19307ORDINANCE NO. 19,307
AN ORDINANCE AUTHORIZING THE CONSTRUCTION
OF BETTERMENTS AND IMPROVEMENTS TO THE
SEWER SYSTEM OF THE CITY OF LITTLE ROCK,
ARKANSAS; AUTHORIZING THE ISSUANCE AND SALE
OF SEWER REFUNDING AND CONSTRUCTION
REVENUE BONDS SERIES 2005; 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 Little Rock, Arkansas (the "City ") owns a sewer system (the
"System "), which is operated by the Sewer Committee of the City (the "Committee "); and
WHEREAS, the Committee has determined that betterments and improvements to the
System (collectively, the "improvements ") are necessary in order to make the services of the
System adequate for the needs of the City; and
WHEREAS, the Committee has caused to be prepared by the engineering staff of the
Little Rock Wastewater Utility a preliminary report, general plans and estimates of cost for the
improvements that have been examined and approved by the Committee and Board of Directors
and a copy of which general plans are on file in the office of the City Clerk and the CEO of the
System where they may be inspected by any interested person; and
WHEREAS, in order to take advantage of low interest rates and to reduce debt service
requirements on an annual basis, the Committee and the Board of Directors have determined that
the City should refund its Sewer Revenue Note, Series 2004 (the "2004 Note ") authorized by
Ordinance No. 19,008 of the City, adopted December 16, 2004 (the "2004 Note Ordinance "); and
WHEREAS, the City can refund the 2004 Note and pay the costs of one or more of the
improvements (or a portion thereof) by the issuance of Sewer Refunding and Construction
Revenue Bonds, Series 2005, in the principal amount of $10,000,000 (the "bonds "); and
WHEREAS, the City and the Committee have made arrangements for the sale of the
bonds to Morgan Keegan & Company, Inc. (the "Purchaser "), at a price of $9,933,079.00
(principal amount plus net original issue premium of $13,079.00 less underwriter's discount of
$80,000.00) plus accrued interest on the bonds from the date of the bonds until the date of
issuance (the "Purchase Price "), on a negotiated basis pursuant to a Bond Purchase Agreement
(the "Agreement ") which has been presented to and is before this meeting; and
WHEREAS, payment of the principal of and interest on the bonds when due will be
insured by a Financial Guaranty Insurance Policy (the "Policy ") to be issued by MBIA
Insurance Corporation ( "MBIA" or the "Insurer ") and the City and MBIA have entered or will
enter into a commitment for a Financial Guaranty Agreement (the "Financial Guaranty
Agreement ") in substantially the form presented to the Board at this meeting for its consideration
and approval; and
WHEREAS, the Preliminary Official Statement, dated April 11, 2005, offering the bonds
for sale (the "Preliminary Official Statement ") has been presented to and is before this meeting;
and
WHEREAS, the Continuing Disclosure Agreement between the City and Regions Bank,
Little Rock, Arkansas, as Dissemination Agent (the 'Disclosure Agreement "), providing for the
ongoing disclosure obligations of the City with respect to the bonds has been presented to and is
before this meeting; and
WHEREAS, the City has outstanding (a) a Sewer Revenue Bond, Series 1990 (the "1990
Bond ") authorized by Ordinance No. 15,966, adopted November 20, 1990 (the "1990
Ordinance "); (b) a Sewer Revenue Bond, Series 1991 (the "1991 Bond "), authorized by
Ordinance No. 16,030, adopted April 2, 1991 (the "1991 Ordinance "); (c) a Sewer Revenue
Bond, Series 1996 (the "1 996 Bond ") authorized by Ordinance No. 17,097, adopted January 16,
1996 (the "1996 Ordinance "); (d) a Sewer Revenue Bond, Series 1999 (the "1999 Bond ")
authorized by Ordinance No. 18,067, adopted July 20, 1999 (the "1999 Ordinance "); (e) an issue
of Sewer Refunding and Construction Revenue Bonds, Series 2001 (the "2001 Bonds "),
authorized by Ordinance 18,557, adopted September 4, 2001 (the "2001 Ordinance "); (f) a Sewer
Revenue Bond, Series 2004A (the "2004A Bond ") authorized by Ordinance No. 19,006, adopted
December 16, 2003 (the "2004A Ordinance "); (g) a Sewer Revenue Bond, Series 2004B (the
"2004B Bond "), authorized by Ordinance 19,007, adopted December 16, 2003 (the "2004B
Ordinance "); and (h) a Sewer Revenue Bond, Series 2004C (the "2004C Bond), authorized by
Ordinance No. 19,229, adopted November 1, 2004 (the "2004C Ordinance "); and
WHEREAS, the coverage test in the 2001 Ordinance for securing the bonds with a lien
on revenues of the System on a parity of security with the 2001 Bonds (the "Parity Bonds ") has
been or will be met; and
WHEREAS, the coverage test in the 1990 Ordinance, the 1991 Ordinance, the 1996
Ordinance, the 1999 Ordinance, the 2004A Ordinance, the 2004B Ordinance, and the 2004C
Ordinance for securing the bonds with a lien on revenues of the System prior to the lien on
System revenues in favor of the 1990 Bond, the 1991 Bond, the 1996, the 1999 Bond, the 2004A
Bonds, the 2004B Bonds, and the 2004C Bonds (collectively, the "Subordinate Bonds ") has been
or will be met;
NOW, THEREFORE, BE IT ORDAINED by the Board of Directors of the City of Little
Rock, Arkansas:
Section 1. The improvements and the refunding of the 2004 Note shall be accomplished.
The Mayor and City Clerk are hereby authorized to take, or cause to be taken, all action
necessary to accomplish the refunding of the 2004 Note and completion of the improvements and
to execute all required contracts in connection therewith. The 2004 Note shall be redeemed in
the amount of the outstanding principal and accrued interest to the date of redemption. The
564027 -v 1 2
accomplishment of the improvements shall be under the control and supervision of, and all
details in connection therewith shall be handled by, the Committee, and the Committee shall
make all contracts and agreements necessary or incidental to the performance of its duties and
the execution of its powers. The Committee shall let all construction contracts pursuant to and in
accordance with existing laws and shall require such performance bonds and insurance from the
contractors as, in the judgment of the Committee, will fully insure the completion of the
improvements in accordance with the plans and specifications therefor.
Section 2. The Board of Directors hereby finds and declares that the period of usefulness
of the improvements will be more than 20 years, which is longer than the term of the bonds.
Section 3. The offer of the Purchaser for the purchase of the bonds from the City at the
Purchase Price 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 the bonds are hereby sold to the Purchaser. The Mayor's approval and execution of the
Agreement on April 14, 2005 is hereby ratified and the Mayor is hereby authorized to 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.
Section 4. The Financial Guaranty Agreement in substantially the form presented to this
meeting is hereby approved and the Mayor is hereby authorized and directed to execute and
deliver the Financial Guaranty Agreement on behalf of the City.
Section 5. The Preliminary Official Statement is hereby approved and the previous use
of the Preliminary Official Statement by the Purchaser in connection with the sale of the bonds is
hereby in all respects authorized and approved, and the Mayor be, and he is hereby authorized
and directed, for and on behalf of the City, to execute the Preliminary Official Statement and the
final Official Statement as set forth in the Agreement.
Section 6. The Disclosure Agreement, in substantially the form submitted to this
meeting, is approved, and the Mayor is hereby authorized and directed to execute and deliver the
Disclosure Agreement on behalf of the City. The Mayor and the Chief Executive Officer of the
Little Rock Wastewater Utility (the "CEO ") are each authorized and directed to take all action
required on the part of the City to fulfill the City's obligations under the Disclosure Agreement.
Section 7. Under the authority of the Constitution and laws of the State of Arkansas (the
"State "), including particularly Title 14, Chapter 164, Subchapter 4, and Title 14, Chapter 235,
Subchapter 2 of the Arkansas Code of 1987 Annotated, City of Little Rock, Arkansas Sewer
Refunding and Construction Revenue Bonds, Series 2005, are hereby authorized and ordered
issued in the principal amount of $10,000,000 for the purpose of financing all or a portion of the
costs of the improvements, refunding the 2004 Note, costs incidental thereto and expenses of
issuing the bonds. The bonds shall bear interest at the rates and shall mature on the dates and in
the amounts as follows:
Principal Principal
Date Amount Interest Rate Date Amount Interest Rate
564027 -0 3
May 1, 2006
$345,000
3.000%
May 1, 2015
$ 470,000
4.000%
May 1, 2007
355,000
3.000
May 1, 2016
490,000
5.000
May 1, 2008
370,000
3.000
May 1, 2017
510,000
4.000
May 1, 2009
380,000
3.500
May 1, 2018
535,000
4.100
May 1, 2010
390,000
3.125
May 1, 2019
555,000
5.000
May 1, 201 1
405,000
3.250
May 1, 2020
585,000
4.200
May 1, 2012
415,000
4.000
May 1, 2013
435,000
4.000
May 1, 2014
450,000
4.000
May 1, 2025
3,310,000*
4.375
The bonds shall be dated May 1, 2005 and shall be issuable only as fully registered bonds
without 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 CUSIP number.
The bonds shall be registered initially in the name of Cede & Co., as nominee for the
Depository Trust Company ( "DTC "), which shall be considered to be the registered owner of the
bonds for all purposes under this Ordinance, including, without limitation, payment by the City
of principal of, redemption price, premium, if any, and interest on the bonds, and receipt of
notices and exercise of rights of registered owners. There shall be one certificated, typewritten
bond for each stated maturity date which shall be immobilized in the custody of DTC with the
beneficial owners having no right to receive the bonds in the form of physical securities or
certificates. DTC and its participants shall be responsible for maintenance of records of the
ownership of beneficial interests in the bonds by book -entry on the system maintained and
operated by DTC and its participants, and transfers of ownership of beneficial interests shall be
made only by DTC and its participants, by book - entry, the City having no responsibility therefor.
DTC is expected to maintain records of the positions of participants in the bonds, and the
participants and persons acting through participants are expected to maintain records of the
purchasers of beneficial interests in the bonds. The bonds as such shall not be transferable or
exchangeable, except for transfer to another securities depository or to another nominee of a
securities depository, without further action by the City.
If any securities depository determines not to continue to act as a securities depository for
the bonds for use in a book -entry system, the City may establish a securities depository /book-
entry system relationship with another securities depository. If the City does not or is unable to
do so, or upon request of the beneficial owners of all outstanding bonds, the City and the Trustee
(hereinafter identified), after the Trustee has made provision for notification of the beneficial
owners by the then securities depository, shall permit withdrawal of the bonds from the securities
depository, and authenticate and deliver bond certificates in fully registered form (in
denominations of $5,000 or integral multiples thereof) to the assigns of the securities depository
or its nominee, all at the cost and expense (including costs of printing definitive bonds) of the
City, if the City fails to maintain a securities depository /book -entry system, or of the beneficial
owners, if they request termination of the system.
Prior to issuance of the bonds, the City shall have executed and delivered to DTC a
written agreement (the "Representation Letter ") setting forth (or incorporating therein by
*Term Bond, subject to mandatory sinking fund redemption.
564027 -v 1 4
reference) certain undertakings and responsibilities of the City with respect to the bonds so long
as the bonds or a portion thereof are registered in the name of Cede & Co. (or a substitute
nominee) and held by DTC. Notwithstanding such execution and delivery of the Representation
Letter, the terms thereof shall not in any way limit the provisions of this Section or in any other
way impose upon the City any obligation whatsoever with respect to persons having interests in
the bonds other than the registered owners, as shown on the registration books kept by the
Trustee. The Trustee shall take all action necessary for all representations of the City in the
Representation Letter with respect to the Trustee to at all times be complied with.
The authorized officers of the Trustee and the City shall do or perform such acts and
execute all such certificates, documents and other instruments as they or any of them deem
necessary or advisable to facilitate the efficient use of a securities depository for all or any
portion of the bonds; provided that neither the Trustee nor the City may assume any obligations
to such securities depository or beneficial owners of bonds that are inconsistent with their
obligations to any registered owner under this Ordinance.
Interest on the bonds shall be payable on November 1, 2005, and semiannually thereafter
on May 1 and November 1 of each year. Payment of each installment of interest shall be made
to the person in whose name the bond is registered on the registration books of the City
maintained by Regions Bank, Little Rock, 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 "), irrespective of any transfer
or exchange of any such bond subsequent to such Record Date and prior to such interest payment
date.
Each bond shall bear interest from the payment date next preceding the date on which it
is authenticated unless it is authenticated on an interest payment date, in which event it shall bear
interest from such date, or unless it is authenticated prior to the first interest payment date, in
which event it shall bear interest from May 1, 2005, or unless it is authenticated during the
period from the Record Date to the next interest payment date, in which case it shall bear interest
from such interest payment date, or unless at the time of authentication thereof interest is in
default thereon, in which event it shall bear interest from the date to which interest has been paid.
Only such bonds as shall have endorsed thereon a Certificate of Authentication
substantially in the form set forth in Section 9 hereof (the "Certificate ") 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 the Certificate shall have been duly executed by the
Trustee, and the Certificate upon any such bond shall be conclusive evidence that such bond has
been authenticated and delivered under this Ordinance. The Certificate 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 on all of the bonds.
In case any bond shall become mutilated or be destroyed or lost, the City shall, if not then
prohibited by law, cause to be executed and the Trustee may authenticate and deliver a new bond
of like date, number, maturity and tenor in exchange and substitution for and upon cancellation
of such mutilated bond, or in lieu of and in substitution for such bond destroyed or lost, upon the
564027 -v 1 5
owner paying the reasonable expenses and charges of the City and Trustee in connection
therewith, and, in the case of a bond destroyed or lost, his filing with the Trustee evidence
satisfactory to it that such bond was destroyed or lost, and of his ownership thereof, and
furnishing the City and Trustee with indemnity satisfactory 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 this Section 7, the City 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 therewith.
The City shall cause books for the registration 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
therewith shall be paid by the City. The City shall not be required 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 on 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 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 date 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 a legal
holiday or a day on which banking institutions 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 with 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 maturity or date fixed for redemption.
Section 8. The bonds shall be executed on behalf of the City by the manual or facsimile
signatures of the Mayor and City Clerk and shall have impressed or imprinted thereon the seal of
the City. The bonds, together with interest thereon, are secured by and are payable solely from
the net revenues derived from the System ( "Revenues ") which are hereby pledged and mortgaged
for the equal and ratable payment of the bonds. The pledge of net Revenues in favor of the
bonds shall be (i) on a parity with the pledge in favor of the Parity Bonds, and (ii) prior to the
564027 -vi 6
pledge in favor of the Subordinate Bonds. The bonds and interest thereon shall not constitute an
indebtedness of the City within any constitutional or statutory limitation.
Section 9. The bonds and the Certificate 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:
564027 -v1 7
(Form of Bond)
REGISTERED REGISTERED
IM
UNITED STATES OF AMERICA
STATE OF ARKANSAS
COUNTY OF PULASKI
CITY OF LITTLE ROCK
SEWER REFUNDING AND CONSTRUCTION
REVENUE BOND, SERIES 2005
Maturity Date:
Dated Date: May 1, 2005
Registered Owner: Cede & Co.
Principal Amount:
KNOW ALL MEN BY THESE PRESENTS:
Interest Rate:
CUSIP No.:
That the City of Little Rock, County of Pulaski, State of Arkansas (the "City "), for value
received, hereby promises to pay, but solely from the source as hereinafter provided and not
otherwise, to the Registered Owner shown above upon the presentation and surrender hereof at
the principal corporate office of Regions Bank, Little Rock, Arkansas, or its successor or
successors, as Trustee and Paying Agent (the "Trustee "), on the Maturity Date shown above, the
Principal Amount shown above, in such coin or currency of the United 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 interest commencement date specified below at the
Interest Rate per annum shown above, payable November 1, 2005 and semiannually thereafter
on the first days of May and November 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 City
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.
Unless this bond is presented by an authorized representative of The Depository Trust
Company, a New York corporation ( "DTC "), to the Trustee for registration of transfer, exchange
or payment, and any certificate issued is registered in the name of Cede & Co. or in such other
name as is requested by an authorized representative of DTC (and any payment is made to Cede
& Co. or to such other entity as is required by an authorized representative of DTC), any transfer,
pledge or other use hereof for value or otherwise by or to any person is wrongful inasmuch as the
registered owner hereof, Cede & Co., has an interest herein.
564027 -v l 8
This bond shall bear interest from the payment date next preceding the date on which it is
authenticated unless it is authenticated on an interest payment date, in which event it shall bear
interest from such date, or unless it is authenticated prior to the first interest payment date, in
which event it shall bear interest from the Dated Date shown above, or unless it is authenticated
during the period from the Record Date to the next ,authenticated payment date, in which case it
shall bear interest from such interest payment date, or unless at the time of authentication hereof
interest is in default hereon, in which event it shall bear interest from the date to which interest
has been paid.
This bond is one of an issue of City of Little Rock, Arkansas Sewer Refunding and
Construction Revenue Bonds, Series 2005, aggregating Ten Million Dollars ($10,000,000) in
principal amount (the "bonds "), and is issued for the purposes of refunding certain outstanding
indebtedness of the City, financing all or a portion of the costs of the acquisition, construction
and equipping by the City of betterments and improvements to the City's sewer system (the
"System "), and paying expenses incidental thereto and to the authorization and issuance of the
bonds.
The bonds are issued pursuant to and in full compliance with the Constitution and laws of
the State of Arkansas (the "State "), including particularly Title 14, Chapter 164, Subchapter 4
and Title 14, Chapter 235, Subchapter 2 of the Arkansas Code of 1987 Annotated, and pursuant
to Ordinance No. 19,307 duly adopted on April 19, 2005 (the "Authorizing Ordinance "), and do
not constitute an indebtedness of the City within any constitutional or statutory limitation. The
bonds are not general obligations of the City, but are special obligations payable on a parity of
security with City's 2001 Bonds, solely from the net revenues derived from the operation of the
System, prior to the pledge in favor of the City's Sewer Revenue Bonds, Series 1990, Series
1991, Series 1996, Series 1999, Series 2004A, Series 2004B, and Series 2004C. An amount of
net System revenues sufficient to pay the principal of and interest on the bonds has been duly
pledged and set aside into the 2005 Sewer 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 City, 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, including 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.
564027 -v1 9
The bonds shall be subject to optional and mandatory sinking fund redemption as
follows:
1. The bonds maturing on and after May 1, 2017 are subject to redemption at the
option of the City, from funds from any source, in whole at any time or in part on any interest
payment date on and after May 1, 2015, at a redemption price equal to the principal amount
being redeemed plus accrued interest to the redemption date. (The bonds maturing on May 1,
2016 are not subject to redemption prior to maturity.) If fewer than all of the bonds shall be
called for redemption, the particular maturities of the bonds to be redeemed shall be selected by
the City in its discretion. If fewer than all of the Bonds of any one maturity shall be called for
redemption, the particular bonds or portion thereof to be redeemed from such maturity shall be
selected by lot by the Trustee.
2. To the extent not previously redeemed, the bonds are subject to mandatory
sinking fund redemption by lot in such manner as the Trustee shall determine, on the dates and in
the amounts set forth below, at a redemption price equal to the principal amount being redeemed
plus accrued interest to the date of redemption:
Bonds Maturing May 1, 2025
Redemption Dates Principal Amounts
May 1, 2021 $605,000
May 1, 2022 635,000
May 1, 2023 660,000
May 1, 2024 690,000
May 1, 2025 (Maturity) 720,000
The provisions for mandatory sinking fund redemption of the bonds are subject to the
provisions of the Authorizing Ordinance which permit the City to receive credit for bonds
previously redeemed or for bonds acquired by the City and surrendered to the Trustee.
In case any outstanding bond is in a denomination greater than $5,000, each $5,000 of
face value of such bond shall be treated as a separate bond of the denomination of $5,000.
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 30 nor more than
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 validity 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
will cease to bear interest on such redemption date.
564027 -v l 10
This bond is transferable by the registered 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, subject to the limitations 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 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 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. Subject to the limitations 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, conditions 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.
564027 -v l I I
IN WITNESS WHEREOF, the City of Little Rock, Arkansas has caused this bond to be
executed by its Mayor and City Clerk and its corporate seal to be impressed or imprinted on this
bond, all as of the Dated Date shown above.
CITY OF LITTLE ROCK, ARKANSAS
ATTEST:
Mayor
City Clerk
(SEAL)
564027 -v 1 12
STATEMENT OF INSURANCE
MBIA Insurance Corporation (the "Insurer ") has issued a policy containing the
following provisions, such policy being on file at Regions Bank, Little Rock, Arkansas
( "Trustee ").
The Insurer, in consideration of the payment of the premium and subject to the
terms of this policy, hereby unconditionally and irrevocably guarantees to any owner, as
hereinafter defined, of the following described obligations, the full and complete payment
required to be made by or on behalf of the Issuer to Regions Bank, Little Rock, Arkansas
or its successor (the "Paying Agent ") of an amount equal to (i) the principal of (either at
the stated maturity or by any advancement of maturity pursuant to a mandatory sinking
fund payment) and interest on, the Bonds (as that term is defined below) as such payments
shall become due but shall not be so paid (except that in the event of any acceleration of
the due date of such principal by reason of mandatory or optional redemption or
acceleration resulting from default or otherwise, other than any advancement of maturity
pursuant to a mandatory sinking fund payment, the payments guaranteed hereby shall be
made in such amounts and at such times as such payments of principal would have been
due had there not been any such acceleration, unless the Insurer elects in its sole discretion,
to pay in whole or in part any principal due by reason of such acceleration); and (ii) the
reimbursement of any such payment which is subsequently recovered from any owner
pursuant to a final judgment by a court of competent jurisdiction that such payment
constitutes an avoidable preference to such owner within the meaning of any applicable
bankruptcy law. The amounts referred to in clauses (i) and (ii) of the preceding sentence
shall be referred to herein collectively as the "Insured Amounts." "Bonds" shall mean:
$10,000,000
City of Little Rock, Arkansas
Sewer Refunding and Construction Revenue Bonds
Series 2005
Dated May 1, 2005
Upon receipt of telephonic or telegraphic notice, such notice subsequently
confirmed in writing by registered or certified mail, or upon receipt of written notice by
registered or certified mail, by the Insurer from the Paying Agent or any owner of a Bond
the payment of an Insured Amount for which is then due, that such required payment has
not been made, the Insurer on the due date of such payment or within one business day
after receipt of notice of such nonpayment, whichever is later, will make a deposit of
funds, in an account with U.S. Bank Trust National Association, in New York, New York,
or its successor, sufficient for the payment of any such Insured Amounts which are then
due. Upon presentment and surrender of such Bonds or presentment of such other proof of
ownership of the Bonds, together with any appropriate instruments of assignment to
evidence the assignment of the Insured Amounts due on the Bonds as are paid by the
Insurer, and appropriate instruments to effect the appointment of the Insurer as agent for
such owners of the Bonds in any legal proceeding related to payment of Insured Amounts
on the Bonds, such instruments being in a form satisfactory to U.S. Bank Trust National
564027 -v l 13
Association, U.S. Bank Trust National Association shall disburse to such owners or the
Paying Agent payment of the Insured Amounts due on such Bonds, less any amount held
by the Paying Agent for the payment of such Insured Amounts and legally available
therefor. This policy does not insure against loss of any prepayment premium which may
at any time be payable with respect to any Bond.
As used herein, the term "owner" shall mean the registered owner of any Bond as
indicated in the books maintained by the Paying Agent, the Issuer, or any designee of the
Issuer for such purpose. The term owner shall not include the Issuer or any party whose
agreement with the Issuer constitutes the underlying security for the Bonds.
Any service of process on the Insurer may be made to the Insurer at its offices
located at 113 King Street, Armonk, New York 10504 and such service of process shall be
valid and binding.
This policy is non - cancellable for any reason. The premium on this policy is not
refundable for any reason including the payment prior to maturity of the Bonds.
MBIA INSURANCE CORPORATION
564027 -0 14
(Form of Trustee's Certificate)
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This bond is one of the bonds designated Series 2005 in and issued under the provisions
of the within mentioned Authorizing Ordinance.
Date of Authentication:
REGIONS BANK
Little Rock, Arkansas, Trustee
C
Authorized Signature
564027 -v 1 15
(Form of Assignment)
ASSIGNMENT
FOR VALUE RECEIVED, ( "Transferor "), hereby
sells, assigns and transfers unto the within bond and all
rights thereunder, and hereby irrevocably constitutes and appoints as
attorney to transfer the within bond on the books kept for registration thereof with full power of
substitution in the premises.
DATE:
Transferor
GUARANTEED BY:
NOTICE: Signature(s) must be guaranteed by a member of or participant in the Securities
Transfer Agents Medallion Program (STAMP), or in another signature guaranty program
recognized by the Trustee.
564027 -0 16
Section 10. The rates charged for services of the System heretofore fixed by ordinances
of the City and the conditions, rights and obligations pertaining thereto, as set out in those
Ordinances, are hereby ratified, confirmed and continued. None of the facilities or services
afforded by the System shall be furnished without a charge being made therefor. In the event
that the City or any department, agency, or instrumentality thereof shall avail itself of the
facilities and services afforded by the System, the reasonable value of the service or facilities so
afforded shall be charged against the City or such department, agency, or instrumentality and
shall be paid for as the charges accrue. The revenues so received shall be deemed to be
Revenues derived from the operation of the System and shall be used and accounted for in the
same manner as the other Revenues derived from the operation of the System.
The City covenants and agrees that the rates shall never be reduced while any of the
bonds are outstanding unless there is obtained from an independent certified public accountant
( "Accountant ") a certificate that the Net Revenues of the System ( "Net Revenues" being defined
as gross Revenues less the expenses of operation and maintenance of the System, including all
expense items properly attributable to the operation and maintenance of the System under
generally accepted accounting principles applicable to municipal sewer facilities, excluding
depreciation, interest and amortization of deferred bond discount expenses), with the reduced
rates, will always be equal to the amount required to be set aside for the Depreciation Fund
(hereinafter identified), and leave a balance equal to at least 130% of the average annual
principal and interest requirements on all outstanding bonds payable from Revenues ( "System
Bonds "). The City further covenants and agrees that the rates shall, if and when necessary, from
time to time, be increased in such manner as will produce Revenues at least sufficient to pay the
principal and interest on all System Bonds when due, to pay the operation and maintenance
expenses of the System, and to deposit the amounts required to be paid into the Depreciation
Fund and the Debt Service Reserve in accordance with this Ordinance.
The City covenants and agrees that the existing rates will produce total Revenues at least
sufficient to pay the operation and maintenance expenses of the System, pay the principal of and
premium, if any, and interest on all outstanding System Bonds and Trustee's fees in connection
therewith, and make the required deposits into the Debt Service Reserve and the Depreciation
Fund.
Section 11. The System shall be continuously operated as a revenue producing
undertaking and all Revenues shall be paid into a special fund heretofore created and designated
"Sewer Fund" (the "Revenue Fund "). The Revenues so deposited in the Revenue Fund are
hereby pledged and shall be applied to the payment of the reasonable and necessary expenses of
operation, repair and maintenance of the System, to the payment of the principal of and
premium, if any, and interest on System Bonds, to the establishment and maintenance of a Debt
Service Reserve, and to the providing of a Depreciation Fund, as hereafter set forth. The
Revenue Fund, and the other special funds hereafter in this Ordinance provided for or referred to,
shall be maintained in such depositories of the City as shall from time to time be designated by
the Committee, with all such depositories to hold membership in the Federal Deposit Insurance
Corporation (the "FDIC "), to be located in Little Rock, Arkansas, and to have a capital and
surplus of not less than $15,000,000, and with all deposits in any depository in excess of the
564027 -v 1 17
amount insured by the FDIC to be secured by bonds or other direct or fully guaranteed
obligations of the United States of America unless invested in accordance with Section 28
hereof.
Section 12. There shall be paid from the Revenue Fund into a fund heretofore created
and designated "Sewer Operation and Maintenance Fund" (the "Operation and Maintenance
Fund ") on or before the tenth day of each month while any bonds are outstanding, an amount
sufficient to pay the reasonable and necessary monthly expenses of operation, repair and
maintenance of the 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 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.
If in any month for any reason there shall be a failure to transfer and pay the required
amount into Operation and Maintenance Fund, the amount of any deficiency shall be added to
the amount otherwise required to be transferred and paid into such fund in the next succeeding
month. If in any fiscal 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 System during the remainder of the then current
fiscal year and the next ensuing fiscal year, such surplus may be transferred and deposited in the
Revenue Fund.
Section 13. (a) After making the required monthly deposits into the Operation and
Maintenance Fund, there shall be paid from the Revenue Fund, pro rata, the required monthly
deposits into the 2001 Bond Fund being maintained in connection with the 2001 Bonds and into
a special fund in the name of the City which is hereby created and designated the "2005 Sewer
Revenue Bond Fund" (the "Bond Fund ") on or before the fifteenth day of each month,
commencing in June 2005, until all outstanding bonds, with interest thereon, have been paid in
full or provision made for such payment 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 due on the bonds; provided, however,
that payments made into the Bond Fund for the first five (5) months shall be increased to 115 of
the next installment of interest due on the bonds and 1 /10 of the next installment of principal due
on the bonds.
The City shall also pay into the 2001 Bond Fund and the Bond Fund such additional sums
as necessary to provide for the Trustee's fees and expenses and any arbitrage rebate due the
United States Treasury under Section 148(f) of the Internal Revenue Code of 1986, as amended
(the "Code "). The City shall realize a credit against monthly deposits into the 2001 Bond Fund
and the Bond Fund from bond proceeds deposited therein, all interest earnings on moneys in the
2001 Bond Fund and the Bond Fund and all transfers made from the Debt Service Reserve
during the preceding month.
There is hereby created, as a part of the Bond Fund, a Debt Service Reserve which shall
be maintained by the City in an amount equal to 75% of the maximum annual principal and
interest requirement on the bonds or 10% of the proceeds of the bonds (excluding accrued
interest but including Underwriter's discount), whichever is lesser (the "Required Level ").
564027 -0 18
Should the Debt Service Reserve become impaired or be reduced below the Required Level, the
City shall make additional monthly payments from the Revenue Fund until the impairment or
reduction is corrected within a twenty -four month period.
If for any reason the City should fail at any time to make any of the required payments
into the Bond Fund, any sums then held in the Debt Service Reserve shall be used to the extent
necessary for the payment of principal of or interest on the bonds, but the Debt Service Reserve
shall be reimbursed from the Revenue Fund before any moneys in the Revenue Fund shall be
used for any other purpose other than the making of payments required to be made into the
Operation and Maintenance Fund and the Bond Fund. The Debt Service Reserve shall be used
solely as provided herein.
The Required Level for the Bonds will be met initially by a Surety Bond issued by MBIA
Insurance Corporation ( "MBIA or the "Insurer ") and the City and the Trustee will enter into a
Financial Guaranty Agreement (the "Agreement ") with MBIA with respect thereto. The Surety
Bond is an unconditional and irrevocable guaranty of MBIA to pay to the Trustee amounts
requested by the Trustee (not to exceed the amount of the Surety Bond) necessary to pay
principal of or interest on the Bonds if amounts available in the Bond Fund are insufficient
therefor on any principal or interest payment date under the Authorizing Ordinance. The Trustee
must first apply all moneys available in the Bond Fund to the payment of principal of or interest
on the Bonds prior to requesting payment under the Surety Bond. Payments under the Surety
Bond will be made upon the later of (i) three days after the receipt of the Trustee's request, or (ii)
the principal or interest payment date when payment is due on the Bonds.
Under the Agreement, the City is obligated to repay MBIA for any payments made under
the Surety Bond, and such repayment shall operate to restore the amount of coverage of the
Surety Bond to the extent of such repayment (but not to exceed the original amount of the Surety
Bond). In order to secure the City's repayment obligations to MBIA, the City has granted a lien
on the Revenues of the System subordinate only to the lien and security interest granted to the
Trustee hereunder. Under the Agreement, MBIA is also subrogated to the rights of the Owners
of the Bonds to the extent of payments made under the Surety Bond, but such rights of
subrogation are subordinate to the Owners' rights to receive regularly scheduled payments of
principal of and interest on the Bonds.
The Surety Bond expires on the earlier (i) May 1, 2025, or (ii) the date on which the City
has made all payments required to be made on the Bonds under the Authorizing Ordinance.
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.
When the moneys held in the Bond Fund shall be and remain sufficient to pay the
principal of and interest on all of the bonds then outstanding plus Trustee's fees and any
564027 -v 1 19
arbitrage rebate due as provided above, the City shall not be obligated to make any further
payments into the Bond Fund.
It shall be the duty of the City to cause to be withdrawn from the Bond Fund and
deposited with the Trustee at least one (1) business day 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 with the Trustee's fee. There shall also be withdrawn and
paid to the United States Treasury any arbitrage rebate due at the times and in the amounts
required by Section 148(f) of the Code. No withdrawal of funds from the Bond Fund shall be
made for any other purpose except as otherwise authorized in this Ordinance.
The bonds shall be specifically secured by a pledge of all Net Revenues remaining after
the deposits have been made to the Operation and Maintenance 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 conformity
with the provisions of this Ordinance.
Section 14. After making the deposits into the Operation and Maintenance Fund and the
Bond Fund, there shall be transferred from the Revenue Fund (a) into (i) the "ADFA Bond Fund"
being maintained in connection with the 1990 Bond and the 1991 Bond, (ii) the "1996 ADFA
Bond Fund" being maintained in connection with the 1996 Bond, (iii) the "1999 ADFA Bond
Fund" being maintained in connection with the 1999 Bond, (iv) the "2004A Bond Fund" being
maintained in connection with the 2004A Bonds; (v) the "2004B Bond Fund" being maintained
in connection with the 2004B Bonds, and (vi) the "Series 2004C Bond Fund" being maintained
in connection with the 2004C Bonds, the amounts required by the 1990 Ordinance, the 1991
Ordinance, the 1996 Ordinance, the 1999 Ordinance, the 2004A Ordinance, the 2004B
Ordinance and the 2004C Ordinance, respectively, and (b) the administration and servicing fees
due in connection with the Subordinate Bonds.
Section 15. After making the required payments into the Operation and Maintenance
Fund, the Bond Fund, the Series 2001 Bond Fund, the ADFA Bond Fund, the 1996 ADFA Bond
Fund, the 1999 ADFA Bond Fund, the 2004A Bond Fund, the 2004B Bond Fund and the 2004C
Bond Fund, there shall be paid from the Revenue Fund into a fund heretofore created and
designated the "Sewer Depreciation Fund" (the "Depreciation Fund ") on or before the 15th day
of each month while any bonds are outstanding, three percent (3 %) of the Revenues which
remain after the required payment into the Operation and Maintenance Fund has been made. 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 System. If in any fiscal year a surplus
shall be accumulated in the Depreciation Fund over and above the amount necessary to defray
the cost of the probable replacements during the then current fiscal year and the next ensuing
fiscal year, such surplus may be transferred and paid into the Revenue Fund.
Section 16. Any surplus in the Revenue Fund, after making the required monthly
deposits into the other funds as set forth above, may be used, at the option of the City, for any
lawful purpose of the System, as approved by the Committee.
