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HomeMy WebLinkAboutOrdinance 5277 ORDINANCE NO. 5277 AN ORDINANCE AUTHORIZING THE ISSUANCE AND SALE OF THE CITY'S SALES AND USE TAX CAPITAL IMPROVEMENT BONDS, SERIES 2009, FOR THE PURPOSE OF FINANCING A PORTION OF THE COSTS OF CERTAIN STREET AND TRAIL SYSTEM IMPROVEMENTS; AUTHORIZING THE EXECUTION AND DELIVERY OF A SECOND SUPPLEMENTAL TRUST INDENTURE PURSUANT TO WHICH THE BONDS WILL BE ISSUED AND SECURED; AUTHORIZING THE EXECUTION AND DELIVERY OF AN OFFICIAL STATEMENT PURSUANT TO WHICH THE BONDS WILL BE OFFERED; AUTHORIZING THE EXECUTION AND DELIVERY OF A BOND PURCHASE AGREEMENT PROVIDING FOR THE SALE OF THE BONDS; AUTHORIZING THE EXECUTION AND DELIVERY OF A CONTINUING DISCLOSURE AGREEMENT; AND PRESCRIBING OTHER MATTERS RELATING THERETO WHEREAS, the City Council of the City of Fayetteville, Arkansas (the "City") has previously determined that there is a great need for a source of revenue to finance the costs of various street and trail system improvements within the City (the "2009 Project"); and WHEREAS, the City is authorized and empowered under the provisions of the Constitution and laws of the State of Arkansas, including particularly Amendment 62 to the Constitution of the State of Arkansas ("Amendment 62") and Arkansas Code Annotated ( 1998 Repl. & 2005 Supp.) Sections 14- 164-301 et seg. (as from time to time amended, the "Local Government Bond Act"), to issue and sell its capital improvement bonds to finance the costs of various capital improvements such as those comprising the 2009 Project, which capital improvement bonds may be secured by and payable from the receipts of the special city-wide sales and use tax authorized by the Local Government Bond Act; and Page 2 Ordinance No. 5277 WHEREAS, pursuant to the provisions of Ordinance No. 4891 of the City, adopted and approved on June 20, 2006 (the "Election Ordinance"), there was submitted to the qualified electors of the City four questions regarding the issuance of an aggregate of not to exceed $ 1 10,000,000 in principal amount of capital improvement bonds pursuant to Amendment 62 and the Local Government Bond Act to finance the capital improvements described in the Election Ordinance, said bonds to be secured by a pledge of and lien upon (i) all of the receipts of a special city-wide sales and use tax levied at the rate of one-quarter of one percent (0.25%) pursuant to the Local Government Bond Act (the "0.25% Sales and Use Tax") and (ii) all of the receipts of a special city-wide sales and use tax levied at the rate of three-quarters of one percent (0.75%) pursuant to the Local Government Bond Act (the "0.75% Sales and Use Tax"); and WHEREAS, at a special election held September 12, 2006, a majority of the qualified electors of the City voting on the questions approved the issuance of capital improvement bonds in the principal amounts and for each of the specific purposes set forth on the ballot (and the corresponding levy of the 0.25% Sales and Use Tax and the 0.75% Sales and Use Tax, and the pledge of the receipts thereof to the payment of the capital improvement bonds); and WHEREAS, as authorized under the provisions of Amendment 62 and the Local Government Bond Act and as approved by the qualified electors of the City, the City has now determined to issue and sell its Sales and Use Tax Capital Improvement Bonds, Series 2009, in the aggregate principal amount of not to exceed $ 11 ,250,000 (the "Bonds"), in order to provide for the funding of the 2009 Project; and WHEREAS, as authorized by the provisions of the Election Ordinance, the City has previously made arrangements for the sale of the Bonds to Stephens Inc., Fayetteville, Arkansas (the "Underwriter"), pursuant to the terns of a Bond Purchase Agreement between the City and the Underwriter (the "Bond Purchase Agreement") in substantially the form presented to and before this meeting; NOW, THEREFORE BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF FAYETTEVILLE, ARKANSAS: Section 1 . Under the authority of the Constitution and laws of the State of Arkansas, including particularly Amendment 62 to the Constitution of the State of Arkansas and the Local Government Bond Act, there is hereby authorized the issuance of bonds of the City to be designated as "Sales and Use Tax Capital Improvement Bonds, Series 2009" (the `Bonds"). The Bonds shall be issued in the original aggregate principal amount of not to exceed Eleven Million Two Hundred Fifty Thousand Dollars ($ 11 ,250,000) and shall mature not later than November 1 , 2023, in the principal amounts and bearing interest at the rates specified in the Bond Purchase Agreement. $9,950,000 aggregate principal amount of the Bonds hereby authorized shall be deemed to apply to the Street Project described in Question 3 of the ballot and $ 1 ,300,000 aggregate principal amount of the Bonds hereby authorized shall be deemed to apply to the Trail Project described in Question 4 of the ballot. Page 3 Ordinance No. 5277 The average yield on the Bonds as a whole shall not exceed 4.75% per annum, and the yield on no single Bond shall exceed 5 .25%. The proceeds of the Bonds will be utilized to finance the costs of the 2009 Project, to establish a debt service reserve for the Bonds or to purchase a surety bond for reserve purposes, to pay a premium for bond insurance, if deemed economically beneficial, and to pay printing, underwriting, legal and other expenses incidental to the issuance of the Bonds. The Bonds shall be issued in the forms and denominations, shall be dated, shall be numbered, shall mature, shall be subject to redemption prior to maturity, and shall contain such other terms, covenants and conditions, all as set forth in the Second Supplemental Trust Indenture submitted to this meeting. The Mayor is hereby authorized and directed to execute and deliver the Bonds in one or more series, each series to be in substantially the form thereof contained in the Second Supplemental Trust Indenture submitted to this meeting, and the City Clerk is hereby authorized and directed to execute and deliver the Bonds and to affix the seal of the City thereto, and the Mayor and City Clerk are hereby authorized and directed to cause the Bonds to be accepted and authenticated by the Trustee. The Mayor is hereby authorized to confer with the Trustee, the Underwriter and Kutak Rock LLP, Little Rock, Arkansas ("Bond Counsel"), in order to complete the Bonds in substantially the form contained in the Second Supplemental Trust Indenture submitted to this meeting, with such changes as shall be approved by such persons executing the Bonds, their execution to constitute conclusive evidence of such approval . Section 2. In order to pay the principal of and interest on the Bonds as they mature or are called for redemption prior to maturity, there is hereby pledged all of the receipts of the 0.25% Sales and Use Tax and the 0.75% Sales and Use Tax levied by the Election Ordinance. Such pledge securing the Bonds shall be made on a parity basis with the existing pledge of such receipts in favor of the City's $50,000,000 Sales and Use Tax Capital Improvement Bonds, Series 2006A (the "Series 2006A Bonds"), and the City's $ 14,340,000 Sales and Use Tax Capital Improvement Bonds, Series 2007 (the "Series 2007 Bonds"). The levy and collection of the 0.25% Sales and Use Tax and the 0.75% Sales and Use Tax shall commence on the dates provided in the Local Government Bond Act and shall continue until such time as the Series 2006A Bonds, the Series 2007 Bonds and the Bonds are no longer outstanding or sufficient funds are on deposit with the Trustee to redeem the Series 2006A Bonds, the Series 2007 Bonds and the Bonds in full. The City covenants and agrees that all receipts from the 0.25% Sales and Use Tax and the 0.75% Sales and Use Tax will be accounted for separately as special funds on the books of the City, and receipts of said 0.25% Sales and Use Tax and 0.75% Sales and Use Tax will be deposited and will be used solely as provided in the Trust Indenture (as defined below). Section 3. To prescribe the terms and conditions upon which the Bonds are to be executed, authenticated, issued, accepted, held and secured, the Mayor is hereby authorized and directed to execute and acknowledge a Second Supplemental Trust Indenture (the "Trust Indenture"), by and between the City and Simmons First Trust Company, N.A., Pine Bluff, Arkansas (the "Trustee"), and the City Clerk is hereby authorized and directed to execute and acknowledge the Second Supplemental Trust Indenture and to affix the seal of the City thereto, 3 Page 4 Ordinance No. 5277 and . the Mayor and the City Clerk are hereby authorized and directed to cause the Second Supplemental Trust Indenture to be accepted, executed and acknowledged by the Trustee. The Second Supplemental Trust Indenture supplements and amends a Trust Indenture dated as of November 1 , 2006, as previously amended by a First Supplemental Trust Indenture dated as of October 1 , 2007, each by and between the City and the Trustee (the "Original Indenture," and collectively with the Second Supplemental Trust Indenture, the "Trust Indenture"). The Second Supplemental Trust Indenture is hereby approved in substantially the form submitted to this meeting, including, without limitation, the provisions thereof pertaining to the pledge of 0.25% Sales and Use Tax receipts and 0.75% Sales and Use Tax receipts and the terms of the Bonds. The Mayor is hereby authorized to confer with the Trustee, the Underwriter and Bond Counsel in order to complete the Second Supplemental Trust Indenture in substantially the form submitted to this meeting, with such changes as shall be approved by such persons executing the Second Supplemental Trust Indenture, their execution to constitute conclusive evidence of such approval. (Advice is given that a copy of the Second Supplemental Trust Indenture in substantially the form authorized to be executed is on file with the City Clerk and is available for inspection by any interested person.) Section 4. There is hereby authorized and approved a Preliminary Official Statement of the City, including the cover page and appendices attached thereto, relating to the Bonds. The Preliminary Official Statement is hereby "deemed final" by the City within the meaning of U.S. Securities and Exchange Commission Rule 15c2- 12. The distribution of the Preliminary Official Statement is hereby approved. The Preliminary Official Statement, as amended to conform to the terms of the Bond Purchase Agreement, including Exhibit A thereto, and with such other changes and amendments as are mutually agreed to by the City and the Underwriter, is herein referred to as the "Official Statement," and the Mayor is hereby authorized to execute the Official Statement for and on behalf of the City. The Official Statement is hereby approved in substantially the form of the Preliminary Official Statement submitted to this meeting, and the Mayor is hereby authorized to confer with the Trustee, the Underwriter and Bond Counsel in order to complete the Official Statement in substantially the form of the Preliminary Official Statement submitted to this meeting, with such changes as shall be approved by such persons, the Mayor' s execution to constitute conclusive evidence of such approval. (Advice is given that a copy of the Preliminary Official Statement is on file with the City Clerk and is available for inspection by any interested person.) Section 5. In order to prescribe the terms and conditions upon which the Bonds are to be sold to the Underwriter, the Mayor is hereby authorized and directed to execute a Bond Purchase Agreement on behalf of the City, to be dated as of the date of its execution (the "Bond Purchase Agreement"), by and between the City and the Underwriter, and the Bond Purchase Agreement is hereby approved in substantially the form submitted to this meeting, and the Mayor is hereby authorized to confer with the Underwriter and Bond Counsel in order to 4 Page 5 Ordinance No. 5277 complete the Bond Purchase Agreement in substantially the form submitted to this meeting, with such changes as shall be approved by such persons executing the Bond Purchase Agreement, their execution to constitute conclusive evidence of such approval. (Advice is given that a copy of the Bond Purchase Agreement in substantially the form authorized to be executed is on file with the City Clerk and is available for inspection by any interested person.) Section 6. In order to provide for continuing disclosure of certain financial and operating information with respect to the 0.25% Sales and Use Tax, the 0.75% Sales and Use Tax and the City in compliance with the provisions of Rule 15c2- 12 of the U. S. Securities and Exchange Commission, the Mayor is hereby authorized and directed to execute a Continuing Disclosure Agreement to be dated as of the date of its execution (the "Continuing Disclosure Agreement"), by and between the City and the Trustee, and the Mayor is hereby authorized and directed to cause the Continuing Disclosure Agreement to be executed by the Trustee. The Continuing Disclosure Agreement is hereby approved in substantially the form submitted to this meeting, and the Mayor is hereby authorized to confer with the Trustee; the Underwriter and Bond Counsel in order to complete the Continuing Disclosure Agreement in substantially the form submitted to this meeting, with such changes as shall be approved by such persons executing the Continuing Disclosure Agreement, their execution to constitute conclusive evidence of such approval . (Advice is given that a copy of the Continuing Disclosure Agreement in substantially the form authorized to be executed is on file with the City Clerk and is available for inspection by any interested person.) Section 7. In order to secure lower interest rates on the Bonds, the Underwriter has proposed that the City consider the purchase of a policy of bond insurance with a portion of the proceeds of the Bonds, which policy would guarantee the payment of the principal of and interest on the Bonds when due. If deemed economically advantageous by the Mayor, upon the advice of the Underwriter, the Mayor is hereby authorized to execute an insurance commitment and to do any and all things necessary to accomplish the delivery of a bond insurance policy with respect to the Bonds. Section 8. The Mayor and City Clerk, for and on behalf of the City, are hereby authorized and directed to do any and all things necessary to effect the issuance, sale, execution and delivery of the Bonds and to effect the execution and delivery of the Second Supplemental Trust Indenture, the Bond Purchase Agreement, the Official Statement, the Continuing Disclosure Agreement and a Tax Regulatory Agreement relating to the tax exemption of interest on the Bonds, and to perform all of the obligations of the City under and pursuant thereto. The Mayor and the City Clerk are further authorized and directed, for and on behalf of the City, to execute all papers, documents, certificates and other instruments that may be required for the carrying out of such authority or to evidence the exercise thereof. 5 Page 6 Ordinance No. 5277 Section 9. As previously provided in the Election Ordinance, Kutak Rock LLP, Little Rock, Arkansas, is hereby confirmed as Bond Counsel on behalf of the City in connection with the issuance and sale of the Bonds. Section 10. The Bonds are hereby designated as "qualified tax-exempt obligations" within the meaning of Section 265(b)(3) of the Internal Revenue Code of 1986, as amended (the "Code"). The City hereby represents and covenants that the aggregate principal amount of its tax-exempt obligations (excluding "private activity bonds" within the meaning of Section 141 of the Code), including those of its subordinate entities, issued in calendar year 2009 will not exceed $30,000,000. Section 11 . The provisions of this Ordinance are hereby declared to be severable, and if any section, phrase or provision shall for any reason be declared to be illegal or invalid, such declaration shall not affect the validity of the remainder of the sections, phrases or provisions of this Ordinance. Section 12. All ordinances, resolutions and parts thereof in conflict herewith are hereby repealed to the extent of such conflict. PASSED and APPROVED this 6'h day of October, 2009. APPROVED: ATTEST: By. By: AAIW� CA 1 NELD J AN, Mayor SONDRA E. SMITH, City Clerk/Treasurer TRS , G $ 6X006 T Y was -a ; FAYETTEVILLE ; �za a r9RKANSPC J, %y�V G City of Fayetteville Staff Review Form j, City Council Agenda Items and Contracts, Leases or Agreements OctoberY2009 City Council Meeting Date Agenda Items Only Paul A. Becker Finance Director Finance & Internal Services Submitted By Division Department Action Required: This is a request for approval of a bond ordinance to issue sales tax bonds in an amount not to exceed $11 ,250,000.$9,950,000 of these bonds would be for the Street Project and $1 ,300,000 would be for the Trails Project.These bonds were authorized pursuant to Ordinance No. 4891 adopted on June 20,2006 which was approved by the voters at a special election held on September 12,2006. N/A $ Cost of this request Category / Project Budget Program Category / Project Name Account Number Funds Used to Date Program / Project Category Name Project Number Remaining Balance Fund Name Budgeted Item = Budget Adjustment Attached kP,,,,J Q 1I - zmq Previous Ordinance or Resolution # Depart t Director Date Original Contrail Date: Original Contract Number: City Attorney Date Finance and Internal Services Director Date Received in City t1111,1013Clerk's Office I/L Ay� 9-/9 09 C f f St ff Date EN EREO Received in LZ Mayor's Office Y�D M yor Date Comments: Revised January 15, 2009 TayeTLeville ARKANSAS THE CITY OFFAYE7TEVILLE, ARKANSAS DEPARTMENTAL CORRESPONDENCE To: Mayor Lioneld Jordan and Fayetteville City Council From: Paul Becker, Finance Director Date: September 17, 2009 Subject: Issuance of Sales Tax Bonds in the amount of $11 ,250,000 Recommendation Staff recommends approval of an ordinance requesting the council to approve the issuance of $ 11 ,250,000 worth of sales tax bonds for the Street and Trails Programs. Discussion On September 12, 2006 the voters of Fayetteville approved the issuance of $ 110,000,000 worth of sales tax bonds for the following projects: WSIP - $4290003000 Street Project- $65,900,000 Trails Project- $2, 100,000 Subsequent to that referendum the City issued sales tax bonds in 2006 and 2007 as follows: WSIP- $39,3401000 Street Project-$24,200,000 Trails Project-$ 800,000 This bond issue, if approved, will provide $9,950,000 for the continuation of the Street Bond Project and $ 1 ,300,000 for the Trails Bond Project. This will leave a balance of $31 ,750,000, to be issued (when capacity allows) for the completion of the Street Bond Project. Budget The approval of this ordinance will provide funds for continued work on the Bond Street Project and complete the funding on the Bond Trail Program. FAYETTEVIL4,E THE CITY OF FAYETTEVILLE, ARKANSAS KIT WILLIAMS. CITY ATTORNEY DAVID WHITAKER, ASST. CITY ATTORNEY DEPARTMENTAL CORRESPONDENCE LEGAL DEPARTMENT TO: Lioneld Jordan, Mayor City Council Don Marr, Chief of Staff Paul Becker, Finance Director FROM: Kit Williams, City Attorney DATE: September 18, 2009 RE: 2009 Sales and Use Tax Bond Ordinance The attached Bond Ordinance was prepared by Gordon Wilbourn of Kutak Rock, LLP with advice and comments from City Staff and Dennis Hunt of Stephens, Inc. Although the City had some problems with bond ordinances in the 1980 ' s and 90' s (which cost our citizen' s millions of dollars in attorney' s fees), we have avoided all such problems in this decade with our new team of Gordon and Dennis carefully advising City Staff. The creation of the Bond Ordinance and all of its necessary supporting documents: Trust Indentures, Preliminary and Final Official Statements, Bond Purchase Agreement, Continuing Disclosure Agreement, Tax Regulatory Agreement, and Opinions letters from Kutak Rock and me is a months long process of drafting, reviews and modifications. Attached is the Schedule of Events Stephen' s, Inc. prepared for this bond issuance which shows all the meetings and work necessary to get this ordinance to you, Stephen' s Inc. has estimated that these bonds will generate $ 11 .25 million with almost $ 11 million net deposited into the City's construction fund. Costs of issuance will be about $ 190,000 (which is less than 1 .7% of the amount obtained). Attached is a document prepared by Stephens, Inc. showing all uses of the funds generated by sale of the bonds. It is estimated that these bonds will be paid off on November 1 , 2021 with a total accrued interest cost of $3 ,773,210. Thus, about three out of every four sales tax dollars collected and paid on these bonds will be used to pay off the principal while only one is necessary to pay interest on the bonds over the twelve year pay off period. This excellent cost ratio is possible because these tax exempt bonds can probably be sold in the 3 .6% range and the twelve year pay off period prevents the much higher interest costs of a 20 or 30 year note. This low payoff is possible even though no principal payments on these bonds are to be made until November 1 , 2015 (after an earlier bond issuance is paid off). ORDINANCE NO, AN ORDINANCE AUTHORIZING THE ISSUANCE AND SALE OF THE CITY' S SALES AND USE TAX CAPITAL IMPROVEMENT BONDS, SERIES 20093 FOR THE PURPOSE OF FINANCING A PORTION OF THE COSTS OF CERTAIN STREET AND TRAIL SYSTEM IMPROVEMENTS; AUTHORIZING THE EXECUTION AND DELIVERY OF A SECOND SUPPLEMENTAL TRUST INDENTURE PURSUANT TO WHICH THE BONDS WILL BE ISSUED AND SECURED; AUTHORIZING THE EXECUTION AND DELIVERY OF AN OFFICIAL STATEMENT PURSUANT TO WHICH THE BONDS WILL BE OFFERED; AUTHORIZING THE EXECUTION AND DELIVERY OF A BOND PURCHASE AGREEMENT PROVIDING FOR THE SALE OF THE BONDS; AUTHORIZING THE EXECUTION AND DELIVERY OF A CONTINUING DISCLOSURE AGREEMENT; AND PRESCRIBING OTHER MATTERS RELATING THERETO WHEREAS, the City Council of the City of Fayetteville, Arkansas (the "City") has previously determined that there is a great need for a source of revenue to finance the costs of various street and trail system improvements within the City (the "2009 Project"); and WHEREAS, the City is authorized and empowered under the provisions of the Constitution and laws of the State of Arkansas, including particularly Amendment 62 to the Constitution of the State of Arkansas ("Amendment 62") and Arkansas Code Annotated ( 1998 Repl. & 2005 Supp.) Sections 14- 164-301 et seg. (as from time to time amended, the "Local Government Bond Act"), to issue and sell its capital improvement bonds to finance the costs of various capital improvements such as those comprising the 2009 Project, which capital improvement bonds may be secured by and payable from the receipts of the special city-wide sales and use tax authorized by the Local Government Bond Act; and WHEREAS, pursuant to the provisions of Ordinance No. 4891 of the City, adopted and approved on June 20, 2006 (the "Election Ordinance"), there was submitted to the qualified electors of the City four questions regarding the issuance of an aggregate of not to exceed $ 110,000,000 in principal amount of capital improvement bonds pursuant to Amendment 62 and the Local Government Bond Act to finance the capital improvements described in the Election Ordinance, said bonds to be secured by a pledge of and lien upon (i) all of the receipts of a special city-wide sales and use tax levied at the rate of one-quarter of one percent (0.25%) pursuant to the Local Government Bond Act (the "0.25% Sales and Use Tax") and (ii) all of the receipts of a special city-wide sales and use tax levied at the rate of three-quarters of one percent (0.75%) pursuant to the Local Government Bond Act (the "0. 75% Sales and Use Tax"); and WHEREAS, at a special election held September 12, 2006, a majority of the qualified electors of the City voting on the questions approved the issuance of capital improvement bonds in the principal amounts and for each of the specific purposes set forth on the ballot (and the corresponding levy of the 0.25% Sales and Use Tax and the 0.75% Sales and Use Tax, and the pledge of the receipts thereof to the payment of the capital improvement bonds); and WHEREAS, as authorized under the provisions of Amendment 62 and the Local Government Bond Act and as approved by the qualified electors of the City, the City has now determined to issue and sell its Sales and Use Tax Capital Improvement Bonds, Series 2009, in the aggregate principal amount of not to exceed $ 11 ,250,000 (the "Bonds"), in order to provide for the funding of the 2009 Project; and WHEREAS, as authorized by the provisions of the Election Ordinance, the City has previously made arrangements for the sale of the Bonds to Stephens Inc., Fayetteville, Arkansas (the "Underwriter"), pursuant to the terms of a Bond Purchase Agreement between the City and the Underwriter (the "Bond Purchase Agreement") in substantially the form presented to and before this meeting; NOW, THEREFORE BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF FAYETTEVILLE, ARKANSAS: Section 1 . Under the authority of the Constitution and laws of the State of Arkansas, including particularly Amendment 62 to the Constitution of the State of Arkansas and the Local Government Bond Act, there is hereby authorized the issuance of bonds of the City to be designated as "Sales and Use Tax Capital Improvement Bonds, Series 2009" (the `Bonds"). The Bonds shall be issued in the original aggregate principal amount of not to exceed Eleven Million Two Hundred Fifty Thousand Dollars ($ 11 ,250,000) and shall mature not later than November 1 , 2023, in the principal amounts and bearing interest at the rates specified in the Bond Purchase Agreement. $9,950,000 aggregate principal amount of the Bonds hereby authorized shall be deemed to apply to the Street Project described in Question 3 of the ballot and $ 1 ,300,000 aggregate principal amount of the Bonds hereby authorized shall be deemed to apply to the Trail Project described in Question 4 of the ballot. 0 0 The average yield on the Bonds as a whole shall not exceed 4.75% per annum, and the yield on no single Bond shall exceed 5.25%. The proceeds of the Bonds will be utilized to finance the costs of the 2009 Project, to establish a debt service reserve for the Bonds or to purchase a surety bond for reserve purposes, to pay a premium for bond insurance, if deemed economically beneficial, and to pay printing, underwriting, legal and other expenses incidental to the issuance of the Bonds. The Bonds shall be issued in the forms and denominations, shall be dated, shall be numbered, shall mature, shall be subject to redemption prior to maturity, and shall contain such other terms, covenants and conditions, all as set forth in the Second Supplemental Trust Indenture submitted to this meeting. The Mayor is hereby authorized and directed to execute and deliver the Bonds in one or more series, each series to be in substantially the form thereof contained in the Second Supplemental Trust Indenture submitted to this meeting, and the City Clerk is hereby authorized and directed to execute and deliver the Bonds and to affix the seal of the City thereto, and the Mayor and City Clerk are hereby authorized and directed to cause the Bonds to be accepted and authenticated by the Trustee. The Mayor is hereby authorized to confer with the Trustee, the Underwriter and Kutak Rock LLP, Little Rock, Arkansas ("Bond Counsel"), in order to complete the Bonds in substantially the form contained in the Second Supplemental Trust Indenture submitted to this meeting, with such changes as shall be approved by such persons executing the Bonds, their execution to constitute conclusive evidence of such approval. Section 2. In order to pay the principal of and interest on the Bonds as they mature or are called for redemption prior to maturity, there is hereby pledged all of the receipts of the 0.25% Sales and Use Tax and the 0.75% Sales and Use Tax levied by the Election Ordinance. Such pledge securing the Bonds shall be made on a parity basis with the existing pledge of such receipts in favor of the City's $50,000,000 Sales and Use Tax Capital Improvement Bonds, Series 2006A (the "Series 2006A Bonds"), and the City's $ 14,340,000 Sales and Use Tax Capital Improvement Bonds, Series 2007 (the "Series 2007 Bonds"). The levy and collection of the 0.25% Sales and Use Tax and the 0.75% Sales and Use Tax shall commence on the dates provided in the Local Government Bond Act and shall continue until such time as the Series 2006A Bonds, the Series 2007 Bonds and the Bonds are no longer outstanding or sufficient funds are on deposit with the Trustee to redeem the Series 2006A Bonds, the Series 2007 Bonds and the Bonds in full. The City covenants and agrees that all receipts from the 0.25% Sales and Use Tax and the 0.75% Sales and Use Tax will be accounted for separately as special funds on the books of the City, and receipts of said 0.25% Sales and Use Tax and 0.75% Sales and Use Tax will be deposited and will be used solely as provided in the Trust Indenture (as defined below). Section 3 . To prescribe the terms and conditions upon which the Bonds are to be executed, authenticated, issued, accepted, held and secured, the Mayor is hereby authorized and directed to execute and acknowledge a Second Supplemental Trust Indenture (the "Trust Indenture"), by and between the City and Simmons First Trust Company, N.A., Pine Bluff, Arkansas (the "Trustee"), and the City Clerk is hereby authorized and directed to execute and acknowledge the Second Supplemental Trust Indenture and to affix the seal of the City thereto, and the Mayor and the City Clerk are hereby authorized and directed to cause the Second Supplemental Trust Indenture to be accepted, executed and acknowledged by the Trustee. The Second Supplemental Trust Indenture supplements and amends a Trust Indenture dated as of 3 November 1, 2006, as previously amended by a First Supplemental Trust Indenture dated as of October 1, 2007, each by and between the City and the Trustee (the "Original Indenture," and collectively with the Second Supplemental Trust Indenture, the "Trust Indenture"). The Second Supplemental Trust Indenture is hereby approved in substantially the form submitted to this meeting, including, without limitation, the provisions thereof pertaining to the pledge of 0.25% Sales and Use Tax receipts and 0.75% Sales and Use Tax receipts and the terms of the Bonds. The Mayor is hereby authorized to confer with the Trustee, the Underwriter and Bond Counsel in order to complete the Second Supplemental Trust Indenture in substantially the form submitted to this meeting, with such changes as shall be approved by such persons executing the Second Supplemental Trust Indenture, their execution to constitute conclusive evidence of such approval. (Advice is given that a copy of the Second Supplemental Trust Indenture in substantially the form authorized to be executed is on file with the City Clerk and is available for inspection by any interested person.) Section 4. There is hereby authorized and approved a Preliminary Official Statement of the City, including the cover page and appendices attached thereto, relating to the Bonds. The Preliminary Official Statement is hereby "deemed final" by the City within the meaning of U.S. Securities and Exchange Commission Rule 15c2-12. The distribution of the Preliminary Official Statement is hereby approved. The Preliminary Official Statement, as amended to conform to the terms of the Bond Purchase Agreement, including Exhibit A thereto, and with such other changes and amendments as are mutually agreed to by the City and the Underwriter, is herein referred to as the "Official Statement," and the Mayor is hereby authorized to execute the Official Statement for and on behalf of the City. The Official Statement is hereby approved in substantially the form of the Preliminary Official Statement submitted to this meeting, and the Mayor is hereby authorized to confer with the Trustee, the Underwriter and Bond Counsel in order to complete the Official Statement in substantially the form of the Preliminary Official Statement submitted to this meeting, with such changes as shall be approved by such persons, the Mayor's execution to constitute conclusive evidence of such approval. (Advice is given that a copy of the Preliminary Official Statement is on file with the City Clerk and is available for inspection by any interested person.) Section 5. In order to prescribe the terms and conditions upon which the Bonds are to be sold to the Underwriter, the Mayor is hereby authorized and directed to execute a Bond Purchase Agreement on behalf of the City, to be dated as of the date of its execution (the "Bond Purchase Agreement"), by and between the City and the Underwriter, and the Bond Purchase Agreement is hereby approved in substantially the form submitted to this meeting, and the Mayor is hereby authorized to confer with the Underwriter and Bond Counsel in order to complete the Bond Purchase Agreement in substantially the form submitted to this meeting, with such changes as shall be approved by such persons executing the Bond Purchase Agreement, their execution to constitute conclusive evidence of such approval. El (Advice is given that a copy of the Bond Purchase Agreement in substantially the form authorized to be executed is on file with the City Clerk and is available for inspection by any interested person.) Section 6. In order to provide for continuing disclosure of certain financial and operating information with respect to the 0.25% Sales and Use Tax, the 0.75% Sales and Use Tax and the City in compliance with the provisions of Rule 15c2-12 of the U. S. Securities and Exchange Commission, the Mayor is hereby authorized and directed to execute a Continuing Disclosure Agreement to be dated as of the date of its execution (the "Continuing Disclosure Agreement"), by and between the City and the Trustee, and the Mayor is hereby authorized and directed to cause the Continuing Disclosure Agreement to be executed by the Trustee. The Continuing Disclosure Agreement is hereby approved in substantially the form submitted to this meeting, and the Mayor is hereby authorized to confer with the Trustee, the Underwriter and Bond Counsel in order to complete the Continuing Disclosure Agreement in substantially the form submitted to this meeting, with such changes as shall be approved by such persons executing the Continuing Disclosure Agreement, their execution to constitute conclusive evidence of such approval. (Advice is given that a copy of the Continuing Disclosure Agreement in substantially the form authorized to be executed is on file with the City Clerk and is available for inspection by any interested person.) Section 7. In order to secure lower interest rates on the Bonds, the Underwriter has proposed that the City consider the purchase of a policy of bond insurance with a portion of the proceeds of the Bonds, which policy would guarantee the payment of the principal of and interest on the Bonds when due. If deemed economically advantageous by the Mayor, upon the advice of the Underwriter, the Mayor is hereby authorized to execute an insurance commitment and to do any and all things necessary to accomplish the delivery of a bond insurance policy with respect to the Bonds. Section 8. The Mayor and City Clerk, for and on behalf of the City, are hereby authorized and directed to do any and all things necessary to effect the issuance, sale, execution and delivery of the Bonds and to effect the execution and delivery of the Second Supplemental Trust Indenture, the Bond Purchase Agreement, the Official Statement, the Continuing Disclosure Agreement and a Tax Regulatory Agreement relating to the tax exemption of interest on the Bonds, and to perform all of the obligations of the City under and pursuant thereto. The Mayor and the City Clerk are further authorized and directed, for and on behalf of the City, to execute all papers, documents, certificates and other instruments that may be required for the carrying out of such authority or to evidence the exercise thereof. Section 9. As previously provided in the Election Ordinance, Kutak Rock LLP, Little Rock, Arkansas, is hereby confirmed as Bond Counsel on behalf of the City in connection with the issuance and sale of the Bonds. 5 Section 10. The Bonds are hereby designated as "qualified tax-exempt obligations" within the meaning of Section 265(b)(3) of the Internal Revenue Code of 1986, as amended (the "Code"). The City hereby represents and covenants that the aggregate principal amount of its tax-exempt obligations (excluding "private activity bonds" within the meaning of Section 141 of the Code), including those of its subordinate entities, issued in calendar year 2009 will not exceed $30,000,000. Section 11. The provisions of this Ordinance are hereby declared to be severable, and if any section, phrase or provision shall for any reason be declared to be illegal or invalid, such declaration shall not affect the validity of the remainder of the sections, phrases or provisions of this Ordinance. Section 12. All ordinances, resolutions and parts thereof in conflict herewith are hereby repealed to the extent of such conflict. PASSED and APPROVED this 6'h day of September, 2009. APPROVED: By: LIONELD JORDAN, Mayor By: ATTEST: SONDRA E. SMITH, City Clerk/Treasurer EI Stephens Inc. CITY OF FAVET I EVILLE, ARKANSAS SALES AND USE TAX CAPITAI, IMPROVEMENTS BONDS, SERIEs2009 Preliminani Schedule of Events August 11, 2009 1 2 3 4 5 6 7 8 9 10 II 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 1 2 3 4 5 6 7 8 9 10 II 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 1 2 3 4 5 6 7 8 9 10 II 12 13 14 I5 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 iliwilin. August 21 Distribute first draft of financing documents KR August 27 Comments due on financing documents All Parties September 3 Distribute blacklined financing documents KR September 9 Send financing documents to rating agency and insurers Stephens September 14 Present financing to Fayetteville Street Committee City / Stephens September 17 Send Bond Ordinance to City for distribution to City Council KR September 18 Conference call with rating agency to discuss issue City / Stephens October 1 Obtain rating Stephens October 6 Obtain insurance Stephens October 6 Approval of Parameters Bond Ordinance City / Stephens /KR October 8 Publish Bond Ordinance KR / City October 8 Finalize Preliminary Official Statement with insurer provisions KR October 12 Electronically distribute Preliminary Official Statements to investors Stephens October 19 Review offering details with the City Stephens October 20 Offer bonds Stephens Stephens Inc. October 21 Commit to underwrite bond issue Stephens October 21 Execute Bond Purchase Agreement City / Stephens October 26 Prepare and distribute closing documents KR October 29 Comments due on closing documents All Parties November It Closing and distribution of bond proceeds All Parties City of Fayetteville, Arkansas Sales and Use Tax Bonds Series 2009 Sources & Uses Dated 11/01/2009 1 Delivered 11/04/2009 Sources Of Funds Par Amount of Bonds $11,250,000.00 Accrued Interest from 11/01/2009 to 11104/2009 3,349.88 Total Sources Deposit to Debt Service Fund 3,349.88 Rounding Amount 8.95 Total Uses Fib I FAYhI I EVILLE IS&UI.sl 1 9152009 1 4.30 PM [1 City of Fayetteville, Arkansas Sales and Use Tax Bonds Series 2009 Debt Service Schedule Date Principal Coupon Interest Total P+I 11/1/2010 - - 401,985.00 401,985.00 11/1/2011 - - 401,985.00 401,985.00 11/1/2012 - - 401,985.00 401,985.00 11/1/2013 - - 401,985.00 401,985.00 11/1/2014 - - 401,985.00 401,985.00 11/1/2015 1,455,000.00 2.800% 401,985.00 1,856,985.00 11/1/2016 1,500,000.00 3.100% 361,245.00 1,861,245.00 11/1/2017 1,545,000.00 3.350% 314,745.00 1,859,745.00 11/1/2018 1,595,000.00 3.600% 262,987.50 1,857,987.50 11/1/2019 1,655,000.00 3.800% 205,567.50 1,860,567.50 11/1/2020 1,715,000.00 4.000% 142,677.50 1,857,677.50 11/1/2021 1,785,000.00 4.150% 74,077.50 1,859,077.50 Total $11,250,000.00 - $3,773,210.00 $15,023,210.00 Yield Statistics Net Interest Cost (NICI 3.6711520% Bond Yield for Arbitrage Purposes 3.7641307% All Inclusive Cost (AIC) 3.9886237% IRS Form 8038 Net Interest Cost 3.6712414% Weighted Average Maturity 9.128 Years File I FAYETTEVILLE IS&UI.sr 18/ 5200910:30 PM • RECEIVED OCT 21 2009 CITY OF FAYETTEVILLE CITY CLERKS OFFICE v NORTHWEST ARKANSAS EDITION Benton County Daily Record P. O. BOX 1607 FAYETTEVILLE, AR 72702 PHONE: 479-571-6421 AFFIDAVIT OF PUBLICATION I, Cathy Wiles, do solemnly swear that I am Legal Clerk of the Arkansas Democrat Gazette newspaper. Printed and published in Benton County Arkansas, (Lowell) and that from my own personal knowledge and reference to the files of said publication, the advertisement of: City of Fayetteville —Ordinance 5277 October 14, 2009 Publication Charge : $ 462.68 Signed: ----- Subscribed and sworn to before me This/L/ day of Dc jOuc , 2009. Notary Public !� i2,./ My Commission Expires: ' 0 L , a.O /a - Do not pay from Affidavit, an invoice will be sent FOR THE PURPOSE OF FINANCING A PORTION OF 1U/j W r 11LV - THE COSTS OF CERTAIN STREET AND TRAIL SYS- ARKANSAS l RECEIVE D • TEM IMPROVEMENTS; AUTHORIZING THE EXECU- TION AND DELIVERY OF A SECOND SUPPLEMENTAL TRUST INDENTURE PURSUANT TO WHICH THE BONDS WILL BE ISSUED AND SECURED; AUTHORIZING THE EXECU- I ION AND DELIVERY OF AN OFFICIAL STATEMENT PURSUANT TO WHICH THE BONDS lA y ' WILL BE OFFERED; AUTHORIZING THE EXECUTION AND DELIVERY OF A BOND PUR- CHASE AGREEMENT PROVIDING FOR THE SALE OF THE BONDS; AUTHORIZING THE AND DELIVERY OF A CONTINUING DISCLOSURE AGREEMENT; AND PRE- CxECUSCR CITYCY OF)E RING OTHERON MATTES RELATING THERETO RKS 0 Fj WHEREAS, theCity Council of the City of Fayetteville. Arkansas (the City) has previously • determir ed that More is a great need for a source of revenue to finance the costs of varl- • Ous street and trail system improvements within the City (the -2009 Project-); and MNERRAS. he City is authorized and empowered under the provisions of the Constitution arid laws of the State of Arkansas, including particularly Amendment 62 to the Constitution of Me State. of Arkansas ('Amendment 62') and Arkansas Code Annotated (1998 Repl. & A 2005 Supp.) Sections 14164.301 at seq. (as from time to time amended, the -Local Government Bad Act'), to issue and sell its capital imprwement.bonds to finance the costs o1 various capital Improvements such as those comprising the 2009 Project, which capital Improvement bands may be secured by and payable from the receipts of the spe- cia(city-widesales. and use tax authorized by the Local Government Bond Act; and ' WHEREASj pursuant to the provisions of Ordinance No, 4891of the City, adopted and ,7 approved on June 20, 2008 (the 'Election Ordinance*). More was submitted to the qualified elifctdrs of the City (our questions regarding the issuance of an aggregate of not to exceed z $110,000,000 in principal amount of capital improvement bonds pursuant to Amendment rK 62 and the Local Government Bond Act to Ilnance the capital improvements described in A the Election Ordinance, said bonds to be secured by a pledge of and lien upon (i) all of the receipts of a special city-wide sales and use tax levied at the rate of one -quarter of one per- cent (0.25%) pursuant to the Local Government Bond Act (Me -0.25% Sales end Use lax) find (H) all of the receipts 01 a special city-wide sales and use tax levied at the rate of three- • quarters of one percent (0.75%) pursuant to the Local Government Bond Act (the 0.75% ' Sales and Use Tax'); and 1 WHEREAS, eta special election hold September 12. 2036, a majority of the qualified elec- tors of the City voting an the questions approved Me issuance of capital improvement bonds in the principal amounts and for each of Me specific purposes set forth on the bel- 1 lot (and the corresponding levy of Me 0.25% Sales and Use Tax and the 0.75% Sales and l Use Tax, and the pledge of the receipts thereof to the payment of the capital improvement ' bonds); and ' WHEREAS, as authorized under the provisions of Amendment 62 and the Local Government Bond Act and as approved by the qualified electors of Me City, Me City has now determined to issue and sell its Sales and Use Tax Capital Improvement Bands, Series 2009. in the aggregate principal amount of not to exceed $11,250,000 (the 'Bads'), in order to provide for the funding of the 2009 Project; and WHEREAS: as authorized by the provisions of the Election Ordinance, the City has previ- k.. pasty made arrangements (or me sale of the Bonds to Stephens Inc., Fayetteville, Arkansas (Itie'Untlerwrite ), pursuant to the terms of a Bond Purchase Agreement between me City and.the Underwriter (the'Bond Purchase Agreement') In substantially Me form presented to and before this meeting; NOW, THEREFORE SE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OP FAYETTEYILLS. ARKANSAS: Section 1. Under me authority of the Constitution and laws of the State of Arkansas, includ- ing particularly Amendment 62 to the Constitution of the State of Arkansas and the Local Government Bond Act, there is hereby authorized the issuance of bands of the City to be designated as 'Sales and Use Tax Capitol Improvement Bonds, Series 2009' (the 'Bonds). The Bonds shall be issued in the original aggregate principal amount of not to exceed ElgvgnMillion Two Hundred Fly Thousand Dollars ($11,250,000) and shall mature not later Ilan November 1, 2023. in me principal amounts and bearing interest at the rates specified in. the Bbnd Purchase Agreement. $9,950,000 aggregate principal amount of the Bonds hereby authorized shall be deemed to apply to the Street Project described in Question 3 of the ballot and $1,30. aggregate principal amount of Me Bonds hereby authorized shall be deemed to apply to me Trail Project described M Question 4 of the ballot. The average yield on the Bonds as a whole shall rot exceed 4.75% per annum, and the yield on no single Bond shall exceed 525%. The proceeds ofthhe Bonds will be utilized to litsrtce the costs of the 2009 Project, to establish a debt service reserve for the Bonds or lb purchase a surety bond for reserve purposes, to pay a premium lot bond insurance, if damned economically beneficial, and to pay printing. underwriting, legal and other expens- es incidental to the issuance of me Bonds. The Bonds shall be issued in me forms and denominations, shall be dated, shall. be numbered, shall mature, shall be subject to redemption prior to maturity, and shall contain such other terms, covenants and conditions, all as set forth in the Second Supplemental Trust Indenture submitted to this meeting. The Mayor is hereby authorized and directed to execute and deliver the Bonds in one a more series, each series to be in substantially the form thereof contained in Me Second Supplemental Trust Indenture submitted to this meeting, and the City Clerk Is hereby authorized and directed to execute and deliver the Bonds and to affix the seal of the City thereto, and the Mayor and City Clerk are hereby authorized and directed to cause the Bonds to be accepted and authenticated by the Trustee. The Mayor is hereby authorized le confer with the Trustee, the Underwrite, and Kulak Rock LIP. Little Rock, Arkansas ('Bond Counsel'), in order to complete the Bonds in substantially the form contained in the Second Supplemental Trust Indenture submitted to this meeting, with such changes as shall be approved by such -persons executing the Bonds, their execution to constitute con- clusive evidence of such approval. Section 2. In order to pay the principal of and interest on the Bonds as they mature or are called for redemption prior to maturity, there is hereby pledged all of the receipts of the 025% Sales and Use Tax and the 0.75% Sales and Use Tax levied by the Election Ordinance. Such pledge securing the Bonds shall be made an a parity basis with the exist- ing pledge of such receipts in favor of Me City B 550,000,000 Sales and Use Tax Capital Improvement Bonds, Series 2006A (the'Series 2006A Bonds'), and the Citys $14,340,000 Salesand.Use Tax Capital Improvement Bonds, Series 2007 (the -Series 2007 Bads'). The levy and collection of the 0.25% Sales and Use Tax and the 0.75% Sales and Use Tax shall commence on the dates provided in the Local Government Bond Act and shall con- lin re until such time as Me Series 2006A Bonds, the Series 2007 Bonds and the Bonds are no longs outstanding or sufficient funds are on deposit with Me Trustee to redeem the Series 2006A Bonds, the Series 2007 Bonds and the Bonds in full. The City covenants and agrees that all receipts from the 0.25% Sales and Use Tax and the 0.75% Sales and Use Tax will be accounted for separately as special funds on the books of the City, and receipts of said 0.25% Sales and Use Tax and 0.75% Sales and Use Tax will be deposited and will be used sees as provided In the Trust Indenture (as defined below). To prescribe the tams and condition upon which the Bonds are to be executI. - Wr,ted to execute and acknowledge a Becmd Supplemental Trust I (the Trust Indenture-), by and between the City and Simmons First Trust Campan , Pine Bluff, Arkansas (the -Trustee-), and the City Clerk is hereby aithorized.and directed to execute and acknowledge the Second Supplemental Trust Indenture and to affix the seal of the City thereto, and the Maya and the City CIer are hereby auitadzed and directed to cause the Second Supplemental Trust Indenide to be accepted, executed and acknowledged by the Trustee .4h0 Second Supplemental. Trust Indenture supplements and, amends a Trust hidenlure.dated as of November 1, 2006, as.previiously amended by a First Supplemental Trust Indenture dated as of October 1, 2007, each by and between the City and the Trustee (the'Original Indenture: and collectively with the Second Supplemental Trust Indenture, the }Th`ust Iadentore'). The Second Supplemental Trust Indenture is hereby approved in • Ivow.......v. V.. .. .. .vw.nio v.n....,.,.,.+. ....,..01•^ •o..v....q n•.,. v.w sv....,., .. n.• the Trustee, the Underwriter and Bond Counsel in order tocomplete the Second • Supplemental Trust Indenture in substantially the form submitted todhis meeting, with such changes as shall be approved by such persons executing ateJSecond Supplemental Trust ' . Indenture, their execution to constitute conclusive evidence of such approval. • Y (Advice is given that a copy of the Second Supplemental Trust Indenture in substantially the lure authorized to be executed is an file with the City Clerk and Is available for inspection L by any interested person.) Section 4. There is hereby authorized and approved a Preliminary Official Statement of the City, including the cover page and appendices attached thereto, relating to the Bads. The Preliminary Official Statement Is hereby -deemed final- by the City within the meaning of — U.S. Securities, and Exchange Con'vnission Rule 15c2-12. The distribution of the • Preliminary Official Statement is hereby approved. The Preliminary Official Statement, as amended to conform to the terms of the Bond Purchase Agreement, including. Exhibit A thereto, and with such other changes and amendments as are mutually agreed to by the City and the Underwriter, is herein referred to as Me'Offoel Statement, and the Mayor is hereby authorized to execute the Official Statement for and on behalf of the CityThe Official Statement is hereby approved in substantially the form of the Preliminary Official Statement submitted to this meeting, and the Mayor is hereby authorized to confer with the •�, Trustee, the Underwriter and Bond Counsel in older to complete the Official Statement in •k. substantially, the form of delPrellminary Official Statement submitted to this meeting, with • such changes as shell be approved by such persons, the Mayor's execution to constitute conclusive evidence of such approval. (Advice is given that a copy of the Preliminary Official Statement is on file with the City Clerk and is available for inspection by any interested person.) �Seclien 5. In order to prescribe the terms and conditions upon which the Bonds are to be : sold to the Underwriter. the Maya is hereby authorized and directed to execute a Bond Purchase Agreement on behalf of the City, to be dated as of the date of its execution (the 'Bad Purchase Agreement), by and between the City and the Underwriter, and the Bond Purchase Agreement is hereby approved in substantially the farm submitted to this meet- ing, and the Mayor Is hereby authorized to canter with the Underwriter and Bond Counsel in order to complete the Band Purchase Agreement in substantially the form submitted to this meeting, with such changes as shall be approved by such persons executwg the Bond Purchase Agreement, their execution to constitute conclusive evidence of such approval. (Advice is given that a copy of the Bond Purchase Agreement in substantially the form authorized to be executed is on file with the City Clerk and is available for inspection by any st• interested person,) Section io In to provide la continuing disclosure Use of certain,7financial Sand operating S •j the Cali an with e to the a pro Sors and Use Tax, the 0. o5 %Sales and cue ies end the City Cam fission with the provisions eb Rule t5iz 12 of the ec U.S. ocuiecs end in Caalsure the t is hereby authorized of and directed its to execute a Continuing Disclosure Agreement to be dated as the date of its execution (the �" 'Continuing Disclosure Ad and directed byeel and use theMenCity the ege the executed hereby 9dhOriste and directed to cause u Agreement Disclosureihereby Agreement to be thethe Continuingd'in•eamUnderwriter this meeting. outlteaMaya itherebyetel heiC touatr • - is with the Trustee, the ndmwdim and Bond Counsel in order to coniplete et the Continuing Disclosure Agreement in substantially the form submitted exeto this meeting, iscllti such changes shall be approvedtoco by such persons ve deneg the Continuing Disclosure Agreement, their thexecutionat of the Co concigsOi evidence such Agreement In sub 1. • (Advfae h gie d the a copy Ise Coe ta Cle isavIn le for inspection on berm es0 to be executed is on file with the City Clerk and Is available la inspection by any interested person.) L Section 7. In order to secure lower interest rates on the Bonds, the Underwriter has pro- posed that but City consider the purchase of a policy of bond insurance with a portion of the proceeds of the bonds. which policy would guarantee the payment d the principal of and interest ontle Bonds when due. If deemed economically advantageous by isle Mayor, upon the advice of the Underwriter, the Maya is hereby authorized to execute an Insurance commitment and to do any and all things necessary to accomplish the delivery of a bond insurance policy with respect to the Bonds. Section 8. The Mayo end City Clark, for and on behalf of the Ciry, are hereby authorized and directed to do any and all things necessary to effect the issuance, sale, execution and delivery of the Bonds and to effect the execution and delivery of the Second Supplemental Trust Indenture. the Bond Purchase Agreement, the Official Statement, the Continuing Disclosure Agreement and a Tax Regulatory Agreement relating to the tax exemption of interest on the Bands, and to perform all of the obligations of the City under and pursuant t thereto. The Mayor end the City Clank are further authorized end directed. for and on behalf of the City, to execute all papas, documents. certificates and other instruments that may be required for the carrying out of such authority or to evidence the exercise thereof. Section 9, As previously provided in the Election Ordinance, Kutak Rock LLP, Little Rock, Arkansas, is hereby confirmed as Bond Counsel on behalf of the City in connection with the issuance and sale d the Bonds. j Section 10. The Bonds are hereby designated as qualified tax-exempt obligations' within L. the meaning of Section 265(b$3) of the Internal Revenue Code of 1986. as emended (the 'Cafe'). The City hereby represents and covenants that the aggregate principal amount of its tax-exempt obligations (excluding 'private activity bonds' within the meaning of Section 141 of the Code), including gross of its subordinate entities. issued In calendar year 2009 will not exceed 530ANJ0,000. Section 11. The provisions of this Ordinance are hereby declared to be severable, and it any section; phrase or provision shall for any reason be declared to be illegal or invalid, such declaration shall not affect the validity of the remainder of the sections, phrases or pro- visions of this Ordinance. Section 12. All ordinances, resolutions and parts thereof in conflict herewith are hereby repealed to the extent of such conflict. PASSED and APPROVED this 6th day of October, 2()09. APPROVE. , ATTEST: By By: LIONILD .IOeDAN. Maya. SONORA E. SMITH. City CIM/her aanr $11,250,000 CITY OF FAYETTEVILLE, ARKANSAS SALES AND USE TAX CAPITAL IMPROVEMENT BONDS SERIES 2009 TRANSCRIPT OF PROCEEDINGS Dated as of November 12, 2009 Prepared By: KUTAK ROCK LLP 124 West Capitol, Suite 2000 Little Rock, Arkansas 72201 4832-8876-5189.1 CI $11,250,000 CITY OF FAYETTEVILLE, ARKANSAS SALES AND USE TAX CAPITAL IMPROVEMENT BONDS SERIES 2009 CLOSING INDEX TAB Proceedings and Certificates Related to Election Certificate of City of Fayetteville, Arkansas (the "City") as to Election Matters Exhibit A - Ordinance No. 4891 adopted June 20, 2006, calling a special election and levying (i) a (0.25%) city-wide sales and use tax and (ii) a (0.75%) city-wide sales and use tax 2 • Exhibit B - Minutes of City Council meeting held June 20, 2006, reciting adoption of Ordinance No. 4891 Exhibit C - Proof of Publication of Ordinance No. 4891 in the Northwest Arkansas edition of the Arkansas Democrat -Gazette on June 29, 2006 4 Exhibit D — Proof of Publication of Notice of Special Election in the Northwest Arkansas edition of the Arkansas Democrat -Gazette on August 30, 2006 Exhibit E — Mayor's Proclamation of Election Results and Proof of Publication in the Northwest Arkansas edition of the Arkansas Democrat -Gazette on October 2, 2006 Certificate of Washington County Board of Election Commissioners Ascertaining and Declaring Results of Special Election held September 12, 2006 0 4832-8876.5189.1 • TAB Proceedings and Certificates Related to Bond Issuance Closing Certificate and Request of the City 8 Exhibit A - Ordinance No. 5277 adopted October 6, 2009, authorizing issuance of the Bonds and pledging receipts of (i) a (0.25%) city-wide sales and use tax and (ii) a (0.75%) city-wide sales and use tax 9 Exhibit B - Minutes of City Council meeting held October 6, 2009, reciting adoption of Ordinance No. 5277 10 Exhibit C - Proof of Publication of Ordinance No. 5277 in the Northwest Arkansas edition of the Arkansas Democrat -Gazette on October 14, 2009 11 Exhibit D — Schedule of Bond Issuance Costs to be Paid at Closing 12 Form 8038-G and Proof of Mailing to Internal Revenue Service 13 Principal Documents • Trust Indenture dated as of November 1, 2006, by and between the City and Simmons First Trust Company, N.A., as trustee (the "Trustee") 14 First Supplemental Trust Indenture dated as of October 1, 2007, by and between the City and the Trustee 15 Second Supplemental Trust Indenture dated as of November 1, 2009, by and between the City and the Trustee 16 Tax Regulatory Agreement dated November 12, 2009, by and between the City and the Trustee 17 Continuing Disclosure Agreement dated November 12, 2009, by and between the City and the Trustee 18 Copies of Bonds 19 Bond Purchase Agreement dated October 21, 2009, by and between the City and Stephens Inc., as underwriter (the "Underwriter") 20 Preliminary Official Statement 21 • Official Statement 22 4832.8876-5189.1 2 • TAB Opinions Approving Opinion of Bond Counsel 23 Supplemental Opinion of Bond Counsel 24 Opinion of City Attorney 25 Bond Insurance and Reserve Policies Series 2009 Bond Insurance Policy 26 Series 2009 Reserve Policy 27 Certificate of Bond Insurer 28 Opinion of Counsel to Bond Insurer 29 2009 Reimbursement Agreement 30 Certificate of Obligor 31 • Miscellaneous Certificates of Arkansas Department of Finance and Administration and State Treasurer as to Sales and Use Taxes 32 Trustee's Certificate 33 Underwriter's Certificate 34 Underwriter's Receipt 35 Trustee's Receipt and Certificate as to Application of Funds 36 DTC Blanket Letter of Representations 37 Standard & Poor's Rating Letters 38 Form of Requisition 39 • 4832-8876-5189.1 3 • Transcripts delivered to: City of Fayetteville, Attn: Mr. Paul Becker (1 copy); Attn: Ms. Sondra Smith (1 CD) Simmons First Trust Company, Attn: Ms. Glenda Dean (1 original and 1CD) Stephens Inc., Attn: Mr. Dennis Hunt (1 copy) Fayetteville City Attorney, Attn: Kit Williams, Esq. (1 copy) Assured Guaranty Corp., Attn: Ms. Barbara -Ann DeLuca, Records Center (3 cds) Kutak Rock LLP (1 original) J 4832-8876-5189.1 0 CERTIFICATE OF CITY AS TO ELECTION MATTERS The undersigned Mayor and City Clerk of the City of Fayetteville, Arkansas, a duly organized municipality and political subdivision of the State of Arkansas (the "City"), do hereby certify and covenant as follows: 1. The undersigned are the duly elected, qualified and acting Mayor and City Clerk of the City, and as such officials have in their possession or have access to the official books and corporate records of the City. This Certificate is executed and delivered in connection with the issuance of the City's $11,250,000 Sales and Use Tax Capital Improvement Bonds, Series 2009 (the "Bonds"). 2. Attached hereto as Exhibit A is a true, complete, and correct copy of Ordinance No. 4891 (the "Election Ordinance"), duly adopted by City Council of the City, at a regular meeting, open to the public, held June 20, 2006, pursuant to which there was submitted to the qualified electors of the City (i) the question of the levy of (I) a one -quarter of one percent (0.25%) city-wide sales and use tax (the "0.25% Sales and Use Tax") and (II) a three-quarter of one percent (0.75%) city-wide sales and use tax (the "0.75% Sales and Use Tax," and together with the 0.25% Sales and Use Tax, the "Sales and Use Taxes"), under the authority of Arkansas Code Annotated (1998 Repl. & Supp. 2005) Sections 14-164-301 et seq., and (ii) questions with respect to the issuance of up to $110,000,000 in aggregate principal amount of Bonds secured by receipts of the Sales and Use Taxes. Attached hereto as Exhibit B is a true, complete and correct copy of the minutes of a duly • called regular meeting of the City Council, open to the public, held June 20, 2006, reciting the adoption of the Election Ordinance, as said minutes appear in the official records of the City; at the meeting a quorum was present and acted throughout; the Election Ordinance is in full force and effect and has not been altered, amended, or repealed as of the date hereof. No petition or petitions to refer the Election Ordinance to the people under Amendment No. 7 to the Constitution of the State of Arkansas has been filed as of the date hereof and the City Council has not referred the Election Ordinance to the people for adoption or rejection. Attached hereto as Exhibit C is a true, complete, and correct copy of a publisher's affidavit showing publication of the Election Ordinance in the Northwest Arkansas edition of the Arkansas Democrat -Gazette on June 29, 2006. 3. The meeting of the City Council referred to in paragraph 2 hereof was open to the public in compliance with the provisions of Section 25-19-106 of the Arkansas Code Annotated, as amended and supplemented. 4. The City has not adopted any by-laws or rules of procedure relating to the conduct of its meetings. 5. Regular meetings of the City Council are held on the first and third Tuesdays of each month. 6. In the City the time for filing a referendum petition is fixed at 31 days after the publication of local measures passed by the City Council of the City. • 7. Attached hereto as Exhibit D is a true, complete and correct copy of a publisher's affidavit showing publication of a Notice of Special Election in the Northwest Arkansas edition of the Arkansas Democrat -Gazette on August 30, 2006. 4851-7069-6965.1 • 8. Attached hereto as Exhibit E is a true, complete and correct copy of a Mayor's Proclamation of Election Results declaring the results of the Special Election and a true, complete, and correct copy of a publisher's affidavit showing publication of the Proclamation in the Northwest Arkansas edition of the Arkansas Democrat -Gazette on October 2, 2006. IN WITNESS WHEREOF, the undersigned have hereunto set their hands this 12th day of November, 2009. CITY OF FAYETTEVILLE, ARKANSAS By: i�— oneld Jordan, By: Ok\GVL40 & MuC S ndra Smith, City Clerk Y • • ;FAYETI-EVILLE; 4851-7069-6965.1 I . �ia m ORDINANCE NO. 4S91 t3¢ 0 • AN ORDINANCE CALLING AND. SETTING A DATE FOR A SPECIAL ELECTION ON THE QUESTIONS OF THE ISSUANCE BY THE CITY OF (1) • NOT TO EXCEED $25,000,000 OF CAPITAL IMPROVEMENT BONDS FOR ;? • THE PURPOSE OF - FINANCING CERTAIN WASTEWATER SYSTEM • IMPROVEMENTS, . (2) NOT TO EXCEED $17,000,000 OF CAPITAL • IMPROVEMENT BONDS FOR THE PURPOSE OF DIRECTLY FINANCING OR REFUNDING REVENUE BONDS ISSUED TO FINANCE CERTAIN WASTEWATER SYSTEM IMPROVEMENTS, (3) NOT TO EXCEED $65,900,000 OF CAPITAL IMPROVEMENT BONDS FOR THE PURPOSE OF FINANCING CERTAIN STREET IMPROVEMENTS, AND (4) NOT TO EXCEED $2,100,000 OF CAPITAL IMPROVEMENT BONDS FOR THE PURPOSE OF FINANCING CERTAIN TRAIL SYSTEM IMPROVEMENTS; % LEVYING A SPECIAL LOCAL SALES AND USE TAX AT THE RATE OF ONE -QUARTER OF ONE PERCENT (025%) AND LEVYING A REPLACEMENT SPECIAL LOCAL SALES AND USE TAX AT THE RATE OF THREE-QUARTERS OF ONE PERCENT (0.75%) FOR THE PURPOSE OF • RETIRING SUCH BONDS; AND PRESCRIBING OTHER MATTERS • PERTAINING THERETO WHEREAS, the City Council of the City of Fayetteville, Arkansas (the. "City") has • determined that there is a critical need for an additional source of revenue to finance wastewater •. 4qcilities and street -w1 trail improvements within the City; and . WHEREAS, Amendment 62 to the Constitution of the State of Arkansas ("Amendment 62') and Title 14, Chapter 164, Subchapter 3 of the Arkansas Code of 1987 Annotated (the "Local Government Bond Act") authorize the issuance of capital improvement bonds by municipalities, which bonds may be secured by the pledge of all of the receipts of the special citywide sales and use tax prescribed by the Local Government Bond Act; and WHEREAS, said special citywide sales and use taxes are to be levied and collected only on the first $2,500 of each single transaction; and WHEREAS, the City has previously issued and there are presently outstanding (i) its not to exceed $20,000,000 Sales and Use Tax Revenue Bond, Series 2006 (the "Series 2006 Bond"), (ii) its $27,000,000 Sales and Use Tax Refunding and Capital Improvement Bonds, Series 2005A (the "Series 2005A Bonds"), and (iii) its $43,995,000 Sales and Use Tax Capital Improvement Bonds, Series 2005B (the "Series 2005B Bonds," and together with the Series 2006 Bond and the Series 2005A Bonds, the "Prior Bonds"); and WHEREAS, the Prior Bonds are secured by and. payable from the receipts of a three- quarters of one percent (0.75%) special citywide sales and use tax previously levied under the ?= authority of the Local Government Bond Act (the "Prior Tax"); and WHEREAS, if approved by the electors of the City, the City has determined to issue (1) its capital improvement bonds in principal amount not to exceed $25,000,000 for the purpose of financing certain wastewater system improvements, (2) its capital improvement bonds in • principal amount not to exceed $17,000,000 for the purpose of financing certain additional wastewater system improvements or to refund water and wastewater revenue bonds originally issued to finance said improvements, (iii) its capital improvement bonds in principal amount not to exceed $65,900,000 for the purpose of financing certain street improvements, and (iv) its capital improvement bonds in principal amount not to exceed $2,100,000 for the purpose of • financing certain trail system improvements (collectively, the "Bonds"), which Bonds are to be secured by(a) a pledge of and lien upon all of the receipts of a one -quarter of one percent • (0.25%) special citywide sales and use tax (the "0.25% Sales and Use Tax") and (b) when all of the Prior Bonds have been retired from the receipts of the Prior Tax, a pledge of and lien upon all. of the receipts of a three-quarter of one percent (0.75%) special citywide sales and use tax (the "0.75% Sales and Use Tax") replacing the Prior Tax, alias authorized by Amendment 62 and the Local Government Bond Act; and WHEREAS, the purpose of this Ordinance is to call a special election on the issuance of the Bonds by the City and for related purposes; NOW, THEREFORE, BE IT ORDAINED by the City Council of the City of Fayetteville, Arkansas: sa +^-.-"Section 1. Tlfat under the authority of Amendment -62 and the Local Government $one Actand subject to approval of the issuance of any series of the Bonds by the electors of the City as provided in Section 3 below, there are hereby levied (i) a sales tax at the rate. of one -quarter of one percent (0.25%) and (ii) a sales tax at the rate of three-quarters of one percent (0.75%) on the gross receipts from the sale at retail within the City of all items and services which are subject to taxation under the Arkansas Gross Receipts Act of 1941, as amended (Arkansas Code of 1987 Annotated §26-52-101 et seq.), and (iii) an excise (or use) tax at the rate of one -quarter of one percent (0.25%) and (iv) an excise (or use) tax at the rate of three-quarters of one percent (0.75%) on the storage, use, distribution or other consumption within the City of tangible personal property or taxable services subject to taxation under the Arkansas Compensating Tax Act of 1949, as amended (Arkansas Code of 1987 Annotated §26-53-101 et seq.), on the sale price of the property or, in the case of leases or rentals, on the lease or rental price (collectively, 2 i the "Sales and Use Tax'). The Sales and Use Tax shall be levied and collected only on the first $2,500 of each "single transaction" (as defined in Section 9 hereof). The levy and collection of the 0.25% Sales and Use Tax shall commence on and as of such date as provided in the Local • Government Bond Act, and shall cease upon retirement in full of the Bonds. The levy and collection of the 0.75% Sales and Use Tax shall commence on the day following the date of expiration of the Prior Tax, and shall cease upon retirement in full of the Bonds. Any collections of the Prior Tax received after its expiration shall be used, if necessary or appropriate, to provide for the payment of debt service on the Bonds. Revenues resulting from the collection of the Sales • and Use Tax shall be utilized solely for the payment of debt service on the Bonds. • ion 2. That under the authority of Amendment 62 and the Local Government Bond Act and subject to approval by the electors of the City as provided in Section 3 below, there is hereby authorized (1) the issuance of the City's capital improvement bonds in the aggregate principal amount of not to exceed $25,000,000 for the purpose of financing all or a portion of the costs of acquisition, construction, reconstruction, extension and equipping of certain improvements to the City's wastewater treatment plants, sewerage and related facilities, including right-of-way acquisition, (2) the issuance of the City's capital improvement bonds in the aggregate principal amount of not to exceed $17,000,000 for the purpose of directly • financing all or a portion of the costs of acquisition, construction, reconstruction, extension and •equipping of certain improvements to the City's wastewater treatment plants, sewerage and related facilities, including right-of-way acquisition, or, alternatively, for the purpose of refunding water and wastewater revenue bonds originally issued to finance said improvements, (3) the issuance of the City's capital improvement bonds in the aggregate principal amount of not . to exceed $65,900,000 for the purpose of financing all or a portion of the costs of acquisition, construction; reconstruction, repair, straightening and widening of certain City streets, which =may include related sidewalk, traffic signal and control, curbing, guttering and drainage • improvements and right-of-way acquisition, and (4) the issuance of the City's capital improvement bonds. in the aggregate principal amount of not to exceed $2,100,000 for the purpose of financing all or a portion of the costs of acquisition and construction of certain City trail system improvements, which may include related pedestrian signal and drainage improvements and right-of-way acquisition. If the issuance of any of the aforementioned capital • improvement bonds (collectively, the "Bonds') is approved by the electors of the City, such Bonds may thereafter be issued in one or more series from time to time in an aggregate principal "'iN otM not to exct»il the respective -principal amount(s) approved by the City's electors. Ir approved by the electors of the City and issued, the Bonds shall be secured by a pledge of and a lien upon all of the receipts of the Sales and Use Tax, as authorized by the Local Government Bond Act. Section 3. That there be, and there is hereby called, a special election to be held on • Tuesday, September 12, 2006, at which election there shall be submitted to the electors of the City the questions of the issuance of the Bonds. Section 4. That the questions shall be placed on the ballot for the special election in substantially the following forms: 3 The bonds described below that are approved may be combined into a single issue or may • be issued in series from time to time. If the bonds for one or more of the purposes described below are approved, there will be levied (i) a one -quarter of one percent (0.25%) sales and use tax (the "0.25% Sales and Use Tax") and (ii) a three-quarter of one percent (0.75%) sales and use tax (the "0.75% Sales and Use Tax"), the net collections of which remaining after the State of • Arkansas deducts its administrative charges will be used solely to retire the bonds and • obligations. of the City with respect thereto. The levy and collection of the 0.25% Sales and Use Tax will commence on January 1, 2007. The aforementioned 0.75% Sales and Use Tax will replace an existing three-quarters of one percent sales and use tax (the "Prior Tax"). The Prior Tax is pledged to the payment of certain existing indebtedness of the City and will continue to be levied and collected until such existing indebtedness is paid in full. The levy and collection of the 0.75% Sales and Use Tax shall commence on the day following the date of expiration of the Prior Tax. Question One• : There is submitted to the qualified electors of the City of Fayetteville, Arkansas, • the question of the issuance of capital improvement bonds in principal amount not to exceed $25,000,000 (the "Wastewater Improvement Bonds") pursuant to Title 14, Chapter 164, Subchapter 3 of the Arkansas Code of 1987 Annotated (the • "Local Government Bond Act") for the purpose of financing all or a portion of the costs of acquisition, construction, reconstruction, extension and equipping of certain improvements to the City's wastewater treatment plants, sewerage and • related facilities. If the issuance of the Wastewater Improvement Bonds is approved, the Wastewater Improvement Bonds shall be secured by a pledge of and lien upon (i) all of the receipts of the 0.25% Sales and Use Tax and (ii) all of the receipts of the 0.75% Sales and Use Tax, each levied pursuant to the Local Government Bond Act. Vote on the question by placing an "X" in one of the squares following the question, either for or against: FOR the issuance of Wastewater Improvement Bonds in principal amount not to exceed $25000,000 for the purpose of financing all or a portion of the costs of acgwsruon, 'construction, reconstruction, extension and equipping of certain improvements to the City's wastewater treatment plants, sewerage and related facilities, including right-of-way acquisition...»..............................»...»..O AGAINST the issuance of Wastewater Improvement Bonds in principal amount not to exceed $25,000,000 for the purpose of financing all or a portion of the costs of acquisition, construction, reconstruction, extension and equipping of certain improvements to the City's wastewater treatment plants, sewerage and related facilities, including right-of-way acquisition...........................................O ` 4 l Two: There There is submitted to the qualified electors of the City of Fayetteville, Arkansas, the question of the issuance of capital improvement bonds in principal amount not to exceed $17,000,000 (the "Wastewater Improvement/Refunding Bonds") pursuant to the Local Government Bond Act for the purpose of directly financing all or a portion of the costs of acquisition, construction, reconstruction, extension and equipping of certain improvements to the City's wastewater treatment plants, sewerage and related facilities (the "Project') or, alternatively, for the purpose of refunding the City's water and wastewater revenue bonds originally issued to finance all or a portion of the Project. If the issuance of the Wastewater • Improvement/Refunding Bonds is approved, the Wastewater Improvement/Refunding Bonds shall be secured by a pledge of and lien upon (i) all of the receipts of the 0.25% Sales and Use Tax and (ii) all of the receipts of the 0.75% Sales and Use Tax, each levied pursuant to the Local Government Bond Act. Vote on the question by placing an "X" in one of the squares following the question, either for or against: FOR the issuance of Wastewater Improvement/Refunding Bonds in principal amount not to exceed $17,000,000 for the purpose of financing or refinancing all or a portion of the costs of acquisition, construction, reconstruction, extension and equipping of certain improvements to the City's wastewater treatment plants, ' sewerage and related facilities, including right-of-way acquisition ................0 AGAINST the issuance of Wastewater Improvement/Refimding Bonds in principal amount not to exceed $17,000,000 for the purpose of financing or refinancing all or a portion of the costs of acquisition, construction, reconstruction, extension and equipping of the improvements to the City's wastewater treatment plants, sewerage and related facilities, including right-of- way acquisition.....................................................................:.......O Question Three: ... , `i There is sub tted to the qualified electors.of the City of Fayetteville, Arkansas, the question of the issuance of capital improvement bonds in principal amount not to exceed $65,900,000 (the "Street Improvement Bonds") pursuant to the Local Government Bond Act for the purpose of financing all or a portion of the costs of acquisition, construction and equipping of certain street improvements. If the • issuance of the Street Improvement Bonds is approved, the Street Improvement Bonds shall be secured by a pledge of and lien upon (i) all of the receipts of the 0.25% Sales and Use Tax and (ii) all of the receipts of the 0.75% Sales and Use Tax, each levied pursuant to the Local Government Bond Act. Vote on the question by placing an "X" in one of the squares following the question, either for or against: • . '111 -II , . ,.,'- .. ... �- 411!!, • I •15fni AGAINST the issuance of Street Improvement Bonds in principal amount not to exceed $65,900,000 for the purpose of financing all or a portion of the costs of acquisition, construction, reconstruction, repair, straightening and widening of certain City streets, which may include related sidewalk, traffic signal and control, curbing, guttering and drainage improvements and right-of-way acquisition .....0 Question Four: There is submitted to the qualified electors of the City of Fayetteville, Arkansas, the question of the issuance of capital improvement bonds in principal amount not to exceed $2,100,000 (the "Trail Improvement Bonds') pursuant to the Local Government Bond Act for the purpose of financing all or a portion of the costs of acquisition, construction and equipping of certain City trail system improvements. If the issuance of the Trail Improvement Bonds is approved, the Trail Improvement Bonds shall be secured by a pledge of and lien upon (i) all of the receipts of the 0.25% Sales and Use Tax and (ii) all of the receipts of the 0.75% Sales and Use Tax, each levied pursuant to the Local Government Bond Act. Vote on the question by placing an "X" in one of the squares following the question, either for or against: FOR the issuance of Trail Improvement Bonds in principal •amount not to exceed $2,100,000 for the purpose of financing all or a portion of the costs of acquisition and construction of certain City trail system improvements,, which may include related pedestrian signal and drainage improvements and right-of-way acquisition. . . . . S..... S S S •S• • SSSS.•••• S S S.. S S 55••••••• e S•• eSSe S. S SSSS S SSSSSSS.S snse • • • • S •• S 55.0 AGAINST the issuance of Trail Improvement Bonds in principal amount not to exceed $2,1 O 000 for the purpose of financing alior a.portion of the costs of acquisition and construction of certain City trail system improvements, which may include related pedestrian signal and drainage improvements and right -of- • way acginsi oa.........................../............/....................................O Section 5. That the election shall be held and conducted and the vote canvassed and the results declared under the law and in the manner now provided for Arkansas municipal elections unless otherwise provided in the Local Government Bond Act, and only qualified voters of the City shall have the right to vote at the election. The City Clerk is hereby directed to give notice of the special election by one advertisement in a newspaper of general circulation within the City, the publication to be not less than ten (10) days prior to the date of the election. rr r _1w r • r r: r r% r' .� r r- Washington r n Board II r rrr r rr i r- aelection r i r r r, -s m r- provided. rrw rr r r Ordinance r r -r , , r' Iur: rr'r r r: r r r r • r ' r: rrr r r- - PV r : r' soon r r Section 7. That the results of the special election shall be proclaimed by the Mayor, and his proclamation shall be published one time in a newspaper of general circulation within the City. The proclamation shall advise that the results as proclaimed shall be conclusive unless attacked in the Circuit Court of Washington County within thirty(30) days after the date of publication of the proclamation. Section 8. That the Mayor and the City Clerk, for and on behalf of the City, be, and they hereby are authorized and directed to do any and all things necessary to call and bold the special • election as herein provided and, if the issuance of any of the Bonds are approved by the electors, to cause the Sales and Use Tax to be collected in accordance with the Local Government Bond Act, and to perform all acts of whatever nature necessary to carry out the authority conferred by . this Ordinance. • Section 9. That, for purposes of the Sales and Use Tax, the term "single transaction" is defined according to the nature of the goods purchased as follows: • A. When two (2) or more devices in which, upon which or by which any person or property is, or may be, transported or drawn, including, but not ' limited to, on -road vehicles, off -road vehicles or farm vehicles, whether required to be licensed or not, airplanes, water vessels, motor vehicles, non -motorized vehicles or mobile homes, are sold to a person by a seller, each individual unit, whether part of a "fleet" sale or not, shall be treated as a single transaction for the purposes of the Sales and Use Tax; B. Charges for utility services which are subject to the Sales and Use Tax, and which are furnished on a continuous service basis, whether such services are paid for daily, weekly, monthly or annually, shall be computed in daily increments, and each such daily charge increment shall be considered to be a single transadflbn for the purposes bfthe Sales and Use Tax; C. For sales of building materials and supplies to contractors, builders or other persons, a single transaction, for the purposes of the Sales and Use Tax, shall be deemed to be any single sale which is reflected on a single invoice, receipt or statement, on which an aggregate sales (or use) tax figure has been reported and remitted to the State of Arkansas; D. When two (2) or more items of major household appliances, • commercial appliances, major equipment or machinery are sold, each individual • unit shall be treated as a single transaction for the purposes of the Sales and Use Tax; and r groceries, 1 1 FII 1 1- , 1 1 1 • r' 1 1 1, 1 for1 1 , :: single1 1 : :, 11 ,' 1 I 11- 1 1 • 1 MII • • 1 • 1 111 • I 1 In the event that the General Assembly of the State of Arkansas shall define "single transaction," the General Assembly's definition shall replace the one in this Section 9. :111 1 1; ii 11' 1'••1:1 ,1- cl: .1111 .il :1 1 1 1 1' I I • 1- u 1 1 I I :11 1 1 1 1 1 1 1 1 1 1- . 1>-•' 1- 1 1 1 V 1: •' 1• 1 1 1 1 Ill! 1 1' 1 1 1 1 1 f 1 1 1 1. 1 •_ • Ii•♦ I. 1•:1 1 1 1 %1 - .I I- I L: 1 1 I' • I I I I I I •: •;.41_. u • :• I•' :II •' • Section 11. That Kutak Rock LLP is hereby engaged as Bond Counsel and Stephens Inc. is hereby engaged as Underwriter with respect to the issuance of the Bonds. The fees and expenses of Bond Counsel and the Underwriter shall be a cost of issuance of the Bond to be paid with Bond proceeds. Section 12. That the provisions of this Ordinance are hereby declared to be separable and if any provision shall for any reason be held illegal or invalid, such holding shall not affect the validity of the remainder of this Ordinance. • Section 13. That all ordinances and parts thereof in conflict herewith are hereby repealed to the extent of such conflict _ PASSED and4PPROVED this 2016 day of June, 2006. o'tia F•'•G� s ;FAYETTEVILLE� • APPROVED: ATTEST: D 9444 N SONDRA SMITH, City Clerk • • lw_DIL •.V_ Y The undersigned, City Clerk of the City of Fayetteville, Arkansas, hereby certifies that the foregoing is a true and perfect copy of an Ordinance adopted at a regular meeting of the City Council of the City of Fayetteville, Arkansas, held at 6:00 p.m. on June 20, 2006. DATED: )1 n o ac) .2006. mZthL SOi+IDRA SMITH, City Clerk y' 1 '1 11 1 11" r M ►-_ i.. r. rr .r .:. � I .� I it r, n f_AIbj .r •' r r.: r i . , r 9 City Council Meeting Minutes June 20, 2006 Page I of 10 S. Mayor Dan Coody City Attorney Kit Williams City Clerk Sondra Smith n Aldermen Ward 1 Position I - Robert Reynolds Ward I Position 2- Brenda Thiel Ward 2 Position I - Kyle B.. Cook Ward 2 Position 2 - Don Mart Ward 3 Position I- Robert K. Rhoads Ward 3 Position 2 —Robert Ferrell Ward 4 Position 1 - Shirley Lucas Ward 4 Position 2- Lioneld Jordan City of Fayetteville Arkansas City Council Meeting Minutes June 20, 2006 A meeting of the Fayetteville City Council was held on. June 20, 2006 at 6:00 PM in Room 219 of the City Administration Building located at 113 West Mountain Street, Fayetteville, Arkansas. Mayor Coody called the meeting to order. PRESENT: Alderman Thiel, Cook, Marr, Rhoads, Ferrell, Lucas, Jordan, Mayor Coody, City Attorney Kit Williams, City Clerk Sondra Smith, Staff, Press, and Audience. ABSENT: Alderman Reynolds Pledge of Allegiance Police Department Presentation Recoenizine 12 members of the Fayetteville Citizen's Police Academy — Sergeant Shannon Gabbard Sergeant Gabbard presented the members of the Fayetteville Citizen's Policy academy a certificate and a shirt for their participation in the academy. The following were presented with Certificates and a shirt: William Jackson, Evelyn Jackson, Marie Mitchell, Marvin Mitchell Peggy Harp, Joe Woessner, Fred Cusanelli, Mya Fulton, Richard Guthrie, Bob Reilly, Trish Hollenbeck, and Danette Williams. Mayor Coody: I hope that all the people that participated in the Police Academy recognized the level of professionalsion that our Police Department has. 113 West Mountain 72701 (479) 521-7700 (479) 575-8257 (Fax) acc¢ssfirvetteville.nro City Council Meeting Mimi June 20, 2006 Page2 of10 Nominating Committee Report: Kyle Cook, Chairman Alderman Cook gave the Nominating Committee Report and thanked Amber Wood in the City Clerk's office for typing the report. A copy of the report is attached. Alderman Cook moved to approve the Nominating Committee Report. Alderman Marr seconded the motion. Upon roll call the motion passed 7-0. Alderman Reynolds was absent. CONSENT: Approval of the June 6, 2006 City Council Meeting Minutes. Approved Rescind Res. 82-06 — McClelland Consulting Engineers Task Order #13: A resolution rescinding the budget adjustment approved by Resolution No. 82-06 of May 2, 2006. Resolution 110-06 as Recorded in the Office of the City Clerk. Professional Turf Products of Tulsa — Bid # 06-38: A resolution awarding Bid # 06-38• and approving the purchase of two (2) multi -deck turf mowers from Professional Turf Products of Tulsa in the amount of $43,987.00 for use by the Parks & Recreation Division. Resolution 111-06 as Recorded in the Office of the City Clerk., Radisson Hotel Parking Space Lease Agreement: A resolution approving a lease agreement with Radisson Hotel Fayetteville for the use of 178 parking spaces on Level One and Three of the Meadow Street Municipal Parking Garage. Resolution 112-06 as Recorded in the Office of the City Clerk. Alderman Ferrell moved to approve the Consent Agenda as read. Alderman Jordan seconded the motion. Upon roll call the motion passed 7-0. Alderman Reynolds was absent. Crystal Springs IV Appeal: Appeal the approval of the PPL 06-1977 Preliminary Plat Crystal Springs IV for property located north of Mt. Comfort Road, at the end of Raven Lane. This item was tabled at the June 6, 2006 City Council meeting to the June 20, 2006 City Council meeting. Jeremy Pate, Director of Current Planning: The bridge will be constructed prior to any homes being built, it will be constructed with Phase one. That will be an additional condition of approval should you chose to affirm the Planning Commission's decision to uphold this 113 West Mountain 72701 (479) 521-7700 (479) 575-8257 (Fax) accessfayettevillaorg City Council Meeting Minutes June 20, 2006 Page 3 of 10 preliminary plat. This was also tabled to discuss the connectivity issue and street connections to Woodlark and Raven. As it currently stands this project is connecting the two existing street stub outs, one to Woodlark Lane and one to Raven. Staffs position is that both connections are warranted and both are supported by The City Council's policy of connectivity. We are recommending both connections at this time. Alderman Jordan: This is something Shirley and I have worked on with the neighborhood, owners and the developers and over the course of the last few weeks we have come to some compromises. The neighborhood, owners and developers are Wright with making the connection through Raven and leaving the connectivity off Woodlark. The bridge will be installed and no houses will be built until the bridge is built. That seems to be agreeable to all parties at this point in time. Alderman Lucas: When you look at this development you have connectivity. We still need to correct Mount Comfort, there needs to be improvements to Mount Comfort. Wayland Harris, speaking on behalf of the residents of Bird Haven Subdivision: We are in agreement with what has been worked out. We would like to ask for approval of this tonight. Bill Overby a resident Woodlark Lane: Woodlark was never considered to be a through street. I appreciate connectivity, I believe we have it and I would strongly urge you to consider the recommendation of Alderman Jordan. SRickReed, Woodlark Lane: At no point under any circumstance is any additional traffic welcomed to Bird Haven. You have north and south access through Salem Road and Deane Solomon. We urge you to please not allow this to happen. City Attorney Kit Williams: In speaking to Alderman Jordan earlier he indicated that a possible solution had been arrived at so I prepared a resolution that would grant the appeal and approve the preliminary plat as slightly modified. It would make Raven the north south connection but not Woodlark. We also need to incorporate the language that Jeremy has that would require the building of the bridge prior to the sale of any house lot. A sidewalk would go where the street is currently platted. A revised resolution was passed out to the City Council. Alderman Cook: I always support connectivity but I certainly respect the Aldermen and their work on this issue, they have come to a good solution. Alderman Lucas moved to approve the revised resolution as prepared by City Attorney Kit Williams. Alderman Jordan seconded the motion. Upon roll call the resolution passed 7-0. Alderman Reynolds was absent. Resolution 113-06 as Recorded in the Office of the City Clerk RZN 06-2028 Mountain Ranch RMF-18: An ordinance rezoning that property described in rezoning petition RZN 06-2028 for approximately 9.16 acres, located west of I-540 and south of 113 West Mountain 72701 (479) 521-7700 (479) 575-8257 (Fax) accessfavetteville.ory City Council Meeting Minutes June20 2006 Page4 of 10 Betty Jo Drive, from C-1, Neighborhood Commercial and R -A, Residential -Agricultural to RMF-18, Residential Multi -Family, 18 units per acre. This ordinance was left on the first reading at the June. 6, 2006 City Council meeting. City Attorney Kit Williams: The petitioner has decided to request a different rezoning. Jeremy Pate: That is correct. The applicant has changed their request to a C -I zoning. Alderman Jordan moved to amend the ordinance by changing the zoning to C-1. Alderman Marr seconded the motion. Upon roll call the motion passed 7-0. Alderman Reynolds was absent. City Attorney Kit Williams read the ordinance. Alderman Jordan moved to suspend the rules and go to the third and final reading. Alderman Lucas seconded the motion. Upon roll call the motion passed 7-0. Alderman Reynolds was absent. City Attorney Kit Williams read the ordinance. Mayor Coody asked shall the ordinance pass. Upon roll call the ordinance passed 7-0. Alderman Reynolds was absent. Ordinance 4887 as Recorded in the Office of the City Clerk. West Fayetteville Annexation Election: An ordinance calling an election to determine whether approximately 2,000 acres contiguous to the western city limits should be annexed into Fayetteville. This ordinance was amended and left on the first reading at the June 6, 2006 City Council meeting. Alderman Jordan moved to suspend the rules and go to the second reading. Alderman Ferrell seconded the motion. Upon roll call the motion passed unanimously. City Attorney Kit Williams read the ordinance. Tim Conklin, Planning and Development Management Director: At your last meeting you indicated that you would like our Annexation Study Committee to meet with Farmington. They contacted us and we met. We asked Farmington what they would like the Fayetteville City Council to know with regard to their recommendation for an annexation line between the two cities. At our last Council meeting, City of Farmington Alderman Ernie Penn, indicated that if someone wants to be annexed into Fayetteville they would agree to allow that to happen. Mr. Conklin showed the Council a map with the proposed annexation area as requested by the aCity of Farmington. You also made a motion to have the Special Election during the General Election. I believe the Election Commission is here to discuss some of those issues with that election date. Staff would 113 West Mountain 72701 (479) 521-7700 (479) 575-8257 (Fax) accessfavettevilleore City Cwocil Mating Minute June 20, 2006 Page5 of10 recommend not placing the annexation election with the election for the wastewater treatment plant or the street bond program election. Alderman Lucas: I asked Farmington if there was any room for negotiation and they said there was not. Alderman Ferrell: How many acres will be included in the annexation election, if we went with what Farmington wanted as opposed to what we initially started out with. Tim Conklin: There would be around 500 acres less. Tim showed the City Council on the map where Fayetteville can grow to in the future on the west side: Alderman Lucas: We studied this and looked at all aspects of it. It is growing out there and would be a perfect place to put a commercial node and this area would service it. We are going to provide the services for this area so it should be in the City. We as a task force felt this was the appropriate area to.bring in. A discussion followed on the proposed annexation area. John Burrow, Chairman of the Washington County Election Commission: We are here to ask you to help us out with this election. We are implementing a whole new scheme of things in election technology and the whole State of Arkansas is having an interesting experience with that. We are still running kind of scared for the General Election in November. It would be very desirable,to have this election in December. That would enable us to get all of the other elections out of the way. You will make our job a whole lot easier for the General Election if we don't have this election going on during it. The biggest problem that we have with elections is the confusion the voting community has about where they are suppose to go an vote. We could potentially have a lot of residents who are confused about whether or not they are qualified to vote in the annexation election waiting in line for a considerable amount of time and then having to call the County Clerk's office. It would be a stressful experience for our polling places. Alderman Thiel: The money for these elections comes out of the City Clerk's budget. How many elections did you have budgeted. Sondra Smith, City Clerk/Treasurer: I budgeted for one special election and the General Election. The Library's Special Election was paid for with the money budgeted for a special election. Alderman Thiel: We are going to have the bond election which was not budgeted, would it be better to push this annexation election into next years budget. Sondra Smith: That is up to the Council. We have seen an increase in the cost of elections so it might be better to pay for it this year. Mayor Coody: We can always appropriate the money out of the General Fund surplus. 113 West Mountain 72701 (479) 521-7700 (479) 575-8257 (Fax) nrrxc,vesfrv:ll....o City Council Meeting Minutes June 20,2006 Page 6 of 10 Alderman Thiel moved to amend the date for the Special Election to December 12, 2006. Alderman Marr seconded the motion. Upon roll call the motion passed 7-0. Alderman Reynolds was absent. Alderman Lucas: With this intent to annex does that protect that area from anyone else annexing it? City Attorney Kit Williams: My feeling is that probably the actual act of annexation is what controls. When it becomes annexed then no other city can come back and get it. Alderman Marr: Is there any other date earlier than December 12i° that we can'consider. Alderman Lucas: That is developing out there and if we want to designate a commercial node we need to move forward. Alderman Thiel moved to reconsider the December 12, 2006 Special Election date. Alderman Ferrell seconded the motion. Upon roll call the motion passed 7-0. Alderman Reynolds was absent. Alderman Thiel moved to amend the date for the Special Election to October 10, 2006. Alderman Marr seconded the motion. Upon roll call the motion passed 7-0. Alderman Reynolds was absent. Alderman Cook: I think annexation is a mistake. Our Police and Fire Departments will need more money we will have to extend sewer service and trash service. I do not think annexation is a good idea. Alderman Man: I think the citizens are going to decide if this is a good or bad thing, I am going to support the election for the citizens to help us make that decision. Alderman Marr moved to suspend the rules and go to the third and final reading. Alderman Jordan seconded the motion. Upon roll call the motion passed 7-0. Alderman Reynolds was absent. CityAttorney Kit Williams read the ordinance. Mayor Coody asked shall the ordinance pass. Upon roll call the ordinance passed 6-l. Alderman Cook voting no. Alderman Reynolds was absent. Ordinance 4888 as Recorded in the Office of the City Clerk NEW BUSINESS: Amend Chapter 72 — Parking Garage Rate Adjustment: An ordinance amending § 72.58 (1), (1), City Parking Garage on Meadow Street, to adjust per visit rates. CityAttorney Kit Williams read the ordinance. 1 13 West Mountain 72701 (479) 521-7700 (479) 575-8257 (Fax) .rr cef0..s.M-11.. ..... City Council Meeting Minutes June 20.2006 Page 7 of 10 Alderman Jordan moved to suspend the rules and go to the second reading. Alderman Ferrell seconded the motion. Upon roll call the motion passed 7-0. Alderman Reynolds was absent. City Attorney Kit Williams read the ordinance. Alderman Jordan moved to suspend the rules and go to the third and final reading. Alderman Marr seconded the motion. Upon roll call the motion passed 7-0. Alderman Reynolds was absent. City Attorney Kit Williams read the ordinance. Mayor Coody asked shall the ordinance pass. Upon roll call the ordinance passed 7-0. Alderman Reynolds was absent. Ordinance 4889 Recorded in the Office of the City Clerk Duncan Associates Road Impact Fee Study: A resolution to accept and adopt the May 2006 Road Impact Fee Study by Duncan Associates. ' Tim Conklin: What is before you this evening is to adopt the Road Impact Fee Study that was updated in May, 2006. You are just adopting the study. The next step would be for our City Attorney's office to draft an Impact Fee Ordinance to be considered by the City Council. Our City Attorney has placed in the resolution a statement that impact fees if enacted will not include the right of way acquisition cost. Alderman Jordan: This has been through the Street Committee and we did agree to the study. Alderman Jordan moved to approve the resolution. Alderman Marr seconded the motion. Upon roll call the resolution passed 6-1. Alderman Ferrell voting no. Alderman Reynolds was absent. Resolution 114-06 as Recorded in the Office of the City Clerk. Duncan Associates Water & Wastewater Impact Fee Update: A resolution accepting a proposal from Duncan Associates in the amount of $110,000.00 to update the existing Water and Wastewater Impact Fees, to calculate fees for the collection system, and negotiate contracts with the cities of Elkins, Farmington and Greenland to pay for and provide potential Water and Wastewater Impact Fees within their corporate boundaries. Tim Conklin: I am working with the Mayors of three cities to have an agreement signed. The City Attorney's office has finalized that agreement and it has been sent to Elkins and Farmington. I will have it to Greenland tomorrow. I would ask that this be tabled until I can bring forward the actual contract. Alderman Ferrell: Tim I appreciate you going forward and visiting with the Mayors. 113 West Mountain 72701 (479) 521-7700 (479) 575-8257 (Fax) nrrceefnvNtmri II - .,.r City Council Mating Minutes June 20, 2006 Page8 of10 Alderman Cook moved to table the resolution to the July 6, 2006 City Council meeting. Alderman Ferrell seconded the motion. Upon roll call the motion passed 7-0. Alderman Reynolds was absent. This resolution was tabled to the July 6, 2006 City Council meeting. ADM 06-2093 - Sprinewoods C-PZD Amendment: An ordinance to amend the approved Commercial Planned Zoning District titled C-PZD 03-8.00, Springwoods, located at 1-540 and Hwy 112, containing approximately 289.26 acres. City Attorney Kit Williams read the ordinance. Jeremy Pate: The staff and the Planning Commission are recommending this amendment. This would allow for three uses within the Use Unit 4, elder care, hospital and dormitory. Lot 6 was planned as a commercial type development lot and all of the use units for typical commercial developments have already been approved. Use Unit 4 Cultural and Recreational Facilities was not one of those and the applicant is indicating they would like to develop something that would fall within that specific use unit. Alderman Cook moved to suspend the rules and go to the second reading. Alderman Ferrell seconded the motion. Upon roll call the motion passed 7-0. Alderman Reynolds was absent. City Attorney Kit Williams read the ordinance. Alderman Jordan moved to suspend the rules and go to the third and final reading. Alderman Lucas seconded the motion. Upon roll call the motion passed 7-0. Alderman Reynolds was absent. City Attorney Kit Williams read the ordinance. Mayor Coody asked shall the ordinance pass. Upon roll call the ordinance passed 7-0. Alderman Reynolds was absent. Ordinance 4890 Recorded in the Office of the City Clerk. Special Election Capital Sales Tax Extension: An ordinance calling for a Special Election on September 12, 2006 to extend the current three quarter (3/) cent Capital Sales Tax and authorize a one quarter ('/4) cent Capital Sales Tax for a Total Sales Tax of one (1) cent, issue bonds and short-term debt to pay for additional cost of the. Waste Water System Improvement Program and for Phase I of the Transportation Improvement Program as recommended by the Street Committee and the Water and Sewer Committee. City Attorney Kit Williams: The draft that we handed out had some blanks in it so we fine tuned it. We handed one out tonight that says final on the top of it. I would like a motion to amend the draft ordinance. 113 West Mountain 72701 (479) 521.7700 (479) 575-8257 (Fax) nrrspafavftrvilln pro City Council Meeting Minutes June 20, 2006 Page 9 of 10 Alderman Jordan moved to amend the Draft Version of the ordinance to the Final Version of the ordinance. Alderman Rhoads seconded the motion. Upon roll call the motion passed 7-0. Alderman Reynolds was absent. City Attorney Nit Williams read the ordinance. Alderman Man moved to suspend the rules and go to the second reading. Alderman Jordan seconded the motion. Upon roll call the motion passed 7-0. Alderman Reynolds was absent. City Attorney Kit Williams read the ordinance. Alderman Jordan moved to suspend the rules and go to the third and final reading. Alderman Ferrell seconded the motion. Upon roll call the motion passed 7-0. Alderman Reynolds was absent. City Attorney Nit Williams read the ordinance. Mayor Coody asked shall the ordinance pass. Upon roll call the ordinance passed 7-0. Alderman Reynolds was absent. Ordinance 4891 Recorded in the Office of the City Clerk Planning Commission Compensation: An ordinance to amend § 33.108 Compensation of Article VII Planning Commission of the Fayetteville Code to provide that Planning Commissioners shall be compensated. City Attorney Nit Williams read the ordinance. Alderman Man: The City of Fayetteville is the last city in Northwest Arkansas to do this and normally we are a leader in these areas. Benton County pays $100 a meeting plus mileage, Rogers pays $300 a month, Springdale pays $300 a month, Bentonville pays $3,600 a year and Washington County pays $75 a meeting. I certainly think our commission is worth this in terms of the value of the position. The amount that I chose was based on where we are today, I do not think it is enough. Mayor Coody: The Planning Commissioners put in a tremendous amount of time and effort, they take a lot of heat as well. We appreciate all their service. I do think they need to be compensated. Alderman Marr moved to suspend the rules and go to the second reading. Alderman Jordan seconded the motion. Upon roll call the motion passed 7-0. Alderman Reynolds was absent. ftCity Attorney Kit Williams read the ordinance. 113 West Mountain 72701 (479) 521-7700 (479) 575-8257 (Fax) accessfavetteville.org City Council Meeting Mniates June 20, 2006 Page 10 of 10 Alderman Marr moved to suspend the rules and go to the third and final reading. Alderman Jordan seconded the motion. Upon roll call the motion passed 7-0. Alderman Reynolds was absent. City Attorney Kit Williams read the ordinance. Mayor Coody asked shall the ordinance pass. Upon roll call the ordinance passed 7-0. Alderman Reynolds was absent. Ordinance 4892 Recorded in the Office of the City Cleric 7:35 PM Dan Coody, Sondra Smith, City Clerk/Treasurer CERTIFICATE OF RECORD State of Arkansas City of Fayetteville } ss. 1, Sondra Smith, City ClerWtreasurer for the City of Fayetteville, do hereby certify that the foregoing instru nt is a true and correct of the original fiked 'n my office on the dnar�ay of and seal this / �y S. 113 West Mountain 72701 (479) 521-7700 (479) 575-8257 (Fax) accessfavetteville.ore t:V.: r.all, i-: ail L'ORi HY; f:ST ARKANSAS EDITION • i • • • • • :• .1 1 • AFFIDAVIT OF PUBLICATION • 1, Elizabeth Wax, do solemnly swear that I am Legal Clerk of the Arkansas Democrat Gazette newspaper. Printed and published In Benton County Arkansas, (Lowell) and that from my own personal knowledge and reference to the files of said publication, the advertisement of: Ordinance 4891 Was inserted in the Regular Editions: June 29, 2006 Publication Charge: $843.15 . .•.: a. 1 My Commission Expires: Sharlene D. 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BOX 1607 FAYETTEVILLE, AR 72702 PHONE: 479-571-6415 AFFIDAVIT OF PUBLICATION I, Elizabeth Wax, do solemnly swear that I am Legal Clerk of the Arkansas Democrat Gazette newspaper. Printed and published in Benton County Arkansas, (Lowell) and that from my own personal knowledge and reference to the files of said publication, the advertisement of: NOTICE OF SPECIAL ELECTION Was inserted in the Regular Editions: August 30, 2006 Publication Charge: $306.60 Subscribed andAwom to before me Th(5f)day.of (rim , 2006. Notary Public k40a My Commission Expires: • Sharlene D. Williams Notary Public State of Arkansas My Commission Expires October 18, 2014 RECEIVED SEP CIE Fc ER '6 ° CAE S PUBLIC NOTICE CITY OF FAYETTEVILLE, ARKANSAS PROCLAMATION DECLARING THE RESULTS OF ELECTION OFFICE OF THE MAYOR OF THE CITY OF FAYETTEVILLE, ARKANSAS TO THE PEOPLE OF THE CITY OF FAYETTEVILLE, ARKANSAS, GREETINGS: WHEREAS, a Special Election was held on September 12, 2006, regarding the issuance of Capital Improvement Bonds (Wastewater Improvement Bonds) for the purpose of financing certain Wastewater System Improvements, the issuance of Capital Improvement Bonds (Wastewater Improvement/Refunding Bonds) for the purpose of financing or refinancing certain Wastewater System Improvements, Capital Improvement Bonds (Street Improvement Bonds) for the purpose of financing certain Street Improvements and the issuance of Capital Improvement Bonds (Trail Improvement Bonds) for the purpose of financing certain Trail System Improvements as set forth in Ordinance Number 4891. NOW, THEREFORE, I, Dan Coody, Mayor of the City of Fayetteville, by virtue of the authority vested in me by law, do hereby proclaim the following to be the results of the September 12, 2006 Special Election: QUESTION ONE: 4,442 FOR the issuance of Wastewater Improvement Bonds in principal amount not to exceed $25,000,000 for the purpose of financing all or a portion of the costs of acquisition, construction, reconstruction, extension and equipping of certain improvements to the City's wastewater treatment plants, sewerage and related facilities, including right-of-way acquisition. 1.384 AGAINST the issuance of Wastewater Improvement Bonds in principal amount not to exceed $25,000,000 for the purpose of financing all or a portion of the costs of acquisition, construction, reconstruction, extension and equipping of certain improvements to the City's wastewater treatment plants, sewerage and related facilities, including right-of-way acquisition. • QUESTION TWO: 4,433 FOR the issuance of Wastewater Improvement/Refunding Bonds in principal amount not to exceed $17,000,000 for the purpose of financing or refinancing all or a portion of the costs of acquisition, construction, reconstruction, extension and equipping of certain improvements to the City's wastewater treatment plants, sewerage and related facilities, including right-of-way acquisition. 1,437 AGAINST the issuance of Wastewater Improvement/Refunding Bonds in principal amount not to exceed $17,000,000 for the purpose of financing or refinancing all or a portion of the costs of acquisition, construction, reconstruction, extension and equipping of the improvements to the City's wastewater treatment plants, sewerage and related facilities, including right-of-way acquisition. QUESTION THREE: 4.274 FOR the issuance of Street Improvement Bonds in principal amount not to exceed $65,900,000 for the purpose of financing all or a portion of the costs of acquisition, construction, reconstruction, repair, straightening and widening of certain City streets, which may include related sidewalk, traffic signal and control, curbing, guttering and drainage improvements and right-of-way acquisition. t _ 535 AGAINST the issuance of Street Improvement Bonds in principal amount not to exceed $65,900,000 for the purpose of financing all or a portion of the costs of acquisition, construction, reconstruction, repair, straightening and widening of certain City streets, which may include related sidewalk, traffic signal and control, curbing, guttering and drainage improvements and right-of-way acquisition. QUESTION FOUR: 3,532 FOR the issuance of Trail Improvement Bonds in principal amount not to exceed $2,100,000 for the purpose of financing all or a portion of the costs of acquisition and construction of certain City trail system improvements, which may include related pedestrian signal and drainage improvements and right-of-way acquisition. 2,271 AGAINST the issuance of Trail Improvement Bonds in principal amount not to exceed $2,100,000 for the purpose of financing all or a portion of the costs of acquisition and construction of certain City trail system improvements, which may include related pedestrian signal and drainage improvements and right-of-way acquisition. NOW, THEREFORE, I, Dan Coody, Mayor of the City of Fayetteville, do hereby notify all persons that the results of the election regarding Capital Improvement Bonds to be used for certain Wastewater Improvements, certain Street Improvements and certain Trail System Improvements shall be conclusive unless attacked in the courts within thirty (30) days. IN WITNESS WHEREOF, I have hereunto set my hand and caused the seal of my office to be affixed this a% ' day of September, 2006. SONDRA SMITH, City Clerk/Treasurer ;FAYETTEVILLE; • I. Northwest Arkansas Times Benton County Daily Record P. O. BOX 1607 FAYETTEVILLE, AR 72702 PHONE: 479-571-6415 AFFIDAVIT OF PUBLICATION • I, Karen Caler, do solemnly swear that I am Legal Clerk of the Arkansas Democrat Gazette newspaper. Printed and published in Benton County Arkansas, (Lowell) and that from my own personal knowledge and reference to the files of said publication, the advertisement of: PUBLIC NOTICE Was inserted in the Regular Editions: September 29, 2006 Publication Charge: $229.95 Subscribed and sworn to before me This day of �C)� ,/2006. Notary Public 7 2(4/Z�//U&__- My Commission Expires: Sharlene D. Williams Notary Public State of Arkansas My Commission Expires October 18, 2014 RECEIVED OCT 03 2006 CITY OF FAYETTEVILLE CITY CLERK'S OFFICE CITY OF FAYETTEVIIE. AREAHRAll; l! IlESU TS C it e ORCL&fu"O TIME 11"IftTs OF ELW"ON OFFlCE OFTNE MAYOR OF THS CRY OF AasANSAS • FAYETTEwitm. AnKAMSA3 TO THE FEOFAR OF THE CITY OF FAYETTOYNIS. ARKANSAS. ORE171Yaa Sa Specld EfOcttan teas fieldw Sad Boa12. 2011 Eregtap S bvancedtr . Bonds• M'estea.lr t. the sumo BRNC) br' the Iwrproe 01 , Xr 6 ( . teI Syaem erpratIa. 0a suns fi Caput: oiwr>...ara Jciti a (We3e tats - BprbeflR the purygee of frla1c. rdaa�ig•cMeal,WeWewaw ddtYN, pAe.t provenants and 1pa isamnca d Ca$aF Impmemi uent i PRAN'LMs pubs) for the purposed rurenca g certain tit* Syeten inpovwients as aeia ki @lmrme.ra■rbw.aee1. • . " "WrApoRE. I. Den howdy. Mayor of the city of Foyenod& by vets of the aide wee • n ore by Iaw, m hereby proclexn the kdloetng to be tfie rieaius of the Septanbu t7- 2(CG ONE: 1-442 tON the issuatce ri Westewdarr MAvowantw>t "da n pRtclpd aixua rot to Reseed JOO,o0o For ea purpRa d hil&nR iRorti a of the wets of adgdsdiucaraaurIIri, p+oR,wauctkn. extenaon BrntQq epeppmO tflfn ariprovenieob to the (]tyt ieaa6w'met aeaureu plentt ni awape and relsledJsciElel rig -away ecqueltbn. .. ,1.3M AGAINST tfuhfA lSlFSriy I zwr ant Bit denflMiiOatStainot IOeXOe C $25.px1.(xx) to, the polpdm by AMnnrS W R e palhn d the rests a e�uLsiUbx cpnaetltlim. ibconanstwn, n iem.on end egtdppltpd dSNn aMtovnw nts to the City§ waslewate veatnent .... se.arege and ti.4fted IeCdltlee.4KMa1bB'ltBl't'ii-wa( acquaiMrs VON tlw trice dW09ewafa ImpnyyerrarxA49fbaag Bblde in prtnclpotrenwM rot. to pcpolf 2,(i0o,00E br eta pep%e a kancmgx refnvvL 7i;.0 ar a portM:d Ate Doft at acfArl' tI 1tMFtt9re pease, se.etaga mN re( ✓rate[ tSoMie9. FCAndg rrprl!-a- ay ae4Yaiwe• .. . SI MAST the, Saax:e of Waslewafa tdpgyararwRe!bnda9 Bonds in pnn:lpal strand VASAWPINT 170o, .00o0 For the repose a R linaicing MMicel an In rep dl R a paeof e corn' N 98pCaw, tecons!M110%extenti0> and egttlppnxi of Tesnponxrtnds m Th City's alrnthe plants. Sewerage end related Ieciktie9. utcJuding rightciway acguisam MEA[t e I jana of Street tnPovflnt Bones In pnncrpl amixn not ID exceed t the pspoie of rvwtcag ad o, a paten of the was at acgweiam cotxuc9ar. r9pSC urdght.aig and w,deRng at cdtYn CM gU ets: which nay Include related signal a,d control. corning, quashing and drainage nroS1i tband r41l-a-way the i9.ance d Street Inpawwnent Binds l , prncipal anobnt rot id exceedr Ifs purpose a rnatx:ing as R a fxxtnn a me poets d acquusitn,cixrepair, otrailfltaning and wldeNng of cAneat City seawa, which may ire;hlde related n signs and m.drd: cwtwig, gutterU g and drainage 4ntimvernanls Rid right d iwy wnnnN FOIRh . FOR me sstance of trait Intpmerrtent Bonds M pt pa? mrxfint nU to exceed $2.1ob,(Le the purpose of remncinq and or a portico of the costs R ocguisilan mid ccnt8ucvnn of ceded Qty b systw, anproyentRib, whah may Indudetelaed p edestRain srgnd and drainage irnprotencrte And r�Mtitway acquhchon. 22T1 A4SINST the issuance d trail Intprovemenl Smtls in s ncipel min nt red ro evc n 312.10o.ol to, the purpose of hrartcxig aD R e purihn of the costs of awiasthan and ca!ratsrxxl d cRti n City tail system imptoyemenb. Mich may nclude related pedestrian signs and Rartage mpavoniere and i Ight-of.*ey aCquisitbn. . MOAS TItfMFORR I. Can Cooly. Mayo R rte City of Faynaavide. do hereby ngity alt porsws Fid s. rewme a the Medan rogwtl'ng Caning snptotmnara Bonds to eta used fur cenaut W9nasgsewwater Irrgrowanerrs. cerbWI Street Mtppvecr*rib and contain trod System Irttp overrnifi I to c ,ctusi'e untes9 attacked in the courts wrann Itarty (30) days. A TRTNESS WHIREOF. 1 have hereunto sal my hand and caused the seal it my office Ic he hKad ads 27th da M ^mpiRrber t'006 - t •I�' 1 • " 11 f • •• : • • • •CO?AMIONERS •11 ..11 . . 11 : • :1 . . \ . 1 I .• 11.. . 114 . ' I..I.. . I n .:11..' .4 _ • ha — II ' � 1 . I n - I -� I I - I 1 - 1 - -.4 . 1 -. _ 1: . 141 4 J 1 4 1 1 :K ingto . 11 1 \ I I li '� . 1 1.. La •1•.. .• • • .. •: 1 : 1 • • - :1 • I . • V I • 11 1. • 1 1 . \ st I 1 1 h '1.. :I1... . V111 •: I11111 • 41I 411 .. L• 1 I LM p: :111 • II I11 .• .._• 111 111 b. , n :ter Ian • 4u.n1 : of •: l II :n n M• I r4 I' 1 r:n • 1 1 "tijr 1" Annotated n 1 V. f . .r Iue41 : nl.. it LII h• I I W I is an i .1 1 . 1 . 1 . 11 ost • acquisition, . • 1 1 M • • I _ .' • 1 11 \ • 1 extension .11.• 1 • • 11 ' • 4 II 1 11•' 1 1 u • 111 4n • :11 K . 1 • ate I:. • 4. FOR 4,442 win AGAINST: 1.384 votes On the question of the issuance of capital improvemwt bonds In principal amount not to exceed $17,000,000 (the "wastewater Imptovemeat/Retimdmg Bonds") pursuant to the Local Government Bond Act for the purpose of directly financing all or a portion of the coats of acquisition, constuction, reconstruction, extension and equipping of certain improvements to the City's wastewater uestdent plants, sewerage and rotated facilities (the "Project") or, alternatively, for the purpose of refmding the City's water and wastewater revenue bonds originally issued to finance all or a portion of the Project. FOR 4.433 votes AGAINST: r_4o;_votes On the question of the issuance of capital improvement bonds in principal amount not to . exceed $65,900.000 (the "Street Imp[ovement Bonds") pmaoant to the Local Government Bond Act for the purpose of financing all or a portion of the costs of acquisition, construction and equipping of certain sheet improvements. FOR 4.274 votes AGAINST: 1.536 votes 1t>o-SWbm7.1 ' RECEIVED SEP 2 7 2006 • «yC • On the question of the issuance of capital improvement bonds in principal amount not to. exceed S2,ioo.000 (the 'Trail Improvement Bonds") pursuant to the Local Government Bond Act for the purpose of financing all ore portion of the costs of acquisition, cousuuction and equipping of certain City trail system improvements. FOR: 3.332 votes AGAINST: 2.271 votes irnusourhea&ddsi7.t,*'of September 2006. • t*' A.. LI . ,._..:xi • CLOSING CERTIFICATE AND REQUEST OF THE CITY The undersigned Mayor and City Clerk of the City of Fayetteville, Arkansas, a duly organized municipality and political subdivision of the State of Arkansas (the "City"), do hereby certify, represent, covenant and request as follows: 1. The undersigned are the duly elected, qualified, and acting Mayor and City Clerk of the City, and as such officials have in their possession or have access to the official books and corporate records of the City. This Certificate is executed and delivered in connection with the issuance of the City's $11,250,000 Sales and Use Tax Capital Improvement Bonds, Series 2009 (the "Bonds"). 2. Attached hereto as Exhibit A is a true, complete, and correct copy of Ordinance No. 5277 (the "Bond Ordinance"), duly adopted by a majority of the City Council at a duly called regular meeting of the City Council, open to the public, held October 6, 2009. The Bond Ordinance authorizes the issuance, sale and delivery of the Bonds, and the Bond Ordinance is in full force and effect and has not been altered, amended or repealed as of the date hereof. No petition or petitions to refer the Bond Ordinance to the people under Amendment No. 7 to the Constitution of the State of Arkansas have been filed as of the date hereof, and the City Council has not referred the Bond Ordinance to the people for adoption or rejection. Attached hereto as Exhibit B is a true, complete and correct copy of the minutes of a •meeting of the City Council held October 6, 2009, showing adoption of the Bond Ordinance, as said minutes appear in the official records of the City. At said meeting a quorum was present and acted throughout. Attached hereto as Exhibit C is a true, complete, and correct copy of a publisher's affidavit showing publication of the Bond Ordinance in the Northwest Arkansas edition of the Arkansas Democrat -Gazette on October 14, 2009. No authority or proceeding in connection with the issuance, sale and delivery of the Bonds has been repealed, revoked or rescinded. 3. The following described instruments, as executed and delivered by the Mayor and/or City Clerk, are in substantially the same form and text as the copies of such instruments which were before and approved by the City Council at the October 6, 2009 meeting referred to in paragraph 2 above, with such changes not inconsistent with the Bond Ordinance as have been approved by the officials executing the same. Document Second Supplemental Trust Indenture Date As of November 1, 2009 Other Party or Parties Simmons First Trust Company, N.A., as Trustee (the "Trustee") • Tax Regulatory Agreement November 12, 2009 Trustee 4811-7785-0629.2 S • CI Continuing Disclosure Agreement Bond Purchase Agreement Official Statement November 12, 2009 October 21, 2009 October 21, 2009 Trustee Stephens Inc. (the "Underwriter") None The Second Supplemental Trust Indenture, the Tax Regulatory Agreement, the Continuing Disclosure Agreement, the Bond Purchase Agreement, the Official Statement, and the Reimbursement Agreement dated November 12, 2009, by and between the City and Assurance Guaranty Corp. with respect to the debt service reserve insurance policy for the Bonds (the "Reimbursement Agreement"), are hereinafter collectively referred to as the "City Documents." 4. The persons named below were on the date or dates of the execution of the City Documents, and are on the date hereof, the duly qualified and acting incumbents of the offices of the City set opposite their respective names. The undersigned, or their successors in office, are the authorized representatives of the City for all purposes of the Bond Ordinance and the City Documents. Title Name Mayor Lioneld Jordan City Clerk Sondra Smith 5. The undersigned Mayor of the City did manually execute each of the City Documents and the undersigned City Clerk of the City did manually attest the Second Supplemental Trust Indenture. The undersigned Mayor of the City did manually execute and the undersigned City Clerk did manually attest $11,250,000 aggregate principal amount of Sales and Use Tax Capital Improvement Bonds, Series 2009, said series of bonds being initially issued in the form of six fully registered bonds numbered from R09-1 upwards, initially dated as of November 1, 2009 (the "Bonds"). 6. The City has duly authorized, executed and delivered the Bonds and each of the City Documents by all necessary action and, as of the date hereof, the Bonds and each of the City Documents are in full force and effect and each constitutes the valid, binding and enforceable obligation of the City, except to the extent their enforceability may be limited by bankruptcy, insolvency or other similar laws affecting'creditors' rights generally, or by the availability of equitable remedies, and the City is entitled to the benefits of the same. 7. Any certificate signed by any official of the City (including this certificate) delivered to the Trustee or the Underwriter shall be deemed a representation and warranty by the City to the Trustee or the Underwriter as to the statements made therein (and herein). 8. The seal affixed to this certificate is the legally adopted, proper and only official seal of the City, and has been duly affixed to the Bonds. 4811-7785.0629.2 2 • 9. The meeting of the City Council of the City referred to in paragraph 2 hereof was open to the public in compliance with the provisions of Section 25-19-106 of the Arkansas Code Annotated (2002 Repl.), as amended and supplemented. 10. The present officials of the City and their respective terms are as follows: Name Office Term Expires Lioneld Jordan Mayor 12/31/12 Kit Williams City Attorney 12/31/10 Sondra Smith City Clerk 12/31/12 Kyle Cook Alderman 12/31/10 Adella Gray Alderman 12/31/10 Bobby Ferrell Alderman 12/31/12 Sarah Lewis Alderman 12/31/12 Shirley Lucas Alderman 12/31/10 Matthew Petty Alderman 12/31/12 Robert Rhoades Alderman 12/31/10 Brenda Thiel Alderman 12/31/12 11. The Authorized Representative of the City for all purposes of the Trust Indenture dated as of November 1, 2006, as amended and supplemented by the First Supplemental Trust •Indenture dated as of October 1, 2007, and by the Second Supplemental Trust Indenture (the "Trust Indenture"), is Lioneld Jordan, Mayor, whose signature appears on page 6. Until further written notice to you, any instrument authorized by the Trust Indenture to be signed by an Authorized Representative of the City is to be honored if it contains the manual signature of this individual. 12. The City has not and will not engage in any activity which might result in the income of the Bonds becoming taxable to it or any interest on the Bonds becoming taxable to the recipients thereof under the Federal income tax laws. This covenant is made to all owners of the Bonds, their successors and assigns, as a further inducement for the purchase of the Bonds. 13. All of the conditions, covenants and agreements required in the Trust Indenture to be satisfied or performed by the City at or prior to the issuance and sale of the Bonds have been complied with, satisfied or performed in the manner and with the effect contemplated in the Bond Purchase Agreement and the Trust Indenture. The representations and warranties of the City contained in the Bond Purchase Agreement and the Trust Indenture are true and correct in all material respects on and as of the date of this Certificate as if made on the date of this Certificate. 14. The information contained in the Official Statement relating to the City, its organization, properties, operations and financial condition, and the description of the Bonds, the Trust Indenture, Ordinance No. 4891 of the City adopted June 20, 2006 (the "Election •Ordinance"), the Bond Ordinance, the one -quarter of one percent (0.25%) special city-wide sales and use tax (the "0.25% Sales and Use Tax") and the three-quarters of one percent (0.75%) special city-wide sales and use tax (the "0.75% Sales and Use Tax", together with the 0.25% 3 4811-7785-0629.2 •Sales and Use Tax, the "Sales and Use Taxes"), each levied pursuant to the Election Ordinance and pledged pursuant to the Bond Ordinance, is true and correct in all material respects. To the best of the knowledge of the undersigned, as of its issue date, the Official Statement does not contain any untrue or incorrect statement of a material fact and does not omit to state a material fact necessary in order to make the statements contained therein, in light of the circumstances under which they were made, not misleading in any material respect. 15. There are hereby delivered to the Trustee six (6) typewritten Bonds in the aggregate principal amount of $11,250,000, to be registered in the name of Cede & Co. The Trustee is hereby requested to authenticate the Bonds and to receipt for and upon the order of the Underwriter on behalf of the City, deliver the Bonds to The Depository Trust Company, New York, New York, after authentication and upon payment therefor of $11,052,875.20, plus accrued interest to the date of delivery in the amount of $12,418.54, and less $100,805.42 paid by the Underwriter to Assured Guaranty Corp. on behalf of the City for the 2009 Bond Policy and the 2009 Reserve Policy (each as defined in the Trust Indenture), for a total purchase price of $10,964,488.32. The Trustee is hereby directed to deposit the Bond proceeds as follows: (i) Deposit the accrued interest ($12,418.54) received on the Bonds into the Interest Account of the Bond Fund; (ii) Deposit $9,633,373.53 into the Street Account of the Project Fund; • (iii) Deposit $1,259,179.08 into the Trail Account of the Project Fund; and (iv) Deposit the remaining balance, in the amount of $59,517.17, into the Costs of Issuance Fund and immediately pay those Costs of Issuance with respect to the Bonds set forth in Exhibit D hereto. 16. The City is a city of the first class pursuant to Title 14, Subtitle 3, Chapter 43 of the Arkansas Code Annotated. The City is operating under the mayor -council form of government pursuant to Title 14. 17. The City has not adopted any by-laws or rules of procedure relating to the conduct of its City Council meetings. 18. There is no action, suit, proceeding, inquiry or investigation involving the City before or by any court or public board or body pending or, to the knowledge of the undersigned, threatened wherein an unfavorable decision, ruling or finding would: (i) affect the creation, organization, existence or powers of the City or the titles of its officials to their respective offices, (ii) enjoin or restrain the issuance, sale or delivery of any of the Bonds or the City Documents, the levy or collection of the Sales and Use Taxes, or the pledge of the receipts thereof, or the accomplishment of the Projects (as defined in the Trust Indenture), (iii) in any way question or affect any of the rights, powers, duties or obligations of the City with respect to the Sales and Use Taxes, (iv) in any way question or affect any authority for the issuance, •authorization, execution, authentication, sale or delivery of the Bonds or the validity or enforceability of the Bonds, the City Documents, the Sales and Use Taxes, the Election 4 4811-7785-0629.2 • Ordinance, the Bond Ordinance, or the assignment by the City of any of the moneys, instruments or other rights pledged under the Trust Indenture, or (v) in any way question or affect the Official Statement or the transactions contemplated thereby, or any other agreement or instrument to which the City is a party and relating to the Bonds. 19. The City will apply a portion of the proceeds from the sale of the Bonds to finance capital improvements of a public nature, as provided in the Trust Indenture. The Sales and Use Taxes authorized under the Act (as defined in the Trust Indenture) have been levied within the City pursuant to the Election Ordinance. The collection of the 0.25% Sales and Use Tax commenced on January 1, 2007, and the collection of the 0.75% Sales and Use Tax will commence on the first day of the first month following cessation of the Existing Tax (as defined in the Trust Indenture). Receipts of the Sales and Use Taxes are not presently pledged or hypothecated in any manner or for any purpose other than for the payment of the Bonds as provided in the Trust Indenture. 20. In the City, the time for filing a referendum petition is fixed at 31 days after the publication of the measure upon which the referendum is sought. 21. The adoption of the Election Ordinance and the Bond Ordinance, the execution and delivery of the City Documents, the authorization, execution and delivery of the Bonds, and compliance with the provisions thereof under the circumstances contemplated thereby does not and will not in any material respect conflict with, or constitute on the part of the City a breach or • default under, any agreement or other instrument to which the City is a party, or any existing law, administrative regulation, court order or consent decree to which the City is subject. 22. The City's employer tax identification number is 71-6018462. 23. The City Documents and the information supplied to Assured Guaranty Corp. in order to obtain the 2009 Reserve Policy and the 2009 Bond Policy do not contain any untrue or misleading statement of a material fact and do not fail to state a material fact required to be stated therein or necessary in order to make the information contained therein not misleading. • 5 EF0.1t k: ERS�Xi . 24. Lioneld Jordan, Mayor, hereby certifies that the signature of Sondra Smith, City Clerk, affixed hereto is her true and correct signature, and Sondra Smith, City Clerk, hereby certifies that the signature of Lioneld Jordan, Mayor, affixed hereto is his true and correct signature. IN WITNESS WHEREOF, the undersigned have hereunto set their hands as of November 12, 2009. CITY OF FAYETTEVILLE, ARKANSAS By: Lioneld an, Mayor By:V\O1W&N Son4a,Slpj)Lh, City Clerk • ' vp•.