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HomeMy WebLinkAbout19814ORDINANCE NO. 199814 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 CONSTRUCTION REVENUE BONDS, SERIES 2007C; PROVIDING FOR THE PAYMENT OF THE PRINCIPAL OF AND INTEREST ON THE BONDS; AND PRESCRIBING OTHER MATTERS RELATING THERETO. WHEREAS, the City of Little Rock, Arkansas (the "City ") owns a sewer system (the "System "), which is operated by the Sanitary Sewer Committee of the City (the "Committee "); and WHEREAS, the Committee has determined that certain betterments and improvements to the System, including the construction and equipping of the Little Maumelle Wastewater Treatment Plant (collectively, the "Improvements ") are necessary in order to make the services of the System adequate for the needs of the City and its inhabitants; and WHEREAS, the Committee has caused to be prepared by the engineering staff of the Little Rock Wastewater Utility a preliminary engineering report containing a general description and estimates of costs for the Improvements which report has been examined and approved by the Committee and Board of Directors and a copy of which report is on file in the office of the City Clerk and the Chief Executive Officer of the System where they may be inspected by any interested person; and WHEREAS, the City can pay the costs of one or more of the Improvements (or a portion thereof) through the issuance of its Sewer Construction Revenue Bonds, Series 2007C, in the principal amount of $71,085,000 (the "Series 2007C Bonds "); and WHEREAS, the City and the Committee have made arrangements for the sale of the Series 2007C Bonds to Morgan Keegan & Company, Inc. and Crews & Associates, Inc. (the "Purchasers "), at a price of $72,611,703.20 (equal to the principal amount thereof plus a net original issue premium of $2,095,383.20 and less underwriter's discount of $568,680.00) plus accrued interest on the Series 2007C Bonds from the date of the Series 2007C Bonds until the date of issuance (the "Purchase Price "), on a negotiated basis pursuant to a Bond Purchase Agreement between the City and the Purchasers (the "Agreement ") which has been presented to and is before this meeting; and WHEREAS, payment of the principal of and interest on the Series 2007C Bonds when due will be insured by a municipal bond insurance policy (the "Bond Insurance Policy ") to be issued by Financial Security Assurance Inc., a New York stock insurance company ( "Financial Security" or the "Insurer "); and 4837 -6962- 7393.2 WHEREAS, the Preliminary Official Statement dated September 6, 2007, offering the Series 2007C 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 Series 2007C Bonds has been presented to and is before this meeting; and WHEREAS, the City has outstanding (a) its Sewer Revenue Bond, Series 1990 (the "Series 1990 Bond "), authorized by Ordinance No. 15,966, adopted November 20, 1990 (the "1990 Ordinance "); (b) its Sewer Revenue Bond, Series 1991 (the "Series 1991 Bond "), authorized by Ordinance No. 16,030, adopted April 2, 1991 (the "1991 Ordinance "); (c) its Sewer Revenue Bond, Series 1996 (the "Series 1996 Bond "), authorized by Ordinance No. 17,097, adopted January 16, 1996 (the "1996 Ordinance "); (d) its Sewer Revenue Bond, Series 1999 (the "Series 1999 Bond "), authorized by Ordinance No. 18,067, adopted July 20, 1999 (the "1999 Ordinance "); (e) its Sewer Refunding and Construction Revenue Bonds, Series 2001 (the "Series 2001 Bonds "), authorized by Ordinance 18,557, adopted September 4, 2001 (the "2001 Ordinance "); (f) its Sewer Revenue Bond, Series 2004A (the "Series 2004A Bond "), authorized by Ordinance No. 19,006, adopted December 16, 2003 (the "2004A Ordinance "); (g) its Sewer Revenue Bond, Series 2004B (the "Series 2004B Bond "), authorized by Ordinance 19,007, adopted December 16, 2003 (the "2004B Ordinance "); (h) its Sewer Revenue Bond, Series 2004C (the "Series 2004C Bond), authorized by Ordinance No. 19,229, adopted November 1, 2004 (the "2004C Ordinance "); (i) its Sewer Refunding and Construction Revenue Bonds, Series 2005 (the "Series 2005 Bonds "), authorized by Ordinance 19,307, adopted April 19, 2005 (the "2005 Ordinance "); (j) its Sewer Construction Revenue Bonds, Series 2007A (the "Series 2007A Bonds ") authorized by Ordinance No. 19,746, adopted May 15, 2007 (the "2007A Ordinance "); and (k) its Sewer Revenue Bond, Series 2007B (the "Series 2007B Bond "), authorized by Ordinance No. 19,769, adopted June 19, 2007 (the 112007B Ordinance "); and WHEREAS, the coverage tests in the 2001 Ordinance, 2005 Ordinance and the 2007A Ordinance for securing the Series 2007C Bonds with a lien on the net revenues of the System on a parity of security with the Series 2001 Bonds, the Series 2005 Bonds and the Series 2007A Bonds (collectively, the "Parity Bonds ") have been or will be satisfied; and WHEREAS, the coverage tests in the 1990 Ordinance, the 1991 Ordinance, the 1996 Ordinance, the 1999 Ordinance, the 2004A Ordinance, the 2004B Ordinance, the 2004C Ordinance and the 2007B Ordinance for securing the bonds with a lien on the net revenues of the System prior to the lien on System revenues in favor of the Series 1990 Bond, the Series 1991 Bond, the Series 1996 Bond, the Series 1999 Bond, the Series 2004A Bond, the Series 2004B Bond, the Series 2004C Bond and the Series 2007B Bond (collectively, the "Subordinate Bonds ") have been or will be satisfied; NOW, THEREFORE, BE IT ORDAINED by the Board of Directors of the City of Little Rock, Arkansas, that: N 4837 - 6962 - 7393.2 Section 1. The Improvements shall be accomplished. The Mayor and City Clerk are hereby authorized to take, or cause to be taken, all action necessary to accomplish the financing and completion of the Improvements and to execute all required contracts in connection therewith. The 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 thirty (30) years, which is longer than the term of the Series 2007C Bonds. Section 3. The offer of the Purchasers for the purchase of the Series 2007C 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 Series 2007C Bonds are hereby sold to the Purchasers. The Mayor's approval and execution of the Agreement on September 13, 2007 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 Preliminary Official Statement is hereby approved and the previous use of the Preliminary Official Statement by the Purchasers in connection with the offer and sale of the Series 2007C 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 5. The Disclosure Agreement, in substantially the form submitted to this meeting, is hereby 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 (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 6. 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 Construction Revenue Bonds, Series 2007C, are hereby authorized and ordered issued in the principal amount of $71,085,000 for the purpose of financing all or a portion of the costs of the Improvements, costs incidental thereto, paying the premium on the Bond Insurance Policy, paying the premium on a municipal bond debt service reserve policy (the "Reserve Policy ") to be issued by the Insurer and deposited in the debt service reserve for the Series 2007C Bonds, and paying expenses of issuing the Series 2007C Bonds. The Series 2007C Bonds shall bear interest at the rates and shall mature on the dates and in the amounts as follows: 3 4837 - 6962 - 73932 * Term Bond, subject to mandatory sinking fund redemption. The Series 2007C Bonds shall be dated October 1, 2007 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 Series 2007C Bonds shall be numbered from R07C -1 upward in order of issuance. Each Series 2007C Bond shall be assigned a CUSIP number. The Series 2007C 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 Series 2007C Bonds for all purposes under this Ordinance, including, without limitation, payment by the City of the principal of, redemption price, premium, if any, and interest on the Series 2007CA Bonds, and the receipt of notices and the 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 Series 2007C 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 Series 2007C 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 Series 2007C Bonds, and the participants and persons acting