Loading...
HomeMy WebLinkAbout2843CITY OF PORT ANGELES, WASHINGTON WATER AND WASTEWATER UTILITY REVENUE AND REFUNDING BONDS, 1994 ORDINANCE NO. 2843 AN ORDINANCE of the City of Port Angeles, Washington, combining the existing water system and wastewater system of the City; adopting and specifying a plan of additions and betterments to the water and wastewater system; providing for the defeasance of certain outstanding water revenue bonds of the City; authorizing the issuance and sale of water and wastewater utility revenue and refunding bonds of the city in the principal amount of $10,000,000, to defease such outstanding water revenue bonds and to pay part of the cost of acquiring, constructing and installing such additions and betterments to the water and wastewater system; authorizing appointment of an escrow agent and the execution of an escrow agreement related to such defeasance; fixing the date, form, terms, maturities and covenants of such bonds; providing the covenants and terms under which the City may issue future water and wastewater revenue bonds on a parity with such bonds; and authorizing the public sale of such bonds. PASSED ON OCTOBER 18, 1994 Prepared By: PRESTON GAI'ES & ELLIS 5000 Columbia Center 701 Fifth Avenue Seattle, Washington 98104 -7078 Table of Contents Page Section 1. Definitions 4 Section 2. Combining the Water System and Wastewater System 10 Section 3. Plan of Improvements 10 Section 4. Authorization and Description of Bonds 12 Section 5 Registration 13 Section 6. Redemption; Purchase of Bonds 16 Section 7. Execution of Bonds 19 Section 8. Form of Bonds 19 Section 9. Construction Account; Application of Project Bond Proceeds 25 Section 10. Defeasance of Refunded Bonds; Application of Refunding Bond Proceeds 25 Section 11. Defeasance of Refunded Bonds 27 Section 12. Finding of Defeasance 28 Section 13. Rate Stabilization Fund 28 Section 14. Revenue Fund 29 Section 15. Bond Fund 30 Section 16. Covenants and Agreements 33 Section 17. Tax Covenants 36 Section 18. Arbitrage Rebate 36 Section 19. Adequacy of Revenues 36 Section 20. Defeasance 37 Section 21. Issuance of Future Parity Bonds 37 Section 22. Sale of Bonds 40 Section 23. Official Statement; Use of Documents 41 Section 24. Municipal Bond Insurance 41 Section 25. Supplements and Amendments 42 Section 26. Lost or Destroyed Bonds 43 Section 27. Approval of Amendment to the DOE Loan Agreement 44 Section 28. Severability 44 Section 29. Effective Date 44 Exhibit A Exhibit B Exhibit C Exhibit D Notice of Bond Sale DTC Letter of Representations Form of Escrow Agreement Amendment to State Revolving Fund Loan Agreement -i- DOTO5Q.DOC 94/10/17 ORDINANCE NO, 284 3 AN ORDINANCE of the City of Port Angeles, Washington, combining the existing water system and wastewater system of the City; adopting and specifying a plan of additions and betterments to the water and wastewater system; providing for the defeasance of certain outstanding water revenue bonds of the City; authorizing the issuance and sale of water and wastewater utility revenue and refunding bonds of the city in the principal amount of $10,000,000, to defease such outstanding water revenue bonds and to pay part of the cost of acquiring, constructing and installing such additions and betterments to the water and wastewater system; authorizing appointment of an escrow agent and the execution of an escrow agreement related to such defeasance; fixing the date, form, terms, maturities and covenants of such bonds; providing the covenants and terms under which the City may issue future water and wastewater revenue bonds on a parity with such bonds; and authorizing the public sale of such bonds. WHEREAS, the City of Port Angeles, Washington (the "City ") owns, operates and maintains a water supply and distribution system (the "Water System ") and a sanitary sewage collection and wastewater treatment system (the "Wastewater System "); and WHEREAS, it is in the best interests of the City, its residents, and ratepayers of the Water System and the Wastewater System that such systems be combined to form a single water and wastewater system (the "System "); and WHEREAS, pursuant to Ordinance No. 1941 of the City, passed on August 24, 1977, the City issued its Water Revenue Bonds, 1977, under date of September 1, 1977, in the principal amount of $1,611,000 (the "1977 Bonds "), bearing interest at a rate of 5% per annum, which Bonds remain outstanding as follows: Bond Nos. Maturity Years Principal (September 1) Amount 67 -72 1995 $ 30,000 73 -79 1996 35,000 80 -86 1997 35,000 87 -93 1998 35,000 94 -101 1999 40,000 102 -109 2000 40,000 110 -118 2001 45,000 119 -127 2002 45,000 128 -136 2003 45,000 137-146 2004 50,000 147 -156 2005 50,000 157 -167 2006 55,000 168 -178 2007 55,000 179 -190 2008 60,000 191 -202 2009 60,000 203 -215 2010 65,000 216 -229 2011 70,000 230 -243 2012 70,000 244 -257 2013 70,000 258 -272 2014 75,000 273 -288 2015 80,000 289 -305 2016 85,000 306 -323 2017 90,000 ; and WHEREAS, the outstanding 1977 Bonds are held by the United States, acting through its Economic Development Administration (the "Government "); and WHEREAS, the City wishes to defease all of the outstanding 1977 Bonds so that it may combine the Water System and the Wastewater System and authorize the issuance of water and wastewater utility revenue bonds without obtaining the Government's consent; and WHEREAS, there are currently outstanding three obligations of the City secured by revenues of the Wastewater System: (1) Public Works Trust Fund Loans in the principal amount of not to exceed $2,500,000 and not to exceed $760,000 (together, the "Public Works Trust Fund Loans ") administered by the State of Washington Department of Community Development -2- DOTO5Q DOC 94/10/17 ( "DCD "); and (2) a Water Pollution Control State Revolving Fund Loan in the principal amount of $2,549,264 (the "Revolving Fund Loan ") administered by the State of Washington Department of Ecology ( "DOE "); and WHEREAS, both DCD and DOE have consented to combining the Water System and the Wastewater System; and WHEREAS, the City Council (the "Council ") of the City has determined that it is in the best interest of the City to acquire, construct and install certain additions and improvements to and extensions of the System; and WHEREAS, to provide funds to defease the outstanding 1977 Bonds and to finance such improvements to the System it is in the best interests of the City, its residents and ratepayers of the System that the City authorize, issue and sell $10,000,000 aggregate principal amount of revenue and refunding bonds with a lien on revenue of the System equal to the lien on such revenue of the Revolving Fund Loan and superior to all other charges of any kind or nature except the costs of operation and maintenance of the System (the "Bonds"); and WHEREAS, the City wishes to reserve the right to issue additional water and wastewater utility revenue bonds on a parity with the Revolving Fund Loan and the Bonds on the terms and conditions set forth in this ordinance; and WHEREAS, DOE has consented or will consent to the issuance of the Bonds and Future Parity Bonds on a parity of lien with the Revolving Fund Loan on the terms and conditions set forth herein; and WHEREAS, DCD has consented to the issuance of the Bonds and Future Parity Bonds with a lien on revenue of the System superior to the lien thereon of the Public Works Trust Fund Loan on the terms and conditions set forth herein; and WHEREAS, it appears to the Council that it is in the best interests of the City that the Bonds be sold by competitive sale on the terms set forth in this ordinance; -3- DOTO5Q.DOC 94/10/17 NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF PORT ANGELES, WASHINGTON, DO ORDAIN, as follows: Section 1. Definitions. As used in this ordinance the following words shall have the following meanings: "Annual Debt Service" for any fiscal year or calendar year means the sum of: (a) the interest due in such year on all outstanding Parity Bonds excluding, however, interest to be paid from the proceeds of Parity Bonds, (b) the principal of all outstanding Serial Bonds due in such year, and (c) the Sinking Fund Requirement, if any, for such year, calculated as of the Sinking Fund Requirement Date for such year. If the interest rate on any such bonds is other than a fixed rate, the rate applicable at the time of the computation shall be used. "Arbitrage and Tax Certification" means the certificate executed by the Finance Director of the City pertaining to the calculation and payment of any Rebate Amount with respect to the Bonds. "Assessments" means assessments (including interest and penalties) levied in any utility local improvement district of the City for the acquisition or construction of additions and improvements to and extension of the System, if such assessments are pledged to be paid into the Bond Fund. "Average Annual Debt Service" means the amount determined by dividing (a) the sum of all interest and principal to be paid on all Parity Bonds from the date of determination to the last maturity date of such Parity Bonds, by (b) the number of fiscal years or calendar years from and including the fiscal year or calendar year in which the determination is made to the last fiscal year or calendar year in which any of such Parity Bonds will be outstanding. "Bond Fund" means the 1994 Water and Wastewater Utility Revenue Bond Fund created by Section 11 of this ordinance. -4- DOTO5Q.DOC 94/10117 "Bond Register" means the books or records maintained by the Bond Registrar for the purpose of registration of the Bonds. "Bond Registrar" or "Registrar" means the fiscal agency of the State of Washington in either Seattle, Washington, or New York, New York, whose duties include the registration and authentication of the Bonds, maintenance of the Bond Register, effecting transfer of ownership of the Bonds, and paying the principal of, premium, if any, and interest on the Bonds. "Bonds" mean the $10,000,000 principal amount of water and wastewater utility revenue and refunding bonds of the City issued pursuant to this ordinance as a single issue combining the Project Bonds and the Refunding Bonds. "City" means the City of Port Angeles, a municipal corporation duly organized and existing under the laws of the State of Washington. "Code" means the federal Internal Revenue Code of 1986, as amended, and applicable regulations. "Construction Account" means the special account of the City known as the "1994 Water and Wastewater Construction Account" created pursuant to Section 9 of this ordinance within the existing Water and Wastewater Construction Fund of the City. "Costs of Maintenance and Operation" means all necessary operating expenses, current maintenance expenses, expenses of reasonable upkeep and repairs, and insurance and administrative expenses, but excludes depreciation, payments for debt service or into reserve accounts and costs of capital additions to or replacements of the System, taxation by the City or payments in lieu of taxes. "Council" means the general legislative authority of the City as the same shall be duly and regularly constituted from time to time. "DCD" means the State of Washington Department of Community Development, administrator of the Public Works Trust Fund Loans. -5- DOTO5Q DOC 94/10/17 "Debt Service Fund" means the account of that name in the Bond Fund created pursuant to Section 11 of this ordinance. "Defeasance Account" means the special account of the City, to be held by the Escrow Agent, created pursuant to Section 10 of this ordinance. "DOE" means the State of Washington Department of Ecology, administrator of the Revolving Fund Loan. "DOE Loan Agreement" means the agreement between the City and DOE with respect to the Revolving Fund Loan. "DTC" means The Depository Trust Company, New York, New York, a limited purpose trust company organized under the laws of the State of New York, as depository for the Bonds pursuant to Section 5 hereof. "Escrow Agent" means the bank or trust company appointed by the Finance Director pursuant to Section 10 hereof. "Escrow Agreement" means the agreement between the City and the Escrow Agent with respect to the Refunded Bonds entered into pursuant to Section 10 hereof. "Future Parity Bonds" mean any revenue bonds, revenue warrants or other revenue obligations that may be issued in the future as Parity Bonds. "Gross Revenue" means all earnings, revenue and moneys, except Assessments, received by the City from or on account of the operation of the System, including proceeds from the sale, lease or other disposition of any of the properties or facilities of the System, and the income from investments of money in the Revenue Fund and any bond fund or from any other investment thereof except the income from investments irrevocably pledged to the payment of revenue bonds pursuant to a plan of retirement or refunding. The words "Gross Revenue" shall not include grants or bond proceeds, but shall include federal or state reimbursements of operating expenses to the extent such expenses are included as "Costs of Maintenance and Operation." -6- DOTO5Q.DOC 94/10/17 "Letter of Representations" means the letter of representations from the Bond Registrar and the City to DTC, in substantially the form attached hereto as Exhibit B. "Net Revenue" means the Gross Revenue less the Costs of Maintenance and Operation. "1977 Bonds" means the City's Water Revenue Bonds, 1977 issued pursuant to Ordinance No. 1941 of the City under date of September 1, 1977 and currently outstanding in the principal amount of $1,285,000. "Parity Bonds" means the Revolving Fund Loan, the Bonds and any revenue bonds, revenue warrants or other revenue obligations of the City that have a lien on money in the Revenue Fund to pay and secure the payment of the principal thereof and interest thereon equal to the lien created on the money in such Fund to pay and secure the payment of the principal of and interest on the Revolving Fund Loan and the Bonds. "Permitted Investments" means any investments of City funds permitted under the laws of the State of Washington as amended from time to time. "Professional Utility Consultant" means the independent person(s) or firm(s) selected by the City having a favorable reputation for skill and experience with water and wastewater systems of comparable size character to the System in such areas as are relevant to the purposes for which they are retained. "Project" means the plan or system of additions to and betterments and extensions of the System specified and adopted in Section 3 of this ordinance. "Project Bonds" means that portion of the Bonds authorized herein to pay a portion of the costs of the Project. "Public Works Trust Fund Loans" means the loans to the City administered by DCD in the original principal amount of not to exceed $2,500,000 (loan number PW -5 -91- 280 -047), as authorized by action of the City Council on June 4, 1991, and in the original principal amount of not to exceed $760,000 (loan number PW -5 -93- 280 -038), as authorized by action of the City Council on June 1, 1993. -7- DOTO5Q.DOC 94/10/17 "Qualified Insurance" means any unconditional municipal bond insurance policy or surety bond issued by any insurance company licensed to conduct an insurance business in any state of the United States or by a service corporation acting on behalf of one or more such insurance companies, which insurance company or service corporation is rated in one of the two highest rating categories by Moody's Investors Service, Inc. or any other rating agency then maintaining a rating on the Bonds, provided, that, as of the time of issuance of such policy or surety bond, such insurance company or companies maintain a policy owner's surplus in excess of $500,000,000. "Qualified Letter of Credit" means any irrevocable letter of credit issued by a bank for the account of the City and for the benefit of the owners of Parity Bonds, provided that such bank maintains an office, agency or branch in the United States, and provided further, that, as of the time of issuance of such letter of credit, such bank is currently rated in one of the two highest rating categories by either Moody's Investors Service, Inc. or any other rating agency then maintaining a rating on the Bonds. "Rate Stabilization Fund" means the fund of that name created pursuant to Section 10 of this ordinance. "Rebate Amount" means the amount, if any, determined to be payable with respect to the Bonds by the City to the United States of America in accordance with Section 148(0 of the Code. "Refunded Bonds" means the 1977 Bonds maturing on and after September 1, 1995. "Refunding Bonds" means the not to exceed $2,000,000 principal amount of the Bonds authorized herein to provide funds to defease the Refunded Bonds. "Registered Owner" means the person in whose name a Bond is registered on the Bond Register. For so long as the City utilizes the book -entry system for the bonds, DTC shall be deemed to be the Registered Owner. "Reserve Account" means the account of that name in the Bond Fund created pursuant to Section 11 of this ordinance. -8- DOTO5Q.DOC 94/10/17 "Reserve Account Requirement" means, with respect to the Bonds or Future Parity Bonds, an amount equal to the least of (a) 125% of Average Annual Debt Service on such bonds, (b) 10% of the net proceeds of such series of bonds, or (c) maximum Annual Debt Service. "Revenue Fund" means the special fund of the City known as the "City of Port Angeles Water and Wastewater Utility Revenue Fund" authorized to be created in the office of the City Treasurer pursuant to Section 2 of this ordinance. "Revolving Fund Loan" means the loan to the City in the original principal amount of $2,549,264 administered by DOE (loan number SRF 91001), as authorized by Resolution No. 7 -90 of the City Council adopted on May 1, 1990. "Sale Resolution" means the subsequent resolution of the Council by which the Council may approve the sale of the Bonds in accordance with the provisions of this ordinance. "Serial Bonds" means Bonds or Future Parity Bonds other than Term Bonds. "Sinking Fund Requirement" means, for any fiscal year or calendar year, the principal amount of Term Bonds required to be purchased, redeemed or paid at maturity in such year as established by the ordinance of the City authorizing the issuance of such Term Bonds. "System" means the combined water supply and distribution and sanitary sewage collection and wastewater treatment system of the City as the same now exists and as it may hereafter be added to, improved and extended for as long as any of the Bonds are outstanding. The "System" shall also include any surface or storm water drainage utility of the City if the Council shall determine by ordinance to create such a utility and combine it with the System. "Term Bonds" means the Bonds identified as such, if any, in the Sale Resolution and any Future Parity Bonds identified as Term Bonds in the ordinance authorizing the issuance thereof, the payment of the principal of which is provided for by a mandatory schedule of deposits of money equal (in the aggregate) to the full principal amount of such Term Bonds, into the Bond Fund, and by a mandatory redemption schedule corresponding (as to time and amounts) to such mandatory schedule of deposits. -9- DOT05Q.DOC 94/10/17 Section 2. Combining the Water System and Wastewater System A. Findings. The City Council (the "Council ") of the City hereby finds and determines that the best interests of the City, its residents, ratepayers of the Water System and ratepayers of the Wastewater System will be served by combining such systems on the terms and conditions set