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HomeMy WebLinkAbout3148CITY OF PORT ANGELES, WASHINGTON WATER AND WASTEWATER UTILITY REVENUE BONDS, 2003 ORDINANCE NO. 3148 AN ORDINANCE of the City of Port Angeles, Washington, authorizing the issuance and sale of water and wastewater utility revenue bonds of the city in the principal amount of $4,220,000 to finance the cost of improvements to the City's water and wastewater utility; fixing the date, form, terms, maturities and covenants of such bonds; and authorizing the sale of such bonds. PASSED ON November 4, 2003 Prepared By: PRESTON GATES & ELLIS LLP 925 Fourth Avenue Suite 2900 Seattle, Washington 98104 -1158 Table of Contents Page Section 1. Definitions 2 Section 2. Compliance with Parity Conditions 13 Section 3. Plan of Improvements 14 Section 4. Authorization and Description of Bonds 15 Section 5. Registration, Exchange and Payments 16 Section 6. Redemption; Purchase of Bonds 21 Section 7. Form of Bonds 24 Section 8. Execution of Bonds 28 Section 9. Construction Fund; Application of Bond Proceeds 28 Section 10. Revenue Fund 29 Section 11. Rate Stabilization Fund 30 Section 12. Bond Fund 31 Section 13. Adequacy of Revenues 34 Section 14. Covenants and Agreements 34 Section 15. Tax Covenants; Special Designation 38 Section 16. Defeasance 38 Section 17. Issuance of Future Parity Bonds 39 Section 18. Sale of Bonds 42 Section 19. Official Statement 42 Section 20. Undertaking to Provide Ongoing Disclosure 43 Section 21. Bond Insurance and Surety Bond 47 Section 22. Supplements and Amendments 52 Section 23. Lost or Destroyed Bonds 54 Section 24. Severability 54 Section 25. Effective Date 54 -i- P:\DO1\DOTI G2 11/04/03 ORDINANCE NO. 3148 AN ORDINANCE of the City of Port Angeles, Washington, authorizing the issuance and sale of water and wastewater utility revenue bonds of the city in the principal amount of $4,220,000 to finance the cost of improvements to the City's water and wastewater utility; fixing the date, form, terms, maturities and covenants of such bonds; and authorizing the sale of such bonds. WHEREAS, the City of Port Angeles, Washington (the "City ") owns, operates and maintains a combined water and wastewater utility (the "System "); and WHEREAS, the City Council of the City (the "Council ") deems it in the best interest of the City and customers of the System to make certain improvements to water and wastewater facilities of the System; and WHEREAS, to pay the costs of such improvements, the Council deems it in the best interest of the City to authorize the issuance of its water and wastewater utility revenue bonds in the principal amount of $4,220,000 (the "Bonds "); and WHEREAS, the City has outstanding a loan to the City administered by the State of Washington Department of Ecology ( "DOE "), loan number SRF 91001 (the "Revolving Fund Loan"), authorized by Resolution No. 7 -90 of the Council adopted on May 1, 1990, with a current balance of $1,059.524; and WHEREAS, pursuant to Ordinance No. 2843 of the City, passed on October 18, 1994, and Resolution No. 20 -94 adopted by the Council on November 1, 1994, the City issued its Water and Wastewater Utility Revenue and Refunding Bonds, 1994, under date of November 1, 1994 (the "1994 Bonds "), currently outstanding in the principal amount of $210,000; and WHEREAS, pursuant to Ordinance No. 3000 of the City, passed on September 15, 1998, and Resolution No. 23 -98, adopted by the Council on November 3, 1998, the City issued its Water and Wastewater Utility Revenue Refunding Bonds, 1998, under date of November 1, 1998 (the "1998 Bonds "), currently outstanding in the principal amount of $9,110,000; and WHEREAS, the DOE Loan Agreement and Ordinance Nos. 2843 and 3000 provide that the City may issue additional water and wastewater utility revenue bonds on a parity with the Revolving Fund Loan, the 1994 Bonds and the 1998 Bonds to finance improvements to the System if certain conditions are met; and WHEREAS, after due consideration it appears to the Council that such parity conditions can be met and that the Bonds may be issued on a parity with the Revolving Fund Loan, the 1994 Bonds and the 1998 Bonds; and WHEREAS, the City has received the offer of Seattle - Northwest Securities Corporation, Seattle, Washington (the "Underwriter ") to purchase the Bonds and it appears to the Council that it is in the best interests of the City and ratepayers of the System that the City accept such offer and sell the Bonds to the Underwriter on the terms set forth therein and herein; 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 -2- P: \DOT\DOT1 G2 11/04/03 (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 15 of Ordinance No. 2843 and referred to in Section 12 of this ordinance. "Bond Register" means the books or records maintained by the Bond Registrar for the purpose of registration of the Bonds. "Bond Insurance Policy" means the municipal bond insurance policy issued by the Insurer insuring the payment when due of the principal of and interest on the Bonds as provided therein. -3- P: \DOT\DOTI G2 11/04/03 "Bond Registrar" means the fiscal agency of the State of Washington in either Seattle, Washington, or New York, New York, whose duties include registering and authenticating the Bonds, maintaining 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 City's Water and Wastewater Utility Revenue Bonds, 2003, issued in the aggregate principal amount of $4,220,000 pursuant to this ordinance. "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 thereunder. "Commission" means the United States Securities and Exchange Commission. "Construction Fund" means the City's Water and Wastewater Utility Capital Projects Fund. "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. "Debt Service Account" means the account of that name created in the Bond Fund by Section 15 of Ordinance No. 2843 and referred to in Section 12 of this ordinance. -4- P:1DOT\DOT1 G2 11/04/03 "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 initial depository for the Bonds or any successor substitute depository for the Bonds. "Finance Director" means the duly appointed and acting Finance Director of the City or the successor to the duties of such office. "Financial Guaranty Agreement" means the Financial Guaranty Agreement with respect to the Surety Bond dated as of the date of delivery of the Bonds, by and between the City and the Insurer. "Fiscal Year" means the fiscal year used by the City at any time. At the time of the adoption of this ordinance, the Fiscal Year is the twelve -month period beginning January 1 of each year and ending December 31 of each year. "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 money, 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 -5- P:1DOT100T1 G2 11/04/03 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." "Insurer" means MBIA Insurance Corporation, a stock insurance company incorporated under the laws of the State of New York. "Letter of Representations" means the Blanket Issuer Letter of Representations from the City to DTC. "MSRB" means the Municipal Securities Rulemaking Board or any successor to its