564027 -v 1 20
Section 17. So long as any of the bonds are outstanding, the City shall not issue or
attempt to issue any bonds claimed to be entitled to a priority of lien on Revenues over the lien
securing the bonds and the Parity Bonds. The City reserves the right to issue additional bonds to
finance or pay the cost of making any future extensions, betterments or improvements to the
System, or to refund bonds issued for such purposes, but the City shall not authorize or issue any
such additional bonds ranking on a parity with the bonds and the Parity Bonds unless and until
there have been procured and filed with the City Clerk and the Trustee a statement by an
Accountant reciting the opinion, based upon necessary investigation, that the Net Revenues of
the System for the fiscal year immediately preceding the fiscal year in which it is proposed to
issue such additional bonds shall equal not less than 120% of the average annual principal and
interest requirements on all the then outstanding System Bonds and the additional bonds then
proposed to be issued. The term "Net Revenues" means gross Revenues less operation and
maintenance expenses other than depreciation, interest and amortization of deferred bond
discount expenses, determined in accordance with generally accepted accounting principles. In
making the computation set forth above, the City, and the Accountant on behalf of the City, may,
based upon the opinion or report of a registered professional engineer not in the regular employ
of the City, treat any increase in rates for the System enacted subsequent to the first day of such
preceding fiscal year as having been in effect during or throughout such fiscal year and may
include in gross Revenues for such fiscal year the amount that would have been received, based
on such opinion or report, had the increase been in effect during or throughout such fiscal year.
Section 18. The City covenants and agrees that it will maintain the 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 full insurable value thereof, in a responsible insurance company or companies
selected by the Committee and authorized and qualified under the laws of the State to assume the
risk thereof, all aboveground structures of the System, to the extent that such structures would be
covered by insurance by private companies engaged in similar types of businesses, against loss
or damage thereto from fire, lightning, tornados, winds, riot, strike, civil commotion, malicious
damage, explosion and against any other loss or damage from any other causes customarily
insured against by private companies engaged in similar types of business. The insurance
policies are to carry a clause making them payable to the Committee and the Trustee as their
interests 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 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 City to
expend any moneys for operation and maintenance of the System or for premiums on its
insurance which are derived from sources other than the operation of the System, but nothing
shall be construed as preventing the City from doing so.
564027 -v1 21
Section 19. The bonds shall be subject to redemption prior to maturity in accordance
with the terms set out in the bond form. The City may acquire bonds by purchase at a price not
in excess of par plus accrued interest, inclusive of brokerage fees, and surrender to the Trustee
any bonds so acquired, in exchange for which the City shall receive a credit under this Ordinance
in an amount equal to the principal amount of the bonds so acquired and surrendered, for and of
the then next date for mandatory sinking fund redemption of bonds of the same maturity.
Section 20. The Committee will keep proper books of accounts and records (separate
from all other records and accounts of the City) in which complete and correct entries shall be
made of all transactions relating to the operation of the System, and such books shall be available
for inspection by the registered owner of any of the bonds at reasonable times and under
reasonable circumstances. The City and the Committee agree to have these records audited by
an Accountant at least once each year, and a copy of the audit shall be delivered to the Trustee
and the Insurer and made available to interested registered owners requesting the same in
writing. In the event that the City or the Committee fail or refuse to make the audit, the Trustee,
or any registered owner of the Bonds, may have the audit made, and the cost thereof shall be
charged against the Operation and Maintenance Fund.
Section 21. 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 otherwise), either (i) shall have been made or caused to be
made in accordance with the terms thereof, or (ii) shall have been provided for by irrevocably
depositing with the Trustee, in trust and irrevocably set aside exclusively for such payment (1)
cash 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 ( "Government Securities ") (provided that such deposit 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 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 shall have
been paid or the payment thereof provided for to the satisfaction of the Trustee.
On the payment of any such 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
Government Securities.
When all the bonds shall have been paid within the meaning of this Ordinance, if the
Trustee has been paid its fees and expenses and if any arbitrage rebate due the United States
Treasury has been paid or provided for to the satisfaction of the Trustee, the Trustee shall take all
appropriate action to cause (i) the pledge and lien of this 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 City. In
determining the sufficiency of the deposit of Government Securities there shall be considered the
principal amount of such Government Securities and interest to be earned thereon until the
maturity of such Government Securities.
564027-vi 22
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 this Ordinance and such failure continues unremedied for thirty
(30) days, or if the City declares bankruptcy or seeks relief from its creditors under the
provisions of any other similar state or federal law, the Trustee may, and upon the written request
of the registered 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 City under the
laws of Arkansas, subject to the rights of Insurer provided for herein. 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 System on behalf of the City 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, subject to the
rights of Insurer provided for herein. When all defaults in principal and interest payments have
been cured, the custody and operation of the System shall revert to the City.
No registered owner of any of the outstanding bonds shall have any right to institute any
suit, action, mandamus or other proceeding in equity 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 10% in principal amount of the bonds then outstanding shall
have made written 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 institute such
action, suit 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, conditions precedent to the execution of any remedy. No one or more
registered 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 instituted, 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 addition to every other remedy given under this Ordinance or by
law.
Subject to the rights of the Insurer provided for herein, the Trustee may, and upon the
written request of the registered owners of not less than 50% in principal amount of the bonds
then outstanding shall, waive any default which shall have been remedied before the entry of
564027-v] 23
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, 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 registered owners of such bonds, subject to the provisions of this Ordinance.
No delay or omission of the Trustee 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 waiver of any such default or an acquiescence 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.
Notwithstanding any other provisions of this Section 22 or this Ordinance, the Insurer,
acting alone, shall have the right to direct all remedies in the event of a default hereunder. The
Trustee shall notify the Insurer before taking any action, either in its discretion or at the direction
of the bondholders, and the Trustee shall recognize the Insurer as the registered owner of each
bond which it insures for purposes of exercising all rights and privileges available to bondholders
hereunder. The Insurer shall have the right to institute any suit, action or proceeding at law or in
equity under the same terms as a bondholder in accordance with the provisions of this Ordinance.
No acceleration of the principal of or interest on the bonds, other than the redemption provisions
expressly set forth in the form of the bonds in Section 9 of this Ordinance, may occur without the
Insurer's prior written consent.
In any proceeding in which any plaintiff bondholder prevails 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.
Section 23. (a) The terms of this 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 while any of these bonds are outstanding, except as hereinafter set forth in
subsections (b) and (c).
(b) The Trustee, with prior written notice to the Insurer, may consent to any
variation or change in this Ordinance without the consent of the owners of the outstanding bonds
(a) in connection with the issuance of additional parity bonds under this Ordinance, (b) in order
to cure any ambiguity, defect or omission herein or to correct or supplement any defective or
inconsistent provisions contained herein as the City may deem necessary or desirable and not
inconsistent herewith or (c) in order to make any other variation or change which the Trustee
determines shall not adversely affect the interests of the owners of the bonds.
(c) The owners of not less than 75% in aggregate principal amount of the bonds
then outstanding shall have the right, from time to time, anything contained in this ordinance to
564027-vi 24
the contrary notwithstanding, but at all times with the prior written consent of the Insurer, 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 this ordinance or in any
supplemental ordinance; provided, however, that nothing contained in this Section shall permit
or be construed as permitting (a) an extension of the maturity of the principal of or the interest on
any bond, or (b) a reduction 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.
(d) Copies of all amendments to this ordinance to which the Insurer has consented
must be made available to Moody's Investor Service and any other rating agency which, at the
time of amendment, shall have issued and outstanding a rating on the bonds issued hereunder.
Section 24. When the bonds have been executed and sealed as herein provided, 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. The accrued interest shall be remitted to the City
for deposit into the Bond Fund. The expenses of issuing the bonds and accomplishing the
refunding as set forth in the delivery instructions to the Trustee signed by the Mayor and City
Clerk shall also be paid from the Purchase Price (the "Delivery Instructions "). The amount
necessary from the Purchase Price to refund the 2004 Note as set forth in the Delivery
Instructions shall be delivered to the owner and holder of the 2004 Note in full payment thereof.
The remainder of the Purchase Price shall be remitted to the City for deposit into an account of
the City heretofore created and designated "Little Rock Wastewater Utility Construction Fund"
( "Construction Fund "). The moneys deposited into the Construction Fund, including earnings
thereon, shall be disbursed in payment of the costs of accomplishing the improvements, paying
necessary expenses incidental thereto and paying expenses of issuing the bonds. Disbursements
shall be on the basis of checks which shall contain at least the following information: the person
to whom payment is being made; the amount of the payment; and the purpose by general
classification of the payment. Each check must be signed by the CEO or Finance Director of the
Little Rock Wastewater Utility. The Committee shall be required to keep accurate records of all
payments made on the basis of checks.
Section 25. In the event the office of Mayor, City Clerk, City Treasurer, Committee or
Board of Directors 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, 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.
564027 -v1 25
So long as the System is under the control of the Committee, performance by the
Committee of any obligation of the City hereunder shall be deemed performance by the City.
The Committee presently consists of James R. Pender, Dale J. Wintroath, Stuart S. Mackey,
Charles G. Goss and Patrick D. Miller.
Section 26. (a) The City covenants that it shall not take any action or suffer or permit
any action to be taken or conditions to exist which causes or may cause the interest payable on
the bonds to be included in gross income for federal income tax purposes. 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.
(b) The City shall assure that (i) not in excess of 10% of the Net Proceeds of the
bonds is used for Private Business Use if, in addition, the payment of more than 10% of the
principal or 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 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 5% of the Net Proceeds of the bonds are used
for a Private Business Use, and (B) an amount in excess of 5% of the principal or 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 derived from payments, whether or not to the City, in
respect of property or borrowed money used or to be used for said Private Business Use, then
said excess over said 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 or the
improvements financed or refinanced by the 2004 Note.
The City shall assure that not in excess of 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
units.
As used in this subsection (b), the following terms shall have the following meanings:
"Net Proceeds" means the face amount of the bonds, plus accrued interest and premium,
if any, less original issue discount, if any, less any amounts deposited into the Debt Service
Reserve from bond proceeds.
"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 unit and use as a member of the general
public.
564027 -v l 26
(c) 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. Nothing in this
Section shall prohibit investments in bonds issued by the United States Treasury.
(d) 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.
(e) The City covenants that it will not reimburse itself from proceeds of the bonds
for costs paid prior to the date the bonds are issued except in compliance with United States
Treasury Regulation No. 1.150 -2 (the "Regulation "). This Ordinance shall constitute an "official
intent" for the purpose of the Regulation.
(f) The City covenants that it will, in compliance with the requirements of Section
148(f) of the Code, pay with moneys in the Bond Fund to the United States Government in
accordance with the requirements of Section 148(f) of the Code, from time to time, an amount
equal to the sum of (1) the excess of (A) the amount earned on all Non - purpose Investments (as
therein defined) attributable to the bonds, other than investments attributable to such excess over
(B) the amount which would have been earned if such Non - purpose Investments attributable to
the bonds were invested at a rate equal to the Yield (as defined in the Code) on the bonds, plus
(2) any income attributable to the excess described in (1), subject to the exceptions set forth in
Section 148 of the Code. The City further covenants that in order to assure compliance with its
covenants herein, it will employ a qualified consultant to advise the City in making the
determination required to comply with this subsection (f). Anything herein to the contrary
notwithstanding this provision may be modified or rescinded if in the opinion of Bond Counsel
such modification or rescission will not affect the tax - exempt status of the bonds for federal
income tax purposes.
Section 27. 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 writing by the owners of
not less than 10% in principal amount of the bonds then outstanding, or the Insurer as provided
herein, 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 60 days'
notice in writing to the City Clerk, to the registered owners of the bonds, the Insurer, and the
City or the majority in value of the registered owners of the outstanding bonds at any time, with
or without cause, but with the consent of the Insurer, may remove the Trustee. In the event of a
vacancy in the office of Trustee, either by resignation or by removal, the City shall appoint a new
Trustee, such appointment to be evidenced by a written instrument or instruments filed with the
City Clerk and provided to the Insurer. Every successor Trustee appointed pursuant to this
Section shall be a trust company or bank in good standing, duly authorized to exercise trust
powers and subject to examination by federal or state authority. The original Trustee and any
successor Trustee shall file a written 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
564027 -0 27
Ordinance and subject to the provisions of this Ordinance, to all of which the respective owners
of the bonds agree. Such written 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 28. (a) Moneys held for the credit of the Bond Fund shall be continuously
invested and reinvested pursuant to the direction of the Committee in Eligible Investments, 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 the payment date for interest or principal and interest.
(b) Moneys held for the credit of the Debt Service Reserve shall be invested and
reinvested at the direction of the Committee in Eligible Investments, 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 maturity date of the bonds whichever is
earlier.
(c) Moneys held for the credit of any other fund shall be continuously invested and
reinvested pursuant to the direction of the Committee in Eligible Investments, 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 the moneys held for the credit of the particular fund
will be required for purposes intended.
(d) "Eligible Investments" means any of the securities that are at the time legal for
investment of City funds pursuant to Resolution No. 10,609 of the City and Arkansas Code
Annotated (1999 Supp.) §14 -58 -309, as each may be amended from time to time, and as
permitted pursuant to the Financial Guaranty Agreement between the City and the Insurer. At
April 19, 2005, "Eligible Investments" includes:
(1) U.S. government obligations, U.S. government agency
obligations, and U.S. government instrumentality obligations, which have a
liquid market with a readily determinable market value;
(2) Certificates of deposit and other evidences of deposit at
financial institutions, and commercial paper, rated in the highest tier (e.g., A -1,
P -1, F -1, D -1, or higher) by a nationally recognized rating agency;
(3) Investment -grade obligations of state, provincial, and local
governments and public authorities; and
(4) Money market mutual
Exchange Commission and whose
denominated securities.
funds regulated by the Securities and
portfolios consist only of dollar-
(e) 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 profit
564027-vi 28
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 which increase the amount thereof above the Required
Level shall to the extent of any such excess be transferred from time to time into the Bond Fund.
(f) 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 depository bank or banks.
(g) All investments and deposits 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.
(h) Investments of moneys in all funds shall be valued in terms of current market
value as of the last 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.
(i) The City covenants that it will make all arbitrage rebate payments to the United
States in accordance with Section 148(f) of the Code.
Section 29. All moneys in the 2004 Sewer Revenue Note Fund established pursuant to
the 2004 Note Ordinance, including the debt service reserve therein, are hereby appropriated and
shall be used to refund the 2004 Note and shall be deposited into the Escrow Account, or other
account designated for payment of the 2004 Note on May 26, 2005, and any balance shall be
deposited into the Bond Fund.
Section 30. It is covenanted and agreed by the City with the registered owners of the
bonds, or any of them, that the City and the Committee will faithfully and punctually perform all
duties with reference to the System required by the Constitution and laws of the State, including
the charging and collecting of reasonable and sufficient rates lawfully established for services
rendered by the System, the segregating of Revenues as herein required, and the applying of
Revenues to the respective funds herein created or referred to.
Section 31. The City covenants that it will not sell or lease the System, 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 System and such replacements and
substitutions for properties of the System as shall be necessary or incidental to the efficient
operation of the System as a revenue - producing undertaking. All revenues derived from such
dispositions shall be deposited into the Revenue Fund.
Section 32. Payment under the Financial Guaranty Insurance Policy issued by MBIA.
(a) In the event that, on the second Business Day, and again on the Business Day, prior to the
payment date, Trustee has not received sufficient moneys to pay all principal of and interest on the bonds
due on the second following or following, as the case may be, Business Day, the Trustee shall immediately
564027 -v1 29
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.
(b) If the deficiency is made up in whole or in part prior to or on the payment date, the Trustee
shall so notify the Insurer or its designee.
(c) In addition, if the Trustee has notice that any bondholder 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 bondholder within the meaning of any applicable bankruptcy laws, then the Trustee shall notify the
Insurer or its designee of such fact by telephone or telegraphic notice, confirmed in writing by registered or
certified mail.
(d) The Trustee is hereby irrevocably designated, appointed, directed and authorized to act as
attomey -in -fact for holders of the bonds as follows:
1. If and to the extent there is a deficiency in amounts required to pay interest on the
bonds, the Trustee shall (a) execute and deliver to U.S. Bank Trust National Association, or its
successors under the Policy (the "Insurance Paying Agent/Trustee "), in form satisfactory to the
Insurance Paying Agent/Trustee, an instrument appointing the Insurer as agent for such holders 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, (b) receive as
designee of the respective holders (and not as Trustee) in accordance with the tenor of the Policy
payment from the Insurance Paying Agent/Trustee with respect to the claims for interest so
assigned, and (c) disburse the same to such respective holders; and
2. If and to the extent of a deficiency in amounts required to pay principal of the
bonds, the Trustee shall (a) execute and deliver to the Insurance Paying Agent/Trustee in form
satisfactory to the Insurance Paying Agent/Trustee an instrument appointing the Insurer as agent for
such holder 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/Trustee of so much of
the principal amount thereof as has not previously been paid or for which moneys are not held by
the Trustee and available for such payment (but such assignment shall be delivered only if payment
from the Insurance Paying Agent/Trustee is received), (b) receive as designee of the respective
holders (and not as Trustee) in accordance with the tenor of the Policy payment therefor from the
Insurance Paying Agent/Trustee, and (c) disburse the same to such holders.
(e) Payments with respect to claims for interest on and principal of bonds disbursed by the
Trustee from proceeds of the 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 bond and claims for the
interest in accordance with the tenor of the assignment made to it under the provisions of this subsection or
otherwise.
(f) Irrespective of whether any such assignment is executed and delivered, the City and the
Trustee hereby agree for the benefit of the Insurer that:
They recognize that to the extent the Insurer makes payments, directly or indirectly
564027 -v 1 30
(as by paying through the Trustee), on account of principal of or interest on the bonds, the Insurer
will be subrogated to the rights of such holders 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
2. 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
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 holders, and
will otherwise treat the Insurer as the owner of such rights to the amount of such principal and
interest.
(g) In connection with the issuance of additional bonds, the City shall deliver to the Insurer a
copy of the disclosure document, if any, circulated with respect to such additional bonds.
(h) Copies of any amendments made to the documents executed in connection with the
issuance of the bonds which are consented to by the Insurer shall be sent to Moody's Investor Services and
any other rating agency which at that time shall have issued and outstanding a rating on the bonds.
(i) The Insurer shall receive notice of the resignation or removal of the Trustee and the
appointment of a successor thereto.
0) The Insurer shall receive copies of all notices required to be delivered to bondholders and,
on an annual basis, copies of the City's audited financial statements and annual budget.
Notices: Any notice that is required to be given to a holder of the bonds or to the Trustee pursuant
to this Ordinance shall also be provided to the Insurer. All notices required to be given to the Insurer under
the Ordinance shall be in writing and shall be sent by registered or certified mail addressed to MBIA
Insurance Corporation, 113 King Street, Armonk, New York 10504 Attention: Surveillance.
(k) The City agrees to reimburse the Insurer immediately and unconditionally upon demand, to
the extent permitted by law, for all reasonable expenses, including attorneys' fees and expenses, incurred by
the Insurer in connection with (i) the 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 the
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 fee in connection with its review of any such consent, amendment or waiver, whether or not
granted or approved.
(1) The City agrees not to use the Insurer's name in any public document including, without
limitation, a press release or presentation, announcement or forum without the Insurer's prior consent;
provided however, such prohibition on the use of the Insurer's name shall not relate to the use of the
Insurer's standard approved form of disclosure in public documents issued in connection with the current
564027 -v] 31
bonds to be issued in accordance with the terms of the Financial Guaranty Agreement; and provided further
such prohibition shall not apply to the use of the Insurer's name in order to comply with public notice, public
meeting or public reporting requirements.
(m) The City shall not enter into any agreement nor shall it consent to or participate in any
arrangement pursuant to which bonds are tendered or purchased for any purpose other than the redemption
and cancellation or legal defeasance of such bonds without the prior written consent of the Insurer.
(n) Defined terms used herein, to the extent not defined in this ordinance, shall have
the meanings ascribed to them in the Financial Guaranty Agreement.
Section 33. The requirements of Ordinance No. 15,249, as they may relate to the sale of
the Bonds, are hereby waived.
Section 34. 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 this Ordinance.
Section 35. All ordinances and resolutions or parts thereof, in conflict herewith are
hereby repealed to the extent of such conflict.
Section 36. It is hereby ascertained and declared that the refunding and the
improvements must be accomplished as soon as possible in order to make the System adequate
for the needs of the City and its inhabitants, without which the life, health, safety and welfare
thereof are jeopardized, and to benefit from interest cost savings, 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, declared that an emergency exists 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: April 19, 2005.
5i��w
Jim Dai , Mayor
i
Nanc Wood, Py C erk
��Appro ed as to form:
'A A
vV l
Tom Carpenter, City Attorney
564027 -0 32
CERTIFICATE
STATE OF ARKANSAS )
COUNTY OF PULASKI )
I, Nancy Wood, City Clerk, within and for the City of Little Rock, Arkansas do hereby
certify that the foregoing is a true and correct copy of Ordinance No. 19,307 of the Ordinances of
the City of Little Rock, Arkansas entitled: "AN ORDINANCE AUTHORIZING THE
CONSTRUCTION OF BETTERMENTS AND IMPROVEMENTS TO THE SEWER
SYSTEM OF THE CITY OF LITTLE ROCK, ARKANSAS; AUTHORIZING THE
ISSUANCE AND SALE OF SEWER REFUNDING AND CONSTRUCTION REVENUE
BONDS SERIES 2005; PROVIDING FOR THE PAYMENT OF THE PRINCIPAL OF
AND INTEREST ON THE BONDS; PRESCRIBING OTHER MATTERS RELATING
THERETO; AND DECLARING AN EMERGENCY;" passed by the Board of Directors of
the City on April 19, 2005.
IN WITNESS WHEREOF, I have hereunto set my hand and seal office this 19th day of
April, 2005.
Nancy Wood, City Clerk
564027 -v l 33
►m
REVISED AS OF APRIL 18, 2005
COMMITMENT TO ISSUE A
FINANCIAL GUARANTY INSURANCE POLICY
Application No.: 2005 - 003107 -001
Sale Date: April 14 2005
Program Type: Negotiated DP
Re: $10,000,000 City of Little Rock, Arkansas, Sewer Refunding and Construction Revenue
Bonds, Series 2005
(the "Obligations ")
This commitment to issue a financial guaranty insurance policy (the "Commitment ")
dated April 18, 2005, constitutes an agreement between LITTLE ROCK WASTEWATER
UTILITY (the "Applicant ") and MBIA Insurance Corporation (the "Insurer "), a stock insurance
company incorporated under the laws of the State of New York.
Based on an approved application dated April 5, 2005, the Insurer agrees, upon
satisfaction of the conditions herein, to issue on the earlier of (i) 120 days of said approval date
or (ii) on the date of delivery of and payment for the Obligations, a financial guaranty insurance
policy (the "Policy ") for the Obligations, insuring the payment of principal of and interest on the
Obligations when due. The issuance of the Policy shall be subject to the following terms and
conditions:
1. Payment by the Applicant, or by the Trustee on behalf of the Applicant, on the date
of delivery of and payment for the Obligations, of a nonrefundable premium in the amount of
$41,800 [.2780% (premium rate) of $15,039,061.26 (Total Debt Service), premium rounded to
the nearest hundred]. The premium set out in this paragraph shall be the total premium required
to be paid on the Policy issued pursuant to this Commitment.
2. The Obligations shall have received the unqualified opinion of bond counsel with
respect to the tax - exempt status of interest on the Obligations.
3. There shall have been no material adverse change in the Obligations or the
Resolution, Bond Ordinance, Trust Indenture or other official document authorizing the issuance
of the Obligations or in the final official statement or other similar document, including the
financial statements included therein.
4. There shall have been no material adverse change in any information submitted to
the Insurer as a part of the application or subsequently submitted to be a part of the application
to the Insurer.
5. No event shall have occurred which would allow any underwriter or any other
purchaser of the Obligations not to be required to purchase the Obligations at closing.
6. A Statement of Insurance satisfactory to the Insurer shall be printed on the
Obligations.
7. Prior to the delivery of and payment for the Obligations, none of the information or
documents submitted as a part of the application to the Insurer shall be determined to contain
any untrue or misleading statement of a material fact or fail to state a material fact required to
be stated therein or necessary in order to make the statements contained therein not misleading.
MBIA
8. No material adverse change affecting any security for the Obligations shall have
occurred prior to the delivery of and payment for the Obligations.
9. The Insurer's "Payments Under the Policy /Other Required Provisions" (see
attached) shall be included in the authorizing document.
10. The Applicant agrees not to use the Insurer's name in any public document
including, without limitation, a press release or presentation, announcement or forum without the
Insurer's prior consent. In the event that the Applicant is advised by counsel that it has a legal
obligation to disclose the Insurer's name in any press release, public announcement or other
public document, the Applicant shall provide the Insurer with at least three (3) business days'
prior written notice of its intent to use the Insurer's name together with a copy of the proposed
use of the Insurer's name and of any description of a transaction with the Insurer and shall obtain
the Insurer's prior consent as to the form and substance of the proposed use of the Insurer's name
and any such description.
11. This Commitment may be signed in counterpart by the parties hereto.
12. Compliance with the Insurer's General Document Provisions (see attached).
13. Compliance with the Insurer's List of Permissible Investments for Indentured'Funds (see
attached).
14. Compliance with the Insurer's General Document Provisions for Surety Bonds & LOC in
place of DSRFS (see attached).
Dated this 18th day of April, 2005.
MBIA I s , e Corpo ti n
By 1 y
Assistant Secretary
LITTLE ROCK WASTEWATER UTILITY
By:
Title:
Mau
GENERAL DOCUMENT PROVISIONS
A. Notice to the Insurer The basic legal documents must provide that any notices required to be
given by any party should also be given to the Insurer, Attn: Insured Portfolio Management.
B. Amendments. In the basic legal document, there are usually two methods of amendment. The
first, which typically does not require the consent of the bondholders, is for amendments which
will cure ambiguities, correct formal defects or add to the security of the financing. The
second, in which bondholder consent is a prerequisite, covers the more substantive types of
amendments. For all financings, the Insurer must be given notice of any amendments that are
of the first type and the Insurer's consent must be required for all amendments of the second
type. All documents must contain a provision which requires copies of any amendments to
such documents which are consented to by the Insurer to be sent to Standard & Pooes.
C. Supplemental Legal Document. If the basic legal document provides for a supplemental legal
document to be issued for reasons other than (l) a refunding to obtain savings; or (2) the
issuance of additional bonds pursuant to an additional bonds test, there must be a requirement
that the Insurer's consent also be obtained prior to the issuance of any additional bonds and /or
execution of such supplemental legal document.
D. Events of Default and Remedies. All documents normally contain provisions which define the
events of default and which prescribe the remedies that may be exercised upon the occurrence
of an event of default. At a minimum, events of default will be defined as follows: '
I. the issuer /obligor fails to pay principal when due;
2. the issuer /obligor fails to pay interest when due;
3. the issuer /obligor fails to observe any other covenant or condition of the document and
such failure continues for 30 days and
4. the issuer /obligor declares bankruptcy.
The Insurer, acting alone, shall have the right to direct all remedies in the event of a default. The
Insurer shall be recognized as the registered owner of each bond which it insures for the purposes of
exercising all rights and privileges available to bondholders. For bonds which it insures, the Insurer
shall have the right to institute any suit, action, or proceeding at law or in equity under the same terms
as a bondholder in accordance with applicable provisions of the governing documents. Other than the
usual redemption provisions, any acceleration of principal payments must be subject to the Insurer's
prior written consent.
E. Defeasance requires the deposit of
Cash
U.S. Treasury Certificates, Notes and Bonds (including State and Local Government
Series -- " SLGs ")
Direct obligations of the Treasury which have been stripped by the Treasury itself,
CATS, TIGRS and similar securities
4. Resolution Funding Corp. ( REFCORP) Only the interest component of REFCORP strips
which have been stripped by request to the Federal Reserve Bank of New York in book
entry form are acceptable.
5. Pre - refunded municipal bonds rated "Aaa" by Moody's and "AAA" by S &P. If however,
the issue is only rated by S &P (i.e., there is no Moody's rating), then the pre- refunded
C
bonds must have been pre- refunded with cash, direct U.S. or U.S. guaranteed obligations,
or AAA rated pre- refunded municipals to satisfy this condition.
6. Obligations issued by the following agencies which are backed by the full faith and credit
ofthe U.S.
a. U.S. Export-Import Bank (Eximbank)
Direct obligations or fully guaranteed certificates of beneficial ownership
b. Farmers Home Administration (FmHA)
Certificates of beneficial ownership
c. Federal Financing Bank
d. General Services Administration
Participation certificates
e. U.S. Maritime Administration
Guaranteed Title XI financing
f. U.S. Department of Housing and Urban Development (HUD)
Project Notes
Local Authority Bonds
New Communities Debentures - U.S. government guaranteed debentures
U.S. Public Housing Notes and Bonds - U.S. government guaranteed public housing
notes and bonds
The Insurer shall be provided with an opinion of counsel acceptable to the Insurer that the Obligations
have been legally defeased and that the escrow agreement establishing such defeasance operates to
legally defease the Obligations within the meaning of the Indenture and the Supplemental Indenture
relating to the Obligations. In addition, the Insurer will be entitled to receive (i) 15 business days
notice of any advance refunding of the Obligations and (ii) an accountant's report with respect to the
sufficiency of the amounts deposited in escrow to defease the Obligations.
F. Agents:
1. In transactions where there is an agent/enhancer (other than the Insurer), the trustee,
tender agent (if any), and paying agent (if any) must be commercial banks with trust
powers.
2. The remarketing agent must have trust powers if they are responsible for holding moneys
or receiving bonds. As an alternative, the documents may provide that if the remarketing
agent is removed, resigns or is unable to perform its duties, the trustee must assume the
responsibilities of remarketing agent until a substitute acceptable to the Insurer is
appointed.
A481A
LIST OF PERMISSIBLE INVESTMENTS FOR INDENTURED FUNDS
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 TIGRS) 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 (Eximbank)
Direct obligations or fully guaranteed certificates of beneficial ownership
2. Farmers Home Administration (FmHA)
Certificates of beneficial ownership
3. Federal Financing Bank
4. Federal Housing Administration Debentures (FHA)
5. General Services Administration
Participation certificates
6. Government National Mortgage Association (GNMA or "Ginnie Mae ")
GNMA - guaranteed mortgage - backed bonds
GNMA - guaranteed pass- through obligations
(not acceptable for certain cash -flow sensitive issues)
7. U.S. Maritime Administration
Guaranteed Title XI financing
8. U.S. Department of Housing and nd Urban Development (HUD)
Project Notes
Local Authority Bonds
New Communities Debentures - U.S. government guaranteed debentures
U.S. Public Housing Notes and Bonds - 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 (FHLMC or "Freddie Mac ")
Participation Certificates
Senior debt obligations
3. Federal National Mortgage Association (FNMA or "Fannie Mae ")
Mortgage- backed securities and senior debt obligations
4. Student Loan Marketing Association (SLMA or "Sallie Mae ")
Senior debt obligations
/VIBIA
5. Resolution Funding Corp. (REFCORP) obligations
6. Farm Credit System
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;
AAA -m; or AA -m and if rated by Moody's rated Aaa, Aal or Aa2.
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 which are fully
insured by FDIC, including BIF and SAT.
G. Investment Agreements, including GIC's, Forward Purchase Agreements and Reserve Fund Put
Agreements acceptable to MBIA (Investment Agreement criteria is available upon request).
H. Commercial paper rated, at the time of purchase, "Prime - 1" by Moody's and "A -1" or better by
S &P.
I. Bonds or notes issued by any state or municipality which are 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 which has an
unsecured, uninsured and unguaranteed obligation rating of "Prime - 1" or "A3" or better by
Moody's and "A -1" or "A" or better by S &P.
K. Repurchase Agreements for 30 days or less must follow the following criteria. Repurchase
Agreements which exceed 30 days must be acceptable to MBIA (criteria available upon request)
Repurchase agreements provide 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.
1. _Reaos must be between the municipal entity and a dealer bank or securities firm
a. Primary dealers on the Federal Reserve reporting dealer list which are rated A or better by
Standard & Poor's Corporation and Moody's Investor Services, or
b. Banks rated "A" or above by Standard & Poor's Corporation and Moody's Investor Services.
r:1 =]_K�
2. The written repo contract must include the following:
a. Securities which are acceptable for transfer are:
(1)Direct U.S. governments, or
(2) Federal agencies backed by the full faith and credit of the U.S. government (and FNMA
& FHLMC)
b. The term of the repo may be 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 /simultaneous with payment (perfection by possession of certificated
securities).
d. Valuation of Collateral
(1) The securities must be valued weekly, marked -to- market at current market price plus ,
accrued interest
(a) The value of collateral must be equal to 104% of the amount of cash transferred by
the municipal entity to the dealer bank or security 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. Legal minion which must be delivered to the municipal entity:
a. Repo meets guidelines under state law for legal investment of public funds.
Additional Notes
(i) There is no list of permitted investments for non - indentured funds. Your own credit
judgment and the relevant circumstances (e.g., amount of investment and timing of
investment) should dictate what is permissible.
(ii) Any state administered pool investment fund in which the issuer is statutorily permitted
or required to invest will be deemed a permitted investment.
(iii) DSRF investments should be valued at fair market value and marked to market at least
once per year. DSRF investments may not have maturities extending beyond 5 years,
except for Investment Agreements approved by the Insurer.
C �
GENERAL DOCUMENT PROVISIONS FOR SURETY BONDS AND LOCS IN PLACE OF
DSRFS
A If the documents provide for the replacement of an existing funded DSRF in the future with either
a surety bond or a letter of credit or provide for the use of a surety bond or letter of credit to fund
the DSRF on parity issues, then a provision should be added to the documents that no such surety
bond or letter of credit may be used without the written consent of the Insurer both as to the
provider of such security and to its structure.
B As an alternative to I and in all cases where a surety bond or letter of credit is replacing a DSRF
in an Insurer- insured issue, the following requirements apply:
1. The surety bond must be from an insurance company that is rated in the highest rating
category by Standard & Poor's and Moody's, or the letter of credit must be from a bank
approved by the Insurer.
2. The Insurer reserves the right to periodically review the LOC bank and if found
unacceptable, require that:
a. another LOC must be found within 45 days, or
b. the issuer must draw upon the LOC to fund the DSR with cash, or
c. the issuer must fund the DSR with cash over an acceptable period of time (to be
negotiated on a deal -by -deal basis).
3. The surety bond or LOC must be unconditional and irrevocable. If the surety bond or
LOC can expire earlier than the final maturity of the bonds, the provisions for funding a
reserve should be examined for acceptability.
4. After the surety bond has been drawn down, any monies available to repay the surety
bond or LOC provider must first be used to reinstate the surety bond or LOC to its
original amount. Any interest or fees due to the surety or LOC provider, other than
reinstatement, must be subordinate to any amounts required to be paid for the benefit of
the bondholders.
2/11/92
A01BIA
REVISED AS OF APRIL 18, 2005
COMMITMENT TO ISSUE A
DEBT SERVICE RESERVE SURETY BOND
Application No.: 2005- 003107 -002
Sale Date: April 14, 2005
Program Type: Negotiated DP
RE: $565,888.13 Debt Service Reserve Fund for the $10,000,000 City of Little Rock,
Arkansas, Sewer Refunding and Construction Revenue Bonds, Series 2005
(the "Obligations ")
This commitment to issue a debt service reserve surety bond (the "Commitment ")
constitutes an agreement between LITTLE ROCK WASTEWATER UTILITY (the
"Applicant "), and MBIA Insurance Corporation (the "Insurer "), a stock insurance company
incorporated under the laws of the State of New York.
