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HomeMy WebLinkAboutOrdinances - O-97-823 - 04/30/1997 - AUTHORIZE ISSUANCE $1.6M GO BONDS W/S SYSTEMORDINANCE No. 0-97-_ AN ORDINANCE authorizing and providing for the issue of $1,600,000 General Obligation Bonds (Waterworks and Sewerage Revenue Alternate Revenue Source), Series 1997B, of the City of McHenry, McHenry County, Illinois, for the purpose of defraying the cost of expanding and improving the south wastewater treatment plant, prescribing the details of said bonds and providing for collection, segregation and distribution of the revenues of the combined waterworks and sewerage system of said City to pay said Bonds. WHEREAS, the City of McHenry, McHenry County, Illinois (the "City"), has provided by ordinance for the combination of its municipally -owned waterworks system and its municipally -owned sanitary sewerage system and for the operation thereof as a combined utility (the "System"), in accordance with the provisions of Division 139 of Article 11 of the Illinois Municipal Code, as amended (the "Water and Sewer Revenue Bond Act"); and WHEREAS, the City Council of the City (the "City Council") has determined that it is advisable, necessary and in the best interests of public health, safety and welfare to improve the System, including the expansion and improvement of the south wastewater treatment plant consisting of aerobic digestive tanks and equipment, sludge handling equipment and additional pumping equipment to provide for an increase in treatment plant capacity of 5,000 PE (500,000 gallons per day), together with any land and related appurtenances and all electrical, mechanical or other services necessary, useful or advisable to such design and construction (the "Project"), all in accordance with the plans and specifications and estimate of costs therefor, which have been prepared for the City by Baxter and Woodman, Consulting Engineers, Crystal Lake, Illinois, which have been approved by the City Council and are now on file in the office of the City Clerk for public inspection; and WHEREAS, the estimated costs of the Project, as defined, including engineering, legal, financial, bond discount, printing and publication costs, and other expenses are not less than $1,600,000; and WHEREAS, there are insufficient funds on hand and lawfully available to pay costs of the Project; and WHEREAS, the City is authorized to issue revenue bonds pursuant to the provisions of the Water and Sewer Revenue Bond Act, and accordingly pursuant to the provisions of the Local Government Debt Reform Act of the State of Illinois, as amended (the "Reform Act"), alternate bonds may be issued for the Project; and WHEREAS, it is necessary and for the best interests of the City that the Project be constructed, and in order to raise the funds required for such purpose, it will be necessary for the City to borrow at this time $1,600,000 and in evidence thereof to issue alternate bonds under the Reform Act, being general obligation bonds issued in lieu of such revenue bonds as authorized, in an aggregate principal amount of $1,600,000; and WHEREAS, the City Council, on the 4th day of September, 1996, adopted an ordinance (the "Authorizing Ordinance") authorizing the issuance of water and sewerage revenue bonds (the "Revenue Bonds") for the Project, as provided in the Water and Sewer Revenue Bond Act, in an amount not to exceed $3,600,000; and WHEREAS, the Authorizing Ordinance further authorized the issuance of General Obligation Bonds (Waterworks and Sewerage System Alternate Revenue Source) (the "Alternate Bonds"), as provided in the Reform Act in an amount not to exceed $3,600,000; and WHEREAS, on the 17th day of September, 1996, the Authorizing Ordinance, together with a separate notice of intent to issue the Revenue Bonds and the Alternate Bonds, was published in the Northwest Herald, being a newspaper published in and of general circulation in the City, and an affidavit evidencing the publication of the Authorizing Ordinance and said separate notice of intent have heretofore been presented to the City Council and made a part of the permanent records of the City; and WHEREAS, more than thirty (30) days have expired since the date of publication of the Authorizing Ordinance and said notice, and no petitions with the requisite number of valid signatures thereon have been filed with the City Clerk requesting that the question of the issuance of either the Revenue Bonds or the Alternate Bonds be submitted to referendum; and WHEREAS, the City has heretofore issued the following described bonds which are payable from the Revenues (as defined herein) of the System: $5,300,000 original issue Waterworks and Sewerage Revenue Refunding Bonds, Series 1993, of which $4,200,000 remain outstanding (the "Series 1993 Bonds"); and WHEREAS, under the proceedings of the City authorizing the Series 1993 Bonds, no obligation or bonds of any kind shall be issued that are payable from the Revenues, as long as the Series 1993 Bonds are outstanding, except upon compliance with the requirements of Section 15 of Ordinance Number 0-86-390, adopted by the City Council on July 30, 1986 (the "1986 Bond Ordinance"); and WHEREAS, said Section 15 permits the issuance of parity bonds, which share ratably and equally in the earnings of the System with the Series 1993 Bonds, for the purpose of paying the cost of repairs, replacements, renewals, improvements and extensions to the System, upon certain conditions having been met (the "Parity Test"); and WHEREAS, the Revenues of the System, as reflected in the audit of the Waterworks and Sewerage Fund of the City for the fiscal year ended on March 31, 1996, are sufficient to meet the Parity Test and to permit the issuance of the not to exceed $1,600,000 additional -2- waterworks and sewerage revenue bonds, to share ratably and equally in the earnings of the System with the Series 1993 Bonds; and WHEREAS, such sufficiency is evidenced by the certificate of Eder Riedell & Company, Certified Public Accountants, McHenry, Illinois, dated April 30, 1997, which certificate is now on file with the City Clerk; and WHEREAS, the Alternate Bonds to be issued will be "Parity Bonds" with the Series 1993 Bonds and will also be payable from the Pledged Taxes, both as hereinafter defined; and WHEREAS, the City Council has heretofore and does hereby determine that the Revenues will be sufficient to provide or pay in each year to final maturity of the Bonds all of the following (1) Operation and Maintenance Costs as hereinafter defined, but not including depreciation, (2) debt service on the Series 1993 Bonds, (3) all amounts required to meet any fund or account requirements with respect to the Series 1993 Bonds, (4) other contractual or tort liability obligations, if any, payable from the Revenues, and (5) in each year, an amount not less than 1.25 times debt service of the Alternate Bonds now proposed to be issued (the Alternate Bonds being the only alternate bonds issued payable from the Revenues); and WHEREAS, such determination of the sufficiency of the 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 Council and is now on file with the City Clerk; 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 $1,600,000 of the authorized 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 5 ay of Fry, 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 119 Pi WHEREAS, the Hearing was held on the X day of Febr)aary, 1997, and at the Hearing, the City Council explained the reasons for the proposed bond issue and permitted persons -3- 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 Stfi day of FeboKary, 1997, and not less than seven (7) days have passed since the final adjournment of the Hearing; 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; Now, THEREFORE, Be It Ordained by the City Council