-.4 FAYETTEVILLE* 6 4811-7785-0629.2 S ORDINANCE NO. 5277 AN ORDINANCE AUTHORIZING THE ISSUANCE AND SALE OF THE CITY'S SALES AND USE TAX CAPITAL IMPROVEMENT BONDS, SERIES 2009, FOR THE PURPOSE OF FINANCING A PORTION OF THE COSTS OF CERTAIN STREET AND TRAIL SYSTEM IMPROVEMENTS; AUTHORIZING THE EXECUTION AND DELIVERY OF A SECOND SUPPLEMENTAL TRUST INDENTURE PURSUANT TO WHICH THE BONDS WILL BE ISSUED AND SECURED; AUTHORIZING THE EXECUTION AND DELIVERY OF AN OFFICIAL STATEMENT PURSUANT TO WHICH THE BONDS WILL BE • OFFERED; AUTHORIZING THE EXECUTION AND DELIVERY OF A BOND PURCHASE AGREEMENT PROVIDING FOR THE SALE OF THE BONDS; AUTHORIZING THE EXECUTION AND DELIVERY OF A CONTINUING DISCLOSURE AGREEMENT; AND PRESCRIBING OTHER MATTERS RELATING THERETO WHEREAS, the City Council of the City of Fayetteville, Arkansas (the "City") has previously determined that there is a great need for a source of revenue to finance the costs of various street and trail system improvements within the City (the "2009 Project"); and WHEREAS, the City is authorized and empowered under the provisions of the Constitution and laws of the State of Arkansas, including particularly Amendment 62 to the Constitution of the State of Arkansas ("Amendment 62") and Arkansas Code Annotated (1998 Repl. & 2005 Supp.) Sections 14-164-301 et seq. (as from time to time amended, the "Local Government Bond Act"), to issue and sell its capital improvement bonds to finance the costs of various capital improvements such as those comprising the 2009 Project, which capital improvement bonds may be secured by and payable from the receipts of the special city-wide sales and use tax authorized by the Local Government Bond Act; and C • Page 2 Ordinance No. 5277 WHEREAS, pursuant to the provisions of Ordinance No. 4891 of the City, adopted and approved on June 20, 2006 (the "Election Ordinance"), there was submitted to the qualified electors of the City four questions regarding the issuance of an aggregate of not to exceed $110,000,000 in principal amount of capital improvement bonds pursuant to Amendment 62 and the Local Government Bond Act to finance the capital improvements described in the Election Ordinance, said bonds to be secured by a pledge of and lien upon (i) all of the receipts of a special city-wide sales and use tax levied at the rate of one -quarter of one percent (0.25%) pursuant to the Local Government Bond Act (the "0.25% Sales and Use Tax") and (ii) all of the receipts of a special city-wide sales and use tax levied at the rate of three-quarters of one percent (0.75%) pursuant to the Local Government Bond Act (the "0.75% Sales and Use Tax"); and WHEREAS, at a special election held September 12, 2006, a majority of the qualified electors of the City voting on the questions approved the issuance of capital improvement bonds in the principal amounts and for each of the specific purposes set forth on the ballot (and the corresponding levy of the 0.25% Sales and Use Tax and the 0.75% Sales and Use Tax, and the pledge of the receipts thereof to the payment of the capital improvement bonds); and WHEREAS, as authorized under the provisions of Amendment 62 and the Local Government Bond Act and as approved by the qualified electors of the City, the City has now • determined to issue and sell its Sales and Use Tax Capital Improvement Bonds, Series 2009, in the aggregate principal amount of not to exceed $11,250,000 (the "Bonds"), in order to provide for the funding of the 2009 Project; and WHEREAS, as authorized by the provisions of the Election Ordinance, the City has previously made arrangements for the sale of the Bonds to Stephens Inc., Fayetteville, Arkansas (the "Underwriter"), pursuant to the terms of a Bond Purchase Agreement between the City and the Underwriter (the "Bond Purchase Agreement") in substantially the form presented to and before this meeting; NOW, THEREFORE BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF FAYETTEVILLE, ARKANSAS: Section 1. Under the authority of the Constitution and laws of the State of Arkansas, including particularly Amendment 62 to the Constitution of the State of Arkansas and the Local Government Bond Act, there is hereby authorized the issuance of bonds of the City to be designated as "Sales and Use Tax Capital Improvement Bonds, Series 2009" (the `Bonds"). The Bonds shall be issued in the original aggregate principal amount of not to exceed Eleven Million Two Hundred Fifty Thousand Dollars ($11,250,000) and shall mature not later than November 1, 2023, in the principal amounts and bearing interest at the rates specified in the Bond Purchase Agreement. $9,950,000 aggregate principal amount of the Bonds hereby authorized shall be deemed to apply to the Street Project described in Question 3 of the ballot and $1,300,000 aggregate principal amount of the Bonds hereby authorized shall be deemed to apply to the Trail Project described in Question 4 of the ballot. • Page 3 Ordinance No. 5277 The average yield on the Bonds as a whole shall not exceed 4.75% per annum, and the yield on no single Bond shall exceed 5.25%. The proceeds of the Bonds will be utilized to finance the costs of the 2009 Project, to establish a debt service reserve for the Bonds or to purchase a surety bond for reserve purposes, to pay a premium for bond insurance, if deemed economically beneficial, and to pay printing, underwriting, legal and other expenses incidental to the issuance of the Bonds. The Bonds shall be issued in the forms and denominations, shall be dated, shall be numbered, shall mature, shall be subject to redemption prior to maturity, and shall contain such other terms, covenants and conditions, all as set forth in the Second Supplemental Trust Indenture submitted to this meeting. The Mayor is hereby authorized and directed to execute and deliver the Bonds in one or more series, each series to be in substantially the form thereof contained in the Second Supplemental Trust Indenture submitted to this meeting, and the City Clerk is hereby authorized and directed to execute and deliver the Bonds and to affix the seal of the City thereto, and the Mayor and City Clerk are hereby authorized and directed to cause the Bonds to be accepted and authenticated by the Trustee. The Mayor is hereby authorized to confer with the Trustee, the Underwriter and Kutak Rock LLP, Little Rock, Arkansas ("Bond Counsel"), in order to complete the Bonds in substantially the form contained in the Second Supplemental Trust Indenture submitted to this meeting, with such changes as shall be approved by such persons executing the • Bonds, their execution to constitute conclusive evidence of such approval. Section 2. In order to pay the principal of and interest on the Bonds as they mature or are called for redemption prior to maturity, there is hereby pledged all of the receipts of the 0.25% Sales and Use Tax and the 0.75% Sales and Use Tax levied by the Election Ordinance. Such pledge securing the Bonds shall be made on a parity basis with the existing pledge of such receipts in favor of the City's $50,000,000 Sales and Use Tax Capital Improvement Bonds, Series 2006A (the "Series 2006A Bonds"), and the City's $14,340,000 Sales and Use Tax Capital Improvement Bonds, Series 2007 (the "Series 2007 Bonds"). The levy and collection of the 0.25% Sales and Use Tax and the 0.75% Sales and Use Tax shall commence on the dates provided in the Local Government Bond Act and shall continue until such time as the Series 2006A Bonds, the Series 2007 Bonds and the Bonds are no longer outstanding or sufficient funds are on deposit with the Trustee to redeem the Series 2006A Bonds, the Series 2007 Bonds and the Bonds in full. The City covenants and agrees that all receipts from the 0.25% Sales and Use Tax and the 0.75% Sales and Use Tax will be accounted for separately as special funds on the books of the City, and receipts of said 0.25% Sales and Use Tax and 0.75% Sales and Use Tax will be deposited and will be used solely as provided in the Trust Indenture (as defined below). Section 3. To prescribe the terms and conditions upon which the Bonds are to be executed, authenticated, issued, accepted, held and secured, the Mayor is hereby authorized and directed to execute and acknowledge a Second Supplemental Trust Indenture (the "Trust Indenture"), by and between the City and Simmons First Trust Company, N.A., Pine Bluff, Arkansas (the "Trustee"), and the City Clerk is hereby authorized and directed to execute and acknowledge the Second Supplemental Trust Indenture and to affix the seal of the City thereto, • Page 4 Ordinance No. 5277 and. the Mayor and the City Clerk are hereby authorized and directed to cause the Second Supplemental Trust Indenture to be accepted, executed and acknowledged by the Trustee. The Second Supplemental Trust Indenture supplements and amends a Trust Indenture dated as of November 1, 2006, as previously amended by a First Supplemental Trust Indenture dated as of October 1, 2007, each by and between the City and the Trustee (the "Original Indenture," and collectively with the Second Supplemental Trust Indenture, the "Trust Indenture"). The Second Supplemental Trust Indenture is hereby approved in substantially the form submitted to this meeting, including, without limitation, the provisions thereof pertaining to the pledge of 0.25% Sales and Use Tax receipts and 0.75% Sales and Use Tax receipts and the terms of the Bonds. The Mayor is hereby authorized to confer with the Trustee, the Underwriter and Bond Counsel in order to complete the Second Supplemental Trust Indenture in substantially the form submitted to this meeting, with such changes as shall be approved by such persons executing the Second Supplemental Trust Indenture, their execution to constitute conclusive evidence of such approval. (Advice is given that a copy of the Second Supplemental Trust Indenture in substantially the form authorized to be executed is on file with the City Clerk and is available for inspection by any interested person.) • Section 4. There is hereby authorized and approved a Preliminary Official Statement of the City, including the cover page and appendices attached thereto, relating to the Bonds. The Preliminary Official Statement is hereby "deemed final" by the City within the meaning of U.S. Securities and Exchange Commission Rule 15c2-12. The distribution of the Preliminary Official Statement is hereby approved. The Preliminary Official Statement, as amended to conform to the terms of the Bond Purchase Agreement, including Exhibit A thereto, and with such other changes and amendments as are mutually agreed to by the City and the Underwriter, is herein referred to as the "Official Statement," and the Mayor is hereby authorized to execute the Official Statement for and on behalf of the City. The Official Statement is hereby approved in substantially the form of the Preliminary Official Statement submitted to this meeting, and the Mayor is hereby authorized to confer with the Trustee, the Underwriter and Bond Counsel in order to complete the Official Statement in substantially the form of the Preliminary Official Statement submitted to this meeting, with such changes as shall be approved by such persons, the Mayor's execution to constitute conclusive evidence of such approval. (Advice is given that a copy of the Preliminary Official Statement is on file with the City Clerk and is available for inspection by any interested person.) Section 5. In order to prescribe the terms and conditions upon which the Bonds are to be sold to the Underwriter, the Mayor is hereby authorized and directed to execute a Bond Purchase Agreement on behalf of the City, to be dated as of the date of its execution (the "Bond Purchase Agreement"), by and between the City and the Underwriter, and the Bond Purchase Agreement is hereby approved in substantially the form submitted to this meeting, and the Mayor is hereby authorized to confer with the Underwriter and Bond Counsel in order to • • Page 5 Ordinance No. 5277 complete the Bond Purchase Agreement in substantially the form submitted to this meeting, with such changes as shall be approved by such persons executing the Bond Purchase Agreement, their execution to constitute conclusive evidence of such approval. (Advice is given that a copy of the Bond Purchase Agreement in substantially the form authorized to be executed is on file with the City Clerk and is available for inspection by any interested person.) Section 6. In order to provide for continuing disclosure of certain financial and operating information with respect to the 0.25% Sales and Use Tax, the 0.75% Sales and Use Tax and the City in compliance with the provisions of Rule 15c2-12 of the U. S. Securities and Exchange Commission, the Mayor is hereby authorized and directed to execute a Continuing Disclosure Agreement to be dated as of the date of its execution (the "Continuing Disclosure Agreement"), by and between the City and the Trustee, and the Mayor is hereby authorized and directed to cause the Continuing Disclosure Agreement to be executed by the Trustee. The Continuing Disclosure Agreement is hereby approved in substantially the form submitted to this meeting, and the Mayor is hereby authorized to confer with the Trustee; the Underwriter and Bond Counsel in order to complete the Continuing Disclosure Agreement in substantially the form submitted to this meeting, with such changes as shall be approved by such persons • executing the Continuing Disclosure Agreement, their execution to constitute conclusive evidence of such approval. (Advice is given that a copy of the Continuing Disclosure Agreement in substantially the form authorized to be executed is on file with the City Clerk and is available for inspection by any interested person.) Section 7. In order to secure lower interest rates on the Bonds, the Underwriter has proposed that the City consider the purchase of a policy of bond insurance with a portion of the proceeds of the Bonds, which policy would guarantee the payment of the principal of and interest on the Bonds when due. If deemed economically advantageous by the Mayor, upon the advice of the Underwriter, the Mayor is hereby authorized to execute an insurance commitment and to do any and all things necessary to accomplish the delivery of a bond insurance policy with respect to the Bonds. Section 8. The Mayor and City Clerk, for and on behalf of the City, are hereby authorized and directed to do any and all things necessary to effect the issuance, sale, execution and delivery of the Bonds and to effect the execution and delivery of the Second Supplemental Trust Indenture, the Bond Purchase Agreement, the Official Statement, the Continuing Disclosure Agreement and a Tax Regulatory Agreement relating to the tax exemption of interest on the Bonds, and to perform all of the obligations of the City under and pursuant thereto. The Mayor and the City Clerk are further authorized and directed, for and on behalf of the City, to execute all papers, documents, certificates and other instruments that may be required for the • carrying out of such authority or to evidence the exercise thereof. • Page 6 Ordinance No. 5277 Section 9. As previously provided in the Election Ordinance, Kutak Rock LLP, Little Rock, Arkansas, is hereby confirmed as Bond Counsel on behalf of the City in connection with the issuance and sale of the Bonds. Section 10. The Bonds are hereby designated as "qualified tax-exempt obligations" within the meaning of Section 265(b)(3) of the Internal Revenue Code of 1986, as amended (the "Code"). The City hereby represents and covenants that the aggregate principal amount of its tax-exempt obligations (excluding "private activity bonds" within the meaning of Section 141 of the Code), including those of its subordinate entities, issued in calendar year 2009 will not exceed $30,000,000. Section 11. The provisions of this Ordinance are hereby declared to be severable, and if any section, phrase or provision shall for any reason be declared to be illegal or invalid, such declaration shall not affect the validity of the remainder of the sections, phrases or provisions of this Ordinance. Section 12. All ordinances, resolutions and parts thereof in conflict herewith are hereby repealed to the extent of such conflict. • PASSED and APPROVED this 6'" day of October, 2009. APPROVED: c ATTEST: I 40 • Mayor Lioncld Jordan City Attorucy Kit Williams City Clerk Sondra Smith City of Fayetteville Arkansas City Council Meeting Minutes October 6, 2009 City Council Meeting Minutes October 6.2009 Page I of 10 Aldermen Ward I Position I — Ade la Gray Ward I Position 2— Brenda Thiel Word 2 Position I — Kyle B. Cook Ward 2 Position 2— Matthew Petty Ward 3 Position I — Robert K. Rhoads Ward 3 Position 2— Robert Ferrell Word 4 Position I — Shirley Lucas Ward 4 Position 2— Sarah E. Lewis A meeting of the Fayetteville City Council was held on October 6, 2009 at 6:00 PM in Room 219 of the City Administration Building located at 113 West Mountain Street, Fayetteville, Arkansas. Mayor Jordan called the meeting to order. PRESENT: Alderman Thiel, Cook, Petty, Rhoads, Ferrell, Lucas, Lewis, Gray, Mayor Jordan, City Attorney Kit Williams, City Clerk Sondra Smith, Staff, Press, and Audience. Alderman Rhoads arrived at 6:25 p.m. Pledge of Allegiance Mayor's Announcements, Proclamations and Recognitions: Mayor Jordan welcomed Troop 116 from Sequoyah United Methodist Church. He stated it is wonderful to have you all here tonight. Methamphetamine Awareness Month Proclamation. Mayor Jordan read the proclamation. Presentations, Reports and Discussion Items: Newspaper Publishing Discussion: Resolution 77-09 was passed on April 7, 2009 to be revisited in 6 months. 113 West Mountain 72701 (479) 575-8323 aeccssfayctteville.org TOD (Telecommunications Device for the Deaf) (479) 521-1316 City Coutcil Meeting Minutes October 6, 2009 • Page 2 of 10 Alderman Cook: We passed this and chose to revisit this in six months to discuss it. I was given some numbers from staff and we had seen some savings from advertising so at this point I am just asking that we continue with the policy unless anyone else has other comments. Mayor Jordan: What is the wish from the Council, to just continue on? A discussion followed on if a motion to continue was required. City Attorney Kit Williams stated to continue on we do not need a motion. The City Council decided to continue on as is. Nominating Committee Report: Alderman Cook stated the Housing Authority has selected Brittany Kendrick to represent them. Alderman Cook moved to approve the appointment to the Housing Authority Board. Alderman Gray seconded the motion. Upon roll call the motion passed 7-0. Alderman Rhoads was absent during the vote. 0 Consent: Approval of the September 1, 2009 and September I5, 2009 City Council meeting minutes. Approved Bid # 09-54 Frost Oil Company: A resolution awarding Bid # 09-54 and approving a contract with Frost Oil Company in the estimated annual amount of $58,363.06 to supply engine oil and lubricants to the Fleet Operations Division. Resolution 204-09 as recorded in the office of tire City Clerk. Bid It 09-55 Electronic Video Systems: A resolution awarding Bid # 09-55 and approving the purchase of a video production system and related equipment from Electronic Video Systems in the amount of $23,183.00 for use in the City Council Chamber. Resolution 205-09 as recorded in the office of the City Clerk. Bid # 09-57 Danny Robinson Construction, LLC: A resolution awarding Bid # 09-57 and approving a contract with Danny Robinson Construction, LLC in the amount of $91,044.00 for the complete installation of two (2) trail bridges for the third phase of Lake Fayetteville Trail; and approving a 15% project contingency in the amount of $13,656.60. • Resolution 206-09 as recorded in the office of the City Clerk. 113 Wcst Mountain 72701 (479) 575-8323 accessfayettcville.org TDD (Telecommunications Device for the Deaf) (479) 521.1316 City Council Meeting Minutes Oetaber 6, 2009 • Page 3 of 10 Bid # 09-58 Chevy of Fayetteville: A resolution rescinding resolution # 117-09, awarding Bid # 09-58 and approving the purchase of one (1) compact 4 x 4 pickup truck from Chevy of Fayetteville in the amount of $19,800.00 for use by the Fayetteville Executive Airport. Resolution 207-09 as recorded in the office of the City Clerk. Bid # 09-59 Chevy of Fayetteville: A resolution rescinding resolutions # 118-09 and # 122- 09 and awarding Bid # 09-59, approving the purchase of two (2) 2 x 4 pickup trucks from Chevy of Fayetteville in the amount of $33,994.00 for use by the Inspections and Meter Operations Divisions. Resolution 208-09 as recorded in the office of the City Clerk. State and Tribal Assistance Grant (STAG): A resolution authorizing the Mayor to accept a State and Tribal Assistance Grant (STAG) in the amount of $291,000.00 from the U.S. Environmental Protection Agency for sanitary sewer system improvements; and approving a budget adjustment recognizing the grant revenue. Resolution 209-09 as recorded in the office of the City Clerk. Insituform Technologies, Inc.: A resolution approving a task order to the contract with Insituform Technologies, Inc. in the amount of $300,000.00 for cured in -place sanitary sewer • main line linings; and approving a contingency in the amount of $30,000.00. Resolution 210-09 as recorded in the office of the City Clerk. Runway 16 Safety Area Improvement Project: A resolution approving offer and acceptance contracts between the City of Fayetteville and the Standard Register Company and Coulson Properties Limited Partnership for the purchase of land needed for the Runway 16 Safety Area Improvement Project; and authorizing the Mayor and City Clerk to execute said agreements. Resolution 211-09 as recorded in the office of the City Clerk. 2009-2010 Selective Enforcement Program Grant: A resolution accepting the 2009-2010 Selective Traffic Enforcement Program (STEP) grant in the amount of $108,000.00 for the purpose of paying overtime to officers engaged in the enforcement of DWUDUI and seatbelt laws and other purposes; and approving a budget adjustment recognizing the grant revenue. Resolution 212-09 as recorded in the office of the City Clerk. Amend Police Department's Policies, Procedures & Rules -Manual: A resolution approving and adopting amendments to the Fayetteville Police Department's Policies, Procedures & Rules Manual. Mayor Jordan: The Police Chief asked that Item #11 on the Consent Agenda be tabled. • 113 West Mountain 72701 (479) 575-8323 accessfayetteville.org TDD (Telecommunications Device for the Deaf) (479) 521-1316 City Council Meeting Minutes October 6, 2009 • Page 4 of 10 City Attorney Kit Williams: It will need to be pulled from the Consent Agenda and then tabled to the next meeting Alderman Petty moved to remove Item # 11 Amend Police Department's Policies, Procedures & Rules Manual from the Consent Agenda and table it to The October 20, 2009 City Council meeting. Alderman Ferrell seconded the motion. Upon roll call the motion passed 7-0. Alderman Rhoads was absent during the vote. This resolution was removed from the Consent Agenda. Alderman Cook moved to approve the Consent Agenda as read with Item # 11 Amend Police Department's Policies, Procedures & Rules Manual removed from the Consent Agenda. Alderman Petty seconded the motion. Upon roll call the motion passed 7-0. Alderman Rhoads was absent during the vote. Agenda Additions: None Unfinished Business: Rock Quarries Facilities: An ordinance to prevent injury or annoyance within the corporate limits of Fayetteville by regulating rock quarrying facilities so that these facilities will not be • nuisances. This ordinance was left on the First Reading at the September 1, 2009 City Council meeting. This ordinance was left on the Second Reading at the September 15, 2009 City Council meeting. Mayor Jordan: This was left on the second reading at the last meeting. There was discussion about sending this to Ordinance Review. City Attorney Kit Williams handed out the current ordinance that was amended at the last meeting. He stated if you choose to table it tonight that will be what will be considered at Ordinance Review unless you make other changes tonight. I would like to get some input from you on the suggested changes that the Rogers Group submitted to you. A discussion followed on what steps should be taken in regards to tabling and taking public comment. City Attorney Kit Williams recommended that it not be read tonight and that it be tabled. Alderman Thiel: It is going to Ordinance Review Committee meeting tomorrow afternoon at 4:30 PM in Room 326. Mayor Jordan: So there will be public comment at the Ordinance Review Committee. 113 West Mountain 72701 (479) 575-8323 accessfayetteville.org 7UD (Telecommunications Device for the Deal) (479) 521-1316 City Council Meeting Minutes October 6, 2009 • Page 5 of 10 Alderman Petty moved to table this ordinance to the October 20, 2009 City Council meeting. Alderman Ferrell seconded the motion. Upon roll call the motion passed 7-0. Alderman Rhoads was absent during the vote. This ordinance was left on the Second Reading and Tabled to the October 20, 2009 City Council meeting. Red Dirt Mining Facilities: An ordinance to prevent injury or annoyance within the corporate limits of Fayetteville by regulating red dirt mining facilities so that these facilities will not be nuisances. This ordinance was left on the First Reading at the September 1, 2009 City Council meeting. This ordinance was left on the Second Reading at the September 15, 2009 City Council meeting. Mayor Jordan: Do you all want to do the same thing with this one? Alderman Lewis: I do want to mention for both of these at the Ordinance Review Committee I would like it to be done in an orderly way that can be addressed on each part of it. Alderman Thiel: I will certainly try to do that as Chair. Alderman Lewis: It is a lot of information and to hop around it can be confusing. • Alderman Thiel: Right and have Kit explain it. City Attorney Kit Williams: Also if any Aldermen want to call me tomorrow and make any suggestions I would be happy to talk with you. Otherwise we will try to do redrafting if any at the Ordinance Review Committee meeting. •Alderman Petty moved to table this ordinance to the October 20, 2009 City Council meeting. Alderman Ferrell seconded the motion. Upon roll call the motion passed 7-0. Alderman Rhoads was absent during the vote. This ordinance was left on the Second Reading and Tabled to the October 20, 2009 City Council meeting. New Business: 2009 Sales and Use Tax Bond Ordinance: An ordinance authorizing the issuance and sale of the City's Sales and Use Tax Capital Improvement Bonds, Series 2009, for the purpose of financing a portion of the costs of certain street and trail system improvements; authorizing the execution and delivery of a second supplemental trust indenture pursuant to which the bonds will be issued and secured; authorizing the execution and delivery of an official statement pursuant to which the bonds will be offered; authorizing the execution and delivery of a bond purchase agreement providing for the sale of the bonds; authorizing the execution and delivery of a • continuing disclosure agreement; and prescribing other matters relating thereto. 113 %Vest Mountain 72701 (479) 575.8323 accessfaycttevilte.org TDD (Telecommunications Device for the Dcaf) (479) 521-1316 City Council Meeting Minutes October 6, 2009 • Page 6 of 10 City Attorney Kit Williams read the ordinance. Paul Becker, Finance Director gave a brief description of the ordinance. Alderman Petty: Will this issuance of bonds to the trails program affect capital funds that we had allocated in previous years to the trails program? Paul Becker: We will still allocate additional money to the trails program but this will help supplement it. Alderman Petty: I just wanted to make sure that it's supplemental as we intended originally. Alderman Ferrell: As we move forward, with the economy changing, is that going to have a positive impact on our ability to go for more down the road? Paul Becker: If the sales tax picks up we will be able to pay off the old bonds earlier therefore giving us the capacity to issue new bonds faster. Right now it looks like 2013 or 2014 before we can issue new bonds. However if the economy picks up then we can pay those bonds off earlier and issue the third phase quicker. Alderman Petty: During the 2008 campaign season we heard a lot about our bond rating. What is our bond rating now and could you explain what that indicator is? • Paul Becker stated these bonds were rated at A+ which in these times is pretty good because that is stable. That indicates how the rating agency perceives the liability or stability of the bond payments. He went on to describe the ratings. Alderman Petty: How does our bond rating on these bonds compare to ratings on other bonds in your portfolio in this State and maybe in the four state regions? Dennis Hunt with Stephens Inc. stated keep in mind that these bonds are subordinate from any having a secondary security to the three quarters of pennies that secures the 2005 bonds that the voters originally approved. Those bonds have an AA- rating so it is very typical to see a slight drop if it is a subordinate bond to those. An AA rating in Northwest Arkansas is about as high as any that I have seen associated with issues in the State. This one is slightly below that because it is taking a second position on the three quarters of a penny until those three quarters of a penny pays off all of the 2005 bonds. Alderman Lewis: I noticed in the memo it says that three out of every four sales tax dollars collected and paid on these bonds will be used to pay off the principal and one is to pay the interest. Can you talk more'about that? City Attorney Kit Williams: We initially start off just paying interest on these bonds but once the earlier bonds are paid off there is an amount of money that comes into these bonds and they are paid off very quickly. Not only because we have low interest rates because they are • 113 West Mountain 72701 (479) 575.8323 accessfayctteville.org 'rDD (Telecommunications Device for the Deaf) (479) 521-1316 City Council Meeting Minutes October 6.2009 • . Page 7 of 10 municipal bonds that are tax exempt but also because they can be paid off pretty quickly that is why we do not have to pay so much interest compared to the principal payments. Alderman Cook moved to suspend the rules and go to the second reading. Alderman Ferrell seconded the motion. Upon roll call the motion passed unanimously. City Attorney Kit Williams read the ordinance. Alderman Ferrell: This did not just happen, there was an election passed for sales tax for us to build streets, infrastructure, and trails in the city and it took everyone working together to put this forward to the people for a vote. It has worked out good and is continuing to work good. Alderman Ferrell moved to suspend the rules and go to the third and final reading. Alderman Cook seconded the motion. Upon roll call the motion passed unanimously. City Attorney Kit Williams read the ordinance. City Attorney Kit Williams: Before you ask for the vote I would like to recognize the Accounting Department who did a lot of work on this. He also thanked Gordon Wilburn of Kutak Rock and Dennis Hunt. They have provided excellent service over the last eight or nine years so I just wanted to recognize them as well as our own Accounting staff. • Mayor Jordan asked shall the ordinance pass. Upon roll call the ordinance passed unanimously. Ordinance 5277 as Recorded in the office of the City Clerk. 2009 Millage Levy: An ordinance levying a tax on the real and personal property within the City of Fayetteville, Arkansas, for the year 2009 fixing the rate thereof at 1.3 mills for General Fund Operations, 0.4 mills for the Firemen's Pension and Relief Fund, 0.4 mills for the Policemen's Pension and Relief Fund and 1.0 mill for the Fayetteville Public Library; and certifying the same to the County Clerk of Washington County, Arkansas. City Attorney Kit Williams read the ordinance. Paul Becker gave a brief description of the ordinance, Alderman Petty: I am looking at this diagram you placed in our boxes. I wanted to check in on what may be a typo. In the County column for Fayetteville it says 5.5 mills and for Springdale it says 6.5 mills. Can you explain what the difference is or if it is just a mistake? Is that because a portion of Springdale is in Benton County? Paul Becker: That would be my explanation. I'll have to check it out for sure. Part of Springdale is in fact in Benton County and the taxes there may very well be higher. 113 West Mountain 72701 (479) 575-8323 accessfayetieville.org TDD (Telecommunications Dcvicc for the Deal) (479) 521-1316 CityCouncil Meeting Minutes October 6, 2009 • Pages of 10 Alderman Petty: I am just trying to make sense of all this especially in these economic times. Where I am coming from on the millage is I am not sure that we should raise it but at the same time I want to keep it on the table for us to talk about and think about between now and the end of the month. I am really trying to brainstorm investments in our economy that don't have ongoing costs, that are one time costs, and that will give us a return and will make 2010 more of a rebound year and 2011 an even more rebound year. What I am trying to do and what I would hope the rest of the Council members would join me in doing over the next two weeks is try and brainstorm those types of investments that are low cost and one time investments that we can make that are going to have a benefit to our economy. I was hoping we could leave this on the second reading to think about things and be open minded. Mayor Jordan: So are you saying that you might want to take some of this money and invest it somewhere else? Alderman Petty: I don't know what the appropriate action to take is yet but I want it to be on the table for raising the millage for a year for altering the current ordinance. Let's just take the time to think about it and see if there is something there that makes sense. Alderman Thiel: You are looking at this table that we got tonight which shows the total millage for the cities in the surrounding area including the school district millage which we did not have on the report at the agenda meeting. We are not the highest in the region now but I assume you are talking about considering a half mill or a mill for something specific like economic • development. Alderman Petty: Yes, specifically for economic development and if there is something appropriate it has to be over in a year so we restore our capacity to address an emergency with the millage. It has to be something for economic development so it's not just an investment that is going to add more costs that aren't sustainable right now. Alderman Ferrell: If you want to wait a couple of weeks that is fine but at this particular time I don't think that is constructive from an economic development point of view. If we don't listen to other people's ideas then we won't learn. Alderman Petty: I am nervous about it too and I feel like I am going out on a limb here even suggesting that we keep it on the table. We did just have the school millage fail but at the same lime it seems that the community is ready to make a certain kind of investment in itself. Alderman Lucas: I don't have a problem with waiting two weeks either but it is going to have to be a pretty good project because once you get it on there it is very hard to take off. Hopefully you will come up with a good one. We have all been working on it and coming up with strategies so two weeks is fine with me. Alderman Lewis: I am okay with waiting as well. I do like the idea of putting a whole group of people towards trying to find ways to invest in things that might have a return. 113 West Mountain 72701 (479) 575-8323 accessfayetteville.org TDD (Telecommunications Device for the DcaQ (479) 521-1316 City Council Mating Minutes October 6, 2009 • Page 9 of 10 Alderman Petty moved to suspend the rules and go to the second reading. Alderman Thiel seconded the motion. Upon roll call the motion passed unanimously. City Attorney Kit Williams read the ordinance. This ordinance was left on the Second Reading. Amend Chapter 50: An ordinance waiving the automatic annual price increase for residential trash service for Fiscal Year 2010; and amending a portion of Chapter 50: Garbage and Trash of the Fayetteville Code of Ordinances. City Attorney Kit Williams read the ordinance. David Jurgens, Utilities Director gave a brief description of the ordinance. Alderman Ferrell moved to suspend the rules and go to the second reading. Alderman Cook seconded the motion. Upon roll call the motion passed unanimously. City Attorney Kit Williams read the ordinance. Alderman Cook moved to suspend the rules and go to the third and final reading. • Alderman Ferrell seconded the motion. Upon roll call the motion passed unanimously. City Attorney Kit Williams read the ordinance. Mayor Jordan asked shall the ordinance pass. Upon roll call the ordinance passed unanimously. Ordinance 5278 as Recorded in the office of the City Clerk. Old Wire Annexation Appeal: An ordinance annexing that property described in annexation petition ANX 09-3409 (CC2009-4), for property located at 3231 North Old Wire Road, the northwest corner of Old Wire Road and Rom Orchard Road, containing approximately 39 acres. City Attorney Kit Williams read the ordinance. Jeremy Pate, Development Services Director: The applicant requested that this item be left on the first reading and not be discussed tonight. I don't believe they are present and they also notified the four members that spoke in opposition at the Planning Commission. I want to say thank you for doing that and for letting the property owners know. This ordinance was left on the First Reading. C 113 West Mountain 72701 (479) 575-8323 accessfayetteville.org TDD (Telecommunications Device for the Deaf) (479) 521.1316 City Council Meeting Minutes October 6, 2009 • Amend Chapter 166 ADM 09-3435 (1121 N. Mission Br resolution approving a variance of § 166.18 Master Street Development Code to allow the existing structure located at remain within the Master Street Plan right-of-way setback and 10% replacement cost allowed by code. Page 10 of 10 �ulevard ROW Variance): A Plan setbacks of the Unified 1121 N. Mission Boulevard to to be improved greater than the Jeremy Pate gave a brief description of the resolution. He stated the applicant went before the Board of Adjustments and received a variance and went before the Planning Commission and received a recommendation in favor of this proposal. Staff is also recommending approval. Alderman Lucas: You said this is a little over half an acre? Jeremy Pate: I believe that is correct. Alderman Lucas: So if the porch was taken off then they could work on the house, is that correct? Jeremy Pate: Yes. Alderman Lucas: After this is approved that building can actually be tom down and other structures could be put on this lot is that not right? There is no reason why if we grant this variance that house has to be used. • Jeremy Pate: That is correct. If the applicant chose not to utilize this and they redevelop the property then none of these variances would apply because this only applies to this structure. Alderman Lucas: Thank you. Alderman Petty: It is really encouraging to me when you see homeowners with rock houses from the 1920's pursuing variances to remodel instead of just tearing it down and building a new structure. We need more of that kind of attitude in Fayetteville. Alderman Thiel moved to approve the resolution. Alderman Petty seconded the motion. Upon roll call the resolution passed 7-1. Alderman Lucas voting no. Resolution 213-09 as recorded in the office of the City Clerk. Meeting adjourned at 7:10 p.m. t / �(/�41Cit.aJ � I!�-►^'vow"'✓ L eld ordan, M Sondra E. Smith, City Clerk/Treasurer 113 West Mountain 72701 (479) 575.8323 accessfayetteville.org TDD (Telecommunications Device for the Deaf) (479) 521.1316 RECEIVED • CITY OF FAOCT S1 2009. YE"MLLH e �ran„as D noat fle MY MMKB OFact S7►ii� �AJCCII�G Northwest Arkansas Times Benton County Daily Record P. O. BOX 1607 FAYETTEVILLE, AR 72702 PHONE: 479-571-6421 AFFIDAVIT OF PUBLICATION I, Cathy Wiles, do solemnly swear that I am Legal Clerk of the Arkansas Democrat Gazette newspaper. Printed and published in Benton County Arkansas, (Lowell) and that from my own personal knowledge and. reference to the tiles of said publication, the advertisement of: City of Fayetteville —Ordinance 5277 October 14, 2009 • r 1 LJ Publication Charge : $ 462.68 Signed: ___-- Subscribed and sworn to before me This/[/ day of Qct 6vc_ , 2009. My Commission Expires: frlccy Z 40/? - Do not pay from Affidavit, an invoice will be sent ORL UANC6 M0. 8477 AN ORDINANCE AUTHORIZING THE ISSUANCE AND SALE OF THE NT•,5 ONER USE TAN a e V e CAPITAL IMPROVEMENTSOFI BONDS. SERIES RNO9. F RE THE PURPOSE OFF WANON(3APoRTION dF •.THECMOFCERTAINSTREETANDTRALLS/5- AeaAasea RECEIVED . TEM IMPROVEMENTS. AUTHORIZING T1E EXECU- • TION AND DELIVERY OF A SECOND SUPFtEMENTAL TRUST INDENTURE PURSUANT TO WHICH THE BONDS WILL SE ISSUED AND SECURED: AUTHORIZING THE E)TCU- OCT24 2009 TION AND DELVERY OF AN OFFICIAL STATEMENT PURSUANT TO WHICH THE BONDS lt. ' WILL BE OFFERED; AUTHORIZING THE EXECUTION AND DELIVERY OF A BOND PUR- 1' CHASE AGREEMENT PROVIDING FOR THE SALE OF THE BONDS: AUTHORIZING THE EXECLFBON MID DELIVERY OF A CONTINUING DISCLOSURE AGREEMENT: AND PRE. CITY OF FAYETI'EVIIyE SCRIBING OTHER MATTERS RELATING THERETO CFTIf CLERKS OFFICE twn*,edWHEREAS. at theC1Iye s o w of me Cava cd v njo & (me •Ply)has sevlous - WIorstax that Henba printMedfpr ausawtlty(t% bMerrwtie costsd vntf} .. WI area endfluCity Sirrpwaaid-e Mothde wid(de"2\X19der Dw lowd•);ofd • tie CuTtiMion and cad 0e Sled Arkarms-Ntlu6(19 Wt aMi MTi�fl,iefl 62 to the CmsdWlim d the Slate of Mknsas CMMdman 62') and Arkansas Code Annotated (1996 Reel 6 :s 2105 Supp.) Seeapra 14164.901 at Mass. (as eon ne In time snarled, pa •Loci GOvernnrerll Bprd Ad-). to Lases end bed Its ®Peal asrProv<anera.barxds o fin nce tie costs of varlaw mpIN mpraarenn sudh as tame omprbxq the 2009 Pr ct, wNdr capital eryrosalbrl bonds may be seated by and payable from the recepts ode tip► celaity. ice mica and use tax adltodaid by the Local Ga+errvnent Bond Act: and WHEREAS, pliant to the provisions d Ordbance No. 469101 0e a s. adopted end eapproved on Hue 20.2tid 006 (me •Dect Ordbecol. theca was subnttod to tae oualiSad Jr electors of the City bur quesdci rngardhp the issuance of an aggregate of ro to exceed •a 7110.000." In pndpai anon of capital opevenenl bonds purs,Aa to Amendment 1a 62 and the Local Government Bond Act to fl, nca the capita mppdnmb described In . ,+ the Election Otirmrx:e. said bonds to be secured by a pledge of end on eten Up(0 all of m • • •4 receipts d a special c6y-wlde sales and use tax eved 0the rate done-anrterdon. per- : coa(0.25%) paauan to tie Local Goveronmt Bond Act(the U% Sales and Use Tel) •. andtm) all of derecelpa ofaspecial dty.widemnenduse'ax lovedtlflit rfmm aax- •'•. Warden of ae perced (0.75%) personal to are Local Govennee Said Ad (me 9.75% ,y . Sales and Use Tax•k and 1'' WHEREAS, at a spedai Saab, held SepNOEo 12.2"B. a many of the gusfled elec-ts of the City aghg on Me Questions approved the Iasuw.ca a capital artpf Qnnml bode In the piiclpel amauda and for each of the specific popmas set fond mime ba- Is. (and the corresponding evy.a the 025% Sales end Use Tax and the 075% Sales and < - Use Tax, and tae pledge of the receip s load to the peyrbrs of the capital imvfwemanl i bverin nt as act s -id ofd« theed pmnaoM d Antedmci D2 and the. CityLocal has OMrmanh Boa Act ed m flppiMe by the aulaxed electors of the Cry. one has ibw determined to ban our cell its Saes and Use 200Taxe$11, foremen Bode. Sob 8. In pre aggregate a not to exceed $1 f.250.000(pe "Soda•). n prier toe ter de fodof de2009 Pfojact:and y-. ammade w asgsnwitsl by the ponsime d oecStopn Odmwrw. the City Lamas i:. �muds. made anenpesoVa lot pre seed ate Bonds b Slephona Inc.. Feyebetwe.n St Cu '. (de Urndewnitar'), purtaen to the terms A a Bpd.haste A9fearem between St City 1' . .. . I arid the U clownas (m •Bpd Purchase Awaemea•) h MubWnlaN' me torn pro eaed Vb ends woes Wa nownp: �' NOMr ynEREFOAE SE IT ORDAINED BY THE CRY COUNCIL OF THE CITY • {{I: r . �. OF FAYETTEYILLE. MRANSAS h.. [' n. mg pa, t.fhdas widn it 62toNCpai Mbioflews Stated A aMkandmel '' ^B pa ne,M B d Adm mere 621° the Ca tho6Aen of W Stele a AMareea and ay Local dovonnenl Bind rs; Vass s hobby olAtedaad the Issuance ai barb d da Cq to b designatedBones•lobe Use has Gall Hnsegre atelSande,lobe20"•r to emus )• The Bahl seep b haired in Tie pound oUar (SI 25O. end n red b exfxad _ 4ElevenNorco t Tr , lkndred ply Thoiaed.OWee (e bewi Moves alien mauo pnt later (t'. .. a,, the Said Pia .2tse Agrab plrrc $8%Ua Ma nO gate pr nap d at de rates ci onds d ` '• I Urn the Bpd Nednese b ado n. En apo.00o me ee. pnc�si d .mMw of the iai 3 �.. of the erdcd7ddohmbtinedatwaytotasaga ofnotedonds book Oabon3 �:; • of the beat n and to aFQ1 "0 aggregate rxncpa ftW h O 04 Bede bobby asalo�dd .. dell be deemed toapplytode Trm Project eeeraLaahGllBakel4doe bind. The average nglis ono U. Balls as a wt Vial sled red exceed 4.75% per eotun..antq tia I,:... yield .on it costa Bane 2 9 Project. est The proceeds st alb Bade wit 9e umaeee e 4;.. to pusu the a costs d the 29 deserve to erpoalan a pant epr ri ma orb ter tie Bads ar II : to paalma0 a Mmes. bond In reserve t PsspoNs, to pry a failing l forge bprdtoasueroa; II 'deemed ep1 the y lea ci and ha gait phtkpo uderwxI be ego ed Weorn,. n v etdidnta to me Ieviwrce of the Bonds..The Pods abide be bush in the earns and `/ denornm inns. ohm be noted. shall- be nunberod, shall make, shat be subject •dempdn Fro to notaby. alleles containRxkroutertame. coverorac acimtdtimq'1 I,• : • �.. mac forth h the Sailed ADpkrtrWel Trash hn0efple efaxmted b me meahg. Mayor Isbaby a2halmd and endedb exaoaa a d deliver Die Bonds„ Im o rtsxe spin. each tabs to be hi sWlsV®Fy the loss the cadged In the Saud �.' . ;�.•. laelNtdna Trust hdodure albeoded to dab aeamg• and tie city Perk is herby ` (_ emixed and dbcted to exepti and dew de -Bonds card to soh de seal a the Ps. arid Me Mayo anal Cis. Perk an tany,whorized and dueled to cane ate . Bonds to be accepted and arlefOeaed by the Tlasbd. The Mayor b hereby 6hithorbed . conlo'with the Trustee. the UdewnTe and KUON Rock U➢. Uses flock. MAoaes , "Band Courad-A border to co plete the Bads h sibstentGGy de term nntdned lime, •_ 9pploMntal Trua- Insensate tubrmed to this meeting. with usch denged Is - duavbe approved a evidence by wn persons execuly the' Bonds, their execution to nnsleae ran- + sudlappovel. . I- . Section 2.10 orres Prima prkeipa' d andmerast nine Bon" as Metheyr maim o tie• ' Cored far redanpO, prior to minds.. there Is hereby pledged m of to sxwpb of St C.- 025% Sobs all Ube Tex and me 0.75% Saes and Use Tax Ievbd.by de Decor 1 -- _ Ordibrce. 5lchpedge sacaMg de Said, Nm be made on a poky basis with the exla-: ,(' a0 pledge duns sreceipt. In lawn of the Ob2 $$O.000,000 Sales and Use Tax Capital al . bpmvernnt Bonds. Solve 2o0BA (liar Serb 200SA Bonds ). and the Coy Sl4 340." Sales .Use Tax CaPM alrOtoveaen Bads. Saba 7.07 (me •swiss 2L7 Bach•). Y :\. i The It and cdeakn d de 0.25% Solos and Use Tax andTe 0.75% Sign and Use To letch l ' 'sb71.mnrence an Me daea presided as the Local Govemren Bad Act and stea cm . .•:. lee urall n. as Sena. Sa. 2DMA Bode, the Series 2"7 Bonds and ale Bonds se ro ban aflh rtgaelldal9 a nmawd kale bra n M dept a. Te Tnrame b redee ii de - Series 2006A Bonds, the Series 2007 BeBats Bonds and de Bs h f. The Cgs. covarferts -: ' eo and agrees Mat aD receipts n To 0.25% Saeas end Use Tax d mns a 0.75%Saes e • -,Ube Tax will b eecarned lei sepanaey as special funds on me bode d de Cis., end 1. • reoeipls of said 025% Sales and Use Tax end 0.75%,Sap and Ube Tax wit b wdep0ahed ' and will be usad solely as provided In the Treat Indexers (as doled babv). w,e•uq•.wyw,u.wsy,yWylpm, Ii m y OaAa w,vw Mu]Y 61'cc coy eW x$'cv a19 directed to aocuto and aclaewladge a Second Stpplemenel Trust InpenWre (theTnsl Idmare ), by and beMwi the Cry and Skmwa Fast hug Cmpany NA, Pine Blau. • Nl asas (he Tnatee•). and the City Clark Y hereby alillaorlzed.end *ecwd to exeaae and aduowedpe to Secaid Spplaneael Trust lndsaae end to affix the seat of the City lel and the Mayor end the City Cbupv k as hereby aimd and Oreaed to awe to :evsocaid Slppalherla Tnm edmhn to be accepted. .SBaded are ampriedged by the • mae, The Second supprnonel Trust IndMua auppSnerms and. arnsrda a That E kdemre dated as of NoverMp 1, 2008, as PwIcUsty err ended by a Feet Supplemental • trust Inde,Ma dated as of October 1, 2001, each by and between the Cy end the Twee • :; (the tdginel Indomure, at mlbahel' tWh the Secod Supper vital Trutt bbenh.n the Trust 1ndWura•) The Second Slpplranaaal Trust Irden*ze is hereby approved In aubaenda y th ben su0rritsd b ties nwGkg, kaadkv. wflhad anletor. Oe lso Mons t,Sr pThWig to to omega of 0.25% Sake and Use In recafpfeand O.TS%Saba and • .. lice Tu tecelpe and he term d ate Dada. The Maya eMreby astwlze0 to eoir Wh ho Trustee, he Underwnlar and Said Camel In afar to coVate to Seoord Suppkmentat Trust Mdman In subraMWthe for m wbM(ed to the meeting, with such sieges as omit be appored by sch pawns neaMg me Second SrpplareMN Trust :. hdvbeispn* execution b consuMe Caekeive Wdere at sera eAp,o. • ;' !Advice b glum hate copy cite Second Supplrnity C Trust bde.taeb nti iropay pre ben atAMmd to beon.) Ym leIsen theay Clark andiaavatlede tar kapeblbn by any nerested prmn.) ' Section 4. Thee Y hereby as odzal and approved a Pregmiiwy Official Statement d he City, Inckdeg the cover page end appendices ceded terao, rWling to the Bonds The PrefNnary Official Suntans Is hereby •dnyned lint by the City wino the mmnbg of U.S.' Sec r es. and Exdw,pe CmVTSbn ROe 150Al2. The distribution tl tie ..:` PeTrnary Official Statement Is hereby approved. The Prekmarrr Official Seemed, as smondnd to mnfand to the tertm at the Bend Plrctham.Aprearive. Inciud,g.E4i bi A hereto, and with such deer dwnge. and emansaene as are nmaplly agreed to by the City and the Underwriter, is twin referred to m the •OIIGal Bremen!: and the Mayo is hereby auhalzed to esoMa tun-omclal Setemml Icr ante on -behalf at the City. The Office!' Sewmnt Is hereby approved in subsWNaly he Om of the Preliminary Official Siawaera s &red leaks neakip. and the Mayor is hereby sudwUnd to coder with ten 22 Tistee, the t rdnwdter aid Said Canal in adr to Impbe to Office Statement In • t. wbradialy the form of te'Paol'iIwy Official Statement flitted to tds melding, wan h % nch changes as roll be approved by such perm. to Mayors execution to cawime wakuslvs evidence 0( such approval. (Advice is Wen that a spyd to Prebnh cry OfiW Slatan¢rs It m le wW the City Clerk . ) and is available e for Inspection by aHeresed person.) ', ..•111 SectionS. In order to preaabe the flat mndlorelpon which The Bads we to be ��. add to the Urdermler. the Mayor Is h'aeeby aMdwized and deed to aaecwe a Bad Purchase Agremont on beat d It. City, to be dated as d to We alit. axeaAian (the 'end Purchms Agreemorc). by and beMeen thasCity end -the llndenMter and to Bond • Purchase A ,suit Y hereby approved h Bubsmaaly to ben submitted a his meat- kv. and the Mayor Y hereby authorized to confer win to llydenrrtm and Said Caned b order to ca -ties to Bond Punta a Aggmat d ku substantially to form s1CRalted to Pt meeeg,vm. srh changes as shag be approved by loch p«vana exeadkg to Band • Purchase Agxnent. their anadwi to constitute conclusive cydanae of such approval. .•• (Advice it given that a copy of the Bond podharo Aprewea In substantially to lain : oulhoeed to beaxeaaed emlM with the City Clerk and Is available for inspection by any keereated oases) e St con & In order b Provide Som*K*V dff'docae of combat firmmJS at operaag . t: M I n Mmraapect b to O,% Saes end Use Tent. to 0.75% Saba end Use Tax ad •s ha City h mmplence wt the prevlsbe of Runt 15c2 12 of the U. & Securities and . " , • 'r . '`!tk. EspMfge a... -L, to Mayor Is eaeby t as of d and dbacted b execvle a • y Catka:rg Oiscbmae Agrenri to be dead as of to date of ls'exewtm-(the r,. ferebbyfl zed nldlreccteed cam IheCphtamaa0City D lmvestApear�imllM 4 . : 's•- be exacided by to Trustw The Contkmag OYcbsas Agerront Is hereby approved in , ). sgslatialy to sum n rCed to Pas m ealkig, rd the killer is hereby agMimd to ben • :�;. fr war be Trustee. to Underwriter and Bad Coi nS at ads b cat ela to ConBvkg • ... Diecloane Ag canted in substantially he torn, eubMed to Oft enmesh& MM Such �:. 'r changer as stall be apgdred by such parses exsageg the Continuing O'mbsn 'w Agoenhml, deal avatc a ccrwaue mrCYaha evidence of such approval. ' (Advice a given that a copy d to CanhmM OYclmure Agresnant In.subicaialty ter, r form sdhavized to be exerted is on ate with he City Clark and Is avallble for inspection and interests Pesch:) .. poseel T. In antes b eecurebemrcMse f aP m the bonds, the ktreawha has pro ."•. ," poandha the fCity ive ondt the pPOlcy de pugcydbah'pamantewins aprelimof (i. the proceeds ed the Bad wenbi pdbywwd eoonar a the payment of the the M al of 1, C endtheinterestviceon-fthe Us ember.. a lamed acanaaaa7Nmdadvto exaom a n imirau. nce 3 hpanluen ancipay tidal U* nece cry to adhrl ththnadem oa bon mrtrmitaateat end n do she and t ttega nerPseary b emmpattitha daherY of a fwd. '• sWeerlLe PdoY wet rekperl bate Bards '. . Secti& The e Mayo and'City'Cask, br and on behM of 7u C* we hereby authored W. ''`: and directed to do any and as 0ikg9 necessary to effect the esarrw: We, execution and l:'. dollvery of to Benda and to effect the executor and de1Mry of he Second Supplemental Trutt bdemde, tie Bond PlumMw Agreement. to Official Statement, the Continuing �. i t Oleck ado AOreemrd and a Tax Regulatory Aprearwd reetM to m.ea exemption tl . '-r interest an he Bads, and b perbm a d but oOPgatbo d he Cty undo end pununt twee The Mayor end 0*Qy Cb.t we haw whalmd end dkectd, for seen be,ai li. of gal City. in areaAe a0 papers, docamne, ceraficatem and often Ynhumne that may be raqukell for he carrying bd at such air aty,or to evidiKa the pxaase hereof. • Section 9. As p ova sty provided In the Section Omnerce. Kutak Rock U.P. ltte Rock. hi Momma, Is hereby withered as Sand Cana on bsdi of the City ii ,act i with Pie (`EF muanhuandsas d ate Bads • • Section 10. The Bonds are herby designated as'quaSed tax b0igatiC wRhb :y..,L to mooning of Section 2t5(bg9) Slit Interns Renames Ceded 19M as amended (tie •Code'} 'Tine City hereby represents and covenants that the aggregate prindpa anholnt is .. of its lax-exo opt obligations (excbdM •od51 `arty bads• withb he naming of ; '.• Saabn 141 d the Code). bctai three bile wtadnate flux burred In salads year :( 2W9 wi noaceed f30.000A00. . }:t �' Sectbn II. The'proWMs of 0hi.Or®nher ance we by decfined to be tamable. and it . any section: phaxe or pmdsbn shall for any mason be declared to -be legal or Invalid. : ' suM declaration des nw Nan the vat d y of the imeb0er d he seabm. phrases or ae- (' ;r vicbns o uta Odaonce. • • Cal,. Sectbn 12. Al adnmoea. maofbe ad seemedpone bail mherewithare hereby _. repsafed.b thee%ant of yawh cadict y . ' PARSED and APPROVED this 6Th day of October. 2009. AltW1OV@ •.. ETTLlT. '• • .t.. IIOMFID JORDAN. Mayo. WImRA 6 MMM City CIMtTaasa ... ......• ..._. ._ • EXHIBIT D COSTS OF ISSUANCE Bond Counsel Fee and Expenses (estimated through closing and transcript preparation) Kutak Rock LLP 124 West Capitol Avenue, Suite 2000 Little Rock, AR 72201 $44,000.00 Rating Fee Standard & Poor's Corporation 2542 Collection Center Drive Chicago, IL 60693 11,800.00 Trustee Acceptance Fee Simmons First Trust Company, N.A. 501 Main Street Pine Bluff, AR 71601 1,000.00 • Reimbursement for Ordinance Publication Expenses City of Fayetteville 113 West Mountain Fayetteville, AR 72701 Attn: Finance Director CI Official Statement Printing Ivize, LLC 200 South Tryon Street, Suite 10 Charlotte, NC 28202 Underwriting Expenses Stephens Inc. 3425 North Futrall Drive, Suite 201 Fayetteville, AR 72703 4811-7785-0629.2 Total: 462.68 1,095.12 1,159.37 • KUTAK ROCK LLP LITTLE ROCK, ARKANSAS Telephone: (501) 975-3000 Facsimile: (501) 975-3001 Federal ID 47-0597598 November 12, 2009 Check Remit To: Kutak Rock LLP PO Box 30057 Omaha, NE 68103-1157 Wire Transfer Remit To: ABA # 104000016 First National Bank of Omaha Kutak Rock LLP A/C # 24-690470 Reference Invoice No. 1428276 Client Matter No.: 1123401-19 City of Fayetteville, Arkansas Fayetteville, Arkansas Invoice No. 1428276 1123401-19 $11,250,000 CITY OF FAYETTEVILLE, ARKANSAS SALES AND USE TAX CAPITAL IMPROVEMENT BONDS SERIES 2009 Fee ($42,000) and expenses ($2,000) for serving as Bond Counsel to the City of Fayetteville TOTAL CURRENT AMOUNT DUE 4831-8908-6213.1 PRIVILEGED AND CONFIDENTIAL ATTORNEY -CLIENT COMMUNICATION AND/OR WORK PRODUCT $44,000.00 iII fIILl III11.. '.II . I MR. DENNIS HUNT STEPHENS, INC. 3425 N. FUTRALL SUITE 201 FAYETTEVILLE AR 72703 Standard & Poor's Financial Services, LLC Statement No.: 10224986 Federal I.D.: 26-3740348 Acct. No.: 1000073473 DBA Standard & Poor's Ratings Services Origi :al Involve Dats: 10/02/09 Statement Date: 11/02/09 Page: 1 SeMces Provided To: PUIChase Order MR_ DENNIS'HUNT STEPHSAS.JNC. 3425'N. FUTRALL-SUITE•201 FAYETTEVILLE AR 72703 101015 ANALYTICAL SERVICES RENDERED IN CONNECTION WITH: $11.800.00 USfn;250,000 City of Fayetteville, Arkansas. Sales and Use Tax Capital Iaprovement Bonds, Serles..2009,,dited: November 1,2009,..due } wl -_ i. [Fee. Discounted For Frequent Issuance] FOR INQUIRIES PLEASE CONTACT: STEVE BARNETT PHONE: 1.800.767.1896 EXTS6 FAX: 1-212-438.5178 STEVE BARNETTMDP.CON THIS STATEENT IS FOR AN INVOICE PREVIOUSLY SENT TO YOU. PLEASE CHECK •YOU! RECORDS TO AVOID A DUPLICATE PAYMENT. STATEMENT ONLY TOTAL This Statw,mmt Reeaots Paymmb end; Credits Processed As OE M1I 1,WN, 144 .n.- ! ;re.. x` :•rl:..'¼'•' 4 ••r: •♦' 11,•3 ,'P'. 1 : I. r ,-••.n. •'Mrt-t^nu SIS::i.•: jNX;::71 :" Lb :4: 1M1is ]`, _ ..:.,r+y, ., .i I111A Slxya: ',JdISeru•laa.lLf:,l•a4!ra:l!l. \i d•' 1s.r's 10tHa S.% ors I (•](.NtS;p I!R! 1 ':-C i� AI',.''rl!!;SIIAS CI•AN;IFL' ,N.31ti1r1:,1' CI.41:G: !1ti il' •:: •I!ti b•"I'! BILLED TO: PAY BY WIRE TRANSFER: 0201 MR. DENNIS HUNT STEPHENS, INC. 3426 N. FUTRALL, SUITE 201 FAYETTEVILLE AR 72703 BANK OF AMERICA SAN FRANCISCO CA STANDARD AND POOR'S ACCOUNT NO. 12334.02500 ABA No. 0200-0969-3 PLEASE REFERENCE INVOICE IF 10000734731 10224986 01180000 1 700 10 07 1009 8 _ •,� ..__ v,. rl "f Cn:Im1 Na . 102210080 '. ALLI No- 100007.3, 13y,r 1•rvare Date 10 D21Y!!le"' RESIT TO: STANDARD AND POOR'S 2542 COLLECTION CENTER DRIVE CHICAGO, IL 60893 TOTAL AMOUNT DUE AMOUNT $11,800.00 USD ENCLOSED O i • qViz IVIZE of Little Rock, LLC • Phone: (501) 376-8000 Fed. Tax ID: 20-5720417 REMIT PAYMENT TO: IVIZE of Little Rock, LLC do IVIZE Group, LLC 200 South Tryon.Street; Suite 10 Charlotte, NC 28202 PLEASE PAY FROM THIS INVOICE. ♦'; INVOICE NO: 12-20396 INVOICE DATE: 10/2912009 SOLD TO: Stephen's lnc, Fayetteville 3435 N. Futrell Dr. Suite 200 Fayetteville, AR 72703 ORDERED BY: Amy McFarland Stephen's Inc., Fayetteville Fay. Sales/use Tax NET 15 I AWS 7,280 MW Grade ... Grade A (autofeed) blade 8. white copies 0.08 58L40T 140 Tape Binding Tape binding 3.00 420.00T • Subtotal: $1,002.40 Sales Tax: $92.72 $1,095.12 THANK YOU FOR CHOOSING TYRE, LLC Poymn is not4 do. .� aupdans for drbd parry parnaas. If kink. 30 days,. fly. p.rcat (3%) 0. dwrps may be added. Customs is mpanslS. far as coin of mawkn, brdudlnp wasoaablo ana my Mn. LuoV (('1c , ,Y. I . r(P„ On F • Stephens Inc. $11,250,000 CITY OF FAYETTEYJLLE, ARKANSAS SALES AND USE TAX BONDS SERIES 2009 Clearing: Cusip Service Bureau $ 363,00 DTC 185.00 Misc. (Postage, Federal Express, Ticket Charges) 304.00 Day Loan 307.37 • Total $1,159.37 • III Center Street P.O. Box 3507 Little Rock, Arkansas 72201 501-377-2000 Fax 501.377-2666 stephens.com KUTAK ROCK LLP ATLANTA CHICAGO SUITE 2000 DENVER 124 WEST CAPITOL AVENUE Dee MOINES NORTHWEST ARKANSAS OFFICE LITTLE ROCK. ARKANSAS 72201-3706 PAYETTEVILLE IRVINE Suite 400 KANSAS CITY 501-976-3000 234 EAST MILLOAP ROAD LOS ANGELES FAYETTEVILLE. ARKANSAS T270S-40SS FACSIMILE 501-676-3001 OKLAHOMA CITY A7S-e7a-4200 www.k utakrock. 0081 OMAHA PHILADELPHIA RICHMOND SCOTTSDALE WASHINGTON GORDON M. WILBOURN WICHITA wR10RNYCOMRQI2ak0dL4«E November 13, 2009 (301)9163101 • VIA CERTIFIED MAIL RETURN RECEIPT REQUESTED Internal Revenue Service Center Ogden Utah 84201 Dear Sir or Madame: 7009 0820 0002 1414 8716 $11,250,000 CITY OF FAYETTEVILLE, ARKANSAS SALES AND USE TAX CAPITAL IMPROVEMENT BONDS SERIES 2009 I have enclosed for filing the original and one copy of IRS Form 8038-G with respect to the above -captioned matter. Please return the copy to me, showing your file -mark, using the enclosed prepaid self addressed envelope. If you have any questions or require additional information, please do not hesitate to contact me. Is enclosure 4949.9965.9077.1 Itoni. Sincerely, Wilbourn • Form (Rev. 80384 November 2000) Information Return for Tax -Exempt Governmental Obligations ► Under Internal Revenue Code section 149(e) ► see separate Instructions. OMB No. 1545.0720 D teprieo a tro crawly maim Sariu Cautiom If the issue price is under $700,002 use Form 8038 -GC. Reporting Authority If Amended Retain check here ► ❑ 1 Issuer's name 2 tnuts en io'r Identification number City of Fayetteville, Arkansas 71 i 6018482 3 Number and street (or P.O. box if mall is not delivered to street address) Roomrsuite 4 Report number 113 West Mountain Street 3 09-2 5 City. town, orpost o0ke. slate. and ZIP code 6 Date of issue Fayetteville, AR 72701 11.12-09 7 Name of issue 8 CUSIP number Sales and Use Tax Capital Improvement Bonds, Series 2809 312673 EH5 9 Name and tide of oflker or legal representative whom the IRS may call for more information Jio Tdep rte ranee d aalte a legal Its Gordon M. Wliboum, Esq., Bond Counsel I( 501 1 9753000 Type of Issue (check applicable box(es) and enter the issue price) See instructions and attach schedule 11 12 13 14 15 16 17 18 0 Education . . . . . . . . . . . . . . . . . . . . . . . (1 Health and hospital . . . . . . . . . . . . . . . . . . . . 0 Transportation . . . . . . . . . . . . . . . . . . . . . . ❑ Public safety . . . . .. . . . . . . . . . . . . . . . . . ❑ Environment (including sewage bonds) . . . . . . . . . . . . . . 0 Housing . . . . . . . . . . . . . . . . . . . . . . . . 0 Utilities . . ® other. Describe ► streets and trolls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 12 13 14 15 18 17 18 11,193,500 19 20 If obligations are TANS or RANs. check box ► ❑ if obligations are BANs. check If obligations are In the form of a lease or installment sale, check box box ► 0 ► ❑ •iuuii Description of Obliqations. Complete for the entire issue for which this form is being filed. W Final thruway dam (b) Issue price la) Stated redemption prim m maN4y Id) Weighted (a) Yield average netunty 21 11-1-21 $ 11,193,500 $ 11,250,000 6.933 years 3.8302 % nra Uses of Proceeds of Bond Issue including underwriters' discount) 22 23 24 Proceeds used for accrued interest . . . . . . . . . . .. . . . . Issue price of entire issue (enter amount from line 21, column (b)) . Proceeds used for bond issuance costs (including underwriters' discount) 24 . . . . . . . 200,142 22 12,419 23 11.193.500 25 28 Proceeds used for credit enhancement . . . . . . . . . . 25 Proceeds allocated to reasonably required reserve or replacement fund 28 79,712 21,094 27 Proceeds used to currently refund prior issues 27 28 29 30 Proceeds used to advance refund prior issues . 28 ` Total (add lines 24 through 28) . . . . . . . . . Nonrefundlr,q proceeds of the issue subtract line 29 from line 23 and enter amount here). . 29 300,948 30 10,892,552 Descron or Refunded Bonds (Complete this part only for refunding bonds.) 31 Enter the remaining weighted average maturity of the bonds to be currently refunded . . . ► years 32 Enter the remaining weighted average maturity of the bonds to be advance refunded . . . ► years 33 Enter the last date on which the refunded bonds will be called . . . . . . . . . . . ► 34 Enter the date(s) the refunded bonds were issued ► 35 Enter the amount of the state volume cap allocated to the issue under section 141(b)(5) . . . ere 38a Enter the amount of gross proceeds invested or to be invested in a guaranteed investment contract (see instructions) 36a -0- b Enter the final maturity date of the guaranteed investment contract ► 37 Pooled financings: a Proceeds of this issue that are to be used to make loans to other governmental units 37a b If this issue is a loan made from the proceeds of another tax-exempt issue, check box ► 0 and enter the name of the issuer ► and the date of the issue ► 38 If the issuer has designated the issue under section 265(b)(3)(B)(1)(III) (small issuer exception), check box . . . ► 39 If the issuer has elected to pay a penalty in lieu of arbitrage rebate, check box . . . . . . . . . . . . ► ❑ An If tin iee,mr hoe idontifiM a hainn ,hark hne t► n under pennies of peijw7 and belief, the re true, Sign • Here ' goer e d issuer's For Paperwork Reduction Act I declare that I have erect, and complete see page 2 of the Instructions. schedules and saternena t i-- Lioneld Jorda Type or P ix fame Cat. No. 63173S to It. best Of my krowledga Form 8038-0 (Ref. 11.2000) S • • a 4827-9893.8625.6 CITY OF FAYETTEVILLE, ARKANSAS to SIMMONS FIRST TRUST COMPANY, N.A. as Trustee TRUST Dated as of November 1, 2006 Providing for: $50,000,000 City of Fayetteville, Arkansas Sales and Use Tax Capital Improvement Bonds Series 2006A Prepared by: Kutak Rock LLP 124 West Capitol Avenue, Suite 2000 Little Rock, Arkansas 72201 EXECUTION COPY TABLE OF CONTENTS so • Parties ................... Recitals ................. Granting Clauses.. Section 101. Section 102. Section 201. Section 202. Section 203. Section 204. Section 205. Section 206. Section 207. Section 208. Section 209. .Section 210. .Section 211. Section 212. Section 213. Section 214. Section 215. Section 216. Section 301. Section 302. Section 303. Section 304. Section 305. Section 306. Section 401. Section 402. Section 403. Section 404. Section 405. Section 406. 4827.9893-8625.6 (This Table of Contents is not a part of the Trust Indenture and is only for convenience of reference.) ARTICLE I DEFINITIONS Definitions..............................................I Use of Words ....................... I.................. ARTICLE II THE BONDS Security for the Bonds ....I.. Authorized Amount ........... Details of Bonds ................. Form................................... Payment.............................. Execution ......... I ............... I. Authentication................................................................................................15 Deliveryof the Bonds....................................................................................15 Mutilated, Destroyed or Lost Bonds...................................................... ........16 Registration and Transfer of Bonds .... ...................................................I....... 17 Cancellation................................................................................................... 18 Additional Bonds and Drawdowns Under RLF Loans .................................. 18 Superior Obligations Prohibited ......... ................ ............. ..........a................... 19 [RESERVED)................................................................................................19 TemporaryBonds........................................................................................... 19 Book -Entry Bonds; Securities Depositor)'..................................................... 19 ..............................................1 ..............................................1 .............................................. 2 ............................................. 4 ...........................................12 12 13 13 14 14 14 ARTICLE III REDEMPTION OF BONDS BEFORE MATURITY Redemptionof Bonds.................................................................................... 21 Notice... ......... . .. ... . .......... . . . . . .......... . .................. ........ .... ................ .. .... . ...... . . . .. 21 Selection of Bonds to be Redeemed.............................................................. 21 Surrender of Bonds Upon Redemption.......................................................... 22 Redemptionin Part ........................................................................................ 22 Redemption of Additional Bonds.................................................................122 ARTICLE IV GENERAL COVENANTS AND REPRESENTATIONS Payment of Principal, Premium, if any, and Interest ..................................... 22 Performance of Covenants............................................................................. 23 Instruments of Further Assurance.................................................................. 23 Recordation and Filing...... . . . ....... .. . ... .... ... . . . . . .... ... .... . .... . 23 Inspectionof Books.........................................................................I............. 23 TaxCovenants............................................................................................... 23 Section 407. Trustee's and Paying Agent's Fees and Expenses......................................... 24 Section 408. Construction of Projects; Certification of Completion Dates............ ............ 24 Section 409. Encumbrances................................................................................................24 Section 410. Continuing Disclosure................................................................................... 24 ARTICLE V FUNDS AND DEPOSITS Section 501. Creation of Funds and Accounts.................................................................... 25 Section 502. Project Fund................................................................................................... 25 Section 503. Revenue Fund................................................................................................ 26 Section504. Bond Fund...................................................................................................... 27 Section 505. Cost of Issuance Fund.................................................................................... 28 Section 506. Redemption Fund........................................................................................... 28 Section507. Rebate Fund................................................................................................... 29 Section 508. Debt Service Reserve Fund............................................................................ 30 Section 509. Cessation of Fund Deposits........................................................................... 30 Section 510. Separate Accounts Authorized....................................................................... 31 ARTICLE VI INVESTMENTS Section 601. Investment of Moneys.................................................................................... 31 Section 602. Investment Earnings....................................................................................... 31 Section 603. Valuation of Funds......................................................................................... 31 Section 604. Responsibility of Trustee............................................................................... 32 ARTICLE VII . DISCHARGE OF LIEN Section 701. Discharge of Lien........................................................................................... 32 Section 702. Bonds Deemed Paid..... .................................................................................. 32 Section 703. Non -Presentment of Bonds............................................................................33 ARTICLE VIII DEFAULT PROVISIONS AND REMEDIES OF TRUSTEE AND BONDHOLDERS Section 801. Events of Default........................................................................................... 33 Section 802. Acceleration ..... ........................... ........ ........................ ............a......... 34 Section 803. Other Remedies; Rights of Bondholders....................................................... 34 Section 804. Right of Bondholders to Direct Proceedings ................................................. 35 Section 805. Appointment of Receiver...............................................................................35 Section806. Waiver............................................................................................................ 35 Section 807. Application of Moneys.................................................................................. 35 Section 808. Remedies Vested in Trustee........................................................................... 36 Section 809. Rights and Remedies of Bondholders............................................................ 36 Section 810. Termination of Proceedings........................................................................... 37 Section 811. Waivers of Events of Default......................................................................... 37 4827-9893-8625.6 ii ARTICLE IX TRUSTEE AND PAYING AGENTS ri Section 901. Section 902. Section 903. Section 904. Section 905. Section 906. Section 907. Section 908. Section 909. Section 910. Section 911. Section 912. Section 913. Acceptance of Trusts...................................................................................... 38 Fees, Charges and Expenses of Trustee and Paying Agents; Trustee's PriorLien....................................................................................................... 40 Additional Duties of Trustee.......................................................................... 40 Notice to Bondholders of Default.................................................................. 41 Interventionby Trustee.................................................................................. 41 Merger or Consolidation of Trustee............................................................... 41 Resignation by Trustee........................................................................ Removalof Trustee........................................................................................ 42 Appointment of Successor Trustee................................................................ 42 Concerning Any Successor Trustee............................................................... 42 Reliance Upon Instruments.. ............. 42 Appointment of Co-Trustee........................................................................... 43 Designation and Succession of Paying Agents..............................................43 ARTICLE X SUPPLEMENTAL INDENTURES Section 1001. Supplemental Indentures Not Requiring Consent of Bondholders................44 44 Section 1002. Supplemental Indentures Requiring Consent of Bondholders................. ...... 45 Section 1003. Effect of Supplemental Indentures................................................................. 45 ARTICLE XI PROVISIONS RELATING TO 2006A BOND POLICY AND 2006A RESERVE POLICY Section 1101. Consents, Approvals and Directions of 2006A Insurer ................................. 46 Section 1102. Disclosures to 2006A Insurer......................................................................... 47 Section 1103. Defeasance and Discharge of Series 2006A Bonds........................ ............... 48 Section 1104. Claims Upon 2006A Bond Policy and Payments by and to 2006A Section 1105. Section 1106. Section 1107, Section 1201. Section 1202. Section 1203. Section 1204. Section 1205. Section 1206. Section 1207. Section 1208. Section 1209. Section 1210. Insurer............................................................................................................ 49 Provisions Relating to Additional Bonds...... ... . . . . .. . ... .... ................................ 51 Miscellaneous Provisions Relating to 2006A Bond Policy.... ........... ............ 52 2006A Reserve Policy Provisions............................................................a..... 52 ARTICLE XII MISCELLANEOUS Consents, etc. of Bondholders Notices .................... ... ............, Limitationof Rights....................................................................................... 54 Severability.................................................................................................... 55 Applicable Provisions of Law........................................................................ 55 Counterparts................................................................................................... 55 Successors and Assigns.................................................................................. 55 Captions......................................................................................................... 55 Photocopies and Reproductions..................................................................... 55 Bonds Owned by the City.............................................................................. 55 54 54 4827.9893-8625.6 iii Exhibit A Form of Series 2006A Bond......................................................................... A-1 Exhibit B Form of Coverage CertiScate....................................................................... B-1 Exhibit C Requisition Form.......................................................................................... C-1 4827-9893-6625.6 iv aTRUST INDENTURE • THIS TRUST INDENTURE dated as of November 1, 2006, by and between the CITY OF FAYETTEVILLE, ARKANSAS (the "City"), a city of the first class organized under and existing by virtue of the laws of the State of Arkansas, and SIMMONS FIRST TRUST COMPANY, N.A., as trustee (the "Trustee"), a national banking association organized under and existing by virtue of the laws of the United States of America and having its principal corporate trust office in Pine Bluff, Arkansas; WITNESSETH: WHEREAS, the City Council of the City has previously determined that there is a great need for a source of revenue to finance all or a portion of the costs of (i) the acquisition, construction, reconstruction, extension, improving and equipping of certain improvements to the City's wastewater treatment plants, sewerage and related facilities (the "Wastewater Project"), (ii) the acquisition, construction, reconstruction, repair, straightening and widening of certain City streets and related improvements (the "Street Project"), and (iii) the acquisition, construction and equipping of certain City trail system improvements (the "Trail Project"); and WHEREAS, the people of the State of Arkansas (the "State") by the adoption of Amendment No. 62 to the Constitution of the State, approved November 6, 1984 ("Amendment . 62"), have authorized cities and counties in the State to issue bonds, upon voter approval, to finance certain capital improvements of a public nature, and to secure said bonds by a pledge of the proceeds of certain taxes; and WHEREAS, the provisions of Amendment 62 have been implemented by the Local Government Bond Act of 1985, codified as Arkansas Code Annotated (1998 Repl. & Supp. 2005) Sections 14-164-301 et seq. (as from time to time amended, the "Act"); and WHEREAS, pursuant to the provisions of Ordinance No. 4891, duly adopted by the City Council of the City on June 20, 2006 (the "Election Ordinance"), there was submitted to the qualified electors of the City four questions regarding the issuance of an aggregate of not to exceed $110,000,000 in principal amount of capital improvement bonds pursuant to Amendment 62 and the Act to finance the capital improvements described in the Election Ordinance, including the Wastewater Project, the Street Project and the Trail Project; and WHEREAS, pursuant to the Election Ordinance, said capital improvement bonds are to be secured by a pledge of and lien upon (i) all of the receipts of a special city-wide sales and use tax at the rate of one -quarter of one percent (0.25%) (the "0.25% Sales and Use Tax"), and (ii) all of the receipts of a special city-wide sales and use tax at the rate of three-quarters of one percent (0.75%) (the "0.75% Sales and Use Tax"), each levied pursuant to the Act; and WHEREAS, at a special election held September 12, 2006, a majority of the qualified electors of the City voting on each of the aforementioned questions approved the issuance of capital improvement bonds, in the principal amounts and for the specific purposes set forth on the ballot (and the correspondifig levy of the 0.25% Sales and Use Tax and the 0.75% Sales and Use 4827-9893-8625.6 Tax, and the pledge of the receipts thereof to the payment of said capital improvement bonds); and WHEREAS, pursuant to the provisions of Ordinance No. 4936 of the City, adopted by the City Council on October 3, 2006 (the "Authorizing Ordinance"), and in accordance with the provisions of Amendment 62 and the Act, the City proposes to issue its Sales and Use Tax Capital Improvement Bonds, Series 2006A (the "Series 2006A Bonds'), in the aggregate principal amount of $50,000,000, in order to provide for the financing of a portion of the costs of the Wastewater Project, the Street Project and the Trail Project; and WHEREAS, the City has further determined to enter into this Indenture to authorize the issuance of and to secure the Series 2006A Bonds by granting to the Trustee a pledge and assignment of the interests and other rights herein contained, and certain funds and. accounts created hereby; and WHEREAS, the regularly scheduled payment of principal of and interest on the Series 2006A Bonds when due will be guaranteed under an insurance policy (the "2006 Bond Policy") to be issued concurrently with the delivery of the Series 2006A Bonds by Financial Security Assurance Inc. (the "2006A Insurer"); and WHEREAS, the Series 2006A Bonds are to be dated, bear interest, mature and be subject to redemption as hereinafter in this Indenture set forth in detail; and . WHEREAS, provision is made in this Indenture for the issuance of Additional Bonds (hereinafter defined) and the incurring of RLF Loans (hereinafter defined) upon compliance with certain conditions set forth herein; and WHEREAS, the execution and delivery of this Indenture and the issuance of the Series 2006A Bonds have been in all respects duly and validly confirmed, authorized and approved under the provisions of the Authorizing Ordinance; and WHEREAS, all things necessary to make the Series 2006A Bonds, when authenticated by the Trustee and issued as in this Indenture provided, the valid, binding and legal obligations of the City according to the import thereof, and to constitute this Indenture a valid pledge of the receipts of the 0.25% Sales and Use Tax and the 0.75% Sales and Use Tax to the payment of the principal of, premium, if any, and interest on the Series 2006A Bonds, as specified in and in accordance with the provisions hereof, have been done and performed, and the creation, execution and delivery of this Indenture and the creation, execution, issuance and delivery of the Series 2006A Bonds, subject to the terms hereof, have in all respects been duly authorized; NOW, THEREFORE, KNOW ALL MEN BY THESE PRESENTS, THIS INDENTURE WITNESSETH: That the City, in consideration of the premises and the acceptance by the Trustee of the trusts hereby created, the issuance of the 2006A Bond Policy and the 2006A Reserve Policy (hereinafter defined) by the 2006A Insurer, and of the purchase and acceptance of the Series 2006A Bonds by the Holders and owners thereof, and the sum of Ten Dollars ($10.00), lawful money of the United States of America, to it duly paid by the Trustee, at or before the execution 4827-9893-8625.6 2 and delivery of these presents, and for other good and valuable consideration, the receipt of which is hereby acknowledged, and in order to secure the payment of the principal of, premium, if any, and interest on the Series 2006A Bonds and all Additional Bonds (hereinafter defined)and RLF Loans (hereinafter defined), if any, according to their tenor and effect, to secure the reimbursement to the 2006A Insurer of all amounts reimbursable pursuant to the 2006A Bond Policy and the 2006A Reserve Policy, and to secure the performance and observance by the City of all the covenants expressed or implied herein and in the Series 2006A Bonds, Additional Bonds and RLF Loans (collectively, the "Bonds"), subject to all of the provisions hereof, does hereby grant, bargain, sell, convey, mortgage, assign, transfer and pledge unto the Trustee, and unto its successor or successors in trust, and to them and their assigns forever, for the securing of the performance of the obligations of the City hereinafter set forth the following: 1. Subject only to the provisions of this Indenture permitting the application thereof for the purposes and on the terms and conditions set forth herein, (i) the proceeds of the sale of the Bonds, (ii) all receipts from the 0.25% Sales and Use Tax and the 0.75% Sales and Use Tax, which are hereby irrevocably assigned and pledged to secure all obligations under this Indenture, and (iii) the Revenue Fund, Bond Fund, Debt Service Reserve Fund (subject to the limitations set forth in Section 508 hereof), Project Fund and Redemption Fund established by this Indenture, including the investment earnings thereon, if any. .2. Any and all other properties, rights and interests of every kind and nature from time to time which have been, are hereby, or hereafter are, by delivery or by writing or transfer of any kind, conveyed, mortgaged, pledged, assigned or transferred, as and for additional security hereunder, by the City or by any other Person, firm or corporation, or with the written consent of the City, to the Trustee, which is hereby authorized to receive any and all such properties, rights and interests at any time and at all times and to hold and apply the same subject to the terms hereof. TO HAVE AND TO HOLD all the same (the "Trust Estate") with all privileges and appurtenances hereby conveyed and assigned, or agreed or intended so to be, to the Trustee and its successors in said trusts and to them and their assigns forever, IN TRUST NEVERTHELESS, upon the terms and trusts herein set forth for the equal and proportionate benefit, security and protection of all owners of the said Bonds issued under and secured by this Indenture without privilege, priority or distinction as to lien or otherwise of any of the Bonds over any of the other Bonds; provided, however, that if the City, its successors or assigns, shall well and truly pay, or cause to be paid, the principal of, premium, if any, and interest due on the Bonds, at the times and in the manner provided in the Bonds, according to the true intent and meaning thereof, and shall make the payments as required under this Indenture or shall provide, as permitted hereby, for the payment thereof by depositing or causing to be deposited with the Trustee the entire amount due or to become due thereon, and shall well and truly keep, perform and observe all of the covenants and conditions pursuant to the terms of this Indenture to be kept, and shall pay to the Trustee all sums of money due or to become due to it in 4827-9893-8625.6 accordance with the terms and provisions hereof, and shall pay all amounts due to the 2006A Insurer by way of reimbursement or otherwise, then upon such final payments or deposits this Indenture and the lien and rights hereby granted shall cease, determine and be void; otherwise, this Indenture is to be and remain in full force and effect. THIS INDENTURE FURTHER WITNESSETH that, and it is expressly declared that, all Bonds issued and secured hereunder are to be issued, authenticated and delivered and all revenues and income hereby pledged are to be dealt with and disposed of under, upon and subject to the terms, conditions, stipulations, covenants, agreements, trusts, uses and purposes as hereinafter expressed, and the City has agreed and covenanted, and does hereby agree and covenant, with the Trustee and with the respective owners from time to time of the Bonds or any part thereof, as follows, that is to say: ARTICLE I Section 101. Definitions. In addition to the words and terms elsewhere defined in this Indenture, the following words and terms as used in this Indenture shall have the following meanings: "Account" means an Account established by Article V of this Indenture. . "Act" means the Local Government Bond Act of 1985, codified as Arkansas Code Annotated (1998 Rep!. & Supp. 2005) Sections 14-164-301 et seq., as from time to time amended. "Additional Bonds" mean Bonds in addition to the Series 2006A Bonds which are issued under the provisions of Section 212 of this Indenture. "Amendment 62" means Amendment No. 62 to the Constitution of Arkansas, approved by the voters of the State on November 6, 1984. "Annual Debt Service" means, with respect to all or any particular amount of Bonds (including any RLF Loan), the Debt Service for any particular Fiscal Year required to be paid or set aside during such Fiscal Year, less the amount of such payment which is provided from the proceeds of the sale of Bonds or which is drawn under an RLF Loan or from sources other than Sales and Use Tax receipts. "Authorized Representative" means either the Mayor or the Finance Director of the City and such additional persons as from time to time may be designated to act on behalf of the City by a Certificate furnished to the Trustee containing the specimen signature thereof and executed on behalf of the City by its Mayor. "Authorizing Ordinance" means Ordinance No. 4936, adopted by the City on October 3, 2006, which authorized the issuance of the Series 2006A Bonds pursuant to this Indenture. 4827-9893.8625.6 "Beneficial Owner" means any Person who acquires beneficial ownership interest in a Bond held by the Securities Depository. In determining the Beneficial Owner of any Bond, the Trustee may rely exclusively upon written representations made and information given to the Trustee by the Securities Depository or its Participants with respect to any Bond held by the Securities Depository in which a beneficial ownership interest is claimed. "Bond Counsel" means any firm of nationally recognized municipal bond counsel selected by the City and acceptable to the Trustee. "Bond Fund" means the fund by that name created and established in Section 501 of this Indenture. "2006A Bond Policy" means the insurance policy issued by the 2006A Insurer guaranteeing the scheduled payment of principal of and interest on the Series 2006A Bonds when due. "Bonds" means the Series 2006A Bonds and all Additional Bonds issued, and all RLF Loans incurred, by the City pursuant to this Indenture. Except to the extent provided in Section 209 hereof and except for refunding bonds issued under the provisions of Section 212 hereof, the aggregate principal amount of Bonds issued hereunder and any RLF Loan incurred by the City shall not exceed $110,000,000. "Book -Entry System" means the book -entry system maintained by the Securities . Depository described in Section 216 of this Indenture. "Business Day" means any day other than (a) a Saturday or Sunday, (b) a day on which commercial banks in New York, New York, or the city in which the corporate trust office of the Trustee is located are authorized or required by law or executive order to close, or (c) a day on which the New York Stock Exchange or the Securities Depository is closed. "Certificate" means a document signed by an Authorized Representative of the City attesting to or acknowledging the circumstances or other matters therein stated. "City" means the City of Fayetteville, Arkansas, a municipality and political subdivision under the laws of the State of Arkansas. "City Clerk" means the person holding the office and performing the duties of the City Clerk of the City. "Closing Date" means, with respect to any series of Bonds, the date upon which there is an exchange of such series of Bonds for the proceeds representing the purchase price for such series of Bonds by the Original Purchaser or Purchasers thereof. "Code" means the Internal Revenue Code of 1986, as from time to time amended, and applicable regulations issued or proposed thereunder. "Completion Date" means the date upon which a particular Project (or portion thereof) is first ready for normal continuous operation, as determined by a Qualified Engineer. 4827-9893-8625.6 "Continuing Disclosure Agreement" means, collectively, each Continuing Disclosure Agreement between the City and the Trustee, dated the date of issuance and delivery of a series of Bonds, as originally executed and as amended from time to time in accordance with the terms thereof. "Costs of Issuance" means all items of expense payable or reimbursable directly or indirectly by the City and related to the authorization, sale and issuance of the Bonds, including, but not limited to, underwriting discounts, fees and expenses, election expenses, publication expenses, expenses of printing, reproducing, filing and recording documents, initial fees and charges of the Trustee and any Paying Agent, fees and expenses for legal, accounting and other professional services, rating fees, costs of securing any credit enhancement for the Bonds, costs of execution, transportation and safekeeping of the Bonds, and other costs, charges and fees incurred in connection with the foregoing. "Costs of Issuance Fund" means the fund by that name created and established in Section 501 of this Indenture. "Debt Service" means, with respect to all or any particular amount of Bonds or any RLF Loan, as the case may be, the total as of any particular date of computation and for any particular period of the scheduled amount of interest and amortization of principal payable on such Bonds and any RLF Loan, excluding amounts scheduled during such period which relate to principal which has been retired before the beginning of such period. . "Debt Service Reserve Fund" means the fund by that name created and established in Section 501 of this Indenture. "Election Ordinance" means Ordinance No. 4891, adopted by the City Council on June 20, 2006, pursuant to which there was submitted to the qualified electors of the City the four questions relating to the issuance of the Bonds. "Event of Default" means any event of default specified in Section 801 hereof. "Existing Indebtedness" means, collectively, the City's (i) $27,000,000 Sales and Use Tax Refunding and Capital Improvement Bonds, Series 2005A, (ii) $45,000,000 Sales and Use Tax Capital Improvement Bonds, Series 2005B, and (iii) $20,000,000 Sales and Use Tax Capital Improvement Bonds, Series 2006 RLF Loan. "Existing Tax" means the three-quarter of one percent (0.75%) city-wide sales and use tax authorized by the Act and presently being levied and collected within the City for the purpose of securing the payment of the Existing Indebtedness. "Fiscal Year" means the 12 -month period used, at any time, by the City for accounting purposes, which may be the calendar year. "Fund" means a fund established by Article V of this Indenture. "Government Securities" means direct obligations of the United States of America (including obligations issued or held in book -entry form on the books of the Department of the 4827-9893-8625.6 6 Treasury, and CATS and TIGRS) or obligations the principal of and interest on which are unconditionally guaranteed by the United States of America. "Holder" or "Bondholder" or "owner of the Bonds" means the registered owner of any Bond. "Indenture" means this Trust Indenture dated as of November 1, 2006, between the City and the Trustee, pursuant to which the Bonds are issued, and any amendments and supplements hereto. "2006A Insurer" means Financial Security Assurance Inc., a New York stock insurance company, or any successor thereto or assignee thereof. "Investment Securities" means, if and to the extent the same are at the time legal for investment of Funds and Accounts held under this Indenture: (a) Government Securities; (b) bonds, debentures, notes or other evidence of indebtedness issued or generated by any of the following federal agencies and provided such obligations are backed by the full faith and credit of the United States of America (stripped securities are only permitted if they have been stripped by the agency itself): (1) U.S. Export -Import Bank (Eximbank) — direct obligations or fully guaranteed certificates of beneficial ownership; (2) Farmers Home Administration (FmHA) — certificates of beneficial ownership; (3) Federal Financing Bank; (4) Federal Housing Administration Debentures (FHA); (5) General Services Administration — participation certificates; (6) Government National Mortgage Association (GNMA or "Ginnie Mae") (a) GNMA — guaranteed mortgage -backed bonds (b) GNMA — guaranteed pass -through obligations; (7) U.S. Maritime Administration — guaranteed Title XI financing; and (8) U.S. Department of Housing and Urban Development (HUD) — Project Notes; Local Authority Bonds; New Communities Debentures — U.S. government guaranteed debentures; U.S. Public Housing Notes and Bonds — U.S. government guaranteed public housing notes and bonds; 4827-9893-8625.6 • (c) bonds, debentures, notes or other evidences of indebtedness issued or guaranteed by any of the following non -fill faith and credit U.S. government agencies (stripped securities are only permitted if they have been stripped by the agency itself): (1) Federal Home Loan Bank System — senior debt obligations; (2) Federal Home Loan Mortgage Corporation (FHLMC or "Freddie Mac") — participation certificates and senior debt obligations; (3) Federal National Mortgage Association (FNMA or "Fannie Mae") — mortgage -backed securities and senior debt obligations; (4) Student Loan Marketing Association (SLMA or "Sallie Mae") — senior debt obligations; (5) Resolution Funding Corp. (REFCOPR) obligations; and (6) Farm Credit System — consolidated systemwide bonds and notes; (d) money market funds registered under the Federal Investment Company Act of 1940, whose shares are registered under the Federal Securities Act of 1933, and having a rating by S&P of AAAm-G, AAA -m or AA -m, and if rated by Moody's rated Ana, Aa1 or Aa2; . (e) certificates of deposit secured at all times by collateral described in (a) and/or (b) above. Such certificates must be issued by commercial banks, savings and loan associations or mutual savings banks. The collateral must be held by a third party and the bondholders must have a perfected first security interest in the collateral; (f) certificates of deposit, savings accounts, deposit accounts or money market deposits which are fully insured by FDIC, including BIF and SAW; (g) bonds or notes issued by any state or municipality which are rated by Moody's and S&P in one of the two highest rating categories assigned by such agencies; and (h) other forms of investments approved in writing by the 2006A Insurer, including the 2006A Reserve Policy. "Mayor" means the person holding the office and performing the duties of the Mayor of the City. "Original Purchaser" means the first purchaser(s) of a series of Bonds from the City. "Outstanding" means, as of any date of computation, Bonds theretofore or thereupon being delivered under this Indenture, except: 4827.9893.8625.6 (a) Bonds cancelled at or prior to such date or delivered to or acquired by the Trustee at or prior to such date for cancellation; (b) Bonds deemed to be paid in accordance with Article VII of this Indenture; Fret (c) Bonds in lieu of or in exchange or substitution for which other Bonds shall have been authenticated and delivered pursuant to this Indenture. "Participants" means those financial institutions for whom the Securities Depository effects book -entry transfers and pledges of securities deposited with the Securities Depository in the Book -Entry System, as such listing of Participants exists at the time of such reference. "Paying Agent" means any bank or trust company named by the City as the place at which the principal of and premium, if any, and interest on the Bonds are payable. "Person" means any natural person, firm, association, corporation, limited liability company, partnership, joint stock company, joint venture, trust, unincorporated organization or firm, or a government or any agency or political subdivision thereof or other public body. "Projects" means, collectively, the Street Project, the Trail Project and the Wastewater Project. . "Project Costs" means, to the extent permitted by the Act or other applicable laws, with respect to the Projects, all costs of planning, designing, purchasing, acquiring, constructing, improving, enlarging, extending, repairing, financing and placing in operation, including obtaining governmental approvals, certificates, permits and licenses with respect thereto, heretofore or hereafter paid or incurred by or on behalf of the City and which shall include, but shall not be limited to: (a) interest accruing in whole or in part on the Bonds prior to and during construction of the Projects, including all amounts required by this Indenture to be paid from the proceeds of the Bonds into the Bond Fund; (b) preliminary investigation and development costs, engineering fees, contractors' fees, labor costs, the cost of materials, equipment, utility services and supplies, costs of obtaining permits, licenses and approvals, costs of real property, insurance premiums, legal and financing fees and costs, administrative and general costs, and all other costs properly allocable to the acquisition, construction and equipping of the Projects and placing the same in operation; (c) all costs relating to injury and damage claims arising out of the acquisition, construction or equipping of the Projects; (d) all other costs incurred in connection with, and properly allocable to, the acquisition, construction and equipping of the Projects; and 4827-9893-8625.6 9 (e) amounts to pay or reimburse the City or any City fund for expenses of the City incident and properly allocable to such planning, designing, purchasing, acquiring, constructing, improving, enlarging, extending, repairing, financing and placing in operation of the Projects. "Project Fund" means the fund by that name created and established in Section 501 of this Indenture. "Qualified Engineer" means an independent consulting engineer or firm of independent consulting engineers not in the regular employ of the City. "Rating Agency" means Moody's Investors Service, Standard & Poor's Ratings Services, a Division of The McGraw-Hill Companies, Inc., or Fitch, Inc., and their respective successors and assigns. If any such corporation ceases to act as a securities rating agency, the City may appoint any nationally recognized securities rating agency as a replacement. "Rebate Fund" means the find by that name created and established in Section 501 of this Indenture. "Record Date" means the fifteenth day of the calendar month preceding the calendar month in which an interest payment date on the Bonds occurs. "Redemption Fund" means the fund by that name established in Section 501 of this . Indenture. "Requisition" means a written requisition of the City, consecutively numbered, signed by an Authorized Representative including, without. limitation, the following with respect to each payment requested: (i) the name of the person or party to whom payment is to be made and the purpose of the payment, (ii) the amount to be paid thereunder (iii) that such amount has not been previously paid by the City and is justly due and owing to the person(s) named therein as a proper payment or reimbursement of a Project Cost; and (iv) that no Event of Default exists under the Indenture and that, to the knowledge of the Authorized Representative, no event has occurred and continues which with notice or lapse of time or both would constitute an Event of Default under the Indenture. "2006A Reserve Policy" means the municipal bond debt service reserve insurance policy, issued by the 2006A Insurer and deposited into the Series 2006A Account of the Debt Service Reserve Fund with respect to the Series 2006A Bonds. 4827-9893-8625.6 10 • "Reserve Requirement" means, with respect to each series of Bonds, an amount equal to 5% of the original principal amount of such series of Bonds. There is no Reserve Requirement in connection with RLF Loans. For all purposes of this Indenture, the Reserve Requirement may be satisfied by cash or by Investment Securities, including the 2006A Reserve Policy. "Revenue Fund" means the fund by that name created and established in Section 501 of this Indenture. "RLF Loan" means any loan to the City under the Arkansas Natural Resources Commission Revolving Loan Fund Program, which loan is to be secured by receipts of the Sales and Use Taxes on a parity basis with the Bonds. RLF Loans may only be incurred with respect to the Wastewater Project. Any RLF Loan may, but need not, be structured in the form of an Additional Bond or Additional Bonds issued hereunder. "0.25% Sales and Use Tax" means the one -quarter of one percent (0.25%) city-wide sales and use tax authorized under the Act which has been levied within the City pursuant to the Election Ordinance and approved by the voters of the City, the collection of which tax will commence on January 1; 2007. "0.75% Sales and Use Tax" means the three-quarters of one percent (0.75%) city-wide sales and use tax authorized under the Act which has been levied within the City pursuant to the Election Ordinance and approved by the voters of the City, the collection of which tax will commence on the first day following the date of expiration of the Existing Tax securing the Existing Indebtedness. "Sales and Use Taxes" mean, collectively, the 0.25% Sales and Use Tax and the 0.75% Sales and Use Tax. Receipts of the Sales and Use Taxes are pledged to the payment of Debt Service on the Bonds. "Securities Depository" means The Depository Trust Company, New York, New York, or its nominee, and its successors and assigns, or any other depository institution appointed by the City or the Trustee to act as depository for the Bonds in connection with the Book -Entry System. "Series 2006A Bonds" means the City's Sales and Use Tax Capital Improvement Bonds, Series 2006A, issued under and secured by this Indenture in the aggregate principal amount of $50,000,000. "State" means the State of Arkansas. "Street Project" means the acquisition, construction, reconstruction, repair, straightening and widening of certain City streets and related improvements, as described in the Election Ordinance and eligible for financing with the proceeds of the Bonds in aggregate principal amount not to exceed $65,900,000. "Supplemental Indenture" means any indenture supplemental to or amendatory of this Indenture, adopted by the City in accordance with Article X hereof. • 4827-9893-8625.6 II S "Surplus Tax Receipts" shall have the meaning ascribed to such term in Section 503 hereof. "Tax Regulatory Agreement" means with respect to any series of Bonds, that Tax Regulatory Agreement of the City relating to maintenance of the excludability of interest on such Bonds from gross income for federal income tax purposes, delivered in connection with the issuance of such series of Bonds. "Trail Project" means the acquisition, construction and equipping of certain City trail system improvements, as described in the Election Ordinance and eligible for financing with the proceeds of the Bonds in aggregate principal amount not to exceed $2,100,000. "Trustee" means the banking corporation or association designated as Trustee in the Indenture, and its successor or successors as such Trustee. The original Trustee is Simmons First Trust Company, N.A. "Trust Estate" means the property described in the granting clauses of this Indenture. "Wastewater Project" means the acquisition, construction, reconstruction, extension, improving and equipping of certain improvements to the City's wastewater treatment plants, sewerage and related facilities, as described in the Election Ordinance and eligible for financing with the proceeds of the Bonds in aggregate principal amount not to exceed $42,000,000. • Section 102. Use of Words. Words of the masculine gender shall be deemed and construed to include correlative words of the feminine and neuter genders. Unless the context shall otherwise indicate, the words "Bond", "owner", "holder" and "person" shall include the plural, as well as the singular, number. ARTICLE H THE BONDS Section 201. Security for the Bonds. (a) The Bonds are special and limited obligations of the City payable as to principal, premium, if any, and interest solely out of the Trust Estate. The Trust Estate is hereby pledged, appropriated and assigned to the payment of the principal of, premium, if any, and interest on the Bonds, all in accordance with their terms and the provisions of this Indenture. The Bonds do not constitute an indebtedness for which the faith and credit of the State of Arkansas or the City is pledged within the meaning of any Constitutional or statutory limitation. The Bonds shall never constitute an obligation of or a charge against the general credit or general taxing powers of the City. (b) The pledge, charge, lien, trusts and assignments made herein with respect to the Trust Estate shall be valid and binding, and shall be deemed continuously perfected from the time of issuance of the Series 2006A Bonds, and the Trust Estate shall thereupon be immediately subject to the pledge, charge, lien, trust and assignment created hereby upon receipt thereof by or for the City or by the Trustee or the Paying Agent hereunder, without any physical delivery, segregation thereof or further act, and such pledge, charge, lien, trust and assignment shall be 4827-9893-8625.6 12 valid and binding as against all parties having claims of any kind in tort, contract or otherwise against the City, irrespective of whether such parties have notice thereof. (c) The Bonds shall be equally and ratably payable and secured hereunder without priority by reason of date of adoption of this Indenture or any Supplemental Indenture authorizing their issuance or by reason of their series, number, date, date of issue, execution, authentication or sale, or otherwise; provided, however, upon the issuance of any series of Additional Bonds, 50% of the Surplus Tax Receipts shall be allocated to the redemption of the Series 2006A Bonds and the remaining 50% of such Surplus Tax Receipts shall be allocated to the redemption of the various series of Additional Bonds in such proportion as shall be set forth in a Supplemental Indenture. (d) So long as any Bonds are Outstanding under the provisions of this Indenture, all receipts derived from the Sales and Use Taxes shall be deemed to be necessary to accomplish the purposes of the City and shall be subject to the covenants and agreements set forth in this Indenture, and no such revenues or receipts shall ever be used or deposited otherwise except as herein expressly permitted. (e) The City covenants, as permitted by the Act, that while any of the Bonds are Outstanding it will use due diligence in causing the collection of the Sales and Use Taxes. Nothing herein shall prohibit the City from increasing any sales and use tax from time to time, to the extent permitted by law, and no part of the revenues or receipts derived by the City from any such increase shall become part of the receipts derived from the Sales and Use Taxes unless authorized and pledged by a Supplemental Indenture. Section 202. Authorized Amount. There is hereby authorized the issuance of bonds of the City to be designated "Sales and Use Tax Capital Improvement Bonds, Series 2006A" in the principal amount of Fifty Million Dollars ($50,000,000) (the "Series 2006A Bonds"). No Bonds may be issued under the provisions of this Indenture except in accordance with this Article II. The total principal amount of Bonds that may be issued hereunder and any ELF Loans that may be incurred by the City is hereby expressly limited to $110,000,000, except as provided in Section 209 and except for refunding bonds issued under the provisions of Section 212 hereof. Section 203. Details of Bonds. (a) The Series 2006A Bonds (i) shall be designated "City of Fayetteville, Arkansas Sales and Use Tax Capital Improvement Bonds, Series 2006A," (ii) shall be in the aggregate principal amount of $50,000,000, (iii) shall be dated as of November 1, 2006, (iv) shall bear interest from such date at the rates hereinafter provided until paid, payable semiannually on May I and November 1 of each year, commencing November 1, 2007, (v) shall be issued in denominations of $5,000 each, or any integral multiple thereof, (vi) shall be numbered from R06A-1 upwards in order of issuance according to the records of the Trustee, and (vii) shall mature, unless sooner redeemed in the manner in this Indenture set forth, on November 1 in each of the years and in the amounts set forth in the following table, which table also sets forth the interest rates for the Series 2006A Bonds: 4827.9893.8625.6 13 f Year November 1) Principal Amount Interest Rate 2015 $6,175,000 5.000% 2016 6,485,000 5.000% 2017 6,810,000 5.000% 2018 7,150,000 4.750% 2019 7,490,000 4.500% 2020 7,830,000 3.000% 2021 8,060,000 4.000% Section 204. Form. (a) The Series 2006A Bonds shall be initially issued as fully registered Bonds, without coupons, in the form of seven typewritten bond certificates (one for each maturity) to be delivered to the Securities Depository. Each such certificate shall be initially registered in the name of the nominee of the Securities Depository, and no Beneficial Owner will receive a certificate representing his interest in the Series 2006A Bonds, except upon the occurrence of the events described in Section 216 hereof. Beneficial Owners shall be deemed to have waived any tight to receive a bond certificate except under the circumstances described in Section 216. The Series 2006A Bonds and the Trustee's certificate of authentication to be endorsed thereon shall be in substantially the form set forth in Exhibit A hereto, with appropriate variations, insertions and omissions as permitted or required by this Indenture. Section 205. Payment. The Bonds shall be payable, with respect to principal, premium, if any, and interest in any coin or currency of the United States of America which at the time of payment is legal tender for the payment of public and private debts. The principal of and premium, if any, on the Bonds shall be payable upon surrender thereof at the principal corporate trust office of the Trustee. Payment of interest on each Bond shall be made by check or draft mailed to the registered owner of such Bond as of the applicable Record Date at his address as it appears on the registration books maintained by the Trustee. For purposes of this Indenture, interest on the Bonds shall be deemed to accrue on the basis of a 360 -day year of twelve 30 -day months. So long as the Securities Depository or its nominee is the sole registered owner of the Bonds, payment of interest thereon shall be made by wire transfer of immediately available funds by the Paying Agent to the Securities Depository or its nominee. Section 206. Execution. The Bonds shall be executed on behalf of the City by the manual or facsimile signatures of its Mayor and City Clerk and shall have impressed or imprinted thereon the seal of the City. A facsimile signature shall have the same force and effect as if manually signed. In case any officer whose manual signature or a facsimile of whose signature shall appear on the Bonds shall cease to be such officer before the delivery of such Bonds, such signature or such facsimile shall nevertheless be valid and sufficient for all purposes, the same as if such official had remained in office until delivery. Section 207. Authentication. Only such Bonds as shall have endorsed thereon a • certificate of authentication substantially in the form set forth in Exhibit A attached hereto duly executed by the Trustee shall be entitled to any right or benefit under this Indenture. No Bond • shall be valid and obligatory for any purpose unless and until such certificate of authentication 4827-9893.8625.6 14 shall have been duly executed by the Trustee, and such certificate of the Trustee upon any such Bond shall be conclusive evidence that such Bond has been authenticated and delivered under this Indenture. The Trustee's certificate of authentication on any Bond shall be deemed to have been executed if signed by an authorized officer of the Trustee, but it shall not be necessary that the same officer sign the certificate of authentication on all of the Bonds issued hereunder. Section 208. Delivery of the Bonds. The City shall execute and deliver to the Trustee and the Trustee shall authenticate the Bonds of any series and deliver said Bonds to the Securities Depository as may be directed in this Section 208, in Section 212 hereof or in any Supplemental Indenture. (a) Prior to the delivery or original issuance by the Trustee of any authenticated Bonds of any series, there shall be delivered to the Trustee: (1) An original executed counterpart of this Indenture or, in the case of Additional Bonds, a Supplemental Indenture by and between the City and the Trustee setting forth the details concerning such Additional Bonds; (2) Original executed counterparts of the Continuing Disclosure Agreement and the Tax Regulatory Agreement applicable to such series of Bonds; (3) A Certificate directing the Trustee to authenticate the Bonds and containing instructions as to the delivery of the Bonds upon payment to the Trustee, for the account of the City, of a sum specified in such Certificate; (4) A copy, duly certified by the City Clerk, of the proceedings of the City authorizing the levy of the Sales and Use Taxes and the issuance of the Bonds; (5) A written opinion of Bond Counsel approving the legality of the Bonds; (6) In the case of any series of Additional Bonds, a Certificate signed by the Mayor of the City certifying that (i) the City is not then in default in the performance of any of the covenants, conditions, agreements or provisions contained in this Indenture, and (ii) the City is current as to all required deposits at that time in all the Funds and Accounts described in Article V of this Indenture or hereafter created by Supplemental Indentures, or if the City is in default or is not so current, certifying in the case of (i) or (ii) as to that fact and that, upon the application of the proceeds of the sale of such Additional Bonds as provided in the Supplemental Indenture authorizing the issuance thereof, the City will not be in default or will be current thereafter; (7) In the case of any series of Additional Bonds, a written opinion of Bond Counsel to the effect that the exemption from federal income tax of the interest on the Series 2006A Bonds and any Additional Bonds theretofore issued will not be adversely affected by the issuance of the Additional Bonds being issued; and (8) Such further documents and certificates as may be required by the Original Purchaser of such series of Bonds. • 4827-9893-8625.6 15 (b) Simultaneously with the delivery of the Series 2006A Bonds, the Trustee shall apply the proceeds thereof as follows: (1) The amount, if any, received as accrued interest on the Series 2006A Bonds shall be deposited in the Interest Account of the Bond Fund; (2) $37,500.00 shall be transferred to the 2006A Insurer in payment of the premium on the 2006A Reserve Policy, which 2006A Reserve Policy shall be deposited in the Series 2006A Account of the Debt Service Reserve Fund; (3) $213,775.80 shall be transferred to the 2006A Insurer in payment of the premium on the 2006A Bond Policy, (4) An amount equal to $24,581,590.00 shall be deposited in the Street Account of the Project Fund; (5) An amount equal to $812,615.00 shall be deposited in the Trail Account of the Project Fund; (6) An amount equal to $25,394,201.00 shall be deposited in the Wastewater Account of the Project Fund; and (7) The balance of said proceeds in the amount of $110,004.75 shall be • deposited in the Costs of Issuance Fund for payment of Costs of Issuance as directed by a Certificate of the City. Section 209. Mutilated, Destroyed or Lost Bonds. In case any Bond issued hereunder shall become mutilated or be destroyed or lost, the City shall, if not then prohibited by law, cause to be executed and the Trustee may authenticate and deliver a new Bond of like series, date, number, maturity and tenor in exchange and substitution for and upon cancellation of such mutilated Bond, or in lieu of and in substitution for such Bond destroyed or lost, upon the Holder's paying the reasonable expenses and charges of the City and the Trustee in connection therewith, and, in the case of a Bond destroyed or lost, filing by the Holder with the Trustee evidence satisfactory to the Trustee that such Bonds were destroyed or lost, and of the Holder's ownership thereof, and furnishing the City and Trustee with indemnity satisfactory to them. The Trustee is hereby authorized to authenticate any such new Bond. In the event any such Bonds shall have matured, instead of issuing a new Bond, the City may pay the same without the surrender thereof. Upon the issuance of a new Bond under this Section 209, the City may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees -and expenses of the Trustee) connected therewith. Section 210. Registration and Transfer of Bonds. The City hereby constitutes and appoints the Trustee as Bond registrar of the City, and as Bond registrar the Trustee shall keep books for the registration and for the transfer of the Bonds as provided in this Indenture at the principal corporate trust office of the Trustee. The person in whose name any Bond shall be registered shall be deemed and regarded as the absolute owner thereof for all purposes and payment of or on account of the principal of and interest on any such Bond shall be made only to 4827-9893-8625.6 16 or upon the order of the registered owner thereof, or the owner's legal representative, and neither the City, the Trustee nor the Bond registrar shall be affected by any notice to the contrary, but such registration may be changed as herein provided. All such payments shall be valid and effectual to satisfy and discharge the liability upon such Bond to the extent of the sum or sums so paid. Bonds may be transferred on the books of registration kept by the Trustee by the registered owner in person or by the owner's duly authorized attorney, upon surrender thereof, together with a written instrument of transfer duly executed by the registered owner or the owner's duly authorized attorney. Upon surrender for transfer of any Bond at the principal corporate office of the Trustee, the City shall execute and the Trustee shall authenticate and deliver in the name of the transferee or transferees a new Bond or Bonds of the same series and in the same aggregate principal amount and of any authorized denomination or denominations. Bonds may be exchanged at the principal corporate trust office of the Trustee for an equal aggregate principal amount of Bonds of any other authorized denomination or denominations of the same series with corresponding maturities. The City shall execute and the Trustee shall authenticate and deliver Bonds which the Bondholder making the exchange is entitled to receive, bearing numbers not contemporaneously then outstanding. The execution by the City of any Bond of any denomination shall constitute full and due authorization of such denomination and the Trustee shall thereby be authorized to authenticate and deliver such Bond. Such transfers of registration or exchanges of Bonds shall be without charge to the . Holders of such Bonds, but any taxes or other governmental charges required to be paid with respect to the same shall be paid by the Holder of the Bond requesting such transfer or exchange as a condition precedent to the exercise of such privilege. The Trustee shall not be required to transfer or exchange any Bond during the period from and including a Record Date to the next succeeding interest payment date of such Bond nor to transfer or exchange any Bond after the mailing of notice calling such Bond for redemption has been made, and prior to such redemption. If the Securities Depository or its nominee is the sole registered owner of the Bonds, transfers of ownership and exchanges shall be effected on the records of the Securities Depository and its Participants pursuant to rules and procedures established by the Securities Depository and its Participants. In such case, the Trustee shall deal with the Securities Depository as representative of the Beneficial Owners of the Bonds for purposes of exercising the rights of Bondholders hereunder, and the rights of the Beneficial Owners of such Bonds held by the Securities Depository or its nominee shall be limited to those established by law and agreements between such Beneficial Owners and the Securities Depository and its Participants. Requests, consents and directions from, and votes of, the Securities Depository or its nominee as representative shall not be deemed inconsistent if they are made with respect to different Participants or Beneficial Owners. Section 211. Cancellation. All Bonds surrendered for payment, redemption, transfer or exchange, if surrendered to the Trustee, shall be promptly cancelled by it, and, if surrendered to any person other than the Trustee, shall be delivered to the Trustee and, if not already cancelled, 4827.9893-8625.6 t7 shall be promptly cancelled by it The City may at any time deliver to the Trustee for cancellation any Bonds previously authenticated and delivered hereunder, which the City may have acquired in any manner whatsoever, and all Bonds so delivered shall be promptly cancelled by the Trustee. All cancelled Bonds held by the Trustee shall be disposed of as directed by the City. Whenever in this Indenture provision is made for the cancellation by the Trustee and the delivery to the City of any Bonds, the Trustee may, upon the written request of the City, in lieu of such cancellation and delivery, destroy such Bonds in the presence of any officer of the City (but only if the City shall so require), and deliver a certificate of such destruction to the City. Section 212. Additional Bonds and Drawdowns Under RLF Loans. To the extent authority remains under the Election Ordinance, the City may issue from time to time one or more series of Additional Bonds and incur RLF Loans for the purpose of (i) financing Project Costs in connection with the acquisition, construction, reconstruction, extension, improving or equipping of any of the Projects, (ii) refunding the Series 2006A Bonds or any series of Additional Bonds or any RLF Loan, in whole or in part, or (iii) any combination thereof. Additional Bonds and RLF Loans shall be secured equally and ratably with the Series 2006A Bonds and any other series of Additional Bonds theretofore issued or any RLF Loan theretofore incurred and then Outstanding, except insofar as any terms or conditions of redemption or purchase established under this Indenture may afford additional benefit or security for the Bonds of any particular series and except for the security afforded by any municipal bond insurance obtained with respect to a particular series of Bonds; provided, however, that RLF Loans structured as Additional Bonds shall not be secured by the Debt Service Reserve Fund. . Before any Additional Bonds are authenticated and prior to any drawdown on an RLF Loan, there shall be delivered to the Trustee the items required for the issuance of Bonds by Section 208 hereof, plus a Certificate of the Finance Director of the City (in the form attached as Exhibit C hereto) certifying that, based upon the most recent twelve (12) months of Sales and Tax collections, (i) receipts of the 0.25% Sales and Use Tax were not less than 125% of the maximum Annual Debt Service for each of the years ending November 1, 2007 through November 1, 2014, on all then Outstanding Bonds and any RLF Loan theretofore incurred, plus the Additional Bonds then proposed to be issued or the amount of the additional RLF Loan to be incurred, and (ii) receipts of the 0.25% Sales and Use Tax and the 0.75% Sales and Use Tax were not less than 125% of the maximum Annual Debt Service for each of the years ending November 1, 2015 and thereafter, on all then Outstanding Bonds and any RLF Loan theretofore incurred, plus the Additional Bonds then proposed to be issued or the amount of the additional RLF Loan to be incurred. For the purpose of making the aforementioned certifications in connection with the issuance of Additional Bonds or drawdowns under RLF Loans, receipts of the Existing Tax may be included in total receipts of the 0.75% Sales and Use Tax for all or any portion of the most recent twelve (12) month period during which the 0.75% Sales and Use Tax was not being collected. RLF Loans may only be incurred to finance Project Costs associated with the Wastewater Project. The aggregate principal amount of Additional Bonds that may be issued and RLF Loans incurred is limited to $60,000,000, except for refunding bonds issued hereunder. Notwithstanding anything herein to the contrary, no Additional Bonds shall be issued and no RLF Loan shall be incurred unless there is no default at the time of issuance under this Indenture. 4827.9893-8625.6 18 ' Section 213. Superior Obligations Prohibited. Except to the extent permitted in Section 212 hereof for the issuance of Additional Bonds, from and after the issuance of any of the Bonds and for so long as any of the Bonds are Outstanding, the City shall not create or permit the creation of any indebtedness, or issue any bonds, notes, warrants, certificates or other obligations or evidences of indebtedness payable in any manner from the receipts of the Sales and Use Taxes or otherwise from the Trust Estate which (i) will in any way be superior to or rank on a parity with the Bonds, or (ii) will in any way be secured by a lien and charge on the receipts of the Sales and Use Taxes or on the moneys deposited in or to be deposited in the Revenue Fund, prior to or equal with the lien, pledge and charge created herein for the security of the Bonds, or (iii) will be payable prior to or equal with the payments to be made from the receipts of the Sales and Use Taxes and the Revenue Fund into the Bond Fund, Debt Service Reserve Fund and Redemption Fund or from said Bond Fund, Debt Service Reserve Fund and Redemption Fund for the payment of the Bonds. Section 214. [RESERVED]. Section 215. Temporary Bonds. Until Bonds in definitive form are ready for delivery, the City may execute, and upon the request of the City, the Trustee shall authenticate and deliver, subject to the provisions, limitations and conditions set forth herein, one or more Bonds in temporary form, whether printed, typewritten, lithographed or otherwise produced, substantially in the form of the definitive Bonds, with appropriate omissions, variations and insertions, and in authorized denominations. Until exchanged for Bonds in definitive form, such Bond in . temporary form shall be entitled to the lien and benefit of this Indenture. Upon the presentation and surrender of any Bond or Bonds in temporary form, the City shall, without unreasonable delay, prepare, execute and deliver to the Trustee and the Trustee shall authenticate and deliver, in exchange therefor, a Bond or Bonds in definitive form. Such exchange shall be made by the Trustee without making any charge therefor to the Holder of such Bond in temporary form. Section 216. Book -Entry Bonds; Securities Depository. The Bonds shall initially be registered to Cede & Co., the nominee for The Depository Trust Company, New York, New York (the "Securities Depository"), and no Beneficial Owner will receive certificates representing their respective interests in the Bonds, except in the event the Trustee issues replacement bonds as provided in this Section 216. It is anticipated that during the term of the Bonds, the Securities Depository will make book -entry transfers among its Participants and receive and transmit payment of principal of, premium, if any, and interest on, the Bonds to the Participants until and unless the Trustee authenticates and delivers replacement bonds to the Beneficial Owners as described in the following paragraph. If the City or the Trustee determines (A) that the Securities Depository is unable to properly discharge its responsibilities, or (B) that the Securities Depository is no longer qualified to act as a securities depository and registered clearing agency under the Securities and Exchange Act of 1934, as amended, or (C) that the continuation of a Book -Entry System to the exclusion of any Bonds being issued to any Bondholder other than Cede & Co. is no longer in the best interests of the Beneficial Owners of the Bonds, or (2) if the Trustee receives written notice from Participants representing interests in not less than 50% of the Bonds Outstanding, as shown on the records of the Securities Depository (and certified to such effect by the Securities Depository), that the continuation of a Book -Entry System to the exclusion of any Bonds being 4827-9893.8625.6 19 • issued to any Bondholder other than Cede & Co. is no longer in the best interests of the Beneficial Owners of the Bonds, then the Trustee shall notify the Bondholders of such determination or such notice and of the availability of certificates to Bondholders requesting the same, and the Trustee shall register in the name of and authenticate and deliver replacement bonds to the Beneficial Owners or their nominees in principal amounts representing the interest of each; provided, that in the case of a determination under (A) or (B) of this paragraph, the City or the Trustee may select a successor securities depository in accordance with the following paragraph to effect book -entry transfers. In such event, all references to the Securities Depository herein shall relate to the period of time when the Securities Depository has possession of at least one Bond. Upon the issuance of replacement bonds, all references herein to obligations imposed upon or to be performed by the Securities Depository shall be deemed to be imposed upon and performed by the Trustee, to the extent applicable with respect to such replacement bonds. If the Securities Depository resigns and the City, the Trustee or Bondholders are unable to locate a qualified successor of the Securities Depository in accordance with the following paragraph, then the Trustee shall authenticate and cause delivery of replacement bonds to Bondholders, as provided herein. The Trustee may rely conclusively on information from the Securities Depository and its Participants as to the names and addresses of the Beneficial Owners of the Bonds. The cost of printing, registration, authentication, and delivery of replacement bonds shall be paid for by the City. In the event the Securities Depository resigns, is unable to properly discharge its responsibilities, or is no longer qualified to act as a securities depository and registered clearing . agency under the Securities and Exchange Act of 1934, as amended, the City may appoint a successor Securities Depository provided the Trustee receives written evidence satisfactory to the Trustee with respect to the ability of the successor Securities Depository to discharge its responsibilities. Any such successor Securities Depository shall be a securities depository which is a registered clearing agency under the Securities and Exchange Act of 1934, as amended, or other applicable statute or regulation that operates a securities depository upon reasonable and customary terms. The Trustee upon its receipt of a Bond or Bonds for cancellation shall cause the delivery of Bonds to the successor Securities Depository in appropriate denominations and form as provided herein. ARTICLE III REDEMPTION OF BONDS BEFORE MATURITY Section 301. Redemption of Bonds:(a) The Series 2006A Bonds shall be subject to redemption prior to maturity as follows: (1) The Series 2006A Bonds shall be redeemed prior to maturity, in whole or in part, on any interest payment date, in inverse order of maturity and by lot in such manner as the Trustee shall determine within a maturity, at a redemption price equal to 100% of the principal amount being redeemed, plus accrued interest to the date of redemption, from Project Fund moneys in excess of the amount needed to complete a Project, which moneys shall be transferred to the Redemption Fund pursuant to Section 502 hereof. 4827.9893-8625.6 20 S (2) The Series 2006A Bonds shall be redeemed prior to maturity, in whole or in part, on any interest payment date, in inverse order of maturity and by lot in such manner as the Trustee shall determine within a maturity, at a redemption price equal to 100% of the principal amount being redeemed, plus accrued interest to the date of redemption, from Surplus Tax Receipts deposited in the Redemption Fund pursuant to Section 503 hereof. Upon the issuance of any series of Additional Bonds, 50% of the Surplus Tax Receipts shall be allocated to the redemption of the Series 2006A Bonds and the remaining 50% of such Surplus Tax Receipts shall be allocated to the various series of Additional Bonds in such proportion as shall be set forth in a Supplemental Indenture. (3) The Series 2006A Bonds are subject to redemption at the option of the City, communicated in a written notice to the Trustee not less than sixty (60) days prior to the date fixed for redemption, in whole or in part on any date on or after November 1, 2016, in inverse order of maturity and by lot in such manner as the Trustee shall determine within a maturity, at a redemption price equal to 100% of the principal amount being redeemed plus accrued interest to the date of redemption. Section 302. Notice. Notice of the call for any redemption, identifying the Bonds or portions thereof being called and the date on which they shall be presented for payment, shall be mailed by the Trustee by first class mail (or, so long as the Securities Depository or its nominee is the sole registered owner of the Bonds, by any other means acceptable to the Securities Depository, including facsimile) to the registered owner of each such Bond addressed to such . registered owner at his registered address and placed in the mails not less than thirty (30) nor more than sixty (60) days prior to the date fixed for redemption; provided, however, that failure to give such notice by mailing, or any defect therein, shall not affect the validity of any proceeding for the redemption of any Bond with respect to which no such failure or defect has occurred. Any notice mailed as provided in this Section 302 shall be conclusively presumed to have been duly given, whether or not the registered owner receives the notice. Section 303. Selection of Bonds to be Redeemed. If less than all of the Bonds of like series, maturity, interest rate and otherwise identical payment terms shall be called for redemption, the particular Bonds or portions of Bonds to be redeemed shall be selected by lot by the Trustee in such manner as the Trustee in its discretion may deem fair and appropriate; provided, however, that the portion of any Bond of a denomination of larger than the minimum denomination may be redeemed in the principal amount of such minimum denomination or a multiple thereof, and that for purposes of selection and redemption, any such Bond of a denomination larger than the minimum denomination shall be considered to be that number of separate Bonds of such minimum denomination which is obtained by dividing the principal amount of such Bond by such minimum denomination. So long as the Securities Depository or its nominee is the sole registered owner of a series of Bonds, the procedures established by the Securities Depository shall control with respect to the selection of the particular Bonds of such series to be redeemed. Section 304. Surrender of Bonds Upon Redemption. Notice having been given in the manner and under the conditions hereinabove provided, and moneys for payment of the redemption price being held by the Trustee as provided in this Indenture (i) the Bonds or portions of Bonds so called for redemption shall, on the date fixed for redemption designated in such 4827-9893-8623.6 21 • notice, become due and payable at the redemption price provided for redemption of such Bonds, and interest on such Bonds or portions of Bonds so called for redemption shall cease to accrue, (ii) upon surrender of the Bonds or portions of Bonds so called for redemption in accordance with such notice, such Bonds or portions of Bonds shall be paid at the applicable redemption price, (iii) such Bonds or portions of Bonds shall cease to be entitled to any lien, benefit or security under this Indenture, and (iv) the owners of said Bonds or portions of Bonds shall have no rights in respect thereof except to receive payment of the redemption price thereof. Section 305. Redemption in Part. Any Bond which is to be redeemed only in part shall be surrendered to the Trustee (with, if the City or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the City and the Trustee duly executed by, the: owner thereof or his attorney duly authorized in writing), and the appropriate officials of the City shall execute and the Trustee shall authenticate and deliver to the owner of such Bond, without service charge, a new Bond or Bonds of the same series, of any authorized denomination or denominations, having the same maturity and interest rate as requested by such owner, in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Bond so surrendered. Section 306. Redemption of Additional Bonds. Additional Bonds may be made subject to optional, extraordinary and mandatory sinking fund redemption, in whole or in part, in such manner, at such times and at such prices as may be provided in the Supplemental Indenture providing for their issuance. . ARTICLE IV GENERAL COVENANTS AND REPRESENTATIONS Section 401. Payment of Principal, Premium, if any, and Interest. The City covenants that it will promptly pay or cause to be paid the principal of and premium, if any, and interest on every Bond issued under this Indenture at the place, on the dates and in the manner provided herein and in the Bonds according to the true intent and meaning thereof. The principal, premium, if any, and interest (except interest paid from the proceeds from the sale of the Bonds and accrued interest) are payable solely from the Trust Estate which is hereby specifically pledged to the payment thereof in the manner and to the extent herein specified, and nothing in the Bonds or this Indenture should be considered as assigning or pledging any funds or assets of the City other than the Trust Estate. Anything in this Indenture to the contrary notwithstanding, it is understood that whenever the City makes any covenants involving financial commitments it pledges no funds or assets other than the Trust Estate in the manner and to the extent herein specified, but nothing herein shall be construed as prohibiting the City from using any other funds or assets. The City covenants to use due diligence in causing the collection of the Sales and Use Taxes. Section 402. Performance of Covenants. The City covenants that it will faithfully perform at all times any and all covenants, undertakings, stipulations and provisions contained in this Indenture, in any and every Bond executed, authenticated and delivered hereunder, and in all ordinances pertaining hereto. The City covenants that it is duly authorized under the Constitution and laws of the State of Arkansas, including particularly and without limitation 4827.9893-8625.6 22 S Amendment 62 and the Act, to issue the Bonds authorized hereby and to execute this Indenture and to make the pledge of the receipts of the Sales and Use Taxes and to make the covenants in the manner and to the extent herein set forth, that all action on its part for the issuance of the Bonds and the execution and delivery of this Indenture has been duly and effectively taken, and that the Bonds in the hands of the Holders and owners thereof are and will be valid and enforceable obligations of the City according to the import thereof. Section 403. Instruments of Further Assurance. At any and all times the City shall, so far as it may be authorized by law, pass, make, do, execute, acknowledge and deliver, all and every such further resolutions, ordinances, acts, deeds, conveyances, assignments, transfers and assurances as may be necessary or desirable for the better assuring, conveying, granting, pledging, assigning and confirming of all and singular the receipts from the Sales and Use Taxes and all other moneys hereby pledged or assigned, or intended so to be, or which the City may become bound to pledge or assign. Section 404. Recordation and Filing. To the extent necessary, the City covenants that it will cause this Indenture, such security agreements, financing statements, and all supplements thereto and other instruments as may be required from time to time to be kept, to be recorded and filed in such manner and in such places as may be required by law in order to fully preserve and protect the security of the owners of the Bonds and the rights of Trustee hereunder, and to perfect the security interest created by this Indenture. Section 405. Inspection of Books. The City shall keep proper books of record and . account (separate from all other records and accounts) in which complete and correct entries .shall be made of its transactions relating to the Project and the Funds and Accounts established by this Indenture. Section 406. Tax Covenants. The City shall not use or permit the use of any Bond proceeds or any other funds of the City, directly or indirectly, in any manner, and will not take or permit to be taken any other action or actions which would adversely effect the exclusion of interest on any Bond from gross income for federal income tax purposes. No part of the proceeds of the Bonds shall at any time be used, directly or indirectly, to acquire securities or obligations the acquisition of which would cause any of such Bonds to be an "arbitrage bond" as defined in Sections 148(a) and (b) of the Code. The City agrees that so long as any of the Bonds remain Outstanding, it will comply with the provisions of each applicable Tax Regulatory Agreement. Section 407. Trustee's and Paying Agent's Fees and Expenses. Subject to the provisions of Section 902 hereof, the City hereby agrees and covenants to make payments for the fees, expenses and charges of the Trustee and Paying Agent, if any, as authorized and provided by this Indenture. The City is to make payments on statements rendered by the Trustee and Paying Agent either (i) directly to the Trustee and Paying Agent or (ii) pursuant to Section 503(b) hereof. Section 408. Construction of Projects; Certification of Completion Dates. The City I ' hereby covenants to use its best efforts to acquire, construct and equip each portion of the Projects being financed with proceeds of the Bonds with all reasonable dispatch and to use its 4827-9893-8625.623 • best efforts to cause the acquisition, construction and equipping of such portion of each Project to be completed as soon as may be practicable, but in any case within a period not to exceed three years after the issuance of the applicable series of Bonds, delays caused by force majeure only excepted, but if for any reason such acquisition, construction and equipping is not completed within said period, there shall be no diminution or postponement of payments required hereunder to be made by the City. Promptly after each such Completion Date, the City shall submit to the Trustee the certificate of a Qualified Engineer which shall specify the Completion Date and shall state that acquisition, construction and equipping of the portion of the Project being financed with a particular series of Bond proceeds has been completed and the Project Costs have been paid, except for any Project Costs which have been incurred but are not then due and payable, or the liability for the payment of which is being contested or disputed by the City, --and for the -payment of which the Trustee is directed to retaim-specified amounts of moneys in the Project Fund. Notwithstanding the foregoing, such certificate may state that it is given without prejudice to any rights against third parties which exist at the date thereof or which may subsequently come into being. Section 409. Encumbrances. The City covenants that it will not create or suffer to be created any lien or charge upon the Trust Estate, except in accordance with the provisions of this Indenture. Section 410. Continuing Disclosure. The City hereby covenants and agrees that it will comply with and carry out all of the provisions of the Continuing Disclosure Agreement. • Notwithstanding any other provision of this Indenture to the contrary, failure of the City or the Trustee to comply with the Continuing Disclosure Agreement shall not be considered an Event of Default hereunder, however, the Trustee may (and at the request of the Original Purchaser of a series of Bonds, the owners of at least 25% in aggregate Outstanding principal amount of such series of Bonds, shall) or any Beneficial Owner may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the City or the Trustee, as the case may be, to comply with its obligations under this Section 410. For purposes of this Section 410 only, "Beneficial Owner" shall mean any Person which (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds (including Persons holding Bonds through nominees, depositories or other intermediaries) or (b) is treated as the owner of Bonds for federal income tax purposes. ARTICLE V FUNDS AND DEPOSITS Section 501. Creation of Funds and Accounts. (a) There are hereby created and established the following Funds and Accounts: (i) Project Fund, and a Street Account, Trail Account and Wastewater Account therein; (ii) Revenue Fund; 4827.9893.8625.6 24 S (iii) Bond Fund, and an Interest Account and a Principal Account therein; (iv) Redemption Fund; (v) Debt Service Reserve Fund, and a Series 2006A Account therein; (vi) Cost of Issuance Fund; and (vii) Rebate Fund. (b) All Funds and Accounts shall be held by the Trustee, which shall hold and maintain said Funds and Accounts in trust, for the use and benefit of the Bondholders and the City, but subject to the permitted applications expressed herein. Section 502. Project Fund. (a) The Trustee shall deposit a portion of the proceeds of the Series 2006A Bonds to the credit of various Accounts in the Project Fund in accordance with the written directions of the City given as provided in Section 208 of this Indenture. (b) Moneys credited to the Project Fund shall be expended only as set forth in this Section 502. (c) Amounts in each Account of the Project Fund shall be expended and . applied only for the payment of Project Costs related to the applicable Project. Disbursements shall be made from the Project Fund on the basis of consecutively .numbered Requisitions in the form attached hereto as Exhibit C signed by an Authorized Representative. Requisitions may be submitted to the Trustee by certified mail, first class mail or facsimile transmission. If the Trustee deems that a Requisition submitted by the City is sufficient pursuant to this Section 502, the amount requested thereunder shall be disbursed in payment of the Project Costs set forth therein, or in reimbursement of such Project Costs, within two (2) business days of•the date of receipt of such Requisition by the Trustee. Each Requisition shall specify: (i) the name of the person or party to whom payment is to be made and the purpose of the payment; (ii) the amount to be paid thereunder; (iii) that such amount has not been previously paid by the City and is justly due and owing to the person(s) named therein as a proper payment or reimbursement of a Project Cost; and (iv) that no Event of Default exists under the Indenture and that, to the knowledge of the Authorized Representative, no event has occurred and continues which with notice or lapse of time or both would constitute an Event of Default under the Indenture. it 4827.9897-8625.6 25 (d) The Trustee shall keep full and complete records concerning and reflecting all disbursements from the Project Fund and shall file an accounting of said disbursements if and when requested by the City. The Trustee shall only make payments from the Project Fund pursuant to and in accordance with Requisitions. In making payments from the Project Fund, the Trustee may rely on any Requisitions delivered to it pursuant to this Section 502, and the Trustee shall be relieved of all liability relating to payments made in accordance with such Requisitions and any supporting certificate or certificates requested by the Trustee without physical inspection of the applicable Project. Within ninety (90) days following completion of the portion of a Project being financed with a particular series of Bonds, the City shall deliver to the Trustee its Certificate stating that the applicable portion of such Project is complete and the Trustee shall -transfer the remaining moneys in the applicable Account of the Project Fund relating to such series of Bonds (save and except moneys needed to satisfy unpaid Project Costs) to the Redemption Fund for application to the retirement of Bonds by redemption or purchase, as provided by Section 301(a) and Section 506 hereof. (e) Upon the occurrence and continuance of an Event of Default or the occurrence and continuance of an event which with notice or lapse of time or both would constitute an Event of Default, amounts on deposit in the Project Fund shall not be disbursed but shall instead be applied to the payment of Debt Service or the redemption price of the Bonds. • Section 503. Revenue Fund. (a) There shall be deposited to the credit of the Revenue Fund, as and when received, all receipts derived from the Sales and Use Taxes. For the purposes of financial reporting by the City with respect to the Sales and Use Taxes, "receipts" and "revenues" shall have the same meaning. (b) Upon receipt, but in no event later than the last day of each month in which receipts of the Sales and Use Taxes are deposited in the Revenue Fund, commencing no later than March 30, 2007, there shall be transferred from the Revenue Fund, in the following order, the amounts set forth below: FIRST: For deposit to the Interest Account of the Bond Fund, an amount equal to one -sixth (1/6) of the interest on the Outstanding Bonds due on the next interest payment date and an amount equal to the interest component of any monthly payment prescribed with respect to any RLF Loan (provided, however, with respect to the deposits to be made to the Interest Account during the months of March; 2007 through October, 2007, such deposits shall be in an amount equal to one -seventh (1/7) of the interest due on the Series 2006A Bonds on November 1, 2007); SECOND: For deposit to the Principals Account of the Bond Fund, an amount equal to one -twelfth (1/12) of the next scheduled principal maturity of Outstanding Bonds (including mandatory sinking fund redemptions) and an amount equal to the principal component of any monthly payment prescribed with respect to any RLF Loan (provided, however, with respect to the Series 2006A Bonds, such deposits shall not commence until 1 November, 2014); 4827-9893-8625.6 26 THIRD: For deposit to the Debt Service Reserve Fund, an amount sufficient to cure any deficiency in the Debt Service Reserve Fund (including reimbursement to the 2006A Insurer for amounts advanced under the 2006A Reserve Policy); FOURTH: For payment to the 2006A Insurer, an amount equal to interest incurred on amounts advanced under the 2006A Reserve Policy. FIFTH: For deposit to the Rebate Fund, an amount sufficient to satisfy the City's obligations under Section 507 hereof; SIXTH: For payment to the Trustee and Paying Agent, the amount, if any, necessary to pay or reimburse the Trustee and Paying Agent for fees and expenses related to the Bonds or any RLF Loan; and SEVENTH: All remaining moneys ("Surplus Tax Receipts") will be transferred to the Redemption Fund and shall be applied to call Bonds or RLF Loans for redemption prior to maturity as provided in Section 301(b) and Section 506 hereof. (c) Required deposits into the Accounts of the Bond Fund and the Debt Service Reserve Fund shall be reduced by investment earnings, if any, in said Funds and Accounts and, with respect to required deposits to the Interest Account of the Bond Fund only, by any accrued interest deposited to the Interest Account of the Bond Fund upon the initial sale of a series of Bonds, In the event there shall be insufficient moneys in the Revenue Fund in a particular month to make the required transfers described above, then any deficiencies shall be added to the required deposits during the next month. Section 504. Bond Fund. (a) There shall be deposited to the credit of the appropriate Account of the Bond Fund all moneys required to be transferred thereto pursuant to Sections 208, 503, 505, 506 and 508 of this Indenture and all other moneys received for said Fund. (b) Moneys credited to the Bond Fund shall be expended only as set forth in this Section 504. (c) (i) On each interest payment date for any of the Bonds Outstanding or any RLF Loan, the Trustee shall pay out of moneys credited to the Interest Account of the Bond Fund the amounts required for the payment of interest on the Bonds or the RLF Loan due on such date, and on each redemption date, the amounts required for the payment of accrued interest on Bonds or the RLF Loan then to be redeemed or purchased unless the payment of such accrued interest shall be otherwise provided for, and such amounts shall be applied to such payments. (ii) On each principal payment or redemption date for any of the Bonds Outstanding or any RLF Loan, the Trustee shall pay out of moneys credited to the Principal Account of the Bond Fund the amounts required for the payment of principal and premium, if any, due on the Bonds or the RLF Loan on such date and such amounts shall be applied to such payments. 