forth herein. B. Combining the Water and Wastewater Systems. Upon the defeasance of the Refunded Bonds, the existing Water System and Wastewater System shall hereafter be operated as a combined water and wastewater utility of the City (the "System "). C. Creation of Water and Wastewater Utility Revenue Fund. When the System begins to operate as provided in Section 2.B hereof, a special fund of the City designated as the "City of Port Angeles Water and Wastewater Utility Revenue Fund" (the "Revenue Fund ") is hereby authorized to be created in the office of the City Treasurer. The heretofore existing Water Utility Fund and Wastewater Division Fund of the City are hereby authorized to then be closed, and moneys in such funds shall be transferred to the Revenue Fund. Upon the closing of the Water Utility Fund and the Wastewater Division Fund and the transfer of moneys therein to the Revenue Fund, all obligations of the Water Utility Fund and Wastewater Division Fund shall become obligations of the Revenue Fund. D. General Authorization and Ratification of Prior Acts. The City's City Manager, Finance Director, City Treasurer, Director of Public Works, and other appropriate officers, employees and agents of the City are hereby authorized and directed to take all actions necessary and convenient to effect the combining of the Water System and the Wastewater System as authorized herein. All past acts of such City officers, employees and agents consistent with the authority granted herein but prior to the effective date of this ordinance are hereby ratified and confirmed. Section 3. Plan of Improvements. The City shall acquire, construct, install and equip the following improvements to the System: -10- DOT05Q.DOC 94/10/17 Projects Estimated Costs Wastewater Projects: Secondary Treatment Plant $ 3,330,650 Phase I Compost Facility 617,750 Ediz Hook Force Main and Restoration 289,600 Compost Facility Phase II 500,000 Compost Facility Loader/Mixer 150,000 Outfall Reconstruction 1,000,000 Silvaculture Vehicle 100,000 Francis Street Diversion Design and Construction 318,000 Golf Course Road Sewer Interceptor 1,000,000 Water Projects: High Zone Pump Station 325,000 Control System Upgrade 455,000 Mill Creek Pump Station Rehabilitation 215,000 Southeast Reservoir Design 375,000 Total Construction Projects $ 8,676,000 This plan of additions to and betterments and extensions of the System (the "Project ") is described with particularity in the plans and specifications prepared by Brown & Caldwell, consulting engineers for a portion of the Project, and said plans and specifications are now on file with the City and available for public inspection. The Project shall be constructed and installed with all necessary equipment and appurtenances. The City may make such changes in the Project as may be found necessary or desirable, either prior to or during the course of acquisition and construction. The City shall acquire by purchase, lease or condemnation all property, both real and personal, or any interest therein, or rights of way and easements necessary to carry out the Project. The estimated cost of the acquisition, construction and installation of the Project is hereby declared to be as near as may be the sum of $8,800,000, including costs of issuing the Bonds, a portion of which shall be financed from the proceeds of the sale of the Project Bonds, and the balance of the Project shall be financed out of other funds available to the City as may be hereafter directed by the Council. DOT050.DOC 94/10/17 Section 4. Authorization and Description of Bonds. For the purpose of providing part of the money necessary to carry out the Project, the City shall issue the Project Bonds in the principal amount of $10,000,000 less the principal amount of the Refunding Bonds, which amounts shall be set by the Sale Resolution. For the purpose of providing the money necessary to defease the Refunded Bonds, the City shall issue the Refunding Bonds in the principal amount of not to exceed $2,000,000. The final principal amount of the Refunding Bonds shall be set by the Sale Resolution. The Project Bonds and the Refunding Bonds shall be combined and sold as a single issue of water and wastewater utility revenue bonds of the City, designated as the "City of Port Angeles, Washington, Water and Wastewater Utility Revenue and Refunding Bonds, 1994" (the "Bonds "), shall be dated November 1, 1994, shall be in the denomination of $5,000 each, or integral multiples thereof, provided that no Bond shall represent more than one maturity, shall be fully registered as to principal and interest, and shall be numbered separately in such manner and with any additional identification as the Bond Registrar deems necessary for identification. Interest shall be payable May 1, 1995, and semiannually thereafter on the first days of May and November of each year until the Bond bearing such interest has been paid or its payment duly provided for. The Bonds shall mature on November 1 of each of the years from 1995 through 2024 in amounts to be established by the Sale Resolution as provided herein. The Bonds will be sold by public sale as provided in this ordinance. The rate or rates of interest to be borne by the Bonds shall be established by the Sale Resolution as provided herein. Bidders have the option of designating maturities of the Bonds as mandatory redemptions (payable in such years in such amounts) of Term Bonds maturing in a year or years to be specified in their bids, as provided in the Notice of Sale. Such provisions, if elected, shall also be established by the Sale Resolution. Both principal of and interest on the Bonds shall be payable in lawful money of the United States of America. Interest on the Bonds shall be paid by check or draft mailed (on the date such -12- DOTO5Q.DOC 94/10/17 interest is due) to the Registered Owners at the addresses appearing on the Bond Register on the 15th day of the month preceding the interest payment date. Principal of the Bonds shall be payable upon presentation and surrender of the Bonds by the Registered Owners at the principal office of the fiscal agency of the State of Washington in Seattle, Washington or New York, New York, at the option of such Registered Owners. Principal of and interest on the Bonds shall be payable solely from the Bond Fund. The Bonds are not general obligations of the City or of the State of Washington or any political subdivision thereof Section 5. Registration. The City hereby adopts the system of registration specified and approved by the Washington State Finance Commission. The Bond Registrar shall keep, or cause to be kept, at its principal corporate trust office, sufficient books for the registration and transfer of the Bonds, which shall at all times be open to inspection by the City. The Bond Registrar is authorized, on behalf of the City, to authenticate and deliver the Bonds transferred or exchanged in accordance with the provisions of such Bonds and this ordinance and to carry out all of the Bond Registrar's powers and duties under this ordinance. The Bond Registrar shall be responsible for its representations contained in the Certificate of Authentication on the Bonds. The Bond Registrar may become the Registered Owner of Bonds with the same rights it would have if it were not the Bond Registrar, and to the extent permitted by law may act as depositary for and permit any of its officers or directors to act as a member of, or in any other capacity with respect to, any committee formed to protect the rights of Registered Owners. (b) Registered Ownership. The City and the Bond Registrar, each in its discretion, may deem and treat the Registered Owner of each Bond as the absolute owner thereof for all purposes, and neither the City nor the Bond Registrar shall be affected by any notice to the contrary. Payment of any such Bond shall be made only as described in Section 4 hereof, but such registration may be transferred as herein provided. All such payments made as described in Section 4 shall be valid and shall satisfy and discharge the liability of the City upon such Bond to -13- DOTO5Q.DOC 94/10/17 the extent of the amount or amounts so paid. Neither the City nor the Bond Registrar will have any responsibility or obligations, legal or otherwise, to any other party including DTC or its successor (or substitute depository or its successor), except for the Registered Owners of the Bonds. (c) DTC Acceptance/Letters of Representations. To induce DTC to accept the Bonds as eligible for deposit at DTC, the City shall execute and deliver a Letter of Representations upon the delivery of the Bonds. The Mayor is hereby authorized to execute the Letter of Representations with such changes as may hereafter be approved by him, and such approval shall be conclusively presumed by the execution thereof. The Bonds initially issued shall be held in fully immobilized form by DTC acting as depository pursuant to the terms and conditions set forth in Exhibit B attached hereto. Neither the City nor the Bond Registrar will have any responsibility or obligation to DTC participants or the persons for whom they act as nominees with respect to the Bonds in respect of the accuracy of any records maintained by DTC or any DTC participant, the payment by DTC or any DTC participant of any amount in respect of the principal of or interest on the Bonds, any notice which is permitted or required to be given to Registered Owners under this ordinance (except such notices as shall be required to be given by the City to the Bond Registrar or to DTC), or any consent given or other action taken by DTC as the Registered Owner. For so long as any Bonds are held in fully immobilized form hereunder, DTC or its successor depository shall be deemed to be the Registered Owner for all purposes hereunder, and all references herein to the Registered Owners shall mean DTC or its nominee and shall not mean the owners of any beneficial interest in the Bonds. If any Bond shall be duly presented for payment and funds have not been duly provided by the City on such applicable date, then interest shall continue to accrue thereafter on the unpaid principal thereof at the rate stated on such Bond until it is paid. -14- DOTO5Q. DOC 94/10/17 (d) Use of Depository. (1) The Bonds shall be registered initially in the name of "Cede & Co.," as nominee of DTC, with one Bond maturing on each of the maturity dates for the Bonds of each series in a denomination corresponding to the total principal therein designated to mature on such date. Registered ownership of such immobilized Bonds, or any portions thereof, may not thereafter be transferred except (i) to any successor of DTC or its nominee, provided that any such successor shall be qualified under any applicable laws to provide the service proposed to be provided by it; (ii) to any substitute depository appointed by the Council pursuant to subsection (2) below or such substitute depository's successor; or (iii) to any person as provided in subsection (4) below. (2) Upon the resignation of DTC or its successor (or any substitute depository or its successor) from its functions as depository or a determination by the Council to discontinue the system of book entry transfers through DTC or its successor (or any substitute depository or its successor), the Council may hereafter appoint a substitute depository. Any such substitute depository shall be qualified under any applicable laws to provided the services proposed to be provided by it. (3) In the case of any transfer pursuant to clause (i) or (ii) of subsection (1) above, the Bond Registrar shall, upon receipt of all outstanding Bonds, together with a written request on behalf of the Council, issue a single new Bond for each maturity of such Bonds then outstanding, registered in the name of such successor or such substitute depository, or their nominees, as the case may be, all as specified in such written request of the Council. (4) In the event that (i) DTC or its successor (or substitute depository or its successor) resigns from its functions as depository, and no substitute depository can be obtained, or (ii) the Council determines that it is in the best interest of the beneficial owners of any of the Bonds that they be able to obtain such Bonds in the form of bond -15- DOTO5Q DOC 94/10/17 certificates, the ownership of Bonds may then be transferred to any person or entity as herein provided, and the Bonds shall no longer be held in fully immobilized form. The Council shall deliver a written request to the Bond Registrar, together with a supply of definitive Bonds, to issue Bonds as herein provided in any authorized denomination. Upon receipt of all then outstanding Bonds by the Bond Registrar together with a written request on behalf of the Council to the Bond Registrar, new Bonds shall be issued in such denominations and registered in the names of such persons as are requested in such written request. (e) Transfer or Exchange of Registered Ownership., Change in Denominations. The registered ownership of any Bond may be transferred or exchanged, but no transfer of any Bond shall be valid unless it is surrendered to the Bond Registrar with the assignment form appearing on such Bond duly executed by the Registered Owner or such Registered Owner's duly authorized agent in a manner satisfactory to the Bond Registrar. Upon such surrender, the Bond Registrar shall cancel the surrendered Bond and shall authenticate and deliver, without charge to the Registered Owner or transferee therefor, a new Bond (or Bonds at the option of the new Registered Owner) of the same date, maturity and interest rate and for the same aggregate principal amount in any authorized denomination, naming as Registered Owner the person or persons listed as the assignee on the assignment form appearing on the surrendered Bond, in exchange for such surrendered and cancelled Bond. Any Bond may be surrendered to the Bond Registrar and exchanged, without charge, for an equal aggregate principal amount of Bonds of the same date, maturity and interest rate, in any authorized denomination. The Bond Registrar shall not be obligated to transfer or exchange any Bond during the 15 days preceding any interest payment or principal payment date. Section 6. Redemption., Purchase of Bonds. (1) Optional Redemption. The Bonds maturing on or after November 1, 2005 are subject to redemption prior to maturity, at the option of the City, on or after November 1, -16- DOTO5Q.DOC 94/10/17 2004, in whole or in part (maturities to be selected by the City and by lot within a maturity), on any date, upon written notice mailed as provided herein, at the prices set forth below as a percentage of par, plus interest accrued thereon to the date fixed for redemption. Redemption Date November 1, 2004 through October 31, 2005 November 1, 2005 through October 31, 2006 November 1, 2006 and thereafter Price 101.0% 100.5 100.0 (2) Mandatory Redemption. In the event that the successful bidder for the Bonds designates one or more maturities as Term Bonds, the Sale Resolution will provide for mandatory redemption of such Term Bonds in accordance with the maturity schedule set forth in the Notice of Sale. (3) Partial Redemption; Effect of Redemption. If less than the whole of a maturity is so called for redemption, the Bond Registrar shall choose by lot the Bonds to be redeemed. In the case of a Bond of a denomination greater than $5,000, the City shall treat each such Bond as representing such number of separate Bonds each of the denomination of $5,000 as is obtained by dividing the actual principal amount of such Bond by $5,000. In the event that only a portion of the principal sum of a Bond is redeemed, upon surrender of the Bond at the principal office of the Bond Registrar there shall be issued to the Registered Owner, without charge therefor, for the then unredeemed balance of the principal sum thereof, at the option of the owner, a Bond or Bonds of like maturity and interest rate in any of the denominations herein authorized. On or prior to any redemption date, the City shall deposit with the Bond Registrar an amount of money sufficient to pay the redemption price of all the Bonds or portions of Bonds which are to be redeemed on that date. Upon surrender of such Bonds for redemption, such Bonds shall be paid by the Bond Registrar at the redemption price. Installments of interest due on or prior to the redemption date shall be payable as herein provided for payment of interest. -17- DOTO5Q.DOC 94/1 0/1 7 (4) Notice of Redemption. Notice of each optional redemption shall be given not less than 30 nor more than 60 days prior to the date fixed for redemption, by first class mail, postage prepaid, to the Registered Owner of any Bond to be redeemed at the address appearing on the Bond Register. All official notices of redemption shall be dated and shall state: (a) the redemption date, (b) the redemption price, (c) if less than all outstanding Bonds are to be redeemed, the identification (and, in the case of partial redemption, the respective principal amounts) of the Bonds to be redeemed, (d) that on the redemption date the redemption price will become due and payable upon each such Bond or portion thereof called for redemption, and that interest thereon shall cease to accrue from and after said date, and (e) the place where such Bonds are to be surrendered for payment of the redemption price, which place of payment shall be the principal offices of the Bond Registrar. The requirements of this section shall be deemed to be complied with when official notice is mailed as herein provided regardless of whether or not it is actually received by the owner of any Bond. The Bonds so called for redemption shall, on the date specified in such notice, become due and payable, and from and after the date so fixed for redemption (unless the City shall default in the payment of the Bonds so called for redemption), interest on said Bonds so called for redemption shall cease to accrue. In addition to the foregoing notice, further notice shall be given as set out below, but no defect in said further notice nor any failure to give all or any portion of such further notice shall in any manner defeat the effectiveness of a call for redemption if notice thereof is given as above prescribed. 