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HomeMy WebLinkAboutOrdinances - O-97-822 - 04/30/1997 - AUTHORIZE $3.6M GO BONDS SANITARY SEWERS EAST OFORDINANCE NUMBER 0-97-$11-- AN ORDINANCE authorizing and providing for the issue of $3,600,000 General Obligation Bonds (Sales Tax Alternate Revenue Source), Series 1997A, of the City of McHenry, McHenry County, Illinois, for the purpose of defraying the cost of constructing sanitary sewers to serve the annexed area of the City east of the Fox River, prescribing the details of said bonds and providing for collection, segregation and application of certain sales tax receipts to pay said Bonds. Adopted by the City Council on the 30th of April, 1997. TABLE OF CONTENTS Page Preambles................................................................................................................... 1 Section 1. Definitions ............................................... Section 2. Incorporation of Preambles............................................................ 5 Section 3. Determination to Issue Bonds.........................................................6 Section4. Bond Details................................................................................6 Section5. Redemption..................................................................................7 Section 6. Execution; Authentication..............................................................8 Section 7. Registration of Bonds; Persons Treated as Owners; Global Book -Entry System.......................................................................9 Section8. Form of Bonds........................................................................... 11 Section 9. Sale of the Bonds........................................................................ 18 Section 10. Treatment of Bonds as Debt ......................................................... 18 Section 11. Series 1997A Alternate Bond Fund ............................................... 18 Section 12. Use of Bond Proceeds................................................................. 19 Section 13. Pledged Taxes; Tax Levy............................................................ 20 Section 14. Filing with County Clerk............................................................. 21 Section 15. Abatement of Pledged Taxes ........................................................ 22 Section 16. Pledged Revenues; General Covenants .......................................... 22 Section 17. Additional Bonds........................................................................ 23 Section18. Defeasance.................................................................................23 Section 19. This Ordinance a Contract........................................................... 24 Section 20. Continuing Disclosure Undertaking .............................................. 24 Section 21. Non -Arbitrage and Tax -Exemption ............................................... 24 Section 22. Registered Form......................................................................... 37 Section 23. Bond Registrar Covenants........................................................... 38 Section 24. Municipal Bond Insurance........................................................... 38 Section 25. Severability................................................................................ 38 Section26. Repealer.................................................................................... 38 Section 27. Publication and Effective Date ..................................................... 39 This Table of Contents is for convenience only and is not a part of the ordinance. ORDINANCE NUMBER 0-97-13f� AN ORDINANCE authorizing and providing for the issue of $3,600,000 General Obligation Bonds (Sales Tax Alternate Revenue Source), Series 1997A, of the City of McHenry, McHenry County, Illinois, for the purpose of defraying the cost of constructing sanitary sewers to serve the annexed area of the City east of the Fox River, prescribing the details of said bonds and providing for collection, segregation and application of certain sales tax receipts to pay said Bonds. Preambles WHEREAS the City of McHenry, McHenry County, Illinois (the "City"), is a duly organized and existing municipality and unit of local government of the State of Illinois, and is operating under and pursuant to the provisions of the Illinois Municipal Code, and all laws amendatory thereof and supplementary thereto (the "Municipal Code"); and WHEREAS the City Council of the City (the "City Council") has determined that it is advisable, necessary and in the best interests of the City, in order to promote and protect the public health, welfare, safety and convenience of the residents of the City, to undertake the construction of sanitary sewers to serve the annexed area east of the Fox River, consisting of sewer mains, two force mains for both a river and creek crossing and three sewage lift stations, together with any land and incidental construction and all electrical, mechanical or other services necessary, useful or advisable to such construction (the "Project"), all in accordance with the plans, specifications and estimate of costs, which have prepared for the City by Baxter and Woodman, Consulting Engineers, Crystal Lake, Illinois, and which have been approved by the Corporate Authorities and are now on file in the office of the City Clerk for public inspection; and WHEREAS the City Council has determined and does hereby determine that the Project is a lawful corporate purpose; and WHEREAS the estimated cost of acquiring, constructing and installing the Project, including engineering, legal, financial, bond discount, printing and publication costs, and other expenses, is $3,600,000, and there are insufficient funds on hand and lawfully available to pay such costs; and WHEREAS there are insufficient funds on hand and lawfully available to pay costs of the Project, and there exists a source of funds, other than enterprise revenues, namely, all collections distributed to the City from those taxes imposed by the State of Illinois pursuant to the Use Tax Law, the Service Use Tax Act, the Service Occupation Tax Act and the Retailer's Occupation Tax Act, each as supplemented and amended from time to time, or substitute taxes therefor as provided by the State of Illinois in the future, and as provided in the Local Government Debt Reform Act, as amended (the "Reform Act"), the City is authorized to issue its General Obligation Bonds (Alternate Revenue Source) payable from such revenue source; and WHEREAS the costs of the Project is expected to be defrayed by up to $3,600,000 of the proceeds of bonds issued pursuant to the Reform Act; and WHEREAS it is necessary and for the best interests of the City that the Project be undertaken, and in order to raise the funds required for such purpose, it will be necessary for the City to borrow an amount not to exceed $3,600,000 and in evidence thereof to issue alternate bonds, being General Obligation Bonds (Alternate Revenue Source) payable from any revenue source as provided by the Reform Act, in an aggregate principal amount not to exceed $3,600,000, all in accordance with the Reform Act; and WHEREAS the City Council, on the 14th day of August, 1996, adopted Ordinance Number 0-96-797 (the "Authorizing Ordinance"), authorizing the issuance of certain Alternate Bonds, being General Obligation Bonds (Alternate Revenue Source) payable from revenue sources as provided by the Reform Act (the "Alternate Bonds"), in an amount riot to exceed $3,600,000 for the Project; and WHEREAS on the 19th day of August, 1996, the Authorizing Ordinance, which included therein a notice in the statutory form, was published in the Northwest Herald, and an affidavit evidencing the publication of the Authorizing Ordinance and said notice has heretofore been presented to the City Council and made a part of the permanent records of the City; and WHEREAS no petition with the requisite number of valid signatures thereon had ever been filed with the City Clerk requesting that the question of the issuance of the Alternate Bonds for the Project be submitted to referenda; and WHEREAS the City Council has been authorized to issue the Alternate Bonds to the amount of $3,600,000 in accordance with the provisions of the Reform Act and the Authorizing Ordinance; none of such bonds has heretofore been issued by the City; and the City Council hereby determines that it is necessary and advisable that there be issued at this time $3,600,000 of the authorized amount; and WHEREAS the Alternate Bonds to be issued will be payable from the Pledged Revenues and the Pledged Taxes, both as hereinafter defined; and WHEREAS the City has heretofore issued the following described bonds which are also payable from the Pledged Revenues: $3,000,000 original issue General Obligation Bonds, Series 1990, of which $2,175,000 remain outstanding (the "Series 1990 Bonds"); and WHEREAS the proceedings of the City authorizing the Series 1990 Bonds permits the issuance of additional bonds payable from, and secured by a lien on, the Pledged Revenues, on a parity with the Series 1990 Bonds; and -2- WHEREAS the City Council hereby determines that the Pledged Revenues will provide in each year to final maturity of the proposed Alternate Bonds an amount not less than 1.25 times debt service of the Series 1990 Bonds and the proposed Alternate Bonds, said two series of bonds being the only series of alternate bonds payable from the Pledged Revenues; and WHEREAS such determination of the sufficiency of the Pledged Revenues is supported by reference to the report dated April 30, 1997 (the "Report"), of Warren Associates, Northbrook, Illinois, which Report has been presented to and accepted by the City Coun--il and is now on file with the City Clerk; and WHEREAS the Property Tax Extension Limitation Law of the State of Illinois, as amended by Public Act 89-385 (the "Tax Limitation Law"), imposes certain limitations on the "aggregate extension" of certain property taxes levied by the City, but provides that the definition of "aggregate extension" contained in Section 18-185 of the Tax Limitation Law does not include "extensions ... payments of principal and interest on bonds issued under Section 15 of the Local Government Debt Reform Act;" and WHEREAS, the County Clerk of McHenry County, Illinois, is therefore authorized to extend and collect said direct annual and valorem tax so levied for the payment of the Alternate Bonds for the Project without limitation as to rate or amount; and WHEREAS pursuant to and in accordance with the provisions of the Bond Issue Notification Act of the State of Illinois, the City Council, on the 8th day of January, 1997, adopted a resolution calling a public hearing (the "Hearing") for the 5th—da`y of F Z, 1997, concerning the intent of the City Council to sell not to exceed $3,600,000 General Obligation Bonds (Alternate Revenue Source); and WHEREAS notice of the Hearing was given by publication at least once not less than seven (7) nor more than twenty-one (21) days before the date of the Hearing in the Northwest Herald, the same being a newspaper of general circulation in the City, and was not placed in the legal notice or classified advertisement sections of said newspaper; and Z977�' ?A-J WHEREAS the Hearing was held on the Siff -day of Felx ry, 1997, and at the Hearing, the City Council explained the reasons for the proposed bond issue and permitted persons desiring to be heard an opportunity to present written or oral testimony within reasonable time limits; and WHEREAS the Hearing was finally adjourned on the Stir day of Febrd-airy, 1997, and not less than seven (7) days have passed since the final adjournment of the Hearing; NOW THEREFORE Be It Ordained by the City Council of the City of McHenry, McHenry County, Illinois, as follows: -3- Section 1. Definitions. The words and terms used in this Ordinance shall have the meanings set forth and defined for them herein unless the context or use clearly indicates another or different meaning is intended, including the words and terms as follows: "Additional Bonds" means any alternate bonds issued in the future in accordance with the provisions of the Reform Act on a parity with and sharing ratably and equally in the Pledged Revenues with the Alternate Bonds and the Series 1990 Bonds. "Alternate Bonds" means the Bonds and any Additional Bonds. "Bond" or "Bonds" means one or more, as applicable, of the $3,600,000 General Obligation Bonds (Sales Tax Alternate Revenue Source), Series 1997A, authorized to be issued by this Ordinance. "Bond Fund" means the City of McHenry 1997 Alternate Bond Fund maintained here- under and further described in Section 11 of this Ordinance. "Bond Register" means the books of the City kept by the Bond Registrar to evidence the registration and transfer of the Bonds, or a successor