of the City of McHenry, McHenry County, Illinois, as follows: Section 1. Definitions. The following words and terms used in this Ordinance shall have the following meanings unless the context or use clearly indicates another or different meaning is intended: "Act" means the Illinois Municipal Code, as amended, and in particular, Division 4 of Article 8 and Division 139 of Article 11 thereof, and as supplemented by the Reform Act. "Alternate Bonds" means any Outstanding Bonds issued as alternate bonds under and pursuant to the provisions of Applicable Law, and includes, expressly, the Bonds. "Applicable Law" means the Act and the Reform Act, collectively. "Bond" or "Bonds" or "Alternate Bonds" means one or more, as applicable, of the $1,600,000 General Obligation Bonds (Waterworks and Sewerage Revenue Alternate Revenue Source), Series 1997B, authorized to be issued by this Ordinance. "Bond Fund" means the Alternate Bond Fund established hereunder and further described by Section 17 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. "Bond Registrar" means American National Bank and Trust Company of Chicago, a national banking association with principal corporate trust offices located in Chicago, Illinois, or successor thereto or designated hereunder. In "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 1954, as amended. "Fiscal Year" means a twelve-month period beginning May 1 of the calendar year and ending on the next succeeding April 30. "Maximum Annual Debt Service" means an amount of money equal to the highest future principal and interest requirement of all Outstanding Bonds and Outstanding Series 1993 Bonds required to be deposited into the Bond and Interest Account created by this Ordinance and the 1986 Bond Ordinance in any Fiscal Year, including and subsequent to the Fiscal Year in which the computation is made. Any Outstanding Bonds or Outstanding Series 1993 Bonds required to be redeemed pursuant to mandatory redemption from said Bond and Interest Account shall be treated as falling due on the date required to be redeemed (except in the case of failure to make any such mandatory redemption) and not on the stated maturity date of such Outstanding Bonds or Outstanding Series 1993 Bonds. "Net Revenues" means Revenues minus Operation and Maintenance Costs. "Operation and Maintenance Costs" means all costs of operating, maintaining, and routine repair of the System, including wages, salaries, costs of materials and supplies, power, fuel, insurance, purchase of water or sewage treatment services (including all payments by the City pursuant to long term contracts for such services); but excluding debt service, depreciation, or any reserve requirements; and otherwise determined in accordance with generally accepted accounting principles for municipal enterprise funds. "Outstanding Bonds" means Bonds, Series 1993 Bonds, and Parity Bonds which are outstanding and unpaid; provided, however, such term shall not include Bonds, Series 1993 Bonds, or Parity Bonds (i) which have matured and for which moneys are on deposit with proper paying agents, or are otherwise properly available, sufficient to 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, Series 1993 Bonds, or Parity Bonds. Bonds that 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 Moneys 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 of the Bonds in the Pledged Moneys. "Parity Bonds" means bonds or any other obligation to be issued subsequent in time to the Bonds and which will share ratably and equally in the earnings of the System with the Bonds and the Series 1993 Bonds. -5- "Pledged Moneys" means the Revenues and Pledged Taxes, collectively, as both are defined herein. "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 all the Bonds. "Project" means the improvements and extensions to the System as set forth in the preambles to this Ordinance. "Reform Act" means the Local Government Debt Reform Act, as amended. "Revenues" means all income from whatever source derived from the System, including (i) investment income; (ii) connection, permit and inspection fees and the like; (iii) penalties and delinquency charges; (iv) capital development, reimbursement, or recovery charges and the like; (v) annexation or pre -annexation charges insofar as designated by the City Council as paid for System connection or service; but excluding expressly (a) non -recurring income from the sale of property of the System; (b) governmental or other grants; (c) advances or grants made from the City; and as otherwise determined in accordance with generally accepted accounting principles for municipal enterprise funds. "System" refers to all property, real, personal or otherwise owned or to be owned by the City or under the control of the City, and used for waterworks and sewerage purposes, including the Project and any and all further extensions, improvements and additions to the System or the Project. "Waterworks and Sewerage Fund" means the Waterworks and Sewerage Fund of the City created and established by this Ordinance. 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. Section 3. Determination To Issue Bonds. It is necessary and in the best interests of the City to construct the Project for the public health, safety and welfare, in accordance with the plans and specifications, as described, and that the System continue to be operated as a combined utility in accordance with the provisions of the Act. Section 4. Determination of Useful Life. The City Council does hereby determine the period of usefulness of the System and the Project to be 25 years from the date of the Bonds. W Section S. Bond Details. For the purpose of constructing the Project, there shall be issued and sold the Bonds in the principal amount of $1,600,000. The Bonds shall each be designated "General Obligation Bond (Waterworks and Sewerage Revenue Alternate Revenue Source), Series 1997B" and 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 $5,000 or authorized integral multiples thereof (but no single Bond shall represent principal maturing on more than one date), shall be numbered in such reasonable fashion as may be selected by the Bond Registrar, and shall become due and payable on May 1 of the years, in the amounts and bearing interest at the rates percent per annurn as follows (subject to the right of optional redemption hereinafter stated): YEAR AMOUNT ($) RATE (%) 1998 50,000 4.75 1999 50,000 4.75 2000 50,000 4.75 2001 50,000 4.80 2002 50,000 4.80 2003 50,000 4.875 2004 50,000 4.875 2005 250,000 5.00 2006 250,000 5.00 2007 750,000 5.10 The Bonds shall bear interest from their dated date until the principal amount of the Bonds is paid, 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 until the principal amount is paid. Interest on each Bond shall be paid by check or draft of the Bond Registrar, 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 15th day of the month next preceding the interest payment date. The principal of and premium (if any) on the Bonds shall be payable upon presentation in lawful money of the United States of America at the principal corporate trust office of the Bond Registrar. Section 6. Redemption. Those of the Bonds due on or after May 1, 2007, are subject to redemption and payment prior to their maturity, at the option of the City, in whole or in part, from any available funds, on May 1, 2006, or on any date thereafter, and if in part, in an amount which is equal to at least $5,000 or is an integral multiple thereof, in such order of maturity as may be selected by the City and within any maturity by lot, at a redemption price of par and accrued interest to the date fixed for redemption. Unless waived by the Bond Registrar, the City shall notify the Bond Registrar of the redemption of Bonds (by maturity and amount per maturity, if less than all Bonds of a