in this Resolution, the Gross Revenues shall be deposited as collected in the Fund and will be credited and disbursed only as set forth in this Resolution and the Agreement from the Fund and the following accounts:

1. 2003 Bond Debt Service Account
2. Prepayment Account
3. Repair and Replacement Account
4. Spirit Mountain Operating Fund

C. Any Gross Revenues not needed for deposits required in Sections 6.02, 6.03 and 6.04 shall be available for creating an operating reserve, capital improvements to the Recreation Facility or prepayment of the Bonds.

6.02 Debt Service Fund.

A. Creation of Debt Service Fund. The Issuer hereby creates and establishes its 2003 Revenue Bond Account as an account in the Fund (the "Debt Service Fund") as a separate and distinct bookkeeping account in the Fund into which it will deposit Gross Revenues in an amount sufficient for payment of principal of and interest on the Bonds.

B. Pledge of Gross Revenues. In order to provide for payment of Debt Service on the Bonds, the Issuer hereby irrevocably pledges and appropriates and will credit to the Debt Service Fund as a first lien and charge on all Gross Revenues, at the times and amounts needed to pay Debt Service on the Bonds when due on the Installment Payment Dates. To fulfill the pledge in the prior sentence, pursuant to Laws of Minnesota 1980, Chapter 511, Subd. 3, as amended, the Issuer hereby pledges and appropriates Tourism Taxes in the amount of $225,000 per year, commencing in calendar year 2004, to pay principal of and interest on the Bonds. Such amounts appropriated from Tourism Taxes shall constitute a portion of the Gross Revenues of the Recreation Facility.

C. Sufficiency of Gross Revenues. The Issuer represents and covenants that Gross Revenues are and shall be during the term of the Bonds deposited in the Debt Service Fund in an amount sufficient to pay when due the Debt Service thereon.

6.03 Spirit Mountain Operating Fund. In order to provide for payment of the Operating Expenses of the Recreation Facility, the Issuer shall transfer Gross Revenues to and deposit in the Spirit Mountain Operating Fund, created and maintained by the City Treasurer pursuant to the Recreation Area Act, each month the amount needed for payment of the Operating Expenses for the Project which are then due and owing.

6.04 Repair and Replacement Account. In order to provide for proper and adequate repairs and replacements to the facilities and equipment used in connection with the Recreation Area, the Issuer shall transfer to and deposit in the Repair and Replacement Account from Gross Revenues in the Fund, $75,000 on each November 15, December 15 and January 15, commencing on November 15, 2003. The monies in such account may be expended by the Authority for such repairs and replacements to the Recreation Facilities in accordance with the terms and procedures set forth in the Agreement.

6.05 Prepayment Account. The proceeds of the Bonds shall be credited to the Prepayment Account and shall be used to prepay the Lease on the date of issuance of the Bonds. In connection with such prepayment, the Lease and the Primary Lease shall terminate.

6.06 Investments. Monies on deposit in the Fund and the accounts therein may, at the discretion of the Treasurer, be invested in securities permitted by Minnesota Statutes, Chapter 118A; provided, that any such investments shall mature at such times and in such amounts as will permit for payment of the principal and interest on the Bonds when due and the Operating Expenses. Investment earnings on monies in the Fund and the accounts therein shall be credited to respective Fund and accounts.

6.07 Limited Obligation of the Issuer.

A. Limitation. Debt Service shall be payable solely from the Gross Revenues and any proceeds derived from the Bonds which are not otherwise expended in redeeming and prepaying the Lease and interest accrued thereon and is not payable from or a charge upon any funds other than the Gross Revenues and proceeds pledged to the payment thereof, and the Purchaser or other holder of the Bonds shall never have the right to compel any exercise of the taxing power of the Issuer to pay the Bonds or the interest thereon, and the Bonds does not constitute a charge, lien or encumbrance, legal or equitable, upon any property of the Issuer other than the Gross Revenues.

B. No Parity Debt. The obligation to apply Gross Revenues to the payment of Debt Service on the Bonds and the pledge of Gross Revenues for such purpose shall at all times be prior and superior to any other obligation of the Issuer to apply all or any part of Gross Revenues to the payment of debt service due on any other indebtedness of the Issuer hereafter incurred in connection with the Recreation Facility and the pledge of such Gross Revenues; and provided, however, in no event shall the foregoing provision be deemed to excuse or limit in any respect the Issuer's payment obligations set forth in the Bonds.

Section 7. Covenants.