Based on an approved application dated April 5, 2005, the Insurer agrees, upon
satisfaction of the conditions herein, to issue on the earlier of (i) 120 days of said approval date
or (ii) on the date of delivery of and payment for the Obligations, a debt service reserve surety
bond (the "Surety Bond "), for the Obligations, guaranteeing the payment to the issuer of up to
$565,888.13 on the Obligations. The issuance of the Surety Bond shall be subject to the
following terms and conditions:
1. Payment by the Applicant, or by the Trustee on behalf of the Applicant, on the date
of delivery of and payment for the Obligations, of a nonrefundable premium in the amount of
$14,100 [2.5% (premium rate) of $565,888.13 (Total Surety Bond Amount), premium rounded
to the nearest hundred]. The premium set out in this paragraph shall be the total premium
required to be paid on the Policy issued pursuant to this Commitment.
2. The Obligations shall have received the unqualified opinion of bond counsel with
respect to the tax- exempt status of interest on the Obligations.
3. There shall have been no material adverse change in the Obligations or the
Resolution, Bond Ordinance, Trust Indenture or other official document authorizing the issuance
of the Obligations or in the final official statement or other similar document, including the
financial statements included therein.
4. There shall have been no material adverse change in any information submitted to
the Insurer as a part of the Application or subsequently submitted to be a part of the Application
to the Insurer.
5. No event shall have occurred which would allow any underwriter or any other
purchaser of the Obligations not to be required to purchase the Obligations at closing.
6. Prior to the delivery of and payment for the Obligations, none of the information or
documents submitted as a part of the Application to the Insurer shall be determined to contain
any untrue or misleading statement of a material fact or fail to state a material fact required to be
stated therein or necessary in order to make the statements contained therein not misleading.
7. No material adverse change affecting any security for the Obligations shall have
occurred prior to the delivery of and payment for the Obligations.
MBIA
8. This Commitment may be signed in counterpart by the parties hereto.
9. Compliance with the Insurer's Term Sheet for Debt Service Reserve Fund Program
(see Attachment A).
Dated this 18th day of April, 2005.
MBIA In orpo ati
3
By"_'„�
Assistant Secretary
LITTLE ROCK WASTEWATER UTILITY
By:
Title:
A01B A
(Attachment A)
TERM SHEET FOR DEBT SERVICE RESERVE FUND PROGRAM
Introduction
The Insurer can, under certain circumstances, issue a debt service reserve fund surety bond
(the "Surety Bond "), to be used as a replacement for a cash funded reserve, in any amount up to
the full amount of the debt service reserve fund requirement.
The Insurer requires that the issuer and/or the underlying obligor of the bonds enter into a
Financial Guaranty Agreement with the Insurer providing for, among other things, the
reimbursement to the Insurer of amounts drawn under the Surety Bond. A sample draft of such
an agreement is attached.
The Insurer will undertake its standard credit analysis of the issuer and/or obligor which
may result in requests for modifications of the structure or certain provisions of the bond
documents. These changes would be in addition to the specific changes required in all
financings where a Surety Bond will be issued (see Required Terms below).
The Surety Bond may be structured to provide debt service reserve fund replacement for the
current issue of bonds and any other debt issued on a parity therewith. However, in all cases, the
Surety Bond will expire on the final maturity date of the current issue.
The program criteria are subject to change by the Insurer.
General Terms
Provision should be made in the bond documents for the creation of a debt service reserve
fund and there should be a requirement to maintain that fund at a certain level. It should also be
provided that this requirement may be satisfied by cash or a qualified surety bond or a
combination of these two (Note: A "qualified surety bond" means a surety bond issued by an
insurance company rated in the highest rating category by Standard & Poor's and Moody's and,
if rated by A.M. Best & Company must also be rated in the highest rating category by A.M.
Best & Company).
In those instances where the issuance of parity debt will cause the debt service reserve fund
requirement to increase, the Insurer requires that at the time of issuance of such parity debt,
either cash or a qualified surety bond be provided so that the increased requirement will be
satisfied.
In any event where the debt service reserve fund contains both an the Insurer Surety Bond
and cash, the Insurer requires that the cash be drawn down completely before any demand is
made on the Surety Bond. In any event where the debt service reserve fund contains a surety
bond from another entity and an INSURER Surety Bond, the documents should provide for a
pro -rata draw on each of the surety bonds.
With regard to replenishment, any available monies, as defined in the Indenture or
Resolution, should be used first to reimburse the Insurer, thereby reinstating the Surety Bond,
and second to replenish the cash in the debt service reserve fund.
The rate covenant should be expanded so that, in addition to all other coverage requirements,
there are sufficient monies available to pay all amounts owed to the Insurer under the terms of
the Financial Guaranty Agreement.
MBIA
If the documents provide for the issuance of additional bonds that do not share a common
reserve fund with the current issue, the Insurer can issue a surety bond that is, by its terms,
available only as a reserve for the current issue. In such cases, the Insurer would require a
covenant that any revenues available for debt service must be distributed between the current
issue and any additional bonds on a pro rata basis without regard to the existence of a funded
debt service reserve or a surety bond.
The bond documents should require the Trustee to deliver a Demand For Payment (see
attached form) at least three days prior to the date on which funds are required.
Required Terms
With respect to any security interest in collateral granted to the bondholders, the Insurer
should be granted that same interest subject only to that of the bondholders. This would apply to
existing security, if any, as well as any to be granted in the future.
The Insurer should receive an opinion from counsel to the issuer /obligor that the Financial
Guaranty Agreement is a legal, valid and binding obligation of the issuer /obligor and is
enforceable against the issuer /obligor in accordance with its terms.
In general terms, the "flow of funds" would be structured as follows:
All gross revenues should be paid in the following order with the priority indicated:
(1) expenses of operation and maintenance;
(2) debt service on the bonds;
(3) reimbursement of amounts advanced by the Insurer under the Surety Bond;
(4) reimbursement of cash amounts, if any, drawn from the reserve fund;
(5) replenishment of Renewal and Replacement Fund;
(6) payment to the Insurer of interest on amounts advanced under the Surety
Bond;
(7) all other lawful uses, including the debt service payment on any subordinate
bonds.
Provision must be made for the Insurer to be paid all amounts owed to it under the terms of
the Financial Guaranty Agreement or any other documents before the bond documents may be
terminated.
It will be the responsibility of the trustee /paying agent to maintain adequate records, verified
with the Insurer, as to the amount available to be drawn at any given time under the Surety Bond
and as to the amounts paid and owing to the Insurer under the terms of the Financial Guaranty
Agreement.
There may be no optional redemption of bonds or distribution of funds to the issuer and/or
the underlying obligor unless all amounts owed to the Insurer under the terms of the Financial
Guaranty Agreement or any other documents have been paid in full.
8/12/93
14
STANDARD FORM FOR MBIA DISCLOSURE
[GENERAL AND S-11
[The section entitled "The MBIA Insurance Corporation Insurance Policy" is for use in public finance
transactions]
[The MBIA Insurance Corporation Insurance Policy
The following information has been furnished by MBIA Insurance Corporation ( "MBIA ") for use
in this Official Statement. Reference is made to Appendix for a specimen of MBIA's policy.
The MBIA Policy unconditionally and irrevocably guarantees the full and complete payment
required to be made by or on behalf of the Company to the Paying Agent or its successor of an amount
equal to (i) the principal of (either at the stated maturity or by an advancement of maturity pursuant to a
mandatory sinking fund payment) and interest on, the [Bonds /Securities] as such payments shall become
due but shall not be so paid (except that in the event of any acceleration of the due date of such principal
by reason of mandatory or optional redemption or acceleration resulting from default or otherwise, other
than any advancement of maturity pursuant to a mandatory sinking fund payment, the payments
guaranteed by the MBIA Policy shall be made in such amounts and at such times as such payments of
principal would have been due had there not been any such acceleration, unless MBIA elects in its sole
discretion, to pay in whole or in part any principal due by reason of such acceleration); and (ii) the
reimbursement of any such payment which is subsequently recovered from any Owner of the
[Bonds /Securities] pursuant to a final judgment by a court of competent jurisdiction that such payment
constitutes an avoidable preference to such Owner within the meaning of any applicable bankruptcy law
(a "Preference').
MBIA's policy does not insure against loss of any prepayment premium which may at any time
be payable with respect to any [Bonds /Securities]. MBIA's policy does not, under any circumstance,
insure against loss relating to: (i) optional or mandatory redemptions (other than mandatory sinking fund
redemptions); (ii) any payments to be made on an accelerated basis; (iii) payments of the purchase price
of [Bonds /Securities] upon tender by an owner thereof; or (iv) any Preference relating to (i) through (iii)
above. MBIA's policy also does not insure against nonpayment of principal of or interest on the
[Bonds /Securities] resulting from the insolvency, negligence or any other act or omission of the Paying
Agent or any other paying agent for the [Bonds/Securities].
Upon receipt of telephonic or telegraphic notice, such notice subsequently confirmed in writing
by registered or certified mail, or upon receipt of written notice by registered or certified mail, by MBIA
from the Paying Agent or any owner of a [Bond/Security] the payment of an insured amount for which is
then due, that such required payment has not been made, MBIA on the due date of such payment or
within one business day after receipt of notice of such nonpayment, whichever is later, will make a
deposit of funds, in an account with U.S. Bank Trust National Association, in New York, New York, or
its successor, sufficient for the payment of any such insured amounts which are then due. Upon
presentment and surrender of such [Bonds /Securities] or presentment of such other proof of ownership of
the [Bonds /Securities], together with any appropriate instruments of assignment to evidence the
assignment of the insured amounts due on the (Bonds /Securities] as are paid by MBIA, and appropriate
instruments to effect the appointment of MBIA as agent for such owners of the [Bonds /Securities] in any
legal proceeding related to payment of insured amounts on the [Bonds /Securities], such instruments being
in a form satisfactory to U.S. Bank Trust National Association, U.S. Bank Trust National Association
shall disburse to such owners or the Paying Agent payment of the insured amounts due on such
[Bonds/Securities], less any amount held by the Paying Agent for the payment of such insured amounts
and legally available therefor.]
MBIA
MBIA Insurance Corporation ( "MBW') is the principal operating subsidiary of MBIA Inc., a
New York Stock Exchange listed company (the "Company"). The Company is not obligated to pay the
debts of or claims against MBIA. MBIA is domiciled in the State of New York and licensed to do
business in and subject to regulation under the laws of all 50 states, the District of Columbia, the
Commonwealth of Puerto Rico, the Commonwealth of the Northern Mariana Islands, the Virgin Islands
of the United States and the Territory of Guam. MBIA has three branches, one in the Republic of France,
one in the Republic of Singapore and one in the Kingdom of Spain. New York has laws prescribing
minimum capital requirements, limiting classes and concentrations of investments and requiring the
approval of policy rates and forms. State laws also regulate the amount of both the aggregate and
individual risks that may be insured, the payment of dividends by MBIA, changes in control and
transactions among affiliates. Additionally, MBIA is required to maintain contingency reserves on its
liabilities in certain amounts and for certain periods of time.
MBIA does not accept any responsibility for the accuracy or completeness of this
[Prospectus/Private Placement Memorandum/Official Statement] or any information or disclosure
contained herein, or omitted herefrom, other than with respect to the accuracy of the information
regarding the policy and MBIA set forth under the heading [" "]. Additionally, MBIA
makes no representation regarding the [Bonds /Securities] or the advisability of investing in the
[Bonds/Securities].
The Financial Guarantee Insurance Policies are not covered by the Property/Casualty Insurance
Security Fund specified in Article 76 of the New York Insurance Law.
MBIA Information
The following document filed by the Company with the Securities and Exchange Commission
(the "SEC ") is incorporated herein by reference:
(1) The Company's Annual Report on Form 10 -K for the year ended December 31, 2004.
Any documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the
Exchange Act of 1934, as amended, after the date of the Company's most recent Quarterly Report on
form 10 -Q, and prior to the tern-iination of the offering of the [Bonds /Securities] offered hereby shall be
deemed to be incorporated by reference in this [Prospectus/Private Placement Memorandum/Official
Statement] and to be a part hereof. Any statement contained in a document incorporated or deemed to be
incorporated by reference herein, or contained in this [Prospectus/Private Placement
Memorandum/Official Statement], shall be deemed to be modified or superseded for purposes of this
[Prospectus/Private Placement Memorandum/Official Statement] to the extent that a statement contained
herein or in any other subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part of this [Prospectus/Private
Placement Memorandum/Official Statement].
The Company files annual, quarterly and special reports, information statements and other
information with the SEC under File No. 1 -9583. Copies of the SEC filings (including (1) the Company's
Annual Report on Form 10 -K for the year ended December 31, 2004, and (2) the Company's Quarterly
Reports on Form 10 -Q for the quarters ended March 31, 2004, June 30, 2004 and September 30, 2004)
are available (i) over the Internet at the SEC's web site at htip: / / /www.sec.goy; (ii) at the SEC's public
reference room in Washington D.C.; (iii) over the Internet at the Company's web site at
http: / /www.mbia.com; and (iv) at no cost, upon request to MBIA Insurance Corporation, I Q King
Street, Armonk, New York 10504. The telephone number of MBIA is (914) 2734545.
As of December 31, 2003, MBIA had admitted assets of $9.9 billion (audited), total liabilities of
$6.2 billion (audited), and total capital and surplus of $3.7 billion (audited) determined in accordance with
statutory accounting practices prescribed or permitted by insurance regulatory authorities. As of
December 31, 2004 MBIA had admitted assets of $10.3 billion (unaudited), total liabilities of $6.9 billion
(unaudited), and total capital and surplus of $3.3 billion (unaudited) determined in accordance with
statutory accounting practices prescribed or permitted by insurance regulatory authorities.
Financial Strength Ratings of MBIA
Moody's Investors Service, Inc. rates the financial strength of MBIA "Aaa."
Standard & Poor's, a division of The McGraw -Hill Companies, Inc. rates the financial strength of
MBIA "AAA."
Fitch Ratings rates the financial strength of MBIA "AAA."
Each rating of MBIA should be evaluated independently. The ratings reflect the respective rating
agency's current assessment of the creditworthiness of MBIA and its ability to pay claims op its policies
of insurance. Any further explanation as to the significance of the above ratings may be obtained only
from the applicable rating agency.
The above ratings are not recommendations to buy, sell or hold the [Bonds /Securities], and such
ratings may be subject to revision or withdrawal at any time by the rating agencies. Any downward
revision or withdrawal of any of the above ratings may have an adverse effect on the market price of the
[Bonds/Securities]. MBIA does not guaranty the market price of the [Bonds/Securities] nor does it
guaranty that the ratings on the [Bonds/Securities] will not be revised or withdrawn.
F�7
DEBT SERVICE RESERVE FUND SURETY BOND
Application has been made to the MBIA Insurance Corporation (the "Insurer ") for a commitment to issue a surety
bond (the "Debt Service Reserve Fund Surety Bond "). The Debt Service Reserve Fund Surety Bond will provide that
upon notice from the Paying Agent to the Insurer to the effect that insufficient amounts are on deposit in the Debt Service
Fund to pay the principal of (at maturity or pursuant to mandatory redemption requirements) and interest on the 2000
Obligations, the Insurer will promptly deposit with the Paying Agent an amount sufficient to pay the principal of and
interest on the 2000 Obligations or the available amount of the Debt Service Reserve Fund Surety Bond, whichever is
less. Upon the later of: (i) three (3) days after receipt by the Insurer of a Demand for Payment in the form attached to the
Debt Service Reserve Fund Surety Bond, duly executed by the Paying Agent; or, (ii) the payment date of the Obligations
as specified in the Demand for Payment presented by the Paying Agent to the Insurer, the Insurer will make a deposit of
funds in an account with U.S. Bank Trust National Association, in New York, New York, or its successor, sufficient for
the payment to the Paying Agent, of amounts which are then due to the Paying Agent (as specified in the Demand for
Payment) subject to the Surety Bond Coverage.
The available amount of the Debt Service Reserve Fund Surety Bond is the initial face amount of the Debt
Service Reserve Fund Surety Bond less the amount of any previous deposits by the Insurer with the Paying Agent which
have not been reimbursed by the City. The 01y and the Insurer have entered into a Financial Guaranty Agreement dated [
] (the "Agreement "). Pursuant to the Agreement, the City is required to reimburse the Insurer, within one year of any
deposit, the amount of such deposit made by the Insurer with the Paying Agent under the Debt Service Reserve Fund
Surety Bond. Such reimbursement shall be made only after all required deposits to the Operation and Maintenance Fund
and the Debt Service Fund have been made.
Under the terms of the Agreement, the Paying Agent is required to reimburse the Insurer, with interest, until the
face amount of the Debt Service Reserve Fund Surety Bond is reinstated before any deposit is made to the General Fund.
No optional redemption of Obligations may be made until the Insurer's Debt Service Reserve Fund Surety Bond is
reinstated. The Debt Service Reserve Fund Surety Bond will be held by the Paying Agent in the Debt Service Reserve
Fund and is provided as an alternative to the Ci t depositing funds equal to the Debt Service Requirement for outstanding
Obligations. The Debt Service Reserve Fund Surety Bond will be issued in the face amount equal to Maximum Annual
Debt Service for the Obligations and the premium therefor will be fully paid by the OLy at the time of delivery of the
Obligations.
FINANCIAL GUARANTY INSURANCE POLICY
MBIA Insurance Corporation
Armonk, New York 10504
Policy No. [NUMBER]
MBIA Insurance Corporation (the "Insurer"), in consideration of the payment of the premium and subject to the terns of this policy, hereby
unconditionally and 'irrevocably guarantees to any owner, as hereinafter defined, of the following described obligations, the full and complete payment
required to be made by or on behalf of the Issuer to [PAYING AGENTITRUSTEE] or its successor (the'Taying Agent") of an amount equal to (i) the
principal of (either at the stated maturity or by any advancement of maturity pursuant to a mandatory sinking fund payment) and interest on, the
Obligations (as that term is defined below) as such payments shall become due but shall not be so paid (except that in the event of any acceleration of the
due date of such principal by reason of mandatory or optional redemption or acceleration resulting from default or otherwise, other than any advaricement
of maturity pursuant to a mandatory sinking fund payment, the payments guaranteed hereby shall be made in such amounts and at such times as such
payments of principal would have been due bad there not been any such acceleration, unless the Insurer elects, in its sole discretion, ion, to pay in whole or in
part any principal due by reason of such acceleration); and (ii) the reimbursement of any such payment which is subsequently recovered from any owner
pursuant to a final judgment by a court of competent jurisdiction that such payment constitutes an avoidable prefer+errce to such owner within the meaning
of any applicable bankruptcy law. The amounts referred to in clauses (i) and (ii) of the preceding sentence shall be referred to herein collectively as the
"Insured Amounts." "Obligations" shall mean:
[PAR]
[LEGAL NAME OF ISSUE]
Upon receipt of telephonic or telegraphic notice, such notice subsequently confirmed in writing by registered or certified mail, or upon receipt of written
notice by registered or certified mail, by the Insurer from the Paying Agent or any owner of an Obligation the payment of an Insured Amount for which is
then due, that such required payment has not been made, the Insurer on the due date of such payment or within one business day after receipt of notice of
such nonpayment, whichever is later, will make a deposit of fiords, in an account with U.S. Bank Trust National Association, in New York, New York,
or its successor, sufficient for the payment of any such Insured Amounts which are then due. Upon presentment and surrender of such Obligations or
presentment of such other proof of ownership of the Obligations, together with any appropriate instruments of assignment to evidence the assignment of
the Insured Amounts due on the Obligations as are paid by the Insurer, and appropriate instruments to effect the appointment of the Insurer as agent for
such owners of the Obligations in any legal proceeding related to payment of Insured Amounts on the Obligations, such instruments being in a form
satisfactory to U.S. Bank Trust National Association, U.S. Bank Trust National Association shall disburse to such owners, or the Paying Agent payment
of the Insured Amounts due on such Obligations, less any amount held by the Paying Agent for the payment of such Insured Amounts and legally
available therefor. This policy does not insure against loss of any prepayment premium which may at any time be payable with respect to any
Obligation.
As used herein, the term "owner" shall mean the registered owner of any Obligation as indicated in the books maintained by the Paying Agent, the Issuer,
or any designee of the Issuer for such purpose. The term owner shall not include the Issuer or any party whose agreement with the Issuer constitutes the
underlying security for the Obligations.
Any service of process on the Insurer maybe made to the Insurer at its of m located at 113 King Street, Armonk, New York 10504 and such service of
process shall be valid and binding.
This policy is non - cancellable for any reason The premium on this policy is not refundable for any reason including the payment prior to maturity, of the
Obligations.
IN WITNESS WHEREOF, the Insurer has caused this policy to be executed in facsimile on its behalf by its duly authorized officers, this [DAY] day of
[MONTH, YEAR].
MBIA Insurance Corporation
President b
I�
Assistant Secretary
SMR 7
010
STATEMENT OF INSURANCE
MBIA Insurance Corporation (the "Insurer ") has issued a policy containing the following provisions, such policy
being on file at [INSERT NAME OF TRUSTEE OR PAYING AGENT INCLUDING CITY STATE].
The Insurer, in consideration of the payment of the premium and subject to the terms of this policy, hereby unconditionally
and irrevocably guarantees to any owner, as hereinafter defined, of the following described obligations, the full and complete payment
required to be made by or on behalf of the Issuer to [INSERT NAME OF TRUSTEE OR PAYING AGENTI or its successor (the
"Paying Agent ") of an amount equal to (i) the principal of (either at the stated maturity or by any advancement of maturity pursuant to
a mandatory sinking fund payment) and interest on, the Obligations (as that term is defined below) as such payments shall become due
but shall not be so paid (except that in the event of any acceleration of the due date of such principal by reason of mandatory or
optional redemption or acceleration resulting from default or otherwise, other than any advancement of maturity pursuant to a
mandatory sinking fund payment, the payments guaranteed hereby shall be made in such amounts and at such times as such payments
of principal would have been due had there not been any such acceleration, unless the Insurer elects in its sole discretion, to pay in
whole or in part any principal due by reason of such acceleration); and (ii) the reimbursement of any such payment which is
subsequently recovered from any owner pursuant to a final judgment by a court of competent jurisdiction that such payment
constitutes an avoidable preference to such owner within the meaning of any applicable bankruptcy law. The amounts referred to in
clauses (i) and (ii) of the preceding sentence shall be referred to herein collectively as the "Insured Amounts." "Obligations" shall
mean: [INSERT LEGAL TITLE OF BONDS. CENTERED AS FOLLOWS :1
[$ PAR AMOJM
[ISSUERI
[DESCRIPTION OF BONDSI
Upon receipt of telephonic or telegraphic notice, such notice subsequently confirmed in writing by registered or
certified mail, or upon receipt of written notice by registered or certified mail, by the Insurer from the Paying Agent or any
owner of an Obligation the payment of an Insured Amount for which is then due, that such required payment has not been
made, the Insurer on the due date of such payment or within one business day after receipt of notice of such nonpayment,
whichever is later, will make a deposit of funds, in an account with U.S. Bank Trust National Association, in New York, New
York, or its successor, sufficient for the payment of any such Insured Amounts which are then due. Upon presentment and
surrender of such Obligations or presentment of such other proof of ownership of the Obligations, together with any
appropriate instruments of assignment to evidence the assignment of the Insured Amounts due on the Obligations as are paid
by the Insurer, and appropriate instruments to effect the appointment of the Insurer as agent for such owners of the Obligations
in any legal proceeding related to payment of Insured Amounts on the Obligations, such instruments being in a form
satisfactory to U.S. Bank Trust National Association, U.S. Bank Trust National Association shall disburse to such owners or
the Paying Agent payment of the Insured Amounts due on such Obligations, less any amount held by the Paying Agent for the
payment of such Insured Amounts and legally available therefor. This policy does not insure against loss of any prepayment
premium which may at any time be payable with respect to any Obligation.
As used herein, the term 'owner" shall mean the registered owner of any Obligation as indicated in the books
maintained by the Paying Agent, the Issuer, or any designee of the Issuer for such purpose. The term owner shall not include
the Issuer or any party whose agreement with the Issuer constitutes the underlying security for the Obligations.
Any service of process on the Insurer may be made to the Insurer at its offices located at 113 King Street, Armonk,
New York 10504 and such service of process shall be valid and binding.
This policy is non - cancellable for any reason. The premium on this policy is not refundable for any reason
including the payment prior to maturity of the Obligations.
MBIA INSURANCE CORPORATION
STD -R -2
NAME OF ISSUER
SERIES DESCRIPTION
CERTIFICATE RE: MBIA INSURANCE POLICY
SCHEDULE `A'
This Certificate of MBIA Insurance Policy (the "Certificate ") is furnished by the City of ,
as issuer (the "Issuer ") of its $ General Obligation Bonds, dated (the "Bonds "), and
, as paying agent under the Bonds (the "Paying Agent "). This Certificate is furnished for
use by MBIA Insurance Corporation ( "MBIA. ") in connection with its issuance of a municipal bond insurance
policy No. (the "Policy "), which Policy shall guarantee the payment of the principal and interest on the
Bonds when due.
The Issuer and the Paying Agent hereby certifies as follows:
1. The parties acknowledge receipt and review of MBIA's "Payments Under the Policy" provisions
with respect to the Policy, all as more particularly set forth in Schedule A attached hereto and made a part hereof.
2. The parties hereby agree, during the term of the Policy and to the best of their abilities, to abide by
the terms, obligations, and provisions required by MBIA as set forth in Schedule A hereto.
IN WITNESS WHEREOF, we have executed this Certificate as of the day of
, as Issuer
0
as Paying Agent
Director of Finance Assistant Vice President
PAYMENTS UNDER THE POLICY /OTHER REQUIRED PROVISIONS
A In the event that, on the second Business Day, and again on the Business Day, prior to the payment date on the Obligations, the Paying
Agentlfrustee has not received sufficient moneys to pay all principal of and interest on the Obligations due on the second following or following, as the case
may be, Business Day, the Paying Agent/rnustee 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.
B. If the deficiency is made up in whole or in part prior to or on the payment date, the Paying Agent/I'nrstee shall so notify the Insurer or its
designee.
C. In addition, if the Paying Agentifmstee has notice that any Bondholder has been required to disgorge payments of principal or interest
on the Obligations 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 Bondholder within the meaning of any applicable bankruptcy laws, then the Paying Agentfrrustee shall notify the
Insurer or its designee of such fact by telephone or telegraphic notice, confirmed in writing by registered or certified marl.
D. The Paying Agent/Tnistee is hereby irrevocably designated, appointed, directed and authorized to act as attorney -in -fact for Holders of
the Obligations as follows:
1. If and to the extent there is a deficiency in amounts required to pay interest on the Obligations, the Paying Agent/Tmstee shall
(a) execute and deliver to U.S. Bank Tnust National Association, or its successors under the Policy (the "Insurance Paying Agent/Trusted), in form
satisfactory to the Insurance Paying Ageri frustee, an instrument appointing the Insurer as agent for such Holders 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, (b) receive as designee of the respective Holders (and not as Paying Agent/ Trustee) in accordance with the tenor of the Policy payment
from the Insurance Paying Agentrrmstee with respect to the claims for interest so assigned, and (c) disburse the same to such respective Holders;
and
2. If and to the extent of a deficiency in amounts required to pay principal of the Obligations, the Paying Agent/rrustee shall (a)
execute and deliver to the Insurance Paying Agent(rmstee in form satisfactory to the Insurance Paying Agent/Trustee an instrument appointing the
Insurer as agent for such Holder in any legal proceeding relating to the payment of such principal and an assignment to the Insurer of any of the
Obligation surrendered to the Insurance Paying Agenu Trustee of so much of the principal amount thereof as has not previously been paid or for
which moneys are not held by the Paying Agent/rnrst ee and available for such payment (but such assignment shall be delivered only if payment
from the Insurance Paying AgentTnustee is received), (b) receive as designee of the respective Holders (and not as Paying Ageri fnustee) in
accordance with the tenor of the Policy payment therefor from the Insurance Paying Ageri Trustee, and (c) disburse the same to such Holders.
E Payments with respect to claims for interest on and principal of Obligations disbursed by the Paying Agent /fmstee from proceeds of the
Policy shall not be considered to discharge the obligation of the Issuer with respect to such Obligations, and the Insurer shall become the owner of such
unpaid Obligation and claims for the interest in accordance with the tenor of the assignment made to it under the provisions of this subsection or otherwise.
F. Irrespective of whether any such assignment is executed and delivered, the Issuer and the Paying Agent/rnnstee hereby agree for the
benefit of the Insurer that
1. They recognize that to the extent the Insurer makes payments, dire* or indirectly (as by paying through the Paying
Agentfrnrstee), on account of principal of or interest on the Obligations, the Insurer will be subrogated to the rights of such Holders to receive the
amount of such principal and interest from the Issuer, with interest thereon as provided and solely from the sources stated in this Indenture and the
Obligations; and
2. 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 Policy, which principal and interest shall be deerned past due and not to have been paid), with
interest thereon as provided in this Indenture and the Obligation, but only from the sources and in the manner provided herein for the payment of
principal of and interest on the Obligations to Holders, and will otherwise treat the Insurer as the owner of such rights to the amount of such
principal and interest
G. In connection with the issuance of additional Obligations, the Issuer shall deliver to the Insurer a copy of the disclosure docu n=4 if any,
circulated with respect to such additional Obligations.
H. Copies of any amendments mace to the docuurnents executed in connection with the issuance of the Obligations which are consorted to
by the Insurer shall be sent to Standard & Poor's Corporation,
L The Insurer shall receive notice of the resignation or removal of the Paying Ageri ffnrstee and the appointment of a successor thereto.
J. The Insurer shall receive copies of all notices required to be delivered to Bondholders and, on an annual basis, copies of the Issuer's
audited financial statements and Annual Budget
Notices: Any notice that is required to be given to a holder of the Obligation or to the Paying Agent/Tnrstee pursuant to the Indenture shall also be
provided to the Insurer. All notices required to be given to the Insurer under the Indenture shall be in writing and shall be sent by registered or certified mail
addressed to Iv1BIA Insurance Corporation, 113 King Street, Armonk, New York 10504 Attention: Stuveillance.
K The Issuer /Obligor agrees to reimburse the Insurer immediately and unconditionally upon demand, to the extent permitted by law, for all
reasonable expenses, including attorneys' fees and expenses, incurred by the Insurer in connection with (i) the enforcement by the Insurer of the Issuer's
/Obligor's obligations, or the preservation or defense of any rights of the Insurer, under this Resolution4ndentutre and any other document executed in
connection with the issuance of the Obligations, and (n) any consent, amendment, waiver or other action with respect to the Resolutior&dent re or any
related docurnent, whether or not granted or approved, together with interest on all such expenses from and including the date incurred to the date ofpayment
at CitbarWs 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 flee
in connection with its review of any such consent, amendment or waiver, whether or not granted or approved ,
L The Is suer /Obligor agrees not to use the Insir&s name in any public document including, without limitation, a press release or
presentation, announcement or form without the Insurer's prior consent; provided however, such probibition on the use of the Insurer's name shall not relate
to the use of the Insurer's standard approved form of disclosure in public documents issued in connection with the current Obligations to be issued in
accordance with the terms of the Commitment; and provided further such prohibition shall not apply to the use of the Insurer's name in order to comply with
public notice, public meeting or public reporting requirements-
Ni The Issuer /Obligor shall not enter into any agreement nor shall it consent to or participate in any arrangement pursuant to which Bonds
are tendered or purchased for any purpose other than the redemption and cancellation or legal defeasance of such Bonds without the prior written consent of
MBIA.
Revised 4/04
(c) any circumstances that might otherwise constitute a defense available to, or discharge of the
Issuer with respect to the Obligations, the Document or any other document executed in connection
with the issuance of the Obligations; or
(d) whether or not such obligations are contingent or matured, disputed or undisputed, liquidated
or unliquidated.
Section 2.05. Insurer's Rights. The Issuer shall repay the Insurer to the extent of payments made and
expenses incurred by the Insurer in connection with the Obligations and this Agreement. The obligation of
the Issuer to repay such amounts shall be subordinate only to the rights of the Owners to receive regularly
scheduled principal and interest on the Obligations.
Section 2.06. On -Going Information Obligations of Issuer.
(a) Ouarterl . The Issuer will provide to the Insurer within 45 days of the close of each
quarter interim financial statements covering all fund balances under the Document, a statement of
operations (income statement), balance sheet and changes in fund balances. These statements need
not be audited by an independent certified public accountant, but if any audited statements are
produced, they must be provided to the Insurer;
(b) Annual Reports. The Issuer will provide to the Insurer annual financial statements audited
by an independent certified public accountant within 90 days of the end of each fiscal year;
(c) Access to Facilities. Books and Records. The Issuer will grant the Insurer reasonable access
to the project financed by the Obligations and will make available to the Insurer, at reasonable times
and upon reasonable notice all books and records relative to the project financed by the,Obligations;
and
(d) Compliance Certificate. On an annual basis the Issuer will provide to the Insurer a certificate
confirming compliance with all covenants and obligations hereunder and under the Revenue
Agreement, the Document or any other document executed in connection with the issuance of the
Obligations.
ARTICLE III
AMENDMENTS TO DOCUMENT
So long as this Agreement is in effect, the Issuer agrees that it will not agree to amend the Document or
any other document executed in connection with the issuance of the Obligations, without the prior written
consent of the Insurer.
ARTICLE IV
EVENTS OF DEFAULT; REMEDIES
Section 4.01. Events of Default. The following events shall constitute Events of Default hereunder.
(a) The Issuer shall fail to pay to the Insurer when due any amount payable under Sections 1.03;
or
(b) The Issuer shall fail to pay to the Insurer any amount payable under Sections 1.04 and 2.01
hereof and such failure shall have continued for a period in excess of the Reimbursement Period; or
(c) Any material representation or warranty made by the Issuer under the Document or
hereunder or any statement in the application for the Surety Bond or any report, certificate, financial
statement, document or other instrument provided in connection with the Commitment, the Surety
Bond, the Obligations, or herewith shall have been materially false at the time when made; or
(d) Except as otherwise provided in this Section 4.01, the Issuer shall fail to perform any of its
other obligations under the Document, or any other document executed in connection with the
issuance of the Obligations, or hereunder, provided that such f0ure continues for more than 30 days
after receipt by the Issuer of written notice of such failure to perform; or
(e) The Issuer shall (i) voluntarily commence any proceeding or file any petition seeking relief .
under the United States Bankruptcy Code or any other Federal, state or foreign banluptcy,
insolvency or similar law, (ii) consent to the institution of; or fail to controvert in a timely and
appropriate manner, any such proceeding or the filing of any such petition, (iii) apply for or consent to
the appointment of a receiver, trustee, custodian, sequestrator or similar official for such party or for a
substantial part of its properly, (iv) file an answer admitting the material allegations of a petition filed
against it in any such proceeding, (v) make a general assignment for the benefit of creditors, (vi)
become unable, admit in writing its inability or fail generally to pay its debts as they become due or
(vii) take action for the purpose of effecting any of the foregoing; or
(f) An involuntary proceeding shall be commenced or an involuntary petition shall be filed in a
court of competent jurisdiction seeking (i) relief in respect of the Issuer, or of a substantial part of its
property, under the United States Bankruptcy Code or any other Federal, state or foreign bankruptcy,
insolvency or similar law or (ii) the appointment of a receiver, trustee, custodian, sequestrator or
similar official for the Issuer or for a substantial part of its property; and such proceeding or petition
shall continue undismissed for 60 days or an order or decree approving or ordering any of the
foregoing shall continue unstayed and in effect for 30 days.