designated as bond registrar hereunder. "Bond Registrar" means American National Bank and Trust Company of Chicago, Chicago, Illinois, or a successor designated as bond registrar hereunder. "City" means the City of McHenry, McHenry County, Illinois. "City Council" means the City Council of the City. "Code" means the Internal Revenue Code of 1986. "Expense Fund" means the fund established hereunder and further described by Section 12 of this Ordinance. "Fiscal Year" means that twelve -calendar month period beginning on the first day of May of any calendar year and ending on the last day of April of the next succeeding calendar year. "Municipal Code" means the Illinois Municipal Code, as supplemented and amended. "Ordinance" means this ordinance as originally adopted and as the same may from time to time be amended or supplemented in accordance with terms hereof. "Outstanding" when used with reference to the Bonds and Additional Bonds means such of those bonds which are outstanding and unpaid; provided, however, such term shall not include any of the Bonds or Additional Bonds (i) which have matured and for which moneys are on deposit with proper paying agents or are otherwise sufficiently available to -4- pay all principal thereof and interest thereon or (ii) the provision for payment of which has been made by the City by the deposit in an irrevocable trust or escrow of funds or direct, full faith and credit obligations of the United States of America, the principal of and interest on which will be sufficient to pay at maturity or as called for redemption all the principal of and interest on such Bonds or Additional Bonds. "Paying Agent" means American National Bank and Trust Company of Chicago, Chicago, Illinois, or a successor designated as paying agent hereunder. "Pledged Moneys" means the Pledged Revenues and the Pledged Taxes, as all of such terms are defined herein. "Pledged Revenues" means all collections distributed to the City from those taxes imposed by the State of Illinois pursuant to the Use Tax Act, the Service Use Tax Act, the Service Occupation Tax Act and the Retailer's Occupation Tax Act, each as supplemented and amended from time to time, or substitute taxes therefor as provided by the State of Illinois in the future. "Pledged Taxes" means the ad valorem taxes levied against all of the taxable property in the City without limitation as to rate or amount, pledged hereunder by the City as security for the Bonds. "Project" means such projects as described and defined as such in the preambles to this Ordinance. "Project Fund" means the fund established hereunder and further described by Section 12 of this Ordinance. "Reform Act" means the Local Government Debt Reform Act of the State of Illinois, as amended. "Tax-exempt" means, with respect to the Bonds, the status of interest paid and received thereon as not includible in the gross income of the owners thereof under the Code for federal income tax purposes except to the extent that such interest will be taken into account in computing an adjustment used in determining the alternative minimum tax for certain corporations, in computing the environmental tax imposed on certain corporations and in computing the "branch profits tax" imposed on certain foreign corporations. Section 2. Incorporation of Preambles; Acceptance of Report. The City Council hereby finds that the recitals contained in the preambles to this Ordinance are true, correct and does hereby incorporate them into this Ordinance by this reference. The Report is hereby accepted and approved by the City Council, and it is hereby found and determined that Warren Associates, Northbrook, Illinois, is an independent feasibility analyst having a national reputation for experience in such matters as the Report. -5- Section 3. Determination to Issue Bonds. It is necessary and in the best interests of the City for the City to construct the Project for the public health, safety and welfare, in accordance with the plans and estimates therefor as described, and to issue the Bonds to enable the City to pay the costs thereof. Section 4. Bond Details. For the purpose of providing for the payment of costs of the Project, there shall be issued and sold the Bonds in the aggregate principal amount. of $3,600,000. The Bonds shall each be designated "General Obligation Bond (Sales Tax Alternate Revenue Source), Series 1997A"; and shall be dated May 1, 1997, and shall also bear the date of authentication thereof. The Bonds shall be in fully registered form, shall be in denominations of $5,000 or authorized integral multiples thereof (but no single Bond shall represent principal maturing on more than one date), shall be numbered in such reasonable fashion as may be selected by the Bond Registrar, and shall become due and payable on May 1 of the years, in the amounts and bearing interest at the rates percent per annum as follows (subject to the right of optional redemption hereinafter stated): YEAR AMOUNT ($) RATE (%) 1998 150,000 5.00 1999 150,000 5.00 2000 150,000 5.00 2001 200,000 5.00 2002 200,000 5.00 2003 200,000 5.00 2004 200,000 5.00 2005 250,000 5.00 2006 250,000 5.00 2007 600,000 5.00 2008 600,000 5.10 2009 650,000 5.10 Each Bond shall bear interest from the later of its Dated Date or from the most recent interest payment date to which interest has been paid or duly provided for, until the principal amount of such Bond is paid or duly provided for, such interest (computed upon the basis of a 360-day year of twelve 30-day months) being payable on November 1, 1997, and semiannually thereafter on May 1 and November 1 of each year. Interest on each Bond shall be paid by check or draft of the Paying Agent, payable upon presentation in lawful money of the United States of America, to the person in whose name such Bond is registered at the close of business on the applicable record date. The applicable record date: (the "Record Date") is the 15th day of the month next preceding any regular interest payment date and the 15th day preceding any other interest payment date which may be occasioned by a redemption of Bonds. The principal of the Bonds shall be payable upon presentation in lawful money of the United States of America at the principal corporate trust office of the Paying Agent. W Section 5. Redemption. (a) Optional Redemption. The Bonds maturing on or after May 1, 2007 are subject to redemption prior to maturity at the option of the City, from any available funds, in whole or in part on May 1, 2006 or on any date thereafter, and if in part, in such order of maturity as may be selected by the City, and if less than an entire maturity, in integral multiples of $5,000, selected by lot, at the redemption price of par plus accrued interest. (b) Mandatory Redemption. The Bonds are not subject to mandatory redemption. (c) Redemption Procedure. The City shall, at least 45 days prior to the redemption date (unless a shorter time period shall be satisfactory to the Bond Registrar), notify the Bond Registrar of such redemption date and of the principal amount and maturities of Bonds to be redeemed. For purposes of any redemption of less than all of the Bonds of a single maturity, the particular Bonds or portions of Bonds to be redeemed shall be selected by lot not more than 60 days prior to the redemption date by the Bond Registrar for the Bonds of such series and maturity by such method of lottery as the Bond Registrar shall deem fair and appropriate; provided, that such lottery shall provide for the selection for redemption of Bonds or portions thereof so that any $5,000 Bond or $5,000 portion of a Bond shall be as likely to be called for redemption as any other such $5,000 Bond or $5,000 portion. The Bond Registrar shall promptly notify the City and the Paying Agent in writing of the Bonds or portions of Bonds selected for redemption and, in the case of any Bond selected for partial redemption, the principal amount thereof to be redeemed. Unless waived by the registered owner of Bonds to be redeemed, official notice of any such redemption shall be given by the Bond Registrar on behalf of the City by mailing the redemption notice by registered mail not less than 30 days and not more than 60 days prior to the date fixed for redemption to each registered owner of the Bond or Bonds to be redeemed at the address shown on the Bond Register or at such other address as is furnished in writing by such registered owner to the Bond Registrar. All official notices of redemption shall include the name of the Bonds and at least the information as follows: (1) the redemption date; (2) the redemption price; (3) if less than all of the Bonds of a single maturity are to be redeemed, the identification (and, in the case of partial redemption of any Bonds, the respective principal amounts) of the Bonds to be redeemed; (4) a statement that on the redemption date the redemption price will become due and payable upon each such Bond or portion thereof called for redemption and that interest thereon shall cease to accrue from and after said date; and -7- (5) the place where such Bonds are to be surrendered for payment of the redemption price, which place of payment shall be the principal corporate trust business office of the Paying Agent. Prior to any redemption date, the City shall deposit with the Paying Agent an amount of money sufficient to pay the redemption price of all the Bonds or portions of Bonds which are to be redeemed on that date. Official notice of redemption having been given as aforesaid, the Bonds or portions of Bonds so to be redeemed shall, on the redemption date, become due and payable at the redemption price therein specified, and from and after such date (unless the City shall default in the payment of the redemption price), such Bonds or portions of Bonds shall cease to bear interest. Neither the failure to mail such redemption notice, nor any defect in any notice so mailed, to any particular registered owner, shall affect the sufficiency of such notice with respect to other Bonds. Notice having been properly given, failure of a registered owner to receive such notice shall not be deemed to invalidate, limit or delay the effect of the notice or redemption action described in the notice. Such notice may be waived in writing by the registered owner entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice: by registered owners shall be filed with the Bond Registrar, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. Upon surrender of such Bonds for redemption in accordance with said notice, such Bonds shall be paid by the Paying Agent at the redemption price. The procedure: for payment of interest due on or prior to the redemption date shall be as herein provided for payment of interest otherwise due. Upon surrender for any partial redemption of any Bond, there shall be prepared for the registered owner a new Bond or Bonds of like tenor, of authorized denominations, of the same maturity and bearing the same rate of interest in the amount of the unpaid principal. If any Bond or portion of Bond called for redemption shall not be so paid upon surrender thereof for redemption, the principal shall, until paid or duly provided for, bear interest from the redemption date at the rate borne by the Bond or portion of Bond so called for redemption. All Bonds which have been redeemed shall be cancelled and destroyed by the Bond Registrar and shall not be reissued. Section 6. Execution; Authentication. The Bonds shall be executed on behalf of the City with the manual or duly authorized facsimile signature of the Mayor and attested with the manual or duly authorized facsimile signature of the City Clerk, as they may determine, and shall have impressed or imprinted thereon the corporate seal or facsimile thereof of the City. In case any officer whose signature shall appear on any Bond shall cease to be such officer before the delivery of such Bond, such signature shall nevertheless be valid and sufficient for all purposes, the same as if such officer had remained in office until delivery. All Bonds shall have thereon a certificate of authentication substantially in the form hereinafter set forth duly executed by the Bond Registrar as authenticating agent of the City and showing the date of authentication. No Bond shall be valid or obligatory for any In purpose or be entitled to any security or benefit under this Ordinance unless and until such certificate of authentication shall have been duly executed by the Bond Registrar by manual signature, and such certificate of authentication upon any such Bond shall be conclusive evidence that such Bond has been authenticated and delivered under this Ordinance. The certificate of authentication on any Bond shall be deemed to have been executed by it if signed by an authorized officer of the Bond Registrar, but it shall not be necessary that the same officer sign the certificate of authentication on all of the Bonds issued hereunder. Section 