4827-9893-8625.6 27 (iii) If there shall be insufficient moneys in the Bond Fund to pay in full interest, principal or premium, if any, due on the Bonds or any RLF Loan on any interest or principal payment or redemption date, the Trustee shall, one day prior to such date, transfer an amount equal to the deficiency into the appropriate Account of the Bond Fund from the Funds indicated in the following order. FIRST: the Revenue Fund; SECOND: the Redemption Fund; and THIRD: the corresponding Account of the Debt Service Reserve Fund (for payment of principal and interest on the Bonds on any interest or principal payment date only). (d) All payments made pursuant to this Section 504 shall be made in immediately available funds. Section 505. Cost of Issuance Fund. There shall be deposited to the credit of the Cost of Issuance Fund all moneys received for said Fund pursuant to Section 208 hereof. The Trustee shall pay those Costs of Issuance as directed by the City pursuant to a Certificate delivered on a Closing Date. After all Costs of Issuance have been paid (and in any event not later than January 1, 2007 with respect to the Series 2006A Bonds), any remaining moneys in the Cost of Issuance Fund shall be transferred to the Interest Account of the Bond Fund. Section 506. Redemption Fund. (a) There shall be deposited to the credit of the Redemption Fund all moneys required to be transferred thereto pursuant to Section 502 and Section 503 of this Indenture. (b) Moneys credited to the Redemption Fund shall be expended only as set forth in this Section 506. (c) Moneys in the Redemption Fund shall be transferred to the Principal Account of the Bond Fund at such times as may be necessary to effectuate, on the first available date, redemptions of Bonds required by Section 301(a) and (b) of this Indenture. Upon the issuance of any series of Additional Bonds, 50% of the Surplus Tax Receipts shall be allocated to the redemption of the Series 2006A Bonds and the remaining 50% of such Surplus Tax Receipts shall be allocated to the various series of Additional Bonds in such proportion as shall be set forth in a Supplemental Indenture. (d) The amounts accumulated in the Redemption Fund, if so directed by the City by means of a Certificate delivered to the Trustee, shall be applied by the Trustee to the purchase of Bonds of the maturities which would otherwise be redeemed pursuant to Section 301(a) and (b) and this Section 506 but for the provisions of this subsection (d), at prices directed by the City not exceeding the applicable redemption prices of the Bonds which would be redeemed but for the operation of this sentence. Interest accrued on the .N Bonds so purchased shall be paid from moneys credited to the Interest Account of the ,S Bond Fund. 4827-9893-8625.6 28 M Section 507. Rebate Fund. (a) The Trustee shall establish and maintain, separate and apart from any other Funds and Accounts established and maintained hereunder, a Fund to be designated as the Rebate Fund, which Fund is not pledged to the payment of any Bonds. Subject to the transfer provisions provided in subsection (c) below, all moneys at any time deposited in the Rebate Fund shall be held by the Trustee in trust, to the extent required to satisfy the Rebate Amount (as defined in each Tax Regulatory Agreement), for payment to the United States of America, and neither the City nor the Owner of any Bond shall have any rights in or claim to such money. All amounts deposited into or on deposit in the Rebate Fund shall be governed by this Section 507, by Section 406, and by each Tax Regulatory Agreement (which are incorporated herein by reference). (b) As provided in -Section 503(b) hereof, there shall be deposited in the Rebate Fund the amount of all income or gain on moneys deposited in any of the Funds and Accounts established by this Indenture which is required to be rebated to the United States and is designated for deposit therein, as calculated by the City to be owing to the United States pursuant to the Tax Regulatory Agreement, which shall be delivered by the City concurrently with the issuance of a series of Bonds. (c) The Trustee, upon receipt of written instructions from the Mayor or Finance Director of the City, shall pay to the United States out of amounts in the Rebate Fund such amounts as are required pursuant to each Tax Regulatory Agreement. (d) Any moneys remaining in the Rebate Fund after payment to the United States, within sixty (60) days after the date on which the last Bond is redeemed, of one hundred percent (100%) of the rebate amount as described in Section 148(f)(2) of the Code, shall be transferred to the Revenue Fund. (e) The Trustee, as instructed by Certificate of the City, shall invest all amounts held in the Rebate Fund in Investment Securities, subject to the restrictions set forth in the applicable Tax Regulatory Agreement. Money shall not be transferred from the Rebate Fund except as provided in subsection (c). (f) Notwithstanding any other provision of this Indenture, the obligation to remit the Rebate Amount to the United States and to comply with all other requirements of this Section 507, Section 406 and each Tax Regulatory Agreement shall survive the defeasance or payment in full of the Bonds. Section 508. Debt Service Reserve Fund. As provided in Section 208 hereof, upon the issuance of each series of Bonds, there shall be deposited into the appropriate Account of the Debt Service Reserve Fund, from proceeds of the Bonds, an amount sufficient to cause the amounts on deposit therein to be equal to the Reserve Requirement; provided, however, that no proceeds of RLF Loans will be deposited in the Debt Service Reserve Fund and the Debt Service Reserve Fund will not secure RLF Loans, whether or not structured as Additional Bonds. Each Account within the Debt Service Reserve Fund shall be maintained in an amount equal to the Reserve Requirement. Amounts on deposit in Accounts within the Debt Service Reserve Fund shall be used solely to pay the principal of and interest on the corresponding series of Outstanding Bonds for which there are no available funds in the Bond Fund to make such 4827.9893-8625.6 29 payments, as the same become due at maturity (including mandatory sinking fund redemption). If any Account of the Debt Service Reserve Fund, by virtue of any such payment, is reduced below the Reserve Requirement, it shall be reimbursed in the amount of any such deficiency as provided in Section 503. Notwithstanding the above provisions of this Section 508, the amount on deposit in an Account of the Debt Service Reserve Fund may be used, together with other available funds, to provide for the payment at maturity or to redeem prior to maturity all, but not less than all, of the related series of Outstanding Bonds. If an excess shall exist in an Account in the Debt Service Reserve Fund over and above the Reserve Requirement, such excess shall be transferred to the Interest Account of the Bond Fund. Section 509. Cessation of Fund Deposits. When the moneys in the Revenue Fund, the Bond Fund, the Debt Service Reserve Fund (except that investments in surety bonds and insurance policies shall not be counted for this purpose) and the Redemption Fund shall be and remain sufficient to pay in full the principal and interest on all Bonds then Outstanding in accordance with Article VII of this Indenture, together with the required fees and expenses to be paid or reimbursed to the Trustee and any Paying Agent, the City shall have no further obligation to make further payments into said Funds. Pursuant to Arkansas Code Annotated Section 14- 164-329(c)(2), the Sales and Use Taxes shall be abolished on the first day of the calendar month subsequent to the expiration of thirty (30) days from the date there is filed with the Director of the Arkansas Department of Finance and Administration a written statement signed by the Mayor and the Trustee wherein either (a) the Trustee certifies that it has or will have sufficient funds on hand to pay the principal of and interest on the Bonds and any RLF Loan at maturity or upon redemption prior to maturity, and the Mayor certifies that the Sales and Use Taxes are not pledged to any other indebtedness of the City, or (b) the Mayor certifies that there are no longer any Bonds or any RLF Loan outstanding payable from receipts of the Sales and Use Taxes. Section 510. Separate Accounts Authorized. A Supplemental Indenture authorizing the issuance of Additional Bonds may provide for the creation of separate Accounts within the Bond Fund, Debt Service Reserve Fund, Project Fund, Costs of Issuance Fund and Rebate Fund for such series of Bonds and such other Accounts as the City may direct; provided, that the creation of such separate Accounts shall be solely for the ease of administration and shall in no event affect the equal and ratable security of the Bonds of each series. If any Supplemental Indenture authorizing the issuance of Additional Bonds provides for the establishment of separate Accounts for a series of Bonds, then such Supplemental Indenture shall require that the receipts of the Sales and Use Taxes received by the City shall be deposited pursuant to written direction of the City into each of the Accounts within the Bond Fund and Debt Service Reserve Fund for each series of Bonds on the basis of the installments of principal, premium, if any, and interest on each series of Bonds and the amounts required to be deposited in the Accounts within the Debt Service Reserve Fund during the applicable period, to the end that the Bonds of each series shall be equally and ratable secured by the receipts of the Sales and Use Taxes. Any Supplemental Indenture authorizing the issuance of Additional Bonds may provide that any proceeds of such series of Bonds and investment earnings thereon remaining after some specified date, or after the construction of all facilities to be financed with the proceeds of such series of Bonds, shall be applied to the redemption of such series of Bonds. 4827-9893-8625.6 30 ARTICLE VI INVESTMENTS Section 601. Investment of Moneys. At the direction of the City or absent such direction, the Trustee shall invest moneys in Funds or Accounts held by the Trustee in Investment Securities with maturity or redemption dates consistent with the times at which said moneys will be required for the purposes provided in this Indenture; provided, however, the stated maturity dates of Investment Securities of Debt Service Reserve Fund moneys (other than surety bonds) shall not exceed five years from the date of investment therein. Moneys in separate Funds or Accounts may be commingled for the purpose of investment. Section 602. Investment Earnings. Subject to the provisions of the Tax Regulatory Agreement and Article V hereof, Investment Securities purchased with moneys held in or attributable to any Fund or Account held by the Trustee under the provisions of this Indenture shall be deemed at all times to be a part of such Fund or Account and the income or interest earned, profits realized or losses suffered by a Fund or Account due to the investment thereof shall be retained in, credited or charged, as the case may be, to such Fund or Account unless otherwise provided pursuant to this Indenture. Section 603. Valuation of Funds. In determining the value of any Fund or Account held by the Trustee under this Indenture, the Trustee shall credit Investment Securities at the fair market value thereof, as determined by the Trustee by any method selected by the Trustee in its reasonable discretion. No less frequently than annually, and in any event within thirty (30) days prior to the end of each Fiscal Year, the Trustee shall determine the value of each Fund and Account held hereunder and shall report such determination to the City. The Trustee shall sell or present for redemption any Investment Securities as necessary in order to provide money for the purpose of making any payment required hereunder, and the Trustee shall not be liable for any loss resulting from any such sale. Section 604. Responsibility of Trustee. The Trustee shall not be responsible or liable for any loss suffered in connection with any investment of moneys made by it at the direction of the City. rTfItcIwIt4YuJi DISCHARGE OF LIEN Section 701. Discharge of Lien. If the City shall pay or cause to be paid to the owners of the Bonds the principal, premium, if any, and interest to become due thereon at the times and in the manner stipulated therein, and if the City shall keep, perform and observe all and singular the covenants and promises in the Bonds and in this Indenture expressed as to be kept, performed and observed by it on its part, then these presents and the estate and rights hereby granted shall cease, determine and be void, and thereupon the Trustee shall cancel and discharge the lien of this Indenture, and execute and deliver to the City such instruments in writing as shall be requisite to satisfy the lien hereof, and reconvey to the City the estate hereby conveyed, and 4827.9893-8623.6 31 assign and deliver to the City any property at the time subject to the lien of this Indenture which may then be in its possession, except moneys or Government Securities held by it for the payment of the principal of and premium, if any, and interest on the Bonds. Section 702. Bonds Deemed Paid. Any Bond shall be deemed to be paid within the meaning of this Article VII when payment of the principal of and premium, if any, and interest on such Bond (whether at maturity or upon redemption as provided in this Indenture, or otherwise), either (i) shall have been made or caused to be made in accordance with the terms thereof, or (ii) shall have been provided for by irrevocably depositing with the Trustee, in trust and irrevocably set aside exclusively for such payment, (1) moneys sufficient to make such payment or (2) Government Securities (provided that such deposit will not affect the tax-exempt status of the interest on any of the Bonds or cause any of the Bonds to be classified as "arbitrage bonds" within the meaning of Section 148(a) of the Code, as reflected in an opinion of Bond Counsel delivered to the Trustee), maturing as to principal and interest in such amount and at such times as will provide sufficient moneys to make such payment, and all necessary and proper fees, compensation and expenses of the Trustee and any Paying Agent pertaining to the Bonds with respect to which such deposit is made shall have been paid or the payment thereof provided for to the satisfaction of the Trustee and any said Paying Agent. In the case of any defeasance of Bonds pursuant to subsection (ii) above, the dates of redemption of such Bonds and the principal amounts and maturities of Bonds to be redeemed on such dates will be determined by taking into consideration the applicable mandatory redemption S requirements with respect to the Bonds to be defeased and the receipts of the Sales and Use Taxes for the most recent twelve months. Section 703. Non -Presentment of Bonds. In the event any Bonds shall not be presented for payment when the principal thereof becomes due, either at maturity or otherwise, or at the date fixed for redemption thereof, if there shall have been deposited with the Trustee for that purpose, or left in trust if previously so deposited, funds sufficient to pay the principal thereof, and premium, if any, together with all interest unpaid and due thereon, to the due date thereof, for the benefit of the Holder thereof, all liability of the City to the Holder thereof for the payment of the principal thereof, premium if any, and interest thereon, shall forthwith cease, determine and be completely discharged, and thereupon it shall be the duty of the Trustee to hold such fund or funds, without liability for interest thereon, for the benefit of the Holder of such Bonds, who shall thereafter be restricted exclusively to such fund or funds, for any claim of whatever nature on his part under this Indenture or on, or with respect to, the Bonds. ARTICLE VIII DEFAULT PROVISIONS AND REMEDIES OF TRUSTEE AND Section 801. Events of Default. Each of the following events shall constitute and is referred to in this Indenture as an "Event of Default": 8 (a) Default in the due and punctual payment of any interest on any Bond; 4827-9893-8625.6 32 (b) Default in the due and punctual payment of the principal of or premium, if any, on any Bond, whether at the stated maturity thereof, or upon proceedings for redemption thereof, or upon the maturity thereof by declaration; (c) Default in the payment of any other amount required to be paid under this Indenture or the performance or observance of any other of the covenants, agreements or conditions contained in this Indenture, or in the Bonds issued hereunder, and continuance thereof for a period of sixty (60) days after written notice specifying such failure and requesting that it be remedied shall have been given to the City by the Trustee, which may give such notice in its discretion and shall give such notice at the written request of Bondholders of not less than 51% in aggregate principal amount of the Bonds then Outstanding, unless the Trustee, or the Trustee and Holders of an aggregate principal amount of Bonds not less than the aggregate principal amount of Bonds the Holders of which requested such notice, as the case may be, shall agree in writing to an extension of such period prior to its expiration; provided, however, if the failure stated in the notice cannot be corrected within the applicable period, the Trustee will not unreasonably withhold its consent to an extension of such time if corrective action is instituted by the City within such period and is being diligently pursued; (d) The filing of a petition in bankruptcy by or against the City under the United States Bankruptcy Code or the commencement of a proceeding by or against the City under any other law concerning insolvency, reorganization or bankruptcy, and (e) If the State has limited or altered the rights of the City pursuant to the Act, as in force on the date of this Indenture, to f lfill the terms of any agreements made with the Trustee or the Bondholders or in any way impaired the rights and remedies of the Trustee or the Bondholders while any Bonds are Outstanding. The teen "default" as used in clauses (a), (b) and (c) above shall mean default by the City in the performance or observance of any of the covenants, agreements or conditions on its part contained in this Indenture or in the Bonds Outstanding hereunder, exclusive of any period of grace required to constitute a default an "Event of Default" as hereinabove provided. Section 802. Acceleration. may, and upon the written request amount of Bonds Outstanding herei the principal of all Bonds then immediately due and payable, and immediately due and payable. Upon the occurrence of an Event of Default, the Trustee of the Holders of not less than 51% in aggregate principal order shall, by notice in writing delivered to the City, declare Outstanding, together with the interest accrued thereon, such principal and interest shall thereupon become and be Section 803. Other Remedies; Rights of Bondholders. Upon the occurrence of an Event of Default, the Trustee may, as an alternative, pursue any available remedy by suit at law or in equity, including, without limitation, mandamus to enforce the payment of the principal of and premium, if any, and interest on the Bonds then Outstanding hereunder. If an Event of Default shall have occurred, and if it shall have been requested so to do by the Holders of not less than 51% in aggregate principal amount of Bonds Outstanding hereunder 4827-9893.8625.6 33 and if it shall have been indemnified as provided in Section 901(1) hereof, the Trustee shall be obligated to exercise such one or more of the rights and powers conferred upon it by this Section 803 as the Trustee, being advised by counsel, shall deem most expedient in the interests of the Bondholders. No remedy by the terms of this Indenture conferred upon or reserved to the Trustee (or to the Bondholders) is intended to be exclusive of any other remedy, but each and every such remedy shall be cumulative and shall be in addition to any other remedy given hereunder or now or hereafter existing at law or in equity or by statute. No delay or omission to exercise any right or power accruing upon any default or Event of Default shall impair any such right or power or shall be construed to be a waiver of any such default or Event of Default or acquiescence therein; and every such right and power may be exercised from time to time and as often as may be deemed expedient. No waiver of any default or Event of Default hereunder, whether by the Trustee or by the Bondholders, shall extend to or shall affect any subsequent default or Event of Default or shall impair any rights or remedies consequent thereon. Section 804. Right of Bondholders to Direct Proceedings. Anything in this Indenture to the contrary notwithstanding, the Holders of not less than 51% in aggregate principal amount of Bonds Outstanding hereunder shall have the right, at any time, by an instrument or • instruments in writing executed and delivered to the Trustee, to direct the method and place of conducting all proceedings to be taken in connection with the enforcement of the terms and conditions of this Indenture, or for the appointment of a receiver or any other proceeding hereunder; provided that such direction shall not be otherwise than in accordance with the provisions of law and of this Indenture. Section 805. Appointment of Receiver. Upon the occurrence of an Event of Default, and upon the filing of a suit or other commencement of judicial proceedings to enforce the rights of the Trustee and of the Bondholders under this Indenture, the Trustee shall be entitled to the appointment of a receiver or receivers of the Trust Estate and of the tolls, rents, revenues, issues, earnings, income, products and profits thereof, including, without limitation, the receipts of the Sales and Use Taxes, pending such proceedings with such powers as the court making such appointment shall confer. Section 806. Waiver. In case of an Event of Default on its part, as aforesaid, to the extent that such rights may then lawfully be waived, neither the City nor anyone claiming through the City or under the City shall or will set up, claim or seek to take advantage of any appraisement, valuation, stay, extension or redemption laws now or thereafter in force, in order to prevent or hinder the enforcement of this Indenture, but the City, for itself and all who may claim through or under it, hereby waives, to the extent that it lawfully may do so, the benefit of all such laws and all right of appraisement and redemption to which it may be entitled under the laws of the State. Section 807. Application of Moneys. Available moneys remaining after discharge of costs, charges and liens prior to this Indenture shall be applied by the Trustee as follows: 4827.9893-8625.6 34 El • (a) Unless the principal of all the Bonds shall have become or shall have been declared due and payable, all such moneys shall be applied: First: To the payment to the Persons entitled thereto of all installments of interest then due, in the order of the maturity of the installments of such interest, and, if the amount available shall not be sufficient to pay in full any particular installment, then to the payment ratably, according to the amounts due on such installment, to the Persons entitled thereto, without any discrimination or privilege; Second: To the payment to the Persons entitled thereto of the unpaid principal of any of the Bonds which shall have become due (other than Bonds called for redemption for the payment of which moneys are held pursuant to the provisions of this Indenture), in the order of their due dates, with interest on such Bonds from the respective dates upon which they become due, and, if the amount available shall not be sufficient to pay in full Bonds due on any particular date, together with such interest, then to the payment ratably, according to the amount of principal due on such date, to the Persons entitled thereto without any discrimination or privilege of any Bond over any other Bond and without preference or priority of principal over interest or of interest over principal; and Third: To the payment of the interest on and the principal of the Bonds, and to the redemption of Bonds, all in accordance with the provisions of Article V of this Indenture. (b) If the principal of all the Bonds shall have become due or shall have been declared due and payable, all such moneys shall be applied first to the payment of the interest then due and unpaid upon the Bonds, and then to the payment of the principal then due and unpaid upon the Bonds, in each case without preference or priority of any Bond over any other Bond, ratably, according to the amounts due respectively for principal and interest, to the Persons entitled thereto. (c) If the principal of all the Bonds shall have been declared due and payable, and if such declaration shall thereafter have been rescinded and annulled under the provisions of this Article VIII then, subject to the provisions of paragraph (b) of this Section 807, in the event that the principal of all the Bonds shall later become due or be declared due and payable, the moneys shall be applied in accordance with the provisions of paragraph (a) of this Section 807. Whenever moneys are to be applied by the Trustee pursuant to the provisions of this Section 807, such moneys shall be applied by it at such times, and from time to time, as it shall determine, having due regard to the amount of such moneys available for application and the likelihood of additional moneys becoming available for such application in the future. Whenever the Trustee shall apply such funds, it shall fix the date (which shall be an interest payment date unless it shall deem another date more suitable) upon which such application is to be made and upon such date interest on the amounts of principal to be paid on such dates shall cease to accrue. The Trustee shall give such notice as it may deem appropriate of the deposit with it of any such 4827.9893-8625.6 35 moneys and of the fixing of any such date and shall not be required to make payment to the Holder of any Bond until such Bond shall be presented to the Trustee for appropriate endorsement or for cancellation if fully paid. Section 808. Remedies Vested in Trustee. All rights of action (including the right to file proof of claim) under this Indenture or under any of the Bonds may be enforced by the Trustee without the possession of any of the Bonds or the production thereof in any trial or other proceeding relating thereto, and any such suit or proceeding instituted by the Trustee shall be brought in its name as Trustee, without the necessity of joining as plaintiffs or defendants any Bondholders hereby secured, and any recovery of judgment shall be for the equal benefit of the Holders of all Outstanding Bonds. Section 809. Rights and Remedies of Bondholders. No Bondholder shall have any right to institute any suit, action or proceeding in equity or at law for the enforcement of this Indenture or for the execution of any trust hereof or for the appointment of a receiver or any other remedy hereunder, unless a default has occurred of which the Trustee has been notified as provided in subsection (g) of Section 901, or of which by said subsection it is deemed to have notice, nor unless such default shall have become an Event of Default and the Holders of not less than 51% in aggregate principal amount of Bonds Outstanding hereunder shall have made written request to the Trustee and shall have offered it reasonable opportunity either to proceed to exercise the powers hereinbefore granted or to institute such action, suit or proceeding in its own name, nor unless also they have offered to the Trustee indemnity as provided in subsection (1) of Section 901, nor unless the Trustee shall thereafter fail or refuse to exercise the powers hereinbefore granted, or to institute such action, suit or proceeding in its own name; and such notification, request and offer of indemnity are hereby declared in every such case, at the option of the Trustee, to be conditions precedent to the execution of the powers and trusts of this Indenture, and to any action or cause of action for the enforcement of this Indenture or for the appointment of a receiver or for any other remedy hereunder, it being understood and intended that no one or more Holders of the Bonds shall have any right in any manner whatsoever to affect, disturb or prejudice the lien of this Indenture by action of the Holder or Holders or to enforce any right hereunder except in the manner herein provided, and that all proceedings at law or in equity shall be instituted, held and maintained in the manner herein provided for the equal benefit of the Holders of all Bonds Outstanding hereunder. Nothing in this Indenture contained shall, however, affect or impair the right of any Bondholders to enforce the payment of the principal of and premium, if any, and interest on any Bonds at and after the maturity thereof, or the obligation of the City to pay the principal of and premium, if any, and interest on each of the Bonds issued hereunder to the respective Holders thereof at the time and place in said Bonds expressed. Section 810. Termination of Proceedings. In case the Trustee shall have proceeded to enforce any right under this Indenture by the appointment of a receiver or otherwise, and such proceedings shall have been discontinued or abandoned for any reason, or shall have been determined adversely to the Trustee, then and in every such case the City and the Trustee shall be restored to their former positions and rights hereunder with respect to the property herein • conveyed, and all rights, remedies and powers of the Trustee shall continue as if no such proceedings had been taken, except to the extent the Trustee is legally bound by such adverse • determination. 4827-9893-8625.6 36 • Section 811. Waivers of Events of Default. The Trustee may, and upon the written request of the Holders of not less than 51% in principal amount of all Bonds Outstanding hereunder shall, waive any Event of Default hereunder and its consequences and rescind any declaration of maturity of principal; provided, however, there shall not be waived any Event of Default described in clause (a) or (b) of the first paragraph of Section 801 hereof, unless prior to such waiver or rescission all arrears of principal (due otherwise than by declaration) and interest, and all expenses of the Trustee and Paying Agent, shall have been paid or provided for. In case of any such waiver or rescission the City, Trustee and the Bondholders shall be restored to their former positions and rights hereunder respectively, but no such waiver or rescission shall extend to any subsequent or other default, or impair any right subsequent thereon. ARTICLE IX TRUSTEE AND PAYING AGENTS Section 901. Acceptance of Trusts. The Trustee hereby accepts the trusts imposed upon it by this Indenture and agrees to perform said trusts, but only upon and subject to the following expressed terms and conditions: (a) The Trustee may execute any of the trusts or powers hereof and perform any duties required of it by or through attorneys, agents, receivers or employees, and shall be entitled to advice of counsel concerning all matters of trusts hereof and its duties • hereunder, and may in all cases pay reasonable compensation to all such attorneys, agents, receivers and employees as may reasonably be employed in connection with the trusts hereof. Reimbursement of such compensation paid by the Trustee is subject to the provisions of Section 902 hereof The Trustee may act upon the opinion or advice of any attorney, surveyor, engineer or accountant selected by it in the exercise of reasonable care, or, if selected or retained by the City prior to the occurrence of a default of which the Trustee has been notified as provided in subsection (g) of this Section 901, or of which by said subsection the Trustee is deemed to have notice, approved by the Trustee in the exercise of such care. The Trustee shall not be responsible for any loss or damage resulting from an action or nonaction in accordance with any such opinion or advice. (b) The Trustee shall not be responsible for any recital herein, or in the Bonds (except in respect to the certificate of authentication of the Trustee endorsed on such Bonds), or for the validity of the execution by the City of this Indenture or of any Supplemental Indentures or instruments of further assurance, or for the sufficiency of the security for the Bonds issued hereunder or intended to be secured hereby, or for the value of the title of the property herein conveyed or otherwise as to the maintenance of the security hereof; except that in the event the Trustee enters into possession of a part or all of the property herein conveyed pursuant to any provision of this Indenture, it shall use due diligence in preserving such property; and the Trustee shall not be bound to ascertain or inquire as to the performance or observance of any covenants, conditions and agreements aforesaid as to the condition of the property herein conveyed. (c) The Trustee may become the owner of Bonds secured hereby with the same rights which it would have if not Trustee. 4827-9893.8625.6 37 • (d) The Trustee shall be protected in acting upon any notice, request, consent, certificate, order, affidavit, letter, telegram or other paper or document believed by it, in the exercise of reasonable care, to be genuine and correct and to have been signed or sent by the proper person or persons. Any action taken by the Trustee pursuant to this., Indenture upon the request or authority or consent of the owner of any Bond secured hereby, shall be conclusive and binding upon all future owners of the same Bond and upon Bonds issued in exchange therefor or in place thereof. (e) As to the existence or nonexistence of any fact or as to the sufficiency or validity of any instrument, paper or proceeding, the Trustee shall be entitled to rely upon a Certificate of the City signed by its Mayor and attested by the City Clerk as sufficient evidence of the facts therein contained and, prior to the occurrence of a default of which it has been notified as provided in subsection (g) of this Section 901, or of which by that subsection it is deemed to have notice, shall also be at liberty to accept a similar certificate to the effect that any particular dealing, transaction, or action is necessary or expedient, but may at its discretion, at the reasonable expense of the City, in every case secure such further evidence as it may think necessary or advisable but shall in no case be bound to secure the same. The Trustee may accept a certificate of the City Clerk of the City under its seal to the effect that a resolution in the form therein set forth has been adopted by the City as conclusive evidence that such resolution has been duly adopted, and is in full force and effect. (f) The permissive right of the Trustee to do things enumerated in this Indenture shall not be construed as a duty of the Trustee, and the Trustee shall be answerable only for its own gross negligence or willful misconduct. (g) The Trustee shall not be required to take notice or be deemed to have notice of any default hereunder (except for defaults under clause (a) or (b) of the first paragraph of Section 801 hereof as to which the Trustee shall be deemed to have notice) unless the Trustee shall be specifically notified in writing of such default by the City or by the Holders of at least 10% in aggregate principal amount of Bonds Outstanding hereunder, and all notices or other instruments required by this Indenture to be delivered to the Trustee must, in order to be effective, be delivered to the principal corporate trust office of the Trustee, and in the absence of such notice so delivered, the Trustee may conclusively assume there is no such default except as aforesaid. (h) [Reserved]. (i) At any and all reasonable times the Trustee, and its duly authorized agents, attorneys, experts, engineers, accountants and representatives, shall have the right fully to inspect any and all of the property herein conveyed, including all books, papers and records of the City pertaining to the receipts of the Sales and Use Taxes and the Bonds, and to take such memoranda from and in regard thereto as may be desired. 0) The Trustee shall not be required to give any bond or surety in respect of • the execution of the said trusts and powers or otherwise in respect of the premises. • 4827.9893.8625.6 38 (k) Notwithstanding anything elsewhere in this Indenture contained, the Trustee shall have the right, but shall not be required, to demand, in respect of the authentication of any Bonds, the withdrawal of any cash, the release of any property, or any action whatsoever within the purview of this Indenture, any showings, certificates, opinions, appraisals or other information, or corporate action or evidence thereof, in addition to that by the terms hereof required as a condition of such action by the Trustee, deemed desirable for the purpose of establishing the right of the City to the authentication of any Bonds, the withdrawal of any cash, the release of any property, or the taking of any other action by the Trustee. (l) Before taking such action hereunder, the Trustee may require that it be furnished an indemnity bond satisfactory to it for the reimbursement to it of all expenses to which it may be put and to protect it against all liability, except liability which is adjudicated to have resulted from the gross negligence or willful misconduct of the Trustee, by reason of any action so taken by the Trustee. Section 902. Fees, Charges and Expenses of Trustee and Paying Agents; Trustee's Prior Lien. (a) Subject to subsection (b) of this Section 902, the City shall, from moneys lawfully available therefor, pay to the Trustee and any Paying Agent reasonable compensation for all services performed hereunder and also all reasonable expenses, charges and other disbursements and those of their attorneys, agents and employees incurred in and about the administration and execution of the trusts hereby created and the performance of the powers and • duties hereunder and, to the extent permitted by law and from moneys lawfully available therefor, shall indemnify and save the Trustee harmless against any liabilities which it may incur •in the exercise and performance of its powers and duties hereunder. With respect to the Series 2006A Bonds, the Trustee's initial authentication fee shall be $3,500 and the annual administration fee of the Trustee shall be $4,000 annually prior to the final Completion Date with respect to any of the Projects, and $3,500 annually thereafter. If the City shall fail to make any payment required by this subsection (a), the Trustee may make such payment from any moneys in its possession under the provisions of this Indenture and shall be entitled to a preference therefor over any of the Bonds Outstanding hereunder. The City shall not be required to indemnify the Trustee against any liabilities which the Trustee may incur as a result of negligent or wrongful acts or omissions of the Trustee. (b) The City shall pay to the Trustee compensation for its services as described in Section 902(a), provided that such compensation, together with all expenses, charges and other disbursements of the Trustee and its attorneys, agents and employees and all reimbursements to the Trustee for all costs and other disbursements as described in Section 901(a) hereof shall not exceed $7,500 annually (not including the initial authentication fee) without the prior written approval of the City, which approval shall not be unreasonably withheld. If the Trustee wishes to consult with or retain counsel for any purpose hereunder whose anticipated fees, together with all other compensation, disbursements and reimbursements of the Trustee and its attorneys, agents and employees to be paid by the City hereunder, shall exceed $10,000 annually, then such counsel shall have to be acceptable to the City and such fees shall have to be approved by the City as described above. 4827-9893.8625.6 39 Section 903. Additional Duties of Trustee. (a) In addition to the other duties of the Trustee described in this Indenture, it shall be the duty of the Trustee, on or before the tenth day of each month after the month in which the Series 2006A Bonds are delivered, to file with the City a statement setting forth in respect of the preceding calendar month: (i) the amount withdrawn or transferred by it and the amount deposited with it on account of each Fund and Account held by it under the provisions of this Indenture; (ii) the amount on deposit with it at the end of such month to the credit of each such Fund and Account; (iii) a brief description of all obligations held by it as an investment of moneys in each such Fund and Account; (iv) the amount applied to the purchase or redemption of Bonds under the provisions of this Indenture and a description of the Bonds or portions of Bonds so purchased or redeemed; and (v) any other information that the City may reasonably request, including; but not limited to, submittal of monthly statements of activity relating to the Bonds and any RLF Loan. Such information shall also be provided at the direction of the City to one additional designated entity. All records and files pertaining to each such Fund and Account in the custody of the Trustee hereunder shall be open at all reasonable times to the inspection of the City and its agents and representatives, and the City may make copies thereof. (b) The Trustee additionally shall be responsible for the preparation and timely distribution of any and all forms and reports required by law to all Bondholders, the State and the Internal Revenue Service in connection with the payment to the Bondholders of interest on the Bonds. Section 904. Notice to Bondholders of Default. If a default occurs of which the Trustee is pursuant to the provisions of Section 901(g) deemed to have or is given notice, the Trustee shall promptly make demand upon the City and give notice to each owner of Bonds then Outstanding. Section 905. Intervention by Trustee. In any judicial proceeding to which the City is a party and which in the opinion of the Trustee and its counsel has a substantial bearing on the interests of Holders of Bonds issued hereunder, the Trustee may intervene on behalf of Bondholders and shall do so if requested in writing by the Holders of at least 51% of the aggregate principal amount of Bonds Outstanding hereunder. The rights and obligations of the Trustee under this Section 905 are subject to the approval of the court having jurisdiction in the premises. ® Section 906. Merger or Consolidation of Trustee. Any bank or trust company to which the Trustee may be merged, or with which it may be consolidated, or to which it may sell • or transfer its trust business and assets as a whole or substantially as a whole, or any bank or trust 4827-9893-8625.6 40 company resulting from any such sale, merger, consolidation or transfer to which it is a party, ipso facto, shall be and become successor trustee hereunder and vested with all of the title to the whole property or Trust Estate and all the trusts, powers, discretions, immunities, privileges and all other matters as was its predecessor, without the execution or filing of any instrument or any further act, deed, or conveyance on the part of any of the parties hereto, anything herein to the contrary notwithstanding; provided, however, that such successor trustee shall have capital and surplus of at least $40 million. Section 907. Resignation by Trustee. The Trustee and any successor trustee may at any time resign from the trusts hereby created by giving written notice to the City and the Bondholders, and such resignation shall take effect upon the appointment of a successor trustee by the Bondholders or by the City. Such notice may be -served personally or sent by registered mail (to the City) or first class mail (to the Bondholders). Section 908. Removal of Trustee. The Trustee may be removed at any time by an instrument or concurrent instruments in writing delivered to the Trustee and to the City, and signed by the Holders of not less than 51% in aggregate principal amount of Bonds Outstanding hereunder. Section 909. Appointment of Successor Trustee. In case the Trustee hereunder shall resign or be removed, or be dissolved, or shall be in course of dissolution or liquidation, or otherwise become incapable of acting hereunder, or in case it shall be taken under the control of any public officer or officers, or of a receiver appointed by the court, a successor may be appointed by the Holders of not less than 51% in aggregate principal amount of Bonds Outstanding hereunder, by an instrument or concurrent instruments in writing signed by such Holders, or by their attorneys in fact, duly authorized; provided, nevertheless, that in case of such vacancy the City by an instrument executed and signed by its Mayor and attested by its City Clerk under its seal, shall appoint a temporary trustee to fill such vacancy until a successor trustee shall be appointed by the Bondholders in the manner above provided. Any such temporary trustee. appointed by the City shall immediately and without further act be superseded by the trustee appointed by such Bondholders. Every such temporary trustee and every such successor trustee shall be a trust company or bank in good standing, having capital and surplus of not less than $40 million. Section 910. Concerning Any Successor Trustee. Every successor or temporary trustee appointed hereunder shall execute, acknowledge and deliver to its predecessor and also to the City an instrument in writing accepting such appointment hereunder, and thereupon such successor or temporary trustee, without any further act or conveyance, shall become fully vested with all the estates, properties, rights, powers, trusts, duties and obligations of its predecessor; but such predecessor shall, nevertheless, on the written request of the City or of its successor trustee, execute and deliver an instrument transferring to such successor all the estate, properties, rights, powers and trusts of such predecessor hereunder, and every predecessor trustee shall deliver all securities, moneys and any other property held by it as trustee hereunder to its successor. Should any instrument in writing from the City be required by any successor trustee • for more fully and certainly vesting in such successor the estates, rights, powers and duties hereby vested or intended to be vested in the predecessor trustee, any and all such instruments in • writing shall, on request, be executed, acknowledged, and delivered by the City. 4827-9893.8625.6 41 Section 911. Reliance Upon Instruments. The resolutions, opinions, certificates and other instruments provided for in this Indenture may be accepted and relied upon by the Trustee as conclusive evidence of the facts and conclusions stated therein and shall be full warrant, protection and authority to the Trustee for its actions taken hereunder. Section 912. Appointment of Co -Trustee. The City and the Trustee shall have power to appoint, and upon the request of the Trustee the City shall for such purpose join with the Trustee in the execution of all instruments necessary or proper to appoint, another corporation or one or more Persons approved by the Trustee, either to act as co -trustee or co -trustees jointly with the Trustee of all or any of the property subject to the lien hereof, with such powers as may be provided in the instrument of appointment and to vest in such corporation or Person or Persons as such co -trustee any property, title, right or power deemed necessary or desirable. In the event that the City shall not have joined in such appointment within fifteen (15) days after the receipt by it of a request so to do, the Trustee alone shall have the power to make such appointment. Should any deed, conveyance or instrument in writing from the City be required by the co -trustee so appointed for more fully and certainly vesting in and confirming to such co - trustee such properties, rights, powers, trusts, duties and obligations, any and all such deeds, conveyances and instruments in writing shall, on request, be executed, acknowledged and delivered by the City. Every such co -trustee shall, to the extent permitted by law, be appointed subject to the following provisions and conditions, namely: (1) The Bonds shall be authenticated and delivered, and all powers, duties, obligations and rights conferred upon the Trustee in respect of the custody of all money and securities pledged or deposited hereunder, shall be exercised solely by the Trustee; and (2) The Trustee, at any time by an instrument in writing, may remove any such separate Trustee or co -trustee. Every instrument, other than this Indenture, appointing any such co -trustee shall refer to this Indenture and the conditions of this Article IX expressed, and upon the acceptance in writing by such co -trustee, the co -trustee shall be vested with the estate or property specified in such instrument, jointly with the Trustee (except insofar as local law makes it necessary for any separate trustee to act alone), subject to all the trusts, conditions and provisions of this Indenture. Any such co -trustee may at any time, by an instrument in writing, constitute the Trustee as the co -trustee's agent or attorney -in -fact with full power and authority, to the extent authorized by law, to do all acts and things and exercise all discretion authorized or permitted by the co -trustee, for and on behalf of the co -trustee and in the co -trustee's name. In case any co -trustee shall die, become incapable of acting, resign or be removed, all the estate, properties, rights, powers, trusts, duties and obligations of said co -trustee shall vest in and be exercised by the Trustee until the appointment of a new trustee or a successor to such co -trustee. Section 913. Designation and Succession of Paying Agents. The Trustee and any other banks or trust companies designated as Paying Agent or Paying Agents in any Supplemental Indenture or in an instrument appointing a successor Trustee shall be the Paying Agent or Paying Agents for the Bonds. 4827-9893-8625.6 42 N Any bank or trust company with which or into which any Paying Agent may be merged or consolidated, or to which the assets and business of such Paying Agent may be sold, shall be deemed the successor of such Paying Agent for the purposes of this Indenture. If the position of Paying Agent shall become vacant for any reason, the City shall, within thirty (30) days thereafter, appoint such bank or trust company as shall be specified by the City as such Paying Agent to fill such vacancy; provided, however, that, if the City shall fail to appoint such Paying Agent within said period, the Trustee shall make such appointment. The Paying Agents shall enjoy the same protective provisions in the performance of its duties hereunder as are specified in Section 901 hereof with respect to the Trustee insofar as such provisions may be applicable. ARTICLE X SUPPLEMENTAL Section 1001. Supplemental Indentures Not Requiring Consent of Bondholders. The City and the Trustee may, from time to time and at any time, without the consent of or notice to the Bondholders, enter into Supplemental Indentures as follows: (a) to cure any formal defect, omission, inconsistency or ambiguity in this Indenture; . (b) to grant to or confer or impose upon the Trustee for the benefit of the Bondholders any additional rights, remedies, powers, authority, security, liabilities or duties which may lawfully be granted, conferred or imposed and which are not contrary to or inconsistent with this Indenture as theretofore in effect, provided that no such additional liabilities or duties shall be imposed upon the Trustee without its consent; (c) to add to the covenants and agreements of, and limitations and restrictions upon, the City in this Indenture other covenants, agreements, limitations and restrictions to be observed by the City which are not contrary to or inconsistent with this Indenture as theretofore in effect; (d) to confirm, as further assurance, any pledge under, and the subjection to any claim, lien or pledge created or to be created by, this Indenture, of the Trust Estate or of any other moneys, securities or funds; (e) to comply with the requirements of the Trust Indenture Act of 1939, as from time to time amended; (f) to authorize the issuance and sale of one or more series of Additional Bonds; (g) to make such additions, deletions or modifications as may be necessary to assure compliance with Section 148(f) of the Code relating to required rebate to the United States or otherwise as may be necessary to assure exemption from federal income taxation of interest on the Bonds; or 4827.9893-8625.6 43 M (h) to modify, alter, amend or supplement this Indenture in any other respect which is not materially adverse to the Bondholders and which does not involve a change described in clause (a), (b), (c), (d), (e) or (f) of Section 1002 hereof and which, in the judgment of the Trustee, is not to the prejudice of the Trustee. Section 1002. Supplemental Indentures Requiring Consent of Bondholders. Subject to the terms and provisions contained in this Section 1002, and not otherwise, the Holders of not less than 2/3 in aggregate principal amount of the Bonds then Outstanding shall have the right, from time to time, anything contained in this indenture to the contrary notwithstanding, to consent to and approve the execution by the City and the Trustee of such indenture or indentures supplemental hereto as shall be deemed necessary and desirable by the City for the purpose of modifying, altering, amending, adding to, or rescinding, in any particular, any of the terms or provisions contained in this Indenture or in any Supplemental Indenture; provided, however, that nothing herein contained shall permit or be construed as permitting (a) an extension of the maturity (or mandatory redemption date) of the principal of or the interest on any Bond issued hereunder, or (b) a reduction in the principal amount of or redemption premium or rate of interest on any Bond issued hereunder, or (c) the creation of any lien on the Trust Estate or any part thereof, except as hereinbefore expressly permitted, or (d) a privilege or priority of any Bond or Bonds over any other Bond or Bonds, or (e) a reduction in the aggregate principal amount of the Bonds required for consent to such Supplemental Indenture, or (f) depriving the Holder of any Bond then Outstanding of the lien hereby created on the Trust Estate. Nothing herein contained, however, shall be construed as making necessary the approval of Bondholders of the execution . of any Supplemental Indenture as provided in Section 1001 of this Article X. If, at any time the City shall request the Trustee to enter into any Supplemental Indenture for any of the purposes of this Section, the Trustee shall, at the expense of the City, cause notice of the proposed execution of such Supplemental Indenture to be mailed by first class mail to each registered owner of the Bonds. Such notice shall briefly set forth the nature of the proposed Supplemental Indenture and shall state that copies thereof are on file at the principal office of the Trustee for inspection by Bondholders. The Trustee shall not, however, be subject to any liability to any Bondholder by reason of its failure to mail such notice, and any such failure shall not affect the validity of such Supplemental Indenture when consented to and approved as provided in this Section 1002. If the Holders of not less than 2/3 in aggregate principal amount of the Bonds Outstanding at the time of the execution of any such Supplemental Indenture shall have consented to and approved the execution thereof as herein provided, no Holder of any Bond shall have any right to object to any of the terms and provisions contained therein, or the operation thereof, or in any manner to question the propriety of the execution thereof, or to enjoin or restrain the Trustee or the City from executing the same or from taking any action pursuant to the provisions thereof. Section 1003. Effect of Supplemental Indentures. Upon the execution of any Supplemental Indenture entered into pursuant to Section 1001 or 1002 hereof, this Indenture shall be deemed to be modified and amended in accordance therewith. 4827-9893-8625.6 44 0 ARTICLE XI PROVISIONS RELATING TO 2006A BOND POLICY AND 2006A RESERVE POLICY Notwithstanding any provision to the contrary contained in this Indenture, so long as the 2006A Bond Policy and/or the 2006A Reserve Policy remain in full force and effect (or any amounts are owed to the 2006A Insurer in connection therewith), the provisions of this Article XI shall control where applicable. Section 1101. Consents, Approvals and Directions of 2006A Insurer. (a) The 2006A .Insurer shall be deemed to be the sole Holder of the Series 2006A -Bonds for the purpose of exercising any voting right or privilege or giving any direction or taking any other action that the Holders of the Series 2006A Bonds are entitled to take pursuant tot Article VIII of this Indenture or relating to the duties and obligations of the Trustee set forth in Article IX of this Indenture. (b) Any amendment, supplement, modification to, or waiver of, this Indenture or any other document relating to the issuance of, of security for, the Series 2006A Bonds (each a "Related Document"), that requires the consent of Bondholders or adversely affects the rights and interests of the 2006A Insurer shall be subject to the prior written consent of the 2006A Insurer. (c) The rights granted to the 2006A Insurer under this Indenture or any other Related . Document to request, consent to or direct any action are rights granted to the 2006A Insurer in consideration of its issuance of the 2006A Bond Policy and the 2006A Reserve Policy. Any exercise by the 2006A Insurer of such rights is merely an exercise of the 2006A Insurer's contractual rights and shall not be construed or deemed to be taken for the benefit, or on behalf, of the Bondholders and such action does not evidence any position of the 2006A Insurer, affirmative or negative, as to whether the consent of the Bondholders or any other person is required in addition to the consent of the 2006A Insurer. (d) No contract shall be entered into or any action taken by which the rights of the 2006A Insurer or security for or sources of payment of the 2006A Bonds may be impaired or prejudiced in any material respect except upon obtaining the prior written consent of the 2006A Insurer. (e) Notwithstanding the provisions of Section 801(c) hereof, no grace period for a covenant default shall exceed thirty (30) days or be extended for more than sixty (60) days, without the prior written consent of the 2006A Insurer. No grace period shall be permitted for payment defaults under Section 801(a) or (b) hereof. (f) Notwithstanding the provisions of Section 802 hereof, the Series 2006A Bonds shall not be accelerated without the consent of the 2006A Insurer and in the event the Series 2006A Bonds are accelerated, the 2006A Insurer may elect, in its sole discretion, to pay accelerated principal and interest accrued, on such principal to the date of acceleration (to the extent unpaid by the City) and the Trustee shall be required to accept such amounts. Upon payment of such accelerated principal and interest accrued to the acceleration date as provided 4827-9893-8625.6 45 above, the 2006A Insurer's obligations under the 2006A Bond Policy with respect to such Series 2006A Bonds shall be fully discharged. (g) Unless the 2006A Insurer otherwise directs, upon the occurrence and continuance of an Event of Default or an event which with notice or lapse of time would constitute an Event of Default, amounts on deposit in the Project Fund relating to the Series 2006A Bonds shall not be disbursed, but shall instead be applied to the payment of debt service or redemption price of the Series 2006A Bonds. (h) The prior written consent of the 2006A Insurer shall be a condition precedent to the deposit of any credit instrument provided in lieu of a cash deposit into the Series 2006A Account of the Debt Service Reserve Fund, if any. Notwithstanding anything to the contrary set forth in this Indenture, amounts on deposit in the Series 2006A Account of the Debt Service Reserve Fund shall be applied solely to the payment of debt service due on the Series 2006A Bonds. (i) Upon the occurrence of an extraordinary optional, special or extraordinary mandatory redemption of the Series 2006A Bonds in part in accordance with the provisions of Article III hereof, the selection of Series 2006A Bonds to be redeemed shall be subject to the approval of the 2006A Insurer. The exercise of any provision of this Indenture which permits the purchase of Series 2006A Bonds in lieu of redemption shall require the prior written approval of the 2006A Insurer if any Series 2006A Bond so purchased is not cancelled upon purchase. 6) In determining whether any amendment, consent, waiver or other action to be taken, or any failure to take action, under this Indenture would adversely affect the security for the Series 2006A Bonds or the rights of the Bondholders, the Trustee shall consider the effect of any such amendment, consent, waiver, action or inaction as if there were no 2006A Bond Policy. Section 1102. Disclosures to 2006A Insurer. (a) The 2006A Insurer shall be provided with the following information by the City or the Trustee, as the case may be: (i) Annual audited financial statements within 180 days after the end of the City's fiscal year (together with a certification of the City that it is not aware of any default or Event of Default under the Indenture), and the City's annual budget within 30 days after the approval thereof together with such other information, data or reports as the 2006A Insurer shall reasonably request from time to time; (ii) Notice of any draw upon the Debt Service Reserve Fund within two (2) Business Days after knowledge thereof other than (i) withdrawals of amounts in excess of the Reserve Requirement and (ii) withdrawals in connection with a refunding of Bonds; (iii) Notice of any default known to the Trustee or the City within five (5) Business Days after knowledge thereof; (iv) Prior notice of the advance refunding or redemption of any of the Series 2006A Bonds, including the principal amount, maturities and CUSIP numbers thereof; 4827-9893-8625.6 46 (v) Notice of the resignation or removal of the Trustee and Bond Registrar and the appointment of, and acceptance of duties by, any successor thereto; (vi) Notice of the commencement of any proceeding by or against the City commenced under the United States Bankruptcy Code or any other applicable bankruptcy, insolvency, receivership, rehabilitation or similar law (an "Insolvency Proceeding"); (vii) Notice of the making of any claim in connection with any Insolvency Proceeding seeking the avoidance as a preferential transfer of any payment of principal of, or interest on, the Series 2006A Bonds; (viii) A full. original transcript of all proceedings relating to the execution of any amendment, supplement, or waiver to this Indenture or the Related Documents; and (ix) All reports, notices and correspondence to be delivered to Bondholders under the terms of this Indenture or the Related Documents. (b) The notice address of the 2006A Insurer is: Financial Security Assurance Inc., 31 West 52nd Street, New York. New York 10019, Attention: Managing Director --Surveillance, Re: Policy No. 207605-N, Telephone: (212) 826-0100; Telecopier. (212) 339-3556. In each case in which notice or other communication refers to an Event of Default, then a copy of such notice or other communication shall also be sent to the attention of the General Counsel and shall be • marked to indicate "URGENT MATERIAL ENCLOSED." Section 1103. Defeasance and Discharge of Series 2006A Bonds. (a) Only (1) cash, •(2) non -callable direct obligations of the United States of America ("Treasuries"), (3) evidences of ownership of proportionate interests in future interest and principal payments on Treasuries held by a bank or trust company as custodian, under which the owner of the investment is the real party in interest and has the right to proceed directly and individually against the obligor and the underlying Treasuries are not available to any person claiming through the custodian or to whom the custodian may be obligated, (4) subject to the prior written consent of the 2006A Insurer, pre -refunded municipal obligations rated "AAA" and "Asa" by S&P and Moody's, respectively, or (5) subject to the prior written consent of the 2006A Insurer, securities eligible for "AAA" defeasance under then existing criteria of S&P or any combination thereof, shall be used to effect defeasance of the Series 2006A Bonds unless the 2006A Insurer otherwise approves. (b) To accomplish defeasance of the Series 2006A Bonds, the City shall cause to be delivered (i) a report of an independent firm of nationally recognized certified public accountants or such other accountant as shall be acceptable to the 2006A Insurer ("Accountant") verifying the sufficiency of the escrow established to pay the Series 2006A Bonds in full on the maturity or redemption date ('Verification"), (ii) an Escrow Deposit Agreement (which shall be acceptable in form and substance to the 2006A Insurer), (iii) an opinion of nationally recognized bond counsel to the effect that the Series 2006A Bonds are no longer Outstanding under the Indenture, and (iv) a certificate of discharge of the Trustee with respect to the Series 2006A Bonds; each Verification and defeasance opinion shall be acceptable in form and substance, and addressed, to the City, the Trustee and 2006A Insurer. The 2006A Insurer shall be provided with final drafts of 4827-9893-8625.6 47 the above -referenced documentation not less than five (5) Business Days prior to the funding of the escrow. (c). Series 2006A Bonds shall be deemed Outstanding under the Indenture unless and until they are in fact paid and retired or the above criteria are met. Section 1104. Claims Upon 2006A Bond Policy and Payments by and to 2006A Insurer. (a) If, on the third Business Day prior to the related scheduled interest payment date or principal payment date with respect to the Series 2006A Bonds ("Payment Date") there is not on deposit with the Trustee, after making all transfers and deposits required under this Indenture, moneys sufficient to pay the principal of and interest on the Series 2006A Bonds due on such Payment Date, the Trustee shall give notice to the 2006A Insurer and to its designated agent (if any) (the "Insurer's Fiscal Agent") by telephone or telecopy of the amount of such deficiency by 12:00 noon, New York City time, on such Business Day. If, on the second Business Day prior to the related Payment Date, there continues to be a deficiency in the amount available to pay the principal of and interest on the Series 2006A Bonds due on such Payment Date, the Trustee shall make a claim under the 2006A Bond Policy and give notice to the 2006A Insurer and the Insurer's Fiscal Agent (if any) by telephone of the amount of such deficiency, and the allocation of such deficiency between the amount required to pay interest on the Series 2006A Bonds and the amount required to pay principal of the Series 2006A Bonds, confirmed in writing to the 2006A Insurer and the Insurer's Fiscal Agent by 12:00 noon, New York City time, on such second Business Day by filling in the form of Notice of Claim and Certificate delivered with the . 2006A Bond Policy. (b) The Trustee shall designate any portion of payment of principal on the Series 2006A Bonds paid by the 2006A Insurer, whether by virtue of mandatory sinking fund redemption, maturity or other advancement of maturity, on its books as a reduction in the principal amount of Series 2006A Bonds registered to the then current Bondholder, whether DTC or its nominee or otherwise, and shall issue a replacement Series 2006A Bond to the 2006A Insurer, registered in the name of the 2006A Insurer in a principal amount equal to the amount of principal so paid (without regard to authorized denominations): provided that the Trustee's failure to so designate any payment or issue any replacement Series 2006A Bond shall have no effect on the amount of principal or interest payable by the City on any Series 2006A Bond or the subrogation rights of the 2006A Insurer. (c) The Trustee shall keep a complete and accurate record of all funds deposited by the 2006A Insurer into the Policy Payments Account (defined below) and the allocation of such funds to payment of interest on and principal of any Series 2006A Bond. The 2006A Insurer shall have the right to inspect such records at reasonable times upon reasonable notice to the Trustee. (d) Upon payment of a claim under the 2006A Bond Policy, the Trustee shall establish a separate special purpose trust account for the benefit of the Holders of the Series 2006A Bonds referred to herein as the "Policy Payments Account" and over which the Trustee shall have exclusive control and sole right of withdrawal. The Trustee shall receive any amount paid under the 2006A Bond Policy in trust on behalf of the Holders of the Series 2006A Bonds and shall deposit any such amount in the Policy Payments Account and distribute such amount 4827-9897-8625.6 48 only for purposes of making the payments for which a claim was made. Such amounts shall be disbursed by the Trustee to Holders of the Series 2006A Bonds in the same manner as principal and interest payments are to be made with respect to the Series 2006A Bonds under the sections hereof regarding payment of the Series 2006A Bonds. It shall not be necessary for such payments to be made by checks or wire transfers separate from the check or wire transfer used to pay debt service with other funds available to make such payments. Notwithstanding anything herein to the contrary, the City agrees to pay to the 2006A Insurer (i) a sum equal to the total of all amounts paid by the 2006A Insurer under the 2006A Bond Policy (the "Insurer Advances"); and (ii) interest on such Insurer Advances from the date paid by the 2006A Insurer until payment thereof in full, payable to the 2006A Insurer at the Late Payment Rate per annum (collectively, the "Insurer Reimbursement Amounts'). "Late Payment Rate" means the lesser of (a) the greater of (i) the per annum rate of interest, publicly announced from time t&time by JPMorgan Chase Bank at its principal office in the City of New York, as its prime or base lending rate (any change in such rate of interest to be effective on the date such change is announced by JPMorgan Chase Bank) plus 3%, and (ii) the then applicable highest rate of interest on the Series 2006A Bonds and (b) the maximum rate permissible under applicable usury or similar laws limiting interest rates. The Late Payment Rate shall be computed on the basis of the actual number of days elapsed over a year of 360 days. The City hereby covenants and agrees that the Insurer Reimbursement Amounts are secured by a lien on and pledge of the Trust Estate and payable from such Trust Estate on a parity with debt service due on the Series 2006A Bonds. (e) Funds held in the Policy Payments Account shall not be invested by the Trustee . and may not be applied to satisfy any costs, expenses or liabilities of the Trustee. Any funds remaining in the Policy Payments Account following a Payment Date with respect to the Series 2006A Bonds shall promptly be remitted to the 2006A Insurer. (f) Amounts paid by the 2006A Insurer under the 2006A Bond Policy shall not be deemed paid for purposes of the Indenture and the Series 2006A Bonds relating to such payments shall remain Outstanding and continue to be due and owing until paid by the City in accordance with the Indenture. The Indenture shall not be discharged unless all amounts due or to become due to the 2006A Insurer have been paid in full or duly provided for. (g) The 2006A Insurer shall, to the extent it makes any payment of principal of or interest on the Series 2006A Bonds, become subrogated to the rights of the recipients of such payments in accordance with the terms of the 2006A Bond Policy. Each obligation of the City to the 2006A Insurer under the Related Documents shall survive discharge or termination of such Related Documents. (h) The City shall pay or reimburse the 2006A Insurer any and all charges, fees, costs and expenses that the 2006A Insurer may reasonably pay or incur in connection with (i) the administration, enforcement, defense or preservation of any rights or security in any Related Document; (ii) the pursuit of any remedies under the Indenture or any other Related Document or otherwise afforded by law or equity, (iii) any amendment, waiver or other action with respect to, or related to, the Indenture or any other Related Document whether or not executed or completed, or (iv) any litigation or other dispute in connection with the Indenture or any other Related Document or the transactions contemplated thereby, other than costs resulting from the failure of the 2006A Insurer to honor its obligations under the 2006A Bond Policy or 2006A 4827-9893.8625.6 49 • Reserve Policy. The 2006A Insurer reserves the right to charge a reasonable fee as a condition to executing any amendment, waiver or consent proposed in respect of the Indenture or any other Related Document. (i) The 2006A Insurer shall be entitled to pay principal or interest on the Series 2006A Bonds that shall become Due for Payment but shall be unpaid by reason of Nonpayment by the City (as such terms are defined in the Insurance Policy) and any amounts due on the Series 2006A Bonds as a result of acceleration of the maturity thereof in accordance with the Indenture, whether or not the 2006A Insurer has received a Notice of Nonpayment (as such terms are defined in the Insurance Policy) or a claim upon the 2006A Bond Policy. Section 1105. Provisions Relating to Additional Bonds. (a)' The principal on any Additional Bonds issued under the Indenture (other than RLF Loans) shall be payable on November 1 of the years provided in the Supplemental Indenture authorizing such Additional Bonds. (b) As a condition to the issuance of Additional Bonds secured on a parity basis with the Series 2006A Bonds, the City shall provide to the 2006A Insurer a copy of certified cash flows evidencing that the Existing Indebtedness will be repaid in full no later than November 1, 2014. Such cash flows shall assume that all of the permitted Existing Indebtedness unissued on the date the cash flows are provided has in fact been issued. Alternatively, the City may covenant to the 2006A Insurer not to issue all or any portion of the unissued Existing Indebtedness and omit that portion of the Existing Indebtedness from the cash flows. (c) Notwithstanding satisfaction of the other conditions to the issuance of Additional Bonds set forth in Article II of this Indenture, no such issuance may occur (1) if an Event of Default (or any event which, once all notice or grace periods have passed, would constitute an Event of Default) exists unless such default shall be cured upon such issuance and (2) unless the Debt Service Reserve Fund is fully funded at the Reserve Requirement (including the Reserve Requirement relating to the proposed issue) upon the issuance of such Additional Bonds, in either case unless otherwise permitted by the 2006A Insurer. (d) In addition to the coverage required in Section 212 hereof relating to the issuance of Additional Bonds, the Certificate delivered by the Finance Director shall also show coverage of at least one times on Policy Costs then due and owing. (e) With respect to drawdowns on RLF Loans as permitted by Section 212 hereof, the Certificate of the Finance Director required therein shall be modified to certify that, based upon the most recent twelve (12) months of Sales and Use Tax collections (i) receipts of the 0.25% Sales and Use Tax were not less than 125% of the maximum Annual Debt Service for each of the years ending November 1, 2007 through November 1. 2015, on all the Outstanding Bonds and any RLF Loan theretofore incurred, plus the amount of the additional RLF Loan to be incurred, and (ii) receipts of the 0.25% Sales and Use Tax and the 0.75% Sales and Use Tax were not less than 125% of the maximum Annual Debt Service for each of the years ending November 1.2016 and thereafter, on all then Outstanding Bonds and any RLF Loan theretofore incurred, plus the amount of the additional RLF Loan to be incurred. All other provisions of Section 212 relating 4827-9893-8625.6 50 S to drawdowns under RLF Loans shall continue to be applicable, and the modification set forth above shall not relate to the issuance of Additional Bonds. Section 1106. Miscellaneous Provisions Relating to 2006A Bond Policy. (a) Unless the 2006A insurer shall otherwise consent, the City hereby covenants not to issue any debt secured by a lien on the Existing Tax except for (i) the approximately $76,000,000 outstanding principal amount of Existing Indebtedness currently secured thereby, and (ii) up to $15,000,000 principal amount of additional Existing Indebtedness in the form of an RLF Loan bearing interest at a rate not in excess of 3% (collectively, the "Prior Debt'). (b) The City hereby covenants not to amend (i) the mandatory redemption provisions for the Prior Debt or (ii) any provisions relating to coverage or other requirements associated with the issuance of additional indebtedness that constitutes Prior Debt. (c) The City and the Trustee covenant and agree to take such action (including, as applicable, filing of UCC financing statements and continuations thereof) as is necessary from time to time to preserve the priority of the pledge of the Trust Estate under applicable law. (d) After payment of reasonable expenses of the Trustee, the application of funds realized upon a default shall be applied to the payment of expenses of the City or to rebate only after that payment of past due and current debt service on the Series 2006A Bonds and amounts required to restore the Series 2006A Account of the Debt Service Reserve Fund to the level of . the applicable Reserve Requirement. (e) The 2006A Insurer is hereby declared to be a third party beneficiary to this Indenture. Section 1107. 2006A Reserve Policy Provisions. (a) The City shall repay any draws under the 2006A Reserve Policy and pay all related reasonable expenses incurred by the 2006A Insurer relating thereto. Interest shall accrue and be payable on such draws and expenses from the date of payment by the 2006A Insurer at the Late Payment Rate. "Late Payment Rate" means the lesser of (a) the greater of (i) the per annum rate of interest, publicly announced from time to time by JPMorgan Chase Bank at its principal office in the City of New York, as its prime or base lending rate ("Prime Rate") (any change in such Prime Rate to be effective on the date such change is announced by JPMorgan Chase Bank) plus 3%, and (ii) the then applicable highest rate of interest on the Series 2006A Bonds and (b) the maximum rate permissible under applicable usury or similar laws limiting interest rates. The Late Payment Rate shall be computed on the basis of the actual number of days elapsed over a year of 360 days. In the event JPMorgan Chase Bank ceases to announce its Prime Rate publicly, Prime Rate shall be the publicly announced prime or base lending rate of such national bank as the 2006A Insurer shall specify. (b) Repayment of draws and payment of expenses relating to the 2006A Reserve Policy and accrued interest thereon at the Late Payment Rate (collectively, "Reserve Policy Costs") shall commence in the first month following each draw, and each such monthly payment shall be in an amount at least equal to 1/12 of the aggregate of Reserve Policy Costs related to 9 such draw. 4827-9893-8625.6 51 • (c) Amounts in respect of Reserve Policy Costs paid to the 2006A Insurer shall be credited first to interest due, then to the expenses due and then to principal due. As and to the extent that payments are made to the 2006A Insurer on account of principal due, the coverage under the 2006A Reserve Policy will be increased by a like amount, subject to the terms of the 2006A Reserve Policy. (d) All cash and investments in the Series 2006A Account of the Debt Service Reserve Fund established for the Series 2006A Bonds (the "Reserve Fund") shall be transferred to the Bond Fund for payment of debt service on the Series 2006A Bonds before any drawing may be made on the 2006A Reserve Policy or any other credit facility credited to the Reserve Fund in lieu of cash ("Credit Facility"). Payment of any Reserve Policy Costs shall be made prior to replenishment of any such cash amounts. Draws on all Credit Facilities (including the 2006A Reserve Policy) on which there is available coverage shall be made on a pro -rata basis (calculated by reference to the coverage then available thereunder) after applying all available cash and investments in the Reserve Fund. Payment of Reserve Policy Costs and reimbursement of amounts with respect to other Credit Facilities shall be made on a pro -rata basis prior to replenishment of any cash drawn from the Reserve Fund. Upon payment of the Series 2006A Bonds from amounts paid under the 2006A Reserve Policy, such Series 2006A Bonds shall be deemed to remain Outstanding under the Indenture and the 2006A Insurer shall be subrogated to the rights of the Holders of such Series 2006A Bonds. (e) If the City shall fail to pay any Reserve Policy Costs in accordance with the • requirements of paragraphs (a), (b), (c) and (d) above, the 2006A Insurer shall be entitled to exercise any and all legal and equitable remedies available to it, including those provided under the Indenture other than (1) acceleration of the maturity of the Series 2006A Bonds or (ii) remedies which would adversely affect owners of the Series 2006A Bonds. (I) The Indenture shall not be discharged until all Reserve Policy Costs owing to the 2006A Insurer shall have been paid in full. The City's obligation to pay such amounts shall expressly survive payment in full of the Series 2006A Bonds. (g) The Trustee is required to ascertain the necessity for a claim upon the 2006A Reserve Policy and to provide notice to the 2006A Insurer in accordance with the teens of the 2006A Reserve Policy at least five (5) Business Days prior to each date upon which interest or principal is due on the Series 2006A Bonds. The Trustee shall give notice to the 2006A Insurer of any failure of the City to make timely payment in full of required deposits to the Revenue Fund and Bond Fund within two (2) Business Days of the date due. ARTICLE XII MISCELLANEOUS Section 1201. Consents, etc. of Bondholders. Any request, direction, objection or other instrument required by this Indenture to be signed and executed by the Bondholders may be in any number of concurrent writings of similar tenor and maybe signed or executed by such Bondholders in person or by agent appointed in writing. Proof of the execution of any such request, direction, objection or other instrument or of the writing appointing any such agent and 4827-9893-8625.6 52 of the ownership of Bonds, if made in the following manner, shall be sufficient for any of the purposes of this Indenture, and shall be conclusive in favor of the Trustee with regard to any action taken by it under such request or other instrument, namely: (a) The fact and date of the execution by any Person of any such writing may be proved by the certificate of any officer in any jurisdiction who by law has power to take acknowledgments within such jurisdiction that the Person signing such writing acknowledged before such officer the execution thereof, or by an affidavit of any witness to such execution. (b) The fact of ownership of Bonds and the amount or amounts, numbers, and other -identification of such Bonds, and the date of holding the same `shall be•proved by - the registration books of the City maintained by the Trustee, as Bond registrar. Section 1202. Notices. Except as otherwise provided in this Indenture, all notices, certificates or other communications shall be sufficiently given and shall be deemed given when mailed by registered or certified mail, postage prepaid, to the City or the Trustee. Notices, certificates or other communications shall be sent to the following addresses: City: City of Fayetteville City Administration Building 113 West Mountain • Fayetteville, Arkansas 72701 Attention: Mayor Trustee: Simmons First Trust Company, N.A. 501 Main Street Pine Bluff, Arkansas 71601 Attention: Glenda L. Dean, Corporate Trust Either of the foregoing may, by notice given hereunder, designate any further or different addresses to which subsequent notices, certificates or other communications shall be sent. Section 1203. Limitation of Rights. With the exception of rights herein expressly conferred, nothing expressed or mentioned in or to be implied from this Indenture, or the Bonds issued hereunder, is intended or shall be construed to give to any person or company other than the parties hereto, and the Holders of the Bonds secured by this Indenture any legal or equitable rights, remedy, or claim under or in respect to this Indenture or any covenants, conditions, and provisions hereof being intended to be and being for the sole exclusive benefit of the parties hereto and the Holders of the Bonds hereby secured as herein provided. Section 1204. Severability. If any provisions of this Indenture shall be held or deemed to be or shall, in fact, be inoperative or unenforceable as applied in any particular case in any jurisdiction or jurisdictions or in all jurisdictions or in all cases because it conflicts with any provisions or any constitution or statute or rule of public policy, or for any other reason, such circumstances shall not have the effect of rendering the provision in question inoperative or unenforceable in any other case or circumstance, or of rendering any other provision or provisions herein contained invalid, inoperative or unenforceable to any extent whatever. 4827-9893.8625.6 53 The invalidity of any one or more phrases, sentences, clauses or paragraphs in this M Indenture contained shall not affect the remaining portions of this Indenture or any part thereof. Section 1205. Applicable Provisions of Law. This Indenture shall be considered to have been executed in the State of Arkansas and it is the intention of the parties that the substantive law of the State of Arkansas govern as to all questions of interpretation, validity and effect. Section 1206. Counterparts. This Indenture may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. Section 1207. Successors and Assigns. All the covenants, stipulations, provisions, agreements, rights, remedies and claims of the parties hereto in this Indenture contained shall bind and inure to the benefit of their successors and assigns. Section 1208. Captions. The captions or headings in this Indenture are for convenience only and in no way define, limit or describe the scope or intent of any provisions or sections of this indenture. Section 1209. Photocopies and Reproductions. A photocopy or other reproduction of this Indenture may be filed as a financing statement pursuant to the Uniform Commercial Code, although the signatures of the City and the Trustee in such reproduction are not original manual signatures. Section 1210. Bonds Owned by the City. In determining whether Bondholders of the requisite aggregate principal amount of the Bonds have concurred in any direction, consent or waiver under this Indenture, Bonds which are owned by the City shall be disregarded and deemed not to be Outstanding for the purpose of any such determination, except that, for the purpose of determining whether the Trustee shall be protected in relying on any such direction, consent or waiver, only Bonds which the Trustee knows are so owned shall be so disregarded. Bonds so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Bonds and that the pledgee is not the City. In case of a dispute as to such right, any decision by the Trustee taken upon the advice of counsel shall be full protection to the Trustee. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 4827-9893-8625.6 54 IN WITNESS WHEREOF, the City has caused these presents to be signed in its name and behalf by its Mayor and its corporate seal to be hereunto affixed and attested by its City Clerk, and, to evidence its acceptance of the trust hereby created, the Trustee has caused these presents to be signed in its behalf by its duly authorized officers and its corporate seal to be hereto affixed. CITY OF FAYETTEVILLE, ARKANSAS ATTEEST: S ems.-c>ti� City Clerk (SEAL) s~ii C" c -a -"�i� eci,•' ;�o? SIMMONS FIRST TRUST COMPANY, N.A., E :FAYEITEVILLE; Trust =.��9�.9gKAN5P5 J�•��: Title: Corporate Trust Officer ATTEST: /� By. `,t S% : �!.�C)CK oQ Title: Asst. VP & Corporate Trust Officer (SEAL) o9po�lF v• im•• SEAL 4827-9893-8625.4 0 • 9 ACKNOWLEDGMENT STATE OF ARKANSAS ) ss. COUNTY OF WASHINGTON Before me a Notary Public, duly commissioned, qualified and acting within and for the State and county aforesaid, appeared in person the within named Dan Coody and Sondra Smith, Mayor and City Clerk, respectively, of the City of Fayetteville, Arkansas, to me personally known, who stated that they were duly authorized in their respective capacities to execute the foregoing instrument for and in the name of the City, and further stated and acknowledged that they had signed, executed and delivered the foregoing instrument for the consideration, uses and purposes therein mentioned and set forth. IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal this Jday of November, 2006. Notary Public My Commission expires: O .-tH- aoo-7 (SEAL) OFFICIAL SEAL Kelly S. Thomas NOTARY PUBLIC - ARKANSAS WASHINGTON COUNTY EXPIRES 02/14/2007 4827-9893-8625.6 [ACKNOWLEDGEMENT TO TRUST INDENTURE] 0 ACKNOWLEDGMENT STATE OF ARKANSAS ) ) ss. COUNTY OF JEFFERSON ) Before me a Notary Public, duly commissioned, qualified and acting within and for the State and county aforesaid, appeared in person the within named Glenda L. Dean and Rita Gronwald, the Corporate Trust Officer and the Assistant Vice President & Corporate Trust Officer, respectively, of Simmons First Trust Company, N.A., to me personally known, who stated that they were duly authorized in their respective capacities to execute the foregoing instrument for and in the name of the Trust Company, and further stated and acknowledged that they had signed, executed and delivered the foregoing instrument for the consideration, uses and purposes therein mentioned and set forth. IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal this Li( ]day of November, 2006. 9 Notary Public My Commission expires: (SEAL) • [ACKNOWLEDGEMENT TO TRUST INDENTURE] • 4827-9893-8625.4 to EXHIBIT A TO TRUST INDENTURE Form of Series 2006A Bond Unless this certificate is presented by an authorized representative of The Depository Trust Company, a New York corporation ("DTC'), to the City or its agent for registration of transfer, exchange or payment, and any certificate issued is registered in the name of Cede & Co. or in such other name as is requested by the authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), any transfer, pledge or other use hereoffor value or otherwise by or to any person is wrongful inasmuch as the registered owner hereof Cede & Co., has an interest herein. REGISTERED REGISTERED No. R06A-_ $ UNITED STATES OF AMERICA STATE OF ARKANSAS CITY OF FAYETTEVILLE, ARKANSAS SALES AND USE TAX CAPITAL IMPROVEMENT BOND SERIES 2006A Interest Rate: ___% Maturity Date: November 1, 20 . Date of Bond: November 1, 2006 CUSIP: Registered Owner. CEDE & CO. Principal Amount: KNOW ALL MEN BY THESE PRESENTS: DOLLARS That the City of Fayetteville, Arkansas, a municipality and political subdivision organized and existing by virtue of the laws of the State of Arkansas (the "City"), for value received, promises to pay to the Registered Owner shown above, or registered assigns, on the Maturity Date shown above, but solely from the source and in the manner hereinafter set forth, the Principal Amount shown above, and in like manner to pay interest on said amount from the date hereof until payment of such Principal Amount has been made or duly provided for, at the Interest Rate per annum shown above, such interest to be payable semiannually on May I and November 1 of each year, commencing November 1, 2007, except as the provisions hereinafter set forth with respect to redemption of this bond prior to maturity may become applicable hereto. The principal of and premium, if any, on this bond are payable in lawful money of the United States of America upon the presentation and surrender hereof at the principal corporate trust office of Simmons First Trust Company, N.A., Pine Bluff, Arkansas, or its successor or successors, as trustee (the "Trustee"). So long as Cede & Co. or another nomi{tee of DTC is the registered owner of this bond, payment of interest hereon shall be made by wire transfer of immediately available funds by the Trustee to the Registered Owner as of the fifteenth day of the calendar month preceding the calendar month in which such interest payment date shall fall (the "Record Date"). At any time thereafter, payment of interest hereon shall be made by check or 4827.9893-8625.6 A- I draft of the Trustee to the Registered Owner as of the applicable Record Date, at the owner's address as it appears on the bond registration books of the City kept by the Trustee. This bond, designated "Sales and Use Tax Capital Improvement Bond, Series 2006A", is one of a series of bonds aggregating Fifty Million Dollars ($50,000,000) (the `Bonds"). The Bonds are being issued for the purpose of financing all or a portion of the costs of (i) the acquisition, construction, reconstruction, extension, improving and equipping of certain improvements to the City's wastewater treatment plants, sewerage and related facilities (the "Wastewater Project"), (ii) the acquisition, construction, reconstruction, repair, straightening and widening of certain City streets and related improvements (the "Street Project"), (iii) the acquisition, construction and equipping of certain City trail system improvements (the "Trail Project," and together with the Wastewater Project and the Street Project, the "Projects"). Bond proceeds will be utilized to pay Project costs, to fund a debt service reserve, to purchase a policy of municipal bond insurance, and to pay the costs of issuance of the Bonds. The Bonds are issued under and are secured by and entitled to the protection of a Trust Indenture dated as of November 1, 2006 (the "Indenture"), by and between the City and the Trustee, which Indenture is available for inspection at the principal corporate trust office of the Trustee. Reference is hereby made to the Indenture and to all indentures supplemental thereto for the provisions, among others, with respect to the nature and extent of the security, the rights, duties and obligations of the City, the Trustee and the owners of the Bonds, and the terms upon which the Bonds are issued and secured. The Bonds are issued pursuant to and in full compliance with the Constitution and laws of the State of Arkansas, including particularly Amendment No. 62 to the Constitution of Arkansas, as implemented by the Local Government Bond Act of 1985, codified as Arkansas Code Annotated (1998 Rep!. & Supp. 2005) §§14-164301 et seq. (as from time to time amended, the "Local Government Bond Act"), Ordinance No. 4936 of the City adopted October 3, 2006, which ordinance authorized the execution and delivery of the Indenture, and a special election duly held on September 12, 2006, at which a majority of the qualified electors of the City voting approved the issuance of the Bonds. In accordance with the Local Government Bond Act, the City has pledged all receipts from (i) a one -quarter of one percent (0.25%) local sales and use tax (the "0.25% Sales and Use Tax") and (ii) a three-quarters of one percent (0.75%) local sales and use tax (the "0.75% Sales and Use Tax"), each levied by the City pursuant to Ordinance No. 4891, adopted by the City on June 20, 2006, to provide funds for the repayment of the Bonds. The pledge of the receipts of the 0.25% Sales and Use Tax and the 0.75% Sales and Use Tax (collectively, the "Tax Receipts") presently secure payment of the Bonds only, but such Tax Receipts may additionally be pledged to secure the payment of up to $60,000,000 in aggregate principal amount of (i) Additional Bonds issued under the provisions of the Indenture and (ii) loans obtained under the Arkansas Natural Resources Commission Revolving Loan Program ("RLF Loans"). The Indenture provides that the City may hereafter issue Additional Bonds and incur RLF Loans from time to time under certain terms and conditions contained in the Indenture and, if issued or incurred, such Additional Bonds and RLF Loans will rank on a parity of security with the Bonds and be equally and ratably secured by and entitled to the protection of the Indenture (except that RLF Loans will not be secured by the debt service reserve). 4827-9893-8625.6 A-2 The Bonds are not general obligations of the City, but are special obligations secured by an irrevocable pledge of and lien on the Tax Receipts, as more particularly described in the Indenture. In no event shall the Bonds constitute an indebtedness of the City within the meaning of any constitutional or statutory limitation. STATEMENT OF INSURANCE Financial Security Assurance Inc. ("Financial Security"), New York, New York, has delivered its municipal bond insurance policy with respect to the scheduled payments due of principal of and interest on this Bond to Simmons First Trust Company, N.A., Pine Bluff, Arkansas, or its successor, as paying agent for the Bonds (the "Paying Agent'). Said Policy is on file and available for inspection at the principal office of the Paying Agent and a copy thereof may be obtained from Financial Security or the Paying Agent. The holder of this Bond shall have no right to enforce the provisions of the Indenture or to institute action to enforce the covenants therein, or to take any action with respect to any event of default under the Indenture, or to institute, appear in or defend any suit or other proceeding with respect thereto, except as provided in the Indenture. In certain events, on the conditions, in the manner and with the effect set forth in the Indenture, the principal of all the Bonds and Additional Bonds, if any, issued under the Indenture and then outstanding may be declared and may become due and payable before the stated maturity thereof, together with accrued interest thereon. Modifications or alterations of the Indenture, or of any indenture supplemental thereto, may be made only to the extent and in the circumstances permitted by the Indenture. The Bonds shall be redeemed prior to maturity, in whole or in part, on any interest payment date, in inverse order of maturity and by lot in such manner as the Trustee shall determine within a maturity, at a redemption price equal to 100% of the principal amount being redeemed, plus accrued interest to the date of redemption, from Project Fund moneys in excess of the amount needed to complete the Projects. The Bonds shall be redeemed prior to maturity, in whole or in part, on any interest payment date, in inverse order of maturity and by lot in such manner as the Trustee shall determine within a maturity, at a redemption price equal to 100% of the principal amount being redeemed, plus accrued interest to the date of redemption, from Surplus Tax Receipts. "Surplus Tax Receipts" are Tax Receipts in excess of the amount necessary to (i) insure the prompt payment of scheduled debt service on the Bonds, Additional Bonds and any RLF Loan, (ii) maintain the debt service reserve fund at the required level, (iii) pay any arbitrage rebate due under Section 148(f) of the Internal Revenue Code of 1986, as amended, with respect to the Bond or any Additional Bonds, and (iv) pay the fees and expenses of the Trustee and any paying agent. Upon the issuance of any series of Additional Bonds, 50% of the Surplus Tax Receipts shall be allocated to the redemption of the Bonds and the remaining 50% of such Surplus Tax Receipts shall be allocated to the various series of Additional Bonds in such proportion as shall be set forth in a Supplemental Indenture. The Bonds are subject to redemption at the option of the City, communicated in a written notice to the Trustee not less than sixty (60) days prior to the date fixed for redemption, in whole or in part on any date on or after November 1, 2016, in inverse order of maturity and by lot in 4827-9893-8625.6 A-3 such manner as the Trustee shall determine within a maturity, at a redemption price equal to 100% of the principal amount being redeemed plus accrued interest to the date of redemption. Notwithstanding the foregoing, so long as DTC or its nominee is the sole registered owner of the Bonds, the particular Bonds or portions thereof to be redeemed in part within a maturity shall be selected by lot by DTC in such manner as DTC shall determine. In selecting Bonds for redemption prior to maturity, in the case any outstanding Bond is in a denomination greater than $5,000, each $5,000 of face value of such Bond shall be treated as a separate Bond of the denomination of $5,000. In the event any of the Bonds or portions thereof (which shall be $5,000 or any integral multiple thereof) are called for redemption, notice thereof shall be given by the Trustee by first class mail to the registered owner of each such Bond addressed to such registered owner at his registered address and placed in the mails not less than thirty (30) nor more than sixty (60) days prior to the date fixed for redemption; provided, however, that failure to give such notice by mailing, or any defect therein, shall not affect the validity of the proceedings for the redemption of any Bond with respect to which no such failure or defect has occurred. Each notice shall identify the Bonds or portions thereof being called, and the date on which they shall be presented for payment. After the date specified in such call notice, the Bond or Bonds so called for redemption will cease to bear interest provided funds sufficient for their redemption have been deposited with the Trustee, and, except for the purpose of payment, shall no longer be protected by the Indenture and shall not be deemed to be outstanding under the provisions of the Indenture. This Bond may be transferred on the books of registration kept by the Trustee by the registered owner or by his duly authorized attorney upon surrender hereof, together with a written instrument of transfer duly executed by the registered owner or his duly authorized attorney. The Bonds are issuable as registered bonds without coupons in denominations of $5,000 and any integral multiple thereof. Subject to the limitations and upon payment of the charges provided in the Indenture, Bonds may be exchanged for a like aggregate principal amount of Bonds of other authorized denominations. No recourse shall be had for the payment of the principal of or premium, if any, or interest on any of the Bonds or for any claim based thereon or upon any obligation, covenant or agreement contained in the Bonds or the Indenture against any past, present or future alderman, officer or employee of the City, or any successor, as such, either directly or through the City or any successor of the City, under any rule of law or equity, statute or constitution or by the enforcement of any assessment or penalty or otherwise, and all such liability of any such alderman, officer or employee as such is hereby expressly waived and released as a condition of and consideration for the issuance of any of the Bonds. This Bond is issued with the intent that the laws of the State of Arkansas will govern its construction. SIT IS HEREBY CERTIFIED, RECITED AND DECLARED that all acts, conditions and things required to exist, happen and be performed precedent to and in the issuance of the Bonds 4827-9893-8625.6 A-4 do exist, have happened and have been performed in due time, form and manner as required by law; that the indebtedness represented by the Bonds, together with all obligations of the City, does not exceed any constitutional or statutory limitation; and that the revenues pledged to the payment of the principal of and premium, if any, and interest on the Bonds as the same become due and payable will be sufficient in amount for that purpose. This Bond shall not be valid or become obligatory for any purpose or be entitled to any security or benefit under the Indenture until the Certificate of Authentication hereon shall have been signed by the Trustee. IN WITNESS WHEREOF, the City of Fayetteville, Arkansas has caused this Bond to be executed by its Mayor and City Clerk, thereunto, duly authorized (by their manual or facsimile signatures), and its corporate seal to be affixed or imprinted hereon, all as of the date hereof shown above. CITY OF FAYETTEVILLE, ARKANSAS Mayor ATTEST: .B City Clerk (SEAL) 4827-9893-8625.6 A-5 ft(Form of Trustee's Certificate) TRUSTEE'S CERTIFICATE OF AUTHENTICATION This bond is one of the Bonds of the issue described in and issued under the provisions of the within mentioned Indenture. Attached hereto is the complete text of the opinion of Kutak Rock LLP, a signed original of which is on file with the undersigned, delivered and dated the date of the original delivery of and payment for the Bonds. SIMMONS FIRST TRUST COMPANY, N.A., -- as Trustee By: Authorized Signature 4827-9893-8625.6 A-6 0 (Form of Assignment) 1Chh51ai�Y II FOR VALUE RECEIVED, , hereby sells, assigns, and transfers unto , the within Bond and all rights thereunder, and hereby irrevocably constitutes and appoints as attorney to transfer the within Bond on the books kept for registration thereof with full power of substitution in the premises. DATE: , 20_ Transferor GUARANTEED BY: NOTICE: Signature(s) must be guaranteed by an institution satisfactory to the Trustee or other transfer agent. 4827.9893-8625.6 A-7 EXHIBIT B TO TRUST INDENTURE COVERAGE CERTIFICATE City of Fayetteville, Arkansas Series 2006A Sales and Use Tax Capital Improvement Bonds TO: Simmons First Trust Company, as Trustee This certificate is provided pursuant to the provisions of Section 212 of the Trust Indenture dated as of November 1, 2006 (the "Indenture"), by and between the City of Fayetteville, Arkansas (the "Issuer'') and you, as trustee, in connection with (i) the proposed issuance of Additional Bonds or (ii) a drawdown under an RLF Loan. In connection with such issuance or drawdown, the undersigned certifies as follows: (a) Receipts of the 0.25% Sales and Use Tax for preceding twelve (12) months: $ (b) Maximum AnnualDebt Service For each of the years ending . 1 11/1/07 through 11/1/14 on all Outstanding Bonds and RLF Loans, plus (i) the proposed Additional Bonds or (ii) following the drawdown on the RLF Loan: (c) (a) divided by (b) _ % (which is greater than 125%) and (d) Receipt of the Sales and Use Taxes for preceding twelve (12) months*: $ (e) Maximum Annual Debt Service for each of the years ending 11/1/15 and thereafter on all Outstanding Bonds and RLF Loans, plus (i) the proposed Additional Bonds or (ii) following the drawdown on the RLF Loan: (f) (d) divided by (e) = % (which is greater than 125%) ® "Receipt of the Existing Tax (as defined in the Indenture) may be included as receipts of the 0.75% Sales and Use Tax for all or any portion of the most recent twelve (12) month period during which the 0.75% Sales and Use Tax • (as defined in the Indenture) was not being collected. 4827-9893-8625.6 B -I The undersigned hereby certifies that he is authorized to deliver this Certificate on behalf of the Issuer. No Event of Default exists under the Indenture and, to the knowledge of the undersigned, no event has occurred and continues which with notice or lapse of time or both would constitute an Event of Default under the Indenture. All capitalized terms not otherwise defined herein shall have the meanings set forth in the Indenture. CITY OF FAYETTEVILLE, ARKANSAS By: Finance Director • 4829.9893-8625.6 2 EXHIBIT C TO TRUST INDENTURE REQUISITION City of Fayetteville, Arkansas Series 2006A Sales and Use Tax Capital Improvement Bonds Date: Requisition TO: Simmons First Trust Company, as Trustee Pursuant to the provisions of Section 502 of the Trust Indenture dated as of November 1, 2006 (the "Indenture"), by and between the City of Fayetteville, Arkansas (the "Issuer") and you, as trustee, you are authorized to make the following described payment directly to the Payee named below from the Account of the Project Fund: Name and Address of Payee: . Amount of Payment: $ General Classification of the Expenditures: The undersigned hereby certifies that he is authorized to deliver this Requisition on behalf of the Issuer. The amount requested hereunder has not been the basis for any previous Requisition by the Issuer and is justly due and owing to the person(s) named herein as a proper payment or reimbursement of a Project Cost with respect to the Project. No Event of Default exists under the Indenture and, to the knowledge of the undersigned, no event has occurred and continues which with notice or lapse of time or both would constitute an Event of Default under the Indenture. CITY OF FAYETTEVILLE, ARKANSAS By. Authorized Representative 4827-9893-8625.6 C -I a EXECUTION COPY CITY OF FAYETTEVILLE, ARKANSAS to SIMMONS FIRST TRUST COMPANY, N.A. as Trustee FIRST SUPPLEMENTAL TRUST INDENTURE Dated as of October 1, 2007 This First Supplemental Trust Indenture supplements and amends a Trust Indenture dated as of November 1, 2006, by and between the City of Fayetteville, Arkansas and Simmons First Trust Company, N.A., as Trustee. The Trust Indenture, as supplemented and amended hereby, secures the City's $50,000,000 original principal amount of Sales and Use Tax Capital Improvement Bonds, Series 2006A, and the City's $14,340,000 original principal amount of Sales and Use Tax Capital Improvement Bonds, Series 2007. 4848-3917-7473.4 Prepared by: Kutak Rock LLP 124 West Capitol Avenue, Suite 2000 Little Rock, Arkansas 72201 ftFIRST SUPPLEMENTAL TRUST INDENTURE THIS FIRST SUPPLEMENTAL TRUST INDENTURE dated as of October 1, 2007, by and between the CITY OF FAYETTEVILLE, ARKANSAS (the "City"), a city of the first class organized under and existing by virtue of the laws of the State of Arkansas, and SIMMONS FIRST TRUST COMPANY, N.A., as trustee (the "Trustee"), a national banking association organized under and existing by virtue of the laws of the United States of America and having its principal corporate trust office located in Pine Bluff, Arkansas; WITNESSETH: WHEREAS, the City Council of the City has previously determined that there is a great need for a source of revenue to finance all or a portion of the costs of (i) the acquisition, construction, reconstruction, extension, improving and equipping of certain improvements to the City's wastewater treatment plants, sewerage and related facilities (the "Wastewater Project"), (ii) the acquisition, construction, reconstruction, repair, straightening and widening of certain City streets and related improvements (the "Street Project"), and (iii) the acquisition, construction and equipping of certain City trail system improvements (the "Trail Project"); and WHEREAS, the people of the State of Arkansas (the "State") by the adoption of Amendment No. 62 to the Constitution of the State, approved November 6, 1984 ("Amendment 62"), have authorized cities and counties in the State to issue bonds, upon voter approval, to finance certain capital improvements of a public nature, and to secure said bonds by a pledge of the proceeds of certain taxes; and WHEREAS, the provisions of Amendment 62 have been implemented by the Local Government Bond Act of 1985, codified as Arkansas Code Annotated (1998 Repl. & Supp. 2005) Sections 14-164-301 et seq. (as from time to time amended, the "Act"); and WHEREAS, pursuant to the provisions of Ordinance No. 4891, duly adopted by the City Council of the City on June 20, 2006 (the "Election Ordinance"), there was submitted to the qualified electors of the City four questions regarding the issuance of an aggregate of not to exceed $110,000,000 in principal amount of capital improvement bonds pursuant to Amendment 62 and the Act to finance the capital improvements described in the Election Ordinance, including the Wastewater Project, the Street Project and the Trail Project; and WHEREAS, pursuant to the Election Ordinance, said capital improvement bonds are to be secured by a pledge of and lien upon (i) all of the receipts of a special city-wide sales and use tax at the rate of one -quarter of one percent (0.25%) (the "0.25% Sales and Use Tax"), and (ii) all of the receipts of a special city-wide sales and use tax at the rate of three-quarters of one percent (0.75%) (the "0.75% Sales and Use Tax"), each levied pursuant to the Act; and WHEREAS, at a special election held September 12, 2006, a majority of the qualified electors of the City voting on each of the aforementioned questions approved the issuance of capital improvement bonds in the principal amounts and for the specific purposes set forth on the ballot (and the corresponding levy of the 0.25% Sales and Use Tax and the 0.75% Sales and Use 4848.3917.7473.4 Tax, and the pledge of the receipts thereof to the payment of said capital improvement bonds); and WHEREAS, pursuant to the provisions of Ordinance No. 4936 of the City, adopted and approved by the City Council on October 3, 2006, and in accordance with Amendment 62 and the Act, the City has previously issued its $50,000,000 Sales and Use Tax Capital Improvement Bonds, Series 2006A (the "Series 2006A Bonds"), for the purpose of financing a portion of the costs of the Wastewater Project, the Street Project and the Trail Project; and WHEREAS, the City and the Trustee have previously entered into a Trust Indenture dated as of November 1, 2006 (the "Original Indenture"), pursuant to which the Series 2006A Bonds were issued and secured; and WHEREAS, in order to secure additional funds to pay a portion of the costs of another component of the Wastewater Project, to fund a debt service reserve, and to pay legal and other expenses incidental to the issuance of sales and use tax capital improvement bonds for such purposes, it has been determined appropriate and necessary that the City authorize the issuance of its $14,340,000 Sales and Use Tax Capital Improvement Bonds, Series 2007 (the "Series 2007 Bonds"), pursuant to the provisions of Amendment 62 and the Act, such Series 2007 Bonds to be payable from and secured by a pledge of the receipts of the Sales and Use Taxes (as defined in the Original Indenture) on a parity with the pledge of the receipts of the Sales and Use Taxes securing the Series 2006A Bonds; and • WHEREAS, the conditions for the issuance of Additional Bonds, as set forth in the Original Indenture, have been satisfied; and WHEREAS, the regularly scheduled payment of principal of and interest on the Series 2007 Bonds when due will be guaranteed under an insurance policy (the "2007 Bond Policy") to be issued concurrently with the delivery of the Series 2007 Bonds by Financial Security Assurance Inc. (the "2007 Insurer"); and WHEREAS, the Series 2007 Bonds are to be dated, bear interest, mature and be subject to redemption as hereinafter in this First Supplemental Trust Indenture set forth in detail; and WHEREAS, the execution and delivery of this First Supplemental Trust Indenture and the issuance of the Series 2007 Bonds have been in all respects duly and validly confirmed, authorized and approved by Ordinance No. 5054 adopted and approved by the City Council of the City on August 23, 2007; and WHEREAS, all things necessary to make the Series 2007 Bonds, when authenticated by the Trustee and issued as in this First Supplemental Trust Indenture provided, the valid, binding and legal obligations of the City according to the import thereof, and to constitute the Indenture (as defined below) a valid pledge of the receipts of the Sales and Use Taxes to the payment of the principal of, premium, if any, and interest on the Series 2006A Bonds, the Series 2007 Bonds and all Additional Bonds (as defined below), if any, to be issued on a parity therewith (the Series 2006A Bonds, the Series 2007 Bonds and such Additional Bonds are hereinafter referred to as the "Bonds"), have been done and performed, and the creation, execution and delivery of this 4848-3917-7473.4 First Supplemental Trust Indenture and the creation, execution, issuance and delivery of the Series 2007 Bonds, subject to the terms hereof, have in all respects been duly authorized; and WHEREAS, in order to make proper provision for the security of the Series 2007 Bonds, it is necessary that the Original Indenture be amended and supplemented as effected hereby, NOW, THEREFORE, KNOW ALL MEN BY THESE PRESENTS, THIS FIRST SUPPLEMENTAL TRUST INDENTURE WITNESSETH: Section 1.01. It is understood and agreed that the provisions of the Original Indenture shall extend to and apply to the security and benefit of the Series 2007 Bonds and that the tens "Bonds" as used in the Original Indenture is hereby recognized to include and shall be deemed to refer to (where applicable) the Series 2007 Bonds. Section 1.02. Section 101 of the Original Indenture is hereby amended by adding thereto the following definitions (and by striking any definitions which are supplanted by the definitions set forth below): "Additional Bonds" mean Bonds in addition to the Series 2006A Bonds and the Series 2007 Bonds which are issued under the provisions of Section 212 of this Indenture. "Authorizing Ordinance" means, collectively, (i) Ordinance No. 4936, adopted by the City on October 3, 2006, which authorized the issuance of the Series 2006A Bonds pursuant to • this Indenture, and (ii) Ordinance No. 5054, adopted by the City on August 23, 2007, which authorized the issuance of the Series 2007 Bonds pursuant to this Indenture. "2007 Bond Policy" means the insurance policy issued by the 2007 Insurer guaranteeing the scheduled payment of principal of and interest on the Series 2007 Bonds when due. "Bonds" mean the Series 2006A Bonds, the Series 2007 Bonds and all Additional Bonds issued by the City pursuant to this Indenture. Except to the extent provided in Section 209 hereof and except for refunding bonds issued under the provisions of Section 212 hereof, the aggregate principal amount of Bonds issued hereunder shall not exceed $110,000,000. "Indenture" means this Trust Indenture dated as of November 1, 2006, as amended and supplemented by a First Supplemental Trust Indenture dated as of October 1, 2007, each by and between the City and the Trustee, pursuant to which the Bonds are issued, and any further amendments and supplements thereto. "2007 Insurer" means Financial Security Assurance Inc., a New York stock insurance company, or any successor thereto or assignee thereof. "2007 Reserve Policy" means the municipal bond debt service reserve insurance policy, issued by the 2007 Insurer and deposited into the Series 2007 Account of the Debt Service Reserve Fund with respect to the Series 2007 Bonds. "Reserve Requirement" means, with respect to each series of Bonds, an amount equal to 5% of the original principal amount of such series of Bonds. For all purposes of this Indenture, 4848-3917-7473.4 the Reserve Requirement may be satisfied by cash or by Investment Securities, including the 2006A Reserve Policy and the 2007 Reserve Policy. "Series 2007 Bonds" means City of Fayetteville, Arkansas Sales and Use Tax Capital Improvement Bonds, Series 2007, issued under and secured by this Indenture in the aggregate principal amount of $14,340,000. Section 2.01. Section 201(c) of the Original Indenture is hereby amended and supplemented to read as follows: "(c) The Bonds shall be equally and ratably payable and secured hereunder without priority by reason of date of adoption of this Indenture or any Supplemental Indenture authorizing their issuance or by reason of their series, number, date, date of issue, execution, authentication or sale, or otherwise; provided, however, (i) while the Series 2006A Bonds are Outstanding, 50% of Surplus Tax Receipts shall be allocated to the redemption of the Series 2006A Bonds and the remaining 50% of Surplus Tax Receipts shall be allocated ratably (based on relative outstanding principal amounts) to the redemption of the Series 2007 Bonds and any other series of Additional Bonds (including RLF Loans) hereafter issued, and (ii) following payment in whole of the Series 2006A Bonds at maturity or upon redemption prior to maturity, all Surplus Tax Receipts shall be allocated ratably (based on relative outstanding principal amounts) to the redemption of the Series 2007 Bonds and any other Series of Additional Bonds." • Section 2.02. Section 202 of the Original Indenture is hereby amended and supplemented to read as follows: "Section 202. Authorized Amount. There is hereby authorized the issuance of bonds of the City to be designated "Sales and Use Tax Capital Improvement Bonds, Series 2006A" in the principal amount of Fifty Million Dollars ($50,000,000) (the "Series 2006A Bonds"). There is hereby authorized the issuance of bonds of the City to be designated "Sales and Use Tax Capital Improvement Bonds, Series 2007" in the principal amount of Fourteen Million Three Hundred Forty Thousand Dollars ($14,340,000) (the "Series 2007 Bonds"). No Bonds may be issued under the provisions of this Indenture except in accordance with this Article 11. The total principal amount of Bonds that may be issued hereunder and any RLF Loans that may be incurred by the City is hereby expressly limited to $110,000,000, except as provided in Section 209 and except for refunding bonds issued under the provisions of Section 212 hereof." Section 2.03. Article 11 of the Original Indenture is hereby amended by adding at the end thereof the following sections: "Section 217. Details of Series 2007 Bonds. The Series 2007 Bonds (i) shall be designated "City of Fayetteville, Arkansas Sales and Use Tax Capital Improvement Bonds, Series 2007," (ii) shall be in the aggregate principal amount of $14,340,000, (iii) shall be dated as of October 1, 2007, (iv) shall bear interest from such date at the rates hereinafter provided until paid, payable semiannually on May I and November 1 of each year, commencing May 1, 2008, (v) shall be issued in denominations of $5,000 4848-3917-7473.4 each, or any integral multiple thereof, (vi) shall be numbered from R07-1 upwards in order of issuance according to the records of the Trustee, and (vii) shall mature, unless sooner redeemed in the manner in this Indenture set forth, on November 1 in each of the years and in the amounts set forth in the following table, which table also sets forth the interest rates for the Series 2007 Bonds: Year (November 1) Principal Amount Interest Rate 2017 $2,940,000 4.000% 2018 1,060,000 4.000% 2019 1,100,000 4.100% 2020 1,145,000 4.125% 2021 1,195,000 5.000% 2022 1,255,000 5.000% 2023 1,315,000 5.000% 2024 1,385,000 4.250% 2025 1,440,000 4.250% 2026 1,505,000 4.125% Section 218. Form of Series 2007 Bonds. The Series 2007 Bonds shall be initially issued as fully registered bonds, without coupons, in the form of ten typewritten bond certificates (one for each maturity) to be delivered to the Securities Depository. • Each such certificate shall be initially registered in the name of the nominee of the Securities Depository, and no Beneficial Owner will receive a certificate representing his interest in the Series 2007 Bonds, except upon the occurrence of the events described in Section 216 of this Indenture. Beneficial Owners shall be deemed to have waived any right to receive a bond certificate except under the circumstances described in Section 216. The Series 2007 Bonds and the Trustee's certificate of authentication to be endorsed thereon shall be in substantially the form set forth in Exhibit A to the First Supplemental Trust Indenture, with appropriate variations, insertions and omissions as permitted or required by this Indenture. Section 219. Delivery of Series 2007 Bonds. Simultaneously with the delivery of the Series 2007 Bonds, the Trustee shall apply the proceeds thereof as follows: (a) The amount, if any, received as accrued interest on the Series 2007 Bonds, shall be deposited in the Interest Account of the Bond Fund; (b) $10,755.00 shall be transferred to the 2007 Insurer in payment of the premium on the 2007 Reserve Policy, which 2007 Reserve Policy shall be deposited in the Series 2007 Account of the Debt Service Reserve Fund; (c) $74,197.30 shall be transferred to the 2007 Insurer in payment of Igthe premium on the 2007 Bond Policy; 4848.3917.7473.4 (d) $14,107,048.89 shall be deposited in the Series 2007 Wastewater Subaccount of the Project Fund; and (e) The balance of said proceeds in the amount of $60,629.01 shall be deposited in the Costs of Issuance Fund for payment of Costs of Issuance of the Series 2007 Bonds as directed by a Certificate of the City." Section 3.01. Article III of the Original Indenture is hereby amended by adding at the end thereof the following section: "Section 307. Redemption of Series 2007 Bonds. (a) The Series 2007 Bonds shall be redeemed prior to maturity, in whole or in part, on any interest payment date, in inverse order of maturity and by lot in such manner as the Trustee shall determine within a maturity, at a redemption price equal to 100% of the principal amount being redeemed, plus accrued interest to the date of redemption, from moneys in the Series 2007 Wastewater Subaccount of the Project Fund in excess of the amount needed to complete the portion of the Wastewater Project intended to be funded with the Series 2007 Bonds, which moneys shall be transferred to the Redemption Fund pursuant to Section 502 hereof. (b) The Series 2007 Bonds shall be redeemed prior to maturity, in • whole or in part, on any interest payment date, in inverse order of maturity and by lot in such manner as the Trustee shall determine within a maturity, at a redemption price equal to 100% of the principal amount being redeemed,, plus accrued interest to the date of redemption, from Surplus Tax Receipts deposited in the Redemption Fund pursuant to Section 503 hereof. So long as the Series 2006A Bonds are outstanding, 50% of the Surplus Tax Receipts shall be allocated to the redemption of the Series 2006A Bonds and the remaining 50% of such Surplus Tax Receipts shall be allocated ratably (based on relative outstanding principal amounts) to the redemption of the Series 2007 Bonds and any series of Additional Bonds. Following payment in whole of the Series 2006A Bonds at maturity or upon redemption prior to maturity, all Surplus Tax Receipts shall be allocated ratably (based on relative outstanding principal amounts) to the redemption of the Series 2007 Bonds and any other Series of Additional Bonds. (c) The Series 2007 Bonds are subject to redemption at the option of the City, communicated in a written notice to the Trustee not less than sixty (60) days prior to the date fixed for redemption, in whole or in part on any date on or after November 1, 2015, in inverse order of maturity and by lot in such manner as the Trustee shall determine within a maturity, at a redemption price equal to 100% of the principal amount being redeemed plus accrued interest to the date of redemption." (d) The Series 2007 Bonds maturing November 1, 2017 are subject to mandatory redemption, to be selected by lot in such manner as the Trustee shall determine, on November 1 in the years and the amounts set forth below, at a 4848.3917-7473.4 redemption price equal to 100% of the principal amount being redeemed, plus accrued interest to the date of redemption. Date Principal Amount November 1, 2015 $ 940,000 November 1, 2016 980,000 November 1, 2017 (maturity) 1,020,000 Section 4.01. Section 501(a) of the Original Indenture is hereby amended and restated to read as follows: "(a) There are hereby created and established the following Funds and Accounts: (i) Project Fund, and a Street Account, Trail Account and Wastewater Account (with a Series 2006A Subaccount and a Series 2007 Subaccount) therein; (ii) Revenue Fund; (iii) Bond Fund, and an Interest Account and a Principal Account therein; (iv) Redemption Fund; • (v) Debt Service Reserve Fund, and a Series 2006A Account and a Series 2007 Account therein; (vi) Cost of Issuance Fund; and (vii) Rebate Fund." Section 4.02. Section 503(b) of the Original Indenture is hereby amended and restated to read as follows: "(b) Upon receipt, but in no event later than the last day of each month in which receipts of the Sales and Use Taxes are deposited in the Revenue Fund, commencing no later than March 30, 2007, there shall be transferred from the Revenue Fund, in the following order, the amounts set forth below: FIRST: For deposit to the Interest Account of the Bond Fund, an amount equal to one -sixth (1/6) of the interest on the Outstanding Bonds due on the next interest payment date; provided, however, (i) with respect to the deposits to be made to the Interest Account relating to the Series 2006A Bonds during the months of March, 2007 through October, 2007, such deposits shall be in an amount equal to one -seventh (1/7) of the interest due on the Series 2006A Bonds on November 1, 2007, and (ii) with respect to the deposits to be made to the Interest Account relating to the Series 2007 Bonds during the months of October, 4848-3917-7473.4 7 • 2007 through April, 2008, such deposits shall be in an amount equal to one - seventh (1/7) of the interest due on the Series 2007 Bonds on May 1, 2008; SECOND: For deposit to the Principal Account of the Bond Fund, an amount equal to one -twelfth (1/12) of the next scheduled principal maturity of Outstanding Bonds (including mandatory sinking fund redemptions); provided, however, with respect to the Series 2006A Bonds and the Series 2007 Bonds, such deposits shall not commence until November 2014; THIRD: For deposit to the Debt Service Reserve Fund, an amount sufficient to cure any deficiency in the Debt Service Reserve Fund (including any reimbursement to the 2006A Insurer under the 2006A Reserve Policy and any reimbursement to the 2007 Insurer under the 2007 Reserve Policy); FOURTH: For deposit to the Rebate Fund, an amount sufficient to satisfy the City's obligations under Section 507 hereof; FIFTH: For payment to the Trustee and Paying Agent, the amount, if any, necessary to pay or reimburse the Trustee and Paying Agent for fees and expenses related to the Bonds; and SIXTH: All remaining moneys ("Surplus Tax Receipts") will be transferred to the Redemption Fund and shall be applied to call Bonds for redemption prior to maturity as provided in Section 301(b) and Section 506 of the Indenture." Section 4.03. Section 505 of the Original Indenture is hereby amended and supplemented to read as follows: "Section 505. Cost of Issuance Fund. There shall be deposited to the credit of the Cost of Issuance Fund all moneys received for said Fund pursuant to Section 208 and Section 219 hereof. The Trustee shall pay those Costs of Issuance as directed by the City pursuant to a Certificate delivered on a Closing Date. After all Costs of Issuance have been paid (and in any event not later than January 1, 2007 with respect to the Series 2006A Bonds and December 1, 2007 with respect to the Series 2007 Bonds), any remaining moneys in the Cost of Issuance Fund shall be transferred to the Interest Account of the Bond Fund." Section 4.04. Section 506 of the Original Indenture is hereby amended and supplemented to read as follows: "Section 506. Redemption Fund. (a) There shall be deposited to the credit of the Redemption Fund all moneys required to be transferred thereto pursuant to Section 502 and Section 503 of this Indenture. (b) Moneys credited to the Redemption Fund shall be expended only as set forth in this Section 506. 4848-3917-7473.4 (c) Moneys in the Redemption Fund shall be transferred to the Principal Account of the Bond Fund at such times as may be necessary to effectuate, on the first available date, redemptions of Bonds required by Section 301(a) and (b) and Section 307(a) and (b) of this Indenture. So long as the Series 2006A Bonds are outstanding, 50% of the Surplus Tax Receipts shall be allocated to the redemption of the Series 2006A Bonds and the remaining 50% of such Surplus Tax Receipts shall be allocated ratably (based on relative outstanding principal amounts) to the redemption of the Series 2007 Bonds and any series of Additional Bonds. Following payment in whole of the Series 2006A Bonds at maturity or upon redemption prior to maturity, all Surplus Tax Receipts shall be allocated ratably (based on relative outstanding principal amounts) to the redemption of the Series 2007 Bonds and any other Series of Additional Bonds. (d) The amounts accumulated in the Redemption Fund, if so directed by the City by means of a Certificate delivered to the Trustee, shall be applied by the Trustee to the purchase of Bonds of the maturities which would otherwise be redeemed pursuant to Section 301(a) and (b), Section 307(a) and (b) and this Section 506 but for the provisions of this subsection (d), at prices directed by the City not exceeding the applicable redemption prices of the Bonds which would be redeemed but for the operation of this sentence. Interest accrued on the Bonds so purchased shall be paid from moneys credited to the Interest Account of the Bond Fund." • Section 5.01. Section 902(a) of the Original Indenture is hereby amended and supplemented to read as follows: "(a) Subject to subsection (b) of this Section 902, the City shall, from moneys lawfully available therefor, pay to the Trustee and any Paying Agent reasonable compensation for all services performed hereunder and also all reasonable expenses, charges and other disbursements and those of their attorneys, agents and employees incurred in and about the administration and execution of the trusts hereby created and the performance of the powers and duties hereunder and, to the extent permitted by law and from moneys lawfully available therefor, shall indemnify and save the Trustee harmless against any liabilities which it may incur in the exercise and performance of its powers and duties hereunder. With respect to the Series 2006A Bonds, the Trustee's initial authentication fee shall be $3,500 and the annual administration fee of the Trustee shall be $4,000 annually prior to the final Completion Date with respect to any of the Projects, and $3,500 annually thereafter. With respect to the Series 2007 Bonds, the Trustee's initial authentication fee shall be $1,500 and the annual administration fee of the Trustee shall be $1,500 annually prior to the final Completion Date with respect to any of the Projects, and $1,500 annually thereafter. If the City shall fail to make any payment required by this subsection (a), the Trustee may make such payment from any moneys in its possession under the provisions of this Indenture and shall be entitled to a preference therefor over any of the Bonds Outstanding hereunder. The City shall not be required to indemnify the Trustee against any liabilities which the Trustee may incur as a result of negligent or wrongful acts or omissions of the Trustee." 