Section 4.02. Remedies. If an Event of Default shall occur and be continuing, then the Insurer may
take whatever action at law or in equity may appear necessary or desirable to collect the amounts then due
and thereafter to become due under this Agreement or to enforce performance of any obligation of the Issuer
to the Insurer under the Document or any related instr unent, and any obligation, agreement or covenant of
the Issuer under this Agreement; provided, however, that the Insurer may not take any action to direct or
require acceleration or other early redemption of the Obligations or adversely affect the rights of the
Owners. In addition, if an Event of Default shall occur due to the failure to pay to the Insurer'the amounts
due under Section 1.03 hereof; the Insurer shall have the right to cancel the Surety Bond in accordance with
its terms. All rights and remedies of the Insurer under this Section 4.02 are cumulative and the exercise of
any one remedy does not preclude the exercise of one or more of the other available remedies.
ARTICLE V
SETTLEMENT
The Insurer shall have the exclusive right to decide and determine whether any claim, liability, suit or
judgment made or brought against the Insurer, the Issuer or any other party on the Surety Bond shall or shall
not be paid, compromised, resisted, defended, tried or appealed, and the Insurer's decision thereon, if made
in good faith, shall be final and binding upon the Insurer, the Issuer and any other party on the Surety Bond.
An itemized statement of payments made by the Insurer, certified by an officer of the Insurer, or the voucher
or vouchers for such payments, shall be prima facie evidence of the liability of the Issuer, and if the Issuer
fails to immediately reimburse the Insurer upon the receipt of such statement of payments, interest shall be
computed on such amount from the date of any payment made by the Insurer at the rate set forth in
subsection (a) of Section 2.01 hereof
ARTICLE VI
NUSCELLANEOUS
Section 6.01. Interest Computations. All computations of interest due hereunder shall be made on the
basis of the actual number of days elapsed over a year of 360 days.
Section 6.02. Exercise of Rights. No failure or delay on the part of the Insurer to exercise any right,
power or privilege under this Agreement and no course of dealing between the Insurer and the Issuer or any
other party shall operate as a waiver of any such right, power or privilege, nor shall any single or partial
exercise of any such right, power or privilege preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. The rights and remedies herein expressly provided are cumulative
and not exclusive of any rights or remedies which the Insurer would otherwise have pursuant to law or
equity. No notice to or demand on any party in any case shall entitle such party to any other or further notice
or demand in similar or other circumstances, or constitute a waiver of the right of the other party to any
other or further action in any circumstances without notice or demand.
Section 6.03. Amendment and Waiver. Any provision of this Agreement may be amended, waived,
supplemented, discharged or terminated only with the prior written consent of the Issuer and the Insurer.
The Issuer hereby agrees that upon the written request of the Paying Agent, the Insurer may make or consent
to issue any substitute for the Surety Bond to cure any ambiguity or formal defect or omission in the Surety
Bond which does not materially change the temrs of the Surety Bond nor adversely affect the rights of the
Owners, and this Agreement shall apply to such substituted surety bond. The Insurer agrees to deliver to the
Issuer and to the company or companies, if any, rating the Obligations, a copy of such substituted surety
bond
Section 6.04. Successors and Assians: Descriptive Headin es.
(a) This Agreement shall bind, and the benefits thereof shall inure to the Issuer and the Insurer
and their respective successors and assigns; provided, that the Issuer'may not transfer or assign any or
all of its rights and obligations hereunder without the prior written consent of the Insurer.
(b) The descriptive headings of the various provisions of this Agreement are inserted for
convenience of reference only and shall not be deemed to affect the meaning or construction of any
of the provisions hereof
Section 6.05. Other Sureties. If the Insurer shall procure any other surety to reinsure the Surety Bond,
this Agreement shall inure to the benefit of such other surety, its successors and assigns, so as to give to it a
direct right of action against the Issuer to enforce this Agreement, and "the Insurer," wherever used herein,
shall be deemed to include such reinsuring surety, as its respective interests may appear.
Section 6.06. Signature on Bond. The Issuer's liability shall not be affected by its failure to sign the
Surety Bond nor by any claim that other indemnity or security was to have been obtained nor by the release
of any indemnity, nor the return or exchange of any collateral that may have been obtained.
Section 6.07. Waiver. The Issuer waives any defense that this Agreement was executed subsequent
to the date of the Surety Bond, admitting and covenanting that such Surety Bond was executed pursuant to
the Issuer's request and in reliance on the Issuer's promise to execute this Agreement.
Section 6.08. Notices, Requests, Demands. Except as otherwise expressly provided herein, all
written notices, requests, demands or other communications to or upon the respective parties hereto shall be
deemed to have been given or made when actually received, or in the case of telex or telecopier notice sent
over a telex or a telecopier machine owned or operated by a party hereto, when sent, addressed as specified
below or at such other address as any of the parties may hereafter specify in writing to the others:
ffto the Issuer. [ISSUER]
[STREET ADDRESS]
[CITY, STATE ZIP]
Attention: [PERSON AT ISSUER]
If to the Paying Agent: [PAYING AGENT]
Attention: Corporate Trust Officer
If to the Insurer: MBIA Insurance Corporation
113 King Street
Armonk, New York 10504
Attention: Insured Portfolio
Management Group
Section 6.09. Survival of Representations and Warranties. All representations, warranties and
obligations contained herein shall survive the execution and delivery of this Agreement and the Surety
Bond
Section 6.10. Governing Law. This Agreement and the rights and obligations of the parties under this
Agreement shall be governed by and construed and interpreted in accordance with the laws of the State.
Section 6.11. Counterparts. This Agreement may be executed in any number of copies and by the
different parties hereto on the same or separate counterparts, each of which shall be deemed to be an original
instrument Complete counterparts of this Agreement shall be lodged with the Issuer and the Insurer.
Section 6.12. Severability In the event any provision of this Agreement shall be held invalid or
unenforceable by any court of competent jurisdiction, such holding shall not invalidate or, render
unenforceable any other provision hereof.
Section 6.13. Survival of Obligati ons. Notwithstanding anything to the contrary contained in this
Agreement, the obligation of the Issuer to pay all amounts due hereunder and the rights of the Insurer to
pursue all remedies shall survive the expiration, tennination or substitution of the Surety Bond and this
Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart ofthis Agreement to be
duly executed and delivered as of the date first above written.
[ISSUER]
Title:
MOM, Insurance Corporation
President
Assistant secretary
u W1]
DEBT SERVICE RESERVE
SURETY BOND
MBIA Insurance Corporation
Armonk, New York 10504
Surety Bond No. [POLICY NO.]
MBIA Insurance Corporation (the "Insurer "), in consideration of the payment of the premium and subject to
the terms of this Surety Bond, hereby unconditionally and irrevocably guarantees the full and complete payments
that are to be applied to payment of principal of and interest on the Obligations (as hereinafter defined) and that are
required to be made by or on behalf of [NAME OF ISSUER] (the "Issuer ") under the [TITLE OF THE
DOCUMENT] (the "Document ") to [NAME OF PAYING AGENT], (the "Paying Agent "), as such payments are
due but shall not be so paid, in connection with the issuance by the Issuer of [TITLE OF THE OBLIGATIONS] (the
"Obligations "), provided, that the amount available hereunder for payment pursuant to any one Demand for Payment
(as hereinafter defined) shall not exceed [a: FIXED COVERAGE [Dollar Amount of Coverage] or the debt service
reserve fund requirement for the Obligations, whichever is less (the "Surety Bond Limit "); provided, further, that the
amount available at any particular time to be paid to the Paying Agent under the terms hereof (the "Surety Bond
Coverage ") shall be reduced and may be reinstated from time to time as set forth herein.] or [b: VARIABLE
COVERAGE the annual amount set forth for the applicable bond year on Exhibit A attached hereto (the "Surety
Bond Limit "); provided, further, that the amount available at any particular time to be paid to the Paying Agent
under the terms hereof (the "Surety Bond Coverage ") shall be reduced and may be reinstated from tirpe to time as
set forth herein.]
1. As used herein, the term "Owner" shall mean the registered owner of any Obligation as indicated in the
books maintained by the applicable paying agent, the Issuer or any designee of the Issuer for such purpose. The
term "Owner" shall not include the Issuer or any person or entity whose obligation or obligations by agreement
constitute the underlying security or source of payment for the Obligations.
2. Upon the later of. (i) three (3) days after receipt by the Insurer of a demand for payment in the form
attached hereto as Attachment I (the "Demand for Payment "), duly executed by the Paying Agent; or (ii) the
payment date of the Obligations as specified in the Demand for Payment presented by the Paying Agent to the
Insurer, the Insurer will make a deposit of funds in an account with U.S. Bank Trust National Association, in New
York, New York, or its successor, sufficient for the payment to the Paying Agent, of amounts that are then due to the
Paying Agent (as specified in the Demand for Payment) subject to the Surety Bond Coverage.
3. Demand for Payment hereunder may be made by prepaid telecopy, telex, TWX or telegram of the
executed Demand for Payment c/o the Insurer. If a Demand for Payment made hereunder does not, in any instance,
conform to the terms and conditions of this Surety Bond, the Insurer shall give notice to the Paying Agent, as
promptly as reasonably practicable, that such Demand for Payment was not effected in accordance with the terms
and conditions of this Surety Bond and briefly state the reason(s) therefor. Upon being notified that such Demand
for Payment was not effected in accordance with this Surety Bond, the Paying Agent may attempt to correct any
such nonconforming Demand for Payment if, and to the extent that, the Paying Agent is entitled and able to do so.
4. The amount payable by the Insurer under this Surety Bond pursuant to a particular Demand for Payment
shall be limited to the Surety Bond Coverage. The Surety Bond Coverage shall be reduced automatically to the
extent of each payment made by the Insurer hereunder and will be reinstated to the extent of each reimbursement of
the Insurer pursuant to the provisions of Article H of the Financial Guaranty Agreement dated the date hereof
between the Insurer and the [ISSUER OR OBLIGOR] (the "Financial Guaranty Agreement "); provided, [ANNUAL
PREMIUM OPTION: that no premium is due and unpaid on this Surety Bond and] that in no event shall such
reinstatement exceed the Surety Bond Limit. The Insurer will notify the Paying Agent, in writing within five (5)
days of such reimbursement, that the Surety Bond Coverage has been reinstated to the extent of such reimbursement
pursuant to the Financial Guaranty Agreement and such reinstatement shall be effective as of the date the Insurer
gives such notice. The notice to the Paying Agent will be substantially in the form attached hereto as Attachment 2.
5. Any service of process on the Insurer or notice to the Insurer may be made to the Insurer at its offices
located at 113 King Street, Armonk, New York 10504 and such service of process shall be valid and binding.
6. The term of this Surety Bond shall expire [ANNUAL PREMIUM OPTION: ,unless cancelled pursuant to
paragraph 9 hereof,] on the earlier of (i) [MATURITY DATE] (the maturity date of the Obligations being currently
issued), or (ii) the date on which the Issuer has made all payments required to be made on the Obligations pursuant to
the Document.
7. The premium payable on this Surety Bond is not refundable for any reason, including the payment prior to
maturity of the Obligations.
8. [OPTIONAL FIRST SENTENCE: This Surety Bond shall be governed by and interpreted under the laws
of the State of (STATE)]. Any suit hereunder in connection with any payment may be brought only by the Paying
Agent within [1 or 3 years] after (i) a Demand for Payment, with respect to such payment, is made pursuant to the
terms of this Surety Bond and the Insurer has failed to make such payment, or (ii) payment would otherwise have
been due hereunder but for the failure on the part of the Paying Agent to deliver to the Insurer a Demand for
Payment pursuant to the terms of this Surety Bond, whichever is earlier.
[NOS. 9 and 11 are OPTIONAL]
9. Subject to the terms of the Document, the Issuer shall have the right, upon 30 days prior written notice to
the Insurer and the Paying Agent, to terminate this Surety Bond. In the event of a failure by the Issuer to pay the
premium due on this Surety Bond pursuant to the terns of the Financial Guaranty Agreement, the Insurer shall have
the right upon [No. of days] days prior written notice to the Issuer and the Paying Agent to cancel this Surety Bond.
No Demand for Payment shall be made subsequent to such notice of cancellation unless payments are due but shall
not have been so paid in connection with the Obligations.
10. There shall be no acceleration payment due under this Policy unless such acceleration is at the sole option
of the Insurer.
11. This policy is not covered by the Property /Casualty Insurance Security Fund specified in Article 76 of the
New York Insurance Law.
In witness whereof, the Insurer has caused this Surety Bond to be executed in facsimile on its behalf by its duly
authorized officers, this [DATE] day of [MONTH,YEAR].
MBIA INSURANCE CORPORATION
President
Assistant Secretary
SB- DSRF- 9- [STATE CODE]
4/95
EXHIBIT A
Surety Bond No. [POLICY NO.]
Bond Year Maximum Annual Debt Service
20 to 20
20 to 20
20 to 20
DEMAND FOR PAYMENT
MBIA Insurance Corporation
113 King Street
Armonk, New York 10504
Attention: President
Attachment 1
Surety Bond No. [POLICY NO.]
20^
Reference is made to the Surety Bond No. [POLICY NO.] (the "Surety Bond ") issued by the MBIA
Insurance Corporation (the "Insurer"). The terms which are capitalized herein and not otherwise defined have the
meanings specified in the Surety Bond unless the context otherwise requires.
The Paying Agent hereby certifies that:
(a) In accordance with the provisions of the Document (attached hereto as Exhibit A), payment is due to the
Owners of the Obligations on (the "Due Date ") in an amount equal to $ (the "Amount Due ").
(b) The [Debt Service Reserve Fund Requirement] for the Obligations is $
(c) The amounts legally available to the Paying Agent on the Due Date will be $ less than the Amount
Due (the "Deficiency ").
(d) The Paying Agent has not heretofore made demand under the Surety Bond for the Amount Due or any
portion thereof.
The Paying Agent hereby requests that payment of the Deficiency (subject to the Surety Bond Coverage)
be made by the Insurer under the Surety Bond and directs that payment under the Surety Bond be made to the
following account by bank wire transfer of federal or other immediately available funds in accordance with the
terms of the Surety Bond:
[Paying Agent's Account]
[PAYING AGENT]
By
Its
NOTICE OF REINSTATEMENT
[Paying Agent]
[Address]
Attachment 2
Surety Bond No. [POLICY NO.]
,20
Reference is made to the Surety Bond No. [POLICY NO.] (the "Surety Bond ") issued by the MBIA
Insurance Corporation (the "Insurer "). The terms which are capitalized herein and not otherwise defined have the
meanings specified in the Surety Bond unless the context otherwise requires.
The Insurer hereby delivers notice that it is in receipt of payment from the Obligor pursuant to Article H
of the Financial Guaranty Agreement and as of the date hereof the Surety Bond Coverage is $
Attest:
MBIA Insurance Corporation
President
Assistant Secretary
smon .
DEFINITIONS
For all purposes of this Agreement and the Surety Bond, except as otherwise expressly provided herein
or unless the context otherwise rewires, all capitalized terms shall have the meaning as set out below,
which shall be equally applicable to both the singular and plural forms of such terms.
"Agreement" means this Financial Guaranty Agreement.
"Closing Date" means [CLOSING DATE], 20
"Commitment" means the commitment to issue Municipal Bond Guaranty Insurance in the form
attached hereto as Annex C.
"Debt Service Payments" means those payments required to be made by or on behalf of the Issuer
which will be applied to payment of principal of and interest on the Obligations.
"Demand for Payment" means the certificate submitted to the Insurer for payment under the Surety
Bond substantially in the form attached to the Surety Bond as Attachment 1.
"Document" means [DOCUMENT].
"Event of Default" shall mean those events of default set forth in Section 4.01 of the Agreement.
"Insurer" has the same meaning as set forth in the first paragraph of this Agreement.
"Issuer" means [ISSUER].
"Obligations" means [LEGAL TITLE OF ISSUE].
"Owners" means the registered owner of any Obligation as indicated in the books maintained by the
Paying Agent, the Issuer or any designee of the Issuer for such purpose.
"Paying Agent" means [PAYING AGENT].
"Premium" means [PREMIUM} payable to the Insurer on or prior to the Closing Date.
"Reimbursement Period" means, with respect to a particular Surety Bond Payment, the period
commencing on the date of such Surety Bond Payment and ending on the earlier of the date of cancellation
of the Surety Bond due to nonpayment of Premium when due or on the expiration of x following such
Surety Bond Payment.
"Reimbursement Rate" means Citibank's prime rate plus three (3) percent per annum, as of the date of
such Surety Bond Payment, said "prime rate" being the rate of interest announced fi-orn time to time by
Citibank, N.A., New York, New York, as its prime rate. The rate of interest shall be calculated on the basis
of the actual number of days elapsed over a 360 -day year.
"State" means [STATE].
"Surety Bond" means that surety bond attached hereto as Annex A and issued by the Insurer
guaranteeing, subject to the terms and limitations thereof Debt Service Payments required to be made by
the Issuer under the Document.
"Surety Bond Coverage" means the amount available at any particular time to be paid under the terms
of the Surety Bond, which amount shall never exceed the Surety Bond Limit.
"Surety Bond Limit" means [SURETY BOND LI VIlTJ.
"Surety Bond Payment" means an amount equal to the Debt Service Payment required to be made by
the Issuer pursuant to the Document less (i) that portion of the Debt Service Payment paid by or on behalf of
the Issuer, and (ii) other funds legally available for payment to the Owners, all as certified in a Demand for
Payment.
ANNEX C
CON vffFN ENT
[To be provided.]
CONTINUING DISCLOSURE CERTIFICATE
This Continuing Disclosure Certificate (the "Disclosure Certificate ") is executed and delivered by the City
of Little Rock, Arkansas (the "City") in connection with the issuance of its Sewer Refunding and
Construction Revenue Bonds, Series 2005, dated May 1, 2005 (the "Bonds ") and the Little Rock
Wastewater Utility (the "Utility"). The Bonds are being issued pursuant to Amendment 62 to the
Arkansas Constitution ( "Amendment 62 "), Arkansas Code Annotated § §14 -164 -301 through 340, (Act
871 of the Acts of Arkansas of 1985, as amended) (the "Act "), and Ordinance No. 19,307 duly adopted
and approved by the City on April 19, 2005 (the "Ordinance "). The City and the Utility covenant and
agree as follows:
Section 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and
delivered by the City and the Utility for the benefit of the Beneficial Owners of the Bonds and the Bond
Insurer (identified herein) and in order to assist the Underwriter in complying with, and constitutes the
written undertaking for the benefit of the Beneficial Owners of the Bonds and the Bond Insurer required
by, subsection (i) of the Securities and Exchange Commission, Rule 15c2- 12(b)(5).
Section 2. Definitions. In addition to the definitions set forth in the Ordinance, which apply to any
capitalized term used in this Disclosure Certificate unless otherwise defined in this Section, the following
capitalized terms shall have the following meanings:
"Annual Report" shall mean any Annual Report provided by the City pursuant to, and as
described in, Sections 3 and 4 of this Disclosure Certificate.
"Authorizing Ordinance" shall mean Ordinance No. 19,307 of the Ordinances of the City
approved April 19, 2005.
"Beneficial Owner" of a Bond shall mean any Bondholder and any person who, directly or
indirectly, through any contract, arrangement, understanding, relationship, or otherwise, has or shares (i)
voting power which includes the power to vote, or to direct the voting of, a Bond and /or (ii) investment
power which includes the power to dispose, or to direct the disposition of, a Bond.
"Bond Insurer" shall mean MBIA Insurance Corporation.
"Dissemination Agent" shall mean the City, or any successor Dissemination Agent designated in
writing by the City and which has filed with the City a written acceptance of such designation.
"Listed Events" shall mean any of the events listed in Section 5(A) of this Disclosure Certificate.
"National Repository" shall mean any Nationally Recognized Municipal Securities Information
Repository for purposes of the Rule. Currently, the following are National Repositories:
Bloomberg Municipal Repositories
101 Business Park Drive
Skillman, New Jersey 08558
Standard & Poor's Securities Evaluations, Inc.
55 Water Street, 45th Floor
New York, New York 10041
569167 -v1
Phone: 609 - 279 -3225
Fax: 609 - 279 -5962
E -Mail: MUNIS @bloomberg.com
Phone:
212 - 438 -4595
Fax:
212 -438 -3975
E- Mail:
nrmsir_repository @sandp.com
DPC Data Inc.
One Executive Drive
Fort Lee, New Jersey 07024
FT Interactive Data
Attn: Repository
100 Williams Street
New York, New York 10038
Phone: 201 - 346 -0701
Fax: 201 - 947 -0107
E -Mail: nrmsir@dpcdata.com
Phone:
212 -771 -6999
Fax:
212 - 771 -7390
E -Mail:
NRMSIR @FTID.com
"Participating Underwriter" shall mean any of the original underwriters of the Bonds required to
comply with the Rule in connection with offering of the Bonds.
"Repository" shall mean each National Repository and each State Repository.
"Rule" shall mean Rule 15c2- 12(b)(5) adopted by the Securities and Exchange Commission under
the Securities Exchange Act of 1934, as the same may be amended from time to time.
"State Repository" shall mean any public or private repository or entity designated by the State as
a state repository for the purpose of the Rule. As of the date of this Certificate, there is no State
Repository.
"System" shall mean the City's sewer and wastewater system.
"Tax - Exempt" shall mean that interest on the Bonds is excluded from gross income for federal
income tax purposes, whether or not such interest is includable as an item of tax preference or otherwise
includable directly or indirectly for purposes of calculating any other tax liability, including any
alternative minimum tax or environmental tax.
"Utility" shall mean the Little Rock Wastewater Utility, which operates the City's sewer system.
Section 3. Provision of Annual Report.
(A) The City and the Utility shall, or shall cause the Dissemination Agent to, not later than
one hundred eighty (180) days after the end of the City's fiscal year, commencing with the fiscal year
ending December 31, 2005, provide to each Repository and the Bond Insurer an Annual Report which is
consistent with the requirements of Section 4 of this Disclosure Certificate. Not later than fifteen (15)
business days prior to said date, the City and the Utility shall provide the Annual Report to the
Dissemination Agent (if other than the City). The Annual Report may be submitted as a single document
or as separate documents comprising a package, and may cross - reference other information as provided in
Section 4 of this Disclosure Certificate; rop vided that the audited financial statements of the City and the
Utility may be submitted separately from the balance of the Annual Report. The City and the Utility shall
provide their audit within sixty (60) days after the audit has been completed and received by the City or
the Utility, respectively. The audit shall be prepared in accordance with generally accepted auditing
standards.
(B) If either the City or the Utility is unable to provide to the Repositories and the Bond
Insurer an Annual Report by the date required in subsection (A), the City shall send a notice to the
Municipal Securities Rulemaking Board in substantially the form attached as Exhibit A.
2
569167 -v 1
(C) The Dissemination Agent shall:
(1) determine each year prior to the date for providing the Annual Report the name
and address of each National Repository and each State Repository, if any; and (if the
Disseminating Agent is other than the City)
(2) file a report with the City and the Utility certifying that the Annual Report has
been provided pursuant to this Disclosure Certificate, stating the date it was provided and listing
all the Repositories to which it was provided.
Section 4. Content of Annual Reports. The City's and the, Utility's Annual Report shall contain or
incorporate by reference the following:
1. The City's and the System's debt structure including its restricted debt.
2. A five -year summary of the City's and the System's sources and uses of funds.
3. A five -year summary of revenues of the System ( "Revenues ")
Any or all of the items above may be incorporated by reference from other documents, including official
statements of debt issues of the City, the System or related public entities, which have been submitted to
each of the Repositories or the Securities and Exchange Commission. If the document incorporated by
reference is a final official statement, it must be available from the Municipal Securities Rulemaking
Board. The City and the Utility shall clearly identify each such other document so incorporated by
reference.
Section 5. Reporting of Significant Events.
(A) This Section 5 shall govern the giving of notices of the occurrence of any of the following
events:
1. Delinquency in payment when due of any principal of or interest on the Bonds.
2. Occurrence of any Event of Default under and as defined in the Authorizing
Ordinance (other than as described in clause 1. above).
3. Amendment to the Authorizing Ordinance or this Disclosure Certificate
modifying the rights of the owners of the Bonds.
4. Giving of a notice of optional or unscheduled redemption of any Bonds.
5. Defeasance of the Bonds or any portion thereof.
6. Any change in any rating on the Bonds.
7. (a) Receipt of an opinion of nationally recognized bond counsel to the effect that
interest on the Bonds is not Tax- exempt; or
3
569167 -v1
(b) Any event adversely affecting the tax- exempt status of the Bonds,
including but not limited to:
0) Any audit, investigation or other challenge of the Tax - exempt
status of the Bonds by the Internal Revenue Service or in any administrative or
judicial proceeding; or
(ii) Receipt of any regulation, decision or other official
pronouncement by the Internal Revenue service or other official tax authority or
by any court adversely affecting the Tax- exempt' status of the Bonds.
8. Any unscheduled draw on any reserve funds.
9. Any unscheduled draw on a Letter of Credit or Bond Insurance Policy, if any,
reflecting financial difficulties.
10. Any change in the provider of the Letter of Credit or Bond Insurance Policy, if
any, or any failure by the Credit Bank or Insurer to perform on the Letter of Credit or Bond
Insurance Policy.
11. The release, substitution or sale of property or change in sewer rates securing
repayment of the Bonds (including property leased, mortgaged or pledged as such security).
(B) Whenever the City or the Utility obtains knowledge of the occurrence of a Listed Event,
the City or the Utility shall promptly file a notice of such occurrence with the Municipal Securities
Rulemaking Board, each State Repository, if any and the Bond Insurer. Each notice of such occurrence
shall be captioned as a "Notice of Material Event" and shall prominently state the date, title and CUSIP
numbers of the Bonds. In the event of any amendment of the Authorizing Ordinance or this Disclosure
Certificate, the City shall provide copies of such amendment to any Rating Agency which shall have
issued a rating on the Bonds which is in effect at such time.
Section 6. Termination of Reporting Obligation. The City's and the Utility's obligations under this
Disclosure Certificate shall terminate upon the defeasance, prior redemption or payment in full of all the
Bonds.
Section 7. Dissemination Agent. The City may, from time to time, appoint or engage a Dissemination
Agent to assist it in carrying out its obligations under this Disclosure Certificate, and may discharge any
such Agent, with or without appointing a successor Dissemination Agent. The initial Dissemination
Agent shall be the City.
Section 8. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, the
City may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be
waived, if such amendment or waiver is supported by an opinion of counsel expert in federal securities
laws, to the effect that such amendment or waiver would not, in and of itself, cause the undertakings
herein to violate the Rule if such amendment or waiver had been effective on the date hereof but taking
into account any subsequent change in or official interpretation of the Rule.
Section 9. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the
City or the Utility from disseminating any other information, using the means of dissemination set forth in
4
569167 -v1
this Disclosure Certificate or any other means of communication, or including any other information in
any Annual Report or notice occurrence of a Listed Event, in addition to that which is required by this
Disclosure Certificate. If the City or the Utility chooses to include any information in any Annual Report
or notice of occurrence of a Listed Event in addition to that which is specifically required by this
Disclosure Certificate, the City and the Utility shall have no obligation under this Certificate to update
such information or include it in any future Annual Report or notice of occurrence of a Listed Event.
Section 10. Default. In the event of a failure of the City to comply with any provision of this Disclosure
Certificate, any Beneficial Owner or the Bond Insurer may take such actions as may be necessary and
appropriate, including seeking mandamus or specific performance by court order, to cause the City or the
Utility to comply with its obligations under this Disclosure Certificate. A default under the Disclosure
Certificate shall not be deemed an Event of Default under the Authorizing Ordinance, and the sole remedy
under this Disclosure certificate in the event of any failure of the City or the Utility to comply with this
Disclosure Certificate shall be an action to compel performance.
Section 11. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall
have only such duties as are specifically set forth in this Disclosure Certificate, and the City agrees to
indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless
against any loss, expense and liabilities which it may incur arising out of or in the exercise or
performance of its powers and duties hereunder, including the costs and expenses (including attorney's
fees) of defending against any claim of liability, but excluding liabilities duo to the Dissemination Agent's
negligence or willful misconduct. The obligation of the City under this section shall survive resignation or
removal of the Dissemination Agent and payment of the Bonds.
Section 12. Beneficiaiies. This Disclosure Certificate shall inure solely to the benefit of the City, the
Utility, the Dissemination Agent, the participating Underwriter, the Beneficial Owners from time to time
of the Bonds, and the Bond Insurer and shall create no rights in any other person or entity.
Dated as of: , 2005.
[Signature Pages Follow]
5
569167 -v1
CITY OF LITTLE ROCK, ARKANSAS
IM
Authorized Representative
[Signature page of Continuing Disclosure Agreement]
569167 -v1
LITTLE ROCK WASTEWATER UTILITY
Chief Executive Officer
[Signature page of Continuing Disclosure Agreement]
569167 -v1
EXHIBIT A
NOTICE TO REPOSITORIES OF FAILURE TO FILE ANNUAL REPORT.
Name of City:
Name of Bond Issue:
Date of Issuance:
NOTICE IS HEREBY GIVEN that City has not provided an Annual Report with respect to the
above -named Bonds as required by Section of the dated , 200_. The City
anticipates that the Annual Report will be filed by
Dated:
CITY OF LITTLE ROCK, ARKANSAS
569167 -v 1
Authorized Representative
BOND PURCHASE AGREEMENT
$10,000,000 City of Little Rock, Arkansas
Sewer Refunding and
Construction Revenue Bonds,
Series 2005
April 14, 2005
City of Little Rock, Arkansas
Little Rock, Arkansas 72201
Gentlemen:
The undersigned, Morgan Keegan & Company, Inc. (the "Underwriter"), hereby offers to
enter into this Bond Purchase Agreement ( "Agreement ") with you, the City of Little Rock,
Arkansas (the "Issuer "), for the purchase by the Underwriter and the sale by the Issuer of the
Bonds of the Issuer more particularly described below. Upon acceptance and approval by you
this Agreement shall be in full force and effect in accordance with its terms and shall be
binding upon both the Issuer and the Underwriter. The further terms of this Agreement are:
1. Upon the terms and conditions and upon the basis of the representations herein
set forth, the Underwriter hereby agrees to purchase from the Issuer and the Issuer hereby
agrees to sell to the Underwriter the entire principal amount of an issue of bonds designated
"City of Little Rock, Arkansas Sewer Refunding and Construction Revenue Bonds, Series
2005" (the "Bonds ") to be issued under and secured by an ordinance of the Issuer (the
"Authorizing Ordinance ") in the form heretofore delivered to us, with only such changes
therein as shall be mutually agreed upon between the Issuer and the Underwriter. The Bonds
shall be subject to redemption prior to maturity as set forth in the Authorizing Ordinance.
2. The Bonds are being issued for the purpose of acquiring, constructing and
equipping betterments and improvements to the Issuer's sewer system (the "System "),
refunding the Issuer's Sewer Revenue Note, Series 2004 (the "2004 Note "), funding a debt
service reserve, and paying expenses of issuing the Bonds. The Bonds shall be secured by a
first and prior pledge of revenues derived from the System ( "Revenues ") after the payment of
the operation and maintenance expenses of the System. The Bonds are issued on a parity of
security with the Issuer's Sewer Refunding and Construction Revenue Bonds, Series 2001 (the
"Parity Bonds "). The pledge of net Revenues in favor of the Bonds is senior to the pledge in
favor of the Issuer's Sewer Revenue Bonds, Series 1990, Series 1991, Series 1996, Series
1999, Series 2004A, Series 2004B and Series 2004C (the "Subordinate Bonds "). Payment of
the principal of and interest on the Bonds will be insured under the terms of a Financial
Guaranty Insurance Policy (the "Insurance Policy ") to be issued by MBIA Insurance
Corporation (the "Insurer ") simultaneously with the delivery of the Bonds.
3. The Bonds shall be dated May 1, 2005. Interest on the Bonds shall be payable
on May 1 and November 1 of each year commencing November 1, 2005. The Bonds shall be
authorized in the principal amount of $10,000,000. The Bonds shall bear interest at the rates
per annum and mature (or be subject to mandatory sinking fund redemption) annually on May
1 in each of the years and in the amounts as set forth in the schedule attached hereto as Exhibit
"A ". Regions Bank, shall be trustee for the Bondholders and paying agent (the "Trustee ").
4. The parties hereto intend that the Bonds be issued pursuant to the Internal
Revenue Code of 1986, as amended (the "Code "), so that the interest on the Bonds will not be
includable in the gross income of the recipients for federal income tax purposes, and that the
Bonds will be exempt from registration under the Securities Act of 1933, as amended.
5. The Underwriter hereby agrees to purchase all of the Bonds from the Issuer and
the Issuer hereby agrees to sell all of the Bonds to the Underwriter at a price of $9,933,079.00
(principal amount plus net original issue premium of $13,079.00 and less Underwriter's
discount of $80,000.00), plus interest accrued thereon from the date of the Bonds to the date of
Closing as hereinafter defined. The sale and purchase of the Bonds shall take place at a
closing (the "Closing ") at 10:00 a.m., prevailing local time, on May 26, 2005, or at such other
time or on such earlier or later date as is mutually agreed upon, and at the offices of Wright,
Lindsey & Jennings LLP, Little Rock, Arkansas or at such other place as is mutually agreed
upon. The Issuer will cause the Trustee to authenticate and deliver one Bond certificate per
maturity registered in the name of Cede & Co. with a CUSIP number to the Depository Trust
Company, New York, New York ( "DTC "), with instructions to place the Bonds in
safekeeping and await further instructions from the Trustee. The Bonds shall be received by
DTC not later than 1:15 P. M. Eastern Time on the last business day preceding the date of
Closing. At the Closing, and subject to satisfaction (or proper waiver by the Underwriter) of
the conditions to its obligations to purchase the Bonds, the Underwriter will pay the purchase
price of the Bonds in federal reserve funds payable to the order of the Trustee for the account
of the Issuer. Upon receipt of the purchase price the Trustee shall authorize DTC to release
the Bonds to the Underwriter. If the Issuer fails to cause the Trustee to deliver the Bonds to
DTC as provided herein, or if at the Closing any of the conditions specified in paragraph 8
hereof shall not have been fulfilled to the satisfaction of the Underwriter, the Underwriter may
elect to be relieved of any further obligations under this Agreement without thereby waiving
any other rights the Underwriter may have by reason of such failure or non - fulfillment. The
Underwriter and the Issuer understand that in any of such events the actual respective
expenses, costs or damages of such parties may be unequal, and any such amounts incurred by
any party may be greater or may be less than those amounts incurred by any other.
Accordingly, and subject to paragraph 12 hereof, such parties hereby waive any right to claim
that their actual expenses, costs or damages are or will be greater than the actual expenses,
costs or damages incurred or suffered by any such party, and no such party shall be entitled to
claim any damages from the other.
6. The Issuer will sell the Bonds to the Underwriter and the Underwriter will make
a public offering thereof in reliance upon representations and agreements herein set forth solely
pursuant to the Official Statement hereinafter described at the initial offering price or yields set
561336 -0 2
forth in the Official Statement, reserving, however, the right to change such initial offering
prices as the Underwriter shall deem necessary in connection with the marketing of the Bonds.
