STATE COLLEGE AREA SCHOOL DISTRICT, Centre County, Pennsylvania A RESOLUTION

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1 STATE COLLEGE AREA SCHOOL DISTRICT, Centre County, Pennsylvania A RESOLUTION OF THE BOARD OF SCHOOL DIRECTORS OF THIS SCHOOL DISTRICT, A PENNSYLVANIA LOCAL GOVERNMENT UNIT, AUTHORIZING THE SETTLEMENT OF THE LITIGATION OVER THE ENFORCEABILITY OF THE APRIL 25, 2006 QUALIFIED INTEREST RATE MANAGEMENT AGREEMENT (a/k/a INTEREST RATE SWAP AGREEMENT) BETWEEN THIS SCHOOL DISTRICT AND ROYAL BANK OF CANADA AND OF THE NOVEMBER 13, 2007 AMENDMENT THERETO ON THE GENERAL TERMS SET FORTH IN THIS RESOLUTION; AUTHORIZING THE BUSINESS ADMINISTRATOR OF THIS SCHOOL DISTRICT TO WORK WITH THIS SCHOOL DISTRICT S LITIGATION COUNSEL IN CONNECTION WITH THE NEGOTIATION, PREPARATION, AND EXECUTION OF A DEFINITIVE WRITTEN SETTLEMENT AGREEMENT THAT MEMORIALIZES THE TERMS OF THE SETTLEMENT AND PROVIDES FOR A RELEASE OF ALL CLAIMS BY AND AGAINST THIS SCHOOL DISTRICT; AND AUTHORIZING THE PRESIDENT OF THIS GOVERNING BODY TO EXECUTE THE DEFINITIVE WRITTEN SETTLEMENT AGREEMENT WHEN FINALIZED. WHEREAS, on April 25, 2006, this School District, pursuant to an authorizing Resolution duly adopted by the Governing Body of this School District in accordance with the Pennsylvania Local Government Unit Debt Act (the Debt Act ) on April 24, 2006, entered into a forward starting interest rate swap agreement (the 2006 Swap ) with Royal Bank of Canada ( RBC ), which related to variable rate bonds in the aggregate amount of $58,050,000 that had been incurred by the Governing Body of this School District by Resolution dated August 30, 2004 to finance the cost of a certain high school capital project; WHEREAS, under the terms of the 2006 Swap, this School District would receive from RBC monthly floating-rate interest payments equal to 67% of the 30-day London Interbank

2 Offered Rate (a/k/a LIBOR) interest rate index and this School District would pay to RBC semiannual fixed interest rate payments of 3.884% based on a notional amount of $58,050,000, during a term from December 1, 2007 to May 1, 2028; WHEREAS, on or about May 21, 2007, the Governing Body of this School District voted to abandon the high school capital project because bids came in over budget; WHEREAS, on November 13, 2007, RBC and this School District, pursuant to an authorizing Resolution duly adopted by the Governing Body of this School District on November 12, 2007, executed an amendment to the 2006 Swap (the 2007 Amendment ) that (i) extended the effective date of the 2006 Swap by three years from December 1, 2007 to December 1, 2010, (ii) increased the fixed interest rate payable by this School District from 3.884% to 4.356% (this School District would continue to receive monthly floating-rate interest payments equal to 67% of the 30-day LIBOR rate), and (iii) lowered the notional amount from $58,050,000 to $53,900,000; WHEREAS, on August 30, 2010, this School District filed a lawsuit against RBC in the U.S. District Court for the Middle District of Pennsylvania (the Court ), captioned State College Area School District v. Royal Bank of Canada, Civil Action No (the Litigation ), seeking, among other relief, an order declaring (i) that the 2006 Swap and 2007 Amendment are void ab initio and unenforceable as a matter of Pennsylvania law because, among other reasons, they do not comply with the applicable requirements of the Debt Act, (ii) that this School District and RBC are not obligated under the 2007 Amendment to make interest rate swap payments beginning on December 1, 2010 or at any other time, and (iii) that neither this School District nor RBC has an obligation under the 2006 Swap or 2007 Amendment to -2-