7.01 Operating Covenants. The Issuer covenants and agrees with the Purchaser that so long as any amounts due on the Bonds remain outstanding and unpaid, the Issuer will keep and enforce the following covenants and agreements:

A. Continued Ownership. Except as provided in clause C, the Issuer (or the Authority) will continue its ownership of the Recreation Facility and will not sell or dispose of its interest in all or any portion thereof.

B. Fees, Rentals and Charges. The Issuer hereby covenants that it will, to the extent authorized by law and the agreement, or will cause the Authority to, establish, maintain, revise when necessary and collect charges for all services, use, and occupancy of the Project in the amounts and at the times required to produce the revenues pledged, including but not limited to, to produce Gross Revenues in each Fiscal Year at least equal to the amount of the annual Debt Service on the Bonds, and also sufficient, with any other funds appropriated by the City Council from time to time, to provide adequately for the operation and maintenance of the Project.

C. Financial Statements; Audit.

(1) The Issuer and the Authority shall keep proper books of record and amount in which full, true and correct entries shall be made of all dealings or transactions of or in relation to the business and affairs of the Project, in accordance with generally accepted accounting principles consistently applied.

(2) The City Auditor, under the direction of the Director of Finance, is required by the Recreation Area Act at least once each year to make or cause to be made a complete examination and audit of all books and accounts of the Project at its expense. The Issuer covenants that such audit will be made by the State Auditor, or by an independent certified public accountant, and that a copy of the report of each such audit will be filed with the Purchaser as soon as possible after the end of each Fiscal Year. Each report of audit shall be based upon an examination made in accordance with generally accepted auditing standards and shall include, in addition to any other matters thought appropriate by the Auditor:

(i) a statement in detail of the income and expenditures of the Project for the year, separating and identifying Gross Revenues, Operating Expenses and capital expenditures;

(ii) a balance sheet as of the end of the year;

(iii) the amount then on hand in the Fund and separate accounts therein; and

(iv) a statement of insurance then in effect with respect to any of the properties and operations of the Project.

D. Collections. The Authority is directed by the Recreation Area Act to appoint a person responsible for the custody and control of all monies received and collected from the operation of the Project until delivered to and receipted for by the City Treasurer, or deposited in a bank account under the control of the City Treasurer; except that the Authority may enter into a contract with any person for the management of all or part of the facilities of the Project, and to delegate to such person the custody and control of monies necessary under such an arrangement. In the Agreement, the Authority has entered into such an arrangement with the Issuer. Should a person other than the Issuer enter into such an arrangement and only if the Issuer has approved such an arrangement, the following shall apply: each such responsible person or manager shall be bonded with a qualified surety company in an amount not less than $50,000, and not less than the amount which he may reasonably be expected to control at any time prior to the deposit thereof with or to the credit of the City Treasurer, as determined by the Authority in the exercise of reasonable discretion. In accordance with the Recreation Area Act each other officer or employee authorized to control funds at any time shall be similarly bonded in an amount not less than the amount so authorized. All such bonds shall be approved in form and substance by the City Attorney. Premiums therefor shall be paid as an Operating Expense unless paid by a manager under contract. A list of all such persons and the amounts of and sureties on their bonds, certified by the representative of the Authority, shall be filed with the Issuer and revised at least once annually.

E. Leases, Sales and Use Contracts.

(1) Pursuant to the Agreement, the Issuer may lease, sell or contract in any manner for the use of real and personal property within the Recreation Area, for any use consistent with the purposes of the Recreation Area Act. The proceeds of any such sale and the rentals or other payments under any such lease or contract are part of the Gross Revenues pledged and assigned to the Purchaser by this Resolution.

(2) Personal property may be sold upon receipt of adequate consideration therefor, but the Issuer covenants that:

(i) no property will be disposed of in violation of the terms of a grant of funds used to acquire it;

(ii) operating equipment and furnishings will not be disposed of if such disposition will cause a material adverse effect on the ability of the Project to produce, in each Fiscal Year, Gross Revenues that are two times the annual Debt Service on the Bonds; and

(iii) the net proceeds of any such property will be deposited in the Fund.

(3) The Issuer covenants that personal property now or hereafter situated on the Recreation Area will not be leased nor will any concession or other contract for the use thereof be granted, without express subordination of the interest of the lessee or other contracting party to the pledge of this Resolution; and that every such lease, concession or contract shall require the lessee or other contracting party to pay all costs of operation and maintenance of the property to be used thereunder, and to pay rentals therefor on an absolute net basis, which rentals shall be deposited as received in the Fund.