functions. "1994 Bonds" means the City's Water and Wastewater Utility Revenue Bonds, 1994, issued under date of November 1, 1994, pursuant to Ordinance No. 2843 of the City and Resolution No. 20 -94 of the Council, and currently outstanding in the principal amount of $210,000. "1998 Bonds" means the City's Water and Wastewater Utility Revenue Refunding Bonds, 1998, issued under date of November 1, 1998, pursuant to Ordinance No. 3000 of the City and Resolution No. 23 -98 of the Council, and currently outstanding in the principal amount of $9,110,000. "Net Revenue" means the Gross Revenue less the Costs of Maintenance and Operation. "NRMSIR" means a nationally recognized municipal securities information repository. "Parity Bonds" means the Revolving Fund Loan, the 1994 Bonds, the 1998 Bonds, 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 -6- P:1DOT1DOT1 G2 11/04/03 payment of the principal of and interest on the Revolving Fund Loan, the 1994 Bonds, the 1998 Bonds, and the Bonds. "Permitted Investments" means (i) so long as any of the 1994 Bonds or the Bonds remain outstanding, any of the following investments, if permitted under the laws of the State of Washington as amended from time to time: A. Direct obligations of the United States of America (including obligations issued or held in book -entry form on the books of the Department of the Treasury, and CATS and TGRS) or obligations the principal of and interest on which are unconditionally guaranteed by the United States of America. B. Bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the following federal agencies and provided such obligations are backed by the full faith and credit of the United States of America (stripped securities are only permitted if they have been stripped by the agency itself): 1. U.S. Export-Import Bank: direct obligations or fully guaranteed certificates of beneficial ownership; 2. Farmers Home Administration: certificates of beneficial ownership; 3. Federal Financing Bank; 4. Federal Housing Administration Debentures; 5. General Services Administration: participation certificates; 6. Government National Mortgage Association (GNMA): GNMA - guaranteed mortgage- backed bonds and GNMA - guaranteed pass - through obligations; 7. U.S. Maritime Administration: guaranteed Title XI financing; and P:DOT\DOT1 G2 11/04/03 8. U.S. Department of Housing and Urban Development: project notes; local authority bonds; U.S. government - guaranteed new communities debentures; U.S. government - guaranteed public housing notes and bonds. C. Bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the following non -full faith and credit U.S. government agencies (stripped securities are only permitted if they have been stripped by the agency itself): 1. Federal Home Loan Bank System: senior debt obligations; 2. Federal Home Loan Mortgage Corporation: participation certificates and senior debt obligations; 3. Federal National Mortgage Association: mortgage- backed securities and senior debt obligations; Student Loan Marketing Association: senior debt obligations; 5. Resolution Funding Corp. (REFCORP) obligations; and 6. Farm Credit Systems: consolidated systemwide bonds and notes. D. Money market funds registered under the Federal Investment Company Act of 1940, whose shares are registered under the Federal Securities Act of 1933, and having a rating by S &P of AAAm -G, AAAm or AAm. E. Certificates of deposit secured at all times by collateral described in (A) and/or (B) above. Such certificates must be issued by commercial banks, savings and loan associations or mutual savings banks. The collateral must be held by a third party and the bondholders must have a perfected first security interest in the collateral. F. Certificates of deposit, savings accounts, deposit accounts or money market deposits that are fully insured by FDIC, including BIF and SAIF. -8- P:IDOTIDOTI G2 11/04103 G. Investment Agreements, including GIC's, acceptable to the Insurer. H. Commercial paper rated, at the time of purchaser, "Prime -1" by Moody's and "A -1" or better by S &P. I. Bonds or notes issued by any state or municipality rated by Moody's and S &P in one of the two highest rating categories assigned by such agencies. J. Federal funds or bankers acceptances with a maximum term of one year of any bank that has an unsecured, uninsured and unguaranteed obligation rating of "Prime -1" or "A3" or better by Moody's and "A" or better by S &P. K. Repurchase agreements providing for the transfer of securities from a dealer bank or securities firm (seller/borrower) to a municipal entity (buyer /lender), and the transfer of cash from a municipal entity to the dealer bank or securities firm with an agreement that the dealer bank or securities firm will repay the cash plus a yield to the municipal entity in exchange for the securities at a specified date. Repurchase Agreements must satisfy the following criteria or be approved by the Insurer: 1. Repos must be between the municipal entity and a dealer bank or securities firm. a. Primary dealers on the Federal Reserve reporting dealer list that are rated A or better by S &P and Moody's, or b. Banks rated "A" or above by S &P and Moody's. 2. The written repo contract must include the following: a. Securities that are acceptable for transfer are: (1) Direct U.S. governments, or -9- P:1DOT1DOT1 G2 11/04/03 (2) Federal agencies backed by the full faith and credit of the U.S. government (and FNMA & FHLMC). b. The term of the repo maybe up to 30 days. c. The collateral must be delivered to the municipal entity, trustee (if trustee is not supplying the collateral) or third party acting as agent for the trustee (if the trustee is supplying the collateral) before or simultaneously with payment (perfection by possession of certificated securities). d. The securities must be valued weekly, marked -to- market at current market price plus accrued interest. The value of collateral must be equal to 104% of the amount of cash transferred by the municipal entity to the dealer bank or securities firm under the repo plus accrued interest. If the value of securities held as collateral slips below 104% of the value of the cash transferred by municipality, then additional cash and/or acceptable securities must be transferred. If, however, the securities used as collateral are FNMA or FHLMC, then the value of collateral must equal 105 %. 