through participants are expected to maintain records of the purchasers of beneficial interests in the Series 2007C Bonds. The Series 2007C 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 Series 2007C 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 Series 2007C 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 Series 2007C Bonds from the securities depository, and shall 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 4 4837- 6962- 7393.2 Principal Principal Date Amount Interest Rate Date Amount Interest Rate October 1, 2024 $ 440,000 4.250% October 1, 2029 $ 4,780,000 4.750% October 1, 2025 460,000 4.375% October 1, 2032* 19,335,000 5.000% October 1, 2026 1,185,000 5.000% October 1, 2033 7,100,000 4.500% October 1, 2027 1,995,000 4.375% October 1, 2037* 32,035,000 5.000% October 1, 2028 3,755,000 4.750% * Term Bond, subject to mandatory sinking fund redemption. The Series 2007C Bonds shall be dated October 1, 2007 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 Series 2007C Bonds shall be numbered from R07C -1 upward in order of issuance. Each Series 2007C Bond shall be assigned a CUSIP number. The Series 2007C 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 Series 2007C Bonds for all purposes under this Ordinance, including, without limitation, payment by the City of the principal of, redemption price, premium, if any, and interest on the Series 2007CA Bonds, and the receipt of notices and the 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 Series 2007C 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 Series 2007C 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 Series 2007C Bonds, and the participants and persons acting through participants are expected to maintain records of the purchasers of beneficial interests in the Series 2007C Bonds. The Series 2007C 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 Series 2007C 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 Series 2007C 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 Series 2007C Bonds from the securities depository, and shall 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 4 4837- 6962- 7393.2 securities depository /book -entry system, or of the beneficial owners, if they request termination of the system. Prior to issuance of the Series 2007C Bonds, the City shall have executed and delivered to DTC a written agreement (the "Representation Letter ") setting forth (or incorporating therein by reference) certain undertakings and responsibilities of the City with respect to the Series 2007C Bonds so long as the Series 2007C Bonds or any 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 Series 2007C 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 Series 2007C Bonds; provided that neither the Trustee nor the City may assume any obligations to such securities depository or beneficial owners of the Series 2007C Bonds that are inconsistent with their obligations to any registered owner under this Ordinance. Interest on the Series 2007C Bonds shall be payable on April 1, 2008, and semiannually thereafter on April 1 and October 1 of each year. Payment of each installment of interest shall be made to the person in whose name the Series 2007C 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 Series 2007C Bond subsequent to such Record Date and prior to such interest payment date. Each Series 2007C 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 October 1, 2007, 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 Series 2007C Bonds as shall have endorsed thereon a Certificate of Authentication substantially in the form set forth in Section 8 hereof (the "Certificate ") duly executed by the Trustee shall be entitled to any right or benefit under this ordinance. No Series 2007C 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 Series 2007C Bond shall be conclusive evidence that such Series 2007C Bond has been authenticated and delivered under this Ordinance. The Certificate on any Series 2007C Bond shall be deemed to have been Wi 4837 - 6962 - 7393.2 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 Series 2007C Bonds. In case any Series 2007C 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 Series 2007C Bond of like date, number, maturity and tenor in exchange and substitution for and upon cancellation of such mutilated Series 2007C Bond, or in lieu of and in substitution for such Series 2007C Bond destroyed or lost, upon the owner paying the reasonable expenses and charges of the City and Trustee in connection therewith, and, in the case of a Series 2007C Bond destroyed or lost, his filing with the Trustee evidence satisfactory to it that such Series 2007C 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 Series 2007C Bond. In the event any such Series 2007C Bond shall have matured, instead of issuing a new Series 2007C Bond, the City may pay the same without the surrender thereof. Upon the issuance of a new Series 2007C Bond under this Section 6, 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 maintain, or cause to be maintained, books for the registration and for the transfer of the Series 2007C Bonds, as provided herein and in the Series 2007C Bonds. The Trustee shall act as the bond registrar. Each Series 2007C 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 Series 2007C 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 Series 2007C Bond for the privilege of transfer or exchange, but any owner of any Series 2007C 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 Series 2007C 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 Series 2007C Bonds selected for redemption in whole or in part. The person in whose name any Series 2007C 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 Series 2007C 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 Series 2007C 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 Series 2007C Bonds or the date fixed for redemption of any Series 2007C 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 me 4837 - 6962 - 7393.2 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 7. The Series 2007C 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 Series 2007C Bonds, together with interest thereon, are secured by and are payable solely from the net revenues derived from the System (the "Net Revenues ") which are hereby pledged and mortgaged for the equal and ratable payment of the Series 2007C Bonds. The pledge of Net Revenues in favor of the Series 2007C Bonds shall be (i) on a parity with the pledge in favor of the Parity Bonds, and (ii) prior to the pledge in favor of the Subordinate Bonds. The Series 2007C Bonds and the interest thereon shall not constitute an indebtedness of the City within the meaning of any constitutional or statutory limitation. Section 8. The Series 2007C 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: 7 4837- 6962 - 7393.2 (Form of Series 2007C Bond) REGISTERED REGISTERED No. R07C- UNITED STATES OF AMERICA STATE OF ARKANSAS COUNTY OF PULASKI CITY OF LITTLE ROCK SEWER CONSTRUCTION REVENUE BOND SERIES 2007C Maturity Date: October 1, 20_ Interest Rate: % Dated Date: October 1, 2007 CUSIP No.: Registered Owner: CEDE & CO. Principal Amount: KNOW ALL MEN BY THESE PRESENTS: DOLLARS 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 April 1, 2008 and semiannually thereafter on the first days of April and October 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. 