maturity are to be redeemed) not less than 45 days prior to the date of redemption. In the event of a partial redemption of Bonds of a given maturity, the particular Bonds or portions -7- thereof to be redeemed shall be selected by lot not more than 60 days prior to the redemption date by the Bond Registrar. With respect to partial redemptions, the Bond Registrar shall assign to each Bond a distinctive number for each $5,000 principal amount of such Bond and shall select by lot from the numbers so assigned as many numbers as, allocating $5,000 to each number, shall equal the principal amount of such Bonds required to be redeemed on the applicable redemption date. The Bonds or portions of Bonds to be redeemed shall be the Bonds or portions of Bonds to which were assigned numbers so selected; provided that only such portion of the principal amount of each Bond shall be redeemed as shall equal $5,000 for each number assigned to it and so selected. The Bond Registrar shall promptly notify the City 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, notice of any such redemption shall be given by the Bond Registrar on behalf of the City by mailing the redemption notice by registered or certified mail not less than thirty days and not more than sixty 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 owners to the Bond Registrar. All notices of redemption shall include 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 (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 office of the Bond Registrar. Prior to any redemption date, the City shall deposit with the Bond Registrar 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. 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. Upon surrender of such Bonds for redemption in accordance with said notice, such Bonds shall be paid by the Bond Registrar at the redemption price. Interest due on or prior to the redemption date shall be payable as herein provided for payment of interest. Upon surrender for any partial redemption of any Bond, there shall be prepared for the registered owner a new Bond or Bonds of the same maturity and 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, and premium, if any, shall, until paid, 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. Parity Bonds hereinafter issued pursuant to the terms hereof may be redeemable at such times and upon such terms as may be determined at the time of authorization thereof. Section 7. Amendment. The rights and obligations of the City and of the owners of Outstanding Bonds may from time to time be modified or amended by a supplemental ordinance adopted by the City Council with the written consent of the owners of not less than two-thirds (2/3rds) of the principal amount of all Outstanding Bonds and Outstanding Series 1993 Bonds (excluding any of said bonds owned by or under the control of the City); provided, however, that no such modification or amendment shall extend or change the maturity of or date of redemption prior to maturity, or reduce the interest rate on, or permit the creation of a preference or priority of any Outstanding Bond or Outstanding Bonds over any other Outstanding Bond or Outstanding Bonds, or otherwise alter or impair the obligation of the City to pay the principal of and interest on any of the Outstanding Bonds or Outstanding Series 1993 Bonds at the time, place, rate, and in the currency provided therein, or alter or impair the obligations of the City with respect to registration, transfer, exchange or notice of redemption of Bonds, without the express consent of the owners of all the Outstanding Bonds and Outstanding Series 1993 Bonds affected; nor shall any such modification or amendment reduce the percentage of the owners of Outstanding Bonds and Outstanding Series 1993 Bonds required for the written consent of such modification or amendment without the consent of the owners of all of the Outstanding Bonds and Outstanding Series 1993 Bonds. Section 8. Execution; Authentication. The Bonds shall be executed on behalf of the City with the manual or facsimile signature of the Mayor and attested with the manual or 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 In and showing the date of authentication. No Bond shall be valid or obligatory for any 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 9. 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 maturity 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. -10- 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 5 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 -11- in place of Cede, the name "Cede" in this Ordinance shall refer to such new nominee. of DTC. 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 9(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 10. Form of Bond. The Bonds shall be prepared in compliance with the National Standard Specifications for Fully Registered Municipal Securities prepared by the American National Standards Institute and shall be in substantially the form hereinafter set forth; provided, however, that if the text of the Bond is to be printed in its entirety on the front side of the Bond, then paragraph [2) and the legend, "See Reverse Side for Additional Provisions", shall be omitted and paragraphs [6] through [14] shall be inserted immediately after paragraph [1]. -12- REGISTERED NO. (Form of Bond - Front Side) UNITED STATES OF AMERICA STATE OF ILLINOIS COUNTY OF MCHENRY CITY OF MCHENRY GENERAL OBLIGATION BOND (WATERWORKS AND SEWERAGE REVENUE SOURCE) SERIES 1997B REGISTERED ---------- .See Reverse Side . . for Additional Provisions Interest Maturity Dated Rate: Date: Date: May 1, 1997 CUSIP Registered Owner: CEDE & CO. Principal Amount: Dollars [1] 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 dated date of this Bond or from the most recent interest payment date to which interest has been paid 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, except as the provisions hereinafter set forth with respect to redemption prior to maturity may be and become applicable hereto. Principal of this Bond is payable in lawful money of the United States of America upon presentation at the principal corporate trust office of American National Bank and Trust Company of Chicago in Chicago, Illinois, as bond registrar and paying agent (the "Bond Registrar"). Payment of interest shall be made to the Registered Owner hereof as appearing 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 the 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. -13- [2] 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. [3] 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 pledge and collection of the Revenues, the levy and collection of the Pledged Taxes, and the segregation of the 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 Bond 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. [4] . 