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0894 !h ORDINANCE NO. 894 AN ORDINANCE AUTHORIZING THE CONSTRUCTION OF EXTENSIONS, BETTERMENTS AND IMPROVEMENTS TO THE WATER SYSTEM OF THE CITY OF JACKSONVILLE, ARKANSAS; AUTHORIZING THE ISSUANCE AND SALE OF WATER REVENUE REFUNDING AND CONSTRUCTION BONDS; PROVIDING FOR THE PAYMENT OF THE PRINCIPAL OF AND INTEREST ON THE BONDS; PRESCRIBING OTHER MATTERS RELATING THERETO; AND DECLARING AN EMERGENCY. WHEREAS, the City of Jacksonville, Arkansas (the "Ci ty" ), a ci ty of the fi rst class, owns and operates a water system (the "Water System" or the "System"); and WHEREAS, the Water Commi ssion and the Ci ty Counci 1 have determined that extensions, betterments and improvements to the Water System are necessary in order to make the services thereof adequate for the needs of the City and have caused to be prepared a preliminary report, plans and specifications and estimates of cost for the proposed extensions, betterments and improvements to the Water System, all as described in detail in the plans and specifications (the "improvements"), which plans and specifications have been examined and approved by the Water Commission and the Ci ty Council and a copy of which plans and specifications are on file in the office of the City Clerk where they may be inspected by any interested person; and WHEREAS, the City has outstanding an issue of Waterworks and Sewer Revenue Bonds, Series A and B, dated June I, 1964 (the "1964 Bonds") authorized by Ordinance No. 152, adopted June II, 1964 (the "1964 Ordinance"), Water and Sewer Revenue Bonds, dated April I, 1973 (the "1973 Bonds") authorized by Ordinance No. 287, adopted March 8, 1973 and an implementing resolution (the "1973 Ordinance") and Water and Sewer Revenue Bonds, dated August I, 1979 (the "1979 Bonds") authorized by Ordinance No. 544, adopted July 12, 1979 (the "1979 Ordinance"); and WHEREAS, the City Council, the Water Commission and the Wastewater Commission deem it in the best interest of the City to refund the 1964 Bonds, the 1973 Bonds and the 1979 Bonds (collectively the "Bonds Refunded") to which the City has pledged combined revenues from the operation of the Water System and the Ci ty' s sewer system (the "Sewer System"); and WHEREAS I upon the issuance of the bonds authorized hereby the revenues of the Water System. and the Sewer System shall be segregated and the provisions of this Ordinance shall apply to the revenues of the Wat,er System only; and WHEREAS, the estimated cost of the improvements, the refunding and authorizing and issuing bonds and of establishing a debt service reserve is $3,175,377; and WHEREAS, the City can obtain the necessary funds for establishing a debt service reserve and paying the costs of authorizing and issuing the bonds, costs of the refunding the Bonds Refunded and costs of the improvements by the issuance of Water Revenue Refunding and Construction Bonds, Series 1988, in the principal amount of $2,245,000 (the "bonds") and from available revenues of the Water System and the Sewer System; and I ~1 WHEREAS, the City has made arrangements for the sale of $2,245,000 in aggregate principal amount of bonds to Stephens Inc., Li ttle Rock, Arkansas (the "Purchaser"), at a price of 97.5% of par plus accrued interest pursuant to a Bond Purchase Agreement (the "Agreement") which has been presented to and is before thi s meeting; and WHEREAS, the Preliminary Official Statement, dated October 24, 1988, offering the bonds for sale (the "Preliminary Official Statement") has been presented to and is before this meeting; NOW, THEREFORE, BE IT ORDAINED by the City Council of the City of Jacksonville, Arkansas: Section 1. That the refunding of the Bonds Refunded (the "refunding") and the improvements be accompli shed and the Mayor and City Clerk are hereby authorized to take or cause to be taken all action necessary to accomplish the refunding and to execute all required contracts and documents. Section 2. That the improvements shall be accomplished under the control and supervision of, and all details in connection therewith shall be handled by the Water Commi ssion. The Water Commi ssion shall make all contracts and agreements necessary or incidental to the performance of i ts duties and execution of its powers. The Water Commission shall let all construction contracts pursuant to and in accordance with existing laws and shall require such performance bonds and insurance for construction as will, in the judgment of the Water Commission, fully insure completion of the improvements so as to fully promote and protect the best interests of the City and the owners of the bonds. The Ci ty Counci 1 hereby finds and declares that the period of usefulness of the improvements will be more than forty (40) years, which is longer than the term of the bonds. Section 3. That the offer of the Purchaser for the purchase of $2,245,000 in principal amount of bonds from the Ci ty at a price of 97.5% of par and accrued interest for bonds bearing interest at the rates per annum, maturing and otherwise subject to the terms and provisions hereafter in this Ordinance set forth in detail be, and is hereby accepted and the Agreement, in substantially the form submitted to this meeting, is approved and confirmed and the bonds are hereby sold to the Purchaser. The Mayor is hereby authorized and directed to execute and deliver the Agreement on behalf of the City and to take all action required on the part of the City to fulfill its obligations under the Agreement. The Preliminary Official Statement is hereby approved and the previous use of the Preliminary Official Statement by the Purchaser in connections wi th the sale of the bonds is hereby in all respects authorized, approved and confirmed, and the Mayor be and he hereby is authorized, empowered and directed, for and on behalf of the City to execute the Preliminary Official Statement and the final Official Statement in the name of the City to be delivered to the Purchaser for use in connection wi th the sale of the bonds as set forth in the Agreement, and the Mayor is hereby authorized, empowered and directed to do all such acts and things necessary to carry out and comply with the provisions of the Official Statement. Section 4. Constitution and laws That under the of the State of authority Arkansas, of the including 2 Ii' particularly Title 14, Chapter 234, Subchapter 2 of the Arkansas Code of 1987 Annotated, and Title 14, Chapter 164, Subchapter 4 of the Arkansas Code of 1987 Annotated, Ci ty of Jacksonville, Arkansas Water Revenue Refunding and Construction Bonds, Series 1988, are hereby authorized and ordered issued in the principal amount of $2,245,000 for the purpose of accomplishing the improvements and the refunding, paying necessary expenses incidental thereto and to the authorization and issuance of the bonds, and establishing a debt service reserve. The bonds shall mature on August 1 in the years and in the amounts and shall bear interest as follows: Year Principal Interest (August 1) Amount Rate 1989 $ 30,000 6.00% 1990 60,000 6.10 1991 65,000 6.20 1992 70,000 6.30 1993 75,000 6.40 1994 80,000 6.50 1995 85,000 6.60 1996 90,000 6.70 1997 95,000 6.80 1998 100,000 6.90 1999 105,000 7.00 2000 115,000 7.05 2001 125,000 7.10 2002 130,000 7.15 2003 140,000 7.25 2004 150,000 7.30 2005 165,000 7.35 2006 175,000 7.40 2007 190,000 7.45 2008 200,000 7.50 The bonds shall bear interest from their respective dates and the bonds shall be issuable only as fully registered Bonds wi thout coupons in the denomination of $5,000 or any integral multiple thereof. Unless the City shall otherwise direct, the bonds shall be numbered from 1 upward in order of issuance. Each bond shall have a CUS IP number. Each bond shall be dated as of the interest payment date to which interest has been paid as of the date on which it is authenticated or if it is authenticated prior to a date on which interest has been paid, i t shall be dated November 15, 1988. Interest on the bonds shall be payable on August I, 198~, and semiannually thereafter on February 1 and August 1 of each year. Payment of each installment of interest shall be made to the person in whose name the bJnd is registered on the registration books of the City maintained by First National Bank in Stuttgart, Stuttgart, Arkansas, as Trustee and Paying Agent (the "Trustee"), at the close of business on the fifteenth day of the month (whether or not a business day) next preceding each interest payment date (the "Record Date"), i rrespecti ve of any transfer or exchange of any such bond subsequent to such Record Date and prior to such interest payment date. Only such bonds as shall have endorsed thereon a Certificate of Authentication substantially in the form set forth in Section 6 hereof duly executed by the Trustee shall be entitled to any right or benefit under this Ordinance. No bond shall be valid and obligatory for any purpose unless and until 3 /1 such Certificate of Authentication shall have been duly executed by the Trustee, and such certificate of the Trustee upon any such bond shall be conclusive evidence that such bond has been authenticated and delivered under this Ordinance. The Trustee's Certificate of Authentication on any bond shall be deemed to have been executed if signed by an