3. A legal opinion must be delivered to the municipal entity to the effect that the repo meets guidelines under state law for legal investment of public funds. L. Any Washington State - administered investment pool in which the City is statutorily permitted or required to invest City funds; and (ii) from and after such time as no 1994 Bonds or Bonds remain outstanding, 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 -10- P:\DOTTDOTI G2 11/04/03 systems of comparable size character to the System in such areas as are relevant to the purposes for which they are retained. "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 13 of Ordinance No. 2843 and referred to in Section 11 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(f) of the Code. "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 sole Registered Owner. P: \DOT\DOT1 G2 11/04/03 "Reserve Account" means the account of that name in the Bond Fund created pursuant to Ordinance No. 2843 and referred to in Section 12 of this ordinance. "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 stated principal amount of such bonds, or (c) maximum Annual Debt Service on such bonds. "Revenue Fund" means the special fund of the City known as the "City of Port Angeles Water and Wastewater Utility Revenue Fund" created in the office of the City Treasurer pursuant to Section 2 of Ordinance No. 2843 and referred to in Section 10 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, currently outstanding in the principal amount of $1,166,012. "Rule" means the Commission's Rule 15c2 -12 under the Securities Exchange Act of 1934, as the same may be amended from time to time. "Serial Bonds" means Bonds or Future Parity Bonds other than Term Bonds. "SID" means a state information depository for the State of Washington (if one is created). "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. "Surety Bond" means the surety bond issued by the Insurer guaranteeing certain payments into the Reserve Account for the Bonds as provided therein and subject to the limitations therein. -12- P:1DOTIDOT1 G2 11/04/03 "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 in Section 6 of this ordinance 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. Section 2. Compliance with Parity Conditions. The Council hereby finds and determines, as required by Ordinance Nos. 2843 and 3000, as follows: First, that the Bonds are being issued for the purpose of acquiring, constructing and installing additions and improvements to and extensions of, acquiring necessary equipment for, and making necessary replacements, repairs and capital improvements to the System, as described in Section 2 of this ordinance; Second, that at the time of the adoption of this ordinance and at the time of the issuance of the Bonds there is not nor will there be any deficiency in the Bond Fund or the Reserve Account; Third, this ordinance provides that the principal of and interest on the Bonds are payable out of the Bond Fund and provides further that payments will be made into the Bond Fund to satisfy the Sinking Fund Requirements on the Term Bonds, and the Surety Bond, which satisfies -13- P:\DOT\DOT1 G2 11/04/03 the definition of "Qualified Insurance," will be obtained to satisfy the Reserve Account Requirement, all as required by Section 13 of Ordinance No. 2843 and Section 11 of Ordinance No. 3000; and Fourth, prior to delivery of the Bonds, the City will have on file in the office of the City Clerk a certificate of a Professional Utility Consultant showing that "Adjusted Net Revenue" (as such term is defined in Ordinance Nos. 2843 and 3000) will equal at least 1.25 times the Annual Debt Service for all Parity Bonds including the Bonds. The parity conditions contained in Ordinance Nos. 2843 and 3000 having been complied with or assured, the payments required in this ordinance to be made out of the Revenue Fund into the Bond Fund and Reserve Account to pay and secure the payment of the principal of and interest on the Bonds shall constitute a lien and charge upon the money in such Revenue Fund equal in rank with the lien and charge thereon for the payments required to be made into the Bond Fund to pay and secure the payment of the principal of and interest on the Revolving Fund Loan, the 1994 Bonds and the 1998 Bonds. Section 3. Plan of Improvements. The Council hereby finds and determines that the public interest requires that the City construct the following additions to and betterments to the System (i) water division improvements, including replacement of water mains in downtown Port Angeles, installation of additional concrete cylinder piping, installation of a new pump at the Spruce Street station, and installation of a cover for the Peabody Heights Reservoir, and (ii) wastewater division improvements, including improvements to two pump stations, installation of a storm drain in Lincoln Street, installation of a catch basin and piping in the Crown Park area, composting facility upgrades and sewer line replacements, expected to be paid as follows: approximately $2,000,000 from a Washington State Public Works Trust Fund loan -14- P:\DOT\OOT1 G2 11/04/03 and approximately $4,191,000 from proceeds of the Bonds) (collectively, the "Projects "). The Council hereby adopts the Projects as a plan and system for additions and betterments to the System. In undertaking the Projects, the City shall acquire and install all equipment and appurtenances necessary for its proper operation, and shall acquire by purchase, lease or condemnation all property, both real and personal, or any interest therein, and all rights -of -way, franchises, and easements necessary to carry out said plan. The Projects shall be subject to such changes as to details of size or location or any other details of said Projects as may be authorized by the City either prior to or during the course of construction. Section 4. Authorization and Description of Bonds. For the purpose of paying costs of the Projects and costs of issuing the Bonds, the City shall issue its water and wastewater utility revenue bonds in the aggregate principal amount of $4,220,000 (the "Bonds "). The Bonds shall be designated as the "City of Port Angeles, Washington, Water and Wastewater Utility Revenue Bonds, 2003," shall be dated as of the date of delivery of the Bonds to the Underwriter, 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, shall be numbered separately in such manner and with any additional identification as the Bond Registrar deems necessary for identification, and shall bear interest from their date (calculated on the basis of a year of 360 days and twelve 30 -day months) payable on May 1, 2004, and semiannually thereafter on the first days of November and May of each year at the following per annum interest rates and shall mature on November 1 of the following years in the following principal amounts: -15- P:1DOT1DOT1 G2 11/04/03 Maturity Year Principal Interest (November 1) Amount Rate 2004 $ 115,000 2.00% 2005 110,000 2.00 2006 115,000 2.00 2007 115,000 2.25 2008 120,000 2.75 2009 120,000 3.00 2010 125,000 3.25 2011 130,000 3.50 2013* 275,000 3.70 2014 145,000 3.80 2015 150,000 4.00 2016 155,000 4.00 2018* 330,000 4.20 2020* 360,000 5.00 2022* 400,000 5.00 2023 215,000 5.00 2024 225,000 5.00 2025 235,000 5.00 2026 245,000 5.00 2027 260,000 5.00 2028 275,000 5.00 * Term Bonds 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, Exchange and Payments. (a) Bond Registrar /Bond Register. The City hereby adopts the system of registration approved by the Washington State Finance Committee, which utilizes the fiscal agencies of the State of Washington in Seattle, Washington, and New York, New York, as registrar, authenticating agent, paying agent and transfer agent (collectively, the "Bond Registrar "). The Bond Registrar shall keep, or cause to be kept, at its principal corporate trust office, sufficient records for the registration and transfer of the Bonds, which shall be open to -16- P:1DOT\DOT1 G2 11/04/03 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. (b) Registered Ownership. The City and the Bond Registrar may deem and treat the Registered Owner of each Bond as the absolute owner 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 5(g) hereof, but such registration may be transferred as herein provided. All such payments made as described in Section 5(g) shall be valid and shall satisfy the liability of the City upon such Bond to the extent of the amount or amounts so paid. (c) DTC Acceptance /Letter of Representations. The Bonds shall be held initially in fully immobilized form by DTC acting as depository. To induce DTC to accept the Bonds as eligible for deposit at DTC, the City has heretofore executed and delivered to DTC a Blanket Issuer Letter of Representations. 