1. Each further notice of redemption given hereunder shall contain the information required above for an official notice of redemption plus (i) the CUSIP numbers of all Bonds being redeemed; (ii) the date of issue of the Bonds as originally issued; (iii) the rate of interest borne by each Bond being redeemed; (iv) the maturity date of each Bond being redeemed; and (v) any other descriptive information needed to identify accurately the Bonds being redeemed. -18- DOTO5Q.DOC 94/10/17 2. Each further notice of redemption shall be sent at least 35 days before the redemption date to Standard & Poor's Ratings Group and Moody's Investors Service, Inc. in New York, New York, or their business successors. (5) Purchase of Bonds in Open Market. The City hereby reserves the right whenever it has any surplus money in the Revenue Fund over and above any amounts necessary to pay necessary costs of maintaining and operating the System, costs of necessary additions, improvements and repairs thereto and extensions and replacements thereof when the same are not to be financed by the issuance of bonds or warrants, all payments required to be made into the Bond Fund and Reserve Account therein, all payments required to be made into other funds or accounts out of the Revenue Fund and all payments required for any other proper purpose in connection with the operation of the System, to use such surplus money at any time to purchase any of the Bonds and any Future Parity Bonds in the open market for retirement. Section 7. Execution of Bonds. The Bonds shall be executed on behalf of the City with the manual or facsimile signature of the Mayor of the City and attested with the manual or facsimile signature of the Clerk thereof, and the seal of the City shall be impressed or imprinted on each of the Bonds. In case any of the officers who shall have signed or attested any of the Bonds shall cease to be such officer before such Bonds have been actually issued and delivered, such Bonds shall be valid nevertheless and may be issued by the City with the same effect as though the persons who had signed or attested such Bonds had not ceased to be such officers. Only such Bonds as shall bear thereon a Certificate of Authentication in the form set forth in Section 8 hereof, manually executed by the Bond Registrar, shall be valid or obligatory for any purpose or entitled to the benefits of this ordinance. Such Certificate of Authentication shall be conclusive evidence that the Bonds so authenticated have been duly executed, authenticated and delivered hereunder and are entitled to the benefits of this ordinance. Section 8. Form of Bonds. The Bonds shall be in substantially the following form: -19- DOTO50.DOC 94/1 0/1 7 UNITED STATES OF AMERICA NO. $ STATE OF WASHINGTON CITY OF PORT ANGELES WATER AND WASTEWATER REVENUE AND REFUNDING BOND, 1994 INTEREST RATE: MATURITY DATE: REGISTERED OWNER: PRINCIPAL AMOUNT: Dollars CUSIP NO: The City of Port Angeles, Washington (the "City "), a municipal corporation of the State of Washington, for value received hereby promises to pay to the Registered Owner identified above on the Maturity Date identified above the Principal Amount identified above and to pay interest thereon from the date hereof, or the most recent date to which interest has been paid or duly provided for at the Interest Rate set forth above, such interest to be payable semiannually on the first days of May and November of each year (commencing May 1, 1995) until the maturity of this bond (or if default should be made in the payment of the principal hereof when the same shall become due and payable, at the same rate of interest until the payment in full of such principal sum). The principal of and interest on this bond are payable solely out of the special fund of the City known as the "1994 Water and Wastewater Utility Revenue Bond Fund" ("Bond Fund "). Both principal of and interest on this bond are payable in lawful money of the United States of America. Interest shall be paid by mailing a check or draft to the Registered Owner at the address shown on the Bond Register as of the 15th day of the month prior to the interest payment date. Principal shall be paid to the Registered Owner upon presentation and surrender of this bond at the principal office of the fiscal agency of the State of Washington in either Seattle, Washington, or New York, New York (hereinafter referred to collectively as the "Bond Registrar "). Reference is hereby made to additional provisions of this bond set forth on the reverse side hereof, and such additional provisions shall for all purposes have the same effect as if set forth on this space. This bond shall not be valid or become obligatory for any purpose or be entitled to any security or benefit under the Bond Ordinance (as hereinafter defined) until the Certificate of Authentication hereon shall have been manually signed by the Bond Registrar. -20- DOTO5Q.DOC 94/10/17 It is hereby certified, recited and declared that all acts, conditions and things required by the Constitution and statutes of the State of Washington to exist, to have happened and to have been performed precedent to and in the issuance of this bond do exist, have happened and have been performed in due time, form and manner as prescribed by law, and that the amount of this bond, together with all other obligations or indebtedness of the City, does not exceed any constitutional or statutory limitations of indebtedness. IN WITNESS WHEREOF, the City of Port Angeles, Washington, has caused this bond to be signed by the manual or facsimile signature of its Mayor, and attested by the manual or facsimile signature of its City Clerk, and the manual or facsimile seal of the City to be impressed or imprinted hereon, all as of the 1st day of November, 1994. (SEAL) Attest: City Clerk CITY OF PORT ANGELES, WASHINGTON By Mayor CERTIFICATE OF AUTHENTICATION Date of Authentication: This bond is one of the bonds described in the within mentioned Bond Ordinance and is one of the Water and Wastewater Utility Revenue and Refunding Bonds, 1994 of the City of Port Angeles, Washington, dated November 1, 1994. WASHINGTON STATE FISCAL AGENCY, Bond Registrar By Authorized Officer -21- DOTO5Q. DOC 94/10/17 ADDITIONAL BOND PROVISIONS This bond is one of a series of bonds issued under authority of Ordinance No. 2843 passed by the City Council on October 18, 1994, and Resolution No2094dopted by the City Council on November 1, 1994 (together, the "Bond Ordinance "), for the purpose of acquiring, constructing and installing additions to and betterments and extensions of the water and wastewater system of the City and to provide funds to defease certain outstanding water revenue bonds of the City. The bonds of this issue have not been designated as "qualified tax - exempt obligations" for purposes of Section 265(b) of the Internal Revenue Code of 1986, as amended. The City hereby covenants and agrees with the owner of this bond that it will keep and perform all the covenants of this bond and of the Bond Ordinance. Reference is hereby made to the Bond Ordinance for the definitions of capitalized terms used herein. The City does hereby pledge and bind itself to set aside from Gross Revenue and to pay into the Bond Fund and the accounts created therein the various amounts required by the Bond Ordinance to be paid into and maintained in such fund and accounts, all within the times provided by the Bond Ordinance. To the extent more particularly provided by the Bond Ordinance, the amounts so pledged to be paid from Gross Revenue into the Bond Fund and accounts therein shall be a lien and charge thereon equal in rank to the lien and charge upon said Revenue of the amounts required to pay and secure the payment of a loan to the City from the State of Washington Water Pollution Control Fund and any revenue bonds of the City hereafter issued on a parity with such loan and the bonds of this issue and superior to all other liens and charges of any kind or nature, except the Costs of Maintenance and Operation of the System. The City has further bound itself to maintain the System in good repair, working order and condition, to operate the same in an efficient manner and at a reasonable cost, and to establish, maintain and collect rates and charges in each calendar year that will make available, for the payment of the principal of and interest on Parity Bonds outstanding as the same shall become due, Net Revenue in an amount that will be equal to at least 1.25 times Annual Debt Service for such year (after deducting Assessments actually collected for such year). The pledge of Gross Revenue and other obligations of the City under the Bond Ordinance may be discharged at or prior to the maturity or redemption of the bonds of this issue upon the making of provision for the payment thereof on the terms and conditions set forth in the Bond Ordinance. Reference is made to the Bond Ordinance for a description of the Bond Fund and the covenants and declarations of the City and other terms and conditions upon which the bonds -22- DOTO5Q.DOC 94/10/17 authorized thereby have been issued and other bonds ranking on a parity therewith may hereafter be issued and outstanding. This bond is a special limited obligation of the City and is not an obligation of the State of Washington or any political subdivision thereof other than the City, and neither the full faith and credit nor the taxing power of the City or the State of Washington is pledged to the payment of this bond. The bonds maturing on or after November 1, 2005 are subject to redemption prior to maturity, at the option of the City, on or after November 1, 2004, in whole or in part on any date, maturities to be selected by the City (and by lot within a maturity in increments of $5,000 if less than all of a maturity is to be redeemed), at the prices set forth below as a percentage of par, together with the interest accrued thereon to the date fixed for redemption. Redemption Date November 1, 2004 through October 31, 2005 November 1, 2005 through October 31, 2006 November 1, 2006 and thereafter Price 101.0% 100.5 100.0 If not redeemed under the optional redemption provisions set forth above, the bonds maturing on November 1, 20_ shall be redeemed by lot (in such manner as the Bond Registrar shall determine) or paid at maturity, at par plus accrued interest, on 1 in years and amounts as follows: Years Amounts * Final Maturity Written notice of redemption shall be given by first class mail, postage prepaid, not less than 30 days nor more than 60 days before the redemption date to the Registered Owners of the bonds to be redeemed in whole or in part at their last addresses, if any, appearing on the Bond Register, but failure to receive any such notice shall not affect the validity of the proceedings for redemption of bonds. Notice of redemption having been given by mailing, as aforesaid, the bonds so called for redemption shall on the date specified in such notice become due and payable at the applicable redemption price herein provided, and from and after the date so fixed for redemption (unless the City shall default in the payment of the bonds so called for redemption) interest on said bonds so called for redemption shall cease to accrue. Portions of the principal sum of this bond in increments of $5,000 or any integral multiple thereof may be redeemed, and if less than all of the principal sum hereof is to be redeemed, in such case upon the surrender of this bond at the principal office of the Bond Registrar, there shall -23- DOT05Q.DOC 94/10/17 be issued to the Registered Owner, without charge therefor, for the then unredeemed balance of the principal sum hereof, fully registered bonds of like series, maturity and interest rate in any of the denominations authorized by the Bond Ordinance. Bonds are interchangeable for bonds of any authorized denomination of equal aggregate principal amount and of the same interest rate and maturity upon presentation and surrender to the Bond Registrar. The Bond Registrar shall not be required to issue, register, transfer or exchange any of the bonds during a period beginning at the opening of business on the 15th day of the month next preceding any interest payment date and ending at the close of business on such interest payment date. AS SIGNMENT FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto PLEASE INSERT SOCIAL SECURITY OR TAXPAYER IDENTIFICATION NUMBER OF TRANSFEREE (Please print or typewrite name and address, including zip code, of Transferee) the within bond and does hereby irrevocably constitute and appoint as attorney -in -fact to transfer said bond on the books kept for registration thereof with full power of substitution in the premises. DATED: SIGNATURE GUARANTEED: -24- NOTE: The signature on this Assignment must correspond with the name of the Registered Owner as it appears upon the face of the within bond in every particular, without alteration or enlargement or any change whatever. DOTO5Q.DOC 94/10117 Section 9. Construction Account; Application of Project Bond Proceeds. There has heretofore been created in the office of the City Treasurer a Water and Wastewater Construction Fund for the purpose of paying the costs of additions to and betterments and extensions of the System. There is hereby authorized to be created in such fund a special account to be known as the "1994 Water and Wastewater Construction Account" (the "Construction Account ") for the purpose of paying a portion of the costs of the Project. The proceeds of sale of the Project Bonds (except for accrued interest, which shall be paid into the Bond Fund, and the amount, if any, to be paid into the Reserve Account) shall be paid into the Construction Account. The money in the Construction Account shall be used for the sole purpose of paying the costs of the Project and all of the expenses incidental thereto, including expenses incidental to the issuance of the Bonds, or, if necessary and proper, shall be used for the purpose of repaying any amounts that the City may have advanced for the purpose of paying part or all of the cost of the additions and improvements to and extensions of the System hereinbefore authorized. The money in the Construction Account not immediately needed to pay any part or all of the above - described costs may be invested in Permitted Investments. All interest earned and /or income derived by virtue of any such investments shall remain in the Construction Account and be used for the purposes for which said Construction Account is created. Any money remaining in the Construction Account after all costs of the Project have been paid shall be transferred to the Bond Fund and /or the Reserve Account. Section 10. Defeasance of Refunded Bonds; Application of Refunding Bond Proceeds There is hereby authorized and established a special account of the City to be maintained with the Escrow Agent (as hereinafter defined) to be known as the "City of Port Angeles 1994 Water and Wastewater Utility Revenue Bond Defeasance Account" (the "Defeasance Account "), which account shall be drawn upon for the sole purpose of paying the principal of and interest on the Refunded Bonds and of paying costs related to issuance of the Bonds and defeasing the Refunded -25- DOT05Q.DOC 94/10/17 Bonds. The proceeds of sale of the Refunding Bonds (exclusive of accrued interest thereon, which shall be paid into the Bond Fund) shall be deposited into the Defeasance Account to defease the Refunded Bonds, as authorized by Ordinance No. 1941, and to pay costs of issuance of the Bonds. Money in the Defeasance Account shall be used immediately upon receipt thereof to defease the Refunded Bonds and discharge the other obligations of the City relating thereto under Ordinance No. 1941 of the City, by providing for the payment of the principal of and interest on the Refunded Bonds as set forth below. The City shall defease such bonds and discharge such obligations by the use of the money in the Defeasance Account to purchase certain "Government Obligations" as such obligations are defined in Chapter 39.53 RCW as now or hereafter amended (which obligations so purchased, are herein called "Acquired Obligations "), bearing such interest and maturing as to principal and interest in such amounts and at such times which, together with any necessary beginning cash balance, will provide for the payment of the principal of and interest on the Refunded Bonds as the same shall become due. Such Acquired Obligations shall be purchased at a yield not greater than the yield permitted by the Code and regulations relating to acquired obligations in connection with refunding bond issues. In order to carry out the defeasance of the Refunded Bonds, the Finance Director is hereby authorized to appoint as escrow agent a bank or trust company qualified by law to perform the duties described herein (the "Escrow Agent "). Any beginning cash balance and the Acquired Obligations shall be irrevocably deposited with the Escrow Agent in an amount sufficient to defease the Refunded Bonds in accordance with this Section 10 and Section 11 of this ordinance. Any amounts described above that are not provided for in full by such beginning cash balance and the purchase and deposit of the Acquired Obligations described in this section shall be provided for by the irrevocable deposit of the necessary amount out of the proceeds of sale of the Bonds or any other money of the City legally available therefor with the Escrow Agent. The proceeds of -26- DOT05Q.DOC 94/10/17 the Bonds remaining in the Defeasance Account after acquisition of the Acquired Obligations and provision for the necessary beginning cash balance shall be utilized to pay expenses of the acquisition and safekeeping of the Acquired Obligations and the costs of issuing the Bonds. The City may, from time to time, transfer, or cause to be transferred, from the Defeasance Account any moneys not thereafter required for the purposes set forth above, subject to verification in writing by an independent certified public accountant that such transfer will not result in inadequate funds being available to make the required payments therefrom. The City reserves the right to substitute other securities for the Acquired Obligations in the event it may do so pursuant to section 148 of the Code and applicable regulations thereunder, upon compliance with the conditions set forth in the Escrow Agreement. Section 11. Defeasance of Refunded Bonds. The City hereby irrevocably sets aside sufficient funds through the purchase of Acquired Obligations and an initial cash deposit to make the payments of principal of and interest on the Refunded Bonds, as specified in Section 10 above. Said defeasance of the Refunded Bonds shall be irrevocable after the final establishment of the escrow account and delivery of the Acquired Obligations and the requisite cash deposit, if any, to the Escrow Agent, except as provided herein relating to the substitution of securities. The Finance Director is authorized and requested to provide whatever assistance is necessary to accomplish such defeasance. The Escrow Agent is hereby authorized and directed to make the payments specified in Section 10 above to the Government, so long as the Government is the registered owner of the Refunded Bonds, and otherwise to the paying agent for the Refunded Bonds as authorized by Ordinance No. 1941 of the City. All such sums shall be paid from the moneys and Acquired Obligations deposited with said Escrow Agent pursuant to Section 10 of this ordinance, and the income therefrom and proceeds thereof. All such sums so paid shall be credited to the Defeasance Account. All money and Acquired Obligations deposited with said bank and any income therefrom shall be held, invested and applied in accordance with the provisions of this ordinance -27- DOTO5Q.DOC 94/10/17 and with the laws of the State of Washington for the benefit of the City and the owner of the Refunded Bonds. The City will take such actions as are found necessary to see that all necessary and proper fees, compensation and expenses of the Escrow Agent shall be paid when due. The proper officers and agents of the City are directed to obtain from the Escrow Agent an agreement setting forth the duties, obligations and responsibilities of the Escrow Agent in connection with the redemption and retirement of the Refunded Bonds as provided herein and stating that such provisions for the payment of the fees, compensation and expenses of such Escrow Agent are satisfactory to it. To carry out the purposes of the preceding section of this ordinance and this section, the Finance Director is authorized and directed to execute and deliver to the Escrow Agent the Escrow Agreement in substantially the form set forth in Exhibit C attached to this ordinance and incorporated herein by this reference. Section 12. Finding of Defeasance. The Council hereby finds and determines that the Acquired Obligations to be deposited with the Escrow Agent and the income therefrom, together with any necessary beginning cash balance, are