8 4837 -6962- 7393.2 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 interest 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 Construction Revenue Bonds, Series 2007C, aggregating Seventy -One Million Eighty -Five Thousand Dollars ($71,085,000) in principal amount (the "Series 2007C Bonds "), and is issued for the purposes of financing all or a portion of the costs of the acquisition, construction and equipping by the City of certain betterments and improvements to the City's sewer system (the "System "), paying expenses incidental thereto and to the authorization, paying the premium on a policy of municipal bond insurance, paying the premium on a policy of municipal bond debt service reserve insurance, and paying expenses of issuance of Series 2007C Bonds. The Series 2007C 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. duly adopted on , 2007 (the "Authorizing Ordinance "), and do not constitute an indebtedness of the City within the meaning of any constitutional or statutory limitation. The Series 2007C Bonds are not general obligations of the City, but are special obligations payable solely from the net revenues derived from the operation of the System (the "Net Revenues ") on a parity of security with the City's outstanding Sewer Refunding and Construction Revenue Bonds, Series 2001, Sewer Refunding and Construction Revenue Bonds, Series 2005, and Sewer Construction Revenue Bonds, Series 2007A, and prior to the pledge of Net Revenues in favor of the City's Sewer Revenue Bonds, Series 1990, Series 1991, Series 1996, Series 1999, Series 2004A, Series 2004B, Series 2004C and 2007B. An amount of Net Revenues sufficient to pay the principal of and interest on the Series 2007C Bonds has been duly pledged and set aside into the 2007C 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 Series 2007C Bonds are issued, of the nature and extent of the security for the Series 2007C Bonds, and the rights and obligations of the City, the Trustee and the registered owners of the Series 2007C 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 Series 2007C 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. The Series 2007C Bonds shall be subject to optional and mandatory sinking fund redemption as follows: 9 4837 -6962- 7393.2 I . The Series 2007C Bonds maturing on and after October 1, 2018 are subject to redemption at the option of the City, from funds from any source, on and after October 1, 2017, in whole at any time or in part on any interest payment date, at a redemption price equal to the principal amount being redeemed plus accrued interest to the redemption date. If fewer than all of the Series 2007C Bonds shall be called for redemption, the particular maturities of the Series 2007C Bonds to be redeemed shall be selected by the City in its discretion. If fewer than all of the Series 2007C Bonds of any one maturity shall be called for redemption, the particular Series 2007C 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 Series 2007C 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 October 1, 2032 Redemption Dates Principal Amounts October 1, 2030 $6,130,000 October 1, 2031 6,445,000 October 1, 2032 (maturity) 6,760,000 Bonds maturing October 1, 2037 Redemption Dates Principal Amounts October 1, 2034 $7,425,000 October 1, 2035 7,805,000 October 1, 2036 8,195,000 October 1, 2037 (maturity) 8,610,000 The provisions for mandatory sinking fund redemption of the Series 2007C Bonds are subject to the provisions of the Authorizing Ordinance which permit the City to receive credit for Series 2007C Bonds previously redeemed or for Series 2007C Bonds acquired by the City and surrendered to the Trustee. In case any outstanding Series 2007C Bond is in a denomination greater than $5,000, each $5,000 of face value of such Series 2007C Bond shall be treated as a separate Series 2007C Bond of the denomination of $5,000. Notice of redemption identifying the Series 2007C Bonds or portions thereof (which shall be $5,000 or a multiple thereof) to be redeemed shall be given by the Trustee, not less than thirty (30) nor more than sixty (60) days prior to the date fixed for redemption, by mailing a copy of the redemption notice by first class mail, postage prepaid, to all registered owners of Series 2007C Bonds to be redeemed. Failure to mail an appropriate notice or any such notice to one or more registered owners of Series 2007C Bonds to be redeemed shall not affect the validity of the 10 4837 - 6962- 7393.2 proceedings for redemption of other Series 2007C Bonds as to which notice of redemption is duly given in proper and timely fashion. All such Series 2007C 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. STATEMENT OF INSURANCE Financial Security Assurance Inc. ( "Financial Security "), New York, New York, has delivered its municipal bond insurance policy with respect to the scheduled payments due of principal of and interest on this Series 2007C Bond to Regions Bank, Little Rock, Arkansas, or its successor, as paying agent for the Series 2007C Bonds (the "Paying Agent "). Said Bond Insurance Policy is on file and available for inspection at the principal office of the Paying Agent and a copy thereof may be obtained from Financial Security or the Paying Agent. 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 Series 2007C 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 Series 2007C 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 Series 2007C 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 Series 2007C Bonds, together with all obligations of the City, does not exceed any constitutional or statutory limitation; and that the above referred to Net Revenues pledged to the payment of the principal of and premium, if any, and interest on the Series 2007C 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. 11 4837 - 6962 - 7393.2 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. ATTEST: City Clerk (SEAL) CITY OF LITTLE ROCK, ARKANSAS 0 Mayor (Form of Trustee's Certificate) TRUSTEE'S CERTIFICATE OF AUTHENTICATION This bond is one of the bonds designated Series 2007C in and issued under the provisions of the within mentioned Authorizing Ordinance. Date of Authentication: REGIONS BANK Little Rock, Arkansas, Trustee Io 12 4837 - 6962 - 7393.2 Authorized Signature (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. 13 4837 - 6962 - 7393.2 Section 9. 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 System rates shall never be reduced while any of the Series 2007C 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 of the System 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 System 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 (hereinafter identified) in accordance with this Ordinance. The City covenants and agrees that the existing rates will produce total System revenues at least sufficient to pay the operation and maintenance expenses of the System, to pay the principal of and premium, if any, and interest on all outstanding System Bonds and trustee fees in connection therewith, and to make the required deposits into the Debt Service Reserve and the Depreciation Fund. Section 10. The System shall be continuously operated as a revenue producing undertaking and all System revenues shall be paid into a special fund heretofore created and designated "Sewer Fund" (the "Revenue Fund "). The System 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 hereinafter set forth. The Revenue Fund, and the other special funds hereinafter 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 amount insured by the FDIC to be secured by bonds 14 4837 - 6962 - 7393.2 or other direct or fully guaranteed obligations of the United States of America unless invested in accordance with Section 27 hereof. Section 11. 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 Series 2007C 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 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 and deposited in the Revenue Fund. Section 12. 