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 -17- P:1DOT\DOT1 G2 11/04103 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. (d) Use of Depository. (1) The Bonds shall be registered initially in the name of "Cede & Co.," as nominee of DTC, with a single Bond for each maturity in a denomination equal to the total principal amount of that maturity. 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 City 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 City 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. -18- P: \DOT\DOT1 G2 11/04/03 (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 City, 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 City. (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 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 City 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 City 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 -19- P: \DOT\DOT1 G2 11/04/03 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 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, or, in the case of any proposed redemption of the bonds, after the mailing of notice of the call of such bonds for redemption. (f) Registration Covenant. The City covenants that, until all Bonds have been surrendered and canceled, it will maintain a system for recording the ownership of each Bond that complies with the provisions of Section 149 of the Code. (g) Place and Medium of Payment. Both principal of and interest on the Bonds shall be payable in lawful money of the United States of America. For so long as all Bonds are in fully immobilized form, payments of principal and interest thereon shall be made as provided in the operational arrangements of DTC referred to in the Letter of Representations. In the event that the Bonds are no longer in fully immobilized form, interest on the Bonds shall be paid by check or draft mailed to the Registered Owners at the addresses for such Registered Owners appearing on the Bond Register on the 15th day of the month preceding the interest payment date, and principal of the Bonds shall be payable upon presentation and surrender of such Bonds by the Registered Owners at the principal office of the Bond Registrar. -20- PADOT\DOT1 G2 11/04/03 (h) Bond Registrar's Ownership of Bonds. The Bond Registrar may become the Registered Owner of any Bond with the same rights it would have if it were not the Bond Registrar, and to the extent permitted by law, may act as depository for and permit any of its officers or directors to act as member of, or in any other capacity with respect to, any committee formed to protect the right of the Registered Owners of Bonds. Section 6. Redemption; Purchase of Bonds. (a) Optional Redemption. The Bonds maturing on or after November 1, 2014 are subject to redemption prior to maturity, at the option of the City, on or after November 1, 2013, in whole or in part on any date (and if in part with maturities to be selected by the City), at a price of par, plus interest accrued thereon to the date fixed for redemption. (b) Mandatory Redemption. The Bonds maturing on November 1 in 2013, 2018, 2020 and 2022 are hereby designated Term Bonds and shall be redeemed prior to maturity by lot (or paid at maturity), on November 1 in the years and amounts set forth below, from amounts credited to the Bond Fund to meet the Sinking Fund Requirements therefor (to the extent such amounts have not been used to redeem or purchase such Term Bonds as otherwise provided in this ordinance), upon written notice as provided below,. by payment of the principal amount thereof, together with the interest accrued thereon to the date fixed for redemption. 2013 Term Bonds Year Amount 2012 $ 135,000 2013 140,000 2018 Term Bonds Year Amount 2017 $ 160,000 2018 170,000 -21- P:1DOl1130T1 G2 11/04/03 2020 Term Bonds Year Amount 2019 $ 175,000 2020 185,000 2022 Term Bonds Year Amount 2021 $ 195,000 2022 205,000 (c) Partial Redemption. If less than all of the principal amount of any Bond is redeemed, upon surrender of such Bond at the principal office of the Bond Registrar, there shall be issued to the registered owner, without charge, for the then unredeemed balance of the principal amount, a new Bond or Bonds, at the option of the registered owner, of like maturity and interest rate in any authorized denomination. (d) Notice of Redemption. Written notice of any redemption of Bonds shall be given by the Bond Registrar on behalf of the City 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 Bonds that are to be redeemed at their last addresses shown on the Bond Register. So long as the Bonds are in book -entry form, notice of redemption shall be given as provided in the Letter of Representations. The Bond Registrar shall provide additional notice of redemption (at least 30 days) to each NRMSIR and SID, if any, in accordance with Section 20. The requirements of this section shall be deemed complied with when notice is mailed, whether or not it is actually received by the owner. Each notice of redemption shall contain the following information: (1) the redemption date, (2) the redemption price, (3) if less than all outstanding Bonds are to be redeemed, the -22- P:1DOT\DOT1 G2 11/04103 identification (and, in the case of partial redemption, the principal amounts) of the Bonds to be redeemed, (4) that on the redemption date the redemption price will become due and payable upon each Bond or portion called for redemption, and that interest shall cease to accrue from the redemption date, (5) that the Bonds are to be surrendered for payment at the principal office of the Bond Registrar, (6) the CUSIP numbers of all Bonds being redeemed, (7) the dated date of the Bonds, (8) the rate of interest for each Bond being redeemed, (9) the date of the notice, and (10) any other information needed to identify the Bonds being redeemed. Upon the payment of the redemption price of Bonds being redeemed, each check or other transfer of funds issued for such purpose shall bear the CUSIP number identifying, by issue and maturity, the Bonds being redeemed with the proceeds of such check or other transfer. (e) Effect of Redemption. Unless the City has revoked a notice of redemption, the City shall transfer to the Bond Registrar amounts that, in addition to