authorized officer of the Trustee, but it shall not be necessary that the same officer sign the Certificate of Authentication on all of the bonds issued hereunder. In case any bond issued hereunder shall become mutilated or be destroyed or lost, the City, shall, if ,not then 'prohibi ted by law, cause to be executed and the Trustee may authenticate and deliver a new bond of like date, number, maturi ty and tenor in exchange and substi tution for and upon cancellation of such mutilated bond, or in lieu of and in substitution for such bond destroyed or lost, upon the holder's paying the reasonable expenses and charges of the Ci ty and Trustee in connection therewi th, and, in the case of a bond destroyed or lost, his filing with the Trustee evidence satisfactory to it that such bonds were destroyed or lost, and of hi s ownership thereof, and furni shing the Ci ty and Trustee wi th indemni ty sati sfactory to them. The Trustee is hereby authorized to authenticate any such new bond. In the event any such bond shall have matured, instead of issuing a new bond, the City may pay the same without the surrender thereof. Upon the issuance of a new bond under thi s Section 4, the Ci ty may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewi th. The Ci ty shall cause books for the regi stration and for the transfer of the bonds as provided herein and in the bonds. The Trustee shall act as the bond registrar. Each bond is transferable by the registered owner thereof or by his attorney duly authorized in writing at the principal office of the Trustee. Upon such transfer a new fully registered bond or bonds of the same maturity, of authorized denomination or denominations, for the same aggregate principal amount will be issued to the transferee in exchange therefor. No charge shall be made to any owner of any bond for the privilege of transfer or exchange, but any owner of any bond requesting any such transfer or exchange shall pay any tax or other governmental charge required to be paid with respect thereto. Except as otherwise provided in the immediately preceding sentence, the cost of preparing each new bond upon each exchange or transfer and any other expenses of the City or the Trustee incurred in connection therewi th shall be paid by the City. The City shall not be required (i) to issue, transfer or exchange any bond during a period beginning at the opening of business 15 days before any selection of bonds of that maturity for redemption and ending at the close of business on the day of the first mailing of the relevant notice of redemption, or (ii) to transfer or exchange any bonds selected for redemption in whole or in part. The person in whose name any bond shall be registered shall be deemed and regarded as the absolute owner thereof for all purposes, and payment of or on account of the principal or premium, if any, or interest of any bond shall be made only to or upon the order of the registered owner thereof or his legal representative, but such registration may be changed as hereinabove provided. All such payments shall be valid and 4 z,o effectual to satisfy and discharge the liability upon such bond to the extent of the sum or sums so paid. In any case where the d~te of maturity of interest on or principal of the bonds or the date fixed for redemption of any bonds shall be a Saturday or Sunday or shall be in the State of Arkansas a legal holiday or a day on which banking insti tutions are authorized by law to close, then payment of interest or principal (and premium, if any) need not be made on such date but may be made on the next succeeding business day not a Saturday or Sunday or a legal holiday or a day upon which banking insti tutions are authorized by law to close wi th the same force and effect as if made on the date of maturity or the date fixed for redemption, and no interest shall accrue for the period after the date of maturi ty or date fixed for redemption. Section 5. That the bonds shall be executed on behalf of the Ci ty 'by the manual or facsimi Ie signatures of the Mayor and City Clerk and shall have impressed, imprinted, engraved or lithographed thereon the seal of the City. The bonds, together wi th interest thereon, are secured by and are payable solely from the gross revenues derived from the Water System ("Revenues") which are hereby irrevocably pledged and mortgaged for the equal and ratable payment of the bonds. The bonds and interest thereon shall not consti tute an indebtedness of the City within any constitutional or statutory limitation. Section 6. That the bonds and the Trustee's Certificate of Authentication shall be in substantially the following form and the Mayor and City Clerk are hereby expressly authorized and directed to make all recitals contained therein: 5 ;2.( (Form of Bond) REGISTERED REGISTERED No. UNITED STATES OF AMERICA STATE OF ARKANSAS COUNTY OF PULASKI CITY OF JACKSONVILLE WATER REVENUE REFUNDING AND CONSTRUCTION BOND, SERIES 1988 Interest Rate: Registered Owner: Principal Amount: CUSIP No. % Maturi ty Date: Dated Date: Dollars ($ KNOW ALL MEN BY THESE PRESENTS: That the City of Jacksonville, County of Pulaski, State of Arkansas (the "Ci ty" ) , for value received, hereby promi ses to pay, but solely from the source as hereinafter provided and not otherwise, to the Registered Owner shown above, or registered assigns, upon the presentation and surrender hereof at the principal corporate office of First National Bank in Stuttgart, Stuttgart, Arkansas, or i ts successor or successors, as Trustee and Paying Agent (herein referred to as the "Trustee"), on the Maturity Date shown above, the Principal Amount shown above, in such coin or currency of the Uni ted States of America as at the time of payment shall be legal tender for the payment of public and private debts and to pay by check or draft interest thereon, but solely from the source as hereinafter provided and not otherwise, in like coin or currency from the date hereof at the Interest Rate per annum shown above, payable August 1, 1989 and semiannually thereafter on the 1st days of February and August of each year, until payment of such principal sum or, if this bond or a portion thereof shall be duly called for redemption, until the date fixed for redemption, and to pay interest on overdue principal and interest (to the extent legally enforceable) at the rate borne by this bond. Payment of each installment of interest shall be made to the person in whose name this bond is registered on the registration books of the Ci ty maintained by the Trustee at the close of business on the fifteenth day of the month (whether or not a business day) next preceding each interest payment date (the "Record Date"), irrespective of any transfer or exchange of this bond subsequent to such Record Date and prior to such interest payment date. This bond is one of an issue of City of Jacksonville, Arkansas Water Revenue Refunding and Construction Bonds, Series 1988, aggregating Two Million Two Hundred Forty-five Thousa.nd Dollars ($2,245,000) in principal amount (the "bonds"), and is issued for the purpose of financing the costs of the acqui si tion, construction and equipment by the Ci ty of exterlsions, betterments and improvements to the Ci ty' s water system (the "System" ) , the refunding of certain outstanding bonds payable from System revenues, paying necessary expenses incidental thereto and to the authorization and issuance of the bonds and establi shing a debt service reserve. The bonds are issued pursuant to and in full compliance with the Constitution and laws of the State of Arkansas, including particularly Ti tie 14, Chapter 234, Subchapter 2 of the Arkansas Code of 1987 Annotated, and Title 6 ;21- 14, Chapter 164, Subchapter 4 of the Arkansas Code of 1987 Annotated, and pursuant to Ordinance No. , duly adopted by the City Council and approved on November 17, 1988 (the "Authorizing Ordinance"), and do not consti tute an indebtedness of the City within any constitutional or statutory limitation. The bonds are not general obligations of the Ci ty, but are special obligations payable solely from the revenues derived from the operation of the System. An amount of System revenues sufficient to pay the principal of and interest on the bonds has been duly pledged and set aside into the 1988 Water Revenue Bond Fund created by the Authorizing Ordinance. Reference is hereby made to the Authorizing Ordinance for a detailed statement of the terms and conditions upon which the bonds are issued, of the nature and extent of the security for the bonds, and the rights and obligations of the Ci ty, the Trustee and the registered owners of the bonds. The City has fixed and has covenanted and agreed to maintain rates for the services of the System which shall be sufficient at all times to provide for the proper and reasonable expenses of operation and maintenance of the System and for the payment of the principal of and interest on the bonds, inc luding Trustee's fees, as the same become due and payable, to establish and maintain a debt service reserve and to make the required deposit for the depreciation of the System. (REFERENCE IS HEREBY MADE TO FURTHER PROVISIONS OF THIS BOND ON THE REVERSE SIDE HEREOF WHICH HAVE THE SAME EFFECT AS IF SET FORTH IN, THIS PLACE. ) THE CITY HAS TAX-EXEMPT OBLIGATION" REVENUE