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Ordinance No. 80-88-37 v ORDINANCE NO. 80-88-37 AN ORDINANCE ACCEPTING THE OFFER OF ATLANTIC UTILITIES OF JACKSONVILLE, INC., TO SELL CERTAIN OF THE ASSETS OF THE OAK HARBOR WATER AND SEWER SYSTEM TO THE CITY FOR THE PURPOSE OF ACQUIRING THE OAK HARBOR WATER AND SEWER SYSTEM OWNED AND OPERATED BY ATLANTIC UTILITIES OF JACKSONVILLE, INC., DESCRIBED IN SAID OFFER FOR THE PURCHASE PRICE SET FORTH IN THE ATTACHED AGREEMENT OF PURCHASE AND SALE; ESTABLISHING THE OAK HARBOR WATER AND SEWER DISTRICT OF THE CITY WITHIN WHICH THE CITY WILL PROVIDE WATER AND SEWER SERVICES THROUGH THE SYSTEM PURCHASED; AUTHORIZING THE ISSUANCE OF OAK HARBOR WATER AND SEWER DISTRICT REVENUE BONDS FOR PAYMENT OF THE PURCHASE PRICE OF THE ASSETS; AUTHORIZING PAYMENT OF THE BONDS FROM THE NET REVENUES AND AVAILABLE IMPACT FEES OF THE UTILITY SYSTEM SERVING OAK HARBOR WATER AND SEWER DISTRICT; AUTHORIZING AND DIRECTING CERTAIN OFFICERS OF THE CITY TO EXECUTE THE AGREEMENT OF PURCHASE AND SALE; AND OTHER DOCUMENTS, AND TAKE CERTAIN ACTION IN CONNECTION THEREWITH; IMPOSING A CAPITAL FACILITIES ACQUISITION CHARGE UPON CURRENT CUSTOMERS OF THE ACQUIRED FACILITIES; AND PROVIDING AN EFFECTIVE DATE. BE IT ORDAINED BY THE CITY COMMISSION OF THE CITY OF ATLANTIC BEACH, FLORIDA. Section 1. AUTHORITY FOR THIS ORDINANCE. This ordinance is enacted pursuant to the provisions of Chapter 180, Florida Statutes (1987), as amended, and other applicable provisions of law. Section 2. FINDINGS. It is hereby found and determined as follows: A. On October 24, 1988, the City adopted a resolution (the "Resolution") making a preliminary determination that the purchase of the Oak Harbor Water and Sewer System owned and operated by Atlantic Utilities of Jacksonville, Inc., the financing of the cost of acquisition by the issuance of revenue bonds of the City, and the establishment of Oak Harbor Water and Sewer District within which the City will LKL-10/24/88-262AA-2738 -1- Rev.11/14/88 provide water and sewer services through the system purchased, was in the public interest, and scheduled a public hearing with respect thereto. B. The public hearing was held at the time and place set forth in the Resolution, and, after consideration of all matters presented to the City at such public hearing, the City has determined that the enactment of this ordinance and implementa- tion of the acquisition of the Oak Harbor System, the financing thereof, and the establishment of Oak Harbor Water and Sewer District is in the public interest. In making such determination, the City has considered all of the factors set forth in the Resolution, and the statement showing that the purchase is in the public interest, in the form attached to the Resolution, is hereby adopted as a final statement with respect thereto. C. The City deems it necessary and advisable for the public health, safety and welfare of its citizens to (1) provide extensions and improvements to its water and sewer system by the acquisition of certain assets (the "Assets") of the Oak Harbor Water and Sewer System (the "Oak Harbor System") owned by Atlantic Utilities of Jacksonville, Inc., a Florida corporation (the "Seller") pursuant to the Agreement of Purchase and Sale (the "Agreement") between the City and Atlantic Utilities of Jacksonville, Inc., dated , 1988, in the form attached hereto as Exhibit A, (2) finance the cost of purchase of the Assets by issuance of the Bonds described herein and in the Agreement, and (3) to establish Oak Harbor Water and Sewer District ("Oak Harbor District"), within which the City shall provide water and sewer services through the Oak Harbor System, as the same may be extended or improved hereafter. D. The cost of acquiring the Oak Harbor System is as set forth in the Agreement. E. The estimated annual Net Revenues and Available Impact Fees to be hereafter derived by the City from the operation of the Oak Harbor System will be LKL-10/24/88-262AA-2738 -2- sufficient to pay the principal of and interest on the Bonds pursuant to the terms and conditions of the Agreement and this Ordinance and to make all other payments required hereunder and under the Agreement. F. The principal of and interest on the Bonds will be payable solely from the Net Revenues and Available Impact Fees derived by the City from the operation of the Oak Harbor System. It will never be necessary or authorized for the ad valorem taxing power of the City, the State of Florida or any political subdivision thereof, to be exercised to pay the principal of or interest on the Bonds or to make any required payments under this Ordinance or under the Agreement, and the Bonds shall not constitute a lien upon any property of or in the City, except the Net Revenues and Available Impact Fees of the Oak Harbor System. G. The City has not issued any other obligations which are payable from the Net Revenues or the Available Impact Fees, and the Net Revenues and Available Impact Fees of the Oak Harbor System are unpledged revenues of the City. Section 3. APPROVAL OF AGREEMENT AND NEGOTIATED SALE OF BONDS. The City hereby approves the Agreement and the terms and conditions provided therein and authorizes the Mayor and City Manager to execute the Agreement and authorizes such officers and the City Attorney to take all action and execute all documents necessary to implement and close the transaction contemplated by this Ordinance and the Agreement. The City hereby finds, determines and declares that it is in its best interest to issue the Bonds contemplated hereby upon the conditions set forth herein and in the Agreement. The negotiated sale of the principal amount of Bonds stated in the Agreement is hereby authorized pursuant to Section 218.385, Florida Statutes (1987). The City acknowledges receipt of the information required by Section 218.385, Florida Statutes (1987), in connection with negotiated sale of bonds. A copy of the LKL-10/24/88-262AA-2738 -3- Sellers' letter containing the required information is attached to this Ordinance as Exhibit Section 4. ESTABLISHMENT OF OAK HARBOR WATER AND SEWER DISTRICT. Upon the acquisition of the Assets of the Oak Harbor System by the City, the area described in Exhibit attached to the Agreement and made a part thereof, which constitutes the service area of the Oak Harbor System, is hereby fixed and established as Oak Harbor Water and Sewer District of the City. The City shall provide water and sewer services to properties within Oak Harbor Water and Sewer District through the Oak Harbor System acquired, as the same be extended or improved hereafter. Section 5. DEFINITIONS. All defined terms in the Agreement shall have the same meaning herein. In addition, the following terms shall have the following meanings herein, unless the text otherwise expressly requires. Words importing singular number shall include the plural number in each case and vice versa, and words importing persons shall include firms and corporations. "Act" shall mean Chapter 180, Florida Statutes (1987), as amended, and other applicable provisions of law. "Additional Bonds" shall mean Bonds issued on a parity with the Initial Bonds under Section 17 Q hereof. "Agreement" shall mean the Agreement of Purchase - Sale between the City and the Seller attached hereto as Exhibit A. "Amortization Installments" with respect to any Term Bonds of a series, shall mean an amount or amounts so designated which is or are established for the Term Bonds of such series, provided that (i) each such installment shall be deemed to be due on such interest or principal maturity date of each applicable year as is fixed by resolution of the City and shall be in an Authorized Denomination, and (ii) the aggregate of such LKL-10/24/88-262AA-2738 -4- installments for such series shall equal the aggregate principal amount of Term Bonds of such series authenticated and delivered on original issuance. "Assets" shall mean the assets of Oak Harbor System to be acquired from the Seller pursuant to the