other money, if any, held by the Bond Registrar, will be sufficient to redeem, on the redemption date, all the Bonds to be redeemed. From the redemption date interest on each Bond to be redeemed shall cease to accrue. (f) Amendment of Notice Provisions. The foregoing notice provisions of this section, including but not limited to the information to be included in redemption notices and the persons designated to receive notices, may be amended by additions, deletions and changes in order to maintain compliance with duly promulgated regulations and recommendations regarding notices of redemption of municipal securities. (g) Purchase of Bonds in Open Market. The City also reserves the right to purchase any of the Bonds in the open market at any time at prices deemed reasonable by the City. -23- P:IDOTTDOT1 G2 11/04/03 Section 7. Form of Bonds. The Bonds shall be in substantially the following form: UNITED STATES OF AMERICA NO. $ STATE OF WASHINGTON CITY OF PORT ANGELES WATER AND WASTEWATER UTILITY REVENUE BOND, 2003 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, 2004) 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. For so long as the bonds of this issue are in fully immobilized form, payments of principal and interest thereon shall be made as provided in accordance with the operational arrangements of DTC referred to in the Blanket Issuer Letter of Representations from the City to The Depository Trust Company. In the event that the bonds of this issue are no longer in fully immobilized form, interest on this bond shall be paid by check or draft mailed to the Registered Owner at the address appearing on the Bond Register on the fifteenth day of the month preceding the interest payment date, and principal of this bond shall be payable upon presentation and surrender of this bond by the Registered Owner at the principal office at the principal office of the fiscal agency of the State of Washington in either Seattle, Washington, or New York, New York (collectively the "Bond Registrar "). -24- P:1DOTTDOT1 G2 11/04/03 This bond is one of a series of bonds in the aggregate principal amount of $4,220,000, issued under authority of Ordinance No. passed by the City Council on November 4, 2003 (the "Bond Ordinance "), to finance the cost of improvements to the water and wastewater utility of the City. 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 the Revolving Fund Loan, the 1994 Bonds, the 1998 Bonds, and any revenue bonds of the City hereafter issued on a parity with such loan, such bonds 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 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. -25- P:1DOT\DOT1 G2 11!04103 The Bonds are subject to optional and mandatory redemption as provided in 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. 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. 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 day of November, 2003. Attest: [Manual or Facsimile Signature] City Clerk (SEAL) CITY OF PORT ANGELES, WASHINGTON By [Manual or Facsimile Signature] Mayor CERTIFICATE OF AUTHENTICATION Date of Authentication: -26- P:\DOT\DOT1 G2 11/04/03 This bond is one of the bonds described in the within mentioned Bond Ordinance and is one of the Water and Wastewater Utility Revenue Bonds, 2003 of the City of Port Angeles, Washington, dated November , 2003. WASHINGTON STATE FISCAL AGENCY, Bond Registrar By Authorized Officer ASSIGNMENT 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: NOTICE: Signature(s) must be guaranteed pursuant to law. -27- 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. P:\DOT\DOT1 G2 11/04/03 Section 8. 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 7 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 9. Construction Fund; Application of Bond Proceeds. A special fund of the City known as the "Water and Wastewater Utility Construction Fund" (the "Construction Fund ") has heretofore been created in the office of the Finance Director for the purpose of paying costs of capital improvements to the System. Amounts received as proceeds of the sale of the Bonds (other than the amount, if any, received on the date of delivery of the Bonds as accrued interest, which shall be deposited in the Debt Service Account of the Bond Fund) shall be deposited in the Construction Fund and used to pay costs of the Projects described in Section 3 of this ordinance including payment of any interfund loans) and to pay all costs incidental thereto, including the costs of issuance of the Bonds. -28- P:1DOT\DOT1 G2 11/04/03 Pending their expenditure, the City may temporarily invest the proceeds of the Bonds in any investments permitted by law. The investment earnings shall be retained in the Construction Fund and expended for the purposes of such Fund. Section 10. Revenue Fund. The City hereby obligates and binds itself to pay all Gross Revenue as collected into the Revenue Fund. 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- P:1DOT\DOT1 G2 11/04/03 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, including the City's Public Works Trust Fund loans, 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 utility revenue bonds, water and wastewater utility revenue warrants or other water and wastewater utility 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 11. Rate Stabilization Fund. Pursuant to Section 13 of Ordinance No. 2843, a special fund of the City designated the "Water and Wastewater Rate Stabilization Fund" (the "Rate Stabilization Fund ") has heretofore been established in anticipation of future increases in revenue requirements of the System. In accordance with the provisions of Section 14 of Ordinance No. 2843 and Section 10 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. -30- P:1DOT\DOT1 G2 11/04/03 Section 12. Bond Fund. Pursuant to Section 15 of Ordinance No. 2843, there has heretofore been created in the office of the City Treasurer a fund of the City known as the "1994 Water and Wastewater Utility Revenue Bond Fund" (the "Bond Fund "), which fund is to be drawn upon for the sole purpose of paying the principal of, premium if any, and interest on any 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 has been 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 deposited and such other money as is 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 money as is 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 has been 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 satisfy the Reserve -31- P:IDOTIDOT1 G2 11/04/03 Account Requirement for the Bonds by obtaining the Surety Bond, which satisfies the definition of "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 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 -32- P:IDOTIDOT1 G2 11/04/03 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 making the payments required to be made under paragraphs "FIRST" through "FOURTH" of Section 10 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 -33- P:IDOT\DOT 1 G2 11/04/03 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 13. 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 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 14. 