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. [5] 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 OF AUTHENTICATION This Bond is one of the Bonds described in the within mentioned Ordinance and is one of the General Obligation Bonds (Waterworks and Sewerage Revenue Alternate Revenue Source), Series 1997B, of the City of McHenry, McHenry, County, Illinois. AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO, as Bond Registrar LM Authorized Officer Bond Registrar and Paying Agent: American National Bank and Trust Company of Chicago Chicago, Illinois -15- [Form of Bond - Reverse Side] City of McHenry, McHenry County, Illinois GENERAL OBLIGATION BONDS (WATERWORKS AND SEWERAGE REVENUE ALTERNATE REVENUE SOURCE), SERIES 1997B [6] This bond and the bonds of the series of which it forms a part ( "Bond" and "Bonds" respectively) are of an authorized issue of One Million Six Hundred Thousand Dollars ($1,600,000) of like dated date and tenor except as to maturity and are issued pursuant to Division 139 of Article 11 of the Illinois Municipal Code, and pursuant to the Local Government Debt Reform Act, being acts of the General Assembly of the State of Illinois, and as supplemented and amended ( "Applicable Law"), for the purpose of paying the costs of the Project as more fully described in the Bond Ordinance as hereinbelow defined. The Bonds are issued pursuant to an authorizing ordinance passed by the City Council on the 4th day of September, 1996, and by a more complete bond ordinance, numbered and passed by the City Council on the 30th day of April, 1997 (the "Bond 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. [7] The Bonds are payable, together with the Series 1993 Bonds (as defined in the Bond Ordinance), from the Revenues (as defined in the Bond Ordinance) on deposit in the Waterworks and Sewerage Fund of the City and further to the credit of the Bond and Interest Account of such Fund, after the payment of all Operation and Maintenance Costs of the Waterworks and Sewerage System of the City. This Bond is also payable from ad valorem taxes levied against all of the taxable property in the City without limitation as to rate or amount (the "Pledged Taxes") (the available Revenues and the Pledged Taxes being collectively called the "Pledged Moneys"), all in accordance with the provisions of the Applicable Law. Bonds may be issued in the future to share in the Revenues of the System on a parity as to lien on such Revenues with this Bond and the Series 1993 Bonds. [8] This Bond shall not constitute an indebtedness of the City within the meaning of any constitutional or statutory provision or limitation, unless the Pledged Taxes shall ;have been 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 Revenues for a complete Fiscal Year. [9] The rights and obligations of the City and of the owners of the Bonds may from time to time be modified or amended by a supplemental ordinance adopted by the City Council with the written consent of the owners of not less than two-thirds (2/3rds) of the principal amount of all Outstanding Bonds and Outstanding Series 1993 Bonds (excluding any of said bonds owned by or under the control of the City); provided, however, that no such modification or amendment shall extend or change the maturity of or date of -16- redemption prior to maturity, or reduce the interest rate or premium on, or permit the creation of a preference or priority of any Outstanding Bond or Outstanding Bonds over any other Outstanding Bond or Outstanding Bonds, or otherwise alter or impair the obligation of the City to pay the principal of or interest on any of the Outstanding Bonds or Outstanding Series 1993 Bonds at the time, place, rate and in the currency provided therein or alter or impair the obligations of the City with respect to registration, transfer, exchange or notice of redemption of Bonds, without the express consent of the owners of all the Outstanding Bonds and Outstanding Series 1993 Bonds affected; nor shall any such modification or amendment reduce the percentage of the owners of Outstanding Bonds and Outstanding Series 1993 Bonds required for the written consent to such modification or amendment without the consent of the owners of all of the Outstanding Bonds and Outstanding Series 1993 Bonds. [10] Those of the Bonds due on or after May 1, 2007, are subject to redemption at the option of the City, in whole or in part, on May 1, 2006, or on any date thereafter, in integral multiples of $5,000, in such order of maturity as may be selected by the City and within any maturity by lot, at a price of par and accrued interest to the date fixed for redemption. [11] Notice of any such redemption shall be sent by registered or certified mail not less than thirty days nor more than sixty days prior to the date fixed for redemption to the Registered Owner of each Bond to be redeemed at the address shown on the registered books of the City maintained by the Bond Registrar or at such other address as is furnished in writing by such Registered Owner to the Bond Registrar. When so called for redemption, this Bond will cease to bear interest on the specified redemption date, provided funds for redemption are on deposit at the place of payment at that time. [12] This Bond is transferable by the Registered Owner hereof in person or by an attorney duly authorized in writing at the principal corporate trust office of the Bond Registrar in Chicago, Illinois, but only in the manner, subject to the limitations and upon payment of the charges provided in the Ordinance, and upon surrender and cancellation of this Bond. Upon such transfer a new Bond or Bonds of authorized denominations of the same maturity and rate of interest and for the same aggregate principal amount will be issued to the transferee in exchange therefor. [13] The Bonds are issued in fully registered form in the denomination of $5,000 or authorized integral multiples thereof. This Bond may be exchanged at the principal corporate trust office of the Bond Registrar for a like aggregate principal amount of Bonds of the same maturity and rate of interest of other authorized denominations upon the terms set forth in the Ordinance. [14] The City 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 neither the City nor the Bond Registrar shall be affected by any notice to the contrary. -17- 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. Section 11. Bonds Limited Obligations. The Bonds shall be payable from the Pledged Moneys and shall not constitute an indebtedness of the City within the meaning of any constitutional or statutory limitation, unless the Pledged Taxes shall have been extended pursuant to the general obligation, full faith and credit promise supporting the Bonds, as set forth in Section 18 hereof, in which case the amount of the Alternate 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 Revenues for a complete Fiscal Year, in accordance with the Applicable Law. Section 12. Continuation of Waterworks and Sewerage Fund and Accounts Thereof. Upon the issuance of any of the Bonds, the System shall continue to be operated on a Fiscal Year basis. All of the Revenues shall be set aside as collected and be deposited into the Waterworks and Sewerage Fund, heretofore created and established under the terms of the 1986 Bond Ordinance. Such Fund shall constitute a trust fund for the purpose of carrying out the covenants, terms, and conditions of the 1986 Bond Ordinance and this Ordinance, and shall be used only in paying Operation and Maintenance Costs, providing an adequate depreciation fund, paying the principal of and interest on all revenue bonds of the City which by their terms are payable from the Revenues, and providing for the establishment of and expenditure from the respective accounts as hereinafter described in this Ordinance. Section 13. Flow of Funds. There shall be and there are hereby continued and maintained separate accounts in the Waterworks and Sewerage Fund to be known as the -18- "Operation and Maintenance Account," the "Bond and Interest Account," the "Bond Reserve Account," the "Depreciation Account," and the "Surplus Account," to which there shall be credited on or before the first day of each month by the financial officer of the City, without any further official action or direction, in the order in which said accounts are hereinafter mentioned, all moneys held in the Waterworks and Sewerage Fund, in accordance with the following provisions: (a) Operation and Maintenance Account. There shall be credited to the Operation and Maintenance Account an amount sufficient, when added to the amount then on deposit in said Account, to establish a balance to an amount not less than the amount necessary to pay Operation and Maintenance Costs for the then current month. Amounts in said Account shall be used to pay Operation and