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 (i) the 2001 Bond Fund being maintained in connection with the Series 2001 Bonds, (ii) the 2005 Bond Fund being maintained in connection with the Series 2005 Bonds, (iii) the 2007A Bond Fund being maintained in connection with the Series 2007A Bonds, and (iv) into a special fund in the name of the City which is hereby created and designated the "2007C Sewer Revenue Bond Fund" (the "2007C Bond Fund ") on or before the fifteenth day of each month, commencing in November 2007, until all outstanding Series 2007C 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 Series 2001 Bonds, the Series 2005 Bonds, the Series 2007A Bonds and the Series 2007C Bonds, and 1/12 of the next installment of principal due on the Series 2001 Bonds, the Series 2005 Bonds, the Series 2007A Bonds and the Series 2007C Bonds; provided, however, that payments made into the 2007C Bond Fund with respect to interest for the first five (5) months shall be increased to 115 of the next installment of interest due on the Series 2007C Bonds and payments made into the 2007C Bond Fund with respect to principal for the first eleven (11) months shall be increased to 1 /11 of the next installment of principal due on the Series 2007C Bonds. The City shall also pay into the 2001 Bond Fund, the 2005 Bond Fund, the 2007A Bond Fund and the 2007C 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, the 2005 Bond Fund, the 2007A Bond Fund and the 2007C Bond Fund from bond proceeds deposited therein, all interest earnings on moneys in the 2001 Bond Fund, the 2005 Bond Fund, the 2007A Bond Fund and the 2007C Bond Fund 15 4837- 6962 - 7393.2 and all transfers, if any, made from the respective debt service reserves for said funds during the preceding month. There is hereby created, as a part of the 2007C Bond Fund, a debt service reserve (the "Debt Service Reserve ") which shall be maintained by the City in an amount equal to the maximum annual principal and interest requirement on the Series 2007C Bonds or 10% of the proceeds of the Series 2007C Bonds (excluding accrued interest but including Underwriters' discount), whichever is lesser (the "Required Level "). The maintenance of the Debt Service Reserve at the Required Level shall be initially satisfied through the purchase of a municipal bond debt service reserve insurance policy (the "Reserve Policy ") to be issued by Financial Security and deposited in the Debt Service Reserve concurrently with the issuance and delivery of the Series 2007C Bonds. Should the Debt Service Reserve become impaired or be reduced below the Required Level by reason of withdrawal or valuation, 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 2007C 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 Series 2007C 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 2001 Bond Fund, the 2005 Bond Fund, the 2007A Bond Fund and the 2007C Bond Fund. The Debt Service Reserve shall be used solely as provided herein. If Net Revenues are insufficient to make the required payment on the first business day of the following month into the 2007C 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 2007C Bond Fund on the first business day of the next month. When the moneys held in the 2007C Bond Fund shall be and remain sufficient to pay the principal of and interest on all of the Series 2007C Bonds then outstanding plus Trustee's fees and any arbitrage rebate due as provided above, the City shall not be obligated to make any further payments into the 2007C Bond Fund. It shall be the duty of the City to cause to be withdrawn from the 2007C 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 Series 2007C Bond, at maturity or redemption prior to maturity, and deposited with the Trustee an amount equal to the amount of such Series 2007C 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 1480 of the Code. No withdrawal of funds from the 2007C Bond Fund shall be made for any other purpose except as otherwise authorized in this Ordinance. The Series 2007C 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 16 4837 -6962- 7393.2 pledge in favor of the Series 2007C 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 13. After making the deposits into the Operation and Maintenance Fund and the 2001 Bond Fund, the 2005 Bond Fund, the 2007A Bond Fund and the 2007C 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 Bond; (v) the "2004B Bond Fund" being maintained in connection with the 2004B Bond, (vi) the "Series 2004C Bond Fund" being maintained in connection with the 2004C Bond, and (vii) the "Series 2007B Bond Fund" being maintained in connection with the 2007B Bond, the amounts required by the 1990 Ordinance, the 1991 Ordinance, the 1996 Ordinance, the 1999 Ordinance, the 2004A Ordinance, the 2004B Ordinance, the 2004C Ordinance and the 2007B Ordinance, respectively, and (b) the administration and servicing fees due in connection with the Subordinate Bonds. Section 14. After making the required payments into the Operation and Maintenance Fund, the 2001 Bond Fund, the 2005 Bond Fund, the 2007A Bond Fund, the 2007C Bond Fund, the ADFA Bond Fund, the 1996 ADFA Bond Fund, the 1999 ADFA Bond Fund, the 2004A Bond Fund, the 2004B Bond Fund, the 2004C Bond Fund and the 2007B 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 Series 2007C Bonds are outstanding, three percent (3 %) of the System 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 15. Any surplus in the Revenue Fund, after making the required monthly deposits into all of the 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. Section 16. So long as any of the Series 2007C Bonds are outstanding, the City shall not issue or attempt to issue any bonds claimed to be entitled to a priority of lien on Net Revenues over the lien securing the Series 2007C 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 Series 2007C 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 17 4837 - 6962 - 7393.2 outstanding System Bonds and the additional bonds then proposed to be issued. The term "Net Revenues" means gross System 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 System 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 17. 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 Series 2007C 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, 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. Section 18. The Series 2007C Bonds shall be subject to redemption prior to maturity in accordance with the terms set out in the Series 2007C Bond form. The City may acquire Series 2007C Bonds by purchase at a price not in excess of par plus accrued interest, inclusive of brokerage fees, and surrender to the Trustee any Series 2007C 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 Series 2007C Bonds so acquired and surrendered, for and of the then next date for mandatory sinking fund redemption of Series 2007C Bonds of the same maturity. Section 19. 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 Trustee and any registered owner of any of the Series 2007C 18 4837 - 6962- 7393.2 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 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 Series 2007C Bonds, may have the audit made, and the cost thereof shall be charged against the Operation and Maintenance Fund. Section 20. Any Series 2007C Bond shall be deemed to be paid within the meaning of this Ordinance when payment of the principal of and interest on such Series 2007C 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 Series 2007C Bonds or cause any of the Series 2007C 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 Series 2007C Bonds within the meaning of this Ordinance, the Trustee shall hold in trust, for the benefit of the owners of such Series 2007C Bonds, all such moneys and /or Government Securities. When all the Series 2007C 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 Series 2007C 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. Section 21. If there be any default in the payment of the principal of or interest on any of the Series 2007C Bonds, or if the City defaults in any 2007C 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 Series 2007C 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 Series 2007C Bonds, the Trustee may and upon written request of the registered owners of not less than 10% in principal amount of the then outstanding Series 2007C Bonds, shall apply in 19 4837 -6962- 7393.2 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 Series 2007C 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 Series 2007C Bonds and interest outstanding and to apply the System 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 Series 2007C 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 Series 2007C 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 Series 2007C 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 hereunder except in 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 Series 2007C Bonds. No remedy conferred upon or reserved to the Trustee or to the registered owners of the Series 2007C 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 Series 2007C Bonds then outstanding shall, waive any default which shall have been remedied before the entry of final judgment or decree in any suit, action or proceeding instituted under the provisions of this Ordinance or before the completion of the enforcement of any other remedy, but no such waiver shall extend to or affect any other existing or any subsequent default or defaults or impair any rights or remedies consequent thereon. All rights of action under this Ordinance or under any of the Series 2007C Bonds, enforceable by the Trustee, may be enforced by it without the possession of any of the Series 2007C 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 Series 2007C Bonds, subject to the provisions of this Ordinance. 