4848.3917-7473.4 9 Section 6.01. The Original Indenture is hereby amended and supplemented by adding at the end thereof the following Article: "ARTICLE XIII PROVISIONS RELATING TO 2007 BOND POLICY AND 2007 RESERVE POLICY Notwithstanding any provision to the contrary contained in this Indenture, so long as the 2007 Bond Policy and/or the 2007 Reserve Policy remain in full force and effect (or any amounts are owed to the 2007 Insurer in connection therewith), the provisions of this Article XIII shall control where applicable. Section 1301. Consents, Approvals and Directions of 2007 Insurer. (a) The 2007 Insurer shall be deemed to be the sole Holder of the Series 2007 Bonds for the purpose of exercising any voting right or privilege or giving any direction or taking any other action that the Holders of the Series 2007 Bonds are entitled to take pursuant tot Article VIII of this Indenture or relating to the duties and obligations of the Trustee set forth in Article IX of this Indenture. (b) Any amendment, supplement, modification to, or waiver of, this Indenture or any other document relating to the issuance of, of security for, the Series 2007 Bonds (each a "Related Document"), that requires the consent of Bondholders or adversely affects . the rights and interests of the 2007 Insurer shall be subject to the prior written consent of the 2007 Insurer. (c) The rights granted to the 2007 Insurer under this Indenture or any other Related Document to request, consent to or direct any action are rights granted to the 2007 Insurer in consideration of its issuance of the 2007 Bond Policy and the 2007 Reserve Policy. Any exercise by the 2007 Insurer of such rights is merely an exercise of the 2007 Insurer's contractual rights and shall not be construed or deemed to be taken for the benefit, or on behalf, of the Bondholders and such action does not evidence any position of the 2007 Insurer, affirmative or negative, as to whether the consent of the Bondholders or any other person is required in addition to the consent of the 2007 Insurer. (d) No contract shall be entered into or any action taken by which the rights of the 2007 Insurer or security for or sources of payment of the 2007 Bonds may be impaired or prejudiced in any material respect except upon obtaining the prior written consent of the 2007 Insurer. (e) Notwithstanding the provisions of Section 801(c) hereof, no grace period for a covenant default shall exceed thirty (30) days or be extended for more than sixty (60) days, without the prior written consent of the 2007 Insurer. No grace period shall be permitted for payment defaults under Section 801(a) or (b) hereof. (f) Notwithstanding the provisions of Section 802 hereof, the Series 2007 Bonds shall not be accelerated without the consent of the 2007 Insurer and in the event 4848-3917.7473.4 10 the Series 2007 Bonds are accelerated, the 2007 Insurer may elect, in its sole discretion, to pay accelerated principal and interest accrued, on such principal to the date of acceleration (to the extent unpaid by the City) and the Trustee shall be required to accept such amounts. Upon payment of such accelerated principal and interest accrued to the acceleration date as provided above, the 2007 Insurer's obligations under the 2007 Bond Policy with respect to such Series 2007 Bonds shall be fully discharged. (g) Unless the 2007 Insurer otherwise directs, upon the occurrence and continuance of an Event of Default or an event which with notice or lapse of time would constitute an Event of Default, amounts on deposit in the Project Fund relating to the Series 2007 Bonds shall not be disbursed, but shall instead be applied to the payment of debt service or redemption price of the Series 2007 Bonds. (h) The prior written consent of the 2007 Insurer shall be a condition precedent to the deposit of any credit instrument provided in lieu of the 2007 Reserve Policy or a cash deposit into the Series 2007 Account of the Debt Service Reserve Fund, if any. Notwithstanding anything to the contrary set forth in this Indenture, amounts on deposit in the Series 2007 Account of the Debt Service Reserve Fund shall be applied solely to the payment of debt service due on the Series 2007 Bonds. (i) Upon the occurrence of an extraordinary optional, special or extraordinary mandatory redemption of the Series 2007 Bonds in part in accordance with the provisions of Article III hereof, the selection of Series 2007 Bonds to be redeemed shall be subject to the approval of the 2007 Insurer. The exercise of any provision of this Indenture which permits the purchase of Series 2007 Bonds in lieu of redemption shall require the prior written approval of the 2007 Insurer if any Series 2007 Bond so purchased is not cancelled upon purchase. (j) In determining whether any amendment, consent, waiver or other action to be taken, or any failure to take action, under this Indenture would adversely affect the security for the Series 2007 Bonds or the rights of the Bondholders, the Trustee shall consider the effect of any such amendment, consent, waiver, action or inaction as if there were no 2007 Bond Policy. Section 1302. Disclosures to 2007 Insurer. (a) The 2007 Insurer shall be provided with the following information by the City or the Trustee, as the case may be: (i) Annual audited financial statements within 180 days after the end of the City's fiscal year (together with a certification of the City that it is not aware of any default or Event of Default under the Indenture), and the City's annual budget within 30 days after the approval thereof together with such other information, data or reports as the 2007 Insurer shall reasonably request from time to time; (ii) Notice of any draw upon the Debt Service Reserve Fund within two (2) Business Days after knowledge thereof other than (i) withdrawals of amounts in excess of the Reserve Requirement and (ii) withdrawals in connection with a refunding of Bonds; 4848-3917.7473.4 11 (iii) Notice of any default known to the Trustee or the City within five (5) Business Days after knowledge thereof; (iv) Prior notice of the advance refunding or redemption of any of the Series 2007 Bonds, including the principal amount, maturities and CUSIP numbers thereof; (v) Notice of the resignation or removal of the Trustee and Bond Registrar and the appointment of, and acceptance of duties by, any successor thereto; (vi) Notice of the commencement of any proceeding by or against the City commenced under the United States Bankruptcy Code or any other applicable bankruptcy, insolvency, receivership, rehabilitation or similar law (an "Insolvency Proceeding"); (vii) Notice of the making of any claim in connection with any Insolvency Proceeding seeking the avoidance as a preferential transfer of any payment of principal of, or interest on, the Series 2007 Bonds; (viii) A full original transcript of all proceedings relating to the execution of any amendment, supplement, or waiver to this Indenture or the Related Documents; and (ix) All reports, notices and correspondence to be delivered to Bondholders under the terms of this Indenture or the Related Documents. (b) The notice address of the 2007 Insurer is: Financial Security Assurance Inc., 31 West 52nd Street, New York. New York 10019, Attention: Managing Director — Surveillance, Re: Policy No. 207605-N, Telephone: (212) 826-0100; Telecopier: (212) 339-3556. In each case in which notice or other communication refers to an Event of Default, then a copy of such notice or other communication shall also be sent to the attention of the General Counsel and shall be marked to indicate "URGENT MATERIAL ENCLOSED." Section 1303. Defeasance and Discharge of Series 2007 Bonds. (a) Only (1) cash, (2) non -callable direct obligations of the United States of America ("Treasuries"), (3) evidences of ownership of proportionate interests in future interest and principal payments on Treasuries held by a bank or trust company as custodian, under which the owner of the investment is the real party in interest and has the right to proceed directly and individually against the obligor and the underlying Treasuries are not available to any person claiming through the custodian or to whom the custodian may be obligated, (4) subject to the prior written consent of the 2007 Insurer, pre -refunded municipal obligations rated "AAA" and "Aaa" by S&P and Moody's, respectively, or (5) subject to the prior written consent of the 2007 Insurer, securities eligible for "AAA" defeasance under then existing criteria of S&P or any combination thereof, shall be used to effect defeasance of the Series 2007 Bonds unless the 2007 Insurer otherwise approves. (b) To accomplish defeasance of the Series 2007 Bonds, the City shall cause to be delivered (i) a report of an independent firm of nationally recognized certified public accountants or such other accountant as shall be acceptable to the 2007 Insurer 4848.3917.7473.4 12 ("Accountant") verifying the sufficiency of the escrow established to pay the Series 2007 Bonds in full on the maturity or redemption date ('Verification"), (ii) an Escrow Deposit Agreement (which shall be acceptable in form and substance to the 2007 Insurer), (iii) an opinion of nationally recognized bond counsel to the effect that the Series 2007 Bonds are no longer Outstanding under the Indenture, and (iv) a certificate of discharge of the Trustee with respect to the Series 2007 Bonds; each Verification and defeasance opinion shall be acceptable in form and substance, and addressed, to the City, the Trustee and 2007 Insurer. The 2007 Insurer shall be provided with final drafts of the above -referenced documentation not less than five (5) Business Days prior to the funding of the escrow. (c) Series 2007 Bonds shall be deemed Outstanding under the Indenture unless and until they are in fact paid and retired or the above criteria are met. Section 1304. Claims Upon 2007 Bond Policy and Payments by and to 2007 Insurer. (a) If, on the third Business Day prior to the related scheduled interest payment date or principal payment date with respect to the Series 2007 Bonds ("Payment Date") there is not on deposit with the Trustee, after making all transfers and deposits required under this Indenture, moneys sufficient to pay the principal of and interest on the Series 2007 Bonds due on such Payment Date, the Trustee shall give notice to the 2007 Insurer and to its designated agent (if any) (the "Insurer's Fiscal Agent") by telephone or telecopy of the amount of such deficiency by 12:00 noon, New York City time, on such Business Day. If, on the second Business Day prior to the related Payment Date, there • continues to be a deficiency in the amount available to pay the principal of and interest on the Series 2007 Bonds due on such Payment Date, the Trustee shall make a claim under the 2007 Bond Policy and give notice to the 2007 Insurer and the Insurer's Fiscal Agent (if any) by telephone of the amount of such deficiency, and the allocation of such deficiency between the amount required to pay interest on the Series 2007 Bonds and the amount required to pay principal of the Series 2007 Bonds, confirmed in writing to the 2007 Insurer and the Insurer's Fiscal Agent by 12:00 noon, New York City time, on such second Business Day by filling in the form of Notice of Claim and Certificate delivered with the 2007 Bond Policy. (b) The Trustee shall designate any portion of payment of principal on the Series 2007 Bonds paid by the 2007 Insurer, whether by virtue of mandatory sinking fund redemption, maturity or other advancement of maturity, on its books as a reduction in the principal amount of Series 2007 Bonds registered to the then current Bondholder, whether DTC or its nominee or otherwise, and shall issue a replacement Series 2007 Bond to the 2007 Insurer, registered in the name of the 2007 Insurer in a principal amount equal to the amount of principal so paid (without regard to authorized denominations): provided that the Trustee's failure to so designate any payment or issue any replacement Series 2007 Bond shall have no effect on the amount of principal or interest payable by the City on any Series 2007 Bond or the subrogation rights of the 2007 Insurer. (c) The Trustee shall keep a complete and accurate record of all funds deposited by the 2007 Insurer into the Policy Payments Account (defined below) and the allocation of such funds to payment of interest on and principal of any Series 2007 Bond. 4848.3917-7473.4 13 The 2007 Insurer shall have the right to inspect such records at reasonable times upon reasonable notice to the Trustee. (d) Upon payment of a claim under the 2007 Bond Policy, the Trustee shall establish a separate special purpose trust account for the benefit of the Holders of the Series 2007 Bonds referred to herein as the "Policy Payments Account" and over which the Trustee shall have exclusive control and sole right of withdrawal. The Trustee shall receive any amount paid under the 2007 Bond Policy in trust on behalf of the Holders of the Series 2007 Bonds and shall deposit any such amount in the Policy Payments Account and distribute such amount only for purposes of making the payments for which a claim was made. Such amounts shall be disbursed by the Trustee to Holders of the Series 2007 Bonds in the same manner as principal and interest payments are to be made with respect to the Series 2007 Bonds under the sections hereof regarding payment of the Series 2007 Bonds. It shall not be necessary for such payments to be made by checks or wire transfers separate from the check or wire transfer used to pay debt service with other funds available to make such payments. Notwithstanding anything herein to the contrary, the City agrees to pay to the 2007 Insurer (i) a sum equal to the total of all amounts paid by the 2007 Insurer under the 2007 Bond Policy (the "Insurer Advances"); and (ii) interest on such Insurer Advances from the date paid by the 2007 Insurer until payment thereof in full, payable to the 2007 Insurer at the Late Payment Rate per annum (collectively, the "Insurer Reimbursement Amounts'). "Late Payment Rate" means the lesser of (a) the greater of (i) the per annum rate of interest, publicly announced from • time to time by JPMorgan Chase Bank at its principal office in the City of New York, as its prime or base lending rate (any change in such rate of interest to be effective on the date such change is announced by JPMorgan Chase Bank) plus 3%, and (ii) the then applicable highest rate of interest on the Series 2007 Bonds and (b) the maximum rate permissible under applicable usury or similar laws limiting interest rates. The Late Payment Rate shall be computed on the basis of the actual number of days elapsed over a year of 360 days. The City hereby covenants and agrees that the Insurer Reimbursement Amounts are secured by a lien on and pledge of the Trust Estate and payable from such Trust Estate on a parity with debt service due on the Series 2007 Bonds. (e) Funds held in the Policy Payments Account shall not be invested by the Trustee and may not be applied to satisfy any costs, expenses or liabilities of the Trustee. Any funds remaining in the Policy Payments Account following a Payment Date with respect to the Series 2007 Bonds shall promptly be remitted to the 2007 Insurer. (f) Amounts paid by the 2007 Insurer under the 2007 Bond Policy shall not be deemed paid for purposes of the Indenture and the Series 2007 Bonds relating to such payments shall remain Outstanding and continue to be due and owing until paid by the City in accordance with the Indenture. The Indenture shall not be discharged unless all amounts due or to become due to the 2007 Insurer have been paid in full or duly provided for. (g) The 2007 Insurer shall, to the extent it makes any payment of principal of or interest on the Series 2007 Bonds, become subrogated to the rights of the recipients of such payments in accordance with the terms of the 2007 Bond Policy. Each obligation of 4848-3917-7473.4 14 the City to the 2007 Insurer under the Related Documents shall survive discharge or termination of such Related Documents. (h) The City shall pay or reimburse the 2007 Insurer any and all charges, fees, costs and expenses that the 2007 Insurer may reasonably pay or incur in connection with (i) the administration, enforcement, defense or preservation of any rights or security in any Related Document; (ii) the pursuit of any remedies under the Indenture or any other Related Document or otherwise afforded by law or equity, (iii) any amendment, waiver or other action with respect to, or related to, the Indenture or any other Related Document whether or not executed or completed, or (iv) any litigation or other dispute in connection with the Indenture or any other Related Document or the transactions contemplated thereby, other than costs resulting from -the failure of the 2007 Insurer to honor its obligations under the 2007 Bond Policy or 2007 Reserve Policy. The 2007 Insurer reserves the right to charge a reasonable fee as a condition to executing any amendment, waiver or consent proposed in respect of the Indenture or any other Related Document. (i) The 2007 Insurer shall be entitled to pay principal or interest on the Series 2007 Bonds that shall become Due for Payment but shall be unpaid by reason of Nonpayment by the City (as such teens are defined in the Insurance Policy) and any amounts due on the Series 2007 Bonds as a result of acceleration of the maturity thereof in accordance with the Indenture, whether or not the 2007 Insurer has received a Notice of Nonpayment (as such terms are defined in the Insurance Policy) or a claim upon the • 2007 Bond Policy. Section 1305. Provisions Relating to Additional Bonds. (a) The principal on any Additional Bonds issued under the Indenture (other than RLF Loans) shall be payable on November 1 of the years provided in the Supplemental Indenture authorizing such Additional Bonds. (b) As a condition to the issuance of Additional Bonds secured on a parity basis with the Series 2006A Bonds and the Series 2007 Bonds, the City shall provide to the 2007 Insurer a copy of certified cash flows evidencing that the Existing Indebtedness will be repaid in full no later than November 1, 2014. Such cash flows shall assume that all of the permitted Existing Indebtedness unissued on the date the cash flows are provided has in fact been issued. Alternatively, the City may covenant to the 2007 Insurer not to issue all or any portion of the unissued Existing Indebtedness and omit that portion of the Existing Indebtedness from the cash flows. (c) Notwithstanding satisfaction of the other conditions to the issuance of Additional Bonds set forth in Article II of this Indenture, no such issuance may occur (1) if an Event of Default (or any event which, once all notice or grace periods have passed,. would constitute an Event of Default) exists unless such default shall be cured upon such issuance and (2) unless the Debt Service Reserve Fund is fully funded at the Reserve Requirement (including the Reserve Requirement relating to the proposed issue) upon the issuance of such Additional Bonds, in either case unless otherwise permitted by the 2007 Insurer. 4848.3917.7473.4 15 (d) In addition to the coverage required in Section 212 hereof relating to the issuance of Additional Bonds, the Certificate delivered by the Finance Director shall also show coverage of at least one times on Policy Costs then due and owing. (e) With respect to drawdowns on RLF Loans as permitted by Section 212 hereof, the Certificate of the Finance Director required therein shall be modified to certify that, based upon the most recent twelve (12) months of Sales and Use Tax collections (i) receipts of the 0.25% Sales and Use Tax were not less than 125% of the maximum Annual Debt Service for each of the years ending November 1, 2007 through November 1. 2015, on all the Outstanding Bonds and any RLF Loan theretofore incurred, plus the amount of the additional RLF Loan to be incurred, and (ii) receipts of the 0.25% Sales and Use Tax and the 0.75% Sales and Use Tax were not less than 125% of the maximum Annual Debt Service for each of the years ending November 1. 2016 and thereafter, on all then Outstanding Bonds and any RLF Loan theretofore incurred, plus the amount of the additional RLF Loan to be incurred. All other provisions of Section 212 relating to drawdowns under RLF Loans shall continue to be applicable, and the modification set forth above shall not relate to the issuance of Additional Bonds. Section 1306. Miscellaneous Provisions Relating to 2007 Bond Policy. (a) Unless the 2007 Insurer shall otherwise consent, the City hereby covenants not to issue any debt secured by a lien on the Existing Tax except for (i) the approximately $62,000,000 outstanding principal amount of Existing Indebtedness currently secured thereby, and (ii) up to $20,000,000 principal amount of additional Existing Indebtedness in the form of an RLF Loan bearing interest at a rate not in excess of 3% (collectively, the "Prior Debt"). (b) The City hereby covenants not to amend (i) the mandatory redemption provisions for the Prior Debt or (ii) any provisions relating to coverage or other requirements associated with the issuance of additional indebtedness that constitutes Prior Debt. (c) The City and the Trustee covenant and agree to take such action (including, as applicable, filing of UCC financing statements and continuations thereof) as is necessary from time to time to preserve the priority of the pledge of the Trust Estate under applicable law. (d) After payment of reasonable expenses of the Trustee, the application of funds realized upon a default shall be applied to the payment of expenses of the City or to rebate only after that payment of past due and current debt service on the Series 2007 Bonds and amounts required to restore the Series 2007 Account of the Debt Service Reserve Fund to the level of the applicable Reserve Requirement. (e) The 2007 Insurer is hereby declared to be a third party beneficiary to this Indenture. Section 1307. 2007 Reserve Policy Provisions. (a) The City shall repay any draws under the 2007 Reserve Policy and pay all related reasonable expenses incurred by 4848-3917-7473.4 16 the 2007 Insurer relating thereto. Interest shall accrue and be payable on such draws and expenses from the date of payment by the 2007 Insurer at the Late Payment Rate. "Late Payment Rate" means the lesser of (a) the greater of (i) the per annum rate of interest, publicly announced from time to time by JPMorgan Chase Bank at its principal office in the City of New York, as its prime or base lending rate ("Prime Rate") (any change in such Prime Rate to be effective on the date such change is announced by JPMorgan Chase Bank) plus 3%, and (ii) the then applicable highest rate of interest on the Series 2007 Bonds and (b) the maximum rate permissible under applicable usury or similar laws limiting interest rates. The Late Payment Rate shall be computed on the basis of the actual number of days elapsed over a year of 360 days. In the event JPMorgan Chase Bank ceases to announce its Prime Rate publicly, Prime Rate shall be the publicly announced prime or base lending rate of such national bank as the 2007 Insurer shall specify. (b) Repayment of draws and payment of expenses relating to the 2007 Reserve Policy and accrued interest thereon at the Late Payment Rate (collectively, "Reserve Policy Costs") shall commence in the first month following each draw, and each such monthly payment shall be in an amount at least equal to 1/12 of the aggregate of Reserve Policy Costs related to such draw. (c) Amounts in respect of Reserve Policy Costs paid to the 2007 Insurer shall be credited first to interest due, then to the expenses due and then to principal due. As • and to the extent that payments are made to the 2007 Insurer on account of principal due, the coverage under the 2007 Reserve Policy will be increased by a like amount, subject to the terms of the 2007 Reserve Policy. (d) All cash and investments in the Series 2007 Account of the Debt Service Reserve Fund established for the Series 2007 Bonds (the "Reserve Fund") shall be transferred to the Bond Fund for payment of debt service on the Series 2007 Bonds before any drawing may be made on the 2007 Reserve Policy or any other credit facility credited to the Reserve Fund in lieu of cash ("Credit Facility"). Payment of any Reserve Policy Costs shall be made prior to replenishment of any such cash amounts. Draws on all Credit Facilities (including the 2007 Reserve Policy) on which there is available coverage shall be made on a pro -rata basis (calculated by reference to the coverage then available thereunder) after applying all available cash and investments in the Reserve Fund. Payment of Reserve Policy Costs and reimbursement of amounts with respect to other Credit Facilities shall be made on a pro -rata basis prior to replenishment of any cash drawn from the Reserve Fund. Upon payment of the Series 2007 Bonds from amounts paid under the 2007 Reserve Policy, such Series 2007 Bonds shall be deemed to remain Outstanding under the Indenture and the 2007 Insurer shall be subrogated to the rights of the Holders of such Series 2007 Bonds. (e) If the City shall fail to pay any Reserve Policy Costs in accordance with the requirements of paragraphs (a), (b), (c) and (d) above, the 2007 Insurer shall be entitled to exercise any and all legal and equitable remedies available to it, including isthose provided under the Indenture other than (i) acceleration of the maturity of the Series 4848.3917-7473.4 17 2007 Bonds or (ii) remedies which would adversely affect owners of the Series 2007 Bonds. (f) The Indenture shall not be discharged until all Reserve Policy Costs owing to the 2007 Insurer shall have been paid in full. The City's obligation to pay such amounts shall expressly survive payment in full of the Series 2007 Bonds. (g) The Trustee is required to ascertain the necessity for a claim upon the 2007 Reserve Policy and to provide notice to the 2007 Insurer in accordance with the terns of the 2007 Reserve Policy at least five (5) Business Days prior to each date upon which interest or principal is due on the Series 2007 Bonds. The Trustee shall give notice to the 2007 Insurer of any failure of the City to make timely payment in full of required deposits to the Revenue Fund and Bond Fund within two (2) Business Days of the date due." Section 7.01. Severability. (a) If any provisions of this First Supplemental Trust Indenture shall be held or deemed to be or shall, in fact, be inoperative or unenforceable as applied in any particular case in any jurisdiction or jurisdictions or in all jurisdictions or in all cases because it conflicts with any provisions or any constitution or statute or rule of public policy, or for any other reason, such circumstances shall not have the effect of rendering the provision in question inoperative or unenforceable in any other case or circumstance, or of rendering any other provision or provisions herein contained invalid, inoperative or • unenforceable to any extent whatever. (b) The invalidity of any one or more phrases, sentences, clauses or paragraphs in this First Supplemental Trust Indenture contained shall not affect the remaining portions of this First Supplemental Trust Indenture or any part thereof. Section 7.02. Applicable Provisions of Law. This First Supplemental Trust Indenture shall be considered to have been executed in the State of Arkansas and it is the intention of the parties that the substantive law of the State of Arkansas govern as to all questions of interpretation, validity and effect. Section 7.03. Counterparts. This First Supplemental Trust Indenture may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. Section 7.04. Ratification of Original Indenture. As supplemented and amended hereby, the Original Indenture is hereby ratified and confirmed. a 4848-3917-7473.4 18 t • • IN WITNESS WHEREOF, the City has caused these presents to be signed in its name and behalf by its Mayor and its corporate seal to be hereunto affixed and attested by its City Clerk, and to evidence its acceptance of the trust hereby created, the Trustee has caused these presents to be signed in its behalf by its duly authorized officers and its corporate seal to be hereto affixed. ATTEST: By: ✓ Y City Clerk aaaaTnn,,,._ (SEAL) ATTEST: Y ;FAYETfEVILLE• ; .. CITY OF SIMMONS FIRST TRUST COMPANY, N.A., as Trustee \\ By aim-' Title: Corporate Trust O cer By: Title: Assistant Vice President and Corporate Trust Officer [SIGNATURE PAGE TO FIRST SUPPLEMENTAL TRUST INDENTURE] 4848.3917-7473.4 ACKNOWLEDGMENT STATE OF ARKANSAS ss. COUNTY OF WASHINGTON Before me a Notary Public, duly commissioned, qualified and acting within and for the State and county aforesaid, appeared in person the within named Dan Coody and Sondra Smith, Mayor and City Clerk, respectively, of the City of Fayetteville, Arkansas, to me personally known, who stated that they were duly authorized in their respective capacities to execute the foregoing instrument for and in the name of the City, and finther stated and acknowledged that they had signed, executed and delivered the foregoing instrument for the consideration, uses and purposes therein mentioned and set forth. IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal this $ aay of October, 2007. My Commission expires: (SEAL) =PUBUC, AL ETT RKANSASUNTY1I2013 [ACKNOWLEDGEMENT TO FIRST SUPPLEMENTAL TRUST INDENTURE] 48483917-7473.4 ACKNOWLEDGMENT STATE OF ARKANSAS ss. COUNTY OF JEFFERSON Before me a Notary Public, duly commissioned, qualified and acting within and for the State and county aforesaid, appeared in person the within named Glenda Dean and Rita Gronwald, the Corporate Trust Officer and the Assistant Vice President and Corporate Trust Officer, respectively, of Simmons First Trust Company, N.A., to me personally known, who stated that they were duly authorized in their respective capacities to execute the foregoing instrument for and in the name of the Trust Company, and further stated and acknowledged that they had signed, executed and delivered the foregoing instrument for the consideration, uses and purposes therein mentioned and set forth. IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal this y of October, 2007. My Commission expires: (SEAL) [ACKNOWLEDGEMENT TO FIRST SUPPLEMENTAL TRUST INDENTURE] 4848-3917-7473.4 • EXHIBIT A TO FIRST SUPPLEMENTAL TRUST INDENTURE Form of Series 2007 Bond Unless this certificate is presented by an authorized representative of The Depository Trust Company, a New York corporation ("DTC'), to the City or its agent for registration of transfer, exchange or payment, and any certificate issued is registered in the name of Cede & Co. or in such other name as is requested by the authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), any transfer, pledge or other use hereof for value or otherwise by or to any person is wrongful inasmuch as the registered owner hereof Cede & Co., has an interest herein. REGISTERED REGISTERED No. R07-_ $ UNITED STATES OF AMERICA STATE OF ARKANSAS CITY OF FAYETTEVILLE, ARKANSAS SALES AND USE TAX CAPITAL IMPROVEMENT BOND SERIES 2007 Interest Rate: _% Maturity Date: November 1, 20_ Date of Bond: October 1, 2007 CUSIP: Registered Owner: CEDE & CO. . Principal Amount: DOLLARS KNOW ALL MEN BY THESE PRESENTS: That the City of Fayetteville, Arkansas, a municipality and political subdivision organized and existing by virtue of the laws of the State of Arkansas (the "City"), for value received, promises to pay to the Registered Owner shown above, or registered assigns, on the Maturity Date shown above, but solely from the source and in the manner hereinafter set forth, the Principal Amount shown above, and in like manner to pay interest on said amount from the date hereof until payment of such Principal Amount has been made or duly provided for, at the Interest Rate per annum shown above, such interest to be payable semiannually on May I and November I of each year, commencing May 1, 2008, except as the provisions hereinafter set forth wiih respect to redemption of this bond prior to maturity may become applicable hereto. The principal of and premium, if any, on this bond are payable in lawful money of the United States of America upon the presentation and surrender, hereof at the principal corporate trust office of Simmons First Trust Company, N.A., Pine Bluff, Arkansas, or its successor or successors, as trustee (the "Trustee"). So long as Cede & Co. or another nominee of DTC is the registered owner of this bond, payment of interest hereon shall be made by wire transfer of immediately available funds by the Trustee to the Registered Owner as of the fifteenth day of the calendar month preceding the calendar month in which such interest payment date shall fall (the "Record Date"). At any time thereafter, payment of interest hereon shall be made by check or draft of the Trustee to the Registered Owner as of the applicable Record Date, at the owner's address as it appears on the bond registration books of the City kept by the Trustee. 4848-3917-7473.4 A -I This bond, designated "Sales and Use Tax Capital Improvement Bond, Series 2007", is one of a series of bonds aggregating Fourteen Million Three Hundred Forty Thousand Dollars ($14,340,000) (the `Bonds"). The Bonds are being issued for the purpose of financing all or a portion of the costs of the extension and betterment of wastewater pipelines and related facilities (the "Wastewater Project"). Bond proceeds will be utilized to pay Project costs, to fund a debt service reserve, to purchase a policy of municipal bond insurance, and to pay the costs of issuance of the Bonds. The Bonds are issued under and are secured by and entitled to the protection of a Trust Indenture dated as of November 1, 2006, as supplemented and amended by a First Supplemental Trust Indenture dated as of October 1, 2007 (as supplemented and amended, the "Indenture"), by and between the City and the Trustee, which Indenture is available for inspection at the principal corporate trust office of the Trustee. Reference is hereby made to the Indenture and to all indentures supplemental thereto for the provisions, among others, with respect to the nature and extent of the security, the rights, duties and obligations of the City, the Trustee and the owners of the Bonds, and the terms upon which the Bonds are issued and secured. The Bonds are issued pursuant to and in full compliance with the Constitution and laws of the State of Arkansas, including particularly Amendment No. 62 to the Constitution of Arkansas, as implemented by the Local Government Bond Act of 1985, codified as Arkansas Code Annotated (1998 Repl. & Supp. 2005) §§14-164301 et seq. (as from time to time amended, the "Local Government Bond Act"), Ordinance No. 5054 of the City adopted August . 23, 2007, which ordinance authorized the execution and delivery of the First Supplemental Trust Indenture, and a special election duly held on September 12, 2006, at which a majority of the qualified electors of the City voting approved the issuance of the Bonds. In accordance with the Local Government Bond Act, the City has pledged all receipts from (i) a one -quarter of one percent (0.25%) local sales and use tax (the "0.25% Sales and Use Tax") and (ii) a three-quarters of one percent (0.75%) local sales and use tax (the "0.75% Sales and Use Tax"), each levied by the City pursuant to Ordinance No. 4891, adopted by the City on June 20, 2006, to provide funds for the repayment of the Bonds. The pledge of the receipts of the 0.25% Sales and Use Tax and the 0.75% Sales and Use Tax (collectively, the "Tax Receipts") presently secures payment of the Bonds and the City's $50,000,000 Sales and Use Tax Capital Improvement Bonds, Series 2006A (the "Series 2006A Bonds"). Such Tax Receipts may additionally be pledged to secure the payment of up to $45,660,000 in aggregate principal amount of Additional Bonds issued under the provisions of the Indenture. The Indenture provides that the City may hereafter issue Additional Bonds from time to time under certain terms and conditions contained in the Indenture and, if issued or incurred, such Additional Bonds will rank on a parity of security with the Bonds and be equally and ratably secured by and entitled to the protection of the Indenture. The Bonds are not general obligations of the City, but are special obligations secured by an irrevocable pledge of and lien on the Tax Receipts, as more particularly described in the Indenture. In no event shall the Bonds constitute an indebtedness of the City within the meaning of any constitutional or statutory limitation. I 4848.3917.7473.4 A-2 STATEMENT OF INSURANCE Financial Security Assurance Inc. ("Financial Security"), New York, New York, has delivered its municipal bond insurance policy with respect to the scheduled payments due of principal of and interest on this Bond to Simmons First Trust Company, N.A., Pine Bluff, Arkansas, or its successor, as paying agent for the Bonds (the "Paying Agent"). Said Policy is on file and available for inspection at the principal office of the Paying Agent and a copy thereof may be obtained from Financial Security or the Paying Agent. The holder of this Bond shall have no right to enforce the provisions of the Indenture or to institute action to enforce the covenants therein, or to take any action with respect to any event of default under the Indenture, or to institute, appear in or defend any suit or other proceeding with respect thereto, except as provided in the Indenture. In certain events, on the conditions, in the manner and with the effect set forth in the Indenture, the principal of all the Bonds and Additional Bonds, if any, issued under the Indenture and then outstanding may be declared and may become due and payable before the stated maturity thereof, together with accrued interest thereon. Modifications or alterations of the Indenture, or of any indenture supplemental thereto, may be made only to the extent and in the circumstances permitted by the Indenture. The Bonds shall be redeemed prior to maturity, in whole or in part, on any interest payment date, in inverse order of maturity and by lot in such manner as the Trustee shall determine within a maturity, at a redemption price equal to 100% of the principal amount being redeemed, plus accrued interest to the date of redemption, from moneys in the Project Fund in • excess of the amount needed to complete the portion of the Project to be funded with the Bonds. The Bonds shall be redeemed prior to maturity, in whole or in part, on any interest payment date, in inverse order of maturity and by lot in such manner as the Trustee shall determine within a maturity, at a redemption price equal to 100% of the principal amount being redeemed, plus accrued interest to the date of redemption, from surplus Tax Receipts deposited in the Redemption Fund pursuant to the Indenture. So long as the Series 2006A Bonds are outstanding, 50% of the surplus Tax Receipts shall be allocated to the redemption of the Series 2006A Bonds and the remaining 50% of such surplus Tax Receipts shall be allocated ratably (based on relative outstanding principal amounts) to the redemption of the Bonds and any series of Additional Bonds. Following payment in whole of the Series 2006A Bonds at maturity or upon redemption prior to maturity, all surplus Tax Receipts shall be allocated ratably (based on relative outstanding principal amounts) to the redemption of the Bonds and any other series of Additional Bonds. The Bonds are subject to redemption at the option of the City, communicated in a written notice to the Trustee not less than sixty (60) days prior to the date fixed for redemption, in whole or in part on any date on or after November 1, 2015, in inverse order of maturity and by lot in such manner as the Trustee shall determine within a maturity, at a redemption price equal to 100% of the principal amount being redeemed plus accrued interest to the date of redemption. The Bonds maturing November 1, 2017 are subject to mandatory redemption, to be selected by lot in such manner as the Trustee shall determine, on November 1 in the years and 4848-3917.7473.4 A-3 the amounts set forth below, at a redemption price equal to 100% of the principal amount being redeemed, plus accrued interest to the date of redemption. Date Principal Amount November 1, 2015 $ 940,000 November 1, 2016 980,000 November 1, 2017 (maturity) 1,020,000 Notwithstanding the foregoing, so long as DTC or its nominee is the sole registered owner of the Bonds, the particular Bonds or portions thereof to be redeemed in part within a maturity shall be selected by lot by DTC in such manner as DTC shall determine. In selecting Bonds for redemption prior to maturity, in the case any outstanding Bond is in a denomination greater than $5,000, each $5,000 of face value of such Bond shall be treated as a separate Bond of the denomination of $5,000. In the event any of the Bonds or portions thereof (which shall be $5,000 or any integral multiple thereof) are called for redemption, notice thereof shall be given by the Trustee by first class mail to the registered owner of each such Bond addressed to such registered owner at his registered address and placed in the mails not less than thirty (30) nor more than sixty (60) days prior to the date fixed for redemption; provided, however, that failure to give such notice by mailing, or any defect therein, shall not affect the validity of the proceedings for the redemption of any Bond with respect to which no such failure or defect has occurred. Each notice shall identify the Bonds or portions thereof being called, and the date on which they shall be presented . for payment. After the date specified in such call notice, the Bond or Bonds so called for redemption will cease to bear interest provided funds sufficient for their redemption have been deposited with the Trustee, and, except for the purpose of payment, shall no longer be protected by the Indenture and shall not be deemed to be outstanding under the provisions of the Indenture. This Bond may be transferred on the books of registration kept by the Trustee by the registered owner or by his duly authorized attorney upon surrender hereof, together with a written instrument of transfer duly executed by the registered owner or his duly authorized attorney. The Bonds are issuable as registered bonds without coupons in denominations of $5,000 and any integral multiple thereof. Subject to the limitations and upon payment of the charges provided in the Indenture, Bonds may be exchanged for a like aggregate principal amount of Bonds of other authorized denominations. No recourse shall be had for the payment of the principal of or premium, if any, or interest on any of the Bonds or for any claim based thereon or upon any obligation, covenant or agreement contained in the Bonds or the Indenture against any past, present or future alderman, officer or employee of the City, or any successor, as such, either directly or through the City or any successor of the City, under any rule of law or equity, statute or constitution or by the enforcement of any assessment or penalty or otherwise, and all such liability of any such alderman, officer or employee as such is hereby expressly waived and released as a condition of and consideration for the issuance of any of the Bonds. 4848-3917-7473.4 A-4 This Bond is issued with the intent that the laws of the State of Arkansas will govern its construction. IT IS HEREBY CERTIFIED, RECITED AND DECLARED that all acts, conditions and things required to exist, happen and be performed precedent to and in the issuance of the Bonds do exist, have happened and have been performed in due time, form and manner as required by law; that the indebtedness represented by the Bonds, together with all obligations of the City, does not exceed any constitutional or statutory limitation; and that the revenues pledged to the payment of the principal of and premium, if any, and interest on the Bonds as the same become due and payable will be sufficient in amount for that purpose. This Bond shall not be valid or become obligatory for any purpose or be entitled to any security or benefit under the Indenture until the Certificate of Authentication hereon shall have been signed by the Trustee. 4848.3917-7473.4 A-5 IN WITNESS WHEREOF, the City of Fayetteville, Arkansas has caused this Series 2007 Bond to be executed by its Mayor and City Clerk, thereunto duly authorized (by their manual or facsimile signatures), and its corporate seal to be affixed or imprinted hereon, all as of the date hereof shown above. CITY OF FAYETTEVILLE, ARKANSAS Mayor ATTEST: By: City Clerk (SEAL) (Form of Trustee's Certificate) TRUSTEE'S CERTIFICATE OF AUTHENTICATION . This bond is one of the Series 2007 Bonds of the issue described in and issued tinder the provisions of the within mentioned Indenture. Attached hereto is the complete text of the opinion of Kutak Rock LIP, a signed original of which is on file with the undersigned, delivered and dated the date of the original delivery of and payment for the Series 2007 Bonds. Date: SIMMONS FIRST TRUST COMPANY, N.A., as Trustee Authorized Signature 4848-3917.7473.4 A-6 (Form of Assignment) ASSIGNMENT FOR VALUE RECEIVED, hereby sells, assigns, and transfers unto , the within Bond and all rights thereunder, and hereby irrevocably constitutes and appoints as attorney to transfer the within Bond on the books kept for registration thereof with full power of substitution in the premises. DATE: _________,20_ . Transferor GUARANTEED BY: • NOTICE: Signature(s) must be guaranteed by an institution satisfactory to the Trustee or other transfer agent. 4848-3917-7413.4 A-7 TRUSTEE'S CERTIFICATE S 0 Simmons First Trust Company, N.A., Pine Bluff, Arkansas, as trustee for $14,340,000 City of Fayetteville, Arkansas Sales and Use Tax Capital Improvement Bonds, Series 2007• (the `Bonds"), hereby certifies that: I. Pursuant to the provisions of a Trust Indenture dated as of November 1, 2006, as supplemented and amended by a First Supplemental Trust Indenture dated as of October 1, 2007 (as supplemented and amended, the "frost Indenture") each by and between the City of Fayetteville, Arkansas (the "City") and Simmons First Trust Company, N.A., arrangements have been made for Simmons First Trust Company, N.A. to serve as trustee and paying agent (the "Trustee") with respect to the Bonds. The Trustee hereby accepts such appointment. 2. Pursuant to the provisions of the Trust Indenture and directions from the City, Glenda L. Dean, Corporate Trust Officer, has duly authenticated the initial Bonds in the aggregate principal amount of $14,340,000, being in the form often typewritten registered bonds, numbered R07-1 through R07-10, inclusive. 3. Each person who, on behalf of the Trustee, authenticated the initial Bonds or executed the First Supplemental Trust Indenture, the Tax Regulatory Agreement dated as of October 4, 2007, or the Continuing Disclosure Agreement dated as of October 4, 2007, with respect to the Bonds was at the date thereof and is now duly elected, appointed or authorized, qualified and acting as an officer or authorized signatory of the Trustee and is duly authorized to perform such acts at the respective times of such acts, and the signatures of such persons appearing on such documents are their genuine signatures. 4. The following are names, titles and specimen signatures of each of the above - mentioned officers of the Trustee: Name Office Signature Glenda L. Dean Corporate Trust Officer Rita Gronwald Asst. Vice President & Corporate Trust Officer 5. The Trustee is a national banking association duly organized, validly existing and in good standing under the laws of the United States of America. The Trustee has all requisite power and authority to carry out its obligations as Trustee under the Trust Indenture. IN WITNESS WHEREOF, SIMMONS FIRST TRUST COMPANY, N.A., has caused this certificate to be executed in its corporate name by an officer thereunto duly authorized. Dated: October 4, 2007 4832.1513-9595.1 SIMMONS FIRST TRUST COMPANY, N.A. Pine Bluff, Arkansas By-. Name: Title: • EXECUTION COPY CITY OF FAYETTEVILLE, ARKANSAS to SIMMONS FIRST TRUST COMPANY, N.A. as Trustee SECOND SUPPLEMENTAL TRUST INDENTURE Dated as of November 1, 2009 • This Second Supplemental Trust Indenture supplements and amends a Trust Indenture dated as of November 1, 2006, as previously supplemented and amended by a First Supplemental Trust Indenture dated as of October 1, 2007, each by and between the City of Fayetteville, Arkansas and Simmons First Trust Company, N.A., as Trustee. The Trust Indenture, as supplemented and amended hereby, secures (i) the City's $50,000,000 original principal amount of Sales and Use Tax Capital Improvement Bonds, Series 2006A, (ii) the City's $14,340,000 original principal amount of Sales and Use Tax Capital Improvement Bonds, Series 2007, and (iii) the City's $11,250,000 original principal amount of Sales and Use Tax Capital Improvement Bonds, Series 2009. Prepared by: Kutak Rock LLP 124 West Capitol Avenue, Suite 2000 Little Rock, Arkansas 72201 • 4823-2826-9828.4 I SECOND SUPPLEMENTAL TRUST INDENTURE THIS SECOND SUPPLEMENTAL TRUST INDENTURE dated as of November 1, 2009, by and between the CITY OF FAYETTEVILLE, ARKANSAS (the "City"), a city of the first class organized under and existing by virtue of the laws of the State of Arkansas, and SIMMONS FIRST TRUST COMPANY, N.A., as trustee (the "Trustee"), a national banking association organized under and existing by virtue of the laws of the United States of America and having its principal corporate trust office located in Pine Bluff, Arkansas; WITNESSETH: WHEREAS, the. City Council of the City has previously determined that there is a great need for a source of revenue to finance all or a portion of the costs of (i) the acquisition, construction, reconstruction, extension, improving and equipping of certain improvements to the City's wastewater treatment plants, sewerage and related facilities (the "Wastewater Project"), (ii) the acquisition, construction, reconstruction, repair, straightening and widening of certain City streets and related improvements (the "Street Project"), and (iii) the acquisition, construction and equipping of certain City trail system improvements (the "Trail Project"); and WHEREAS, the people of the State of Arkansas (the "State") by the adoption of Amendment No. 62 to the Constitution of the State, approved November 6, 1984 ("Amendment • 62"), have authorized cities and counties in the State to issue bonds, upon voter approval, to finance certain capital improvements of a public nature, and to secure said bonds by a pledge of the proceeds of certain taxes; and WHEREAS, the provisions of Amendment 62 have been implemented by the Local Government Bond Act of 1985, codified as Arkansas Code Annotated (1998 Repl. & Supp. 2005) Sections 14-164-301 et seq. (as from time to time amended, the "Act"); and WHEREAS, pursuant to the provisions of Ordinance No. 4891, duly adopted by the City Council of the City on June 20, 2006 (the "Election Ordinance"), there was submitted to the qualified electors of the City four questions regarding the issuance of an aggregate of not to exceed $110,000,000 in principal amount of capital improvement bonds pursuant to Amendment 62 and the Act to finance the capital improvements described in the Election Ordinance, including the Wastewater Project, the Street Project and the Trail Project; and WHEREAS, pursuant to the Election Ordinance, said capital improvement bonds are to be secured by a pledge of and lien upon (i) all of the receipts of a special city-wide sales and use tax at the rate of one -quarter of one percent (0.25%) (the "0.25% Sales and Use Tax"), and (ii) all of the receipts of a special city-wide sales and use tax at the rate of three-quarters of one percent (0.75%) (the "0.75% Sales and Use Tax"), each levied pursuant to the Act; and WHEREAS, at a special election held September 12, 2006, a majority of the qualified electors of the City voting on each of the aforementioned questions approved the issuance of capital improvement bonds in the principal amounts and for the specific purposes set forth on the • ballot (and the corresponding levy of the 0.25% Sales and Use Tax and the 0.75% Sales and Use 4823-2826-9828.4 • Tax, and the pledge of the receipts thereof to the payment of said capital improvement bonds); and WHEREAS, pursuant to the provisions of Ordinance No. 4936 of the City, adopted and approved by the City Council on October 3, 2006, and in accordance with Amendment 62 and the Act, the City has previously issued its $50,000,000 Sales and Use Tax Capital Improvement Bonds, Series 2006A (the "Series 2006A Bonds"), for the purpose of financing a portion of the costs of the Wastewater Project, the Street Project and the Trail Project; and WHEREAS, pursuant to the provisions of Ordinance No. 5504 of the City, adopted and approved by the City Council on August 23, 2007, and in accordance with Amendment 62 and the Act, the City has previously issued its $14,340,000 Sales and Use Tax Capital Improvement Bonds, Series 2007 (the "Series 2007 Bonds"), for the purpose of financing a portion of the costs of the Wastewater Project; and WHEREAS, the City and the Trustee have previously entered into a Trust Indenture dated as of November 1, 2006, as previously supplemented and amended by a First Supplemental Trust Indenture dated as of October 1, 2007 (as supplemented and amended, the "Original Indenture"), pursuant to which the Series 2006A Bonds and the Series 2007 Bonds were issued and secured; and WHEREAS, in order to secure additional funds to pay a portion of the costs of additional components of the Street Project and the Trail Project, to fund a debt service reserve, and to pay • legal and other expenses incidental to the issuance of sales and use tax capital improvement bonds for such purposes, it has been determined appropriate and necessary that the City authorize the issuance of its $11,250,000 Sales and Use Tax Capital Improvement Bonds, Series 2009 (the "Series 2009 Bonds"), pursuant to the provisions of Amendment 62 and the Act, such Series 2009 Bonds to be payable from and secured by a pledge of the receipts of the Sales and Use Taxes (as defined in the Original Indenture) on a parity with the pledge of the receipts of the Sales and Use Taxes securing the Series 2006A Bonds and the Series 2007 Bonds; and WHEREAS, the conditions for the issuance of Additional Bonds, as set forth in the Original Indenture, have been satisfied; and WHEREAS, the regularly scheduled payment of principal of and interest on the Series 2009 Bonds when due will be guaranteed under a financial guaranty insurance policy (the "2009 Bond Policy") to be issued concurrently with the delivery of the Series 2009 Bonds by Assured Guaranty Corp. (the "2009 Insurer"); and WHEREAS, the Series 2009 Bonds are to be dated, bear interest, mature and be subject to redemption as hereinafter in this Second Supplemental Trust Indenture set forth in detail; and WHEREAS, the execution and delivery of this Second Supplemental Trust Indenture and the issuance of the Series 2009 Bonds have been in all respects duly and validly confirmed, authorized and approved by Ordinance No. 5277 adopted and approved by the City Council of the City on October 6, 2009; and • WHEREAS, all things necessary to make the Series 2009 Bonds, when authenticated by the Trustee and issued as in this Second Supplemental Trust Indenture provided, the valid, 4823-2826-9828.4 • binding and legal obligations of the City according to the import thereof, and to constitute the Indenture (as defined below) a valid pledge of the receipts of the Sales and Use Taxes to the payment of the principal of, premium, if any, and interest on the Series 2006A Bonds, the Series 2007 Bonds, the Series 2009 Bonds and all Additional Bonds (as defined below), if any, to be issued on a parity therewith (the Series 2006A Bonds, the Series 2007 Bonds, the Series 2009 Bonds and such Additional Bonds are hereinafter referred to as the "Bonds"), have been done and performed, and the creation, execution and delivery of this Second Supplemental Trust Indenture and the creation, execution, issuance and delivery of the Series 2009 Bonds, subject to the terms hereof, have in all respects been duly authorized; and WHEREAS, in order to make proper provision for the security of the Series 2009 Bonds, it is necessary that the Original Indenture be amended and supplemented as effected hereby; NOW, THEREFORE, KNOW ALL MEN BY THESE PRESENTS, THIS SECOND SUPPLEMENTAL TRUST INDENTURE WITNESSETH: Section 1.01. It is understood and agreed that the provisions of the Original Indenture shall extend to and apply to the security and benefit of the Series 2009 Bonds and that the term "Bonds" as used in the Original Indenture is hereby recognized to include and shall be deemed to refer to (where applicable) the Series 2009 Bonds. Section 1.02. Section 101 of the Original Indenture is hereby amended by adding thereto the following definitions (and by striking any definitions which are supplanted by the definitions • set forth below): "Additional Bonds" mean Bonds in addition to the Series 2006A Bonds, the Series 2007 Bonds and the Series 2009 Bonds which are issued under the provisions of Section 212 of this Indenture. "Authorizing Ordinance" means, collectively, (i) Ordinance No. 4936, adopted by the City on October 3, 2006, which authorized the issuance of the Series 2006A Bonds pursuant to this Indenture, (ii) Ordinance No. 5054, adopted by the City on August 23, 2007, which authorized the issuance of the Series 2007 Bonds pursuant to this Indenture, and (iii) Ordinance No. 5277, adopted by the City on October 6, 2009, which authorized the issuance of the Series 2009 Bonds pursuant to this Indenture. "2009 Bond Policy" means the financial guaranty insurance policy issued by the 2009 Insurer guaranteeing the scheduled payment of principal of and interest on the Series 2009 Bonds when due. "Bonds" mean the Series 2006A Bonds, the Series 2007 Bonds, the Series 2009 Bonds and all Additional Bonds issued by the City pursuant to this Indenture. Except to the extent provided in Section 209 hereof and except for refunding bonds issued under the provisions of Section 212 hereof, the aggregate principal amount of Bonds issued hereunder shall not exceed $110,000,000. • "Government Securities" means (a) direct obligations (other than an obligation subject to variation in principal repayment) of the United States of America, (b) obligations fully and unconditionally guaranteed as to timely payment of principal and interest by the United States of 4823-2826-9828.4 3 • America, (c) obligations fully and unconditionally guaranteed as to timely payment of principal and interest by any agency or instrumentality of the United States of America when such obligations are backed by the full faith and credit of the United States of America, or (d) evidences of ownership of proportionate interests in future interest and principal payments on obligations described above held by a bank or trust company as custodian, under which the owner of the investment is the real party in interest and has the right to proceed directly and individually against the obligor and the underlying government obligations are not available to any person claiming through the custodian or to whom the custodian may be obligated. "Indenture" means this Trust Indenture dated as of November 1, 2006, as amended and supplemented by a First Supplemental Trust Indenture dated as of October 1, 2007, and by a Second Supplemental Trust Indenture dated as of November 1, 2009, each by and between the City and the Trustee, pursuant to which the Bonds are issued, and any further amendments and supplements thereto. "2009 Insurer" means Assured Guaranty Corp., a Maryland -domiciled insurance corporation, or any successor thereto or assignee thereof. "Investment Securities" means, if and to the extent the same are at the time legal for investment of Funds and Accounts held under this Indenture: (a) cash (fully insured by the Federal Deposit Insurance Corporation); • (b) Government Securities; (c) Federal Housing Administration debentures; (d) The obligations of the following government -sponsored agencies which are not backed by the full faith and credit of the United States of America: (1) Federal Home Loan Mortgage Corporation (FHLMC) senior debt obligations and Participation certificates (excluded are stripped mortgage securities which are purchased at prices exceeding their principal amounts); (2) Farm Credit System (formerly Federal Land Banks, Federal Intermediate Credit Banks and Banks for Cooperatives) consolidated system -wide bonds and notes; (3) Federal Home Loan Banks (FHL Banks) consolidated debt obligations; and (4) Federal National Mortgage Association (FNMA) senior debt obligations and mortgage -backed securities (excluded are stripped mortgage securities which are purchased at prices exceeding their principal amounts); (e) Unsecured certificates of deposit, time deposits, and bankers' acceptances (having maturities of not more than 365 days) of any bank the short-term obligations of which are rated "A -l+" or better by S&P and "Prime -l" by Moody's; (1) Deposits the aggregate amount of which are fully insured by the Federal Deposit Insurance Corporation, in banks which have capital and surplus of at least $15 • million; (g) Commercial paper (having original maturities of not more than 270 days) rated "A -I+" by S&P and "Prime -l" by Moody's; 4823-2826-9828.4 4 • (h) Money market funds rated "Aam" or "AAm-G" by S&P, or better and if rated by Moody's rated "Aa2" or better; (i) "State Obligations", which means: (1) Direct general obligations of any state of the United States of America or any subdivision or agency thereof to which is pledged the full faith and credit of a state the unsecured general obligation debt of which is rated at least "A3" by Moody's and at least "A-" by S&P, or any obligation fully and unconditionally guaranteed by any state, subdivision or agency whose unsecured general obligation debt is so rated; (2) Direct general short-term obligations of any state agency or subdivision or agency thereof described in (a) above and rated "A-1+" by S&P and "MIG-I" by Moody's; and (3) Special Revenue Bonds (as defined in the United States Bankruptcy Code) of any state or state agency described in (b) above and rated "AA-" or better by S&P and "Aa3" or better by Moody's; (j) Pre -refunded municipal obligations rated "AAA" by S&P and "Aaa" by Moody's meeting the following requirements: (1) the municipal obligations are (I) not subject to redemption prior to maturity or (II) the trustee for the municipal obligations has been given • irrevocable instructions concerning their call and redemption and the issuer of the municipal obligations has covenanted not to redeem such municipal obligations other than as set forth in such instructions; (2) the municipal obligations are secured by cash or U.S. Treasury Obligations which may be applied only to payment of the principal of, interest and premium on such municipal obligations; (3) the principal of and interest on the U.S. Treasury Obligations @lus any cash in the escrow) has been verified by the report of independent certified public accountants to be sufficient to pay in full all principal of, interest, and premium, if any, due and to become due on the municipal obligations ("Verification Report"); (4) the cash or U.S. Treasury Obligations serving as security for the municipal obligations are held by an escrow agent or trustee in trust for owners of the municipal obligations; (5) no substitution of a U.S. Treasury Obligation shall be permitted except with another U.S. Treasury Obligation and upon delivery of a new Verification Report; and (6) the cash or U.S. Treasury Obligations are not available to satisfy any other claims, including those by or against the trustee or escrow agent; and (k) other forms of investments approved in writing by the 2009 Insurer, including the 2009 Reserve Policy. • 4823-2826-9828.4 5 • "2009 Reserve Policy" means the financial guaranty insurance policy issued by the 2009 Insurer and deposited into the Series 2009 Account of the Debt Service Reserve Fund with respect to the Series 2009 Bonds. "Reserve Requirement" means, with respect to each series of Bonds, an amount equal to 5% of the original principal amount of such series of Bonds. For all purposes of this Indenture, the Reserve Requirement may be satisfied by cash or by Investment Securities, including the 2006A Reserve Policy, the 2007 Reserve Policy and the 2009 Reserve Policy. "Series 2009 Bonds" means City of Fayetteville, Arkansas Sales and Use Tax Capital Improvement Bonds, Series 2009, issued under and secured by this Indenture in the aggregate principal amount of $11,250,000. Section 2.01. Section 201(c) of the Original Indenture is hereby amended and supplemented to read as follows: "(c) The Bonds shall be equally and ratably payable and secured hereunder without priority by reason of date of adoption of this Indenture or any Supplemental Indenture authorizing their issuance or by reason of their series, number, date, date of issue, execution, authentication or sale, or otherwise; provided, however, (i) while the Series 2006A Bonds are Outstanding, 50% of Surplus Tax Receipts shall be allocated to the redemption of the Series 2006A Bonds and the remaining 50% of Surplus Tax • Receipts shall be allocated ratably (based on relative outstanding principal amounts) to the redemption of the Series 2007 Bonds, the Series 2009 Bonds and any other series of Additional Bonds (including RLF Loans) hereafter issued, and (ii) following payment in whole of the Series 2006A Bonds at maturity or upon redemption prior to maturity, all Surplus Tax Receipts shall be allocated ratably (based on relative outstanding principal amounts) to the redemption of the Series 2007 Bonds, the Series 2009 Bonds and any other Series of Additional Bonds." Section 2.02. Section 202 of the Original Indenture is hereby amended and supplemented to read as follows: "Section 202. Authorized Amount. There is hereby authorized the issuance of bonds of the City to be designated "Sales and Use Tax Capital Improvement Bonds, Series 2006A" in the principal amount of Fifty Million Dollars ($50,000,000) (the "Series 2006A Bonds"). There is hereby authorized the issuance of bonds of the City to be designated "Sales and Use Tax Capital Improvement Bonds, Series 2007" in the principal amount of Fourteen Million Three Hundred Forty Thousand Dollars ($14,340,000) (the "Series 2007 Bonds"). There is hereby authorized the issuance of bonds of the City to be designated "Sales and Use Tax Capital Improvement Bonds, Series 2009" in the principal amount of Eleven Million Two Hundred Fifty Thousand Dollars ($11,250,000) (the "Series 2009 Bonds"). No Bonds may be issued under the provisions of this Indenture except in accordance with this Article II. The total principal amount of Bonds that may be issued hereunder and any RLF Loans that may be incurred by the City is hereby expressly limited to $110,000,000, except as provided in Section 209 and except for • refunding bonds issued under the provisions of Section 212 hereof." 4823-2826-9828.4 • Section 2.03. Article II of the Original Indenture is hereby amended by adding at the end thereof the following sections: "Section 220. Details of Series 2009 Bonds. The Series 2009 Bonds (i) shall be designated "City of Fayetteville, Arkansas Sales and Use Tax Capital Improvement Bonds, Series 2009," (ii) shall be in the aggregate principal amount of $11,250,000, (iii) shall be dated as of November 1, 2009, (iv) shall bear interest from such date at the rates hereinafter provided until paid, payable semiannually on May 1 and November 1 of each year, commencing May 1, 2010, (v) shall be issued in denominations of $5,000 each, or any integral multiple thereof, (vi) shall be numbered from R09-1 upwards in order of issuance according to the records of the Trustee, and (vii) shall mature, unless sooner redeemed in the manner in this Indenture set forth, on November 1 in each of the years and in the amounts set forth in the following table, which table also sets forth the interest rates for the Series 2009 Bonds: Year (November 1) Principal Amount Interest Rate 2015 $1,450,000 3.000% 2016 1,495,000 3.250% 2017 1,545,000 3.500% 2018 1,600,000 3.625% 2019 1,655,000 3.750% • 2021 3,505,000 4.000% Section 221. Form of Series 2009 Bonds. The Series 2009 Bonds shall be initially issued as fully registered bonds, without coupons, in the form of six typewritten bond certificates (one for each maturity) to be delivered to the Securities Depository. Each such certificate shall be initially registered in the name of the nominee of the Securities Depository, and no Beneficial Owner will receive a certificate representing his interest in the Series 2009 Bonds, except upon the occurrence of the events described in Section 216 of this Indenture. Beneficial Owners shall be deemed to have waived any right to receive a bond certificate except under the circumstances described in Section 216. The Series 2009 Bonds and the Trustee's certificate of authentication to be endorsed thereon shall be in substantially the form set forth in Exhibit A to the Second Supplemental Trust Indenture, with appropriate variations, insertions and omissions as permitted or required by this Indenture. Section 222. Delivery of Series 2009 Bonds. Simultaneously with the delivery of the Series 2009 Bonds, the Trustee shall apply the proceeds thereof as follows: (a) The amount, if any, received as accrued interest on the Series 2009 Bonds, shall be deposited in the Interest Account of the Bond Fund; • (b) $21,093.75 shall be transferred to the 2009 Insurer in payment of the premium on the 2009 Reserve Policy, which 2009 Reserve Policy shall be deposited in the Series 2009 Account of the Debt Service Reserve Fund; 4823-2826-9828.4 7 • (c) $79,711.67 shall be transferred to the 2009 Insurer in payment of the premium on the 2009 Bond Policy; (d) $9,633,373.53 shall be deposited in the Series 2009 Street Subaccount of the Project Fund; (e) $1,259,179.08 shall be deposited in the Series 2009 Trail Subaccount of the Project Fund; and (f) The balance of said proceeds in the amount of $59,517.17 shall be deposited in the Costs of Issuance Fund for payment of Costs of Issuance of the Series 2009 Bonds as directed by a Certificate of the City." Section 3.01. Article III of the Original Indenture is hereby amended by adding at the end thereof the following section: "Section 308. Redemption of Series 2009 Bonds. (a) The Series 2009 Bonds shall be redeemed prior to maturity, in whole or in part, on any interest payment date, in inverse order of maturity and by lot in such manner as the Trustee shall determine within a maturity, at a redemption price equal to 100% of the principal amount being redeemed, plus accrued interest to the date of redemption, from moneys in the Series 2009 Street Subaccount or the Series 2009 Trail Subaccount of the Project Fund in excess of the amount needed to complete • the portion of the Street Project and the Trail Project intended to be funded with the Series 2009 Bonds, which moneys shall be transferred to the Redemption Fund pursuant to Section 502 hereof. (b) The Series 2009 Bonds shall be redeemed prior to maturity, in whole or in part, on any interest payment date, in inverse order of maturity and by lot in such manner as the Trustee shall determine within a maturity, at a redemption price equal to 100% of the principal amount being redeemed, plus accrued interest to the date of redemption, from Surplus Tax Receipts deposited in the Redemption Fund pursuant to Section 503 hereof. So long as the Series 2006A Bonds are outstanding, 50% of the Surplus Tax Receipts shall be allocated to the redemption of the Series 2006A Bonds and the remaining 50% of such Surplus Tax Receipts shall be allocated ratably (based on relative outstanding principal amounts) to the redemption of the Series 2007 Bonds, the Series 2009 Bonds and any series of Additional Bonds. Following payment in whole of the Series 2006A Bonds at maturity or upon redemption prior to maturity, all Surplus Tax Receipts shall be allocated ratably (based on relative outstanding principal amounts) to the redemption of the Series 2007 Bonds, the Series 2009 Bonds and any other series of Additional Bonds. (c) The Series 2009 Bonds are subject to redemption at the option of the City, communicated in a written notice to the Trustee not less than sixty (60) days prior to the date fixed for redemption, in whole or in part on any date on or • after November 1, 2015, in inverse order of maturity and by lot in such manner as the Trustee shall determine within a maturity, at a redemption price equal to 100% 4823-2826-9828.4 • of the principal amount being redeemed plus accrued interest to the date of redemption. (d) The Series 2009 Bonds maturing November 1, 2021 are subject to mandatory redemption, to be selected by lot in such manner as the Trustee shall determine, on November 1 in the years and the amounts set forth below, at a redemption price equal to 100% of the principal amount being redeemed, plus accrued interest to the date of redemption. Date Principal Amount November 1, 2020 $1,720,000 November 1, 2021 (maturity) 1,785,000 Section 4.01. Section 501(a) of the Original Indenture is hereby amended and restated to read as follows: "(a) There are hereby created and established the following Funds and Accounts: (i) Project Fund, and a Street Account (with a Series 2006A and a Series 2009 Subaccount), a Trail Account (with a Series 2006A and a Series 2009 Subaccount) and a Wastewater Account (with a Series 2006A Subaccount and a Series 2007 Subaccount) therein; • (ii) Revenue Fund; (iii) Bond Fund, and an Interest Account and a Principal Account therein; (iv) Redemption Fund; (v) Debt Service Reserve Fund, and a Series 2006A Account, a Series 2007 Account and a Series 2009 Account therein; (vi) Cost of Issuance Fund; and (vii) Rebate Fund." Section 4.02. Section 503(b) of the Original Indenture is hereby amended and restated to read as follows: "(b) Upon receipt, but in no event later than the last day of each month in which receipts of the Sales and Use Taxes are deposited in the Revenue Fund, commencing no later than March 30, 2007, there shall be transferred from the Revenue Fund, in the following order, the amounts set forth below: FIRST: For deposit to the Interest Account of the Bond Fund, an • amount equal to one -sixth (1/6) of the interest on the Outstanding Bonds due on the next interest payment date; provided, however, (i) with respect to the deposits to be made to the Interest Account relating to the Series 2006A Bonds during the 4823-2826-9828.4 9 • months of March, 2007 through October, 2007, such deposits shall be in an amount equal to one -seventh (1/7) of the interest due on the Series 2006A Bonds on November 1, 2007, and (ii) with respect to the deposits to be made to the Interest Account relating to the Series 2007 Bonds during the months of October, 2007 through April, 2008, such deposits shall be in an amount equal to one - seventh (1/7) of the interest due on the Series 2007 Bonds on May 1, 2008; SECOND: For deposit to the Principal Account of the Bond Fund, an amount equal to one -twelfth (1/12) of the next scheduled principal maturity of Outstanding Bonds (including mandatory sinking fund redemptions); provided, however, with respect to the Series 2006A Bonds, the Series 2007 Bonds and the Series 2009 Bonds, such deposits shall not commence until November 2014; THIRD: For deposit to the Debt Service Reserve Fund, an amount sufficient to cure any deficiency in the Debt Service Reserve Fund (including any reimbursement to the 2006A Insurer under the 2006A Reserve Policy, any reimbursement to the 2007 Insurer under the 2007 Reserve Policy, and any reimbursement to the 2009 Insurer under the 2009 Reserve Policy); FOURTH: For deposit to the Rebate Fund, an amount sufficient to satisfy the City's obligations under Section 507 hereof, FIFTH: For payment to the Trustee and Paying Agent, the amount, • if any, necessary to pay or reimburse the Trustee and Paying Agent for fees and expenses related to the Bonds; and SIXTH: All remaining moneys ("Surplus Tax Receipts") will be transferred to the Redemption Fund and shall be applied to call Bonds for redemption prior to maturity as provided in Section 301(b) and Section 506 of the Indenture." Section 4.03. Section 505 of the Original Indenture is hereby amended and supplemented to read as follows: "Section 505. Cost of Issuance Fund. There shall be deposited to the credit of the Cost of Issuance Fund all moneys received for said Fund pursuant to Section 208 and Section 219 hereof. The Trustee shall pay those Costs of Issuance as directed by the City pursuant to a Certificate delivered on a Closing Date. After all Costs of Issuance have been paid (and in any event not later than January 1, 2007 with respect to the Series 2006A Bonds, December 1, 2007 with respect to the Series 2007 Bonds, and December 1, 2009 with respect to the Series 2009 Bonds), any remaining moneys in the Cost of Issuance Fund shall be transferred to the Interest Account of the Bond Fund." Section 4.04. Section 506 of the Original Indenture is hereby amended and supplemented to read as follows: • "Section 506. Redemption Fund. (a) There shall be deposited to the credit of the Redemption Fund all moneys required to be transferred thereto pursuant to Section 502 and Section 503 of this Indenture. 4823-2826-9828.4 10 • (b) Moneys credited to the Redemption Fund shall be expended only as set forth in this Section 506. (c) Moneys in the Redemption Fund shall be transferred to the Principal Account of the Bond Fund at such times as may be necessary to effectuate, on the first available date, redemptions of Bonds required by Section 301(a)(1) and (2), Section 307(a) and (b), and Section 308(a) and (b) of this Indenture. So long as the Series 2006A Bonds are outstanding, 50% of the Surplus Tax Receipts shall be allocated to the redemption of the Series 2006A Bonds and the remaining 50% of such Surplus Tax Receipts shall be allocated ratably (based on relative outstanding principal amounts) to the redemption of the Series 2007 Bonds, the Series 2009 Bonds and any series of Additional Bonds. Following payment in whole of the Series 2006A Bonds at maturity or upon redemption prior to maturity, all Surplus Tax Receipts shall be allocated ratably (based on relative outstanding principal amounts) to the redemption of the Series •2007 Bonds, the Series 2009 Bonds and any other series of Additional Bonds. (d) The amounts accumulated in the Redemption Fund, if so directed by the City by means of a Certificate delivered to the Trustee, shall be applied by the Trustee to the purchase of Bonds of the maturities which would otherwise be redeemed pursuant to Section 301(a)(1) and (2), Section 307(a) and (b), Section 308(a) and (b) and this Section 506 but for the provisions of this subsection (d), at • prices directed by the City not exceeding the applicable redemption prices of the Bonds which would be redeemed but for the operation of this sentence. Interest accrued on the Bonds so purchased shall be paid from moneys credited to the Interest Account of the Bond Fund." Section 5.01. Section 902(a) of the Original Indenture is hereby amended and supplemented to read as follows: "(a) Subject to subsection (b) of this Section 902, the City shall, from moneys lawfully available therefor, pay to the Trustee and any Paying Agent reasonable compensation for all services performed hereunder and also all reasonable expenses, charges and other disbursements and those of their attorneys, agents and employees incurred in and about the administration and execution of the trusts hereby created and the performance of the powers and duties hereunder and, to the extent permitted by law and from moneys lawfully available therefor, shall indemnify and save the Trustee harmless against any liabilities which it may incur in the exercise and performance of its powers and duties hereunder. With respect to the Series 2006A Bonds, the Trustee's initial authentication fee shall be $3,500 and the annual administration fee of the Trustee shall be $4,000 annually prior to the final Completion Date with respect to any of the Projects, and $3,500 annually thereafter. With respect to the Series 2007 Bonds, the Trustee's initial authentication fee shall be $1,500 and the annual administration fee of the Trustee shall be $1,500 annually prior to the final Completion Date with respect to any of the Projects, and $1,500 annually thereafter. With respect to the Series 2009 • Bonds, the Trustee's initial authentication fee shall be $1,000 and the annual administration fee of the Trustee shall be $1,500 annually prior to the final Completion Date with respect to any of the Projects, and $1,000 annually thereafter. If the City shall fail to make any payment required by this subsection (a), the Trustee may make such 4823-28269828.4 • payment from any moneys in its possession under the provisions of this Indenture and shall be entitled to a preference therefor over any of the Bonds Outstanding hereunder. The City shall not be required to indemnify the Trustee against any liabilities which the Trustee may incur as a result of negligent or wrongful acts or omissions of the Trustee." Section 6.01. The Original Indenture is hereby amended and supplemented by adding at the end thereof the following Article: "ARTICLE XIV PROVISIONS RELATING TO 2009 BOND POLICY AND 2009 RESERVE POLICY Notwithstanding any provision to the contrary contained in this Indenture, so long as the 2009 Bond Policy and/or the 2009 Reserve Policy remain in full force and effect (or any amounts are owed to the 2009 Insurer in connection therewith), the provisions of this Article XIV shall control where applicable. Section 1401. Consents, Approvals and Directions of 2009 Insurer. (a) The 2009 Insurer shall be deemed to be the sole Holder of the Series 2009 Bonds for the purpose of (i) exercising all remedies and directing the Trustee to take actions or for any other purposes following an Event of Default, and (ii) granting any consent, waiver, direction or approval or taking any action permitted or required under this Indenture to be • granted to or taken by the Holders of the Series 2009 Bonds. (b) With respect to any amendment, supplement, modification to, or waiver of, this Indenture or any other document relating to the issuance of, of security for, the Series 2009 Bonds not requiring the consent of Bondholders, prior written notice thereof must be provided to the 2009 Insurer. The 2009 Insurer's prior written consent is required for any amendment, supplement, modification to, or waiver of, this Indenture or any other document relating to the issuance of, of security for, the Series 2009 Bonds that does require. Copies of any amendment, supplement, modification or waiver requiring the consent of the 2009 Insurer must be provided to all rating agencies that have assigned a rating to the Series 2009 Bonds. (c) In addition to the requirements in (b) above, in any other case requiring the consent of all Bondholders, the prior written consent of the 2009 Insurer shall also be required. (d) Any provision of the Indenture expressly recognizing or granting rights in or to the 2009 Insurer may not be amended in any manner that affects the rights of the 2009 Insurer hereunder without the prior written consent of the 2009 Insurer. (e) No removal or resignation of the Trustee (or Paying Agent) shall take effect until a successor, acceptable to the 2009 Insurer, shall be appointed. The Trustee (or Paying Agent) may be removed at any time, at the request of the 2009 Insurer, for any • breach of its obligations under this Indenture. 4823.2826-9828.4 12 • (f) Upon the occurrence and continuance of an Event of Default, the 2009 Insurer shall be entitled to control and direct the enforcement of all rights and remedies granted to the Bondholders or the Trustee for the benefit of the Bondholders under this Indenture, including, without limitation, (i) the right to accelerate the principal of the Series 2009 Bonds and (ii) the right to annul any declaration of acceleration. The 2009 Insurer shall also be entitled to approve all waivers of Events of Default. (g) Upon the occurrence of an Event of Default, the Trustee may, with the prior written consent of the 2009 Insurer, and shall at the direction of the 2009 Insurer or the Bondholders with the prior written consent of the 2009 Insurer, declare the principal of the Series 2009 Bonds to be immediately due and payable, whereupon that portion of the principal of the Series 2009 Bonds thereby coming due and the interest accrued thereon to the date of payment shall, without further action, become and be immediately due and payable, anything in this Indenture or in the Series 2009 Bonds to the contrary notwithstanding. (h) The prior written consent of the 2009 Insurer shall be a condition precedent to the deposit of any credit instrument provided in lieu of the 2009 Reserve Policy or a cash deposit into the Series 2009 Account of the Debt Service Reserve Fund, if any. Notwithstanding anything to the contrary set forth in this Indenture, amounts on deposit in the Series 2009 Account of the Debt Service Reserve Fund shall be applied solely to the payment of debt service due on the Series 2009 Bonds. • (i) The exercise of any provision of this Indenture which permits the purchase of Series 2009 Bonds in lieu of redemption shall require the prior written approval of the 2009 Insurer if any Series 2009 Bond so purchased is not redeemed, defeased or cancelled upon purchase. (j) In determining whether the rights of Bondholders will be adversely affected by any action taken pursuant to the terms and provisions of this Indenture, the Trustee (or Paying Agent) shall consider the effect on the Bondholders as if there were no 2009 Bond Policy. (k) Any reorganization or liquidation plan with respect to the City must be acceptable to the 2009 Insurer. In the event of any such reorganization or liquidation, the 2009 Insurer shall have the right to vote on behalf of all Bondholders who hold Series 2009 Bonds guaranteed by the 2009 Insurer absent a payment default by the 2009 Insurer under the 2009 Bond Policy. Section 1402. Disclosures to 2009 Insurer. (a) The 2009 Insurer shall be provided with the following information by the City or the Trustee, as the case may be: (i) Annual audited financial statements prepared by a certified public accountant within 180 days after the end of the City's fiscal year (together with a certification of the City that it is not aware of any default or Event of Default under the Indenture), and the City's annual budget within 30 days after the . approval thereof, together with such other information, data or reports as the 2009 Insurer shall reasonably request from time to time; 4823-2826-9828.4 13 • (ii) Immediate notice of any draw upon the Debt Service Reserve Fund other than (1) withdrawals of amounts in excess of the Reserve Requirement and (2) withdrawals in connection with a refunding of Bonds; (iii) Prior to issuing Additional Bonds, any disclosure document or financing agreement relating thereto, which disclosure document or financing agreement shall include the applicable maturity schedule, interest rate(s), redemption and security provision pertaining to said Additional Bonds; (iv) Prior written notice of any name change of the Trustee (or Paying Agent) or the resignation or removal of the Trustee (or Paying Agent); (v) Within thirty (30) days following the commencement of any litigation or investigation that may have a material adverse effect on the ability of the City to comply with its obligations under this Indenture, notice of such litigation or investigation; and (vi) All reports and notices required to be delivered to the Bondholders, the Trustee or any entity designated pursuant to Rule 15c2 -12(b)(5) adopted by the Securities and Exchange Commission shall also be provided to the 2009 Insurer simultaneously with the delivery of said reports or notices. (b) All demands, notices and other information required to be given to the • 2009 Insurer hereunder shall be in writing and shall be mailed by registered or certified mail or personally delivered, emailed or telecopied to the 2009 Insurer as follows: Assured Guaranty Corp. 31 West 52nd Street New York, New York 10019 Attn: Risk Management Department (Re: Policy No: D-2009-1478) Telecopy No. (212) 581-3268 Email: riskmanagementdeptpassured ug aranty.com In each case in which notice or other communication refers to an Event of Default, a claim on the 2009 Policy or any event with respect to which failure on the part of the 2009 Insurer to respond shall be deemed to constitute consent or acceptance, then such demand, notice or other communication shall be marked to indicate "URGENT MATERIAL ENCLOSED" and shall also be sent to the attention of the General Counsel at the same address and telecopy above and to generalcounsel(7a,assured ug aranty.com. (c) The City will permit the 2009 Insurer to discuss the affairs, finances and accounts of the City or any information the 2009 Insurer may reasonably request regarding the security for the Series 2009 Bonds with appropriate members of the City staff and will use commercially reasonable efforts to enable the 2009 Insurer to have access to the facilities, books and records of the City on any business day upon • reasonable prior notice. 4823-2826-9828.4 14 • (d) The Trustee shall notify the 2009 Insurer of any failure by the City to provide notices, certificates and other information under this Indenture. Section 1403. Defeasance and Discharge of Series 2009 Bonds. (a) In the event that the principal and/or interest due on the Series 2009 Bonds shall be paid by the 2009 Insurer pursuant to the 2009 Policy, the Series 2009 Bonds shall remain Outstanding for all purposes, shall not be defeased or otherwise satisfied and shall not be considered paid by the City, and the assignment and pledge of the Trust Estate and all covenants, agreements and other obligations of the City to the registered owners shall continue to exist and shall run to the benefit of the 2009 Insurer, and the 2009 Insurer shall be subrogated to the rights of such registered owners including, without limitation, any rights that such owners may have in respect of securities law violations arising from the offer and sales of the Series 2009 Bonds. (b) In the event of any defeasance of the Series 2009 Bonds in accordance with the provisions of Article VII of this Indenture, the following items shall be provided to the Trustee and to the 2009 Insurer: (i) An opinion of Bond Counsel to the effect (1) that the defeasance will not adversely impact the exclusion from gross income for federal income tax purposes of interest on the Series 2009 Bonds, and (2) that the Series 2009 Bonds are no longer Outstanding under the Indenture; and • (ii) If the Series 2009 Bonds are being advance refunding (within the meaning of the Code) through a net defeasance, a refunding trust or escrow agreement (the "Escrow Agreement") and an opinion of counsel regarding the validity and enforceability thereof. The Escrow Agreement shall provide that: (1) any substitution of securities in the escrow will require verification by an independent certified public accountant and the prior written consent of the 2009 Insurer: (2) the City will not exercise any optional redemption rights with the respect to the Series 2009 Bonds secured by the Escrow Agreement or any other redemption rights other than mandatory sinking fund redemptions unless (I) the right to make any such redemption has been expressly reserved in the Escrow Agreement and such reservation has been disclosed in detail in the official statement for any refunding bonds used to fund the escrow, and (II) as a condition of any such redemption, there shall be provided to the 2009 Insurer a verification of an independent certified public accountant as to the sufficiency of escrow receipts without reinvestment to meet the escrow requirements remaining following such redemption; and (3) the City shall not amend the Escrow Agreement or enter into a forward purchase agreement or other agreement with respect to rights in the escrow without the prior written consent of the 2009 Insurer. Section 1404. Claims Upon 2009 Bond Policy and Payments by and to 2009 Insurer. (a) At least two (2) Business Days prior to each payment date on the Series 2009 Bonds, the Trustee will determine whether there will be sufficient funds to pay all • principal of and interest on the Series 2009 Bonds due on the related payment date and shall immediately notify the 2009 Insurer or its designee on the same Business Day by telephone or electronic mail, confirmed in writing by registered or certified mail, of the 4823.2826-9828.4 15 • amount of any deficiency. Such notice shall specify the amount of the anticipated deficiency, the Series 2009 Bonds to which such deficiency is applicable and whether such Series 2009 Bonds will be deficient as to principal or interest or both. If the deficiency is made up in whole or in part prior to or on the payment date, the. Trustee shall so notify the 2009 Insurer or its designee. (b) The Trustee shall, after giving notice to the 2009 Insurer as provided above, make available to the 2009 Insurer and, at the 2009 Insurer's direction, to any fiscal agent, the registration books of the City maintained by the Trustee and ail records relating to the funds maintained under the Indenture. (c) The Trustee shall provide the 2009 Insurer and any fiscal agent with a list of registered owners of the Series 2009 Bonds entitled to receive principal or interest payments from the 2009 Insurer under the terms of the 2009 Policy, and shall make arrangements with the 2009 Insurer, the fiscal agent or another designee of the 2009 Insurer to (i) mail checks or drafts to the registered owners of the Series 2009 Bonds entitled to :receive full or partial interest payments from the 2009 Insurer and (ii) pay principal upon the Series 2009 Bonds surrendered to the 2009 Insurer, the fiscal agent or another designee of the 2009 Insurer by the registered owners of the Series 2009 Bonds entitled to receive full or partial principal payments from the 2009 Insurer. (d) The Trustee shall, at the time it provides notice to the 2009 Insurer of any • deficiency pursuant to clause (a) above, notify registered owners of the Series 2009 Bonds entitled to receive the payment of principal or interest thereon from the 2009 Insurer (i) as to such deficiency and its entitlement to receive principal or interest, as applicable, (ii) that the 2009 Insurer will remit to them all or a part of the interest payments due on the related payment date upon proof of its entitlement thereto and delivery to the 2009 Insurer or any fiscal agent, in form satisfactory to the 2009 Insurer, of an appropriate assignment of the registered owner's right to payment, (iii) that, if they are entitled to receive partial payment of principal from the 2009 Insurer, they must surrender the related Series 2009 Bonds for payment first to the Trustee, which will note on such Series 2009 Bonds the portion of the principal paid by the Trustee, and second to the 2009 Insurer or its designee, together with an appropriate assignment, in form satisfactory to the 2009 Insurer, to permit ownership of such Series 2009 Bonds to be registered in the name of the 2009 Insurer, which will then pay the unpaid portion of principal, and (iv) that, if they are entitled to receive full payment of principal from the 2009 Insurer, they must surrender the related Series 2009 Bonds for payment to the 2009 Insurer or its designee, rather than the Trustee, together with the an appropriate assignment, in form satisfactory to the 2009 Insurer, to permit ownership of such Series 2009 Obligations to be registered in the name of the 2009 Insurer. (e) In addition, if the Trustee has notice that any Holder of the Series 2009 Bonds has been required to disgorge payments of principal or interest on the Series 2009 Bonds previously Due for Payment pursuant to a final non -appealable order by a court of competent jurisdiction that such payment constitutes an avoidable preference to such holder within the meaning of any applicable bankruptcy laws, then the Trustee shall notify • the 2009 Insurer or its designee of such fact by telephone or electronic notice, confirmed in writing by registered or certified mail. 4823-2826-9828.4 16 • (0 The Trustee will be hereby irrevocably designated, appointed, directed and authorized to act as attorney -in -fact for holders of the Series 2009 Bonds as follows: (i) If and to the extent there is a deficiency in amounts required to pay interest on the Series 2009 Bonds, the Trustee shall (1) execute and deliver to the 2009 Insurer, in form satisfactory to the 2009 Insurer, an instrument appointing the 2009 Insurer as agent for such holders in any legal proceeding related to the payment of such interest and an assignment to the 2009 Insurer of the claims for interest to which such deficiency relates and which are paid by the 2009 Insurer, (2) receive as designee of the respective holders (and not as Trustee) in accordance with the tenor of the 2009 Bond Policy payment from the 2009 Insurer with respect to the claims for interest so assigned, and (3) disburse the same to such respective holders; and (ii) If and to the extent of a deficiency in amounts required to pay principal of the Series 2009 Bonds, the Trustee shall (1) execute and deliver to the 2009 Insurer, in form satisfactory to the 2009 Insurer, an instrument appointing the 2009 Insurer as agent for such holder in any legal proceeding related to the payment of such principal and an assignment to the 2009 Insurer of the Series 2009 Bonds surrendered to the 2009 Insurer in an amount equal to the principal amount thereof as has not previously been paid or for which moneys are not held by the Trustee and available for such payment (but such assignment shall be delivered only if payment • from the 2009 Insurer is received), (2) receive as designee of the respective holders (and not as Trustee) in accordance with the tenor of the 2009 Bond Policy payment therefore from the 2009 Insurer, and (3) disburse the same to such holders. (g) Payments with respect to claims for interest on and principal of Series 2009 Bonds disbursed by the Trustee from proceeds of the 2009 Bond Policy shall not be considered to discharge the obligation of the City with respect to such Series 2009 Bonds, and the 2009 Insurer shall become the owner of such unpaid Series 2009 Bonds and claims for the interest in accordance with the tenor of the assignment made to it under the provisions of this subsection or otherwise. (h) Irrespective of whether any such assignment is executed and delivered, the City and the Trustee hereby agree for the benefit of the 2009 Insurer that: (i) they recognize that to the extent the 2009 Insurer makes payments, directly or indirectly (e.g., by paying through the Trustee), on account of principal of or interest on the Series 2009 Bonds, the 2009 Insurer will be subrogated to the rights of such holders to receive the amount of such principal and interest from the City, with interest thereon as provided and solely from the sources stated in this Indenture and the Series 2009 Bonds; and (ii) they will accordingly pay to the 2009 Insurer the amount of such principal and interest, with interest thereon as provided in this Indenture and the • Series 2009 Bonds, but only from the sources and in the manner provided herein for the payment of principal of and interest on the Series 2009 Bonds to holders, and 4823-2826-9828.4 17 • will otherwise treat the 2009 Insurer as the owner of such rights to the amount of such principal and interest. (i) The 2009 Insurer shall be entitled to pay principal or interest on the Series 2009 Bonds that shall become Due for Payment but shall be unpaid by reason of Nonpayment (as such terms are defined in the 2009 Bond Policy) and any amounts due on the Obligations as a result of acceleration of the maturity thereof in accordance with this Indenture, whether or not the 2009 Insurer has received a Notice (as defined in the 2009 Bond Policy) of Nonpayment or a claim upon the 2009 Bond Policy. (j) In addition, the 2009 Insurer shall, to the extent it makes any payment of principal or interest on the Series 2009 Bonds, become subrogated to the rights of the recipients of such payments in accordance with the terms of the 2009 Bond Policy, and to evidence such subrogation (1) in the case of claims for interest, the Trustee shall note the 2009 Insurer's rights as subrogee on the registration books of the City maintained by the Trustee, upon receipt of proof of payment of interest thereon to the registered holders of the Series 2009 Bonds, and (2) in the case of claims for principal, the Trustee, if any, shall note the 2009 Insurer's rights as subrogee on the registration books of the City maintained by the Trustee, upon surrender of the Series 2009 Bonds together with receipt of proof of payment of principal thereof. (k) The City hereby agrees to pay or reimburse the 2009 Insurer (i) all amounts • paid by the 2009 Insurer under the 2009 Bond Policy, and (ii) to the extent permitted by law, any and all charges, fees, costs and expenses which the 2009 Insurer may reasonably pay or incur, including, but not limited to, fees and expenses of attorneys, accountants, consultants and auditors and reasonable costs of investigations, in connection with (1) any accounts established to facilitate payments under the 2009 Bond Policy, (2) the administration, enforcement, defense or preservation of any rights in respect of this Indenture or any other financing agreement relating to the Series 2009 Bonds, including defending, monitoring or participating in any litigation or proceeding (including any bankruptcy proceeding in respect of the City or any affiliate thereof) relating to this Indenture or any such financing agreement, any party to this Indenture or any other such financing agreement or the transaction contemplated by this Indenture, (3) the foreclosure against, sale or other disposition of any collateral securing any obligations under this Indenture or any such other financing agreement, or the pursuit of any remedies under this Indenture or any other such financing agreement, to the extent such costs and expenses are not recovered from such foreclosure, sale or other disposition, or (4) any amendment, waiver or other action with respect to, or related to, this Indenture or any other financing agreement whether or not executed or completed; costs and expenses shall include a reasonable allocation of compensation and overhead attributable to time of employees of the 2009 Bond Insurer spent in connection with the actions described in clauses (2) - (4) above. In addition, the 2009 Bond Insurer, the City recognizes that the 2009 Bond Insurer has reserved the right to charge a reasonable fee as a condition to executing any amendment, waiver or consent proposed in respect of this Indenture or any other financing agreement. The City will pay interest on the amounts owed in this paragraph from the date of any payment due or paid, at • the lesser of (x) the maximum rate of interest permitted by then applicable law, or (y) the per annum rate of interest publicly announced from time to time by JP Morgan Chase Bank, National Association at its principal office in New York, New York as its prime lending 4823-2826-9828.4 18 rate (any change in such prime rate of interest to be effective on the date such change is announced by JPMorgan Chase Bank, National Association), plus three percent (3%) per annum (the "Reimbursement Rate"). The Reimbursement Rate shall be calculated on the basis of the actual number of days elapsed over a 360 -day year. In the event JPMorgan Chase Bank ceases to announce its prime rate publicly, the prime rate shall be the publicly announced prime rate or base lending rate of such national bank as the 2009 Bond Insurer shall specify. (1) In addition to any and all rights of reimbursement, subrogation and any other rights pursuant hereto or under law or in equity, the City agrees to pay or reimburse the 2009 Insurer, to the extent permitted by law, any and all charges, fees, costs, claims, losses, liabilities (including penalties), judgments, demands, damages and expenses which the 2009 Insurer or its officers, directors, shareholders, employees, agents and each Person, if any, who controls the 2009 Insurer within the meaning of either Section 15 of the Securities Act of 1933, as amended, or Section 20 of the Securities Exchange Act of 1934, as amended, may reasonably pay or incur, including, but not limited to, fees and expenses of attorneys, accountants, consultants and auditors and reasonable costs of investigations, of any nature in connection with, in respect of or relating to the transactions contemplated by this Indenture or any other financing agreement relating to the Series 2009 Bonds, by reason of: (i) any omission or action (other than of or by the 2009 Insurer) in • connection with the offering, issuance, sale, remarketing or delivery of the Series 2009 Bonds; (ii) the negligence, bad faith, willful misconduct, misfeasance, malfeasance or theft committed by any director, officer, employee or agent of the City in connection with any transaction arising from or relating to this Indenture or any other financing. agreement; (iii) the violation by the City of any law, rule or regulation; or any judgment, order or decree applicable to it; (iv) the breach by the City of any representation, warranty or covenant under this Indenture or any other financing agreement relating to the Series 2009 Bonds, or the occurrence, in respect. of the City, under this Indenture or any other such financing agreement of any "event of default" or any event which, with the giving of notice or lapse of time or both, would constitute any "event of default"; or (v) any untrue statement or alleged untrue statement of a material fact contained in any official statement relating to the Series 2009 Bonds, if any, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such claims arise out of or are based upon any untrue statement or omission in information included in an official statement, if any, and furnished by the 2009 Insurer in writing expressly for use therein. r1 LJ 4823-2826-9828.4 19 • Section 1405. Provisions Relating to Additional Bonds. (a) The principal on any Additional Bonds issued under the Indenture shall be payable on November 1 of the years provided in the Supplemental Indenture authorizing such Additional Bonds. (b) As a condition to the issuance of Additional Bonds secured on a parity basis with the Series 2006A Bonds, the Series 2007 Bonds and the Series 2009 Bonds, the City shall provide to the 2009 Insurer a copy of certified cash flows evidencing that the Existing Indebtedness will be repaid in full no later than November 1, 2014. Such cash flows shall assume that all of the permitted Existing Indebtedness unissued on the date the cash flows are provided has in fact been issued. Alternatively, the City may covenant to the 2009 Insurer not to issue all or any portion of the unissued Existing Indebtedness and omit that portion of the Existing Indebtedness from the cash flows. (c) Notwithstanding satisfaction of the other conditions to the issuance of Additional Bonds set forth in Article II of this Indenture, no such issuance may occur (i) if an Event of Default (or any event which, once all notice or grace periods have passed, would constitute an Event of Default) exists unless such default shall be cured upon such issuance and (ii) unless the Debt Service Reserve Fund is fully funded at the Reserve Requirement (including the Reserve Requirement relating to the proposed issue) upon the issuance of such Additional Bonds, in either case unless otherwise permitted by the 2009 Insurer. • (d) In addition to the coverage required in Section 212 hereof relating to the issuance of Additional Bonds, the Certificate delivered by the Finance Director shall also show coverage of at least one times on Policy Costs then due and owing. Section 1406. Miscellaneous Provisions Relating to 2009 Bond Policy. (a) Unless the 2009 Insurer shall otherwise consent, the City hereby covenants not to issue any additional debt secured by a lien on the Existing Tax. (b) The 2009 Insurer is explicitly recognized as being a third party beneficiary to this Indenture and may enforce any right, remedy or claim conferred, given or granted hereunder. (c) The City shall not enter into (i) any variable rate indebtedness on a parity with or subordinate to the Series 2009 Bonds, or (ii) any derivative instruments in connection with the Series 2009 Bonds and any parity or subordinate obligations, in each case subsequent to the date hereof and so long as any Series 2009 Bonds insured by the 2009 Insurer remain outstanding." Section 7.01. Severability. (a) If any provisions of this Second Supplemental Trust Indenture shall be held or deemed to be or shall, in fact, be inoperative or unenforceable as applied in any particular case in any jurisdiction or jurisdictions or in all jurisdictions or in all cases because it conflicts with any provisions or any constitution or statute or rule of public policy, or for any other reason, such circumstances shall not have the effect of rendering the provision in question inoperative or unenforceable in any other case or circumstance, or of • rendering any other provision or provisions herein contained invalid, inoperative or unenforceable to any extent whatever. 4823-2826-9828.4 20 • (b) The invalidity of any one or more phrases, sentences, clauses or paragraphs in this Second Supplemental Trust Indenture contained shall not affect the remaining portions of this Second Supplemental Trust Indenture or any part thereof. Section 7.02. Applicable Provisions of Law. This Second Supplemental Trust Indenture shall be considered to have been executed in the State of Arkansas and it is the intention of the parties that the substantive law of the State of Arkansas govern as to all questions of interpretation, validity and effect. Section 7.03. Counterparts. This Second Supplemental Trust Indenture may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. Section 7.04. Ratification of Original Indenture. As supplemented and amended hereby, the Original Indenture is hereby ratified and confirmed. • • 4823.2826-9828.4 21 •IN WITNESS WHEREOF, the City has caused these presents to be signed in its name and behalf by its Mayor and its corporate seal to be hereunto affixed and attested by its City Clerk, and to evidence its acceptance of the trust hereby created, the Trustee has caused these presents to be signed in its behalf by its duly authorized officers and its corporate seal to be hereto affixed. CITY OFF YETTARKAN EVILLE, SAS — ayor ATTEST: r/ By: _ City Clerk L ',FAYET1EVILLE; • ATTEST: By: Title: Vice President (SEAL) SIMMONS FIRST TRUST COMPANY, N.A., as Trustee By: Title: Assistant Vice President [SIGNATURE PAGE TO SECOND SUPPLEMENTAL TRUST INDENTURE] 4823-2826-9828.4 • IN WITNESS WHEREOF, the City has caused these presents to be signed in its name and behalf by its Mayor and its corporate seal to be hereunto affixed and attested by its City Clerk, and to evidence its acceptance of the trust hereby created, the Trustee has caused these presents to be signed in its behalf by its duly authorized officers and its corporate seal to be hereto affixed. CITY OF FAYETTEVILLE, ARKANSAS By: Mayor ATTEST: By: City Clerk (SEAL) SIMMONS FIRST TRUST COMPANY, N.A., as Trustee • By:�, a — Title: Assistant Vice President ATTEST: By: �• Title: Vice Pre dent (SEAL) • QpORAt C • sSAZ'. • [SIGNATURE PAGE TO SECOND SUPPLEMENTAL TRUST INDENTURE] 4823-2826-9828.4 • ACKNOWLEDGMENT STATE OF ARKANSAS ) ) ss. COUNTY OF WASHINGTON ) Before me a Notary Public, duly commissioned, qualified and acting within and for the State and county aforesaid, appeared in person the within named Lioneld Jordan and Sondra Smith, Mayor and City Clerk, respectively, of the City of Fayetteville, Arkansas, to me personally known, who stated that they were duly authorized in their respective capacities to execute the foregoing instrument for and in the name of the City, and further stated and acknowledged that they had signed, executed and delivered the foregoing instrument for the consideration, uses and purposes therein mentioned and set forth. IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal this IY day of November, 2009. Notary Public • My Commission expires: DOM a 6ownE WAellwQroK caws PCTMY PUeuc-MKp76p8 Ca ,wydsa, No, 17871864 (SEAL) • [ACKNOWLEDGEMENT TO SECOND SUPPLEMENTAL TRUST INDENTURE] 4823-2826-9828.4 - CT: P J E ACKNOWLEDGMENT STATE OF ARKANSAS ss. COUNTY OF JEFFERSON Before me a Notary Public, duly commissioned, qualified and acting within and for the State and county aforesaid, appeared in person the within named Glenda Dean and Roy Ferrell, the Assistant Vice President and the Vice President, respectively, of Simmons First Trust Company, N.A., to me personally known, who stated that they were duly authorized in their respective capacities to execute the foregoing instrument for and in the name of the Trust Company, and further stated and acknowledged that they had signed, executed and delivered the foregoing instrument for the consideration, uses and purposes therein mentioned and set forth. IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal thisy of November, 2009. My Commission expires: (S [ACKNOWLEDGEMENT TO SECOND SUPPLEMENTAL TRUST INDENTURE] [x1•resz:rra•TIN11 n .r r £... 1.)JI. �1• • S i 0 EXHIBIT A TO SECOND SUPPLEMENTAL TRUST INDENTURE Form of Series 2009 Bond Unless this certificate is presented by an authorized representative of The Depository Trust Company, a New York corporation ("DTC'), to the City or its agent for registration of transfer, exchange or payment, and any certificate issued is registered in the name of Cede & Co. or in such other name as is requested by the authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), any transfer, pledge or other use hereof for value or otherwise by or to any person is wrongful inasmuch as the registered owner hereof Cede & Co., has an interest herein. REGISTERED REGISTERED No. R09-_ $ UNITED STATES OF AMERICA STATE OF ARKANSAS CITY OF FAYETTEVILLE, ARKANSAS SALES AND USE TAX CAPITAL IMPROVEMENT BOND SERIES 2009 Interest Rate: _% Date of Bond: November 1, 2009 Registered Owner: CEDE & CO. Principal Amount: KNOW ALL MEN BY THESE PRESENTS: Maturity Date: November 1, 20 CUSIP: DOLLARS That the City of Fayetteville, Arkansas, a municipality and political subdivision organized and existing by virtue of the laws of the State of Arkansas (the "City"), for value received, promises to pay to the Registered Owner shown above, or registered assigns, on the Maturity Date shown above, but solely from the source and in the manner hereinafter set forth, the Principal Amount shown above, and in like manner to pay interest on said amount from the date hereof until payment of such Principal Amount has been made or duly provided for, at the Interest Rate per annum shown above, such interest to be payable semiannually on May I and November 1 of each year, commencing May 1, 2010, except as the provisions hereinafter set forth with respect to redemption of this bond prior to maturity may become applicable hereto. The principal of and premium, if any, on this bond are payable in lawful money of the United States of America upon the presentation and surrender hereof at the principal corporate trust office of Simmons First Trust Company, N.A., Pine Bluff, Arkansas, or its successor or successors, as trustee (the "Trustee"). So long as Cede & Co. or another nominee of DTC is the registered owner of this bond, payment of interest hereon shall be made by wire transfer of immediately available funds by the Trustee to the Registered Owner as of the fifteenth day of the calendar month preceding the calendar month in which such interest payment date shall fall (the "Record Date"). At any time thereafter, payment of interest hereon shall be made by check or draft of the Trustee to the Registered Owner as of the applicable Record Date, at the owner's address as it appears on the bond registration books of the City kept by the Trustee. 4823-2826-9828.4 A-1 This bond, designated "Sales and Use Tax Capital Improvement Bond, Series 2009", is one of a series of bonds aggregating Eleven Million Two Hundred Fifty Thousand Dollars ($11,250,000) (the `Bonds"). The Bonds are being issued for the purpose of financing all or a portion of the costs of (i) the acquisition, construction, reconstruction, repair, straightening and widening of certain City streets and related improvements (the "Street Project"), and (ii) the acquisition, construction and equipping of certain City trail system improvements (the "Trail Project"). Bond proceeds will be utilized to pay Project costs, to fund a debt service reserve, to purchase a policy of municipal bond insurance, and to pay the costs of issuance of the Bonds. The Bonds are issued under and are secured by and entitled to the protection of a Trust Indenture dated as of November 1, 2006, as supplemented and amended by a First Supplemental Trust Indenture dated as of October 1, 2007, and by a Second Supplemental Trust Indenture dated as of November 1, 2009 (as supplemented and amended, the "Indenture"), by and between the City and the Trustee, which Indenture is available for inspection at the principal corporate trust office of the Trustee. Reference is hereby made to the Indenture and to all indentures supplemental thereto for the provisions, among others, with respect to the nature and extent of the security, the rights, duties and obligations of the City, the Trustee and the owners of the Bonds, and the terms upon which the Bonds are issued and secured. The Bonds are issued pursuant to and in full compliance with the Constitution and laws of the State of Arkansas, including particularly Amendment No. 62 to the Constitution of Arkansas, as implemented by the Local Government Bond Act of 1985, codified as Arkansas Code Annotated (1998 Repl. & Supp. 2005) §§14-164-301 et seq. (as from time to time amended, the "Local Government Bond Act"), Ordinance No. 5277 of the City adopted October 6, 2009, which ordinance authorized the execution and delivery of the Second Supplemental Trust Indenture, and a special election duly held on September 12, 2006, at which a majority of the qualified electors of the City voting approved the issuance of the Bonds. In accordance with the Local Government Bond Act, the City has pledged all receipts from (i) a one -quarter of one percent (0.25%) local sales and use tax (the "0.25% Sales and Use Tax") and (ii) a three-quarters of one percent (0.75%) local sales and use tax (the "0.75% Sales and Use Tax"), each levied by the City pursuant to Ordinance No. 4891, adopted by the City on June 20, 2006, to provide funds for the repayment of the Bonds. The pledge of the receipts of the 0.25% Sales and Use Tax and the 0.75% Sales and Use Tax (collectively, the "Tax Receipts") presently secures payment of the Bonds and (i) the City's $50,000,000 Sales and Use Tax Capital Improvement Bonds, Series 2006A (the "Series 2006A Bonds"), and (ii) the City's $14,340,000 Sales and Use Tax Capital Improvement Bonds, Series 2007 (the "Series 2007 Bonds"). Such Tax Receipts may additionally be pledged to secure the payment of up to $34,410,000 in aggregate principal amount of Additional Bonds issued under the provisions of the Indenture. The Indenture provides that the City may hereafter issue Additional Bonds from time to time under certain terms and conditions contained in the Indenture and, if issued or incurred, such Additional Bonds will rank on a parity of security with the Bonds, the Series 2006A Bonds and the Series 2007 Bonds and will be equally and ratably secured by and entitled to the protection of the Indenture. The Bonds are not general obligations of the City, but are special obligations secured by • an irrevocable pledge of and lien on the Tax Receipts, as more particularly described in the 4823-2826-9828.4 A-2 Indenture. In no event shall the Bonds constitute an indebtedness of the City within the meaning of any constitutional or statutory limitation. STATEMENT OF INSURANCE Assured Guaranty Corp. ("Assured Guaranty"), a Maryland -domiciled insurance company, has delivered its financial guaranty insurance policy with respect to the scheduled payments of principal of and interest on this Bond to Simmons First Trust Company, N.A., Pine Bluff, Arkansas, as paying agent on behalf of the holders of the Bonds (the "Paying Agent"). Said Policy is on file and available for inspection at the principal office of the Paying Agent and a copy thereof may be obtained from Assured Guaranty or the Paying Agent. All payments required to be made under the Policy shall be made in accordance with the provisions thereof. The owner of this bond acknowledges and consents to the subrogation rights of Assured Guaranty as more fully set forth in the Policy. The holder of this Bond shall have no right to enforce the provisions of the Indenture or to institute action to enforce the covenants therein, or to take any action with respect to any event of default under the Indenture, or to institute, appear in or defend any suit or other proceeding with respect thereto, except as provided in the Indenture. In certain events, on the conditions, in the manner and with the effect set forth in the Indenture, the principal of all the Bonds and Additional Bonds, if any, issued under the Indenture and then outstanding may be declared and may become due and payable before the stated maturity thereof, together with accrued interest • thereon. Modifications or alterations of the Indenture, or of any indenture supplemental thereto, may be made only to the extent and in the circumstances permitted by the Indenture. The Bonds shall be redeemed prior to maturity, in whole or in part, on any interest payment date, in inverse order of maturity and by lot in such manner as the Trustee shall determine within a maturity, at a redemption price equal to 100% of the principal amount being redeemed, plus accrued interest to the date of redemption, from moneys in the Project Fund in excess of the amount needed to complete the portions of the Projects to be funded with the Bonds. The Bonds shall be redeemed prior to maturity, in whole or in part, on any interest payment date, in inverse order of maturity and by lot in such manner as the Trustee shall determine within a maturity, at a redemption price equal to 100% of the principal amount being redeemed, plus accrued interest to the date of redemption, from surplus Tax Receipts deposited in the Redemption Fund pursuant to the Indenture. So long as the Series 2006A Bonds are outstanding, 50% of the surplus Tax Receipts shall be allocated to the redemption of the Series 2006A Bonds and the remaining 50% of such surplus Tax Receipts shall be allocated ratably (based on relative outstanding principal amounts) to the redemption of the Series 2007 Bonds, the Bonds and any series of Additional Bonds. Following payment in whole of the Series 2006A Bonds at maturity or upon redemption prior to maturity, all surplus Tax Receipts shall be allocated ratably (based on relative outstanding principal amounts) to the redemption of the Series 2007 Bonds, the Bonds and any other series of Additional Bonds. The Bonds are subject to redemption at the option of the City, communicated in a written • notice to the Trustee not less than sixty (60) days prior to the date fixed for redemption, in whole 4823-2826-9828.4 A-3 or in part on any date on or after November 1, 2015, in inverse order of maturity and by lot in such manner as the Trustee shall determine within a maturity, at a redemption price equal to 100% of the principal amount being redeemed plus accrued interest to the date of redemption. The Bonds maturing November 1, 2021 are subject to mandatory redemption, to be selected by lot in such manner as the Trustee shall determine, on November 1 in the years and the amounts set forth below, at a redemption price equal to 100% of the principal amount being redeemed, plus accrued interest to the date of redemption. Date Principal Amount November 1, 2020 $1,720,000 November I, 2021 (maturity) 1,785,000 Notwithstanding the foregoing, so long as DTC or its nominee is the sole registered owner of the Bonds, the particular Bonds or portions thereof to be redeemed in part within a maturity shall be selected by lot by DTC in such manner as DTC shall determine. In selecting Bonds for redemption prior to maturity, in the case any outstanding Bond is in a denomination greater than $5,000, each $5,000 of face value of such Bond shall be treated as a separate Bond of the denomination of $5,000. In the event any of the Bonds or portions thereof (which shall be $5,000 or any integral multiple thereof) are called for redemption, notice thereof shall be given by the Trustee by first class mail to the registered owner of each such Bond addressed to such registered owner at his registered address and placed in the mails not less than thirty (30) nor more than sixty (60) days prior to the date fixed for redemption; provided, however, that failure to give such notice by mailing, or any defect therein, shall not affect the validity of the proceedings for the redemption of any Bond with respect to which no such failure or defect has occurred. Each notice shall identify the Bonds or portions thereof being called, and the date on which they shall be presented for payment. After the date specified in such call notice, the Bond or Bonds so called for redemption will cease to bear interest provided funds sufficient for their redemption have been deposited with the Trustee, and, except for the purpose of payment, shall no longer be protected by the Indenture and shall not be deemed to be outstanding under the provisions of the Indenture. This Bond may be transferred on the books of registration kept by the Trustee by the registered owner or by his duly authorized attorney upon surrender hereof, together with a written instrument of transfer duly executed by the registered owner or his duly authorized attorney. The Bonds are issuable as registered bonds without coupons in denominations of $5,000 and any integral multiple thereof Subject to the limitations and upon payment of the charges provided in the Indenture, Bonds may be exchanged for a like aggregate principal amount of Bonds of other authorized denominations. No recourse shall be had for the payment of the principal of or premium, if any, or interest on any of the Bonds or for any claim based thereon or upon any obligation, covenant or agreement contained in the Bonds or the Indenture against any past, present or future alderman, officer or employee of the City, or any successor, as such, either directly or through the City or 4823-2826-9828.4 A-4 any successor of the City, under any rule of law or equity, statute or constitution or by the enforcement of any assessment or penalty or otherwise, and all such liability of any such alderman, officer or employee as such is hereby expressly waived and released as a condition of and consideration for the issuance of any of the Bonds. The City has designated this Bond as a "qualified tax-exempt obligation" within the meaning of Section 265(b) of the Internal Revenue Code of 1986, as amended. This Bond is issued with the intent that the laws of the State of Arkansas will govern its construction. IT IS HEREBY CERTIFIED, RECITED AND DECLARED that all acts, conditions and things required to exist, happen and be performed precedent to and in the issuance of the Bonds do exist, have happened and have been performed in due time, form and manner as required by law; that the indebtedness represented by the Bonds, together with all obligations of the City, does not exceed any constitutional or statutory limitation; and that the revenues pledged to the payment of the principal of and premium, if any, and interest on the Bonds as the same become due and payable will be sufficient in amount for that purpose. This Bond shall not be valid or become obligatory for any purpose or be entitled to any security or benefit under the Indenture until the Certificate of Authentication hereon shall have been signed by the Trustee. C 4823-2826-9828.4 A-5 IN WITNESS WHEREOF, the City of Fayetteville, Arkansas has caused this Series 2009 Bond to be executed by its Mayor and City Clerk, thereunto duly authorized (by their manual or facsimile signatures), and its corporate seal to be affixed or imprinted hereon, all as of the date hereof shown above. CITY OF FAYETTEVILLE, ARKANSAS Mayor ATTEST: City Clerk (SEAL) (Form of Trustee's Certificate) TRUSTEE'S CERTIFICATE OF AUTHENTICATION This bond is one of the Series 2009 Bonds of the issue described in and issued under the provisions of the within mentioned Indenture. Attached hereto is the complete text of the opinion of Kutak Rock LLP, a signed original of which is on file with the undersigned, delivered and dated the date of the original delivery of and payment for the Series 2009 Bonds. Date: SIMMONS FIRST TRUST COMPANY, N.A., as Trustee By: Authorized Signature I 4823-2826-9828.4 A-6 0 (Form of Assignment) ASSIGNMENT FOR VALUE RECEIVED, , hereby sells, assigns, and transfers unto , the within Bond and all rights thereunder, and hereby irrevocably constitutes and appoints as attorney to transfer the within Bond on the books kept for registration thereof with full power of substitution in the premises. DATE: __________,20_ Transferor GUARANTEED BY: 6 NOTICE: Signature(s) must be guaranteed by an institution satisfactory to the Trustee or other transfer agent. I 4823-2826-9828.4 A-7 • EXECUTION COPY TAX REGULATORY AGREEMENT between CITY OF FAYETTEVILLE, ARKANSAS SIMMONS FIRST TRUST COMPANY, N.A. as Trustee Dated as of November 12, 2009 L.J Relating to: $11,250,000 City of Fayetteville, Arkansas Sales and Use Tax Capital Improvement Bonds Series 2009 Prepared by: Kutak Rock LLP 124 West Capitol Avenue Suite 2000 Little Rock, Arkansas 72201 CJ 4848-1596-6340.2 TAX REGULATORY AGREEMENT THIS TAX REGULATORY AGREEMENT (this "Tax Regulatory Agreement) is made and dated as of November 12, 2009, by and between the CITY OF FAYETTEVILLE, ARKANSAS, a city of the first class and political subdivision of the State of Arkansas (the "Issuer"), and SIMMONS FIRST TRUST COMPANY, N.A., a national banking association organized and existing under the laws of the United States of America, not in its individual capacity but solely in its capacity as the trustee (the "Trustee") named under that certain Trust Indenture dated as of November 1, 2006, as supplemented and amended by that certain First Supplemental Trust Indenture dated as of October 1, 2007, and by that certain Second Supplemental Trust Indenture dated as of November 1, 2009 (as supplemented and amended, the "Indenture"), each by and between the Issuer and the Trustee. WITNESSETH: WHEREAS, pursuant to the Constitution and laws of the State of Arkansas, including particularly Amendment 62 and Arkansas Code Annotated §§ 14-164-301 et seq. (as from time to time amended, the "Authorizing Legislation"), the Issuer has authorized the issuance of $11,250,000 principal amount of its Sales and Use Tax Capital Improvement Bonds, Series 2009 (the "Bonds"), pursuant to the Indenture and Ordinance No. 5277, adopted and approved on October 6, 2009 (the "Authorizing Ordinance"), for the purposes of providing the funds (i) to acquire, construct, reconstruct, repair, straighten and widen certain City streets and related • improvements (the "Street Project"), (ii) to acquire, construct and equip certain City trail system improvements (the "Trail Project," and together with the Street Project, the "Projects"), (iii) to pay the premium on a debt service reserve insurance policy for deposit in a debt service reserve, (iv) to pay the premium for a policy of municipal bond insurance, and (v) to pay the costs of issuance of the Bonds; and WHEREAS, the Issuer has determined that the issuance, sale and delivery of the Bonds is necessary in order to provide a portion of the financing for the Projects and • WHEREAS, this Tax Regulatory Agreement has been entered into by the Issuer and the Trustee to provide for compliance with the provisions of the Internal Revenue Code of 1986, as amended, and the Regulations promulgated thereunder; and WHEREAS, this Tax Regulatory Agreement is executed in part for the purpose of setting forth the facts, estimates and expectations of the Issuer on the date hereof as to future events regarding the Bonds; NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Issuer and the Trustee hereby agree as follows: ernc�s��� • ARTICLE I DEFINITIONS Section 1.1. Definitions. The following words and phrases shall have the following meanings. Any capitalized word or term used herein but not defined herein shall have the same meaning given in the Indenture. "Adjusted Fair Market Value" of an investment means the Fair Market Value plus the sum of all adjustments, if any, made to the issue price of such investment under Section 1272 of the Code, since the date the investment became a Nonpurpose Obligation. "Arbitrage Rebate Consultant" means an accounting firm or a firm of attorneys or another person or firm with knowledge of or experience in advising bond trustees with respect to the provisions of Section 148(f) of the Code. "Bond Counsel" means Kutak Rock LLP or an attorney or firm of attorneys recognized as having expertise in matters relating to the issuance of tax-exempt obligations reasonably acceptable to the Trustee. "Bonds" means the Issuer's $11,250,000 original principal amount of Sales and Use Tax Capital Improvement Bonds, Series 2009. • "Bond Year" means the one-year period beginning on the day after expiration of the preceding bond year. The first Bond Year begins on the date of issue of the Bonds and ends November 1, 2010. "Code" means the Internal Revenue Code of 1986, as amended, and the Regulations thereunder. "Computation Period" means each period from the date of issue through the date on which a determination of the Rebate Amount is made. "Costs of Issuance" means all costs incurred in connection with the borrowing. Examples of costs of issuance include (but are not limited to): (a) underwriter's spread (whether realized directly or derived through purchase of the Bonds at a discount below the price at which a substantial number of Bonds are sold to the public); (b) counsel fees (including bond counsel, underwriter's counsel, issuer's counsel, trustee's counsel and any other specialized counsel fees incurred in connection with the borrowing); (c) financial advisor fees (including the Issuer's financial advisor) incurred in connection with the borrowing; (d) rating agency fees; • (e) trustee fees incurred in connection with the borrowing; 4848-4596-6340.2 2 • (0 paying agent and certifying and authenticating agent fees related to issuance of the Bonds; (g) accountant fees related to issuance of the Bonds; (h) printing costs (for the Bonds and of preliminary and final offering materials); and (i) costs incurred in connection with the required public approval process (e.g., publication costs for public notices generally and costs of any public hearing or voter referendum or election expense). "Fair Market Value" of an investment means the fair market value, including accrued interest, of such investment at the time it becomes a Nonpurpose Obligation. "Gross Proceeds " means: (a) Sale proceeds (as defined in Section 1.148-1(b) of the Regulations); (b) Investment proceeds (as defined in Section 1.148-1(b) of the Regulations); (c) Transferred proceeds (as defined in Section 1.148-9 of the Regulations); (d) Any amounts held as a sinking fund for the Bonds; (e) Any amounts held in a pledged fund or reserve fund for the Bonds; and • (f) Any other replacement proceeds (as defined in Section 1.148-1(c) of the Regulations). "Net Sale Proceeds" means sale proceeds, less the portion of those sales proceeds invested in a reasonably required reserve or replacement fund under Section 148(d) of the Code. "Nonpurpose Obligation" means any investment property, as defined in Section 148(b) of the Code, in which Gross Proceeds are invested and which is not acquired to carry out the governmental purpose of the issue. "Qualified Project Costs" means Project Costs (as defined in the Indenture); provided, however, that (i) Project Costs paid or incurred more than sixty (60) days prior to June 20, 2006 shall not be deemed to be Qualified Project Costs (except for costs under the de minimis and preliminary expenditure exceptions set forth in Section 1.150-2 of the U.S. Treasury Regulations), (ii) Costs of Issuance shall not be deemed to be Qualified Project Costs, and (iii) interest prior to the Completion Date (as defined in the Indenture) of the Project, letter of credit fees, and municipal bond insurance premiums which represent a transfer of credit risk must be allocated between Qualified Project Costs and other costs and expenses to be paid with Bond proceeds. "Rebate Amount" means, with respect to the Bonds, the amount computed as described in Section 4.13 hereof. "Regulation" or "Regulations" means the temporary, proposed or final Income Tax • Regulations promulgated by the Department of the Treasury and applicable to the Bonds. 