Maintenance Costs. (b) Bond and Interest Account. There next shall be credited to the Bond and Interest Account and held, in cash and investments, a fractional amount of the interest becoming due on the next succeeding interest payment date on all Outstanding Bonds and Outstanding Series 1993 Bonds and also a fractional amount of the principal becoming due or subject to mandatory redemption of the next succeeding principal maturity or mandatory redemption date of all of the Outstanding Bonds and Outstanding Series 1993 Bonds until there shall have been accumulated and held, in cash and investments, in the Bond and Interest Account on or before the month preceding such maturity date of interest or maturity or mandatory redemption 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 Bond and Interest 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 Outstanding Bonds and Outstanding Series 1993 Bonds and shall be not less than one -fifth of the interest becoming due on the next succeeding interest payment date and not less than one -tenth of the principal becoming due or subject to mandatory redemption on the next succeeding principal payment or mandatory redemption date on all Outstanding Bonds and Outstanding Series 1993 Bonds until there is sufficient money in said Account to pay such principal or interest, or both. Credits to the Bond and Interest Account may be suspended in any Fiscal Year 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 for the balance of such Fiscal Year, but such credits shall again be resumed at the beginning of the next Fiscal Year. All moneys in said Account shall be used only for the purpose of paying interest on and principal of Outstanding Bonds and Outstanding Series 1993 Bonds. (c) Depreciation Account: There shall next be credited and held, in cash and investments, the sum of $3,000 each month until the credit balance of said Account -19- aggregates the sum of $300,000. No additional funds shall be credited to said Account, except that whenever for any reason the amount on deposit to the credit of said Account is less than $300,000, credits into said Account shall be resumed in the amount of $3,000 each month and continued until the amount on deposit to the credit of said Account is once again equal to $300,000. Amounts to the credit of said Depreciation Account shall be used for (i) the payment of the cost of extraordinary maintenance, necessary repairs and replacements, or contingencies, the payment for which no other funds are available, in order that the System may at all times be able to render efficient service and (ii) the payment of principal of or interest on any Outstanding Bonds and Outstanding Series 1993 Bonds at any time when there are no other funds available for that purpose in order to prevent a default and shall be transferred to the Bond and Interest Account for such purpose. Whenever an amount is withdrawn from such Account for the purpose stated in clause (ii) of the preceding paragraph, the amount so transferred shall be added to the amount to be next and thereafter credited to said Depreciation Account until full reimbursement to said Account has been made. (d) Bond Reserve Account: There next shall be credited to the Bond Reserve Account and held, in cash and investments, the sum of $7,500 each month until the credit balance of said Account aggregates the amount of $7,500. In the event of a withdrawal from the Bond Reserve Account, the City covenants to replenish the Bond Reserve Account at the rate of 1/12 the amount withdrawn per month, or $7,500 per month, whichever is greater. Amounts to the credit of the Bond Reserve Account shall be used to pay principal of or interest on the Outstanding Series 1993 Bonds at any time when there are insufficient funds available in the Bond and Interest Account to pay the same. Amounts to the credit of the Bond Reserve Account are expressly unavailable to pay principal of or interest on the Outstanding Bonds. (e) Surplus Account: All moneys remaining in the Waterworks and Sewerage Fund, after crediting the required amounts to the respective accounts hereinabove provided for, and after making up any deficiency in the accounts described in subsections (a) to (d), inclusive, shall be credited each month to the Surplus Account. Funds in the Surplus Account shall first be used to make up any subsequent deficiencies in any of the accounts hereinabove named and then, at the discretion of the City Council, shall be used for one or more of the following purposes without any priority among them: (1) For the purpose of constructing or acquiring repairs, replacements, or improvements to the System; or -20- (2) For the purpose of calling and redeeming Outstanding Bonds or Outstanding Series 1993 Bonds which are callable at the time; or (3) For the purpose of purchasing Outstanding Bonds or Outstanding Series 1993 Bonds at the time at a price of not to exceed par and accrued interest to the date of purchase; or (4) For the purpose of paying principal of and interest on any subordinate bonds or obligations issued for the purpose of acquiring or constructing repairs, replacements, or improvements to the System; or (5) For any other lawful City purpose. (f) Money to the credit of the Waterworks and Sewerage Fund prior to the monthly accounting and to the credit of the Operation and Maintenance Account may be invested pursuant to any authorization granted to municipal corporations by Illinois statute or court decision. Moneys to the credit of the Bond and Interest Account, Bond Reserve Account, Depreciation Account and Surplus Account may be invested from time to time by the Treasurer of the City in (i) interest bearing bonds, notes, or other direct full faith and credit obligations of the United States of America, (ii) obligations unconditionally guaranteed as to both principal and interest by the United States of America, or (iii) certificates of deposit or time deposits of any bank, as defined by the Illinois Banking Act, provided such bank is insured by the Federal Deposit Insurance Corporation or a successor corporation to the Federal Deposit Insurance Corporation, and provided further that the principal of such deposits in excess of the insured amount is secured by a pledge of obligations as described in clauses (f)(i) and (f)(ii) above in the full principal amount of such excess. Such investments may be sold from time to time by the Treasurer of the City as funds may be needed for the purpose for which said respective accounts have been created. To the extent moneys in said Accounts, as described in this paragraph are held uninvested and on deposit in demand accounts, such amounts shall be added to the amount invested pursuant to clause (iii) above and the sum so derived subject to the limitations as set forth therein. Investments in the Accounts shall mature or be subject to redemption at the option of the holder thereof prior to the time when needed, and, in any event, within the times as follows: -21- ACCOUNT TIME Operation and Maintenance 90 days Bond and Interest 1 year Bond Reserve 3 years Depreciation 5 years Surplus 5 years All interest on any funds so invested shall be credited to the Waterworks and Sewerage Fund and is hereby deemed and allocated as expended with the next expenditure(s) of money from the Waterworks and Sewerage Fund. Moneys in any of said accounts shall be invested by the Treasurer, if necessary, in investments restricted as to yield, which investments may be in United States Treasury Obligations -State and Local Government Series, if available, and to such end the Treasurer shall refer to any investment restrictions covenanted by the City or any officer thereof as part of the transcript of proceedings for the issuance of the Bonds, and to appropriate opinions of counsel. (g) Any amounts to the credit of the Accounts in excess