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 -34- P: \DOT\DOT1 G2 11/04/03 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 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 -35- P:IDOTTDOT1 G2 11/04/03 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 (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 -36- P:IDOTDOT1 G2 11/04/03 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. (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. -37- P:1DOT\13OT1 G2 11/04/03 (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 15. Tax Covenant; Special Designation. 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. The City hereby designates the Bonds as "qualified tax - exempt obligations" under Section 265(b)(3) of the Code for banks, thrift institutions and other financial institutions. The City does not expect to issue more than $10,000,000 of "qualified tax - exempt obligations" during 2003. Section 16. 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. Within 30 days of any defeasance of Bonds, the City shall provide notice -38- P: \DOT\DOT1 G2 11/04/03 of defeasance of Bonds to registered owners and to each NRMSIR and SID, if any, in accordance with Section 20 hereof. Section 17. 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) Parity Conditions. 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 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 -39- P:1130T\DOT1 G2 11/04/03 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 12 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. 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 -40- P:IDOTIDOT1 G2 11/04/03 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) Refunding. 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 -41- P: \DOT\DOT1 G2 11/04/03 or calendar year for principal of and interest on such refunding Future Parity Bonds over and above the 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) Junior Lien Obligations. 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 18. Sale of Bonds. The City hereby approves the offer of Seattle- Northwest Securities Corporation (the "Underwriter ") to purchase the Bonds on the terms and conditions set forth in its purchase contract received on the date of this ordinance (the "Purchase Contract "). The City Manager is hereby authorized to sign the Purchase Contract on behalf of the City and deliver it to the Underwriter. 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 Underwriter, in accordance with this ordinance and the Purchase Contract, and to apply the Bond proceeds in accordance with this ordinance. Section 19. Official Statement. The City approves the preliminary Official Statement presented to this Council and authorizes the Underwriter's distribution of the preliminary Official Statement in connection with the offering of the Bonds for sale. Pursuant to the Rule, the City deems the preliminary Official Statement dated October 27, 2003 final as of its date except for the omission of information dependent upon the pricing of the Bonds and the completion of the Purchase Contract. The City agrees to cooperate with the Underwriter to deliver or cause to be delivered, within seven business days from the date of the sale of the Bonds and in sufficient time to accompany any confirmation that requests payment from any customer of the -42- P: \DOT\DOT1 G2 11/04/03 Underwriter, copies of a final Official Statement in sufficient quantity to comply with paragraph (b)(4) of the Rule and the rules of the MSRB. The City authorizes the Underwriter to use the Official Statement, substantially in the form of the preliminary Official Statement, in connection with the sale of the Bonds. The City Manager and Finance Director are hereby authorized to review and approve on behalf of the City the final Official Statement relative to the Bonds with such additions and changes as they may deem necessary or advisable. Section 20. Undertaking to Provide Ongoing Disclosure. This Section 20 constitutes the City's written undertaking for the benefit of the owners and Beneficial Owners of the Bonds as required by Section (b)(5) of the Rule. (a) Financial Statements /Operating Data. The City agrees to provide or cause to be provided to each NRMSIR and to the SID, if any, in each case as designated by the Commission in accordance with the Rule, the following annual financial information and operating data for the prior fiscal year (commencing in 2004 for the fiscal year ended December 31, 2003): (1) Annual financial statements, which statements may or may not be audited, showing end fund balance for the country's general fund prepared in accordance with the Budget Accounting and Reporting System prescribed by the Washington State Auditor pursuant to RCW 43.09.200 (or any successor statute) and generally of the type included in the official statement for the Bonds under the headings "Water /Wastewater Fund - Statement of Revenues, Expenses and other Changes in Fund Equity" and "Water /Wastewater Utility - Historical Coverage from Operations"; (2) The principal amount of Parity Bonds and debt service coverage for Parity Bonds; -43- P:I DOT TDOT1 G2 11/04/03 (3) Water and wastewater rates; and (4) Number of water and wastewater customers of the System. Items (2) — (4) shall be required only to the extent that such information is not included in the annual financial statements provided pursuant to (1). Such annual information and operating data described above shall be provided on or before seven months after the end of the City's fiscal year. The City's fiscal year currently ends on December 31. The City may adjust such fiscal year by providing written notice of the change of fiscal year to each then existing NRMSIR and the SID, if any. In lieu of providing such annual financial information and operating data, the City may cross - reference to other documents provided to the NRMSIR, the SID or to the Commission and, if such document is a final official statement within the meaning of the Rule, available from the MSRB. If not provided as part of the annual financial information discussed above, the City shall provide the City's audited annual financial statement prepared in accordance with the Budget Accounting and Reporting System prescribed by the Washington State Auditor pursuant to RCW 43.09.200 (or any successor statute) when and if available to each then existing NRMSIR and the SID, if any. (b) Material Events. The City agrees to provide or cause to be provided, in a timely manner, to the SID, if any, and to each NRMSIR or to the MSRB notice of the occurrence of any of the following events with respect to the Bonds, if material: (1) Principal and interest payment delinquencies; (2) Non- payment related defaults; (3) Unscheduled draws on debt service reserves reflecting financial difficulties; -44- P:IDOTIDOT1 G2 11/04/03 difficulties; perform; the Bonds; (4) Unscheduled draws on credit enhancements reflecting financial (5) Substitution of credit or liquidity providers, or their failure to (6) Adverse tax opinions or events affecting the tax - exempt status of (7) (8) Modifications to