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4.02. Escrow Account. In accordance with the Escrow Agreement (hereafter defined) by and between the City and U.S. Bank National Association in St. Paul, Minnesota (the "Escrow Agent"), an escrow account (the "Escrow Account") will be established and maintained with the Escrow Agent, which is a suitable financial institution within the State, whose deposits are insured by the Federal Deposit Insurance Corporation, whose combined capital and surplus is not less than $500,000 and said financial institution is hereby designated escrow agent for the Escrow Account. All proceeds of the sale of the Bonds (less amounts deposited in the Debt Service Account under Section 4.01) will be received by the Escrow Agent and applied to fund the Escrow Account or used to pay costs of issuance. Proceeds of the Bonds not used to pay costs of issuance or fund the Escrow Account will be returned to the City for deposit into the Debt Service Fund. All investment earnings on the Escrow Account are hereby irrevocably pledged and appropriated thereto. The Escrow Account will be invested in securities maturing or callable at the option of the holder on such dates and bearing interest at such rates as will be required to provide sufficient funds, together with any cash or other funds retained in the Escrow Account, to pay when due the interest to accrue on each Bond to and including the Redemption Date, and to pay on the Redemption Date the principal amount of each of the Refunded Bonds. From the Escrow Account there will be paid (i) all interest paid on, or to be paid on, or to accrue on, the Bonds to and including the Redemption Date, and (ii) the principal of the Refunded Bonds due by reason of redemption on the Redemption Date. The Escrow Account will be irrevocably appropriated to the payment of the principal of and interest on the Bonds until the proceeds of the Bonds therein are applied to prepayment of the Refunded Bonds. The moneys in the Escrow Account will be used solely for the purposes herein set forth and for no other purpose, except that any surplus in the Escrow Account may be remitted to the City, all in accordance with the Escrow Agreement (hereafter defined) by and between the City and the Escrow Agent. Any moneys remitted to the City upon termination of the Escrow Agreement will be deposited in the Debt Service Account. 4.03. Findings. It is hereby found and determined that based upon information presently available from the City's financial advisers, the issuance of the Bonds will result in a reduction of debt service cost to the City on the Refunded Bonds, such that the present value of the dollar amount of the debt service on the Bonds, computed to their stated maturity dates, after deducting any premium, is lower by at least 3.00% than the present value of the dollar amount of debt service, on the Refunded Bonds, exclusive of any premium, computed to their stated maturity dates (the "Reduction"). The Reduction, after the inclusion of all authorized expenses of refunding in the computation of the effective interest rate on the Bonds, is adequate to authorize the issuance of the Bonds as provided by Minnesota Statutes, Section 475.67, Subdivision 13. 4.04. Investment of Funds. Moneys in the Debt Service Fund will be used solely to pay the principal of and interest on the Bonds or any other bonds hereafter issued and made payable from the Fund. No portion of the proceeds of the Bonds will 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 (i) for a reasonable temporary period until such proceeds are needed for the purpose for which the Bonds were issued, and (ii) in addition to the above, in an amount not greater than the lesser of 5% of the proceeds of the Bonds or $100,000. To this effect, any proceeds of the Bonds and any sums from time to time held in the Fund (or any other 470595v1 JSB NE136-257 7