7. Registration of Bonds; Persons Treated as Owners; Global Book -Entry System. (a) General. The City shall cause books (the "Bond Register") for the registration and for the transfer of the Bonds as provided in this Ordinance to be kept at the principal corporate trust office of the Bond Registrar, which is hereby constituted and appointed the registrar of the City. The City is authorized to prepare, and the Bond Registrar shall keep custody of, multiple Bond blanks executed by the City for use in the transfer and exchange of Bonds. Upon surrender for transfer of any Bond at the principal corporate trust office of the Bond Registrar, duly endorsed by, or accompanied by a written instrument or instruments of transfer in form satisfactory to the Bond Registrar and duly executed by, the registered owner or his attorney duly authorized in writing, the City shall execute and the Bond Registrar shall authenticate, date and deliver in the name of the transferee or transferees a new fully registered Bond or Bonds of the same maturity of authorized denominations, for a like aggregate principal amount. Any fully registered Bond or Bonds may be exchanged at said principal corporate trust office of the Bond Registrar for a like aggregate principal amount of Bond or Bonds of the same maturity of other authorized denominations. The execution by the City of any fully registered Bond shall constitute full and due authorization of such Bond and the Bond Registrar shall thereby be authorized to authenticate, date and deliver such Bond, provided, however, the principal amount of outstanding Bonds of each matutity authenticated by the Bond Registrar shall not exceed the authorized principal amount of Bonds for such maturity less previous retirements. The Bond Registrar shall not be required to transfer or exchange any Bond during the period beginning at the close of business on the 15th day of the month next preceding any interest payment date on such Bond and ending at the opening of business on such interest payment date nor to transfer or exchange any Bond after notice calling such Bond for redemption has been mailed, nor during a period of fifteen days next preceding mailing of a notice of redemption of any Bonds. The person in whose name any Bond shall be registered shall be deemed and regarded as the absolute owner thereof for all purposes, and payment of the principal of or interest on any Bond shall be made only to or upon the order of the registered owner thereof or his legal representative. All such payments shall be valid and effectual to satisfy and discharge the liability upon such Bond to the extent of the sum or sums so paid. No service charge shall be made for any transfer or exchange of Bonds, but the City or the Bond Registrar may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any transfer or exchange of Bonds except in the case of the issuance of a Bond or Bonds for the unredeemed portion of a Bond surrendered for redemption. (b) Global Book -Entry System. The Bonds shall be initially issued in the form of a separate single fully registered Bond for each of the maturities of the Bonds as provided in Section 4 hereof, and the ownership of each such Bond shall be registered in the Bond Register in the name of Cede & Co., or any successor thereto ("Cede"), as nominee of The Depository Trust Company, New York, New York, and its successors and assigns ("DTC"). All of the outstanding Bonds shall be registered in the Bond Register in the name of Cede, as nominee of DTC, except as hereinafter provided. The Mayor, the Treasurer and City Clerk are hereby authorized to execute and deliver on behalf of the City such letters to or agreements with DTC and the Bond Registrar as shall be necessary to effectuate such book - entry system (any such letter or agreement being referred to herein as the "Representation Letter "). With respect to the Bonds registered in the Bond Register in the name of Cede, as nominee of DTC, the City and the Bond Registrar shall have no responsibility or obligation to any broker -dealer, bank or other financial institution for which DTC holds Bonds from time to time as securities depository (each such broker -dealer, bank or other financial institution being referred to herein as a "DTC Participant") or to any person on behalf of whom such a DTC Participant holds an interest in the Bonds. Without limiting the immediately preceding sentence, the City and the Bond Registrar shall have no responsibility or obligation with respect to (i) the accuracy of the records of DTC, Cede or any DTC Participant with respect to any ownership interest in the Bonds, (ii) the delivery to any DTC Participant or any other person, other than a registered owner of a Bond as shown in the Bond Register, of any notice with respect to the Bonds, including any notice of redemption, or (iii) the payment to any DTC Participant or any other person, other than a registered owner of a Bond as shown in the Bond Register, of any amount with respect to principal of or interest on the Bonds. The City and the Bond Registrar may treat and consider the person in whose name each Bond is registered in the Bond Register as the holder and absolute owner of such Bond for the purpose of payment of principal and interest with respect to such Bond, for the purpose of giving notices of redemption and other matters with respect to such Bond, for the purpose of registering transfers with respect to such Bond, and for all other purposes whatsoever. The Bond Registrar shall pay all principal of and interest on the Bonds only to or upon the order of the respective registered owners of the Bonds, as shown in the Bond Register, or their respective attorneys duly authorized in writing, and all such payments shall be valid and effective to fully satisfy and discharge the City's obligations with respect to payment of principal of and interest on the Bonds to the extent of the sum or sums so paid. No person other than a registered owner of a Bond as shown in the Bond Register, shall receive a Bond certificate evidencing the obligation of the City to make payments of principal and interest with respect to any Bond. Upon delivery by DTC to the Bond Registrar of written notice to the effect that DTC has determined to substitute a new nominee in place of Cede, the name "Cede" in this ordinance shall refer to such new nominee of DTC. -10- In the event that (i) the City determines that DTC is incapable of discharging, its responsibilities described herein and in the Representation Letter, (ii) the agreement among the City, the Bond Registrar and DTC evidenced by the Representation Letter shall be terminated for any reason or (iii) the City determines that it is in the best interests of the beneficial owners of the Bonds that they be able to obtain certificated Bonds, the City shall notify DTC and DTC Participants of the availability through DTC of Bond certificates and the Bonds shall no longer be restricted to being registered in the Bond Register in the name of Cede, as nominee of DTC. At the time, the City may determine that the Bonds shall be registered in the name of and deposited with such other depository operating a global book - entry system, as may be acceptable to the City, or such depository's agent or designee, and if the City does not select such alternate global book -entry system, then the Bonds may be registered in whatever name or names registered owners of Bonds transferring or exchanging Bonds shall designate, in accordance with the provisions of Section 7(a) hereof. Notwithstanding any other provision of this Ordinance to the contrary, so long as any Bond is registered in the name of Cede, as nominee of DTC, all payments with respect to principal of and interest on such Bond and all notices with respect to such Bond shall be made and given, respectively, in the manner provided in the Representation Letter. Section 8. Form of Bonds. The Bonds shall be in substantially the form hereinafter set forth; provided, however, that if the text of the Bonds is to be printed 'in its entirety on the front side of the Bonds, then the second paragraph on the front side and the legend "See Reverse Side for Additional Provisions" shall be omitted and the text of paragraphs set forth for the reverse side shall be inserted immediately after the first paragraph. -11- REGISTERED NO. [Form of Bond - Front Side] UNITED STATES OF AMERICA STATE OF ILLINOIS COUNTY OF MCHENRY CITY OF MCHENRY GENERAL OBLIGATION BOND (SALES TAX ALTERNATE REVENUE SOURCE) See Reverse Side for Additional Provisions Interest Rate: % Registered Owner: Principal Amount: Maturity Date: May 1, Cede & Co. Dollars SERIES 1997A Dated Date: May 1, 1997 REGISTERED CUSIP: KNOW ALL PERSONS BY THESE PRESENTS that the City of McHenry, McHenry County, Illinois, a municipality and political subdivision of the State of Illinois (the "City"), hereby acknowledges itself to owe and for value received promises to pay to the Registered Owner identified above, or registered assigns as hereinafter provided, on the Maturity Date identified above, the Principal Amount identified above, and to pay interest (computed on the basis of a 360-day year of twelve 30-day months) on such Principal Amount from the later of the Dated Date of this Bond identified above or from the most recent interest payment date to which interest has been paid or duly provided for, at the Interest Rate per annum identified above, such interest to be payable on November 1, 1997, and semiannually thereafter on May 1 and November 1 of each year until the Principal Amount is paid or duly provided for, except as the provisions hereinafter set forth with respect to redemption prior to maturity may be and become applicable hereto. The Principal Amount of this Bond is payable in lawful money of the United States of America upon presentation and surrender hereof at the principal corporate trust office of American National Bank and Trust Company of Chicago, as bond registrar and paying agent (the "Bond Registrar"). Payment of the installments of interest shall be made to the Registered Owner hereof as shown on the registration books of the City maintained by the Bond Registrar at the close of business on the 15th day of the month next preceding each interest payment date and shall be paid by check or draft of the Bond Registrar, payable upon presentation in lawful money of the United States of America, mailed to the address of such Registered Owner as it appears on such registration books or at such other address furnished in writing by such Registered Owner to the Bond Registrar, or as otherwise agreed by the City and Cede & Co., as nominee, or successor, for so long as this Bond is held by The Depository Trust Company, -12- New York, New York, the depository, or nominee, in book -entry only form as provided for same. Reference is hereby made to the further provisions of this Bond set forth on the reverse hereof, and such further provisions shall for all purposes have the same effect as if set forth at this place. It is hereby certified and recited that all acts, conditions and things required to be done precedent to and in the issuance of this Bond have been done and have happened and have been performed in regular and due form of law; that the indebtedness of the City, including the issue of Bonds of which this is one, does not exceed any limitation imposed by law; that provision has been made for the collection of the Pledged Revenues, the levy and collection of the Pledged Taxes, and the segregation of all Pledged Moneys to pay the interest hereon as it falls due and also to pay and discharge the principal hereof at maturity; and that the City hereby covenants and agrees that it will properly account for said Pledged Moneys and will comply with all the covenants of and maintain the funds and accounts as provided by the Ordinance. FOR THE PROMPT PAYMENT OF THIS BOND, BOTH PRINCIPAL AND INTEREST AT MATURITY, THE FULL FAITH, CREDIT AND RESOURCES OF THE CITY ARE HEREBY IRREVOCABLY PLEDGED. THE CITY HAS DESIGNATED THIS BOND AS A "QUALIFIED TAX-EXEMPT OBLIGATION" PURSUANT TO SECTION 265(b)(3) OF THE INTERNAL REVENUE CODE OF 1986. This Bond shall not be valid or become obligatory for any purpose until the certificate of authentication hereon shall have been signed by the Bond Registrar. -13- IN WITNESS WHEREOF the City of McHenry, McHenry County, Illinois, by its City Council, has caused this Bond to be executed with the manual or duly authorized facsimile signature of its Mayor and attested by the manual or duly authorized facsimile signature of its City Clerk and its corporate seal or a facsimile thereof to be impressed or reproduced hereon, all as appearing hereon and as of the Dated Date identified above. ATTEST: City Clerk City of McHenry McHenry County, Illinois [SEAL.] Mayor City of McHenry McHenry County, Illinois -14- Date of Authentication: CERTIFICATE Bond Registrar and Paying Agent: OF