Agreement. "Authorized Investments" shall mean investments permitted under Section 166.261, Florida Statutes (1987), as in effect on the date of adoption of this Ordinance. "Available Impact Fees" shall mean all Impact Fees received, multiplied by a fraction, the numerator of which is the total Bond Service Requirements in all Fiscal Years applicable to Bond issued to finance the cost of acquisition or construction of additions or expansions to the capacity of the Oak Harbor System and the denominator of which is the total Bond Service Requirements in all Fiscal Year applicable to all Bonds. "Bondholder" shall mean a registered owner of a Bond as shown on the registration books of the Registrar. "Bond Service Requirement" for any Fiscal Year, as applied to the Bonds of any series, shall mean the sum of: (1) the amount required to pay the interest becoming due on the Bonds of such series during the Fiscal Year, except to the extent that such interest shall have been provided by payments into the Sinking Fund out of bond proceeds for a specific period of time; (2) the amount required to pay the principal of Serial Bonds of such series maturing in such Fiscal Year; and (3) the Amortization Installments for the maturities of Term Bonds of such series for such Fiscal Year. "Bonds" shall mean the Initial Bonds, together with any Additional Bonds hereafter issued under the terms, conditions, and limitations contained herein. LKL-10/24/88-262AA-2738 -5- "Capital Facilities Acquisition Charge" shall mean a fee to be charged to customers of the Oak Harbor System as of the date of acquisition to defray the cost of other water supply facilities and sewage treatment facilities devoted to serving such existing customers. "Consulting Engineers" shall mean such qualified and recognized consulting engineers, having a favorable repute for skill and experience in the construction and operation of such facilities as the Oak Harbor System, at the time retained by the City to perform the acts and carry out the duties as herein provided for Consulting Engineers. "Cost of Operation and Maintenance" of the Oak Harbor System shall mean the current expenses, paid or accrued, of operation, maintenance and repair of the Oak Harbor System as calculated in accordance with sound accounting practice, but shall not include any reserves for renewals and replacements, for extraordinary repairs or any allowance for depreciation. "Federal Securities" shall mean only direct obligations of, or obligations fully guaranteed as to principal and interest by, the United States of America. "Fiscal Year" shall mean the period commencing on October 1 of each year and ending on the succeeding September 30, or such other period as is at the time prescribed by law. "Gross Revenues" shall mean all income or earnings, including any income from the investment of funds as herein provided, derived by the City from the operation of the Oak Harbor System, excluding Impact Fees, but including Capital Facilities Acquisition Charges imposed herein. "Impact Fees" shall mean the impact fees received by the City from connections of new customers to the water or sewer facilities of the Oak Harbor System. "Initial Bonds" shall mean the Oak Harbor Water and Sewer District Revenue Bonds, herein authorized. LKL-11/14/88-262AA-2738 -6- "Maximum Bond Service Requirement" shall mean, as of any particular date of calculation, the greatest amount of aggregate Bond Service Requirements for the then current or any future Fiscal Year. "Net Revenues" shall mean Gross Revenues of the Oak Harbor System less the Cost of Operation and Maintenance of the Oak Harbor System. "Oak Harbor System" shall mean the Oak Harbor System to be acquired under the Agreement, as the same may be extended or improved hereafter, serving properties within the Oak Harbor Water and Sewer District, together with all lands or interests therein, including plants, buildings, machinery, franchises, pipes, mains, fixtures, equip- ment and all property, real or personal, tangible or intangible, now or hereafter owned or used in connection therewith, and including any undivided or partial ownership interests therein. "Payment Date" shall mean, with respect to payment to the Bondholders of principal of or interest on the Bonds, or with respect to the mandatory amortization of Term Bonds, the date upon which payment of such principal, interest or Amortization Installment is required to be made to the Registrar. "Project" shall mean the construction or acquisition of certain of the Assets of the Oak Harbor System. "Registrar" shall mean the paying agent for the Bonds, as Bond Registrar, or such other person, firm or corporation as may thereafter be from time to time designated by the City-as the Registrar for the Bonds. As to the Initial Bonds, the City Clerk shall be the Registrar, unless a successor Registrar shall be hereafter appointed. "Seller" shall mean Atlantic Utilities of Jacksonville, Inc., a Florida corpora- tion. "Serial Bonds" shall mean any Bonds for the payment of the principal of which, at the maturity thereof, no Amortization Installments are required to be made prior to the twelve-month period immediately preceding the stated date of maturity of such Serial Bonds. LKL-11/14/88-262AA-2738 -7- "Term Bonds" shall mean the Bonds of a series all of which shall be stated to mature on one date and which shall be subject to retirement by operation of the Bond Amortization Account. Section 6. ORDINANCE TO CONSTITUTE CONTRACT. In consid- eration of the acceptance of the Initial Bonds by the Bondholders from time to time, this Ordinance shall be deemed to be and shall constitute a contract between the City and such Bondholders. The covenants and agreements herein set forth to be performed by the City shall be for the equal benefit, protection and security of the Bondholders of any and all of such Initial Bonds, all of which shall be of equal rank and without preference, priority or distinction of any of the Initial Bonds over any other thereof, except as expressly provided therein and herein. Section 7. AUTHORIZATION OF ACQUISITION OF ASSETS AND ISSUANCE OF BONDS. The acquisition of the Assets of the Oak Harbor System pursuant to the Agreement and this Ordinance is hereby authorized and the issuance of the Bonds pursuant to the terms and conditions of the Agreement and the Original Ordinance is hereby authorized. Section 8. DESCRIPTION OF INITIAL BONDS. The Initial Bonds shall be dated as of their date of delivery, shall be designated "R- " and numbered consecutively from one upward in order of authentication; shall be in Authorized Denominations, and shall bear interest at the rate of 8.0% per annum, payable semi- annually on December 1, 1988 and each June 1 and December 1 thereafter. The Bond shall mature serially in installments on December 1, 1988, and each December 1 thereafter, in amounts such that the total annual payments of principal and interest shall be as nearly equal as practicable, and all principal of each Bond shall have matured on or before December 1, 2018. LKL-10/24/88-262AA-2738 -8- If the date for payment of the principal of, premium, if any, or interest on the Bonds shall be a Saturday, Sunday, legal holiday or a day on which the banking institutions in the City where the Registrar is located are authorized by law or executive order to close, then the date for such payment shall be the next succeeding day which is not a Saturday, Sunday or legal holiday or a day on which such banking institutions are authorized to close, and payment on such dates and in such date shall have the same force and effect as if made on the nominal date of payment. The Bonds (except the Initial Bonds) may be issued or exchanged for Bonds in coupon form, payable to bearer, in such form, with such attributes and upon such conditions as the City may provide by supplemental resolutions, upon receipt of an opinion from a nationally recognized bond counsel that such issuance or exchange will not cause interest