CODE OF 1986. DESIGNATED THIS BOND AS WITHIN THE MEANING OF A "QUALIFIED THE INTERNAL IN WITNESS WHEREOF, the City of Jacksonville, Arkansas has caused this bond to be executed by its Mayor and City Clerk, their facsimile signatures thereunto duly authorized and its corporate seal to be impressed, Ii thographed or imprinted on this bond, all as of the Dated Date shown above. A~ST: ~. ~ile si ature) Ci ty Clerk C I T~ J ACKSONV I}LE I AR~NSAS By('a~~ M"ayor (SEAL) 7 'b~ (Reverse Side of Bond) CITY OF JACKSONVILLE, ARKANSAS WATER REFUNDING AND CONSTRUCTION REVENUE BOND, SERIES 1988 The bonds shall be subject to extraordinary and optional redemption as follows: 1. The bonds or portions thereof shall be redeemed from proceeds of the bonds which are not needed for the purposes intended, in whole or in part, on any interest payment date, in inverse order of maturity (and by lot within a maturity in such manner as the Trustee shall determine), at a price equal to the principal amount being redeemed plus accrued interest to the redemption date. 2. The bonds or portions thereof may be redeemed at the option of the City, in whole or in part, from funds from any other source, in inverse order of maturity (and by lot within a maturity in such manner as the Trustee shall determine) on any interest payment date on and after August I, 1995, at redemption prices (expressed as percentages of the principal amount being redeemed) plus accrued interest to the redemption date as follows: Redemption Dates Redemption Prices AUgl1st I, 1995 or February I, 1996 August I, 1996 or February I, 1997 August I, 1997 and thereafter 102% 101% 100% Notice of redemption identifying the bonds or portions thereof (which shall be $5,000 or a multiple thereof) to be redeemed shall be given by the Trustee, not less than thirty (30) nor more than sixty (60) days prior to the date fixed for redemption, by mailing a copy of the redemption notice by first class mail, postage prepaid, to all registered owners of bonds to be redeemed. Failure to mail an appropriate notice or any such notice to one or more registered owners of bonds to be redeemed shall not affect the validi ty of the proceedings for redemption of other bonds as to which notice of redemption is duly given in proper and timely fashion. All such bonds or portions thereof thus called for redemption and for the retirement of which funds are duly provided in accordance with the Authorizing Ordinance prior to the date fixed for redemption wi 11 cease to bear interest on such redemption date. Thi s bond is transferable by the regi stered owner hereof in person or by his attorney-in-fact duly authorized in writing at the principal corporate trust office of the Trustee, but only in the manner, subj ect to the limi tations and upon payment of the charges provided in the Authorizing Ordinance, and upon surrender and cancellation of this bond. Upon such transfer a new fully registered bond or bonds of the same maturity, of authorized denomination or denominations, for the same aggregate principal amount, will be issued to the transferee in exchange therefor. This bond is issued with the intent that the laws of the State of Arkansas shall govern its construction. The City and the Trustee may deem and treat the registered owner hereof as the absolute owner hereof for the purpose of receiving payment of or on account of principal hereof and premium, if any, hereon and interest due hereon and for all other purposes, and neither the City nor the Trustee nor 8 :zt/- any paying agent shall be affected by any notice to the contrary. The bonds are issuable only as fully registered bonds in the denomination of $5,000, and any integral multiple thereof. Subj ect to the limi tations and upon payment of the charges provided in the Authorizing Ordinance, fully registered bonds may be exchanged for a like aggregate principal amount of fully registered bonds of the same maturity of other authorized denominations. IT IS HEREBY CERTIFIED, RECITED AND DECLARED that all acts, condi tions and things required to exist, happen and be performed precedent to and in the issuance of the bonds do exist, have happened and have been performed in due time, form and manner as required by law; that the indebtedness represented by the bonds, together with all obligations of the City, does not exceed any constitutional or statutory limitation; and that the above referred to revenues pledged to the payment of the principal of and premium, if any, and interest on the bonds as the same become due and payable will be sufficient in amount for that purpose. This bond shall not be valid or become obligatory for any purpose or be entitled to any security or benefit under the Authorizing Ordinance until the Certificate of Authentication hereon shall have been signed by the Trustee. 9 :2--5 (Form of Trustee's Certi ficate) TRUSTEE'S CERTIFICATE OF AUTHENTICATION This bond is one of the bonds designated Series 1988 in and issued under the provisions of the wi thin mentioned Authorizing Ordinance. FIRST NATIONAL BANK IN STUTTGART Stuttgart, Arkansas TRUSTEE By Authorized Signature 10 ~~// (Form of Assignment) ASSIGNMENT VALUE RECEIVED, hereby sells, assigns and transfers unto , the within bond and all rights thereunder, irrevocably constitutes and appoints as attorney to transfer the within bond on the books kept for registration thereof wi th full power of substi tution in the premises. FOR ( "Transferor" ) , and hereby DATE: Transferor GUARANTEED BY: NOTICE: Signature (s) must be guaranteed by a member firm of the New York Stock Exchange or a commercial bank or a trust company. 11 :z7 Section 7. That the rates charged for services of the Water System heretofore fixed by ordinances of the City and the condi tions, rights' and obligations pertaining thereto, as set out in those Ordinances, are hereby rati fied, confi rmed and continued. None of the facilities or services afforded by the Water System shall be furnished wi thout a charge being made therefor. The City hereby covenants and agrees that there will be imposed and collected such charges for the use of the Water System as will at all times produce sufficient Revenues to provide for the operation, maintenance and repair of the Water System, to provide for the payment of the principal of and interest on all outstanding bonds to the payment of which Revenues are pledged, including these bonds, as the same become due, to provide for Trustee's fees, to make requi red deposi ts for depreciation of the Water System and to maintain all funds at requi red level s, all as provided in ordinances and resolutions authorizing and securing such bonds. This covenant shall include the agreement and obligation to increase the charges from time to time as and to the extent necessary to produce sufficient Revenues to meet the above requirements. The City will continually monitor the Revenues, including specifically the adequacy of its rates and delinquent billings. Section 8. The City covenants that it will continuously operate the Water System as a revenue-producing undertaking and will not sell or lease the same, or any substantial portion thereof;. provided, however, that nothing herein shall be construed to prohibit the City from making such dispositions of properties of the Water System and such replacements and substitutions for properties of the Water System as shall be necessary or incidental to the efficient operation of the Water System as a revenue-producing undertaking; provided that all revenue derived from such disposi tions shall be deposi ted into the Revenue Fund (hereinafter identified) · Section 9. That the Treasurer of the Ci ty shall be statutory custodian of the Revenues. However, Revenues shall be collected, held and disbursed by the Water Commission. Each employee of the City handling Revenues shall give bond for the faithful discharge of his duties. Such bonds shall be approved by the City Council. All Revenues shall be held in trust for the registered owners of the bonds and shall at all times be accounted for separately and distinctly from other moneys of the City. All Revenues shall be used and applied only as provided herein. All Revenues shall be deposited in such depository or deposi tories for the Ci ty as may be lawfully designated from time to time by resolution of the Water Commi ssion; subj ect, however, to the giving of security as now or as hereafter may be required by law and provided that such deposi tory or depositories shall hold membership in the Federal Deposit Insurance Corporation ("FDIC"). All deposi ts shall be in the name of the City and shall be so designated as to indicate the particul~r fund to which the Revenues belong. The Ci ty shall notify the Trustee in wri ting of the ini tial deposi tories for each fund into which Revenues have been deposited and any change in deposi tories. Section 10. That there is hereby created a special fund in the name of the Ci ty designated "Water Revenue Fund" (the "Revenue Fund") into which special fund there shall be paid all Revenues as and when received. Moneys in the Revenue Fund are hereby pledged and shall be applied to the payment of the 12 ;z.f' reasonable and necessary expenses of operation and maintenance of the System, to the payment of the principal of and interest on