The Issuer shall deliver or cause to be delivered to the Underwriter, within seven business days
after acceptance of this Agreement, 200 copies of the Official Statement, substantially in the
form of the Preliminary Official Statement, dated April 11, 2005, relating to the Bonds (the
"Preliminary Official Statement") with only such changes therein as shall be accepted by us
(such Official Statement with such subsequent modifications and changes, if any, and including
the cover page and all appendices, exhibits, reports and statements included therein or attached
thereto being herein called the "Official Statement "), signed on behalf of the Issuer by its
Mayor. The Issuer authorizes the use of copies of the Official Statement and Authorizing
Ordinance in connection with the public offering and sale of the Bonds. The Issuer ratifies the
lawful use by the Underwriter prior to the date hereof of the Preliminary Official Statement.
7. In order to induce the Underwriter to enter into this Agreement and to make an
offering of the Bonds, the Issuer represents to and agrees with the Underwriter that:
A. The Issuer is and will be at the Closing a duly organized and existing
municipality under the Constitution and laws of the State of Arkansas (the "State ") and
has, and at the date of Closing will have, full legal right, power and authority (i) to
enter into this Agreement, (ii) to adopt the Authorizing Ordinance, (iii) to issue, sell
and deliver the Bonds to the Underwriter as provided herein, (iv) to acquire, construct
and equip the facilities to be financed by the Bonds (the "Project "), and (v) to carry out
and consummate the transactions contemplated by this Agreement, the Authorizing
Ordinance and the Official Statement;
B. The Bonds will be issued pursuant to and in full compliance with the
Constitution and laws of the State;
C. Both on the date hereof and at the Closing, the statements and
information contained in the Official Statement will be true, correct and complete in all
material respects and shall not and will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they were
made, not misleading;
D. The execution and delivery of this Agreement and the compliance with
the provisions hereof under the circumstances contemplated hereby, will not in any
respect conflict with, or constitute on the part of the Issuer a breach or default under
any agreement or other instrument to which the Issuer is a party, or any existing law,
administrative regulations court order or consent decree to which the Issuer is subject;
E. The Issuer will not take or omit to take any action, which action or
omission will in any way cause the proceeds from the sale of the Bonds to be applied in
a manner other than as provided in the Authorizing Ordinance;
561336 -v1 3
F. When delivered to and paid for by the Underwriter, the Bonds will have
been duly authorized, executed, authenticated, issued and delivered, and will constitute
valid and legally binding special obligations of the character referred to in the, statutes
under which issued;
G. The financial statements of the System to be contained in the Official
Statement present fairly the financial position of the System as of the dates indicated
and the results of its operations for the periods specified, and said financial statements
have been prepared in conformity with generally accepted accounting principles applied
in all material respects on a consistent basis with respect to the periods involved and
there has been no material adverse change (not in the ordinary course of business) in
the financial condition of the System from the most recent date so set forth;
H. The Issuer will immediately notify the Underwriter of any adverse
change of a material nature in the financial condition of the System;
I. Between the date of this Agreement and the Closing, the Issuer will not,
without the prior written consent of the Underwriter, issue any bonds, notes, or other
obligations for borrowed money and secured by or payable from revenues derived from
the operations of the System;
J. The Issuer shall enter into a Continuing Disclosure Agreement with the
Trustee, as Dissemination Agent, as required by the Securities and Exchange
Commission, Rule 15c -12 and as described in the Official Statement;
K. There is no action, suit, proceeding, or investigation which has not been
disclosed in the Official Statement involving the Issuer before or by any court, public
board, or body pending or, to the knowledge of the Issuer, threatened wherein an
unfavorable decision, ruling, or finding would: (i) affect the existence or powers of the
Issuer or the titles of its officers to their respective offices, (ii) enjoin or restrain the
issuance, sale, and delivery of the Bonds or the collection of any moneys or property
pledged or to be pledged under the authorizing Ordinance or the pledge thereof, (iii) in
any way question or affect any of the rights, powers, duties, or obligations of the Issuer
with respect to the moneys and assets pledged or to be pledged to pay the principal of
and premium, if any, and interest on the Bonds, (iv) in any way question or affect any
authority for the issuance of the Bonds or the validity or enforceability of the Bonds,
the Authorizing Ordinance, of any ordinance of the Issuer establishing rates to be
charged for the services of the System (the "Rate Ordinance"), or (v) in any way
question or affect this Agreement or the transactions contemplated hereby or by the
official Statement, the documents referred to in the Official Statement, or any other
agreement or instrument to which the Issuer is a party and relating to the Bonds, the
Project or the System; and
L. The Issuer will furnish such information, execute such instruments, and
take such other action in cooperation with the Underwriter, as the Underwriter may
561336 -v1 4
reasonably request, to qualify the Bonds for offer and sale under the Blue Sky or other
securities laws and regulations of such states and other jurisdictions of the United States
of America as the Underwriter may designates and the Issuer will assist, if necessary
therefor, in the continuance of such qualifications in effect so long as required for the
distribution of the Bonds; provided, however, that the Issuer shall not be required to
qualify as a foreign corporation or to file any general consents to service of process
under the laws of any state.
8. The Underwriter has entered into this Agreement in reliance upon the
representations and agreements of the Issuer herein and the performance by the Issuer of its
obligations hereunder, both as of the date hereof and as of the Closing. The Underwriter's
obligations under this Agreement are and shall be subject to the following further conditions:
A. At the Closing, the Authorizing Ordinance and the Rate Ordinance shall
be in full force and effect and the Authorizing Ordinance and the Official Statement
shall not have been amended, modified or supplemented except as may have been
agreed to by the Underwriter, and the Issuer shall have duly adopted and there shall be
in full force and effect such other ordinances and resolutions as, in the opinion of
Wright, Lindsey & Jennings LLP, Little Rock, Arkansas (the "Bond Counsel ") shall be
necessary in connection with the transactions contemplated hereby;
B. At the Closing the Underwriter shall receive the approving opinion,
dated as of the Closing, of Bond Counsel, in customary form and content satisfactory to
the Underwriter, plus all other documents, opinions and certificates reasonably required
by Bond Counsel or the Underwriter to evidence (i) compliance by the Issuer with legal
requirements, (ii) the truth and accuracy, as of the date of Closing, of the
representations of the Issuer contained herein, (iii) the due performance or satisfaction
by the Issuer at or prior to the Closing of all agreements to be performed and all
conditions to be satisfied by the Issuer, (iv) the validity of the Bonds and this
Agreement, and (v) the tax - exempt status of the interest on the Bonds under the Code;
C. At the Closing, the Continuing Disclosure Agreement shall have been
executed by the Issuer and the Trustee, with only such amendments as may have been
agreed to by the Underwriter;
D. At the Closing, the Underwriter shall receive a certificate, dated the date
of the Closing, signed by the Mayor and City Clerk of the Issuer and Manager of the
System and in form and substance satisfactory to the Underwriter, to the effect that;
(1) Each of the representations and warranties of the Issuer set forth
herein is true and correct in all material respects as of the Closing and the Issuer
has complied with each of its covenants and agreements required in this
Agreement to be complied with at or prior to the Closing;
(2) There has been no material adverse change in the business,
561336 -0 5
property or financial condition of the System as described in the Official
Statement and, except as provided for or contemplated or described in the
Official Statement, the System has not incurred any material liabilities other than
in the normal course of business; and
(3) They have examined the Official Statement and, in their opinion,
with respect to the System and the Issuer the official Statement, as of the date of
Closing, does not include any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
E. At or prior to the Closing, the Underwriter shall receive (a) a consent
letter from Cobb and Suskie, Ltd., Certified Public Accountants, Little Rock, Arkansas
(the "Accountants") , in form and content satisfactory to the Underwriters and (b) a
certificate from the Accountants in form and content satisfactory to the Underwriter
stating that the debt service coverage tests for the Subordinate Bonds have been meet;
F. The Trustee shall have received the Insurance Policy, duly executed and
delivered by the Insurer;
G. At or prior to the Closing,
"Aaa" by Moody's Investor Service, Inc
Insurance Policy.
the Bonds shall have received a rating of
(the "Rating Agency "), based upon the
9. The Underwriter shall have the right to cancel and terminate its obligations
under this Agreement at any time before Closing if any of the following occurs:
(a) Legislation shall have been enacted by the Congress of the United States,
or adopted by or introduced in either House or any committee thereof, or a decision
shall have been rendered by a court of the United States or the Tax Court of the United
States, or a ruling shall have been made or regulations shall have been proposed or
made by the Treasury Department of the United States, the Internal Revenue Service or
any other governmental agency with respect to federal taxation upon revenues or other
income of the general character to be derived by the Issuer or by any similar body, or
upon interest received on obligations of the general character of the Bonds which, in the
opinion of the Underwriter, materially adversely affects the market price of the Bonds
or the market price generally of obligations of the general character of the Bonds; or
(b) Any legislation, ordinance, rule or regulation shall be enacted or be
actively considered for enactment by any governmental body, department or agency of
the State, or a decision by any court of competent jurisdiction within the State shall be
rendered which, in the opinion of the Underwriter, materially adversely affects the
market price of the Bonds; or
561336 -v1
(c) A stop order, ruling, regulation or official statement by or on behalf of
the Securities and Exchange Commission shall be issued or made to the effect that the
issuance, offering or sale of the Bonds, or of obligations of the general character of the
Bonds, as contemplated hereby, is in violation of any provisions of the Securities Act of
1933, or the Trust Indenture Act of 1939; or
(d) (i) Any restriction on, or general suspension of, trading in securities on
the New York Stock Exchange or any banking moratorium, or the establishment by the
New York Stock Exchange, by the Securities and Exchange Commission, by any
Federal or state agency, or by the decision of any court, of any limitation on prices for
such trading or (ii) any new outbreak of hostilities or other national or international
calamity or crisis, the effect of which on the financial markets of the United States shall
be such as to make it impracticable, in the reasonable judgment of the Underwriter, for
the Underwriter to enforce contracts for the sale of the Bonds; or
(e) Any event or condition which, in the judgment of the Underwriter,
renders untrue or incorrect, in any material respect as of the time the same purports to
speak, the information, including the financial statements, contained in the Official
Statement, or which requires that information not reflected in the Official Statement
should be reflected therein in order to make the statements and information contained
therein not misleading in any material respect as of such time; provided the Issuer and
the Underwriter will use its best efforts to amend or supplement the Official Statement
to reflect, to the satisfaction of the Underwriter, such changes in or additions to the
information contained in the Official Statement.
10. All notices, demands and formal actions hereunder will be in writing mailed,
telegraphed or delivered to:
The Issuer: City of Little Rock, Arkansas
City Hall, 500 W. Markham
Little Rock, Arkansas 72201
Attention: Mayor
With copy to: Little Rock Wastewater Utility
221 East Capitol
Little Rock, Arkansas 72202
Attention: Chief Executive Officer
The Underwriter: Morgan Keegan & Company, Inc.
P.O. Box 3647
Little Rock, Arkansas 72203
Attention: James Alexander
11. All representations, warranties and covenants of the Issuer contained herein
shall remain operative and in full force and shall survive (a) the execution and delivery of this
561336 -v1
Agreement, (b) any investigation made by or on behalf of the Underwriter, (c) the purchase of
the Bonds hereunder, and (d) any disposition of or payment for the Bonds.
12. The Underwriter shall be under no obligation to pay and the Issuer shall pay any
expenses incident to the performance of its obligations hereunder including, but not limited to:
(i) the cost of the preparation and distribution of this Agreement and the Authorizing
Ordinance, the cost of the preparation, printing and delivery of the Bonds, and the cost of
printing of the Official Statement (in such reasonable quantities as may be requested by the
Underwriter); (ii) the fees and disbursements of Bond Counsel and any counsel to the Issuer;
(iii) the fees and disbursements of the Accountants and any other experts or consultants
retained by the Issuer and any other fees of the Issuer; (iv) the bond insurance and surety bond
premiums of MBIA Insurance Corporation; (v) legal publication costs; (vi) the Trustee's fees
and expenses; (vii) the prepaid Escrow Agent's and Prior Trustee's fees and expenses relating
to the refunding of the 2004 Note; (viii) the Underwriter's fees payable to DTC relating to the
underwriting of the Bonds; (ix) the fees of the Rating Agency.
The Underwriter shall pay: (i) the cost of the preparation and printing of any
amendment or supplement to the Official Statement resulting from a determination by the
Underwriter to change the initial offering prices or yields set forth in the Official Statement;
(ii) all advertising expenses in connection with the public offering of the Bonds; (iii) the cost of
preparation of Blue Sky and Legal Investment Memoranda; and (iv) all other expenses incurred
by us in connection with our public offering and distribution of the Bonds except as described
above.
13. The Issuer covenants and agrees with the Underwriter that:
(a) It will advise the Underwriter promptly of any proposal to amend or
supplement the Official Statement or any part thereof. If between the date of this
Agreement and ninety (90) days after the end of the underwriting period an event
occurs which is materially adverse to the purpose for which the Official Statement is to
be used and is not disclosed in the Official Statement, or if there shall exist any event
which in the reasonable judgment of the Underwriter makes untrue or incorrect in any
material respect any statement or information contained in the Official Statement, or is
not reflected in the official Statement but should be reflected therein in order to make
the statements and information contained therein not misleading in any material respect,
the Issuer will supplement or amend the official Statement in a form and in a manner
approved by the Underwriter, the expense of which shall be paid by the Issuer. The
"end of the underwriting period" shall mean the later of (i) the Closing date, or (ii) the
date the Underwriter no longer retains (directly or as a syndicate member) an unsold
balance of the securities for sale to the public. The Underwriter agrees to notify the
Issuer in writing when the underwriting period has ended and if no such notification is
given within ninety (90) days after the Closing date, the Issuer may assume that the
underwriting period ended on the Closing Date;
(b) It will indemnify and hold harmless the Underwriter and each person, if
561336 -v 1 8
any, who controls (as such term is defined in Section 15 of the Securities Act of 1933,
as amended) the Underwriter against any and, all losses, claims, damages, and liabilities
of any kind, including the expenses of defense thereof, (i) arising out of any statement
or information contained in the official Statement relating to the Issuer, the Authorizing
Ordinance, the Bonds, the System, the Project, the 2004 Note and use of Bond
proceeds that is untrue or incorrect in any material respect or the omission from the
official Statement of any statement, or information relating to the Issuer, the Bonds, the
System, the Project, the 2004 Note, and use of Bond proceeds and the Authorizing
Ordinance, which is necessary to make the statements therein not misleading in any
material respect, and (ii) to the extent of the aggregate amount paid in settlement of any
litigation commenced or threatened arising from a claim based upon any such untrue
statement or omission if such settlement is effected with the written consent of the
Issuer (which consent shall not be unreasonably withheld). In case any claim shall be
made or action brought against the Underwriter or any controlling person (as aforesaid)
based upon the Official Statement, in respect of which indemnity may be sought against
the Issuer, the Underwriter shall promptly notify the Issuer in writing, setting forth the
particulars of such claim or action, and the Issuer shall assume the defense thereof,
including the retaining of counsel and the payment of all expenses. The Underwriter or
any such controlling person shall have the right to retain separate counsel in any such
action and to participate in the defense thereof, but the fees and expenses of such
counsel shall be at the Underwriter's expense or the expense of such controlling person
unless the retaining of such counsel has been specifically authorized by the Issuer. The
obligations of the Issuer hereunder are limited to revenues of the System.
14. This Agreement may be executed in any number of counterparts with each
executed counterpart constituting an original but all of which together shall constitute one and
the same instrument.
15. This Agreement will inure to the benefit of and be binding upon the parties
thereto and their successors and will not confer any rights upon any other person. This
Agreement shall be governed by and construed in accordance with the laws of the State.
561336 -v1 9
APPROVED AND RECOMMENDED TO THE CITY this 14th . day of
April , 2005.
LITTLE ROCK SEWER COMMITTEE
By:
e e A. Corbitt, P.E.
C ief Executive Officer
[Signature page of Little Rock Sewer Committee]
APPROVED AND RECOMMENDED TO THE CITY this 14th 'day of
April , 2005.
CITY OF LITTLE ROCK,'ARKANSAS
By:
[Signature page of Issuer]
561336 -v1
EXHIBIT A
Maturity
(May 1)
Principal Amount
Interest Rate
2006
$ 345,000
3.000%
2007
355,000
3.000%
2008
370,000
3.000%
2009
380,000
3.500%
2010
390,000
3.125%
2011
405,000
3.250%
2012
415,000
4.000%
2013
435,000
4.000%
2014
450,000
4.000%
2015
470,000
4.000%
2016
490,000
5.000%
2017
510,000
4.000%
2018
535,000
4.100%
2019
555,000
5.000%
2020
585,000
4.200%
2025*
3,310,000
4.375%
*Term Bond, subject to mandatory sinking fund redemption.
PRELIMINARY DRAFT
Dated: 4/19/2005
OFFICIAL STATEMENT
NEW ISSUE RATING: (MBIA Insured) Moody's: Aaa
BOOK -ENTRY ONLY (Underlying Rating: Moody's: Al)
In the opinion of Bond Counsel, based on existing statutes, regulations, rulings and court decisions, the interest on the Bonds
is excluded from gross income for federal income tax purposes, subject to the condition that the City comply with all
requirements of the Internal Revenue Code that must be satisfied subsequent to the issuance of the Bonds, the Bonds are not
subject to property taxation in the State of Arkansas and interest on the Bonds is excluded from Arkansas income taxation. In
the opinion of Bond Counsel, interest on the Bonds is not an item of tax preference for purposes of the federal alternative
minimum tax imposed on individuals and corporations, although it is included in adjusted current earnings in calculating the
corporate alternative minimum taxable income. See LEGAL MATTERS, Tax Exemption- Opinion of Bond Counsel.
Dated: May 1, 2005
$10,000,000
CITY OF LITTLE ROCK, ARKANSAS
SEWER REFUNDING AND CONSTRUCTION
REVENUE BONDS
SERIES 2005
Due: As shown on the inside front cover
The Bonds will not be general obligations of the City of Little Rock, Arkansas (the "City") but will be special
obligations, secured by a first and prior pledge of and payable from net revenues derived from the operation of
the City's Sewer System (the "System "). See THE BONDS, Security.
Interest on the Bonds is payable on May 1 and November 1 of each year, commencing November 1, 2005.
(FOR THE MATURITY SCHEDULES AND INTEREST RATES, SEE THE INSIDE FRONT COVER)
The Bonds of each maturity will be initially issued as a single registered bond registered in the name of Cede &
Co., the nominee of The Depository Trust Company ( "DTC "), New York, New York. The Bonds will be
available for purchase in book -entry form only, in denominations of $5,000 or any integral multiple thereof.
Except in limited circumstances described herein, purchasers of the Bonds will not receive physical delivery of
Bonds. Payments of principal of and interest on the Bonds will be made by Regions Bank, Little Rock, Arkansas,
as the Trustee, directly to Cede & Co., as nominee for DTC, as registered owner of the Bonds, to be
subsequently disbursed to DTC Participants and thereafter to the Beneficial Owners of the Bonds, all as further
described herein.
The scheduled payment of principal of and interest on the Bonds when due will be guaranteed under an insurance
policy to be issued concurrently with the delivery of the Bonds by MBIA Insurance Corporation.
The Bonds are offered when, as and if issued and received by the Underwriter named below, subject to approval
as to legality by Wright, Lindsey & Jennings, LLP, Bond Counsel, and subject to satisfaction of certain other
conditions.
This cover page contains information for quick reference only. It is not a summary of the issue. Investors must
read the entire Official Statement to obtain information essential to the making of an informed investment
decision.
MORGAN KEEGAN & COMPANY, INC.
Dated: April 20, 2005
568429 -v1
MATURITIES, AMOUNTS, PRICES AND INTEREST RATES
The Bonds mature, bear interest and are priced to yield at follows:
Date
(Ma 1 )
Amount
Rate %
Yield %
2006
$345,000
3.000%
2.700%
2007
355,000
3.000
2.850
2008
370,000
3.000
3.000
2009
380,000
3.500
3.150
2010
390,000
3.125
3.330
2011
405,000
3.250
3.480
2012
415,000
4.000
3.600
2013
435,000
4.000
3.730
2014
450,000
4.000
3.840
2015
470,000
4.000
3.940
2016
490,000
5.000
4.020
2017
510,000
4.000
4.100
2018
535,000
4.100
4.170
2019
555,000
5.000
4.150
2020
585,000
4.200
4.310
$3,310,000 4.375% Term Bond* Due May 1, 2025 to Yield 4.550%
(Accrued Interest from May 1, 2005 to be Added)
No dealer, broker, salesman or any other person has been authorized by the City or the
Underwriters to give any information or to make any representations other than those contained
in this Official Statement in connection with the offering of the Bonds described herein and, if
given or made, such information or representations must not be relied upon as having been
authorized by the City. Neither the delivery of this Official Statement nor any sale hereunder
shall under any circumstances create any implication that there has been no change in the
business, operations or financial condition of the City since the date hereof. This Official
Statement does not constitute an offer or solicitation in any state in which such offer or
solicitation is not authorized, or in which the person making such offer or solicitation is not
qualified to do so, or is made to any person to whom it is unlawful to make such offer or
solicitation.
The Bonds have not been registered under the Securities Act of 1933, as amended, nor has the
Authorizing Ordinance described herein been qualified under the Trust Indenture Act of 1939,
as amended, in reliance upon certain exemptions in such laws from such registration and
qualification.
568429 -v1 ii
TABLE OF CONTENTS
Page
THEBONDS .................................................................... ............................... 3
Book -Entry Only System .....................................:............. ............................... 3
Generally...................................................................... ............................... 5
Redemption................................................................... ............................... 6
OptionalRedemption ......................................................... ..............................6
Mandatory Sinking Fund Redemption .................................... ..............................7
Purposefor Bonds ........................................................... ............................... 7
Security........................................................................ ............................... 8
BONDINSURANCE ........................................................... ..............................9
THECITY AND THE COUNTY ......................................... ............................... 12
General...................................................................... ............................... 12
Government................................................................. ............................... 13
Employees................................................................... ............................... 14
Policeand Fire ............................................................. ............................... 14
Airport....................................................................... ............................... 14
Port.................................................................... ............................... .... 15
Population................................................................... ............................... 15
LandUse .................................................................... ............................... 15
PublicSchools .............................................................. ............................... 16
HigherEducation .......................................................... ............................... 16
ConstructionPermits ...................................................... ............................... 16
RetailSales ................................................................. ............................... 17
Principal Employers ...........................
Employment................................................................ ............................... 18
CountyEconomic Data ................................................... ............................... 18
Litigation.................................................................... ............................... 19
THESYSTEM ................................................................ ............................... 19
General...................................................................... ............................... 19
Management................................................................ ............................... 21
KeyEmployees ............................................................. ............................... 21
Users......................................................................... ............................... 21
Litigation.................................................................... ............................... 22
Rates......................................................................... ............................... 23
THE AUTHORIZING ORDINANCE .................................... ............................... 25
Rates and General Covenants to Operate .............................. ............................... 25
Funds and Disposition of Revenues .................................... ............................... 26
ParityBonds ................................................................ ............................... 28
568429 -v1 111
Accountsand Records .................................................... ............................... 29
Maintenance; Insurance ........................................... ............................... L ...... 29
Defeasance.................................................................. ............................... 30
Defaultand Remedies ..................................................... ............................... 30
Amendment of Authorizing Ordinance ................................ ............................... 31
TheTrustee ................................................................. ............................... 32
Investments................................................................. ............................... 32
CONTINUING DISCLOSURE AGREEMENT ........................ ............................... 34
Purpose of the Continuing Disclosure Agreement ................... ............................... 34
Definitions.................................................................. ............................... 34
Provision of Annual Report .............................................. ............................... 35
Contentof Annual Reports ............................................... ............................... 36
Reporting of Significant Events ......................................... ............................... 36
Termination of Reporting Obligation .................................. ............................... 37
DisseminationAgent ...................................................... ............................... 37
Amendment; Waiver ...................................................... ............................... 37
AdditionalInformation .................................................... ............................... 38
Default....................................................................... ............................... 38
Duties of Trustee and Dissemination Agent and Right of Indemnity ............................ 38
Beneficiaries................................................................. ............................... 39
FINANCIALINFORMATION ............................................ ............................... 39
DEBT SERVICE COVERAGE ............................................ ............................... 41
DEBT SERVICE REQUIREMENTS ..................................... ............................... 42
LEGALMATTERS .......................................................... ............................... 43
LegalProceedings ......................................................... ............................... 43
LegalOninions ............................................................. ............................... 43
Tax Exemption - Opinion of Bond Counsel ............................ ............................... 43
Tax Treatment of Original Issue Discount ............................ ............................... 44
Tax Treatment of Original Issue Premium ............................ ............................... 45
StateTaxes .................................................................. ............................... 46
MISCELLANEOUS......................................................... ............................... 46
Enforceability of Remedies ..............................................
...............................
46
Rating........................................................................
...............................
46
46
Underwriting...............................................................
...............................
in Official Statement
47
Information the ..................................
...............................
EXHIBIT A - Form of Bond Insurance Policy
EXHIBIT B - Audited Financial Statements of the System for the
Fiscal Years Ended December 31, 2003 and 2004
568429 -v1 iv
OFFICIAL STATEMENT
$10,000,000
CITY OF LITTLE ROCK, ARKANSAS
SEWER REFUNDING AND CONSTRUCTION REVENUE BONDS
SERIES 2005
INTRODUCTION TO THE OFFICIAL STATEMENT
This Introduction is subject in all respects to the more complete information contained in this
Official Statement. The offering of the Bonds to potential investors is made only by means of
the entire Official Statement, including the cover page hereof and exhibits hereto. A full
review should be made of the entire Official Statement, as well as the Authorizing Ordinance
described herein.
This Official Statement is provided to furnish certain information in connection with the
issuance by the City of Little Rock, Arkansas (the "City "), of its Sewer Refunding and
Construction Revenue Bonds, Series 2005, dated May 1, 2005, in the aggregate principal
amount of $10,000,000 (the "Bonds "). The Bonds are being issued to finance the cost of
constructing betterments and improvements to the City's sewer system (the "System "),
refunding the City's Sewer Revenue Note, Series 2004 (the "Series 2004 Note "), funding a
debt service reserve and paying expenses incidental thereto and to the authorization and
issuance of the Bonds. See THE BONDS, Purpose for Bonds.
The City is a city of the first class organized under the laws of the State of Arkansas (the
"State ") located in Pulaski County, Arkansas which is in central Arkansas. The City is
authorized and empowered under the laws of the State, including particularly Title 14, Chapter
164, Subchapter 4 and Title 14, Chapter 235, Subchapter 2 of the Arkansas Code of 1987
Annotated (the "Authorizing Legislation "), to issue revenue bonds and to expend the proceeds
thereof for the intended purpose. See THE CITY AND THE COUNTY.
The Bonds are not general obligations of the City, but are special obligations payable solely
from the revenues derived from the operation of the System ( "Revenues ") after the payment of
the operation and maintenance expenses of the System. The Bonds are issued on a parity of
security with the City's Sewer Revenue Bond, Series 2001, of which $20,815,000 in principal
amount is currently outstanding (the "Parity Bonds "). The pledge of net Revenues in favor of
the Bonds is senior to the pledge in favor of the City's Sewer Revenue Bond, Series 1990 (the
"1990 Bond "), the City's Sewer Revenue Bond, Series 1991 (the "1991 Bond "), the City's
Sewer Revenue Bond, Series 1996 (the "1996 Bond "), the City's Sewer Revenue Bond, Series
1999 (the "1999 Bond "), the City's Sewer Revenue Bond, Series 2004A (the "Series 2004A
Bond "), the City's Sewer Revenue Bond, Series 2004B (the "Series 2004B Bond "), and the
City's Sewer Revenue Bond, Series 2004C (the "Series 2004C Bond" and, collectively with the
1990 Bond, the 1991 Bond, the 1996 Bond, the 1999 Bond, the 2004A Bond, the 2004B Bond,
and the 2004C Bond, the "Subordinate Bonds "). See THE BONDS, Security. The Bonds are
being issued pursuant to and in full compliance with the Constitution and laws of the State,
568429 -v1
particularly the Authorizing Legislation, and Ordinance No. adopted on April 19, 2005
(the "Authorizing Ordinance "). See THE AUTHORIZING ORDINANCE.
Payment of the principal of and interest on the Bonds when due will be insured by a Financial
Guaranty Insurance Policy to be issued by MBIA Insurance Corporation ( "MBIA" or the
"Insurer ") simultaneously with the delivery of the Bonds. A specimen bond insurance policy is
attached hereto as Appendix A. It is expected that, based upon the commitment of MBIA to
insure the Bonds, Moody's Investors Service will assign a rating of "Aaa" to the Bonds.
However, there is no guarantee that such rating will be received. See BOND INSURANCE and
RATING. So long as MBIA is not in default under the Financial Guaranty Insurance Policy, it
is subrogated to, and may enjoy and exercise, all rights and remedies of the owners of the Bonds
and may direct the Trustee in the exercise of any remedies set forth herein. No remedy set forth
herein may be exercised by the Trustee or by any owner of any of the Bonds without the prior
written approval of MBIA. See THE AUTHORIZING ORDINANCE, Default and Remedies.
The Bonds are issuable only as fully registered bonds, without coupons, in the denomination of
$5,000 or integral multiple thereof. Interest is payable November 1, 2005, and semiannually
thereafter on each May 1 and November 1. Principal is payable at the principal office of
Regions Bank, Little Rock, Arkansas, as trustee and paying agent (the "Trustee"). Interest is
payable by check mailed by the Trustee to the registered owners as of the record date for each
interest payment date. The record date for payment of interest on the Bonds shall be the
fifteenth day of the calendar month next preceding each interest payment date. A Bond may be
transferred, in whole or in part (in integral multiples of $5,000), but only upon delivery of the
Bond, together with a written instrument of transfer, to the Trustee. See THE BONDS,
Generally and Book -Entry Only System.
The Bonds maturing on May 1, 2017 and thereafter are subject to optional redemption on and
after May 1, 2015 (the Bonds maturing on May 1, 2016 are not subject to redemption prior to
maturity). The Term Bonds shown on the inside front cover of this Official Statement are also
subject to mandatory sinking fund redemption as described herein. The Trustee shall give at
least thirty (30) days notice of redemption and shall redeem Bonds in inverse order of maturity
(and by lot within a maturity) in such manner as the Trustee may determine. See THE
BONDS, Redemption.
Under existing law and assuming compliance with certain covenants described herein, (i)
interest on the Bonds is excluded from gross income for federal income tax purposes, (ii)
interest on the Bonds is not an item of tax preference for purposes of the federal alternative
minimum tax imposed on individuals and corporations, (iii) with respect to corporations,
interest on the Bonds will be taken into account in determining adjusted current earnings for
the purpose of computing the federal alternative minimum tax, (iv) interest on the Bonds is
exempt from State income tax and (v) the Bonds are not subject to property taxes in the State.
See LEGAL MATTERS, Tax Exemption - Opinion of Bond Counsel.
It is expected that the Bonds will be available for delivery on or about May 26, 2005, through
the facilities of The Depository Trust Company, in New York, New York.
568429 -v1 2
The City and the Trustee have entered into a Continuing Disclosure Agreement in order to
assist the Underwriter in complying with Securities and Exchange Commission Rule 15c2-
12(b)(5) (the "Continuing Disclosure Agreement "). See CONTINUING DISCLOSURE
AGREEMENT.
This Official Statement speaks only as of its date, and the information contained herein is
subject to change. Copies of the Authorizing Ordinance and the Continuing Disclosure
Agreement summarized herein are available upon request from Morgan Keegan & Company,
Inc., 100 Morgan Keegan Drive, Suite 400, Little Rock, Arkansas 72202, Attention: Public
Finance.
THE BONDS
Book -Entry Only System. The Depository Trust Company (ADTC), New York, New York,
or its successor, will act as securities depository for the Bonds. The Bonds will each be issued
as fully- registered securities registered in the name of Cede & Co. (DTC's partnership
nominee). One fully- registered Bond certificate for each maturity will be issued in the
principal amount of the maturity, and will be deposited with DTC.
DTC is a limited - purpose trust company organized under the New York Banking Law, a
banking organization within the meaning of the New York Banking Law, a member of the
Federal Reserve System, a clearing corporation within the meaning of the New York Uniform
Commercial Code, and a clearing agency registered pursuant to the provisions of Section 17A
of the Securities Exchange Act of 1934. DTC holds securities that its participants ( "Direct
Participants ") deposit with DTC. DTC also facilitates the settlement among Direct Participants
of securities transactions, such as transfers and pledges, in deposited securities through
electronic computerized book -entry changes in Direct Participants' accounts, thereby
eliminating the need for physical movement of securities certificates. Direct Participants
include securities brokers and dealers, banks, trust companies, clearing corporations, and
certain other organizations. DTC is owned by a number of its Direct Participants and by the
New York Stock Exchange, Inc., the American Stock Exchange, Inc., and the National
Association of Securities Dealers, Inc. Access to the DTC system is also available to others
such as securities brokers and dealers, banks, and trust companies that clear through or
maintain a custodial relationship with a Direct Participant, either directly or indirectly
( "Indirect Participants"). The Rules applicable to DTC and its Participants are on file with the
Securities and Exchange Commission.
Purchases of Bonds under the DTC system must be made by or through Direct Participants,
which will receive a credit for the Bonds on DTC's records. The ownership interest of each
actual purchaser of each Bond (referred to herein as "Beneficial Owner ") is in turn to be
recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive
written confirmation from DTC of their purchase, but Beneficial Owners are expected to
receive written confirmations providing details of the transaction, as well as periodic
statements of their holdings, from the Direct or Indirect Participant through which the
568429 -v1 3
Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds
are to be accomplished by entries made on the books of Participants acting on behalf of
Beneficial Owners. Beneficial Owners will not receive certificates representing their
ownership interest in Bonds, except in the event that use of the book -entry system for the
Bonds is discontinued.
To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are
registered in the name of DTC's partnership nominee, Cede & Co. The deposit of Bonds with
DTC and their registration in the name of Cede & Co., effect no change in beneficial
ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC's
records reflect only the identity of the Direct Participants to whose accounts such Bonds are
credited, which may or may not be the Beneficial Owners. Direct and Indirect Participants
will remain responsible for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct Participants, by Direct
Participants to Indirect Participants and by Direct Participants and Indirect Participants to
Beneficial Owners will be governed by arrangements among them, subject to any statutory or
regulatory requirements as may be in effect from time to time.
Redemption notices will be sent to Cede & Co. If fewer than all of the Bonds are being
redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct
Participant to be redeemed.
Neither DTC nor Cede & Co. will consent or vote with respect to the Bonds. Under its usual
procedures, DTC mails an Omnibus Proxy to the Trustee as soon as possible after the record
date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct
Participants to whose accounts the Bonds are credited on the record date (identified in a listing
attached to the Omnibus Proxy).
Principal and interest payments on the Bonds will be made to DTC. DTC's practice is to
credit Direct Participants' accounts on the payable date in accordance with their respective
holdings shown on DTC's records unless DTC has reason to believe that it will not receive
payments on the payable date. Payments by Direct and Indirect Participants to Beneficial
Owners will be governed by standing instructions and customary practices, as is the case with
securities held for the accounts of customers in bearer form or registered in a street name, and
will be the responsibility of such Participant and not of DTC, the Trustee, or the City, subject
to any statutory or regulatory requirements as may be in effect from time to time. Payment of
principal and interest on the Bonds to DTC is the responsibility of the Trustee, disbursement of
such payments to Direct Participants will be the responsibility of DTC, and disbursement of
such payments to the Beneficial Owners shall be the responsibility of Direct and Indirect
Participants.