20 4837 -6962- 7393.2 No delay or omission of the Trustee or of any registered owners of the Series 2007C 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 Series 2007C Bonds, respectively, may be exercised from time to time and as often as may be deemed expedient. In any proceeding in which any plaintiff bondholder prevails to enforce the provisions of this Ordinance, such plaintiff bondholder shall be entitled to recover from the City all costs of such proceeding, including reasonable attorneys' fees. Section 22. (a) The terms of this Ordinance shall constitute a contract between the City and the registered owners of the Series 2007C Bonds and no variation or change in the undertaking herein set forth shall be made while any of the Series 2007C Bonds are outstanding, except as hereinafter set forth in subsections (b) and (c). (b) Subject to the rights of the Insurer provided for herein, the Trustee may consent to any variation or change in this Ordinance without the consent of the owners of the outstanding Series 2007C 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 Series 2007C Bonds. (c) Subject to the rights of the Insurer provided for herein, the owners of not less than 75% in aggregate principal amount of the Series 2007C Bonds then outstanding shall have the right, from time to time, anything contained in this ordinance to the contrary notwithstanding, to consent to and approve the adoption by the City of such ordinance supplemental hereto as shall be necessary or desirable for the purpose of modifying, altering, amending, adding to or rescinding, in any particular, any of the terms or provisions contained in this Ordinance or in any supplemental ordinance; provided, however, that nothing contained in this Section 22 shall permit or be construed as permitting (a) an extension of the maturity of the principal of or the interest on any Series 2007C Bond, or (b) a reduction in the principal amount of any Series 20070 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 Series 2007C Bond or Bonds over any other Series 2007C Bond or Bonds, or (e) a reduction in the aggregate principal amount of the Series 2007C Bonds required for consent to such supplemental ordinance. Section 23. When the Series 2007C Bonds have been executed and sealed as herein provided, they shall be authenticated by the Trustee, and the Trustee shall deliver the Series 2007C Bonds to the Purchasers upon payment in cash of the Purchase Price. The accrued interest thereon shall be remitted to the City for deposit into the 2007C Bond Fund. The expenses of issuing the Series 2007C Bonds and the premiums for the Bond Insurance Policy and the Reserve Policy, 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 "). 21 4837 -6962- 7393.2 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 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, paying interest on the Series 2007C Bonds, and paying expenses of issuing the Series 2007C 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 Little Rock Wastewater. The Committee shall be required to keep accurate records of all payments made on the basis of checks. Section 24. In the event any of the offices of Mayor, City Clerk, Chief Executive Officer, 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. 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, Andrew L. Harper and Charles G. Goss. Section 25. (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 Series 2007C 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 Series 2007C Bonds and System revenues will not be used directly or indirectly in such manner as to cause the Series 2007C 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 Series 2007C 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 Series 2007C 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 Series 2007C 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 Series 2007C Bonds during the term thereof is, under the terms of the Series 2007C Bonds or any underlying arrangement, 22 4837- 6962 - 7393.2 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 he used for said Private Business Use, then said excess over said 5% of Net Proceeds of the Series 2007C Bonds used for a Private Business Use shall be used for a Private Business Use related to the governmental use of the Improvements. The City shall assure that not in excess of 5% of the Net Proceeds of the Series 2007C 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 Series 2007C Bonds, plus accrued interest and premium, if any, less original issue discount, if any, less any amounts deposited into the Debt Service Reserve from Series 2007C 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. (e) The City covenants that it will take no action which would cause the Series 2007C 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 Series 2007C Bonds are issued, the statement required by Section 149(e) of the Code. (e) The City covenants that it will not reimburse itself from proceeds of the Series 2007C Bonds for costs paid prior to the date the Series 2007C Bonds are issued except in compliance with United States Treasury Regulation Section 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 2007C 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 Series 2007C 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 Series 2007C Bonds were invested at a rate equal to the Yield (as defined in the Code) on the Series 2007C 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 23 4837 - 6962 - 7393.2 rescinded if in the opinion of Bond Counsel such modification or rescission will not affect the tax - exempt status of the Series 2007C Bonds for federal income tax purposes. Section 26. 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 on the face of the Series 2007C 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 Series 2007C 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 sixty (60) days' notice in writing to the City Clerk, to the registered owners of the Series 2007C Bonds, the Insurer, and the City or the majority in value of the registered owners of the outstanding Series 2007C Bonds at any time, with or without cause, subject to the rights of the Insurer provided for herein, may remove the Trustee. In the event of a vacancy in the office of Trustee, either by resignation or by removal, the City shall (subject to the rights of the Insurer provided for herein) appoint a new Trustee, such appointment to be evidenced by a written instrument or instruments filed with the City Clerk. Every successor Trustee appointed pursuant to this Section 26 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 Ordinance and subject to the provisions of this Ordinance, to all of which the respective owners of the Series 2007C 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 27. (a) Moneys held for the credit of the 2007C 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 on the Series 2007C Bonds. (b) Moneys held for the credit of the Debt Service Reserve shall be invested and reinvested at the direction of the Committee in the Reserve Policy or other 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 seven (7) years after the date of investment or the final maturity date of the Series 2007C 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 the Reserve Policy and any of the securities that are at the time legal for investment of City funds pursuant to a Resolution of the City adopted May 24 4837 -6962- 7393.2 15, 2007, and Arkansas Code Annotated (1999 Supp.) §14 -58 -309, as each may be amended from time to time. At September 18 , 2007, "Eligible Investments" include: (1) U.S. Treasury obligations which carry the full faith and credit guarantee of the United States government and are considered to be the most secure investments available; (2) U.S. government agency obligations and U.S. government instrumentality obligations, which have a liquid market with a readily determinable market value; (3) Certificates of deposit and other evidences of deposit at financial institutions; (4) 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; (5) Investment -grade obligations of state, provincial and local governments and public authorities; (6) Money market mutual funds regulated by the Securities and Exchange Commission and whose portfolios consist only of dollar- denominated securities; and (7) Local government investment pools either State - administered or developed through joint powers statutes and other intergovernmental agreement legislation. (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 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 2007C 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. 