the bonds and other bonds payable from Revenues, to the maintenance of any debt service reserves at the required levels, and to the providing of an adequate depreciation fund and otherwise as described herein in the order of priority hereinafter set forth. Section 11. (a) That there shall be paid from the Revenue Fund into a special fund in the name of the City which is hereby created and designated "1988 Water R,evenue Bond Fund" (the "Bond Fund") on the first business day of each month, commencing January 3, 1989, unti 1 all outstanding bonds, wi th interest thereon, have been paid in full or provision made for such payment the following: (a) on the first business day of January, 1989, to and including the first business day of July, 1989 a sum equal to 1/7 of the next installment of the interest due on the bonds and 1/7 of the next installment of the principal due on the bonds; and (b) on the fi rst business day of August, 1989 and thereafter a sum equal to 1/6 of the next installment of interest due on the bonds and 1/12 of the next installment of principal on the bonds. The City shall also pay into the Bond Fund such additional sums as necessary to provide for the Trustee's fees and expense s . There is hereby created, as a part of the Bond Fund, a Debt Service Reserve which the Ci ty agrees to continuously maintain in an amount equal to the maximum annual principal and interest requirements on all bonds outstanding (the "Required Level"). There shall be deposi ted from Bond proceeds the sum of $218,887.50 for such purpose plus the City shall deposit therein from Revenues each month the sum necessary to increase the Debt Service Reserve to the Required Level over a twenty-four month period. Should the Debt Service Reserve become impaired or be reduced below the Required Level, the deficiency shall be cured by making addi tional monthly payments equal to 1/24 of the deficiency until the impairment or reduction is corrected. The Required Level for the Debt Service Reserve shall be increased in the event additional bonds are issued on a parity of security wi th these bonds to the maximum annual principal and interest requirements on these bonds a.nd the addi tional bonds being issued. If Revenues are insufficient to make the required payment on the first business day of the following month into the Bond Fund, the amount of any such deficiency in the payment made shall be added to the amount otherwise required to be paid into the Bond Fund on the first business day of the next month. If for any reason there shall be a deficiency in the payments made into the Bond Fund so that there are unavailable sufficient moneys therein to pay the principal of and interest on, the bonds as the same become due, any sums then held in the Debt Service Reserve shall be used to the extent necessary to pay such principal, interest and Trustee's fees, but the Debt Service Reserve shall be reimbursed in the amount of any such payment as described above. The Debt Service Reserve shall be used solely as herein described, but the moneys therein may be invested as set forth below. 13 'Vo I f a surplus shall exi st in the Bond Fund over and above the amount required for making all principal and interest payments during the next succeeding twelve month period and in excess of the Required Level of the Debt Service Reserve, such surplus (1) may be applied by the City (a) to the payment of the principal of and interest on bonds of this issue that may be called for redemption prior to maturity or (b) for the construction of extensions, betterments and improvements to the System or (2 ) may be transferred by the Ci ty to the Revenue Fund. When the moneys held in the Bond Fund, including the Debt Service Reserve, shall be and remain sufficient to pay the principal of and interest on all of the bonds then outstanding plus Trustee's fees, the City shall not be obligated to make any further payments into the Bond Fund. It shall be the duty of the Ci ty to cause to be wi thdrawn from the Bond Fund at least two (2) days before the due date of any principal and/or interest on any bond, at maturity or redemption prior to maturity, and deposited with the Trustee an amount equal to the amount of such bond and interest due thereon for the sole purpose of paying the same, together wi th the Trustee's fee. No wi thdrawal of funds from the Bond Fund shall be made for any other purpose except as otherwise authorized in thi s Ordinance. The bonds of -this issue shall be specifically secured by a pledge of all Revenues required to be placed into the Bond Fund. This pledge in favor of the bonds is hereby irrevocably made according to the terms of this Ordinance, and the City and its officers and employees shall execute, perform and carry out the terms thereof in strict conformi ty wi th the provi sions of thi s Ordinance. Section 12. That after making the required deposi t into the Bond Fund, there shall be paid from the Revenue Fund into a fund hereby created and designated "Water Depreciation Fund" (the "Depreciation Fund"), on the first business day of each month 3% of the Revenues for the preceding month. The moneys in the Depreciation Fund shall be used solely for the purpose of paying the cost of replacements made necessary by the depreciation of the Water System. I f in any month for any reason there shall be a failure to transfer and pay the required amount into the Depreciation Fund, the amount of the deficiency shall be added to the amount otherwise required to be paid therein during the next succeeding month. If any surplus shall be accumulated in the Depreciation Fund over and above the amount necessary to defray the costs of the probable replacements during the then fiscal year and the next ensuing fiscal year, such surplus shall be transferred and paid into the Revenue Fund. Section 13. That after making the required deposi t into the Bond Fund and the Depreciation Fund, there shall be paid from the Revenue Fund into a special fund in the name of the City, which is hereby created and designated "Water Operation and Maintenance Fund" (the "Operation and Maintenance Fund"), on the first business day of each month, an amount sufficient to pay the reasonable and necessary monthly expenses of operation, repair and maintenance of the Water System for such month and from which disbursements shall be made only for those purposes. Fixed annual charges, such as insurance premiums and the cost of major repair and maintenance expenses 14 30 may be computed and set up on an annual basis and one-twelfth (1/12) of the amount thereof may be paid into the Operation and Maintenance Fund each month. I f in any month for any reason there shall be a failure to transfer and pay the required amount into the Operation and Maintenance Fund, the amount of any deficiency shall be added to the amount otherwise required to be transferred and paid into the Operation and Maintenance Fund in the next succeeding month. I f in any fi scal year a surplus shall be accumulated in the Operation and Maintenance Fund over and above the amount which shall be necessary to defray the reasonable and necessary cost of operation, repair and maintenance of the Water System during the remainder of the then current fi scal year and the next ensuing fi scal year, such surplus may be transferred and deposi ted in the Revenue Fund. Section 14. That payments from the respecti ve funds shall be made by check signed by the person or persons designated by the Water Commission and drawn on the depository with which the moneys in the fund shall have been deposited, and each such check shall briefly specify the purpose of the expenditure. Section 15. Any surplus in the Revenue Fund after making all disbursements and providing for all funds described above may be used, at the option of the City, for the payment of debt service on bonds secured by a pledge of Revenues which are subordinate to the pledge in favor of these bonds, or for any lawful municipal purpose. Section 16. (a) That so long as any of the bonds are outstanding, the City shall not issue or attempt to issue any bonds claimed to be enti tIed to a priori ty of lien on the revenues of the System over the lien securing the bonds. The Ci ty may issue addi tional bonds on a pari ty of security with these bonds ("Additional Parity Bonds") to finance the cost of constructing any future extensions, betterments and improvements to the System, including reimbursement of expenditures made by it, funding required reserves, and paying indebtedness incurred by it for such purposes, but only upon the sati sfaction of the following condi tions: (1) The Ci ty, as evidenced by a certificate of the Mayor and Chairman of the Water Commission is not in default as to any covenant, condi tion or obligation prescribed by this Ordinance or any ordinance authorizing Additional Parity Bonds, or in the payment of any bonds secured by a lien on Revenues subordinate to the lien in favor of the bonds ("S'ubordinate Bonds"), and no such default will result from the issuance of such l\ddi tional Pari ty Bonds. (2) Each of the funds created for the payment and security of the bonds contains the amount then required to be on deposit therein. (3) The City shall have obtained from an Accountant a certificate showing that Net Revenues for