4848-0596-6340.2 3 S"State" means the State of Arkansas. "Tax Regulatory Agreement" means this Tax Regulatory Agreement. "Trustee" means Simmons First Trust Company, N.A., a national banking association organized and existing under the laws of the United States of America, or any successor trustee under the Indenture. "Underwriter" means Stephens Inc. "Wastewater Project" means the various wastewater treatment plants, sewerage and related facilities to be financed with proceeds of the Bonds. "Yield" means, with respect to the Bonds, yield computed under Section 1.148-4 of the Regulations, and with respect to an investment, yield computed under Section 1.148-5 of the Regulations. Section 1.2. Reliance on Issuer Information. Bond Counsel and the Trustee shall be permitted to rely upon the contents of this Tax Regulatory Agreement and any certification, document or instructions provided pursuant to this Tax Regulatory Agreement and shall not be responsible or liable in any way for the accuracy of their contents or the failure of the Issuer to deliver any required information. r1 ARTICLE II REPRESENTATIONS AND COVENANTS BY THE ISSUER Section 2.1. Organization and Authority. The Issuer hereby represents that it (1) is a political subdivision duly organized and existing under the laws of the State of Arkansas, and (2) has lawful power and authority to issue the Bonds for the purposes set forth in the Indenture, to enter into, execute and deliver the Indenture and this Tax Regulatory Agreement, and to carry out its obligations under such documents, and (3) by all necessary action has been duly authorized to execute and deliver the Indenture and this Tax Regulatory Agreement, acting by and through its duly authorized officials. Section 2.2. Use of Bond Proceeds; Ownership of the Projects; Use of Bond Proceeds. The Issuer hereby represents and warrants for the benefit of the Bond Counsel, the Trustee and holders of the Bonds that the proceeds of the Bonds will be used to finance or reimburse a portion of the costs of the acquisition, construction, reconstruction, extending, improving and equipping of the Projects (except those limited proceeds which are used to pay debt service insurance and bond insurance premiums and to pay Costs of Issuance) and that all of the Projects financed with proceeds of the Bonds will be, or will continue to be, owned and operated by the Issuer. Section 2.3. Change in Use or Ownership of the Projects. The Issuer represents that it • intends to own and operate the Projects at all times during the term of the Bonds. The Issuer does 4848-0596-6340.2 • not know of any reason why the Projects will not be so used in the absence of (i) supervening circumstances not now anticipated by it, (ii) adverse circumstances beyond its control, or (iii) obsolescence of such insubstantial parts or portions thereof as may occur as a result of normal wear and tear. The Issuer covenants that it will not change the use, ownership or nature of any portion of the Projects so long as any of the Bonds are outstanding unless, in the written opinion of Bond Counsel, such change will not result in the inclusion of interest on the Bonds in the gross income of the recipient thereof for purposes of federal income taxation, except that the Issuer may, without an opinion, sell or otherwise dispose of minor parts or portions of the Projects as may be necessary or desirable due to normal wear, tear or obsolescence. Section 1.4. Bonds in Registered Form. The Bonds will be issued in registered form as required by Section 149(a) of the Code. Section 2.5. Information Reporting. The Issuer covenants to file IRS Form 8038-G (Information Return for Tax -Exempt Governmental Obligations) with the Internal Revenue Service in connection with the issuance of the Bonds, as required by § 149(e) of the Code. Section 2.6. No Federal Guarantee. The Issuer represents and covenants that it has not taken and will not take, or permit to be taken, any action that will cause the Bonds to be "federally guaranteed" within the meaning of § 149(b) of the Code. Section 2.7. Bonds Not Hedge Bonds. The Issuer represents that it reasonably expects • to expend at least 85 percent of the "spendable proceeds" of the Bonds for the specific purposes for which the Bonds are issued within three years of the date hereof and not more than 50 percent of the proceeds of the Bonds will be invested in Nonpurpose Obligations having substantially guaranteed Yields for four years or more. Section 2.8. Reimbursement. The Issuer acknowledges its understanding that if any proceeds of the Bonds are used to reimburse the Issuer for costs relating to the Projects that were paid prior to the date of issuance of the Bonds, such costs shall be deemed Qualified Project Costs eligible for requisition from the Project Fund by the Issuer only if the reimbursement is valid under § 1.150-2 of the Regulations. The Issuer further acknowledges its understanding that, in general, a reimbursement is valid only if (A) such costs were paid no sooner than sixty (60) days prior to June 20, 2006, the date the Issuer adopted an ordinance expressing its official intent to issue tax-exempt bonds to finance the Projects, and (B) Bond proceeds are allocated to reimburse such costs within eighteen (18) months after the later of the date such expenditures were made or the date the applicable Project is placed in service, but in no event later than three (3) years after the original expenditure was paid. Series 2.9. No Replacement. No portion of the amounts received from the sale of the Bonds will be used as a substitute for other funds which were otherwise to be used as a source of financing for the Projects, and which will be used to acquire, directly or indirectly, investment obligations producing a Yield in excess of the Yield on the Bonds. Section 2.10. No Abusive Arbitrage Device. The Issuer represents that the Bonds are • not and will not be part of a transaction or series of transactions that has the effect of (1) enabling 4848-4596-6340.2 5 • the Issuer to exploit the difference between tax-exempt and taxable interest rates to gain a material financial advantage, and (2) overburdening the tax-exempt bond market. Section 2.11. Single Issue. The Issuer represents that the Bonds constitute a single "issue" under §1.150-1(c) of the Regulations. No other obligations of the Issuer (1) are being sold within fifteen (15) days of the sale of the Bonds, (2) are being sold pursuant to the same plan of financing as the Bonds, and (3) are expected to be paid from substantially the same source of funds (disregarding guaranties from third parties, such as bond insurance) as the Bonds. Section 2.12. Representations as to Limits on the Use of Proceeds. The amount of Bond proceeds to be utilized to pay the premium on the 2007 Reserve Policy (as defined in the Indenture) for deposit to the Debt Service Reserve Fund shall not exceed the lesser of (i) 10 percent of the initial stated principal amount of the Bonds, (ii) the maximum annual debt service on the Bonds, or (iii) 125 percent of the average annual debt service on the Bonds. Section 2.13. Reliance on Representations of Issuer; Survival. The Issuer understands and acknowledges that Bond Counsel is relying on the various representations, warranties and covenants of the Issuer contained in this Tax Regulatory Agreement for purposes of delivering its approving opinion. All representations and certifications of the Issuer contained in this Tax Regulatory Agreement will survive the execution and delivery of this Tax Regulatory Agreement and the issuance, sale and delivery of the Bonds, as representations of facts existing as of the • date of the execution and delivery of this Tax Regulatory Agreement. The covenants and warranties of the Issuer contained in this Article II will remain in full force and effect notwithstanding the defeasance of the Bonds and the discharge of the Indenture, until the final maturity date of all Bonds Outstanding and payment of such Bonds. ARTICLE III COVENANTS OF THE TRUSTEE Section 3.1. Covenants of the Trustee. The Trustee covenants to the Issuer that it will comply with all applicable provisions of this Tax Regulatory Agreement and any written letter or opinion of Bond Counsel which sets forth any action necessary by the Trustee to preserve interest on the Bonds from the gross income of the recipients thereof for federal income tax purposes. Such covenant will remain in full force and effect notwithstanding the defeasance of the Bonds and the discharge of the Indenture, until the final maturity date of all Bonds Outstanding and payment of such Bonds. The Trustee shall keep records of the expenditure of Gross Proceeds of the Bonds for the term of this Tax Regulatory Agreement. Such records, if any, as are maintained by the Trustee may, at the option of the Trustee, be maintained by electronic filing or record keeping systems. • 4848-4596-6340.2 6 SARTICLE IV ARBITRAGE AND REBATE Section 4.1. Purpose. The purpose of this Article IV is to certify, pursuant to §1.148- 2(b) of the Regulations, the reasonable expectations of the Issuer as to the sources, uses and investment of Bond proceeds and other moneys in order to support the Issuer's conclusion that the Bonds will not be deemed to be "arbitrage bonds" within the meaning of §148 of the Code. The person executing this Tax Regulatory Agreement on behalf of the Issuer is an officer of the Issuer responsible for issuing and delivering the Bonds. The Issuer has not been notified of any listing or proposed listing of the Issuer by the Internal Revenue Service as an issuer that may not certify its bonds. Section 4.2. Reasonable Expectations. The facts, estimates, expectations and representations of the Issuer set forth in this Article IV are based upon the Issuer's understanding of various documents and certificates executed in connection with the issuance of the Bonds, including (1) the Indenture, (2) this Tax Regulatory Agreement, and (3) a certificate of the Underwriter. To the Issuer's knowledge, the facts, estimates and expectations set forth in this Tax Regulatory Agreement are reasonable. The Issuer has no knowledge that would cause it to believe that the representations, warranties and certifications described herein are unreasonable or inaccurate or may not be relied upon. • Section 4.3. Authority and Purpose for Bonds. The Issuer is issuing and delivering the Bonds simultaneously with the execution of this Tax Regulatory Agreement, pursuant to the Authorizing Legislation, the Indenture and an ordinance adopted by the City Council of the Issuer. The Bonds are being issued for the purposes of providing a portion of the funds needed for (i) acquiring, constructing, reconstructing, extending, improving and equipping the Projects, (ii) paying the premium on the 2009 Reserve Policy (as defined in the Indenture) for deposit in a debt service reserve, (iii) paying the premiums on the 2009 Bond Policy (as defined in the Indenture), and (iv) paying Costs of Issuance of the Bonds. The proceeds of the Bonds to be used to acquire, construct, reconstruct, extend, improve and equip the Projects, together with other available moneys and investment earnings on such moneys and proceeds, do not exceed the amount necessary to provide for such purposes. Section 4.4. Funds and Accounts. The following funds and accounts have been established with the Trustee pursuant to the Indenture in connection with the Bonds: Project Fund, and a Street Account, a Trail Account and a Wastewater Account therein; Revenue Fund; Bond Fund, and an Interest Account and Principal Account therein; Redemption Fund; Debt Service Reserve Fund, and a Series 2009 Account therein; Costs of Issuance Fund; and • Rebate Fund. 4848-4596-6340.2 • Section 4.5. Source and Disbursement of Bond Proceeds. The Bonds will be sold to the public at a purchase price equal to $11,205,918.74 (representing the $11,250,000.00 par amount of the Bonds, less an original net offering discount of $56,499.80 and plus $12,418.54 of accrued interest thereon). The Underwriter will retain an underwriting discount of $140,625.00. Accordingly, the net amount of proceeds of the Bonds to be received by the Issuer shall be $11,065,293.74, which amount shall be deposited and expended as follows: (i) $12,418.54, representing the accrued interest on the Bonds, will be deposited into the Interest Account of the Bond Fund and will be utilized to make a portion of the first interest payment due on the Bonds on May 1, 2010; (ii) $21,093.75 will be paid to Assured Guaranty Corp. for the premium on the 2009 Reserve Policy (as defined in the Indenture), which 2009 Reserve Policy shall be deposited in the Series 2009 Account of the Debt Service Reserve Fund; (iii) $79,711.67 will be paid to Assured Guaranty Corp. for the premium on the 2009 Bond Policy (as defined in the Indenture); (iv) $9,633,373.53 will be deposited into the Street Account of the Project Fund and will be used to pay Qualified Project Costs with respect to the Street Project; (v) $1,259,179.08 will be deposted into the Trail Account of the Project Fund • and will be used to pay Qualified Project Costs with respect to the Trail Project; and (vi) the remaining $59,517.17 of the proceeds will be deposited into the Cost of Issuance Fund and used to pay Costs of Issuance of the Bonds. Section 4.6. Costs of Issuance Fund. The Indenture creates the Costs of Issuance Fund which will be initially funded with $59,517.17 of Bond proceeds. Moneys in the Cost of Issuance Fund will be used to pay Costs of Issuance associated with the Bonds. Proceeds of the Bonds deposited in the Costs of Issuance Fund shall be spent within a one-year period beginning on the date of issuance of the Bonds and may be invested until expended in Nonpurpose Obligations that bear a Yield that is materially higher than the Yield on the Bonds. The earnings on such investments will be subject to the rebate requirements described in Section 4.13 of this Tax Regulatory Agreement unless the Issuer qualifies under one of the rebate exemptions described in the Code and the Regulations. Section 4.7. Revenue Fund, Bond Fund and Redemption Fund. The Indenture creates the Revenue Fund, the Bond Fund and the Redemption Fund. Moneys will be transferred to the Revenue Fund, and from the Revenue Fund to the Bond Fund as described in the Indenture, to provide for the payment of principal of and interest on the Bonds as due. Moneys will be transferred from the Revenue Fund to the Redemption Fund as described in the Indenture to provide for the payment prior to maturity of the principal of the Bonds. Moneys deposited in the Revenue Fund, the Bond Fund and the Redemption Fund will be spent within a 13 -month period beginning on the date of the original deposit in the Revenue Fund, and any amount received from investment of moneys held in the Revenue Fund, the Bond Fund or the • Redemption Fund will be spent within a one-year period beginning on the date of receipt. The Revenue Fund, the Bond Fund and the Redemption Fund will be completely depleted at least 4848-0596-6340.2 • once a year. Accordingly, the Revenue Fund, the Bond Fund and the Redemption Fund constitute "bona fide debt service funds" for the Bonds. Amounts in the Revenue Fund, Bond Fund and Redemption Fund may be invested until expended in Nonpurpose Obligations that bear a Yield that is materially higher than the Yield on the Bonds. The earnings on such investments will be subject to the rebate requirements described in Section 4.13 of this Tax Regulatory Agreement for any year in which the sum of such investment earnings equals or exceeds $100,000 unless the Issuer qualifies under one of the other rebate exemptions described in the Code and the Regulations. Section 4.8. Debt Service Reserve Fund. The Indenture creates the Debt Service Reserve Fund into which $21,093.75 of the proceeds of the Bond proceeds will be deposited for the payment of the premium on the 2009 Reserve Policy (as defined in the Indenture). Moneys and investments in the Debt Service Reserve Fund will be expended solely to pay principal of and interest on the Bonds when the same become due, when and if there is a deficiency in the Bond Fund available to make such payments. The Debt Service Reserve Fund will be maintained in an amount equal to the Reserve Requirement (as defined in the Indenture). The Issuer is of the opinion, based on representations of the Underwriter, that the amount deposited in the Debt Service Reserve Fund is reasonably required for the purposes for which such fund is established. Accordingly, the Debt Service Reserve Fund is a "reasonably required reserve fund" for the Bonds within the meaning of the Code and the Regulations. Amounts in the Debt Service Reserve Fund may be invested until expended in Nonpurpose Obligations that bear a Yield that is materially higher than the Yield on the Bonds. The earnings on such investments • will be subject to the rebate requirements described in Section 4.13 of this Tax Regulatory Agreement unless the Issuer qualifies under one of the rebate exemptions described in the Code and the Regulations. Section 4.9. Project Fund. The Indenture creates the Project Fund which will be initially funded with $10,892,552.61 of Bond proceeds. Moneys in the Project Fund will be used to pay costs associated with the acquisition, construction, reconstruction, extending, improving and equipping of the Projects. The Issuer has incurred, or will incur within six (6) months of the date of issuance of the Bonds, a substantial binding obligation to a third party to spend at least 5% of the Net Sale Proceeds on the Projects. The completion of the Projects and the allocation of Net Sale Proceeds to expenditures will proceed with due diligence. Completion of the portion of the Projects to be financed with proceeds of the Bonds is expected to occur on or before November 12, 2012. At least 85% of the Net Sale Proceeds will be allocated to Project expenditures within three (3) years from the date of issuance of the Bonds. Until November 12 2012, the Net Sale Proceeds of the Bonds deposited in the Project Fund may be invested until expended in Nonpurpose Obligations that bear a Yield that is materially higher than the Yield on the Bonds. The earnings on such investments will be subject to the rebate requirements described in Section 4.13 of this Tax Regulatory Agreement unless the Issuer qualifies under one of the rebate exemptions described in the Code and the Regulations. Section 4.10. Yield on the Bonds. (a) The Underwriter has certified (i) that the initial offering price of the Bonds, as set forth in Section 4.5 of this Tax Regulatory Agreement, represents the maximum initial offering price at which a substantial amount of each maturity of • the Bonds were offered for sale and sold to purchasers (exclusive of bond houses, brokers or similar persons acting in the capacity of underwriters or wholesalers) through a bona fide 4848-4596-6340.2 9 • offering, (ii) that such initial offering prices were established by a bona fide bid without regard to any amounts which would increase the Yield on any maturity of the Bonds above its market yield and (iii) that the description of interest rates and Yields contained in the final Official Statement with respect to the Bonds constitutes a true and correct summary thereof. (b) The Yield on the Bonds has been calculated by the Underwriter to be not less than 3.8302128%. The calculation of Yield has been made on the basis of semiannual compounding using a 360 -day year and upon the assumption that payments are made on the last day of each semiannual interest payment period. For purposes of computing Yield on Nonpurpose Obligations, the purchase price of any such obligation is equal to the Fair Market Value as of the date of a binding contract to acquire such obligation. Section 4.11. Arbitrage Representations. Pursuant to the issuance of the Bonds, the Issuer hereby represents, certifies and warrants as follows: (a) Other than Revenue Fund, the Bond Fund, the Redemption Fund, the Project Fund, the Debt Service Reserve Fund and the Costs of Issuance Fund created under the Indenture, there has not been created or established and the Issuer does not expect that there will be created or established, any sinking fund, pledged fund or similar fund, including, without limitation, any arrangement under which money, securities or obligations are pledged directly or indirectly to secure the Bonds or any contract securing the Bonds or any arrangement providing for compensating balances to be maintained by • the Issuer with any holder of the Bonds. (b) All funds established pursuant to the Indenture will be invested pursuant to the Indenture and this Tax Regulatory Agreement. (c) The Issuer will instruct the Trustee with respect to investment of the various funds held under the Indenture. (i) The Issuer will not instruct the Trustee to invest in any Nonpurpose Obligation unless at Fair Market Value. The Fair Market Value of a Nonpurpose Obligation shall be the price at which a willing buyer would purchase the investment from a willing seller in a bona fide, arm's -length transaction determined as of the date on which the contract to buy or sell the investment is entered into. (ii) If a Nonpurpose Obligation is acquired or sold or disposed of in an arm's length transaction without regard to any amount paid to reduce the Yield on the Nonpurpose Obligation, or any reduction in sale or disposition price to reduce the Rebate Amount, the Fair Market Value of the Nonpurpose Obligation shall be the amount paid for, or the amount realized upon the sale or disposition of, the Nonpurpose Obligation. (iii) If a United States Treasury obligation is acquired directly from or • sold or disposed of directly to the United States Treasury, such acquisition or sale or disposition shall be treated as establishing a market for the obligation and as establishing the Fair Market Value of the obligation. 4848-4596-6340.2 10 • (iv) The purchase or sale of a certificate of deposit issued by a commercial bank will be at Fair Market Value if the Yield at which it is purchased is not less than (i) the Yield of comparable United States Treasury Obligations and (ii) the highest Yield posted by such provider on comparable deposits to the public. (v) The Trustee, on behalf of the Issuer, may not purchase or sell Nonpurpose Obligations pursuant to any investment contract or repurchase agreement unless (i) it receives at least three bids from persons other than those with an interest in the Bonds, (ii) a certification is provided by the person whose bid is accepted stating the administrative costs that are reasonably expected to be paid to third parties in connection with the investment contract, (iii) a certification is provided by the person whose bid is accepted stating that the Yield of the investment contract is not less than the Yield of comparable investment contracts to other persons who do not utilize proceeds of tax-exempt bonds to purchase such contracts, (iv) the Yield on the investment contract is at least equal to the Yield offered under the highest bid received from a noninterested party, (v) the bidding for the investment contract takes into account as a significant factor the expected drawdown schedule of the Bond proceeds, and (vi) any collateral security requirements of the investment contract are reasonable. Section 4.12. Arbitrage Compliance. The Issuer acknowledges that the continued • exclusion of interest on the Bonds from gross income of the recipients for purposes of federal income taxation depends, in part, upon compliance with the arbitrage limitations imposed by Section 148 of the Code, including the rebate requirement described in Sections 4.13, 4.14 and 4.15 below. The Issuer hereby agrees and covenants that it shall not permit at any time or times any of the proceeds of the Bonds or other funds of the Issuer to be used, directly or indirectly, to acquire any asset or obligation, the acquisition of which would cause the Bonds to be "arbitrage bonds" for purposes of Section 148 of the Code. The Issuer further agrees and covenants that it shall do and perform all acts and things necessary in order to ensure that the requirements of Section 148 of the Code are met. To that end, the Issuer hereby agrees to take the actions described in Sections 4.13 through 4.15 below with respect to the investment of Gross Proceeds on deposit in the funds and accounts established under the Indenture and to direct the Trustee to make the required transfers and dispositions described in Sections 4.13, 4.14 and 4.15, below. Section 4.13. Rebate Fund; Calculation of Rebate Amount. Section 148(0 of the Code requires the payment to the United States of the excess of the amount earned on the investment of Gross Proceeds in Nonpurpose Obligations over the amount that would have been earned on such investments had the amount so invested been invested at a rate equal to the Yield on the Bonds, together with any income attributable to such excess. The Cost of Issuance Fund, the Project Fund, the Revenue Fund, the Bond Fund, the Redemption Fund, the Debt Service Reserve Fund and the Rebate Fund (defined below) are subject to this rebate requirement. In accordance with the requirements set out in the Code, the Rebate Fund (the "Rebate Fund") has been created in the Indenture with respect to the Bonds to be held by the Trustee and • used as provided in this Section 4.13. The Rebate Fund shall be held and disbursed in accordance with the following: 4848-4596-6340.2 11 • (a) All money at any time deposited in the Rebate Fund shall be held by the Trustee in trust, except as may otherwise be directed in writing by the Issuer, for payment to the federal government of the United States of America. All amounts deposited into or on deposit in the Rebate Fund shall be governed by this Tax Regulatory Agreement. The Trustee shall be deemed conclusively to have complied with this Tax Regulatory Agreement if it follows the directions of the Issuer or an Arbitrage Rebate Consultant engaged by the Issuer, and shall have no liability or responsibility to enforce compliance by the Issuer with the terms of this Tax Regulatory Agreement. (b) (i) Any funds remaining in the Rebate Fund after redemption and payment of all the Bonds and the final payment to the United States of America described in Section 4.14 below, or provision made therefor including accrued interest and payment of any applicable fees and expenses to the Trustee and any Arbitrage Rebate Consultant and satisfaction of the payment of the Rebate Amount in accordance with directions from the Issuer, shall be withdrawn by the Trustee upon written instructions from the Issuer and remitted to the Issuer. (ii) Notwithstanding anything to the contrary in this Tax Regulatory Agreement, any amount received from the investments of amounts held in the Rebate Fund which represents an amount earned shall be credited to and retained in the Rebate Fund upon the receipt thereof. • (iii) In the event that on the first day of any Bond Year the amount on deposit in the Rebate Fund exceeds the aggregate Rebate Amount as certified by an Arbitrage Rebate Consultant engaged by or on behalf of the Issuer, the Trustee, upon written instructions from the Issuer, shall withdraw the excess from the Rebate Fund, pay any amounts then due and payable under the Indenture and pay any remaining excess to the Issuer. (iv) For purposes of crediting amounts to the Rebate Fund or withdrawing amounts from the Rebate Fund, Nonpurpose Obligations shall be valued in the manner provided in this Tax Regulatory Agreement. (c) On or before 30 days following the end of the fifth Bond Year, upon the Issuer's written direction, an amount shall be deposited to the Rebate Fund by the Trustee from deposits made by the Issuer, if and to the extent required, so that the balance of the Rebate Fund shall equal the aggregate Rebate Amount required as of the end of such fifth Bond Year. (d) In order to meet the Issuer's obligations in complying with the rebate requirement of Section 148(0 of the Code, the Trustee and the Issuer agree and covenant to take the following actions: (i) For each investment of amounts held with respect to the Bonds (other than investments in obligations described in Section 103(a) of the Code, including amounts so treated) in the (I) Costs of Issuance Fund, (II) Project Fund, • (III) Revenue Fund, (IV) Bond Fund, (V) Redemption Fund, (VI) Debt Service Reserve Fund, and (VII) Rebate Fund, the Trustee shall record the purchase date 4848-4596-6340.2 12 Sof such investment, its purchase price, the accrued interest due on its purchase date, its face amount, its coupon rate, the frequency of its interest payment, and if disposed of, its disposition price, accrued interest due on its disposition date and its disposition date. If so engaged by the Issuer, an Arbitrage Rebate Consultant shall calculate the Fair Market Value for such investments and the Yield thereon. The Yield for an investment shall be calculated by using as its purchase price its Fair Market Value on the purchase date of such investment or on the date on which it becomes a Nonpurpose Obligation, whichever is later. (ii) Any Arbitrage Rebate Consultant shall determine the amount of earnings received on all investments described in paragraph (i) above, other than investments in obligations described in Section 103(a) of the Code (including amounts so treated) which are not defined by the Code as "investment property" or amounts in the Revenue Fund, Bond Fund and Redemption Fund if the earnings on the Revenue Fund, Bond Fund and Redemption Fund do not, in the aggregate, exceed $100,000 for any Bond Year, during the Computation Periods ending with the following determination dates: (I) the last day of the first Bond Year and each succeeding last day of each Bond Year; (II) the maturity date of the Bonds; and (III) if all outstanding Bonds are redeemed prior to the maturity date of the Bonds, the date on which all Bonds are redeemed. In addition, where Nonpurpose Obligations are retained by the Trustee after retirement of the Bonds, any unrealized gains or losses as of the date of retirement of the Bonds must be • taken into account in calculating the earnings on such Nonpurpose Obligations with each such obligation treated as sold for its Fair Market Value. In calculating the earnings described above, earnings received in a Bond Year shall include amounts which would be treated as income under Section 1272 of the Code regarding the accrual of original issue discount. In addition, earnings received in any Bond Year within the Computation Period shall include the gain or loss on the sale of any investment determined by subtracting the Adjusted Fair Market Value of the investment from the disposition price of the investment. For purposes of assisting the Issuer or an Arbitrage Rebate Consultant engaged by or on behalf of the Issuer in making such determinations, the Trustee shall provide to the Issuer or Arbitrage Rebate Consultant all information requested by the Issuer or Arbitrage Rebate Consultant in the possession of the Trustee. (iii) For each Computation Period specified in paragraph (ii) above, the Issuer or an Arbitrage Rebate Consultant engaged by the Issuer shall determine the amount of earnings on all investments held in the Rebate Fund during the Computation Period. In calculating the earnings, earnings within the Computation Period shall include amounts which would be treated as income under Section 1272 of the Code regarding the accrual of original issue discount. In addition, earnings in any Bond Year within the Computation Period shall include the gain or loss on the sale of any investment determined by subtracting the Adjusted Fair Market Value of the investment from the disposition price of the investment. • 4648-0596-6340.2 13 • (iv) For each Computation Period specified in paragraph (ii) above, the Issuer or an Arbitrage Rebate Consultant engaged by the Issuer shall calculate the Rebate Amount by any appropriate method described in the Code and Regulations applicable or which become applicable to the Bonds. (v) For each Computation Period specified in paragraph (ii) above and within 30 days of the end of each such Computation Period, the Issuer or an Arbitrage Rebate Consultant engaged by the Issuer shall calculate the Rebate Amount and notify the Issuer (if the calculation is made by an Arbitrage Rebate Consultant) and the Trustee in writing of the Rebate Amount. If the Rebate Amount (less amounts previously rebated to the United States) exceeds the amount on deposit in the Rebate Fund, the Issuer shall immediately pay such amount to the Trustee for deposit into the Rebate Fund. If the Issuer does not pay such amount within 20 days of notice of the Rebate Amount to the Trustee, the Trustee shall withdraw and transfer such amount, first, from amounts on deposit in the funds and accounts under the Indenture (and the Trustee, without direction from the Issuer, and without making demand on, but with notice to, the Issuer, shall immediately withdraw such amount from such funds and accounts) and, if such amounts are insufficient, second, from any other source. Section 4.14. Payment to United States. (a) Within 45 days after the end of the fifth Bond Year and after every fifth Bond Year thereafter, the Issuer shall direct the Trustee to pay to • the United States, not later than 45 days after the end of the fifth Bond Year, and not later than five years after each preceding payment was due or would have been due if a Rebate Amount existed at that time, an amount equal to not less than the excess of (i) 90% of the sum of the balance, if any, in the Rebate Fund at such time plus all previous payments made to the United States, over (ii) all previous payments made to the United States. The Issuer shall direct the Trustee and the Trustee, in accordance with such directions, shall pay to the United States, not later than 60 days after the last outstanding Bonds are paid or redeemed, 100% of the Rebate Amount as of the end of the final Computation Period less all previous payments made to the United States. (b) Each payment of Rebate Amount shall be mailed by the Trustee to the Internal Revenue Service Center, Ogden, Utah 84201. Each payment shall be accompanied by a copy of the Form 8038-T and the statement summarizing the determination of the Rebate Amount. (c) If during any Computation Period, the aggregate amount earned on Nonpurpose Obligations in which the Gross Proceeds of the Bonds are invested is less than the amount that would have been earned if the obligations had been invested at a rate equal to the Yield on the Bonds, such deficit may at the request of the Issuer be withdrawn from the Rebate Fund and paid to the Issuer. The Issuer may direct that any overpayment of rebate may be recovered from any Rebate Amount previously paid to the United States under any procedure that may, after the date of this Tax Regulatory Agreement, be permitted by the Code or the Regulations. (d) The Issuer shall provide to the Trustee all information and calculations necessary • for the Trustee to fulfill its obligations under this Section 4.14. 4848-4596-6340.2 14 • Section 4.15. Recordkeeping. In connection with the rebate requirement, the Trustee and the Issuer shall maintain the following records: (a) The Trustee and the Issuer shall record all amounts paid to the United States pursuant to Section 4.14. (b) The Trustee and the Issuer shall retain records of any rebate calculations until six years after the retirement of the last obligation of the issue. Section 4.16. Payment to Arbitrage Rebate Consultant. The Issuer shall pay the fees and expenses of any Arbitrage Rebate Consultant. If at any time when the Issuer has retained and is required to pay an Arbitrage Rebate Consultant and the Issuer does not make sufficient payment, the Trustee, 20 days after receiving from the Arbitrage Rebate Consultant a demand for such payment, shall withdraw from the funds and accounts established under the Indenture (except for the Rebate Fund) such amount as may be needed to pay the fees and expenses of the Arbitrage Rebate Consultant. ARTICLE V TERM OF TAX REGULATORY AGREEMENT Section 5.1. Term. Including all representations, warranties and covenants herein, this • Tax Regulatory Agreement shall be effective from the date of issuance of the Bonds through the date that is six years after the last Bond is redeemed, paid or deemed paid pursuant to the Indenture. ARTICLE VI AMENDMENTS Section 6.1. Amendments. Notwithstanding any other provision hereof, any provision of this Tax Regulatory Agreement may be deleted or modified at any time at the option of the Issuer if the Issuer has provided to the Trustee an opinion of Bond Counsel, in form and substance satisfactory to the Trustee, that such deletion or modification will not adversely affect the exclusion of interest on the Bonds from the gross income of the recipients for purposes of federal income taxation. ARTICLE VII EVENTS OF DEFAULT; REMEDIES Section 7.1. Events of Default. The failure of either party to this Tax Regulatory Agreement to perform any of its required duties under any provision hereof shall constitute an Event of Default under this Tax Regulatory Agreement. • 4848-4596-6340.2 15 • Section 7.2. Remedies for an Event of Default. Upon an occurrence of an Event of Default under Section 7.1 hereof, the Issuer or the Trustee may, in their discretion, proceed to protect and enforce their rights and the rights of the holders of the Bonds by pursuing any available remedy, including a suit at law or in equity. ARTICLE VIII PROTECTION OF TRUSTEE Section B.I. Protection of Trustee. (a) It is hereby recognized and agreed that the Trustee is entering into this Tax Regulatory Agreement in its respective capacity as Trustee under the Indenture, and the Trustee shall, with respect to this Tax Regulatory Agreement, be entitled to all of the same rights, protections and immunities hereunder as are afforded to the Trustee under the Indenture. (b) The parties hereto acknowledge that the Trustee has no liabilities with respect to compliance with the Code except to take administrative actions as directed by the Issuer pursuant to this Tax Regulatory Agreement. (c) The Issuer hereby agrees to indemnify and hold the Trustee harmless for, from and against any and all claims, losses, damages, judgments, costs and expenses incurred by the Trustee relating to this Tax Regulatory Agreement except for claims caused by the negligence, • breach of trust or willful misconduct of the Trustee. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.] 4848-4596-6340.2 16 •IN WITNESS WHEREOF, the Issuer and the Trustee have caused this Tax Regulatory Agreement to be executed in their respective names and by their proper officers thereunto duly authorized, all as of the day and year first written above. CITY OF FAYETTEVILLE, ARKANSAS By: a or SIMMONS FIRST TRUST COMPANY, N.A., as Trustee By: �Cr� Title: Assistant Vice President • • [SIGNATURE PAGE TO TAX REGULATORY AGREEMENT] 4848-0596-6340.2 17 P EXECUTION COPY CONTINUING DISCLOSURE AGREEMENT This Continuing Disclosure Agreement dated as of November 12, 2009 (this "Agreement"), is executed and delivered by the City of Fayetteville, Arkansas (the "City") and Simmons First Trust Company, N.A., as trustee (the "Trustee"), in connection with the issuance of the City's $11,250,000 Sales and Use Tax Capital Improvement Bonds, Series 2009 (the "Bonds"). The Bonds are being issued pursuant to the terms and provisions of Ordinance No. 5277 duly adopted by the City Council of the City on October 6, 2009 (the "Authorizing Ordinance"), and a Trust Indenture dated as of November 1, 2006, as supplemented and amended by a First Supplemental Trust Indenture dated as of October 1, 2007, and by a Second Supplemental Trust Indenture dated as of November 1, 2009 (as supplemented and amended, the "Indenture"), by and between the City and the Trustee. The scheduled payment of principal of and interest on the Bonds when due is guaranteed under a financial guaranty insurance policy issued by Assured Guaranty (as defined below). In connection with the issuance of the Bonds, the City and the Trustee agree as follows: Section 1. Purpose of this Agreement. This Agreement is being executed and delivered by the City and the Trustee for the benefit of the Beneficial Owners of the Bonds and in order to assist the Participating Underwriter in complying with, and constitutes the written undertaking for the benefit of the Beneficial Owners of the Bonds required by, Section (b)(5)(i) • of Securities and Exchange Commission Rule 15c2-12 under the Securities Act of 1934, as amended (17 C.F.R. Section 240.15c2-12) (the "Rule"). The City hereby represents that it has not failed to comply with any previous undertaking pursuant to the Rule. • Section 2. Definitions. In addition to the definitions set forth in the Indenture, which apply to any capitalizcd term used in this Agrccmcnt unless otherwise defined in this Section, the following capitalized terms shall have the following meanings: "Annual Financial Information" shall mean the annual financial information provided by the City pursuant to, and as described in, Sections 3 and 4 of this Agreement. "Arkansas State Repository" shall mean any public or private repository or entity as may be designated by the State of Arkansas as a state repository for the purpose of the Rule and recognized as such by the SEC. As of the date of this Agreement, there is no Arkansas State Repository. "A.ccured Guaranty" shall mean Assured Guaranty Corp., a Maryland -domiciled insurance corporation, or any successor thereto or assignee thereof. "Beneficial Owner" shall mean any person which has or shares the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds, including persons holding Bonds through nominees, depositories or other intermediaries. 4837-5446-4260.2 • "Disclosure Representative" shall mean the City's Finance Director or his or her designee, or such other officer or employee as the City shall designate in writing to the Trustee from time to time. "Fiscal Year" shall mean the 12 -month period used, at any time, by the City for accounting purposes, which may be the calendar year. "MSRB" shall mean the Municipal Securities Rulemaking Board established in accordance with the provisions of Section 15B(b)(1) of the 1934 Act. "National Repository" shall mean any Nationally Recognized Municipal Securities Information Repository for purposes of the Rule. The National Repository currently approved by the Securities and Exchange Commission is listed in Exhibit B hereto. "Participating Underwriter" shall mean Stephens Inc. "Repository" shall mean each National Repository and the Arkansas State Repository, if any. "Rule" shall mean Rule 15c2 -12(b)(5) adopted by the Securities and Exchange Commission ("SEC") under the Securities Exchange Act of 1934, as the same may be amended from time to time ("1934 Act"). • "0.25% Sales and Use Tax" shall mean the one -quarter of one percent (0.25%) city-wide sales and use tax authorized under the Act which has been levied within the City pursuant to Ordinance No. 4891 adopted by the City on June 20, 2006, the collection of which tax commenced on January 1, 2007, as approved by the voters of the City. "0.75% Sales and Use Tax" shall mean the three-quarters of one percent (0.75%) city- wide sales and use tax authorized under the Act which has been levied within the City pursuant to Ordinance No. 4891 adopted by the City on June 20, 2006, and approved by the voters of the City. The collection of the 0.75% Sales and Use Tax will commence on the first day following the date of expiration of an existing three-quarters of one percent (0.75%) city-wide sales and use tax authorized under the Act and securing certain currently outstanding indebtedness of the City. "Sales and Use Taxes" shall mean, collectively, the 0.25% Sales and Use Tax and the 0.75% Sales and Use Tax. "Specified Events" shall mean any of the events with respect to the Bonds listed in Section 5(a) of this Agreement. Section 3. Provision of Annual Financial Information. (a) The City shall, not later than August 1 of each year, commencing August 1, 2010, provide to each Repository, to Assured Guaranty, and to the Trustee its Annual Financial Information which is consistent with the requirements of Section 4 of this Agreement. The City's Annual Financial Information may be submitted as a single • document or as separate documents comprising a package, and may cross-reference other 4837-54464260.2 • information as provided in Section 4(b) hereof; provided that the audited financial statements of the City may be submitted separately from the balance of its Annual Financial Information and later than the date required above for the filing of the Annual Financial Information if they are not available by that date. If the City's fiscal year changes, it shall give notice of such change in the same manner as for a material Specified Event under Section 5 of this Agreement. (b) If, on the date specified in subsection (a) for providing the Annual Financial Information to Repositories and Assured Guaranty, the Trustee has not received a copy of the Annual Financial Information, the Trustee shall contact the Disclosure Representative to determine if the City is in compliance with subsection (a). (c) If the Trustee is unable to verify that the Annual Financial Information has been provided to the Repositories and Assured Guaranty by the date required in subsection (a), the Trustee shall file a notice with the Repositories, Assured Guaranty and the MSRB in substantially the form set forth in Exhibit A and as required by the Rule. (d) The City shall: (i) determine each year prior to the date for providing the Annual Financial Information the name and address of each Repository; and (ii) file a report with the Trustee certifying that the Annual Financial • Information has been provided pursuant to this Agreement, stating the date it was provided, and listing all of the Repositories to which it was provided. Section 4. Content of Annual Financial Information. (a) The City's Annual Financial Information shall contain or incorporate by reference the following: (i) Receipts of the Sales and Use Taxes for the latest Fiscal Year and for the four previous Fiscal Years, if available (ii) The City's audited financial statements for the prior Fiscal Year, prepared in accordance with accounting principles generally accepted in the United States ("GAAP") as such principles are modified by the governmental accounting standards promulgated by the Government Accounting Standards Board ("GASB") and by mandated principles of the State of Arkansas, if any, as in effect from time to time, which financial statements have been audited by such auditor as shall then be required or permitted by the laws of the State of Arkansas. If the City's audited financial statements are not available by the time its Annual Financial Information is required to be filed pursuant to Section 3(a) hereof, the Annual Financial Information shall contain the unaudited financial statements of the City, and the audited financial statements shall be filed in the same manner as the Annual Financial Information when they become available. • 4837-54464260.2 • (b) Any or all of the items listed above may be incorporated by reference from other documents, including official statements of debt issues of the City or related public entities, which have been submitted to each of the Repositories or the Securities and Exchange Commission. If the document has been incorporated by reference in a final official statement, it must be available from the Municipal Securities Rulemaking Board. The City must clearly identify each such other document incorporated by reference. Section 5. Reporting of Specified Events. (a) This Section 5 shall govern the giving of notices of the occurrence of any of the following events with respect to the Bonds, if material: (1) Principal and interest payment delinquencies; (2) Non-payment related defaults; (3) Unscheduled draws on debt service reserves reflecting financial difficulties; (4) Unscheduled draws on credit enhancements reflecting financial difficulties; (5) Substitution of any credit or liquidity providers, or their failure to • perform; (6) Adverse tax opinions or events affecting the tax-exempt status of the Bonds; (7) Modifications to rights of Bondowners; (8) Bond calls; (9) Defeasances; (10) Release, substitution, or sale of property securing repayment of the Bonds; and (11) Rating changes. (b) The Trustee, upon obtaining actual knowledge of the occurrence of any of the Specified Events, shall promptly inform the Disclosure Representative of any Specified Event that has occurred, and shall request that the City promptly notify the Trustee in writing whether to report the event pursuant to subsection (e). (c) If the City determines that the occurrence of a Specified Event is material to a Beneficial Owner of the Bonds, the Disclosure Representative shall promptly notify the Trustee in writing. Such notice shall instruct the Trustee to report the occurrence • pursuant to subsection (e) below. 4837-5446-4260.2 4 • (d) If the City determines that the occurrence of a Specified Event is not material, the Disclosure Representative shall so notify the Trustee in writing and instruct the Trustee not to report the occurrence pursuant to subsection (e) below. (e) If the Trustee has been instructed by the Disclosure Representative to report the occurrence of a Specified Event, the Trustee shall file a notice of such occurrence with each National Repository and Assured Guaranty, or with the MSRB, Assured Guaranty and the Arkansas State Repository. The Trustee shall not be obligated to report the occurrence of a Specified Event if there is no instruction to do so from the Disclosure Representative. Notwithstanding the foregoing: (i) notice of the occurrence of a Specified Event described in subsections (a)(1), (4) or (5) shall be given by the Trustee unless the Disclosure Representative gives the Trustee affirmative instructions not to disclose such occurrence; and (ii) notice of the Specified Events described in subsections (a)(8) and (9) need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to Beneficial Owners of affected Bonds pursuant to the Indenture. Section 6. Termination of Reporting Obligation. The City's obligations under this • Agreement shall terminate if the City is no longer an "obligated person" within the meaning of the Rule. The City's obligations under this Agreement shall terminate upon the maturity, defeasance, prior redemption or payment in full of all of the Bonds. Section 7. Amendment; Waiver. Notwithstanding any other provision of this Agreement, the City and the Trustee may amend this Agreement (and the Trustee shall consent in its discretion, such consent not to be unreasonably withheld, to any amendment so requested by the City), and any provision of this Agreement may be waived, if such amendment or waiver is supported by an opinion of counsel, reasonably acceptable to each of the City and the Trustee, to the effect that such amendment or waiver would not, in and of itself, cause the undertakings herein to violate the Rule taking into account any subsequent change in or official interpretation of the Rule. Section 8. Additional Information. Nothing in this Agreement shall be deemed to prevent the City from disseminating any other information, using the means of dissemination set forth in this Agreement or any other means of communication, or including any other information in any Annual Financial Information or notice of occurrence of a Specified Event, in addition to that which is required by this Agreement. If the City chooses to include any information in any Annual Financial Information or notice of occurrence of a Specified Event in addition to that which is specifically required by this Agreement, the City shall have no obligation under this Agreement to update such information or include it in any future Annual Financial Information or notice of occurrence of a Specified Event. r1 4837-5446-4260.2 5 • Section 9. Default. (a) In the event of a failure of the City to provide to the Repositories the Annual Financial Information as undertaken by the City in this Agreement, the Beneficial Owner of any Bonds may take such actions as may be necessary and appropriate, including seeking mandamus or specific performance by court order, to cause the City to comply with its obligations to provide Annual Financial Information or notices under this Agreement. (b) Notwithstanding the foregoing, no Beneficial Owner of the Bonds shall have the right to challenge the content or adequacy of the information provided pursuant to Sections 3, 4 or 5 of this Agreement by mandamus, specific performance or other equitable proceedings unless the City shall have been given ninety (90) days' written notice by a Beneficial Owner of the Bonds to remedy the alleged inadequacy of the information provided and unless Beneficial Owners of Bonds representing at least 25% aggregate principal amount of outstanding Bonds shall join in such proceedings. (c) A default under this Agreement shall not be deemed an Event of Default under the Trust Indenture, and the sole remedy under this Agreement in the event of any failure of the City or the Trustee to comply with this Agreement shall be an action to compel performance. • Section 10. Duties, Immunities and Liabilities of Trustee. Article IX of the Trust Indenture is hereby made applicable to this Agreement as if this Agreement were (solely for this purpose) contained in the Trust Indenture The Trustee shall have only such duties as are specifically set forth in this Agreement, and the City agrees to indemnify and save the Trustee, its officers, directors, employees and agents, harmless against any liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorneys' fees and expenses) of defending against any claim of liability, but excluding liabilities due to its own negligence or willful misconduct. Section 11. Beneficiaries. This Agreement shall inure solely to the benefit of the City, the Trustee, Assured Guaranty and the Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person or entity. • 4837-5446-4260.2 • Section 12. Counterparts. This Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. CITY OF FAYETTEVILLE, ARKANSAS By: r �� Titl . ayor SIMMONS FIRST TRUST COMPANY, N.A., as Trustee Title: s stant Vice President • I. 4837-5446-4260.2 7 • EXHIBIT A NOTICE TO REPOSITORIES REGARDING FINANCIAL INFORMATION NAME OF ISSUER: City of Fayetteville, Arkansas NAME OF BOND ISSUE: $11,250,000 Sales and Use Tax Capital Improvement Bonds, Series 2009 DATE OF ISSUANCE: November 12, 2009 NOTICE IS HEREBY GIVEN that the City of Fayetteville, Arkansas (the "City") has not yet provided Annual Financial Information with respect to the above -named Bonds as required by Section 3 of the Continuing Disclosure Agreement dated November 12, 2009, between the City and Simmons First Trust Company, N.A., as trustee. [The City anticipates that the Annual Financial Information will be filed by .] Dated: SIMMONS FIRST TRUST COMPANY, N.A., as Trustee • cc: City of Fayetteville Stephens Inc. • 4837-54464260.2 • EXHIBIT B List of Nationally Recognized Municipal Securities Information Repositories at the time of execution and delivery of the Continuing Disclosure Agreement This list may change from time to time. The Agreement requires that information and notices be provided to each Repository. This list should be checked for changes each time information or notice is to be provided. A current list may be obtained from the Securities and Exchange Commission over the Internet at http://www.sec.gov/info/municipal/nrmsir.htm. Municipal Securities Rulemaking Board http://emma.msrb.org/ CI • B -I 4837-5446.4260.2 COPY I • Unless this certificate is presented by an authorized representative of The Depository Trust Company, a New York corporation ("DTC'), to the City or its agent for registration of transfer, exchange or payment, and any certificate issued is registered in the name of Cede & Co. or in such other name as is requested by the authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), any transfer, pledge or other use hereoffor value or otherwise by or to any person is wrongful inasmuch as the registered owner hereof Cede & Co., has an interest herein. REGISTERED No. R09-1 REGISTERED $1,450,000 UNITED STATES OF AMERICA STATE OF ARKANSAS CITY OF FAYETTEVILLE, ARKANSAS SALES AND USE TAX CAPITAL IMPROVEMENT BOND SERIES 2009 Interest Rate: 3.000% Maturity Date: November 1, 2015 Date of Bond: November 1, 2009 Registered Owner: CEDE & CO. Principal Amount: One Million Four Hundred Fifty Thousand DOLLARS KNOW ALL MEN BY THESE PRESENTS: CUSIP: 312673 EC6 That the City of Fayetteville, Arkansas, a municipality and political subdivision organized and existing by virtue of the laws of the State of Arkansas (the "City"), for value received, promises to pay to the Registered Owner shown above, or registered assigns, on the Maturity Date shown above, but solely from the source and in the manner hereinafter set forth, the Principal Amount shown above, and in like manner to pay interest on said amount from the date hereof until payment of such Principal Amount has been made or duly provided for, at the Interest Rate per annum shown above, such interest to be payable semiannually on May I and November 1 of each year, commencing May 1, 2010, except as the provisions hereinafter set forth with respect to redemption of this bond prior to maturity may become applicable hereto. The principal of and premium, if any, on this bond are payable in lawful money of the United States of America upon the presentation and surrender hereof at the principal corporate trust office of Simmons First Trust Company, N.A., Pine Bluff, Arkansas, or its successor or successors, as trustee (the "Trustee"). So long as Cede & Co. or another nominee of DTC is the registered owner of this bond, payment of interest hereon shall be made by wire transfer of immediately available funds by the Trustee to the Registered Owner as of the fifteenth day of the calendar month preceding the calendar month in which such interest payment date shall fall (the "Record Date"). At any time thereafter, payment of interest hereon shall be made by check or draft of the Trustee to the Registered Owner as of the applicable Record Date, at the owner's address as it appears on the bond registration books of the City kept by the Trustee. This bond, designated "Sales and Use Tax Capital Improvement Bond, Series 2009", is one of a series of bonds aggregating Eleven Million Two Hundred Fifty Thousand Dollars • ($11,250,000) (the "Bonds"). The Bonds are being issued for the purpose of financing all or a portion of the costs of (i) the acquisition, construction, reconstruction, repair, straightening and 4847-9543-8597.1 C I C(Dpy Unless this certificate is presented by an authorized representative of The Depository Trust Company, a New York corporation ("DTC'), to the City or its agent for registration of transfer, exchange or payment, and any certificate issued is registered in the name of Cede & Co. or in such other name as is requested by the authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), any transfer, pledge or other use hereoffor value or otherwise by or to any person is wrongful inasmuch as the registered owner hereof Cede & Co., has an interest herein. REGISTERED No. R09-2 REGISTERED $1,495,000 UNITED STATES OF AMERICA STATE OF ARKANSAS CITY OF FAYETTEVILLE, ARKANSAS SALES AND USE TAX CAPITAL IMPROVEMENT BOND SERIES 2009 Interest Rate: 3.250% Date of Bond: November 1, 2009 Maturity Date: November 1, 2016 CUSIP: 312673 ED4 Registered Owner: CEDE & CO. Principal Amount: One Million Four Hundred Ninety Five Thousand DOLLARS KNOW ALL MEN BY THESE PRESENTS: That the City of Fayetteville, Arkansas, a municipality and political subdivision organized and existing by virtue of the laws of the State of Arkansas (the "City"), for value received, promises to pay to the Registered Owner shown above, or registered assigns, on the Maturity Date shown above, but solely from the source and in the manner hereinafter set forth, the Principal Amount shown above, and in like manner to pay interest on said amount from the date hereof until payment of such Principal Amount has been made or duly provided for, at the Interest Rate per annum shown above, such interest to be payable semiannually on May 1 and November 1 of each year, commencing May 1, 2010, except as the provisions hereinafter set forth with respect to redemption of this bond prior to maturity may become applicable hereto. The principal of and premium, if any, on this bond are payable in lawful money of the United States of America upon the presentation and surrender hereof at the principal corporate trust office of Simmons First Trust Company, N.A., Pine Bluff, Arkansas, or its successor or successors, as trustee (the "Trustee"). So long as Cede & Co. or another nominee of DTC is the registered owner of this bond, payment of interest hereon shall be made by wire transfer of immediately available funds by the Trustee to the Registered Owner as of the fifteenth day of the calendar month preceding the calendar month in which such interest payment date shall fall (the "Record Date"). At any time thereafter, payment of interest hereon shall be made by check or draft of the Trustee to the Registered Owner as of the applicable Record Date, at the owner's address as it appears on the bond registration books of the City kept by the Trustee. This bond, designated "Sales and Use Tax Capital Improvement Bond, Series 2009", is one of a series of bonds aggregating Eleven Million Two Hundred Fifty Thousand Dollars • ($11,250,000) (the "Bonds"). The Bonds are being issued for the purpose of financing all or a portion of the costs of (i) the acquisition, construction, reconstruction, repair, straightening and 4847.9543-8597.1 COPY [1 C1 Unless this certificate is presented by an authorized representative of The Depository Trust Company, a New York corporation ("DTC'), to the City or its agent for registration of transfer, exchange or payment, and any certificate issued is registered in the name of Cede & Co. or in such other name as is requested by the authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), any transfer, pledge or other use hereoffor value or otherwise by or to any person is wrongful inasmuch as the registered owner hereof Cede & Co., has an interest herein. REGISTERED No. R09-3 REGISTERED $1,545,000 UNITED STATES OF AMERICA STATE OF ARKANSAS CITY OF FAYETTEVILLE, ARKANSAS SALES AND USE TAX CAPITAL IMPROVEMENT BOND SERIES 2009 Interest Rate: 3.500% Date of Bond: November 1, 2009 Maturity Date: November 1, 2017 CUSIP: 312673 EE2 Registered Owner: CEDE & CO. Principal Amount: One Million Five Hundred Forty -Five Thousand DOLLARS KNOW ALL MEN BY THESE PRESENTS: That the City of Fayetteville, Arkansas, a municipality and political subdivision organized and existing by virtue of the laws of the State of Arkansas (the "City"), for value received, promises to pay to the Registered Owner shown above, or registered assigns, on the Maturity Date shown above, but solely from the source and in the manner hereinafter set forth, the Principal Amount shown above, and in like manner to pay interest on said amount from the date hereof until payment of such Principal Amount has been made or duly provided for, at the Interest Rate per annum shown above, such interest to be payable semiannually on May I and November I of each year, commencing May 1, 2010, except as the provisions hereinafter set forth with respect to redemption of this bond prior to maturity may become applicable hereto. The principal of and premium, if any, on this bond are payable in lawful money of the United States of America upon the presentation and surrender hereof at the principal corporate trust office of Simmons First Trust Company, N.A., Pine Bluff, Arkansas, or its successor or successors, as trustee (the "Trustee"). So long as Cede & Co. or another nominee of DTC is the registered owner of this bond, payment of interest hereon shall be made by wire transfer of immediately available funds by the Trustee to the Registered Owner as of the fifteenth day of the calendar month preceding the calendar month in which such interest payment date shall fall (the "Record Date"). At any time thereafter, payment of interest hereon shall be made by check or draft of the Trustee to the Registered Owner as of the applicable Record Date, at the owner's address as it appears on the bond registration books of the City kept by the Trustee. This bond, designated "Sales and Use Tax Capital Improvement Bond, Series 2009", is one of a series of bonds aggregating Eleven Million Two Hundred Fifty Thousand Dollars • ($11,250,000) (the "Bonds"). The Bonds are being issued for the purpose of financing all or a portion of the costs of (i) the acquisition, construction, reconstruction, repair, straightening and 4847-9543-8597.1 • Unless this certificate is presented by an authorized representative of The Depository Trust Company, a New York corporation ("DTC'), to the City or its agent for registration of transfer, exchange or payment, and any certificate issued is registered in the name of Cede & Co. or in such other name as is requested by the authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), any transfer, pledge or other use hereoffor value or otherwise by or to any person is wrongful inasmuch as the registered owner hereof Cede & Co., has an interest herein. REGISTERED No. R09-4 REGISTERED $1,600,000 UNITED STATES OF AMERICA STATE OF ARKANSAS CITY OF FAYETTEVILLE, ARKANSAS SALES AND USE TAX CAPITAL IMPROVEMENT BOND SERIES 2009 Interest Rate: 3.625% Date of Bond: November 1, 2009 Maturity Date: November 1, 2018 Registered Owner: CEDE & CO. Principal Amount: One Million Six Hundred Thousand DOLLARS KNOW ALL MEN BY THESE PRESENTS: CUSIP: 312673 EF9 That the City of Fayetteville, Arkansas, a municipality and political subdivision organized and existing by virtue of the laws of the State of Arkansas (the "City"), for value received, promises to pay to the Registered Owner shown above, or registered assigns, on the Maturity Date shown above, but solely from the source and in the manner hereinafter set forth, the Principal Amount shown above, and in like manner to pay interest on said amount from the date hereof until payment of such Principal Amount has been made or duly provided for, at the Interest Rate per annum shown above, such interest to be payable semiannually on May 1 and November 1 of each year, commencing May 1, 2010, except as the provisions hereinafter set forth with respect to redemption of this bond prior to maturity may become applicable hereto. The principal of and premium, if any, on this bond are payable in lawful money of the United States of America upon the presentation and surrender hereof at the principal corporate trust office of Simmons First Trust Company, N.A., Pine Bluff, Arkansas, or its successor or successors, as trustee (the "Trustee"). So long as Cede & Co. or another nominee of DTC is the registered owner of this bond, payment of interest hereon shall be made by wire transfer of immediately available funds by the Trustee to the Registered Owner as of the fifteenth day of the calendar month preceding the calendar month in which such interest payment date shall fall (the "Record Date"). At any time thereafter, payment of interest hereon shall be made by check or draft of the Trustee to the Registered Owner as of the applicable Record Date, at the owner's address as it appears on the bond registration books of the City kept by the Trustee. This bond, designated "Sales and Use Tax Capital Improvement Bond, Series 2009", is one of a series of bonds aggregating Eleven Million Two Hundred Fifty Thousand Dollars • ($11,250,000) (the "Bonds"). The Bonds are being issued for the purpose of financing all or a portion of the costs of (i) the acquisition, construction, reconstruction, repair, straightening and 4847-9543-8597.1 • CI Unless this certificate is presented by an authorized representative of The Depository Trust Company, a New York corporation ("DTC'), to the City or its agent for registration of transfer, exchange or payment, and any certificate issued is registered in the name of Cede & Co. or in such other name as is requested by the authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), any transfer, pledge or other use hereof for value or otherwise by or to any person is wrongful inasmuch as the registered owner hereof Cede & Co., has an interest herein. REGISTERED No. R09-5 REGISTERED $1,655,000 UNITED STATES OF AMERICA STATE OF ARKANSAS CITY OF FAYETTEVILLE, ARKANSAS SALES AND USE TAX CAPITAL IMPROVEMENT BOND SERIES 2009 Interest Rate: 3.750% Date of Bond: November 1, 2009 Registered Owner: CEDE & CO. Maturity Date: November 1, 2019 CUSIP: 312673 EG7 Principal Amount: One Million Six Hundred Fifty -Five Thousand DOLLARS KNOW ALL MEN BY THESE PRESENTS: That the City of Fayetteville, Arkansas, a municipality and political subdivision organized and existing by virtue of the laws of the State of Arkansas (the "City"), for value received, promises to pay to the Registered Owner shown above, or registered assigns, on the Maturity Date shown above, but solely from the source and in the manner hereinafter set forth, the Principal Amount shown above, and in like manner to pay interest on said amount from the date hereof until payment of such Principal Amount has been made or duly provided for, at the Interest Rate per annum shown above, such interest to be payable semiannually on May 1 and November 1 of each year, commencing May 1, 2010, except as the provisions hereinafter set forth with respect to redemption of this bond prior to maturity may become applicable hereto. The principal of and premium, if any, on this bond are payable in lawful money of the United States of America upon the presentation and surrender hereof at the principal corporate trust office of Simmons First Trust Company, N.A., Pine Bluff, Arkansas, or its successor or successors, as trustee (the "Trustee"). So long as Cede & Co. or another nominee of DTC is the registered owner of this bond, payment of interest hereon shall be made by wire transfer of immediately available funds by the Trustee to the Registered Owner as of the fifteenth day of the calendar month preceding the calendar month in which such interest payment date shall fall (the "Record Date"). At any time thereafter, payment of interest hereon shall be made by check or draft of the Trustee to the Registered Owner as of the applicable Record Date, at the owner's address as it appears on the bond registration books of the City kept by the Trustee. This bond, designated "Sales and Use Tax Capital Improvement Bond, Series 2009", is one of a series of bonds aggregating Eleven Million Two Hundred Fifty Thousand Dollars •($11,250,000) (the "Bonds"). The Bonds are being issued for the purpose of financing all or a portion of the costs of (i) the acquisition, construction, reconstruction, repair, straightening and 4847-9543-8597.1 COPY • r1 Unless this certificate is presented by an authorized representative of The Depository Trust Company, a New York corporation ("DTC'), to the City or its agent for registration of transfer, exchange or payment, and any certificate issued is registered in the name of Cede & Co. or in such other name as is requested by the authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), any transfer, pledge or other use hereof for value or otherwise by or to any person is wrongful inasmuch as the registered owner hereof Cede & Co., has an interest herein. REGISTERED No. R09-6 REGISTERED $3,505,000 UNITED STATES OF AMERICA STATE OF ARKANSAS CITY OF FAYETTEVILLE, ARKANSAS SALES AND USE TAX CAPITAL IMPROVEMENT BOND SERIES 2009 Interest Rate: 4.000% Date of Bond: November 1, 2009 Maturity Date: November 1, 2021 Registered Owner: CEDE & CO. Principal Amount: Three Million Five Hundred Five Thousand DOLLARS KNOW ALL MEN BY THESE PRESENTS: CUSIP: 312673 EH5 That the City of Fayetteville, Arkansas, a municipality and political subdivision organized and existing by virtue of the laws of the State of Arkansas (the "City"), for value received, promises to pay to the Registered Owner shown above, or registered assigns, on the Maturity Date shown above, but solely from the source and in the manner hereinafter set forth, the Principal Amount shown above, and in like manner to pay interest on said amount from the date hereof until payment of such Principal Amount has been made or duly provided for, at the Interest Rate per annum shown above, such interest to be payable semiannually on May I and November 1 of each year, commencing May 1, 2010, except as the provisions hereinafter set forth with respect to redemption of this bond prior to maturity may become applicable hereto. The principal of and premium, if any, on this bond are payable in lawful money of the United States of America upon the presentation and surrender hereof at the principal corporate trust office of Simmons First Trust Company, N.A., Pine Bluff, Arkansas, or its successor or successors, as trustee (the "Trustee"). So long as Cede & Co. or another nominee of DTC is the registered owner of this bond, payment of interest hereon shall be made by wire transfer of immediately available funds by the Trustee to the Registered Owner as of the fifteenth day of the calendar month preceding the calendar month in which such interest payment date shall fall (the "Record Date"). At any time thereafter, payment of interest hereon shall be made by check or draft of the Trustee to the Registered Owner as of the applicable Record Date, at the owner's address as it appears on the bond registration books of the City kept by the Trustee. This bond, designated "Sales and Use Tax Capital Improvement Bond, Series 2009", is one of a series of bonds aggregating Eleven Million Two Hundred Fifty Thousand Dollars • ($11,250,000) (the "Bonds"). The Bonds are being issued for the purpose of financing all or a portion of the costs of (i) the acquisition, construction, reconstruction, repair, straightening and 4847-9543-8597.1 • widening of certain City streets and related improvements (the "Street Project"), and (ii) the acquisition, construction and equipping of certain City trail system improvements (the "Trail Project"). Bond proceeds will be utilized to pay Project costs, to fund a debt service reserve, to purchase a policy of municipal bond insurance, and to pay the costs of issuance of the Bonds. The Bonds are issued under and are secured by and entitled to the protection of a Trust Indenture dated as of November 1, 2006, as supplemented and amended by a First Supplemental Trust Indenture dated as of October 1, 2007, and by a Second Supplemental Trust Indenture dated as of November 1, 2009 (as supplemented and amended, the "Indenture"), by and between the City and the Trustee, which Indenture is available for inspection at the principal corporate trust office of the Trustee. Reference is hereby made to the Indenture and to all indentures supplemental thereto for the provisions, among others, with respect to the nature and extent of the security, the rights, duties and obligations of the City, the Trustee and the owners of the Bonds, and the terms upon which the Bonds are issued and secured. The Bonds are issued pursuant to and in full compliance with the Constitution and laws of the State of Arkansas, including particularly Amendment No. 62 to the Constitution of Arkansas, as implemented by the Local Government Bond Act of 1985, codified as Arkansas Code Annotated (1998 Repl. & Supp. 2005) §§14-164-301 et seq. (as from time to time amended, the "Local Government Bond Act"), Ordinance No. 5277 of the City adopted October 6, 2009, which ordinance authorized the execution and delivery of the Second Supplemental Trust Indenture, and a special election duly held on September 12, 2006, at which a majority of • the qualified electors of the City voting approved the issuance of the Bonds. In accordance with the Local Government Bond Act, the City has pledged all receipts from (i) a one -quarter of one percent (0.25%) local sales and use tax (the "0.25% Sales and Use Tax") and (ii) a three-quarters of one percent (0.75%) local sales and use tax (the "0.75% Sales and Use Tax"), each levied by the City pursuant to Ordinance No. 4891, adopted by the City on June 20, 2006, to provide funds for the repayment of the Bonds. The pledge of the receipts of the 0.25% Sales and Use Tax and the 0.75% Sales and Use Tax (collectively, the "Tax Receipts") presently secures payment of the Bonds and (i) the City's $50,000,000 Sales and Use Tax Capital Improvement Bonds, Series 2006A (the "Series 2006A Bonds"), and (ii) the City's $14,340,000 Sales and Use Tax Capital Improvement Bonds, Series 2007 (the "Series 2007 Bonds"). Such Tax Receipts may additionally be pledged to secure the payment of up to $34,410,000 in aggregate principal amount of Additional Bonds issued under the provisions of the Indenture. The Indenture provides that the City may hereafter issue Additional Bonds from time to time under certain terms and conditions contained in the Indenture and, if issued or incurred, such Additional Bonds will rank on a parity of security with the Bonds, the Series 2006A Bonds and the Series 2007 Bonds and will be equally and ratably secured by and entitled to the protection of the Indenture. The Bonds are not general obligations of the City, but are special obligations secured by an irrevocable pledge of and lien on the Tax Receipts, as more particularly described in the Indenture. In no event shall the Bonds constitute an indebtedness of the City within the meaning of any constitutional or statutory limitation. • 4847-9543-8597.1 2 COPY • STATEMENT OF INSURANCE Assured Guaranty Corp. ("Assured Guaranty"), a Maryland -domiciled insurance company, has delivered its financial guaranty insurance policy with respect to the scheduled payments of principal of and interest on this Bond to Simmons First Trust Company, N.A., Pine Bluff, Arkansas, as paying agent on behalf of the holders of the Bonds (the "Paying Agent"). Said Policy is on file and available for inspection at the principal office of the Paying Agent and a copy thereof may be obtained from Assured Guaranty or the Paying Agent. All payments required to be made under the Policy shall be made in accordance with the provisions thereof. The owner of this bond acknowledges and consents to the subrogation rights of Assured Guaranty as more fully set forth in the Policy. The holder of this Bond shall have no right to enforce the provisions of the Indenture or to institute action to enforce the covenants therein, or to take any action with respect to any event of default under the Indenture, or to institute, appear in or defend any suit or other proceeding with respect thereto, except as provided in the Indenture. In certain events, on the conditions, in the manner and with the effect set forth in the Indenture, the principal of all the Bonds and Additional Bonds, if any, issued under the Indenture and then outstanding may be declared and may become due and payable before the stated maturity thereof, together with accrued interest thereon. Modifications or alterations of the Indenture, or of any indenture supplemental thereto, may be made only to the extent and in the circumstances permitted by the Indenture. • The Bonds shall be redeemed prior to maturity, in whole or in part, on any interest payment date, in inverse order of maturity and by lot in such manner as the Trustee shall determine within a maturity, at a redemption price equal to 100% of the principal amount being redeemed, plus accrued interest to the date of redemption, from moneys in the Project Fund in excess of the amount needed to complete the portions of the Projects to be funded with the Bonds. The Bonds shall be redeemed prior to maturity, in whole or in part, on any interest payment date, in inverse order of maturity and by lot in such manner as the Trustee shall determine within a maturity, at a redemption price equal to 100% of the principal amount being redeemed, plus accrued interest to the date of redemption, from surplus Tax Receipts deposited in the Redemption Fund pursuant to the Indenture. So long as the Series 2006A Bonds are outstanding, 50% of the surplus Tax Receipts shall be allocated to the redemption of the Series 2006A Bonds and the remaining 50% of such surplus Tax Receipts shall be allocated ratably (based on relative outstanding principal amounts) to the redemption of the Series 2007 Bonds, the Bonds and any series of Additional Bonds. Following payment in whole of the Series 2006A Bonds at maturity or upon redemption prior to maturity, all surplus Tax Receipts shall be allocated ratably (based on relative outstanding principal amounts) to the redemption of the Series 2007 Bonds, the Bonds and any other series of Additional Bonds. The Bonds are subject to redemption at the option of the City, communicated in a written notice to the Trustee not less than sixty (60) days prior to the date fixed for redemption, in whole or in part on any date on or after November 1, 2015, in inverse order of maturity and by lot in • such manner as the Trustee shall determine within a maturity, at a redemption price equal to 100% of the principal amount being redeemed plus accrued interest to the date of redemption. 4847-9543-8597.1 3 • The Bonds maturing November 1, 2021 are subject to mandatory redemption, to be selected by lot in such manner as the Trustee shall determine, on November 1 in the years and the amounts set forth below, at a redemption price equal to 100% of the principal amount being redeemed, plus accrued interest to the date of redemption. Date Principal Amount November 1, 2020 $1,720,000 November 1, 2021 (maturity) 1,785,000 Notwithstanding the foregoing, so long as DTC or its nominee is the sole registered owner of the Bonds, the particular Bonds or portions thereof to be redeemed in part within a maturity shall be selected by lot by DTC in such manner as DTC shall determine. In selecting Bonds for redemption prior to maturity, in the case any outstanding Bond is in a denomination greater than $5,000, each $5,000 of face value of such Bond shall be treated as a separate Bond of the denomination of $5,000. In the event any of the Bonds or portions thereof (which shall be $5,000 or any integral multiple thereof) are called for redemption, notice thereof shall be given by the Trustee by first class mail to the registered owner of each such Bond addressed to such registered owner at his registered address and placed in the mails not less than thirty (30) nor more than sixty (60) days prior to the date fixed for redemption; provided, however, that failure to give such notice by mailing, or any defect therein, shall not affect the validity of the proceedings for the redemption • of any Bond with respect to which no such failure or defect has occurred. Each notice shall identify the Bonds or portions thereof being called, and the date on which they shall be presented for payment. After the date specified in such call notice, the Bond or Bonds so called for redemption will cease to bear interest provided funds sufficient for their redemption have been deposited with the Trustee, and, except for the purpose of payment, shall no longer be protected by the Indenture and shall not be deemed to be outstanding under the provisions of the Indenture. This Bond may be transferred on the books of registration kept by the Trustee by the registered owner or by his duly authorized attorney upon surrender hereof, together with a written instrument of transfer duly executed by the registered owner or his duly authorized attorney. The Bonds are issuable as registered bonds without coupons in denominations of $5,000 and any integral multiple thereof. Subject to the limitations and upon payment of the charges provided in the Indenture, Bonds may be exchanged for a like aggregate principal amount of Bonds of other authorized denominations. No recourse shall be had for the payment of the principal of or premium, if any, or interest on any of the Bonds or for any claim based thereon or upon any obligation, covenant or agreement contained in the Bonds or the Indenture against any past, present or future alderman, officer or employee of the City, or any successor, as such, either directly or through the City or any successor of the City, under any rule of law or equity, statute or constitution or by the enforcement of any assessment or penalty or otherwise, and all such liability of any such • alderman, officer or employee as such is hereby expressly waived and released as a condition of and consideration for the issuance of any of the Bonds. 4847-9543-8597.1 4 copy • The City has designated this Bond as a "qualified tax-exempt obligation" within the meaning of Section 265(b) of the Internal Revenue Code of 1986, as amended. This Bond is issued with the intent that the laws of the State of Arkansas will govern its construction. IT IS HEREBY CERTIFIED, RECITED AND DECLARED that all acts, conditions and things required to exist, happen and be performed precedent to and in the issuance of the Bonds do exist, have happened and have been performed in due time, form and manner as required by law; that the indebtedness represented by the Bonds, together with all obligations of the City, does not exceed any constitutional or statutory limitation; and that the revenues pledged to the payment of the principal of and premium, if any, and interest on the Bonds as the same become due and payable will be sufficient in amount for that purpose. This Bond shall not be valid or become obligatory for any purpose or be entitled to any security or benefit under the Indenture until the Certificate of Authentication hereon shall have been signed by the Trustee. • C1 4847-9543-8597.1 py� 1 • IN WITNESS WHEREOF, the City of Fayetteville, Arkansas has caused this Series 2009 Bond to be executed by its Mayor and City Clerk, thereunto duly authorized (by their manual or facsimile signatures), and its corporate seal to be affixed or imprinted hereon, all as of the date hereof shown above. CITY OF FAYETTEVILLE, ARKANSAS ATTEST: By: � ,Vt C.! t. l�tuZt City Clerk Yi • FAYETTEVILLE: a ' (Form of Trustee's Certificate) %yr%�o`E'S CERTIFICATE OF AUTHENTICATION G • This bond is one of the Series 2009 Bonds of the issue described in and issued under the provisions of the within mentioned Indenture. Attached hereto is the complete text of the opinion of Kutak Rock LLP, a signed original of which is on file with the undersigned, delivered and dated the date of the original delivery of and payment for the Series 2009 Bonds. Date: // /.) -(C- SIMMONS FIRST TRUST COMPANY, N.A., as Trustee II By: ; Authdilied Signature CI 4847-9543-8597.1 fop • (Form of Assignment) ASSIGNMENT FOR VALUE RECEIVED, , hereby sells, assigns, and transfers unto the within Bond and all rights thereunder, and hereby irrevocably constitutes and appoints as attorney to transfer the within Bond on the books kept for registration thereof with full power of substitution in the premises. DATE: ,20_. Transferor GUARANTEED BY: CI NOTICE: Signature(s) must be guaranteed by an institution satisfactory to the Trustee or other transfer agent. • 4847-9543-8597.1 7 EXECUTION COPY • City of Fayetteville City Administration Building 113 West Mountain Fayetteville, Arkansas 72701 Ladies and Gentlemen: BOND PURCHASE AGREEMENT October 21, 2009 $11,250,000 City of Fayetteville, Arkansas Sales and Use Tax Capital Improvement Bonds, Series 2009 On the basis of the representations, warranties and agreements and upon the terms and conditions contained herein, the undersigned, Stephens Inc. (the "Underwriter"), hereby offers to enter into this Bond Purchase Agreement (this "Bond Purchase Agreement") with the City of Fayetteville, Arkansas (the "City") which, upon your acceptance of this offer, will be binding • upon you and upon the Underwriter. Terms not otherwise defined herein shall have the same meanings as set forth in the Indenture defined and described below. This offer is made subject to your acceptance of this Bond Purchase Agreement on or before midnight on October 21, 2009. 1. General. Upon the terms and conditions and in reliance upon the respective representations, warranties and covenants herein, the Underwriter hereby agrees to purchase from the City, and the City hereby agrees to sell to the Underwriter, all (but not less than all) of $11,250,000 City of Fayetteville, Arkansas Sales and Use Tax Capital Improvement Bonds, Series 2009 (the "Bonds"), at the purchase price (the "Purchase Price") of $1 1,052,875.20 (equal to the par amount of the Bonds less a net reoffering discount of $56,499.80 and less underwriter's discount of $140,625.00) plus accrued interest, if any, from November 1, 2009 to the Closing Date (hereinafter defined). The Bonds shall be issued by the City pursuant to the provisions of the Constitution and laws of the State of Arkansas, including, particularly, Amendment 62 to the Constitution and Arkansas Code Annotated (1998 Repl. & Supp. 2005) §§14-164-301 et seq. (the "Act"). The Bonds will constitute special and limited obligations of the City, secured solely by and payable solely from (1) a pledge of and lien on the receipts from (A) a one -quarter of one percent (0.25%) city-wide sales and use tax (the "0.25% Sales and Use Tax) and (B) a three- quarters of one percent (0.75%) city-wide sales and use tax (the "0.75% Sales and Use Tax"), • each authorized under the Act and levied within the City pursuant to Ordinance No. 4891 of the City Council of the City which was adopted on June 20, 2006 (the "Election Ordinance"), which 4838-0473-0372.3 • levies were approved by the voters of the City at a special election held September 12, 2006, (2) moneys or investments on deposit in the Revenue Fund, Bond Fund, Redemption Fund and Debt Service Reserve Fund established by a Trust Indenture dated as of November 1, 2006, as supplemented and amended by a First Supplemental Trust Indenture dated as of October 1, 2007, and by a Second Supplemental Trust Indenture dated as of November I, 2009 (as supplemented and amended, the "Indenture"), by and between the City and Simmons First Trust Company, N.A., Pine Bluff, Arkansas, as trustee (the `Trustee"), and (3) a financial guaranty insurance policy with respect to the Bonds to be issued by Assured Guaranty Corp. concurrently with the delivery of the Bonds, all as more particularly described in the Indenture. The pledge of receipts from the 0.25% Sales and Use Tax and the 0.75% Sales and Use Tax is made on a parity basis with the existing pledge of such receipts securing (i) the City's Sales and Use Tax Capital Improvement Bonds, Series 2006A (the "Series 2006A Bonds"), and (ii) the City's Sales and Use Tax Capital Improvement Bonds, Series 2007 (the "Series 2007 Bonds"), pursuant to the Indenture. The Bonds shall be issued and secured pursuant to Ordinance No. 5277 of the City Council of the City which was adopted on October 6, 2009 (the "Authorizing Ordinance"), and pursuant to the Indenture. The Bonds shall have the maturities and interest rates as set forth in Exhibit A hereto. The Bonds shall be subject to redemption as set forth in the Indenture and in the Official Statement (hereinafter defined). The proceeds of the Bonds will be utilized (i) to finance a portion of the costs of the Street Project and the Trail Project (as defined in the Indenture), (ii) to purchase a financial • guaranty insurance policy for deposit in the Debt Service Reserve Fund, (iii) to purchase a financial guaranty insurance policy with respect to the Bonds, and (iv) to pay the costs of issuance of the Bonds. The City will undertake, pursuant to a Continuing Disclosure Agreement to be dated as of the date of delivery of the Bonds (the "Continuing Disclosure Agreement"), to provide certain annual financial and operating information and notices of the occurrence of certain events, if material, as required by Section (b)(5)(i) of Rule 15c2-12 under the Securities Exchange Act of 1934, as amended (the "Rule"). A description of this undertaking is set forth in the Preliminary Official Statement and will also be set forth in the Official Statement (each hereinafter defined). The City is not in default with respect to any of its obligations under previous undertakings pursuant to the Rule. In order to ensure compliance with the provisions of the Internal Revenue Code of 1986, as amended (the "Code"), the City will enter into a Tax Regulatory Agreement dated as of the date of delivery of the Bonds (the "Tax Regulatory Agreement"). 2. Bona Fide Public Offering. The Underwriter agrees to make a bona fide public offering of all of the Bonds at the offering prices set forth on the cover of the final Official Statement described below. 3. Delivery of Official Statement. (a) The City has previously provided the • Underwriter with copies of its Preliminary Official Statement, including the cover page and the appendices thereto, dated October 14, 2009, relating to the Bonds (the 2 4838-0473-0372.3 "Preliminary Official Statement"). As of its date, the Preliminary Official Statement is • "deemed final" by the City for purposes of SEC Rule 15c2 -12(b)(1). The Preliminary Official Statement, as amended to conform to the terns of this Bond Purchase Agreement, including Exhibit A hereto, and with such other changes and amendments as are mutually agreed to by the City and the Underwriter, is herein referred to as the "Official Statement." (b) The City agrees to deliver to the Underwriter, at such address as the Underwriter shall specify, as many copies of the final Official Statement dated October 21, 2009, relating to the Bonds as the Underwriter shall reasonably request as necessary to comply with paragraph (b)(4) of the Rule (as defined above) and with Rule G-32 and all other applicable rules of the Municipal Securities Rulemaking Board. The City agrees to deliver such final Official Statement within seven (7) business days after the execution hereof. (c) The City hereby authorizes and approves the Preliminary Official Statement and the final Official Statement, consents to their distribution and use by the Underwriter and authorizes the execution of the final Official Statement by a duly authorized officer of the City. The City ratifies and confirms the use of the Preliminary Official Statement by the Underwriter prior to the date hereof in connection with the public offering of the Bonds. (d) The Underwriter shall give notice to the City on the date after which no • participating underwriter, as such term is defined in the Rule, remains obligated to deliver final Official Statements pursuant to paragraph (b)(4) of the Rule. 4. City's Representations and Warranties. The City represents and warrants to the Underwriter that: (a) The City is a duly organized and existing political subdivision under the Constitution and laws of the State of Arkansas (the "State"). The City is authorized by the provisions of the Act to issue the Bonds for the purpose of financing a portion of the Street Project and the Trail Project. (b) The City has the full legal right, power and authority (i) to adopt the Election Ordinance levying the 0.25% Sales and Use Tax and the 0.75% Sales and Use Tax (collectively, the "Sales and Use Taxes"), (ii) to adopt the Authorizing Ordinance authorizing the issuance of and sale of the Bonds, (iii) to enter into this Bond Purchase Agreement, the Second Supplemental Trust Indenture, the Continuing Disclosure Agreement and the Tax Regulatory Agreement, (iv) to levy the Sales and Use Taxes, (v) to issue, sell and deliver the Bonds to the Underwriter as provided herein, (vi) to pledge irrevocably the receipts of the Sales and Use Taxes to the payment of the principal of, premium, if any, and interest on the Bonds, and (vii) to carry out and consummate all other transactions contemplated by each of the aforesaid documents, and the City has complied with all provisions of applicable law, including the Act, in all matters relating • to such transactions. 3 4838-0473-0372.3 (c) The City has duly authorized (i) the execution and delivery of the Bonds • and the execution, delivery and due performance of this Bond Purchase Agreement, the Second Supplemental Trust Indenture, the Continuing Disclosure Agreement and the Tax Regulatory Agreement, (ii) the distribution and use of the Preliminary Official Statement and the execution, delivery and distribution of the final Official Statement, and (iii) the taking of any and all such actions as may be required on the part of the City to carry out, give effect to and consummate the transactions contemplated by such instruments. All consents or approvals necessary to be obtained by the City in connection with the foregoing have been received, and the consents or approvals so received remain still in full force and effect. (d) The Election Ordinance and the Authorizing Ordinance have been duly adopted by City Council of the City, are each in full force and effect and each constitutes the legal, valid and binding act of the City; and this Bond Purchase Agreement, the Second Supplemental Trust Indenture, the Continuing Disclosure Agreement and the Tax Regulatory Agreement, when executed and delivered, will constitute legal, valid and binding obligations of the City, and this Bond Purchase Agreement, the Second Supplemental Trust Indenture, the Continuing Disclosure Agreement and the Tax Regulatory Agreement are enforceable against the City in accordance with their respective terms, except as enforceability thereof may be limited by bankruptcy, insolvency or other laws affecting creditors' rights generally. (e) When delivered to or at the direction of the Underwriter, the Bonds will • have been duly authorized, executed, authenticated, issued and delivered and will constitute legal, valid and binding obligations of the City in conformity with the laws of the State of Arkansas, including the Act, and will be entitled to the benefit and security of the Authorizing Ordinance and the Indenture. (f) The City has duly approved and authorized the distribution and use of the Preliminary Official Statement and the execution, delivery and distribution of the Official Statement. (g) The information contained in the Preliminary Official Statement is, and as of the Closing Date such information in the final Official Statement will be, trite and correct in all material respects, and the Preliminary Official Statement does not and the final Official Statement will not contain any untrue or misleading statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (h) If, at any time prior to the earlier of (i) receipt of notice from the Underwriter pursuant to Section 3(d) hereof that Official Statements are no longer required to be delivered under the Rule or (ii) 25 days after the Closing Date, any event occurs as a result of which the Official Statement, as then amended or supplemented, might include an untrue statement of a material fact, or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they • were made, not misleading, the City shall promptly notify the Underwriter in writing of such event. Any information supplied by the City for inclusion in any amendments or 4 4838-0473-0372.3 • supplements to the Official Statement will not contain any untrue or misleading statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. Upon the request of the Underwriter therefor, the City shall prepare and deliver to the Underwriter, at the City's expense, as many copies of an amendment or supplement to the Official Statement which will correct any untrue statement or omission therein as the Underwriter may reasonably request. (i) Neither the adoption of the Authorizing Ordinance or the Election Ordinance, the execution and delivery of this Bond Purchase Agreement, the Bonds, the Second Supplemental Trust Indenture, the Continuing Disclosure Agreement or the Tax Regulatory Agreement, nor the consummation of the transactions contemplated herein or therein or the compliance with the provisions hereof or thereof will conflict with, or constitute on the part of the City a violation of, or a breach of or default under, (i) any statute, indenture, mortgage, commitment, note or other agreement or instrument to which the City is a party or by which it is bound, (ii) any provision of the Constitution of the State of Arkansas, or (iii) any existing law, rule, regulation, ordinance, judgment, order or decree to which the City (or the members of its City Council or any of its officers in their respective capacities as such) is subject. All consents, approvals, authorizations and orders of governmental or regulatory authorities, if any, which are required for the City's execution and delivery of, consummation of the transactions contemplated by, and compliance with the provisions of this Bond Purchase Agreement, the Authorizing Ordinance, the Election Ordinance, the Bonds, the Second Supplemental • Trust Indenture, the Continuing Disclosure Agreement and the Tax Regulatory Agreement have been obtained. (j) Except as is specifically disclosed in the Official Statement, there is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, public board or body, pending or, to the best knowledge of the City, threatened, which in any way questions the powers of the City referred to in subparagraph 4(b) above, or the validity of any proceeding taken by the City in connection with the issuance of the Bonds or the levy of the Sales and Use Taxes, or wherein an unfavorable decision, ruling or finding could materially adversely affect the transactions contemplated by this Bond Purchase Agreement, or of any other document or instrument required or contemplated by the Bond financing, or which, in any way, could adversely affect the validity or enforceability of the Authorizing Ordinance, the Election Ordinance, the Bonds, the Indenture, the Continuing Disclosure Agreement, the Tax Regulatory Agreement or this Bond Purchase Agreement or, to the knowledge of the City, which in any way questions the exclusion from gross income of the recipients thereof of the interest on the Bonds for federal income tax purposes or in any other way questions the status of the Bonds under federal or State of Arkansas tax laws or regulations. (k) Any certificate signed by any official of the City and delivered to the Underwriter shall be deemed a representation and warranty by the City to the Underwriter as to the truth of the statements therein contained. • 5 4838-0473-0372.3 (I) The City has not been notified of any listing or proposed listing by the • Internal Revenue Service to the effect that it is a bond issuer whose arbitrage certifications may not be relied upon. (m) The collection history with respect to the City's previously levied sales and use taxes set forth in the Preliminary Official Statement under the caption entitled "HISTORICAL SALES AND USE TAX COLLECTIONS" is fair, accurate and complete. (n) The City will not knowingly take or omit to take any action, which action or omission will in any way cause the proceeds from the sale of the Bonds to be applied in a manner other than as provided in the Indenture, or which would cause the interest on the Bonds to be includable in gross income for federal income tax purposes. 5. City's Covenants. The City covenants with the Underwriter as follows: (a) The City will cooperate with the Underwriter in qualifying the Bonds for offer and sale under the securities or Blue Sky laws of such jurisdictions of the United States as the Underwriter may request; provided, however, that the City shall not be required to consent to suit or to service of process in any jurisdiction. The City consents to the use by the Underwriter in the course of its compliance with the securities or Blue Sky laws of the various jurisdictions of the documents relating to the Bonds, subject to the right of the City to withdraw such consent for cause by written notice to the • Underwriter. (b) Prior to the earlier of(i) receipt of notice from the Underwriter pursuant to Section 3(d) hereof that final Official Statements are no longer required under the Rule or (ii) 25 days after the Closing Date, the City shall provide the Underwriter with such information regarding the City, the receipts from the Sales and Use Taxes, and the current financial condition and ongoing operations of the City, all as the Underwriter may reasonably request. 6. Closing. At 10:00 a.m. Fayetteville time on November 12, 2009, or at such other time and/or date as shall have been mutually agreed upon by the City and the Underwriter (the "Closing Date"), the City will deliver the Bonds, or cause the Bonds to be delivered, to or at the direction of the Underwriter, said Bonds to be in definitive form duly executed by the City and authenticated by Simmons First Trust Company, N.A., Pine Bluff, Arkansas, as trustee (the "Trustee"), together with the other documents hereinafter mentioned; and the Underwriter will accept such delivery and pay the Purchase Price of the Bonds by making a wire transfer of federal funds payable to the order of the Trustee for the account of the City. The Bonds shall be delivered to The Depository Trust Company in New York, New York, and the activities relating to the final execution and delivery of the Authorizing Ordinance, the Election Ordinance, the Second Supplemental Trust Indenture, the Continuing Disclosure Agreement and the Tax Regulatory Agreement and the other documents related to the Bonds and the payment for the Bonds and the delivery of the certificates, opinions and other • instruments as described in Section 8 of this Bond Purchase Agreement shall occur in the offices 6 4838-0473-0372.3 of Kutak Rock LLP, 234 East Millsap Road, Suite 400, Fayetteville, Arkansas ("Bond Counsel") or at such other place as shall have been mutually agreed upon between the City and the Underwriter. The payment for the Bonds and simultaneous delivery of the Bonds to or at the direction of the Underwriter is herein referred to as the "Closing." 7. Underwriter's Right to Cancel. The Underwriter shall have the right to cancel its obligation to purchase the Bonds hereunder by notifying the City in writing or by telegram of its election to do so between the date hereof and the Closing, if at any time hereafter and prior to the Closing: (i) the House of Representatives or the Senate of the Congress of the United States, or a committee of either, shall have pending before it, or shall have passed or recommended favorably, legislation introduced previous to the date hereof, which legislation, if enacted in its form as introduced or as amended, would have the purpose or effect of imposing federal income taxation upon revenues or other income of the general character to be derived by the City or by any similar body under the Authorizing Ordinance or the Indenture or similar documents or upon interest received on obligations of the general character of the Bonds or the Bonds, or of causing interest on obligations of the general character of the Bonds, or the Bonds, to be includable in gross income for purposes of federal income taxation, and such legislation, in the Underwriter's opinion, materially adversely affects the market price of the Bonds; or (ii) a tentative decision with respect to legislation shall be reached by a • committee of the House of Representatives or the Senate of the Congress of the United States, or legislation shall be favorably reported or rereported by such a committee or be introduced, by amendment or otherwise, in or be passed by the House of Representatives or the Senate, or recommended to the Congress of the United States for passage by the President of the United States, or be enacted or a decision by a federal court of the United States or the United States Tax Court shall have been rendered, or a ruling, release, order, regulation or official statement by or on behalf of the United States Treasury Department, the Internal Revenue Service or other governmental agency shall have been made or proposed to be made having the purpose or effect, or any other action or event shall have occurred which has the purpose or effect, directly or indirectly, of adversely affecting the federal income tax consequences of owning the Bonds or of any of the transactions contemplated in connection herewith, including causing interest on the Bonds to be included in gross income for purposes of federal income taxation, or imposing federal income taxation upon revenues or other income of the general character to be derived by the City or by any similar body under the Authorizing Ordinance or the Indenture or similar documents or upon interest received on obligations of the general character of the Bonds, or the Bonds which, in the opinion of the Underwriter, materially adversely affects the market price of or market for the Bonds; or (iii) legislation shall have been enacted, or actively considered for enactment with an effective date prior to the Closing, or a decision by a court of the United States shall have been rendered, the effect of which is that the Bonds, including any underlying • obligations, or the Indenture, as the case may be, is not exempt from the registration, qualification or other requirements of the Securities Exchange Act of 1933, as amended and 7 4838-0473.0372.3 • as then in effect, the Securities Exchange Act of 1934, as amended and as then in effect, or the Trust Indenture Act of 1939, as amended and as then in effect; or (iv) a stop order, ruling, regulation or official statement by the Securities and Exchange Commission or any other governmental agency having jurisdiction of the subject matter shall have been issued or made or any other event occurs, the effect of which is that the issuance, offering or sale of the Bonds, including any underlying obligations, or the execution and delivery of the Indenture as contemplated hereby or by the Official Statement, is or would be in violation of any provision of the federal securities laws, including the Securities Act of 1933, as amended and as then in effect, the Securities Exchange Act of 1934, as amended and as then in effect, or the Trust Indenture Act of 1939, as amended and as then in effect; or (v) any event shall have occurred or any information shall have become known to the Underwriter which causes the Underwriter to reasonably believe that the Official Statement as then amended or supplemented includes an untrue statement of a material fact, or omits to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; or (vi) there shall have occurred any outbreak of hostilities or any national or international calamity or crisis, including a financial crisis, the effect of which on the financial markets of the United States is such as, in the reasonable judgment of the Underwriter, would materially adversely affect the market for or market price of the Bonds; • or (vii) there shall be in force a general suspension of trading on the New York Stock Exchange, the effect of which on the financial markets of the United States is such as, in the reasonable judgment of the Underwriter, would materially adversely affect the market for or market price of the Bonds; or (viii) a general banking moratorium shall have been declared by federal, New York or State authorities; or (ix) any proceeding shall be pending or threatened by the Securities and Exchange Commission against the City; or (x) additional material restrictions not in force as of the date hereof shall have been imposed upon trading in securities generally by any governmental authority or by any national securities exchange; or (xi) the New York Stock Exchange or other national securities exchange, or any governmental authority, shall impose, as to the Bonds or obligations of the general character of the Bonds, any material restrictions not now in force, or increase materially those now in force, with respect to the extension of credit by, or the charge to the net capital requirements of the Underwriter. • 8. Conditions to Underwriter's Obligations. The obligation of the Underwriter to purchase the Bonds shall be subject (a) to the performance by the City of its obligations to be 8 4838-0473-0372.3 • performed hereunder at and prior to the Closing, (b) to the accuracy of the representations and warranties of the City herein as of the date hereof and as of the time of the Closing, and (c) to the following conditions, including the delivery by the City of such documents as are enumerated herein in fora and substance satisfactory to the Underwriter: (a) The Bonds shall have been duly authorized, executed and delivered in the forms approved by the City in the Second Supplemental Trust Indenture with only such changes therein as the Underwriter and the City shall mutually agree upon, which shall in all instances be as described in the final Official Statement; (b) At the time of Closing, (i) the Official Statement, this Bond Purchase Agreement, the Second Supplemental Trust Indenture, the Authorizing Ordinance, the Election Ordinance, the Continuing Disclosure Agreement and the Tax Regulatory Agreement shall be in full force and effect and shall not have been amended, modified or supplemented from the date hereof, except as may have been agreed to in writing by the Underwriter, (ii) the proceeds of the sale of the Bonds and other funds shall be deposited and applied as described in the Indenture, (iii) no default or event of default under the Indenture shall have occurred and be continuing, and (iv) no material adverse change affecting the City or the Sales and Use Taxes shall have occurred, nor shall any development involving a prospective and material adverse change in, or affecting the business, financial condition, results of operations, prospects or properties of the City have occurred; • (c) Receipt of fully executed originals of the Second Supplemental Trust Indenture, the Continuing Disclosure Agreement and the Tax Regulatory Agreement at or prior to the Closing; (d) At or prior to the Closing, the Underwriter shall receive the following documents in such number of counterparts as shall be mutually agreeable to the Underwriter and Bond Counsel: (I) A final approving opinion of Bond Counsel, dated the Closing Date, in substantially the font set forth in Exhibit B hereto; (2) A supplemental opinion of Bond Counsel, addressed to the City, the Trustee and the Underwriter and dated the Closing Date, in substantially the form set forth in Exhibit C hereto; (3) The Official Statement executed by a duly authorized officer of the City; (4) Certified copies of the Authorizing Ordinance and the Election Ordinance and all other ordinances and resolutions of the City relating to the Bonds; (5) Certified copies of the Notice of Election and Mayor's • Proclamation of Election Results, together with proofs of publication thereof, 9 4838-0473-0372.3 • (6) Photocopies of the Bonds as executed and delivered; (7) A financial guaranty insurance policy with respect to the Bonds (the "Bond Policy") issued by Assured Guaranty Corp. ("Assured Guaranty"), together with such supporting certificates of Assured Guaranty and opinions of counsel to Assured Guaranty as shall be satisfactory to Bond Counsel; (8) A letter or letters from Standard & Poor's Ratings Services, a Division of The McGraw-Hill Companies, Inc., to the effect that the Bonds have been assigned a rating of no less than "AAA (negative outlook)" based on the delivery of the Bond Policy and an underlying rating of no less than "A+ (stable outlook)," which ratings shall be in effect as of the Closing Date; (9) A financial guaranty insurance policy issued by Assured Guaranty (the "DSR Policy") for deposit in the Debt Service Reserve Fund, together with such supporting certificates of Assured Guaranty and an opinion of counsel to Assured Guaranty as shall be satisfactory to Bond Counsel; (10) A certificate, in form and substance satisfactory to the Underwriter, of any duly authorized officer or official of the City satisfactory to the Underwriter, dated as of the Closing Date, to the effect that: (i) each of the City's representations, warranties and covenants contained herein are true and correct as of the Closing Date; (ii) the City has duly adopted the Authorizing • Ordinance and the Election Ordinance by all action necessary under the Act and the laws and Constitution of the State of Arkansas, and has duly authorized the execution, delivery and due performance of the Bonds, the Second Supplemental Trust Indenture, the Continuing Disclosure Agreement, the Tax Regulatory Agreement, the Official Statement and this Bond Purchase Agreement; (iii) no litigation is pending, or to the knowledge of the officer or official of the City signing the certificate after due investigation and inquiry, threatened, to restrain or enjoin the issuance or sale of the Bonds or in any way affecting any authority for or the validity of the Bonds, the Sales and Use Taxes, the Official Statement, the Authorizing Ordinance, the Election Ordinance, the Indenture, the Continuing Disclosure Agreement, the Tax Regulatory Agreement, or this Bond Purchase Agreement; (iv) the Bonds, the Second Supplemental Trust Indenture, this Bond Purchase Agreement, the Continuing Disclosure Agreement and the Tax Regulatory Agreement, as executed and delivered by the City, are in the form or in substantially the form approved for such execution by appropriate proceedings of the City; (v) since December 31, 2008, there has not been any material adverse change in the financial condition or results of operations of the City whether or not arising in the ordinary course of business, other than as set forth in the Official Statement; (vi) neither the Authorizing Ordinance nor the Election Ordinance have been amended, modified or repealed as of the Closing Date, and the Authorizing Ordinance and the Election Ordinance remain in full force and effect; (vii) none of the proceedings of the City taken preliminary to the issuance of the Bonds, as certified in such certificate, including the levy of the Sales and Use • Taxes, have been in any manner repealed, amended or changed; (viii) the City has 10 4838-0473-0372.3 • complied in all respects with the provisions of the Act and has full legal right, power and authority to levy the Sales and Use Taxes and to issue the Bonds for the purposes stated in the Act and to enter into this Bond Purchase Agreement, to adopt the Authorizing Ordinance and the Election Ordinance, to issue, sell and deliver the Bonds as provided in this Bond Purchase Agreement, and to carry out and consummate all other transactions contemplated by this Bond Purchase Agreement, the Authorizing Ordinance, the Election Ordinance, the Indenture, the Continuing Disclosure Agreement and the Tax Regulatory Agreement; (ix) neither the Official Statement nor any amendment or supplement thereto contains any untrue statement of a material fact or omits to state any material fact necessary in order to make the statements contained therein, in the light of the circumstances under which they were made, not misleading; and (x) to the best knowledge of the officer or official of the City signing the certificate, no event affecting the City or the Sales and Use Taxes has occurred since the date of the Official Statement which should be disclosed in the Official Statement for the purposes for which it is used that is necessary to disclose therein in order to make the statements and information therein not misleading in any respect; (11) An opinion of Kit Williams, Esq., City Attorney, dated the Closing Date and addressed to the Underwriter, Bond Counsel and the Trustee, to the effect that (i) the City is a duly organized and validly existing political subdivision and city of the first class, organized under the laws of the State of • Arkansas, with full power and authority to adopt the Authorizing Ordinance and Election Ordinance, to levy the Sales and Use Taxes, and to execute and deliver the Bonds, the Second Supplemental Trust Indenture, the Continuing Disclosure Agreement, the Tax Regulatory Agreement and this Bond Purchase Agreement; (ii) the City has duly approved the Preliminary Official Statement and the Official Statement; (iii) the Authorizing Ordinance and the Election Ordinance have been duly adopted by the City by all action necessary under the Act and the laws and Constitution of the State of Arkansas, and each remains in full force and effect; (iv) the Second Supplemental Trust Indenture, the Continuing Disclosure Agreement, the Tax Regulatory Agreement and this Bond Purchase Agreement have been duly authorized, approved, executed and delivered by the City and, subject to the extent that the enforceability of the rights and remedies set forth therein may be limited by bankruptcy, insolvency or other laws affecting creditors' rights generally, constitute valid and binding agreements of the City enforceable in accordance with their terms; (v) the information in the Official Statement under the captions "THE PROJECT," "THE CITY" and "LEGAL MATTERS" (apart from financial or statistical data contained or incorporated therein, as to which no view need be expressed) is fair, accurate and complete and does not omit any matter which, in such counsel's opinion, for the purposes for which the Official Statement is to be used, should be included or referred to therein; (vi) excepting those matters discussed in the Official Statement, there is no action, suit or proceeding at law or in equity before or by any court, public board or body, pending or threatened, against or affecting the City, challenging • the validity of the transactions contemplated by the Official Statement or the validity of the Bonds, the Sales and Use Taxes, the Authorizing Ordinance, the 11 4838-0473-0372.3 Election Ordinance, the Indenture, the Continuing Disclosure Agreement, the Tax • Regulatory Agreement or this Bond Purchase Agreement and, to the best of such counsel's knowledge, there is no investigation, pending or threatened, and no threatened action, suit or proceeding involving any of the matters hereinabove mentioned in this clause (vi); (vii) the execution and delivery of the Authorizing Ordinance, the Election Ordinance, the Second Supplemental Trust Indenture, the Continuing Disclosure Agreement, the Tax Regulatory Agreement and this Bond Purchase Agreement, and compliance with the provisions hereof and thereof, under the circumstances contemplated hereby and thereby, do not and will not in any material respect conflict with or constitute on the part of the City a breach of or default under any agreement or other instrument to which the City is a party or any existing law, regulation, court order or consent decree to which the City is subject; and (viii) based upon the examinations which such counsel has made as counsel to the City, which shall be specified, nothing has come to such counsel's attention which would lead such counsel to believe that the Official Statement (except for the financial statements and other financial data included in the Official Statement, as to which no view need be expressed) contains an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; (12) Evidence that Federal Form 8038-G has been executed by the City and is ready for filing with the Internal Revenue Service. • (13) Evidence that, except as disclosed in the Official Statement, all necessary approvals, whether legal or administrative, have been obtained from applicable federal, state and local entities and agencies; and (14) Such additional legal opinions, certificates, proceedings, instruments and other documents as the Underwriter and Bond Counsel may reasonably request to evidence compliance by the City with legal requirements, the truth and accuracy, as of the time of Closing, of the representations of the City herein contained and the due performance or satisfaction by the City at or prior to such time of all agreements then to be performed and all conditions then to be satisfied. If the City shall be unable to satisfy the conditions to the obligations of the Underwriter contained in this Bond Purchase Agreement, or if the obligation of the Underwriter to purchase and accept delivery of the Bonds shall be terminated for any reason permitted by this Bond Purchase Agreement, this Bond Purchase Agreement shall terminate and neither the Underwriter nor the City shall be under further obligation hereunder; except that the respective obligations to pay expenses, as provided in Section 12 hereof, shall continue in full force and effect. 9. Conditions to Obligations of the City. The obligations of the City hereunder are subject to the performance by the Underwriter of its obligations hereunder. 12 4838-0473-0372.3 10. Survival. All representations, warranties and agreements of the City shall remain • operative and in full force and effect, regardless of any investigations made by or on behalf of the Underwriter, and shall survive the Closing. The obligations of the City under Sections II or 12 hereof shall survive any termination of this Bond Purchase Agreement by the Underwriter pursuant to the terms hereof. II. Indemnification. The City, to the extent permitted by law, agrees to indemnify and hold harmless the Underwriter, each member, officer, director, partner or employee of the Underwriter and each person who controls the Underwriter within the meaning of Section 15 of the Securities Act of 1933, as amended, or Section 20 of the Securities Exchange Act of 1934, as amended (collectively called the "Indemnified Parties"), against any and all losses, claims, damages, liabilities or expenses (including any legal or other expenses incurred by an Indemnified Party in connection with investigating any claims against an Indemnified Party and defending any actions) whatsoever caused by any untrue statement or misleading statement or alleged untrue statement or alleged misleading statement of a material fact contained in the Official Statement or caused by any omission or alleged omission from the Official Statement of any material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading insofar as such losses, claims, damages, liabilities or expenses are caused by any such untrue or misleading statement or omission or alleged untrue or misleading statement or omission in the information contained in the Official Statement; provided, however, that the City shall not be liable to an Indemnified Party in any such case to the extent that any such loss, claim, damage, liability or action arises out of, or is based upon, any untrue statement or alleged untrue statement or • omission or alleged omission made in any of such documents in reliance upon and in conformity with written information furnished to the City by the Underwriter specifically for use therein. No Indemnified Parties shall be indemnified hereunder for any losses, claims, damages or liabilities resulting from the negligence of such Indemnified Parties. In case any action shall be brought against one or more of the Indemnified Parties based upon the Official Statement and in respect of which indemnity may be sought against the City, the Indemnified Parties shall promptly notify the City in writing, and, to the extent permitted by law, the City shall promptly assume the defense thereof, including the employment of counsel, the payment of all expenses and the right to negotiate and consent to settlement. Any one or more of the Indemnified Parties shall have the right to employ separate counsel in any such action and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party or Parties unless employment of such counsel has been specifically authorized by the City. The City shall not be liable for any settlement of any such action effected without its consent by any of the Indemnified Parties, but if settled with the consent of the City, the City agrees to indemnify and hold harmless the Indemnified Parties to the extent provided in this Bond Purchase Agreement and to the extent permitted by law. 12. Payment of Expenses. The City will pay or cause to be paid all reasonable expenses incident to the performance of its obligations under this Bond Purchase Agreement, including, but not limited to, expenses of mailing or delivery of the Bonds, legal publication costs, costs for obtaining CUSIP numbers on the Bonds, fees payable to The Depository Trust Company relating to the Bonds, Federal Funds charges, costs of printing the Bonds, the • Preliminary and final Official Statements, any amendment or supplement to the Preliminary or 13 4838-0473-0372.3 • final Official Statement and this Bond Purchase Agreement, fees and disbursements of Bond Counsel, accountants' fees and expenses, any fees charged by investment rating agencies for the rating of the Bonds, bond insurance premiums, if any, fees of the Trustee and any paying agent fees, and any fees and disbursements in connection with the qualification of the Bonds for sale under the securities or "Blue Sky" laws of the various jurisdictions and the preparation of "Blue Sky" memoranda. In the event this Bond Purchase Agreement shall terminate because of the default of the Underwriter, the City will, nevertheless, pay, or cause to be paid, all of the expenses specified above. The Underwriter shall pay all advertising expenses in connection with the public offering of the Bonds, and all other expenses incurred by it in connection with the public offering and distribution of the Bonds, including the fees and expenses of any counsel retained by the Underwriter. If the City defaults under this Bond Purchase Agreement, the Underwriter may bring whatever legal action it may have against the City to recover damages, if any, incurred by the Underwriter. 13. Notices. Any notice or other communication to be given to the City under this Bond Purchase Agreement may be given by delivering the same in writing to the Mayor at the address set forth above, and any notice or other communication to be given to the Underwriter under this Bond Purchase Agreement may be given by delivering the same in writing to Stephens Inc., 3425 North Futrall, Suite 201, Fayetteville, AR 72703, Attention: Mr. Dennis Hunt. 14. Nonassignability. This Bond Purchase Agreement is made solely for the benefit of the City and the Underwriter (including any successor or assign of the Underwriter), and no other person, including any purchaser of the Bonds, shall acquire or have any right hereunder or • by virtue hereof. 15. Applicable Law. This Bond Purchase Agreement shall be governed by and construed in accordance with the laws of the State of Arkansas. 16. Counterparts. This Bond Purchase Agreement shall become effective upon your acceptance hereof and may be executed in counterparts, each of which shall be regarded as an original and all of which shall constitute one and the same document. Very truly yours, STEPHENS INC. By: Authorize Representative Accepted and agreed to as of p.m. on the date first above written: CITY OF FAYETTEVILLE, ARKANSAS •Title. ayor 14 4838-0473-0372.3 P • • EXHIBIT A MATURITY SCHEDULE (November 1) Principal Interest Maturity Amount Rate Yield Price 2015 $1,450,000 3.000% 3.100% 99.458% 2016 1,495,000 3.250% 3.350% 99.382% 2017 1,545,000 3.500% 3.600% 99.311% 2018 1,600,000 3.625% 3.750% 99.054% 2019 1,655,000 3.750% 3.850% 99.177% 2020 1,720,000* 4.000% 4.000% 100.000% 2021 1,785,000 4.000% 4.000% 100.000% (with accrued interest on all Bonds from November 1, 2009) * Mandatory sinking fund redemption. 4838-0473-0372.3 A-1 EXHIBIT B PROPOSED FORM OF BOND COUNSEL APPROVING OPINION Upon delivery of the Bonds in definitive form, Kutak Rock LLP, Little Rock, Arkansas, proposes to deliver its approving opinion in substantially the following form: November , 2009 City of Fayetteville, Arkansas Fayetteville, Arkansas Simmons First Trust Company, N.A., as Trustee Pine Bluff, Arkansas Stephens Inc. Fayetteville, Arkansas Assured Guaranty Corp. New York, New York • $11,250,000 City of Fayetteville, Arkansas Sales and Use Tax Capital Improvement Bonds Series 2009 Ladies and Gentlemen: We have acted as bond counsel in connection with the issuance and sale by the City of Fayetteville, Arkansas (the "City"), a political subdivision of the State of Arkansas, of its $11,250,000 Sales and Use Tax Capital Improvement Bonds, Series 2009 (the "Bonds"). The Bonds are being issued pursuant to the provisions of the Constitution and laws of the State of Arkansas, including, particularly, Amendment 62 and Arkansas Code Amiotated (1998 Repl. & Supp. 2005) §§14-164-301 e[ seq. (as from time to time amended, the "Act"), pursuant to Ordinance No. 5277 of the City, duly adopted and approved on October 6, 2009 (the "Authorizing Ordinance"), and pursuant to a Trust Indenture dated as of November 1, 2006, as amended and supplemented by a First Supplemental Trust Indenture dated as of October 1, 2007, and by a Second Supplemental Trust Indenture dated as of November 1, 2009 (as amended and supplemented, the "Indenture"), by and between the City and Simmons First Trust Company, N.A., as trustee (the "Trustee"). Reference is hereby made to the Indenture and to all indentures supplemental thereto for the provisions, among others, with respect to the conditions for the issuance of parity indebtedness by the City, with respect to the nature and extent of the security for the Bonds, the rights, duties and obligations of the City, the Trustee and the Holders of the • Bonds, and the terms upon which the Bonds are issued and secured. 4838.0473-0372.3 B- I • Reference is made to an opinion of even date herewith of Kit Williams, Esq., City Attorney, a copy of which is on file with the Trustee, with respect, among other matters, to the status and valid existence of the City, the power of the City to adopt the Election Ordinance and the Authorizing Ordinance and to enter into and perform its obligations under the Indenture, the valid adoption of the Election Ordinance and the Authorizing Ordinance, and the due authorization, execution and delivery of the Indenture by the City, and with respect to the Indenture being enforceable upon the City. We have examined the law and such certified proceedings and other papers as we have deemed necessary to render this opinion. As to questions of fact material to our opinion, we have relied upon the representations of the City contained in the Election Ordinance, the Authorizing Ordinance and the Indenture and in the certified proceedings and other certifications of public officials furnished to us, without undertaking to verify the same by independent investigation. Based upon the foregoing, we are of the opinion, under existing law, as follows: I. The City is duly created and validly existing as a municipal corporation of the State of Arkansas. Pursuant to the Constitution and laws of the State of Arkansas, including, particularly, Amendment 62 and the Act, the City is empowered to adopt the Election Ordinance and the Authorizing Ordinance, to execute and deliver the Indenture, to perform the agreements on its part contained therein, and to issue the Bonds. 2. The Authorizing Ordinance has been duly adopted by the City and constitutes a • valid and binding obligation of the City enforceable upon the City in accordance with its terms. 3. The Indenture has been duly authorized, executed and delivered by the City and is a valid and binding obligation of the City enforceable upon the City in accordance with its terms. 4. The Bonds have been duly authorized, executed and delivered by the City and are valid and binding limited obligations of the City payable from and secured by a valid lien on and pledge of the Trust Estate (as defined in the Indenture), including receipts of the 0.25% Sales and Use Tax and the 0.75% Sales and Use Tax (each as defined in the Indenture), in the manner and to the extent provided in the Indenture. Such lien and pledge are made on a parity basis with the existing lien and pledge of the Trust Estate securing (i) the City's Sales and Use Tax Capital Improvement Bonds, Series 2006A, and (ii) the City's Sales and Use Tax Capital Improvement Bonds, Series 2007. The City is duly authorized to pledge such Trust Estate, and no further action on the part of the City or any other party is required to perfect the same or the interest of the owners of the Bonds therein. 5. The 0.25% Sales and Use Tax and the 0.75% Sales and Use Tax have been validly adopted in accordance with the Constitution and laws of the State of Arkansas, including Amendment 62 and the Act, and may be validly pledged to secure the Bonds. Levy and collection of the 0.25% Sales and Use Tax commenced as of January 1, 2007, and levy and collection of the 0.75% Sales and Use Tax will commence as of the first day of the first month • following cessation of the Existing Tax securing the Existing Indebtedness (each as defined in the Indenture). 4838-0473-0372.3 B-2 • 6. Interest on the Bonds is excludable from gross income for federal income tax purposes. In addition, interest on the Bonds is not a specific preference item nor is it included in adjusted current earnings for purposes of the federal alternative minimum tax. The opinions described in the preceding sentences assume the accuracy of certain representations and compliance by the City with covenants designed to satisfy the requirements of the Internal Revenue Code of 1986, as amended (the "Code"), that must be met subsequent to the issuance of the Bonds. Failure to comply with certain of such requirements could cause interest on the Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds. The City has covenanted to comply with such requirements. The Bonds are "qualified tax-exempt obligations" within the meaning of Section 265(b)(3) of the Code, and, in the case of certain financial institutions (within the meaning of Section 265(b)(5) of the Code), a deduction is allowed for eighty percent (80%) of that portion of such financial institution's interest expenses allocable to interest on the Bonds. We express no opinion regarding other federal tax consequences of holding the Bonds. 7. The interest on the Bonds is exempt from all state, county and municipal taxes in the State of Arkansas. 8. The Bonds are exempt from registration pursuant to the Securities Act of 1933, as amended, and the Indenture is not required to be qualified under the Trust Indenture Act of 1939, as amended, in connection with the offer and sale of the Bonds. It is to be understood that the rights of the registered owners of the Bonds and the • enforceability of the Bonds, the Authorizing Ordinance and the Indenture may be subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights heretofore or hereafter enacted to the extent constitutionally applicable and that their enforcement may also be subject to the exercise ofjudicial discretion in appropriate cases. Very truly yours, 4838-0473-0372.3 B-3 0 EXHIBIT C PROPOSED FORM OF BOND COUNSEL SUPPLEMENTAL OPINION November_, 2009 City of Fayetteville, Arkansas Fayetteville, Arkansas Simmons First Trust Company, N.A., as Trustee Pine Bluff, Arkansas Stephens Inc. Fayetteville, Arkansas Assured Guaranty Corp. New York, New York 511,250,000 City of Fayetteville, Arkansas Sales and Use Tax Capital Improvement Bonds • Series 2009 Ladies and Gentlemen: This opinion supplements our bond approving opinion, dated the date hereof, relating to the above -captioned bonds (the "Bonds"). Except as otherwise defined herein, the terms used herein shall have the meanings prescribed for them in said opinion. We have examined the law and such certified proceedings and other papers as we have deemed necessary to render this opinion. As to questions of fact material to our opinion, we have relied upon the representations of the City contained in the Indenture and in the certified proceedings and other certifications of public officials furnished to us, without undertaking to verify the same by independent investigation. In addition to the documents specifically mentioned in the approving opinion, in connection with this opinion we have also examined: (a) An executed counterpart of the Bond Purchase Agreement dated October 21, 2009 (the "Bond Purchase Agreement"), by and between the City and Stephens Inc., as underwriter (the "Underwriter"); (b) An executed counterpart of the Continuing Disclosure Agreement dated November 12, 2009 (the "Disclosure Agreement"), by and between the City and • Simmons First Trust Company, N.A., as trustee (the "Trustee"); 4838-0473-0372.3 C- I (c) An executed counterpart of the Tax Regulatory Agreement dated November 12, 2009 (the "Tax Regulatory Agreement"), by and between the City and the Trustee; (d) An executed counterpart of the Reimbursement Agreement dated November 12, 2009 (the "Reimbursement Agreement"), by and between the City and Assured Guaranty Corp. ("Assured Guaranty"); (e) The Official Statement dated October 21, 2009, with respect to the Bonds ((lie "Official Statement"); and (1) The Financial Guaranty Insurance Policy (the "DSR Policy") issued and delivered by Assured Guaranty concurrently with the issuance of the Bonds for deposit in the Debt Service Reserve Fund (as defined in the Indenture). Based on our examination, we are of the opinion, as of the date hereof and under existing law, as follows: 1. The Bond Purchase Agreement has been duly authorized, executed and delivered by the City and, assuming due authorization, execution and delivery by the Underwriter, the Bond Purchase Agreement constitutes the valid and binding agreement of the City enforceable in accordance with its terns. 2. The Disclosure Agreement has been duly authorized, executed and delivered by the City and, assuming due authorization, execution and delivery by the Trustee, the Disclosure Agreement constitutes the valid and binding agreement of the City enforceable in accordance with its terms. 3. The Tax Regulatory Agreement has been duly authorized, executed and delivered by the City and, assuming due authorization, execution and delivery by the Trustee, the Tax Regulatory Agreement constitutes the valid and binding agreement of the City enforceable in accordance with its terms. 4. The Reimbursement Agreement has been duly authorized, executed and delivered by the City and, assuming due authorization, execution and delivery by Assured Guaranty, the Reimbursement Agreement constitutes the valid and binding agreement of the City, enforceable in accordance with its terms. 5. To the best of our knowledge, there is no litigation or other proceeding pending or threatened in any court, agency or other administrative body (either State or Federal) which could have a material adverse effect on (a) the financial condition of the City, (b) the ability of the City to perform its obligations under the Authorizing Ordinance, the Indenture, the Bond Purchase Agreement, the Continuing Disclosure Agreement, the Tax Regulatory Agreement or the Reimbursement Agreement (collectively, the "Related Documents"), (c) the security for the Bonds, or (d) the transactions contemplated by the Related Documents. 4838.0473-0372.3 C-2 6. Nothing has come to our attention which would cause us to believe that, as • of the date hereof, the Official Statement (excluding financial and statistical data and information provided by Assured Guaranty, which is contained or incorporated in the Official Statement, as to which no view is expressed) contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. 7. The DSR Policy constitutes an Investment Security (as defined in the Indenture) eligible for deposit in the Debt Service Reserve Fund under the provisions of the Indenture. The enforceability of the respective obligations of the parties to the documents and other items described above, and the availability of certain rights and remedies provided for therein, may be limited by bankruptcy, receivership, insolvency, reorganization, moratorium, marshalling or other similar statutes or rules of law affecting creditors' rights and remedies, to general principles of equity and to the discretion of any court in granting any relief or issuing any order, whether the proceeding is considered a proceeding at law or equity. In particular, the right to indemnification under any of the documents or other items described above may be limited by federal of state securities laws or by the public policy underlying such laws. This opinion is being rendered to you solely for your use and benefit and may not be relied upon in any manner, nor used, by any other person. • Very truly yours, • 4838-0473-0372.3 C-3 Bnn L C •V .9 V 2° U p N > A o g T � gg r T 8.9 o. N u .00 g` n `o C go= _ V 0 o.z g x: 1n N V Q hN 0 sN u� p o c o N -Co v M b ; 4N Hic c n � c— u o E —" W s a ,A G a e.� as �N N - n Y e� a � 03 s k � C V 0 o c n C N Ly- Y —Co a o--. c - o L` N Sty` v1 u 0 L 6.n t-o.z PRELIMINARY OFFICIAL STATEMENT DATED OCTOBER 14, 2009 NEW ISSUE BOOK -ENTRY ONLY *RATINGS: S&P "AAA" (negative outlook) (Assured Guaranty Insured) Underlying "A+" (stable outlook) In the opinion of Kutak Rock LLP, Bond Counsel, under existing laws, regulations, rulings and judicial decisions and assuming the accuracy of certain representations and continuing compliance with certain co✓enants, interest on the Series 2009 Bonds is excludable from gross income for federal income tax purposes and is not a specific preference item for purposes of the federal alternative minimum tar. Bond Counsel is also of the opinion that the Series 2009 Bonds are "qual fed tax-exempt obligations" under Section 265(b)(3) of the Internal Revenue Code of 1986, as amended. Under existing laws, regulations. rulings and judicial decisions, Bond Counsel is of the opinion that the Series 2009 Bonds and the interest thereon are exempt from all stale. county and municipal taxes in the State ofArkansas. Fora more complete description, see the caption "TAX MATFERS"herein. Dated: November 1, 2009 $11,2$0,000** CITY OF FAYETTE VILLE, ARKANSAS SALES AND USE TAX CAPITAL IMPROVEMENT BONDS SERIES 2009 Due: November 1, as shown on inside front cover The Sales and Use Tax Capital Improvement Bonds, Series 2009 (the "Stria 2009 Bonds"), are being issued by the City of Fayetteville, Arkansas (the "City") for the purpose of (i) financing a portion of the costs of certain City street and trail system improvements, (ii) purchasing a policy of municipal bond insurance, (iii) purchasing a municipal bond debt service reserve insurance policy for deposit in the debt service reserve, and (iv) paying certain expenses in connection with the issuance of the Series 2009 Bonds. See the captions 'ESTIMATED SOURCES AND USES OF FUNDS" and "THE PROJECTS" herein. The Series 2009 Bonds are issuable only as fully registered bonds and, when issued, will be registered in the name of Cede & Co., as nominee of The Depository Trust Company ("DTC"), New York, New York, to which principal, premium, it any, and interest payments on the Series 2009 Bonds will be made so long as Cede & Co. is the registered owner of the Series 2009 Bonds. Individual purchases of the Series 2009 Bonds will be made only in book -entry form, in denominations of $5,000 or integral multiples thereof. Individual purchasers ("Beneficial Owners") of Series 2009 Bonds will not receive physical delivery of bond certificates. See the caption "BOOK -ENTRY ONLY SYSTEM" herein. The Series 2009 Bonds shall bear interest from their dated date, payable on May I and November I of each year, commencing May I, 2010. All such interest payments shall be payable to the persons in whose name such Series 2009 Bonds are registered on the bond registration books maintained by Simmons First Trust Company, N.A., Pine Bluff, Arkansas as trustee (the "Trustee"), as of the fifteenth day of the calendar month preceding the calendar month in which the applicable interest payment date falls. Principal of and premium, if any, on the Series 2009 Bonds shall be payable at the principal corporate trust office of the Trustee. So long as DTC or its nominee is the registered owner of the Series 2009 Bonds, disbursement of such payments to DTC Participants is the responsibility of DTC, and the disbursement of such payments to Beneficial Owners is the responsibility of DTC Participants or Indirect Participants, as more fully described herein. Pursuant to a Trust Indenture dated as of November 1, 2006, as supplemented and amended by a First Supplemental Trust Indenture dated as of October 1, 2007, and by a Second Supplemental Trust Indenture dated as of November 1, 2009 (as supplemented and amended, the "Indenture"), between the City and the Trustee, the payment of the principal of, premium, if any, and interest on the Series 2009 Bonds is secured by a pledge of the receipts from (i) a one -quarter of one percent (0.25%) city-wide sales and use tax (the "0.25% Sales and Use Tax") and (ii) a three-quarters of one percent (0.75%) city-wide sales and use tax (the "0.75% Sales and Use Tax," and together with the 0.25% Sales and Use Tax, the "Sala and Use Taxes"). Such pledge is made on a parity basis with the existing pledge of receipts of the Sales and Use Taxes securing (i) $48,125,000 outstanding principal amount of the City's Sales and Use Tax Capital Improvement Bonds, Series 2006A (the "Series 2006A Bonds"), and (ii) $13,090,000 outstanding principal amount of the City's Sales and Use Tax Capital Improvement Bonds, Series 2007 (the "Series 2007 Bonds"). See the caption "SECURITY FOR THE BONDS" herein. The Series 2009 Bonds are subject to optional and mandatory redemption prior to maturity as more fully described herein under the caption "THE SERIES 2009 BONDS - Redemption." The scheduled payment of principal of and interest on the Series 2009 Bonds when due will be guaranteed under a financial guaranty insurance policy to be issued concurrently with the delivery of the Series 2009 Bonds by Assured Guaranty Corp. ASSURED GUARANTY The Series 2009 Bonds are special obligations of the City secured by and payable solely from receipts of the Sales and Use Taxes. The Series 2009 Bonds do not constitute an indebtedness of the City within the meaning of any constitutional or statutory debt limitation or restriction. The issuance of the Series 2009 Bonds shall not directly, indirectly or contingently obligate the City to levy or pledge any taxes whatsoever or to make any appropriation for the payment of the Series 2009 Bonds, except as described herein with respect to the Sales and Use Taxes. The Series 2009 Bonds are offered when, as and if issued by the City and are subject to the final approving opinion of Kutak Rock LLP, Little Rock, Arkansas, Bond Counsel. Certain matters will be passed upon for the City by its counsel, Kit Williams, Esq., City Attorney. It is expected that the Series 2009 Bonds will be available for delivery in New York, New York, on or about November 12, 2009. • See the caption "RATINGS" hi •• Preliminary; subject to change. Stephens Inc. The date of this Official Statement is October_, 2009. • MATURITY SCHEDULE* Maturity Principal Interest (November I) Amount Rate Yield 2015 $ 1,430,000 % 2016 1,485,000 2017 1,550,000 2018 1,605,000 2019 1,675,000 2020 1,725,000 2021 1,780,000 (Plus accrued interest) • Preliminary, subject to change. CITY OF FAYETTEVILLE, ARKANSAS Issuer • City Council Lioneld Jordan, Mayor Kyle Cook Bobby Ferrell Adella Gray Sarah Lewis Shirley Lucas Matthew Petty Robert Rhoads Brenda Thiel Paul Becker, Finance Director Sondra Smith, City Clerk Kit Williams, City Attorney SIMMONS FIRST TRUST COMPANY, N.A. Pine Bluff, Arkansas Trustee and Paying Agent KUTAK ROCK LLP Little Rock, Arkansas Bond Counsel STEPHENS INC. Fayetteville, Arkansas Underwriter • No dealer, broker, salesman or other person has been authorized by the City or by Stephens Inc. (the "Underwriter") to give any information or to make any representations, other than those contained herein; and, if given or made, such other information or representations must not be relied upon as having been authorized by either of the foregoing. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of any Series 2009 Bonds in any jurisdiction in which such offer is not authorized, or in which the person making such offer, solicitation or sale is not qualified to do so, or to any person to whom it is unlawful to make such offer, solicitation or sale. The information and expressions of opinion contained herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the City since the date hereof. Assured Guaranty makes no representation regarding the Series 2009 Bonds or the advisability of investing in the Series 2009 Bonds. In addition, Assured Guaranty has not independently verified, makes no representation regarding, and does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding Assured Guaranty and presented under the heading "BOND INSURANCE" and "Exhibit D — Specimen Financial Guaranty Insurance Policy." THE SERIES 2009 BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR HAS THE TRUST INDENTURE BEEN QUALIFIED UNDER THE TRUST INDENTURE ACT OF 1939, AS AMENDED, IN RELIANCE UPON CERTAIN EXEMPTIONS FROM SUCH REGISTRATION AND QUALIFICATION CONTAINED IN SUCH LAWS. CERTAIN INFORMATION CONTAINED HEREIN HAS BEEN OBTAINED FROM THE CITY, THE DEPOSITORY TRUST COMPANY AND OTHER SOURCES WHICH ARE BELIEVED TO BE RELIABLE. THE UNDERWRITER HAS REVIEWED THE INFORMATION IN THIS OFFICIAL STATEMENT IN ACCORDANCE WITH, AND AS PART OF, ITS RESPONSIBILITIES TO INVESTORS UNDER THE FEDERAL SECURITIES LAWS AS APPLIED TO THE FACTS AND CIRCUMSTANCES OF THIS TRANSACTION, BUT THE UNDERWRITER DOES NOT GUARANTY THE ACCURACY OR COMPLETENESS OF SUCH INFORMATION. IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SERIES 2009 BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. • TABLE OF CONTENTS Pane IntroductoryStatement............................................................................................................................................................ I TheSeries 2009 Bonds............................................................................................................................................................ 2 Securityfor the Bonds............................................................................................................................................................. 4 BondInsurance........................................................................................................................................................................ 6 Book -Entry Only System......................................................................................................................................................... 8 TheProjects............................................................................................................................................................................. 10 Historical Sales and Use Tax Collections................................................................................................................................ 10 Estimated Sources and Uses of Funds..................................................................................................................................... I I Estimated Debt Service Requirements..................................................................................................................................... I I Estimated Debt Service Coverage........................................................................................................................................... 12 ProjectedMandatory Redemptions.......................................................................................................................................... 12 TheCity................................................................................................................................................................................... 13 TheSales and Use Taxes........................................................................................................................................................... 16 Summaryof the Indenture....................................................................................................................................................... 18 Summary of the Continuing Disclosure Agreement................................................................................................................ 23 Underwriting............................................................................................................................................................................ 25 TaxMatters.............................................................................................................................................................................. 25 Ratings...................................................................................................................................................................................... 27 LegalMatters........................................................................................................................................................................... 27 Miscellaneous.......................................................................................................................... ............... 27 ................................. Accuracy and Completeness of Official Statement.................................................................................................................. 27 APPENDIX A - Form of Bond Counsel Opinion.................................................................................................................... A -I APPENDIX B - Definitions of Certain Terms.........................................................................................................................B-I APPENDIX C - The Sales and Use Taxes...............................................................................................................................C-1 APPENDIX D - Specimen of Financial Guaranty Insurance Policy........................................................................................ D -I • C • [THIS PAGE INTENTIONALLY BLANK] • PRELIMINARY OFFICIAL STATEMENT $11,250,000* CITY OF FAYETTEVILLE, ARKANSAS SALES AND USE TAX CAPITAL IMPROVEMENT BONDS SERIES 2009 INTRODUCTORY STATEMENT The following introductory statement is subject in all respects to the more complete information set forth in this Official Statement. All descriptions and summaries of documents hereinafter set forth are qualified in their entirety by reference to each such document. Capitalized terms not otherwise defined herein shall have the meanings ascribed to such terms in "Appendix B -- DEFINITIONS OF CERTAIN TERMS". This Official Statement, including the cover page and the Appendices hereto, is furnished in connection with the offering by the City of Fayetteville, Arkansas (the "City") of its Sales and Use Tax Capital Improvement Bonds, Series 2009, in the principal amount of$I 11,250,000• (the "Series 2009 Bonds"). The City is a city of the first class organized and existing under the laws of the State of Arkansas (the "State"). The City is authorized under Amendment 62 to the Constitution of the State ("Amendment 62") and Arkansas Code Annotated (1998 Repl. & 2005 Supp.) §§14-164-301 et seq. (as from time to time amended, the "Act"), to issue and sell bonds for the purpose of financing the cost of capital improvements of a public nature. The Series 2009 Bonds are to be issued by the City pursuant to Amendment 62, the Act and Ordinance No. 5277, adopted and approved on October 6, 2009 (the "Authorizing Ordinance"), for the purpose of (i) financing a portion of the costs of acquiring, constructing, reconstructing, repairing, straightening and widening certain streets and related improvements (the "Street Project"), (ii) financing a portion of the costs of acquiring, constructing and • equipping certain City trail system improvements (the "Trail Project"), (iii) purchasing a policy of municipal bond insurance, (iv) purchasing a municipal bond debt service reserve insurance policy for deposit in the debt service reserve, and (v) paying certain expenses in connection with the issuance of the Series 2009 Bonds. See the captions "ESTIMATED SOURCES AND USES OF FUNDS" and "THE PROJECTS" herein. The Series 2009 Bonds are not general obligations of the City, but are special obligations payable solely from and secured by a pledge of the receipts of (i) a special city-wide sales and use tax levied pursuant to the Act at the rate of one -quarter of one percent (0.25%) (the "0.25% Sales and Use Tax") and (ii) a special city-wide sales and use tax levied pursuant to the Act at the rate of three-quarters of one percent (0.75%) (the "0.75% Sales and Use Tax," and together with the 0.25% Sales and Use Tax, the "Sales and Use Taxes"). Such pledge shall be made on a parity basis with the existing pledge of receipts of the Sales and Use Taxes securing (i) $48,125,000 outstanding principal amount of the City's Sales and Use Tax Capital Improvement Bonds, Series 2006A (the "Series 2006A Bonds"), and (ii) $13,090,000 outstanding principal amount of the City's Sales and Use Tax Capital Improvement Bonds, Series 2007 (the "Series 2007 Bonds"). The scheduled payment of principal of and interest on the Series 2009 Bonds when due will be guaranteed under a financial guaranty insurance policy (the "Policy") to be issued concurrently with the delivery of the Series 2009 Bonds by Assured Guaranty Corp. ("Assured Guaranty"). A specimen financial guaranty insurance policy is attached hereto as Appendix D. It is expected that, based on the commitment of Assured Guaranty to insure the Series 2009 Bonds, Standard & Poor's Rating Services, a division of the McGraw-Hill Companies, Inc. ("S&P"), will assign a rating of "AAA" to the Series 2009 Bonds. However, there is no guarantee that such rating will be received. See the captions "SECURITY FOR THE BONDS," "HISTORICAL SALES AND USE TAX COLLECTIONS," "BOND INSURANCE" and "RATINGS" herein. The faith and credit of the City are not pledged to the payment of the Series 2009 Bonds, and the Series 2009 Bonds do not constitute an indebtedness of the City within the meaning of any constitutional or statutory debt limitation or restriction. The issuance of the Series 2009 Bonds shall not directly, indirectly or contingently obligate the City to levy or pledge any taxes whatsoever or to make any appropriation for the payment of the Series 2009 Bonds, except as described herein with respect to the Sales and Use Taxes. • * Preliminary; subject to change. • The Series 2009 Bonds are subject to redemption from excess moneys in the Project Fund following completion of the portions of the Street Project and the Trail Project to be financed with the Series 2009 Bonds and from Surplus Tax Receipts. So long as the Series 2006A Bonds are outstanding, 50% of the Surplus Tax Receipts shall be allocated to the redemption of the Series 2006A Bonds and the remaining 50% of Surplus Tax Receipts shall be allocated ratably (based on relative outstanding principal amounts) to the redemption of the Series 2007 Bonds, the Series 2009 Bonds and any series of Additional Bonds, hereafter issued as provided under the "THE SERIES 2009 BONDS —Additional Bonds." Following payment in whole of the Series 2006A Bonds at maturity or upon redemption prior to maturity, all Surplus Tax Receipts shall be allocated ratably (based on relative outstanding principal amounts) to the redemption of the Series 2007 Bonds, the Series 2009 Bonds and any other series of Additional Bonds. See the captions "THE SERIES 2009 BONDS — Redemption" and "PROJECTED MANDATORY REDEMPTIONS" herein. Pursuant to the provisions of a Continuing Disclosure Agreement dated as of the date of delivery of the Series 2009 Bonds, by and between the City and the Trustee (the "Continuing Disclosure Agreement"), the City has undertaken certain obligations with respect to providing ongoing disclosure of certain financial and operating data concerning the City and the Sales and Use Taxes and of the occurrence of certain material events. See the caption "SUMMARY OF THE CONTINUING DISCLOSURE AGREEMENT' herein. This Official Statement contains brief descriptions or summaries of, among other matters, the City, the Series 2009 Bonds, the Sales and Use Taxes, the Continuing Disclosure Agreement, and the Trust Indenture dated as of November 1, 2006, as supplemented and amended by a First Supplemental Trust Indenture dated as of October I, 2007, and by a Second Supplemental Trust Indenture dated as of November 1, 2009 (as supplemented and amended, the "Indenture"), by and between the City and Simmons First Trust Company, N.A., Pine Bluff, Arkansas, as trustee (the "Trustee"), pursuant to which the Series 2006A Bonds, the Series 2007 Bonds and the Series 2009 Bonds are issued and secured. Such descriptions and information do not purport to be comprehensive or definitive. All references herein to the Indenture and the Continuing Disclosure Agreement are qualified in their entirety by reference to each such document, and all references to the Series 2009 Bonds are qualified in their entirety by • reference to the definitive forms thereof and the information with respect thereto included in the Indenture. Copies of the Continuing Disclosure Agreement, the Indenture, and the form of Series 2009 Bond included therein, are available from the City by writing to the attention of the Finance Director, City of Fayetteville, City Administration Building, 113 West Mountain, Fayetteville, Arkansas 72701 and, during the initial offering period only, from the Underwriter, Stephens Inc., 3425 North Futrall, Suite 201, Fayetteville, Arkansas 72703. Certain financial and operating data has been provided by the City from the audited records of the City and certain demographic information has been obtained from other sources which are believed to be reliable. THE SERIES 2009 BONDS Description. The Series 2009 Bonds will be initially dated as of November 1, 2009, and will bear interest payable semiannually on May I and November 1 of each year, commencing May 1, 2010, at the rates set forth on the inside cover page hereof. The Series 2009 Bonds will mature on November I in the years and in the principal amounts set forth on the inside cover page hereof. The Series 2009 Bonds are issuable only in the form of fully registered bonds and, when issued, will be registered in the name of Cede & Co., as nominee of The Depository Trust Company ("DTC"), New York, New York, to which principal, premium, if any, and interest payments on the Series 2009 Bonds will be made so long as Cede & Co. is the registered owner of the Series 2009 Bonds. Individual purchases of the Series 2009 Bonds will be made only in book -entry form, in denominations of $5,000 or integral multiples thereof. Individual purchasers ("Beneficial Owners") of Series 2009 Bonds will not receive physical delivery of bond certificates. See the caption "BOOK -ENTRY ONLY SYSTEM" herein. All interest payments on the Series 2009 Bonds shall be payable to the persons in whose name such Series 2009 Bonds are registered on the bond registration books maintained by the Trustee, as of the fifteenth day of the calendar month preceding the calendar month in which the applicable interest payment date falls. Principal of and premium, if any, on the Series 2009 Bonds shall be payable at the principal corporate trust office of the Trustee. All such payments shall be valid and effectual to satisfy and discharge the liability upon such Series 2009 Bond to the extent of the sum or sums so paid. So long as DTC or its nominee is the registered owner of the Series 2009 Bonds, • disbursement of such payments to DTC Participants is the responsibility of DTC, and the disbursement of such • payments to Beneficial Owners is the responsibility of DTC Participants or Indirect Participants, as more fully described herein. Redemption. The Series 2009 Bonds are subject to redemption prior to maturity as follows: (i) The Series 2009 Bonds shall be redeemed prior to maturity, in whole or in part, on any interest payment date, in inverse order of maturity and by lot in such manner as the Trustee shall determine within a maturity, at a redemption price equal to 100% of the principal amount being redeemed, plus accrued interest to the date of redemption, from moneys in the Street Account and the Trail Account of the Project Fund moneys in excess of the amount needed to complete the portion of the Street Project and the Trail Project intended to be funded with proceeds of the Series 2009 Bonds. (ii) The Series 2009 Bonds shall be redeemed prior to maturity, in whole or in part, on any interest payment date, in inverse order of maturity and by lot in such manner as the Trustee shall determine within a maturity, at a redemption price equal to 100% of the principal amount being redeemed, plus accrued interest to the date of redemption, from Surplus Tax Receipts. "Surplus Tax Receipts" are collections of the Sales and Use Taxes in excess of the amount necessary to (i) insure the prompt payment of the principal of and interest on Outstanding Bonds, (ii) maintain the Debt Service Reserve Fund in an amount equal to the Reserve Requirement, (iii) pay any arbitrage rebate due under Section 148(0 of the Internal Revenue Code of 1986, as amended (the "Code"), and (iv) pay Trustee and Paying Agent fees and expenses. So long as the Series 2006A Bonds are outstanding, 50% of the Surplus Tax Receipts shall be allocated to the redemption of the Series 2006A Bonds and the remaining 50% of Surplus Tax Receipts shall be allocated ratably (based on relative outstanding principal amounts) to the redemption of the Series 2007 Bonds, the Series 2009 Bonds and any series of Additional Bonds hereafter issued as provided under the "THE SERIES 2009 BONDS — Additional Bonds." Following payment in whole of the Series 2006A Bonds at maturity or upon redemption prior to maturity, all Surplus Tax Receipts shall be allocated ratably (based on relative outstanding principal amounts) to the redemption of the Series 2007 Bonds, the Series 2009 Bonds and any other series of Additional Bonds. See the caption "PROJECTED MANDATORY • REDEMPTIONS" herein. (iii) The Series 2009 Bonds are subject to redemption at the option of the City, communicated in a written notice to the Trustee not less than sixty (60) days prior to the date fixed for redemption, in whole or in part on any date on or after November 1, 2015, in inverse order of maturity and by lot in such manner as the Trustee shall determine within a maturity, at a redemption price equal to 100% of the principal amount being redeemed plus accrued interest to the date of redemption. In the case of any defeasance of the Series 2009 Bonds, the dates of redemption, the principal amounts and the maturities of the Series 2009 Bonds to be redeemed will be determined by taking into consideration the mandatory redemption requirements set forth above and the receipts of the Sales and Use Taxes for the most recent twelve months. Partial Redemption of a Series 2009 Bond. If less than all of the Series 2009 Bonds of a maturity are called for redemption, the particular Series 2009 Bonds or portions of Series 2009 Bonds to be redeemed shall be selected by lot in such manner as the Trustee in its discretion may deem fair and appropriate. So long as DTC or its nominee is the sole registered owner of the Series 2009 Bonds, the procedures established by DTC shall control with respect to the selection of the particular Series 2009 Bonds to be redeemed. Notice of Redemption. Notice of the call for any redemption, identifying the Series 2009 Bonds or portions thereof being called and the date on which they shall be presented for payment, shall be mailed by the Trustee by first class mail (or, so long as DTC or its nominee is the sole registered owner of the Series 2009 Bonds, by any other means acceptable to DTC, including facsimile) to the registered owner of each such Series 2009 Bond addressed to such registered owner at his registered address and placed in the mails not less than thirty (30) nor more than sixty (60) days prior to the date fixed for redemption; provided, however, that failure to give such notice by mailing, or any defect therein, shall not affect the validity of any proceeding for the redemption of any Series 2009 Bond with respect to which no such failure or defect has occurred. Any notice mailed as provided above shall be conclusively presumed to have been duly given, whether or not the registered owner receives the notice. • • Additional Bonds. To the extent authority remains under the Election Ordinance, the City may issue from time to time one or more series of Additional Bonds for the purpose of (i) financing Project Costs in connection with the acquisition, construction, reconstruction, extension, improving or equipping of the Projects, (ii) refunding the Series 2006A Bonds, the Series 2007 Bonds, the Series 2009 Bonds or any series of Additional Bonds, in whole or in part, or (iii) any combination thereof. Additional Bonds shall be secured equally and ratably with the Series 2006A Bonds, the Series 2007 Bonds, the Series 2009 Bonds and any other series of Additional Bonds theretofore issued and then Outstanding, except insofar any terms or conditions of redemption or purchase established under the Indenture may afford additional benefit or security for the Bonds of any particular series and except for the security afforded by any municipal bond insurance obtained with respect to a particular series of Bonds. Before any Additional Bonds are authenticated, there shall be delivered to the Trustee a certificate of the City's Finance Director certifying that, based upon the most recent twelve (12) months of Sales and Use Tax collections, (i) receipts of the 0.25% Sales and Use Tax were not less than 125% of the maximum Annual Debt Service for each of the years ending November 1, 2009 through November 1, 2014, on all the Outstanding Bonds theretofore incurred, plus the Additional Bonds to be issued, and (ii) receipts of the 0.25% Sales and Use Tax and the 0.75% Sales and Use Tax were not less than 125% of the maximum Annual Debt Service for each of the years ending November 1, 2015 and thereafter, on all the Outstanding Bonds, plus the Additional Bonds to be issued. For the purpose of making the aforementioned certification, receipts of the Existing Tax may be included in total receipts of the 0.75% Sales and Use Tax for all or any portion of the most recent twelve (12) month period during which the 0.75% Sales and Use Tax was not being collected. The aggregate principal amount of Additional Bonds that may be issued is limited to $34,410,000, except for refunding bonds issued under the Indenture. Notwithstanding anything described above to the contrary, no Additional Bonds shall be issued unless there is no default at the time of issuance under the Indenture. Transfer or Exchange. The Series 2009 Bonds may be transferred on the books of registration kept by the Trustee by the registered owner in person or by the owner's duly authorized attorney, upon surrender thereof, together with a written instrument of transfer duly executed by the registered owner or the owner's duly authorized • attorney. Upon surrender for transfer of any Series 2009 Bond at the principal corporate office of the Trustee, the City shall execute and the Trustee shall authenticate and deliver in the name of the transferee or transferees a new Series 2009 Bond or Bonds in the same aggregate principal amount and of any authorized denomination or denominations. Transfers of registration or exchanges of Series 2009 Bonds shall be without charge to the Holders of such Series 2009 Bonds, but any taxes or other governmental charges required to be paid with respect to the same shall be paid by the Holder of the Series 2009 Bond requesting such transfer or exchange as a condition precedent to the exercise of such privilege. The Trustee shall not be required to transfer or exchange any Series 2009 Bond during the period from and including a Record Date to the next succeeding interest payment date of such Series 2009 Bond nor to transfer or exchange any Series 200 Bond after the mailing of notice calling such Series 200 Bond for redemption has been made, and prior to such redemption. So long as DTC or its nominee is the sole registered owner of the Series 2009 Bonds, transfers of beneficial interests in the Series 2009 Bonds shall be in accordance with the rules and procedures of DTC and its direct and indirect participants. See the caption "BOOK -ENTRY ONLY SYSTEM" herein. SECURITY FOR THE BONDS General. The Series 2009 Bonds are special obligations of the City secured by and payable from the receipts of (i) a special city-wide sales and use tax levied pursuant to the Act at the rate of one -quarter of one percent (0.25%) (the "0.25% Sales and Use Tax") and (ii) a special city-wide sales and use tax levied pursuant to the Act at the rate of three-quarters of one percent (0.75%) (the "0.75% Sales and Use Tax," and together with the 0.25% Sales and Use Tax, the "Sales and Use Taxes"). The Sales and Use Taxes were levied under Ordinance No. 4891, duly adopted by the City Council of the City on June 20, 2006 (the "Election Ordinance"). Pursuant to the Election Ordinance, a special election was held on September 12, 2006, at which time the qualified electors of the City approved the issuance of capital improvement bonds in principal amount not to exceed $110,000,000 and the corresponding levy of the Sales and Use Taxes. The receipts of the Sales and Use Taxes were pledged to secure the payment of Debt Service on the Series 2009 Bonds pursuant to Ordinance No. 5277, duly adopted by the City Council • of the City on October 6, 2009 (the "Authorizing Ordinance"). Such pledge is made on a parity basis with • an existing pledge on such receipt securing (i) $48,125,000 outstanding principal amount of the City's Sales and Use Tax Capital Improvement Bonds, Series 2006A (the "Series 2006A Bonds"), and (ii) $13,090,000 outstanding principal amount of the City's Sales and Use Tax Capital Improvement Bonds, Series 2007 (the "Series 2007 Bonds"). Pursuant to the terms of the Election Ordinance, the collection of the 0.25% Sales and Use Tax commenced on January 1, 2007. An existing three-quarters of one percent (0.75%) special city-wide sales and use tax (the "Existing Tax") is pledged to the payment of certain indebtedness of the City originally authorized in the aggregate principal amount of $92,000,000 (the "Existing Indebtedness"). Given redemptions of the Existing Indebtedness to date, the outstanding principal amount of the Existing Indebtedness is $60,452,196. Assuming no growth in collections of the Existing Tax, it is currently projected that the Existing Indebtedness will be paid in full in the fourth quarter of 2014. The levy of the Existing Tax will cease upon payment in full of the Existing Indebtedness or adequate provision therefor. Collection of the 0.75% Sales and Use Tax will commence on the first day of the first month following cessation of the Existing Tax. See the captions "THE SALES AND USE TAXES" and "HISTORICAL SALES AND USE TAX COLLECTIONS" herein. The Series 2009 Bonds do not constitute an indebtedness of the City within the meaning of any constitutional or statutory debt limitation or restriction. The issuance of the Series 2009 Bonds shall not directly, indirectly or contingently obligate the City to levy or pledge any taxes whatsoever or to make any appropriation for the payment of the Series 2009 Bonds, except as described herein with respect to the Sales and Use Taxes. Debt Service Reserve. From the proceeds of the Series 2009 Bonds, there shall be deposited into the Series 2009 Account of the Debt Service Reserve Fund an amount sufficient to cause the amounts on deposit therein to be equal to 5% of the aggregate principal amount of the Series 2009 Bonds (the "Reserve Requirement"). Amounts on deposit in the Series 2009 Account of the Debt Service Reserve Fund shall be used solely to pay the principal of and interest on the Outstanding Series 2009 Bonds as due for which there are no available funds in the Bond Fund to make such payments. The Reserve Requirement may be satisfied by cash or by Investment Securities, including the Reserve Fund Insurance Policy (as defined below). . If the amount in the Debt Service Reserve Fund is ever reduced below the Reserve Requirement, it shall be reimbursed to an amount equal to the Reserve Requirement through monthly payments, beginning not later than the last day of the month in which the Debt Service Reserve Fund was reduced below the Reserve Requirement, and continuing not later than the last day of each month thereafter until such reimbursement shall have been accomplished, from any funds in the Revenue Fund (after making the required deposits into the Interest Account and Principal Account of the Bond Fund, as provided in the Indenture). If a surplus shall exist in the Debt Service Reserve Fund over and above the Reserve Requirement, such surplus shall be deposited into the Interest Account of the Bond Fund. Assured Guaranty has made a commitment to issue a financial guaranty insurance policy for the Debt Service Reserve Fund with respect to the Series 2009 Bonds (the "Reserve Fund Insurance Policy"), effective as of the date of issuance of such Series 2009 Bonds. Under the terms of the Reserve Fund Insurance Policy, Assured Guaranty will unconditionally and irrevocably guarantee to pay that portion of the scheduled principal and interest on the Series 2009 Bonds that becomes due for payment but shall be unpaid by reason of nonpayment by the City (the "Insured Payments"). Assured Guaranty will pay each portion of an Insured Payment that is due for payment and unpaid by reason of nonpayment by the City to the Trustee or Paying Agent, as beneficiary of the Reserve Fund Insurance Policy on behalf of the holders of the Series 2009 Bonds, on the later to occur of (i) the date such scheduled principal or interest becomes due for payment or (ii) the business day next following the day on which Assured Guaranty receives a demand for payment therefor in accordance with the terms of the Reserve Fund Insurance Policy. No payment shall be made under the Reserve Fund Insurance Policy in excess of $562,500' (the "Reserve Fund Insurance Policy Limit"). Pursuant to the terms of the Reserve Fund Insurance Policy, the amount available at any particular time to be paid to the Trustee or Paying Agent shall automatically be reduced to the extent of any payment made by Assured Guaranty under the Reserve Fund Insurance Policy, provided, that, to the extent of the • ' Preliminary; subject to change. reimbursement of such payment to Assured Guaranty, the amount available under the Reserve Fund Insurance Policy shall be reinstated in full or in part, in an amount not to exceed the Reserve Fund Insurance Policy Limit. The Reserve Fund Insurance Policy does not insure against nonpayment caused by the insolvency or negligence of the Trustee or Paying Agent. The Reserve Fund Insurance Policy is not covered by any insurance or guaranty fund established under New York, California, Connecticut or Florida insurance law. For information on Assured Guaranty, see the caption "BOND INSURANCE" herein. BOND INSURANCE The Insurance Policy Concurrently with the issuance of the Series 2009 Bonds, Assured Guaranty Corp. ("Assured Guaranty" or the "Insurer") will issue its financial guaranty insurance policy (the "Policy") for the Series 2009 Bonds. The Policy guarantees the scheduled payment of principal of and interest on the Series 2009 Bonds when due as set forth in the form of the Policy included as an exhibit to this Official Statement. The Policy is not covered by any insurance security or guaranty fund established under New York, California, Connecticut or Florida insurance law. The Insurer Assured Guaranty is a Maryland -domiciled insurance company regulated by the Maryland Insurance Administration and licensed to conduct financial guaranty insurance business in all fifty states of the United States, the District of Columbia and Puerto Rico. Assured Guaranty commenced operations in 1988. Assured Guaranty is a wholly owned, indirect subsidiary of Assured Guaranty Ltd. ("AGL"), a Bermuda -based holding company whose shares are publicly traded and are listed on the New York Stock Exchange under the symbol "AGO." AGL, through • its operating subsidiaries, provides credit enhancement products to the U.S. and global public finance, structured finance and mortgage markets. Neither AGL nor any of its shareholders is obligated to pay any debts of Assured Guaranty or any claims under any insurance policy issued by Assured Guaranty. Assured Guaranty's financial strength is rated "AAA" (negative outlook) by Standard & Poor's, a division of The McGraw-Hill Companies, Inc. ("S&P"), "Aa2" (on review for possible downgrade) by Moody's Investors Service, Inc. ("Moody's") and "AA-" (negative outlook) by Fitch, Inc. ("Fitch"). Each rating of Assured Guaranty should be evaluated independently. An explanation of the significance of the above ratings may be obtained from the applicable rating agency. The above ratings are not recommendations to buy, sell or hold any security, and such ratings are subject to revision or withdrawal at any time by the rating agencies. Any downward revision or withdrawal of any of the above ratings may have an adverse effect on the market price of any security guaranteed by Assured Guaranty. Assured Guaranty does not guaranty the market price of the securities it guarantees, nor does it guaranty that the ratings on such securities will not be revised or withdrawn. Recent Developments Ratings On July I, 2009, S&P published a Research Update in which it affirmed its "AAA" counterparty credit and financial strength ratings on Assured Guaranty. At the same time, S&P revised its outlook on Assured Guaranty to negative from stable. Reference is made to the Research Update, a copy of which is available at www.standardandpoors.com, for the complete text of S&P's comments. On May 20, 2009, Moody's issued a press release stating that it had placed the "Aa2" insurance financial strength rating of Assured Guaranty on review for possible downgrade. Subsequently, in an announcement dated July 24, 2009 entitled "Moody's Comments on Assured's Announcement to Guarantee and Delist FSA Debt", Moody's announced that it expected to conclude its review by mid -August 2009. Reference is made to the press release and the announcement, copies of which are available at www.moodys.com, for the complete text of Moody's comments. In a press release dated October 12, 2009, Fitch announced that it had downgraded the insurer financial • strength rating of Assured Guaranty to "AA-" (negative outlook) from "AA" (ratings watch negative). Reference is • made to the press release, a copy of which is available at www.fitchratings.com, for the complete text of Fitch's comments. There can be no assurance as to the outcome of Moody's review, or as to the further action that Fitch or S&P may take with respect to Assured Guaranty. For more information regarding Assured Guaranty's financial strength ratings and the risks relating thereto, see AGL's Annual Report on Form 10-K for the fiscal year ended December 31, 2008, which was filed by AGL with the Securities and Exchange Commission ("SEC") on February 26, 2009, AGL's Quarterly Report on Form 10- Q for the quarterly period ended March 31, 2009, which was filed by AGL with the SEC on May 11, 2009, and AGL's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2009, which was filed by AGL with the SEC on August 10, 2009. Acquisition of FSA On July 1, 2009, AGL acquired the financial guaranty operations of Financial Security Assurance Holdings Ltd. ("FSA"), the parent of financial guaranty insurance company Financial Security Assurance Inc. For more information regarding the acquisition by AGL of FSA, see Item 1.01 of the Current Report on Form 8-K filed by AGL with the SEC on July 8, 2009. Capitalization ofAssured Guaranty Corp. As of June 30, 2009, Assured Guaranty had total admitted assets of $1,950,949,811 (unaudited), total liabilities of $1,653,306,246 (unaudited), total surplus of $297,643,565 (unaudited) and total statutory capital (surplus plus contingency reserves) of $1,084,906,800 (unaudited) determined in accordance with statutory accounting practices prescribed or permitted by insurance regulatory authorities. Incorporation of Certain Documents by Reference The portions of the following documents relating to Assured Guaranty are hereby incorporated by reference • into this Official Statement and shall be deemed to be a part hereof: • the Annual Report on Form 10-K of AGL for the fiscal year ended December 31, 2008 (which was filed by AGL with the SEC on February 26, 2009); • the Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2009 (which was filed by AGL with the SEC on May 11, 2009); • the Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2009 (which was filed by AGL with the SEC on August 10, 2009); and • the Current Reports on Form 8-K filed by AGL with the SEC relating to the periods following the fiscal year ended December 31, 2008. All consolidated financial statements of Assured Guaranty and all other information relating to Assured Guaranty included in documents filed by AGL with the SEC pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended, subsequent to the date of this Official Statement and prior to the termination of the offering of the Series 2009 Bonds shall be deemed to be incorporated by reference into this Official Statement and to be a part hereof from the respective dates of filing such consolidated financial statements. Any statement contained in a document incorporated herein by reference or contained herein under the heading "Bond Insurance -The Insurer" shall be modified or superseded for purposes of this Official Statement to the extent that a statement contained herein or in any subsequently filed document which is incorporated by reference herein also modifies or supersedes such statement. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Official Statement. Copies of the consolidated financial statements of Assured Guaranty incorporated by reference herein and of the statutory financial statements filed by Assured Guaranty with the Maryland Insurance Administration are available upon request by contacting Assured Guaranty at 31 West 52" Street, New York, New York 10019 or by calling Assured Guaranty at (212) 974-0100. In addition, the information regarding Assured Guaranty that is incorporated by reference in this Official Statement that has been filed by AGL with the SEC is available to the public over the Internet at the SEC's web site at http://www.sec.gov and at AGL's web site at • hap://www.assuredguaranty.com, from the SEC's Public Reference Room at 450 Fifth Street, N.W., Room 1024, • Washington, D.C. 20549, and at the office of the New York Stock Exchange at 20 Broad Street, New York, New York 10005. Assured Guaranty makes no representation regarding the Series 2009 Bonds or the advisability of investing in the Series 2009 Bonds. In addition, Assured Guaranty has not independently verified, makes no representation regarding, and does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding Assured Guaranty supplied by Assured Guaranty and presented under the heading "BOND INSURANCE". BOOK -ENTRY ONLY SYSTEM The Series 2009 Bonds will be issued only as one fully registered Series 2009 Bond for each maturity, in the name of Cede & Co., as nominee for The Depository Trust Company, New York, New York ("DTC"), as registered owner of all the Series 2009 Bonds. The fully registered Series 2009 Bonds will be retained and immobilized in the custody of DTC. DTC (or any successor securities depository) or its nominee will be considered by the City and the Trustee to be the owner or holder of the Series 2009 Bonds for all purposes under the Indenture. Owners of any book entry interests in the Series 2009 Bonds (the "book entry interest owners") described below, will not receive or have the right to receive physical delivery of the Series 2009 Bonds, and will not be considered by the City and the Trustee to be, and will not have any rights as, owners or holders of the Series 2009 Bonds under the bond proceedings and the Indenture except to the extent, if any, expressly provided thereunder. CERTAIN INFORMATION REGARDING DTC AND DIRECT PARTICIPANTS IS SET FORTH BELOW. THIS INFORMATION HAS BEEN PROVIDED BY DTC. THE CITY, THE UNDERWRITER AND BOND COUNSEL ASSUME NO RESPONSIBILITY FOR THE ACCURACY OF SUCH STATEMENTS. DTC, the world's largest depository, is a limited -purpose trust company organized under the New York • Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues and money market instruments (from over 100 countries) that DTC's participants ("Direct Participants") deposit with DTC. DTC also facilitates the post -trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book - entry transfers and pledges among Direct Participants' accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly -owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC is the holding company for DTC, the National Securities Clearing Corporation and the Fixed Income Clearing Corporation, all of which are registered agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). The DTC Rules applicable to its Direct and Indirect Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com and www.dtc.org. Purchases of Series 2009 Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Series 2009 Bonds on DTC's records. The ownership interest of each actual purchaser of each Series 2009 Bond ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase, but Beneficial Owners are expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction, Transfers of ownership interests in the Series 2009 Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Series 2009 Bonds, except in the event that use of the Book -Entry System for the Series 2009 Bonds is discontinued. • • To facilitate subsequent transfers, all Series 2009 Bonds deposited by Direct Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co. or such other name as may be requested by an authorized representative of DTC. The deposit of Series 2009 Bonds with DTC and their registration in the name of Cede & Co. or such other nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Series 2009 Bonds; DTC's records reflect only the identity of the Direct Participants to whose accounts such Series 2009 Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Redemption notices shall be sent to DTC. If less than all of the Series 2009 Bonds within a maturity are to be redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be redeemed. Neither DTC nor Cede & Co. (nor such other DTC nominee) will consent or vote with respect to the Series 2009 Bonds unless authorized by a Direct Participant in accordance with DTC's Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the City as soon as possible after the Record Date. The Omnibus Proxy will assign Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the Series 2009 Bonds are credited on the Record Date (identified in a listing attached to the Omnibus Proxy). Payment of debt service and redemption proceeds with respect to the Series 2009 Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC's practice is to credit Direct Participants' accounts upon DTC's receipt of funds and corresponding detail information from the City or the Trustee on payable date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and • will be the responsibility of such Participant and not of DTC, the Trustee or the City, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds and debt service to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the City or the Trustee, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. BENEFICIAL OWNERS SHOULD CONSULT WITH THE DIRECT PARTICIPANTS OR INDIRECT PARTICIPANTS FROM WHOM THEY PURCHASE A BOOK ENTRY INTEREST TO OBTAIN INFORMATION CONCERNING THE SYSTEM MAINTAINED BY SUCH DIRECT PARTICIPANTS OR INDIRECT PARTICIPANTS TO RECORD SUCH INTERESTS, TO MAKE PAYMENTS, TO FORWARD NOTICES OF REDEMPTION AND OF OTHER INFORMATION. THE CITY AND THE TRUSTEE HAVE NO RESPONSIBILITY OR LIABILITY FOR ANY ASPECTS OF THE RECORDS OR NOTICES RELATING TO, OR PAYMENTS MADE ON ACCOUNT OF, BOOK ENTRY INTEREST OWNERSHIP, OR FOR MAINTAINING, SUPERVISING OR REVIEWING ANY RECORDS RELATING TO THAT OWNERSHIP. The Trustee and the City, so long as a book entry method of recording and transferring interest in the Series 2009 Bonds is used, will send any notice of redemption or of any Indenture amendment or supplement or other notices to Bondholders under the Indenture only to DTC (or any successor securities depository) or its nominee. Any failure of DTC to advise any Direct Participants, or of any Direct Participants or Indirect Participants to notify any Beneficial Owner, of any such notice and its content or effect will not affect the validity of the redemption of the Series 2009 Bonds called for redemption, the Indenture amendment or supplement, or any other action premised on notice given under the Indenture. The City and the Trustee cannot and do not give any assurances that DTC, Direct Participants, Indirect Participants or others will distribute payments of debt service on the Series 2009 Bonds made to DTC or its nominee as the registered owner of the Series 2009 Bonds, or any redemption or other notices, to the Beneficial Owners, or that they will do so on a timely basis, or that DTC will serve and act in a manner described in this Official • Statement. • DTC may discontinue providing its services as securities depository with respect to the Series 2009 Bonds at any time by giving reasonable notice to the City or the Trustee. Under such circumstances, in the event that a successor securities depository is not obtained, bond certificates are required to be printed and delivered. In addition, the City may decide to discontinue use of the system of book -entry transfers through DTC (or a successor securities depository). In that event, bond certificates will be printed and delivered. THE PROJECTS Street Project. Approximately $9,695,000 of the proceeds of the Series 2009 Bonds will be deposited into the Street Account of the Project Fund to finance a portion of the costs of acquiring, constructing, reconstructing, repairing, straightening and widening certain streets and related improvements (the "Street Project'). Trail Project, Approximately $1,265,000 of the proceeds of the Series 2009 Bonds will be deposited into the Trail Account of the Project Fund to finance a portion of the costs of acquiring, constructing and equipping certain City trail system improvements (the "Trail Project"). HISTORICAL SALES AND USE TAX COLLECTIONS An existing three-quarters of one percent (0.75%) special city-wide sales and use tax (the "Existing Tax") is pledged to the payment of certain indebtedness of the City originally authorized in the aggregate principal amount of $92,000,000 (the "Existing Indebtedness"). Given redemptions of the Existing Indebtedness to date, the outstanding principal amount of the Existing Indebtedness is $60,452,196. Assuming no growth in collections of the Existing Tax, it is currently projected that the Existing Indebtedness will be paid in full in the fourth quarter of 2014. The levy of the Existing Tax will cease upon payment in full of the Existing Indebtedness or adequate provision therefor. Collection of the 0.75% Sales and Use Tax will commence on the first day of the first month following cessation of the Existing Tax. Collection of the Existing Tax commenced April 1, 2002. Set forth below is a table showing receipts of the Existing Tax and receipts of a separate one percent (1.00%) city-wide sales and use tax (the • "1.00% Tax") over the last seven years. Collections of the 1.00% Tax for the most recent twelve-month period (August, 2008 to July, 2009) were $16,093,882, a 0.63% decrease from the previous twelve-month period (August, 2007 to July, 2008). Historical Collections of Historical Collections of Year Existing Tax (0.75%) 1.00% Tax (2) Growth Percentage 2002 $ 6,185,7001'1 $12,451,096 n/a 2003 9,721,700 12,962,441 4.11% 2004 10,637,825 14,184,374 9.43% 2005 11,512,386 15,350,158 8.22% 2006 11,819,776 15,761,266 2.68% 2007 11,656,893 15,564,174 (1.25%) 2008 12,375,932 16,501,242 6.02% Reflects collections of the Existing Tax for the nine -month period from April 1, 2002 to December 31, 2002. (2) Reflects collections of a one percent (1.00%) city-wide sales and use tax. This tax is not pledged to the payment y p g p yment of any indebtedness. • IG • ESTIMATED SOURCES AND USES OF FUNDS The proceeds of the Series 2009 Bonds are expected to be used as follows: Sources of FundsW Par Amount of Series 2009 Bonds $11,250,000 Total Sources: SI 1250.000 Uses of Funds(' Deposit to Street Account of Project Fund $9,695,000 Deposit to Trail Account of Project Fund 1,265,000 Costs of Issuance, including Bond Insurance and Reserve Policy premiums and Underwriter's Discount 290.000 Total Uses: Preliminary, subject to change. ESTIMATED DEBT SERVICE REQUIREMENTS As of the date of closing, the Series 2006A Bonds, the Series 2007 Bonds and the Series 2009 Bonds will • constitute the only debt obligations secured by receipts of the Sales and Use Taxes. The following table sets forth estimates of the amounts required to pay scheduled principal of and interest on the Series 2006A Bonds, the Series 2007 Bonds and the Series 2009 Bonds during each year: Series 2006A and Series 2006A and Series 2009 Series 2009 Total Debt Year 2007 Principal 2007 Interest Principal Interest' Service 2009 $ -- $2,703,638 $ -- $ -- $2,703,638 2010 -- 2,703,638 -- 408,665 3,112,303 2011 -- 2,703,638 -- 408,665 3,112,303 2012 -- 2,703,638 -- 408,665 3,112,303 2013 -- 2,703,638 -- 408,665 3,112,303 2014 - 2,703,638 -- 408,665 3,112,303 2015 7,115,000 2,703,638 1,430,000 408,665 11,657,303 2016 7,465,000 2,357,287 1,485,000 351,465 11,658,752 2017 7,830,000 1,993,837 1,550,000 292,065 11,665,902 2018 8,210,000 1,612,537 1,605,000 230,065 11,657,602 2019 8,590,000 1,230,512 1,675,000 165,865 11,661,377 2020 8,975,000 848,362 1,725,000 113,940 11,662,302 2021 7,380,000 566,231 1,780,000 58,740 9,784,971 2022 1,255,000 259,081 -- -- 1,514,081 2023 1,315,000 196,331 -- -- 1,511,331 2024 1,385,000 130,581 -- -- 1,515,581 2025 1,440,000 71,719 -- -- 1,511,719 2026 255.000 10,519 -- -- 265,519 Totals: $61.zli000 $28.22 $11250.000 53.664.130 $104.331.593 0l Preliminary; subject to change. Assuming for purposes of this Preliminary Official Statement, an average coupon rate on the Series 2009 Bonds of 3.56% per annum. • • ESTIMATED DEBT SERVICE COVERAGE Set forth below are tables showing estimated debt service coverage with respect to the Series 2006A Bonds, the Series 2007 Bonds and the Series 2009 Bonds during the years 2009-2014 and during the years 2015-2026. Collections of the Existing Tax during the twelve-month period ended July 31, 2009 were utilized for the purpose of making the coverage calculations. See the caption "HISTORICAL SALES AND USE TAX COLLECTIONS" herein. The City will initially receive collections only from the 0.25% Sales and Use Tax which was levied and commenced being collected as of January 1, 2007. The Existing Tax is pledged to the payment of the Existing Indebtedness, originally authorized in the aggregate principal amount of $92,000,000. Given redemptions of the Existing Indebtedness to date, the outstanding principal amount of the Existing Indebtedness is $60,452,196. Assuming no growth in collections of the Existing Tax, it is currently projected that the Existing Indebtedness will be paid in full in the fourth quarter of 2014. The levy of the Existing Tax will cease upon payment in full of the Existing Indebtedness or adequate provision therefor. Collection of the 0.75% Sales and Use Tax will commence on the first day of the first month following cessation of the Existing Tax. Historical Existing Tax Receipts at 0.25% 017 $4,023,471 Maximum Annual Debt Service (2009-2014) (Z) $3,112,303 Maximum Annual Debt Service Coverage I.29X "' Actual collections of the Existing Tax during the last twelve-month period ending July 31, 2009, and assuming a tax rate of 0.25%. Seethe caption "HISTORICAL SALES AND USE TAX COLLECTIONS" herein. (2) Preliminary, subject to change, and representing debt service on the Series 2006A Bonds, the Series 2007 Bonds and the Series 2009 Bonds in 2009-2014. See the caption "ESTIMATED DEBT SERVICE REQUIREMENTS" herein. • Historical Existing Tax Receipts at 1.00% 111 $16,093,882 Maximum Annual Debt Service (2015-2026)(2) $11,665,902 Maximum Annual Debt Service Coverage 1.38X Actual collections of the Existing Tax during the last twelve-month period ending July 31, 2009, and assuming a tax rate of 1.00%. See the caption "HISTORICAL SALES AND USE TAX COLLECTIONS" herein. R1 Preliminary, subject to change, and representing debt service on the Series 2006A Bonds, the Series 2007 Bonds and the Series 2009 Bonds in 2015-2026. See the caption "ESTIMATED DEBT SERVICE REQUIREMENTS" herein. THE COVERAGE NUMBERS SET FORTH ABOVE ARE BASED ON HISTORICAL RECEIPTS OF THE EXISTING TAX. ACTUAL RECEIPTS OF THE SALES AND USE TAXES WILL DEPEND ON NUMEROUS FACTORS, AND THERE CAN BE NO ASSURANCE THAT FUTURE RECEIPTS OF THE SALES AND USE TAXES AVAILABLE TO PAY DEBT SERVICE ON THE SERIES 2006A BONDS, THE SERIES 2007 BONDS AND THE SERIES 2009 BONDS WILL APPROXIMATE SUCH HISTORICAL RESULTS. See the caption "THE SALES AND USE TAXES — Future Receipt of the Sales and Use Taxes" herein. PROJECTED MANDATORY REDEMPTIONS The table under the caption "ESTIMATED DEBT SERVICE REQUIREMENTS" does not reflect possible mandatory redemptions of the Series 2006A Bonds, the Series 2007 Bonds and the Series 2009 Bonds from Surplus Tax Receipts, if available. Surplus Tax Receipts are all receipts of the Sales and Use Taxes in excess of the amount necessary (i) to assure the prompt payment of the principal of and interest on Outstanding Series 2006A Bonds, the Series 2007 Bonds, the Series 2009 Bonds and any Additional Bonds, (ii) to maintain the Debt Service Reserve Fund in an amount equal to the Reserve Requirement, (iii) to pay any arbitrage rebate due under Section 148(t) of the Code, and (iv) to pay Trustee and Paying Agent fees and expenses. So long as the Series 2006A Bonds are outstanding, 50% of the Surplus Tax Receipts shall be allocated to the redemption of the Series 2006A Bonds and the remaining 50% of Surplus Tax Receipts shall be allocated ratably (based on relative outstanding principal amounts) to the redemption of the Series 2007 Bonds, the Series 2009 Bonds and any series of Additional Bonds • hereafter issued as provided under the "THE SERIES 2009 BONDS — Additional Bonds." Following payment in whole of the Series 2006A Bonds at maturity or upon redemption prior to maturity, all Surplus Tax Receipts shall be 12 • allocated ratably (based on relative outstanding principal amounts) to the redemption of the Series 2007 Bonds, the Series 2009 Bonds and any other series of Additional Bonds. THERE CAN BE NO ASSURANCE GIVEN THAT RECEIPTS OF THE SALES AND USE TAXES WILL BE REALIZED IN THE AMOUNTS ASSUMED IN THE TABLE ABOVE. See the caption "THE SALES AND USE TAXES — Future Sales and Use Tax Receipts" herein. Assuming 0% Tax Growth Series 2009 Bonds Year Ending Series 2009 Redeemed Prior to Total Series 2009 December 31(1) Principal Due Maturi (1x3)(4) Principal Retired 2010 $ -- 210,000 $ 210,000 2011 -- 225,000 225,000 2012 -- 235,000 235,000 2013 -- 245,000 245,000 2014 -- 255,000 255,000 2015 1,430,000 870,000 2,300,000 2016 1,485,000 1,120,000 2,605,000 2017 1,550,000 1,150,000 2,700,000 2018 1,595,000 880.000 2,475.000 Totals: $6.060.000 $5.190.000 $11.250.000 " Series 2009 Bonds are subject to mandatory redemption from Surplus Tax Receipts on each May I and November I. See the caption "TliE SERIES 2009 BONDS — Redemption" herein. (2) Assuming receipts of the Sales and Use Taxes of $4,023,471 for each of the twelve month periods ending December 31, 2010 through 2014, and annual receipts ofS16,093,882 thereafter. (3) Projected mandatory redemptions related to Series 2009 Bonds maturing November I, 2019 through November 1, 2021. (4) Assuming the issuance of no Additional Bonds. If there is an increase in annual collections of the Sales and Use Taxes, the City • contemplates that it will issue Additional Bonds. THE CITY General. The City is a city of the first class organized and existing under the laws of the State of Arkansas. The City is the seat of government of Washington County (the "County") and is the fourth largest city in the State. The City is located in the Metropolitan Statistical Area of Fayetteville/Springdale/Rogers (the "MSA"), which includes all of Washington and Benton Counties in the northwest comer of the State and is approximately 185 miles northwest of Little Rock, Arkansas, 125 miles east of Tulsa, Oklahoma, and 210 miles south of Kansas City, Missouri. The City is served by U.S. Interstate 540, U.S. Highways 62 and 71, and State Highways 16, 45, 112, 156, 180 and 265. The Burlington Northern Railroad has several lines running through the City, and a general aviation airport with a 6,006 -foot runway is available for limited commuter travel. The Northwest Arkansas Regional Airport is located approximately 40 minutes from downtown Fayetteville and provides daily flights to numerous venues. Government. The City currently operates under the Mayor -Council form of government pursuant to which a mayor, city attorney, city clerk and eight aldermen are elected, two from each of the City's four wards. The mayor, city attorney and city clerk are full-time positions elected to four year terms. Aldermen also serve four year terms. • 13 • The City's elected officials and the dates on which their respective terms expire are as follows: Name Office Term Expires Lioneld Jordan Mayor 12/31/12 Kit Williams City Attorney 12/31/10 Sondra Smith City Clerk 12/31/12 Kyle Cook Alderman 12/31/10 Adella Gray Alderman 12/31/10 Bobby Ferrell Alderman 12/31/12 Sarah Lewis Alderman 12/31/12 Shirley Lucas Alderman 12/31/10 Matthew Petty Alderman 12/31/12 Robert Rhoades Alderman 12/31/10 Brenda Thiel Alderman 12/31/12 Population. The following is a table of population changes for the City, the MSA and the State of Arkansas, according to the United States Census Bureau: City of State of Year Fayetteville MSA Arkansas 1960 20,274 92,069 1,786,272 1970 30,729 127,846 1,923,322 1980 36,608 178,609 2,286,435 1990 42,099 210,908 2,350,624 2000 58,047 311,121 2,673,400 2006['1 67,158 n/a n/a City of Fayetteville special census data. Economic Data. Per capita personal income figures for the MSA and the State of Arkansas are as follows: State of Year MSA Arkansas 1998 22,893 21,256 1999 24,213 22,223 2000 23,316 21,995 2001 24,585 22,750 2002 24,788 23,556 2003 25,359 24,384 2004 27,122 25,814 2005 27,994 26,681 2006 29,807 28,473 2007 n/a 30,060 Source: Discover Arkansas, Data Analysis. 14 • Retail sales figures for the MSA and the State are as follows: State of MSA as % of Year MSA Arkansas State of Arkansas 2000 $3,526,791,000 $28,488,033,000 12.38% 2001 3,806,422,000 29,652,693,000 12.84 2002 3,841,326,000 29,269,775,000 13.12 2003 3,968,812,000 29,920,716,000 13.26 2004 4,610,051,000 31,463,983,000 14.65 2005 5,287,158,000 34,290,412,000 15.42 2006 7,251,810,000 38,843,312,000 18.70 2007 8,250,140,000 43,504,752,000 18.96 Source: 2007 Demographics USA. The following table shows the total assessed value of non -utility real and personal property within the City for the years indicated: Year Real Property Personal Property Total 1999 $413,648,415 $137,404,499 $551,052,914 2000 432,951,171 145,147,891 578,099,062 2001 486,853,822 155,794,579 642,648,401 2002 530,235,135 158,778,031 689,013,166 2003 565,846,525 167,638,657 733,485,182 2004 649,361,820 183,102,702 832,464,522 2005 729,172,106 212,694,254 941,866,260 2006 802,306,156 198,469,816 1,000,775,972 2007 942,667,570 203,094,564 1,145,762,134 • 2008 1,026,022,871 203,311,701 1,232,334,572 Source: Washington County Tax Assessor's Office. The assessed value represents 20% of the appraised value of property. Building permits issued by the City' are shown below for the years indicated: 2004 2005 2006 2007 2008 Residential Building 755 721 550 597 420 Permits Commercial Building 29 40 33 557 55 Permits Value of All Building Permits $164,695,359 $237,893,360 $199,638,759 $217,969,400 $241,750,225 (I) Does not include building activity of the University of Arkansas, school permits and additions/alterations to existing structures. Source: City of Fayetteville. • 15 • Unemployment figures for the MSA and the State of Arkansas, according to the U.S. Bureau of Labor Statistics, are as follows: Year MSA State of Arkansas 2000 2.9 4.2 2001 3.0 4.7 2002 3.3 5.3 2003 3.7 5.8 2004 3.8 5.6 2005 3.3 5.3 2006 3.6 5.4 2007 3.9 5.4 2008 3.8 5.2 2009" 6.2 7.4 ' July, 2009 only, preliminary. Employment and Industry. The principal campus of the University of Arkansas is located in the City and had total enrollment for the Fall semester of 2009 of approximately 19,700. On the Fayetteville campus, the University employs approximately 7,963 faculty, administrative, secretarial, clerical and maintenance personnel in both full-time and part-time positions, making the University the largest employer in the City. Other major employers in the City, their products or services and approximate number of employees are set forth below: Employer Product or Service Employee Range Veterans Admin. Med. Ctr. Medical 1,000-2,499 • Washington Regional Med. Ctr. Fayetteville School District Washington County Gov't. City of Fayetteville Superior Industries Arvest Bank Source: City of Fayetteville. L� Medical 1,000-2,499 Education 1,000-2,499 Government 1,000-2,499 Government 500-999 Cast Aluminum Wheels 500-999 Banking 300-499 THE SALES AND USE TAXES Generally. The Sales and Use Taxes are levied under the Election Ordinance pursuant to the authority of the Act. The Sales and Use Taxes are taxes levied within the City on all items which are subject to taxation under The Arkansas Gross Receipts Act of 1941 and taxes levied on the receipts from storing, using or consuming tangible personal property under The Arkansas Compensating (Use) Tax Act of 1949. The Sales and Use Taxes are collected only on the first $2,500 of gross receipts, gross proceeds or sales price from any single transaction. Pursuant to the Indenture and the Authorizing Ordinance, the City has pledged the receipts of the Sales and Use Taxes to the payment of the Series 2009 Bonds. Collection of the 0.25% Sales and Use Tax commenced on January 1, 2007. An existing three-quarters of one percent (0.75%) special city-wide sales and use tax (the "Existing Tax") is pledged to the payment of certain indebtedness of the City originally authorized in the aggregate principal amount of $92,000,000 (the "Existing Indebtedness"). Given redemptions of the Existing Indebtedness to date, the outstanding principal amount of the Existing Indebtedness is $60,452,196. Assuming no growth in collections of the Existing Tax, it is currently projected that the Existing Indebtedness will be paid in full in the fourth quarter of 2014. The levy of the Existing Tax will cease upon payment in full of the Existing Indebtedness or adequate provision therefor. Collection of the 0.75% Sales and Use Tax will commence on the first day of the first month following cessation of the Existing Tax. See "Appendix C — THE SALES AND USE TAXES" for a detailed description of the property and services subject to sales and use taxation and the exemptions therefrom. 16 • Administration. Pursuant to the Act, the Commissioner of Revenues of the State (the "Commissioner") performs all functions incidental to the administration, collection, enforcement and operation of the Sales and Use Taxes. All receipts of the Sales and Use Taxes collected, less certain charges payable and retainage due the commissioner for administrative services in the amount of 3% of the gross receipts of the Sales and Use Taxes, shall be remitted by the State Treasurer to the Trustee monthly, See the caption "SUMMARY OF THE INDENTURE — Application of Sales and Use Tax Receipts" herein. Streamlined Sales and Use Tax Treatment. Pursuant to action of the General Assembly of the State of Arkansas (the "State"), the State elected to participate in a multistate agreement to simplify and modernize sales and use tax administration known as the Streamlined Sales and Use Tax Agreement (the "Streamline Agreement"). The State's participation became effective as of January 1, 2008. Participation in the Streamline Agreement permits the collection by the State and its cities and counties of sales and use tax revenues relating to internet sales from vendors outside of the State. The Streamline Agreement requires each retailer to collect sales and use taxes at the point of delivery instead of at the point of sale as was the previous practice. With respect to sales of motor vehicles, aircraft, watercraft, modular homes, manufactured homes and mobile homes, the Streamline Agreement limits the application of sales and use taxes to the first $2,500 of sales proceeds. There is no limit on the amount of tax collected on the sale of other items. In response to objections to the application of this provision of the Streamline Agreement, the Arkansas General Assembly revised Arkansas law to permit businesses, nonprofits and governmental entities that purchase items pursuant to an invoice that totals more than $2,500 to file for a refund of tax paid in excess of the amount that would have been due on a $2,500 sale. Such refund requests must be filed with the Arkansas Department of Finance and Administration within six months of the date of purchase or six months from the date of payment, if later. Refunds are remitted to purchasers by the State Treasurer and a corresponding amount withheld from disbursements of local sales and use taxes to the applicable city or county. Future Receipts of the Sales and Use Taxes. Receipts of the Sales and Use Taxes will be contingent upon • the sale and use of property and services within the City, which activity is generally dependent upon economic conditions within the City and the surrounding trade area. Also, receipts of the Sales and Use Taxes may be affected by changes to transactions exempted from the Sales and Use Taxes made by legislation adopted by the General Assembly of the State or by the people of the State in the form of a constitutional amendment or initiated act. In the past the General Assembly of the State has considered new exemptions to sales and use taxes, such as food sales, which, if adopted, would materially reduce receipts of the Sales and Use Taxes. The City has no control over actions of the General Assembly or the people of the State and cannot predict whether changes to the Sales and Use Taxes may be made. Accordingly, the City cannot predict with certainty the expected amount of receipts of the Sales and Use Taxes to the be received and, therefore, there can be no assurance that receipts of the Sales and Use Taxes will be sufficient to pay the principal of and interest on the Series 2009 Bonds. [REMAINDER OF PAGE INTENTIONALLY BLANK] 17 • SUMMARY OF THE INDENTURE The following statements are brief summaries of certain provisions of the Indenture. The statements do not purport to be complete, and reference is made to the Indenture, copies of which are available for examination at the offices of the Finance Director of the City, for a full statement thereof. Funds and Accounts. Receipts of the Sales and Use Taxes are pledged by the Indenture to the payment of the principal of and interest on the Bonds. The following Funds and Accounts have been established with the Trustee in connection with the issuance of the Bonds: Funds and Accounts Revenue Fund Bond Fund, and an Interest Account and a Principal Account therein Debt Service Reserve Fund, and a Series 2006A, Series 2007 and Series 2009 Account therein Redemption Fund Project Fund, and a Street Account, Trail Account and Wastewater Account therein Cost of Issuance Fund Rebate Fund Application of Receipts of the Sales and Use Taxes. The application of receipts of the Sales and Use Taxes is as follows: • (a) Revenue Fund. All receipts from the Sales and Use Taxes shall, as and when received, be deposited into the Revenue Fund. All moneys at any time in the Revenue Fund shall be applied on a monthly basis to the payment of Debt Service on the Bonds, to the maintenance of the Debt Service Reserve Fund, to the payment of any arbitrage rebate due under Section 148(f) of the Code, to the payment of fees and. expenses of the Trustee and any Paying Agent, and to the early redemption of the Bonds, at the times and in the amounts set forth as follows: (b) Bond Fund. Upon receipt, but in no event later than the last day of each month in which receipts of the Sales and Use Taxes are deposited in the Revenue Fund, there shall be transferred from the Revenue Fund (i) into the Interest Account of the Bond Fund, an amount equal to 1/6 of the interest on the Outstanding Bonds due on the next interest payment date, and (ii) into the Principal Account of the Bond Fund, an amount equal to 1/12 of the next scheduled principal maturity of Outstanding Bonds. Moneys in the Bond Fund shall be used solely for the purpose of paying Annual Debt Service on the Bonds or for redemption of Bonds, as provided in the Indenture. The Trustee shall withdraw from the Bond Fund, on the date of any principal or interest payment, an amount equal to such payment for the sole purpose of paying the same. If receipts of the Sales and Use Taxes in the Revenue Fund are insufficient to make the required monthly payment into the Bond Fund, the amount of any such deficiency in the payment made shall be added to the amount otherwise required to be paid into the Bond Fund not later than last day of the next succeeding month. When the moneys held in the Revenue Fund, the Bond Fund, the Debt Service Reserve Fund and the Redemption Fund shall be and remain sufficient to pay in full the principal of and interest on all Bonds then Outstanding in accordance with the Indenture, together with the required fees and expenses to be paid or reimbursed to the Trustee and any Paying Agent, the City shall have no further obligation to make payments into such Funds and the levy of the Sales and Use Taxes shall cease. (c) Debt Service Reserve Fund. See the caption "SECURITY FOR THE BONDS — Debt Service Reserve" herein. (d) Rebate Fund. The Trustee shall establish and maintain, separate and apart from any other Funds and Accounts established and maintained under the Indenture, the Rebate Fund, which Fund is not pledged to the payment of any Bonds. Subject to transfer to the United States in payment of any arbitrage rebate due under Section • 148(f) of the Code, all moneys at any time deposited in the Rebate Fund shall be held by the Trustee in trust, and IL • neither the City nor the Owner of any Bond shall have any rights in or claim to such money. Any amounts remaining in the Rebate Fund after payment in full of the rebate amount owing to the United States, within sixty (60) days after the date on which the last Bond is redeemed, shall be transferred to the Revenue Fund. (e) Redemption Fund. After making the required deposits into the Bond Fund, into the Debt Service Reserve Fund, and into the Rebate Fund, and after paying the fees and expenses of the Trustee and any Paying Agent, there shall be paid from the Revenue Fund into the Redemption Fund all remaining moneys in the Revenue Fund (the "Surplus Tax Receipts"). Moneys in the Redemption Fund shall be transferred to the appropriate Principal Account(s) of the Bond Fund at such times as may be necessary to effectuate redemptions of Bonds on the first available redemption date. So long as the Series 2006A Bonds are outstanding, 50% of the Surplus Tax Receipts shall be allocated to the redemption of the Series 2006A Bonds and the remaining 50% of Surplus Tax Receipts shall be allocated ratably (based on relative outstanding principal amounts) to the redemption of the Series 2007 Bonds, the Series 2009 Bonds and any series of Additional Bonds. Following payment in whole of the Series 2006A Bonds at maturity or upon redemption prior to maturity, all Surplus Tax Receipts shall be allocated ratably (based on relative outstanding principal amounts) to the redemption of the Series 2007 Bonds, the Series 2009 Bonds and any other series of Additional Bonds. See the captions "THE SERIES 2009 BONDS —Redemption" and "PROJECTED MANDATORY REDEMPTIONS" herein. (f) Project Fund. A portion of the proceeds of the Series 2009 Bonds shall be deposited in the Street Account and the Trail Account of the Project Fund. See the captions "ESTIMATED SOURCES AND USES OF FUNDS" and "THE PROJECTS" herein. Amounts in the Street Account in the Project Fund shall be expended only for the payment of Project Costs related to the applicable portion of the Street Project being financed with the Series 2009 Bonds upon the submission of Requisitions by the City to the Trustee. Amounts in the Trail Account in the Project Fund shall be expended only for the payment of Project Costs related to the applicable portion of the Trail Project being financed with the Series 2009 Bonds upon the submission of Requisitions by the City to the Trustee. The Trustee shall only make payments from the Project Fund pursuant to and in accordance with Requisitions. Within ninety (90) days following completion of the portion of a Project being financed with a particular series of • Bonds, the City shall deliver to the Trustee its Certificate stating that the applicable portion of such Project is complete and the Trustee shall transfer the remaining moneys in the applicable Account of the Project Fund relating to such series of Bonds (save and except moneys needed to satisfy unpaid Project Costs) to the Redemption Fund for application to the retirement of the corresponding series of Bonds by redemption or purchase. See the caption "THE SERIES 2009 BONDS — Redemption" herein. (g) Cost of Issuance Fund. A portion of the proceeds of the Series 2009 Bonds shall be deposited to the credit of the Cost of Issuance Fund. The Trustee shall pay those Costs of Issuance as directed by the City pursuant to a Certificate delivered on a Closing Date. After all Costs of Issuance have been paid with respect to the Series 2009 Bonds (and in any event not later than December 1, 2009), any remaining moneys in the Cost of Issuance Fund shall be transferred to the Interest Account of the Bond Fund. Investment of Funds. At the direction of the City or absent such direction, the Trustee shall invest moneys in Funds or Accounts held by the Trustee in Investment Securities with maturity or redemption dates consistent with the times at which said moneys will be required for the purposes provided in the Indenture. Moneys in separate Funds or Accounts may be commingled for the purpose of investment. Valuation of Funds and Accounts. In determining the value of any Fund or Account held by the Trustee under the Indenture, the Trustee shall credit Investment Securities at the fair market value thereof, as determined by the Trustee by any method selected by the Trustee in its reasonable discretion. No less frequently than annually, and in any event within thirty (30) days prior to the end of each Fiscal Year, the Trustee shall determine the value of each Fund and Account held under the Indenture and shall report such determination to the City. The Trustee shall sell or present for redemption any Investment Securities as necessary in order to provide money for the purpose of making any payment required under the Indenture, and the Trustee shall not be liable for any loss resulting from any such sale. Responsibility of Trustee. The Trustee shall not be responsible or liable for any loss suffered in connection with any investment of moneys made by it at the direction of the City. Instruments of Further Assurance. At any and all times the City shall, so far as it may be authorized by law, • pass, make, do, execute, acknowledge and deliver, all and every such further resolutions, ordinances, acts, deeds, conveyances, assignments, transfers and assurances as may be necessary or desirable for the better assuring, 19 • conveying, granting, pledging, assigning and confirming of all and singular the receipts from the Sales and Use Taxes and all other moneys pledged or assigned by the Indenture, or intended so to be, or which the City may become bound to pledge or assign. Tax Covenants. The City shall not use or permit the use of any Series 2009 Bond proceeds or any other funds of the City, directly or indirectly, in any manner, and will not take or permit to be taken any other action or actions which would adversely effect the exclusion of interest on any Series 2009 Bond from gross income for federal income tax purposes. No part of the proceeds of the Series 2009 Bonds shall at any time be used, directly or indirectly, to acquire securities or obligations the acquisition of which would cause any of such Series 2009 Bonds to be an "arbitrage bond" as defined in Sections 148(a) and (b) of the Code. The City agrees that so long as any of the Series 2009 Bonds remain Outstanding, it will comply with the provisions of the Tax Regulatory Agreement. Defeasance. Any Bond shall be deemed to be paid within the meaning of the Indenture when payment of the principal of and premium, if any, and interest on such Bond (whether at maturity or upon redemption as provided in the Indenture, or otherwise), either (i) shall have been made or caused to be made in accordance with the terms thereof, or (ii) shall have been provided for by irrevocably depositing with the Trustee, in trust and irrevocably set aside exclusively for such payment, (1) moneys sufficient to make such payment or (2) Government Securities (provided that such deposit will not affect the tax-exempt status of the interest on any of the Bonds or cause any of the Bonds to be classified as "arbitrage bonds" within the meaning of Section 148(a) of the Code, as reflected in an opinion of Bond Counsel delivered to the Trustee), maturing as to principal and interest in such amounts and at such times as will provide sufficient moneys to make such payment, and all necessary and proper fees, compensation and expenses of the Trustee and any Paying Agent pertaining to the Bonds with respect to which such deposit is made shall have been paid or the payment thereof provided for to the satisfaction of the Trustee and any said Paying Agent. In the case of any defeasance of Series 2009 Bonds, the dates of redemption of such Series 2009 Bonds and the principal amounts and maturities of Series 2009 Bonds to be redeemed on such dates will be determined by taking into consideration the applicable redemption requirements with respect to the Series 2009 Bonds to be defeased and the receipts of the Sales and Use Taxes for the most recent twelve months. • Events of Default. Each of the following events shall constitute and is referred to in the Indenture as an "Event of Default": (a) Default in the due and punctual payment of any interest on any Bond; (b) Default in the due and punctual payment of the principal of or premium, if any, on any Bond, whether at the stated maturity thereof, or upon proceedings for redemption thereof, or upon the maturity thereof by declaration; (c) Default in the payment of any other amount required to be paid under the Indenture or the performance or observance of any other of the covenants, agreements or conditions contained in the Indenture, or in the Bonds issued under the Indenture, and continuance thereof for a period of sixty (60) days after written notice specifying such failure and requesting that it be remedied, shall have been given to the City by the Trustee, which may give such notice in its discretion and shall give such notice at the written request of Holders of not less than fifty-one percent (51%) in aggregate principal amount of the Bonds then Outstanding, unless the Trustee, or the Trustee and Holders of an aggregate principal amount of Bonds not less than the aggregate principal amount of Bonds the Holders of which requested such notice, as the case may be, shall agree in writing to an extension of such period prior to its expiration; provided, however, if the failure stated in the notice cannot be corrected within the applicable period, the Trustee will not unreasonably withhold its consent to an extension of such time if corrective action is instituted by the City within such period and is being diligently pursued; (d) The filing of a petition in bankruptcy by or against the City under the United States Bankruptcy Code or the commencement of a proceeding by or against the City under any other law concerning insolvency, reorganization or bankruptcy; and (e) If the State has limited or altered the rights of the City pursuant to the Act, as in force on the date of the Indenture, to fulfill the terms of any agreements made with the Trustee or the Bondholders or in any way impaired the rights and remedies of the Trustee or the Bondholders while any Bonds are Outstanding. The term "default" as used in clauses (a), (b) and (c) above shall mean default by the City in the performance or observance of any of the covenants, agreements or conditions on its part contained in the Indenture, • go • or in the Bonds Outstanding thereunder, exclusive of any period of grace required to constitute a default an "Event of Default" as described above. Acceleration. Upon the occurrence of an Event of Default, the Trustee may, and upon the written request of the Holders of not less than 51% in aggregate principal amount of Bonds Outstanding shall, by notice in writing delivered to the City, declare the principal of all Bonds then Outstanding, together with any premium and the interest accrued thereon, immediately due and payable, and such principal and interest shall thereupon become and be immediately due and payable. So long as the Policy is in effect, any such acceleration shall be subject to the prior written consent of Assured Guaranty. Other Remedies; Rights of Bondholders. Upon the occurrence of an Event of Default, the Trustee may, as an alternative, pursue any available remedy by suit at law or in equity, including, without limitation, mandamus to enforce the payment of the principal of and premium, if any, and interest on the Bonds then Outstanding. If an Event of Default shall have occurred, and if it shall have been requested so to do by the Holders of 51% in aggregate principal amount of Bonds Outstanding and if it shall have been indemnified as provided in the Indenture, the Trustee shall be obligated to exercise such one or more of the rights and powers conferred upon it by the Indenture as the Trustee, being advised by counsel, shall deem most expedient in the interests of the Bondholders. No remedy by the terms of the Indenture conferred upon or reserved to the Trustee (or to the Bondholders) is intended to be exclusive of any other remedy, but each and every such remedy shall be cumulative and shall be in addition to any other remedy given under the Indenture or now or hereafter existing at law or in equity or by statute. No delay or omission to exercise any right or power accruing upon any default or Event of Default shall impair any such right or power or shall be construed to be a waiver of any such default or Event of Default or acquiescence therein; and every such right and power may be exercised from time to time and as often as may be deemed expedient. • No waiver of any default or Event of Default under the Indenture, whether by the Trustee or by the Bondholders, shall extend to or shall affect any subsequent default or Event of Default or shall impair any rights or remedies consequent thereon. Rights and Remedies of Bondholders. No Holder of any Bond shall have any right to institute any suit, action or proceeding in equity or at law for the enforcement of the Indenture or for the execution of any trust thereof or for the appointment of a receiver or any other remedy thereunder, unless a default has occurred of which the Trustee has been notified as provided in the Indenture, or of which by the Indenture it is deemed to have notice, nor unless such default shall have become an Event of Default and the Holders of not less than 51% in aggregate principal amount of Bonds Outstanding shall have made written request to the Trustee and shall have offered it reasonable opportunity either to proceed to exercise the powers granted or to institute such action, suit, or proceeding in its own name, nor unless also they have offered to the Trustee indemnity as provided in the Indenture nor unless the Trustee shall thereafter fail or refuse to exercise the powers granted, or to institute such action, suit, or proceeding in its own name; and such notification, request and offer of indemnity are declared in every such case at the option of the Trustee to be conditions precedent to the execution of the powers and trusts of the Indenture, and to any action or cause of action for the enforcement of the Indenture or for the appointment of a receiver or for any other remedy thereunder; it being understood and intended that no one or more Holders of the Bonds shall have any right in any manner whatsoever to affect, disturb or prejudice the lien of the Indenture by action of the Holder or Holders or to enforce any right under the Indenture except in the manner therein provided, and that all proceedings at law or in equity shall be instituted, held and maintained in the manner therein provided for the equal benefit of the Holders of all Bonds Outstanding thereunder. Nothing in the Indenture contained shall, however, affect or impair the right of any Bondholders to enforce the payment of the principal of and premium, if any, and interest on any Bonds at and after the maturity thereof, or the obligation of the City to pay the principal of and premium, if any, and interest on each of the Bonds issued under the Indenture to the respective Holders thereof at the time and place in said Bonds expressed. So long as the Policy is in effect, Assured Guaranty shall have the right to direct all remedies upon the occurrence of an Event of Default. Supplemental Indentures Not Requiring Consent of Bondholders. The City and the Trustee may, from time to time and at any time, without the consent of or notice to the Bondholders, enter into Supplemental Indentures as • follows: 21 • (a) to cure any formal defect, omission, inconsistency or ambiguity in the Indenture; (b) to grant to or confer or impose upon the Trustee for the benefit of the Bondholders any additional rights, remedies, powers, authority, security, liabilities or duties which may lawfully be granted, conferred or imposed and which are not contrary to or inconsistent with the Indenture as theretofore in effect, provided that no such additional liabilities or duties shall be imposed upon the Trustee without its consent; (c) to add to the covenants and agreements of, and limitations and restrictions upon, the City in the Indenture other covenants, agreements, limitations and restrictions to be observed by the City which are not contrary to or inconsistent with the Indenture as theretofore in effect; (d) to confirm, as further assurance, any pledge under, and the subjection to any claim, lien or pledge created or to be created by, the Indenture, of the Trust Estate or of any other moneys, securities or funds; (e) to comply with the requirements of the Trust Indenture Act of 1939, as from time to time amended; (I) to authorize that issuance and sale of one or more series of Additional Bonds; (g) to make such additions, deletions or modifications as may be necessary to assure compliance with Section 148(f) of the Code relating to required rebate to the United States or otherwise as may be necessary to assure exemption from federal income taxation of interest on the Bonds; or (h) to modify, alter, amend or supplement the Indenture in any other respect which is not materially adverse to the Bondholders and which does not involve a change described in clause (a), (b), (c), (d), (e) or (q above and which, in the judgment of the Trustee, is not to the prejudice of the Trustee. Supplemental Indentures Requiring Consent of Bondholders. Subject to the terms and provisions contained in this paragraph, and not otherwise, the Holders of not less than 2/3 in aggregate principal amount of the Bonds then Outstanding shall have the right, from time to time, anything contained in the Indenture to the contrary • notwithstanding, to consent to and approve the execution by the City and the Trustee of such indenture or indentures supplemental to the Indenture as shall be deemed necessary and desirable by the City for the purpose of modifying, altering, amending, adding to, or rescinding, in any particular, any of the terms or provisions contained in the Indenture or in any Supplemental Indenture; provided, however, that nothing contained in the Indenture shall permit or be construed as permitting (a) an extension of the maturity (or mandatory redemption date) of the principal of or the interest on any Bond issued thereunder, or (b) a reduction in the principal amount of or redemption premium or rate of interest on any Bond issued thereunder, or (c) the creation of any lien on the Trust Estate or any part thereof, except as expressly permitted in the Indenture, or (d) a privilege or priority of any Bond or Bonds over any other Bond or Bonds, or (e) a reduction in the aggregate principal amount of the Bonds required for consent to such Supplemental Indenture, or (f) depriving the Holder of any Bond then Outstanding of the lien created on the Trust Estate. If, at any time the City shall request the Trustee to enter into any Supplemental Indenture for any of the purposes described above, the Trustee shall, at the expense of the City, cause notice of the proposed execution of such Supplemental Indenture to be mailed by first class mail to each registered owner of the Bonds. Such notice shall briefly set forth the nature of the proposed Supplemental Indenture and shall state that copies thereof are on file at the principal office of the Trustee for inspection by Bondholders. The Trustee shall not, however, be subject to any liability to any Bondholder by reason of its failure to mail such notice, and any such failure shall not affect the validity of such Supplemental Indenture when consented to and approved as provided above. If the Holders of not less than 2/3 in aggregate principal amount of the Bonds Outstanding at the time of the execution of any such Supplemental Indenture shall have consented to and approved the execution thereof, no Holder of any Bond shall have any right to object to any of the terms and provisions contained therein, or the operation thereof, or in any manner to question the propriety of the execution thereof, or to enjoin or restrain the Trustee or the City from executing the same or from taking any action pursuant to the provisions thereof. So long as the Policy is in effect, Supplemental Indentures of the type described in the preceding paragraph shall require the written consent of Assured Guaranty. • 22 • SUMMARY OF THE CONTINUING DISCLOSURE AGREEMENT The City has entered into an undertaking in the form of the Continuing Disclosure Agreement as required by the Indenture for the benefit of the Beneficial Owners of the Series 2009 Bonds to cause certain financial information to be sent to certain information repositories annually and to cause notice to be sent to such information repositories of certain specified events, pursuant to the requirements of Section (b)(5)(i) of Rule 15c2-12 of the Securities Exchange Act of 1934, as amended (the "Rule"). The City has not failed to comply with any previous undertaking pursuant to the Rule. Pursuant to SEC Release No. 34-60332 issued July 17, 2009, the U.S. Securities and Exchange Commission (the "Commission") has proposed amendments to the Rule which, if adopted in the proposed form, would cause substantive changes to the reporting obligations of the issuer of municipal securities. Among the proposed changes are provisions that would (i) require that continuing disclosure undertakings specify that the issuer must provide notice of material events within ten (10) days of their occurrence, (ii) add new items to the current list of Specified Events, and (iii) provide that certain of the Specified Events will always be deemed to be material. The Commission has received and is evaluating comments received with respect to the proposed amendments to the Rule. It is not known when the changes to the Rule will become effective or in what form they will finally be promulgated. The Continuing Disclosure Agreement contains the following covenants and provisions: (a) The City shall, not later than August I of each year, commencing August 1, 2010, provide to each Repository and the Trustee its Annual Financial Information consistent with the requirements of subsection (d) below. (b) If, on the date specified in subsection (a) above for providing the Annual Financial Information to Repositories, the Trustee has not received a copy of the Annual Financial Information, the Trustee shall contact the Disclosure Representative to determine if the City is in compliance with subsection (a). • (c) If the Trustee is unable to verify that the Annual Financial Information has been provided to the Repositories by the date required within subsection (a), the Trustee shall file a notice to such effect with the Repositories and the MSRB. (d) The City's Annual Financial Information shall contain or incorporate by reference the following: (i) Receipts of the Sales and Use Taxes for the latest Fiscal Year and for the four previous Fiscal Years, if available. (ii) The City's audited financial statements for the prior Fiscal Year, prepared in accordance with accounting principles generally accepted in the United States ("GAAP") as such principles are modified by the governmental accounting standards promulgated by the Government Accounting Standards Board ("GASB") and by mandated principles of the State of Arkansas, if any, as in effect from time to time, which financial statements have been audited by such auditor as shall then be required or permitted by the laws of the State of Arkansas. If the City's audited financial statements are not available by the time its Annual Financial Information is required to be filed pursuant to subsection (a) above, the Annual Financial Information shall contain the unaudited financial statements of the City, and the audited financial statements shall be filed in the same manner as the Annual Financial Information when they become available. (e) The City has agreed to instruct the Trustee to deliver to each National Repository, or the MSRB and the Arkansas State Repository, notice of the occurrence of any of the following Specified Events, if deemed material: (i) Principal and interest payment delinquencies; (ii) Non-payment related defaults; (iii) Unscheduled draws on any debt service reserve reflecting financial difficulties; (iv) Unscheduled draws on any credit enhancement reflecting financial difficulties; • (v) Substitution of any credit or liquidity providers, or their failure to perform; (vi) Adverse tax opinions or events affecting the tax-exempt status of the Series 2009 Bonds; 23 • (vii) Modifications to rights of Bondowners; (viii) Series 2009 Bond calls; (ix) Defeasances; (x) Release, substitution or sale of property securing payment of the Series 2009 Bonds; or (xi) Rating changes. (1) The City has agreed that the foregoing undertakings shall be for the benefit of the Beneficial Owners of the Series 2009 Bonds, and shall be enforceable by any Beneficial Owner of the Series 2009 Bonds in an action for specific performance against the City. (g) The continuing obligation of the City to provide Annual Financial Information and notice of the occurrence of Specified Events, if material, will terminate if the City is no longer an "obligated person" within the meaning of the Rule or upon the maturity, defeasance, prior redemption or payment in full of the Series 2009 Bonds. The City and the Trustee may amend the Continuing Disclosure Agreement, and any provision of the Continuing Disclosure Agreement may be waived, if such amendment or waiver is supported by an opinion of counsel, reasonably acceptable to each of the City and the Trustee, to the effect that such amendment or waiver would not, in and of itself, cause the undertakings under the Continuing Disclosure Agreement to violate the Rule, taking into account any subsequent change in or official interpretation of the Rule. (h) The following terms used under this caption shall have the meanings set forth below: "Annual Financial Information" means the annual financial information to be provided by the City of the type described in the Continuing Disclosure Agreement. "Arkansas State Repository" means any public or private repository or entity as may be designated by the State of Arkansas as a state repository for purposes of the Rule and recognized as such by the SEC. As of the date • of the Continuing Disclosure Agreement, there is no Arkansas State Repository. "Beneficial Owner" means any Person which has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Series 2009 Bonds, including Persons holding Series 2009 Bonds through nominees, depositories or other intermediaries. "Disclosure Representative" means the City's Finance Director or his or her designee, or such other officer or employee as the City shall designate in writing to the Trustee from time to time. "Fiscal Year" means the 12 -month period used, at any time, by the City for accounting purposes, which may be the calendar year. The City's fiscal year presently ends on December 31. "MSRB" means the Municipal Securities Rulemaking Board. "National Repository" means any nationally recognized municipal securities information repository for purposes of the Rule. "Participating Underwriter" means Stephens Inc. "Repository" means each National Repository and the Arkansas State Repository. "Specified Events" means each of the events with respect to the Series 2009 Bonds listed in subsection (e) above. (i) A failure by the City to comply with the provisions of the Continuing Disclosure Agreement will not constitute an Event of Default under the Indenture, and the sole remedy in such an event shall be an action to compel specific performance. Nevertheless, such a failure to comply must be reported in accordance with the Rule and must be considered by any broker, dealer or municipal securities dealer before recommending the purchase or sale of the Series 2009 Bonds in the secondary market. Consequently, such a failure may adversely affect the transferability and liquidity of the Series 2009 Bonds. • 24 • UNDERWRITING Under a bond purchase agreement entered into by and among the City and Stephens Inc. (the "Underwriter"), the Series 2009 Bonds are being purchased at a purchase price of $ (representing the stated principal amount of the Series 2009 Bonds [less][plus] a net reoffering [discount][premium] of $ and less an underwriting discount of $) plus accrued interest from November 1, 2009 to the date of delivery of the Series 2009 Bonds. The bond purchase agreement provides that the Underwriter will purchase all of the Series 2009 Bonds if any are purchased. The obligation of the Underwriter to accept delivery of the Series 2009 Bonds is subject to various conditions contained in the bond purchase agreement, including the absence of pending or threatened litigation questioning the validity of the Series 2009 Bonds or any proceedings in connection with the issuance thereof, and the absence of material adverse changes in the financial condition of the City. The Underwriter intends to offer the Series 2009 Bonds to the public initially at the offering prices as set forth on the inside cover page of this Official Statement, which offering prices (or bond yields establishing such offering prices) may subsequently change without any requirement of prior notice. The Underwriter reserves the right to join with dealers and other underwriters in offering the Series 2009 Bonds to the public, and may offer the Series 2009 Bonds to such dealers and other underwriters at a price below the public offering price. The City has agreed to indemnify the Underwriter against certain civil liabilities in connection with the offering and sale of the Series 2009 Bonds, including certain liabilities under federal securities laws. TAX MATTERS Federal Income Taxes. In the opinion of Kutak Rock LLP, Bond Counsel, under existing laws, regulations, rulings and judicial decisions, interest on the Series 2009 Bonds is excludable from the gross income for federal income tax purposes. In addition, interest on the Series 2009 Bonds is not a specific preference item nor is it included in adjusted current earnings for purposes of the federal alternative minimum tax. The opinions described in the preceding sentences assume the accuracy of certain representations and compliance by the City with certain • covenants designed to satisfy the requirements of the Code that must be satisfied subsequent to the issuance of the Series 2009 Bonds. Failure to comply with certain of such requirements may cause interest on the Series 2009 Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Series 2009 Bonds. The City has covenanted to comply with such requirements. Bank Qualification. The City has represented that it does not reasonably anticipate issuing greater than $30,000,000 of tax-exempt obligations in calendar year 2009 (excluding certain private activity and refunding bonds) and that it has designated the Series 2009 Bonds as "qualified tax-exempt obligations" within the meaning of Section 265(b)(3) of the Code. Accordingly, Bond Counsel is of the opinion that in the case of certain banks, thrift institutions or other financial institutions owning the Series 2009 Bonds, a deduction is allowed for 80% of that portion of such institutions' interest expense allocable to interest on the Series 2009 Bonds. Bond Counsel has expressed no opinion with respect to any deduction for federal income tax purposes of interest incurred or continued by a holder of the Series 2009 Bonds or a related person to purchase or carry the Series 2009 Bonds. Original Issue Discount. The Series 2009 Bonds maturing November 1, 20_, 20_, 20 and 20_ (collectively, the "Discount Bonds") are being sold at an original issue discount. The difference between the initial public offering prices of such Discount Bonds and their stated amounts to be paid at maturity constitutes original issue discount treated in the same manner for federal income tax purposes as interest, as described above. The amount of original issue discount which is treated as having accrued with respect to a Discount Bond is added to the cost basis of the owner in determining, for federal income tax purposes, gain or loss upon disposition of such Discount Bond (including its sale, redemption or payment at maturity). Amounts received upon disposition of such Discount Bond which are attributable to accrued original issue discount will be treated as tax-exempt interest, rather than as taxable gain, for federal income tax purposes. Original issue discount is treated as compounding semiannually, at a rate determined by reference to the yield to maturity of each individual Discount Bond, on days which are determined by reference to the maturity date of such Discount Bond. The amount treated as original issue discount on such Discount Bond for a particular semiannual accrual period is equal to the product of (i) the yield to maturity for such Discount Bond (determined by compounding at the close of each accrual period) and (ii) the amount which would have been the tax basis of such • Discount Bond at the beginning of any particular accrual period if held by the original purchaser, less the amount of any interest payable for such Discount Bond during the accrual period. The tax basis is determined by adding to the 25 • initial public offering price on such Discount Bond the sum of the amounts which have been treated as original issue discount for such purposes during all prior periods. If such Discount Bond is sold between semiannual compounding dates, original issue discount which would have been accrued for that semiannual compounding period for federal income tax purposes is to be apportioned in equal amounts among the days in such compounding period. Owners of Discount Bonds should consult their tax advisors with respect to the determination and treatment of original issue discount accrued as of any date and with respect to the state and local tax consequences of owning a Discount Bond. Original Issue Premium. The Series 2009 Bonds maturing November 1, 20_, 20_, 20_ and 20_ (collectively, the "Premium Bonds") are being sold at a premium. An amount equal to the excess of the issue price of a Premium Bond over its stated redemption price at maturity constitutes premium on such Premium Bond. An initial purchaser of a Premium Bond must amortize any premium over such Premium Bond's term using constant yield principles, based on the purchaser's yield to maturity (or, in the case of Premium Bonds callable prior to their maturity, by amortizing the premium to the call date, based on the purchaser's yield to the call date and giving effect to the call premium). As premium is amortized, the amount of the amortization offsets a corresponding amount of interest for the period and the purchaser's basis in such Premium Bond is reduced by a corresponding amount resulting in an increase in the gain (or decrease in the loss) to be recognized for federal income tax purposes upon a sale or disposition of such Premium Bond prior to its maturity. Even though the purchaser's basis may be reduced, no federal income tax deduction is allowed. Purchasers of the Premium Bonds should consult their tax advisors with respect to the determination and treatment of premium for federal income tax purposes and with respect to the state and local tax consequences of owning a Premium Bond. Bond Counsel has expressed no opinion regarding other federal tax consequences arising with respect to the Series 2009 Bonds. The accrual or receipt of interest on the Series 2009 Bonds may otherwise affect the federal income tax • liability of the owners of the Series 2009 Bonds. The extent of these other tax consequences will depend upon such owner's particular tax status and other items of income or deduction. Bond Counsel has expressed no opinion regarding any such consequences. Purchasers of the Series 2009 Bonds, particularly purchasers that are corporations (including S corporations and foreign corporations operating branches in the United States), property or casualty insurance companies, banks, thrifts or other financial institutions, certain recipients of Social Security or Railroad Retirement benefits, taxpayers otherwise entitled to claim the earned income credit, or taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry tax-exempt obligations, should consult their tax advisors as to the tax consequences of purchasing or owning the Series 2009 Bonds. Backup Withholding. As a result of the enactment of the Tax Increase Prevention and Reconciliation Act of 2005, interest on tax-exempt obligations such as the Series 2009 Bonds is subject to information reporting in a manner similar to interest paid on taxable obligations. Backup withholding may be imposed on payments made after March 31, 2007 to any bondholder who fails to provide certain required information, including an accurate taxpayer identification number, to any person required to collect such information pursuant to Section 6049 of the Code. The new reporting requirement does not in and of itself affect or alter the excludability of interest on the Series 2009 Bonds from gross income for federal income purposes or any other federal tax consequence of purchasing, holding or selling tax-exempt obligations. State Taxes. Bond Counsel is of the opinion that, under existing law, the interest on the Series 2009 Bonds is exempt from all state, county and municipal taxes in the State of Arkansas. Changes in Federal and State Tax Law. From time to time, there are legislative proposals in the Congress and in the states that, if enacted, could alter or amend the federal and state tax matters referred to above or adversely affect the market value of the Series 2009 Bonds. It cannot be predicted whether or in what form any such proposal might be enacted or whether if enacted it would apply to bonds issued prior to enactment. In addition, regulatory actions are from time to time announced or proposed and litigation is threatened or commenced which, if implemented or concluded in a particular manner, could adversely affect the market value of the Series 2009 Bonds. It cannot be predicted whether any such regulatory action will be implemented, how any particular lawsuit will be resolved, or whether the Series 2009 Bonds or the market value thereof would be impacted thereby. Purchasers of the Series 2009 Bonds should consult their tax advisors regarding any pending or proposed legislation, regulatory • initiatives or litigation. The opinions expressed by Bond Counsel are based upon existing legislation and regulations 26 • as interpreted by relevant judicial authorities as of the date of issuance and delivery of the Series 2009 Bonds, and Bond Counsel has expressed no opinion as of any date subsequent thereto or with respect to any pending legislation, regulatory initiatives or litigation. RATINGS Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. ("S&P"), is expected to assign the Series 2009 Bonds the rating of "AAA" (negative outlook) based on the delivery of the Policy by Assured Guaranty Corp. and has assigned an underlying rating of "A+" (stable outlook) to the Series 2009 Bonds. Such ratings reflect only the view of S&P at the time such ratings were given. An explanation of the significance of the ratings may be obtained from S&P. There is no assurance that such ratings will continue for any given period of time or that the ratings will not be revised downward or withdrawn entirely by S&P if in its judgment circumstances so warrant. Any downward revision or withdrawal of the ratings may have an adverse effect on the market price of the Series 2009 Bonds. Neither the City nor the Underwriter has undertaken any responsibility subsequent to the issuance of the Series 2009 Bonds to assure the maintenance of the ratings or to oppose any revision or withdrawal of the ratings. No application has been made to any Rating Agency other than S&P fora rating on the Series 2009 Bonds. LEGAL MATTERS Legal Opinions. Legal matters incident to the authorization and issuance of the Series 2009 Bonds are subject to the unqualified approving opinion of Kutak Rock LLP, Little Rock, Arkansas, Bond Counsel, a copy of whose approving opinion will be delivered with the Series 2009 Bonds and a form of which is attached hereto as Appendix A. Certain legal matters will be passed upon for the City by its counsel, Kit Williams, Esq., City Attorney. Litigation. There is no litigation pending seeking to restrain or enjoin the issuance or delivery of the Series • 2009 Bonds or questioning or affecting the legality of the Series 2009 Bonds or the proceedings and authority under which the Series 2009 Bonds are to be issued, or questioning the right of the City to issue the Series 2009 Bonds. There is no action, suit or proceeding known to be pending or threatened, restraining or enjoining the City in any way which could have a material adverse effect on the Sales and Use Taxes or the City's ability to pay debt service with respect to the Series 2009 Bonds. MISCELLANEOUS Any statements made in this Official Statement involving matters of opinion or of estimates, whether or not so expressly stated, are set forth as such and not as representations of fact, and no representation is made that any of the estimates will be realized. This Official Statement is not to be construed as a contract or agreement between the City and the purchasers or owners of any of the Series 2009 Bonds. ACCURACY AND COMPLETENESS OF OFFICIAL STATEMENT The information contained in this Official Statement has been taken from sources considered to be reliable, but is not guaranteed. To the best of the knowledge of the City, this Official Statement does not include any untrue statement of a material fact, nor does it omit the statement of any material fact required to be stated herein, or necessary to make the statements herein, in light of the circumstances under which they were made, not misleading. 27 • The execution and delivery of this Official Statement has been duly authorized by the City of Fayetteville, Arkansas. CITY OF FAYETTEVILLE, ARKANSAS Mayor • C J 28 • APPENDIX A Proposed Form of Bond Counsel Opinion Upon delivery of the Series 2009 Bonds in definitive form, Kutak Rock LLP, Little Rock, Arkansas, proposes to deliver its approving opinion in substantially the following form: November ,2009 City of Fayetteville, Arkansas Fayetteville, Arkansas Simmons First Trust Company, N.A., as Trustee Pine Bluff, Arkansas Stephens Inc. Fayetteville, Arkansas Assured Guaranty Corp. New York, New York $11,250,000• City of Fayetteville, Arkansas Sales and Use Tax Capital Improvement Bonds Series 2009 • Ladies and Gentlemen: We have acted as bond counsel in connection with the issuance and sale by the City of Fayetteville, Arkansas (the "City"), a political subdivision of the State of Arkansas, of its $11,250,000" Sales and Use Tax Capital Improvement Bonds, Series 2009 (the "Bonds"). CI The Bonds are being issued pursuant to the provisions of the Constitution and laws of the State of Arkansas, including, particularly, Amendment 62 and Arkansas Code Annotated (1998 Repl. & Supp. 2005) §§14- 164-301 et seq. (as from time to time amended, the "Act"), pursuant to Ordinance No. 5277 of the City, duly adopted and approved on October 6, 2009 (the "Authorizing Ordinance"), and pursuant to a Trust Indenture dated as of November 1, 2006, as amended and supplemented by a First Supplemental Trust Indenture dated as of October 1, 2007, and by a Second Supplemental Trust Indenture dated as of November 1, 2009 (as amended and supplemented, the "Indenture"), by and between the City and Simmons First Trust Company, N.A., as trustee (the "Trustee"). Reference is hereby made to the Indenture and to all indentures supplemental thereto for the provisions, among others, with respect to the nature and extent of the security for the Bonds, the rights, duties and obligations of the City, the Trustee and the Holders of the Bonds, and the terms upon which the Bonds are issued and secured. Reference is made to an opinion of even date herewith of Kit Williams, Esq., City Attorney, a copy of which is on file with the Trustee, with respect, among other matters, to the status and valid existence of the City, the power of the City to adopt the Election Ordinance and the Authorizing Ordinance and to enter into and perform its obligations under the Indenture, the valid adoption of the Election Ordinance and the Authorizing Ordinance, and the due authorization, execution and delivery of the Indenture by the City, and with respect to the Indenture being enforceable upon the City. We have examined the law and such certified proceedings and other papers as we have deemed necessary to render this opinion. As to questions of fact material to our opinion, we have relied upon the representations of the City contained in the Election Ordinance, the Authorizing Ordinance and the Indenture and in the certified proceedings and other certifications of public officials furnished to us, without undertaking to verify the same by independent investigation. • Preliminary; subject to change. A -I • Based upon the foregoing, we are of the opinion, under existing law, as follows: I. The City is duly created and validly existing as a municipal corporation of the State of Arkansas. Pursuant to the Constitution and laws of the State of Arkansas, including, particularly, Amendment 62 and the Act, the City is empowered to adopt the Election Ordinance and the Authorizing Ordinance, to execute and deliver the Indenture, to perform the agreements on its part contained therein, and to issue the Bonds. 2. The Authorizing Ordinance has been duly adopted by the City and constitutes a valid and binding obligation of the City enforceable upon the City in accordance with its terms. 3. The Indenture has been duly authorized, executed and delivered by the City and is a valid and binding obligation of the City enforceable upon the City in accordance with its terms. 4. The Bonds are payable from and security by a valid lien on and pledge of the Trust Estate (as defined in the Indenture), including receipts of the 0.25% Sales and Use Tax and the 0.75% Sales and Use Tax (each as defined in the Indenture), in the manner and to the extent provided in the Indenture. Such lien and pledge are made on a parity basis with the existing lien and pledge of the Trust Estate securing (i) the City's Sales and Use Tax Capital Improvement Bonds, Series 2006A, and (ii) the City's Sales and Use Tax Capital Improvement Bonds, Series 2007. The City is duly authorized to pledge such Trust Estate, and no further action on the part of the City or any other party is required to perfect the same or the interest of the owners of the Bonds therein. 5. The 0.25% Sales and Use Tax and the 0.75% Sales and Use Tax have been validly adopted in accordance with the Constitution and laws of the State of Arkansas, including Amendment 62 and the Act, and may be validly pledged to secure the Bonds. Levy and collection of the 0.25% Sales and Use Tax commenced as of January 1, 2007, and levy and collection of the 0.75% Sales and Use Tax will commence as of the first day of the first month following cessation of the Existing Tax securing the Existing Indebtedness (each as defined in the • Indenture). 6. Interest on the Bonds is excludable from gross income for federal income tax purposes. In addition, interest on the Bonds is not a specific preference item nor is it included in adjusted current earnings for purposes of the federal alternative minimum tax. The opinions described in the preceding sentences assume the accuracy of certain representations and compliance by the City with covenants designed to satisfy the requirements of the Internal Revenue Code of 1986, as amended (the "Code"), that must be met subsequent to the issuance of the Bonds. Failure to comply with certain of such requirements could cause interest on the Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds. The City has covenanted to comply with such requirements. The Bonds are "qualified tax-exempt obligations" within the meaning of Section 265(b)(3) of the Code, and, in the case of certain financial institutions (within the meaning of Section 265(b)(5) of the Code), a deduction is allowed for eighty percent (80%) of that portion of such financial institution's interest expense allocable to the Bonds. We express no opinion regarding other federal tax consequences arising with respect to the Bonds. The interest on the Bonds is exempt from all state, county and municipal taxes in the State of Arkansas. 8. The Bonds are exempt from registration pursuant to the Securities Act of 1933, as amended, and the Indenture is not required to be qualified under the Trust Indenture Act of 1939, as amended, in connection with the offer and sale of the Bonds. It is to be understood that the rights of the registered owners of the Bonds and the enforceability of the Bonds, the Authorizing Ordinance and the Indenture may be subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights heretofore or hereafter enacted to the extent constitutionally applicable and that their enforcement may also be subject to the exercise of judicial discretion in appropriate cases. • A-2 Very truly yours, • APPENDIX B DEFINITIONS OF CERTAIN TERMS The following are definitions of certain terms used in this Official Statement: "Account" means an Account established by Article V of the Indenture. "Act" means the Local Government Bond Act of 1985, codified as Arkansas Code Annotated (1998 Repl. & Supp. 2005) Sections 14-164-301 et seq., as from time to time amended. "Additional Bonds" means Bonds in addition to the Series 2006A Bonds, the Series 2007 Bonds and the Series 2009 Bonds which are issued under the provisions of the Indenture. "Amendment 62" means Amendment No. 62 to the Constitution of Arkansas, approved by the voters of the State on November 6, 1984. "Annual Debt Service" means, with respect to all or any particular amount of Bonds, the Debt Service for any particular Fiscal Year required to be paid or set aside during such Fiscal Year, less the amount of such payment which is provided from the proceeds of Bonds or from sources other than Sales and Use Tax receipts. "Assured Guaranty" means Assured Guaranty Corp., a Maryland insurance corporation, or any successor thereto or assigned thereof. "Authorized Representative" means either the Mayor or the Finance Director of the City and such additional persons as from time to time may be designated to act on behalf of the City by a Certificate furnished to the Trustee containing the specimen signature thereof and executed on behalf of the City by its Mayor. "Authorizing Ordinance" means, collectively, (i) Ordinance No. 4936, adopted by the City on October 3, 2006, which authorized the issuance of the Series 2006A Bonds pursuant to the Indenture, (ii) Ordinance No. 5054, adopted by the City on August 23, 2007, which authorized the issuance of the Series 2007 Bonds pursuant to the • Indenture, and (iii) Ordinance No. 5277, adopted by the City on October 6, 2009, which authorized the issuance of the Series 2009 Bonds pursuant to the Indenture. "Beneficial Owner" means any Person who acquires beneficial ownership interest in a Bond held by the Securities Depository. In determining the Beneficial Owner of any Bond, the Trustee may rely exclusively upon written representations made and information given to the Trustee by the Securities Depository or its Participants with respect to any Bond held by the Securities Depository in which a beneficial ownership interest is claimed. "Bond Counsel" means any firm of nationally recognized municipal bond counsel selected by the City and acceptable to the Trustee. "Bond Fund" means the fund by that name created and established in the Indenture. "Bonds" means the Series 2006A Bonds, the Series 2007 Bonds, the Series 2009 Bonds and all Additional Bonds issued by the City pursuant to the Indenture. "Book -Entry System" means the book -entry system maintained by the Securities Depository and described in the Indenture. "Business Day" means any day other than (a) a Saturday or Sunday, (b) a day on which commercial banks in New York, New York, or the city in which the corporate trust office of the Trustee is located are authorized or required by law or executive order to close, or (c) a day on which the New York Stock Exchange or the Securities Depository is closed. "Certificate" means a document signed by an Authorized Representative of the City attesting to or acknowledging the circumstances or other matters therein stated. "City" means the City of Fayetteville, Arkansas, a municipality and political subdivision under the laws of the State of Arkansas. "City Clerk" means the person holding the office and performing the duties of the City Clerk of the City. "Closing Date" means, with respect to any series of Bonds, the date upon which there is an exchange of • such series of Bonds for the proceeds representing the purchase price for such series of Bonds by the Original Purchaser or Purchasers thereof. B -I • "Code" means the Internal Revenue Code of 1986, as from time to time amended, and applicable regulations issued or proposed thereunder. "Completion Date" means the date upon which a particular Project (or portion thereof) is first ready for normal continuous operation, as determined by a Qualified Engineer. "Continuing Disclosure Agreement" means the Continuing Disclosure Agreement between the City and the Trustee, dated the date of issuance and delivery of the Series 2009 Bonds, as originally executed and as amended from time to time in accordance with the terms thereof. "Costs of Issuance" means all items of expense payable or reimbursable directly or indirectly by the City and related to the authorization, sale and issuance of the Bonds, including, but not limited to, underwriting discounts, fees and expenses, election expenses, publication expenses, expenses of printing, reproducing, filing and recording documents, initial fees and charges of the Trustee and any Paying Agent, fees and expenses for legal, accounting and other professional services, rating fees, costs of securing any credit enhancement for the Bonds, costs of execution, transportation and safekeeping of the Bonds, and other costs, charges and fees incurred in connection with the foregoing. "Costs of Issuance Fund" means the fund by that name created and established in the Indenture. "Debt Service" means, with respect to all or any particular amount of Bonds, the total as of any particular date of computation and for any particular period of the scheduled amount of interest and amortization of principal payable on such Bonds, excluding amounts scheduled during such period which relate to principal which has been retired before the beginning of such period. "Debt Service Reserve Fund" means the fund by that name created and established in the Indenture "Election Ordinance" means Ordinance No. 4891, adopted by the City Council on June 20, 2006, pursuant to which there was submitted to the qualified electors of the City the four questions relating to the issuance of the • Bonds. "Event of Default" means any event of default specified in Section 801 of the Indenture. "Existing Indebtedness" means, collectively, the City's (i) $27,000,000 Sales and Use Tax Refunding and Capital Improvement Bonds, Series 2005A, (ii) $45,000,000 Sales and Use Tax Capital Improvement Bonds, Series 2005B, and (iii) $20,000,000 Sales and Use Tax Capital Improvement Bond, Series 2006 RLF Loan. "Existing Tax" means the three-quarter of one percent (0.75%) city-wide sales and use tax authorized by the Act and presently being levied and collected within the City for the purpose of securing the payment of the Existing Indebtedness. "Fiscal Year" means the 12 -month period used, at any time, by the City for accounting purposes, which may be the calendar year. "Fund" means a fund established by the Indenture. "Government Securities" means (a) direct obligations (other than an obligation subject to variation in principal repayment) of the United States of America, (b) obligations fully and unconditionally guaranteed as to timely payment of principal and interest by the United States of America, (c) obligations fully and unconditionally guaranteed as to timely payment of principal and interest by any agency or instrumentality of the United States of America when such obligations are backed by the full faith and credit of the United States of America, or (d) evidences of ownership of proportionate interests in future interest and principal payments on obligations described above held by a bank or trust company as custodian, under which the owner of the investment is the real party in interest and has the right to proceed directly and individually against the obligor and the underlying government obligations are not available to any person claiming through the custodian or to whom the custodian may be obligated. "Holder" or "Bondholder" or "owner of the Bonds" means the registered owner of any Bond. "Indenture" means the Trust Indenture dated as of November 1, 2006, as amended and supplemented by a First Supplemental Trust Indenture dated as of October 1, 2007, and by a Second Supplemental Trust Indenture • dated as of November 1, 2009, each by and between the City and the Trustee, pursuant to which the Bonds are issued, and any amendments and supplements thereto. B-2 • "Investment Securities" means, if and to the extent the same are at the time legal for investment of Funds and Accounts held under the Indenture: (a) cash (fully insured by the Federal Deposit Insurance Corporation); (b) Government Securities; (c) Federal Housing Administration debentures; (d) The obligations of the following government -sponsored agencies which are not backed by the full faith and credit of the United States of America: 1) Federal Home Loan Mortgage Corporation (FHLMC) senior debt obligations and Participation certificates (excluded are stripped mortgage securities which are purchased at prices exceeding their principal amounts); 2) Farm Credit System (formerly Federal Land Banks, Federal Intermediate Credit Banks and Banks for Cooperatives) consolidated system -wide bonds and notes; 3) Federal Home Loan Banks (FHL Banks) consolidated debt obligations; and 4) Federal National Mortgage Association (FNMA) senior debt obligations and mortgage -backed securities (excluded are stripped mortgage securities which are purchased at prices exceeding their principal amounts); (e) Unsecured certificates of deposit, time deposits, and bankersacceptances (having maturities of not more than 365 days) of any bank the short-term obligations of which are rated "A -I+" or better by S&P and "Prime -I" by Moody's; • (f) Deposits the aggregate amount of which are fully insured by the Federal Deposit Insurance Corporation, in banks which have capital and surplus of at least $15 million; (g) Commercial paper (having original maturities of not more than 270 days) rated "A -l+" by S&P and "Prime -I" by Moody's; (h) Money market funds rated "Aam" or "AAm-G" by S&P, or better and if rated by Moody's rated "Aa2" or better; (i) "State Obligations", which means: 1) Direct general obligations of any state of the United States of America or any subdivision or agency thereof to which is pledged the full faith and credit of a state the unsecured general obligation debt of which is rated at least "A3" by Moody's and at least "A-" by S&P, or any obligation fully and unconditionally guaranteed by any state, subdivision or agency whose unsecured general obligation debt is so rated; 2) Direct general short-term obligations of any state agency or subdivision or agency thereof described in (a) above and rated "A -l+" by S&P and "MIG-l" by Moody's; and 3) Special Revenue Bonds (as defined in the United States Bankruptcy Code) of any state or state agency described in (b) above and rated "AA-" or better by S&P and "Aa3" or better by Moody's; (j) Pre -refunded municipal obligations rated "AAA" by S&P and "Aaa" by Moody's meeting the following requirements: • I) the municipal obligations are (1) not subject to redemption prior to maturity or (2) the trustee for the municipal obligations has been given irrevocable instructions concerning their call and redemption and the issuer of the municipal obligations has covenanted not to redeem such municipal obligations other than as set forth in such instructions; 2) the municipal obligations are secured by cash or U.S. Treasury Obligations which may be applied only to payment of the principal of, interest and premium on such municipal obligations; 3) the principal of and interest on the U.S. Treasury Obligations (plus any cash in the escrow) has been verified by the report of independent certified public accountants to be sufficient to pay in full all principal of, interest, and premium, if any, due and to become due on the municipal obligations ("Verification Report"); 4) the cash or U.S. Treasury Obligations serving as security for the municipal obligations are held by an escrow agent or trustee in trust for owners of the municipal obligations; 5) no substitution of a U.S. Treasury Obligation shall be permitted except with another U.S. Treasury Obligation and upon delivery of a new Verification Report; and 6) the cash or U.S. Treasury Obligations are not available to satisfy any other claims, including those by or against the trustee or escrow agent; and • (k) other forms of investments approved in writing by Assured Guaranty, including the Reserve Fund Insurance Policy. "Mayor" means the person holding the office and performing the duties of the Mayor of the City. "Original Purchaser" means the first purchaser(s) of a series of the Bonds from the City. "Outstanding" means, as of any date of computation, Bonds theretofore or thereupon being delivered under the Indenture, except: (a) Bonds cancelled at or prior to such date or delivered to or acquired by the Trustee at or prior to such date for cancellation; (b) Bonds deemed to be paid in accordance with Article VII of the Indenture; and (c) Bonds in lieu of or in exchange or substitution for which other Bonds shall have been authenticated and delivered pursuant to the Indenture. "Participants" means those financial institutions for whom the Securities Depository effects book -entry transfers and pledges of securities deposited with the Securities Depository in the Book -Entry System, as such listing of Participants exists at the time of such reference. "Paying Agent" means any bank or trust company named by the City as the place at which the principal of and premium, if any, and interest on the Bonds are payable. "Person" means any natural person, firm, association, corporation, limited liability company, partnership, joint stock company, joint venture, trust, unincorporated organization or firm, or a government or any agency or political subdivision thereof or other public body. "Policy" means the financial guaranty insurance policy issued by Assured Guaranty guaranteeing the scheduled payment of principal of and interest on the Series 2009 Bonds when due. • "Projects" means, collectively, the Street Project, the Trail Project and the Wastewater Project. B-4 • "Project Costs" means, to the extent permitted by the Act or other applicable laws, with respect to the Projects, all costs of planning, designing, purchasing, acquiring, constructing, improving, enlarging, extending, repairing, financing and placing in operation, including obtaining governmental approvals, certificates, permits and licenses with respect thereto, heretofore or hereafter paid or incurred by or on behalf of the City and which shall include, but shall not be limited to: (a) interest accruing in whole or in part on the Bonds prior to and during construction of the Projects, including all amounts required by the Indenture to be paid from the proceeds of the Bonds into the Bond Fund; (b) preliminary investigation and development costs, engineering fees, contractors' fees, labor costs, the cost of materials, equipment, utility services and supplies, costs of obtaining permits, licenses and approvals, costs of real property, insurance premiums, legal and financing fees and costs, administrative and general costs, and all other costs properly allocable to the acquisition, construction and equipping of the Projects and placing the same in operation; (c) all costs relating to injury and damage claims arising out of the acquisition, construction or equipping of the Projects; (d) all other costs incurred in connection with, and properly allocable to, the acquisition, construction and equipping of the Projects; and (e) amounts to pay or reimburse the City or any City fund for expenses of the City incident and properly allocable to such planning, designing, purchasing, acquiring, constructing, improving, enlarging, extending, repairing, financing and placing in operation of the Projects. "Project Fund" means the fund by that name created and established in the Indenture. "Qualified Engineer" means an independent consulting engineer or firm of independent consulting • engineers not in the regular employ of the City. "Rating Agency" means Moody's Investors Service, Standard & Poor's Ratings Services, a Division of The McGraw-Hill Companies, Inc., or Fitch, Inc., and their respective successors and assigns. If any such corporation ceases to act as a securities rating agency, the City may appoint any nationally recognized securities rating agency as a replacement. "Rebate Fund" means the fund by that name created and established in the Indenture. "Record Date" means the fifteenth day of the calendar month preceding the calendar month in which an interest payment date on the Bonds occurs. "Redemption Fund" means the fund by that name established in the Indenture. "Requisition" means a written requisition of the City, consecutively numbered, signed by an Authorized Representative including, without limitation, the following with respect to each payment requested: (i) the name of the Person or party to whom payment is to be made and the purpose of the payment, (ii) the amount to be paid thereunder; (iii) that such amount has not been previously paid by the City and is justly due and owing to the Person(s) named therein as a proper payment or reimbursement of a Project Cost; and (iv) that no Event of Default exists under the Indenture and that, to the knowledge of the Authorized Representative, no event has occurred and continues which with notice or lapse of time or both would constitute an Event of Default under the Indenture. "Reserve Fund Insurance Policy" means the financial guaranty insurance policy issued by Assurance Guaranty and deposited in the Debt Service Reserve Fund. "Reserve Requirement" means, with respect to each series of Bonds, an amount equal to 5% of the original principal amount of such series of Bonds, For all purposes of the Indenture, the Reserve Requirement may be satisfied by the deposit of cash or by the deposit of Investment Securities, including the Reserve Fund Insurance • Policy. B -S • "Revenue Fund" means the fund by that name created and established in the Indenture. "RLF Loan" means the City's $20,000,000 original principal amount of Sales and Use Tax Capital Improvement Bond, Series 2006 RLF Loan, constituting a portion of the Existing Indebtedness and structured as a loan to the City under the Arkansas Natural Resources Commission Revolving Loan Fund Program "0.25% Sales and Use Tax" means the one -quarter of one percent (0.25%) city-wide sales and use tax authorized under the Act which has been levied within the City pursuant to the Election Ordinance and approved by the voters of the City, the collection of which tax commenced on January 1, 2007. "0.75% Sales and Use Tax" means the three-quarters of one percent (0.75%) city-wide sales and use tax authorized under the Act which has been levied within the City pursuant to the Election Ordinance and approved by the voters of the City, the collection of which tax will commence on the first day following the date of expiration of the Existing Tax securing the Existing Indebtedness. "Sales and Use Taxes" mean, collectively, the 0.25% Sales and Use Tax and the 0.75% Sales and Use Tax. Receipts of the Sales and Use Taxes are pledged to the payment of Debt Service on the Bonds. "Securities Depository" means The Depository Trust Company, New York, New York, or its nominee, and its successors and assigns, or any other depository institution appointed by the City or the Trustee to act as depository for the Bonds in connection with the Book -Entry System. "Series 2006A Bonds" means the City's Sales and Use Tax Capital Improvement Bonds, Series 2006A, issued in the original aggregate principal amount of $50,000,000. "Series 2007 Bonds" means the City's Sales and Use Tax Capital Improvement Bonds, Series 2007, issued in the original aggregate principal amount of $14,340,000. "Series 2009 Bonds" means the City's Sales and Use Tax Capital Improvement Bonds, Series 2009, issued in the original aggregate principal amount of $11,250,000. • "State" means the State of Arkansas. "Street Project" means the acquisition, construction, reconstruction, repair, straightening and widening of certain City streets and related improvements, as described in the Election Ordinance and eligible for financing with the proceeds of the Bonds in aggregate principal amount not to exceed $65,900,000. "Supplemental Indenture" means any indenture supplemental to or amendatory of the Indenture. "Surplus Tax Receipts" shall have the meaning ascribed to such term in Section 503 of the Indenture. "Tax Regulatory Agreement" means that Tax Regulatory Agreement of the City relating to maintenance of the excludability of interest on the Series 2009 Bonds from gross income for federal income tax purposes, delivered in connection with the issuance of the Series 2009 Bonds. "Trail Project" means the acquisition, construction and equipping of certain City trail system improvements, as described in the Election Ordinance and eligible for financing with the proceeds of the Bonds in aggregate principal amount not to exceed $2,100,000. "Trustee" means the banking corporation or association designated as Trustee in the Indenture, and its successor or successors as such Trustee. The original Trustee is Simmons First Trust Company, N.A. "Trust Estate" means the property described in the granting clauses of the Indenture. "Wastewater Project" means the acquisition, construction, reconstruction, extension, improving and equipping of certain improvements to the City's wastewater treatment plants, sewerage and related facilities, as described in the Election Ordinance and eligible for financing with the proceeds of the Bonds in aggregate principal amount not to exceed $42,000,000. Preliminary; subject to change. LJ • APPENDIX C THE SALES AND USE TAXES Sales Tax. The sales tax portion of the Sales and Use Taxes is generally levied upon the gross proceeds and receipts derived from all sales to any Person within the City of the following: (a) Tangible personal property; (b) Natural or artificial gas, electricity, water, ice, steam, or any other utility or public service except transportation services, sewer services and sanitation or garbage collection services (natural gas and electricity sales to a manufacturer for use directly in the manufacturing process will be taxed at a reduced rate); (c) (i) Service by telephone, telecommunications and telegraph companies to subscribers or users, including transmission of messages or images, whether local or long distance, including all service, installation, construction and rental charges having any connection with transmission of any message or image; (ii) Service of furnishing rooms, suites, condominiums, townhouses, rental houses or other accommodations by hotels, apartment hotels, lodging houses, tourist camps, tourist courts, property management companies, or any other provider of accommodations to transient guests; (iii) Service of cable television, community antenna television, and any and all other distribution of television, video, or radio services with or without the use of wires provided to subscribers, paying customers or users, including installation, service, rental, repair and other charges having any connection with the providing of the said services; provided, however, sales taxes are not levied on services purchased by radio or television providers for use in providing their services; • (iv) Service or alteration, addition, cleaning, refinishing, replacement and repair of motor vehicles, aircraft, farm machinery and implements, motors of all kinds, tires and batteries, boats, electrical appliances and devices, furniture, rugs, upholstery, household appliances, televisions and radios, jewelry, watches and clocks, engineering instruments, medical and surgical instruments, machinery of all kinds, bicycles, office machines and equipment, shoes, tin and sheet metal, mechanical tools and shop equipment; however, the tax does not apply to (A) coin operated car washes, (B) the maintenance or repair of railroad parts, railroad