rights of Bond holders; Optional, contingent or unscheduled calls of any Bonds other than scheduled sinking fund redemptions for which notice is given pursuant to Exchange Act Release 34- 23856; (9) Defeasances; (10) Release, substitution or sale of property securing repayment of the Bonds; and (11) Rating changes. Solely for purposes of disclosure, and not intending to modify this undertaking, the City advises with reference to item (10) above that no property secures payment of the Bonds. The Reserve Account is the applicable debt service reserve, and the Bond Insurance Policy is the applicable credit enhancement. (c) Notification Upon Failure to Provide Financial Data. The City agrees to provide or cause to be provided, in a timely manner, to each NRMSIR or to the MSRB and to the SID, if any, notice of its failure to provide the annual financial information described in subsection (a) above on or prior to the date set forth in subsection (a) above. -45- P:IDOT0OT1 G2 11104/03 (d) Termination /Modification. The City's obligations to provide annual financial information and notices of material events shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Bonds. This section, or any provision hereof, shall be null and void if the City (i) obtains an opinion of nationally recognized bond counsel to the effect that those portions of the Rule which require this section, or any such provision, are invalid, have been repealed retroactively or otherwise do not apply to the Bonds; and (ii) notifies each then existing NRMSIR and the SID, if any, of such opinion and the cancellation of this section. Notwithstanding any other provision of this motion, the City may amend this Section 20, and any provision of this Section 20 may be waived, with an approving opinion of nationally recognized bond counsel and in accordance with the Rule. In the event of any amendment or waiver of a provision of this Section 20, the City shall describe such amendment in the next annual report, and shall include, as applicable, a narrative explanation of the reason for the amendment or waiver and its impact on the type (or in the case of a change of accounting principles, on the presentation) of financial information or operating data being presented by the City. In addition, if the amendment relates to the accounting principles to be followed in preparing financial statements, (i) notice of such change shall be given in the same manner as for a material event under subsection (b), and (ii) the annual report for the year in which the change is made should present a comparison (in narrative form and also, if feasible, in quantitative form) between the financial statements as prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. (e) Bond Owner's Remedies Under This Section. The right of any Bond Owner or Beneficial Owner of Bonds to enforce the provisions of this section shall be limited to -46- P:1DOT\DOT1 G2 11/04/03 a right to obtain specific enforcement of the City's obligations hereunder, and any failure by the City to comply with the provisions of this undertaking shall not be an event of default with respect to the Bonds hereunder. For purposes of this section, "Beneficial Owner" means any person who has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds, including persons holding Bonds through nominees or depositories. Section 21. Bond Insurance and Surety Bond. (a) Acceptance. of Commitment. The City hereby accepts the commitment from MBIA Insurance Corporation (the "Insurer ") to provide a Bond Insurance Policy insuring repayment of the Bonds and a Surety Bond to fund the Reserve Requirement for the Bonds. The City agrees to the conditions for obtaining the Surety Bond, including the payment of the premium therefor and the other requirements set forth in the Financial Guaranty Agreement. The Financial Guaranty Agreement is hereby approved and the City Manager or Finance Director is hereby authorized to sign the Financial Guaranty Agreement on behalf of the City. The Council . further authorizes and directs all proper officers, agents, attorneys and employees of the City to cooperate with the Insurer in preparing such additional agreements, certificates, and other documentation on behalf of the City as shall be necessary or advisable in providing for the Bond Insurance Policy and the Surety Bond. (b) Payments Under the Bond Insurance Policy. As long as the Bond Insurance Policy shall be in full force and effect, the City and the Bond Registrar agree to comply with the following provisions: (1) In the event that, on the second business day, and again on the business day, prior to the payment date on the Bonds, the Bond Registrar has not received sufficient money to pay all principal of and interest on the Bonds due on the second following or -47- P:1DOT1DOT1 G2 11/04/03 following, as the case may be, business day, the Bond Registrar shall immediately notify the Insurer or its designee on the same business day by telephone or telegraph, confirmed in writing by registered or certified mail, of the amount of the deficiency. (2) If the deficiency is made up in whole or in part prior to or on the payment date, the Bond Registrar shall so notify the Insurer or its designee. (3) In addition, if the Bond Registrar has notice that any Bond holder has been required to disgorge payments of principal or interest on the Bonds to a trustee in bankruptcy or creditors or others pursuant to a final judgment by a court of competent jurisdiction that such payment constitutes an avoidable preference to such Bond holder within the meaning of any applicable bankruptcy laws, then the Bond Registrar shall notify the Insurer or its designee of such fact by telephone or telegraphic notice, confirmed in writing by registered or certified mail. (4) The Bond Registrar is hereby irrevocably designated, appointed, directed and authorized to act as attorney -in -fact for owners of the Bonds as follows: a. If and to the extent there is a deficiency in amounts required to pay interest on the Bonds, the Bond Registrar shall (i) execute and deliver to U.S. Bank Trust National Association, or its successors under the Bond Insurance Policy (the "Insurance Paying Agent "), in form satisfactory to the Insurance Paying Agent, an instrument appointing the Insurer as agent for such owners in any legal proceeding related to the payment of such interest and an assignment to the Insurer of the claims for interest to which such deficiency relates and which are paid by the Insurer, (ii) receive as designee of the respective owners (and not as Bond Registrar) in accordance with the tenor of the Bond Insurance Policy payment from the Insurance Paying -48- P:1DOT\DOT1 G2 11/04/03 Agent with respect to the claims for interest so assigned, and (iii) disburse the same to such respective owners; and b. If and to the extent of a deficiency in amounts required to pay principal of the Bonds, the Bond Registrar shall (i) execute and deliver to the Insurance Paying Agent in form satisfactory to the Insurance Paying Agent an instrument appointing the Insurer as agent for such owner in any legal proceeding relating to the