the Fiscal Year next preceding the date of issuance of the Additional Parity Bonds, as adjusted pursuant to (A), (B) and (C) below, are equal to at least 1.20 times the maximum annual Debt Service Requirements (calculated on a Fiscal Year basis) for all bonds and Additional Bonds outstanding after the issuance of the proposed Additional Pari ty Bonds. In making the computation set forth above, the 15 ~( Accountant may, based upon the opinion or report of the Consul ting Engineer, (A) treat any increase in rates for the Water System enacted subsequent to the first day of such preceding Fiscal Year as having been in effect throughout such Fiscal Year and may include in Revenues for such Fiscal Year the amount that would have been received, based on such opinion or report, had the increase been in effect throughout such Fi sc al Year i (B) add to the Net Revenues for such Fiscal Year the increase in Net Revenues projected by the Consulting Engineer if new customers of the Water System added subsequent to the first day of such Fiscal Year had been customers for the enti re Fi scal Year; and (C) add to the Net Revenues for such Fiscal Year the Net Revenues to be received in the first Fiscal Year after completion of the extensions or improvements to the Water System to be financed by the Additional Parity Bonds from new customers served by such extensions or improvements, as projected by the Consulting Engineer. In making the projection for this subparagraph (C), the Consulting Engineer shall consider as "new customers" only those prospecti ve users that are currently in exi stence. (4) The City shall have obtained from the Consulting Engineer a certificate to the effect that: (A) such extensions or improvements are desirable and required for proper and efficient operation of the Water System, or in the case of extensions of service, are reasonable and practicable; and (B) the proceeds to be derived from the Additional Pari ty Bonds, together wi th other avai lable moneys are necessary and will be sufficient to pay the costs of such construction or acqui si tion. (5) The City shall have obtained from nationally recognized bond counsel an opinion to the effect that: (A) the conditions of this Ordinance for the issuance of the proposed Addi tional Pari ty Bonds have been satisfied; and (B) the issuance of the proposed Addi tional Pari ty Bonds will not affect the exclusion from gross income for federal income tax purposes of the interest on any then outstanding bonds. (6) There shall be on deposi t in the Debt Service Reserve an amount equal to the Required Level for the Debt Service Reserve for all outstanding bonds and Additional Parity Bo~!ds, including the Addi tional Pari ty Bonds then being issued. (7) If the terms of the Additional Parity Bonds then being issued are such that the holders thereof have the option to tender the bonds for payment prior to maturity, the obligation of the City to pay the bonds upon such tender shall be secured by an irrevocable letter of credi t issued by a commercial bank which has a rating on its short term obligations by ei ther Standard & Poor's Corporation or Moody's Investors 16 3Y' Services, lnc. or any successors thereto, of at least SP-2 or MIG-2, or the equivalent. (b) The Ci ty may issue Addi tional Pari ty Bonds for refunding all or any part of the bonds or any Additional Parity Bonds then outstanding I if the above requirements (except for paragraph 4 thereof) are meti except that paragraph (3) shall not be applicable to the issuance of refunding bonds if the City shall have obtained an Accountant's certificate to the effect that debt service in each Fi scal Year after the refunding for all then outstanding bonds or Additional Parity Bonds will be less than the debt service scheduled thereon for such Fiscal Years prior to the refunding. (c) The City may from time to time issue Subordinate Bonds for any purpose specified above. As used in thi s Section 16,. the following terms are defined as follows: "Accountant" means an independent certified public accountant or firm of independent certified public accountants selected by the Water Commi ssion. "Addi tional Bonds" means Addi tional Pari ty Bonds and Subordinate Bonds. "Consul ting Engineer" shall mean an independent registered professional en.gineer or firm of independent regi stered professional engineers, at the time engaged by tne Water Commission to advise and assist in the efficient operation of the Water System and the making of extensions and improvements to the Water System, who shall be favorably recognized and of sui table experience in such areas. "Debt Service Requirements" means for any Fiscal Year as applied to any outstanding bonds, Additional Bonds or to any Additional Parity Bonds then proposed to be issued, the sum of all amounts required to pay principal (at maturi ty or upon mandatory redemption) and interest due in such Fiscal Year. For purposes of calculating Debt Service Requirements on variable rate bonds or any other bond issue where the interest rate is not fixed for its full term, interest shall be calculated for any period by assuming that the rate of interest applicable for such period is equal to the higher of (i) the annual rate of interest on the date of calculation, or (ii) the highest annual rate of interest (calculated in the manner in which the rate of interest for such period is to be or would have been calculated) which would have been in effect at any time during the then next preceding twelve-month period. Principal of non fixed-rate bonds during any Fiscal Year shall be calculated by assuming a level amortization o~"er the term of the relevant bond issue at such annual interest rate. "Fiscal Year" means the fiscal year of the System. The initial Fiscal Year is the twelve months ending December 31, but the Water Commission may change the Fiscal Year from time to time. "Net Revenues" means Revenues less Operation and Maintenance Expenses. "Operation and Maintenance Expenses" means all expenses incurred in the operation and maintenance of the Water System which are properly accounted for such purpose under 17 ?~ generally accepted accounting principles. Such term does not include depreciation or obsolescence charges or reserves therefor or payment of principal of or interest on any indebtedness of the Ci ty. Section 17. The bonds authorized hereby and issued hereunder shall be subj ect to redemption prior to maturi ty in accordance wi th the terms set out in the bond form. Section 18. The Ci ty shall cause proper books of accounts and records to be kept (separate from all other records and acco'unts) in which complete and correct entries shall be made o~ all transactions relating to the operation of the Water System and Revenues, and such books shall be avai lable for inspection by the registered owners of any of the bonds at reasonable times and under reasonable circumstances. The Ci ty agrees to have these records audited by an independent certified public accountant at least once each year, and a copy of the audit shall be delivered to the Trustee and the Purchaser and made available to interested registered owners of the bonds. In the event that the City fails or refuses to make the audit, the Trustee, or any regi stered owner of the bonds, may have the audit made, and the cost thereof shall be charged against the Operation and Maintenance Fund. Section 19. That the bonds paid either at or before maturi ty shall be canceled and shall not be reissued. Section 20. That the Ci ty covenants and agrees that it will maintain the Water System in good condition and operate the same in an efficient manner and at reasonable cost. While any of the bonds are outstanding, the City agrees that it will insure and at all times keep insured, in the amount of the actual value thereof, in a responsible insurance company or companies authorized and qualified under the laws of the State of Arkansas to assume the risk thereof, properties of the Water System, to the extent that such properties would be covered by insurance by private companies engaged in simi lar types of businesses against loss or damage thereto from fire and other perils included in extended coverage insurance in effect in Arkansas. The insurance policies are to be taken with companies approved by the Trustee and are to carry a clause making them payable to the Trustee as its interest may appear, and satisfactory evidence of said insurance shall be filed with the Trustee. In the event of loss, the proceeds of such insurance shall be applied solely toward the reconstruction, replacement or repair of the Water System, and in such event the City will, with reasonable promptness, cause to be commenced and completed the reconstruction, replacement and repair work. If such proceeds are more than sufficient for such purposes, the balance remaining shall be deposited to the credit of the Revenue Fund, and if such proceeds shall be insufficient for such purposes the deficiency shall be supplied first from moneys in the Depreciation Fund and second from moneys in the Operation and Maintenance Fund and third from surplus moneys in the Revenue Fund. Nothing shall be construed as requiring the Ci ty to expend any moneys for operation and maintenance of the \^later System or for premiums on its insurance which