of the then current requirement therefor may be transferred by the City Council to such other Account or Accounts of the Waterworks and Sewerage Fund as they may in their sole discretion designate. Section 14. General Covenants. The City covenants and agrees with the holders of the Outstanding Bonds, so long as there are any Outstanding Bonds, as follows: (a) The City will maintain the System in good repair and working order, will operate the same efficiently and faithfully, will promptly proceed with the Project, and will punctually perform all duties with respect thereto required by the Constitution and laws of the State of Illinois. (b) The City will establish and maintain at all times reasonable fees, charges, and rates for the use and service of the System and will provide for the collection thereof and the segregation and application of the Revenues in the manner provided by this Ordinance, sufficient at all times to pay Operation and Maintenance Costs, to provide an adequate depreciation fund, to pay the principal of and interest on all revenue bonds of the City which by their terms are payable solely from the Revenues, and to provide for the creation and maintenance of the respective accounts as provided in Section 13 of this Ordinance. There shall be charged against all users of the System, including the City, such rates and amounts for water and sewer services as shall be adequate to meet the requirements of this subsection. Charges for services rendered the City shall be made against the City, and payment for the same shall be made monthly from the corporate funds into the Waterworks and Sewerage Fund as revenues derived from the operation -22- of the System; provided, however, that the City need not charge itself for such services if in the previous Fiscal Year Revenues not including any payments made by the City shall have met the requirements of this Ordinance. Whenever money in the Bond Reserve Account is used to pay principal of or interest on Outstanding Series 1993 Bonds, the City covenants to promptly have prepared a rate study for the System by an independent consultant employed for that purpose, and further, to send a copy of such study, when completed, to the original purchaser of the Series 1993 Bonds along with a letter indicating what action the City has taken responsive to such study. (c) The City from time to time will make all needful and proper repairs, replacements, additions, and betterments to the System so that it may at all times be operated properly and advantageously; and when any necessary equipment or facility shall have been worn out, destroyed, or otherwise is insufficient for proper use, it shall be promptly replaced so that the value and efficiency of the System shall be at all times fully maintained. (d) The City will establish such rules and regulations for the control and operation of the System necessary for the safe, lawful, efficient and economical operation thereof. (e) The City will make and keep proper books and accounts (separate and apart from all other records and accounts of said City), in which complete entries shall be made of all transactions relating to the System, and hereby covenants that within 90 days following the close of each Fiscal Year, it will cause the books and accounts of the System to be audited by independent certified public accountants. Said audit will be available for inspection by the holders of any of the Bonds. Each such audit, in addition to whatever matters may be thought proper by the accountants to be included therein, shall, without limiting the generality of the foregoing, include the following: (i) A statement in detail of income and expenditures of the System for such Fiscal Year. (ii) A balance sheet as of the end of such Fiscal Year, including a statement of the amount held in each of the accounts of the Waterworks and Sewerage Fund. (iii) A list of all insurance policies in force at the end of the Fiscal Year, setting out as to each policy the amount of the policy, the risks covered., the name of the insurer, and the expiration date of the policy. (iv) The number of sewer customers served by the System at the end of the year and the quantity of sewage treated, the number of metered water customers and the number of unmetered water customers at the end of the year, the quantity of water pumped and the quantity of water billed. -23- (v) Changes in the cost of purchased water or sewer services during such Fiscal Year. (vi) A summary of rates in effect at the end of such Fiscal Year for services of the System and any changes in such rates effective during such Fiscal Year. (vii) The amount and details of all Outstanding Bonds and Outstanding Series 1993 Bonds. (viii) The accountant's comment regarding the manner in which the City has carried out the requirements of this Ordinance, and the accountant's recommendations for any changes or improvements in the operation of the System. All expenses of the audit required by this section shall be regarded and paid as Operation and Maintenance Costs. It is further covenanted and agreed that a copy of each such audit shall be furnished upon completion to the original purchaser of the Bonds, and a summary thereof shall be furnished to any bondholder upon request. (f) The City will keep the books and accounts for the System in accordance with generally accepted fund reporting practices for municipal enterprise funds; provided, however, that the monthly credits to the Bond and Interest Account, the Bond Reserve Account and the Depreciation Account shall be in cash and said funds shall be held separate and apart in cash and investments. For the purpose; of determining whether sufficient cash and investments are on deposit in such accounts under the terms and requirements of this Ordinance, investments shall be valued at amortized cost. (g) The City will not sell, lease, loan, mortgage or in any manner dispose of or encumber the System (subject to the right of the City to issue Parity Bonds as provided in this Ordinance, to issue bonds subordinate to Outstanding Bonds and Outstanding Series 1993 Bonds, and to dispose of real or personal property which is no longer useful or necessary to the operation of the System), and the City will take no action in relation to the System which would unfavorably affect the security of the Outstanding Bonds or Outstanding Series 1993 Bonds or the prompt payment of the principal thereof and interest thereon. Any amounts received from the sale of property of the System shall be deposited to the credit of the Depreciation Account. (h) Any holder of a Bond may proceed by civil action to compel performance of all duties required by law and this Ordinance, including the making and collecting of sufficient charges and rates for the service supplied by the System and the application of the income and revenue therefrom. -24- (i) The City will carry insurance on the System of the kinds and in the amounts which are usually carried by private parties operating similar properties, covering such risks as shall be recommended by a competent consulting engineer or insurance consultant employed by the City for the purpose of making such recommendations. All moneys received for loss under such insurance policies shall be deposited to the credit of the Depreciation Account and used in making good the loss or damage in respect of which they were paid, either by repairing the property damaged or making replacement of the property destroyed, and provision for making good such loss or damage shall be made within 90 days from the date of the loss. The payment of premiums for all insurance policies required under the provisions of this covenant shall be considered an Operation and Maintenance Cost. The proceeds derived from any and all policies for workers' compensation or public liability shall be paid into the Operation and Maintenance Account and used in paying the claims on account of which they were received. 