25 4837 - 6962 - 7393.2 (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 28. It is covenanted and agreed by the City with the registered owners of the Series 2007C 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 System revenues as herein required, and the applying of System revenues to the respective funds herein created or referred to. Section 29. 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 30. Provisions Relating to Bond Insurance. (a) Notwithstanding any provision to the contrary contained in this Ordinance, so long as the Bond Insurance Policy remains in full force and effect (or any amounts are owed to the Insurer in connection therewith), the provisions of this Section 30 shall control where applicable. (b) When used in this Ordinance, "Bond Insurance Policy" shall mean the insurance policy issued by the Insurer guaranteeing the scheduled payment of principal of and interest on the Series 2007C Bonds when due. (c) When used in this Ordinance, "Insurer" shall mean Financial Security Assurance Inc., a New York stock insurance company, or any successor thereto or assignee thereof. (d) The prior written consent of the Insurer shall be a condition precedent to the deposit of any credit instrument provided in lieu of a cash deposit into the Debt Service Reserve. Notwithstanding anything to the contrary set forth in this Ordinance, amounts on deposit in the Debt Service Reserve shall be applied solely to the payment of debt service on the Series 2007C Bonds. (e) The Insurer shall be deemed to be the sole holder of the Series 2007C Bonds for the purpose of exercising any voting right or privilege or giving any consent or direction or taking any other action that the holders of the Series 2007C Bonds are entitled to take pursuant to the provisions of this Ordinance pertaining to (i) defaults and remedies and (ii) the duties and obligations of the Trustee. (f) The maturity of the Series 2007C Bonds shall not be accelerated without the consent of the Insurer. In the event the maturity of the Series 2007C Bonds is accelerated, the Insurer may elect, in its sole discretion, to pay accelerated principal and interest accrued on such principal to the date of acceleration (to the extent unpaid by the City) and the Trustee shall be required to accept such amounts. Upon payment of such accelerated principal and interest 26 4837 - 6962 - 73932 accrued to the acceleration date as provided above, the Insurer's obligations under the Bond Insurance Policy with respect to the Series 2007C Bonds shall be fully discharged. (g) No grace period for a covenant default under this Ordinance shall exceed thirty (30) days or be extended for more than sixty (60) days without the prior written consent of the Insurer. No grace period shall be permitted for payment defaults hereunder. (h) The Insurer shall be deemed to be a third party beneficiary to this Ordinance. (i) Upon the occurrence of an optional redemption of the Series 2007C Bonds in part, the selection by the City of Series 2007C Bonds to be redeemed shall be subject to the approval of the Insurer. The exercise of any provision of this Ordinance that permits the purchase of the Series 2007C Bonds in lieu of redemption shall require the prior written approval of the Insurer if any Series 2007C Bond so purchased is not cancelled upon such purchase. 0) Any amendment, supplement, modification to, or waiver of this Ordinance that requires the consent of the registered owners of the Series 2007C Bonds or adversely affects the rights and interests of the Insurer shall be subject to the prior written consent of the Insurer. (k) Unless the Insurer otherwise directs, upon the occurrence and continuance of a default hereunder, or an event which with notice or lapse of time would constitute a default hereunder, any unspent proceeds of the Series 2007C Bonds shall not be disbursed, but shall instead be applied to the payment of debt service or the redemption price of the Series 2007C Bonds. (1) The rights granted to the Insurer under this Ordinance to request, consent to or direct any action are rights granted to the Insurer in consideration of its issuance of the Bond Insurance Policy. Any exercise by the Insurer of such rights is merely an exercise of the Insurer's contractual rights and shall not be construed or deemed to be taken for the benefit, or on behalf of, the registered owners of the Series 2007C Bonds, and such action does not evidence any position of the Insurer, affirmative or negative, as to whether the consent of the registered owners of the Series 2007C Bonds or any other person is required in addition to the consent of the Insurer. (m) Only (1) cash, (2) non - callable direct obligations of the United States of America ( "Treasuries "), (3) evidences of ownership of proportionate interests in future interest and principal payments on Treasuries held by a bank or trust company as custodian, under which the owner of the investment is the real party in interest and has the right to proceed directly and individually against the obligor and the underlying Treasuries are not available to any person claiming through the custodian or to whom the custodian may be obligated, (4) subject to the prior written consent of the Insurer, pre - refunded municipal obligations rated "AAA" and "Aaa" by S &P and Moody's, respectively, or (5) subject to the prior written consent of the Insurer, securities eligible for "AAA" defeasance under then existing criteria of S & P or any combination thereof, shall be used to effect defeasance of the Series 2007C Bonds pursuant to Section 20 of this Ordinance unless the Insurer otherwise approves. To accomplish such defeasance, the City shall cause to be delivered (i) a report of an independent firm of nationally recognized certified public accountants or such other accountant as shall be acceptable to the Insurer ( "Accountant ") verifying the 27 4837- 6962 - 7393.2 sufficiency of the escrow established to pay the Series 2007C Bonds in full on the maturity or redemption date ( "Verification "), (ii) an Escrow Deposit Agreement (which shall be acceptable in form and substance to the Insurer), (iii) an opinion of nationally recognized bond counsel to the effect that the Series 2007C Bonds are no longer "Outstanding" under this Ordinance and (iv) a certificate of discharge of the Trustee with respect to the Series 2007C Bonds. Each Verification and defeasance opinion shall be acceptable in form and substance, and addressed, to the City, the Trustee and the Insurer. The Insurer shall be provided with final drafts of the above - referenced documentation not less than five (5) business days prior to the funding of the escrow. The Series 2007C Bonds shall be deemed "Outstanding" under this Ordinance unless and until they are in fact paid and retired or the above criteria are met. (n) Amounts paid by the Insurer under the Bond Insurance Policy shall not be deemed paid for purposes of this Ordinance, and the Series 2007C Bonds relating to such payments shall remain Outstanding and continue to be due and owing until paid by the City in accordance with this Ordinance. This Ordinance shall not be discharged unless all amounts due or to become due to the Insurer have been paid in full or duly provided for. (o) Each of the City and the Trustee covenant and agree to take such action (including, as applicable, filing of UCC financing statements and continuations thereof) as is necessary from time to time to preserve