sufficient to defease the Refunded Bonds and will discharge and satisfy the obligations of the City under the ordinance authorizing the issuance of the Refunded Bonds and the pledge of the City therein. Immediately upon the delivery of such Acquired Obligations to the Escrow Agent and the deposit of any necessary beginning cash balance, the Refunded Bonds shall be deemed not to be outstanding under Ordinance No. 1941 of the City and shall cease to be entitled to any lien, benefit or security under such ordinance except the right to receive payment from the Acquired Obligations and beginning cash balance so set aside and pledged. Section 13. Rate Stabilization Fund. A special fund of the City to be designated the "Water and Wastewater Rate Stabilization Fund" (the "Rate Stabilization Fund ") is hereby authorized and established in anticipation of future increases in revenue requirements of the -28- DOTO5Q.DOC 94/10/17 System. In accordance with the provisions of Section 14 of this ordinance, the City may from time to time appropriate or budget amounts in the Revenue Fund for deposit in the Rate Stabilization Fund and may from time to time withdraw amounts therefrom for deposit in the Revenue Fund to prevent or mitigate water and wastewater rate increases or for other lawful purposes of the City related to the System. Section 14. Revenue Fund. The City hereby obligates and binds itself to pay all Gross Revenue as collected into the Revenue Fund, created pursuant to Section 2 of this ordinance. The money in the Revenue Fund shall be held separate and apart from all other funds and accounts of the City. The Gross Revenue deposited in the Revenue Fund shall be used only for the following purposes and in the following order of priority: FIRST, to pay the Costs of Maintenance and Operation and to maintain a balance in the Revenue Fund sufficient in amount to enable the City to continuously meet Costs of Maintenance and Operation on a current basis; SECOND, to make all payments required to be made into the Bond Fund to pay the interest on any Parity Bonds; THIRD, to make all payments required to be made into the Bond Fund to pay the maturing principal of any Serial Bonds and to make all payments required to be made into the Bond Fund to satisfy the Sinking Fund Requirement; FOURTH, to make all payments required to be made pursuant to a reimbursement agreement or agreements (or other equivalent documents) in connection with Qualified Insurance or a Qualified Letter of Credit; provided that if there is not sufficient money to make all payments under reimbursement agreements the payments will be made on a pro rata basis; FIFTH, to make all payments required to be made into the Reserve Account to secure the payment of the principal of and interest on outstanding Parity Bonds; -29- DOTO5Q.DOC 94/1 0/1 7 SIXTH, to make all payments required by the DOE Loan Agreement to be made into the Emergency Repair and Replacement Fund of the System; SEVENTH, to make all payments required to be made into any revenue bond redemption fund, revenue warrant redemption fund, debt service account, reserve account or bond retirement account created to pay and secure the payment of the principal of and interest on any revenue bonds, or revenue warrants or other revenue obligations of the City having a lien upon Gross Revenue junior and inferior to the lien thereon for the payment of the principal of and interest on the Parity Bonds; and EIGHTH, to retire by redemption or purchase in the open market any outstanding water and wastewater revenue bonds, water and wastewater revenue warrants or other water and wastewater revenue obligations of the City, to make necessary additions, betterments, improvements and repairs to or extensions and replacements of the System, to make deposits into the Rate Stabilization Fund, or for any other lawful City purposes. Section 15. Bond Fund. There is hereby authorized to be created in the office of the City Treasurer a fund of the City to be known as the "1994 Water and Wastewater Utility Revenue Bond Fund" (the "Bond Fund "), which fund shall be drawn upon for the sole purpose of paying the principal of, premium if any, and interest on the Revolving Fund Loan, the Bonds and any Future Parity Bonds. The money in the Bond Fund shall be kept separate and apart from all other funds and accounts of the City. A. Debt Service Account. A special account known as the Debt Service Account is hereby authorized to be created in the Bond Fund for the purpose of paying the principal of, premium, if any, and interest on the Parity Bonds. As long as any of the Bonds remain outstanding, the City hereby irrevocably obligates and binds itself to set aside and pay from the Revenue Fund into the Debt Service Account, on or before the date due, those amounts necessary, together with Gross Revenue collected and -30- DOT05Q.DOC 94/10/17 deposited and such other moneys as are on hand and available therefor in the Debt Service Account, to pay the interest or principal and interest next coming due on the outstanding Bonds. The City covenants and agrees that in the event it issues any future Parity Bonds that are Term Bonds, it will provide in each ordinance authorizing the issuance of the same for annual payments to be made from the Revenue Fund into the Debt Service Account sufficient together with Gross Revenue collected and deposited and such other moneys as are on hand and available therefor in such account to amortize the principal of future Parity Bonds which are Term Bonds on or before the maturity date thereof. B. Reserve Account. A Reserve Account is hereby created in the Bond Fund for the purpose of securing the payment of the principal of and interest on the Bonds and any Future Parity Bonds. The City hereby covenants and agrees that it will pay into the Reserve Account from Bond proceeds a sum equal to the Reserve Account Requirement for the Bonds or will satisfy such requirement by obtaining Qualified Insurance. The City further covenants and agrees that in the event it issues any Future Parity Bonds it will provide in each ordinance authorizing the issuance of such Future Parity Bonds that on or prior to the date of issuance of such Future Parity Bonds money shall be deposited into the Reserve Account, from proceeds of such Bonds or other funds available therefor, so that the total amount of money in the Reserve Account will at least equal the Reserve Account Requirement. The City may substitute Qualified Insurance or a Qualified Letter of Credit for amounts required to be deposited into the Reserve Account. Such Qualified Letter of Credit or Qualified Insurance shall not be cancellable on less than 5 years notice. In the event of any cancellation, the Reserve Account shall be funded in accordance with the provisions of this section providing for payment in the event of a deficiency therein, as if the Parity Bonds that remain outstanding had been issued on the date of such notice of cancellation. The City further covenants and agrees that when the required deposits have been made into the Reserve Account, it will at all times maintain therein an amount at least equal to the -31- DOTO5Q. DOC 94/10/17 Reserve Account Requirement, as redetermined in each calendar year with respect to the bonds secured by such Reserve Account. Whenever there is a sufficient amount in the Bond Fund, including all accounts therein, to pay the principal of, premium, if any, and interest on all outstanding Parity Bonds, the money in the Reserve Account may be used to pay the principal of, premium, if any, and interest on the Parity Bonds secured thereby. Money in the Reserve Account may also be withdrawn to redeem and retire, and to pay the premium, if any, and interest due to such date of redemption, on the outstanding Parity Bonds secured by such Reserve Account, as long as the money remaining on deposit in such Reserve Account is at least equal to the Reserve Account Requirement determined with respect to the Parity Bonds then outstanding. In the event the Bonds outstanding are ever refunded, the money set aside in the Reserve Account to secure the payment thereof may be used to retire Bonds or may be transferred to any other reserve account that may be created to secure the payment of any bonds issued to refund the Bonds. In the event there shall be a deficiency in the Debt Service Account to meet maturing installments of either interest on or principal of and interest on the outstanding Parity Bonds payable out of such Account, such deficiency shall be made up from the Reserve Account by the withdrawal of money therefrom and by the sale or redemption of obligations held in the Reserve Account, if necessary, in such amounts as will provide cash in the Reserve Account sufficient to make up any such deficiency, and if a deficiency still exists immediately prior to an interest payment date and after the withdrawal of cash, the City shall then draw from any Qualified Letter of Credit, Qualified Insurance, or other equivalent credit facility in sufficient amount to make up the deficiency. Such draw shall be made at such times and under such conditions as the agreement for such Qualified Letter of Credit or such Qualified Insurance shall provide. If more than one Qualified Letter of Credit or Qualified Insurance is available, draws shall be made ratably thereon to make up the deficiency. Any deficiency created in the Reserve Account by reason of any such withdrawal shall then be made up from money in the Revenue Fund first available after -32- DOT05Q.DOC 94/10/17 making the payments required to be made under paragraphs "FIRST" through "FOURTH" of Section 14 of this ordinance. C. Lien of Bond Fund. The Bonds, together with the interest thereon, shall be payable from Gross Revenue, and such Gross Revenue is hereby pledged and set aside out of the Revenue Fund into the Bond Fund. Said amounts so pledged are hereby declared to be a lien and charge upon Gross Revenue and the money in the Revenue Fund equal to the lien and charge thereon to secure and pay the principal of and interest on the Revolving Fund Loan and any Future Parity Bonds and superior to all other charges of any kind or nature, except the Costs of Maintenance and Operation. D. Investment of Money in Bond Fund. All money in the Debt Service Account or Reserve Account may be kept in cash or invested in Permitted Investments maturing not later than the last maturity of the Bonds outstanding at the time of such purchase. Interest earned on or profits made from the sale of such investments shall be deposited in and become a part of the Revenue Fund. Section 16. Covenants and Agreements. The City hereby covenants with the owner of each of the Bonds for as long as any of the same remain outstanding as follows: A. Rates and Charges. The City covenants that it will establish, maintain and collect lawful rates and charges for the use of the services and facilities of the System, and shall adjust such rates and charges from time to time so that: (1) Gross Revenue will at all times be sufficient (a) to pay all Costs of Maintenance and Operations and to pay all taxes, assessments or other governmental charges lawfully imposed on the System or the revenue therefrom or payments in lieu thereof and any and all other amounts that the City may now be and hereafter become obligated to pay from Gross Revenue by law or contract, including payments other than debt service required under the DOE Loan Agreement; and, together with Assessments actually collected, (b) to pay the principal of and interest on all outstanding Parity Bonds as and when the same become due and payable, to -33- DOTO5Q DOC 94/10/17 make all payments required to be made into the Bond Fund to satisfy the Sinking Fund Requirement, and to make when due all payments required to be made into the Reserve Account. (2) the Net Revenue in each calendar year will equal at least 1.25 times Annual Debt Service for such year (after deducting Assessments actually collected for such year). For the purpose of meeting the requirement of this paragraph there may be added to Net Revenue for any calendar year any amount withdrawn from the Rate Stabilization Fund and deposited in the Revenue Fund. There shall be subtracted from Net Revenue for any calendar year any amounts in such year withdrawn from the Revenue Fund and deposited into the Rate Stabilization Fund in such calendar year. B. Maintenance of System. The City covenants that it will at all times keep and maintain the System in good repair, working order and condition, and will at all times operate the same and the business in connection therewith in an efficient manner and at a reasonable cost. C. Sale or Disposition of the System. The City will not sell or otherwise dispose of the System in its entirety unless simultaneously with such sale or other disposition, provision is made for the payment into the Bond Fund of cash or "Government Obligations," as now or hereafter defined in RCW Chapter 39.53, as amended, or its successor statute, if any, sufficient together with interest to be earned thereon to pay the principal of and interest on the then outstanding Parity Bonds, nor will it sell or otherwise dispose of any part of the useful operating properties of the System unless such facilities are replaced or provision is made for payment into the Bond Fund of the greater of: (1) An amount that will be in the same proportion to the net amount of Parity Bonds then outstanding (defined as the total amount of the Parity Bonds less the amount of cash and investments in the Bond Fund and accounts therein) that the Net Revenue from the portion of the System sold or disposed of for the preceding year bears to the total Net Revenue for such period; or -34- DOTO5Q.DOC 94/10/17 (2) An amount that will be in the same proportion to the net principal amount of Parity Bonds then outstanding that the book value of the part of the System sold or disposed of bears to the book value of the entire System immediately prior to such sale or disposition. The proceeds of any such sale or disposition of a portion of the properties of the System (to the extent required above) shall be paid into the Bond Fund. Notwithstanding any other provision of this subsection, the City may sell or otherwise dispose of any of the works, plant, properties and facilities of the System or any real or personal property comprising a part of the same with a value less than 2% of the net utility plant of the System or which shall have become unserviceable, inadequate, obsolete or unfit to be used in the operation of the System, or no longer necessary, material to or useful in such operation, without making any deposit into the Bond Fund. D. Collection of Assessments. The City shall promptly collect all Assessments levied in any utility local improvement district now or hereafter created to secure the payment of the principal of and interest on the Parity Bonds and shall pay the same into the Bond Fund without allocation of such Assessments to any particular series of Parity Bonds. It is hereby provided further, however, that nothing in this ordinance or in this subsection shall be construed to prohibit the City from issuing revenue bonds having a lien on Gross Revenue junior to the lien on such revenue for the payment of the principal of and interest on Parity Bonds and pledging as security for the payments of such junior lien bonds assessments levied in any utility local improvement district that may have been created to pay part or all the cost of improvements to the System for which such junior lien revenue bonds were specifically issued. E. Books and Accounts. The City covenants that it will maintain complete books and records relating to the operation of the System and its financial affairs, and will cause such books and records to be audited annually, and cause to be prepared an annual financial and operating statement, said statement to be mailed to any owner of Parity Bonds upon request. -35- DOT05Q.DOC 94110/17 F. Insurance. The City covenants that it will carry fire and extended coverage insurance on the System as is ordinarily carried on the property of similar public utilities by other municipal corporations engaged in the operation of the same, to the full insurable value thereof, and will also carry adequate public liability insurance and other kinds of insurance as under good practices are ordinarily carried on the properties of similar public utilities by private companies engaged in the operation of the same; provided, however, that the City may if deemed necessary and advisable by the Council, institute or continue a self - insurance program with respect to any or all of the aforementioned risks. The premiums paid for all such insurance shall be regarded and paid as a Cost of Maintenance and Operation. G. Delinquencies. The City covenants that it will promptly collect all service charges and Assessments, determine in a timely manner all delinquencies, and take all necessary legal action to enforce collection of such delinquencies. H. No Free Service. Except as permitted by law, the City will not furnish any service of the System to any customer whatsoever free of charge. Section 17. Tax Covenants. The City will not make any use of the proceeds of the Bonds or any other money or obligations held under this ordinance for any purpose, nor shall the City take any other action, that would cause any Bond to be (i) an "arbitrage bond" within the meaning of Section 148 of the Code and the applicable regulations thereunder, or (ii) a "private activity bond" under Section 141 of the Code and the applicable regulations thereunder. Section 18. Arbitrage Rebate. The City covenants and agrees to pay the Rebate Amount, if any, to the United States of America at the times and in the amounts necessary to meet the requirements of the Code to maintain the federal income tax exemption for interest payments on the Bonds, in accordance with the Arbitrage and Tax Certification. Section 19. Adequacy of Revenues. The Council hereby declares that in fixing the amounts to be paid into the Bond Fund as hereinbefore provided it has exercised due regard for the Costs of Maintenance and Operation and has not obligated the City to set aside and pay into -36- DOTO5Q. DOC 94/10/17 the Bond Fund a greater amount of money in the Revenue Fund than in its judgment will be available over and above such Costs of Maintenance and Operation. Section 20. Defeasance. In the event that money and /or Government Obligations (as defined in Chapter 39.53 RCW, as amended, or its successor statute), maturing at such time or times and bearing interest to be earned thereon in amounts (together with such money, if necessary) sufficient to redeem and retire the Bonds or any of them in accordance with their terms are set aside in a special account to effect such redemption and retirement and such money and the principal of and interest on such Government Obligations are irrevocably set aside and pledged for such purpose, then no further payments need be made into the Bond Fund for the payment of the principal of and interest on the Bonds so provided for, and the owners of such Bonds shall cease to be entitled to any lien, benefit or security of this ordinance except for the right to receive the money so set aside and pledged, and such Bonds shall be deemed not to be outstanding hereunder. Section 21. Issuance of Future Parity Bonds. The City hereby further covenants and agrees with the owners of the Bonds for as long as any of the same remain outstanding as follows: A. That it will not issue any bonds with a lien on Gross Revenue superior to the lien on such revenues of the Bonds. The City