payment of such principal and an assignment to the Insurer of any of the Bonds surrendered to the Insurance Paying Agent of so much of the principal amount thereof as has not previously been paid or for which money is not held by the Bond Registrar and available for such payment (but such assignment shall be delivered only if payment from the Insurance Paying Agent is received), (ii) receive as designee of the respective owners (and not as Bond Registrar) in accordance with the tenor of the Bond Insurance Policy payment therefor from the Insurance Paying Agent, and (iii) disburse the same to such owner. (5) Payments with respect to claims for interest on and principal of Bonds disbursed by the Bond Registrar from proceeds of the Bond Insurance Policy shall not be considered to discharge the obligation of the City with respect to such Bonds, and the Insurer shall become the owner of such unpaid Bonds and claims for the interest in accordance with the tenor of the assignment made to it under the provisions of this subsection or otherwise. (6) Irrespective of whether any such assignment is executed and delivered, the City and the Bond Registrar hereby agree for the benefit of the Insurer that: a. They recognize that to the extent the Insurer makes payments, directly or indirectly (as by paying through the Bond Registrar), on account of principal of or interest on the Bonds, the Insurer will be subrogated to the rights of such owners -49- P:\OOT\DOT1 G2 11/04/03 to receive the amount of such principal and interest from the City, with interest thereon as provided and solely from the sources stated in this ordinance and the Bonds; and b. They will accordingly pay to the Insurer the amount of such principal and interest (including principal and interest recovered under subparagraph (ii) of the first paragraph of the Bond Insurance Policy, which principal and interest shall be deemed past due and not to have been paid), with interest thereon as provided in this ordinance and the Bonds, but only from the sources and in the manner provided herein for the payment of principal of and interest on the Bonds to owners, and will otherwise treat the Insurer as the owner of such rights to the amount of such principal and interest. (c) Payments under the Surety Bond. So long as the Surety Bond is in effect; the Bond Registrar shall deliver a Demand for Payment in the form set forth as Attachment 1 to the Surety Bond at least three days prior to the date on which funds are required under the Surety Bond. (d) Rights of Insurer. The following provisions shall govern, notwithstanding anything to the contrary set forth in this ordinance: (1) In connection with the issuance of Future Parity Bonds, the City shall deliver to the Insurer a copy of the disclosure document, if any, circulated with respect to such Future Parity Bonds. (2) The Insurer shall receive copies of the City's audited financial statements and annual budget. (3) The City shall give notice to the Insurer of the adoption of any ordinance supplementing or amending this ordinance without the consent of Bondowners. Insurer consent is required for the adoption of any ordinance supplementing this ordinance where -50- P: \DOT\DOT1 G2 11/04/03 such supplement requires the consent of Bondowners. Copies of any amendments made to the documents executed in connection with the issuance of the Bonds which are consented to be the Insurer shall be sent to Standard & Poor's Ratings Services. (4) The Insurer shall receive notice of the resignation or removal of the Bond Registrar and the appointment of a successor, other than the designated state fiscal agent. (5) Any notices required to be given by any party under this ordinance shall also be given to the Insurer and sent by registered or certified mail addressed to: MBIA Insurance Corporation, 113 King Street, Armonk, New York 10504, Attention: Surveillance. (6) Upon the occurrence of any default hereunder the Insurer shall be considered the Bondowner of all outstanding Bonds for purposes of exercising rights and remedies in connection with such default. (7) The City agrees to reimburse the Insurer immediately and unconditionally upon demand, to the extent permitted by law, for all reasonable expenses, including reasonable attorneys' fees and expenses, incurred by the Insurer in connection with (i) enforcement by the Insurer of the City's obligations, or the preservation or defense of any rights of the Insurer, under this ordinance and any other document executed in connection with the issuance of the Bonds, and (ii) any consent, amendment, waiver or other action with respect to this ordinance or any related document, whether or not granted or approved, together with interest on all such expenses from and including the date incurred to the date of payment at Citibank's Prime Rate plus 3% or the maximum interest rate permitted by law, whichever is less. In addition, the Insurer reserves the right to charge a reasonable fee in connection with its review of any such consent, amendment or waiver, whether or not granted or approved. -51- P: \DOT\DOT1 G2 11/04/03 Section 22. 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. -52- P: \DOT\DOT1 G2 11/04/03 (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 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 bond owners 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 bond owners 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. -53- P: \DOT\DOT 1 G2 11/04/03 Section 23. 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. Section 24. 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 25. 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 on November 4, 2003. CITY OF PORT ANGELES, WASHINGTON (SEAL) Attest: By Published: November 9, 2003 031.- Summary}'- -54- Mayor P: \DOT\DOT1 G2 11/04/03 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. 3148 of the City (the "Ordinance "), as finally passed at a regular meeting of the City Council held on November 4, 2003, 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. 2003. IN WITNESS WHEREOF, I have hereunto set my hand this 4th day of November, Ci Clerk P:IDOTTDOTI G2 11/04/03 Summaries of Ordinances Adopted by the Port Angeles City Council on November 4, 2003 Ordinance No. 3148 This Ordinance of the City of Port Angeles, Washington, authorizes the issuance and sale of water and wastewater utility revenue bonds of the City in the principal amount of $4,220,000 to finance the cost of improvements to the City's water and wastewater utility; fixes the date, form, terms, maturities and covenants of such bonds; and authorizes the sale of such bonds. Ordinance No. 3149 This Ordinance of the City of Port Angeles, Washington, revises the fringe benefits plan for the City's Management, Administrative, and Non - Represented Personnel and amends Ordinance 3048. This Ordinance is effective as of November 1, 2003. The full texts of the Ordinances are 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. Unless otherwise noted above, these Ordinances shall take effect five days after publication of these summaries. Becky J. Upton City Clerk Publish: November 9, 2003