0) Except as hereinabove expressly provided for services to the City,, the City covenants not to provide any free service of the System, and, to the extent permitted by law, the City will not grant a franchise for the operation of any competing waterworks system, sewerage system, or combined waterworks and sewerage system within the City. (k) The City covenants to redeem Bonds pursuant to the mandatory redemption provisions hereof at the times and in the amounts provided herein. (1) The City will adopt a budget for the Waterworks and Sewerage Fund prior to the beginning of each Fiscal Year, subject to applicable state law, providing for payment of all sums to be due in the Fiscal Year so as to comply with the terms of this Ordinance and of long term water supply agreements. The budget may include in its estimate of income, the use of available surplus moneys or other funds of the City appropriated for the purpose. If during the Fiscal Year there are extraordinary receipts or payments of unusual cost, the City will adopt an amended budget for the remainder of the Fiscal Year, providing for receipts or payments pursuant to this Ordinance. Section 15. Covenants Required by the Reform Act. The City covenants and agrees with the holders of the Bonds, so long as there are any Outstanding Bonds (as defined herein), as follows: A. The City Council covenants and agrees to provide for, collect and apply Revenues of the System to the payment of the Bonds as hereinabove provided and the provision of not less than an additional .25 times debt service. The determination of the sufficiency of the Revenues pursuant to this subsection (A) shall be supported by reference to the most recent audit of the City, and the reference to and acceptance of such audit by the City Council shall be conclusive evidence that the conditions of Section 15 of the Reform Act have been met. -25- B. The City will punctually pay or cause to be paid from the Bond and Interest Account and from the Bond Fund the principal of and interest on the Bonds in strict conformity with the terms of the Bonds and this Ordinance, and it will faithfully observe and perform all of the conditions, covenants and requirements thereof and hereof. C. The City will pay and discharge, or cause to be paid and discharged, from the Bond and Interest Account and the Bond Fund any and all lawful claims which, if unpaid, might become a lien or charge upon the Pledged Moneys, or any part thereof, or upon any funds in the hands of the Paying Agent, or which might impair the security of the Bonds, other than as otherwise permitted by the terms of this Ordinance. 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 and correct entries shall be made of all transactions relating to the Project, the System, the Pledged Moneys, the Waterworks and Sewerage Fund and the.Bond Fund. E. The City will preserve and protect the security of the Bonds and the rights of the registered owners of the 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 Bonds by the City, such 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 registered owners of the Bonds of the rights and benefits provided in this Ordinance. G. As long as any Bonds are Outstanding, the City will continue to deposit and apply the Revenues as provided herein and, if applicable, the Pledged Taxes to the Bond Fund. The City covenants and agrees with the purchasers of the Bonds and with the registered owners thereof that so long as any such 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 levy the Pledged Taxes and to collect and to segregate the Pledged Moneys. The City and its officers will comply with all present and future applicable laws in order to assure that the Pledged Taxes can be levied and extended and that the Revenues and the Pledged Taxes may be collected and deposited into the Waterworks and Sewerage Fund and to the credit of the respective Accounts thereof and the Bond Fund, respectively, as provided herein. H. The 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 from the Revenues, as herein provided, from the levy of the Pledged Taxes as provided in the Act. -26- Section 16. Issuance of Parity Bonds. As long as there are any Outstanding Bonds or Outstanding Series 1993 Bonds, no obligations or bonds of any kind shall be issued which are payable from the Revenues except upon compliance with one of the options (a) through (d) set out below: (a) Parity Bonds may be issued for the purpose of paying the cost of repairs, replacements, renewals, improvements and extensions to the System or for refunding Outstanding Bonds or Outstanding Series 1993 Bonds upon compliance with the following conditions: (i) The amounts required to be credited monthly to the respective accounts described in subsections (a) through (d), inclusive, of Section 13 of this Ordinance must have been credited in full up to the date of the delivery of such Parity Bonds. (ii) The Net Revenues of the System for the last completed Fiscal Year prior to the issuance of the Parity Bonds (as shown by the audit of an independent certified public accountant), or the adjusted Net Revenues of the System for such year (as defined herein) must equal at least 120% of Maximum Annual Debt Service computed immediately after the issuance of the proposed Parity Bonds, but only for those Fiscal Years in which the Outstanding Bonds or Outstanding Series 1993 Bonds immediately prior to such issuance will continue to be Outstanding Bonds and Outstanding Series 1993 Bonds as provided herein. (iii) Net Revenues of the System may be adjusted as follows: In the event there shall have been an increase in the rates of the System from the rates in effect for the preceding Fiscal Year, which increase is in effect at the time of the issuance of any such Parity Bonds, the Net Revenues as described hereinabove may be adjusted to reflect the Net Revenues of the System for the immediately preceding Fiscal Year as they would have been had said then existing rates been in effect during all of said Fiscal Year. Any such adjustment shall be evidenced by the certificate of an independent consulting engineer or an independent certified public accountant employed for that purpose, which certificate shall be filed with and approved by the City Council prior to the issuance of the proposed Parity Bonds. (b) Parity Bonds may be issued to refund Outstanding Bonds or Outstanding Series 1993 Bonds if the Parity Bonds so issued (i) do not exceed the principal amount of the Outstanding Bonds and Outstanding Series 1993 Bonds to be refunded, (ii) do not bear interest at a rate in excess of the Outstanding Bonds or Outstanding Series 1993 Bonds to be refunded, and (iii) do not mature earlier than any Outstanding Bonds or Outstanding Series 1993 Bonds not to be refunded. (c) Parity Bonds may be issued to refund Outstanding Bonds or Outstanding Series 1993 Bonds in order to avoid default in the payment of principal of or interest -27- on Outstanding Bonds and Outstanding Series 1993 Bonds; provided, they are issued to avoid such default within three months of the date thereof. (d) Bonds or other obligations may be issued payable from the Revenues subordinate to the Outstanding Bonds and Outstanding Series 1993 Bonds. Such subordinate bonds shall be payable from the Surplus Account created in Section 13 of this Ordinance. All bonds issued under this Section shall mature as to principal on May 1 and as to interest on May 1 and/or November 1. Contracts or agreements, including long-term and take or pay contracts or agreements, for the supply of water or the treatment of sewage which by their terms require payment by the City as an Operation and Maintenance Cost or from the Operation and Maintenance Account are expressly excluded from the provisions of this Ordinance pertaining to Parity Bonds. Such contracts or agreements may be made by the City notwithstanding any of the provisions herein. Section 17. 