on the Bonds to be includable in gross income of the holder for federal income tax purposes. Section 9. EXECUTION OF BONDS. The Bonds shall be executed in the name of the City by the Mayor and City Manager and attested by the City Clerk, and approved as to form, sufficiency and correctness by the City Attorney, either manually or with his facsimile signature, and the official seal of the City or a facsimile thereof shall be affixed thereto or reproduced thereon. The facsimile signature of such officers may be imprinted or reproduced on the Bonds. The Certificate of Authentication of the Bond Registrar shall appear on the Bonds, and no bond shall be valid or obligatory for any purpose or be entitled to any security or benefit under this Ordinance unless such certificate shall have been duly executed on such Bond. The authorized signature for the Bond Registrar shall be either manual or facsimile; provided, however, that at least one of the signatures appearing on the Bonds, shall at all times be a manual signature. In case any officer whose signature shall appear on any Bonds shall cease to be such officer LKL-10/24/88-262AA-2738 -9- before the delivery of such Bonds, such signature or facsimile shall nevertheless be valid and sufficient for all purposes the same as if he had remained in office until such delivery. Any Bonds may be signed and sealed on behalf of the City by such person who at the actual time of the execution of such Bonds shall hold the proper office with the City, although at the date of enactment of this Ordinance such person may not have held such office or may not have been so authorized. Section 10. NEGOTIABILITY. Subject to the provisions hereof respect- ing registration and transfer, the Bonds (except the Initial Bonds) shall be and shall have all the qualities and incidents of negotiable instruments under the laws of the State of Florida, and each successive holder, in accepting any of the Bonds (except the Initial Bonds), shall be conclusively deemed to have agreed that such Bonds shall be and have all of such qualities and incidents of negotiable instruments under the Uniform Commercial Code - Investment Securities of the State of Florida. The Initial Bonds shall not be negotiable, and ownership of the Initial Bonds shall not be transferable except for transfers by operation of law and transfers made with prior approval of the City. The debt of the City evidenced by the Initial Bonds shall be subject to defenses and set-off in accordance with the Agreement. Section 11. REGISTRATION, EXCHANGE AND TRANSFER. There shall be a Bond Registrar for the Bonds which may be the City Clerk or a designated bank or trust company located within or without the State of Florida. The Bond Registrar shall maintain the registration books of the City and be responsible for the transfer and exchange of the Bonds. The City shall, prior to the proposed date of delivery of the Bonds, by resolution designate the Bond Registrar and Paying Agent. The Bond Registrar shall maintain the books for the registration of the transfer and exchange of the Bonds in LKL-10/24/88-262AA-2738 -10- compliance with the Florida Registered Public Obligations Act and the system of registration as established by the City pursuant thereto. Subject to the limitations in Section 10 of this Ordinance, Bonds may be transferred upon the registration books, upon delivery to the Registrar, together with written instructions as to the details of the transfer of such Bonds, along with the social security number or federal employer identification number of such transferee and, if such transferee is a trust, the name and social security or federal employer identification numbers of the settlor and beneficiaries of the trust, the date of the trust and the name of the trustee. No transfer of any Bond shall be effective until entered on the registration books maintained by the Bond Registrar. Upon surrender for transfer or exchange of any Bond, the City shall execute and the Bond Registrar shall authenticate and deliver in the name of the registered owner or the transferee or transferees, as the case may be, a new fully registered Bond or Bonds of Authorized Denominations of the same maturity and interest rate for the aggregate principal amount which the registered owner is entitled to receive at the earliest practicable time in accordance with the provisions of this Ordinance. The City or the Bond Registrar may charge the owner of such Bond for every such transfer or exchange an amount sufficient to reimburse them for their reasonable fees and for any tax, fee, or other governmental charge required to be paid with respect to such transfer, and may require that such charge be paid before any such new Bond shall be delivered. All Bonds presented for transfer, exchange, redemption or payment (if so required by the Bond Registrar), shall be accompanied by a written instrument or instruments of transfer or authorization for exchange, in form and with guaranty of signature satisfactory to the Bond Registrar, duly executed by the registered holder or by his duly authorized attorney in fact or legal representative. LKL-10/24/88-262AA-2738 -11- All Bonds delivered upon transfer or exchange shall bear interest from the preceding interest payment date so that neither gain nor loss in interest shall result from the transfer or exchange. New Bonds delivered upon any transfer or exchange shall be valid obligations of the City, evidencing the same debt as the Bond surrendered, shall be secured by this Ordinance and shall be entitled to all of the security and the benefits hereof to the same extent as the Bonds surrendered. The City and the Bond Registrar may treat the registered owner of any Bond as the absolute owner thereof for all purposes, whether or not such Bonds shall be overdue, and shall not be bound by any notice to the contrary. Notwithstanding the foregoing provisions of this section, the City reserves the right, on or prior to the delivery of the Bonds to amend or modify the foregoing provisions relating to the registration of the Bonds by resolution or ordinance in order to comply with all applicable laws, rules, and regulations of the United States and/or the State of Florida relating thereto. Section 12. BONDS MUTILATED, DESTROYED, STOLEN OR LOST. In case any Bond shall become mutilated, or be destroyed, stolen or lost, the City may in its discretion issue and deliver a new Bond of like tenor as the Bond so mutilated, destroyed, stolen or lost, in exchange and substitution for such mutilated Bond upon surrender and cancellation of such mutilated Bond or in lieu of and substitution for the Bond destroyed, stolen or lost, and upon the holder furnishing the City proof of his ownership thereof and satisfactory indemnity and complying with such other reasonable regulations and condi- tions as the City may prescribe and paying such expenses as the City may incur. All Bonds so surrendered shall be cancelled by the Registrar for the Bonds. If any of the Bonds shall have matured or be about to mature, instead of issuing a substitute Bond, the LKL-10/24/88-262AA-2738 -12- City may pay the same, upon being indemnified as aforesaid, and if such Bonds be lost, stolen or destroyed, without surrender thereof. Any such duplicate Bonds issued pursuant to this section shall constitute original, additional contractual obligations on the part of the City whether or not the lost, stolen or destroyed Bonds be at any time found by anyone, and such duplicate Bonds shall be entitled to equal and proportionate benefits and rights as to lien on the source and security for payment from the funds, as hereinafter pledged, to the same extent as all other Bonds issued hereunder. Section 13. PROVISIONS FOR REDEMPTION. The Initial Bonds shall be redeemable, at the option of the City, on and after , 1993, in whole or in part, on any date, at the price of par plus accrued interest to the redemption date. In the case of a partial redemption, the remaining principal balance