are derived from sources other than the operation of the Water System, but nothing shall be construed as preventing the Ci ty from doing so. Section 21. That any bond shall be deemed to be paid within the meaning of this Ordinance when payment of the principal of and interest on such bond (whether at maturity or upon redemption as provided herein, or otherwi se), ei ther (i) 18 31 shall have been made or caused to be made in accordance with the terms thereof, or (ii) shall have been provided for by irrevocably deposi ting wi th the Trustee, in trust and irrevocably set aside exclusively for such payment (1) cash fully insured by l:!1)IC sufficient to make such payment and/or (2) direct obligations of (including obligations issued or held in book entry form on the books of) the Department of the Treasury of the United States of America ("Investment Securities") (provided that such deposi t will not affect the tax exempt status of the interest on any of the bonds or cause any of the bonds to be classified as "arbitrage bonds" within the meaning of Section 148 of the Internal Revenue Code of 1986 (the "Code")), maturing as to principal and interest in such amounts and at such times as will provide sufficient moneys to make such payment, and all necessary and proper fees, compensation and expenses of the Trustee and Paying Agent pertaining to the bonds with respect to which such deposit is made shall have been paid or the payment thereof provided for to the satisfaction of the Trustee. On the payment of all the bonds within the meaning of this Ordinance, the Trustee shall hold in trust, for the benefit of the owners of such bonds, all such moneys and/or Investment Securities. When all the bonds shall have been paid wi thin the meaning of this Ordinance, and if the Trustee has been paid its fees and expenses, the Trustee shall take all appropriate action to cause (i) the pledge and lien of thi s Ordinance to be discharged and cancelled, and (ii) all moneys held by it pursuant to this Ordinance and which are not required for the payment of such bonds to be paid over or delivered to or at the direction of the Ci ty. In determining the sufficiency of the deposit of Investment Securities there shall be considered the principal amount of such investment securities and interest to be earned thereon until the maturity of such Investment Securities. Section 22. If there be any default in the payment of the principal of or interest on any of the bonds, or if the City defaults in any Bond Fund requirement or in the performance of any of the other covenants contained in thi s Ordinance, the Trustee may, and upon the wri tten request of the regi stered owners of not less than 10% in principal amount of the then outstanding bonds, shall, by proper suit, compel the performance of the duties of the officials of the Ci ty and the Water Commi ssion under the laws of Arkansas. And in the case of a default in the payment of the principal of and interest on any of the bonds, the Trustee may and upon written request of the registered owners of not less than 10% in principal amount of the then outstanding bonds, shall apply in a proper action to a court of competent jurisdiction for the appointment of a receiver to administer the Water System on behalf of the Ci ty and the registered owners of the bonds with power to charge and collect (or by mandatory injunction or otherwise to cause to be charged and collected) rates sufficient to provide for the payment of the expenses of operation, maintenance and repair and to pay any bonds and interest outstanding and to apply the Revenues in conformity with the laws of Arkansas and with this Ordinance. When all defaults in principal and interest payments have been cured, the custody and operation of the Water System shall revert to the Ci ty and the Water Commission. No regi stered owner of any of the outstanding bonds shall have any right to institute any suit, action, mandamus or 19 ~ ?~ other proceeding in equi ty or at law for the protection or enforcement of any power or right unless such owner previously shall have given to the Trustee written notice of the default on account of which such suit, action or proceeding is to be taken, and unless the registered owners of not less than ten percent (10%) in principal amount of the bonds then outstanding shall have made wri tten request of the Trustee after the right to exercise such power or right of action, as the case may be, shall have accrued, and shall have afforded the Trustee a reasonable opportunity either to proceed to exercise the powers granted to the Trustee, or to insti tute such action, sui t or proceeding in its name, and unless, also, there shall have been offered to the Trustee reasonable security and indemnity against the costs, expenses and liabilities to be incurred therein or thereby and the Trustee shall have refused or neglected to comply with such request within a reasonable time. Such notification, request and offer of indemnity are, at the option of the Trustee, condi tions precedent to the execution of any remedy. No one or more regi stered owners of the bonds shall have any right in any manner whatever by his or their action to affect, disturb or prejudice the security of this Ordinance, or to enforce any right thereunder except the manner herein described. All proceedings at law or in equity shall be insti tuted, had and maintained in the manner herein described and for the benefit of all registered owners of the outstanding bonds. No remedy conferred upon or reserved to the Trustee or to the registered owners of the bonds is intended to be exclusive of any other remedy or remedies, and every such remedy shall be cumulative and shall be in addi tion to every other remedy given under thi s Ordinance or by law. The Trustee may, and upon the written request of the registered owners of not less than fifty percent (50%) in principal amount of the bonds then outstanding shall, waive any default which shall have been remedied before the entry of final judgment or decree in any suit, action or proceeding instituted under the provisions of this Ordinance or before the completion of the enforcement of any other remedy, but no such waiver shall extend to or affect any other existing or any subsequent default or defaults or impair any rights or remedies consequent thereon. All rights of action under this Ordinance or under any of the bonds secured hereby, enforceable by the Trustee, may be enforced by it without the possession of any of the bonds, and any such suit, action or proceeding instituted by the Trustee shall be brought in its name for the benefit of all the regi stered owners of such bonds, subj ect to the provi sions of thi s Ordinance. No delay or omission of the T~ustee or of any registered owners of the bonds to exercise any right or power accrued upon any default shall impair any such right or power or shall be construed to be a wai ver of any such defaul t or an acquaintances therein; and every power and remedy given by this Ordinance to the Trustee and to the registered owners of the bonds, respectively, may be exercised from time to time and as often as may be deemed expedient. In any proceeding to enforce the provisions of this Ordinance any plaintiff bondholder shall be entitled to recover from the City all costs of such proceeding, including reasonable attorneys' fees. 20 '70 Section 23. ( a) That the terms of thi s Ordinance shall constitute a contract between the City and the registered owners of the bonds and no variation or change in the undertaking herein set forth shall be made whi Ie any of these bonds are outstanding, except as hereinafter set forth in subsections (b) and (c), and the owner of any bonds may at any time for and on his own behalf or for and on behalf of all bondholders enforce the obligations of the City by a proper suit for that purpose. - (b) The Trustee may consent to any variation or change in this Ordinance to cure any ambiguity, defect or omission in this Ordinance or any amendment hereto without the consent of the owners of the outstanding bonds. (c) The owners of not less than seventy-five percent (75%) in aggregate principal amount of the bonds then outstanding shall have the right, from time to time, anything contained in this Ordinance to the contrary notwithstanding, to consent to and approve the adoption by the City of such ordinance supplemental hereto as shall be necessary or desirable for the purpose of modifying, altering, amending, adding to or rescinding, in any particular, any of the terms or provisions contained in thi s Ordinance or in any supplemental ordinance i provided, however, that nothing contained in this Section shall permi t or be construed as permi tting (a) an extension of the maturity of the principal of or the interest on any bond issued hereunder, or (b) a red1.1ction in the principal amount of any bond or the rate of interest thereon, or ,(c) the creation of a lien or pledge superior to the lien and pledge created by this Ordinance, or (d) a privilege or priority of any bond or bonds over any other bond or bonds, or (e) a reduction in the aggregate principal amount of the bonds required for consent to such supplemental ordinance. Section 24. (a) Moneys held for the credi t of the Debt Service Reserve shall be