American National Bank and Trust AUTHENTICATION Company of Chicago, Chicago, Illinois This Bond is one of the Bonds described in the within mentioned ordinance and is one of the General Obligation Bonds (Sales Tax Alternate Revenue Source), Series 1997A, of the City of McHenry, McHenry County, Illinois. American National Bank and Trust Company of Chicago, Chicago, Illinois, as Bond Registrar Authorized Signatory -15- [Form of Bond - Reverse Side] CITY OF MCHENRY, MCHENRY COUNTY, ILLINOIS GENERAL OBLIGATION BOND (SALES TAX ALTERNATE REVENUE SOURCE) SERIES 1997A This bond and the bonds of the series of which it forms a part ("Bond" and "Bonds" respectively) are of an authorized issue of Three Million Six Hundred Thousand Dollars ($3,600,000) Series 1997A Bonds, of like dated date and tenor except as to maturity, rate of interest, and privilege of redemption and are issued pursuant to applicable provisions of the Illinois Municipal Code, as amended (the "Code"), and the Local Government Debt Reform Act of the State of Illinois, as amended (the "Reform Act"). The Bonds are issued for the purpose of paying the costs of defraying the cost of constructing sanitary sewers to serve the annexed area of the City east of the Fox River. The Bonds are payable from the Pledged Revenues of the City and from the Pledged Taxes of the City. The Pledged Revenues are also pledged to the City's General Obligation Bonds, Series 1990. The Bonds are issued pursuant to an authorizing ordinance passed by the City Council of the City (the "City Council") on 14th of August, 1996, and by a more complete bond ordinance passed by the City Council on the 30th of April, 1997 (the "Ordinance"), to which reference is hereby expressly made for further definitions and terms and to all the provisions of which the Registered Owner by the acceptance of this Bond assents. This Bond does not and will not constitute an indebtedness of the City within the meaning of any constitutional or statutory provision or limitation, unless the Pledged Taxes shall be extended pursuant to the general obligation, full faith and credit promise supporting the Bonds, in which case the amount of the Bonds then Outstanding shall be included in the computation of indebtedness of the City for purposes of all statutory provisions or limitations until such time as an audit of the City shall show that the Bonds shall have been paid from the Pledged Revenues for a complete Fiscal Year. The City reserves the right to issue Additional Bonds without limit from time to time payable from the Pledged Revenues, and any such Additional Bonds shall share ratably and equally in the Pledged Revenues with the Bonds; provided, however, that not Additional Bonds shall be issued except in accordance with the provisions of the Reform Act. The Bonds are subject to optional redemption as set forth in the Ordinance. Notice of any such redemption shall be given by the Bond Registrar on behalf of the City as set forth in the Ordinance. This Bond may be transferred or exchanged, but only in the manner, subject to the limitations, and upon payment of the charges as set forth in the Ordinance. The City, the Paying Agent and the Bond Registrar 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, premium, if any, hereon and interest due hereon and for all other purposes; and none of the City, the Paying Agent and the Bond Registrar shall be affected by any notice to the contrary. -16- ASSIGNMENT FOR VALUE RECEIVED the undersigned sells, assigns and transfers unto (Name and Address of Assignee) the within Bond and does hereby irrevocably constitute and appoint as attorney to transfer the said Bond on the books kept for registration thereof with full power of substitution in the premises. Dated: Signature Guaranteed: NOTICE: The signature to this assignment must correspond with the name of the registered owner as it appears upon the face of the within Bond in every particular, without alteration or enlargement or any change whatever. -17- Section 9. Sale of the Bonds. -The Bonds hereby authorized shall be sold and executed as in this Ordinance provided as soon after the passage hereof as may be, and thereupon be deposited with the City Treasurer of the City, and be by said City Treasurer delivered to the purchaser thereof, the same being Griffin, Kubik, Stephens & Thompson, Inc., Chicago, Illinois (the "Purchaser"), upon receipt of the purchase price therefor, the same being $3,582,000 plus accrued interest to date of delivery; the contract for the sale of the Bonds heretofore entered into is in all respects ratified, approved and confirmed„ it being hereby found and determined that said contract is in the best interest of the City and that no person holding an office of the City either by election or appointment, is in any manner interested, either directly or indirectly, in his own name or in the name of any other person, association, trust or corporation, in said contract for the purchase of the Bonds. As a part of the sale as aforesaid, the City Council hereby authorizes and directs the Purchaser to pay from the proceeds of the Bonds (and at the time of the delivery and issuance thereof) any costs of issuance of the Bonds provided that a statement of charges is provided to the Purchaser at such time of issuance. The distribution by the Purchaser of the Preliminary Official Statement relating to the Bonds, dated April 16, 1997, is hereby in all respects ratified, authorized and approved, and the proposed use by the Purchaser of an Official Statement (in substantially the form of the Preliminary Official Statement but with appropriate variations to reflect the final terms of the Bonds) is hereby authorized and approved. Such officer or officers of the City as are designated therein are hereby authorized to execute and deliver the Official Statement on behalf of the City. Section 10. Treatment of Bonds as Debt. The Bonds shall be payable from the Pledged Moneys and do not and shall not constitute an indebtedness of the City within the meaning of any constitutional or statutory limitation, unless the Pledged Taxes shall be extended pursuant to the general obligation, full faith and credit promise supporting the Bonds, as set forth in Section 13 hereof, in which case the amount of the Bonds then Outstanding shall be included in the computation of indebtedness of the City for purposes of all statutory provisions or limitations until such time, as an audit of the City shall show that the Bonds have been paid from the Pledged Revenues for a complete Fiscal Year, in accordance with the Reform Act. Section 11. Series 1997A Alternate Bond Fund There is hereby created a special fund of the City, which fund shall be held separate and apart from all other funds and accounts of the City and shall be known as the "City of McHenry Series 1997A Alternate Bond Fund" (the "Bond Fund"). The purpose of the Bond Fund is to provide a fund to receive and disburse the Pledged Moneys for any of the Bonds. All payments with respect to the Bonds shall be made directly from the Bond Fund. There are hereby created two accounts of the Bond Fund, designated the Pledged Revenues Account and the Pledged Taxes Account. All PIedged Revenues to be applied to the payment of the Bonds shall be deposited to the credit of the Pledged Revenues Account and all Pledged Taxes shall be deposited to the credit of the Pledged Taxes Account. The Bond Fund and its respective accounts constitute a trust fund established for the purpose of carrying out the covenants, terms and conditions imposed upon the City by this Ordinance. Any Pledged Taxes received by the City shall promptly be deposited into the Pledged Taxes Account of the Bond Fund. Pledged Taxes on deposit to the credit of the Pledged Taxes Account shall be fully spent to pay the principal of and interest on the Bonds for which such taxes were levied and collected prior to use of any moneys on deposit in the Pledged Revenues Account of the Bond Fund. There shall be credited to the Pledged Revenues Account of the Bond Fund and held, in cash and investments, on or before the first day of each month by the financial officer of the City, without any further official action or direction, the Pledged Revenues. Each monthly deposit shall be a fractional amount of the interest becoming due on the next succeeding interest payment date on all Bonds and also a fractional amount of the principal becoming due on the next succeeding maturity date of all of the Bonds until there shall have been accumulated and held, in cash and investments, in the Pledged Revenues Account on or before the month preceding such maturity date of interest or maturity date of principal, an amount sufficient to pay such principal or interest, or both. In computing the fractional amount to be set aside each month in the Pledged Revenues Account, the fraction shall be so computed that a sufficient amount will be: set aside in said Account and will be available for the prompt payment of such principal of and interest on all Bonds and shall be not less than one -sixth of the interest becoming due on the succeeding interest payment date and not less than one -twelfth of the principal becoming; due on the next succeeding principal payment date on all Bonds outstanding until there is sufficient money in said Account to pay such principal or interest, or both. Credits to the Pledged Revenues Account need not be made at such time as there shall be a sufficient sum, held in cash and investments, in said Account to meet principal and interest requirements in said Account on the next two (2) succeeding debt service payment dates on the Bonds outstanding. Section 12. Use of Bond Proceeds. The .proceeds derived from the sale of the Bonds shall be used as follows: A. Accrued interest received by the City upon the sale of the Bonds shall be remitted by the City Treasurer for deposit into the Bond Fund, and be used to pay first interest coming due on the Bonds. B. The City shall then allocate from the Bond proceeds the sum necessary for expenses incurred in the issuance of the Bonds which shall be deposited into an "Expense Fund" to be maintained by the City Treasurer and disbursed for such issuance expenses from time to time in accordance with usual City procedures for the disbursement of funds, which disbursements are hereby expressly authorized. Moneys not disbursed from the Expense Fund within six months shall be transferred by the -19- City for deposit in the hereinafter described Project Fund, and any deficiencies in the Expense Fund shall be paid by disbursement from the Project Fund. C. The remaining funds shall be set aside in a separate fund hereby created and designated as the "Project Fund (1997)" (the "Project Fund"), which the City shall maintain as a separate and segregated account. Monies in said fund shall be withdrawn from time to time as needed for the payment of costs of the Project, and paying the fees and expenses incidental thereto not paid out of the Expense Fund; and said monies shall be disbursed by the City from time to time only upon submission to the City Treasurer of the following: (1) If such disbursement is for payment to a supplier, materialman, or contractor for work done in connection with the Project, a certificate executed by the engineer or architect or City officer in charge of the construction or acquisition of the pertinent project stating the amount of materials supplied or the nature of the work completed, that such materials have been properly accepted or such work approved by him, the amount due and payable thereon, and the amount remaining to be paid in connection with the project as applicable; and (2) A duplicate copy of the order signed by an officer of the City, stating specifically the purpose for which the order is issued and indicating that the payment for which the order is issued has been approved by the City. Funds on deposit in the Project Fund may be invested by the City Treasurer of the City in any lawful manner. All investment earnings in the Project Fund shall first be reserved and transferred to such other account as and to the extent necessary to pay any "excess arbitrage profits" or "penalty in lieu of rebate" under Section 148 of the Code to maintain the Tax -Exempt status' of the Bonds, and the remainder shall be retained in the Project Fund and appropriate account for costs of the Project. Within sixty (60) days after full depletion of any account of the Project Fund, or if the Project has been completed and accepted, the City Treasurer of the City shall certify to the City Council the fact of such depletion or the engineer or architect or City officer in responsible charge of the pertinent project shall certify to the City Council the fact that the work has been completed and accepted, and upon approval of such certification by the City Council, funds (if any) remaining in the Project Fund shall be credited by the City Treasurer of the