may issue Future Parity Bonds for: First, the purpose of acquiring, constructing and installing additions and improvements to and extensions of, acquiring necessary equipment for, or making necessary replacements or repairs and capital improvements to the System; or Second, the purpose of refunding or purchasing and retiring at or prior to their maturity any outstanding revenue bonds or other obligations payable out of Gross Revenue; and to pledge that payments be made into the Bond Fund for the payment of the principal thereof and interest thereon out of the Revenue Fund sufficient to pay the principal of and interest on such Future Parity Bonds and to maintain the reserves required therefor, which such payments may rank equally with the payments out of such Revenue Fund into the Bond Fund and the -37- DOTO5Q.DOC 94/10/17 Reserve Account to pay and secure the payment of the principal of and interest on any Parity Bonds then outstanding, upon compliance with the following conditions: (1) That at the time of the issuance of such Future Parity Bonds there is no deficiency in the Bond Fund and the Reserve Account. (2) If there are special assessments levied in any utility local improvement district in which additions and improvements to and extensions of the System will be constructed from the proceeds of such Future Parity Bonds, the ordinance authorizing such Future Parity Bonds shall require that such special assessments be paid into the Bond Fund. (3) If there are special assessments pledged to be paid into a warrant or bond redemption fund for revenue bonds or warrants being refunded by Future Parity Bonds, the ordinance authorizing such Future Parity Bonds shall require such special assessments to be used for the refunding or paid into the Bond Fund. (4) The principal of and interest on the Future Parity Bonds shall be payable out of the Bond Fund, and the ordinance authorizing their issuance shall further provide for payments into the Bond Fund to satisfy the Sinking Fund Requirement and payments into the Reserve Account to satisfy the Reserve Account Requirement, all as required by Section 13 of this ordinance. (5) Prior to the delivery of any Future Parity Bonds, the City shall have on file in the office of the City Clerk a certificate of a Professional Utility Consultant showing: that the Net Revenue determined and adjusted as hereafter provided for each calendar or fiscal year after the issuance of such Future Parity Bonds (the "Adjusted Net Revenue ") will equal at least 1.25 times the Annual Debt Service (after deducting Assessments, allocated to the years in which they would be received if the unpaid balance of each assessment roll were paid in the remaining number of installments with interest on the declining balance at the times and at the rate provided in the ordinance confirming the assessment roll) for each such calendar or fiscal year for all Parity Bonds plus the Future Parity Bonds proposed to be issued. -3 8- DOT05Q.DOC 94/10/17 The Adjusted Net Revenue shall be the Net Revenue for a period of any 12 consecutive months out of the 24 months immediately preceding the date of delivery of such proposed Future Parity Bonds as adjusted by such Professional Utility Consultant to take into consideration changes in Net Revenue estimated to occur under the following conditions for each year after such delivery for so long as any Parity Bonds, including the Future Parity Bonds proposed to be issued, shall be outstanding: (i) the additional Net Revenue that would have been received if any change in rates and charges adopted prior to the date of such certificate and subsequent to the beginning of such 12 -month period, had been in force during the full 12 -month period; (ii) the additional Net Revenue that would have been received if any facility of the System that became fully operational after the beginning of such 12 -month period had been so operating for the entire period; and (iii) the additional Net Revenue estimated by such Professional Utility Consultant to be received as a result of any additions, betterments and improvements to and extensions of any facilities of the System that are (a) under construction at the time of such certificate or (b) will be constructed from the proceeds of the Future Parity Bonds to be issued. Such Professional Utility Consultant may rely upon, and his or her certificate shall have attached thereto, financial statements of the System certified by the City Treasurer showing income and expenses for the period upon which the same is based. The certificate of such Professional Utility Consultant shall be conclusive and the only evidence required to show compliance with the provisions and requirements of this subsection (5). B. Notwithstanding the foregoing requirement, if Future Parity Bonds are to be issued for the purpose of refunding at or prior to their maturity any part or all of the then outstanding Parity Bonds and the issuance of such refunding Future Parity Bonds will result in a debt service savings and does not require an increase of more than $5,000 in any fiscal or calendar year for principal of and interest on such refunding Future Parity Bonds over and above the -39- DOT05Q.DOC 94/10/17 amount required in such year for the principal of and interest on the bonds being refunded thereby, the condition stated in subsection A(5) of this section need not be met. C. Nothing herein contained shall prevent the City from issuing any revenue bonds, warrants or other obligations that are a charge upon the money in the Revenue Fund junior or inferior to the payments required by this ordinance to be made into the Bond Fund and the Reserve Account. Section 22. Sale of Bonds. The Bonds shall be sold by public sale at 10:00 a.m., Seattle time, on November 1, 1994. The sale shall be conducted substantially in accordance with the provisions of this Section 22 and the Notice of Bond Sale attached hereto as Exhibit A. The Bonds shall be sold at a price not less than 98% of the principal amount thereof plus accrued interest to the date of delivery, and the bids shall be for no less than all of the Bonds. The Bonds shall be sold to the bidder offering to purchase them at the lowest true interest cost to the City. Sealed bids for the purchase of the Bonds shall be received on behalf of the City by Sound Finance Group, the financial advisors to the City, at the offices of Preston Gates & Ellis, bond counsel to the City, located at 701 Fifth Avenue (Floor 50), Seattle, Washington, until the time set forth above, whereupon said bids shall be publicly opened and read. The Council shall accept a bid for the Bonds and approve the terms of the Bonds by Sale Resolution adopted on the same day as the bond sale, provided that the Council reserves the right to reject any and all bids for the Bonds. All bids shall be accompanied by surety bond or a cashier's or certified check, as a good faith deposit, made payable to the order of the City, in an amount to be determined by the City's Finance Director in consultation with the City's financial advisor. The good faith check or surety bond of the successful bidder shall be security for the performance of its bid and shall be held as liquidated damages in case the successful bidder fails to take up and pay for the Bonds within 45 days if tendered for delivery. The City reserves the right to waive any irregularity or informality in any bid. -40- DOT05Q.DOC 94/1 0/1 7 The City Clerk shall publish the Notice of Bond Sale substantially in the form attached hereto as Exhibit A, or a short form of such notice, prior to such sale once in the Daily Journal of Commerce. Following the sale of the Bonds, the City shall cause definitive Bonds to be prepared, executed and delivered, which Bonds shall be lithographed or printed with engraved or lithographed borders. The proper City officials are hereby authorized and directed to do everything necessary for the prompt issuance, execution and delivery of the Bonds to the successful bidder and for the proper use and application of the proceeds of such sale. Section 23. Official Statement; Use of Documents. The City hereby approves the Preliminary Official Statement presented herewith to the Council and authorizes the distribution of the Preliminary Official Statement in connection with the offering of the Bonds. Pursuant to Securities and Exchange Commission Rule 15c2 -12 ( "Rule 15c2 -12 "), the City hereby deems this Preliminary Official Statement as final as of its date except for the omission of the information dependent upon the pricing of the issue in connection with the public sale of the Bonds, such as offering prices and interest rates, and other terms of the Bonds dependent on the foregoing matters. The City agrees to cooperate with the successful bidder to deliver or cause to be delivered, within seven business days from the date of the public sale authorized herein and in sufficient time to accompany any confirmation that requests payment from any customer of the successful bidder, copies of a final official statement in sufficient quantity to comply with paragraph (b)(4) of Rule 15c2 -12 and the rules of the Municipal Securities Rulemaking Board. Section 24. Municipal Bond Insurance. In the Sale Resolution, the City Council may provide for the Bonds to be insured by a municipal bond insurance company under terms and conditions to be set forth therein. -41- DOTO5Q.DOC 94/10/17 Section 25. Supplements and Amendments. A. The Council from time to time and at any time may adopt an ordinance or ordinances supplemental hereof, which ordinance or ordinances thereafter shall become a part of this ordinance, for any one or more or all of the following purposes: (1) To add to the covenants and agreements of the City in this ordinance other covenants and agreements thereafter to be observed, which shall not adversely affect the interests of the owners of any Bonds or any Parity Bonds in any material respect, or to surrender any right or power herein reserved to or conferred upon the City. (2) To make such provisions for the purpose of curing any ambiguities or of curing, correcting or supplementing any defective provision contained in this ordinance in regard to such matters or questions as the Council may deem necessary or desirable and not inconsistent with this ordinance and which shall not adversely affect the interests of the owners of any Bonds or any Parity Bonds in any material respect. (3) To amend or supplement any provision contained in this ordinance for the purpose of obtaining or maintaining a rating on the Bonds so long as such amendment or supplement is not inconsistent with this ordinance and will not adversely affect the interests of the owners of any Bonds or any Parity Bonds in any material respect. Any such supplemental ordinance of the Council may be adopted without the consent of the owners of any Bonds at any time outstanding, notwithstanding any of the provisions of subsection B of this section; provided, however, that the City shall obtain an opinion of nationally recognized bond counsel to the effect that such supplemental ordinance complies with this subsection A and will not adversely affect the interests of the owners of any Bonds or any Parity Bonds in any material respect. B. With the consent of the owners of not less than 65% in aggregate principal amount of the Parity Bonds at the time outstanding, the Council may adopt an ordinance or ordinances supplemental hereto for the purpose of adding any provisions to or changing in any -42- DOTO5Q.DOC 94/10/17 manner or eliminating any of the provisions of this ordinance or of any supplemental ordinance; provided, however, that no such supplemental ordinance shall: (1) Extend the fixed maturity of any Parity Bonds, or reduce the rate of interest thereon, or extend the time of payments of interest from their due date, or reduce the amount of the principal thereof, or reduce any premium payable on the redemption thereof, without the consent of the owner of each bond so affected; or (2) Reduce the aforesaid percentage of bondowners required to approve any such supplemental ordinance, without the consent of the owners of all of the Parity Bonds then outstanding. It shall not be necessary for the consent of bondowners under this subsection B to approve the particular form of any proposed supplemental ordinance, but it shall be sufficient if such consent shall approve the substance thereof C. Upon the adoption of any supplemental ordinance pursuant to the provisions of this section, this ordinance shall be deemed to be modified and amended in accordance therewith, and the respective rights, duties and obligations of the City under this ordinance and all owners of Bonds outstanding hereunder shall thereafter be determined, exercised and enforced thereunder, subject in all respects to such modification and amendments, and all the terms and conditions of any such supplemental ordinance shall be deemed to be part of the terms and conditions of this ordinance for any and all purposes. Section 26. Lost or Destroyed Bonds. In case any Bonds shall be lost, stolen or destroyed, the Bond Registrar may authenticate and deliver a new Bond or Bonds of like amount, date and tenor to the Registered Owner thereof upon the owner paying the expenses and charges of the Bond Registrar and the City in connection therewith and upon his or her filing with the Bond Registrar and the City evidence satisfactory to both that such Bond or Bonds were actually lost, stolen or destroyed and of his or her ownership thereof, and upon furnishing the City and the Bond Registrar with indemnity satisfactory to both. -43- DOTO5Q.DOC 94/10/17 Section 27. Approval of Amendment to the DOE Loan Agreement. The City hereby approves an amendment to the DOE Loan Agreement in substantially the form attached as Exhibit D hereto and incorporated herein by this reference. The Mayor and City Attorney are authorized to execute this amendment to the Loan Agreement with such minor changes as may be approved by the City Attorney or bond counsel to the City. Section 28. Severability. If any one or more of the covenants and agreements provided in this ordinance to be performed on the part of the City shall be declared by any court of competent jurisdiction to be contrary to law, then such covenant or covenants, agreement or agreements, shall be null and void and shall be deemed separable from the remaining covenants and agreements in this ordinance and shall in no way affect the validity of the other provisions of this ordinance or of any Bonds. Section 29. Effective Date. This ordinance shall become effective five days from and after its passage, approval and publication. PASSED by the City Council of the City of Port Angeles, Washington, at a regular meeting of said Council held this 18th day of October, 1994. CITY OF PORT ANGELES, WASHINGTON Attest: By 0 1.c Cle k Publish: October 23, 1994 By (By Summary) -44- Mayor DOT050.DOC 94/10/17 EXHIBIT A NOTICE OF BOND SALE CITY OF PORT ANGELES, WASHINGTON WATER AND WASTEWATER UTILITY REVENUE AND REFUNDING BONDS, 1994 $10,000,000 NOTICE IS HEREBY GIVEN that sealed bids will be received by the City of Port Angeles, Washington (the "City "), at the offices of Preston Gates & Ellis, bond counsel to the City, located at 701 Fifth Avenue (Floor 50), Seattle, Washington, until 10:00 o'clock a.m., Seattle time, on November 1, 1994 for the purchase of the City's Water and Wastewater Utility Revenue and Refunding Bonds, 1994 (the "Bonds ") in the aggregate principal amount of $10,000,000, at which time bids will be publicly opened and read. The City Council of the City will consider bids at its regular meeting at 7:00 p.m. on November 1, 1994. If the City accepts a bid, it will be awarded to the successful bidder (the "Purchaser ") and its terms will be approved by a resolution of the Council adopted at such meeting. The City reserves the right to extend any date and /or time fixed for the receipt of bids by giving at least twenty -four (24) hours' advance notice, by Munifacts wire service and by posting at the place established for the receipt of bids, of the new date and time so fixed, which notice shall be given by 10:00 a.m., Seattle time, on October 31, 1994, with respect to the extension of the date originally established for the opening of the bids, and at least twenty -four (24) hours prior to any such subsequently established date and time. If all bids for the Bonds are rejected, the City may fix a new date and time for the receipt of bids for such Bonds by giving notice in the same manner at least twenty -four (24) hours prior to such new date and time. Any notice specifying a new date and /or time for the receipt of bids, following the rejection of bids received or otherwise, shall be considered an amendment to this Official Notice of Bond Sale. Bond Details. The Bonds will be dated November 1, 1994, and will be in the denomination of $5,000 each or any integral multiple thereof The Bonds will be fully registered as to both principal and interest, and will be numbered in the manner and with such additional designation as the Bond Registrar deems necessary for purposes of identification. The Bonds will bear interest from the date thereof payable May 1, 1995, and semiannually thereafter on each May 1 and November 1 and will mature on November 1 in the years and amounts as follows: A -1 DOTO5Q.DOC 94/10/17 Maturity Years Amounts Maturity Years Amounts 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Optional Designation of Term Bonds. Bidders have the option to designate part or all of the maturities as term bonds, subject to mandatory redemption at par in the years and in the amounts set forth in the serial maturity schedules for such Bonds. Any term bonds designated must consist of the total principal payments for two or more consecutive years and mature on the latest of such years. If no term bonds are designated, the Bonds will mature in the amounts (subject to adjustment as provided herein) and on the dates set forth in the serial maturity schedule described above. Bond Registrar And Paying Agent. The fiscal agencies of the State of Washington in Seattle, Washington and New York, New York will act as bond registrar, transfer agent, and authenticating and paying agent with respect to the Bonds (collectively, the "Bond Registrar "). Book -Entry System. The Bonds will be held in fully immobilized form, and individual purchasers will receive payments of principal and interest solely through the facilities of The Depository Trust Company ( "DTC ") in New York, New York. Individual purchasers of Bonds will not be able to receive printed Bond certificates. Purpose. The Bonds are being issued (a) to finance a portion of the costs of constructing a secondary sewage treatment facility and certain related improvements and betterments to the City's water and wastewater system, (b) to fund a deposit into the Reserve Account for the Bonds (which shall be funded by purchase of Qualified Insurance, as such term is defined in the Bond Ordinance), (c) to defease certain outstanding water revenue bonds of the City, and (d) to pay costs of issuance of the Bonds. Prior Redemption. The Bonds of this issue maturing on and after November 1, 2005 will be subject to redemption prior to their maturity on and after November 1, 2004, in whole or in A -2 DOTO5Q.DOC 94/10/17 part (maturities to be selected by the City and by lot within a maturity in the manner chosen by the Bond Registrar), on any date, at the price set forth below as a percentage of par, plus accrued interest by mailing notice at least 30 and no more than 60 days prior to the redemption date to owners of the