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 "Alternate Bond Fund-1997" (the "Bond Fund"). The purpose of the Bond Fund is to provide a fund to receive and disburse Pledged Taxes for any of the Bonds. All payments made with respect to the Bonds from the Revenues shall be made directly from the Bond and Interest Account of the Waterworks and Sewerage Fund. The Bond Fund constitutes a trust fund established for the purpose of carrying out the covenants, terms and conditions imposed upon the City by this Ordinance with respect to the Bonds. Any Pledged Taxes received by the City shall promptly be deposited into the :Bond Fund. Pledged Taxes on deposit to the credit of the Bond Fund shall be fully spent to pay the principal of and interest and premium, if any, on the Bonds for which such taxes were levied and collected prior to use of any moneys on deposit in the Bond and Interest Account of the Waterworks and Sewerage Fund (for the Bonds). Section 18. Pledged Taxes; Tax Levy. The Bonds are Alternate Bonds. For the purpose of providing funds to pay the principal of and interest on the Bonds, 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"): -28- FOR THE YEAR A TAX SUFFICIENT TO PRODUCE THE SUM OF: 1997 $127,675.00 for interest up to and including May 1, 1999 (net of funds on hand) 1998 $125,300.00 for principal and interest 1999 $122,925.00 for principal and interest 2000 $120,525.00 for principal and interest 2001 $118,125.00 for principal and interest 2002 $115,687.50 for principal and interest 2003 $313,250.00 for principal and interest 2004 $300,750.00 for principal and interest 2005 $788,250.00 for principal and interest Following any extension of Pledged Taxes, interest or principal coming due at any time when there are insufficient funds on hand from the Pledged Taxes to pay the same shall be paid promptly when due from current funds on hand in advance of the collection of the Pledged Taxes herein levied; and when the Pledged Taxes shall have been collected, reimbursement shall be made to said funds in the amount so advanced. Section 19. Filing with County Clerk, Bond Fund. After this Ordinance becomes effective, a copy hereof, certified by the City Clerk, shall be filed with the County Clerk of The County of Will, 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 corporate 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. Section 20. Abatement of Pledged Taxes.- As provided in the Reform Act, whenever the 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 Revenues have been deposited in the Bond and Interest Account 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 and Interest Account, the sum of $130,050 derived from funds of the City on hand and lawfully -29- 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 Revenues have been deposited in the Bond and Interest Account and the abatement of the Pledged Taxes for such calendar year has been filed with the County Clerk. Section 21. Sale of 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 $1,592,000 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 22. Use of Proceeds, Expense Fund, Project Fund (1997). 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 and Interest Account of the Waterworks and Sewerage Fund, and be used to pay first interest corning 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 KC 12 not disbursed from the Expense Fund within six months shall be transferred by the 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 23. Provisions a Contract. The provisions of this Ordinance shall constitute a contract between the City and the holders of the Outstanding Bonds and no changes, additions, or alterations of any kind shall be made hereto, except as herein provided, so long as there are any Outstanding Bonds. -31- Section 24. 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. "Bond Fund" for purposes of this Section 24 means, collectively, the Bond Fund and the Bond and Interest Account of the Waterworks and Sewerage Fund. "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. "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 -32- (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 agreement to supply investments on two or more future dates (e.g., a forward supply contract). "Gross Proceeds" means amounts in the Bond Fund, Expense 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 -33- 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. "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 -34- 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 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; -35- (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. -36- (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 of (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. Other Funds and Accounts. Other accounts within the waterworks and Sewerage Fund will not contain any Sale Proceeds. No amounts in any such accounts are expected to be used to pay debt service on the Bonds. Because amounts in such accounts are available for uses other than the payment of debt service on the Bonds, there are no assurances that such amounts would be available to pay principal or interest on the Bonds or any credit enhancement or liquidity device with respect to the Bonds, even if the Issuer encounters financial difficulties. 3.4. 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 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 not 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 -37- 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 25 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 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. (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; -39- (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 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 -40- 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); (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 -41- (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. (b) The payment of more than five pefeent 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. -42- (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. Form 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 1997A 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 1997A 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 1997A 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 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 Egli 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. 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 25. 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 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 26. 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 -45- 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 27. 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 28. 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. 1011 Section 29. 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 30. 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. -47- Section 31. 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. AYES: Bolger, Bates, Lawson. NAYS: ABSENT: Locke. Baird. APPROVED: April 30, 1997. r Mayor PUBLISHED in Pamphlet Form on May 1 , 1997. RECORDED in the Municipal Records on April 30, 1997. Attest: ity Cle (SEAL) Alderman Lawson moved and Alderman Bolger the motion that said ordinance as presented and read by the City Clerk be adopted. seconded After a full and complete discussion thereof, 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 EMENERMIUM-26 ABSENT: Baird. NAY: Locke. 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. C ty Clerk