of each Initial Bond shall be redeemed pro rata, and each installment of principal due on each Initial Bond shall be redeemed such that the remaining annual principal and interest payments shall be as nearly equal as practicable. Except for Initial Bonds, Bonds in denominations greater than an Authorized Denomination shall be deemed to be an equivalent number of Bonds in the denomination of the minimum Authorized Denomination, and if a Bond is of a denomination larger than the minimum Authorized Denomination, a portion of such Bond may be redeemed, in the amount of any Authorized Denomination. Initial Bonds may be redeemed in any even dollar amount. Notice of such redemption, identifying the Bonds or portions thereof called for redemption (i) shall be filed with the paying agents and any Registrar; and (ii) shall be mailed by the Registrar, first-class mail, postage prepaid, to all registered owners of the Bonds to be redeemed not more than thirty (30) days and not less than fifteen (15) days LKL-10/24/88-262AA-2738 -13- I prior to the date fixed for redemption at their addresses as they appear on the registration books to be maintained in accordance with the provisions hereof. Failure to give such notice by mailing to any owner of Bonds, or any defect therein, shall not affect the validity of any proceeding for the redemption of other Bonds. Notice having been mailed and filed in the manner and under the conditions hereinabove provided, the Bonds or portions of Bonds so called for redemption shall, on the redemption date designated in such notice, become and be due and payable at the redemption price provided for redemption of such Bonds or portions of Bonds on such date. On the date so designated for redemption, notice having been mailed and filed and moneys for payment of the redemption price being held in separate accounts in trust for the holders of the Bonds or portions thereof to be redeemed, all as provided in this Ordinance, interest on the Bonds or portions of Bonds so called for redemption shall cease to accrue, such Bonds and portions of Bonds shall cease to be entitled to any lien, benefit or security under this Ordinance, and the holders or Registered Owners of such Bonds or portions of Bonds, shall have no rights in respect thereof except to receive payment of the redemption price thereof. Upon surrender of any Bond for redemption in part only, the City shall issue and deliver to the holder thereof, the costs of which shall be paid by the holder, a new Bond or Bonds of Authorized Denominations in aggregate principal amount equal to the unredeemed portion surrendered. Section 14. FORM OF BONDS. The text of the Initial Bonds, the Certificate of Authentication and the Assignment shall be in a form which reflects the provisions of this Ordinance, such form to be recommended by the City's bond counsel and approved by the Mayor, such approval to be evidenced by his execution thereof. LKL-10/24/88-262AA-2738 -14- Section 15. BONDS NOT DEBT OF CITY. The Bonds shall not be or constitute general indebtedness of the City within the meaning of any constitutional or statutory provision or limitation, but shall be payable solely from and secured by a prior lien upon and pledge of the Net Revenues and Available Impact Fees as herein provided. No Bondholder shall ever have the right to compel the exercise of the ad valorem taxing power of the City or taxation in any form of any real property therein to pay such bonds or the interest thereon or be entitled to payment of such principal and interest from any other funds of the City except from the Net Revenues and Available Impact Fees in the manner provided herein. Section 16. NET REVENUES AND AVAILABLE IMPACT FEES PLEDGED. Until payment has been provided for as herein permitted, the payment of the principal of and interest on the Bonds shall be secured forthwith equally and ratably by an irrevocable lien on the Net Revenues and Available Impact Fees prior and superior to all other liens or encumbrances on such Net Revenues and Available Impact Fees and the City does hereby irrevocably pledge such Net Revenues and Available Impact Fees to the payment of the principal of and interest on the Bonds, the reserves therefor, and for all other required payments under this Ordinance. Section 17. COVENANTS OF THE CITY. Until all principal of and interest on the Bonds shall have been paid or provided for as herein permitted, the City covenants with the Bondholders as follows: A. REVENUE FUND. The entire Gross Revenues shall upon receipt thereof be deposited in the "Oak Harbor District Water and Sewer System Revenue Fund" (hereinafter called "Revenue Fund"), hereby created and established. Such Revenue Fund shall constitute a trust fund for the purposes herein provided and shall be kept separate LKL-10/24/88-262AA-2738 -15- and distinct from all other funds of the City and used only for the purposes and in the manner herein provided. B. DISPOSITION OF REVENUES. All funds at any time remaining on deposit in the Revenue Fund shall be disposed of on or before the twentieth day of each month, commencing in the month immediately following the delivery of the Initial Bonds, only in the following manner and in the following order of priority: (1) Moneys in the Revenue Fund shall first be used for deposit into a fund to be known as the "Operation and Maintenance Fund", which is hereby established, in such sums as are necessary for the Cost of Operation and Maintenance for the next ensuing month. (2) Funds shall next be deposited into a separate fund, which is hereby created and designated Oak Harbor Water and Sewer District Revenue Bonds Sinking Fund (hereinafter called "Sinking Fund"), in such sums as will be sufficient to pay (a) the monthly portion of all interest becoming due on the Bonds on the next interest payment date; (b) commencing in the first month which is twelve (12) months or six (6) months prior to the first annual or semi-annual maturity date, respectively, of any Serial Bonds, one-twelfth (1/12) or one-sixth (1/6), respectively, of the amount of Serial Bonds which will become due and payable on the next annual or semi-annual principal maturity date, respectively, and (c) one-twelfth (1/12) of the Amortization Installment required to be made on the next annual payment date or one-sixth (1/6) of the Amortization Installment required to be made on the next semi-annual payment date into a "Bond Amortization Account", which is hereby created and established in the Sinking Fund. Such payments shall be credited to a separate special account for each series of Term Bonds outstanding, and if there shall be more than one stated maturity for Term Bonds of a series, then into a separate special account in the Sinking Fund for each such separate maturity of Term LKL-10/24/88-262AA-2738 -16- Bonds. The funds and investments in each such separate account shall be applied to the payment of principal of the Term Bonds of the series or maturity within a series for which it is established. The Amortization Installments may be due either annually or semi- annually, but in any event, the required payments as set forth above shall be made monthly commencing in the first month which is six (6) months or twelve (12) months, as the case may be, prior to the date on which the Amortization Installment is required to be made pursuant to (c) above. Upon the sale of any series of Term Bonds, the City shall by resolution, establish the amounts and maturities of such Amortization Installments for each series, and if there shall be more than one maturity of Term Bonds within a series, the Amortization Installments for the Term Bonds of each maturity. Moneys on deposit in each of the separate special accounts in the Bond Amortization Account shall be used for the open market purchase or the redemption of Term Bonds of the series or maturity of Term Bonds within a series for which such separate special account is established, (3) No Reserve Account shall be established for the Initial