the priority of the pledge of the Trust Estate under applicable law. (p) (i) If, on the third business day prior to the related scheduled interest payment date or principal payment date with respect to the Series 2007C Bonds ( "Payment Date ") there is not on deposit with the Trustee, after making all transfers and deposits required under this Ordinance, moneys sufficient to pay the principal of and interest on the Series 2007C Bonds due on such Payment Date, the Trustee shall give notice to the Insurer and to its designated agent (if any) (the "Insurer's Fiscal Agent ") by telephone or telecopy of the amount of such deficiency by 12:00 noon, New York City time, on such business day. If, on the second business day prior to the related Payment Date, there continues to be a deficiency in the amount available to pay the principal of and interest on the Series 2007C Bonds due on such Payment Date, the Trustee shall make a claim under the Insurance Policy and give notice to the Insurer and the Insurer's Fiscal Agent (if any) by telephone of the amount of such deficiency, and the allocation of such deficiency between the amount required to pay interest on the Series 2007C Bonds and the amount required to pay principal of the Series 2007C Bonds, confirmed in writing to the Insurer and the Insurer's Fiscal Agent by 12:00 noon, New York City time, on such second Business Day by filling in the form of Notice of Claim and Certificate delivered with the Bond Insurance Policy. (ii) The Trustee shall designate any portion of payment of principal on the Series 2007C Bonds paid by the Insurer, whether by virtue of mandatory sinking fund redemption, maturity or other advancement of maturity, on its books as a reduction in the principal amount of Series 2007C Bonds registered to the then current registered owner, whether DTC or its nominee or otherwise, and shall issue a replacement Series 2007C Bond to the Insurer, registered in the name of Financial Security Assurance Inc., in a principal amount equal to the amount of principal so paid (without regard to authorized denominations): provided that the Trustee's failure to so designate any payment or issue any replacement Series 2007C Bond shall have no effect on the amount of principal or interest payable by the Issuer on any Series 2007C Bond or the subrogation rights of the Insurer. 28 4837 - 6962 - 7393.2 (iii) The Trustee shall keep a complete and accurate record of all funds deposited by the Insurer into the Policy Payments Account (defined below) and the allocation of such funds to payment of interest on and principal of any Series 2007C Bond. The Insurer shall have the right to inspect such records at reasonable times upon reasonable notice to the Trustee. (iv) Upon payment of a claim under the Bond Insurance Policy, the Trustee shall establish a separate special purpose trust account for the benefit of the registered owners of the Series 2007C Bonds referred to herein as the 'Policy Payments Account" and over which the Trustee shall have exclusive control and sole right of withdrawal. The Trustee shall receive any amount paid under the Bond Insurance Policy in trust on behalf of the registered owners of the Series 2007C Bonds and shall deposit any such amount in the Policy Payments Account and distribute such amount only for purposes of making the payments for which a claim was made. Such amounts shall be disbursed by the Trustee to the registered owners of the Series 2007C Bonds in the same manner as principal and interest payments are to be made with respect to the Series 2007C Bonds under the sections hereof regarding payment of the Series 2007C Bonds. It shall not be necessary for such payments to be made by checks or wire transfers separate from the check or wire transfer used to pay debt service with other funds available to make such payments. Notwithstanding anything herein to the contrary, the City agrees to pay to the Insurer (1) a sum equal to the total of all amounts paid by the Insurer under the Bond Insurance Policy (the "Insurer Advances "); and (2) interest on such Insurer Advances from the date paid by the Insurer until payment thereof in full, payable to the Insurer at the Late Payment Rate per annum (collectively, the "Insurer Reimbursement Amounts "). "Late Payment Rate" means the lesser of (a) the greater of (i) the per annum rate of interest, publicly announced from time to time by JPMorgan Chase Bank at its principal office in The City of New York, as its prime or base lending rate (any change in such rate of interest to be effective on the date such change is announced by JPMorgan Chase Bank) plus 3 %, and (ii) the then applicable highest rate of interest on the Series 2007C Bonds and (b) the maximum rate permissible under applicable usury or similar laws limiting interest rates. The Late Payment Rate shall be computed on the basis of the actual number of days elapsed over a year of 360 days. The City hereby covenants and agrees that the Insurer Reimbursement Amounts are secured by a lien on and pledge of the Net Revenues and payable from such Net Revenues on a parity with debt service due on the Series 2007C Bonds. (v) Funds held in the Policy Payments Account shall not be invested by the Trustee and may not be applied to satisfy any costs, expenses or liabilities of the Trustee. Any funds remaining in the Policy Payments Account following a Payment Date shall promptly be remitted to the Insurer. (q) The Insurer shall, to the extent it makes any payment of principal of or interest on the Series 2007C Bonds, become subrogated to the rights of the recipients of such payments in accordance with the terms of the Bond Insurance Policy. Each obligation of the City to the Insurer hereunder shall survive discharge or termination this Ordinance. (r) The City shall pay or reimburse the Insurer any and all charges, fees, costs and expenses that the Insurer may reasonably pay or incur in connection with (i) the 29 4837 -6962- 7393.2 administration, enforcement, defense or preservation of any rights or security hereunder; (ii) the pursuit of any remedies under this Ordinance or otherwise afforded by law or equity; (iii) any amendment, waiver or other action with respect to, or related to, this Ordinance whether or not executed or completed; or (iv) any litigation or other dispute in connection with the Ordinance or the transactions contemplated thereby, other than costs resulting from the failure of the Insurer to honor its obligations under the Bond Insurance Policy. The Insurer reserves the right to charge a reasonable fee as a condition to executing any amendment, waiver or consent proposed in respect of this Ordinance. (s) After payment of reasonable expenses of the Trustee, the application of funds realized upon default shall be applied to the payment of expenses of the City or rebate only after the payment of past due and current debt service on the Series 2007C Bonds and amounts required to restore the Debt Service Reserve to the Required Level. (t) The Insurer shall be entitled to pay principal or interest on the Series 2007C Bonds that shall become Due for Payment but shall be unpaid by reason of Nonpayment by the City (as such terms are defined in the Insurance Policy) and any amounts due on the Series 2007C Bonds as a result of acceleration of the maturity thereof in accordance with this Ordinance, whether or not the Insurer has received a Notice of Nonpayment (as such terms are defined in the Bond Insurance Policy) or a claim upon the Bond Insurance Policy. (u) The notice address of the Insurer is: Financial Security Assurance Inc., 31 West 52nd Street, New York, New York 10019, Attention: Managing Director - Surveillance, Re: Policy No. , Telephone: (212) 826 -0100; Telecopier: (212) 339 -3556. In each case in which notice or other communication refers to a default, then a copy of such notice or other communication shall also be sent to the attention of the General Counsel and shall be marked to indicate "URGENT MATERIAL ENCLOSED." (v) The Insurer shall be provided with the following information by the City or the Trustee, as the case may be: (i) Annual audited financial statements of the System within 150 days after the end of the City's fiscal year (together with a certification of the City that it is not