City to the appropriate account for payment of the Bonds; and the Project Fund shall be closed. Section 13. Pledged Taxes; Tax Levy. For the purpose of providing necessary funds to pay the principal of and interest on the Bonds at maturity, and as provided in Section 15 of the Reform Act, there is hereby levied upon all of the taxable property within the City, in the years for which any of the Bonds are Outstanding, a direct annual tax in amounts sufficient for that purpose, and there be and there hereby is levied upon all of the taxable property in the City the following direct annual taxes (the Pledged Taxes): -20- FOR THE YEAR A TAX SUFFICIENT TO PRODUCE THE SUM OF: 1997 $323,750 for principal and interest up to and including May 1, 1999 (net of funds on hand) 1998 316,250 for principal and interest 1999 358,750 for principal and interest 2000 348,750 for principal and interest 2001 338,750 for principal and interest 2002 328,750 for principal and interest 2003 368,750 for principal and interest 2004 356,250 for principal and interest 2005 693,750 for principal and interest 2006 663,750 for principal and interest 2007 693,150 for principal and interest Principal or interest maturing at any time when there are insufficient funds on hand from the Pledged Moneys to pay the same shall be paid promptly when due from current funds on hand in advance of the collection of the Pledged Moneys herein pledged and levied; and when the Pledged Moneys shall have been collected, reimbursement shall be made to said funds in the amount so advanced. Section 14. Filing with County Clerk. After this Ordinance becomes effective, a copy hereof, certified by the City Clerk, shall be filed with the County Clerk of The County of McHenry, Illinois (the "County Clerk"). The County Clerk shall in and for each of the years required ascertain the rate percent required to produce the aggregate Pledged Taxes hereinbefore provided to be levied in each of said years; and the County Clerk shall extend the same for collection on the tax books in connection with other taxes levied in said years in and by the City for general corporate purposes of the City; and the County Clerk, or other appropriate officer or designee, shall remit the Pledged Taxes for deposit to the credit of the Bond Fund, and in said years the Pledged Taxes shall be levied and collected by and for and on behalf of the City in like manner as taxes for general municipal purposes of the City for said years are levied and collected, and in addition to and in excess of all other taxes. The Pledged Taxes are hereby irrevocably pledged to and shall be used only for the purpose of paying principal of and interest on the Bonds. -21- Section 15. Abatement of Pledged Taxes. As provided in the Reform Act, whenever the Pledged Revenues shall have been determined by the City Treasurer to provide in any calendar year an amount not less than 1.25 times debt service of all outstanding Bonds in the next succeeding Bond Year (November 1 and May 1) and whenever the Pledged Revenues have been deposited in the Bond Fund in an amount sufficient to pay debt service on all outstanding Bonds in the next succeeding Bond Year, the City Treasurer shall, prior to the time the Pledged Taxes levied in such calendar year are extended, direct the abatement of the Pledged Taxes, and proper notification of such abatement shall be filed with the County Clerk in a timely manner to effect such abatement. At the time of delivery of the Bonds, there shall be credited to the Bond Fund, the sum of $331,250 derived from funds of the City on hand and lawfully available therefor. Such amount shall represent the amount sufficient to pay debt service on the Bonds for the Bond Year up to and including May 1, 1998. The City covenants and agrees that it will not direct the County Clerk to abate any other taxes levied for general corporate purposes in a calendar year until sufficient Pledged Revenues have been deposited in the Bond Fund and the abatement of the Pledged Taxes for such calendar year has been filed with the County Clerk. Section 16. Pledged Revenues; General Covenants. The City covenants and agrees with the holders of the Alternate Bonds that, so long as any Alternate Bonds remain Outstanding: A. The Pledged Revenues are hereby pledged to the payment of the Alternate Bonds; and the City Council covenants and agrees to provide for, collect and apply the Pledged Revenues to the payment of all of such bonds as are from time to time Outstanding Bonds and the provision of -not less than an additional 0.25 times debt service thereon, all in accordance with Section 15 of the Reform Act. B. The City will punctually pay or cause to be paid from the Bond Fund the principal of, interest on and premium, if any, to become due in respect to the Alternate Bonds in strict conformity with the terms of the Alternate Bonds and this Ordinance, and it will faithfully observe and perform all of the conditions, covenants and requirements thereof. C. The City will pay and discharge, or cause to be paid and discharged, from the Bond Fund any and all lawful claims which, if unpaid, might become a lien or charge upon the Pledged Revenues, or any part thereof, or upon any such funds in the hands of the Paying Agent, or which might impair the security of the Alternate Bonds. Nothing herein contained shall require the City to make any such payment so long as the City in good faith shall contest the validity of said claims. D. The City will keep, or cause to be kept, proper books of record and accounts, separate from all other records and accounts of the City, in which complete -22- and correct entries shall be made of all transactions relating to the Project, to the Pledged Revenues and to the Bond Fund. Such books of record and accounts shall at all times during business hours be subject to the inspection of the holders of not less than ten per cent (10%) of the principal amount of the Outstanding Alternate Bonds or their representatives authorized in writing. E. The City will preserve and protect the security of the Alternate Bonds and the rights of the registered owners of the Alternate Bonds, and will warrant and defend their rights against all claims and demands of all persons. From and after the sale and delivery of any of the Alternate Bonds by the City, the Alternate Bonds shall be incontestable by the City. F. The City will adopt, make, execute and deliver any and all such further ordinances, resolutions, instruments and assurances as may be reasonably necessary or proper to carry out the intention of, or to facilitate the performance of, this Ordinance, and for the better assuring and confirming unto the holders of the Alternate Bonds of the rights and benefits provided in this Ordinance. G. As long as any Alternate Bonds are Outstanding, the City will continue to deposit the Pledged Revenues and, if necessary, the Pledged Taxes to the appropriate accounts of the Bond Fund. The City covenants and agrees with the purchasers of the Alternate Bonds and with the registered owners thereof that so long as any Alternate Bonds remain Outstanding, the City will take no action or fail to take any action which in any way would adversely affect the ability of the City to collect the Pledged Revenues. The City and its officers will comply with all present and future applicable laws in order to assure that the Pledged Revenues and the Pledged Taxes may be collected as provided herein and deposited into the Bond Fund. H. Once issued, the Alternate Bonds shall be and forever remain until paid or defeased the general obligation of the City, for the payment of which its full faith and credit are pledged, and shall be payable, in addition to the Pledged Revenues, from the levy of the Pledged Taxes as provided in the Reform Act. Section 17. Additional Bonds. The City reserves the right to issue Additional Bonds without limit from time to time payable from the Pledged Revenues, and any such Additional Bonds shall share ratably and equally in the Pledged Revenues with the Bonds; provided, however, that no Additional Bonds shall be issued except in accordance with the provisions of the Reform Act. Section 18. Defeasance. Bonds which are no longer Outstanding Bonds as defined in this Ordinance shall cease to have any lien on or right to receive or be paid from Pledged Revenues or the Pledged Revenues, as applicable, or the Pledged Taxes, for either series, and shall no longer have the benefits of any covenant for the registered owners of Outstanding Bonds as set forth herein as such relates to lien and security for the Bonds in the Pledged Revenues or the Pledged Taxes. -23- Section 19. This Ordinance a Contract. The provisions of this Ordinance shall constitute a contract between the City and the registered owners of the Bonds, and no changes, additions or alterations of any kind shall be made hereto, except as herein provided. Section 20. Continuing Disclosure Undertaking. The Mayor, Treasurer or City Clerk of the City is hereby authorized, empowered and directed to execute and deliver the Continuing Disclosure Undertaking (the "Continuing Disclosure Undertaking") in substantially the same form as now before the City Council, or with such changes therein as the individual executing the Continuing Disclosure Undertaking on behalf of the City shall approve, the official's execution thereof to constitute conclusive evidence of the approval of such changes. When the Continuing Disclosure Undertaking is executed and delivered on behalf of the City as herein provided, the Continuing Disclosure Undertaking will be binding on the City and the officers, employees and agents of the City, and the officers, employees and agents of the City are hereby authorized, empowered and directed to do all such acts ,and things and to execute all such documents as may be necessary to carry out and comply with the provisions of the Continuing Disclosure Undertaking as executed. Notwithstanding any other provision of this Ordinance, the sole remedies for failure to comply with the Continuing Disclosure Undertaking shall be the ability of the beneficial owner of any Bond to seek mandamus or specific performance by court order, to cause the City to comply with its obligations under the Continuing Disclosure Undertaking. Section 21. Non -Arbitrage and Tax -Exemption. One purpose of this Section is to set forth various facts regarding the Bonds and to establish the expectations of the City Council and the City as to future events regarding the Bonds and the use of Bond proceeds. The certifications, covenants and representations contained herein and at the time of the Closing are made on behalf of the City for the benefit of the owners from time to time of the Bonds. In addition to providing the certifications, covenants and representations contained herein the City covenants not to take any action that would cause interest on the Bonds to become includable in the gross income of the holders thereof for federal income tax purposes. The City Council and the City certify, covenant and represent as follows: 1.1. Definitions. In addition to such other words and terms used and defined in this Ordinance, the following words and terms used in this Section shall have the following meanings unless, in either case, the context or use clearly indicates another or different meaning is intended: "Bond Counsel" means Chapman and Cutler or any other nationally recognized firm of attorneys experienced in the field of municipal bonds whose opinions are generally accepted by purchasers of municipal bonds. "Capital Expenditures" means costs of a type that would be properly chargeable to a capital account under the Code (or would be so chargeable with a proper election) under federal income tax principles if the City were treated as a corporation subject to federal income taxation, taking into account the definition of Placed -in -Service set forth herein. -24- "Closing " means the first date on which the City is receiving the purchase price for the Bonds. "Code" means the Internal Revenue Code of 1986. "Commingled Fund" means any fund or account containing both Gross Proceeds and an amount in excess of $25,000 that are not Gross Proceeds if the amounts in the fund or account are invested and accounted for, collectively, without regard to the source of funds deposited in the fund or account. An open-ended regulated investment company under Section 851 of the Code is not a commingled fund. "Control" means the possession, directly or indirectly through others, of either of the following discretionary and non -ministerial rights or powers over another entity: (a) to approve and to remove without cause a controlling portion of the governing body of a Controlled Entity; or (b) to require the use of funds or assets of a Controlled Entity for any purpose. "Controlled Entity" means any entity or one of a group of entities that is subject to Control by a Controlling