7.02 Payment of Bonds. The Issuer will promptly pay the principal of and interest on the Bonds according to the true intent and meaning thereof, at the places, on the dates and in the manner provided herein and in the Bonds and will pay interest (to the extent enforceable under applicable law) on any overdue installments of principal or interest at the same rate per annum as stated in the Bonds, but solely from the Gross Revenues herein pledged and appropriated for such payments.

7.03 Execution of Additional Instruments. The Issuer will, upon reasonable request by the Purchaser, execute and deliver and secure the execution and delivery by the proper officers of the Issuer of such instruments, and will do such further acts, as may be necessary or proper to carry out more effectually the purpose of this Resolution.

7.04 Tax Covenants. The Issuer shall take all steps necessary to preserve the tax-exempt status of the Bonds, including without limitation the taking of all such actions as are required and lawful to prevent the interest on the Bonds from becoming taxable for federal income tax purposes to the owners thereof, all of which actions shall include, but are not limited to, the following:

(1) The Issuer hereby covenants not to use the Recreation Facility or to cause or permit the Recreation Facility to be used by a non-governmental person, in such a manner as to cause the Bonds to be a "private activity bond" within the meaning of Sections 103 and 141 through 150 of the Code.

(2) The Issuer shall spend the gross proceeds of the Bonds to pay the redemption price of the Lease on the date of issuance of the Bonds, and shall take other actions as may be necessary to exempt the gross proceeds of the Bonds from the arbitrage rebate requirements of Section 148(f) of the Code.

(3) No portion of the proceeds of the Bonds shall be used directly or indirectly to acquire higher yielding investments or to replace funds which were used directly or indirectly to acquire higher yielding investments, except (1) for a reasonable temporary period until such proceeds are needed for the purpose for which the Bonds were issued, and (2) in addition to the above, in an amount not greater than the lesser of five percent 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 Debt Service Fund (or any other Issuer account which will be used to pay principal and interest to become due on the Bonds) in excess of amounts which under the applicable federal arbitrage regulations may be invested without regard as to yield shall not be invested at a yield in excess of the applicable yield restrictions imposed by the arbitrage regulations on such investments after taking into account any applicable temporary periods of minor portion made available under the federal arbitrage regulations.

(4) The proceeds of the Bonds and money in the Debt Service 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 Code.

7.05 Operation and Maintenance.

(1) The Issuer hereby covenants that it:

(i) will or will cause the Authority to maintain and operate the Project as a public ski area so long as any of the Bonds are outstanding;

(ii) will continuously furnish and equip the Project so that it shall at all times be an operational complex of facilities suitable as a public ski area;

(iii) will at all times maintain, preserve and keep the Project and every part thereof in good condition, repair and working order;

(iv) will from time to time make all needful and proper repairs, replacements, additions, betterment and improvements so that its operations and business may at all times be conducted properly and advantageously;

(v) will do all things possible to encourage the use and improve and maintain the character of the recreational opportunities available so as to fulfill the purpose and policy of the Act;

(vi) whenever any facility in the Recreation Area is worn out or destroyed or becomes obsolete, inefficient or otherwise unfit for use, will procure and install a substitute of at least equal utility and efficiency, so that the efficiency of the Project will at all times be fully maintained;

(vii) will provide in its budget each year for any anticipated deficiency in the Gross Revenues available for the operation and maintenance of the Project;

(viii) will pay for the costs of operation and maintenance of the Project which are not otherwise paid from Gross Revenues, provided however the City shall not be required to fund such deficiency in any year beyond the amount budgeted in accordance with paragraph (vii) above for such year and monies so appropriated are limited as provided in Section 10 of the Recreation Area Act; and

(ix) will not mortgage or otherwise encumber the Project, the Recreation Area or any part thereof, except as provided herein and in the Agreement.

7.06 Insurance.

(1) Liability Insurance. The Issuer shall take such measures as may be necessary to ensure that any liability for injuries to or death of any person or damage to or loss of property arising out of or in any way relating to the condition or the operation of the Recreation Facility or any part thereof, is covered (i) by a blanket or other general liability insurance policy maintained by Issuer (or the Authority) or (ii) through the Issuer's self insurance program, with a limit of not less than the maximum limits of liability of the Issuer and the Authority prescribed in Minnesota Statutes, Chapter 466, as now in effect or hereafter amended.