aware of any default under the Ordinance), and the System's annual budget within 30 days after the approval thereof, together with such other information, data or reports as the Insurer shall reasonably request from time to time; (ii) Notice of any draw upon the Debt Service Reserve within two business days after knowledge thereof other than (i) withdrawals of amounts in excess of the Required Level and (ii) withdrawals in connection with a refunding of the Series 2007C Bonds; (iii) Notice of any default known to the Trustee or the City within five business days after knowledge thereof, (iv) Prior notice of the advance refunding or redemption of any of the Series 2007C Bonds, including the principal amount, maturities and CUSIP numbers thereof, 30 4837 - 6962 - 7393.2 (v) Notice of the resignation or removal of the Trustee and the appointment of, and acceptance of duties by, any successor thereto: (vi) Notice of the commencement of any proceeding by or against the City commenced under the United States Bankruptcy Code or any other applicable bankruptcy, insolvency, receivership, rehabilitation or similar law (an "Insolvency Proceeding "); (vii) Notice of the making of any claim in connection with any Insolvency Proceeding seeking the avoidance as a preferential transfer of any payment of principal of, or interest on, the Series 2007C Bonds; (viii) A full original transcript of all proceedings relating to the execution of any amendment, supplement, or waiver to this Ordinance; and (ix) All reports, notices and correspondence to be delivered to the registered owners of the Series 2007C Bonds under the terms of this Ordinance. (w) Notwithstanding satisfaction of the other conditions to the issuance of Additional Bonds set forth in this Ordinance, no such issuance may occur (1) if a default (or any event which, once all notice or grace periods have passed, would constitute a default) exists unless such default shall be cured upon such issuance, and (2) unless the Debt Service Reserve is fully funded at the Required Level (including the proposed issue) upon the issuance of such Additional Bonds, in either case unless otherwise permitted by the Insurer. (x) In determining whether any amendment, consent, waiver or other action to be taken, or any failure to take action, under this Ordinance would adversely affect the security for the Series 2007C Bonds or the rights of the registered owners of the Series 2007C Bonds, the Trustee shall consider the effect of any such amendment, consent, waiver, action or inaction as if there were no Bond Insurance Policy. (y) No contract shall be entered into or any action taken by which the rights of the Insurer or security for or sources of payment of the Series 2007C Bonds may be impaired or prejudiced in any material respect except upon obtaining the prior written consent of the Insurer. Section 31. (a) Notwithstanding any provision to the contrary contained in this Ordinance, so long as the Reserve Policy remains in full force and effect (or any amounts are owed to the Insurer in connection with the Reserve Policy or the Insurance Agreement), the provisions of this Section 31 shall control where applicable. (b) In connection with the issuance and delivery of the Reserve Policy, execution and delivery of an Insurance Agreement by and between the City and the Insurer (the "Insurance Agreement ") will be required. The Mayor is hereby authorized and directed to execute and deliver the Insurance Agreement on behalf of the City in the form presented by the Insurer. (c) The City shall repay any draws under the Reserve Policy and pay all related reasonable expenses incurred by the Insurer. Interest shall accrue and be payable on such draws and expenses from the date of payment by the Insurer at the Late Payment Rate. "Late Payment Rate" means the lesser of (a) the greater of (i) the per annum rate of interest, publicly announced 31 4837- 6962- 7393.2 from time to time by JPMorgan Chase Bank at its principal office in the City of New York, as its prime or base lending rate ( "Prime Rate ") (any change in such Prime Rate to be effective on the date such change is announced by JPMorgan Chase Bank) plus 3 %, and (ii) the then applicable highest rate of interest on the Series 2007C Bonds and (b) the maximum rate permissible under applicable usury or similar laws limiting interest rates. The Late Payment Rate shall be computed on the basis of the actual number of days elapsed over a year of 360 days. In the event JPMorgan Chase Bank ceases to announce its Prime Rate publicly, Prime Rate shall be the publicly announced prime or base lending rate of such national bank as the Insurer shall specify. Repayment of draws and payment of expenses and accrued interest thereon at the Late Payment Rate (collectively, "Policy Costs ") shall commence in the first month following each draw, and each such monthly payment shall be in an amount at least equal to 1/12 of the aggregate of Policy Costs related to such draw. Amounts in respect of Policy Costs paid to the Insurer shall be credited first to interest due, then to the expenses due and then to principal due. As and to the extent that payments are made to the Insurer on account of principal due, the coverage under the Reserve Policy will be increased by a like amount, subject to the terms of the Reserve Policy. (d) All cash and investments in the Debt Service Reserve established for the Series 2007C Bonds (the "Reserve Fund ") shall be transferred to the 2007C Bond Fund for payment of debt service on Series 2007C Bonds before any drawing may be made on the Reserve Policy or any other credit facility credited to the Reserve Fund in lieu of cash ( "Credit Facility "). Payment of any Policy Costs shall be made prior to replenishment of any such cash amounts. Draws on all Credit Facilities (including the Reserve Policy) on which there is available coverage shall be made on a pro -rata basis (calculated by reference to the coverage then available thereunder) after applying all available cash and investments in the Reserve Fund. Payment of Policy Costs and reimbursement of amounts with respect to other Credit Facilities shall be made on a pro -rata basis prior to replenishment of any cash drawn from the Reserve Fund. (e) If the City shall fail to pay any Policy Costs in accordance with the requirements of subsection (c) of this Section 31, the Insurer shall be entitled to exercise any and all legal and equitable remedies available to it, including those provided under this Ordinance other than (i) acceleration of the maturity of the Series 2007C Bonds or (ii) remedies which would adversely affect the owners of the Series 2007C Bonds. (f) This Ordinance shall not be discharged until all Policy Costs owing to the Insurer shall have been paid in full. The City's obligation to pay such amounts shall expressly survive payment in full of the Series 2007C Bonds. (g) "Average annual principal and interest requirements" as used in the additional bonds test in Section 16 of the Ordinance and in the rate covenant contained in Section 9 of the Ordinance shall be deemed to include the dollar amount of Policy Costs then due and owing, if any, at the time of calculation under either Section. (h) The Trustee shall ascertain the necessity for a claim upon the Reserve Policy and to provide notice to the Insurer in accordance with the terms of the Reserve Policy at least five business days prior to each date upon which interest or principal is due on the Series 2007C Bonds. The Trustee shall give notice to the Insurer of any failure of the City to make timely 32 4837-6962-73932 payment to it in full of the monthly deposits required by this Ordinance within two business days of the applicable due date thereof. Section 32. The requirements of Ordinance No. 15,249, as they may relate to the authorization and sale of the Bonds, are hereby waived. Section 33. 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 34. All ordinances and resolutions or parts thereof, in conflict herewith are hereby repealed to the extent of such conflict. PASSED: September 18, 2007. Mark Stodola, Mayor 4 - X9Z4-IjV Na ki S. Blocker, Assistant City Clerk For Nancy Wood, City Clerk Approved as to form: t U�' 4AA_ �- Tom Carpenter, City Attorney 33 4837 - 6962 - 7393.2