Entity or group of Controlling Entities. "Controlled Group" means a group of entities directly or indirectly subject to Control by the same entity or group of entities, including the entity that has the Control of the other entities. "Controlling Entity" means any entity or one of a group of entities directly or indirectly having Control of any entities or group of entities. "Costs of Issuance" means the costs of issuing the Bonds, including underwriters' discount and legal fees. "De minimis Amount of Original Issue Discount or Premium" means (a) any original issue discount or premium that does not exceed two percent of the stated redemption price at maturity of the Bonds plus (b) any original issue premium that is attributable exclusively to reasonable underwriter's compensation. "External Commingled Fund" means a Commingled Fund in which the City and all members of the same Controlled Group as the City own, in the aggregate, not more than ten percent of the beneficial interests. "GIC" means (a) any investment that has specifically negotiated withdrawal or reinvestment provisions and a specifically negotiated interest rate and (b) any -25- agreement to supply investments on two or more future dates (e.g., a forward supply contract). "Gross Proceeds" means amounts in the Bond Fund and the Project Fund. "Placed -in -Service" means the date on which, based on all facts and circumstances (a) a facility has reached a degree of completion that would permit its operation at substantially its design level and (b) the facility is, in fact, in operation at such level. "Qualified Administrative Costs of Investments" means (a) reasonable, direct administrative costs (other than carrying costs) such as separately stated brokerage or selling commissions (other than a broker's commission paid on behalf of either the City or the provider of a GIC to the extent such commission exceeds the present value of annual payments equal to 0.05 percent of the weighted average amount reasonably expected to be invested each year of the term of the GIC; for this purpose, present value is computed using the taxable discount rate used to compute the commission or, if not readily ascertainable, a reasonable taxable discount rate), but not legal and accounting fees, recordkeeping, custody and similar costs; (b) all administrative costs, direct or indirect, incurred by a publicly offered regulated investment company or an External Commingled Fund; or (c) in the case of purpose investments, costs, or expenses paid directly to purchase, carry, sell or retire the investment and costs of issuing, carrying, or repaying the Bonds, and any placement agent fee or underwriter's discount. "Qualified Tax Exempt Obligations" means (a) any obligation described in Section 103(a) of the Code, the interest on which is excludable from gross income of the owner thereof for federal income tax purposes and is not an item of tax preference for purposes of the alternative minimum tax imposed by Section 55 of the Code; (b) an interest in a regulated investment company to the extent that at least ninety --five percent of the income to the holder of the interest is interest which is excludable from gross income under Section 103 of the Code of any owner thereof for federal income tax purposes and is not an item of tax preference for purposes of the alternative minimum tax imposed by Section 55 of the Code; and (c) certificates of indebtedness issued by the United States Treasury pursuant to the Demand Deposit State and Local Government Series program described in 31 C.F.R. part 344. "Rebate Fund" means the fund, if any, identified and defined in paragraph 4.1 herein. "Rebate Provisions" means the rebate requirements contained in Section 148(f) of the Code and in the Regulations. "Regulations" means United States Treasury Regulations dealing with the tax- exempt bond provisions of the Code. -26- "Reimbursed Expenditures" means amounts, if any, used from Sale Proceeds and investment earnings thereon to reimburse the City for an expenditure paid prior to Closing. "Sale Proceeds" means amounts actually or constructively received from the sale of the Bonds, including (a) amounts used to pay underwriters' discount or compensation and accrued interest, other than accrued interest for a period not greater than one year before Closing but only if it is to be paid within one year after Closing and (b) amounts derived from the sale of any right that is part of the terms of a Bond or is otherwise associated with a Bond (e.g., a redemption right). "Sale Proceeds Funds" means the funds containing amounts derived by the sale of the Bonds or investment earnings thereon. "Yield" means that discount rate which when used in computing the present value of all payments of principal and interest paid and to be paid on an obligation (using semiannual compounding on the basis of a 360-day year) produces an amount equal to the obligation's purchase price (or in the case of the Bonds, the issue price as established in paragraph 5.1 hereof), including accrued interest. "Yield Reduction Payment" means a rebate payment or any other amount paid to the United States in the same manner as rebate amounts are required to be paid or at such other time or in such manner as the Internal Revenue Service may prescribe that will be treated as a reduction in Yield of an investment under the Regulations. 2.1. Purpose of the Bonds. The Bonds are being issued to finance the Project in a prudent manner consistent with the revenue needs of the City. A breakdown of the sources and uses of funds is set forth in the preceding Section of this Ordinance. At least 75% of the Project Costs financed with Sale Proceeds and investment earnings thereon are expected to be used for construction purposes with respect to property owned by a government unit or a Section 501(c)(3) organization. 2.2. The Project — Binding Commitment and Timing. The City has incurred or will, within six months of the Closing, incur a substantial binding obligation (not subject to contingencies within the control of the City or any member of the same Controlled Group as the City) to a third party to expend at least five percent of the Sale Proceeds on the Project. It is expected that the work of acquiring and constructing the Project and the expenditure of amounts deposited into the Project Fund will continue to proceed with due diligence through May 1, 2000 at which time it is anticipated that all Sale Proceeds and investment earnings thereon will have been spent. The investment earnings on the Project Fund will be spent to pay costs of the Project and interest on the Bonds not later than the date set forth in the preceding paragraph, the investment earnings on the Bond Fund will be spent to pay interest on the Bonds, or to the extent permitted by law, investment earnings on amounts in the -27- Project Fund and the Bond Fund will be commingled with substantial revenues from the governmental operations of the City, and the earnings are reasonably expected to be spent for governmental purposes within six months of the date earned. No proceeds of the Bonds will be used more than 30 days after the date of issue of the Bonds for the purpose of paying any principal or interest on any issue of bonds, notes, certificates or warrants or on any installment contract or other obligation of the City or for the purpose of replacing any funds of the City used for such purpose. 2.3. Reimbursement. None of the Sale Proceeds or investment earnings thereon will be used for Reimbursed Expenditures. 2.4. Working Capital. All amounts in the Sale Proceeds Funds will be used, directly or indirectly, to finance Capital Expenditures other than the following: (a) an amount not to exceed five percent of the Sale Proceeds for working capital expenditures directly related to Capital Expenditures financed by the Bonds; (b) payments of interest on the Bonds for a period commencing; at Closing and ending on the later of the date three years after Closing or one year after the date on which the Project is Placed -in -Service; (c) Costs of Issuance and Qualified Administrative Costs of Investments; (d) payments of rebate or Yield Reduction Payments made to the United States under the Regulations; and (e) principal of or interest on the Bonds paid from unexpected excess Sale Proceeds and investment earnings thereon. 2.5. Consequences of Contrary Expenditure. The City acknowledges that if amounts in the Sale Proceeds Funds and investment earnings thereon are spent for non -Capital Expenditures other than as permitted by paragraph 2.4 hereof, a like amount of then available funds of the City will be treated as unspent Sale Proceeds. 2.6. Investment of Bond Proceeds. Not more than 50% of the Sale Proceeds and investment earnings thereon are or will be invested in investments (other than Qualified Tax Exempt Obligations) having a Yield that is substantially guaranteed for four years or more. No portion of the Bonds is being issued solely for the purpose of investing a portion of Sale Proceeds or investment earnings thereon at a Yield higher than the Yield on the Bonds. 2.7. No Grants. None of the Sale Proceeds or investment earnings thereon will be used to make grants to any person. 2.8. Hedges. Neither the City nor any member of the same Controlled Group as the City has entered into or expects to enter into any hedge (e.g., an interest rate swap, interest rate cap, futures contract, forward contract or an option) with respect to the Bonds. The City acknowledges that any such hedge could affect the calculation of Bond Yield under the Regulations, and that the Internal Revenue Service could recalculate Bond Yield if the failure account for the hedge fails to clearly reflect the economic substance of the transaction. 3.1. Use of Proceeds. (a) The use of the Sale Proceeds and investment earnings thereon and the funds held under the Ordinance at the time of Closing .are described in the preceding Section of this Ordinance. (b) Only the funds and accounts described in said Section will be funded at Closing. There are no other funds or accounts created under this Ordinance. (c) Principal of and interest on the Bonds will be paid from the Bond Fund. (d) Any Costs of Issuance incurred in connection with the Bonds to be paid by the City will be paid from the Expense Fund or the Project Fund. (e) The costs of the Project will be paid from the Project Fund and no other moneys (except for investment earnings on amounts in the Project Fund) are expected to be deposited therein. 3.2. Purpose of Bond Fund. The Bond Fund will be used primarily to achieve a proper matching of revenues and earnings with principal and interest payments on the Bonds in each bond year. It is expected that the Bond Fund will be depleted at least once a year, except for a reasonable carry over amount not to exceed the greater oT (a) the earnings on the investment of moneys in the Bond Fund for the immediately preceding bond year or (b) 1/12th of the principal and interest payments on the Bonds for the immediately preceding bond year. 3.3. No Other Gross Proceeds. (a) Except for the Bond Fund and the Project Fund, and except for investment earnings that have been commingled as described in paragraph 2.2 and any credit enhancement or liquidity device related to the Bonds, after the issuance of the Bonds, neither the City nor any member of the same Controlled Group as the City has or will have any property, including cash or securities that constitutes: (i) Sale Proceeds; (ii) amounts in any fund and account with respect to the Bonds (other than the Rebate Fund); (iii) amounts that have a sufficiently direct nexus to the Bonds or to the governmental purpose of the Bonds to conclude that the amounts would have -29- been used for that governmental purpose if the Bonds were not used or to be used for that governmental purpose (the mere availability or preliminary earmarking of such amounts for a governmental purpose, however, does riot itself establish such a sufficient nexus); (iv) amounts in a debt service fund, redemption fund, reserve fund, replacement fund or any similar fund to the extent reasonably expected to be used directly or indirectly to pay principal of or interest on the Bonds or any amounts for which there is provided, directly or indirectly, a reasonable assurance that the amount will be available to pay principal of or interest on the Bonds or any obligations under any credit enhancement or liquidity device with respect to the Bonds, even if the City encounters financial difficulties; (v) any amounts held pursuant to any agreement (such as an agreement to maintain certain levels of types of assets) made for the benefit of the Bondholders or any credit enhancement provider, including any liquidity device or negative pledge (any amount pledged to pay principal of or interest on an issue held under an agreement to maintain the amount at a particular level for the direct or indirect benefit of Bondholders or a guarantor of the bonds); or (vi) amounts actually or constructively received from the investment and reinvestment of the amounts described in (i) or (ii) above. (b) No compensating balance, liquidity account, negative pledge of property held for investment purposes or similar arrangement exists with respect to, in any way, the Bonds or any credit enhancement or liquidity device related to the Bonds. (c) The term of the Bonds is not longer than is reasonably necessary for the governmental purposes of the Bonds. The average reasonably expected economic life of the Project is at least 20 years. The weighted average maturity of the Bonds does not exceed 8.50 years and does not exceed 120 percent of the average reasonably expected economic life of the Project. 