(2) Property Insurance. The Authority, pursuant to the Agreement, shall procure and maintain continuously in effect during the period that the Bonds are outstanding all-risk insurance, subject only to the standard exclusions contained in the policy, in such amount as will be at least sufficient either: (a) so that a claim may be made for the full replacement cost of any part thereof damaged or destroyed or (b) to pay the outstanding principal amount of the Bonds. Such insurance may be provided by a rider to an existing policy or under a separate policy. Such insurance may be written with customary deductible amounts. The net proceeds of insurance required by this Section shall be applied either

(i) to the prompt repair, restoration or replacement of the Recreation Facility or

(ii) to the prepayment and redemption of the Bonds.

(3) Worker's Compensation Insurance. If required by State law, Issuer shall cause the Authority to carry worker's compensation insurance covering all employees of the Authority.

(4) Requirements for all Insurance. All insurance policies (or riders) required by this Section shall be taken out and maintained within responsible insurance companies organized under the laws of one of the states of the United States and qualified to do business in the State of Minnesota, and shall contain a provision that the insurer shall not cancel or revise coverage thereunder without giving written notice to the certificate holders at least 10 days before the cancellation or revision becomes effective. All insurance policies or riders required by clause (1) and (2) shall name the Issuer and Authority as insured parties.

7.07 Restoration Upon Damage and Condemnation. If while any Bonds remain outstanding all or any part of the Project is taken by eminent domain or destroyed or damaged, unless the Issuer exercises its option to call the outstanding Bonds for redemption, pursuant to Section 3.02C hereof, the Issuer shall proceed promptly to replace, repair, and rebuild the Project and restore it as nearly as practicable to the same condition as existed before the taking or the event causing the damage or destruction, with such changes, alterations and modifications (including substitution or addition of other property) as may be desired by the Issuer and will be suitable for continued operation of the Project, and the Issuer will pay all costs thereof and shall be entitled to reimbursement from the net proceeds of the condemnation award or insurance claim;

Section 8. Certificate of Proceedings.

8.01 Filing with County Auditor. The Clerk of the Issuer is directed to file in the offices of the County Auditor of St. Louis County a certified copy of this Resolution and such other information as the County Auditor may require, and to obtain from the County Auditor a certificate stating that the Bonds as a bond of the Issuer has been duly entered on his bond register.

Section 9. Miscellaneous.

9.01 Proceedings. The officers of the Issuer are authorized and directed to prepare and furnish to the Purchaser, and to bond counsel, certified copies of all proceedings and records of the Issuer relating to the legality and marketability of the Bonds, as such facts appear from the official books and records in the officers' custody or are otherwise known to them. All such certified copies, certificates, and affidavits, including any heretofore furnished, constitute representations of the Issuer as to the correctness of the facts recited therein and the action stated therein to have been taken.

9.02 Absent or Disabled Officers. In the event of the absence or disability of the Mayor or the Clerk, such officers of the Issuer as, in the opinion of the Issuer's attorney, may act in their behalf, shall without further act or authorization, execute and deliver the Bonds, and do all things and execute all instruments and documents required to be done or executed by such absent or disabled officers.

9.03 Implied Authority. The approvals given to the various documents referred to in this Resolution include approval of such additional details therein as may be necessary and appropriate and such modifications thereof, deletions therefrom and additions thereto as may be necessary and appropriate and approved by counsel to the Issuer and the Issuer officials authorized herein to execute said documents prior to their execution; and said Issuer officials are hereby authorized to approve said changes on behalf of the Issuer. The execution of any instrument by the appropriate officer or officers of the Issuer herein authorized shall be conclusive evidence of the approval of such documents in accordance with the terms hereof.

9.04 Additional Authority of Officers. The officers, attorneys, engineers and other agents or employees of the Issuer are hereby authorized to do all acts and things required of them by or in connection with this Resolution for the full, punctual and complete performance of all the terms, covenants and agreements contained in the Bonds and this Resolution.

STATEMENT OF PURPOSE:  This resolution provides for the issuance and sale of $1,646,749.70 gross revenue recreation facility bond (Spirit Mountain Recreation Area), Series 2003, the proceeds of which will be used to refinance an existing lease-purchase agreement. The interest rate on the Bond is 4.50%, down from 4.85% under the lease-purchase agreement. The principal of and interest on the Bond will be paid from gross revenues of Spirit Mountain Recreation Area, including a pledge of $225,000 per year of tourism taxes.