Bonds to be redeemed. Redemption Date November 1, 2004 through October 31, 2005 November 1, 2005 through October 31, 2006 November 1, 2006 and thereafter Price 101.0% 100.5 100.0 Governmental Bonds/Bank Designation. The Bonds are not private activity bonds. The City has not designated the Bonds as "qualified tax - exempt obligations" under Section 265(b) of the Code for investment by financial institutions. Security And Parity. The City currently has three outstanding obligations secured by water and wastewater utility revenues: (1) a State of Washington Water Pollution Control Revolving Fund Loan in the principal amount of $2,549,264 (the "Revolving Fund Loan "), which has a lien on revenues equal to that of the Bonds; and (2) two State of Washington Public Works Trust Fund Loans in the combined principal amount of not to exceed $3,260,000, which have a lien on revenues junior to that of the Revolving Fund Loan and the Bonds. In the ordinance authorizing issuance of the Bonds (the "Bond Ordinance "), the City has pledged that it will set aside from the gross revenue of the City's water and wastewater system and pay into the "1994 Water and Wastewater Utility Revenue Bond Fund" (the "Bond Fund ") amounts sufficient to pay and secure the payment of the principal of and interest on the Bonds. In the Bond Ordinance, the City has reserved the right to issue water and wastewater utility revenue bonds on a parity with the Revolving Fund Loan and the Bonds on certain terms and conditions set forth therein. Principal of and interest on the Revolving Fund Loan and the Bonds and any future parity bonds are payable solely from the Bond Fund. The Revolving Fund Loan and the Bonds and any future parity bonds have a lien and charge on gross revenue of the City's water and wastewater system superior to all other liens and charges thereon, except for the costs of maintenance and operation of the system. The Bonds are not general obligations of the City, and neither the full faith and credit of the City or of the State of Washington, nor any revenues of the City from sources other than the water and wastewater system, are pledged to the payment thereof. Reserve Account. The Reserve Account requirement for the Bonds will be funded by the City's purchase of Qualified Insurance, as such term is defined in the Bond Ordinance, from either AMBAC Indemnity or MBIA. The cost of such Qualified Insurance will be paid by the City and will be included in the calculation of the true interest cost of the Bonds, as described below under "Award of Bid." A -3 DOTO5Q.DOC 94110/17 Bond Insurance. The City will accept bids that are based on the issuance of a municipal bond insurance policy for some or all of the Bonds by an insurer whose claims - paying ability is rated in the highest rating categories by Moody's Investors Service and Standard & Poor's Ratings Group. However, bids shall not be conditioned upon the issuance of any such policy. The City will cooperate in any effort to qualify the Bonds for such bond insurance. The City makes no representations as to whether the Bonds will qualify for municipal bond insurance. Payment of any insurance premium and any rating fees of any rating agency charged for rating insured Bonds shall be the sole responsibility of the Purchaser, except that the City will pay for the rating on the Bonds that it has requested and received from Moody's Investors Service. In the Bond Ordinance, the City has provided for inclusion in the bond sale resolution of terms for the issuance of a municipal bond insurance policy. Any terms and conditions that an insurer proposes be included in such bond sale resolution must be made available for review by the City and its bond counsel no later than October 28, 1994 The Purchaser must provide the City with the municipal bond insurance commitment and information with respect to the municipal bond insurance policy and the insurance provider for inclusion in the final Official Statement within two (2) business days following the award of the bid. The City will require a certificate from the insurance provider regarding disclosure in the Official Statement with respect to the insurance provider and its policy, substantially in the form attached hereto as Exhibit A, on or prior to the date of delivery of the Bonds, and will also require an opinion of counsel to the insurance provider regarding the enforceability of the municipal bond insurance policy, in form reasonably satisfactory to the City and the Purchaser. [ has qualified the Bonds for bond insurance.] FAILURE OF THE INSURANCE PROVIDER TO ISSUE ITS POLICY SHALL NOT CONSTITUTE CAUSE FOR A FAILURE OR REFUSAL BY THE PURCHASER TO ACCEPT DELIVERY OF OR PAY FOR THE BONDS. Interest Rates And Bidding Details. Each bid shall be on the official bid form furnished by the City and enclosed in a sealed envelope marked "Bid for Purchase of the City of Port Angeles, Water and Wastewater Utility Revenue and Refunding Bonds, 1994." The Bonds shall be purchased at no less than 98% of the principal amount. No more than one rate of interest may be fixed for any one maturity. Each bid submitted shall provide for payment of accrued interest to date of delivery and shall specify the rate of interest at which the bidder will purchase said Bonds. No bid will be accepted for the purchase of less than all of the Bonds. To enable the City to comply with the requirements of the Internal Revenue Code of 1986, as amended, with respect to the determination of yield on the Bonds, the winning bidder shall provide the re- offering price for a substantial portion of the Bonds at or prior to closing on the Bonds. A -4 DOTO5Q. DOC 94/10/17 Deposit. Each bid shall be sealed and shall be accompanied by a good faith deposit of $ in cash or by a certified or bank cashier's check or a financial surety bond, payable to the order of the City of Port Angeles, which deposit shall be security for the performance of such bid and shall be held for liquidated damages in case the purchaser fails to take up and pay for the Bonds within 40 days, if tendered for delivery, after the acceptance thereof. Interest will not be allowed to the purchaser on such good faith deposit. If a check is used, it must accompany the applicable bid. If a financial surety bond is used, it must be from an insurance company licensed to issue such a bond in the State of Washington and preapproved by the City. Such bond must be submitted to the City in care of Preston Gates & Ellis, Columbia Center, 701 Fifth Avenue, Suite 5000, Seattle, Washington 98104 prior to the opening of the bids. The financial surety bond must identify each bidder whose deposit is guaranteed by such financial surety bonds. If the Bonds are awarded to a bidder using a financial surety bond, then that Purchaser is required to submit its deposit to the City in the form of a certified or cashier's check or wire transfer as instructed by the City not later than 3:30 p.m. Seattle time on the next business day following the award. If such deposit is not received by that time, the financial surety bond may be drawn upon by the City to satisfy the deposit requirement. When the Bonds are ready for delivery, the City will give the Purchaser five (5) days' notice of the delivery date and the City will expect payment in full (net of the good faith deposit) in immediately available federal funds by 9:00 a.m. Seattle time on that date, otherwise reserving the right, at its option, to determine that the Purchaser has failed to comply with that offer of purchase. The good faith deposit of cash or checks of all bidders except that of the successful bidder will be returned as soon as possible after the bids have been opened and evaluated. Award of Bid. The Bonds will be awarded to the bidder offering to purchase all of the same at the lowest true interest cost to the City. The true interest cost is defined as the annual rate which, when compounded semiannually, will discount the debt service payments on the Bonds (including mandatory Term Bond redemption payments) and the premium for the Qualified Insurance that will fund the Reserve Account Requirement for the Bonds (but not the premium for any policy of municipal bond insurance for the Bonds to be obtained by the Purchaser) from the payment date to the date of the Bonds and to the price bid, without regard to interest accrued to the date of delivery. The City may reject any or all bids submitted and may waive any irregularities in any bid. Delivery. Closing will occur within 45 days from the date of sale at the offices of Preston Gates & Ellis in Seattle, Washington, or at such other place as the Purchaser shall choose at its expense. The Bonds will be delivered to the Purchaser through the facilities of The Depository Trust Company ( "DTC ") in New York, New York, against payment to the account of the City, in Port Angeles, Washington, in immediately available federal funds of the purchase price plus accrued interest to the date of delivery, less the amount of the Deposit. The legal opinion of Preston Gates & Ellis, Seattle, Washington, approving the legality of the issuance of the Bonds, will be furnished to the Purchaser without charge, together with the usual closing documents. If, prior to the delivery of the Bonds, the interest thereon shall become includable in the gross income of the recipients thereof for federal income tax purposes, or if legislation that would A -5 DOT05O.DOC 94/10/17 have the same effect if adopted into law is passed by either house of the U.S. Congress or proposed by a joint conference committee, the Purchaser, at its option, may be relieved of the obligation to purchase the Bonds, or the City, at its option, may be relieved of the obligation to deliver the Bonds. In the event none of the Bonds are purchased or delivered, the Deposit will be returned to the Purchaser, without interest. CUSIP Numbers. It is anticipated that CUSIP identification numbers will be printed on the Bonds, but neither the failure to print such numbers on the Bonds nor any error with respect thereto shall constitute cause for a failure or refusal by the Purchaser to accept delivery of and pay for the Bonds. All expenses in relation to the printing of the CUSIP number on said Bonds shall be paid for by the City, but the charge of the CUSIP Bureau shall be paid by the Purchaser. Official Statement. A copy of the City's Preliminary Official Statement with respect to the Bonds, may be obtained by contacting the City's financial advisor, the address and telephone number of which is listed below. The Preliminary Official Statement is in a form deemed final by the City for the purpose of SEC Rule 15c2- 12(b)(1), but is subject to revision, amendment and completion in a final Official Statement, which the City will deliver, at the expense of the City, to the purchaser not later than seven business days after the City's acceptance of the purchaser's bid. No fewer than 150 copies of the final Official Statement will be delivered. By submitting the successful bid the purchaser agrees to file, or cause to be filed, within one business day following the receipt from the City, the final Official Statement with a nationally recognized municipal securities information repository designated by the Securities and Exchange Commission. The City will advise the purchaser, by written notice, of any "developments that impact the accuracy and completeness of the key presentations" (within the meaning of Rule 15c2 -12) contained in the final Official Statement, which may occur during the period commencing on the date of the acceptance by the City of the successful bid and ending on the 90th day next following that date of acceptance, unless the final Official Statement has been filed with such municipal securities information repository, in which event such period shall end on the 25th day. Secondary Market Disclosure. The City has agreed that it will make available its annual financial reports and similar information to any person requesting such information from the City, after the sale and delivery of the Bonds. A -6 DOTO5Q.DOC 94/1 0/1 7 Further Information. Further information regarding these Bonds and copies of the preliminary official statement may be obtained upon request made to Joan Egan, Sound Finance Group, Financial Advisor to the City, 1212 E. Newton, Seattle, Washington 98102 (206) 328- 9251. DATED at Port Angeles, Washington, this day of , 1994. A -7 Director of Finance DOT05Q.DOC 94/10/17 EXHIBIT A TO NOTICE OF SALE CERTIFICATE OF BOND INSURER The undersigned, the duly authorized and acting of (the "Bond Insurer "), hereby certifies on behalf of the Bond Insurer as follows: 1. The statements contained in the Official Statement dated , 1994 (the "Official Statement "), relating to the City of Port Angeles, Washington, Water and Wastewater Utility Revenue and Refunding Bonds, 1994 (the "Bonds") under the captions , insofar as such statements constitute descriptions or summaries of the Bond Insurer or municipal bond insurance policy (the "Policy ") of the Bond Insurer with respect to the Bonds, accurately reflect and fairly present the information set forth therein, and do not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they are made, not misleading; and 2. The form of Policy set forth in Appendix _ of the Official Statement is a true and complete copy of the form of Policy. A -A -1 [NAME OF BOND INSURER] By Title DOTO5Q.DOC 94/1 0/1 7 EXHIBIT B liOt)1� 1:A 1111-0\ II NIL \ICIMI. 130 \I)' Letter of Representations [Name of Issuer] Attention: General Counsel's Office The Depository Trust Company 55 Water Street; 49th Floor New York, NY 10041 -0099 Re. [Name of Agent] ( Date) (Issue Description) Ladies and Gentlemen: This letter sets forth our understanding with respect to certain matters relating to the above - referenced issue (the "Bonds "). Agent will act as trustee, paying agent, fiscal agent, or other agent of Issuer with respect to the Bonds. The Bonds will be issued pursuant to a trust indenture, bond resolution, or other such document authorizing the issuance of the Bonds dated , 199_ (the "Document ") ( "Underwriter) is distributing the Bonds through The Depository Trust Company ( "DTC "). �1 To induce DTC to accept the Bonds as eligible for deposit at DTC, and to act in accordance with its Rules with respect to the Bonds, Issuer and Agent, if any, make the following representations to DTC: 1. Prior to closing on the Bonds on , 199 —, there shall be deposited with DTC one Bond certificate registered in the name of DTC's nominee, Cede & Co., for each stated maturity of the Bonds in the face amounts set forth on Schedule A hereto, the total of which represents 100% of the principal amount of such Bonds. If, however, the aggregate principal amount of any maturity exceeds $150 million, one certificate will be issued with respect to each $150 million of principal amount and an additional certificate will be issued with respect to any remaining principal amount. Each $150 million Bond certificate shall bear the following legend: Unless this certificate is presented by an authorized representative of The Depository Trust Company, a New York corporation ( "DTC "), to Issuer or its agent for registration of transfer, exchange, or payment, and any certificate issued is registered in the name of Cede & Co. or in such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein. 2. In the event of any solicitation of consents from or voting by holders of the Bonds, Issuer or Agent shall establish a record date for such purposes (with no provision for revocation of consents or votes by subsequent holders) and shall, to the extent possible, send notice of such record date to DTC not less than 15 calendar days in advance of such record date. 3. In the event of a full or partial redemption or an advance refunding of part of the outstanding Bonds, Issuer or Agent shall send a notice to DTC specifying: (a) the amount of the redemption or refunding; (b) in the case of a refunding, the maturity date(s) established under the refunding; and (c) the date such notice is to be mailed to beneficial owners or published (the "Publication Date "). Such notice shall be sent to DTC by a secure means (e.g., legible telecopy, registered or certified mail, overnight delivery) in a timely manner designed to assure that such notice is in DTC's possession no later than the close of business on the business day before the Publication Date. Issuer or Agent shall forward such notice either in a separate secure transmission for each CUSIP number or in a secure transmission for multiple CUSIP numbers (if applicable) which includes a manifest or list of each CUSIP submitted in that transmission. (The party sending such notice shall have a method to verify subsequently the use of such means and the timeliness of such notice.) The Publication Date shall be not less than 30 days nor more than 60 days prior to the redemption date or, in the case of an advance refunding, the date that the proceeds are deposited in escrow. 4. In the event of an invitation to tender the Bonds, notice by Issuer or Agent to Bondholders specifying the terms of the tender and the Publication Date of such notice shall be sent to DTC by a secure means in the manner set forth in the preceding Paragraph. 5. All notices and payment advices sent to DTC shall contain the CUSIP number of the Bonds. 6. Notices to DTC pursuant to Paragraph 2 by telecopy shall be sent to DTC's Reorganization Department at (212) 709 -6896 or (212) 709 -6897, and receipt of such notices shall be confirmed by telephoning (212) 709 -6870. Notices to DTC pursuant to Paragraph 2 by mail or by any other means shall be sent to: Supervisor; Proxy Reorganization Department The Depository Trust Company 7 Hanover Square; 23rd Floor New York, NY 10004 -2695 7. Notices to DTC pursuant to Paragraph 3 by telecopy shall be sent to DTC's Call Notification Department at (516) 2274164 or (516) 2274190. If the party sending the notice does not receive a telecopy receipt from DTC confirming that the notice has been received, such party shall telephone (516) 2274070. Notices to DTC pursuant to Paragraph 3 by mail or by any other means shall be sent to: Call Notification Department The Depository Trust Company 711 Stewart Avenue Garden City, NY 11530 -4719 8. Notices to DTC pursuant to Paragraph 4 and notices of other actions (including mandatory tenders, exchanges, and capital changes) by telecopy shall be sent to DTC's Reorganization Department at (212) 709 -1093 or (212) 709 -1094, and receipt of such notices shall be confirmed by telephoning (212) 709 -6884. Notices to DTC pursuant to the above by mail or by any other means shall be sent to: Manager; Reorganization Department Reorganization Window The Depository Trust Company 7 Hanover Square; 23rd Floor New York, NY 10004 -2695 9. Transactions in the Bonds shall be eligible for next -day funds settlement in DTC's Next -Day Funds Settlement ( "NDFS ") system. A. Interest payments shall be received by Cede & Co., as nominee of DTC, or its registered assigns in next -day funds on each payment date (or the equivalent in accordance with existing arrangements between Issuer or Agent and DTC). Such payments shall be made payable to the order of Cede & Co. Absent any other existing arrangements such payments shall be addressed as follows: Manager; Cash Receipts Dividend Department The Depository Trust Company 7 Hanover Square; 24th Floor New York, NY 10004-2695 B. Principal payments shall be received by Cede & Co., as nominee of DTC, or its registered assigns in next -day funds on each payment date (or the equivalent in accordance with existing arrangements between Issuer or Agent and DTC). Such payments shall be made payable to the order of Cede & Co., and shall be addressed as follows: NDFS Redemption Department The Depository Trust Company 55 Water Street; 50th Floor New York, NY 10041 -0099 10. DTC may direct Issuer or Agent to use any other telephone number or address as the number or address to which notices or payments of interest or principal may be sent. 11. In the event of a redemption, acceleration, or any other similar transaction (e.g., tender made and accepted in response to Issuer's or Agent's invitation) necessitating a reduction in the aggregate principal amount of Bonds outstanding or an advance refunding of part of the Bonds outstanding, DTC, in its discretion: (a) may request Issuer or Agent to issue and authenticate a new Bond certificate, or (b) may make an appropriate notation on the Bond certificate indicating the date and amount of such reduction in principal except in the case of final maturity, in which case the certificate will be presented to Issuer or Agent prior to payment if required. -3- 12. In the event that Issuer determines that beneficial owners of Bonds shall be able to obtain certificated Bonds, Issuer or Agent shall notify DTC of the availability of Bond certificates. In such event, Issuer or Agent shall issue, transfer, and exchange Bond certificates in appropriate amounts, as required by DTC and others. 