4.1. Rebate Fund. The City is hereby authorized to create and establish a special fund to be known as the Rebate Fund (the "Rebate Fund"), which, if created, shall be continuously held, invested, expended and accounted for in accordance with this Ordinance. Moneys in the Rebate Fund shall not be considered moneys held for the benefit of the Bondholders. Except as provided in the Regulations, moneys in the Rebate Fund (including earnings and deposits therein) shall be held in trust for payment to the United States as required by the Rebate Provisions and by the Regulations and as contemplated under the provisions of this Ordinance. 4.2. Compliance with Rebate Provisions. The City covenants to take such actions and make, or cause to be made, all calculations, transfers and payments that may be necessary to comply with the Rebate Provisions applicable to the Bonds. The -30- City will make, or cause to be made, rebate payments with respect to the Bonds in accordance with law. 4.3. Records. The City agrees to keep and retain or cause to be kept and retained until six years after the Bonds are paid in full adequate records with respect to the investment of all Gross Proceeds and amounts in the Rebate Fund. Such records shall include: (a) purchase price; (b) purchase date; (c) type of investment; (d) accrued interest paid; (e) interest rate; (f) principal amount; (g) maturity date; (h) interest payment date; (i) date of liquidation; and 0) receipt upon liquidation. If any investment becomes Gross Proceeds on a date other than the date such investment is purchased, the records required to be kept shall include the fair market value of such investment on the date it becomes Gross Proceeds. If any investment is retained after the date the last Bond is retired, the records required to be kept shall include the fair market value of such investment on the date the last Bond is retired. Amounts or investments will be segregated whenever necessary to maintain these records. 4.4. Fair Market Value; Certificates of Deposit and Investment Agreements. In making investments of Gross Proceeds, the City shall take into account prudent investment standards including the date on which moneys to be invested may be needed. The City shall provide that all amounts which constitute Gross Proceeds and any amounts in the Rebate Fund shall be invested at all times to the greatest extent practicable in investments permitted under this Ordinance, and no amounts may be held as cash or be invested in zero Yield investments other than obligations of the United States purchased directly from the United States; provided, however, that in the event moneys cannot be invested, other than as provided in this sentence, due to the denomination, price or availability of investments, such amounts shall be invested in an interest bearing deposit account of a bank with a Yield not less than that paid to the general public or held uninvested (but uninvested amounts shall be held to the minimum amount necessary). For purposes of determining the purchase price of investments (for either yield restriction or rebate purposes), Gross Proceeds and any amounts in the Rebate Fund that are invested in certificates of deposit or in GICs shall be invested only in accordance with the following provisions: (a) Investments in certificates of deposit of banks or savings and loan associations that have a fixed interest rate, fixed payment schedules and substantial penalties for early withdrawal shall be made only if either (i) the Yield on the certificate of deposit (A) is not less than the Yield on reasonably comparable direct obligations of the United States and (B) is not less than the highest Yield that is published or posted by the provider to be currently available from the provider on reasonably comparable certificates of deposit offered to the public or (ii) the investment is an investment in a GIC and qualifies under paragraph (b) below. -31- (b) Investments in GICs shall be made only if (i) a bona fide solicitation is made for a specified GIC and at least three bona fide bids from different providers that have no material financial interest in the Bonds (e.g., as underwriters or brokers) are received; (ii) the highest -yielding GIC for which a qualifying bid is made (determined net of broker's fees) is in fact purchased; (iii) the Yield on the GIC (determined net of broker's fees) is not less than the Yield then available from the provider on reasonably comparable GICs, if any, offered to other persons from a source of funds other than Gross Proceeds of tax-exempt obligations; (iv) the determination of the terms of the GIC takes into account as a significant factor the reasonably expected drawdown schedule for the amounts to be invested, except for amounts deposited in the Bond Fund; (v) the terms of the GIC, including collateral security requirements, are reasonable; (vi) the obligor on the GIC certifies the administrative costs that it is paying or expects to pay to third parties in connection with the GIC; (vii) any agent used to conduct the bidding for the GIC does not bid to provide the GIC; (viii) all bidders for the GIC have equal opportunity to bid so that, for example, no bidder is given the opportunity to review others bids (a last look) before bidding; and (ix) all bidders for the GICS are reasonably competitive providers of investments of the type purchased. Moneys to be rebated to the United States shall be invested to mature on or prior to the anticipated rebate payment date. All investments made with Gross Proceeds or amounts in the Rebate Fund shall be bought and sold at fair market value. The fair market value of an investment is the price at which a willing buyer would purchase the investment from a willing seller in a bona fide, arm's length transaction. Except for investments specifically described in this section and United States Treasury obligations that are purchased directly from the United States Treasury, only investments that are traded on an established securities market, within the meaning of regulations promulgated under Section 1273 of the Code, will be purchased with Gross Proceeds. In general, an "established securities market" includes: (i) property that is listed on a national securities exchange, an interdealer quotation system or -32- certain foreign exchanges; (ii) property that is traded on a Commodities Futures Trading Commission designated board of trade or an interbank market; (iii) property that appears on a quotation medium; and (iv) property for which price quotations are readily available from dealers and brokers. A debt instrument is not treated as traded on an established market solely because it is convertible into property which is so traded. An investment of Gross Proceeds in an External Commingled Fund shall be made only to the extent that such investment is made without an intent to reduce the amount to be rebated to the United States Government or to create a smaller profit. or a larger loss than would have resulted if the transaction had been at arm's length and had the rebate or Yield restriction requirements not been relevant to the City. An investment of Gross Proceeds shall be made in a Commingled Fund other than an External Commingled Fund only if the investments made by such Commingled Fund satisfy the provisions of this paragraph. 4.5. Arbitrage Elections. The Mayor, City Clerk and City Treasurer are hereby authorized to execute one or more elections regarding certain matters with respect to arbitrage. 5.1. Issue Price. For purposes of determining the Yield on the Bonds, the purchase price of the Bonds is equal to the first offering price at which the Purchaser sold at least ten percent of each maturity of the Bonds or is equal to par, plus accrued interest, if the Purchaser does not intend to resell the Bonds. 5.2. Yield Limits. (a) Except as provided in paragraph (b) or (c), all Gross Proceeds shall be invested at market prices and at a Yield (after taking into account any Yield Reduction Payments) not in excess of the Yield on the Bonds plus, for amounts in the Project Fund that are not to be used for Refunding Purposes more than 90 days following the issuance of the Bonds, 1/8th of one percent. (b) The following may be invested without Yield restriction: (i) amounts invested in Qualified Tax Exempt Obligations (to the extent permitted by the Act and this Ordinance); (ii) amounts in the Rebate Fund; (iii) amounts on deposit in the Bond Fund (except for capitalized interest) that have not been on deposit under the Ordinance for more than 13 months, so long as the Bond Fund continues to qualify as a bona fide debt service fund as described in paragraph 3.2 hereof (moneys on deposit for more than 13 months shall be invested at a yield not in excess of the Yield on the Bonds); -33- (iv) amounts on deposit in the Project Fund, other than those amounts to be used for Refunding Purposes more than 90 days following the issuance of the Bonds, prior to the earlier of three years after Closing or the completion (or abandonment) of the Project; (v) amounts in the Bond Fund to be used to pay capitalized interest on the Bonds prior to the earlier of three years after Closing or the payment of all capitalized interest; (vi) all amounts other than Sale Proceeds for the first 30 days after they become Gross Proceeds; and (vii) all amounts derived from the investment of Sale Proceeds and investment earnings thereon for a period of one year from the date received. (c) An amount not to exceed the lesser of $100,000 or five percent of the Sale Proceeds may be invested without regard to Yield restriction. 5.3. Continuing Nature of Yield Limits. Except as provided in paragraph 7.6, once moneys are subject to the Yield limits of paragraph 5.2 hereof, such moneys remain Yield restricted until they cease to be Gross Proceeds. 5.4. Federal Guarantees. Except for investments meeting the requirements of paragraph 5.2(b) hereof, investments of Gross Proceeds shall not be made in (a) investments constituting obligations of or guaranteed, directly or indirectly, by the United States (except obligations of the United States Treasury, obligations guaranteed by the Federal Housing Administration, the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation, the Government National Mortgage Association, the Student Loan Marketing Association, any guarantee by the Bonneville Power Authority pursuant to the Northwest Power Act (16 U.S.C. 839d) as in effect on the date of enactment of the Tax Reform Act of 1984, or investments in obligations issued pursuant to Section 21B(d)(3) of the Federal Home Loan Bank, as amended (e.g., Refcorp Strips)); or (b) federally insured deposits or accounts (as defined in Section 149(b)(4)(B) of the Code). No portion of the payment of principal or interest on the Bonds or any other credit enhancement or liquidity device relating to the foregoing is or will be guaranteed, directly or indirectly (in whole or in part), by the United States (or any agency or instrumentality thereof). No portion of the Gross Proceeds has been or will be used to make loans the payment of principal or interest with respect to which is or will be guaranteed (in whole or in part) by the United States (or any agency or instrumentality thereof). 