Bonds. Upon issuance of any Additional Bonds, moneys remaining in the Revenue Fund shall next be applied by the City to maintain a Reserve Account, which Reserve Account is hereby created and established, in a sum equal to and sufficient to pay the Maximum Bond Service Requirement on all outstanding Additional Bonds becoming due in any ensuing Fiscal Year, all or a portion of which such sum may be initially provided from the proceeds of the sale of the Additional Bonds and/or other moneys of the City. The City shall thereafter deposit into said Reserve Account an amount equal to one-twelfth (1/12) of twenty per cent (20%) of the difference between the amount, if any, so deposited upon the delivery of the Additional Bonds and the amount of the Maximum Bond Service LKL-10/24/88-262AA-2738 -17- Requirement on all outstanding Additional Bonds becoming due in any ensuing Fiscal Year. No further payments shall be required to be made into such Reserve Account when there has been deposited therein and as long as there shall remain on deposit therein a sum equal to the Maximum Bond Service Requirement on all outstanding Additional Bonds becoming due in any ensuing Fiscal Year. Any withdrawals from the Reserve Account shall be subsequently restored from the first moneys available in the Revenue Fund after all required current payments into the Sinking Fund and into the Reserve Account, including all deficiencies for prior payments, have been made in full. Moneys in the Reserve Account shall be used only for the purpose of the payment of maturing principal (including Amortization Installments) of or interest on the Additional Bonds when the moneys in the Sinking Fund are insufficient therefor, and for no other purpose. Upon the issuance by the City of any further Additional Bonds under the terms, limitations and conditions provided in this Ordinance, the payments into the Reserve Account shall be increased so that the amount on deposit therein shall be equal to the Maximum Bond Service Requirement on all Additional Bonds outstanding and to be outstanding. Whenever the amount on deposit in the Reserve Account exceeds the Maximum Bond Service Requirement on all Additional Bonds then outstanding, the excess may be withdrawn and deposited into the Sinking Fund. The City shall not be required to make any further payments into the Sinking Fund or into the Reserve Account when the aggregate amount of moneys in the Sinking Fund and the Reserve Account are at least equal to the aggregate principal amount of Bonds then outstanding, plus the amount of interest then due or thereafter to become due on the Bonds then outstanding. LKL-10/24/88-262AA-2738 -18- Notwithstanding the foregoing provisions, in lieu of the required deposits of Gross Revenues into the Reserve Account, the City may cause to be deposited into the Reserve Account a surety bond or an insurance policy issued by a reputable and recognized insurer for the benefit of the Bondholders in an amount equal to the difference between the Maximum Bond Service Requirement and the sums then on deposit in the Reserve Account, if any, which surety bond or insurance policy shall be payable (upon the giving of notice as required thereunder) on any interest payment date on which a deficiency exists which cannot be cured by funds in any other account held pursuant to this Ordinance and available for such purpose. The insurer providing such surety bond or insurance policy shall be an insurer whose municipal bond insurance policies insuring the payment, when due, of the principal of and interest on municipal bond issues results in such issues being rated in the highest rating category by either Standard & Poor's Corporation or Moody's Investors Service, Inc., or their successors or any insurer who holds the highest policyholder rating accorded insurers by A.M. Best & Co. or any comparable service. If a disbursement is made from a surety bond or an insurance policy provided pursuant to this paragraph, the City shall be obligated to either reinstate the maximum limits of such surety bond or insurance policy immediately following such disbursement or to deposit into the Reserve Account, as herein provided in this paragraph for restoration of withdrawals from the Reserve Account, funds in the amount of the disbursement made under such policy, or a combination of such alternatives. (4) The City shall next apply and deposit the moneys in the Revenue Fund into a special account to be known as the "Renewal and Replacement Fund", which fund is hereby created. The City shall deposit into such Renewal and Replacement Fund an amount equal to one-twelfth (1/12) of ten per centum (10%) of the Net Revenues of the Oak Harbor System for the previous Fiscal Year, provided, that no deposit shall be LKL-10/24/88-262AA-2738 -19- required whenever there shall be on deposit in the Fund at least $250,000. The moneys in said Renewal and Replacement Fund shall be used only for the purpose of paying the cost of the replacement of capital assets of the Oak Harbor System and emergency repairs thereto. Such moneys on deposit in such Fund shall also be used to supplement the Reserve Account if necessary in order to prevent a default in the payment of the principal of and interest on the Bonds. (5) To the extent junior lien bonds are issued and outstanding (which subordinated bonds the City reserves the right to issue), the City shall next apply moneys in the Revenue Fund to the payment of principal of, redemption premium, if any, and interest on such subordinated debt of the City. (6) The balance of any moneys remaining in the Revenue Fund after the above required payments have been made may either be deposited into either the Renewal and Replacement Fund or the Sinking Fund, or may be used for the purchase or redemption of Bonds, or may be used by the City for any lawful purpose of the City. C. INVESTMENT OF FUNDS. The Operation and Maintenance Fund, the Sinking Fund, the Reserve Account, the Renewal and Replacement Fund, the Revenue Fund, the Available Impact Fee Account, and any other special funds herein established and created shall constitute trust funds for the purposes provided herein for such funds. All such funds shall be continuously secured in the same manner as state and municipal deposits are required to be secured by the laws of the State of Florida. Moneys on deposit in any of such funds and accounts may be invested and reinvested in Authorized Invest ments. Investments made with moneys in the Revenue Fund, the Operation and Maintenance Fund, the Sinking Fund (except the Bond Amortization Account therein), and in the Available Impact Fee Account must mature not later than the date that such LKL-10/24/88-262AA-2738 -20- moneys will be needed. Investments made with moneys in the accounts in the Bond Amortization Account, in the Reserve Account and in the Renewal and Replacement Fund must mature, in the case of the accounts in the Bond Amortization Account not later than the stated date of maturity of the Term Bonds to be retired from the sub-accounts in the Bond Amortization Account from which the investment is made, in the case of the Reserve Account not later than the final maturity of any Bonds then outstanding; and in the case of the Renewal and Replacement Fund, not later than such date as shall be determined by the City. Any and all income received by the City from all such investments shall be deposited into the Revenue Fund, except however, that investment income earned in the Bond Amortization Account may be retained thereon or deposited into the Sinking Fund and used to pay maturing principal of and interest on the Bonds, at the option of the City. The cash required to be accounted for in each of the foregoing funds and accounts established herein may be deposited in a single bank account, and funds allocated to the various accounts established herein may be invested in a common investment pool, provided that adequate accounting records are maintained to reflect and control the