continuously invested and reinvested pursuant to the direction of the City in direct obligations of, or obligations the principal of and interest on which, are uncondi tionally guaranteed by the Uni ted States of America ("Government Securities"), or in certificates of deposit of banks to the extent insured by FDIC, all of which shall mature, or which shall be subject to redemption by the holder thereof, at the option of such holder, not later than seven (7) years after the date of investment or the final maturity date of the bonds, whichever is earlier. (b) Moneys held for the credit of any other fund may, at the option of the City, be invested and reinvested pursuant to the direction of the City in Government Securities, in certificates of deposit of banks which are members of FDIC, or other investments as may, from time to time, be permi tted by law, which shall mature, or which shall be subject to redemption by the holder thereof, at the option of such holder, not later than the date or dates when such money will be required for the purposes intended. (c) Obligations so purchased as an investment of moneys in any Fund shall be deemed at all times to be a part of such fund and the interest accruing thereon and any profi t realized from such investments shall be credited to such fund, and any loss resulting from such investment shall be charged to such fund, except that interest earnings and profits on investments of moneys in the Debt Service Reserve in the Bond Fund which increases the amount thereof above the Required Level 21 ?1 shall to the extent of any such excess be transferred from time to time out of the Debt Service Reserve into the Revenue Fund. (d) Moneys so invested in Government Securities or in certificates of deposit of banks to the extent insured by FDIC need not be secured by the deposi tory bank or banks. (e) All investments and deposi ts shall have a par value (or market value when less than par), exclusive of accrued interest at all times at least equal to the amount of money credited to such funds and shall be made in such a manner that the money required to be expended from any fund will be available at the proper time or times. (f) Investments of moneys in all funds shall be valued in terms of current market value as of the first day of .each year, except that direct obligations of the United States (State and Local Government Series) in book-entry form shall be continuously valued at par or face principal amount. Section 25. When the bonds have been executed, they shall be authenticated by the Trustee and the Trustee shall deliver the bonds to the Purchaser upon payment in cash of the purchase price of 97.5% of the principal amount thereof plus accrued interest ("total sale proceeds"). The accrued interest shall be remi tted to the Ci ty for deposi t into the Bond Fund. The sum of $218,'887.50 from the total sale proceeds shall be deposi ted in the Debt Service Reserve. The Trustee's authentication fee shall also be paid from the total sale proceeds. There shall next be deposited with First Jacksonville Bank, Jacksonville, Arkansas as escrow agent for the refunding (the "Escrow Agent") from bond proceeds the sum necessary, along wi th other avai lable moneys, to accompli sh the refunding. The remainder of total sale proceeds shall be remitted to the City for deposi t in trust into a special account in the name of the Ci ty designated "Water Revenue Bond Construction Fund, Series 1988" ("Construction Fund") in a deposi tory designated by the Water Commi ssion that is a member of FDIC. The moneys in the Construction Fund in excess of the amount insured by FDIC shall be continuously secured by Government Securities. The moneys in the Construction Fund shall be disbursed solely in payment of the costs of accompli shing the improvements, paying necessary expenses incidental thereto, paying interest during construction and paying expenses of issuing the bonds. In the case of all construction costs each check written on the Construction Fund shall be accompanied by a certificate signed by the Manager of the Jacksonvi lIe Water Works (the "Manager" ) certi fying hi s approval thereof. When the improvements have been completed and all required expenses paid and expendi tures made from the Construction Fund for and in connection with the accomplishment of the improvements and the financing thereof, tllis fact shall be evidenced by a certificate signed by the Manager, which certificate shall state, among other things, the date of the completion and that all obligRtions payable from the Construction Fund have been discharged. A copy of the certificate shall be filed with the depository of the Construction Fund, and a copy with the Trustee, and upon receipt thereof the deposi tory of the Construction Fund shall transfer any remaining balance to the Bond Fund. Section 26. That all moneys in the bond funds and reserves therein maintained under the 1964 Ordinance, the 1973 Ordinance and the 1979 Ordinance (the "Prior Ordinances") shall 22 ?6 be deposi ted wi th the Escrow Agent upon the issuance of the bonds. The moneys in the Waterworks and Sewer Revenue Fund (the "Prior Revenue Fund"), the Waterworks and Sewer Operation and Maintenance Fund (the "Prior Operation and Maintenance Fund") and the Waterworks and Sewer Depreciation Fund (the "Prior Depreciation Fund") maintained under the Prior Ordinances shall be segregated based upon which revenues were deri ved from the operation of the Water System ("Water Revenues") or the operation of the Sewer System (" Sewer Revenues" ) . Water Revenues in the Prior Revenue Fund shall be transferred into the Revenue Fund. Water Revenues in the Prior Operation and Maintenance Fund shall be transferred into the Operation and Maintenance Fund. Water Revenues in the Prior Depreciation Fund shall be transferred into the Depreciation Fund. Sewer Revenues in the Prior Revenue Fund in an amount necessary to provide sufficient funds to accomplish the refunding shall be deposi ted wi th the Escrow Agent and the balance shall remain in the Prior Revenue Fund, which fund is hereby re-designated as the "Sewer Revenue Fund." Sewer Revenues in the Prior Operation and Maintenance Fund shall remain therein. Sewer Revenues in the Prior Depreciation Fund shall also remain therein. The Prior Operation and Maintenance Fund is hereby re-designated as the "Sewer Operation and Maintenance Fund." The Prior Depreciation Fund is hereby re-designated as the "Sewer Depreciation Fund. " Section 27. From time to time during the construction of the improvements, the City shall deposit when necessary surplus moneys in the Revenue Fund into the Construction Fund to finance the costs of the improvements. Section 28. That there shall be a statutory mortgage lien upon the Water System (including all extensions I improvements and betterments now or hereafter existing) which shall exist in favor of the registered owners of the bonds, and each of them and the Water System shall remain subject to such statutory mortgage lien until payment in full of the interest on and principal of the bonds. Section 29. (a) That the City covenants that it shall not take any action or suffer or permit any action to be taken or condi tions to exist which causes or may cause the interest payable on the bonds to be subj ect to federal income taxation without limiting the generality of the foregoing, the City covenants that the proceeds of the sale of the bonds and Revenues will not be used directly or indirectly in such manner as to cause the bonds to be treated as "arbitrage bonds" within the meaning of Section 148 of the Code. The City further covenants to pay the United States Treasury the amounts required to be rebated under Section 148(f) of the Code at the times required by Section 148(f) of the Code. The City shall give notice to the Trustee annually of the calculation of the amount due for the preceding bond year. Payment of any rebate amount is hereby declared to be a proper exense of the System and shall be payable from moneys in the Operation and Maintenance Fund. (b) The City shall assure that (1) not in excess of ten percent (10%) of the Net Proceeds of the bonds is used for Private Business Use if, in addition, the payment of more than ten percent (10%) of the principal or ten percent (10%) of the interest due on the bonds during the term thereof is, under the terms of the bonds or any underlying arrangement, directly or 23 ~q indirectly secured by any interest in property used or to be used for a Private Business Use or in payments in respect of property used or to be used for a Private Business Use or is to be derived from payments, whether or not to the City, in respect of property or borrowed moneys used or to be used for a Private Business Use; and (ii) that, in the event that both (A) in excess of five percent (5%) of the Net Proceeds of the bonds are used for a Private Business Use, and (B) an amount in excess of five percent (5%) of the principal or five percent (5%) of the interest due on the bonds during the term thereof is, under the terms of the bonds or any underlying arrangement, directly or indirectly, secured by any interest in property used or to be used for said Private Business Use or in payments in respect of property used or to be used for said Private