DTC may discontinue providing its services as securities depository with respect to the Bonds
at any time by giving reasonable notice to the City or the Trustee. Under such circumstances,
in the event that a successor securities depository is not obtained, Bonds are required to be
568429 -v1 4
printed and delivered. The City may decide to discontinue use of the system of book -entry
transfers through DTC (or a successor securities depository). In that event, Bonds will be
printed and delivered.
The information concerning DTC and DTC's book -entry system set forth above has been
obtained from DTC. Neither the Underwriter nor the City make any representation or
warranty regarding the accuracy or completeness thereof.
So long as the Bonds are in book -entry only form, Cede & Co., as nominee for DTC, will
be treated as the sole owner of the Bonds for all purposes under the Authorizing
Ordinance, including receipt of all principal of and interest on the Bonds, receipt of
notices, voting and requesting or directing the Trustee to take or not to take, or
consenting to, certain actions under the Authorizing Ordinance. The City and the
Trustee have no responsibility or obligation to the Participants or the Beneficial owners
with respect to (a) the accuracy of any records maintained by DTC or any Participant; (b)
the payment by any Participant of any amount due to any Beneficial owner in respect of
the principal of and interest on the Bonds; (c) the delivery or timeliness of delivery by any
Participant of any notice to any Beneficial owner which is required or permitted under
the terms of the Authorizing Ordinance to be given to owners of Bonds; or (d) other
action taken by DTC or Cede & Co. as owner of the Bonds.
Generally. The Bonds are dated, mature, bear interest and interest is payable on the Bonds as
set forth on the cover page hereof.
The Bonds are issuable in the form of registered Bonds without coupons in the denomination of
$5,000 each or any integral multiple thereof, interchangeable in accordance with the provisions
of the Authorizing Ordinance. In the event any Bond is mutilated, lost or destroyed, the City
shall, if not then prohibited by law, execute and the Trustee may authenticate a new Bond in
accordance with the provisions therefor in the Authorizing Ordinance.
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 registration, but any
owner of any Bond requesting any such registration 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 therewith
shall be paid by the City. Neither the City nor the Trustee shall 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.
568429 -v 1 5
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 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 date 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 a legal
holiday or a day on which banking institutions 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 with 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 maturity or date fixed for redemption.
Redemption. The Bonds shall be subject to optional and mandatory sinking fund redemption as
follows:
(1) Optional Redemption. The Bonds maturing on May 1, 2017 and thereafter are
subject to redemption at the option of the City from funds from any source, in whole at any
time or in part on any interest payment date on and after May 1, 2015 (the Bonds maturing on
May 1 2016 are not subiect to redemption prior to maturity), at a redemption price equal to the
principal amount being redeemed plus accrued interest to the redemption date. If fewer than
all of the Bonds shall be called for redemption, the particular maturities of the Bonds to be
redeemed shall be selected by the City in its discretion. If fewer than all of the Bonds of any
one maturity shall be called for redemption, the particular Bonds or portion thereof to be
redeemed from such maturity shall be selected by lot by the Trustee.
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568429 -v1 6
(2) Mandatory Sinking Fund Redemption. To the extent not previously redeemed, the
Bonds are subject to mandatory sinking fund redemption by lot in such manner as the' Trustee
shall determine, on the dates and in the amounts set forth below, at a redemption price equal to
the principal amount being redeemed plus accrued interest to the date of redemption:
Bonds Maturing May 1, 2025
Redemption Dates Principal Amounts
May 1, 2021 $605,000
May 1, 2022 635,000
May 1, 2023 660,000
May 1, 2024 690,000
May 1, 2025 (Maturity) 720,000
The provisions for mandatory sinking fund redemption of the Bonds are subject to the
provisions of the Authorizing Ordinance which permit the City to receive credit for Bonds
previously redeemed or for Bonds acquired by the City and surrendered to the Trustee.
In case any outstanding Bond is in a denomination greater than $5,000, each $5,000 of face
value of such Bond shall be treated as a separate Bond of the denomination of $5,000.
The Trustee shall give notice of the call for redemption by first class mail placed in the mail
not less than thirty (30), nor more than sixty (60) days prior to the date fixed for redemption,
to the registered owner of any Bond called for redemption, addressed to such registered
owner's registered address. After the date for redemption no further interest shall accrue on
any Bond called for redemption if funds for their redemption have been deposited with the
Trustee as provided in the Authorizing Ordinance.
Notwithstanding the above, so long as the Bonds are issued in book -entry only form, if fewer
than all the Bonds of an issue are called for redemption, the particular Bonds to be redeemed
will be selected pursuant to the procedures established by DTC. So long as the Bonds are
issued in book -entry only form, notice of redemption will be given only to Cede & Co., as
nominee for DTC. The Trustee will not give any notice of redemption to the Beneficial
Owners of the Bonds.
Purpose for Bonds. The purpose for issuing the Bonds is to finance the costs of improvements
to the System (the "Project "), refund the Series 2004 Note (the "Refunding "), fund a debt
service reserve and pay expenses of issuing the Bonds.
The Project will include one or more of the following betterments and improvements (or
portion thereof) on an as needed basis: (a) Clearwater Administration Building; (b)
engine /generator building improvements - Fourche Creek Waste Water Treatment Plant; (c)
Adams Field Wastewater Treatment Plant Improvements; (d) new sewer mains; (e) Fourche
Creek Bar Screen improvements; (f) land and easement costs for the collection system Phase
568429 -v1 7
V; ; and (gh) such other betterments and
improvements as the Committee shall deem necessary and appropriate.
The Series 2004 Note was issued to finance the costs of sewer improvements to the System.
The Series 2004 Note is in the outstanding amount of $2,998,853.50 and will be refunded on a
current basis. The Series 2004 Note will be redeemed in the amount of outstanding principal
and accrued interest on May 26, 2005.
The sources and uses of funds to accomplish the Project and the Refunding are estimated by
the City are as follows:
SOURCES
Par Amount of Bonds
Reoffering Premium
Accrued Interest from 5/01/2005 to 5/26/2005
Total Sources
USES
Costs of Issuance (including Underwriter's
discount, Bond Insurance, and Surety
Bond Premiums)
Deposit to Project Construction Fund
Bank of America Note Pay Off
Deposit to Bond Fund
Rounding Amount
Total Uses
$10,000,000.00
13,079.00
28,160.94
$10,041,239.94
$ 195,955.80
6,816,000.00
3,000,583.80
28,160.94
326.07
$10,041,239.94
The payment of Underwriter's discount and the costs of issuing the Bonds relating to the
payment of professional fees will be contingent on the Bonds being issued. See
MISCELLANEOUS, Underwriting for a description of the Underwriter's discount. The City
will deposit the principal amount of the Bonds less Underwriter's discount, debt service
reserve deposit, refunding deposit and certain issuance costs, into an account of the City and
will disburse such amount, including earnings thereon, in payment of Project costs, paying
necessary expenses incidental thereto and paying expenses of issuing the Bonds.
Disbursements shall be on the basis of checks which shall contain at least the following
information: the person to whom payment is being made; the amount of the payment; and the
purpose by general classification of the payment. For a description of how the Bond proceeds
are to be invested pending use and the provisions governing those investments, see THE
AUTHORIZING ORDINANCE, Investments.
Security. The Bonds are not general obligations of the City but are special obligations, secured
by a pledge of net Revenues. The Bonds are secured by a lien on net Revenues senior to the
lien on net Revenues securing the Subordinate Bonds. There is a debt service reserve securing
568429 -v1 8
the Bonds in an amount equal to the lesser of (a) 75 % of the maximum annual principal and
interest requirements on the Bonds or (b) 10% of the proceeds of the Bonds (excluding- accrued
interest but including Underwriter's discount), (the "Required Level") or, in lieu thereof, a
Surety Bond equal to the Required Level. The Bonds are secured under the Authorizing
Ordinance. For a summary of the terms of the Authorizing Ordinance, see THE
AUTHORIZING ORDINANCE. The City may issue additional bonds on a parity of security
with the Bonds. See THE AUTHORIZING ORDINANCE, Parity Bonds.
The Required Level for the Bonds will be met by a Surety Bond issued by MBIA Insurance
Corporation ( "MBIA" or the "Issuer ") and the City and the Trustee will enter into a Financial
Guaranty Agreement (the "Agreement ") with MBIA with respect thereto. The Surety Bond is
an unconditional and irrevocable guaranty of MBIA to pay to the Trustee amounts requested by
the Trustee (not to exceed the amount of the Surety Bond) necessary to pay principal of or
interest on the Bonds if amounts available in the Bond Fund are insufficient therefor on any
principal or interest payment date under the Authorizing Ordinance. The Trustee must first
apply all moneys available in the Redemption Fund to the payment of principal of or interest
on the Bonds prior to requesting payment under the Surety Bond. Payments under the Surety
Bond will be made upon the later of (i) three days after the receipt of the Trustee's request, or
(ii) the principal or interest payment date when payment is due on the Bonds.
Under the Agreement, the City is obligated to repay MBIA for any payments made under the
Surety Bond, and such repayment shall operate to restore the amount of coverage of the Surety
Bond to the extent of such repayment (but not to exceed the original amount of the Surety
Bond). In order to secure the City's repayment obligations to MBIA, the City has granted a
lien on the Revenues of the System subordinate only to the lien and security interest granted to
the Trustee under the Authorizing Ordinance. Under the Agreement, MBIA is also subrogated
to the rights of the Owners of the Bonds to the extent of payments made under the Surety
Bond, but such rights of subrogation are subordinate to the Owner's rights to receive regularly
scheduled payments of principal of and interest on the Bonds.
Under the Authorizing Ordinance, the City is required to restore the Surety Bond's coverage to
the Required Level from first available revenues from the Revenues of the System.
The Surety Bond expires on the earlier (i) May 1, 2025, or (ii) the date on which the City has
made all payments required to be made on the Bonds under the Authorizing Ordinance.
BOND INSURANCE
The following information has been furnished by MBIA Insurance Corporation ( "MBIA ") for
use in this Official Statement. Reference is made to Appendix B for a specimen of MBIA's
policy.
MBIA's policy unconditionally and irrevocably guarantees the full and complete payment
required to be made by or on behalf of the Issuer to the Paying Agent or its successor of an
amount equal to (i) the principal of (either at the stated maturity or by an advancement of
568429 -vi 9
maturity pursuant to a mandatory sinking fund payment) and interest on, the Bonds as such
payments shall become due but shall not be so paid (except that in the event of any acceleration
of the due date of such principal by reason of mandatory or optional redemption or acceleration
resulting from default or otherwise, other than any advancement of maturity pursuant to a
mandatory sinking fund payment, the payments guaranteed by MBIA's policy shall be made in
such amounts and at such times as such payments of principal would have been due had there
not been any such acceleration); and (ii) the reimbursement of any such payment which is
subsequently recovered from any owner of the Bonds pursuant to a final judgment by a court
of competent jurisdiction that such payment constitutes an avoidable preference to such owner
within the meaning of any applicable bankruptcy law (a "Preference ").
MBIA's policy does not insure against loss of any prepayment premium which may at any time
be payable with respect to any Bonds. MBIA's policy does not, under any circumstance,
insure against loss relating to: (i) optional or mandatory redemptions (other than mandatory
sinking fund redemptions); (ii) any payments to be made on an accelerated basis; (iii) payments
of the purchase price of Bonds upon tender by an owner thereof; or (iv) any Preference
relating to (i) through (iii) above. MBIA's policy also does not insure against nonpayment of
principal of or interest on the Bonds resulting from the insolvency, negligence or any other act
or omission of the Paying Agent or any other paying agent for the Bonds.
Upon receipt of telephonic or telegraphic notice, such notice subsequently confirmed in writing
by registered or certified mail, or upon receipt of written notice by registered or certified mail,
by MBIA from the Paying Agent or any owner of a Bond the payment of an insured amount
for which is then due, that such required payment has not been made, MBIA on the due date of
such payment or within one business day after receipt of notice of such nonpayment,
whichever is later, will make a deposit of funds, in an account with U.S. Bank Trust National
Association, in New York, New York, or its successor, sufficient for the payment of any such
insured amounts which are then due. Upon presentment and surrender of such Bonds or
presentment of such other proof of ownership of the Bonds, together with any appropriate
instruments of assignment to evidence the assignment of the insured amounts due on the Bonds
as are paid by MBIA, and appropriate instruments to effect the appointment of MBIA as agent
for such owners of the Bonds in any legal proceeding related to payment of insured amounts on
the Bonds, such instruments being in a form satisfactory to U.S. Bank Trust National
Association, U.S. Bank Trust National Association shall disburse to such owners or the Paying
Agent payment of the insured amounts due on such Bonds, less any amount held by the Paying
Agent for the payment of such insured amounts and legally available therefor.
MBIA
MBIA Insurance Corporation ( "MBIA ") is the principal operating subsidiary of MBIA Inc., a
New York Stock Exchange listed company (the "Company "). The Company is not obligated
to pay the debts of or claims against MBIA. MBIA is domiciled in the State of New York and
licensed to do business in and subject to regulation under the laws of all 50 states, the District
of Columbia, the Commonwealth of Puerto Rico, the Commonwealth of the Northern Mariana
Islands, the Virgin Islands of the United States and the Territory of Guam. MBIA has three
568429 -v1 10
branches, one in the Republic of France, one in the Republic of Singapore and one in the
Kingdom of Spain. New York has laws prescribing minimum capital requirements, � limiting
classes and concentrations of investments and requiring the approval of policy rates and forms.
State laws also regulate the amount of both the aggregate and individual risks that may be
insured, the payment of dividends by MBIA, changes in control and transactions among
affiliates. Additionally, MBIA is required to maintain contingency reserves on its liabilities in
certain amounts and for certain periods of time.
MBIA does not accept any responsibility for the accuracy or completeness of this Official
Statement or any information or disclosure contained herein, or omitted herefrom, other than
with respect to the accuracy of the information regarding the policy and MBIA set forth under
the heading "Bond Insurance". Additionally, MBIA makes no representation regarding the
Bonds or the advisability of investing in the Bonds.
The Financial Guarantee Insurance Policies are not covered by the Property/Casualty Insurance
Security Fund specified in Article 76 of the New York Insurance Law.
MBIA Information
The following document filed by the Company with the Securities and Exchange Commission
(the "SEC ") are incorporated herein by reference:
(1) The Company's Annual Report on Form 10 -K for the year ended
December 31, 2004; and
Any documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the
Exchange Act of 1934, as amended, after the date of the Company's most recent Quarterly
Report on form 10 -Q, and prior to the termination of the offering of the Bonds offered hereby
shall be deemed to be incorporated by reference in this Official Statement and to be a part
hereof. Any statement contained in a document incorporated or deemed to be incorporated by
reference herein, or contained in this Official Statement, shall be deemed to be modified or
superseded for purposes of this Official Statement to the extent that a statement contained
herein or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such statement
so modified or superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Official Statement.
The Company files annual, quarterly and special reports, information statements and other
information with the SEC under File No. 1 -9583. Copies of the SEC filings (including (1) the
Company's Annual Report on Form 10 -K for the year ended December 31, 2004, and (2) the
Company's Quarterly Reports on Form 10 -Q for the quarters ended March 31, 2004, June 30,
2004 and September 30, 2004) are available (i) over the Internet at the SEC's web site at
http: / /www.sec.gov; (ii) at the SEC's public reference room in Washington D.C.; (iii) over the
Internet at the Company's web site at http: / /www.mbia.com; and (iv) at no cost, upon request
568429 -v1 11
to MBIA Insurance Corporation, 113 King Street, Armonk, New York 10504. The telephone
number of MBIA is (914) 273 -4545.
As of December 31, 2003, MBIA had admitted assets of $9.9 billion (audited), total liabilities
of $6.2 billion (audited), and total capital and surplus of $3.7 billion (audited) determined in
accordance with statutory accounting practices prescribed or permitted by insurance regulatory
authorities. As of December 31, 2004 MBIA had admitted assets of $10.3 billion (unaudited),
total liabilities of $6.9 billion (unaudited), and total capital and surplus of $3.3 billion
(unaudited) determined in accordance with statutory accounting practices prescribed or
permitted by insurance regulatory authorities.
Financial Strength Ratings of MBIA
Moody's Investors Service, Inc. rates the financial strength of MBIA "Aaa."
Standard & Poor's, a division of The McGraw -Hill Companies, Inc. rates the financial strength
of MBIA "AAA."
Fitch Ratings rates the financial strength of MBIA "AAA."
Each rating of MBIA should be evaluated independently. The ratings reflect the respective
rating agency's current assessment of the creditworthiness of MBIA and its ability to pay
claims on its policies of insurance. Any further explanation as to the significance of the above
ratings may be obtained only from the applicable rating agency.
The above ratings are not recommendations to buy, sell or hold the Bonds, and such ratings
may be subject to revision or withdrawal at any time by the rating agencies. Any downward
revision or withdrawal of any of the above ratings may have an adverse effect on the market
price of the Bonds. MBIA does not guaranty the market price of the Bonds nor does it
guaranty that the ratings on the Bonds will not be revised or withdrawn.
THE CITY AND THE COUNTY
General. The City is organized under the laws of the State of Arkansas as a city of the first
class. It is the capital of the State and was chartered in 1835. Through annexation the area of
the City has grown from 111.43 square miles in 1990 to 117.14 square miles in 1996 to 122.99
square miles in 2005.
The City is the largest city in Arkansas as well as the governmental, economic, cultural, and
financial center of the State. It is nearly equidistant from the four comers of the State and is
the county seat of Pulaski County (the "County "). Within a radius of 500 miles from the City
are located 24 metropolitan areas and substantial portions of 17 states containing more than one
third of the nation's population. Major cities near the City include St. Louis, 360 miles
northeast; Kansas City, 400 miles northwest; Atlanta, 520 miles east; New Orleans, 440 miles
568429 -v1 12
south; Oklahoma City, 350 miles northwest; Dallas, 310 miles southwest; and Memphis, 135
miles northeast.
Government. The City operates under the City Manager /City Board form of municipal
government. It has an 11- member Board of Directors, including the Mayor, with seven
Directors elected from wards and three Directors elected citywide. The Mayor's position is a
citywide elected position and must be elected by at least 40% of the votes cast. If no candidate
for mayor receives 40% or more of the votes cast, the two candidates receiving the most votes
will face each other in a run -off election. All Directors and the Mayor serve four -year terms.
The current Mayor and members of the Board of Directors are as follows:
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568429 -v1 13
Term (Expires
Name, Office
December 311
Occupation
Jim Dailey, Mayor
2006
Mayor, City of Little Rock
Barbara Graves, Vice Mayor and At Large
2008
Owner, Barbara Graves Intimate
Director, Position 9
Fashions
Joan Adcock, At -large Director, Position 10
2008
Project Director, Hope Center,
Inc.
Brad Cazort, Ward 4
2008
Attorney, Cazort Law Firm
Willie Hinton, Ward 2 Director
2006
Vocational Trade Instructor,
Arkansas School for the Deaf
Michael Keck, Ward 5 Director
2006
Director of Employee Relations &
Advocacy, St. Vincent Health
System
Dean Kumpuris, At -large Director, Position 8
2008
Physician, Kumpuris, Davis &
Metrailer
Stacey Hurst, Ward 3 Director
2006
Tipton & Hurst
Johnnie Pugh, Ward 1 Director
2006
Retired
Genevieve Stewart, Ward 6 Director
2006
Self Employed
B J. Wyrick, Ward 7 Director
2006
Executive Call Center Manager,
State of Arkansas
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568429 -v1 13
The principal executive officers of the City are:
Name and Office
Bruce Moore, City Manager
5 -Year
Employment History
Little Rock City Manager
2002 -2005; Assistant City
Manager 1999 -2002
Education
MPA Arkansas State -1994, BS-
Henderson State University-1989
Thomas M. Carpenter, Little Rock City Attorney JD, 1977, University of Arkansas
City Attorney School of Law, Fayetteville; BA
1974, Hendrix College, Conway,
AR
Robert K. Biles Finance Director and BSBA Accounting from Pittsburg
Finance Director & Treasurer Treasurer (2001- present), State University - 1977
Director of Support
Services, Bryan Texas
(1995 -2001)
The City Manager and the City Attorney are appointed by the Board of Directors; the Finance
Director is employed by the City Manager.
The City provides a broad range of municipal services under the auspices of the City Manager,
including: Police, Fire, Parks and Recreation, Finance, Human Resources, City Clerk,
Housing and Neighborhood Programs and Planning and Development, Public Works, General
Services, and Management Support. Boards and commissions have primary responsibility for
the operation of the City's Airport, Wastewater Utility, and Emergency Medical Service. The
water utilities of the City have been conveyed for operation by a joint board known as Central
Arkansas Water consisting of the former Little Rock and North Little Rock Water Utilities.
Employees. The City operates a full service Human Resources Department under the
leadership of Don Flegal, Human Resources Manager. There are presently 2,248 employees,
363 of whom are part -time employees. City workers are represented by a number of trade
unions. The primary ones are the American Federation of State, County and Municipal
Employees, representing blue - collar employees; the Fraternal Order of Police, representing
police officers; and the International Association of Fire Fighters, representing fire department
employees.
Police and Fire. Little Rock's Interim Chief of Police is Carlos Corbin, who heads a
uniformed force of 520 at 4 stations. The Fire Chief is Rhoda Mae Kerr. There are more than
400 uniformed members in the fire department and 20 stations.
Airport. The Little Rock National Airport is the 79th largest commercial airport in the nation
(out of 439). In 2000, 2.6 million passengers traveled through this facility. The airport
underwent $190 million in improvements during the 1990s; presently underway is another $30
million in improvements for the terminal building and parking areas. Seven airlines and a
568429 -v1 14
variety of private charter services operate at the Airport. It has three runways and twelve gates
(ten with jetways).
Port. The Little Rock Port handles rail and barge cargo that is shipped in or out of the area. In
2000, one billion pounds of cargo were handled at the port. The port operates its own
railroad, services 40 major industries in the Port Industrial Park, has an industrial harbor,
switches 5,500 railroad cars annually, and its connections include the deep water ports along
the Gulf Coast, allowing for the export of products to the markets worldwide. The port has a
designated Foreign Trade Zone.
Population. The following chart sets out population data for the City, the County, and the
State:
Source: U.S. Bureau of Census and Arkansas Institute for Economic Advancement.
*Estimated by UALR Institute for Economic Advancement
Land Use. The City's Planning and Development Department reports the following use of
buildings and structures in the City for 2004:
Number
Percentage M
Pulaski
State of
Year
Little Rock
County
Arkansas
2005
187,748*
367,299*
2,763,616*
2000
183,133
361,474
2,673,400
1990
175,795
349,660
2,350,725
1980
159,151
340,613
2,286,435
1970
132,483
287,189
1,923,322
1960
107,813
242,980
1,786,272
Source: U.S. Bureau of Census and Arkansas Institute for Economic Advancement.
*Estimated by UALR Institute for Economic Advancement
Land Use. The City's Planning and Development Department reports the following use of
buildings and structures in the City for 2004:
Number
Percentage M
Type of Use
56,765
62.92%
Single Family
14,516
16.09%
Accessory Building
3,790
4.20%
Multi- Family
2,680
2.97%
Commercial
2,011
2.23%
Mobile Homes
1,523
1.69%
Public
1,121
1.24%
Manufacturing /Industrial
952
1.06%
Office
6,736
7.47%
Others
100
0.11%
Unknown
28
0.03%
Residential Commercial
568429 -v1 15
Public Schools. Enrollment in the Little Rock School District is reported by the Arkansas
Department of Education as follows:
Schnnl Year
2004 -2005
2003 -2004
2002 -2003
2001 -2002
2000 -2001
Enrollment
24,424
24,392
24,501
24,460
24,462
Higher Education. Enrollment in institutions of higher education in the City is reported by the
Arkansas Department of Higher Education for the Spring 2005 semester as follows:
Institution
Arkansas Baptist College
Philander Smith College
Shorter College
University of Arkansas at Little Rock
University of Arkansas Medical Sciences
Pulaski Technical College
*Enrollment figures for these institutions not reported.
Enrollment
11,018
2,158
7,947
*
*
Construction Permits. Commercial and residential construction in the City of Little Rock is
shown below:
Number of
Year
Permits Issued
Total Cost
2004
949
$349,913,515
2003
821
$345,425,665
2002
649
$181,954,090
2001
591
$160,609,245
2000
662
$274,501,956
Source: City of Little Rock
568429 -v1 16
Retail Sales. Retail sales (in thousands) in the City are as follows:
Source: Survey of Buying Power, Sales and Marketing Management.
Principal Employers. The principal employers in the County are identified below:
2004
$ 330,649
285,759
384,624
249,065
869.047
$2,119,144
Number of
2000
2001
2002
2003
Food /Beverage
$ 44,834
$ 303,372
$ 305,506
$ 309,967
Food Service /Drinking
2.
University of Arkansas for Medical Sciences
Medical /Education
Estab.
311,406
272,900
274,059
270,116
General
310,531
433,274
406,592
391,961
Furniture
233,104
247,033
226,902
246,124
Motor Vehicle
910,215
955,159
929,527
832,735
Total
$2,010,090
$2,211,738
$2,142,586
$2,050,902
Source: Survey of Buying Power, Sales and Marketing Management.
Principal Employers. The principal employers in the County are identified below:
2004
$ 330,649
285,759
384,624
249,065
869.047
$2,119,144
Number of
Source: Greater Little Rock Chamber of Commerce.
568429 -v1 17
Employer
Product /Service
Employees
I.
Local, State and Federal Government
Government (including school districts
49,868
and LRAFB)
2.
University of Arkansas for Medical Sciences
Medical /Education
8,500
3.
Baptist Health
Medical Services
7,000
4.
Axciom
Information Technology
4,388
5.
St. Vincent Infirmary Medical Center
Medical Services
3,500
6.
Entergy
Utility (Electric)
2,881
7.
Central Arkansas Veterans Healthcare
Medical Services
2,785
8.
Alltel Corporation
Telecommunications
2,734
9.
Southwestern Bell Telephone
Utility (Telephone)
2,613
10.
Arkansas Children's Hospital
Medical Services
2,503
11.
Dillard Department Stores
Department Stores
2,400
Source: Greater Little Rock Chamber of Commerce.
568429 -v1 17
Employment. The Arkansas Employment Security Division has provided the following data
about the labor force and rate of unemployment for the Little Rock/North Little Rock MSA:
Unemployment
Year
Labor Force
Employed
Unemployed
Rate
2004
323,300
306,850
16,450
5.1%
2003
305,625
289,450
16,175
5.3%
2002
313,600
299,375
14,225
4.5%
2001
305,275
293,125
12,150
4.0%
2000
307,475
297,050
10,425
3.4%
County Economic Data. Per capita personal income estimates for the County are as follows:
Source: Bureau of Economic Analysis, Washington, D.C.
*Most recent year available.
Average
Annual Growth
Total personal income estimates for the County are as follows:
2.96%
3.75%
5.44%
3.29%
Total Personal Income Average Annual
Year
Per Capita
Growth
Personal Income
Year
n(I $000)
2002*
$ 32,072
2001
$ 31,149
2000
$ 30,021
1999
$ 28,472
1998
$ 27,565
Source: Bureau of Economic Analysis, Washington, D.C.
*Most recent year available.
Average
Annual Growth
Total personal income estimates for the County are as follows:
2.96%
3.75%
5.44%
3.29%
Total Personal Income Average Annual
Year
n(I $000)
Growth
2002*
$11,660,859
3.29%
2001
$11,288,966
3.96%
2000
$10,858,731
5.84%
1999
$10,258,743
3.69%
1998
$ 9,893,300
Source: Bureau of Economic Analysis, Washington, D.C.
*Most recent year available.
568429 -v1 18
Total real and personal property assessments in the County are as follows:
Tax Year
Real Estate
2004
$3,190,525,089
2003
2,973,350,539
2002
2,791,368,048
2001
2,698,654,440
2000
2,629,897,304
Personal
$1,106,577,990
1,076,221,180
1,047,149,735
1,033,838,880
986,927,550
Source: Arkansas Assessment Coordination Department.
Public Service
Real Estate
$49,251,810
50,356,697
48,133,053
46,709,850
40,345,034
Rihlir CPrvirp
Personal
$188,715,050
180,208,137
172,459,728
168,243,020
158,530,537
Total
$4,535,069,939
4,280,136,553
4,059,110,564
3,947,446,190
3,815,700,425
Litigation. The City is a party to multiple matters of litigation and regulatory proceedings
arising from the City's various governmental activities. No such pending litigation or
regulatory proceedings directly impact on the System or the Project except as hereinafter
described under THE SYSTEM, Litigation. There are no lawsuits or regulatory proceedings
pending or, to the knowledge of the City, threatened against the City, in which claims of
damage are made which, individually or in the aggregate, create a financial exposure which
would substantially impair the financial solvency of the City.
A lawsuit was filed in 2001 by Nora Harris as a second challenge to the City's use of
Amendment 65 revenue bonds to purchase park lands and recreational equipment within the
City. See Nora Harris v. City of Little Rock, Arkansas, Pulaski County Ch. Ct. OT2001 -2068
(relating to the City's $16,405,000 Capital Improvement Revenue Bonds (Parks and Recreation
Projects), Series 1998A). The Plaintiff contends that the City has violated Amendment 65 by
using tax proceeds for the repayment of the bonds. The present suit is apparently based upon
collateral language in the separate opinions of the Arkansas Supreme Court which upheld 7 -0
the City's authority to issue the bonds. Nora Harris v. City of Little Rock, 344 Ark. 95, 40
S.W.3d 214 (2001). The City intends to defend the suit vigorously. The Plaintiff seeks a
declaration that the bonds are illegal and a return to the City's general fund of any tax proceeds
found to have been used to make debt service payments on the bonds. If the Plaintiff is
successful, a collateral effect could be a reduction in the budget for the City's Parks &
Recreation Department and the now separate Zoo Department. The City does not believe that
this litigation is material to a decision to purchase or sell the Bonds.
THE SYSTEM
Generall. Before 1935 the System consisted of a series of discontinuous neighborhood systems
discharging partially treated sewage into neighborhood septic tanks or directly into open
streams and ditches. The sewers were maintained in part by the City Street Department and in
part by neighborhood volunteers.
In May 1935, the City created the System and, pursuant to Act No. 132 of 1933, appointed the
City's first Sewer Committee (the "Committee "). Initially the Committee was charged with the
responsibility for administering a Public Works Administration grant made to the City for the
568429 -v1 19
purpose of constructing a series of trunk sewers for transporting and discharging collected
wastes into the Arkansas River. The undertaking was the City's first major capital project and
was completed in two years at a cost of $1,640,000. The new system provided the first central
sewer collection facilities in the City's history.
In the 70 years since its creation the System has been operated and improved exclusively from
the collection of user charges and fees, supplemented by Federal grants for some capital
improvements. During these years, the service area has been greatly expanded such that at
present it includes over 122 square miles containing approximately 1,229 miles of public
sewers serving approximately 64,364 homes and businesses.
The facilities of the System include 26 remote, unattended pumping stations and two secondary
treatment plants discharging into the Arkansas River. The Adams Field Plant, constructed in
1961, has a capacity of 36 million gallons per day ( "MGD ") and utilizes the activated sludge
method of treatment. The Fourche Creek Plant, constructed in 1983, has a design capacity of
16 MGD and also utilizes the activated sludge method of treatment. Sewage sludge from both
plants is processed at the Fourche Creek plant in anaerobic digesters and resulting methane gas
is used as a fuel for electric generation.
The System has received awards from the Environmental Protection Agency ( "EPA "), the
Association of Metropolitan Sewerage Agencies ( "AMSA "), which is a national association of
municipal authorities operating sewer systems throughout the United States, and other state and
local organizations. Beginning in 1989, the Utility has been awarded the EPA Region 6,
Regional Administrators Environmental Excellence Award on Beneficial Sewerage Sludge Use -
Regional Award, Pretreatment Program Implementation, and Beneficial Use of Municipal
Wastewater Sludge -State Award. In 1990 thru 2000, LRWU was awarded the AMSA Peak
Performance Gold Award for achieving 100% compliance with LRWU's National Pollutant
Discharge Elimination System ( "NPDES ") permits. In 1991, the Utility was awarded the EPA
Region 6 Administrators Environmental Excellence Award for Exemplary Implementation of
Industrial Pretreatment Program and the EPA Region 6, Regional Environmental "Compliance
Plus" Recognition Award for Maintaining Regulatory Compliance and Implementing
Innovative Solutions to Environmental /Public Health Problems. In 1992, LRWU received an
EPA Region 6 Certificate of Appreciation in Recognition of the City's Contribution to the
Region's Beneficial Sewerage Sludge Use Program and the City's Leadership in Promoting the
Beneficial Use of Sludge. The Utility was awarded the Regional Administrators
Environmental Excellence Award in Excellent Wastewater Treatment Operations and
Maintenance and the AMSA Public Information and Education Award to Recognize the
Outstanding Leadership in the Protection and Improvement of our Nation's Water Quality for
Little Rock Wastewater Utility's Captain Sewer Water Conservation Education Program in
1993. In 1994, LRWU received the National Association of Professional Environmental
Communicators Environmental Education Merit Award for the Captain Sewer Environmental
Education Program and the first of many United Way Awards of Recognition (1995, 1997,
1998, 2001). The Utility received the Arkansas Department of Labor Accumulative Safety
Award in 1995 for the dates of July 23, 1993 to September 30, 1995. In 1997, LRWU
received the Water Environment Federation Public Education Award for Outstanding
568429 -v1 20
Volunteer Commitment and Inspirational Leadership for Clear Water for the 2151 Century. In
2003, the Utility received the AMSA Peak Performance Gold Award for achieving 100%
compliance with LRWU's NPDES permits and Best Large Partnership Volunteers in Public
Schools.
Management. The System is governed by the Committee which is comprised of five residents
of the City who are appointed by the City Board of Directors. The members serve staggered
terms of four years each and may be reappointed to the Committee. The following are the
names, occupations, and years their terms expire of the persons comprising the Committee:
Name
Stuart S. Mackey, Chairman
Patrick D. Miller, Vice Chairman
Charles G. Goss, Secretary
James R. Pender, Member
Dale J. Wintroath, Member
Occupation
Real Estate
Investment Counselor
Retired
Attorney
Retired
Year Term Expires
(August 1
2006
2007
2008
2005
2005
Key Employees. The System employees 236 persons. The following are the names and ages
of the key employees of the System and how long each has served in such capacity:
Name
Position
Age
Length Served
Reggie A. Corbitt, P.E.
Chief Executive Officer
57
20 Years
James A. Barham, PHR
Manager of Finance and Administration
55
30 Years
Rick L. Barger, P.E.
Manager of Operations
52
25 Years
Thad L. Luther, P.E.
Manager of Engineering
49
18 Years
Mack M. Vought
Manager of Maintenance
51
20 Years
Don F. Hamilton
General Counsel
68
15 Years
Users. As of December 2004, there were approximately 64,364 sewer users, of which 567
were located outside the City limits. The average number of sewer users by category for each
of the past five (5) years is as follows:
Year
Residential
Commercial
Industrial
Other*
Total
2000
56,337
5,632
54
305
62,328
2001
56,747
5,691
56
298
62,792
2002
56,978
5,849
55
302
63,184
2003
57,245
5,976
54
396
63,671
2004
57,866
6,028
56
414
64,364
*Municipalities, schools and other public entities.