restricted allocation of the cash on deposit therein and such investments for the various purposes of such funds and accounts as herein provided. The designation and establishment of the various funds in and by this Ordinance shall not be construed to require the establishment of any completely independent, self-balancing funds as such term is commonly defined and used in governmental accounting, but rather is intended solely to constitute an earmarking of certain revenues and assets of the Oak Harbor System for certain purposes and to establish certain priorities for application of such revenues and assets as herein provided. LKL-10/24/88-262AA-2738 -21- D. OPERATION AND MAINTENANCE. The City will maintain the Oak Harbor System and all parts thereof in good condition and will operate the same in an efficient and economical manner, making such expenditures for equipment and for renewals, repairs and replacements as may be proper for the economical operation and maintenance thereof. E. RATE ORDINANCE. The City has enacted or will enact a rate ordinance and thereby will fix, establish and maintain such rates and will collect such fees, rentals and other charges for the services and facilities of the Oak Harbor System and revise the same from time to time whenever necessary, as will always provide Gross Revenues in each Fiscal Year sufficient to pay the Cost of Operation and Maintenance of the Oak Harbor System in such Fiscal Year, one hundred ten per centum (110%) of the Bond Service Requirement becoming due in such Fiscal Year on the outstanding Bonds, plus one hundred per centum (100%) of all reserve and other payments required to be made pursuant to this Ordinance. Such rates, fees, rentals and other charges shall not be reduced so as to be insufficient to provide Gross Revenues for such purposes. However, nothing in this Ordinance shall ever require the City to raise rates or charges for utility services provided to areas outside Oak Harbor District. F. BOOKS AND RECORDS. The City shall keep books and records of the Oak Harbor System, which such books and records shall be kept separate and apart from all other books, records and accounts of the City, and Bondholders shall have the right at all reasonable times to inspect all records, accounts and data of the City relating thereto. G. ANNUAL AUDIT. The City shall also, at least once a year, cause the books, records and accounts relating to the Oak Harbor System to be properly audited by a recognized independent firm of certified public accountants and shall make generally available the report of such audits to any Bondholder. LKL-10/24/88-262AA-2738 -22- H. NO MORTGAGE OR SALE OF THE OAK HARBOR SYSTEM. The City irrevocably covenants, binds and obligates itself not to sell, lease, encumber or in any manner dispose of the Oak Harbor System as a whole until all of the Bonds shall have been paid in full as to both principal and interest, or payment shall have been duly provided for under this Ordinance. The foregoing provision notwithstanding, the City may sell or dispose of, for fair market value, any properties or parts of the Oak Harbor System which the Consulting Engineer shall certify in writing are not necessary for the continued operation of the Oak Harbor System and that the sale or disposal of which will not adversely affect the Gross Revenues to be derived from the Oak Harbor System to such an extent that the City will fail to comply with the covenants contained herein, including Section 17(E) hereof. The proceeds derived from any sale or disposal of any properties or parts of the Oak Harbor System as provided for in the above paragraph shall, in the discretion of the City, be (1) deposited in the Renewal and Replacement Fund and used exclusively for the purpose of paying the cost of extensions, enlargements or additions to, or the replacement of capital assets of the Oak Harbor System and for unusual or extraordinary repairs thereto, or for the construction or acquisition of additions, extensions and improvements to the Oak Harbor System, or (2) for the purchase or retirement of the Bonds then outstanding. However, if the Consulting Engineer certifies that proceeds are necessary for the purposes stated in part (1) above, such proceeds shall remain in the Renewal and Replacement Fund until such certified requirements are satisfied, and the proceeds shall not be used for any other purpose allowed by this Ordinance. I. INSURANCE. The City will make adequate provision to maintain fire and windstorm insurance on all buildings and structures and properties of the Oak Harbor System which are subject to loss through fire or windstorm, public liability insurance, and LKL-10/24/88-262AA-2738 -23- other insurance of such types and in such amounts as are normally carried in the operation of similar public and private utility systems within the State of Florida. Any such insurance shall be placed with nationally recognized and reputable insurors or under State approved and authorized self insurance programs or any combination of both and shall be carried for the benefit of the Bondholders. All monies received for losses under any such insurance, except public liability, are hereby pledged by the City as security for the Bonds, until and unless such proceeds are used to remedy the loss or damage for which such proceeds are received, either by repairing the property damaged or replacing the property destroyed within ninety (90) days from the receipt of such proceeds. J. NO FREE SERVICE. The City will not render or cause to be rendered any free services of any nature, except for public emergency, by its Oak Harbor System, nor will any preferential rates be established for users of the same class. This covenant shall not prevent individual contracts with other governmental entities for the wholesale delivery of services of the Oak Harbor System. The City, including its departments, agencies and instrumentalities, shall avail itself of the facilities or services provided by the Oak Harbor System for services within the Oak Harbor System or any part thereof, and the same rates, fees or charges applicable to other customers receiving like services under similar circumstances shall be charged to the City and any such department, agency or instrumentality. Such charges shall be paid as they accrue, and the City shall transfer from its general funds sufficient sums to pay such charges. The revenues so received shall be deemed to be Gross Revenues derived from the operation of the Oak Harbor System and shall be deposited and accounted for in the same manner as other Gross Revenues derived from such operation of the Oak Harbor System. K. MANDATORY CONNECTION. To the full extent permitted by law the City will adopt and keep in force and effect an ordinance requiring that all improved LKL-10/24/88-262AA-2738 -24- premises with respect to which water or sewer services from the Oak Harbor System are available shall connect such premises to the Oak Harbor System and shall obtain available water and sewer services only from the Oak Harbor System. L. ENFORCEMENT OF COLLECTIONS. The City will diligently enforce and collect all fees, rentals or other charges for the services and facilities of the Oak Harbor System and take all steps, actions and proceedings for the enforcement and collection of such fees, rentals or other charges which shall become delinquent to the full extent permitted or authorized by the Act and by the laws of the State of Florida. The City will, under reasonable rules and regulations, shut off and discontinue the supplying of the water service and the sewer service of the Oak Harbor System for the non-payment of fees, rentals or other charges for said water service or said sewer service, or either of them, and will not restore said water service or sewer service, or either of them, until all delinquent charges for both water service and sewer service, together with interest and reasonable penalties, have been paid in full. M. REMEDIES. (1) It shall