13. DTC may discontinue providing its services as securities depository with respect to the Bonds at any time by giving reasonable notice to Issuer or Agent (at which time DTC will confirm with Issuer or Agent the aggregate principal amount of Bonds outstanding). Under such circumstances. at DTC's request Issuer and Agent shall cooperate fully with DTC by taking appropriate action to make available one or more separate certificates evidencing Bonds to any DTC Participant having Bonds credited to its DTC accounts. 14. Nothing herein shall be deemed to require Agent to advance funds on behalf of Issuer. Notes: Very truly yours, A. If there is an Agent as defined in this Letter of Representations), Agent as well as Issuer must sign this Letter. If there is no Agent, in signing this Letter Issuer itself undertakes to perform all of-the obligations set forth herein. B. Under Rules of the Municipal Securities Rulemaking By. Board relating to "good delivery', a municipal securities (Authorized Officer's Signature) dealer must be able to determine the date that a notice of a partial call or of an advance refunding of a part of an issue is published (the "publication date ").'The establishment of (Agent) such a publication date is addressed in Paragraph 3 of the Letter. C. Schedule B contains statements that DTC believes accurately describe DTC, the method of effecting book- entry transfers of securities distributed through DTC, and certain related matters. ( Issuer) Received and Accepted: THE DEPOSITORY TRUST COMPANY By. (Authorized Officer) cc: Underwriter Underwriter's Counsel By: (Authorized Officer's Signature) SCHEDULE A (Describe Issue) CUSIP Principal Amount Maturity Date Interest Rate SCHEDULE B SAMPLE OFFICIAL STATEMENT LANGUAGE DESCRIBING BOOK-ENTRY-ONLY ISSUANCE (Prepared by DTC -- bracketed material may be applicable only to certain issues) 1. The Depository Trust Company ( "DTC "), New York, NY, will act as securities depository for the securities (the "Securities "). The Securities will be issued as fully- registered securities registered in the name of Cede & Co. (DTC's partnership nominee). One fully - registered Security certificate will be issued for [each issue of] the Securities, [each] in the aggregate principal amount of such issue, and will be deposited with DTC. [If, however, the aggregate principal amount of [any] issue exceeds $150 million, one certificate will be issued with respect to each $150 million of principal amount and an additional certificate will be issued with respect to any remaining principal amount of such issue.] 2. DTC is a limited- purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds securities that its participants ( "Participants ") deposit with DTC. DTC also facilitates the settlement among Participants of securities transactions, such as transfers and pledges, in deposited securities through electronic computerized book -entry changes in Participants' accounts, thereby eliminating the need for physical movement of securities certificates. Direct Participants include securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is owned by a number of its Direct Participants and by the New York Stock Exchange, Inc., the American Stock Exchange, Inc., and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as securities brokers and dealers, banks, and trust companies that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ( "Indirect Participants "). The Rules applicable to DTC and its Participants are on file with the Securities and Exchange Commission. 3. Purchases of Securities under the DTC system must be made by or through Direct Participants, which will receive a credit for the Securities on DTC's records. The ownership interest of each actual purchaser of each Security ( "Beneficial Owner ") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase, but Beneficial Owners are expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Securities are to be accomplished by entries made on the books of Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Securities, except in the event that use of the book -entry system for the Securities is discontinued. 4. To facilitate subsequent transfers, all Securities deposited by Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co. The deposit of Securities with DTC and their registration in the name of Cede & Co. effect no change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Securities; DTC's records reflect only the identity of the Direct Participants to whose accounts such Securities are credited, which may or may not be the Beneficial Owners, The Participants will remain responsible for keeping account of their holdings on behalf of their customers. 5. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. [6. Redemption notices shall be sent to Cede & Co. If less than all of the Securities within an issue are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.] 7. Neither DTC nor Cede & Co. will consent or vote with respect to Securities. Under its usual procedures, DTC mails an Omnibus Proxy to the Issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the Securities are credited on the record date (identified in a listing attached to the Omnibus Proxy). 8. Principal and interest payments on the Securities will be made to DTC. DTC's practice is to credit Direct Participants' accounts on payable date in accordance with their respective holdings shown on DTC's records unless DTC has reason to believe that it will not receive payment on payable date. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC, the Agent, or the Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest to DTC is the responsibility of the Issuer or the Agent, disbursement of such payments to Direct Participants shall be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners shall be the responsibility of Direct and Indirect Participants. [9. A Beneficial Owner shall give notice to elect to have its Securities purchased or tendered, through its Participant, to the [Tender /Remarketing] Agent, and shall effect delivery of such Securities by causing the Direct Participant to transfer the Participant's interest in the Securities, on DTC's records, to the [Tender /Remarketing] Agent. The requirement for physical delivery of Securities in connection with a demand for purchase or a mandatory purchase will be deemed satisfied when the ownership rights in the Securities are transferred by Direct Participants on DTC's records.] 10. DTC may discontinue providing its services as securities depository with respect to the Securities at any time by giving reasonable notice to the Issuer or the Agent. Under such circumstances, in the event that a successor securities depository is not obtained, Security certificates are required to be printed and delivered. 11. The Issuer may decide to discontinue use of the system of book -entry transfers through DTC (or a successor securities depository). In that event, Security certificates will be printed and delivered. 12. The information in this section concerning DTC and DTC's book -entry system has been obtained from sources that the Issuer believes to be reliable, but the Issuer takes no responsibility for the accuracy thereof. EXHIBIT C ESCROW AGREEMENT THIS ESCROW AGREEMENT, made and entered into as of the day of , 1994 (the "Agreement "), by and between the City of Port Angeles, Washington (the "City "), and , , Washington (the "Escrow Agent "); WITNESSETH: WHEREAS, the City, pursuant to Ordinance No. 1941 of the City, passed on August 24, 1977, issued and sold its $1,600,000 Water Revenue Bonds, 1977 (the "1977 Bonds "); and WHEREAS, the City by Ordinance No. Resolution No. , passed on , 1994, and adopted on , 1994 (together, the "Bond Ordinance "), has determined to defease the outstanding 1977 Bonds maturing after September 1, 1994 (the "Refunded 1977 Bonds "), by the issuance of its Water and Wastewater Utility Revenue and Refunding Bonds, 1994 (the "Bonds "); and WHEREAS, the City pursuant to the Bond Ordinance has duly authorized the execution and delivery of this Agreement and the irrevocable pledge of the moneys and obligations to be deposited with the Escrow Agent hereunder to the payment of the Refunded Bonds; NOW, THEREFORE, in consideration of the mutual covenants hereinafter contained, and for the benefit of the owners and holders of the Refunded Bonds, the parties hereto covenant and agree as follows: Section 1. Definitions. Capitalized terms used herein shall have the same meanings set forth in the Bond Ordinance, unless the context clearly indicates otherwise. Section 2. Provisions for Defeasing the Refunded Bonds. The City agrees, simultaneously with the delivery of the Bonds, to irrevocably deposit with the Escrow Agent $ of the proceeds thereof for credit to the Defeasance Account. C -1 DOT05Q.DOC 94/10/17 The Escrow Agent shall immediately apply $ to purchase, on behalf of the City, the securities described in Appendix A attached hereto (collectively, the "Acquired Obligations ") for credit to the Defeasance Account, to establish a beginning cash balance of $ in such Account, and to pay certain costs of issuance as set forth on Appendix B attached hereto. The Acquired Obligations and beginning cash balance shall be applied by the Escrow Agent to the payment of the principal and interest due and to become due on the Refunded Bonds in accordance with the schedule set forth in Appendix C hereof. Investments in mutual funds and unit investment trusts are prohibited. The Acquired Obligations and beginning cash balance in the Defeasance Fund shall be held in trust for the security and benefit of the holders and owners of the Refunded Bonds (subject to the right to substitute obligations pursuant to Section 5 of this Agreement). The City agrees that it will cause to be delivered to the Escrow Agent, on or before the delivery of the Bonds to the initial purchasers thereof, statements setting forth the maturity schedule of the Refunded Bonds by number, amount, date of maturity and interest rates, the amount of interest to be paid on each semiannual interest payment date, the amount of principal to be paid on each annual principal payment date, together with an opinion of a certified public accounting firm regarding the sufficiency of the Acquired Obligations and moneys to be deposited in the Defeasance Account. The City represents to the Escrow Agent that the maturing principal and interest on the Acquired Obligations, if paid when due, together with the necessary beginning cash balance, will be sufficient to pay, when due: (a) Principal and interest that will become due and payable on and before September 1, 2017, on the Refunded Bonds. Section 3. Disbursements by Escrow Agent. The Escrow Agent shall present for payment on the due dates thereof the Acquired Obligations so deposited with it and shall apply the proceeds derived therefrom and the interest paid thereon in accordance with the provisions of the C -2 DOTO5Q.DOC 94/10/17 Bond Ordinance and this Agreement. Moneys shall be transferred, in a timely manner, by the Escrow Agent to the Economic Development Administration, United States Department of Commerce, so long as it is the registered owner of the Refunded Bonds, and otherwise to the paying agent for the Refunded Bonds as authorized by Ordinance No. 1941 of the City in amounts sufficient for the payments specified in Section 2 of this Agreement. Section 4. Reports and Notice of Insufficiency. For as long as any of the Refunded Bonds are outstanding, on or before the twentieth (20th) day of each and , commencing with the month of 1994, the Escrow Agent shall render a statement as of the last day of the preceding month to the City, which statement shall set forth the cash and Acquired Obligations held by the Escrow Agent, any of such Acquired Obligations that have matured and the amounts received by the Escrow Agent by reason of such maturity, the interest earned on any of such Acquired Obligations, a list of any investments or reinvestments made by the Escrow Agent in other obligations, and the interest and /or principal derived therefrom, the amounts of cash delivered to the Treasurer or on her order, and the dates of the use thereof for the payment of the principal of and interest on the Refunded Bonds as the same shall become due and payable, and any other transactions of the Escrow Agent pertaining to its duties and obligations as set forth herein. In the event the maturity of principal and interest of the Acquired Obligations and other money held by the Escrow Agent pursuant to this Agreement shall at any time be insufficient to make a payment described in Section 2 of this Agreement, the Escrow Agent shall give the City prompt notice of such insufficiency, and shall promptly deliver to the City a written request to deposit with the Escrow Agent sums sufficient to make such payment, which payment the City shall promptly make. Section 5. Custody and Safekeeping of Obligations. All Acquired Obligations and moneys deposited with or received by the Escrow Agent pursuant to this Agreement, and the principal thereof and interest thereon and any reinvestments thereof, shall be held in trust separate C -3 DOTO5Q. DOC 94/10/17 and apart from all other funds and investments held by the Escrow Agent solely for the purposes set forth herein. The Escrow Agent shall not sell, transfer, assign or hypothecate such funds, moneys and obligations, except as set forth herein. The City may, according to the terms of this Section 5, substitute other securities for the Acquired Obligations and withdraw funds from the trust hereby created. The City may from time to time transfer, or cause to be transferred, from the Defeasance Account to the Bond Fund any moneys not required for payment of the principal and interest due and to become due on the Refunded Bonds upon securing: (a) a verification by an independent certified public accounting firm which shall be satisfactory to bond counsel to the City that the moneys and Acquired Obligations on deposit after such transfer will be sufficient, without reinvestment, to effect the defeasance of the Refunded Bonds as set forth herein and in Section 11 of the Bond Ordinance; and (b) an opinion from bond counsel that such transfer (i) is permitted under Ordinance Nos. 1941 of the City, and (ii) will not cause the interest on the Refunded Bonds or the Bonds to become subject to federal income taxes and will not cause any Refunded Bond or Bond to become an "arbitrage bond" as defined in Section 148 of the Internal Revenue Code of 1986, as amended, and the applicable regulations promulgated thereunder (as the same may be amended, to the extent such amendments apply to the Refunded Bonds or the Bonds). The City reserves the right to substitute other securities for the Acquired Obligations in the event it may do so pursuant to Section 148 of the federal Internal Revenue Code of 1986, as amended, and applicable regulations thereunder, upon compliance with the following conditions: (a) The securities to be substituted are direct noncallable obligations of the United States of America. (b) The City obtains a verification by an independent certified public accounting firm which shall be satisfactory to bond counsel and the City that such securities bear such interest and mature at such times and in such amounts, without reinvestment, as to fully C -4 DOTO5Q. DOC 94/10/17 replace the Acquired Obligations for which they are substituted, and to provide, together with Acquired Obligations and cash remaining, for the payment of the amounts specified in Section 2, item (a) above. (c) The City obtains an opinion from bond counsel that such substitution (i) is permitted under Ordinance No. 1941 of the City, and (ii) will not cause the interest on the Refunded Bonds or the Bonds to become subject to federal income taxes and will not cause any Refunded Bond or Bond to become an "arbitrage bond" as defined in Section 148 of the Internal Revenue Code of 1986 and the applicable regulations promulgated thereunder (as the same may be amended, to the extent such amendments apply to the Refunded Bonds or the Bonds). The Escrow Agent agrees to such substitution and withdrawal if the conditions precedent thereto contained in the Bond Ordinance are met, provided, that the required legal opinion shall be from nationally - recognized bond counsel. Section 6. Reinvestment of Proceeds of Acquired Obligations. The proceeds (principal and interest) and reinvestment proceeds of any Government Obligations or Substitute Obligations that are not immediately needed to make any required payment as described in Section 2 of this Agreement shall be reinvested by the Escrow Agent on the date of receipt for the benefit of the City and the holders and owners of the Refunded Bonds, as follows: (a) Such proceeds and reinvestment proceeds shall be reinvested only in direct noncallable obligations of the United States or non - callable obligations unconditionally guaranteed by the United States ( "Open Markets ") purchased at prevailing market prices and for which there is an established market, or non - callable United States Treasury Certificates, Notes and Bonds- - State and Local Government Series ( "SLGs "), bearing a yield not in excess of %; provided, however, if the Escrow Agent obtains an opinion from bond counsel that such yield will not cause interest on the Refunded Bonds or the Bonds to be taxable, the Escrow Agent may invest in Open Markets or in SLGs bearing a yield in excess of %. C -5 DOT05Q.DOC 94/10/17 (b) The obligations in which such proceeds are reinvested shall mature not later than the date the principal thereof and interest thereon are needed to make any required payment as described in Section 2 of this Agreement and as shown in the then applicable independent certified public accountant escrow verification. (c) If such proceeds, together with other moneys on hand in the Defeasance Account, are insufficient to reinvest in the smallest denomination of such obligations or are required sooner than the shortest maturity of such obligations, such proceeds shall be converted to cash and retained in the trust in the Defeasance Account until needed to make a required payment therefrom, or until sufficient moneys are accumulated to