6.1. Payment and Use Tests. (a) No more than five percent of the Sale Proceeds plus investment earnings thereon will be used, directly or indirectly, in whole or in part, in any activity carried on by any person other than a state or local governmental unit. -34- (b) The payment of more than five percent of the principal of or the interest on the Bonds will not be, directly or indirectly (i) secured by any interest in (A) property used or to be used in any activity carried on by any person other than a state or local governmental unit or (B) payments in respect of such property or (ii) on a present value basis, derived from payments (whether or not by or to the City) in respect of property, or borrowed money, used or to be used in any activity carried on by any person other than a state or local governmental unit. (c) No more than five percent of the Sale Proceeds and investment earnings thereon will be used, directly or indirectly, to make or finance loans to any persons. (d) No users of the Project other than state or local governmental units will use more than five percent of the Project, in the aggregate, on any basis other than the same basis as the general public; and no person other than a state or local governmental units will be users of more than five percent of the Project, in the aggregate, as a result of (i) ownership, (ii) actual or beneficial use pursuant to a lease or a management, service, incentive payment or output contract, or (iii) any other similar arrangement, agreement or understanding, whether written or oral. 6.2. U.S. Forst 8038-G. The information contained in the Information Return for Tax -Exempt Governmental Obligations, Form 8038-G, is true and complete. The City will file Form 8038-G (and all other required information reporting forms) in a timely manner. 7.1. Termination; Interest of City in Rebate Fund. The terms and provisions set forth in this Section shall terminate at the later of (a) 75 days after the Bonds have been fully paid and retired or (b) the date on which all amounts remaining on deposit in the Rebate Fund, if any, shall have been paid to or upon the order of the United States and any other payments required to satisfy the Rebate Provisions of the Code have been made to the United States. Notwithstanding the foregoing, the provisions of paragraph 4.3 hereof shall not terminate until the sixth anniversary of the date the Bonds are fully paid and retired. 7.2. No Common Plan of Financing. Since a date that is 15 days prior to the date of sale of the Bonds by the City to the Purchaser, neither the City nor any member of the same Controlled Group as the City has sold or delivered any obligations other than the Bonds that are reasonably expected to be paid out of substantially the same source of funds as the Bonds, except the Series 1996B Bonds. Neither the City nor any member of the same Controlled Group as the City will sell or deliver within 15 days after the date hereof any obligations other than the Bonds that are reasonably expected to be paid out of substantially the same source of funds as the Bonds, except the Series 1996B Bonds. No obligation other than the Bonds were sold on the same date as the Bonds, are being issued on the date of the Closing, and were or are being offered pursuant to a single offering document, except the Series 1996B Bonds. 7.3. No Sale of the Project. No acquisition or improvement made as a Material Part of the Project has been or is expected to be sold or otherwise disposed -35- of in whole or in part prior to the last maturity of the Bonds. "Material Part" means (i) land, or (ii) any improvement, or (iii) personal property or fixtures in excess of that which is expected to be sold, traded in or discarded upon wearing out or becoming obsolete. 7.4. Bank Qualification. (a) The City hereby designates each of the Bonds as a "qualified tax-exempt obligation" for the purposes and within the meaning of Section 265(b)(3) of the Code. In support of such designation, the City hereby certifies that (i) none of the Bonds will be at anytime a "private activity bond" (as defined in Section 141 of the Code) other than a "qualified 501(c)(3) bond"' (as defined in Section 145 of the Code), (ii) as of the date hereof, the City has not issued any tax-exempt obligations of any kind in calendar year 1997 other than the Bonds nor have any tax-exempt obligations of any kind been issued on behalf of the City and (iii) not more than $10,000,000 of obligations of any kind (including the Bonds) issued by or on behalf of the City during calendar year 1997 will be designated for purposes of Section 265(b)(3) of the Code. (b) The City is not subject to Control by any entity, and there are no entities subject to Control by the City. (c) On the date hereof, the City does not reasonably anticipate that for calendar year 1997 it will issue any Section 265 Tax -Exempt Obligations (other than the Bonds), or that any Section 265 Tax -Exempt Obligations will be issued on behalf of it. "Section 265 Tax -Exempt Obligations" are obligations the interest on which is excludable from gross income of the owners thereof under Section 103 of the Code, except for private activity bonds other than qualified 501(c)(3) bonds, both as defined in Section 141 of the Code. The City will not issue or permit the issuance on behalf of it or by any entity subject to Control by the City (which may hereafter come into existence) of Section 265 Tax -Exempt Obligations (including the Bonds) that exceed the aggregate amount of $10,000,000 during calendar year 1997 unless it first obtains an opinion of Bond Counsel to the effect that such issuance will not adversely affect the treatment of the Bonds as "qualified tax-exempt obligations" for the purposes and within the meaning of Section 265(b)(3) of the Code. 7.5. Future Events. The City acknowledges that any changes in facts or expectations from those set forth herein may result in different Yield restrictions or rebate requirements from those set forth herein. Such changes in facts or expectations might include, but are not in any respect whatsoever limited to, moneys or investments being pledged or otherwise set aside for payment of principal of or interest on the Bonds, amounts being derived from the sale of any right that is part of the terms of a Bond or is otherwise associated with a Bond (e.g., a redemption right) or the City entering into any agreement to maintain certain levels of types of assets for the benefit of a holder of a bond or any credit enhancement with respect to the Bonds. The City shall promptly contact Bond Counsel if such changes do occur. -36- 7.6. Permitted Changes; Opinion of Bond Counsel. The Yield restrictions contained in paragraph 5.2 or any other restriction or covenant contained herein need not be observed or may be changed if the City receives an opinion of Bond Counsel to the effect that such nonobservance or change will not result in the loss of any exemption for the purpose of federal income taxation to which interest on the Bonds is otherwise entitled. 7.7. Successors and Assigns. The terms, provisions, covenants and conditions of this Section shall bind and inure to the benefit of the respective successors and assigns of the City Council and the City. 7.8. Expectations. The City Council has reviewed the facts, estimates and circumstances in existence on the date of issuance of the Bonds. Such facts, estimates and circumstances, together with the expectations of the City as to future events, are set forth in summary form in this Section. Such facts and estimates are true and are not incomplete in any material respect. On the basis of the facts and estimates contained herein, the City has adopted the expectations contained herein. On the basis of such facts, estimates, circumstances and expectations, it is not expected that the Sale Proceeds or any other moneys or property will be used in a manner that will cause: the Bonds to be arbitrage bonds within the meaning of the Rebate Provisions and the Regulations. Such expectations are reasonable and there are no other facts, estimates and circumstances that would materially change such expectations. The City also agrees and covenants with the purchasers and holders of the Bonds from time to time outstanding that, to the extent possible under Illinois law, it will comply with whatever federal tax law is adopted in the future which applies to the Bonds and affects the tax-exempt status of the Bonds. The City Council hereby authorizes the officials of the City responsible for issuing the Bonds, the same being the Mayor, City Clerk and City Treasurer, to make such further covenants and certifications as may be necessary to assure that the use thereof will not cause the Bonds to be arbitrage bonds and to assure that the interest in the Bonds will be exempt from federal income taxation. In connection therewith, the City and the City Council further agree: (a) through their officers, to make such further specific covenants, representations as shall be truthful, and assurances as may be necessary or advisable; (b) to consult with counsel approving the Bonds and to comply with such advice as may be given; (c) to pay to the United States, as necessary, such sums of money representing required rebates of excess arbitrage profits relating to the Bonds; (d) to file such forms, statements, and supporting documents as may be required and in a timely manner; and (e) if deemed necessary or advisable by their officers, to employ and pay fiscal agents, financial advisors, attorneys, and other persons to assist the City in such compliance. Section 22. Registered Form. The City recognizes that Section 149(a) of the Code requires the Bonds to be issued and to remain in fully registered form in order that interest thereon is exempt from federal income taxation under laws in force at the time the Bonds -37- are delivered. In this connection, the City agrees that it will not take any action to permit the Bonds to be issued in, or converted into, bearer or coupon form. Section 23. Bond Registrar Covenants. If requested by the Bond Registrar, the Mayor and City Clerk are authorized to execute the Bond Registrar's standard form of agreement between the City and the Bond Registrar with respect to the obligations and duties of the Bond Registrar hereunder. Subject to modification by the express terms of any such agreement, such duties shall include the following: (a) to act as bond registrar, authenticating agent, paying agent and transfer agent as provided herein; (b) to maintain a list of Bondholders as set forth herein and to furnish such list to the City upon request, but otherwise to keep such list confidential to the extent permitted by law; (c) to give notice of redemption of Bonds as provided herein; (d) to cancel and/or destroy Bonds which have been paid at maturity or upon earlier redemption or submitted for exchange or transfer; (e) to furnish the City at least annually a certificate with respect to Bonds cancelled and/or destroyed; and (f) to furnish the City at least annually an audit confirmation of Bonds paid, Outstanding Bonds and payments made with respect to interest on the Bonds. The City Clerk is hereby directed to file a certified copy of this Ordinance with the Bond Registrar. Section 24. Municipal Bond Insurance. In the event the payment of principal and interest on the Bonds is insured pursuant to a municipal bond insurance policy (the "Municipal Bond Insurance Policy") issued by a bond insurer (the "Bond Insurer"), and as long as such Municipal Bond Insurance Policy shall be in full force and effect, the City and the Bond Registrar agree to comply with such usual and reasonable provisions regarding presentment and payment of the Bonds, subrogation of the rights of the Bondholders to the Bond Insurer when holding Bonds, amendment hereof, or other terms, as approved by the Board on advice of counsel, their approval to constitute full and complete acceptance by the City of such terms and provisions under authority of this section. Section 25. Severability. If any section, paragraph, clause or provision of this Ordinance shall be held invalid, the invalidity of such section, paragraph, clause or provision shall not affect any of the other provisions of this Ordinance. Section 26. Repealer. All ordinances, resolutions or orders, or parts thereof, in conflict with the provisions of this Ordinance are to the extent of such conflict hereby repealed. -38- Section 27. Publication and Effective Date. This Ordinance shall be published in pamphlet form and shall be effective immediately. Passed by the City Council on April 30, 1997. APPROVED: April 30, 1997. 4�z ayor AYES: Bolger, Bates, Lawson. NAYS: ABSENT: Baird. PUBLISHED in pamphlet form by authority of the City Council on April 30, 1997. RECORDED in the City Records on April 30, 1997. ATTEST: City Clerk [SEAL] nT Alderman Lawson moved and Alderman Bolger seconded the motion that said ordinance as presented and read by the City Clerk be adopted. After a full and complete discussion thereof, including a public recital of the nature of the matter being considered and such other information as would inform the public of the business being conducted, the Mayor directed that the roll be called for a vote upon the motion to adopt the ordinance as read. Upon the roll being called, the following Aldermen voted NAY: Locke. ABSENT: Baird. Whereupon the Mayor declared the motion carried and the ordinance adopted, and henceforth did approve and sign the same in open meeting and did direct the City Clerk to record the same in full in the records of the City Council of the City. Other business not pertinent to the adoption of said ordinance was duly transacted at said meeting. Upon motion duly made and seconded, the meeting was adjourned. City Clerk