be an "Event of Default" under this Ordinance if any of the following shall occur: (a) As to the Initial Bonds, if Net_Revenues or Available Impact Fees are available at such time under the terms of this Ordinance, failure by the City to pay any portion of principal of or interest on the Initial Bonds, when due, from such Net Revenues or Available Impact Fees; (b) As to the Initial Bonds, if Net Revenues or Available Impact Fees are not available to pay any portion of principal of or interest on the Bonds when due, failure by the City to pay such unpaid portion of principal of or interest on the Initial Bonds on the earlier of: (i) the first date that sufficient Net Revenues or Available Impact Fees are available for such purpose under the terms of this Ordinance, or (ii) one LKL-10/24/88-262AA-2738 -25- year after the last stated date of maturity of any of the principal amount of the Initial Bonds; (c) As to all Bonds except the Initial Bonds, failure to pay any portion of the principal of or interest on the Bonds (other than the Initial Bonds) when due; (d) Failure by the City to comply with any of the covenants and terms of this Ordinance made for the benefit of the Bondholders (other than as described in paragraphs (a), (b) or (c) above) for a period of 60 days after written notice of such failure shall have been given to the City by one or more of the Bondholders; (e) There shall occur the filing by the City of a voluntary petition in bankruptcy, or the commission by the City of any act of bankruptcy, or the adjudication of the City as a bankrupcy, or the assignment by the City for the benefit of its creditors, or the entry by the City into an agreement of composition with its creditors, or the approval by a court of competent jurisdiction of a petition applicable to the City in any proceeding for its reorganization, instituted under the provisions of the Federal Bankruptcy Act, as amended, or any similar act in any jurisdiction which may now be in effect or hereinafter amended; or (f) An order or decree shall be entered, with the consent or acquiescence of the City, appointing a receiver or receivers of the Oak Harbor System, or any part thereof, or of the rents, fees, charges or other revenues therefrom, or if such order or decree, having been entered without the consent of acquiescence of the City, shall not be vacated or discharged or stayed within 90 days after the entry thereof. (2) Upon the occurrence of any Event of Default, any Bondholder, or any trustee acting for the Bondholders, may, either at law or in equity, by suit, action, mandamus or other proceedings in any court of competent jurisdiction, protect and enforce any and all rights, including the right to the appointment of a receiver, existing LKL-10/24/88-262AA-2738 -26- under the laws of the State of Florida, or granted and contained herein, and may enforce and compel the performance of all duties herein required or by any applicable statutes to be performed by the City or by any officer thereof. (3) Nothing herein, however, shall be construed to grant to any Bondholders any lien on any real property of the City. N. CONSULTING ENGINEERS. The City will retain an independent consulting engineer or engineering firm having a favorable reputation for skill and experience for the design, construction and operation of systems of comparable size and character as the Oak Harbor System, for the purpose of providing the City competent engineering counsel in connection with the making of the capital improvements. The City may, however, employ additional engineers at any time with • relation to specific engineering and operation problems arising in connection with the Oak Harbor System. O. CITY MANAGER REPORTS. On an annual basis, within 45 days of the receipt of the annual audit of the Oak Harbor System provided for above, the City shall cause to be prepared by the City Manager a report or survey of the Oak Harbor District System with respect to the management of the properties thereof, the sufficiency of the rates and charges for services, the proper maintenance of the properties of the Oak Harbor System and the necessity for capital improvements and recommendations therefor. Such a report or survey shall also show any failure of the City to perform or comply with the covenants herein contained, including those contained in subsection I above. In the event that such annual report reflects that the rates and charges for services are insufficient to protect the rights of the Bondholders, then the City shall take such steps as are required by law to raise the rates and charges for services pursuant to Section 17E hereof. LKL-10/24/88-262AA-2738 -27- P. NO COMPETING SYSTEM. To the full extent permitted by law the City will not grant or cause, consent to, or allow the granting of any franchise or permit to any person, firm, corporation or body or agency or instrumentality whatsoever for the furnishing of water or sanitary sewerage services to or within the service area of the Oak Harbor System, if determined by the Consulting Engineers: (i) to be materially competitive with the Oak Harbor System, and (ii) to adversely affect the Net Revenues or Available Impact Fees derived from the operation thereof. Q. ISSUANCE OF OTHER OBLIGATIONS. The City will not issue any other obligations, except under the conditions and in the manner provided herein, payable from the Net Revenues or Available Impact Fees, nor voluntarily create or cause to be created any debt, lien, pledge, assignment, encumbrance or other charge having priority to or being on a parity with the lien of the Initial Bonds and the interest thereon upon the Net Revenues or Available Impact Fees. Any other obligations issued by the City in addition to the Initial Bonds or Additional Bonds provided for in subsection R below, payable from the Net Revenues or Available Impact Fees shall contain an express statement that such obligations are junior and subordinate in all respects to the Bonds as to lien on and source and security for payment from the Net Revenues and Available Impact Fees. R. ISSUANCE OF ADDITIONAL BONDS. Additional Bonds, payable on a parity from the Net Revenues and Available Impact Fees with the Initial Bonds, shall be issued only for the purposes of refunding a part of the outstanding Bonds or financing the cost of a Project. Additional Bonds, other than for refunding purposes, shall be issued only upon compliance with all of the following conditions: (1) There shall have been obtained and filed with the City Clerk of the City a certificate of a qualified and recognized firm of independent certified public LKL-10/24/88-262AA-2738 -28- accountants stating: (a) that the books and records of the City relative to the System have been audited by such firm; (b) the amount of the Net Revenues derived for the Fiscal Year preceding the date of issuance of the proposed Additional Bonds or for any 12 consecutive months during the 18 months immediately preceding the date of the issuance of the Additional Bonds with respect to which such certificate is made, adjusted as herein below provided; (c) that the aggregate amount of such Net Revenues, as adjusted, for the period for which such Net Revenues are being certified is equal to not less than 125% of the Maximum Bond Service Requirement becoming due in any Fiscal Year thereafter on (i) all Bonds then outstanding, and (ii) on the Additional Bonds with respect to which such certificate is made. (2) Upon recommendation of the Consulting Engineers, the Net Revenues certified pursuant to (b) in the previous paragraph may be adjusted for purposes of this Subsection by including: (a) 100% of the additional Net Revenues which in the opinion of the Consulting Engineer would have been derived by the City from rate increases adopted before the Additional Bonds are issued, if such rate increases had been implemented before the commencement of the period for which such Net Revenues are being certified, and (b) 100% of the additional Net Revenues