568429 -v1 21
No user of the System accounts for more than 5 % of gross revenues of the System. The
following are the largest users of the System:
User
U of A Medical Science
Odom Sausage
Baptist Medical Center
City Of Little Rock
Central Arkansas Water
City of Shannon Hills
Coca Cola Bottling
V.A. Hospitals
St. Vincents Hospitals
Coleman Dairy
*Note: Revenues shown are for assessments levied only, which are based upon volumetric & availability charges.
Revenues for sewer surcharges, connection fees and miscellaneous charges are not included. Percentages shown
reflect a comparison of individual customer's assessments to total revenue from assessments of $281,992,505.
Litigation. There is no material litigation pending or threatened against the System except as
described below.
The Committee is a defendant in a lawsuit filed in the U.S. District Court on January 13, 2000
by the Sierra Club (the "Plaintiff "). The Plaintiff and the Committee entered into a written
settlement agreement (the "Settlement Agreement ") dated September 12, 2001 which
settlement was subsequently approved by the Court pursuant to a judgment filed on November
16, 2001, subject to fulfillment of certain obligations by the Committee. The final judgment
against the Committee was entered on December 13, 2002 and the judgment has been paid in
full. However, pursuant to the Settlement Agreement, the Court retained jurisdiction for the
purpose of enforcing the non - monetary provisions of the Settlement Agreement, which include
certain reporting, notice and maintenance procedures as well as completing a study addressing
sanitary sewer overflows in the System with the goal of eliminating them. With the exception
of selection of a site for the proposed Little Maumelle Treatment facility, the Committee is of
the opinion that the utility is generally in compliance with the provisions of the Settlement
Agreement. In the event further delays occur in selection of a site for the Little Maumelle
plant, further court action could result as a consequence. It is anticipated that final site
selection will occur at the April 2005 meeting of the Committee.
On February 11, 2004, staff representatives of the Arkansas Department of Environmental
Quality ( "ADEQ ") and Little Rock Wastewater Utility ( "LRWU ") met to discuss provisions in
the Sierra Club Settlement Agreement. Following further document review by ADEQ and the
United States Environmental Protection Agency ( "USEPA "). LRWU, USEPA and ADEQ
have discussed a possible further agreement concerning compliance with certain provisions of
the Clean Water Act on issues not covered by the prior Settlement Agreement. ADEQ has
568429 -v1 22
Percent of
2004 Revenue
Average Monthly
Total
from
Revenue From
Revenue From
Assessments*
Assessments
Assessments*
286,042
23,837
0.99%
274,040
22,835
0.95%
233,454
19,455
0.81%
219,303
18,275
0.76%
184,818
15,402
0.64%
155,749
12,979
0.54%
131,038
10,920
0.45%
130,769
10,897
0.45%
128,115
10,676
0.44%
111,988
9,332
0.39%
*Note: Revenues shown are for assessments levied only, which are based upon volumetric & availability charges.
Revenues for sewer surcharges, connection fees and miscellaneous charges are not included. Percentages shown
reflect a comparison of individual customer's assessments to total revenue from assessments of $281,992,505.
Litigation. There is no material litigation pending or threatened against the System except as
described below.
The Committee is a defendant in a lawsuit filed in the U.S. District Court on January 13, 2000
by the Sierra Club (the "Plaintiff "). The Plaintiff and the Committee entered into a written
settlement agreement (the "Settlement Agreement ") dated September 12, 2001 which
settlement was subsequently approved by the Court pursuant to a judgment filed on November
16, 2001, subject to fulfillment of certain obligations by the Committee. The final judgment
against the Committee was entered on December 13, 2002 and the judgment has been paid in
full. However, pursuant to the Settlement Agreement, the Court retained jurisdiction for the
purpose of enforcing the non - monetary provisions of the Settlement Agreement, which include
certain reporting, notice and maintenance procedures as well as completing a study addressing
sanitary sewer overflows in the System with the goal of eliminating them. With the exception
of selection of a site for the proposed Little Maumelle Treatment facility, the Committee is of
the opinion that the utility is generally in compliance with the provisions of the Settlement
Agreement. In the event further delays occur in selection of a site for the Little Maumelle
plant, further court action could result as a consequence. It is anticipated that final site
selection will occur at the April 2005 meeting of the Committee.
On February 11, 2004, staff representatives of the Arkansas Department of Environmental
Quality ( "ADEQ ") and Little Rock Wastewater Utility ( "LRWU ") met to discuss provisions in
the Sierra Club Settlement Agreement. Following further document review by ADEQ and the
United States Environmental Protection Agency ( "USEPA "). LRWU, USEPA and ADEQ
have discussed a possible further agreement concerning compliance with certain provisions of
the Clean Water Act on issues not covered by the prior Settlement Agreement. ADEQ has
568429 -v1 22
requested that a Consent Administrative Order ( "CAO") be issued addressing certain issues
including, but not limited to, maintenance practices, secondary treatment bypasses at the
Adams Field Wastewater Treatment Plant, administrative requirements, design and
performance provisions, monitoring, measurement and program modifications, sanitary sewer
overflow plan, system evaluation and capacity assurance plan, audits, communications and
money penalties for failure of compliance with performance and deadlines based on civil
penalty of $100 to $500 per day, depending upon the duration of any violation of the proposed
CAO. At this time discussions concerning finalization of the CAO are continuing and it is
anticipated that it will be finalized and issued in the next few months. Termination of the CAO
is to occur at such time when all actions required to be taken by the CAO have been completed
and LRWU has been notified by ADEQ in writing that the CAO has been satisfied and
terminated.
Rates. The sewer charge is based on the monthly water consumption of the customer, based
on consumption records of Central Arkansas Water, or by other appropriate means if all or a
portion of the customer's water is obtained from a source other than Central Arkansas Water.
For residential customers, the sewer charge each month will be based on the average monthly
consumption billed for the months of October, November, December, January, February, and
March (Winter Month Period). Unestablished customers without at least 3 months of winter
month periods will be calculated after the next year winter month period.
In the case of water used for irrigation or lawn sprinkling purposes, the customer shall have an
additional service meter installed to deliver the water in such a way that the water is billed
separately without a sewer charge being computed.
Set forth below are the monthly rates for the System which became effective on June 1, 2003:
(1) Service Availability Charge
Size Water Meter
Furnishing Water
5/8"
3/4"
1"
1 1/2"
2"
3"
4"
6" or larger
Inside City Limits
$ 11.00
12.90
17.25
28.25
41.40
72.00
115.85
225.40
568429 -v1 23
Outside City Limits
$ 16.50
19.40
25.85
42.40
63.35
108.00
173.80
338.10
(2) Volumetric Charge (for all water consumed over 200 cu. ft. per month)
Volume of Water Consumed
Inside City Limits Outside City Limits
Per 100 cu. ft. $2.21 $3.32
(3) Billing Charge. Customers whose usage requires' rendering a bill by means other than
through a water billing by Central Arkansas Water shall pay a service charge of $5.00 per bill
in addition to all other charges.
(4) Extra Strength Charges. Each customer is required to limit the Biochemical Oxygen
(BOD) and /or Total Suspended Solids (TSS) of his wastewater to 250 mg /1 and the Oils and
Grease (O &G) of this wastewater to 50 mg /1. Discharge of wastewaters with characteristics
exceeding these parameters is only allowed by payment of a surcharge to defray the additional
treatment costs:
BOD in excess of 250 mg/ 1 requires a surcharge of 10 cents per pound for all
quantities over the basic limit.
TSS in excess of 250 mg /1 requires a surcharge of 9 cents per pound for all
quantities over the basic limit.
O &G in excess of 50 mg/ 1 requires a surcharge of 10 cents per pound for
quantities over the basic limit.
COD in excess of 400 mg /l requires a surcharge of 10 cents per pound for
quantities over the basic limit.
pH outside the range equal or greater than 5.0 but equal or less than 12.0
requires a surcharge of $1.38 per CCF.
Surcharges for BOD, TSS and O &G shall be computed separately on the total consumption.
When in the opinion of the Utility, the strength of non - domestic wastewater discharge is best
characterized by a Chemical Oxygen Demand (COD) concentration, the Utility may substitute
the COD for BOD for the purpose of surcharge billing.
568429 -v1 24
THE AUTHORIZING ORDINANCE
The Bonds are being issued and secured pursuant to the Authorizing Ordinance, to which
reference may be had in its entirety for a detailed statement of its provisions, the description
set forth below being a summary of certain provisions. The City will covenant as set forth
below in the Authorizing Ordinance.
Rates and General Covenants to Operate.
(a) The rates charged for services of the System heretofore fixed by ordinances of the
City and the conditions, rights and obligations pertaining thereto, as set out in those
ordinances, are ratified, confirmed and continued. None of the facilities or services afforded
by the System shall be furnished without a charge being made therefor. In the event that the
City or an department, agency, or instrumentality thereof shall avail itself of the facilities and
services afforded by the System, the reasonable value of the service or facilities so afforded
shall be charged against the City or such department, agency, or instrumentality and shall be
paid for as the charges accrue. The revenues so received shall be deemed to be Revenues
derived from the operation of the System and shall be used and accounted for in the same
manner as the other Revenues derived from the operation of the System.
The City covenants that the rates shall never be reduced while any of the Bonds are outstanding
unless there is obtained from an independent certified public accountant ( "Accountant") a
certificate that the net Revenues of the System (net Revenues being defined as gross Revenues
less the expenses of operation and maintenance of the System, including all expense items
properly attributable to the operation and maintenance of the System under generally accepted
accounting principles applicable to municipal sewer facilities other than depreciation, interest
and amortization of deferred bond discount expenses), with the reduced rates, will always
leave a balance equal to at least 130% of the average annual principal and interest requirements
on all outstanding bonds to which Revenues are pledged ( "System Bonds "). The City further
covenants that the rates shall, if and when necessary from time to time, be increased in such
manner as will produce Revenues at least sufficient to pay the principal and interest on all
System Bonds when due, to pay the operation, repair and maintenance expenses of the System,
and to deposit the amounts required to be paid into the Depreciation Fund and the Debt Service
Reserve in accordance with the Authorizing Ordinance.
(b) The System shall be continuously operated as a revenue producing undertaking,
and all moneys received from its operation shall be deposited in such depository or depositories
for the City as may be lawfully designated from time to time by the Committee, subject,
however, to the giving of security as now or as hereafter may be required by law, and
provided that such depositories are located in the City, have a capital and surplus of
$15,000,000, and hold membership in the Federal Deposit Insurance Corporation ( "FDIC ").
568429 -v1 25
Funds and Disposition of Revenues.
(a) All revenues derived from the operation of the System shall be paid into a
special fund designated "Sewer Fund" (the "Revenue Fund "). Moneys in the Revenue Fund
shall be applied to the payment of the reasonable and necessary expenses of operation and
maintenance of the System, to the payment of the principal of and interest on the System
Bonds, to the providing of the Depreciation Fund, to the' maintenance of debt service reserves
and otherwise as described in the Authorizing Ordinance.
(b) There shall be first paid from the Revenue Fund into a fund designated "Sewer
Operation and Maintenance Fund" (the "Operation and Maintenance Fund "), on or before the
10th day of each month, an amount sufficient to pay the reasonable and necessary monthly
expenses of operation, repair and maintenance of the 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 may be computed and set up
on an annual basis, and 1/12 of the amount thereof may be paid into the Operation and
Maintenance Fund each month.
If 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 therein during the next succeeding
month. If any 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 costs of
operation, repair and maintenance of the System during the remainder of the then current fiscal
year and the next ensuing fiscal year, such surplus may be transferred to the Revenue Fund.
(c) There shall next be paid from the Revenue Fund into the 2001 Bond Fund being
maintained in connection with the 2001 Bonds, the required monthly deposits pursuant to the
2001 Ordinance and into a special fund designated "2005 Sewer Revenue Bond Fund" (the
"Bond Fund ") on or before the 15' day of each month, commencing in June 2005, until all
outstanding Bonds, with interest thereon, have been paid in full or provision made for such
payment 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 due on the Bonds; provided, however, that payments made into
the Bond Fund for the first five months shall be increased to 115 of the next installment of
interest due on the Bonds and 1 /11 of the next installment of principal due on the Bonds.
The City shall also pay into the 2001 Bond Fund and the Bond Fund such additional sums as
necessary to provide for the Trustee's fees and expenses and any arbitrage rebate payment due
to be paid to the United States Treasury under Section 148 (f) of the Internal Revenue Code of
1986, as amended (the "Code "). The City shall realize a credit against monthly deposits into
the 2001 Bond Fund and the Bond Fund from Bond proceeds deposited therein, all interest
earnings on moneys in the 2001 Bond Fund and the Bond Fund and for transfers into the Bond
Fund derived from earnings on the Debt Service Reserve during the preceding month.
568429 -0 26
There is created, as a part of the Bond Fund, a Debt Service Reserve which shall be
maintained by the City in an amount equal to 75% of the maximum annual principal and
interest requirements on the Bonds or 10% of the proceeds of the Bonds (excluding accrued
interest but including Underwriter's discount), whichever is lesser (the "Required Level ").
Should the Debt Service Reserve become impaired or be reduced below the Required Level,
the City shall make additional monthly payments from the Revenue Fund until the impairment
or reduction is corrected within a twenty-four month period.
The Required Level for the Bonds will be met by a Surety Bond issued ( "MBIA ") and the City
and the Trustee will enter into a Financial Guaranty Agreement (the "Agreement ") with MBIA
with respect thereto. The Surety Bond is an unconditional and irrevocable guaranty of MBIA
to pay to the Trustee amounts requested by the Trustee (not to exceed the amount of the Surety
Bond) necessary to pay principal of or interest on the Bonds if amounts available in the Bond
Fund are insufficient therefor on any principal or interest payment date under the Authorizing
Ordinance. The Trustee must first apply all moneys available in the Redemption Fund to the
payment of principal of or interest on the Bonds prior to requesting payment under the Surety
Bond. Payments under the Surety Bond will be made upon the later of (i) three days after the
receipt of the Trustee's request, or (ii) the principal or interest payment date when payment is
due on the Bonds.
Under the Agreement, the City is obligated to repay MBIA for any payments made under the
Surety Bond, and such repayment shall operate to restore the amount of coverage of the Surety
Bond to the extent of such repayment (but not to exceed the original amount of the Surety
Bond). In order to secure the City's repayment obligations to MBIA, the City has granted a
lien on the Revenues of the System subordinate only to the lien and security interest granted to
the Trustee under the Authorizing Ordinance. Under the Agreement, MBIA is also subrogated
to the rights of the Owners of the Bonds to the extent of payments made under the Surety
Bond, but such rights of subrogation are subordinate to the Owner's rights to receive regularly
scheduled payments of principal of and interest on the Bonds.
Under the Authorizing Ordinance, the City is required to restore the Surety Bond's coverage to
the Required Level from first available revenues from the Revenues of the System.
The Surety Bond expires on the earlier (i) May 1, 2025, or (ii) the date on which the City has
made all payments required to be made on the Bonds under the Authorizing Ordinance.
If for any reason the City should fail at any time to make any of the required payments into the
Bond Fund, any sums then held in the Debt Service Reserve shall be used to the extent
necessary for the payment of principal of or interest on the Bonds.
If Revenues are insufficient to make the required payment on the first business day of the
following month into the Bond Fund, then 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.
568429 -v1 27
There shall be withdrawn from the Bond Fund and deposited with the Trustee at least one
business day before the due date for the principal and /or interest on any Bond, at maturity or
redemption prior to maturity, an amount equal to the amount of such Bond or interest due
thereon for the sole purpose of paying the same, together with the Trustee's fee. There shall
also be withdrawn and paid to the United States Treasury any arbitrage rebate due at the times
and in the amounts in accordance with Section 148(f) of the Code.
(d) There shall next be paid from the Revenue Fund the amounts required to be paid
into (a) the "ADFA Bond Fund" being maintained in connection with the 1990 Bond and the
1991 Bond, (b) the "1996 ADFA Bond Fund" being maintained in connection with the 1996
Bond (c) the "1999 ADFA Bond Fund" being maintained in connection with the 1999 Bond,
(d) the "2004A Bond Fund" being maintained in connection with the 2004A Bond, (e) the
"2004B Bond Fund" being maintained in connection with the 2004B Bond, and (f) the 2004C
Bond Fund being maintained in connection with the 2004C Bond, for the purpose of providing
for the payment of the principal of and interest on the Subordinate Bonds when due.
(e) There shall next be paid from the Revenue Fund the administrative and
servicing fees due in connection with the Subordinate Bonds.
(f) There shall next be paid from the Revenue Fund into a fund designated "Sewer
Depreciation Fund" (the "Depreciation Fund "), on or before the 15th day of each month while
any of the Bonds are outstanding, 3 % of the Revenues for the preceding month which remain
after the required payment into the Operation and Maintenance Fund. 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 System.
If in any fiscal year a surplus shall be accumulated in the Depreciation Fund over and above
the amount which shall be necessary to defray the cost of the probable replacements during the
then current fiscal year and next ensuing fiscal year, such surplus may be transferred into the
Revenue Fund.
(g) 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 any lawful purpose
related to the System authorized by the Committee.
Parity Bonds. So long as any of the Bonds are outstanding, the City shall not issue or attempt
to issue any bonds claimed to be entitled to a priority of lien on Revenues over the lien
securing the Bonds.
The City reserves the right to issue additional bonds to finance or pay the cost of making any
future extensions, betterments or improvements to the System, or to refund bonds issued for
such purposes, but the City shall not authorize or issue any such additional bonds ranking on a
parity with the Bonds unless and until there have been, procured and filed with the City Clerk
and the Trustee a statement by an Accountant reciting the opinion, based upon necessary
investigation, that the net Revenues of the System for the fiscal year immediately preceding the
568429 -v1 28
fiscal year in which it is proposed to issue such additional bonds shall equal not less than 120%
of the average annual principal and interest requirement on all the then outstanding System
Bonds and the additional bonds then proposed to be issued. The term "Net Revenues" means
gross Revenues less operation and maintenance expenses other than depreciation, interest and
amortization of deferred bond discount expenses, determined in accordance with generally
accepted accounting principles applicable to municipal sewer facilities. In making the
computation set forth above, the City, and the Accountant on behalf of the City, may, based
upon the opinion or report of a registered professional engineer not in the regular employ of
the City, treat any increase in rates for the System enacted subsequent to the first day of such
preceding fiscal year as having been in effect during or throughout such fiscal year and may
include in gross Revenues for such fiscal year the amount that would have been received,
based on such opinion or report, had the increase been in effect during or throughout such
fiscal year.
Accounts and Records. The City will keep proper books of accounts and records (separate
from all other records and accounts) in which complete and correct entries shall be made of all
transactions relating to the operation of the System, and such books shall be available for
inspection by the Trustee and registered owner of any of the Bonds at reasonable times and
under reasonable circumstances. The City agrees to have these records audited by an
Accountant at least once each year, and a copy of the audit shall be delivered to the Trustee
and made available to registered owners requesting the same in writing. In the event that the
City fails or refuses to make the audit, the Trustee or any registered owner of the Bonds may
have the audit made, and the cost thereof shall be charged against the Operation and
Maintenance Fund.
Maintenance; Insurance. The City covenants and agrees that it will maintain the 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 full insurable value thereof, in a responsible insurance company or
companies selected by the Committee and authorized and qualified under the laws of the State
to assume the risk thereof, all above - ground structures of the System to the extent that such
structures would be covered by insurance by private companies engaged in similar types of
business, against loss or damage thereto from fire, lightning, tornados, winds, riot, strike, civil
commotion, malicious damage, explosion and against any other loss or damage from any other
causes customarily insured against by private companies engaged in similar types of business.
The insurance policies are to carry a clause making them payable to the Committee and the
Trustee as their interests 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 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 City to
568429 -0 29
expend any moneys for operation and maintenance of the System or for premiums on its
insurance which are derived from sources other than the operation of the System, but. nothing
shall be construed as preventing the City from doing so.
Defeasance. Any Bond shall be deemed to be paid within the meaning of the Authorizing
Ordinance when payment of the principal of and interest on such Bond (whether at maturity or
upon redemption, or otherwise), either (1) shall have been made or caused to be made in
accordance with the terms thereof, or (ii) shall have been provided for by irrevocably
depositing with the Trustee, in trust and irrevocably set aside exclusively for such payment (1)
cash 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 ( "Government Securities") (provided that such deposit 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 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 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 any Bonds within the meaning of the Authorizing Ordinance, the Trustee
shall hold in trust, for the benefit of the owners of such Bonds, all such moneys and /or
Government Securities.
When all the Bonds shall have been paid within the meaning of the Authorizing Ordinance, if
the Trustee has been paid its fees and expenses and if any arbitrage rebate due the United
States Treasury under Section 148(f) of the Code has been paid or provided for to the
satisfaction of the Trustee, the Trustee shall take all appropriate action to cause (i) the pledge
and lien of the Authorizing Ordinance to be discharged and cancelled, and (ii) all moneys held
by it pursuant to the Authorizing 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 City.
Default and Remedies. 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 the Authorizing Ordinance, the Trustee may, and
upon the written request of the registered owners of not less than ten percent (10 %) in
principal amount of the Bonds then outstanding shall, by proper suit, compel the performance
of the duties of the officials of the City 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 the written request of registered owners of not less than ten percent (10 %) in
principal amount of the Bonds then outstanding shall, apply in a proper action to a court of
competent jurisdiction for the appointment of a receiver to administer the System on behalf of
the City 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
568429 -v1 30
Arkansas and with the Authorizing Ordinance. When all defaults in principal and interest
payments have been cured, the custody and operation of the System shall revert to the City.
No registered owner of any of the outstanding Bonds shall have any right to institute any suit,
action, mandamus or other proceeding in equity 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 written 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 institute such action, suit 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, conditions precedent to the execution of any
remedy. No one or more registered 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 the Authorizing
Ordinance, or to enforce any right thereunder except in the manner described in the
Authorizing Ordinance. All proceedings at law or in equity shall be instituted, 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 addition to every other remedy given under the Authorizing
Ordinance or by law.
The Trustee may, and upon the written request of the registered owners of not less than a
majority 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 the Authorizing 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.
In any proceeding to enforce the provisions of the Authorizing Ordinance, the Trustee or any
plaintiff Bondholder shall be entitled to recover costs of such proceeding, including reasonable
attorneys' fees.
Amendment of Authorizing Ordinance. The terms of the Authorizing Ordinance constitute a
contract between the City and the owners of the Bonds and MBIA and no variation or change
in the undertaking set forth in the Authorizing Ordinance shall be made while any of the Bonds
are outstanding, except as hereinafter set forth below.
568429 -v1 31
The Trustee may, with written notice to MBIA, consent to any variation or change in the
Authorizing Ordinance without the consent of the owners of the outstanding Bonds (a) in
connection with the issuance of additional parity bonds under the Authorizing Ordinance, (b) in
order to cure any ambiguity, defect or omission therein or to correct or supplement any
defective or inconsistent provisions contained therein as the City may deem necessary or
desirable and not inconsistent therewith or (c) in order to make any other variation or change
which the Trustee determines shall not adversely affect the interests of the owners of the
Bonds.
The owners of not less than seventy -five percent (75%) in aggregate principal amount of the
Bonds then outstanding, with written notice to MBIA, shall have the right, from time to time,
anything contained in the Authorizing Ordinance to the contrary notwithstanding, to consent to
and approve, the adoption by the City of such ordinance supplemental thereto 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 the Authorizing
Ordinance or in any supplemental ordinance; provided, however, that nothing contained in the
Authorizing Ordinance shall permit or be construed as permitting (a) an extension of the
maturity of the principal of or the interest on any Bond, or (b) a reduction 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 the Authorizing 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.
The Trustee. The Trustee shall only be responsible for the exercise of good faith and
reasonable prudence in the execution of its trust. The Trustee shall not be required to take any
action as Trustee unless it shall have been requested to do so in writing by the registered
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 giving
sixty (60) days notice in writing to the City Clerk, with written notice to MBIA, the registered
owners of the Bonds and MBIA, and the City or the majority in value of the registered owners
of the outstanding Bonds, at any time, with or without cause, may remove the Trustee. In the
event of a vacancy in the office of Trustee, either by resignation or by removal, the City shall,
with written notice to MBIA, forthwith designate a new Trustee by a written instrument filed
in the office of the City Clerk. Every successor Trustee shall be a trust company or bank in
good standing, duly authorized to exercise trust powers and subject to examination by federal
or state authority. The original Trustee and any successor Trustee shall file a written
acceptance and agreement to execute the trusts imposed upon it or them but only upon the
terms and conditions set forth in the Authorizing Ordinance and subject to the provisions of the
Authorizing Ordinance, to all of which the respective registered owners of the Bonds agree.
Any successor Trustee shall have all the powers granted to the original Trustee.
Investments. (a) Moneys held for the credit of the Bond Fund shall be continuously invested
and reinvested pursuant to the direction of the Committee in Eligible Investments, all of which
568429 -v1 32
shall mature, or which shall be subject to redemption by the older thereof, at the option of such
holder, not later than the payment date for interest or principal and interest.
(b) Moneys held for the credit of the Debt Service Reserve shall be invested
and reinvested at the direction of the Committee in Eligible Investments, 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.
(c) Moneys held for the credit of any other fund shall be continuously
invested and reinvested pursuant to the direction of the Committee in Eligible Investments
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 the moneys held for the credit of the
particular fund will be required for purposes intended.
(d) "Eligible Investments" means any of the securities that are at the time
legal for investment of City funds pursuant to Resolution No. 10,609 of the City and Arkansas
Code Annotated (1999 Supp.) §14 -58 -309, as each may be amended from time to time. At
May 1, 2005, "Eligible Investments" includes:
(1) U.S. government obligations, U.S. government agency
obligations, and U.S. government instrumentality obligations, which have a
liquid market with a readily determinable market value;
(2) Certificates of deposit and other evidences of deposit at financial
institutions, and commercial paper, rated in the highest tier (e.g., A -1, P -1, F -1,
D -1, or higher) by a nationally recognized rating agency;
(3) Investment -grade obligations of state, provincial, and local
governments and public authorities; and
(4) Money market mutual funds regulated by the Securities and
Exchange Commission and whose portfolios consist only of dollar- denominated
securities.
Not more than 20% of the City's funds may be invested in uninsured certificates of deposit or
other evidences of deposit at financial institutions; commercial paper, state, provincial, and
local government obligations that do not constitute general obligations; and money market
funds with a portfolio not limited to U.S. government obligations.
The City's investment policy prohibits investments in derivative products, common stocks, and
long -term bonds and for speculation.
(e) 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 profit
568429 -v1 33
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 which increase the amount thereof above
the Required Level shall to the extent of any such excess be transferred from time to time into
the Bond Fund.
(f) 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 depository bank or banks.
(g) All investments and deposits 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.
(h) Investments of moneys in all funds shall be valued in terms of current
market value as of the last 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.
(i) The City covenants that it will make all arbitrage rebate payments to the
United States in accordance with Section 148 of the Code.
Certain Powers of MBIA as Bond Insurer. The exercise of various rights, powers and
remedies set forth in the Authorizing Ordinance is subject to the prior approval of MBIA
Insurance Corporation as Bond Insurer.
CONTINUING DISCLOSURE AGREEMENT
Purpose of the Continuing Disclosure Agreement. The Continuing Disclosure Agreement is
executed and delivered by the City and the Trustee for the benefit of the Beneficial Owners of
the Bonds and MBIA, as Bond Insurer, and in order to assist the Underwriter in complying
with the Securities and Exchange Commission, Rule 15c2- 12(b)(5).
Definitions. In addition to the definitions set forth in this Official Statement, the following
capitalized terms shall have the following meanings:
"Annual Report" shall mean any Annual Report provided by the City pursuant to, and as
described in, the Continuing Disclosure Agreement.
"Beneficial Owner" of a Bond shall mean any person who has or shares the power,
directly or indirectly, to make investment decisions concerning ownership of any Bonds
(including persons holding Bonds through nominees, depositories or other intermediaries).
"Bond Insurer" shall mean MBIA Insurance Corporation.
568429 -v1 34
"Dissemination Agent" shall mean the Trustee, acting in its capacity as Dissemination
Agent, or any successor Dissemination Agent designated in writing by the City and which has
filed with the Trustee a written acceptance of such designation.
"Listed Events" shall mean any of the events listed hereunder.
'I
"National Repository" shall mean any Nationally Recognized Municipal Securities
Information Repository for purposes of the Rule.
"Repository" shall mean each National Repository and each State Repository.
"Rule" shall mean Rule 15c2- 12(b)(5) adopted by the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as the same may be amended from
time to time.
"State Repository" shall mean any public or private repository or entity designated by
the State of Arkansas as a state repository for the purpose of the Rule. As of the date hereof,
there is no State Repository.
Provision of Annual Report. (a) The City shall, or cause the Dissemination Agent to, not
later than two hundred ten (210) days after the end of the System's fiscal year (presently
December 31), commencing with the report after the end of the 2005 fiscal year, provide to
each Repository and the Bond Insurer an Annual Report which is consistent with the
requirements of the Continuing Disclosure Agreement. The Annual Report may be submitted
as a single document or as separate documents comprising a package and may cross - reference
other information as provided in the Continuing Disclosure Agreement; rop vided that the
audited financial statements of the System may be submitted separately from the balance of the
Annual Report and later than the date required above for the filing of the Annual Report if they
are not available by that date, but, in such event, such audited financial statements shall be
submitted not less than thirty (30) days after receipt thereof by the City.
(b) No later than fifteen (15) days prior to the date specified in subsection
(a) for providing the Annual Report to Repositories, the City shall provide the Annual Report
to the Dissemination Agent and the Trustee (if the Trustee is not the Dissemination Agent). If
by such date, the Trustee has not received a copy of the Annual Report, the Trustee shall
contact the City and the Dissemination Agent to determine if the City is in compliance with the
first sentence of this subsection (b).
(c) If the Trustee is unable to verify that an Annual Report has been
provided to Repositories and the Bond Insurer by the date required in subsection (a), the
Trustee shall send a notice to each Repository, and the Bond Insurer and the Municipal
Securities Rulemaking Board.
568429 -v1 35
Content of Annual Reports. The City's Annual Report shall contain or incorporate by
reference the following:
1. Information of the type set forth in this Official Statement under
the caption THE SYSTEM with respect to (i) the number of sewer users for the
fiscal year then ended and the four previous fiscal years; and (ii) a statement as
to which users, if any, accounted for 5% or more of System revenues for the
preceding fiscal year.
2. The annual audit of the System prepared in accordance with
generally accepted government auditing standards:
Any or all of the items above may be incorporated by reference from other documents,
including official statements of debt issues of the City or related public entities, which have
been submitted to each of the Repositories, the Bond Insurer, or the Securities and Exchange
Commission. If the document incorporated by reference is a final official statement, it must be
available from the Municipal Securities Rulemaking Board. The City shall clearly identify
each such other document so incorporated by reference.
Reporting of Significant Events. (a) This caption describes the giving of notices of the
occurrence of any of the following events:
1. Principal and interest payment delinquencies.
2. Non - payment related defaults.
3. Unscheduled draws on debt service reserves reflecting financial difficulties.
4. Unscheduled draws on credit enhancements reflecting financial difficulties.
5. Substitution of credit or liquidity providers, or their failure to perform.
6. Adverse tax opinions or events affecting the tax- exempt status of the security.
7. Modification to rights of security holders.
8. Bond calls (excluding mandatory sinking fund redemption).
9. Defeasances.
10. Release, substitution, or sale of property securing repayment of the securities.
11. Rating changes.
568429 -v1 36
(b) When the City obtains knowledge of the occurrence of any of the Listed
Events, the City shall notify the Trustee in writing. Such notice shall instruct the Trustee to
report the occurrence.
(c) Whenever the Trustee obtains actual knowledge of the occurrence of any
of the Listed Events, whether from notice by the City or otherwise, the Trustee shall file a
notice of such occurrence with the Municipal Securities Rulemaking Board, each State
Repository, the Bond Insurer and the City. Notwithstanding the foregoing, notice of the Listed
Event described in subsection (a) (8) need not be given under this subsection any earlier than
the notice for the underlying event is given to registered owners of affected Bonds pursuant to
the terms of the Bonds. Each notice of the occurrence of a Listed Event shall be captioned
"Notice of Material Event" and shall properly state the date, title and CUSIP number of the
Bonds.
Termination of Reporting Obligation. The City's obligations under the Continuing Disclosure
Agreement shall terminate upon the defeasance, prior redemption or payment in full of all the
Bonds.
Dissemination Agent. The City may, from time to time, appoint or engage a Dissemination
Agent to assist it in carrying out its obligations under the Continuing Disclosure Agreement,
and may discharge any such Agent, with or without appointing a successor Dissemination
Agent. The Dissemination Agent shall not be responsible in any manner for the content of any
notice or report prepared by the City pursuant to the Continuing Disclosure Agreement. If at
any time there is not any other designated Dissemination Agent, the Trustee shall be the
Dissemination Agent. The initial Dissemination Agent shall be the Trustee.
Amendment; Waiver. Notwithstanding any other provision of the Continuing Disclosure
Agreement, the City and the Trustee may amend, with the consent of the Bond Insurer, the
Continuing Disclosure Agreement, and any provisions of the Continuing Disclosure Agreement
may be waived, provided that the following conditions are satisfied:
(a) If the amendment or waiver relates to the requirements for
providing an Annual Report, to the contents of the Annual Report or the
reporting of Listed Events, it may only be made in connection with a change in
circumstances that arises from a change in legal requirements, change in law, or
change in the identity, nature or status of an obligated person with respect to the
Bonds, or the type of business conducted;
(b) The undertaking, as amended or taking into account such waiver,
would, in the opinion of nationally recognized bond counsel, have complied
with the requirements of the Rule at the time of the original issuance of the
Bonds, after taking into account any amendments or interpretations of the Rule,
as well as any change in circumstances; and
568429 -v1 37
(c) The amendment or waiver either (i) is approved by the Beneficial
Owners of the Bonds in the same manner as provided in the Authorizing
Ordinance for amendments to the Authorizing Ordinance with the consent of
Beneficial Owners, or (ii) does not, in the opinion of the Trustee, materially
impair the interests of the Beneficial Owners of the Bonds.
In the event of any amendment or waiver of a provision of the Continuing Disclosure
Agreement, the City shall describe such amendment in the next Annual Report, and shall
include, as applicable, a narrative explanation of the reason of 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 Listed Event,
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.
Additional Information. Nothing in the Continuing Disclosure Agreement shall be deemed to
prevent the City from disseminating any other information, using the means of dissemination
set forth in the Continuing Disclosure Agreement or any other means of communication, or
including any other information in any Annual Report or notice of occurrence of a Listed
Event, in addition to that which is required by the Continuing Disclosure Agreement. If the
City chooses to include any information in any Annual Report or notice of occurrence of a
Listed Event in addition to that which is specifically required by the Continuing Disclosure
Agreement, the City shall have no obligation under the Continuing Disclosure Agreement to
update such information or include it in any future Annual Report or notice of occurrence of a
Listed Event.