cars and equipment brought into the City solely and exclusively for the purpose of being repaired, refurbished, modified, or converted within the City, (C) the service of alteration, addition, cleaning, refinishing, replacement or repair of commercial jet aircraft or commercial jet aircraft components or subcomponents, (D) the repair or remanufacture of industrial metal rollers or platens that have a remanufactured non-metallic material covering on all or a part of the roller or platen surface, or (E) the alteration, addition, cleaning, refinishing, replacement or repair of non -mechanical, passive or manually operated components of buildings or other improvements or structures affixed to real estate; (v) Service of providing transportation or delivery of money, property or valuables by armored car; service of providing cleaning or janitorial work; service of pool cleaning and servicing; pager services; telephone answering services; landscaping and non-residential lawn care services; service of parking a motor vehicle or allowing a motor vehicle to be parked; service of storing a motor vehicle; service of storing furs; service of providing indoor tanning at a tanning salon; wrecker and towing services; service of collecting and disposing of solid waste; services associated with the lease or rental of a portable toilet; parking lot and gutter cleaning services; dry cleaning and laundry services; industrial laundry services; mini warehouse and self storage rental services; body piercing, tattooing and electrolysis services; pest control services; security and alarm monitoring services; boat storage and docking fees; furnishing campground spaces or trailer spaces at public or privately owned campgrounds, except for federal campgrounds, on less than a month -to -month basis; locksmith services; pet grooming and kennel services; and the new installation and replacement labor for hardwood, vinyl, ceramic tile or other types of flooring; and (vi) Initial installation services relating to motor vehicles, aircraft, farm machinery and • implements, motors of all kinds, tires and batteries, boats, electrical appliances and devices, furniture, rugs, C -I • flooring, upholstery, household appliances, television and radio, jewelry, watches and clocks, engineering instruments, medical and surgical instruments, machinery of all kinds, bicycles, office machines and equipment, shoes, tin and sheet metal, mechanical tools and shop equipment; provided, however, if the item being installed is specifically exempted from the imposition of the sales tax, the service of installation will also be exempt; (d) Printing of all kinds, types and characters, including the service of overprinting, and photography of all kinds; (e) Tickets or admissions, for which consideration is paid, to places of amusement, to athletic, entertainment, recreational events, or fees for access to or the use of amusement, entertainment, athletic or recreational facilities; (f) Dues and fees to health spas, health clubs and fitness clubs; dues and fees to private clubs which hold any permit from the Alcoholic Beverage Control Board allowing the sale, dispensing or serving of alcoholic beverages of any kind on the premises; (g) Lease or rental of motor vehicles and trailers, other than diesel trucks rented for residential moving or commercial shipping or farm machinery rented or leased for a commercial purpose, for a period less than 30 days, or purchase of motor vehicles for rental or lease regardless of the length of the rental or lease; (h) Lease or rental of a portable toilet on a long or short-term basis, but excluding gross proceeds from the sale of a portable toilet purchased for subsequent lease or rental, and any service associated with the lease or rental of a portable toilet provided by the lessor or otherwise; (i) Orders by telegraph, telephone or other means of communication transmitted by florists; (j) Sales of beer, wine, liquor or any intoxicating beverages; (k) Proceeds derived from the operation or use of coin -operated pinball machines, coin -operated • music machines, coin -operated mechanical games, and similar devices; (1) Contracts, including service contracts, maintenance agreements and extended warranties, which in whole or in part provide for the future performance of or payment for services which are subject to the sales tax; (m) Receipts derived from the retail sale of any device used in playing bingo and any charge for admittance to facilities or for the right to play bingo or other games of chance regardless of whether such activity might otherwise be permitted by law; (n) The first $50,000 of the purchase price from the sale of machinery or equipment and related attachments that are sold to or used by a person engaged primarily in the harvesting of timber; (o) Receipts from a fishing guide service when the service is provided as part of a guided fishing trip and the guide service is provided in conjunction with the sale or lease of tangible personal property including a boat, a boat motor, or bait; and (p) Food and food ingredients other than alcoholic beverages, tobacco, dietary supplements or food prepared by a seller. Exemptions from Sales Tax. As summarized below, several types of transactions have been exempted from the sales tax portion of the Sales and Use Taxes by the General Assembly of the State. Some of the current exemptions include the sale of: (a) New or used house trailers, mobile homes, aircraft, motor vehicles, trailers or semi -trailers and a used house trailer, mobile home, aircraft, motor vehicle, trailer or semi -trailer is taken as a credit or part payment of the purchase price, when the total consideration is less than certain set dollar amounts; (b) Aircraft held for resale and used for rental or charter, whether by a business or an individual for a period not to exceed one year from the date of purchase of aircraft; (c) Tangible personal property or services by churches, except where such organizations may be engaged in business for profit; • C-2 • (d) Tangible personal property, or service by charitable organizations, except where such organizations may be engaged in business for profit; (e) Food in public, common, high school or college cafeterias and lunchrooms operated primarily for teachers and pupils, and not operated primarily for the public or for profit; (f) Newspapers; (g) Property or services to the United States Government; motor vehicles and adaptive equipment to disabled veterans who have purchased said vehicles or equipment with financial assistance of the Veterans Administration; tangible personal property to the Salvation Army, Heifer Project International, Inc., Habitat for Humanities, the Boy Scouts of America, the Girl Scouts of America or any of the Scout Councils in the State; tangible personal property or service to the Boys Clubs of America or any local councils or organizations of the Boys Clubs of America, the Girls Clubs of America or any local councils or organizations of the Girls Clubs of America, to the Poets' Roundtable of Arkansas, to 4-H Clubs and FFA Clubs, to the Arkansas 4-H Foundation, to the Arkansas Future Farmers of America Foundation and the Arkansas Future Farmers of America Association, to qualified museums and to the Arkansas Symphony Orchestra, Inc.; and to the Arkansas Search Dog Association, Inc.; (h) Gasoline or motor vehicle fuel on which the motor vehicle fuel or gasoline tax has been paid to the State; special fuel, dyed distillate or petroleum products sold for consumption by vessels, barges and other commercial watercraft and railroads; dyed distillate special fuel on which taxes have been paid by the suppliers; fuel sold to the U.S. government; and biodiesel fuel; (1) Property resales to persons regularly engaged in the business of reselling the articles purchased; (j) Advertising space in newspapers and publications and billboard advertising services; (k) Gate admissions at State, district, county or township fairs or at any rodeo if the receipts derived • from gate admissions to the rodeo are used exclusively for the improvement, maintenance and operation of such rodeo, and if no part of the net earnings thereof inures to the benefit of any private stockholder or individual; (1) Property or services which the State is prohibited by the constitution or laws of the United States or by the constitution of the State from taxing or further taxing and tangible personal property exempted from taxation by the Arkansas Compensating (Use) Tax Act of 1949, as amended; (m) Isolated sales not made by an established business; (n) Cotton, seed cotton, lint cotton, bated cotton, whether compressed or not, or cotton seed in its original condition; seed for use in commercial production of an agricultural product or of seed; raw products from the farm, orchard or garden, where such sale is made by the producer of such raw products directly to the consumer and user; livestock, poultry, poultry products and dairy products of producers owning not more than five cows; and baby chickens; (o) Foodstuffs to governmental agencies for free distribution to any public, penal and eleemosynary institutions or for free distribution to the poor and needy, and the rental or sale of medical equipment, for the benefit of Persons enrolled in and eligible for Medicare or Medicaid programs; (p) Tangible personal property or services provided to any hospital or sanitarium operated for charitable and nonprofit purposes or any nonprofit organization whose sole purpose is to provide temporary housing to the family members of patients in a hospital or sanitarium; (q) Used tangible personal property when the used property was (1) traded in and accepted by the seller as part of the sale of other tangible personal property and (2) the Arkansas Gross Receipts Tax was collected and paid on the total amount of consideration for the sale of the other tangible personal property without any deduction or credit for the value of the used tangible personal property; provided, however, this exemption does not apply to transactions involving used automobiles, used mobile homes, or used aircraft; (r) Unprocessed crude oil; (s) Tangible personal property consisting of machinery and equipment, including, without limitation, • molds, frames, forms, dies, tools, devices, and testing equipment, used directly in producing, manufacturing, fabricating, assembling, processing, finishing or packaging of articles of commerce at (i) new manufacturing or C-3 • processing plants or facilities in the State or (ii) existing manufacturing or processing plants or facilities in the State if the tangible personal property is used to replace existing machinery and equipment; (t) Property consisting of machinery and equipment required by State law or regulation to be installed and utilized by manufacturing or processing plants or facilities to prevent or reduce air and/or water pollution or contamination; (u) Electricity used in the manufacture of aluminum metal by the electrolytic reduction process and sale of articles sold on the premises of the Arkansas Veterans Home; (v) Automobile parts which constitute "core charges," which are received for the purpose of securing a trade-in for the article purchased; (w) Bagging and other packaging and tie materials sold to and used by cotton gins for packaging and/or tying baled cotton and from the sale of twine which is used in the production of tomato crops; (x) Prescription drugs by licensed pharmacists, hospitals, oncologists or dispensing physicians, and oxygen sold for human use on prescription of a licensed physician; (y) Property or services to humane societies; (z) Vessels, barges and towboats of at least fifty tons load displacement and parts and labor used in the repair and construction of the same; (aa) Property or sales to all orphans' homes, or children's homes, which are not operated for profit and whether operated by a church, religious organization or other benevolent charitable association; (bb) Agricultural fertilizer, agricultural limestone and agricultural chemicals; (cc) Sale of tickets or admissions by municipalities and counties to places of amusement, to athletic, entertainment or recreational events, or fees for the privilege of having access to or the use of amusement, • entertainment, athletic or recreational facilities, including free or complimentary passes, tickets, admissions, dues or fees; (dd) Free or complimentary admission to places of amusement, to athletic, entertainment or recreational events, or for access to or for the use of amusement, athletic or recreational facilities; (ee) New and used farm machinery and equipment; (ft) New automobiles to a veteran of the United States Armed Services who is blind as a result of a service connected injury; (gg) Motor vehicles sold to municipalities, counties, school districts, and state supported colleges and universities; (hh) School buses sold to school districts and, in certain cases, to other purchasers providing school bus service to school districts; (ii) Natural gas, LP gas, or electricity sold to a processor or mining company engaging in open pit and underground mining or processing of bauxite; (Aj) Feedsmffs used in the commercial production of livestock or poultry; (kk) New and used mobile homes and custom manufactured homes; (11) The first 500 kilowatt hours of electricity per month and the total franchise taxes billed to each residential customer whose household income is less than $12,000 per year; (mm) Natural gas and electricity used in the manufacturing of tires; (nn) Waste fuel used in producing, manufacturing, fabricating, assembling, processing, finishing, or packaging of articles of commerce at manufacturing or processing plants or facilities in the State; (oo) Electricity and natural gas to qualified steel and wall and floor tile manufacturers; • (pp) Electricity used for the production of chlorine and other chemicals using a chlor-alkali manufacturing process; C-4 • • (qq) Tangible personal property lawfully purchased with food stamps, food coupons, food instruments or vouchers in connection with certain Federal programs; (rr) Publications sold through regular subscriptions; (ss) Tickets for admission to athletic events and interscholastic activities of public and private elementary and secondary schools in the State and tickets for admission to athletic events at public and private colleges and universities in the State; (it) Prescriptive durable medical equipment, mobility enhancing equipment, including wheelchair lifts and automobile hand controls, and prescriptive disposable medical equipment; (uu) Insulin and test strips for testing blood sugar levels in humans; (vv) Telephone instruments sent into the State for refurbishing or repair and then shipped back to the state of origin; (ww) Industrial metal rollers sent into the State for repair or remanufacture and then shipped back to the state of origin; (xx) New motor vehicles purchased by non-profit organizations and used for the performance of contracts with the Department of Human Services, and new motor vehicles purchased with Urban Mass Transit Administration funds if (i) the vehicles are purchased in lots of ten vehicles, (ii) meet minimum State specifications, and (iii) vehicles are used for transportation under the Department of Human Servicesprograms for the aging, disabled, mentally ill, and children and family services; (yy) Motor fuels and dyed distillates to owners or operators of motor buses operated on designated streets according to regular schedule and under municipal franchise which are used for municipal transportation purposes; (zz) Parts or other tangible personal property incorporated into or which become a part of commercial • jet aircraft component or subcomponent; (aaa) Transfer of fill material by a business engaged in transporting or delivering fill material; (bbb) Long-term leases, thirty days or more, of commercial trucks used for interstate transportation of goods under certain conditions; (ccc) Foodstuffs to nonprofit agencies; (ddd) Tangible personal property consisting of forms constructed of plaster, cardboard, fiberglass, natural fibers, synthetic fibers or composites and which are destroyed or consumed during the manufacture of the item; (eee) Natural gas used as a fuel in the process of manufacturing glass; (fff) Sales to Fort Smith Clearinghouse; (ggg) Substitute fuel used in producing, manufacturing, fabrication, assembling, processing, finishing or packaging of articles at manufacturing facilities or processing plants in the State; (hhh) Railroad rolling stock used in transporting persons or property in interstate commerce; (iii) Parts or other tangible personal property which become apart of railroad parts, railroad cars and equipment brought into the State for the purpose of being repaired, refurbished, modified or converted within the State; (ijj) Fire protection and emergency equipment to be owned by and exclusively used by a volunteer fire department, and supplies and materials to be used in the construction and maintenance of volunteer fire departments; (kkk) Gas produced from biomass and sold for the purpose of generating energy to be sold to the gas producer; (III) Parts or other tangible personal property incorporated into or which become part of commercial jet aircraft components or subcomponents; • C-5 • (mmm) Catalysts, chemicals, reagents and solutions which are consumed or used in producing, manufacturing, processing or finishing articles of commerce at manufacturing or processing plants in the State; (nnn) Fuel packaging materials sold to persons engaged in the business of processing hazardous and non -hazardous waste materials into fuel products; (000) Instructional materials used in public schools; (ppp) Livestock reproduction equipment and substances used in livestock reproduction; and (qqq) Thermal imaging equipment purchased by a county government for use by law enforcement aircraft. Reference is made to "The Arkansas Gross Receipts Act of 1941," Title 26, Chapter 52 of the Arkansas Code of 1987 Annotated, for more information concerning the sales tax. Use Tax. The use tax portion of the Sales and Use Taxes is levied on every Person for the privilege of storing, using, distributing or consuming in the City any article of tangible personal property purchased for storage, use, distribution or consumption. The use tax applies to the use, distribution, storage or consumption of every article of tangible personal property except as hereinafter provided. The use tax does not apply to aircraft equipment, and railroad parts, cars, and equipment, nor to tangible personal property owned or leased by aircraft, automotive or railroad companies brought into the City solely and exclusively for refurbishing, conversion, or modification within the City or storage for use outside or inside the City regardless of the length of time any such property is so stored in the City. Among other items, the use tax is levied on the following described tangible personal property: (a) Tractors, trailers, semi -trailers, trucks, buses and other rolling stock, including replacement tires, used directly in the transportation of persons or property in intrastate or interstate common carrier transportations; (b) Property (except fuel) consumed in the operation of railroad rolling stock; • (c) Transmission lines and pumping or pressure control equipment used directly in or connected to the primary pipeline facility engaged in intrastate or interstate common carrier transportation of property; (d) Airplanes and navigation instruments used directly in or becoming a part of flight aircraft engaged in transportations of persons or property in regular scheduled intrastate or interstate common carrier transportation; (e) Exchange equipment, lines, boards and all accessory devices used directly in and connected to the primary facility engaged in the transmission of messages; (f) Transmission and distribution pipelines in pumping or pressure control and equipment used in connection therewith used directly in primary pipeline facility for the purpose of transporting and delivering natural gas; (g) Transmission and distribution lines, pumping machinery and controls used in connection therewith in cleaning or treating equipment of primary water distribution system; (h) Property of public electric power companies consisting of all machinery and equipment including reactor cores and related accessory devices used in the generation and production of electric power and energy and transmission facilities consisting of the lines, including poles, towers and other supporting structures, transmitting electric power and energy together with substations located on or attached to such lines; and (i) Computer software. Exemptions from Use Tax. Some of the property exempted from the use tax by the General Assembly of the State is as follows: (a) Property, the storage, use or consumption of which the State is prohibited from taxing under the Constitution or laws of the United States of America or the State; (b) Sales of tangible personal property in which the tax under the Arkansas Gross Receipts Act of 1941 is levied; (c) Tangible personal property which is exempted from the sales tax under the Arkansas Gross • Receipts Act of 1941; C-6 • (d) Prescriptive durable medical equipment, mobility enhancing equipment, including wheelchair lifts and automobile hand controls, and disposable medical equipment; (e) Feedstuffs used in the commercial production of livestock or poultry in the State; (f) Unprocessed crude oil; (g) Machinery and equipment including, without limitation, molds, frames, forms, dies, tools, devices and testing equipment, used directly in producing, manufacturing, fabricating, assembling, processing, finishing or packaging of articles of commerce at manufacturing or processing plants or facilities in the State, including facilities and plants for manufacturing feed, processing of poultry and/or eggs and livestock and the hatching of poultry and such equipment is either (I) purchased to create or expand manufacturing or processing plants in the State, (2) purchased to replace existing machinery and used directly in producing, manufacturing, fabricating, assembling, processing, finishing or packaging of articles of commerce at manufacturing or processing plants in the State, or (3) required by State law to be installed and utilized by manufacturing or processing plants to prevent or reduce air and/or water pollution or contamination; (h) Modular homes constructed with materials on which the sales or use tax has once been paid; (i) Aircraft, aircraft equipment, railroad parts, cars, and equipment, and tangible personal property owned or leased by aircraft, airmotive, or railroad companies, brought into the State solely and exclusively for refurbishing, conversion, or modification or for storage for use outside or inside the State; (j) Vessels, barges, and towboats of at least 50 tons load displacement and parts and labor used in the repair and construction of them; (k) Motor fuels and dyed distillates to the owners or operators of motor buses operated on designated streets according to regular schedule, under municipal franchise, which are used for municipal transportation purposes; • (I) Natural gas and electricity used in the manufacturing of tires; (m) Agricultural fertilizer, agricultural limestone, agricultural chemicals, including agricultural pesticides and herbicides used in commercial production of agricultural products, and vaccines, medications, and medicinal preparations, used in treating livestock and poultry being grown for commercial purposes and other ingredients used in the commercial production of yeast; (n) All new and used motor vehicles, trailers or semi -trailers that are purchased for a total consideration of less than $2,500; and (o) Any tangible personal property used, consumed, distributed, or stores in this State upon which a like tax, equal to or greater than the Arkansas Compensating (Use) Tax, has been paid in another state. Reference is made to "The Arkansas Compensation (Use) Tax Act of 1949," Title 26, Chapter 53 of the Arkansas Code of 1987 Annotated, for more information concerning the use tax. C-7 [THIS PAGE INTENTIONALLY BLANK] • Li APPENDIX D • SPECIMEN OF FINANCIAL GUARANTY INSURANCE POLICY ASSURE D GUARANTY ENDURING FINANCIAL STRENGTH FINANCIAL GUARANTY INSURANCE POLICY Issuer: Policy Na: Assured Guaranty Corp., a Maryland corporation ("Assured Guaranty"), in consideration of the payment of the Premium and on the terms and subject to the conditions of this Policy (which includes each endorsement hereto), hereby unconditionally and irrevocably agrees to pay to the trustee (the Trustee") or the paying agent (the "Paying Agent') for the Obligations (as set forth in the documentation providing for the issuance of and securing the Obligations) for the benefit of the Holders, that portion of the Insured Payments which shall become Due for Payment but shall be unpaid by reason of Nonpayment. Assured Guaranty will make such Insured Payments to the Trustee or the Paying Agent on the later to occur of (i) the date applicable principal or interest becomes Due for Payment, or (ii) the Business Day next following the on which Assured Guaranty shall have Received a completed Notice of Nonpayment. If a Notice of Non n b ured Guaranty is incomplete or does not in any instance conform to the terms and conditions of this Pol" , I sh I d e not Received, and Assured Guaranty shall promptly give notice to the Trustee or the Paying A en p rec ' uch i the Trustee or the Paying Agent may submit an amended Notice of Nonpayment. JJe ru e or P yi en d bursa the Insured Payments to the Holders only upon receipt by the Trus or a ying t, i fo m r s n ly $a sfactory to it of (i) evidence of the Holder's right to receive such ay ants, n ( ) vie a in I din t i itat n any appropriate Instruments of assignment, that all of t de s igh to y e t c p i ip I or ' r t ue for Payment shall • thereupon vest in Assured GuaJos. and h e en f s ch di b t, su a a y s become the Holder of the Obligations, any un n t eret nd right to r e pt of ay nt princi t reof or interest thereon, and shall be fully subrog ed to IIr g t t tie nd r st h re de , n u without limitation the right to receive payments in respec o I yme y r u ra t to ee or the Paying Agent for the benefit of the Holders shall disch rg ob ed Gu n un er h cy to the extent of such payment. This Policy is non -ca abl Gua for any reason. The Premium on this Policy is not refundable for any reason. This Poli n i oss of any prepayment premium or other acceleration payment which at any time may become due i resftion, other than at the sole option of Assured Guaranty, nor against any risk other than Nonpayment. Except to the extent expressly modified by any endorsement hereto, the following terms shall have the meanings specified for all purposes of this Policy. "Avoided Payment" means any amount previously distributed to a Holder in respect of any Insured Payment by or on behalf of the Issuer, which amount has been recovered from such Holder pursuant to the United States Bankruptcy Code in accordance with a final, nonappealable order of a court having competent jurisdiction that such payment constitutes an avoidable preference with respect to such Holder. Business Day means any day other than (i) a Saturday or Sunday, (ii) any day on which the offices of the Trustee, the Paying Agent or Assured Guaranty are dosed, or (iii) any day on which banking institutions are authorized or required by law, executive order or governmental decree to be closed in the City of New York or in the State of Maryland. "Dire for Payment" means (i) when referring to the principal of an Obligation, the stated maturity date thereof, or the date on which such Obligation shall have been duly called for mandatory sinking fund redemption, and does not refer to any earlier date on which payment is due by reason of a call for redemption (other than by mandatory sinking fund redemption), acceleration or other advancement of maturity (unless Assured Guaranty in its sole discretion elects to make any principal payment, in whole or in pan, on such earlier date) and (ii) when referring to interest on an Obligation, the stated date for payment of such interest. "Holder means, in respect of any Obligation, the person or entity who, at the time of Nonpayment, is entitled under the terms of such Obligation to payment of principal or interest thereunder, except that Holder shall not include the Issuer or any person or entity whose direct or indirect obligation constitutes the underlying security for the Obligations. 'Insured Payments' means that portion of the principal of and interest on the Obligations that shall become Due for Payment but shall be unpaid by reason of Nonpayment. Insured Payments shall not include any additional amounts owing by the Issuer solely as a result of the failure by the Trustee or the Paying Agent to pay such amount when due and payable, including without limitation any such additional amounts as may be attributable to penalties or to interest accruing at a default rate, to amounts payable in respect of indemnification, or to any other additional amounts payable by the Trustee or the Paying Agent by reason of such failure. 'Nonpayment' means, in respect of an Obligation, the failure of the Issuer to have provided sufficient funds to the Trustee or the Paying Agent for payment in full of all principal and interest Due for Payment on such Obligation. It is further understood that the term "Nonpayment" in respect of an Obligation includes any Avoided Payment. 'Receipt' or 'Received' means actual receipt or notice of or, if notice is given by overnight or other delivery service, or by certified or registered United States mail, by a delivery receipt signed by a person authorized to accept delivery on behalf of the • person to whom the notice was given. Notices to Assured Guaranty may be mailed by registered mail or personally delivered or telecopied to it at 1325 Avenue of the Americas, New York, New York 10019, Telephone Number: (212) 974-0100, Facsimile Number. (212) 581-3268, Attention: Risk Management Department - Public Finance Surveillance, with a copy to the General Counsel at the same address and at generalcounsel©assuredguaranty.com or at the following Facsimile Number: (212) 445- D-1 8705, or to such other address as shall be specified by Assured Guaranty to the Trustee or the Paying Agent in writing. A Notice of Nonpayment will be deemed to be Received by Assured Guaranty on a given Business Day if it is Received prior to • 12:00 noon (New York City time) on such Business Day; otherwise it will be deemed Received on the next Business Day. Termmeans the period from and including the Effective Date until the earlier 01(i) the maturity date for the Obligations, or (ii) the date on which the Issuer has made all payments required to be made on the Obligations. At any time during the Term of this Policy, Assured Guaranty may appoint a fiscal agent (the'Fls®I Agenr) for purposes of this Policy by written notice to the Trustee or the Paying Agent, specifying the name and notice address of such Fiscal Agent. From and after the dale of Receipt of such notice by the Trustee or the Paying Agent, copies of all notices and documents required to be delivered to Assured Guaranty pursuant to this Policy shall be delivered simultaneously to the Fiscal Agent and to Assured Guaranty. All payments required to be made by Assured Guaranty under this Policy may be made directly by Assured Guaranty or by the Fiscal Agent on behalf of Assured Guaranty. The Fiscal Agent is the agent of Assured Guaranty only, and the Fiscal Agent shall in no event be liable to the Trustee or the Paying Agent for any acts of the Fiscal Agent or any failure of Assured Guaranty to deposit, or cause to be deposited, sufficient funds to make payments due under this Policy. To the fullest extent permitted by applicable law, Assured Guaranty hereby waives, in each case for the benefit of the Holders only, all rights and defenses of any kind (including, without limitation, the defense of fraud in the induce nt or in fact or any other circumstance that would have the effect of discharging a surety, guarantor or any other n i I or in equity) that may be available to Assured Guaranty to deny or avoid payment of its obligations u I oil i a rdance with the express provisions hereof. Nothing in this paragraph will be construed (1) to limit o o he i pair, and Assured Guaranty expressly reserves, Assured Guaranty's rights and remedies, di g, t ut itati n: its ' ht to assert any claim or to pursue recoveries (based on contractual rights, securities olab 1fir o ukes f ction) against any person or entity, in each case, whether directly or acgyd a su r ep, sn or othe i e,abseq ent to making any payment to the Trustee or the Paying Agentyaccrrd nce wit t e x refs o si n eof, a d/ r (f)) to equire payment by Assured Guaranty of any amounts that hate been r7vio/lsll.$il or ht 1\e �o) �Otl)e�vi ,dam ir) aGm nbe with the express provisions of this Policy. I I I I I I I This Policy (which iqtludes a h hc�or erif hert4) ) is 9Yrt f411 nQdt"Assured Guaranty with respect to the subject matter her f, nbjhe if , It red9a ad b a er agreement or instrument, including, without limitation, any modiIica'tionie to or e d ent t e I. TH I IS NOT COVERED BY THE PROPERTY/CASUALTY INSURANCE SECLkRITY Ft feffective CIF E L 6 OF THE NEW YORK INSURANCE LAW. This Policy will be governed by. and shSfl-bcof a rdan "th, the laws of the State of New York. IN WITNESS WH E aranty has caused this Policy to be affixed with its corporate seal, to be signed by its duly authorized officer, d3d to bdco e and binding upon Assured Guaranty by virtue of such signature. • (SEAL) • D-2 By: Authorized Officer Signature attested to by: Counsel OFFICIAL STATEMENT NEW ISSUE BOOK -ENTRY ONLY *RATINGS: S&P "AAA" (negative outlook) (Assured Guaranty Insured) Underlying "A+" (stable outlook) In the opinion of Kurak Rock LLP, Bond Counsel, under existing laws, regulations, rulings and judicial decisions and assuming the accuracv of certain representations and continuing compliance with certain covenants, interest on the Series 2009 Bonds is excludable from gross income for federal income tax purposes and is nor a specific preference item for purposes of the federal alternative minimum tar. Bond Counsel is also of the opinion that the Series 2009 Bonds are "qualified tax-exempt obligations" under Section 265(b)(3) of the Internal Revenue Cole of 1986. as amended Under existing laws. regulations. ratings and judicial decisions, Bond Counsel is of the opinion that the Series 2009 Bonds and the interest thereon are exempt from all state. carom' and municipal tares in the State of Arkansas. For a more complete description, see the caption "TAX MATTERS" herein. $11,250,000 CITY OF FAYETTEVILLE, ARKANSAS SALES AND USE TAX CAPITAL IMPROVEMENT BONDS SERIES 2009 Dated: November 1, 2009 Due: November 1, as shown on inside front cover The Sales and Use Tax Capital Improvement Bonds, Series 2009 (the 'Series 2009 Bonds"), arc being issued by the City of Fayetteville, Arkansas (the "City") for the purpose of (i) financing a portion of the costs of certain City street and trail system improvements, (ii) purchasing a policy of municipal bond insurance, (iii) purchasing a municipal bond debt service reserve insurance policy for deposit in the debt service reserve, and (iv) paying certain expenses in connection with the issuance of the Scrics 2009 Bonds. See the captions 'SOURCES AND USES OF FUNDS" and "THE PROJECTS" herein. The Series 2009 Bonds am issuable only as fully registered bonds and, when issued, will be registered in the name of Cede & Co., as nominee of The Depository Trust Company ("DTC"), New York, New York, to which principal, premium, if any, and interest payments on the Series 2009 Bonds will be made so long as Cede & Co. is the registered owner of the Scrics 2009 Bonds. Individual purchases of the Series 2009 Bonds will be made only in book -entry four, in denominations of 55,000 or integral multiples thereof. Individual purchasers ("Beneficial Owners") of Series 2009 Bonds will not receive physical delivery of bond certificates. See the caption "BOOK -ENTRY ONLY SYSTEM" herein. The Series 2009 Bonds shall bear interest from their dated date, payable on May I and November I of each year, commencing May 1, 2010. All such interest payments shall be payable to the persons in whose name such Series 2009 Bonds are registered on the bond registration books maintained by Simmons First Trust Company, N.A., Pine Bluff, Arkansas as trustee (the "Trustee"), as of the fifteenth day of the calendar month preceding the calendar month in which the applicable interest payment date falls. Principal of and premium, if any, on the Series 2009 Bonds shall be payable at the principal corporate trust office of the Trustee. So long as DTC or its nominee is the registered owner of the Series 2009 Bonds, disbursement of such payments to DTC Participants is the responsibility of DTC, and the disbursement of such payments to Beneficial Owners is the responsibility of DTC Participants or Indirect Participants, as more fugy described herein. Pursuant to a Trust Indenture dated as of November I, 2006, as supplemented and amended by a First Supplemental Trust Indenture dated as of October I, 2007, and by a Second Supplemental Trust Indenture dated as of November I, 2009 (as supplemented and amended, the "Indenture"), between the City and the Trustee, the payment of the principal of, premium, if any, and interest on the Series 2009 Bonds is secured by a pledge of the receipts from (i) a one -quarter of one percent (0.25%) city-wide sales and use tax (the "0.25% Sales and Use Tax") and (ii)3 three-quarters of one percent (0.75%) city-wide sales and use tax (the "0.75% Sales and Use Tax," and together with the 0.25% Sales and Use Tax, the "Sales and Use Taxes"). Such pledge is made on a parity basis with the existing pledge of receipts of the Sales and Use Taxes securing (i) $48,125,000 outstanding principal amount of the City's Sales and Use Tax Capital Improvement Bonds, Series 2006A (the 'Scrics 2006A Bonds"), and (ii) $13,090,000 outstanding principal amount of the City's Sales and Use Tax Capital Improvement Bonds, Series 2007 (the "Series 2007 Bonds"). See the caption "SECURITY FOR THE BONDS" herein. The Series 2009 Bonds are subject to optional and mandatory redemption prior to maturity as more fully described herein under the caption "THE SERIES 2009 BONDS - Redemption." The scheduled payment of principal of and interest on the Series 2009 Bonds when due will be guaranteed under a financial guaranty insurance policy to be issued concurrently with the delivery of the Series 2009 Bonds by Assured Guaranty Corp. ASSURED GUARANTY The Series 2009 Bonds are special obligations of the City secured by and payable solely from receipts of the Sales and Use Taxes. The Series 2009 Bonds do not constitute an indebtedness of the City within the meaning of any constitutional or statutory debt limitation or restriction. The issuance of the Series 2009 Bonds shall not directly, indirectly or contingently obligate the City to levy or pledge any taxes whatsoever or to make any appropriation for the payment of the Series 2009 Bonds, except as described herein with respect to the Sales and Use Taxes. The Scrics 2009 Bonds am offered when, as and if issued by the City and am subject to the final approving opinion of Kutak Rock LLP, Little Rock, Arkansas, Bond Counsel, Certain matters will be passed upon for the City by its counsel, Kit Williams, Esq., City Atlomcy. It is expected that the Series 2009 Bonds will be available for delivery in New York, New York, on or about November 12. 2009. Stephens Inc. beaxtcn tkstkra The date of this Official Statement is October 21, 2009. t Sec the caption "RATINGS" herein. MATURITY SCHEDULE • Maturity Principal Interest (November 11 Amount Rate Yicid 2015 S 1,450,000 3.000% 3.100% 2016 1,495,000 3.250% 3.350% 2017 1,545,000 3.500% 3.600% 2018 1,600,000 3.625% 3.750% 2019 1,655,000 3.750% 3.850% $3,505,000 4.000% Term Bonds due November 1, 2021 Yield: 4.000% (Plus accrued interest) CITY OF FAYETTEVILLE, ARKANSAS Issuer City Council Lioneld Jordan, Mayor Kyle Cook Bobby Ferrell Adel la Gray Sarah Lewis Shirley Lucas Matthew Petty Robert Rhoads Brenda Thiel Paul Becker, Finance Director Sondra Smith, City Clerk Kit Williams, City Attorney SIMMONS FIRST TRUST COMPANY, N.A. Pine Bluff, Arkansas Trustee and Paying Agent KUTAK ROCK LLP Little Rock, Arkansas Bond Counsel STEPHENSINC. Fayetteville, Arkansas Underwriter • • No dealer, broker, salesman or other person has been authorized by the City or by Stephens Inc. (the "Underwriter") to give any information or to make any representations, other than those contained herein; and, if given or made, such other information or representations must not be relied upon as having been authorized by either of the foregoing. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of any Series 2009 Bonds in any jurisdiction in which such offer is not authorized, or in which the person making such offer, solicitation or sale is not qualified to do so, or to any person to whom it is unlawful to make such offer, solicitation or sale. The information and expressions of opinion contained herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the City since the date hereof. Assured Guaranty makes no representation regarding the Series 2009 Bonds or the advisability of investing in the Series 2009 Bonds. In addition, Assured Guaranty has not independently verified, makes no representation regarding, and does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding Assured Guaranty and presented under the heading "BOND INSURANCE" and "Exhibit D— Specimen Financial Guaranty Insurance Policy." THE SERIES 2009 BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR HAS THE TRUST INDENTURE BEEN QUALIFIED UNDER THE TRUST INDENTURE ACT OF 1939, AS AMENDED, IN RELIANCE UPON CERTAIN EXEMPTIONS FROM SUCH REGISTRATION AND QUALIFICATION CONTAINED IN SUCH LAWS. CERTAIN INFORMATION CONTAINED HEREIN HAS BEEN OBTAINED FROM THE CITY, THE DEPOSITORY TRUST COMPANY AND OTHER SOURCES WHICH ARE BELIEVED TO BE RELIABLE. THE UNDERWRITER HAS REVIEWED THE INFORMATION IN THIS OFFICIAL STATEMENT IN ACCORDANCE WITH, AND AS PART OF, ITS RESPONSIBILITIES TO INVESTORS UNDER THE FEDERAL SECURITIES LAWS AS APPLIED TO 11E FACTS AND CIRCUMSTANCES OF THIS TRANSACTION, BUT THE UNDERWRITER DOES NOT GUARANTY TILE ACCURACY OR COMPLETENESS OF SUCH INFORMATION. IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SERIES 2009 BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY 13E DISCONTINUED AT ANY TIME. • is TABLE OF CONTENTS Introductory Statement ............................................ The Series 2009 Bonds ............................................ Security for the Bonds ............................................. Bond Insurance........................................................ Book -Entry Only System ......................................... TheProjects............................................................. Historical Sales and Use Tax Collections ................ Sources and Uses of Funds ...................................... Debt Service Requirements ...................................... Estimated Debt Service Coverage ............................ Projected Mandatory Redemptions .......................... TheCity................................................................... The Sales and Use Taxes ........................................... Summary of the Indenture ....................................... Summary of the Continuing Disclosure Agreement Underwriting............................................................ TaxMatters .............................................................. Ratings...................................................................... LegalMatters ........................................................... Miscellaneous.......................................................... Accuracy and Completeness of Official Statement .. APPENDIX A - Form of Bond Counsel Opinion ................................... APPENDIX B - Definitions of Certain Terms ........................................ APPENDIX C - The Sales and Use Taxes .............................................. APPENDIX D - Specimen of Financial Guaranty Insurance Policy ....... Page 2 6 10 12 12 13 14 17 19 24 26 26 27 28 28 28 (This page intentionally left blank.) • • OFFICIAL STATEMENT $11,250,000 CITY OF FAYETTEVILLE, ARKANSAS SALES AND USE TAX CAPITAL IMPROVEMENT BONDS SERIES 2009 INTRODUCTORY STATEMENT The following introductory statement is subject in all respects to the more complete information set forth in this Official Statement. All descriptions and summaries of documents hereinafter set forth are qualified in their entirety by reference to each such document. Capitalized terms not otherwise defined herein shall have the meanings ascribed to such terms in "Appendix B -- DEFINITIONS OF CERTAIN TERMS". This Official Statement, including the cover page and the Appendices hereto, is furnished in connection with the offering by the City of Fayetteville, Arkansas (the "City") of its Sales and Use Tax Capital Improvement Bonds, Series 2009, in the principal amount of $ 1 1,250,000 (the "Series 2009 Bonds"). The City is a city of the first class organized and existing under the laws of the State of Arkansas (the "State"). The City is authorized under Amendment 62 to the Constitution of the State ("Amendment 62") and Arkansas Code Annotated (1998 Repl. & 2005 Supp.) §§ 14-164-301 et seq. (as from time to time amended, the "Act"), to issue and sell bonds for the purpose of financing the cost of capital improvements of a public nature. The Series 2009 Bonds are to be issued by the City pursuant to Amendment 62, the Act and Ordinance No. 5277, adopted and approved on October 6, 2009 (the "Authorizing Ordinance"), for the purpose of (i) financing a portion of the costs of acquiring, constructing, reconstructing, repairing, straightening and widening certain streets and related improvements (the "Street Project"), (ii) financing a portion of the costs of acquiring, constructing and • equipping certain City trail system improvements (the "Trail Project"), (iii) purchasing a policy of municipal bond insurance, (iv) purchasing a mmucipai bond debt service reserve insurance policy for deposit in the debt service reserve, and (v) paying certain expenses in connection with the issuance of the Series 2009 Bonds. See the captions "SOURCES AND USES OF FUNDS" and "THE PROJECTS" herein. The Series 2009 Bonds are not general obligations of the City, but arc special obligations payable solely from and secured by a pledge of the receipts of (i) a special city-wide sales and use tax levied pursuant to the Act at the rate of one -quarter of one percent (0.25%) (the "0.25% Sales and Use Tax") and (ii) a special city-wide sales and use tax levied pursuant to the Act at the rate of three-quarters of one percent (0.75%) (the "0.75% Sales and Use Tax," and together with the 0.25% Sales and Use Tax, the "Sales and Use Taxes"). Such pledge shall be made on a parity basis with the existing pledge of receipts of the Sales and Use Taxes securing (i) $48,125,000 outstanding principal amount of the City's Sales and Use Tax Capital Improvement Bonds, Series 2006A (the `Series 2006A Bonds"), and (ii) $13,090,000 outstanding principal amount of the City's Sales and Use Tax Capital Improvement Bonds, Series 2007 (the "Series 2007 Bonds"). The scheduled payment of principal of and interest on the Series 2009 Bonds when due will be guaranteed under a financial guaranty insurance policy (the "Policy") to be issued concurrently with the delivery of the Series 2009 Bonds by Assured Guaranty Corp. ("Assured Guaranty"). A specimen financial guaranty insurance policy is attached hereto as Appendix D. It is expected that, based on the commitment of Assured Guaranty to insure the Series 2009 Bonds, Standard & Poor's Rating Services, a division of the McGraw-Hill Companies, Inc. ("S&P"), will assign a rating of "AAA" to the Series 2009 Bonds. However, there is no guarantee that such rating will be received. See the captions "SECURITY FOR THE BONDS," "HISTORICAL SALES AND USE TAX COLLECTIONS," "BOND INSURANCE" and "RATINGS" herein. The faith and credit of the City are not pledged to the payment of the Series 2009 Bonds, and the Series 2009 Bonds do not constitute an indebtedness of the City within the meaning of any constitutional or statutory debt limitation or restriction. The issuance of the Series 2009 Bonds shall not directly, indirectly or contingently obligate the City to levy or pledge any taxes whatsoever or to make any appropriation for the payment of the Series 2009 Bonds, except as described herein with respect to the Sales and Use Taxes. • The Series 2009 Bonds are subject to redemption from excess moneys in the Project Fund following • completion of the portions of the Street Project and the Trail Project to be financed with the Series 2009 Bonds and from Surplus Tax Receipts. So long as the Series 2006A Bonds are outstanding, 50% of the Surplus Tax Receipts shall be allocated to the redemption of the Series 2006A Bonds and the remaining 50% of Surplus Tax Receipts shall be allocated ratably (based on relative outstanding principal amounts) to the redemption of the Series 2007 Bonds, the Series 2009 Bonds and any series of Additional Bonds, hereafter issued as provided under the "THE SERIES 2009 BONDS —Additional Bonds.'" Following payment in whole of the Series 2006A Bonds at maturity or upon redemption prior to maturity, all Surplus Tax Receipts shall be allocated ratably (based on relative outstanding principal amounts) to the redemption of the Series 2007 Bonds, the Series 2009 Bonds and any other series of Additional Bonds. See the captions "THE SERIES 2009 BONDS - Redemption" and "PROJECTED MANDATORY REDEMPTIONS" herein. Pursuant to the provisions of a Continuing Disclosure Agreement dated as of the date of delivery of the Series 2009 Bonds, by and between the City and the Trustee (the "Continuing Disclosure Agreement"), the City has undertaken certain obligations with respect to providing ongoing disclosure of certain financial and operating data concerning the City and the Sales and Use Taxes and of the occurrence of certain material events. See the caption "SUMMARY OF THE CONTINUING DISCLOSURE AGREEMENT" herein. This Official Statement contains brief descriptions or summaries of, among other matters, the City, the Series 2009 Bonds, the Sales and Use Taxes, the Continuing Disclosure Agreement, and the Trust Indenture dated as of November 1, 2006, as supplemented and amended by a First Supplemental Trust Indenture dated as of October 1, 2007, and by a Second Supplemental Trust Indenture dated as of November 1, 2009 (as supplemented and amended, the "Indenture"), by and between the City and Simmons First Trust Company, N.A., Pine Bluff, Arkansas, as trustee (the "Trustee"), pursuant to which the Series 2006A Bonds, the Series 2007 Bonds and the Series 2009 Bonds arc issued and secured. Such descriptions and information do not purport to. be comprehensive or definitive. All references herein to the Indenture and the Continuing Disclosure Agreement are qualified in their entirety by reference to each such document, and all references to the Series 2009 Bonds are qualified in their entirety by reference to the definitive forms thereof and the information with respect thereto included in the Indenture. Copies • of the Continuing Disclosure Agreement, the Indenture, and the form of Series 2009 Bond included therein, are available from the City by writing to the attention of the Finance Director, City of Fayetteville, City Administration Building, 113 West Mountain, Fayetteville, Arkansas 72701 and, during the initial offering period only, from the Underwriter, Stephens Inc., 3425 North Futrall, Suite 201, Fayetteville, Arkansas 72703. Certain financial and operating data has been provided by the City from the audited records of the City and certain demographic information has been obtained from other sources which are believed to be reliable. THE SERIES 2009 BONDS Description. The Series 2009 Bonds will be initially dated as of November I, 2009, and will bear interest payable semiannually on May I and November I of each year, commencing May I, 2010, at the rates set forth on the inside cover page hereof. The Series 2009 Bonds will mature on November I in the years and in the principal amounts set forth on the inside cover page hereof. The Series 2009 Bonds are issuable only in the form of fully registered bonds and, when issued, will be registered in the name of Cede & Co., as nominee of The Depository Trust Company ("DTC"), New York, New York, to which principal, premium, if any, and interest payments on the Series 2009 Bonds will be made so long as Cede & Co. is the registered owner of the Series 2009 Bonds. Individual purchases of the Series 2009 Bonds will be made only in book -entry form, in denominations of $5,000 or integral multiples thereof. Individual purchasers ("Beneficial Owners") of Series 2009 Bonds will not receive physical delivery of bond certificates. See the caption "BOOK -ENTRY ONLY SYSTEM" herein. All interest payments on the Series 2009 Bonds shall be payable to the persons in whose name such Series 2009 Bonds are registered on the bond registration books maintained by the Trustee, as of the fifteenth day of the calendar month preceding the calendar month in which the applicable interest payment date falls. Principal of and premium, if any, on the Series 2009 Bonds shall be payable at the principal corporate trust office of the Trustee. All such payments shall be valid and effectual to satisfy and discharge the liability upon such Series 2009 Bond to the extent of the sum or sums so paid. So long as DTC or its nominee is the registered owner of the Series 2009 Bonds, disbursement of such payments to DTC Participants is the responsibility of DTC, and the disbursement of such • • payments to Beneficial Owners is the responsibility of DTC Participants or Indirect Participants, as more fully described herein. Redemption. The Series 2009 Bonds are subject to redemption prior to maturity as follows: (i) The Series 2009 Bonds shall be redeemed prior to maturity, in whole or in part, on any interest payment date, in inverse order of maturity and by lot in such manner as the Trustee shall determine within a maturity, at a redemption price equal to 100% of the principal amount being redeemed, plus accrued interest to the date of redemption, from moneys in the Street Account and the Trail Account of the Project Fund moneys in excess of the amount needed to complete the portion of the Street Project and the Trail Project intended to be funded with proceeds of the Series 2009 Bonds. (ii) The Series 2009 Bonds shall be redeemed prior to maturity, in whole or in part, on any interest payment date, in inverse order of maturity and by lot in such manner as the Trustee shall determine within a maturity, at a redemption price equal to 100% of the principal amount being redeemed, plus accrued interest to the date of redemption, from Surplus Tax Receipts. "Surplus Tax Receipts" are collections of the Sales and Use Taxes in excess of the amount necessary to (i) insure the prompt payment of the principal of and interest on Outstanding Bonds, (ii) maintain the Debt Service Reserve Fund in an amount equal to the Reserve Requirement, (iii) pay any arbitrage rebate due under Section 148(f) of the Internal Revenue Code of 1986, as amended (the "Code"), and (iv) pay Trustee and Paying Agent fees and expenses. So long as the Series 2006A Bonds are outstanding, 50% of the Surplus Tax Receipts shall be allocated to the redemption of the Series 2006A Bonds and the remaining 50% of Surplus Tax Receipts shall be allocated ratably (based on relative outstanding principal amounts) to the redemption of the Series 2007 Bonds, the Series 2009 Bonds and any series of Additional Bonds hereafter issued as provided under the "THE SERIES 2009 BONDS — Additional Bonds. " Following payment in whole of the Series 2006A Bonds at maturity or upon redemption prior to maturity, all Surplus Tax Receipts shall be allocated ratably (based on relative outstanding principal amounts) to the redemption of the Series 2007 Bonds, the Series 2009 Bonds and any other series of Additional Bonds. See the caption "PROJECTED MANDATORY • REDEMPTIONS" herein. (iii) The Series 2009 Bonds are subject to redemption at the option of the City, communicated in a written notice to the Trustee not less than sixty (60) days prior to the date fixed for redemption, in whole or in part on any date on or after November 1, 2015, in inverse order of maturity and by lot in such manner as the Trustee shall determine within a maturity, at a redemption price equal to 100% of the principal amount being redeemed plus accrued interest to the date of redemption. (iv) The Series 2009 Bonds maturing on November 1, 2021, are subject to mandatory sinking fund redemption prior to maturity in part, selected by lot by the Trustee in such manner as it may determine, on November I in the years and amounts set forth below at a redemption price equal to the principal amount thereof plus accrued interest to the date of redemption, without premium. Year Principal Amount 2020 $1,720,000 2021 (maturity) $1,785,000 At its option, to be exercised on or before the 4511 day next preceding any mandatory sinking fund redemption date for any Series 2009 Bonds maturing November I, 2021 (the "Series 2009 Term Bonds"), the City may deliver to the Trustee for cancellation Series 2009 Tenn Bonds, or portions thereof ($5,000 or any integral multiple thereof), in any aggregate principal amount desired. Each such Series 2009 Tenn Bond, or portion thereof, so delivered or previously redeemed (otherwise than through mandatory sinking fund redemption) and canceled by the Trustee shall be credited by the Trustee at 100% of the principal amount thereof on the obligation of the City on such mandatory sinking fund redemption date, and any excess over such amount shall be credited on future mandatory sinking fund redemption obligations with respect to the Series 2009 Term Bonds in chronological order, and the principal amount of such Series 2009 Tenn Bonds so to be redeemed shall he accordingly reduced. • In the case of any defeasance of the Series 2009 Bonds, the dates of redemption, the principal • amounts and the maturities of the Series 2009 Bonds to be redeemed will be determined by taking into consideration the mandatory redemption requirements set forth above and the receipts of the Sales and Use Taxes for the most recent twelve months. Partial Redemption of a Series 2009 Bond. If less than all of the Series 2009 Bonds of a maturity are called for redemption, the particular Series 2009 Bonds or portions of Series 2009 Bonds to be redeemed shall be selected by lot in such manner as the Trustee in its discretion may deem fair and appropriate. So long as DTC or its nominee is the sole registered owner of the Series 2009 Bonds, the procedures established by DTC shall control with respect to the selection of the particular Series 2009 Bonds to be redeemed. Notice of Redemption. Notice of the call for any redemption, identifying the Series 2009 Bonds or portions thereof being called and the date on which they shall be presented for payment, shall be mailed by the Trustee by first class mail (or, so long as DTC or its nominee is the sole registered owner of the Series 2009 Bonds, by any other means acceptable to DTC, including facsimile) to the registered owner of each such Series 2009 Bond addressed to such registered owner at his registered address and placed in the mails not less than thirty (30) nor more than sixty (60) days prior to the date fixed for redemption; provided, however, that failure to give such notice by mailing, or any defect therein, shall not affect the validity of any proceeding for the redemption of any Series 2009 Bond with respect to which no such failure or defect has occurred. Any notice mailed as provided above shall be conclusively presumed to have been duly given, whether or not the registered owner receives the notice. Additional Bonds. To the extent authority remains under the Election Ordinance, the City may issue from time to time one or more series of Additional Bonds for the purpose of (i) financing Project Costs in connection with the acquisition, construction, reconstruction, extension, improving or equipping of the Projects, (ii) refunding the Series 2006A Bonds, the Series 2007 Bonds, the Series 2009 Bonds or any series of Additional Bonds, in whole or in pan, or (iii) any combination thereof. Additional Bonds shall be secured equally and ratably with the Series 2006A Bonds, the Series 2007 Bonds, the Series 2009 Bonds and any other series of Additional Bonds theretofore • issued and then Outstanding, except insofar any tens or conditions of redemption or purchase established under the Indenture may afford additional benefit or security for the Bonds of any particular series and except for the security afforded by arty municipal bond insurance obtained with respect to a particular series of Bonds. Before any Additional Bonds are authenticated, there shall be delivered to the Trustee a certificate of the City's Finance Director certifying that, based upon the most recent twelve (12) months of Sales and Use Tax collections, (i) receipts of the 0.25% Sales and Use Tax were not less than 125% of the maximum Annual Debt Service for each of the years ending November I, 2009 through November I, 2014, on all the Outstanding Bonds theretofore incurred, plus the Additional Bonds to be issued, and (ii) receipts of the 0.25% Sales and Use Tax and the 0.75% Sales and Use Tax were not less than 125% of the maximum Annual Debt Service for each of the years ending November 1, 2015 and thereafter, on all the Outstanding Bonds, plus the Additional Bonds to be issued. For the purpose of making the aforementioned certification, receipts of the Existing Tax may be included in total receipts of the 0.75% Sales and Use Tax for all or any portion of the most recent twelve (12) month period during which the 0.75% Sales and Use Tax was not being collected. The aggregate principal amount of Additional Bonds that may be issued is limited to 534,410,000, except for refunding bonds issued under the Indenture. Notwithstanding anything described above to the contrary, no Additional Bonds shall be issued unless there is no default at the time of issuance tinder the Indenture, Transfer or Exchange. The Series 2009 Bonds may be transferred on the books of registration kept by the Trustee by the registered owner in person or by the owner's duly authorized attorney, upon surrender thereof, together with a written instrument of transfer duly executed by the registered owner or the owner's duly authorized attorney. Upon surrender for transfer of any Series 2009 Bond at the principal corporate office of the Trustee, the City shall execute and the Trustee shall authenticate and deliver in the name of the transferee or transferees a new Series 2009 Bond or Bonds in the same aggregate principal amount and of any authorized denomination or denominations. Transfers of registration or exchanges of Series 2009 Bonds shall be without charge to the Holders of such Series 2009 Bonds, but any taxes or other governmental charges required to be paid with respect to the same shall be paid by the Holder of the Series 2009 Bond requesting such transfer or exchange as a condition precedent to the exercise of such privilege. • • The Trustee shall not be required to transfer or exchange any Series 2009 Bond during the period from and including a Record Date to the next succeeding interest payment date of such Series 2009 Bond nor to transfer or exchange any Series 200 Bond after the mailing of notice calling such Series 200 Bond for redemption has been made, and prior to such redemption. So long as DTC or its nominee is the sole registered owner of the Series 2009 Bonds, transfers of beneficial interests in the Series 2009 Bonds shall be in accordance with the rules and procedures of DTC and its direct and indirect participants. Sec the caption "BOOK -ENTRY ONLY SYSTEM" herein. SECURITY FOR THE BONDS General. The Series 2009 Bonds are special obligations of the City secured by and payable from the receipts of (i) a special city-wide sales and use tax levied pursuant to the Act at the rate of one -quarter of one percent (0.25%) (the "0.25% Sales and Use Tax") and (ii) a special city-wide sales and use tax levied pursuant to the Act at the rate of three-quarters of one percent (0.75%) (the "0.75% Sales and Use Tax," and together with the 0.25% Sales and Use Tax, the "Sales and Use Taxes"). The Sales and Use Taxes were levied under Ordinance No. 4891, duly adopted by the City Council of the City on June 20, 2006 (the "Election Ordinance"). Pursuant to the Election Ordinance, a special election was held on September 12, 2006, at which time the qualified electors of the City approved the issuance of capital improvement bonds in principal amount not to exceed $110,000,000 and the corresponding levy of the Sales and Use Taxes. The receipts of the Sales and Use Taxes were pledged to secure the payment of Debt Service on the Series 2009 Bonds pursuant to Ordinance No. 5277, duly adopted by the City Council of the City on October 6, 2009 (the "Authorizing Ordinance"). Such pledge is made on a parity basis with an existing pledge on such receipt securing (i) S48,125,000 outstanding principal amount of the City's Sales and Use Tax Capital Improvement Bonds, Series 2006A (the "Series 2006A Bonds"), and (ii) $13,090,000 outstanding principal amount of the City's Sales and Use Tax Capital Improvement Bonds, Series 2007 (the "Series 2007 Bonds"). Pursuant to the terms of the Election Ordinance, the collection of the 0.25% Sales and Use Tax commenced • on January I, 2007. An existing three-quarters of one percent (0.75%) special city-wide sales and use tax (the "Existing Tax") is pledged to the payment of certain indebtedness of the City originally authorized in the aggregate principal amount of $92,000,000 (the "Existing Indebtedness"). Given redemptions of the Existing Indebtedness to date, the outstanding principal amount of the Existing Indebtedness is $60,452,196. Assuming no growth in collections of the Existing Tax, it is currently projected that the Existing Indebtedness will be paid in full in the fourth quarter of 2014. The levy of the Existing Tax will cease upon payment in full of the Existing Indebtedness or adequate provision therefor. Collection of the 0.75% Sales and Use Tax will commence on the first day of the first month following cessation of the Existing Tax. See the captions "THE SALES AND USE TAXES" and "HISTORICAL SALES AND USE TAX COLLECTIONS" herein. The Series 2009 Bonds do not constitute an indebtedness of the City within the meaning of any constitutional or statutory debt limitation or restriction. The issuance of the Series 2009 Bonds shall not directly, indirectly or contingently obligate the City to levy or pledge any taxes whatsoever or to make any appropriation for the payment of the Series 2009 Bonds, except as described herein with respect to the Sales and Use Taxes. Debt Service Reserve. From the proceeds of the Series 2009 Bonds, there shall be deposited into the Series 2009 Account of the Debt Service Reserve Fund an amount sufficient to cause the amounts on deposit therein to be equal to 5% of the aggregate principal amount of the Series 2009 Bonds (the "Reserve Requirement"). Amounts on deposit in the Series 2009 Account of the Debt Service Reserve Fund shall be used solely to pay the principal of and interest on the Outstanding Series 2009 Bonds as due for which there are no available funds in the Bond Fund to make such payments. The Reserve Requirement may be satisfied by cash or by Investment Securities, including the Reserve Fund Insurance Policy (as defined below). If the amount in the Debt Service Reserve Fund is ever reduced below the Reserve Requirement, it shall be reimbursed to an amount equal to the Reserve Requirement through monthly payments, beginning not later than the last day of the month in which the Debt Service Reserve Fund was reduced below the Reserve Requirement, and continuing not later than the last day of each month thereafter until such reimbursement shall have been accomplished, from any funds in the Revenue Fund (after making the required deposits into the Interest Account and Principal Account of the Bond Fund, as provided in the Indenture). If a surplus shall exist in the Debt Service Reserve Fund over and above the Reserve Requirement, such surplus shall be deposited into the Interest Account of • the Bond Fund. Assured Guaranty has made a commitment to issue a financial guaranty insurance policy for the Debt • Service Reserve Fund with respect to the Series 2009 Bonds (the "Reserve Fund Insurance Policy"), effective as of the date of issuance of such Series 2009 Bonds. Under the terms of the Reserve Fund Insurance Policy, Assured Guaranty will unconditionally and irrevocably guarantee to pay that portion of the scheduled principal and interest on the Series 2009 Bonds that becomes due for payment but shall be unpaid by reason of nonpayment by the City (the "Insured Payments"). Assured Guaranty will pay each portion of an Insured Payment that is due for payment and unpaid by reason of nonpayment by the City to the Trustee or Paying Agent, as beneficiary of the Reserve Fund Insurance Policy on behalf of the holders of the Series 2009 Bonds, on the later to occur of (i) the date such scheduled principal or interest becomes due for payment or (ii) the business day next following the day on which Assured Guaranty receives a demand for payment therefor in accordance with the terms of the Reserve Fund Insurance Policy. No payment shall be made under the Reserve Fund Insurance Policy in excess of $562,500 (the "Reserve Fund Insurance Policy Limit"). Pursuant to the terms of the Reserve Fund Insurance Policy, the amount available at any particular time to be paid to the Trustee or Paying Agent shall automatically be reduced to the exteni of any payment made by Assured Guaranty under the Reserve Fund Insurance Policy, provided, that, to the extent of the reimbursement of such payment to Assured Guaranty, the amount available under the Reserve Fund Insurance Policy shall be reinstated in full or in part, in an amount not to exceed the Reserve Fund Insurance Policy Limit. The Reserve Fund Insurance Policy does not insure against nonpayment caused by the insolvency or negligence of the Trustee or Paying Agent. The Reserve Fund Insurance Policy is not covered by any insurance or guaranty fund established under New York, California, Connecticut or Florida insurance law. For information on Assured Guaranty, see the caption "BOND INSURANCE" herein. BOND INSURANCE The Insurance Policy Concurrently with the issuance of the Series 2009 Bonds, Assured Guaranty Corp. ("Assured Guaranty" or the "Insurer") will issue its financial guaranty insurance policy (the "Policy") for the Series 2009 Bonds. The Policy guarantees the scheduled payment of principal of and interest on the Series 2009 Bonds when due as set forth in the form of the Policy included as an exhibit to this Official Statement. The Policy is not covered by any insurance security or guaranty fund established under New York, California, Connecticut or Florida insurance law. The Insurer Assured Guaranty is a Maryland -domiciled insurance company regulated by the Maryland Insurance Administration and licensed to conduct financial guaranty insurance business in all fifty states of the United States, the District of Columbia and Puerto Rico. Assured Guaranty commenced operations in 1988. Assured Guaranty is a wholly owned, indirect subsidiary of Assured Guaranty Ltd. ("AGL"), a Bermuda -based holding company whose shares are publicly traded and are listed on the New York Stock Exchange under the symbol "AGO." AGL, through its operating subsidiaries, provides credit enhancement products to the U.S. and global public finance, structured finance and mortgage markets. Neither AGL nor any of its shareholders is obligated to pay any debts of Assured Guaranty or any claims under any insurance policy issued by Assured Guaranty. L Assured Guaranty's financial strength is rated "AAA" (negative outlook) by Standard & Poor's, a division of The McGraw-Hill Companies, Inc. ("S&P"), "Aa2" (on review for possible downgrade) by Moody's Investors Service, Inc. ("Moody's") and "AA-" (negative outlook) by Fitch, Inc. ("Fitch"). Each rating of Assured Guaranty should be evaluated independently. An explanation of the significance of the above ratings may be obtained from the applicable rating agency. The above ratings are not recommendations to buy, sell or hold any security, and such ratings are subject to revision or withdrawal at any time by the rating agencies. Any downward revision or withdrawal of any of the above ratings may have an adverse effect on the market price of any security guaranteed by Assured Guaranty. Assured Guaranty does not guaranty the market price of the securities it guarantees, nor does it • guaranty that the ratings on such securities will not be revised or withdrawn. • Recent Developments Ratings On July 1, 2009, S&P published a Research Update in which it affirmed its "AAA" countcrparty credit and financial strength ratings on Assured Guaranty. At the same time, S&P revised its outlook on Assured Guaranty to negative from stable. Reference is made to the Research Update, a copy of which is available at www.standardandpoors.com, for the complete text of S&P's comments. On May 20, 2009, Moody's issued a press release stating that it had placed the "Aa2" insurance financial strength rating of Assured Guaranty on review for possible downgrade. Subsequently, in an announcement dated July 24, 2009 entitled "Moody's Comments on Assured's Announcement to Guarantee and Delist FSA Debt", Moody's announced that it expected to conclude its review by mid -August 2009. Reference is made to the press release and the announcement, copies of which are available at www.moodys.com, for the complete text of Moody's comments. In a press release dated October 12, 2009, Fitch announced that it had downgraded the insurer financial strength rating of Assured Guaranty to "AA-" (negative outlook) from "AA" (ratings watch negative). Reference is made to the press release, a copy of which is available at www.fitchratings.com, for the complete text of Fitch's comments. There can be no assurance as to the outcome of Moody's review, or as to the further action that Fitch or S&P may take with respect to Assured Guaranty. For more information regarding Assured Guaranty's financial strength ratings and the risks relating thereto, see AGL's Annual Report on Form 10-K for the fiscal year ended December 31, 2008, which was filed by AGL with the Securities and Exchange Commission ("SEC") on February 26, 2009, AGL's Quarterly Report on Form 10- Q for the quarterly period ended March 31, 2009, which was filed by AGL with the SEC on May 11, 2009, and AGL's Quarterly Report on Fort 10-Q for the quarterly period ended June 30, 2009, which was filed by AGL with • the SEC on August 10, 2009. Acquisition of FSA On July 1, 2009, AGL acquired the financial guaranty operations of Financial Security Assurance Holdings Ltd. ("FSA"), the parent of financial guaranty insurance company Financial Security Assurance Inc. For more information regarding the acquisition by AGL of FSA, see Item 1.01 of the Current Report on Form 8-K filed by AGL with the SEC on July 8, 2009. Capitalization of Assured Guaranty Corp. As of June 30, 2009, Assured Guaranty had total admitted assets of 51,950,949,811 (unaudited), total liabilities of 51,653,306,246 (unaudited), total surplus of $297,643,565 (unaudited) and total statutory capital (surplus plus contingency reserves) of $1,084,906,800 (unaudited) determined in accordance with statutory accounting practices prescribed or permitted, by insurance regulatory authorities. Incorporation of Certain Documents by Reference The portions of the following documents relating to Assured Guaranty are hereby incorporated by reference into this Official Statement and shall be deemed to be a part hereof: • the Annual Report on Form 10-K of AGL for the fiscal year ended December 31, 2008 (which was filed by AGL with the SEC on February 26, 2009); • the Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2009 (which was filed by AGL with the SEC on May 11,2009); C • the Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2009 (which was • filed by AGL with the SEC on August 10, 2009); and • the Current Reports on Form 8-K filed by AGL with the SEC relating to the periods following the fiscal year ended December 31, 2008. All consolidated financial statements of Assured Guaranty and all other information relating to Assured Guaranty included in documents filed by AGL with the SEC pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended, subsequent to the date of this Official Statement and prior to the termination of the offering of the Series 2009 Bonds shall be deemed to be incorporated by reference into this Official Statement and to be a part hereof from the respective dates of filing such consolidated financial statements. Any statement contained in a document incorporated herein by reference or contained herein under the heading "Bond Insurance -The Insurer" shall be modified or superseded for purposes of this Official Statement to the extent that a statement contained herein or in any subsequently filed document which is incorporated by reference herein also modifies or supersedes such statement. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Official Statement. Copies of the consolidated financial statements of Assured Guaranty incorporated by reference herein and of the statutory financial statements filed by Assured Guaranty with the Maryland Insurance Administration are available upon request by contacting Assured Guaranty at 31 West 52nd Street, New York, New York 10019 or by calling Assured Guaranty at (212) 974-0100. In addition, the information regarding Assured Guaranty that is incorporated by reference in this Official Statement that has been filed by AGL with the SEC is available to the public over the Internet at the SEC's web site at hap://www.sec.gov and at AGL's web site at hrrp://www.assuredguaran0v.com, from the SEC's Public Reference Room at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at the office of the New York Stock Exchange at 20 Broad Street, New York, New York 10005. Assured Guaranty makes no representation regarding the Series 2009 Bonds or the advisability of investing • in the Series 2009 Bonds. In addition, Assured Guaranty has not independently verified, makes no representation regarding, and does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding Assured Guaranty supplied by Assured Guaranty and presented under the heading "BOND INSURANCE". BOOK -ENTRY ONLY SYSTEM The Series 2009 Bonds will be issued only as one fully registered Series 2009 Bond for each maturity, in the name of Cede & Co., as nominee for The Depository Trust Company, New York, New York ("DTC"), as registered owner of all the Series 2009 Bonds. The fully registered Series 2009 Bonds will be retained and immobilized in the custody of DTC. DTC (or any successor securities depository) or its nominee will be considered by the City and the Trustee to be the owner or holder of the Series 2009 Bonds for all purposes under the Indenture. Owners of any book entry interests in the Series 2009 Bonds (the "book entry interest owners") described below, will not receive or have the right to receive physical delivery of the Series 2009 Bonds, and will not be considered by the City and the Trustee to be, and will not have any rights as, owners or holders of the Series 2009 Bonds under the bond proceedings and the Indenture except to the extent, if any, expressly provided thereunder. CERTAIN INFORMATION REGARDING DTC AND DIRECT PARTICIPANTS IS SET FORTH BELOW. THIS INFORMATION HAS BEEN PROVIDED BY DTC. THE CITY. THE UNDERWRITER AND BOND COUNSEL ASSUME NO RESPONSIBILITY FOR THE ACCURACY OF SUCH STATEMENTS. DTC, the world's largest depository, is a limited -purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues and money market instruments (from over 100 countries) that DTC's participants ("Direct Participants") deposit with DTC. DTC also facilitates the post -trade settlement among Direct • • Participants of sales and other securities transactions in deposited securities, through electronic computerized book - entry transfers and pledges among Direct Participants' accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly -owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC is the holding company for DTC, the National Securities Clearing Corporation and the Fixed Income Clearing Corporation, all of which are registered agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). The DTC Rules applicable to its Direct and Indirect Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com and www.dtc.ore. Purchases of Series 2009 Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Series 2009 Bonds on DTC's records. The ownership interest of each actual purchaser of each Series 2009 Bond ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participantsrecords. Beneficial Owners will not receive written confirmation from DTC of their purchase, but Beneficial Owners are expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Series 2009 Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Series 2009 Bonds, except in the event that use of the Book -Entry System for the Series 2009 Bonds is discontinued. To facilitate subsequent transfers, all Series 2009 Bonds deposited by Direct Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co. or such other name as may be requested by an authorized representative of DTC. The deposit of Series 2009 Bonds with DTC and their registration in the name of Cede & Co. or such other nominee do not effect any change in beneficial ownership. DTC has no knowledge of the • actual Beneficial Owners of the Series 2009 Bonds; DTC's records reflect only the identity of the Direct Participants to whose accounts such Series 2009 Bonds are credited, which may or may not he the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Redemption notices shall be sent to DTC. If less than all of the Series 2009 Bonds within a maturity are to be redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be redeemed. Neither DTC nor Cede & Co. (nor such other DTC nominee) will consent or vote with respect to the Series 2009 Bonds unless authorized by a Direct Participant in accordance with DTC's Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the City as soon as possible after the Record Date. The Omnibus Proxy will assign Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the Series 2009 Bonds arc credited on the Record Date (identified in a listing attached to the Omnibus Proxy). Payment of debt service and redemption proceeds with respect to the Series 2009 Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC's practice is to credit Direct Participants' accounts upon DTC's receipt of funds and corresponding detail information from the City or the Trustee on payable date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC, the Trustee or the City, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds and debt service to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the City or the Trustee, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. • BENEFICIAL OWNERS SHOULD CONSULT WITH THE DIRECT PARTICIPANTS OR INDIRECT • PARTICIPANTS FROM WHOM THEY PURCHASE A BOOK ENTRY INTEREST TO OBTAIN INFORMATION CONCERNING THE SYSTEM MAINTAINED BY SUCH DIRECT PARTICIPANTS OR INDIRECT PARTICIPANTS TO RECORD SUCH INTERESTS, TO MAKE PAYMENTS, TO FORWARD NOTICES OF REDEMPTION AND OF OTHER INFORMATION. THE CITY AND THE TRUSTEE HAVE NO RESPONSIBILITY OR LIABILITY FOR ANY ASPECTS OF THE RECORDS OR NOTICES RELATING TO, OR PAYMENTS MADE ON ACCOUNT OF, BOOK ENTRY INTEREST OWNERSHIP, OR FOR MAINTAINING, SUPERVISING OR REVIEWING ANY RECORDS RELATING TO THAT OWNERSHIP. The Trustee and the City, so long as a book entry method of recording and transferring interest in the Series 2009 Bonds is used, will send any notice of redemption or of any Indenture amendment or supplement or other notices to Bondholders under the Indenture only to DTC (or any successor securities depository) or its nominee. Any failure of DTC to advise any Direct Participants, or of any Direct Participants or Indirect Participants to notify any Beneficial Owner, of any such notice and its content or effect will not affect the validity of the redemption of the Series 2009 Bonds called for redemption, the Indenture amendment or supplement, or any other action premised on notice given under the Indenture. The City and the Trustee cannot and do not give any assurances that DTC, Direct Participants, Indirect Participants or others will distribute payments of debt service on the Series 2009 Bonds made to DTC or its nominee as the registered owner of the Series 2009 Bonds, or any redemption or other notices, to the Beneficial Owners, or that they will do so on a timely basis, or that DTC will serve and act in a manner described in this Official Statement. DTC may discontinue providing its services as securities depository with respect to the Series 2009 Bonds at any time by giving reasonable notice to the City or the Trustee. Under such circumstances, in the event that a successor securities depository is not obtained, bond certificates are required to be printed and delivered. In addition, the City may decide to discontinue use of the system of book -entry transfers through DTC (or a • successor securities depository). In that event, bond certificates will be printed and delivered. THE PROJECTS Street Project. Approximately 59,633,000 of the proceeds of the Series 2009 Bonds will be deposited into the Street Account of the Project Fund to finance a portion of the costs of acquiring, constructing, reconstructing, repairing, straightening and widening certain streets and related improvements (the "Street Project"). Trail Project, Approximately 51,258,000 of the proceeds of the Series 2009 Bonds will be deposited into the Trail Account of the Project Fund to finance a portion of the costs of acquiring, constructing and equipping certain City trail system improvements (the "Trail Project"). [REMAINDER OF PAGE INTENTIONALLY BLANK] • 10 • HISTORICAL SALES AND USE TAX COLLECTIONS An existing three-quarters of one percent (0.75%) special city-wide sales and use tax (the "Existing Tax") is pledged to the payment of certain indebtedness of the City originally authorized in the aggregate principal amount of $92,000,000 (the "Existing Indebtedness"). Given redemptions of the Existing Indebtedness to date, the outstanding principal amount of the Existing Indebtedness is $60,452,196. Assuming no growth in collections of the Existing Tax, it is currently projected that the Existing Indebtedness will be paid in full in the fourth quarter of 2014. The levy of the Existing Tax will cease upon payment in full of the Existing Indebtedness or adequate provision therefor. Collection of the 0.75% Sales and Use Tax will commence on the first day of the first month following cessation of the Existing Tax. Collection of the Existing Tax commenced April 1, 2002. Set forth below is a table showing receipts of the Existing Tax and receipts of a separate one percent (1.00%) city-wide sales and use tax (the "1.00% Tax") over the last seven years. Collections of the 1.00% Tax for the most recent twelve-month period (August, 2008 to July, 2009) were S 16,093,882, a 0.63% decrease from the previous twelve-month period (August, 2007 to July, 2008). historical Collections of Historical Collections of Year Existing Tax (0.75%) 1.00% Tax (�) Growth Percentage 2002 $6,185,700(11 512,451,096 n/a 2003 9,721,700 12,962,441 4.11% 2004 10,637,825 14,184,374 9.43% 2005 11,512,386 15,350,158 8.22% 2006 11,819,776 15,761,266 2.68% 2007 11,656,893 15,564,174 (1.25%) 2008 12,375,932 16,501,242 6.02% • (1) Reflects corrections of the Existing Tax for the nine -month period from April 1, 2002 to December 31, 2002. (2) Reflects collrctions of a one percent (1.00%) city-wide sales and use tax. This tax is not pledged to the payment ofany indebtedness. SOURCES AND USES OF FUNDS The proceeds of the Series 2009 Bonds are expected to be used as follows Sources of Funds0l Par Amount of Series 2009 Bonds $11,250,000 Original Issue Discount 56,500 Total Sources: $ 1 1.193.500 Uses of Fundsul Deposit to Street Account of Project Fund 59,633,445 Deposit to Trail Account of Project Fund 1,258,624 Bond Insurance Premium 79,712 Debt Service Reserve Policy Premium 21,094 Costs of Issuance, including Bond Insurance and Reserve Policy premiums and Underwriter's Discount 200,625 Total Uses • DEBT SERVICE REQUIREMENTS • As of the date of closing, the Series 2006A Bonds, the Series 2007 Bonds and the Series 2009 Bonds will constitute the only debt obligations secured by receipts of the Sales and Use Taxes. The following table sets forth the amounts required to pay scheduled principal of and interest on the Series 2006A Bonds, the Series 2007 Bonds and the Series 2009 Bonds during each year: Series 2006A and Series 2006A and Series 2009 Series 2009 Total Debt Year 2007 Principal 2007 Interest Principal° Interest Service 2009 $ -- $2,703,638 $ -- $ -- $2,703,638 2010 -- 2,703,638 -- 406,425 3,110,063 2011 -- 2,703,638 -- 406,425 3,110,063 2012 -- 2,703,638 -- 406,425 3,110,063 2013 -- 2,703,638 -- 406,425 3,1 10,063 2014 -- 2,703,638 -- 406,425 3,110,063 2015 7,115,000 2,703,638 1,450,000 406,425 11,675,063 2016 7,465,000 2,357,287 1,495,000 362,925 11,680,212 2017 7,830,000 1,993,837 1,545,000 314,338 II ,683, 175 2018 8,210,000 1,612,537 1,600,000 260,262 11,682,799 2019 8,590,000 1,230,512 1,655,000 202,263 11,677,775 2020 8,975,000 848,362 1,720,000 140,200 - 11,683,562 2021 7,380,000 566,231 1,785,000 71,400 9,802,631 2022 1,255,000 259,081 -- -- 1,514,081 2023 1,315,000 196,331 -- -- 1,511,331 2024 1,385,000 130,581 -- -- 1,515,581 2025 1,440,000 71,719 -- -- 1,511,719 2026 255,000 10,519 — -- 265,519 • Totals: $61 21 2S .29A1 $11250,000 $ 82,`3$ S104 457.401 to Including mandatory sinking fund redemptions. ESTIMATED DEBT SERVICE COVERAGE Set forth below arc tables showing estimated debt service coverage with respect to the Series 2006A Bonds, the Series 2007 Bonds and the Series 2009 Bonds during the years 2009-2014 and during the years 2015-2026. Collections of the Existing Tax during the twelve-month period ended July 3!, 2009 were utilized for the purpose of making the coverage calculations. See the caption "HISTORICAL SALES AND USE TAX COLLECTIONS" herein. [REMAINDER OF PAGE INTENTIONALLY BLANK] • 12 • The City will initially receive collections only from the 0.25% Sales and Use Tax which was levied and commenced being collected as of January I, 2007. The Existing Tax is pledged to the payment of the Existing Indebtedness, originally authorized in the aggregate principal amount of 592,000,000. Given redemptions of the Existing Indebtedness to date, the outstanding principal amount of the Existing Indebtedness is $60,452,196. Assuming no growth in collections of the Existing Tax, it is currently projected that the Existing Indebtedness will be paid in full in the fourth quarter of 2014. The levy of the Existing Tax will cease upon payment in full of the Existing Indebtedness or adequate provision therefor. Collection of the 0.75% Sales and Use Tax will commence on the first day of the first month following cessation of the Existing Tax. Historical Existing Tax Receipts at 0.25%01 54,023,471 Maximum Annual Debt Service (2009-2014)(') $3,110,063 Maximum Annual Debt Service Coverage 1.29X Actual collections of the Existing Tax during the last twelve-month period ending July 31, 2009. and assuming a tax rate of 0.25%. Sec the caption "IIISTORICAL SALES AND USE TAX COLLECTIONS" herein. 121 Representing debt service on the Safes 2006A Bonds, 'he Series 2007 Bonds and the Series 2009 Bonds in 2009-2014. See the caption "DEBT SERVICE REQUIREMENTS' herein. Historical Existing Tax Receipts at 1.00% (I) S 16,093,882 Maximum Annual Debt Service (2015-2026) (2) S 11,683,562 Maximum Annual Debt Service Coverage 1.38X I) Actual collections of the Existing Tax during the last Iwelwe-month period ending July 31, 2009, and assuming a tax rate of 1.00%. See the • caption "I IISTORICAL SALES AND USE TAX COLLECTIONS" herein. 1't Representing debt service on the Series 2006A Bonds, the Series 2007 Bonds and the Series 2009 Bonds in 2015-2026. Sec the caption "DEBT SERVICE REQUIREMENTS" herein. THE COVERAGE NUMBERS SET FORTH ABOVE ARE BASED ON HISTORICAL RECEIPTS OF THE EXISTING TAX, ACTUAL RECEIPTS OF THE SALES AND USE TAXES WILL DEPEND ON NUMEROUS FACTORS, AND THERE CAN 13E NO ASSURANCE THAT FUTURE RECEIPTS OF THE SALES AND USE TAXES AVAILABLE TO PAY DEBT SERVICE ON THE SERIES 2006A BONDS, THE SERIES 2007 BONDS AND THE SERIES 2009 BONDS WILL APPROXIMATE SUCH HISTORICAL RESULTS. See the caption "THE SALES AND USE TAXES - Future Receipt ofthe Sales and Use Taxes" herein. PRO,IECTED MANDATORY REDEMPTIONS The table under the caption "DEBT SERVICE REQUIREMENTS" does not reflect possible mandatory redemptions of the Series 2006A Bonds, the Series 2007 Bonds and the Series 2009 Bonds from Surplus Tax Receipts, if available. Surplus Tax Receipts are all receipts of the Sales and Use Taxes in excess of the amount necessary (i) to assure the prompt payment of the principal of and interest on Outstanding Series 2006A Bonds, the Series 2007 Bonds, the Series 2009 Bonds and any Additional Bonds, (ii) to maintain the Debt Service Reserve Fund in an amount equal to the Reserve Requirement, (iii) to pay any arbitrage rebate due under Section 148(f) of the Code, and (iv) to pay Trustee and Paying Agent fees and expenses. So long as the Series 2006A Bonds are outstanding, 50% of the Surplus Tax Receipts shall be allocated to the redemption of the Series 2006A Bonds and the remaining 50% of Surplus Tax Receipts shall be allocated ratably (based on relative outstanding principal amounts) to the redemption of the Series 2007 Bonds, the Series 2009 Bonds and any series of Additional Bonds hereafter issued as provided under the "THE SERIES 2009 BONDS — Additional Bonds. " Following payment in whole of the Series 2006A Bonds at maturity or upon redemption prior to maturity, all Surplus Tax Receipts shall be allocated ratably (based on relative outstanding principal amounts) to the redemption of the Series 2007 Bonds, the Series 2009 Bonds and any other series of Additional Bonds. THERE CAN BE NO ASSURANCE GIVEN THAT RECEIPTS OF THE SALES AND USE TAXES WILL BE REALIZED IN THE AMOUNTS ASSUMED IN THE TABLE ABOVE. See the caption "THE SALES AND USE TAXES —Future Sales and Use Tax Receipts" herein. CI 13 Assuming 0% Tax Growth • Series 2009 Bonds Year Ending Series 2009 Redeemed Prior to Total Series 2009 December 31ttt Principal Due Malurityl�11111't Principal Retired 2010 S -- 210,000 S 210,000 2011 -- 225,000 225,000 2012 -- 240,000 240,000 2013 -- 245,000 245,000 2014 -- 260,000 260,000 2015 1,545,000 850,000 2,300,000 2016 1,495,000 1,1 10,000 2,605,000 2017 1,545,000 1,130,000 2,675,000 2018 1.600.000 890,000 2,490.000 Totals: $ .090.000 $ , t 60.000 Series 2009 Bonds are subject to mandatory redemption from Surplus Tax Receipts on each May I and November I. See the caption "THE SERIES 2009 BONDS — Redemption' herein. (2) Assuming receipts of the Sales and Use Taxes of 54,023,471 for each of the twelve month periods ending December 31, 2010 through 2014, and annual receipts of$16,093,882 thereafter. p) Projected mandatory redemptions related to Series 2009 Bonds maturing November 1, 2019 through November 1. 2021. (4) Assuming the issuance of no Additional Bonds. If there is an increase in annual collections of the Sales and Use Taxes, the City contemplates that it will issue Additional Bonds. THE CITY General. The City is a city of the first class organized and existing under the laws of the State of Arkansas. • The City is the scat of government of Washington County (the "County") and is the fourth largest city in the State. The City is located in the Metropolitan Statistical Area of Fayetteville/Springdale/Rogers (the "MSA"), which includes all of Washington and Benton Counties in the northwest comer of the State and is approximately 185 miles northwest of Little Rock, Arkansas, 125 miles cast of Tulsa, Oklahoma, and 210 miles south of Kansas City, Missouri. The City is served by U.S. Interstate 540, U.S. Highways 62 and 71, and State Highways 16, 45, 112, 156, 180 and 265. The Burlington Northern Railroad has several lines running through the City, and a general aviation airport with a 6,006 -foot runway is available for limited commuter travel. The Northwest Arkansas Regional Airport is located approximately 40 minutes from downtown Fayetteville and provides daily flights to numerous venues. Government. The City currently operates under the Mayor -Council form of government pursuant to which a mayor, city attorney, city clerk and eight aldermen are elected, two from each of the City's four wards. The mayor, city attorney and city clerk are full-time positions elected to four year terms. Aldermen also serve four year terms. • 14 • The City's elected officials and the dates on which their respective terms expire are as follows: Name Office Term Expires Lioneld Jordan Mayor 12/31/12 Kit Williams City Attorney 12/31/10 Sondra Smith City Clerk 12/31/12 Kyle Cook Alderman 12/31/10 Adella Gray Alderman 12/31/10 Bobby Ferrell Alderman 12/31/12 Sarah Lewis Alderman 12/31/12 Shirley Lucas Alderman 12/31/10 Matthew Petty Alderman 12/31/12 Robert Rhoades Alderman 12/31/10 Brenda Thiel Alderman 12/31/12 Population. The following is a table of population changes for the City, the MSA and the State of Arkansas, according to the United States Census Bureau: City of State of Year Fayetteville MSA Arkansas 1960 -20,274 92,069 1,786,272 1970 30,729 127,846 1,923,322 1980 36,608 178,609 2,286,435 1990 42,099 210,908 2,350,624 2000 58,047 311,121 2,673,400 2006" 67,158 n/a n/a • City of Fayetteville special census data. Economic Data. Per capita personal income figures for the MSA and the State of Arkansas are as follows: State of Year MSA Arkansas 1998 22,893 21,256 1999 24,213 22,223 2000 23,316 21,995 2001 24,585 22,750 2002 24,788 23,556 2003 25,359 24,384 2004 27,122 25,814 2005 27,994 26,681 2006 29,807 28,473 2007 n/a 30,060 Source: Discover Arkansas, Data Analysis. C1 15 Retail sales figures for the MSA and the State are as follows: • State of MSA as % of Year MSA Arkansas State of Arkansas 2000 53,526,791,000 528,488,033,000 12.38% 2001 3,806,422,000 29,652,693,000 12.84 2002 3,841,326,000 29,269,775,000 13.12 2003 3,968,812,000 29,920,716,000 13.26 2004 4,610,051,000 31,463,983,000 14.65 2005 5,287,158,000 34,290,412,000 15.42 2006 7,251,810,000 38,843,312,000 18.70 2007 8,250,140,000 43,504,752,000 18.96 Source: 2007 Demographics USA The following table shows the total assessed value of non -utility real and personal property within the City for the years indicated: Year Real Property Personal Property Total 1999 5413,648,415 $137,404,499 $551,052,914 2000 432,951,171 145,147,891 578,099,062 2001 486,853,822 155,794,579 642,648,401 2002 530,235,135 158,778,031 689,013,166 2003 565,846,525 167,638,657 733,485,182 2004 649,361,820 183,102,702 832,464,522 2005 729,172,106 212,694,254 941,866,260 2006 802,306,156 198,469,816 1,000,775,972 2007 942,667,570 203,094,564 1,145,762,134 • 2008 1,026,022,871 203,31 1,701 1,232,334,572 Tax Assessor's Office. The assessed value represents 20% of the appraised value of Source: Washington County property. Building permits issued by the City'" are shown below for the years indicated: 2004 2005 2006 2007 2008 Residential Building 755 721 550 597 420 Permits Commercial Building 29 40 33 557 55 Permits Value of All Building Permits $164,695,359 $237,893,360 $199,638,759 $217,969,400 5241,750,225 (I) Does not include building activity of the Universiiv ofArkansas, school permits and additions/alterations to existing structures. City of Fayetteville. L� 16 • Unemployment figures for the MSA and the State of Arkansas, according to the U.S. Bureau of Labor Statistics, are as follows: Year MSA State of Arkansas 2000 2.9 4.2 2001 3.0 4.7 2002 3.3 5.3 2003 3.7 5.8 2004 3.8 5.6 2005 3.3 5.3 2006 3.6 5.4 2007 3.9 5.4 2008 3.8 5.2 2009* 6.2 7.4 July, 2009 only, preliminary. Employment and Industry. The principal campus of the University of Arkansas is located in the City and had total enrollment for the Fall semester of 2009 of approximately 19,700. On the Fayetteville campus, the University employs approximately 7,963 faculty, administrative, secretarial, clerical and maintenance personnel in both full-time and part-time positions, making the University the largest employer in the City. Other major employers in the City, their products or services and approximate number of employees are set forth below: Employer Product or Service Employee Range Veterans Admin. Med. Ctr. Medical 1,000-2,499 Washington Regional Med. Ctr. Medical 1,000-2,499 • Fayetteville School District Education 1,000-2,499 Washington County Gov't. Government 1,000-2,499 City of Fayetteville Government 500-999 Superior Industries Cast Aluminum Wheels 500-999 Arvest Bank Banking 300-499 Source: City of Fayetteville. TUE SALES AND USE TAXES Generally. The Sales and Use Taxes are levied under the Election Ordinance pursuant to the authority of the Act. The Sales and Use Taxes are taxes levied within the City on all items which are subject to taxation under The Arkansas Gross Receipts Act of 1941 and taxes levied on the receipts from storing, using or consuming tangible personal property under The Arkansas Compensating (Use) Tax Act of 1949. The Sales and Use Taxes are collected only on the first $2,500 of gross receipts, gross proceeds or sales price from any single transaction. Pursuant to the Indenture and the Authorizing Ordinance, the City has pledged the receipts of the Sales and Use Taxes to the payment of the Series 2009 Bonds. Collection of the 0.25% Sales and Use Tax commenced on January 1, 2007. An existing three-quarters of one percent (0.75%) special city-wide sales and use tax (the "Existing Tax") is pledged to the payment of certain indebtedness of the City originally authorized in the aggregate principal amount of $92,000,000 (the "Existing Indebtedness"). Given redemptions of the Existing Indebtedness to date, the outstanding principal amount of the Existing Indebtedness is $60,452,196. Assuming no growth in collections of the Existing Tax, it is currently projected that the Existing Indebtedness will be paid in full in the fourth quarter of 2014. The levy of the Existing Tax will cease upon payment in full of the Existing Indebtedness or adequate provision therefor. Collection of the 0.75% Sales and Use Tax will commence on the first day of the first month following cessation of the Existing Tax. See "Appendix C — THE SALES AND USE TAXES" for a detailed description of the property and services subject to sales and use taxation and the exemptions therefrom. • 17 Administration. Pursuant to the Act, the Commissioner of Revenues of the State (the "Commissioner") • performs all functions incidental to the administration, collection, enforcement and operation of the Sales and Use Taxes. All receipts of the Sales and Use Taxes collected, less certain charges payable and retainage due the commissioner for administrative services in the amount of 3% of the gross receipts of the Sales and Use Taxes, shall be remitted by the State Treasurer to the Trustee monthly. See the caption "SUMMARY OF THE INDENTURE — Application of Sales and Use Tax Receipts" herein. Streamlined Sales and Use Tax Treatment. Pursuant to action of the General Assembly of the State of Arkansas (the "State"), the State elected to participate in a multistate agreement to simplify and modernize sales and use tax administration known as the Streamlined Sales and Use Tax Agreement (the "Streamline Agreement"). The State's participation became effective as of January 1, 2008. Participation in the Streamline Agreement permits the collection by the State and its cities and counties of sales and use tax revenues relating to internet sales from vendors outside of the State. The Streamline Agreement requires each retailer to collect sales and use taxes at the point of delivery instead of at the point of sale as was the previous practice. With respect to sales of motor vehicles, aircraft, watercraf, modular homes, manufactured homes and mobile homes, the Streamline Agreement limits the application of sales and use taxes to the first $2,500 of sales proceeds. There is no limit on the amount of tax collected on the sale of other items. In response to objections to the application of this provision of the Streamline Agreement, the Arkansas General Assembly revised Arkansas law to permit businesses, nonprofits and governmental entities that purchase items pursuant to an invoice that totals more than $2,500 to file for a refund of tax paid in excess of the amount that would have been due on a $2,500 sale. Such refund requests must be filed with the Arkansas Department of Finance and Administration within six months of the date of purchase or six months from the date of payment, if later. Refunds are remitted to purchasers by the State Treasurer and a corresponding amount withheld from disbursements of local sales and use taxes to the applicable city or county. Future Receipts of the Sales and Use Taxes. Receipts of the Sales and Use Taxes will be contingent upon the sale and use of property and services within the City, which activity is generally dependent upon economic • conditions within the City and the surrounding trade area. Also, receipts of the Sales and Use Taxes may be affected by changes to transactions exempted from the Sales and Use Taxes made by legislation adopted by the General Assembly of the State or by the people of the State in the form of a constitutional amendment or initiated act. In the past the General Assembly of the State has considered new exemptions to sales and use taxes, such as food sales, which, if adopted, would materially reduce receipts of the Sales and Use Taxes. The City has no control over actions of the General Assembly or the people of the State and cannot predict whether changes to the Sales and Use Taxes may be made. Accordingly, the City cannot predict with certainty the expected amount of receipts of the Sales and Use Taxes to the be received and, therefore, there can be no assurance that receipts of the Sales and Use Taxes will be sufficient to pay the principal of and interest on the Series 2009 Bonds. [REMAINDER OF PAGE INTENTIONALLY BLANK] • 18 • SUMMARY OF THE INDENTURE The following statements are brief summaries of certain provisions of the Indenture. The statements do not purport to be complete, and reference is made to the Indenture, copies of which are available for examination at the offices of the Finance Director of the City, for a full statement thereof. Funds and Accounts. Receipts of the Sales and Use Taxes are pledged by the Indenture to the payment of the principal of and interest on the Bonds. The following Funds and Accounts have been established with the Trustee in connection with the issuance of the Bonds: Funds and Accounts Revenue Fund Bond Fund, and an Interest Account and a Principal Account therein Debt Service Reserve Fund, and a Series 2006A, Series 2007 and Series 2009 Account therein Redemption Fund Project Fund, and a Street Account, Trail Account and Wastewater Account therein Cost of Issuance Fund Rebate Fund Application of Receipts of the Sales and Use Taxes. The application of receipts of the Sales and Use Taxes is as follows: (a) Revenue Fund. All receipts from the Sales and Use Taxes shall, as and when received, be • deposited into the Revenue Fund. All moneys at any time in the Revenue Fund shall be applied on a monthly basis to the payment of Debt Service on the Bonds, to the maintenance of the Debt Service Reserve Fund, to the payment of any arbitrage rebate due under Section 148(1) of the Code, to the payment of fees and expenses of the Trustee and any Paying Agent, and to the early redemption of the Bonds, at the times and in the amounts set forth as follows: (b) Bond Fund. Upon receipt, but in no event later than the last day of each month in which receipts of the Sales and Use Taxes are deposited in the Revenue Fund, there shall be transferred from the Revenue Fund (i) into the Interest Account of the Bond Fund, an amount equal to 1/6 of the interest on the Outstanding Bonds due on the next interest payment date, and (ii) into the Principal Account of the Bond Fund, an amount equal to 1/12 of the next scheduled principal maturity of Outstanding Bonds. Moneys in the Bond Fund shall be used solely for the purpose of paying Annual Debt Service on the Bonds or for redemption of Bonds, as provided in the Indenture. The Trustee shall withdraw from the Bond Fund, on the date of any principal or interest payment, an amount equal to such payment for the sole purpose of paying the same. If receipts of the Sales and Use Taxes in the Revenue Fund are insufficient to make the required monthly payment into the Bond Fund, the amount of any such deficiency in the payment made shall be added to the amount otherwise required to be paid into the Bond Fund not later than last day of the next succeeding month. When the moneys held in the Revenue Fund, the Bond Fund, the Debt Service Reserve Fund and the Redemption Fund shall be and remain sufficient to pay in full the principal of and interest on all Bonds then Outstanding in accordance with the Indenture, together with the required fees and expenses to be paid or reimbursed to the Trustee and any Paying Agent, the City shall have no further obligation to make payments into such Funds and the levy of the Sales and Use Taxes shall cease. (c) Debt Service Reserve Fund. See the caption "SECURITY FOR THE BONDS — Debt Service Reserve" herein. (d) Rebate Fund. The Trustee shall establish and maintain, separate and apart from any other Funds and Accounts established and maintained under the Indenture, the Rebate Fund, which Fund is not pledged to the payment of any Bonds. Subject to transfer to the United States in payment of any arbitrage rebate due under Section • 148(f) of the Code, all moneys at any time deposited in the Rebate Fund shall be held by the Trustee in trust, and 19 neither the City nor the Owner of any Bond shall have any rights in or claim to such money. Any amounts • remaining in the Rebate Fund after payment in full of the rebate amount owing to the United States, within sixty (60) days after the date on which the last Bond is redeemed, shall be transferred to the Revenue Fund. (e) Redemption Fund. After making the required deposits into the Bond Fund, into the Debt Service Reserve Fund, and into the Rebate Fund, and after paying the fees and expenses of the Trustee and any Paying Agent, there shall be paid from the Revenue Fund into the Redemption Fund all remaining moneys in the Revenue Fund (the "Surplus Tax Receipts"). Moneys in the Redemption Fund shall be transferred to the appropriate Principal Account(s) of the Bond Fund at such times as may be necessary to effectuate redemptions of Bonds on the. first available redemption date. So long as the Series 2006A Bonds are outstanding, 50% of the Surplus Tax Receipts shall be allocated to the redemption of the Series 2006A Bonds and the remaining 50% of Surplus Tax Receipts shall be allocated ratably (based on relative outstanding principal amounts) to the redemption of the Series 2007 Bonds, the Series 2009 Bonds and any series of Additional Bonds. Following payment in whole of the Series 2006A Bonds at maturity or upon redemption prior to maturity, all Surplus Tax Receipts shall be allocated ratably (based on relative outstanding principal amounts) to the redemption of the Series 2007 Bonds, the Series 2009 Bonds and any other series of Additional Bonds. See the captions "THE SERIES 2009 BONDS — Redemption" and "PROJECTED MANDATORY REDEMPTIONS" herein. (I) Project Fund. A portion of the proceeds of the Series 2009 Bonds shall be deposited in the Street Account and the Trail Account of the Project Fund. See the captions "SOURCES AND USES OF FUNDS" and "THE PROJECTS" herein. Amounts in the Street Account in the Project Fund shall be expended only for the payment of Project Costs related to the applicable portion of the Street Project being financed with the Series 2009 Bonds upon the submission of Requisitions by the City to the Trustee. Amounts in the Trail Account in the Project Fund shall be expended only for the payment of Project Costs related to the applicable portion of the Trail Project being financed with the Series 2009 Bonds upon the submission of Requisitions by the City to the Trustee. The Trustee shall only make payments from the Project Fund pursuant to and in accordance with Requisitions. Within ninety (90) days following completion of the portion of a Project being financed with a particular series of Bonds, the City shall deliver to the Trustee its Certificate stating that the applicable portion of such Project is complete and • the Trustee shall transfer the remaining moneys in the applicable Account of the Project Fund relating to such series of Bonds (save and except moneys needed to satisfy unpaid Project Costs) to the Redemption Fund for application to the retirement of the corresponding series of Bonds by redemption or purchase. See the caption "THE SERIES 2009 BONDS — Redemption" herein. (g) Cost of Issuance Fund. A portion of the proceeds of the Series 2009 Bonds shall be deposited to the credit of the Cost of Issuance Fund. The Trustee shall pay those Costs of Issuance as directed by the City pursuant to a Certificate delivered on a Closing Date. After all Costs of Issuance have been paid with respect to the Series 2009 Bonds (and in any event not later than December 1, 2009), any remaining moneys in the Cost of Issuance Fund shall be transferred to the Interest Account of the Bond Fund. Investment of Funds. At the direction of the City or absent such direction, the Trustee shall invest moneys in Funds or Accounts held by the Trustee in Investment Securities with maturity or redemption dates consistent with the times at which said moneys will be required for the purposes provided in the Indenture. Moneys in separate Funds or Accounts may be commingled for the purpose of investment. Valuation of Funds and Accounts. In determining the value of any Fund or Account held by the Trustee under the Indenture, the Trustee shall credit Investment Securities at the fair market value thereof, as determined by the Trustee by any method selected by the Trustee in its reasonable discretion. No less frequently than annually, and in any event within thirty (30) days prior to the end of each Fiscal Year, the Trustee shall determine the value of each Fund and Account held under the Indenture and shall report such determination to the City. The Trustee shall sell or present for redemption any Investment Securities as necessary in order to provide money for the purpose of making any payment required under the Indenture, and the Trustee shall not be liable for any loss resulting from any such sale. Responsibility of Trustee. The Trustee shall not be responsible or liable for any loss suffered in connection with any investment of moneys made by it at the direction of the City. Instruments ofFun her Assurance. At any and all times the City shall, so far as it may be authorized by law, pass, make, do, execute, acknowledge and deliver, all and every such further resolutions, ordinances, acts, deeds, • conveyances, assignments, transfers and assurances as may be necessary or desirable for the better assuring, 20 • conveying, granting, pledging, assigning and confirming of all and singular the receipts from the Sales and Use Taxes and all other moneys pledged or assigned by the indenture, or intended so to be, or which the City may become bound to pledge or assign. Tax Covenants. The City shall not use or permit the use of any Series 2009 Bond proceeds or any other funds of the City, directly or indirectly, in any manner, and will not take or permit to be taken any other action or actions which would adversely effect the exclusion of interest on any Series 2009 Bond from gross income for federal income tax purposes. No part of the proceeds of the Series 2009 Bonds shall at any time be used, directly or indirectly, to acquire securities or obligations the acquisition of which would cause any of such Series 2009 Bonds to be an "arbitrage bond" as defined in Sections 148(a) and (b) of the Code- The City agrees that so long as any of the Series 2009 Bonds remain Outstanding, it will comply with the provisions of the Tax Regulatory Agreement. Defeasance. Any Bond shall be deemed to be paid within the meaning of the Indenture when payment of the principal of and premium, if any, and interest on such Bond (whether at maturity or upon redemption as provided in the Indenture, or otherwise), either (i) shall have been made or caused to be made in accordance with the terms thereof, or (ii) shall have been provided for by irrevocably depositing with the Trustee, in trust and irrevocably set aside exclusively for such payment, (I) moneys sufficient to make such payment or (2) Government Securities (provided that such deposit will not affect the tax-exempt status of the interest on any of the Bonds or cause any of the Bonds to be classified as "arbitrage bonds" within the meaning of Section 148(a) of the Code, as reflected in an opinion of Bond Counsel delivered to the Trustee), maturing as to principal and interest in such amounts and at such times as will provide sufficient moneys to make such payment, and all necessary and proper fees, compensation and expenses of the Trustee and any Paying Agent pertaining to the Bonds with respect -to which such deposit is made shall have been paid or the payment thereof provided for to the satisfaction of the Trustee and any said Paying Agent, In the case of any defeasance of Series 2009 Bonds, the dates of redemption of such Series 2009 Bonds and the principal amounts and maturities of Series 2009 Bonds to be redeemed on such dates will be determined by taking into consideration the applicable redemption requirements with respect to the Series 2009 Bonds Co be defeased and the receipts of the Sales and Use Taxes for the most recent twelve months - • Events of Default. Each of the following events shall constitute and is referred to in the Indenture as an "Event of Default": (a) Dcthult in the due and punctual payment of any interest on any Bond; (b) Default in the due and punctual payment of the principal of or premium, if any, on any Bond, whether at the stated maturity thereof, or upon proceedings for redemption thereof, or upon the maturity thereof by declaration; (c) Default in the payment of any other amount required to be paid under the Indenture or the performance or observance of any other of the covenants, agreements or conditions contained in the Indenture, or in the Bonds issued under the Indenture, and continuance thereof for a period of sixty (60) days after written notice specifying such failure and requesting that it be remedied, shall have been given to the City by the Trustee, which may give such notice in its discretion and shall give such notice at the written request of Holders of not less than fifty-one percent (51%) in aggregate principal amount of the Bonds then Outstanding, unless the Trustee, or the Trustee and Holders of an aggregate principal amount of Bonds not less than the aggregate principal amount of Bonds the Holders of which requested such notice, as the case may be, shall agree in writing to an extension of such period prior to its expiration; provided, however, if the failure stated in the notice cannot be corrected within the applicable period, the Trustee will not unreasonably withhold its consent to an extension of such time if corrective action is instituted by the City within such period and is being diligently pursued; (d) The filing of a petition in bankruptcy by or against the City under the United States Bankruptcy Code or the commencement of a proceeding by or against the City under any other law concerning insolvency, reorganization or bankruptcy; and (c) If the State has limited or altered the rights of the City pursuant to the Act, as in force on the date of the Indenture, to fulfill the terms of any agreements made with the Trustee or the Bondholders or in any way impaired the rights and remedies of the Trustee or the Bondholders while any Bonds are Outstanding. The term "default" as used in clauses (a), (b) and (c) above shall mean default by the City in the performance or observance of any of the covenants, agreements or conditions on its part contained in the Indenture, • 21 or in the Bonds Outstanding thereunder, exclusive of any period of grace required to constitute a default an "Event • of Default" as described above. Acceleration. Upon the occurrence of an Event of Default, the Trustee may, and upon the written request of the Holders of not less than 51% in aggregate principal amount of Bonds Outstanding shall, by notice in writing delivered to the City, declare the principal of all Bonds then Outstanding, together with any premium and the interest accrued thereon, immediately due and payable, and such principal and interest shall thereupon become and be immediately due and payable. So long as the Policy is in effect, any such acceleration shall be subject to the prior written consent of Assured Guaranty. Other Remedies, Rights of Bondholders. Upon the occurrence of an Event of Default, the Trustee may, as an alternative, pursue any available remedy by suit at law or in equity, including, without limitation, mandamus to enforce the payment of the principal of and premium, if any, and interest on the Bonds then Outstanding. If an Event of Default shall have occurred, and if it shall have been requested so to do by the Holders of 51% in aggregate principal amount of Bonds Outstanding and if it shall have been indemnified as provided in the Indenture, the Trustee shall be obligated to exercise such one or more of the rights and powers conferred upon it by the Indenture as the Trustee, being advised by counsel, shall deem most expedient in the interests of the Bondholders. No remedy by the terms of the Indenture conferred upon or reserved to the Trustee (or to the Bondholders) is intended to be exclusive of any other remedy, but each and every such remedy shall be cumulative and shall be in addition to any other remedy given under the Indenture or now or hereafter existing at law or in equity or by statute. No delay or omission to exercise any right or power accruing upon any default or Event of Default shall impair any such right or power or shall be construed to be a waiver of any such default or Event of Default or acquiescence therein; and every such right and power may be exercised from time to time and as often as may be deemed expedient. No waiver of any default or Event of Default under the Indenture, whether by the Trustee or by the • Bondholders, shall extend to or shall affect any subsequent default or Event of Default or shall impair any rights or remedies consequent thereon. Rights and Remedies of Bondholders- No Holder of any Bond shall have any right to institute any suit, action or proceeding in equity or at law for the enforcement of the Indenture or for the execution of any trust thereof or for the appointment of a receiver or any other remedy thereunder, unless a default has occurred of which the Trustee has been notified as provided in the Indenture, or of which by the Indenture it is deemed to have notice, nor unless such default shall have become an Event of Default and the Holders of not less than 51% in aggregate principal amount of Bonds Outstanding shall have made written request to the Trustee and shall have offered it reasonable opportunity either to proceed to exercise the powers granted or to institute such action, suit, or proceeding in its own name, nor unless also they have offered to the Trustee indemnity as provided in the Indenture nor unless the Trustee shall thereafter fail or refuse to exercise the powers granted, or to institute such action, suit, or proceeding in its own name; and such notification, request and offer of indemnity are declared in every such case at the option of the Trustee to be conditions precedent to the execution of the powers and trusts of the Indenture, and to any action or cause of action for the enforcement of the Indenture or for the appointment of a receiver or for any other remedy thereunder; it being understood and intended that no one or more Holders of the Bonds shall have any right in any manner whatsoever to affect, disturb or prejudice the lien of the Indenture by action of the Holder or Holders or to enforce any right under the Indenture except in the manner therein provided, and that all proceedings at law or in equity shall be instituted, held and maintained in the manner therein provided for the equal benefit of the Holders of all Bonds Outstanding thereunder. Nothing in the Indenture contained shall, however, affect or impair the right of any Bondholders to enforce the payment of the principal of and premium, if any, and interest on any Bonds at and after the maturity thereof, or the obligation of the City to pay the principal of and premium, if any, and interest on each of the Bonds issued under the Indenture to the respective Holders thereof at the time and place in said Bonds expressed. So long as the Policy is in effect, Assured Guaranty shall have the right to direct all remedies upon the occurrence of an Event of Default. Supplemental Indentures Not Requiring Consent of Bondholders. The City and the Trustee may, from time to time and at any time, without the consent of or notice to the Bondholders, enter into Supplemental Indentures as follows: • 22 • (a) to cure any formal defect, omission, inconsistency or ambiguity in the Indenture; (b) to grant to or confer or impose upon the Trustee for the benefit of the Bondholders any additional rights, remedies, powers, authority, security, liabilities or duties which may lawfully be granted, conferred or imposed and which are not contrary to or inconsistent with the Indenture as theretofore in effect, provided that no such additional liabilities or duties shall be imposed upon the Trustee without its consent; (c) to add to the covenants and agreements of, and limitations and restrictions upon, the City in the Indenture other covenants, agreements, limitations and restrictions to be observed by the City which are not contrary to or inconsistent with the Indenture as theretofore in effect; (d) to confirm, as further assurance, any pledge under, and the subjection to any claim, lien or pledge created or to be created by, the Indenture, of the Trust Estate or of any other moneys, securities or funds; (e) to comply with the requirements of the Trust Indenture Act of 1939, as from time to time amended; (I) to authorize that issuance and sale of one or more series of Additional Bonds; (g) to make such additions, deletions or modifications as may be necessary to assure compliance with Section 148(f) of the Code relating to required rebate to the United States or otherwise as may be necessary to assure exemption from federal income taxation of interest on the Bonds; or (h) to modify, alter, amend or supplement the Indenture in any other respect which is not materially adverse to the Bondholders and which does not involve a change described in clause (a), (b), (c), (d), (e) or (1) above and which, in the judgment of the Trustee, is not to the prejudice of the Trustee. Supplemental Indentures Requiring Consent of Bondholders. Subject to the terms and provisions contained in this paragraph, and not otherwise, the Holders of not less than 2/3 in aggregate principal amount of the Bonds then Outstanding shall have the right, from time to time, anything contained in the Indenture to the contrary • notwithstanding, to consent to and approve the execution by the City and the Trustee of such indenture or indentures supplemental to the Indenture as shall be deemed necessary and desirable by the City for the purpose of modifying, altering, amending, adding to, or rescinding, in any particular, any of the terms or provisions contained in the Indenture or in any Supplemental Indenture; provided, however, that nothing contained in the Indenture shall permit or be construed as permitting (a) an extension of the maturity (or mandatory redemption date) of the principal of or the interest on any Bond issued thereunder, or (b) a reduction in the principal amount of or redemption premium or rate of interest on any Bond issued thereunder, or (c) the creation of any lien on the Trust Estate or any part thereof, except as expressly permitted in the Indenture, or (d) a privilege or priority of any Bond or Bonds over any other Bond or Bonds, or (e) a reduction in the aggregate principal amount of the Bonds required for consent to such Supplemental Indenture, or (f) depriving the Bolder of any Bond then Outstanding of the lien created on the Trust Estate. If, at any time the City shall request the Trustee to enter into any Supplemental Indenture for any of (he purposes described above, the Trustee shall, at the expense of the City, cause notice of the proposed execution of such Supplemental Indenture to be mailed by first class mail to each registered owner of the Bonds. Such notice shall briefly set forth the nature of the proposed Supplemental Indenture and shall state that copies thereof are on file at the principal office of the Trustee for inspection by Bondholders. The Trustee shall not, however, be subject to any liability to any Bondholder by reason of its failure to mail such notice, and any such failure shall not affect the validity of such Supplemental Indenture when consented to and approved as provided above. If the Holders of not less than 2/3 in aggregate principal amount of the Bonds Outstanding at the time of the execution of any such Supplemental Indenture shall have consented to and approved the execution thereof, no Holder of any Bond shall have any right to object to any of the terms and provisions contained therein, or the operation thereof, or in any manner to question the propriety of the execution thereof, or to enjoin or restrain the Trustee or the City from executing the same or from taking any action pursuant to the provisions thereof. So long as the Policy is in effect, Supplemental Indentures of the type described in the preceding paragraph shall require the written consent of Assured Guaranty. • 23 SUMMARY OF THE CONTINUING DISCLOSURE AGREEMENT The City has entered into an undertaking in the form of the Continuing Disclosure Agreement as required by the Indenture for the benefit of the Beneficial Owners of the Series 2009 Bonds to cause certain financial information to be sent to certain information repositories annually and to cause notice to be sent to such information repositories of certain specified events, pursuant to the requirements of Section (b)(5)(i) of Rule 15c2-12 of the Securities Exchange Act of 1934, as amended (the "Rule"). The City has not failed to comply with any previous undertaking pursuant to the Rule. ' Pursuant to SEC Release No. 34-60332 issued July 17, 2009, the U.S. Securities and Exchange Commission (the "Commission") has proposed amendments to the Rule which, if adopted in the proposed form, would cause substantive changes to the reporting obligations of the issuer of municipal securities. Among the proposed changes are provisions that would (i) require that continuing disclosure undertakings specify that the issuer must provide notice of material events within ten (10) days of their occurrence, (ii) add new items to the current list of Specified Events, and (iii) provide that certain of the Specified Events will always be deemed to be material. The Commission has received and is evaluating comments received with respect to the proposed amendments to the Rule. It is not known when the changes to the Rule will become effective or in what form they will finally be promulgated. The Continuing Disclosure Agreement contains the following covenants and provisions: (a) The City shall, not later than August I of each year, commencing August I, 2010, provide to each Repository and the Trustee its Annual Financial Information consistent with the requirements of subsection (d) below. (b) If, on the date specified in subsection (a) above for providing the Annual Financial Information to Repositories, the Trustee has not received a copy of the Annual Financial Information, the Trustee shall contact the Disclosure Representative to determine if the City is in compliance with subsection (a). (c) If the Trustee is unable to verify that the Annual Financial Information has been provided to the Repositories by the date required within subsection (a), the Trustee shall file a notice to such effect with the Repositories and the MSRB. (d) The City's Annual Financial Information shall contain or incorporate by reference the following: (i) Receipts of the Sales and Use Taxes for the latest Fiscal Year and for the four previous Fiscal Years, if available. (ii) The City's audited financial statements for the prior Fiscal Year, prepared in accordance with accounting principles generally accepted in the United States ("GAAP") as such principles are modified by the governmental accounting standards promulgated by the Government Accounting Standards Board ("GASB") and by mandated principles of the State of Arkansas, if any, as in effect from time to time, which financial statements have been audited by such auditor as shall then be required or permitted by the laws of the State of Arkansas. If the City's audited financial statements are not available by the time its Annual Financial Information is required to be filed pursuant to subsection (a) above, the Annual Financial Information shall contain the unaudited financial statements of the City, and the audited financial statements shall be filed in the same manner as the Annual Financial Information when they become available. (e) The City has agreed to instruct the Trustee to deliver to each National Repository, or the MSRI and the Arkansas State Repository, notice of the occurrence of any of the following Specified Events, if deemed material: (i) Principal and interest payment delinquencies; (ii) Non-payment related defaults; (iii) Unscheduled draws on any debt service reserve reflecting financial difficulties; (iv) Unscheduled draws on any credit enhancement reflecting financial difficulties; (v) Substitution of any credit or liquidity providers, or their failure to perform; (vi) Adverse tax opinions or events affecting the tax-exempt status of the Series 2009 Bonds; 24 r [1 • (vii) Modifications to rights of Bondowners; (viii) Series 2009 Bond calls; (ix) Defeasances; (x) Release, substitution or sale of property securing payment of the Series 2009 Bonds; or (xi) Rating changes. (f) The City has agreed that the foregoing undertakings shall be for the benefit of the Beneficial Owners of the Series 2009 Bonds, and shall be enforceable by any Beneficial Owner of the Series 2009 Bonds in an action for specific performance against the City. (g) The continuing obligation of the City to provide Annual Financial Information and notice of the occurrence of Specified Events, if material, will terminate if the City is no longer an "obligated person" within the meaning of the Rule or upon the maturity, defcasance, prior redemption or payment in full of the Series 2009 Bonds. The City and the Trustee may amend the Continuing Disclosure Agreement, and any provision of the Continuing Disclosure Agreement may be waived, if such amendment or waiver is supported by an opinion of counsel, reasonably acceptable to each of the City and the Trustee, to the effect that such amendment or waiver would not, in and of itself, cause the undertakings under the Continuing Disclosure Agreement to violate the Rule, taking into account any subsequent change in or official interpretation of the Rule. (h) The following terms used tinder this caption shall have the meanings set forth below: "Annual Financial bjormation" means the annual financial information to be provided by the City of the type described in the Continuing Disclosure Agreement. "Arkansas Slate Repository" means any public or private repository or entity as may be designated by the State of Arkansas as a state repository for purposes of the Rule and recognized as such by the SEC. As of the date of the Continuing Disclosure Agreement, there is no Arkansas State Repository. • "Beneficial Owner" means any Person which has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Series 2009 Bonds, including Persons holding Series 2009 Bonds through nominees, depositories or other intermediaries. "Disclosure Representative" means the City's Finance Director or his or her designee, or such other officer or employee as the City shall designate in writing to the Trustee from time to time. "Fiscal Year" means the 12 -month period used, at any time, by the City for accounting purposes, which may be the calendar year. The City's fiscal year presently ends on December 31. "MSRB" means the Municipal Securities Rulemaking Board. "National Repository" means any nationally recognized municipal securities information repository for purposes of the Rule. "Participating Underwriter" means Stephens Inc. "Repository" means each National Repository and the Arkansas State Repository. "Specified Events means each of the events with respect to the Series 2009 Bonds listed in subsection (e) above. (i) A failure by the City to comply with the provisions of the Continuing Disclosure Agreement will not constitute an Event of Default under the Indenture, and the sole remedy in such an event shall be an action to compel specific performance. Nevertheless, such a failure to comply must be reported in accordance with the Rule and must be considered by any broker, dealer or municipal securities dealer before recommending the purchase or sale of the Series 2009 Bonds in the secondary market. Consequently, such a failure may adversely affect the transferability and liquidity of the Series 2009 Bonds. • 25 UNDERWRITING Under a bond purchase agreement entered into by and among the City and Stephens Inc. (the "Underwriter"), the Series 2009 Bonds are being purchased at a purchase price of 511,052,875.20 (representing the stated principal amount of the Series 2009 Bonds less a net reoffering discount of $56,499.80 and less an underwriting discount of S 140,625.00) plus accrued interest from November I, 2009 to the date of delivery of the Series 2009 Bonds. The bond purchase agreement provides that the Underwriter will purchase all of the Series 2009 Bonds if any are purchased. The obligation of the Underwriter to accept delivery of the Series 2009 Bonds is subject to various conditions contained in the bond purchase agreement, including the absence of pending or threatened litigation questioning the validity of the Series 2009 Bonds or any proceedings in connection with the issuance thereof, and the absence of material adverse changes in the financial condition of the City. The Underwriter intends to offer the Series 2009 Bonds to the public initially at the offering prices as set forth on the inside cover page of this Official Statement, which offering prices (or bond yields establishing such offering prices) may subsequently change without any requirement of prior notice. The Underwriter reserves the right to join with dealers and other underwriters in offering the Series 2009 Bonds to the public, and may offer the Series 2009 Bonds to such dealers and other underwriters at a price below the public offering price. The City has agreed to indemnify the Underwriter against certain civil liabilities in connection with the offering and sale of the Series 2009 Bonds, including certain liabilities tinder federal securities laws. TAX MATTERS Federal Income Taxes. In the opinion of Kutak Rock LLP, Bond Counsel, under existing laws, regulations, rulings and judicial decisions, interest on the Series 2009 Bonds is excludable from the gross income for federal income tax purposes. In addition, interest on the Series 2009 Bonds is not a specific preference item nor is it included in adjusted current earnings for purposes of the federal alternative minimum tax. The opinions described in the preceding sentences assume the accuracy of certain representations and compliance by the City with certain covenants designed to satisfy the requirements of the Code that must be satisfied subsequent to the issuance of the • Series 2009 Bonds. Failure to comply with certain of such requirements may cause interest on the Series 2009 Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Series 2009 Bonds. The City has covenanted to comply with such requirements. Bank Qual fcation. The City has represented that it does not reasonably anticipate issuing greater than $30,000,000 of tax-exempt obligations in calendar year 2009 (excluding certain private activity and refunding bonds) and that it has designated the Series 2009 Bonds as "qualified tax-exempt obligations" within the meaning of Section 265(b)(3) of the Code. Accordingly, Bond Counsel is of the opinion that in the case of certain banks, thrift institutions or other financial institutions owning the Series 2009 Bonds, a deduction is allowed for 80% of that portion of such institutions' interest expense allocable to interest on the Series 2009 Bonds. Bond Counsel has expressed no opinion with respect to any deduction for federal income tax purposes of interest incurred or continued by a holder of the Series 2009 Bonds or a related person to purchase or carry the Series 2009 Bonds. Original Issue Discount. The Series 2009 Bonds maturing November I, 2015, 2016, 2017, 2018 and 2019 (collectively, the "Discount Bonds") are being sold at an original issue discount. The difference between the initial public offering prices of such Discount Bonds and their stated amounts to be paid at maturity constitutes original issue discount treated in the same manner for federal income tax purposes as interest, as described above. The amount of original issue discount which is treated as having accrued with respect to a Discount Bond is added to the cost basis of the owner in determining, for federal income tax purposes, gain or loss upon disposition of such Discount Bond (including its sale, redemption or payment at maturity). Amounts received upon disposition of such Discount Bond which are attributable to accrued original issue discount will be treated as tax-exempt interest, rather than as taxable gain, for federal income tax purposes. Original issue discount is treated as compounding semiannually, at a rate determined by reference to the yield to maturity of each individual Discount Bond, on days which are determined by reference to the maturity date of such Discount Bond. The amount treated as original issue discount on such Discount Bond for a particular semiannual accrual period is equal to the product of (i) the yield to maturity for such Discount Bond (determined by compounding at the close of each accrual period) and (ii) the amount which would have been the tax basis of such Discount Bond at the beginning of any particular accrual period if held by the original purchaser, less the amount of • any interest payable for such Discount Bond during the accrual period. The tax basis is determined by adding to the 26 • initial public offering price on such Discount Bond the sum of the amounts which have been treated as original issue discount for such purposes during all prior periods. If such Discount Bond is sold between semiannual compounding dates, original issue discount which would have been accrued for that semiannual compounding period for federal income tax purposes is to be apportioned in equal amounts among the days in such compounding period. Owners of Discount Bonds should consult their tax advisors with respect to the determination and treatment of original issue discount accrued as of any date and with respect to the state and local tax consequences of owning a Discount Bond. Backup Wirhha/ding. As a result of the enactment of the Tax Increase Prevention and Reconciliation Act of 2005, interest on tax-exempt obligations such as the Series 2009 Bonds is subject to information reporting in a manner similar to interest paid on taxable obligations. Backup withholding may be imposed on payments made after March 31, 2007 to any bondholder who fails to provide certain required information, including an accurate taxpayer identification number, to any person required to collect such information pursuant to Section 6049 of the Code. The new reporting requirement does not in and of itself affect or alter the excludability of interest on the Series 2009 Bonds from gross income for federal income purposes or any other federal tax consequence of purchasing, holding or selling tax-exempt obligations. State Taxes. Bond Counsel is of the opinion that, under existing law, the interest on the Series 2009 Bonds is exempt from all state, county and municipal taxes in the State of Arkansas. Changes in Federal and State Tax Law. From time to time, there are legislative proposals in the Congress and in the states that, if enacted, could alter or amend the federal and state tax matters referred to above or adversely affect the market value of the Series 2009 Bonds. It cannot be predicted whether or in what form any such proposal might be enacted or whether if enacted it would apply to bonds issued prior to enactment. In addition, regulatory actions are tirom time to time announced or proposed and litigation is threatened or commenced which, if implemented or concluded in a particular manner, could adversely affect the market value of the Series 2009 Bonds. • It cannot he predicted whether any such regulatory action will be implemented, how any particular lawsuit will be resolved, or whether the Series 2009 Bonds or the market value thereof would be impacted thereby. Purchasers of the Series 2009 Bonds should consult their tax advisors regarding any pending or proposed legislation, regulatory initiatives or litigation. The opinions expressed by Bond Counsel are based upon existing legislation and regulations as interpreted by relevant judicial authorities as of the date of issuance and delivery of the Series 2009 Bonds, and Bond Counsel has expressed no opinion as of any date subsequent thereto or with respect to any pending legislation, regulatory initiatives or litigation. RATINGS Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. ("S&P"), is expected to assign the Series 2009 Bonds the rating of "AAA" (negative outlook) based on the delivery of the Policy by Assured Guaranty Corp. and has assigned an underlying rating of "A+" (stable outlook) to the Series 2009 Bonds. Such ratings reflect only the view of S&P at the time such ratings were given. An explanation of the significance of the ratings may be obtained from S&P. There is no assurance that such ratings will continue for any given period of time or that the ratings will not be revised downward or withdrawn entirely by S&P if in its judgment circumstances so warrant. Any downward revision or withdrawal of the ratings may have an adverse effect on the market price of the Series 2009 Bonds. Neither the City nor the Underwriter has undertaken any responsibility subsequent to the issuance of the Series 2009 Bonds to assure the maintenance of the ratings or to oppose any revision or withdrawal of the ratings. No application has been made to any Rating Agency other than S&P for a rating on the Series 2009 Bonds. • 27 LEGAL MATTERS Legal Opinions. Legal matters incident to the authorization and issuance of the Series 2009 Bonds are subject to the unqualified approving opinion of Kutak Rock LLP, Little Rock, Arkansas, Bond Counsel, a copy of whose approving opinion will be delivered with the Series 2009 Bonds and a form of which is attached hereto as Appendix A. Certain legal matters will be passed upon for the City by its counsel, Kit Williams, Esq., City Attorney. Litigation. There is no litigation pending seeking to restrain or enjoin the issuance or delivery of the Series 2009 Bonds or questioning or affecting the legality of the Series 2009 Bonds or the proceedings and authority under which the Series 2009 Bonds are to be issued, or questioning the right of the City to issue the Series 2009 Bonds. There is no action, suit or proceeding known to be pending or threatened, restraining or enjoining the City in any way which could have a material adverse effect on the Sales and Use Taxes or the City's ability to pay debt service with respect to the Series 2009 Bonds. MISCELLANEOUS Any statements made in this Official Statement involving matters of opinion or of estimates, whether or not so expressly stated, arc set forth as such and not as representations of fact, and no representation is made that any of the estimates will be realized. This Official Statement is not to be construed as a contract or agreement between the City and the purchasers or owners of any of the Series 2009 Bonds. ACCURACY AND COMPLETENESS OF OFFICIAL STATEMENT The information contained in this Official Statement has been taken from sources considered to be reliable, but is not guaranteed. To the best of the knowledge of the City, this Official Statement does not include any untrue statement of a material fact, nor does it omit the statement of any material fact required to be stated herein, or necessary to make the statements herein, in light of the circumstances under which they were made, not misleading. • S 28 • The execution and delivery of this Official Statement has been duly authorized by the City of Fayetteville, Arkansas. CITY Ofi�RKAIYSAS By: /s/ Lioneld Jorda Mayor • • 29 [THIS PAGE INTENTIONALLY BLANK] • • APPENDIX A Proposed Form of Bond Counsel Opinion Upon delivery of the Series 2009 Bonds in definitive form, Kutak Rock LLP, Little Rock, Arkansas, proposes to deliver its approving opinion in substantially the following form: November ,2009 City of Fayetteville, Arkansas Fayetteville, Arkansas Simmons First Trust Company, N.A., as Trustee Pine Bluff, Arkansas Stephens Inc. Fayetteville, Arkansas Assured Guaranty Corp. New York, New York $11,250,000 City of Fayetteville, Arkansas Sales and Use Tax Capital Improvement Bonds Series 2009 • Ladies and Gentlemen: We have acted as bond counsel in connection with the issuance and sale by the City of Fayetteville, Arkansas (the "City"), a political subdivision of the State of Arkansas, of its $11,250,000 Sales and Use Tax Capital Improvement Bonds, Series 2009 (the "Bonds"). • The Bonds are being issued pursuant to the provisions of the Constitution and laws of the State of Arkansas, including, particularly, Amendment 62 and Arkansas Code Annotated (1998 Repl. & Supp. 2005) §§14- 164-301 er seq. (as from time to time amended, the "Act"), pursuant to Ordinance No. 5277 of the City, duly adopted and approved on October 6, 2009 (the "Authorizing Ordinance"), and pursuant to a Trust Indenture dated as of November 1, 2006, as amended and supplemented by a First Supplemental Trust Indenture dated as of October I, 2007, and by a Second Supplemental Trust Indenture dated as of November 1, 2009 (as amended and supplemented, the "Indenture"), by and between the City and Simmons First Trust Company, N.A., as trustee (the "Trustee"). Reference is hereby made to the Indenture and to all indentures supplemental thereto for the provisions, among others, with respect to the nature and extent of the security for the Bonds, the rights, duties and obligations of the City, the Trustee and the Holders of the Bonds, and the terms upon which the Bonds are issued and secured. Reference is made to an opinion of even date herewith of Kit Williams, Esq., City Attorney, a copy of which is on file with the Trustee, with respect, among other matters, to the status and valid existence of the City, the power of the City to adopt the Election Ordinance and the Authorizing Ordinance and to enter into and perform its obligations under the Indenture, the valid adoption of the Election Ordinance and the Authorizing Ordinance, and the due authorization, execution and delivery of the Indenture by the City, and with respect to the Indenture being enforceable upon the City. We have examined the law and such certified proceedings and other papers as we have deemed necessary to render this opinion. As to questions of fact material to our opinion, we have relied upon the representations of the City contained in the Election Ordinance, the Authorizing Ordinance and the Indenture and in the certified proceedings and other certifications of public officials furnished to us, without undertaking to verify the same by independent investigation. A- I Based upon the foregoing, we are of the opinion, under existing law, as follows: • I. The City is duly created and validly existing as a municipal corporation of the State of Arkansas. Pursuant to the Constitution and laws of the State of Arkansas, including, particularly, Amendment 62 and the Act, the City is empowered to adopt the Election Ordinance and the Authorizing Ordinance, to execute and deliver the Indenture, to perform the agreements on its part contained therein, and to issue the Bonds. 