estimated by the Consulting Engineer to be derived during the first full twelve month period after the date of placing in service the Project financed with the proceeds of the Additional Bonds with respect to which such certificate is made. The adjustments described in Section 17(R)(2)(b) may only be made if the Net Revenues as adjusted under Section 17(R)(2)(a) for the period for which such Net Revenues are being certified equals at least 1.00 times the Maximum Bond Service Requirement becoming due in any Fiscal Year thereafter on (i) all Bonds then outstanding, and (ii) on the Additional Bonds with respect to which such certificate is made. LKL-10/24/88-262AA-2738 -29- (3) Each ordinance or resolution authorizing the issuance of Additional Bonds will recite that all of the covenants herein contained will be applicable to such Additional Bonds. (4) The City shall not be in default in performing any of the covenants and obligations assumed hereunder, and all payments herein required to have been made into the accounts and funds, as provided hereunder, shall have been made to the full extent required. S. MAINTENANCE OF THE SYSTEM. The City will acquire the Utility System simultaneously with issuance of the Initial Bonds. Thereafter, the City will maintain the Oak Harbor System in good condition and continuously operate the same in an efficient manner and at a reasonable cost. T. IMPACT FEES. (1) The City shall deposit all Impact Fees, promptly upon receipt, into the "Oak Harbor District Water and Sewer System Impact Fee Fund (hereinafter called the "Impact Fee Fund"), hereby created and established. The Impact Fee Fund shall constitute a trust fund for the purposes herein provided and shall be kept separate and distinct from all other funds of the City and used only for the purposes and in the manner herein provided. That portion of the Impact Fees constituting Available Impact Fees shall be held in a separate account in the Impact Fee Fund, designated the "Available Impact Fee Account," and the balance of the Impact Fees shall be held in a separate account in the Impact Fee Fund, designated the "General Impact Fee Account" (2) The moneys in the General Impact Fee Account shall be invested, held, and used, without restriction under this Ordinance, in accordance with law and the direction from time to time of the City Commission. LKL-10/24/88-262AA-2738 -30- (3) The moneys in the Available Impact Fee Account shall be held in such Account upon receipt until one day after the latest principal maturity date on any Bonds outstanding, coming due in each Fiscal Year, and, during such period, shall be used only to make the payments described in Section 17B (2) or (3) or (5) of this Ordinance to the extent that Net Revenues are insufficient for such purpose. After such period, the balance, if any, collected during such period and remaining in the Available Impact Fee Account may, at the option of the City, be held therein, be used to reimburse the City for payments made from other sources under Section 17B (2), (3) or (5) of this Ordinance which could have been made from Available Impact Fees, or be transferred to the General Impact Fee Account. Section 18. ARBITRAGE. The City at all times while the Bonds are outstanding will comply with the requirements of Section 148 of the Internal Revenue Code of 1986, as amended, and any valid and applicable rules and regulations promulgated thereunder. Section 19. MODIFICATION OR AMENDMENT. No material modifi- cation or amendment of this Ordinance or of any ordinance or resolution amendatory hereof or supplemental hereto may be made without the consent in writing of (i) the insuror under any insurance policy of the City then in force which insures against non- payment of principal of and redemption premium, if applicable, and interest on, the Bonds, and (ii) the Registered Owners of two-thirds or more in the principal amount of the Bonds then outstanding; providing, however, that no modification or amendment shall permit a change in the maturity of the Bonds or reduction in the rate of interest thereon or in the amount of the principal obligation thereof or affecting the promise of the City to pay the principal of and interest on the Bonds as the same shall become due from the Net Revenues or Available Impact Fees or reduce the percentage of Registered Owners LKL-10/24/88-262AA-2738 -31- required to consent to any material modification or amendment hereof without the consent in writing of any insuror and of all Registered Owners. Section 20. DEFEASANCE AND SUBROGATION. (a) If, at any time, the City shall have paid, or shall have made provision for payment of, the principal, interest and redemption premiums, if any, with respect to the Bonds, then, and in that event, the pledge of and lien on the Net Revenues and Available Impact Fees and all covenants herein in favor of the Bondholders shall be no longer in effect. For purposes of the preceding sentence, deposit of Federal Securities or bank certificates of deposit fully secured as to principal and interest by Federal Securities (or deposit of any other securities or investments which may be authorized by law from time to time and sufficient under such law to effect such a defeasance) in irrevocable trust with a banking institution or trust company, for the sole benefit of the Bondholders, in respect to which such Federal Securities or certificates of deposit, the principal and interest received will be sufficient to make timely payment of the principal of, interest on, redemption premiums, if any, expenses and any other obligations of the City incurred with respect to the outstanding Bonds, shall be considered "provision for payment". Nothing herein shall be deemed to require the City to call any of the outstanding Bonds for redemption prior to maturity pursuant to any applicable optional redemption provisions, or to impair the discretion of the City in determining whether to exercise any such option for early redemption. (b) In the event any of the principal and redemption premium, if applicable, and interest due on the Bonds shall be paid by an insuror pursuant to an insurance policy which insures against non-payment thereof, the pledge of the Net Revenues and Available Impact Fees and all covenants, agreements and other obligations of the City to the Registered Owners to whom or for the benefit of whom the insuror has made such LKL-10/24/88-262AA-2738 -32- payments, shall continue to exist and the insuror shall be subrogated to the rights of such Registered Owners to the full extent of such payments. Section 21. SEVERABILITY OF INVALID PROVISIONS. If any one or more of the covenants, agreements or provisions herein contained shall be held contrary to any express provisions of law or contrary to the policy of express law, though not expressly prohibited, or against public policy, or shall for any reason whatsoever be held invalid, then such covenants, agreements or provisions shall be null and void and shall be deemed separable from the remaining covenants, agreements or provisions and shall in no way affect the validity of any of the other provisions hereof or of the Bonds issued hereunder. Section 22. CAPITAL FACILITIES ACQUISITION CHARGES IMPOSED. There is hereby imposed upon each customer of the Oak Harbor System as of the date of acquisition of the Assets a Capital Facilities Acquisition Charge of $1,250, payable in five equal annual installments of $250 each, which shall be collected at the same time as other rates, fees and charges for use of the Oak Harbor System on a monthly or quarterly basis, commencing on the date of acquisition of the Assets. LKL-11/14/88-262AA-2738 -33- Section 22. Effective Date. This ordinance shall become effective in the manner required by law. Passed on First Reading October 24 , 1988. Passed on Final Reading December 12 , , 1988. Approved as to form and correctness: City Attorney AL AL i ► . . ayo Pres �Q'f icer up Attest: --7) Cam-,t) City Clerk il LKL-10/24/88-262AA-2738 -34-