Default. At the direction of or with the consent of the Bond Insurer, in the event of a failure
of the City or the Trustee to comply with any provision of the Continuing Disclosure
Agreement, the Trustee, the City or any Beneficial Owner may (and the Trustee, at the request
of the Underwriter or the Beneficial Owners of at least 25 % aggregate principal amount of
outstanding Bonds, shall) take such actions as may be necessary and appropriate, including
seeking mandamus or specific performance by court order, to cause the City or the Trustee, as
the case may be, to comply with its obligations under the Continuing Disclosure Agreement.
A default under the Continuing Disclosure Agreement shall not be deemed a default under the
Authorizing Ordinance, and the sole remedy under the Continuing Disclosure Agreement in the
event of any failure of the City or the Trustee to comply with the Continuing Disclosure
Agreement shall be an action to compel performance.
Duties of Trustee and Dissemination Agent and Right of Indemnity. The Dissemination Agent
(if other than the Trustee) and the Trustee in its capacity as Dissemination Agent shall have
only such duties as are specifically set forth in the Continuing Disclosure Agreement, and the
City agrees to indemnify and save the Dissemination Agent and the Trustee, their officers,
568429 -v1 38
directors, employees and agents, harmless against any loss, expense and liabilities which they
may incur arising out of or in the exercise or performance of their powers and duties
hereunder, including the costs and expenses (including attorney's fees) of defending against
any claim of liability, but excluding liabilities due to the Dissemination Agent's or the
Trustee's gross negligence or willful misconduct.
Beneficiaries. The Continuing Disclosure Agreement shall inure solely to the benefit of the
City, the Trustee, the Dissemination Agent, the Underwriter, the Bond Insurer and the
Beneficial Owners and shall create no rights in any other person or entity.
FINANCIAL INFORMATION
Set forth in Exhibit B to this Official Statement are the audited financial statements of the
System for the fiscal years ended December 31, 2003 and 2004. These financial statements
should be read in their entirety, together with any notes and supplemental information affixed
thereto.
[Remainder of page left blank.]
568429 -v1 39
Revenues and expenses of the System are summarized as follows for the preceding five years
(fiscal years ended December 31):
Operating Revenue
Operating Expenses
Excluding
Depreciation
Net Operating
Income Before
Depreciation
Depreciation
Interest and Other
Non- Operating
Income
Interest, Amortization
and Non - Operating
Expense
2004 2003
$30,295,588 $27,811,390
(19,348,737) (17,498,220)
10,946,851 10,313,170
2002 2001 2000
$21,136,586 $20,295,613 $20,422,070
(16,208,850) (14,379,127) (13,019,665)
4,927,736 5,916,486 7,402,405
(5,098,192)
(4,924,975)
(4,860,468)
(4,658,076)
(4,677,362)
700,887
369,841
553,591
391,736
516,505
(2,149,811)
(2,073,166)
(1,818,536)
(2,390,375)
(1,817,421)
Net Income $4,399,735 $3,684,870 ($1,197,677) ($740,229) $1,424,127
Revenues and expenses of the System have been summarized by the City as follows for the
three -month period ending March 31, 2004 and 2005:
March 31. 2004
Operating Revenue
$7,251,589
Operating Expenses
(4,730,553)
Excluding Depreciation
Net Operating Income Before
2,521,036
Depreciation
Depreciation
(1,260,865)
Interest and Other Non - Operating
19,709
Income
Interest, Amortization and
(529,065)
Non - Operating Expense
Net Income (Loss)
$750,815
568429 -vi 40
March 31, 2005
$ 7,459,662
(4,912,833)
2,546,829
(1,371,419)
77,264
(518,481)
$ 734,193
DEBT SERVICE COVERAGE
The following table shows the estimated net Revenues available for debt service on the Bonds and the
Subordinate Bonds, the maximum amount of annual debt service, and the extent to which debt service
is covered by such funds:
Revenues (1) $ 30,544,665
Less: Expenses (1)(2) 19,348,737
Net Revenues Available for Debt Service (A) 11,195,928
Maximum Annual Debt Service on Parity Bonds (B)(3) 3,46835,453624
Debt Service Coverage (A /B) 3.23X
Maximum Annual Debt Service on Parity Bonds and 7,763,070
Subordinate Bonds (C)(3)
Debt Service Coverage (A /C) 1.44X
(1) Based on 2004 audited financial statements with respect to the System.
(2) Total expenses before depreciation, interest and bond amortization expenses.
(3) Based upon an average interest rate of 4.2676% for the 2005 Bonds. Does not include the debt service for the 2004
Note.
[Remainder of page left blank.]
568429 -v1 41
DEBT SERVICE REQUIREMENTS
Set forth below are the debt service requirements for the Bonds:
Date
(Ma 1 )
Bond Principal
Bond Interest
Total Debt Service
May 1, 2006
$ 345,000.00
$405,517.50
$750,517.50
May 1, 2007
355,000.00
395,167.50
750,167.50
May 1, 2008
370,000.00
384,517.50
754,517.50
May 1, 2009
380,000.00
373,417.50
753,417.50
May 1, 2010
390,000.00
360,117.50
750,117.50
May 1, 2011
405,000.00
347,930.00
752,930.00
May 1, 2012
415,000.00
334,767.50
749,767.50
May 1, 2013
435,000.00
318,167.50
753,167.50
May 1, 2014
450,000.00
300,767.50
750,767.50
May 1, 2015
470,000.00
282,767.50
752,767.50
May 1, 2016
490,000.00
263,967.50
753,967.50
May 1, 2017
510,000.00
239,467.50
749,467.50
May 1, 2018
535,000.00
219,067.50
754,067.50
May 1, 2019
555,000.00
197,132.50
752,132.50
May 1, 2020
585,000.00
169,382.50
754,382.50
May 1, 2021
605,000.001'1
144,812.50
749,812.50
May 1, 2022
635,000.001'1
118,343.76
753,343.76
May 1, 2023
660,000.00111
90,562.50
750,562.50
May 1, 2024
690,000.00111
61,687.50
751,687.50
May 1, 2025
720,000.00(' �1
31,500.00
751,500.00
(')Term Bond, subject to mandatory sinking fund redemption. (2)Term Bond Maturity
[Remainder of page left blank.]
568429 -v1 42
Set forth below are the debt service requirements for the Bonds and the Subordinate Bonds for
each fiscal year (ending December 31) during the scheduled maturity of the Bonds:
*Includes estimated principal and interest on the 2004 Note from January to May 26, 2005. Also, 2004A, 2004B
and 2004C Bond debt service payments are based on construction projects taking the maximum three year
period.
LEGAL MATTERS
Legal Proceedings. There is no litigation pending seeking to restrain or enjoin the issuance or
delivery of the Bonds, or questioning or affecting the legality of the Bonds or the proceedings
and authority under which the Bonds are to be issued, or questioning the right of the City to
adopt the Authorizing Ordinance or to issue the Bonds.
Legal Opinions. Legal matters incident to the authorization and issuance of the Bonds are
subject to the unqualified approving opinion of Wright, Lindsey & Jennings, LLP, Little Rock,
Arkansas, Bond Counsel.
Tax Exemption- Opinion of Bond Counsel. In the opinion of Bond Counsel, under existing
law, the interest on the Bonds is exempt from all State income taxes and the Bonds are exempt
from property taxation in the State.
568429 -v1 43
Parity Bonds
FY Ending
Series
Series
Subordinate
December 31
2005
2001
Total
Bonds*
Total All Debt
2005
$202,758.75
$1,358,456.26
$1,561,215.01
$2,628,336
$4,189,551.01
2006
745,342.50
1,358,956.26
2,104,298.76
2,228,336
4,332,634.76
2007
744,842.50
1,358,756.26
2,103,598.76
3,018,234
5,121,832.76
2008
748,967.50
1,358,056.26
2,107,023.76
4,765,584
6,872,607.76
2009
746,767.50
1,361,656.26
2,108,423.76
5,654,646
7,763,069.76
2010
744,023.75
1,359,401.26
2,103,425.01
5,654,646
7,758,071.01
2011
746,348.75
1,356,368.51
2,102,71'6.26
5,654,646
7,757,362.26
2012
741,467.50
1,357,160.01
2,098,627.51
5,654,646
7,753,273.51
2013
744,467.50
1,356,638.51
2,101,105.01
5,654,646
7,755,751.01
2014
741,767.50
1,832,878.51
2,574,645.01
5,179,419
7,754,064.01
2015
743,367.50
2,309,709.76
3,053,076.26
4,704,196
7,757,272.26
2016
741,717.50
2,307,031.25
3,048,748.75
4,704,196
7,752,944.75
2017
739,267.50
2,305,938.50
3,045,205.00
4,704,196
7,749,401.00
2018
743,100.00
2,309,612.50
3,052,712.50
4,704,196
7,756,908.50
2019
738,257.50
2,515,918.50
3,254,175.00
4,494,339
7,962,561.50
2020
742,097.50
2,726,125.00
3,468,222.50
4,284,530
7,752,752.50
2021
736,578.13
2,725,750.00
3,462,328.13
4,284,530
7,746,858.13
2022
739,453.13
2,729,000.00
3,468,453.13
4,284,512
7,752,965.13
2023
736,125.00
0.00
736,125.00
3,426,310
4,162,435.00
2024
736,593.75
0.00
736,593.75
3,426,310
4,162,903.00
2025
735,750.00
0.00
735,750.00
3,426,310
4,162,060.00
2026
3,426,310
3,426,310.00
2027
2,636,421
2,636,421.00
2028
889,062
889,062.00
*Includes estimated principal and interest on the 2004 Note from January to May 26, 2005. Also, 2004A, 2004B
and 2004C Bond debt service payments are based on construction projects taking the maximum three year
period.
LEGAL MATTERS
Legal Proceedings. There is no litigation pending seeking to restrain or enjoin the issuance or
delivery of the Bonds, or questioning or affecting the legality of the Bonds or the proceedings
and authority under which the Bonds are to be issued, or questioning the right of the City to
adopt the Authorizing Ordinance or to issue the Bonds.
Legal Opinions. Legal matters incident to the authorization and issuance of the Bonds are
subject to the unqualified approving opinion of Wright, Lindsey & Jennings, LLP, Little Rock,
Arkansas, Bond Counsel.
Tax Exemption- Opinion of Bond Counsel. In the opinion of Bond Counsel, under existing
law, the interest on the Bonds is exempt from all State income taxes and the Bonds are exempt
from property taxation in the State.
568429 -v1 43
Also, in the opinion of Bond Counsel, interest on the Bonds under existing law (a) is excluded
from gross income for federal income tax purposes and (b) is not an item of tax preference for
purposes of the federal alternative minimum tax imposed on individuals and corporations;
however, it should be noted that with respect to corporations (as defined for federal income tax
purposes), such interest is taken into account in determining adjusted current earnings for the
purpose of computing the alternative minimum tax imposed on such corporations. The
opinions set forth in the preceding sentence are subject to the condition that the City comply
with all requirements of the Code that must be satisfied subsequent to the issuance of the Bonds
in order that interest thereon be (or continue to be) excluded from gross income for federal
income tax purposes. These requirements generally relate to arbitrage, the use of the proceeds
of the Bonds and the System. Failure to comply with certain of such requirements could cause
the interest on the Bonds to be so included in gross income retroactive to the date of issuance
of the Bonds. The City has covenanted to comply with all such requirements in the
Authorizing Ordinance.
Prospective purchasers of the Bonds should be aware that (i) with respect to insurance
companies subject to the tax imposed by Section 831 of the Code, Section 832(b)(5)(B)(i)
reduces the deduction for loss reserves by 15 percent of the sum of certain items, including
interest on the Bonds, (ii) interest on the Bonds earned by certain foreign corporations doing
business in the United States could be subject to a branch profits tax imposed by Section 884 of
the Code, (iii) passive investment income including interest on the Bonds, may be subject to
federal income taxation under Section 1375 of the Code for Subchapter S corporations that
have Subchapter C earnings and profits at the close of the taxable year if greater than 25% of
the gross receipts of such Subchapter S corporation is passive investment income and (iv)
Section 86 of the Code requires recipients of certain Social Security and certain Railroad
Retirement benefits to take into account in determining gross income, receipts or accruals of
interest on the Bonds.
Prospective purchasers of the Bonds should be further aware that Section 265 of the Code
denies a deduction for interest on indebtedness incurred or continued to purchase or carry the
Bonds or, in the case of a financial institution, that portion of a holder's interest expense
allocated to interest on the Bonds, except with respect to certain financial institutions (within
the meaning of Section 265(b)(5) of the Code).
Tax Treatment of Original Issue Discount. When the initial public offering price for any Bond,
as reflected on the confirmation of sale received from the Underwriter, is less than the original
amount payable at maturity for such Bonds (the "OID Bonds"), such difference constitutes
original issue discount which is treated as interest and is excluded from gross income for
federal income tax purposes subject to the caveats and provisions described above.
In the case of an owner of an OID Bond, the amount of original issue discount which is treated
as having accrued with respect to such OID Bond is added to the cost basis of the owner in
determining, for federal income tax purposes, gain or loss upon disposition of such OID Bond
(including its sale, redemption or payment at maturity). Amounts received upon disposition of
568429 -v1 44
such OID Bond which are attributable to accrued original issue discount will be treated as tax -
exempt interest, rather than as taxable gain, for federal income tax purposes.
Original issue discount is treated as compounding semiannually, at a rate determined by
reference to the yield to maturity of each individual Bond bearing original issue discount, on
days which are determined by reference to the maturity of such Bond. The amount treated as
original issue discount on such OID Bond for a particular semiannual accrual period is equal to
(i) the product of (a) the yield to maturity for such OID Bond (determined by compounding at
the close of each accrual period) and (b) the amount which would have been the tax basis of
such OID Bond at the beginning of the particular accrual period if held by the original
purchaser, (ii) less the amount of any payments on such,OID Bond during the accrual period.
The tax basis is determined by adding to the initial public offering price on such OID Bond the
sum of the amounts which would have been treated as original issue discount for such purposes
during all prior periods. If such OID Bond is sold between semiannual compounding dates,
original issue discount which would have accrued for that semiannual compounding period for
federal income tax purposes is to be apportioned in equal amounts among the days in such
compounding period.
Owners of OID Bonds should consult their own tax advisors with respect to the determination
for federal income tax purposes of original issue discount accrued with respect to OID Bonds
as of any date, with respect to the accrual of original issue discount for such OID Bonds
purchased in the secondary markets and with respect to the state and local tax consequences of
owning OID Bonds.
Tax Treatment of Original Issue Premium. When the initial public offering price for any
Series 2005 Bond, as reflected on the confirmation of sale received from the Underwriter, is
greater than the principal amount thereof, such difference constitutes original issue premium
and the bond is a "Premium Bond. " Under the Code, the difference between the principal
amount of a Premium Bond and the cost basis of such Premium Bond to an owner thereof is
"bond premium." Under the Code, bond premium is amortized over the term of a Premium
Bond (i.e., the maturity date of a Premium Bond or its earlier call date) for federal income tax
purposes. An owner of a Premium Bond is required to decrease his or her basis in such
Premium Bond by the amount of the amortizable bond premium attributable to each taxable
year (or portion thereof) he or she owns such Premium Bond. the amount of the amortizable
bond premium attributable to each taxable year is determined on an actuarial basis at a constant
interest rate determined with respect to the yield on a Premium Bond compounded on each
interest payment date. The amortizable bond premium attributable to a taxable year is not
deductible for federal income tax purposes.
Owners of Premium Bonds (including purchasers of Premium Bonds in the secondary market)
should consult their own tax advisors with respect to the precise determination for federal
income tax purposes of the treatment of bond premium upon sale, redemption or other
disposition of Premium Bonds and with respect to the state and local consequences of owning
and disposing of Premium Bonds.
568429 -v1 45
State Taxes. Further, in the opinion of Bond Counsel, under existing laws, interest on the
Bonds is exempt from all state, county, and municipal taxation, and the Bonds are exempt from
property taxation in the State of Arkansas.
MISCELLANEOUS,
Enforceability of Remedies. Rights of the registered owners of the Bonds and the
enforceability of the remedies available under the Authorizing Ordinance may depend on
judicial action and may be subject to the valid exercise of the constitutional powers of the
United States of America and of the sovereign police powers of the State or other
governmental units having jurisdiction, and to the application of federal bankruptcy laws or
other debtor relief or moratorium laws in general. Therefore, enforcement of those remedies
may be delayed or limited, or the remedies may be modified or unavailable, subject to the
exercise of judicial discretion in accordance with general principles of equity. Bond Counsel
expresses no opinion as to any effect upon any right, title, interest or relationship created by or
arising under the Authorizing Ordinance resulting from the application of state or federal
bankruptcy, insolvency, reorganization, moratorium or similar debtor relief laws affecting
creditors' rights which are presently or may from time to time be in effect.
Rating. Moody's Investors Service ( "Moody's) will assign its municipal bond rating of "Aaa"
to the Bonds with the understanding that upon delivery of the Bonds, a Financial Guaranty
Insurance Policy insuring the payment when due of the principal of and interest on the Bonds
will be issued by MBIA Insurance Corporation. Moody's has assigned an "underlying rating"
of "Al" to the Bonds. Any explanation of the significance of such rating may be obtained
from Moody's.
The City furnished to Moody's the information contained in a preliminary form of this Official
Statement and other information. Generally, rating agencies base their ratings on such material
and information, as well as their own investigations, studies, assumptions, and policies. It
should be noted that ratings may be changed at any time and that no assurance can be given
that they will not be revised or withdrawn by the rating agencies if, in their respective
judgments, circumstances should warrant such action. Any downward revision or withdrawal
of a rating could have an adverse effect on market prices of the Bonds.
Underwriting. Under a Bond Purchase Agreement (the "Agreement ") entered into by and
between the City, as issuer, and Morgan Keegan & Company, Inc., as underwriter (the
"Underwriter "), the Bonds are being purchased at a price of $9,933,079.00 (principal amount
plus net original issue premium of $13,079.00 and less Underwriter's discount of $80,000.00,)
plus interest accrued thereon from the date of the Bonds to the date of Closing. The
Agreement provides that the Underwriter will purchase all of the Bonds if any are purchased.
The obligation of the Underwriter to accept delivery of the Bonds is subject to various
conditions contained in the Agreement, including the absence of pending or threatened
litigation questioning the validity of the Bonds or any proceedings in connection with the
568429 -v1 46
issuance thereof, and the absence of material adverse changes in the financial or business
condition of the City.
The Underwriter intends to offer the Bonds to the public initially at the offering prices set forth
on the cover page of this Official Statement, which prices may subsequently change without
any requirement of prior notice. The Underwriter reserves the right to join with dealers and
other underwriters in offering the Bonds to the public. 'The Underwriter may offer and sell
Bonds to certain dealers (including dealers depositing Bonds into investment trusts) at prices
lower than the public offering price.
The City has agreed to indemnify the Underwriter against certain civil liabilities in connection
with the offering and sale of the Bonds, including certain liabilities under federal securities
laws.
Information in the Official Statement. Any statements made in this Official Statement
involving matters of opinion or of estimates, whether or not so expressly stated, are set forth as
such and not as representations of fact, and no representation is made that any of the estimates
will be realized. This Official Statement is not to be construed as a contract or agreement
between the City and the purchasers or owners of any of the Bonds.
The information contained in this Official Statement has been taken from sources considered to
be reliable, but is not guaranteed. To the best of the knowledge of the undersigned the Official
Statement does not include any untrue statement of a material fact, nor does it omit the
statement of any material fact required to be stated therein, or necessary to make the statements
therein, in light of the circumstances under which they were made, not misleading.
The execution and delivery of this Official Statement on behalf of the City has been authorized
by the City.
CITY OF LITTLE ROCK, ARKANSAS,
By: /s /Jim Dailey
Dated: As of the Cover Page hereof.
568429 -0 47
APPENDIX A
FINANCIAL GUARANTY INSURANCE POLICY
MBIA Insurance Corporation
Armonk, New York 10504
Policy No. [NUMBER]
MBIA Insurance Corporation (the "Insurer "), in consideration of the payment of the premium and subject to the
terms of this policy, hereby unconditionally and irrevocably guarantees to any owner, as hereinafter defined, of the
following described obligations, the full and complete payment required to be made by or on behalf of the Issuer to
[PAYING AGENT/TRUSTEE] or its successor (the "Paying Agent ") of an amount equal to (i) the principal of
(either at the stated maturity or by any advancement of maturity pursuant to a mandatory sinking fund payment) and
interest on, the Obligations (as that tern is defined below) as such payments shall become due but shall not be so
paid (except that in the event of any acceleration of the due date of such principal by reason of mandatory or
optional redemption or acceleration resulting from default or otherwise, other than any advancement of maturity
pursuant to a mandatory sinking fund payment, the payments guaranteed hereby shall be made in such amounts and
at such times as such payments of principal would have been due had there not been any such acceleration, unless
the Insurer elects in its sole discretion, to pay in whole or in part any principal due by reason of such acceleration);
and (ii) the reimbursement of any such payment which is subsequently recovered from any owner pursuant to a final
judgment by a court of competent jurisdiction that such payment constitutes an avoidable preference to such owner
within the meaning of any applicable bankruptcy law. The amounts referred to in clauses (i) and (ii) of the
preceding sentence shall be referred to herein collectively as the "Insured Amounts." "Obligations" shall mean:
$10,000,000 CITY OF LITTLE ROCK, ARKANSAS
SEWER REFUNDING AND CONSTRUCTION REVENUE BONDS, SERIES 2005
Upon receipt of telephonic or telegraphic notice, such notice subsequently confirmed in writing by registered or
certified mail, or upon receipt of written notice by registered or certified mail, by the Insurer from the Paying Agent
or any owner of an Obligation the payment of an Insured Amount for which is then due, that such required payment
has not been made, the Insurer on the due date of such payment or within one business day after receipt of notice of
such nonpayment, whichever is later, will make a deposit of funds, in an account with U.S. Bank Trust National
Association, in New York, New York, or its successor, sufficient for the payment of any such Insured Amounts
which are then due. Upon presentment and surrender of such Obligations or presentment of such other proof of
ownership of the Obligations, together with any appropriate instruments of assignment to evidence the assignment
of the Insured Amounts due on the Obligations as are paid by the Insurer, and appropriate instruments to effect the
appointment of the Insurer as agent for such owners of the Obligations in any legal proceeding related to payment of
Insured Amounts on the Obligations, such instruments being in a form satisfactory to U.S. Bank Trust National
Association, U.S. Bank Trust National Association shall disburse to such owners, or the Paying Agent payment of
the Insured Amounts due on such Obligations, less any amount held by the Paying Agent for the payment of such
Insured Amounts and legally available therefor. This policy does not insure against loss of any prepayment
premium which may at any time be payable with respect to any Obligation.
As used herein, the term "owner" shall mean the registered owner of any Obligation as indicated in the books
maintained by the Paying Agent, the Issuer, or any designee of the Issuer for such purpose. The term owner shall
not include the Issuer or any party whose agreement with the Issuer constitutes the underlying security for the
Obligations.
Any service of process on the Insurer may be made to the Insurer at its offices located at 113 King Street, Armonk,
New York 10504 and such service of process shall be valid and binding.
This policy is non - cancellable for any reason. The premium on this policy is not refundable for any reason
including the payment prior to maturity of the Obligations.
IN WITNESS WHEREOF, the Insurer has caused this policy to be executed in facsimile on its behalf by its duly
authorized officers, this [DAY] day of [MONTH, YEAR].
MBIA Insurance Corporgtiorl
Attest I ^_ice` r " _
tpr
STD-R-7/12/04
568429 -v1
JAMIE
JAMIE
[OMicrosoft Word - DOCS- #569167 -v1- City_of Lit
E)04/19/05 02:54 PM
CONTINUING DISCLOSURE CERTIFICATE
This Continuing Disclosure Certificate (the "Disclosure Certificate ") is executed and delivered by the City
of Little Rock, Arkansas (the "City") in connection with the issuance of its Sewer Refunding and
Construction Revenue Bonds, Series 2005, dated May 1, 2005 (the "Bonds ") and the Little Rock
Wastewater Utility (the "Utility"). The Bonds are being issued pursuant to Amendment 62 to the
Arkansas Constitution ( "Amendment 62 "), Arkansas Code Annotated § §14 -164 -301 through 340, (Act
871 of the Acts of Arkansas of 1985, as amended) (the "Act "), and Ordinance No. .19,307 duly adopted
and approved by the City on April 19, 2005 (the "Ordinance "). The City and the Utility covenant and
agree as follows:
Section 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and
delivered by the City and the Utility for the benefit of the Beneficial Owners of the Bonds and the Bond
Insurer (identified herein) and in order to assist the Underwriter in complying with, and constitutes the
written undertaking for the benefit of the Beneficial Owners of the Bonds and the Bond Insurer required
by, subsection (i) of the Securities and Exchange Commission, Rule 15c2- 12(b)(5).
Section 2. Definitions. In addition to the definitions set forth in the Ordinance, which apply to any
capitalized term used in this Disclosure Certificate unless otherwise defined in this Section, the following
capitalized terms shall have the following meanings:
"Annual Report" shall mean any Annual Report provided by the City pursuant to, and as
described in, Sections 3 and 4 of this Disclosure Certificate.
"Authorizing Ordinance" shall mean Ordinance No. 19,307 of the Ordinances of the City
approved April 19, 2005.
"Beneficial Owner" of a Bond shall mean any Bondholder and any person who, directly or
indirectly, through any contract, arrangement, understanding, relationship, or otherwise, has or shares (i)
voting power which includes the power to vote, or to direct the voting of, a Bond and /or (ii) investment
power which includes the power to dispose, or to direct the disposition of, a Bond.
"Bond Insurer" shall mean MBIA Insurance Corporation.
"Dissemination Agent" shall mean the City, or any successor Dissemination Agent designated in
writing by the City and which has filed with the City a written acceptance of such designation.
"Listed Events" shall mean any of the events listed in Section 5(A) of this Disclosure Certificate.
"National Repository" shall mean any Nationally Recognized Municipal Securities Information
Repository for purposes of the Rule. Currently, the following are National Repositories:
Bloomberg Municipal Repositories
101 Business Park Drive
Skillman, New Jersey 08558
Standard & Poor's Securities Evaluations, Inc.
55 Water Street, 45th Floor
New York, New York 10041
569167 -v 1
Phone: 609 - 279 -3225
Fax: 609 - 279 -5962
E -Mail: MUNIS @bloomberg.com
Phone:
212 - 438 -4595
Fax:
212 -438 -3975
E -Mail:
nrmsir_ repository@sandp.com
DPC Data Inc. Phone: 201- 346 -0701
One Executive Drive Fax: 201 - 947 -0107
Fort Lee, New Jersey 07024 E -Mail: nrmsir @dpcdata.com
FT Interactive Data Phone: 212 - 771 -6999
Attn: Repository Fax: 212 - 771 -7390
100 Williams Street E -Mail: NRMSIR @FTID.com
New York, New York 10038
"Participating Underwriter" shall mean any of the original underwriters of the Bonds required to
comply with the Rule in connection with offering of the Bonds.
"Repository" shall mean each National Repository and each State Repository.
"Rule" shall mean Rule 15c2- 12(b)(5) adopted by the Securities and Exchange Commission under
the Securities Exchange Act of 1934, as the same may be amended from time to time.
"State Repository" shall mean any public or private repository or entity designated by the State as
a state repository for the purpose of the Rule. As of the date of this Certificate, there is no State
Repository.
"System" shall mean the City's sewer and wastewater system.
"Tax- Exempt" shall mean that interest on the Bonds is excluded from gross income for federal
income tax purposes, whether or not such interest is includable as an item of tax preference or otherwise
includable directly or indirectly for purposes of calculating any other tax liability, including any
alternative minimum tax or environmental tax.
"Utility" shall mean the Little Rock Wastewater Utility, which operates the City's sewer system.
Section 3. Provision of Annual Report.
(A) The City and the Utility shall, or shall cause the Dissemination Agent to, not later than
one hundred eighty (180) days after the end of the City's fiscal year, commencing with the fiscal year
ending December 31, 2005, provide to each Repository and the Bond Insurer an Annual Report which is
consistent with the requirements of Section 4 of this Disclosure Certificate. Not later than fifteen (15)
business days prior to said date, the City and the Utility shall provide the Annual Report to the
Dissemination Agent (if other than the City). The Annual Report may be submitted as a single document
or as separate documents comprising a package, and may cross - reference other information as provided in
Section 4 of this Disclosure Certificate; rop vided that the audited financial statements of the City and the
Utility may be submitted separately from the balance of the Annual Report. The City and the Utility shall
provide their audit within sixty (60) days after the audit has been completed and received by the City or
the Utility, respectively. The audit shall be prepared in accordance with generally accepted auditing
standards.
(B) If either the City or the Utility is unable to provide to the Repositories and the Bond
Insurer an Annual Report by the date required in subsection (A), the City shall send a notice to the
Municipal Securities Rulemaking Board in substantially the form attached as Exhibit A.
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(C) The Dissemination Agent shall:
(1) determine each year prior to the date for providing the Annual Report the name
and address of each National Repository and each State Repository, if any; and (if the
Disseminating Agent is other than the City)
(2) file a report with the City and the Utility certifying that the Annual Report has
been provided pursuant to this Disclosure Certificate, stating the date it was provided and listing
all the Repositories to which it was provided.
Section 4. Content of Annual Reports. The City's and the Utility's Annual Report shall contain or
incorporate by reference the following:
1. The City's and the System's debt structure including its restricted debt.
2. A five -year summary of the City's and the System's sources and uses of funds.
3. A five -year summary of revenues of the System ( "Revenues ").
Any or all of the items above may be incorporated by reference from other documents, including official
statements of debt issues of the City, the System or related public entities, which have been submitted to
each of the Repositories or the Securities and Exchange Commission. If the document incorporated by
reference is a final official statement, it must be available from the Municipal Securities Rulemaking
Board. The City and the Utility shall clearly identify each such other document so incorporated by
reference.
Section 5. Reporting of Significant Events.
(A) This Section 5 shall govern the giving of notices of the occurrence of any of the following
events:
1. Delinquency in payment when due of any principal of or interest on the Bonds.
2. Occurrence of any Event of Default under and as defined in the Authorizing
Ordinance (other than as described in clause 1. above).
3. Amendment to the Authorizing Ordinance or this Disclosure Certificate
modifying the rights of the owners of the Bonds.
4. Giving of a notice of optional or unscheduled redemption of any Bonds.
5. Defeasance of the Bonds or any portion thereof.
6. Any change in any rating on the Bonds.
7. (a) Receipt of an opinion of nationally recognized bond counsel to the effect that
interest on the Bonds is not Tax- exempt; or
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569167 -v 1
(b) Any event adversely affecting the tax- exempt status of the Bonds,
including but not limited to:
(i) Any audit, investigation or other challenge of the Tax - exempt
status of the Bonds by the Internal Revenue Service or in any administrative or
judicial proceeding; or
(ii) Receipt of any regulation, decision or other official
pronouncement by the Internal Revenue service or other official tax authority or
by any court adversely affecting the Tax - exempt status of the Bonds.
8. Any unscheduled draw on any reserve funds.
9. Any unscheduled draw on a Letter of Credit or Bond Insurance Policy, if any,
reflecting financial difficulties.
10. Any change in the provider of the Letter of Credit or Bond Insurance Policy, if
any, or any failure by the Credit Bank or Insurer to perform on the Letter of Credit or Bond
Insurance Policy.
11. The release, substitution or sale of property or change in sewer 'rates securing
repayment of the Bonds (including property leased, mortgaged or pledged as such security).
(B) Whenever the City or the Utility obtains knowledge of the occurrence of a Listed Event,
the City or the Utility shall promptly file a notice of such occurrence with the Municipal Securities
Rulemaking Board, each State Repository, if any and the Bond Insurer. Each notice of such occurrence
shall be captioned as a "Notice of Material Event" and shall prominently state the date, title and CUSIP
numbers of the Bonds. In the event of any amendment of the Authorizing Ordinance or this Disclosure
Certificate, the City shall provide copies of such amendment to any Rating Agency which shall have
issued a rating on the Bonds which is in effect at such time.
Section 6. Termination of Reporting Obligation. The City's and the Utility's obligations under this
Disclosure Certificate shall terminate upon the defeasance, prior redemption or payment in full of all the
Bonds.
Section 7. Dissemination Agent. The City may, from time to time, appoint or engage a Dissemination
Agent to assist it in carrying out its obligations under this Disclosure Certificate, and may discharge any
such Agent, with or without appointing a successor Dissemination Agent. The initial Dissemination
Agent shall be the City.
Section 8. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, the
City may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be
waived, if such amendment or waiver is supported by an opinion of counsel expert in federal securities
laws, to the effect that such amendment or waiver would not, in and of itself, cause the undertakings
herein to violate the Rule if such amendment or waiver had been effective on the date hereof but taking
into account any subsequent change in or official interpretation of the Rule.
Section 9. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the
City or the Utility from disseminating any other information, using the means of dissemination set forth in
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569167 -v1
this Disclosure Certificate or any other means of communication, or including any other information in
any Annual Report or notice occurrence of a Listed Event, in addition to that which is required by this
Disclosure Certificate. If the City or the Utility chooses to include any information in any Annual Report
or notice of occurrence of a Listed Event in addition to that which is specifically required by this
Disclosure Certificate, the City and the Utility shall have no obligation under this Certificate to update
such information or include it in any future Annual Report or notice of occurrence of a Listed Event.
Section 10. Default. In the event of a failure of the City to comply with any provision of this Disclosure
Certificate, any Beneficial Owner or the Bond Insurer may take such actions as may be necessary and
appropriate, including seeking mandamus or specific performance by court order, to cause the City or the
Utility to comply with its obligations under this Disclosure Certificate. A default under the Disclosure
Certificate shall not be deemed an Event of Default under the Authorizing Ordinance, and the sole remedy
under this Disclosure certificate in the event of any failure of the City or the Utility to comply with this
Disclosure Certificate shall be an action to compel performance.
Section 11. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall
have only such duties as are specifically set forth in this Disclosure Certificate, and the City agrees to
indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless
against any loss, expense and liabilities which it may incur arising out of or in the exercise or
performance of its powers and duties hereunder, including the costs and expenses (including attorney's
fees) of defending against any claim of liability, but excluding liabilities duo to the Dissemination Agent's
negligence or willful misconduct. The obligation of the City under this section shall survive resignation or
removal of the Dissemination Agent and payment of the Bonds.
Section 12. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the City, the
Utility, the Dissemination Agent, the participating Underwriter, the Beneficial Owners from time to time
of the Bonds, and the Bond Insurer and shall create no rights in any other person or entity.
Dated as of: , 2005.
[Signature Pages Follow]
569167 -v 1
CITY OF LITTLE ROCK, ARKANSAS
By:
Authorized Representative
[Signature page of Continuing Disclosure Agreement]
569167 -v1
LITTLE ROCK WASTEWATER UTILITY
Chief Executive Officer
[Signature page of Continuing Disclosure Agreement]
«SIVIrml
EXHIBIT A
NOTICE TO REPOSITORIES OF FAILURE TO FILE ANNUAL REPORT.
Name of City:
Name of Bond Issue:
Date of Issuance:
NOTICE IS HEREBY GIVEN that City has not provided an Annual Report with respect to the
above -named Bonds as required by Section of the dated , 200_. The City
anticipates that the Annual Report will be filed by
Dated:
CITY OF LITTLE ROCK, ARKANSAS
By:
569167-vi
Authorized Representative