permit the reinvestment thereof. (d) To the extent obligations meeting the requirements of (a) and (b) of this Section are not available, such proceeds shall be held uninvested in the escrow account, provided that the Escrow Agent's Internal rate of return is not greater than 20 %, or in cash. For purposes of this Section, "yield" means that discount rate which, when computing the present worth of all payments of principal and interest to be paid on the obligations, produce an amount equal to the purchase price thereof (which shall be a market price), with such calculations based upon a 360 -day year and semiannual compounding. Section 7. Remission of Funds When Refunded Bonds Paid. At such time as the Escrow Agent shall receive evidence satisfactory to it from the City that the Refunded Bonds have been paid in full, including both the principal thereof and interest thereon, the Escrow Agent shall deliver forthwith or remit to the City any Acquired Obligations and moneys held pursuant to this Agreement in the Defeasance Account. Section 8. Duties and Obligations of the Escrow Agent. The duties and obligations of the Escrow Agent shall be as prescribed by the provisions of this Agreement and the Bond Ordinance, and the Escrow Agent shall only be responsible for the performance of its duties and obligations as so specifically set forth and to act in good faith in the performance thereof, and no implied duties or obligations shall be incurred by the Escrow Agent other than those specified herein. C -6 DOTO5Q. DOC 94/10/17 None of the provisions contained in this Agreement shall require the Escrow Agent to use or advance its own funds or otherwise incur financial liability in the performance of any of its duties or the exercise of any of its rights or powers hereunder. The Escrow Agent shall be under no liability for interest on any funds or other property received by it hereunder, except as herein expressly provided. The Escrow Agent may consult with counsel of its choice, and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or not taken or suffered by it hereunder in good faith and in accordance with the opinion of such counsel. The Escrow Agent is authorized to comply with the requirements of this Agreement and is relieved from all liability for so doing notwithstanding any demand or notice to the contrary by any party hereto. The Escrow Agent shall not be responsible or liable for any promise, representation, agreement, condition or stipulation not herein set forth; for the sufficiency, correctness, genuineness or validity of any instruments delivered to or deposited with it; for the form of execution thereof or the identity, authority or rights of any person executing or depositing the same; or for the performance or compliance by any party other than the Escrow Agent with the terms or conditions of any such instruments; for any loss which may occur by reason of forgeries, false representations or the exercise of the Escrow Agent's discretion in any particular manner unless such exercise is negligent or constitutes willful misconduct. If any controversy arises between the parties hereto, the Escrow Agent shall not be required to determine the same, but it may, in its discretion, institute such interpleader or other proceedings in connection therewith as it may deem proper, and in following either course, it shall not be liable, except as provided above. Nothing in this paragraph is intended to create or expand upon any right that the Escrow Agent would otherwise have available to it under applicable law to commence an interpleader action or to alter the obligations of the Escrow Agent under this Escrow Agreement. C -7 DOT05Q.DOC 94/10/17 Section 9. Compensation of Escrow Agent. The Escrow Agent shall be paid the sum of $ for services rendered by it pursuant to the provisions of this Agreement, and such payment is inclusive of all fees, compensation and expenses of the Escrow Agent; provided, however, that the Escrow Agent shall be separately compensated for services performed in connection with any substitution of Acquired Obligations pursuant to Section 5 of this Agreement. In the event that the Escrow Agent renders any service not provided for in this Agreement, or the Escrow Agent is made a party to or intervenes in any litigation pertaining to this Agreement or institutes interpleader proceedings relative hereto, the Escrow Agent shall be reasonably compensated by the City for such extraordinary services and reimbursed for all fees, costs, liability and expenses (including reasonable attorneys' fees) occasioned thereby. In no event shall the Escrow Agent ever assert a lien or be entitled to payment or reimbursement of any fees, costs, liability or expense out of the moneys or securities held by it in trust hereunder. Section 10. Successor Escrow Agent. The obligations assumed by the Escrow Agent pursuant to this Agreement may be transferred by the Escrow Agent to a successor; provided that the Escrow Agent has presented evidence satisfactory to the City and its bond counsel that the successor meets the requirements of RCW Chapter 39.53, as now in effect or hereafter amended, and has assumed all the obligations of the Escrow Agent under this Agreement, and that all the Acquired Obligations and moneys held by the Escrow Agent pursuant to this Agreement have been duly transferred to such successor. Section 11. Agreement to Remain in Force. The Escrow Agent and the City recognize that the holders and owners from time to time of the Refunded Bonds have a beneficial interest in the Acquired Obligations and moneys to be held by the Escrow Agent as herein provided. It is therefore understood and agreed that this irrevocable Agreement shall not be subject to amendment without the consent of the holders of the Refunded Bonds except for the purpose of (1) clarifying any ambiguity herein, or (2) to strengthen the security of the holders of the C -8 DOTO5Q.DOC 94/10/17 Refunded Bonds by means of revised or additional terms, conditions or covenants, (3) to strengthen the escrow by placing therein additional moneys or direct noncallable government obligations, or (4) making any amendments to the exhibits hereto or textual references herein to such exhibits necessary in connection with the deposit with the Escrow Agent of any substitute Acquired Obligations. Section 12. Notices. All notices or requests required or permitted to be given hereunder shall, until further notice in writing, be given in writing at the following addresses: City: Escrow Agent: City of Port Angeles, Washington 321 East Fifth Port Angeles, Washington 98362 Attention: Finance Director Section 13. Miscellaneous. This Agreement is governed by Washington law and may not be modified except by a writing signed by the parties. In the event any one or more of the provisions contained in this Agreement shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Agreement, but this Agreement shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein. The headings of this Agreement are for convenience of reference only and shall not define or limit the provisions hereof Section 14. Notification. If any provision hereof is adjudged to be severed from this Agreement, notification thereof shall be sent to: C -9 DOTO5Q.DOC 94/10/17 Standard & Poor's Ratings Group Attn: Public Finance Rating Desk/Refunded Bonds 25 Broadway New York, New York 10004 Moody's Investors Service Attn: Public Finance Rating Desk/ Refunded Bonds 99 Church Street New York, New York 10007 IN WITNESS WHEREOF, the parties have executed and delivered this Agreement, all as of the date and year first above written. ATTEST: City Clerk C -10 CITY OF PORT ANGELES, WASHINGTON By Mayor [ ], as Escrow Agent By Trust Officer DOTO5Q.DOC 94/10/17 APPENDIX A [INSERT HERE A COPY OF THE DESCRIPTION OF THE ESCROW SECURITIES FROM THE VERIFICATION REPORT.] Appendix A - Page 1 DOTO5Q.DOC 94/10/17 Expenses to be paid at Closing: Description APPENDIX B Payee Amount Escrow Verification Fee Escrow Agent Fee Bond Counsel Fee Preston Gates & Ellis Financial Advisor Sound Finance Group Official Statement Printing Sound Finance Group and Mailing Rating Agency - -New Bonds Rating Agency -- Refunded Bonds Total Appendix B - Page 1 $ DOTO5Q. DOC 94/10/17 APPENDIX C [INSERT HERE A COPY FROM THE VERIFICATION REPORT OF THE SCHEDULE OF PAYMENTS TO BE MADE ON THE REFUNDED BONDS.] Appendix C - Page 1 DOTO5Q.DOC 94/1 0/1 7 EXHIBIT D • Amendment No. 4 to the Washington State Water Pollution Control State Revolving Fund (SRF) loati agreement between the Washington State Department of Ecology and the City of Port Angeles iaan No. SRF 91 -001 Purpose: To amend the above referenced loan agreement between the Department of Ecology and the City of Port Angeles. It Is Mutually Agreed that the loan agreement is amended as follows: • This amendment is necessary to evidence the Department's consent to the issuance of water and wastewater revenue bonds by the Recipient on a parity of charge and lien on the revenues of the Recipient's water and wastewater utility with the charge and lien on those revenues for repayment of the Department's SRF loan (the "loan "), and the terms and conditions under which those bonds and additional parity bonds may be issued. • Delete the second paragraph of S, and C, Section VI, Net Revenues Pledged, and replace with the following: C. The Recipient has authorized this amended loan agreement by Ordinance No. , passed by the City Council of the Recipient on (the "bond Ordinance "). The Recipient warrants that this amended loan agreement is in conformity with the provisions of the Constitution and laws of the State of Washington and laws amendatory thereto applicable to the Recipient and this amended loan agreement. D. The recipient warrants that there is no material adverse information relating to the project (as that term is used in the loan agreement) or the loan agreement known to it which has not been disclosed to the Department. E. The recipient warrants that-, to the Recipient's knowledge, no litigation exists, and no litigation has been threatened, which could case doubt on the enforceability of the recipient's obligations under the loan agreement or the amended loan agreement. • Delete Section VII, Rate Covenant. and replace with the following: A. De.Einitions, The capitalized terms Assessments, Costs of Maintenance and Operation, Future. Parity Bonds, Cross Revenue, Net Revenue and Parity Bonds shall have the meaning in this amended loan agreement as given to such terms in the Bond Ordinance. B. rity Bonds. The Recipient agrees not to incur Future Parity Bonds as provided in the Bond Ordinance, but in no event shall such terms, conditions and covenants impair the validity and enforceability, or diminish the effect, of the Recipient's covenants to the Department contained in the loan agreement and this amended loan agreement while the loan remains outstanding and unpaid. Amendment No. 4 City of Port Angeles Loan No. SRF 91-001 C. at Covenants. The Recipient hereby covenants with the Department that, for as long as any principal or interest is due or outstanding for the loan, it will at all times establish, maintain and collect rates and charges of the water and wastewater system in accordance with Section 16(A) of the Bond Ordinance. D. Other Covenants. The Recipient also covenants to the Department for so long as the lean is outstanding and unpaid as follows; 1. Keep Water and Wastewater System in Good Repair. It will at all times maintain and keep the water and wastewater system in good repair, working order and condition and also will at all times operate the water and wastewater system and the business in connection therewith in an efficient manner and at a reasonable cost. 2. Accounts and_ Rec:orda. It will :keep proper and separate accounts and records in which complete and separate entries shall be made of all transactions relating to the water and wastewater system. 3. Po Free Water and Wastewater System Service. It will not furnish water and sewer system services to any customer whatsoever free of charge. 4. Pot to Dispose of Water and Weseewater System. It will not: (a) Sall, lease, mortgage or in any manner encumber or dispose of all of the property of the water and wastewater system unless provision is made for the immediate repayment in full of the loan; and (b) sell, lease, mortgage or in any manner encumber or dispose of any part of the property of the water and wastewater system that is :used, useful or material to the operation thereof unless provision is made for the replacement thereof or for immediate repayment of the portion of the outstanding loan in the same ratio as the Gross Revenue available for debt service for the outstanding loan for the twelve months preceding such sale, lease, encumbrance or disposal from the portion of the water and wastewater system sold, leased, encumbered or disposed of bears to the Gross Revenue available for debt service for the outstanding loan from the entire water and sewer system for the same period. Nothing herein contained shall prevent the Recipient from issuing Future Parity bonds containing covenants more restrictive to the Recipient, or more favorable to the holder, than those contained herein, but in such event those covenants shall be treated as also running, to the Amendment No. 4 City of Port Angeles Loan No. SRF 91 -001 Department for its benefit ae;if they had been expressly made and incorporated herein. E. jtepeym nt from Other Sources. Nothing herein contained shall prevent the Recipient from repaying any portion of the loan from any other funds, other than Net Revenue of the water and wastewater system, legally available to it for the repayment, including special assessment, general taxes, proceeds of general obligation bonds or revenue bonds, or other sources. F. 2'rcpaymesnt of the Loan. So long ass the Department shall hold this loan, the Recipient may prepay, from any funds legally available to the Recipient for the purpose, on any payment date the entire unpaid principal amount of the lean or, from time to time at any time, may prepay such lesser portion as the Recipient may determine of the unpaid principal amount thereof. Upon prepayment of a portion of the principal amount of the loan, the semiannual payments of principal and interest shall be adjusted to reflect that recalculation. Notice of any such optional prepayment of this loan shall be given by the Recipient at least thirty days prior to the prepayment date by mailing to the Department a notice fixing such prepayment date and the amount of principal to be prepaid. C. Flo Defeasance or Advance Refunding. So long as the Department shall told this loan, the Recipient shall not be entitled to, and shall not effect, an economic defeasance or an advance refunding of the loan. • Add S•eetion XXIII, Transferability of the loan. The Departm int-.expressly reserves the right to trans r— oWfership of this loan to any person a y- Mine- an4- -Ln- -i sole discretion. 3 Amendment No. 4 City of Port Angeles Loan No. SRF 91 -001 Section XXI, Opinion of Legal Counsel, Delete Subparagraph B and replace with the following; D. This amended loan agreement has been duly executed, acknowledged where necessary, by Recipient's authorized representatives and, to the best knowledge of such Counsel, all other necessary actions have been taken, so that this amended loan agreement is valid binding and enforceable upon the Recipient in accordance with its terms, except as such enforcement is affected by bankruptcy, insolvency, moratorium or other laws affecting the creditor's rights generally; and to such counsel's knowledge, this amended loan agreement does not violate any other agreement, statute, court order or law to which the Recipient is a party or by which it is bound, • The Special Conditions for SRF Loan Agreements (Exhibit A to the original loan agreement) (the "Special Conditions ") are hereby amended as follows: A. Section 6 of the Special Conditions is hereby amended by the addition of the following sentence: "The requirements of this section with respect to insurance may be satisfied by a program of self insurance, as provided in Section 16(F) of the Bond Ordinance." B. Section 8 of the Special Conditions is hereby amended by the addition of the following sentence: "The requirements of this section with respect to the Reserve Fund may be satisfied by the City's obtaining a Qualified Letter of Credit and /or qualified Insurance (as such terms are defined in the Bond Ordinance), as provided in the Bond Ordinance.° Except as expressly provided by this amendment, all other terms and conditions of the original loan agreement and any amendments thereto remain in full force and effect, This amendment shall be effective on the date of signature by the Water Quality Financial Assistance Program Manager of the Department. State of Washington City of Port Angeles Department of Ecology Jon K. Peterson Date James Mallet Date Project Officer Mayor Jay A. Shepard Date Recipient's Legal Counsel Date Program Manager Water Quality Financial Assistance Approved as to Form Only Assistant Attorney General CERTIFICATE OF CITY CLERK I DO HEREBY CERTIFY that I am the duly chosen, qualified and acting Clerk of the City of Port Angeles, Washington (the "City "), and keeper of the records of the City Council; and I HEREBY CERTIFY: 1. That the attached ordinance is a true and correct copy of Ordinance No. 2843 of the City (the "Ordinance "), as finally passed at a regular meeting of the City Council held on the 18th day of October, 1994 and duly recorded in my office. 2. That said meeting was duly convened and held in all respects in accordance with law, and to the extent required by law, due and proper notice of such meeting was given; that a quorum was present throughout the meeting and a legally sufficient number of members of the City Council voted in the proper manner for the passage of the Ordinance; that all other requirements and proceedings incident to the proper passage of the Ordinance have been duly fulfilled, carried out and otherwise observed, and that I am authorized to execute this certificate. IN WITNESS WHEREOF, I have hereunto set my hand and affixed the official seal of the City this 18th day of October, 1994. (SEAL) Summary of Ordinance Adopted by the Port Angeles City Council on October 18. 1994 Ordinance No. 2843 This Ordinance of the City of Port Angeles combines the existing water system and wastewater system of the City; adopts and specifies a plan of additions and betterments to the water and wastewater system; provides for the defeasance of certain outstanding water revenue bonds of the City; authorizes the issuance and sale of water and wastewater utility revenue and refunding bonds of the City in the principal amount of $10,000,000, to defease such outstanding water revenue bonds and to pay part of the cost of acquiring, constructing and installing such additions and betterments to the water and wastewater system; authorizes appointment of an escrow agent and the execution of an escrow agreement related to such defeasance; fixes the date, form, terms, maturities and covenants of such bonds; provides the covenants and terms under which the City may issue future water and wastewater revenue bonds on a parity with such bonds; and authorizes the public sale of such bonds. The full text of the Ordinance is available at City Hall in the City Clerk's office or will be mailed upon request. Office hours are Monday through Friday from 8:00 a.m. to 5:00 p.m. This Ordinance shall take effect five days after the date of publication of this summary. Becky J. Upton City Clerk Publish: October 23. 1994