3 make an early termination payment or other termination payment in any amount to the other party; WHEREAS, on July 28, 2011, RBC filed an amended counterclaim against this School District in the Litigation seeking to recover an early termination payment of $10,368,632 that allegedly became due following this School District s failure to make its initial semi-annual swap payment to RBC under the 2007 Amendment by the May 2, 2011 due date; WHEREAS, the Court held in an October 5, 2012 Memorandum and Order that (i) the 2006 Swap is valid and enforceable, (ii) the 2007 Amendment is void ab initio and unenforceable, and (iii) the 2006 Swap is not nullified by the unenforceability of the 2007 Amendment; WHEREAS, the Court held in a subsequent January 7, 2013 Memorandum and Order that the 2007 Amendment is merely voidable and not void ab initio, and directed the parties to cure the deficiencies that it had identified to bring the 2007 Amendment into compliance with the Debt Act s requirements forthwith; WHEREAS, a proposed settlement of the Litigation has been negotiated by, between, and among this School District, RBC, and the special bond counsel and independent financial advisor that had provided legal and financial services to this School District in connection with the 2006 Swap and 2007 Amendment; and WHEREAS, this Governing Body is satisfied that the settlement terms are fair and reasonable under the circumstances, and that settlement on such terms is in the best financial interest of this School District. NOW, THEREFORE, BE IT RESOLVED, by the Governing Body of this Local Government Unit, as follows: -3-

4 Section 1. This School District shall settle, resolve, and terminate the Litigation on the following general terms and conditions: 1. This School District shall pay Nine Million Dollars ($9,000,000) to RBC as follows: (a) a Six Million Dollar ($6,000,000) up-front payment via wire transfer within fourteen (14) days following the effective date of a definitive written settlement agreement, (b) an Eight Hundred Thousand Dollar ($800,000) payment via wire transfer on or before the first anniversary of the date of the up-front payment, and (c) four (4) payments of Five Hundred Fifty Thousand Dollar ($550,000) each on or before the second, third, fourth, and fifth anniversaries of the date of the up-front payment. 2. The law firm of Rhoads & Sinon LLP ( Rhoads ), which served as this School District s special bond counsel in connection with the 2006 Swap and 2007 Amendment, shall pay One Hundred Thousand Dollars ($100,000) to this School District. 3. Public Financial Management, Inc. and/or PFM Asset Management LLC (collectively, PFM ), which served as this School District s independent financial advisor in connection with the 2006 Swap and 2007 Amendment, shall pay Sixty Thousand Dollars ($60,000) to this School District. 4. If requested by the Governing Body of this School District at any time within a five year period following the settlement of the Litigation, RBC shall provide, subject to its customary and standard underwriting procedures, underwriting services to this School District on a municipal bond offering of this School District of any amount, and RBC shall not charge, and SCASD shall have no obligation to pay to RBC, any cost, fee, commission, underwriter s discount, or gross spread in connection with the underwriting. 5. This School District, RBC, Rhoads, and PFM shall exchange mutual general releases of all claims and causes of action asserted in the Litigation and for all claims and causes of action that could have been asserted in the Litigation. Section 2. The Business Administrator of this School District is authorized to work with this School District s Litigation counsel in connection with the negotiation, preparation, and execution of a definitive written settlement agreement that, among other things, memorializes the terms of the settlement and provides for a release of all claims by and against this School District, RBC, Rhoads, and PFM. -4-

5 Section 3. The President of the Governing Body of this School District is authorized to execute the definitive written settlement agreement when finalized. Section 4. All resolutions or parts of resolutions, insofar as the same shall be inconsistent herewith, shall be and the same expressly are repealed. DULY ADOPTED, by the Governing Body of this School District, in lawful session duly assembled, this 14 th day of January, STATE COLLEGE AREA SCHOOL DISTRICT, Centre County, Pennsylvania By: President of the Board of School Directors ATTEST: Secretary of the Board of School Directors (SEAL) -5-

II. D. 2 12/3/2018 (F&A)

II. D. 2 12/3/2018 (F&A) ATTACHMENT A DELEGATION RESOLUTIONS Electric System: Series Three 2019/20X Supplemental Resolution (Resolution No. 2018-15) Exhibit A Form of Bond Purchase Agreement Exhibit B