Business Use or is to be deri ved from payments, whether or not to the Ci ty I in respect of property or borrowed money used or to be used for said Pri vate Business Use, then said excess over said five percent (5%) of Net Proceeds of the bonds used for a Private Business Use shall be used for a Private Business Use related to the governmental use of the improvements. The Ci ty covenants that none of the proceeds of the Bonds Refunded were used for Private Business Use. The Ci ty shall assure that not in excess of five percent (5%) of the Net Proceeds of the bonds are used, directly or indirectly, to make or finance a loan to persons other than state or local governmental uni ts. As used in this subsection (b) I the following terms shall have the following meanings: "Net Proceeds" means the face amount of the bonds plus accrued interest and premium, if any, Iless original issue discount, if any, less the amount deposited into the Debt Service Reserve. "Private Business Use" means use directly or indirectly in a trade or business carried on by a natural person or in any activity carried on by a person other than a natural person, excluding, however, use by a state or local governmental uni t and use as a member of the general public. (c) The bonds are hereby designated as "qualified tax-exempt obligations" wi thin the meaning of the Code. The City represents and covenants that the aggregate principal amount of its qualified tax-exempt obligations (excluding "pri vate acti vi ty bonds" wi thin the meaning of Section 141 of the Code which are not "qualified 501(c)(3) bonds" within the meaning of Sec1tion 145 of the Code), including those of i ts subordinate entities, issued in calendar year 1988 does not and wi 11 not exceed $10, 000, 000 . (d) That the City covenants that it will take no action which would cause the bonds to be "federally guaranteed" within the meaning of Section 149(b) of the Code; specifically, (A) the payment of any portion of principal or i_ntel:"'est wi th respect to the bonds will not be guaranteed (directly or indirectly) by the United States or any agency or instrumentality thereof and (B) not more than 5% of the proceeds of the bonds (exclusive of proceeds invested for an ini tial temporary period unti I needed for the purpose for which the bonds were issued and proceeds deposi ted into the Bond Fund) will be invested (directly or indirectly) in federally insured deposits or accounts. Nothing in this Section 29 shall prohibit investments in bonds issued by the Uni ted States Treasury. 24 t~i) (e) The City covenants that it will submit to the Secretary of the Treasury of the United States, not later than the 15th day of the second calendar month after the close of the calendar quarter in which the bonds are issued, a statement required by Section 149(e) of the Code. Section 30. That in the event the office of Mayor, City Clerk, City Treasurer, Water Commission, City Council, or Ci ty Attorney shall be abolished, or any two or more of such offices shall be merged or consolidated, or in the event the duties of a particular office shall be transferred to another office or officer I or in the event of a vacancy in any such office by reason of death, resignation, removal from office or otherwise, or in the event any such officer shall become incapable of performing the duties of his office by reason of sickness, absence from the City or otherwise, all powers conferred and all obligations and duties imposed upon such office or officer shall be performed by the office or officer succeeding to the principal functions thereof, or by the office or officer upon whom such powers, obligations and duties shall be imposed by law. So long as the Water System is under control of the Water Commission, performance by the Water Commission of any obligation of the City hereunder shall be deemed performance by the City. Section 31. That the Mayor is hereby di rected to publi sh for one insertion in a newspaper which is publi shed in the City and of general circulation therein, this Ordinance, to which shall be attached a Notice signed by him in substantially the following form: NOTICE Notice is hereby given that the City Council of the City of Jacksonville, Arkansas, has adopted the ordinance hereinafter set out; that the City contemplates the issuance of Water Revenue Refunding and Construction Bonds, Series 1988, described in the ordinance; that any person interested may appear before the Council on the 1st day of December, 1988, at 8:00 p.m., at the usual meeting place of the Council held in the Ci ty and present protests. At such hearing all obj ections and suggestions will be heard, and the Council will take such action as is deemed proper in the premises.. DATED this 18th day of November, 1988. ~ /s/~~~~ Mayor 25 tf( Section 32. That the Trustee shall only be responsible for the exercise of good faith and reasonable prudence in the execution of its trust. The recitals in this Ordinance and in the face of the bonds are the recitals of the City and not of the Trustee. The Trustee shall not be required to take any action as Trustee unless it shall have been requested to do so in wri ting by the regi stered owners of not less than ten percent (10%) in principal amount of the bonds then outstanding and shall have been offered reasonable security and indemnity against the costs, expenses and liabilities to be incurred therein or thereby. The Trustee may resign at any time by sixty (60) days notice in writing to the City Clerk and to the registered owners of the bonds, and the majority in value of the registered owners of the outstanding bonds at any time, with or wi thout cause I may remove the Trustee. In the event of a vacancy in the office of Trustee, either by resignation or by removal, the majority in value of the registered owners of the outstanding bonds of this issue may appoint a new Trustee, such appointment to be evidenced by a written instrument or instruments filed with the City Clerk. If the majority in value of the registered owners of the outstanding bonds of this issue shall fail to fill a vacancy within forty-five (45) days after the same shall occur, then the City shall forthwith designate a new Trustee by a written instrument filed in the office of the Ci ty Clerk. The original Trustee and any successor Trustee shall file a wri tten acceptance and agreement to execute the trust imposed upon it or them by this Ordinance, but only upon the terms and conditions set forth in this Ordinance and subject to the provisions of this Ordinance, to all of which the respecti ve regi stered owners of the bonds agree. Such wri tten acceptance shall be filed with the City Clerk and a copy thereof shall be placed in the bond transcript. Any successor Trustee shall have all the powers herein granted to the original Trustee. The Trustee's resignation shall become effective upon the acceptance of the trusts by the successor Trustee. Section 33. That anything herein to the contrary notwithstanding, all rights of any registered owner of any bond hereunder to or with respect to any moneys or investments held in any fund hereunder shall terminate at the expiration of five years from the date of maturity of such bond, whether by scheduled maturity or by call for redemption prior to maturity in accordance wi th the terms hereof. Section 34. That the provisions of this Ordinance are hereby declared to be separable and if any provision shall for any reason be held illegal or invalid, such holding shall not affect the validity of the remainder of the Ordinance. Section 35. That this Ordinance shall not create any right of any kind and no right of any kind shall arise hereunder pursuant to it until the bonds shall be issued and delivered. Section 36. That all ordinances and resolutions or parts thereof, in conflict herewith are hereby repealed to the extent of such conflict. Section 37. That i tis hereby ascertained and declared that the improvements must be accomplished as soon as possible in order to make the Water System adequate for the needs of the 'City and its inhabitants, without which the life, health, safety and welfare thereof are jeopardized, and that the issuance of the bonds and the taking of the other action authorized by this Ordinance is necessary for the accomplishment thereof. It is, therefore, dec lared that an emergency exi sts 26 J~ and this Ordinance being necessary for the immediate preservation of the public peace, health and safety shall take effect and be in force from and after its passage. PASSED: November 17, 1988. ATTEST: ;L~ L,_ 0 l C:::X<A1-,~-.~t /JI.. c:::;;(~,?L-tt.A-~,(,.J --- "'--_/ ,..,./ Isl Lula M. Leonard City Clerk APPROVED: ~~ ' / s ~ ~waim-(...c)a....-... Mayor (SEAL) CERTIFICATE The undersigned, Ci ty Clerk of the Ci ty of Jacksonville, Arkansas, hereby certifies that the foregoing pages are a true and correct copy of Ordinance No. 894 (#18-88) adopted at a regular session of the Counci 1 of the Ci ty of Jacksonville, Arkansas, held at the regular meeting place of the Council in the City at 7:30 p.m., on the 17th day of November, 1988, and that said Ordinance is of record in Ordinance Record Book No. VIII, Page 16-27, now in my possession. GIVEN under my hand and seal this 18th day of November, 1988. ~L~r~ ~la M. Leonard City Clerk (SEAL) 27