2. The Authorizing Ordinance has been duly adopted by the City and constitutes a valid and binding obligation of the City enforceable upon the City in accordance with its terms. 3. The Indenture has been duly authorized, executed and delivered by the City and is a valid and binding obligation of the City enforceable upon the City in accordance with its terms. 4. The Bonds arc payable from and security by a valid lien on and pledge of the Trust Estate (as defined in the Indenture), including receipts of the 0.25% Sales and Use Tax and the 0.75% Sales and Use Tax (each as defined in the Indenture), in the manner and to the extent provided in the Indenture. Such lien and pledge are made on a parity basis with the existing lien and pledge of the Trust Estate securing (i) the City's Sales and Use Tax Capital Improvement Bonds, Series 2006A, and (ii) the City's Sales and Use Tax Capital Improvement Bonds, Series 2007. The City is duly authorized to pledge such Trust Estate, and no further action on the part of the City or any other party is required to perfect the same or the interest of the owners of the Bonds therein. 5. The 0.25% Sales and Use Tax and the 0.75% Sales and Use Tax have been validly adopted in accordance with the Constitution and laws of the State of Arkansas, including Amendment 62 and the Act, and may be validly pledged to secure the Bonds. Levy and collection of the 0.25% Sales and Use Tax commenced as of January I, 2007, and levy and collection of the 0.75% Sales and Use Tax will commence as of the first day of the first month following cessation of the Existing Tax securing the Existing Indebtedness (each as defined in the Indenture). • 6. Interest on the Bonds is excludable from gross income for federal income tax purposes. In addition, interest on the Bonds is not a specific preference item nor is it included in adjusted current earnings for purposes of the federal alternative minimum tax. The opinions described in the preceding sentences assume the accuracy of certain representations and compliance by the City with covenants designed to satisfy the requirements of the Internal Revenue Code of 1986, as amended (the "Code"), that must be met subsequent to the issuance of the Bonds. Failure to comply with certain of such requirements could cause interest on the Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds. The City has covenanted to comply with such requirements. The Bonds are "qualified tax-exempt obligations" within the meaning of Section 265(b)(3) of the Code, and, in the case of certain financial institutions (within the meaning of Section 265(b)(5) of the Code), a deduction is allowed for eighty percent (80%) of that portion of such financial institution's interest expense allocable to the Bonds. We express no opinion regarding other federal tax consequences arising with respect to the Bonds. 7. The interest on the Bonds is exempt from all state, county and municipal taxes in the State of Arkansas. 8. The Bonds are exempt from registration pursuant to the Securities Act of 1933, as amended, and the Indenture is not required to be qualified under the Trust Indenture Act of 1939, as amended, in connection with the offer and sale of the Bonds. It is to be understood that the rights of the registered owners of the Bonds and the enforceability of the Bonds, the Authorizing Ordinance and the Indenture may be subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights heretofore or hereafter enacted to the extent constitutionally applicable and that their enforcement may also be subject to the exercise of judicial discretion in appropriate cases. Very truly yours, A-2 • SAPPENDIX B DEFINITIONS OF CERTAIN TERMS The following are definitions of certain terms used in this Official Statement: "Account" means an Account established by Article V of the Indenture. "Act" means the Local Government Bond Act of 1985, codified as Arkansas Code Annotated (1998 Repl. & Supp. 2005) Sections 14-164-301 et seq., as from time to time amended. "Additional Bonds" means Bonds in addition to the Series 2006A Bonds, the Series 2007 Bonds and the Series 2009 Bonds which arc issued under the provisions of the Indenture. "Amendment 62" means Amendment No. 62 to the Constitution of Arkansas, approved by the voters of the State on November 6, 1984. "Annual Debt Service" means, with respect to all or any particular amount of Bonds, the Debt Service for any particular Fiscal Year required to be paid or set aside during such Fiscal Year, less the amount of such payment which is provided from the proceeds of Bonds or from sources other than Sales and Use Tax receipts. "Assured Guaranty" means Assured Guaranty Corp., a Maryland insurance corporation, or any successor thereto or assignee thereof. "Authorized Representative" means either the Mayor or the Finance Director of the City and such additional persons as from time to time may be designated to act on behalf of City by a Certificate furnished to the Trustee containing the specimen signature thereof and executed on behalf of the City by its Mayor. "Authorizing Ordinance" means, collectively, (i) Ordinance No. 4936, adopted by the City on October 3, 2006, which authorized the issuance of the Series 2006A Bonds pursuant to the Indenture, (ii) Ordinance No. 5054, adopted by the City on August 23, 2007, which authorized the issuance of the Series 2007 Bonds pursuant to the • Indenture, and (iii) Ordinance No. 5277, adopted by the City on October 6, 2009, which authorized the issuance of the Series 2009 Bonds pursuant to the Indenture. "Beneficial Owner" means any Person who acquires beneficial ownership interest in a Bond held by the Securities Depository. In determining the Beneficial Owner of any Bond, the Trustee may rely exclusively upon written representations made and information given to the Trustee by the Securities Depository or its Participants with respect to any Bond held by the Securities Depository in which a beneficial ownership interest is claimed. "Bond Counsel" means any firm of nationally recognized municipal bond counsel selected by the City and acceptable to the Trustee. "Bond Fund" means the fund by that name created and established in the Indenture. "Bonds" means the Series 2006A Bonds, the Series 2007 Bonds, the Series 2009 Bonds and all Additional Bonds issued by the City pursuant to the Indenture. "Book -Entry System" means the book -entry system maintained by the Securities Depository and described in the Indenture. "Business Day" means any day other than (a) a Saturday or Sunday, (b) a day on which commercial banks in New York, New York, or the city in which the corporate trust office of the Trustee is located are authorized or required by law or executive order to close, or (c) a day on which the New York Stock Exchange or the Securities Depository is closed. "Certificate" means a document signed by an Authorized Representative of the City attesting to or acknowledging the circumstances or other matters therein stated. "City" means the City of Fayetteville, Arkansas, a municipality and political subdivision under the laws of the State of Arkansas. "City Clerk" means the person holding the office and performing the duties of the City Clerk of the City. "Closing Date" means, with respect to any series of Bonds, the date upon which there is an exchange of • such series of Bonds for the proceeds representing the purchase price for such series of Bonds by the Original Purchaser or Purchasers thereof. 13-I "Code" means the Internal Revenue Code of 1986, as from time to time amended, and applicable • regulations issued or proposed thereunder. "Completion Date" means the date upon which a particular Project (or portion thereof) is first ready for normal continuous operation, as determined by a Qualified Engineer. "Continuing Disclosure Agreement" means the Continuing Disclosure Agreement between the City and the Trustee, dated the date of issuance and delivery of the Series 2009 Bonds, as originally executed and as amended from time to time in accordance with the terms thereof. "Costs of Issuance" means all items of expense payable or reimbursable directly or indirectly by the City and related to the authorization, sale and issuance of the Bonds, including, but not limited to, underwriting discounts, fees and expenses, election expenses, publication expenses, expenses of printing, reproducing, filing and recording documents, initial fees and charges of the Trustee and any Paying Agent, fees and expenses for legal, accounting and other professional services, rating fees, costs of securing any credit enhancement for the Bonds, costs of execution, transportation and safekeeping of the Bonds, and other costs, charges and fees incurred in connection with the foregoing. "Costs of Issuance Fund" means the fund by that name created and established in the Indenture. "Debt Service" means, with respect to all or any particular amount of Bonds, the total as of any particular date of computation and for any particular period of the scheduled amount of interest and amortization of principal payable on such Bonds, excluding amounts scheduled during such period which relate to principal which has been retired before the beginning of such period. "Debt Service Reserve Fund" means the fund by that name created and established in the Indenture "Election Ordinance" means Ordinance No. 4891, adopted by the City Council on June 20, 2006, pursuant to which there was submitted to the qualified electors of the City the four questions relating to the issuance of the Bonds. • "Event of Default" means any event of default specified in Section 801 of the Indenture. "Existing Indebtedness" means, collectively, the City's (i) $27,000,000 Sales and Use Tax Refunding and Capital Improvement Bonds, Series 2005A, (ii) $45,000,000 Sales and Use Tax Capital Improvement Bonds, Series 20056, and (iii) $20,000,000 Sales and Use Tax Capital Improvement Bond, Series 2006 RLF Loan. "Existing Tax" means the three-quarter of one percent (0.75%) city-wide sales and use tax authorized by the Act and presently being levied and collected within the City for the purpose of securing the payment of the Existing Indebtedness. "Fiscal Year" means the 12 -month period used, at any time, by the City for accounting purposes, which may be the calendar year. "Fund" means a fund established by the Indenture. "Government Securities" means (a) direct obligations (other than an obligation subject to variation in principal repayment) of the United States of America, (b) obligations fully and unconditionally guaranteed as to timely payment of principal and interest by the United States of America, (c) obligations fully and unconditionally guaranteed as to timely payment of principal and interest by any agency or instrumentality of the United States of America when such obligations are backed by the full faith and credit of the United States of America, or (d) evidences of ownership of proportionate interests in future interest and principal payments on obligations described above held by a bank or trust company as custodian, under which the owner of the investment is the real party in interest and has the right to proceed directly and individually against the obligor and the underlying government obligations are not available to any person claiming through the custodian or to whom the custodian may be obligated. "Holder" or "Bondholder" or "owner of the Bonds" means the registered owner of any Bond. "Indenture" means the Trust Indenture dated as of November I, 2006, as amended and supplemented by a First Supplemental Trust Indenture dated as of October 1, 2007, and by a Second Supplemental Trust Indenture dated as of November 1, 2009, each by and between the City and the Trustee, pursuant to which the Bonds are • issued, and any amendments and supplements thereto. M • "Investment Securities" means, if and to the extent the same are at the time legal for investment of Funds and Accounts held under the Indenture: (a) cash (fully insured by the Federal Deposit Insurance Corporation); (b) Government Securities; (c) Federal Housing Administration debentures; (d) The obligations of the following government -sponsored agencies which are not backed by the fill faith and credit of the United States of America: 1) Federal Home Loan Mortgage Corporation (FHLMC) senior debt obligations and Participation certificates (excluded are stripped mortgage securities which are purchased at prices exceeding their principal amounts); 2) Farm Credit System (formerly Federal Land Banks, Federal Intermediate Credit Banks and Banks for Cooperatives) consolidated systemwide bonds and notes; 3) Federal Home Loan Banks (FHL Banks) consolidated debt obligations; and 4) Federal National Mortgage Association (FNMA) senior debt obligations and mortgage -backed securities (excluded are stripped mortgage securities which are purchased at prices exceeding their principal amounts); (e) Unsecured certificates of deposit, time deposits, and bankers' acceptances (having maturities of not more than 365 days) of any bank the short-term obligations of which are rated "A -I+" or better by S&P and "Prime -I" by Moody's: • (f) Deposits the aggregate amount of which are fully insured by the Federal Deposit Insurance Corporation, in banks which have capital and surplus of at least 515 million; (g) Commercial paper (having original maturities of not more than 270 days) rated "A -I+" by S&P and "Prime -I" by Moody's; (h) Money market funds rated "Aam" or "AAm-G" by S&P, or better and if rated by Moody's rated "Aa2" or better: (i) "State Obligations", which means: I) Direct general obligations of any state of the United States of America or any subdivision or agency thereof to which is pledged the full faith and credit of a state the unsecured general obligation debt of which is rated at least "A3" by Moody's and at least "A" by S&P, or any obligation fully and unconditionally guaranteed by any state, subdivision or agency whose unsecured general obligation debt is so rated; 2) Direct general short-term obligations of any state agency or subdivision or agency thereof described in (a) above and rated "A-1+" by S&P and "MIG-1" by Moody's; and 3) Special Revenue Bonds (as defined in the United States Bankruptcy Code) of any state or state agency described in (b) above and rated "AA-" or better by S&P and "Aa3" or better by Moody's; (j) Pre -refunded municipal obligations rated "AAA" by S&P and "Aaa" by Moody's meeting the following requirements: • B-3 I) the municipal obligations are (1) not subject to redemption prior to maturity or • (2) the trustee for the municipal obligations has been given irrevocable instructions concerning their call and redemption and the issuer of the municipal obligations has covenanted not to redeem such municipal obligations other than as set forth in such instructions; 2) the municipal obligations are secured by cash or U.S. Treasury Obligations which may be applied only to payment of the principal of, interest and premium on such municipal obligations; 3) the principal of and interest on the U.S. Treasury Obligations (plus any cash in the escrow) has been verified by the report of independent certified public accountants to be sufficient to pay in full all principal of, interest, and premium, if any, due and to become due on the municipal obligations ("Verification Report"); 4) the cash or U.S. Treasury Obligations serving as security for the municipal obligations are held by an escrow agent or trustee in trust for owners of the municipal obligations; 5) no substitution of a U.S. Treasury Obligation shall be permitted except with another U.S. Treasury Obligation and upon delivery of a new Verification Report; and 6) the cash or U.S. Treasury Obligations are not available to satisfy any other claims, including those by or against the trustee or escrow agent; and (k) other forms of investments approved in writing by Assured Guaranty, including the • Reserve Fund Insurance Policy. "Mayor" means the person holding the office and performing the duties of the Mayor of the City. "Original Purchaser" means the first purchaser(s) of a series of the Bonds from the City. "Outstanding" means, as of any date of computation, Bonds theretofore or thereupon being delivered under the Indenture, except: (a) Bonds cancelled at or prior to such date or delivered to or acquired by the Trustee at or prior to such date for cancellation; (b) Bonds deemed to be paid in accordance with Article VII of the Indenture; and (c) Bonds in lieu of or in exchange or substitution for which other Bonds shall have been authenticated and delivered pursuant to the Indenture. "Participants" means those financial institutions for whom the Securities Depository effects book -entry transfers and pledges of securities deposited with the Securities Depository in the Book -Entry System, as such listing of Participants exists at the time of such reference. "Paying Agent" means any bank or trust company named by the City as the place at which the principal of and premium, if any, and interest on the Bonds are payable. "Person" means any natural person, firm, association, corporation, limited liability company, partnership, joint stock company, joint venture, trust, unincorporated organization or firm, or a government or any agency or political subdivision thereof or other public body. "Policy" means the financial guaranty insurance policy issued by Assured Guaranty guaranteeing the scheduled payment of principal of and interest on the Series 2009 Bonds when due. "Projects" means, collectively, the Street Project, the Trail Project and the Wastewater Project. • "Project Costs" means, to the extent permitted by the Act or other applicable laws, with respect to the Projects, all costs of planning, designing, purchasing, acquiring, constructing, improving, enlarging, extending, repairing, financing and placing in operation, including obtaining governmental approvals, certificates, permits and licenses with respect thereto, heretofore or hereafter paid or incurred by or on behalf of the City and which shall include, but shall not be limited to: (a) interest accruing in whole or in part on the Bonds prior to and during construction of the Projects, including all amounts required by the Indenture to be paid from the proceeds of the Bonds into the Bond Fund; (b) preliminary investigation and development costs, engineering fees, contractors' fees, labor costs, the cost of materials, equipment, utility services and supplies, costs of obtaining permits, licenses and approvals, costs of real property, insurance premiums, legal and financing fees and costs, administrative and general costs, and all other costs properly allocable to the acquisition, construction and equipping of the Projects and placing the same in operation; (c) all costs relating to injury and damage claims arising out of the acquisition, construction or equipping of the Projects; (d) all other costs incurred in connection with, and properly allocable to, the acquisition, construction and equipping of the Projects; and (e) amounts to pay or reimburse the City or any City fund for expenses of the City incident and properly allocable to such planning, designing, purchasing, acquiring, constructing, improving, enlarging, extending, repairing, financing and placing in operation of the Projects. "Project Fund" means the fund by that name created and established in the Indenture. "Qualified Engineer" means an independent consulting engineer or firm of independent consulting engineers not in the regular employ of the City. • "Rating Agency" means Moody's Investors Service, Standard & Poor's Ratings Services, a Division of The McGraw-Hill Companies, Inc., or Fitch, Inc., and their respective successors and assigns. If any such corporation ceases to act as a securities rating agency, the City may appoint any nationally recognized securities rating agency as a replacement. "Rebate Fund" means the fund by that name created and established in the Indenture. "Record Date" means the fifteenth day of the calendar month preceding the calendar month in which an interest payment date on the Bonds occurs. "Redemption Fund" means the fund by that name established in the Indenture. "Requisition" means a written requisition of the City, consecutively numbered, signed by an Authorized Representative including, without limitation, the following with respect to each payment requested: (i) the name of the Person or party to whom payment is to be made and the purpose of the payment, (ii) the amount to be paid thereunder; (iii) that such amount has not been previously paid by the City and is justly due and owing to the Person(s) named therein as a proper payment or reimbursement of a Project Cost; and (iv) that no Event of Default exists under the Indenture and that, to the knowledge of the Authorized Representative, no event has occurred and continues which with notice or lapse of time or both would constitute an Event of Default under the Indenture. "Reserve Fund Insurance Policy" means the financial guaranty insurance policy issued by Assurance Guaranty and deposited in the Debt Service Reserve Fund. "Reserve Requirement" means, with respect to each series of Bonds, an amount equal to 5% of the original principal amount of such series of Bonds. For all purposes of the Indenture, the Reserve Requirement may be satisfied by the deposit of cash or by the deposit of Investment Securities, including the Reserve Fund Insurance • Policy. B-5 "Revenue Fund" means the fund by that name created and established in the Indenture. 0 "RLF Loan" means the City's 520,000,000 original principal amount of Sales and Use Tax Capital Improvement Bond, Series 2006 RLF Loan, constituting a portion of the Existing Indebtedness and structured as a loan to the City under the Arkansas Natural Resources Commission Revolving Loan Fund Program "0.25% Sales and Use Tax" means the one -quarter of one percent (0.25%) city-wide sales and use tax authorized under the Act which has been levied within the City pursuant to the Election Ordinance and approved by the voters of the City, the collection of which tax commenced on January 1, 2007. "0.75% Sales and Use Tax" means the three-quarters of one percent (0.75%) city-wide sales and use tax authorized under the Act which has been levied within the City pursuant to the Election Ordinance and approved by the voters of the City, the collection of which tax will commence on the first day following the date of expiration of the Existing Tax securing the Existing Indebtedness. "Sales and Use Taxes" mean, collectively, the 0.25% Sales and Use Tax and the 0.75% Sales and Use Tax. Receipts of the Sales and Use Taxes are pledged to the payment of Debt Service on the Bonds. "Securities Depository" means The Depository Trust Company, New York, New York, or its nominee, and its successors and assigns, or any other depository institution appointed by the City or the Trustee to act as depository for the Bonds in connection with the Book -Entry System. "Series 2006A Bonds" means the City's Sales and Use Tax Capital Improvement Bonds, Series 2006A, issued in the original aggregate principal amount of $50,000,000. "Series 2007 Bonds" means the City's Sales and Use Tax Capital Improvement Bonds, Series 2007, issued in the original aggregate principal amount of S 14,340,000. "Series 2009 Bonds" means the City's Sales and Use Tax Capital Improvement Bonds, Series 2009, issued in the original aggregate principal amount of51 1,250,000. "State" means the State of Arkansas. • "Street Project" means the acquisition, construction, reconstruction, repair, straightening and widening of certain City streets and related improvements, as described in the Election Ordinance and eligible for financing with the proceeds of the Bonds in aggregate principal amount not to exceed $65,900,000. "Supplemental Indenture" means any indenture supplemental to or amendatory of the Indenture. "Surplus Tax Receipts" shall have the meaning ascribed to such term in Section 503 of the Indenture. "Tax Regulatory Agreement" means that Tax Regulatory Agreement of the City relating to maintenance of the excludability of interest on the Series 2009 Bonds from gross income for federal income tax purposes, delivered in connection with the issuance of the Series 2009 Bonds. "Trail Project" means the acquisition, construction and equipping of certain City trail system improvements, as described in the Election Ordinance and eligible for financing with the proceeds of the Bonds in aggregate principal amount not to exceed $2,100,000. "Trustee" means the banking corporation or association designated as Trustce in the Indenture, and its successor or successors as such Trustee. The original Trustee is Simmons First Trust Company, N.A. "Trust Estate" means the property described in the granting clauses of the Indenture. "Wastewater Project" means the acquisition, construction, reconstruction, extension, improving and equipping of certain improvements to the City's wastewater treatment plants, sewerage and related facilities, as described in the Election Ordinance and eligible for financing with the proceeds of the Bonds in aggregate principal amount not to exceed $42,000,000. • SAPPENDIX C THE SALES AND USE TAXES Sales Tux. The sales tax portion of the Sales and Use Taxes is generally levied upon the gross proceeds and receipts derived from all sales to any Person within the City of the following: (a) Tangible personal property; (b) Natural or artificial gas, electricity, water, ice, steam, or any other utility or public service except transportation services, sewer services and sanitation or garbage collection services (natural gas and electricity sales to a manufacturer for use directly in the manufacturing process will be taxed at a reduced rate); (c) (i) Service by telephone, telecommunications and telegraph companies to subscribers or users, including transmission of messages or images, whether local or long distance, including all service, installation, construction and rental charges having any connection with transmission of any message or image; (ii) Service of furnishing rooms, suites, condominiums, townhouses, rental houses or other accommodations by hotels, apartment hotels, lodging houses, tourist camps, tourist courts, property management companies, or any other provider of accommodations to transient guests; (iii) Service of cable television, community antenna television, and any and all other distribution of television, video, or radio services with or without the use of wires provided to subscribers, paying customers or users, including installation, service, rental, repair and other charges having any connection with the providing of the said services; provided, however, sales taxes are not levied on services purchased by radio or television providers for use in providing their services; • (iv) Service or alteration, addition, cleaning, refinishing, replacement and repair of motor vehicles, aircraft, farm machinery and implements, motors of all kinds, tires and batteries, boats, electrical appliances and devices, furniture, rugs, upholstery, household appliances, televisions and radios, jewelry, watches and clocks, engineering instruments, medical and surgical instruments, machinery of all kinds, bicycles, office machines and equipment, shoes, tin and sheet metal, mechanical tools and shop equipment; however, the tax does not apply to (A) coin operated car washes, (B) the maintenance or repair of railroad parts, railroad cars and equipment brought into the City solely and exclusively for the purpose of being repaired, refurbished, modified, or converted within the City, (C) the service of alteration, addition, cleaning, refinishing, replacement or repair of commercial jet aircraft or commercial jet aircraft components or subcomponents, (D) the repair or remanufacture of industrial metal rollers or platens that have a remanufactured non-metallic material covering on all or a part of the roller or platen surface, or (E) the alteration, addition, cleaning, refinishing, replacement or repair of non -mechanical, passive or manually operated components of buildings or other improvements or structures affixed to real estate; (v) Service of providing transportation or delivery of money, property or valuables by armored car; service of providing cleaning or janitorial work; service of pool cleaning and servicing; pager services; telephone answering services; landscaping and non-residential lawn care services; service of parking a motor vehicle or allowing a motor vehicle to be parked; service of storing a motor vehicle; service of storing furs; service of providing indoor tanning at a tanning salon; wrecker and towing services; service of collecting and disposing of solid waste; services associated with the lease or rental of a portable toilet; parking lot and gutter cleaning services; dry cleaning and laundry services; industrial laundry services; mini warehouse and self storage rental services; body piercing, tattooing and electrolysis services; pest control services; security and alarm monitoring services; boat storage and docking fees; furnishing campground spaces or trailer spaces at public or privately owned campgrounds, except for federal campgrounds, on less than a month -to -month basis; locksmith services; pet grooming and kennel services; and the new installation and replacement labor for hardwood, vinyl, ceramic tile or other types of flooring; and (vi) Initial installation services relating to motor vehicles, aircraft, farm machinery and • implements, motors of all kinds, tires and batteries, boats, electrical appliances and devices, furniture, rugs, C -I flooring, upholstery, household appliances, television and radio, jewelry, watches and clocks, engineering • instruments, medical and surgical instruments, machinery of all kinds, bicycles, office machines and equipment, shoes, tin and sheet metal, mechanical tools and shop equipment; provided, however, if the item being installed is specifically exempted from the imposition of the sales tax, the service of installation will also be exempt; (d) Printing of all kinds, types and characters, including the service of overprinting, and photography of all kinds; (e) Tickets or admissions, for which consideration is paid, to places of amusement, to athletic, entertainment, recreational events, or fees for access to or the use of amusement, entertainment, athletic or recreational facilities; (f) Dues and fees to health spas, health clubs and fitness clubs; dues and fees to private clubs which hold any permit from the Alcoholic Beverage Control Board allowing the sale, dispensing or serving of alcoholic beverages of any kind on the premises; (g) Lease or rental of motor vehicles and trailers, other than diesel trucks rented for residential moving or commercial shipping or farm machinery rented or leased for a commercial purpose, for a period less than 30 days, or purchase of motor vehicles for rental or lease regardless of the length of the rental or lease; (h) Lease or rental of a portable toilet on a long or short-term basis, but excluding gross proceeds from the sale of a portable toilet purchased for subsequent lease or rental, and any service associated with the lease or rental of a portable toilet provided by the lessor or otherwise; (i) Orders by telegraph, telephone or other means of communication transmitted by florists; (j) Sales of beer, wine, liquor or any intoxicating beverages; (k) Proceeds derived from the operation or use of coin -operated pinball machines, coin -operated music machines, coin -operated mechanical games, and similar devices; • (I) Contracts, including service contracts, maintenance agreements and extended warranties, which in whole or in part provide for the future performance of or payment for services which are subject to the sales tax; (m) Receipts derived from the retail sale of any device used in playing bingo and any charge for admittance to facilities or for the right to play bingo or other games of chance regardless of whether such activity might otherwise be permitted by law; (n) The first 550,000 of the purchase price from the sale of machinery or equipment and related attachments that are sold to or used by a person engaged primarily in the harvesting of timber; (o) Receipts from a fishing guide service when the service is provided as part of a guided fishing trip and the guide service is provided in conjunction with the sale or lease of tangible personal property including a boat, a boat motor, or bait; and (p) Food and food ingredients other than alcoholic beverages, tobacco, dietary supplements or food prepared by a seller. Exemptions from Sales Tax. As summarized below, several types of transactions have been exempted from the sales tax portion of the Sales and Use Taxes by the General Assembly of the State. Sonic of the current exemptions include the sale of: (a) New or used house trailers, mobile homes, aircraft, motor vehicles, trailers or semi -trailers and a used house trailer, mobile home, aircraft, motor vehicle, trailer or semi -trailer is taken as a credit or part payment of the purchase price, when the total consideration is less than certain set dollar amounts; (b) Aircraft held for resale and used for rental or charter, whether by a business or an individual for a period not to exceed one year from the date of purchase of aircraft; (c) Tangible personal property or services by churches, except where such organizations may be engaged in business for profit; • C-2 • (d) Tangible personal property, or service by charitable organizations, except where such organizations may be engaged in business for profit; (e) Food in public, common, high school or college cafeterias and lunchrooms operated primarily for teachers and pupils, and not operated primarily for the public or for profit; (p Newspapers; (g) Property or services to the United States Government; motor vehicles and adaptive equipment to disabled veterans who have purchased said vehicles or equipment with financial assistance of the Veterans Administration; tangible personal property to the Salvation Army, Heifer Project International, Inc., Habitat for Humanities, the Boy Scouts of America, the Girl Scouts of America or any of the Scout Councils in the State; tangible personal property or service to the Boys Clubs of America or any local councils or organizations of the Boys Clubs of America, the Girls Clubs of America or any local councils or organizations of the Girls Clubs of America, to the Poets' Roundtable of Arkansas, to 4-H Clubs and FFA Clubs, to the Arkansas 4-H Foundation, to the Arkansas Future Farmers of America Foundation and the Arkansas Future Farmers of America Association, to qualified museums and to the Arkansas Symphony Orchestra, Inc.; and to the Arkansas Search Dog Association, Inc.; (h) Gasoline or motor vehicle fuel on which the motor vehicle fuel or gasoline tax has been paid to the State; special fuel, dyed distillate or petroleum products sold for consumption by vessels, barges and other commercial watercraft and railroads; dyed distillate special fuel on which taxes have been paid by the suppliers; fuel sold to the U.S. government; and biodiesel fuel; (i) Property resales to persons regularly engaged in the business of reselling the articles purchased; (j) Advertising space in newspapers and publications and billboard advertising services; (k) Gate admissions at State, district, county or township fairs or at any rodeo if the receipts derived from gate admissions to the rodeo are used exclusively for the improvement, maintenance and operation of such • rodeo, and if no part of the net earnings thereof inures to the benefit of any private stockholder or individual; (I) Property or services which the State is prohibited by the constitution or laws of the United States or by the constitution of the State from taxing or further taxing and tangible personal property exempted from taxation by the Arkansas Compensating (Use) Tax Act of 1949, as amended; (m) Isolated sales not made by an established business; (n) Cotton, seed cotton, lint cotton, bated cotton, whether compressed or not, or cotton seed in its original condition; seed for use in commercial production of an agricultural product or of seed; raw products from the farm, orchard or garden, where such sale is made by the producer of such raw products directly to the consumer and user; livestock, poultry, poultry products and dairy products of producers owning not more than five cows; and baby chickens; (o) Foodstuffs to governmental agencies for free distribution to any public, penal and eleemosynary institutions or for free distribution to the poor and needy, and the rental or sale of medical equipment, for the benefit of Persons enrolled in and eligible for Medicare or Medicaid programs; (p) Tangible personal property or services provided to any hospital or sanitarium operated for charitable and nonprofit purposes or any nonprofit organization whose sole purpose is to provide temporary housing to the family members of patients in a hospital or sanitarium; (q) Used tangible personal property when the used property was (I) traded in and accepted by the seller as part of the sale of other tangible personal property and (2) the Arkansas Gross Receipts Tax was collected and paid on the total amount of consideration for the sale of the other tangible personal property without any deduction or credit for the value of the used tangible personal property; provided, however, this exemption does not apply to transactions involving used automobiles, used mobile homes, or used aircraft; (r) Unprocessed crude oil; (s) Tangible personal property consisting of machinery and equipment, including, without limitation, molds, frames, forms, dies, tools, devices, and testing equipment, used directly in producing, manufacturing, • fabricating, assembling, processing, finishing or packaging of articles of commerce at (i) new manufacturing or C-3 processing plants or facilities in the State or (ii) existing manufacturing or processing plants or facilities in the State • if the tangible personal property is used to replace existing machinery and equipment; (t) Property consisting of machinery and equipment required by State law or regulation to be installed and utilized by manufacturing or processing plants or facilities to prevent or reduce air and/or water pollution or contamination; (u) Electricity used in the manufacture of aluminum metal by the electrolytic reduction process and sale of articles sold on the premises of the Arkansas Veterans Home; (v) Automobile parts which constitute "core charges," which are received for the purpose of securing a trade-in for the article purchased; (w) Bagging and other packaging and tie materials sold to and used by cotton gins for packaging and/or tying baled cotton and from the sale of twine which is used in the production of tomato crops; (x) Prescription drugs by licensed pharmacists, hospitals, oncologists or dispensing physicians, and oxygen sold for human use on prescription of a licensed physician; (y) Property or services to humane societies; (z) Vessels, barges and towboats of at least fifty tons load displacement and parts and labor used in the repair and construction of the same; (aa) Property or sales to all orphans' homes, or children's homes, which are not operated for profit and whether operated by a church, religious organization or other benevolent charitable association; (bb) Agricultural fertilizer, agricultural limestone and agricultural chemicals; (cc) Sale of tickets or admissions by municipalities and counties to places of amusement, to athletic, entertainment or recreational events, or fees for the privilege of having access to or the use of amusement, entertainment, athletic or recreational facilities, including free or complimentary passes, tickets, admissions, dues or • fees; (dd) Free or complimentary admission to places of amusement, to athletic, entertainment or recreational events, or for access to or for the use of amusement, athletic or recreational facilities; (ee) New and used farm machinery and equipment; (ft) New automobiles to a veteran of the United States Armed Services who is blind as a result of a service connected injury; (gg) Motor vehicles sold to municipalities, counties, school districts, and state supported colleges and universities; (hh) School buses sold to school districts and, in certain cases, to other purchasers providing school bus service to school districts; (ii) Natural gas, LP gas, or electricity sold to a processor or mining company engaging in open pit and underground mining or processing of bauxite; (ii) Feedstuffs used in the commercial production of livestock or poultry; (kk) New and used mobile homes and custom manufactured homes; (II) The first 500 kilowatt hours of electricity per month and the total franchise (axes billed to each residential customer whose household income is less than $12,000 per year; (mm) Natural gas and electricity used in the manufacturing of tires; (nn) Waste fuel used in producing, manufacturing, fabricating, assembling, processing, finishing, or packaging of articles of commerce at manufacturing or processing plants or facilities in the State; (oo) Electricity and natural gas to qualified steel and wall and floor tile manufacturers; (pp) Electricity used for the production of chlorine and other chemicals using a chlor-alkali • manufacturing process; C-0 • (qq) Tangible personal property lawfully purchased with food stamps, food coupons, food instruments or vouchers in connection with certain Federal programs; (rr) Publications sold through regular subscriptions; (ss) Tickets for admission to athletic events and interscholastic activities of public and private elementary and secondary schools in the State and tickets for admission to athletic events at public and private colleges and universities in the State; (tt) Prescriptive durable medical equipment, mobility enhancing equipment, including wheelchair lifts and automobile hand controls, and prescriptive disposable medical equipment; (uu) Insulin and test strips for testing blood sugar levels in humans; (vv) Telephone instruments sent into the State for refurbishing or repair and then shipped back to the state of origin; (ww) Industrial metal rollers sent into the State for repair or remanufacture and then shipped back to the state of origin; (xx) New motor vehicles purchased by non-profit organizations and used for the performance of contracts with the Department of Human Services, and new motor vehicles purchased with Urban Mass Transit Administration funds if (i) the vehicles are purchased in lots of ten vehicles, (ii) meet minimum State specifications, and (iii) vehicles are used for transportation under the Department of Human Services' programs for the aging, disabled, mentally ill, and children and family services; (yy) Motor fuels and dyed distillates to owners or operators of motor buses operated on designated streets according to regular schedule and under municipal franchise which are used for municipal transportation purposes; (zz) Parts or other tangible personal property incorporated into or which become a part of commercial • jet aircraft component or subcomponent; (aaa) Transfer of fill material by a business engaged in transporting or delivering fill material; (bbb) Long-term leases, thirty days or more, of commercial trucks used for interstate transportation of goods under certain conditions; (ccc) Foodstuffs to nonprofit agencies; (ddd) Tangible personal property consisting of forms constructed of plaster, cardboard, fiberglass, natural fibers, synthetic fibers or composites and which are destroyed or consumed during the manufacture of the item; (eee) Natural gas used as a fuel in the process of manufacturing glass; (ffl) Sales to Fort Smith Clearinghouse; (ggg) Substitute fuel used in producing, manufacturing, fabrication, assembling, processing, finishing or packaging of articles at manufacturing facilities or processing plants in the State; (hhh) Railroad rolling stock used in transporting persons or property in interstate commerce; (iii) Parts or other tangible personal property which become apart of railroad parts, railroad cars and equipment brought into the State for the purpose of being repaired, refurbished, modified or converted within the State; (jjj) Fire protection and emergency equipment to be owned by and exclusively used by a volunteer fire department, and supplies and materials to be used in the construction and maintenance of volunteer fire departments; (kkk) Gas produced from biomass and sold for the purpose of generating energy to be sold to the gas producer; (III) Parts or other tangible personal property incorporated into or which become part of commercial jet aircraft components or subcomponents; 0 C-5 (mmm) Catalysts, chemicals, reagents and solutions which are consumed or used in producing, • manufacturing, processing or finishing articles of commerce at manufacturing or processing plants in the State; (nnn) Fuel packaging materials sold to persons engaged in the business of processing hazardous and non -hazardous waste materials into fuel products; (000) Instructional materials used in public schools; (ppp) Livestock reproduction equipment and substances used in livestock reproduction; and (qqq) Thermal imaging equipment purchased by a county government for use by law enforcement aircraft. Reference is made to "The Arkansas Gross Receipts Act of 1941," Title 26, Chapter 52 of the Arkansas Code of 1987 Annotated, for more information concerning the sales tax. Use Tax. The use tax portion of the Sales and Use Taxes is levied on every Person for the privilege of storing, using, distributing or consuming in the City any article of tangible personal property purchased for storage, use, distribution or consumption. The use tax applies to the use, distribution, storage or consumption of every article of tangible personal property except as hereinafter provided. The use tax does not apply to aircraft equipment, and railroad parts, cars, and equipment, nor to tangible personal property owned or leased by aircraft, automotive or railroad companies brought into theCity solely and exclusively for refurbishing, conversion, or modification within the City or storage for use outside or inside the City regardless of the length of time any such property is so stored in the City. Among other items, the use tax is levied on -the following described tangible personal property: (a) Tractors, trailers, semi -trailers, trucks, buses and other rolling stock, including replacement tires, used directly in the transportation of persons or property in intrastate or interstate common carrier transportations; (b) Property (except fuel) consumed in the operation of railroad rolling stock; (c) Transmission lines and pumping or pressure control equipment used directly in or connected to the • primary pipeline facility engaged in intrastate or interstate common carrier transportation of property; (d) Airplanes and navigation instruments used directly in or becoming a part of flight aircraft engaged in transportations of persons or property in regular scheduled intrastate or interstate common carrier transportation; (e) Exchange equipment, lines, boards and all accessory devices used directly in and connected to the primary facility engaged in the transmission of messages; (I) Transmission and distribution pipelines in pumping or pressure control and equipment used in connection therewith used directly in primary pipeline facility for the purpose of transporting and delivering natural gas; (g) Transmission and distribution lines, pumping machinery and controls used in connection therewith in cleaning or treating equipment of primary water distribution system; (h) Property of public electric power companies consisting of all machinery and equipment including reactor cores and related accessory devices used in the generation and production of electric power and energy and transmission facilities consisting of the lines, including poles, towers and other supporting structures, transmitting electric power and energy together with substations located on or attached to such lines; and (i) Computer software. Exemptions from Use Tax. Some of the property exempted from the use tax by the General Assembly of the State is as follows: (a) Property, the storage, use or consumption of which the State is prohibited from taxing under the Constitution or laws of the United States of America or the State; (b) Sales of tangible personal property in which the tax under the Arkansas Gross Receipts Act of 1941 is levied; (c) Tangible personal property which is exempted from the sales tax under the Arkansas Gross Receipts Act of 1941; C-6 (d) Prescriptive durable medical equipment, mobility enhancing equipment, including wheelchair lifts and automobile hand controls, and disposable medical equipment; (e) Feedstuffs used in the commercial production of livestock or poultry in the State; (I) Unprocessed crude oil; (g) Machinery and equipment including, without limitation, molds, frames, forms, dies, tools, devices and testing equipment, used directly in producing, manufacturing, fabricating, assembling, processing, finishing or packaging of articles of commerce at manufacturing or processing plants or facilities in the State, including facilities and plants for manufacturing feed, processing of poultry and/or eggs and livestock and the hatching of poultry and such equipment is either (I) purchased to create or expand manufacturing or processing plants in the State, (2) purchased to replace existing machinery and used directly in producing, manufacturing, fabricating, assembling, processing, finishing or packaging of articles of commerce at manufacturing or processing plants in the State, or (3) required by State law to be installed and utilized by manufacturing or processing plants to prevent or reduce air and/or water pollution or contamination; (h) Modular homes constructed with materials on which the sales or use tax has once been paid; (i) Aircraft, aircraft equipment, railroad parts, cars, and equipment, and tangible personal property owned or leased by aircraft, airmotive, or railroad companies, brought into the State solely and exclusively for refurbishing, conversion, or modification or for storage for use outside or inside the State; (j) Vessels, barges, and towboats of at least 50 tons load displacement and parts and labor used in the repair and construction of them; (k) Motor fuels and dyed distillates to the owners or operators of motor buses operated on designated streets according to regular schedule, under municipal franchise, which are used for municipal transportation purposes; • (I) Natural gas and electricity used in the manufacturing of tires; (in) Agricultural fertilizer, agricultural limestone, agricultural chemicals, including agricultural pesticides and herbicides used in commercial production of agricultural products, and vaccines, medications, and medicinal preparations, used in treating livestock and poultry being grown for commercial purposes and other ingredients used in the commercial production of yeast; (n) All new and used motor vehicles, trailers or semi -trailers that arc purchased for a total consideration of less than $2,500; and (o) Any tangible personal property used, consumed, distributed, or stores in this State upon which a like tax, equal to or greater than the Arkansas Compensating (Use) Tax, has been paid in another state. Reference is made to "The Arkansas Compensation (Use) Tax Act of 1949," Title 26, Chapter 53 of the Arkansas Code of 1987 Annotated, for more information concerning the use tax. • C-7 El (This page intentionally left blank.) • • APPENDIX D • SPECIMEN OF FINANCIAL GUARANTY INSURANCE POLICY ASSURED GUARANTY T ENDURING FINANCIAL STRENGTH FINANCIAL GUARANTY INSURANCE POLICY Issuer. Policy No.: Obligations: Premium: Effective Date: Assured Guaranty Corp., a Maryland corporation ('Assured Guaranty"), in consideration of the payment of the Premium and on the terms and subject to the conditions of this Policy (which includes each endorsement hereto), hereby unconditionally and irrevocably agrees to pay to the trustee (the "Trustee") or the paying agent (the "Paying Agent') for the Obligations (as set forth in the documentation providing for the issuance of and securing the Obligations) for the benefit of the Holders, that portion of the Insured Payments which shall become Due for Payment but shall be unpaid by reason of Nonpayment. Assured Guaranty will make such Insured Payments to the Trustee or the Paying Agent on the later to occur of (i) the date applicable principal or interest becomes Due for Payment, or (ii) the Business Day next following the on which Assured Guaranty shall have Received a completed Notice of Nonpayment. 'If a Notice of Nogpay en b A sured Guaranty is incomplete or does not in any instance conform to the terms and conditions of this Poli , it sh I e e not Received, and Assured Guaranty shall promptly give notice to the Trustee or the Paying A ent p rec f uch tic , the Trustee or the Paying Agent may submit an amended Notice of Nonpayment, m e or P yin e t II isburse the Insured Payments to the Holders only upon receipt by the Tms or it e ing t i f r a o bl s tisfactory to it of (i) evidence of the Holder's right to receive such ay ents, n (' ) viF e i c din t u mita ion any appropriate instruments of assignment, that all of th der' gh to y e t §f ri ci al or i to e D e for Payment shall thereupon vest in Assured Guanatr)SH and a en s c d sWir n , ss ar nt II become the Holder • of the Obligations, any rte t Bret nd right to ec i pay e f princi I reof or interest thereon, and shall be fully subroga d to lis g tie an a es 1 e n i C ' without limitation the right to receive payments in respect�oyme As ur d ar n h tee or the Paying Agent for the benefit of the Holders shall discharge`thq obligation 9f ylssilred Gulpradtg ugtd4r tljlslPdlicy to the extent of such payment This Policy is non-can ab by Assur d Gua ty for any reason. The Premium on this Policy is not refundable for any reason. This Polic e n ns re ago oss of any prepayment premium or other acceleration payment which at any time may become due i re ec o Obligation, other than at the sole option of Assured Guaranty, nor against any risk other than Nonpayment. Except to the extent expressly modified by any endorsement hereto, the following terms shall have the meanings specified for all purposes of this Policy. "Avoided Payment" means any amount previously distributed to a Holder in respect of any Insured Payment by or on behalf of the Issuer, which amount has been recovered from such Holder pursuant to the United States Bankruptcy Code in accordance with a final, nonappealable order of a court having competent jurisdiction that such payment constitutes an avoidable preference with respect to such Holder. "Business Day" means any day other than (i) a Saturday or Sunday, (ii) any day on which the offices of the Trustee, the Paying Agent or Assured Guaranty are closed, or (iii) any day on which banking institutions are authorized or required by law, executive order or governmental decree to be closed in the City of New York or in the State of Maryland. "Due for Payment" means (t) when referring to the principal of an Obligation, the stated maturity date thereof, or the date on which such Obligation shall have been duly called for mandatory sinking fund redemption, and does not refer to any earlier date on which payment is due by reason of a call for redemption (other than by mandatory sinking fund redemption), acceleration or other advancement of maturity (unless Assured Guaranty in its sole discretion elects to make any principal payment, in whole or in part, on such earlier date) and (ii) when referring to interest on an Obligation, the stated date for payment of such interest. "Holder" means, in respect of any Obligation, the person or entity who, at the time of Nonpayment, is entitled under the terms of such Obligation to payment of principal or interest thereunder, except that Holder shall not include the Issuer or any person or entity whose direct or indirect obligation constitutes the underlying security for the Obligations. 'Insured Payments" means that portion of the principal of and interest on the Obligations that shall become Due for Payment but shall be unpaid by reason of Nonpayment. Insured Payments shall not include any additional amounts owing by the Issuer solely as a result of the failure by the Trustee or the Paying Agent to pay such amount when due and payable, including without limitation any such additional amounts as may be attributable to penalties or to interest accruing at a default rate, to amounts payable in respect of indemnification, or to any other additional amounts payable by the Trustee or the Paying Agent by reason of such failure. "Nonpayment" means, in respect of an Obligation, the failure of the Issuer to have provided sufficient funds to the Trustee or the Paying Agent for payment in full of all principal and interest Due for Payment on such Obligation. It is further understood that the term "Nonpayment" in respect of an Obligation includes any Avoided Payment. 'Receipt' or "Received' means actual receipt or notice of or, if notice is given by overnight or other delivery service, or by certified or registered United States mail, by a delivery receipt signed by a person authorized to accept delivery on behalf of the • person to whom the notice was given. Notices to Assured Guaranty may be mailed by registered mail or personally delivered or telecopied to it at 1325 Avenue of the Americas, New York, New York 10019, Telephone Number: (212) 974-0100, Facsimile Number: (212) 581-3268, Attention: Risk Management Department - Public Finance Surveillance, with a copy to the General Counsel at the same address and atgeneralcounsel@assuredguaranty.com or at the following Facsimile Number: (212) 445- D-1 8705. or to such other address as shall be specified by Assured Guaranty to the Trustee or the Paying Agent in writing. A Notice of Nonpayment will be deemed to be Received by Assured Guaranty on a given Business Day if it is Received prior to 12:00 noon (New York City time) on such Business Day; otherwise it will be deemed Received on the next Business Day. • 'Terri means the period from and including the Effective Date until the earlier of (i) the maturity date for the Obligations, or (ii) the date on which the Issuer has made all payments required to be made on the Obligations. At any time during the Term of this Policy, Assured Guaranty may appoint a fiscal agent (the "Fiscal Agent') for purposes of this Policy by written notice to the Trustee or the Paying Agent, specifying the name and notice address of such Fiscal Agent. From and after the date of Receipt of such notice by the Trustee or the Paying Agent, copies of all notices and documents required to be delivered to Assured Guaranty pursuant to this Policy shall be delivered simultaneously to the Fiscal Agent and to Assured Guaranty. All payments required to be made by Assured Guaranty under this Policy may be made directly by Assured Guaranty or by the Fiscal Agent on behalf of Assured Guaranty. The Fiscal Agent is the agent of Assured Guaranty only, and the Fiscal Agent shall in no event be liable to the Trustee or the Paying Agent for any acts of the Fiscal Agent or any failure of Assured Guaranty to deposit, or cause to be deposited, sufficient funds to make payments due under this Policy. To the fullest extent permitted by applicable law, Assured Guaranty hereby waives, in each case for the benefit of the Holders only, all rights and defenses of any kind (including, without limitation, the defense of fraud in the induce nt or in fact or any other circumstance that would have the effect of discharging a surety, guarantor or any other p n i I or in equity) that may be available to Assured Guaranty to deny or avoid payment of its obligations un i oli y ccordance with the express provisions hereof. Nothing in this paragraph will be construed (i) to limit o he i i pair, and Assured Guaranty expressly reserves, Assured Guaranty's rights and remedies, di , w u itati n: it g to assert any claim or to pursue recoveries (based on contractual rights, securities volat n , fir u o r a e o action) against any person or entity, in each case, whether directly or acqu' a u r , a s n or othe se ubs vent to making any payment to the Trustee or the Paying Agent, i rd ce wit I e x r s is s eof, n o (ii) require payment by Assured Guaranty of any amounts th ha been r io s i or t t r n o h rw s in c rd nce with the express provisions of this Policy. This Policy (which in udes e d rs en he t ) ets h in I I un rt K Assured Guaranty with respect to the subject matter here , n nI6e dif It re a y er agreement or instrument, including, without limitation, any modif air the to or d ent th eo. T P L IS NOT COVERED BY THE PROPERTY/CASUALTY INSURANCE SEC ITY D Cl IE R CL 6 F THE NEW YORK INSURANCE LAW. This Policy will be governed by, and sha c t din a cordan with, the laws of the State of New York. IN WITNESS WHE E ur d Guaranty has caused this Policy to be affixed with its corporate seal, to be signed by its duly authorized officer, d to a effective and binding upon Assured Guaranty by virtue of such signature. ASSURED GUARANTY CORP. (SEAL) • By: Authorized Officer Signature attested to by: Counsel • D-2 •IV KUTAK ROCK LLP ATLANTA CHICAGO SUITE 2000 DENVER •124 WEST CAPITOL AVENUE DES MOINES FAYETTEVILLE ORTHWEST ARKANSAS OFFICE LITTLE ROCK, ARKANSAS 72201-3706 IRVINE SUITE 400 KANSAS CITY 501-975-3000 234 EAST MILLSAP ROAD LOS ANGELES FAYETTEVILLE. ARKANSAS 12703-4099 FACSIMILE 501-976-3001 OKLAHOMA CITY 479-973-4200 OMAHA W W W.kutakrock .corn PHILADELPHIA RICHMOND SCOTTSDALE WASHINGTON GORDON M. WILBOURN WICHITA gordon.wllboum@kutakrock.com November 12, 2009 (501) 975-3101 City of Fayetteville, Arkansas Fayetteville, Arkansas Stephens Inc. Fayetteville, Arkansas Simmons First Trust Company, N.A., as Trustee Pine Bluff, Arkansas Assured Guaranty Corp. New York, New York $11,250,000 City of Fayetteville, Arkansas Sales and Use Tax Capital Improvement Bonds • Series 2009 Ladies and Gentlemen: We have acted as bond counsel in connection with the issuance and sale by the City of Fayetteville, Arkansas (the "City"), a political subdivision of the State of Arkansas, of its $11,250,000 Sales and Use Tax Capital Improvement Bonds, Series 2009 (the "Bonds"). The Bonds are being issued pursuant to the provisions of the Constitution and laws of the State of Arkansas, including, particularly, Amendment 62 and Arkansas Code Annotated (1998 Repl. & Supp. 2005) §§14-164-301 et seq. (as from time to time amended, the "Act"), pursuant to Ordinance No. 5277 of the City, duly adopted and approved on October 6, 2009 (the "Authorizing Ordinance"), and pursuant to a Trust Indenture dated as of November 1, 2006, as amended and supplemented by a First Supplemental Trust Indenture dated as of October 1, 2007, and by a Second Supplemental Trust Indenture dated as of November 1, 2009 (as amended and supplemented, the "Indenture"), by and between the City and Simmons First Trust Company, N.A., as trustee (the "Trustee"). Reference is hereby made to the Indenture and to all indentures supplemental thereto for the provisions, among others, with respect to the conditions for the issuance of parity indebtedness by the City, with respect to the nature and extent of the security for the Bonds, the rights, duties and obligations of the City, the Trustee and the Holders of the Bonds, and the terms upon which the Bonds are issued and secured. • Reference is made to an opinion of even date herewith of Kit Williams, Esq., City Attorney, a copy of which is on file with the Trustee, with respect, among other matters, to the status and valid existence of the City, the power of the City to adopt the Election Ordinance and 4816-9525-7349.1 KUTAK ROCK LLP • Bond Approving Opinion November 12, 2009 Page 2 the Authorizing Ordinance and to enter into and perform its obligations under the Indenture, the valid adoption of the Election Ordinance and the Authorizing Ordinance, and the due authorization, execution and delivery of the Indenture by the City, and with respect to the Indenture being enforceable upon the City. We have examined the law and such certified proceedings and other papers as we have deemed necessary to render this opinion. As to questions of fact material to our opinion, we have relied upon the representations of the City contained in the Election Ordinance, the Authorizing Ordinance and the Indenture and in the certified proceedings and other certifications of public officials furnished to us, without undertaking to verify the same by independent investigation. Based upon the foregoing, we are of the opinion, under existing law, as follows: 1. The City is duly created and validly existing as a municipal corporation of the State of Arkansas. Pursuant to the Constitution and laws of the State of Arkansas, including, particularly, Amendment 62 and the Act, the City is empowered to adopt the Election Ordinance • and the Authorizing Ordinance, to execute and deliver the Indenture, to perform the agreements on its part contained therein, and to issue the Bonds. 2. The Authorizing Ordinance has been duly adopted by the City and constitutes a valid and binding obligation of the City enforceable upon the City in accordance with its terms. 3. The Indenture has been duly authorized, executed and delivered by the City and is a valid and binding obligation of the City enforceable upon the City in accordance with its terms. 4. The Bonds have been duly authorized, executed and delivered by the City and are valid and binding limited obligations of the City payable from and secured by a valid lien on and pledge of the Trust Estate (as defined in the Indenture), including receipts of the 0.25% Sales and Use Tax and the 0.75% Sales and Use Tax (each as defined in the Indenture), in the manner and to the extent provided in the Indenture. Such lien and pledge are made on a parity basis with the existing lien and pledge of the Trust Estate securing (i) the City's Sales and Use Tax Capital Improvement Bonds, Series 2006A, and (ii) the City's Sales and Use Tax Capital Improvement Bonds, Series 2007. The City is duly authorized to pledge such Trust Estate, and no further action on the part of the City or any other party is required to perfect the same or the interest of the owners of the Bonds therein. 5. The 0.25% Sales and Use Tax and the 0.75% Sales and Use Tax have been validly adopted in accordance with the Constitution and laws of the State of Arkansas, including Amendment 62 and the Act, and may be validly pledged to secure the Bonds. Levy and • collection of the 0.25% Sales and Use Tax commenced as of January 1, 2007, and levy and collection of the 0.75% Sales and Use Tax will commence as of the first day of the first month 4816-9525.7349.1 KUTAK ROCK LLP •Bond Approving Opinion November 12, 2009 Page 3 following cessation of the Existing Tax securing the Existing Indebtedness (each as defined in the Indenture). 6. Interest on the Bonds is excludable from gross income for federal income tax purposes. In addition, interest on the Bonds is not a specific preference item nor is it included in adjusted current earnings for purposes of the federal alternative minimum tax. The opinions described in the preceding sentences assume the accuracy of certain representations and compliance by the City with covenants designed to satisfy the requirements of the Internal Revenue Code of 1986, as amended (the "Code"), that must be met subsequent to the issuance of the Bonds. Failure to comply with certain of such requirements could cause interest on the Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds. The City has covenanted to comply with such requirements. The Bonds are "qualified tax-exempt obligations" within the meaning of Section 265(b)(3) of the Code, and, in the case of certain financial institutions (within the meaning of Section 265(b)(5) of the Code), a deduction is allowed for eighty percent (80%) of that portion of such financial institution's interest expenses allocable to interest on the Bonds. We express no opinion regarding other federal tax consequences of holding the Bonds. • 7. The interest on the Bonds is exempt from all state, county and municipal taxes in the State of Arkansas. 8. The Bonds are exempt from registration pursuant to the Securities Act of 1933, as amended, and the Indenture is not required to be qualified under the Trust Indenture Act of 1939, as amended, in connection with the offer and sale of the Bonds. It is to be understood that the rights of the registered owners of the Bonds and the enforceability of the Bonds, the Authorizing Ordinance and the Indenture may be subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights heretofore or hereafter enacted to the extent constitutionally applicable and that their enforcement may also be subject to the exercise of judicial discretion in appropriate cases. Very truly yours, 1 k 4a • 4816.9525-7349.1 KUTAK ROCK LLP ATLANTA CHICAGO SUITE 2000 DENVER • 124 WEST CAPITOL AVENUE DES MOINES ORTHWEST ARKANSAS OFFICE LITTLE ROCK, ARKANSAS 72201-3706 FAYETTEVILLE IRVINE SUITE 400 501-975-3000 KANSAS CITY 234 EAST MULaAP ROAD LOS ANGELES PAYETTEVILLE. ARKANSAS 72703-4099 FACSIMILE 501-975-3001 OKLAHOMA CITY 479-973-4200 w w w.k Uta k rock. corn OMAHA PHILADELPHIA RICHMOND SCOTTSDALE WASHINGTON GORDON M. WILBOURN WICHITA gordon.wllbouMGkutakrock.con, November 12, 2009 (501)975.3101 • • City of Fayetteville, Arkansas Fayetteville, Arkansas Stephens Inc. Fayetteville, Arkansas Ladies and Gentlemen: Simmons First Trust Company, N.A., as Trustee Pine Bluff, Arkansas Assured Guaranty Corp. New York, New York $11,250,000 City of Fayetteville, Arkansas Sales and Use Tax Capital Improvement Bonds Series 2009 This opinion supplements our bond approving opinion, dated the date hereof, relating to the above -captioned bonds (the "Bonds"). Except as otherwise defined herein, the terms used herein shall have the meanings prescribed for them in said opinion. We have examined the law and such certified proceedings and other papers as we have deemed necessary to render this opinion. As to questions of fact material to our opinion, we have relied upon the representations of the City contained in the Indenture and in the certified proceedings and other certifications of public officials furnished to us, without undertaking to verify the same by independent investigation. In addition to the documents specifically mentioned in the approving opinion, in connection with this opinion we have also examined: (a) An executed counterpart of the Bond Purchase Agreement dated October 21, 2009 (the "Bond Purchase Agreement"), by and between the City and Stephens Inc., as underwriter (the "Underwriter"); (b) An executed counterpart of the Continuing Disclosure Agreement dated November 12, 2009 (the "Disclosure Agreement"), by and between the City and Simmons First Trust Company, N.A., as trustee (the "Trustee"); 4826-51624197.1 KUTAK ROCK LLP • Supplemental Opinion of Bond Counsel November 12, 2009 Page 2 (c) An executed counterpart of the Tax Regulatory Agreement dated November 12, 2009 (the "Tax Regulatory Agreement"), by and between the City and the Trustee; (d) An executed counterpart of the Reimbursement Agreement dated November 12, 2009 (the "Reimbursement Agreement"), by and between the City and Assured Guaranty Corp. ("Assured Guaranty"); (e) The Official Statement dated October 21, 2009, with respect to the Bonds (the "Official Statement"); and (f) The Financial Guaranty Insurance Policy (the "DSR Policy") issued and delivered by Assured Guaranty concurrently with the issuance of the Bonds for deposit in the Debt Service Reserve Fund (as defined in the Indenture). Based on our examination, we are of the opinion, as of the date hereof and under existing law, as follows: • 1. The Bond Purchase Agreement has been duly authorized, executed and delivered by the City and, assuming due authorization, execution and delivery by the Underwriter, the Bond Purchase Agreement constitutes the valid and binding agreement of the City enforceable in accordance with its terms. 2. The Disclosure Agreement has been duly authorized, executed and delivered by the City and, assuming due authorization, execution and delivery by the Trustee, the Disclosure Agreement constitutes the valid and binding agreement of the City enforceable in accordance with its terms. 3. The Tax Regulatory Agreement has been duly authorized, executed and delivered by the City and, assuming due authorization, execution and delivery by the Trustee, the Tax Regulatory Agreement constitutes the valid and binding agreement of the City enforceable in accordance with its terms. 4. The Reimbursement Agreement has been duly authorized, executed and delivered by the City and, assuming due authorization, execution and delivery by Assured Guaranty, the Reimbursement Agreement constitutes the valid and binding agreement of the City, enforceable in accordance with its terms. 5. To the best of our knowledge, there is no litigation or other proceeding pending or threatened in any court, agency or other administrative body (either State or • Federal) which could have a material adverse effect on (a) the financial condition of the City, (b) the ability of the City to perform its obligations under the Authorizing Ordinance, the Indenture, the Bond Purchase Agreement, the Continuing Disclosure 4826-5162-4197.1 KUTAK ROCK LLP • Supplemental Opinion of Bond Counsel November 12, 2009 Page 3 Agreement, the Tax Regulatory Agreement or the Reimbursement Agreement (collectively, the "Related Documents"), (c) the security for the Bonds, or (d) the transactions contemplated by the Related Documents. 6. Nothing has come to our attention which would cause us to believe that, as of the date hereof, the Official Statement (excluding financial and statistical data and information provided by Assured Guaranty, which is contained or incorporated in the Official Statement, as to which no view is expressed) contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. 7. The DSR Policy constitutes an Investment Security (as defined in the Indenture) eligible for deposit in the Debt Service Reserve Fund under the provisions of the Indenture. The enforceability of the respective obligations of the parties to the documents and other • items described above, and the availability of certain rights and remedies provided for therein, may be limited by bankruptcy, receivership, insolvency, reorganization, moratorium, marshalling or other similar statutes or rules of law affecting creditors' rights and remedies, to general principles of equity and to the discretion of any court in granting any relief or issuing any order, whether the proceeding is considered a proceeding at law or equity. In particular, the right to indemnification under any of the documents or other items described above may be limited by federal of state securities laws or by the public policy underlying such laws. This opinion is being rendered to you solely for your use and benefit and may not be relied upon in any manner, nor used, by any other person. Very truly yours, 4 t`q a • 4826-5162-4197.1 KIT WILLIAMS FAYETTEVILLE CITY ATTORNEY DAVID J. WHITAKER Assistant City Attorney Judy Housley Office Manager Phone (479) 575-8313 FAX (479) 575-8315 November 12, 2009 Simmons First Trust Company, N.A., as trustee Pine Bluff, Arkansas Stephens Inc. Little Rock, Arkansas Assured Guaranty Corp. New York, New York Kutak Rock LLP Little Rock, Arkansas THE CITY OF FAYETTEVILLE. ARKANSAS 113 W. Mountain, Suite 302 Fayetteville, AR 72701-6083 Re: $11,250,000 City of Fayetteville, Arkansas Sales and Use Tax Capital • Improvement Bonds, Series 2009 Ladies and Gentlemen: I am City Attorney for to the City of Fayetteville, Arkansas and have acted in that capacity in connection with the issuance and sale by the City of its $11,250,000 Sales and Use Tax Capital Improvement Bonds, Series 2009 (the "Bonds"), which Bonds are being sold pursuant to the terms of a Bond Purchase Agreement dated October 21, 2009, by and between Stephens Inc. and the City. The terms defined in the Bond Purchase Agreement are used in this opinion with the meanings assigned to them in the Bond Purchase Agreement. In this connection, I have reviewed certain documents with respect to the Bonds, and have examined such records, certificates and other documents as I have considered necessary or appropriate for the purposes of this opinion, including Ordinance No. 4891 adopted by the City Council on June 20, 2006 (the "Election Ordinance"), Ordinance No. 5277 adopted by the City Council on October 6, 2009 (the "Bond Ordinance"), the Trust Indenture dated as of November 1, 2006, as supplemented and amended by a First Supplemental Trust Indenture dated as of October 1, 2007 and by a Second Supplemental Trust Indenture dated as of November 1, 2009 (as supplemented and amended, the "Indenture"), each by and between the City and Simmons First Trust Company, N.A., as trustee (the "Trustee"), the Tax Regulatory Agreement dated November 12, 2009 (the "Tax Regulatory Agreement"), by and between the City and the Trustee, the Continuing Disclosure Agreement dated November 12, 2009 (the "Disclosure Agreement"), by and between the City and the Trustee, the Reimbursement Agreement (Reserve Fund Surety) dated November 12, 2009, with respect to the municipal bond debt service reserve • insurance policy for the Bonds (the "Reimbursement Agreement") by and between the City and • Assured Guaranty Corp., the Preliminary Official Statement dated October 14, 2009 (the "Preliminary Official Statement"), and the Official Statement dated October 21, 2009 (the "Official Statement") relating to the offering of the Bonds, and closing certificates of the City. Based on such review and such other considerations of law and fact as I believe to be relevant, I am of the opinion that: 1. The City is a duly organized and validly existing municipal corporation and City of the First Class, organized under the laws of the State of Arkansas, with full power and authority to adopt the Election Ordinance and the Bond Ordinance, to levy the Sales and Use Taxes, and to execute and deliver the Bonds, the Indenture, the Tax Regulatory Agreement, the Disclosure Agreement, the Reimbursement Agreement, and the Bond Purchase Agreement. 2. The City has duly approved the Preliminary Official Statement and the Official Statement 3. The Election Ordinance and the Bond Ordinance have been duly adopted by the City by all action necessary under the Act and the laws and Constitution of the State of Arkansas, and each remains in full force and effect. 4. The 0.25% Sales and Use Tax and the 0.75% Sales and Use Tax have been validly adopted in accordance with the Constitution and laws of the State of Arkansas, including Amendment 62 and the Act, and may be validly pledged to secure the Bonds. Levy and • collection of the 0.75% Sales and Use Tax will commence as of the first day of the first month following cessation of the Existing Tax securing the Existing Indebtedness (each as defined in the Indenture). 5. The Indenture, the Tax Regulatory Agreement, the Disclosure Agreement, the Reimbursement Agreement, and the Bond Purchase Agreement have been duly authorized, approved, executed and delivered by the City and, subject to the extent that the enforceability of the rights and remedies set forth therein may be limited by bankruptcy, insolvency or other laws affecting creditors' rights generally, constitute valid and binding agreements of the City enforceable in accordance with their terms. 6. The information in the Official Statement under the captions "THE PROJECT," "THE CITY" and "LEGAL MATTERS" (apart from financial or statistical data contained or incorporated therein, as to which no view is expressed) is fair, accurate and complete and does not omit any matter which, in my opinion, for the purposes for which the Official Statement is to be used, should be included or referred to therein. 7. There is no action, suit or proceeding at law or in equity before or by any court, public board or body, pending or threatened, against or affecting the City, challenging the validity of the transactions contemplated by the Official Statement, the Bonds, the Sales and Use Taxes, the Election Ordinance, the Bond Ordinance, the Indenture, the Tax Regulatory Agreement, the Disclosure Agreement, the Reimbursement Agreement, or the Bond Purchase Agreement and, to the best of my knowledge, there is no investigation, pending or threatened, and no threatened action, suit or proceeding involving any of the matters hereinabove mentioned • in this paragraph 7. • 8. The adoption of the Election Ordinance and the Bond Ordinance and the execution and delivery of the Indenture, the Tax Regulatory Agreement, the Disclosure Agreement, the Reimbursement Agreement and the Bond Purchase Agreement, and compliance with the provisions thereof, under the circumstances contemplated thereby, do not and will not in any material respect conflict with or constitute on the part of the City a breach of or default under any agreement or other instrument to which the City is a party or any existing law, regulation, court order or consent decree to which the City is subject. 9. Based upon the examinations which I have made as Fayetteville City Attorney, nothing has come to my attention which would lead me to believe that the Official Statement (except for financial and statistical data contained or incorporated in the Official Statement, as to which no view is expressed) contains an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. I hereby consent to the references made to me in the Official Statement. r1 LJ • Sincerely, L. _KIT WILLIAMS Fayetteville City Attorney 9' fl • • GSA. • ARANTY ENDURING FINANOAL STRENGTH Issuer: Cityof Fayetteville, Arkansas Policy No.: 42009-1478 Obligations: $11,250,000 Sales and Use Tax Capital Premlwn: $79,711.67 Improvement Bonds, Series 2009 Effective Data November 12, 2009 C1 • Page I of 2 Policy No.: 0`2009-1478 Form FG001 (05107) Assured Guaranty Corp. 31 Wes15r Street New YIxR, NV 10019 main 2129740100 info@aseuredguaranty.mm I wwv.assuredguarenty.mm (ax 212 581 3268 • .tics •I•.: .:.- :• ••: :..: :.• v :• • .�': • �•.�•' •_ •• • . . • .I • .•1 - •e 1 •' :III ..: I: • •. .:1. • 1.. .m 1 • kJ q •` •1 ♦ 1 1 • •': :•1 :. •: �1 • • `• • 1 • \ ♦ :11 :..C iuj • `� :.• 1 C • :1': YI 11'1 • I: • l • • : tl: •: • • ♦ :Y•!jr a.,rIiQ' *t: £: ________ Signature attested to by: lIt/tY UP Page zo12 Poilcy • No.: 605 Form P0001 • Public Finance Surveillance and General Counsel •.i Nonpayment. . :'..L • .. w - •SCI .. . .: . . •; I: .: - . �I 4 . .: ... .1• .I �. . 1 • • \ :. • • • 1 .. \ : :. • u . • L • • 4 • 1 • • 1 111 ••�: • • :.• I:I• •: • p• c • �:• Y.\• • �• (1. •�I :. !1 • •p• .,. - ••.::•1. 1.1.1• •. 1 1• •:li :•: 1 .nom,:. • 1.. •• •ya. C • \1:.1• • \•L` • •. .: _ I • • • C..�. !;• •. �:• Imo. _ •• Y:1• C :I • 1 •.G.1 -• •' �I emu' :./.. • •: • '•: •• • •: c• ••', • Capitalized terms used In this Notice of Nonpayment and not otherwise defined herein shall have the respective meanings ascribed thereto In the Policy. This Notice of Nonpayment may be revoked at any time by written notice of such revocation by the [Trusteef[Payi g Agentl[Holderl to the Assured Guaranty. ANY PERSON W 10 IQCW/AGL Y AND kW7H INTENT 70 DEFRAUD ANY INSURANCE COMPANY OR OTHER PERSON FILES AN APPLIC47701V FOR /NSURAACE OR STATEMENT OF CLAIM CONTAIN/AG ANY MA 1ERZAL.L Y FALSE INFORMA77OM OR COAG'EALS FOR THE PURPOSE OF MISLEADING. INFORM4770N CONCERNING ANY FACT MATERIAL 7HERETU. COMMITS A FRAU0L/LENT INSL RAACEACT, WHICH IS A CRIME AND SHALL ALSO BE SUBJECT 70 A CML PEM4LTY ACT 7O EXCEED FNE THOUSAND DOLLARS AND 7HE STATED VALUE OF THE CLAIM FOR £401 SUd/ VIOLATION. IN WITNESS WHEREOF, the undersigned has executed and delivered this Notice of Nonpayment as of the _ day of of [TRUSTEEIPAYING AGENT) By: • Name: Title: • r1 ASSURED GUARANTY• • ENDURING EINANWL STRENGTH Financial Guaranty Insurance Policy (Reserve Fund) Issuer. City of Fayetteville, Arkansas Policy No.: D-2009-1479 • ' 1 111 .I • :I. 1 • of I.lesser • 11 • 1 - rl a%.I: n •: 11• a•r -:.. .j a•• U' - • r tIthx.Jfr• ' v : • • w`• : 1 :II.' • • • • •�: •: • • • •: • • •L• ..: 1.! Lj, "'' }f'''r I Sl ,'.0 'ii lrn Except to the extent expressly modified by any endorsement hereto, the following terms shall have the meanings specified for all purposes of this Policy. Avolded Payment means any amount previously distributed to a Holder in respect of any Insured Payment by or on behalf of the Issuer, which amount has been recovered from such Holder pursuant to the United States Bankruptcy Code In accordance with a final, nonappealable order of a court having competent jurisdiction that such payment constitutes an avoidable preference with respect to such Holder. 'Business Day means any day other than (i) a Saturday or Sunday, (II) any day on which the offices of the Trustee, the Paying Agent or Assured Guaranty are closed, or pie any day on which banking Institutions are authorized or required by law, executive order or governmental decree to be dosed In the City of New York or In the State of Maryland. "Due for Payment means (e when referring to the principal of an Obligation, the stated maturity date thereof, or the date on which such Obligation shall have been duly called for mandatory sinking fund redemption, and does not refer to any earlier date on which payment Is due by reason of a call for redemption (other than by mandatory sinking fund redemption). Pago I of 2 Policy No.: 0-2009-1479 Fore FO002 (05107) Assured Guaranty Corp. 31 Wee152nd Street main 212 974 0100 info©asswedguaranly.com www.easuredgualenty.Wm New Von. NV 10019 fax 212581 3268 :.•' •:• • •t •' • • r: • •' •' • • 1 rte•:• •s J9 j • flipj'/ / l. tet .� / •/ iaa/ / �' a //' / 1.m / •/ ". IN WITNESS WHEREOF, the undersigned has executed and delivered this Notice of Nonpayment as of the — day of of 20 [TRUSTEE !PAVING AGENT] • Name: Tale: IRATE) [TRUSTEE] [PAYING AGENT] [INSERT ADDRESS) By Name: TIUe: • L� • CERTIFICATE OF ASSURED GUARANTY CORP. • In connection with the issuance of $11,250,000 Sales and Use Tax Capital Improvement Bonds, Series 2009 (the "Obligations") by City of Fayetteville, Arkansas (the "Issuer"), Assured Guaranty Corp. ("Assured Guaranty") is issuing financial guaranty insurance policy no. D-2009-1478 (the "FG Policy") and financial guaranty insurance policy no. D-2009-1479 (the "Reserve Fund Policy" and, together with the FG Policy, collectively the "Policies" and each a "Policy") guaranteeing, when due, the scheduled payment of principal of and interest on the Obligations, all as set forth in the Policies. On behalf of Assured Guaranty, the undersigned hereby certifies that: (i) each Policy is an unconditional and recourse obligation of Assured Guaranty (enforceable on behalf of the holders of the Obligations) to pay the scheduled payments of interest and principal on the Obligations in the event of a Nonpayment (as defined in the Policies); (ii) the insurance premium of $79,711.67 for the FG Policy and $21,093.75 for the Reserve Fund Policy was determined in an arm's length negotiation in accordance with our standard procedure, and is required to be paid as a condition of the issuance of each Policy; (iii) no portion of such premium represents a payment for any direct or indirect services other than the transfer of credit risk; (iv) Assured Guaranty is not a co -obligor on the Obligations and does not reasonably expect that it will be called upon to make any payment under the Policies; (v) the Issuer is not entitled to a refund of premium for the Policies in the event that the Obligations are retired prior to their stated maturity; (vi) there has not come to the attention of the undersigned any information which would cause the undersigned to believe that the description of Assured Guaranty under the caption "BOND INSURANCE" in the official statement relating to the above referenced Obligations dated • October 21, 2009 (the "Official Statement"), as of the date of the Official Statement or as of the date of this certificate, contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; (vii) Assured Guaranty is not currently in default nor has Assured Guaranty ever been in default under any policy or obligation guaranteeing the payment of principal of or interest on an obligation; (viii) except for the insurance premium referred to in paragraph (ii) above, neither Assured Guaranty nor any party related to Assured Guaranty within the meaning of Section 1.150-1(b) of the Treasury Regulations will use any portion of the proceeds of the Obligations; and (ix) Assured Guaranty would not have issued the FG Policy in the absence of a debt service reserve fund of the size and type established by the documents pursuant to which the Obligations are being issued. IN WITNESS WHEREOF, Assured Guaranty has caused this certificate to be executed in its name on this 12TH day of November, 2009, by one of its duly authorized officers. ASSURED ANTY CORP. By: hard Cassata Managing Director C • ASSURED GUARANTY® ENDURING FINANCIAL STRENGTH November 12, 2009 To the Addressees listed on Annex A hereto Re: Financial Guaranty Insurance Policy No. D-2009-1478 relating to $11,250,000 City of Fayetteville, Arkansas Sales and Use Tax Capital Improvement Bonds, Series 2009 and Debt Service Reserve Fund Policy No. D-2009-1479 (each a'Policyand collectively, the'Policiesi Ladies and Gentlemen: This opinion letter has been requested of the undersigned, in the capacity of the undersigned as a Associate General Counsel of Assured Guaranty Corp., a Maryland corporation ('Assured Guaranty'), in connection with the issuance by Assured Guaranty of its Policies, effective as of the date hereof. In connection with this opinion letter, I have examined an execution copy of each Policy and such documents, certificates, agreements and instruments and proceedings as I have considered necessary or appropriate under the circumstances to render the following opinion letter. As to all questions of fact material to this opinion letter, which have not been independently established by me, I have relied upon certificates or comparable documents of public officials or of officers and representatives of Assured Guaranty. In addition, I have assumed the genuineness of all signatures other than those of representatives of Assured Guaranty, the authenticity of all documents submitted to me as originals, the conformity to the original document of certified or photostatic copies thereof and the •authenticity of the originals of such latter documents. Based upon the foregoing, and subject to the limitations and qualifications hereinafter set forth, I am of the opinion that: 1. Assured Guaranty is a corporation duly incorporated and validly existing under the laws of the State of Maryland and has all requisite corporate power and authority to issue and to perform its obligations under each Policy in accordance with the terms thereof. 2. The execution and delivery by Assured Guaranty of the Policies, and the performance by Assured Guaranty of its obligations thereunder, have been duly authorized by all necessary corporate action on the part of Assured Guaranty. 3. Each Policy has been validly executed and delivered by Assured Guaranty, and each constitutes the legal, valid and binding obligation of Assured Guaranty, enforceable against Assured Guaranty in accordance with its terms, subject to applicable bankruptcy, reorganization, insolvency, liquidation, rehabilitation, moratorium, arrangement, fraudulent conveyance or similar laws or enactments now or hereafter enacted affecting the enforcement of creditors' rights generally, as well as to equitable principles of general application limiting the availability of equitable remedies and the discretion of the court before which any proceeding therefor may be brought (regardless, in each case, of whether enforcement is sought in a proceeding in equity or at law). I am licensed to practice law in the State of New York, and do not purport to be an expert as to, or to express any opinion concerning the laws of any other jurisdiction other than the laws of the State of New York and the federal laws of the United States of America to the extent specifically referred to herein. To the extent that the opinions set forth herein purport to deal with matters of Maryland law, the statements made therein are based solely upon my review of the corporate documents of Assured Guaranty, my reading of the Maryland General Corporation Law and, in respect of the opinion set forth in paragraph (1) above, my reading of the Maryland Insurance Code. • Assured Guaranty Corp. 31 West 52"Street I main 212 974 0100 infoQassuretl0uaranty.com i www.assuredguararty.com New York, NY 10019 ' fax 212 581 3268 The opinions expressed herein are limited to the matters expressly set forth herein, and no opinion is implied • or may be inferred beyond the matters expressly set forth herein. The opinions expressed herein are based solely on factual matters in existence as of the date hereof and laws and regulations in effect on the date hereof. I assume no obligation to revise or supplement this opinion letter should such factual matters change or should such laws or regulations be changed by legislative or regulatory action, judicial decision or otherwise, and I hereby express no opinion as to the effect any such changes may have on the foregoing opinions. This opinion letter is being delivered to you solely for your benefit in connection with the issuance of the Policies, and may not be used, circulated, quoted or otherwise referred to or relied upon for any other purpose by any other person, in each case without my express prior written consent. Very truly yours, • • -2- City of Fayetteville, Arkansas, as Issuer Stephens Inc., as Underwriter Simmons First Trust Company, N.A., as Trustee/Paying Agent S • Annex A REIMBURSEMENT AGREEMENT (RESERVE FUND SURETY) This AGREEMENT (this "Agreement") is made as of November _12, 2009 by and between ASSURED GUARANTY CORP., a Maryland insurance corporation (together with its successors and assigns, "Assured Guaranty") and CITY OF FAYETTEVILLE, ARKANSAS (the "Issuer"). WITNESSETH: WHEREAS, the Issuer will issue the Obligations (as hereinafter defined) pursuant to the terms of the Authorizing Resolution (as hereinafter defined); WHEREAS, the Issuer has requested that Assured Guaranty, subject to the terms and conditions set forth in the Commitment, issue its Policy (as hereinafter defined) pursuant to which Assured Guaranty will guarantee certain payments by the Issuer subject to the terms and conditions of the Policy; WHEREAS, as consideration for Assured Guaranty issuing the Policy, the Issuer has agreed to (i) cause to be paid to Assured Guaranty a premium as provided in the Commitment, (ii) reimburse Assured Guaranty for any payment made by Assured Guaranty under the Policy, • and (iii) indemnify Assured Guaranty for certain amounts as more fully set forth herein; WHEREAS, the Issuer acknowledges and agrees that execution and delivery of this agreement is a requirement of Assured Guaranty and an element of the consideration for issuance of the Policy; NOW, THEREFORE, in consideration of the premises and of the agreements herein contained and of the execution of the Policy, the Issuer and Assured Guaranty agree as follows: ARTICLE I DEFINITIONS Section 1.01. Definitions. Except as otherwise defined herein, the following words and phrases shall have the following meanings: "Agreement" shall mean this Reimbursement Agreement dated November 12, 2009 between Assured Guaranty and the Issuer as such agreement may be amended or supplemented. "Assured Guaranty" shall have the meaning set forth in the first paragraph of this Agreement. "Authorizing Resolution" shall mean the Trust Indenture dated as of November 1, 2006, as supplemented by a Second Supplemental Trust Indenture dated as of November 1, 2009, as amended or supplemented from time to time. • 4841-9578-7522.4 "Available Funds" shall mean all funds available under the Authorizing Resolution that may be used to reimburse Assured Guaranty in connection with the Policy, including without limitation the sales and use taxes. "Commitment" shall mean the commitment of Assured Guaranty to issue the Policy dated October 7, 2009. "Debt Service Payments" shall mean those payments required to be made by or on behalf of the Issuer, which will be applied to payment of principal of and interest on the Obligations. "Demand for Payment" shall mean the certificate submitted to Assured Guaranty for payment under the Policy substantially in the form attached to the Policy. "Event of Default" shall have the meaning given that term in Section 5.01 hereof. "Financing Documents" shall mean the Authorizing Resolution, and all other documents entered into by the Issuer with respect to the Obligations, as all such documents are amended from time to time. "Obligations" shall mean the Issuer's Sales and Use Tax Capital Improvement Bonds, Series 2009. "Owners" shall mean the registered owner of any Obligation as indicated in the books • maintained by the Trustee for such purpose. "Trustee" shall mean the Trustee for the Bonds, or any successor thereto. "Policy" shall mean financial guaranty insurance policy no. D-2009-1479 issued by Assured Guaranty guaranteeing, subject to the terms and limitations thereof, the Debt Service Payments. "Policy Coverage" shall mean the amount available at any particular time to be paid under the terms of the Policy, which amount shall never exceed the Policy Limit. "Policy Limit" shall mean the Reserve Account Requirement, provided that such amount shall not exceed the amount set forth in the Policy. "Policy Payment" shall mean an amount equal to the Debt Service Payment required to be made by the,Issuer pursuant to the Authorizing Resolution less (i) that portion of the Debt Service Payment paid by or on behalf of the Issuer, and (ii) other funds legally available for payment to the Owners, all as certified in a Demand for Payment. "Reimbursement Rate" shall mean the per annum rate of interest, publicly announced from time to time by JPMorgan Chase Bank, National Association at its principal office in New York, New York as its prime lending rate (any change in such prime rate of interest to be effective on the date such change is announced by JP Morgan Chase Bank, National Association) plus three percent (3%) per annum. The Reimbursement Rate shall be calculated on the basis of the actual number of days elapsed over a 360 -day year. In the event JP Morgan Chase Bank • ceases to announce its prime rate publicly, the prime rate shall be the publicly announced prime rate or base lending rate of such national bank as Assured Guaranty shall specify. "Reserve Account Requirement" shall have the meaning ascribed to such term as set forth in the Authorizing Resolution, but only as such term relates to the Obligations. "State" shall mean the State of New York. Section 1.02. Generic Terms. The term "hereof' or "herein" unless otherwise modified by more specific reference, shall refer to this Agreement. Unless otherwise specified, the term "Article" or "Section" shall refer to an Article or Section of this Agreement. ARTICLE II THE POLICY Section 2.01. The Policy. Assured Guaranty will issue the Policy in accordance with and subject to the terms and conditions of the Commitment. The maximum liability of Assured Guaranty under the Policy and the coverage and term thereof shall be subject to and limited by the terms and conditions of the Policy. Section 2.02. Premium. In consideration of Assured Guaranty agreeing to issue the Policy, the Issuer hereby agrees to cause to be paid to Assured Guaranty the premium set forth in • the Commitment. The premium on the Policy is not refundable for any reason. Section 2.03. Policy Limit. Payments under the Policy will reduce the Policy Coverage to the extent of such payment. Section 2.04. Settlement. Assured Guaranty shall have the exclusive right to settle and determine any claim, liability, suit or judgment relating to the Policy. Any such decision by Assured Guaranty shall be final and binding upon the Issuer for all purposes of this Agreement. ARTICLE III REPRESENTATIONS AND WARRANTIES Section 3.01. Power and Authority. The Issuer has full corporate power and authority to execute and deliver this Agreement and the Financing Documents to which it is a party. The execution and delivery of this Agreement and the Financing Documents have been duly authorized by the Issuer, and all necessary approvals for the execution, delivery and performance of this Agreement and the Financing Documents have been obtained by the Issuer. Section 3.02. Non -contravention. The execution and delivery of this Agreement and the Financing Documents to which it is a party by the Issuer, the consummation of the transactions contemplated by this Agreement and the Financing Documents to which it is a party by the Issuer, and the fulfillment of or compliance with the terms and conditions of this Agreement and the Financing Documents to which it is a party by the Issuer, does not conflict with or result in any breach or violation of any of the terms, conditions or provisions of any applicable laws, • including regulations, or any material agreement, organizational document or instrument to which it is now a party or by which it is bound, or constitute a default under any of the foregoing which breach or default would materially and adversely affect the consummation of the transactions contemplated by this Agreement. Section 3.03. Conditions Required for Delivery of the Policy. The Issuer shall provide or cause to be provided to Assured Guaranty prior to the issuance of the Policy (i) conformed copies of this Agreement and the Financing Documents, (ii) certifications of the Issuer, as requested by Assured Guaranty, if any, and (iii) such opinions of legal counsel to the Issuer evidencing necessary or appropriate corporate action taken by the Issuer, and such other documents as may reasonably be requested by Assured Guaranty (including documents evidencing any required approvals of the transactions contemplated by this Agreement and the Financing Documents). ARTICLE IV REIMBURSEMENT; INDEMNIFICATION; PAYMENTS Section 4.01. Reimbursement for Payments Under the Policy and Expenses; Indemnification; Payment. (a) The Issuer will reimburse Assured Guaranty, from Available Funds, • without demand or notice by Assured Guaranty to the Issuer, or any other person, to the extent of each Policy Payment with interest on each Policy Payment from and including the date made to the date of the reimbursement at the lesser of the Reimbursement Rate or the maximum rate of interest permitted by then applicable law. Such reimbursement of principal and interest shall commence in the first month following such draw and each such monthly payment shall be in an amount at least equal to 1/12th of the amount drawn together with interest accrued to the date of payment and in any event shall be reimbursed in full within the date one year from the date of such Policy Payment. (b) The Issuer will pay all other amounts required to be paid to Assured Guaranty pursuant to the terms of this Agreement or in connection with the transactions contemplated by the Financing Documents, this Agreement, or the Policy, from Available Funds, within one business day of receipt of written notice from Assured Guaranty of the amounts so owed. (c) The Issuer will pay or reimburse Assured Guaranty, to the extent permitted by law, and solely from Available Funds, any and all charges, fees, costs, losses, liabilities and expenses which Assured Guaranty may pay or incur, including, but not limited to, fees and expenses of attorneys, accountants, consultants and auditors and reasonable costs of investigations, in connection with (i) any accounts established to facilitate payments under the Policy, (ii) the administration, enforcement, defense or preservation of any rights in respect of this Agreement or any Financing Document including defending, monitoring or participating in any litigation or proceeding (including any bankruptcy proceeding in respect of the Issuer, or any affiliate thereof) relating to this Agreement or any other Financing Document, any party to this Agreement or any other Financing Document or the transaction contemplated by the Financing Documents, (iii) the foreclosure against, sale or other disposition of any collateral securing any obligations under this Agreement or any other Financing Document, if any, or the pursuit of any remedies under any other Financing Document, to the extent such costs and expenses are not recovered from such foreclosure, sale or other disposition, (iv) any amendment, waiver or other action with respect to, or related to this Agreement, the Policy or any other Financing Document whether or not executed or completed, or (v) any action taken by Assured Guaranty to cure a default or termination or similar event (or to mitigate the effect thereof) under any Financing Document; costs and expenses shall include a reasonable allocation of compensation and overhead attributable to time of employees of Assured Guaranty spent in connection with the actions described in clauses (ii) -(v) above. Assured Guaranty reserves the right to charge a reasonable fee as a condition to executing any amendment, waiver or consent proposed in respect of this Agreement or any other Financing Document. (d) The Obligor will pay interest on the amounts owed in clauses (a), (b), and (c), of this Section 4.01 from the date of any payment due or paid as described in clauses (a) or (c), and from the date of receipt of written notice from Assured Guaranty, as provided in clause (b), in each case at the Reimbursement Rate (but not in excess of the amount permitted by law). [If the interest provisions of this clause (d) shall result in an effective rate of interest which, for any period, exceeds the limit of the usury or any other laws applicable to the indebtedness created herein, then all sums in excess of those • lawfully collectible as interest for the period in question shall, without further agreement or notice between or by any party hereto, be applied as additional interest for any later periods of time when amounts are outstanding hereunder to the extent that interest otherwise due hereunder for such periods plus such additional interest would not exceed the limit of the usury or such other laws, and any excess shall be applied upon principal immediately upon receipt of such moneys by Assured Guaranty, with the same force and effect as if the Obligor had specifically designated such extra sums to be so applied and Assured Guaranty had agreed to accept such extra payment(s) as additional interest for such later periods. In no event shall any agreed -to or actual exaction as consideration for the indebtedness created herein exceed the limits imposed or provided by the law applicable to this transaction for the use or detention of money or for forbearance in seeking its collection.] Section 4.02. Conduct of Actions or Proceedings. In the event that any action or proceeding (including any governmental investigation) shall be commenced or claim asserted which may entitle Assured Guaranty, any of its subsidiaries and affiliates, and any shareholder, director, officer, employee, agent or "controlling person," within the meaning of Section 15 of the Securities and Exchange Act or Section 20 of the Securities and Exchange Act, of any of the foregoing (each, an "Indemnified Party" and, collectively, the "Indemnified Parties") to be indemnified under this Agreement, such party shall give the Issuer (the "Indemnifying Party") written notice of such action, proceeding or claim promptly after receipt of written notice thereof. If any such action, proceeding or claim shall be brought against an Indemnified Party, it shall notify the Indemnifying Party thereof. The Indemnified Party shall have the right to employ its own counsel in any such action, proceeding or claim at the expense of the Indemnifying Party and all such reasonable fees and expenses shall be reimbursed promptly as they are incurred. Section 4.03. Allocation of Payments. Assured Guaranty and the Issuer hereby agree that each payment received by Assured Guaranty from or on behalf of the Issuer as a reimbursement to Assured Guaranty as required by Section 4.01 hereof shall be applied by Assured Guaranty as follows: (i) first, toward repayment of the aggregate Policy Payments made by Assured Guaranty and not yet repaid; payment of which will reinstate all or a portion of the Policy Coverage to the extent of such repayment (but not to exceed the Policy Limit), and (ii) second, upon reinstatement of the Policy Coverage to the Policy Limit, toward other amounts as determined by Assured Guaranty in its sole discretion, including, without limitation, any interest payable with respect to any Policy Payments then due to Assured Guaranty. Section 4.04. Security for Payments. To the extent, but only to the extent, that, the Authorizing Resolution or any other Financing Document or related indenture, trust agreement, ordinance, resolution, mortgage, security agreement or any similar instrument, if any, pledges to the Owners or any trustee therefore or to any holder of any other obligations of the Issuer secured on a parity basis with the Obligations, or grants a security interest or lien in or on any collateral, property, revenue or other payments ("Collateral and Revenues") in order to secure the Obligations or such parity obligations or provide a source of payment for the Obligations or such parity obligations, the Issuer hereby grant to Assured Guaranty a security interest in or lien on, as the case may be, and pledges to Assured Guaranty all such Collateral and Revenues as • security for payment of all amounts due hereunder, under the Authorizing Resolution and under any other Financing Document, (A) which security interest, lien and/or pledge created or granted under this Section 4.04 shall be subordinate only to (i) the interests of the Owners or owners of such parity obligations and any trustee therefor in such Collateral and Revenues, and (ii) the interests of any grantee of any other previously granted security interest in, lien on and/or pledge of such Collateral and Revenue, and (B) which security interest, lien and/or pledge created or granted under this Section 4.04 shall be on a parity with any security interest in, lien on and/or pledge of such Collateral and Revenue hereafter granted to any provider of any letter of credit, surety bond or financial guaranty insurance policy issued to fund a reserve account to the reserve requirement with respect to any parity obligations hereafter issued pursuant to the Authorizing Resolution. The Issuer agrees that it will, from time to time, execute, acknowledge and deliver any instruments as may be necessary or appropriate as shall be requested by Assured Guaranty to perfect or protect the security interests granted hereby. Section 4.05. Payments. All payments made to Assured Guaranty under this Agreement shall be paid in lawful currency of the United States in immediately available funds to Assured Guaranty Corp., 31 West 52 o Street, New York, New York 10019, Attention: Accounting Department, or at such other place as shall be designated by Assured Guaranty Section 4.06. Unconditional Obligation. The obligations of the Issuer to pay all amounts due under this Agreement shall be an absolute and unconditional obligation of the Issuer and will be paid or performed strictly in accordance with this Agreement, irrespective of: (a) (i) any lack of validity or enforceability of or any amendment or other modifications of, or waiver with respect to the Obligations or any Financing Document, or (ii) any amendment or other modification of, or waiver with respect to the Policy; (b) any exchange, release or non -perfection of any security interest in property securing the Obligations, this Agreement or any Financing Documents; (c) whether or not such Obligations are contingent or matured, disputed or undisputed, liquidated or unliquidated; (d) any amendment, modification or waiver of or any consent to departure from this Agreement, the Policy or all or any of the Financing Documents; (e) the existence of any claim, setoff, defense (other than the defense of payment in full), reduction, abatement or other right which the Issuer may have at any time against the Paying Agent or any other person or entity other than Assured Guaranty, whether in connection with this Agreement, the transactions contemplated herein or in the Financing Documents or any unrelated transactions; (f) any statement or any other document presented under or in connection with the Policy or the Commitment proving in any and all respects invalid, inaccurate, insufficient, fraudulent or forged or any statement therein being untrue or inaccurate in • any respect; or (g) any payment by Assured Guaranty under the Policy against presentation of a certificate or other document which does not strictly comply with the terms of the Policy. ARTICLE V EVENTS OF DEFAULT; REMEDIES Section 5.01. Events of Default. The following events shall constitute Events of Default hereunder: (a) The Issuer shall fail to pay to Assured Guaranty any amount payable under Article IV hereof; or (b) Any representation or warranty made by the Issuer hereunder or under the Financing Documents or in any report, certificate, financial statement or other instrument provided in connection with the Commitment, the Policy or this Agreement shall have been or is untrue in any material respect; or (c) Except as otherwise provided in this Section 5.01, the Issuer shall fail to perform any of its other obligations hereunder or under any other Financing Document; or • (d) The occurrence and continuation of an event of default under any Financing Document; or (e) The Issuer shall (i) voluntarily commence any proceeding or file any petition seeking relief under the United States Bankruptcy Code or any other Federal, state or foreign bankruptcy, insolvency or similar law, (ii) consent to the institution of; or fail to controvert in a timely and appropriate manner, any such proceeding or the filing of any such petition, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator or similar official for such party or for a substantial part of its property, (iv) file an answer admitting the material allegations of a petition fled against it in any such proceeding, (v) make a general assignment for the benefit of creditors, (vi) become unable, admit in writing its inability or fail generally to pay its debts as they become due or (vii) take action for the purpose of effecting any of the foregoing; or (t) An involuntary proceeding shall be commenced or an involuntary petition shall be filed in a court of competent jurisdiction seeking (i) relief in respect of the Issuer, or of a substantial part of its property, under the United States Bankruptcy Code or any other Federal, state or foreign bankruptcy, insolvency or similar law or (ii) the appointment of a receiver, trustee, custodian, sequestrator or similar official for the Issuer or for a substantial part of its property, and such proceeding or petition shall continue undismissed for sixty (60) days or an order or decree approving or ordering any of the foregoing shall continue unstayed and in effect for thirty (30) days. • Section 5.02. Remedies. Whenever an Event of Default referred to in Section 5.01 hereof shall have happened and be continuing, Assured Guaranty may take whatever action at law or in equity as may appear necessary or desirable in Assured Guaranty's judgment to collect the amounts then due and thereafter to become due hereunder or to enforce performance of any obligation of the Issuer to Assured Guaranty hereunder or under any Financing Document. Section 5.03. No Remedy Exclusive. Unless otherwise expressly provided, no remedy herein conferred upon or reserved to Assured Guaranty is intended to be exclusive of any other available remedy, but each remedy shall be cumulative and shall be in addition to other remedies given under this Agreement or any Financing Document or existing at law or in equity. No delay or failure to exercise any right or power occurring under this Agreement or any Financing Document upon the happening of any Event of Default set forth in Section 5.01 hereof or an event of default under any Financing Document shall impair any such right or power or shall be construed to be a waiver thereof, but any such right and power may be exercised from time to time and as often as may be deemed expedient. ARTICLE VI MISCELLANEOUS Section 6.01. Interest Computations. All computations of premium, interest and fees due hereunder shall be made on the basis of the actual number of days elapsed over a year of 360 days. Section 6.02. Exercise of Rights. No failure or delay on the part of Assured Guaranty to exercise any right, power or privilege under this Agreement and no course of dealing between Assured Guaranty and the Issuer or any other party shall operate as a waiver of any such right, power or privilege, nor shall any single or partial exercise of any such right, power or privilege preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein expressly provided are cumulative and not exclusive of any rights or remedies which Assured Guaranty would otherwise have pursuant to law or equity. No notice to or demand on any party in any case shall entitle such party to any other or further notice or demand in similar or other circumstances, or constitute a waiver of the right of the other party to any other or further action in any circumstances without notice or demand. Section 6.03. Amendments and Waivers. This Agreement may only be amended, modified, waived, supplemented, discharged or terminated only by written instruments signed by the parties hereto. The Issuer hereby agrees that Assured Guaranty may issue a substitute or replacement for the Policy to cure any ambiguity or omission in the Policy which does not materially change the terms of the Policy nor adversely affect the rights of the Owners, and this Agreement shall apply to such substituted Policy. So long as the Policy is in effect, the Issuer agrees not to amend or supplement any Financing Document so as to adversely affect the rights of Assured Guaranty without the prior written consent of Assured Guaranty. Section 6.04. Successors and Assigns; Descriptive Headings. • (a) This Agreement shall bind, and the benefits thereof shall inure to, the Issuer and Assured Guaranty and their respective successors and assigns; provided, that the Issuer may not transfer or assign any or all of its rights and obligations hereunder without the prior written consent of Assured Guaranty. (b) The descriptive headings of the various provisions of this Agreement are inserted for convenience of reference only and shall not be deemed to affect the meaning or construction of any of the provisions hereof. Section 6.05. Waiver. The Issuer waives any defense that this Agreement was executed subsequent to the date of the Policy, admitting and covenanting that such Policy was executed pursuant to their request and in reliance on their promise to execute this Agreement. Section 6.06. Other Sureties. If Assured Guaranty shall procure any other surety to reinsure the Policy, this Agreement shall inure to the benefit of such other surety, its successors and assigns, so as to give to it a direct right of action against the Issuer to enforce this Agreement and "Assured Guaranty" whenever used herein, shall be deemed to include such reinsuring surety, as its respective interest may appear. Section 6.07. Notices, Requests, Demands. Except as otherwise expressly provided herein, all written notices, requests, demands or other communications to or upon the respective parties hereto shall be deemed to have been given or made when actually received, or in the case of telex or telecopier notice sent over a telex or a telecopier machine owned or operated by a party hereto, when sent, addressed as specified in the Authorizing Resolution or at such other address as any of the parties may hereafter specified in writing to the others. • n Section 6.08. Survival of Representations and Warranties. All representations, warranties and obligations contained herein shall survive the execution and delivery of this Agreement and the Policy. Section 6.09. Governing Law. THIS AGREEMENT AND ANY DISPUTES OR CONTROVERIES ARISING OUT OF OR RELATING TO THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AND APPLICABLE FEDERAL LAW, WITHOUT REGARD TO CHOICE OF LAW RULES OTHER THAN NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1401. Section 6.10. Consent to Jurisdiction. (a) PURSUANT TO, AND IN ACCORDANCE WITH, SECTION 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW (OR TO ANY SUCCESSOR STATUTE THERETO), THE PARTIES HERETO HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND ANY COURT IN THE STATE OF NEW YORK LOCATED IN THE CITY AND COUNTY OF NEW YORK, AND ANY APPELLATE COURT WHICH HEARS APPEALS FROM ANY COURT THEREOF, IN ANY ACTION, SUIT OR PROCEEDING BROUGHT AGAINST IT AND TO OR IN CONNECTION WITH ANY OF THE FINANCING DOCUMENTS • OR THE TRANSACTIONS CONTEMPLATED THEREUNDER OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREE THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION, SUIT OR PROCEEDING MAY BE HEARD OR DETERMINED IN SUCH NEW YORK STATE COURT OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT. THE PARTIES HERETO AGREE THAT A FINAL JUDGMENT IN ANY SUCH ACTION, SUIT OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE PARTIES HERETO HEREBY WAIVE AND AGREE NOT TO ASSERT BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE IN ANY SUCH SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURTS, THAT THE SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM, THAT THE VENUE OF THE SUIT, ACTION OR PROCEEDING IS IMPROPER OR THAT THE FINANCING DOCUMENTS OR THE SUBJECT MATTER THEREOF MAY NOT BE LITIGATED IN OR BY SUCH COURTS. (b) To the extent permitted by applicable law, the parties hereto shall not seek and hereby waive the right to any review of the judgment of any such court by any court of any other nation or jurisdiction which may be called upon to grant an enforcement of such judgment. • 10 Section 6.11. Counterparts. This Agreement may be executed in counterparts by the parties hereto and such counterparts shall constitute one and the same instrument, each of which shall be deemed to be an original instrument. Section 6.12. Trial by Jury Waived. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION ARISING DIRECTLY OR INDIRECTLY OUT OF, UNDER OR IN CONNECTION WITH ANY PROVISIONS OF THE THIS AGREEMENT OR ANY OTHER THE FINANCING DOCUMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREUNDER. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT IT WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE FINANCING DOCUMENTS TO WHICH IT IS A PARTY BY, AMONG OTHER THINGS, THIS WAIVER. Section 6.13. Further Assurances. Assured Guaranty and the Issuer each agree that it will, from time to time, execute, acknowledge and deliver, or cause to be executed, acknowledged and delivered, such supplements hereto (including any financing statements, if applicable) and such further instruments as may be required by law or as shall reasonably be requested by Assured Guaranty for carrying out the intention of or facilitating the performance of • this Agreement. Section 6.14. Severability. In the event any provision of this Agreement shall be held invalid or unenforceable by any court of competent jurisdiction, the parties hereto agree that such holding shall not invalidate or make unenforceable any other provision hereof. The parties hereto further agree that the holding by any court of competent jurisdiction that any remedy pursued by any party hereto is unavailable or unenforceable shall not affect in any way the ability of such party to pursue any other remedy available to it. Section 6.15. Survival of Obligations. Notwithstanding anything to the contrary contained in this Agreement, the obligation of the Issuer to pay all amounts due hereunder and the rights of Assured Guaranty to pursue all remedies shall survive the expiration, termination or substitution of the Policy and this Agreement. Section 6.16. Information and Reporting. The Issuer covenants to provide to Assured Guaranty, promptly upon request, any information regarding the Obligations, the Financing Documents or the financial condition and operations of the Issuer as reasonably requested by Assured Guaranty. C] • IN WITNESS WHEREOF, each of the parties hereto have duly executed and delivered this Agreement as of the date first above written. CITY OF FAYETTEVILLE, ARKANSAS By: Name: Title: ASSURED GUA NTY CORP. By: Name: Richard Cassata Title: Managing Director • • 12 • CERTIFICATE OF CITY OF FAYETTEVILLE, ARKANSAS In connection with the issuance by City of Fayetteville. Arkansas of its $11,250,000 Sales and Use Tax Capital Improvement Bonds, Series 2009 (the'Obligationsj and In consideration of the issuance of financial guaranty Insurance policy no. D-2009-1478 (the Polk), City Of Fayetteville, Arkansas (the Obligor") represents and warrants to Assured Guaranty Corp. ('Assured Guaranty) that: The Obligor has made its own Independent Investigation and decision as to whether to insure the payment when due of the principal of and Interest on the Obligations and whether the Policy Is appropriate or proper for it based upon its own Judgment and upon advice from such legal and financial advisers as it has deemed necessary. The Obligor acknowledges that Assured Guaranty has not made, and therefore the Obligor Is not relying on, any recommendation from Assured Guaranty that the Obligor Insure the Obligations or obtain the Policy; it being understood and agreed that communications from Assured Guaranty (whether written or oral) referring to, containing infommation about or negotiating the terms and conditions of the Policy, any related Insurance document or the documentation governing the Obligations do not constitute a recommendation to Insure the Obligations or obtain the Policy. The Obligor further acknowledges that Assured Guaranty has not made any representation, warranty or undertaking, and has not given any assurance or guarantee, In each case, expressed or Implied, concerning its future financial strength or the rating of Assured Guaranty's financial strength by the rating agencies. The Obligor acknowledges that the ratings of Assured Guaranty reflect only the views of the rating agencies and an explanation of the significance of such ratings may be obtained only from the rating agencies. The Obligor understands that such ratings may not continue for any given time period and Instead may change over time, Including without limitation being placed under review for possible downgrade, revised downward, withdrawn entirely by the relevant rating agency If, in the judgment of such rating agency, circumstances so warrant, or withdrawn entirely by Assured Guaranty In Its sole discretion. The Obligor acknowledges and agrees that Assured Guaranty undertakes no responsibility to bring to its attention, and shall have no liability for, the placement of a rating under review for possible downgrade or the downward revision or withdrawal of any rating obtained, and that any such review for possible downgrade, downward revision or withdrawal may have an • adverse effect on the Obligations. The Obligor acknowledges that Assured Guaranty pays rating agencies to rate Assured Guaranty's financial strength, but that such payment is not in exchange for any specific rating or for a rating within any particular range. IN WITNESS WHEREOF, the undersigned has hereunto subscribed its name as of this 12tH day of November, 2009. CITY OF FAYETTEVILLE, ARKANSAS By: >N ` Its Authorize r 0 t n �§ 3 Z£ CI • • CERTIFICATE OF TREASURER OF THE STATE OF ARKANSAS The undersigned hereby certifies as follows: 1. The undersigned is a duly qualified officer acting on behalf of the Treasurer of the State of Arkansas. 2. This Certificate is executed in connection with the issuance of $11,250,000 Sales and Use Tax Capital Improvement Bonds, Series 2009 (the "Bonds"), by the City of Fayetteville, Arkansas (the "City"). 3. There has been filed in the office of the Treasurer of the State of Arkansas (A) a certified copy of Ordinance No. 4891 of the City, adopted June 20, 2006, (B) a proclamation declaring the results of an election held September 12, 2006, within the City, (C) a copy of a proof of publication of such proclamation, and (D) a certified copy of Ordinance No. 5277 of the City, adopted October 6, 2009, all relating to the levy by the City of (i) a one -quarter of one percent (0.25%) city-wide sales and use tax (the "0.25% Tax') and (ii) a three-quarters of one percent (0.75%) city-wide sales and use tax (the "0.75% Tax"), each under the authority of Arkansas Code Annotated Sections 14-164-301 et seq. (the "Act"), and the pledge of the receipts from the 0.25% Tax and the 0.75% Tax to the payment of the Bonds, the City's $50,000,000 Sales and Use Tax Capital Improvement Bonds, Series 2006A, and the City's Sales and Use Tax • Capital Improvement Bonds, Series 2007. Certified this day of October, 2009. TREASURER OF THE STATE OF ARKANSAS 0 4844-9284.9413.1 • CERTIFICATE OF ARKANSAS DEPARTMENT OF FINANCE AND ADMINISTRATION The undersigned hereby certifies as follows: 1. The undersigned is the duly qualified and acting Sales & Use Tax Manager of the Department of Finance and Administration of the State of Arkansas. 2. This Certificate is executed in connection with the issuance of $11,250,000 Sales and Use Tax Capital Improvement Bonds, Series 2009 (the "Bonds"), by the City of Fayetteville, Arkansas (the "City"). 3. There has been filed in this office (A) a certified copy of Ordinance No. 4891 of the City, adopted June 20, 2006, (B) a proclamation declaring the results of an election held September 12, 2006, within the City, (C) a copy of a proof of publication of such proclamation, and (D) a certified copy of Ordinance No. 5277 of the City, adopted October 6, 2009, all relating to the levy by the City of (i) a one -quarter of one percent (0.25%) city-wide sales and use tax (the "0.25% Tax") and (ii) a three-quarters of one percent (0.75%) city-wide sales and use tax (the "0.75% Tax"), each under the authority of Arkansas Code Annotated Sections 14-164-301 et seq. (the "Act"), and the pledge of the receipts from the 0.25% Tax and the 0.75% Tax to the •payment of the Bonds, the City's $50,000,000 Sales and Use Tax Capital Improvement Bonds, Series 2006A, and the City's $14,340,000 Sales and Use Tax Capital Improvement Bonds, Series 2007. 4. The collection of the 0.25% Tax commenced as of January 1, 2007. The collection of the 0.75% Tax shall commence as of the day following the date of termination of the City's existing three-quarters of one percent (0.75%) city-wide sales and use tax presently levied under the Act pursuant to the Ordinance No. 4327 adopted August 7, 2001, and pledged to the payment of certain outstanding indebtedness of the City. oUe4qber Certified this day o deq 2eteb009. DEPARTMENT OF FINANCE AND ADMINISTRATION iii: /�L �• / /.�i. . RECEIVED OCT 272009 SALES TAX 4836.8780.5189.1 r cc CI • TRUSTEE'S CERTIFICATE • Simmons First Trust Company, N.A., Pine Bluff, Arkansas, as trustee for $11,250,000 City of Fayetteville, Arkansas Sales and Use Tax Capital Improvement Bonds, Series 2009 (the "Bonds"), hereby certifies that: I. Pursuant to the provisions of a Trust Indenture dated as of November 1, 2006, as supplemented and amended by a First Supplemental Trust Indenture dated as of October 1, 2007, and by a Second Supplemental Trust Indenture dated as of November 1, 2009 (as supplemented and amended, the "Trust Indenture") each by and between the City of Fayetteville, Arkansas (the "City") and Simmons First Trust Company, N.A., arrangements have been made for Simmons First Trust Company, N.A. to serve as trustee and paying agent (the "Trustee") with respect to the Bonds. The Trustee hereby accepts such appointment. 2. Pursuant to the provisions of the Trust Indenture and directions from the City, Glenda L. Dean, Assistant Vice President, has duly authenticated the initial Bonds in the aggregate principal amount of $11,250,000, being in the form of six (6) typewritten registered bonds, numbered R09-1 through R09-6, inclusive. 3. Each person who, on behalf of the Trustee, authenticated the initial Bonds or executed the Second Supplemental Trust Indenture, the Tax Regulatory Agreement dated as of November 12, 2009, or the Continuing Disclosure Agreement dated as of November 12, 2009, with respect to the Bonds was at the date thereof and is now duly elected, appointed or authorized, • qualified and acting as an officer or authorized signatory of the Trustee and is duly authorized to perform such acts at the respective times of such acts, and the signatures of such persons appearing on such documents are their genuine signatures. 4. The following are names, titles and specimen signatures of each of the above - mentioned officers of the Trustee: Name Office Signature Glenda L. Dean Assistant Vice President Roy Ferrell Vice President 5. The Trustee is a national banking association duly organized, validly existing and in good standing under the laws of the United States of America. The Trustee has all requisite power and authority to carry out its obligations as Trustee under the Trust Indenture. IN WITNESS WHEREOF, SIMMONS FIRST TRUST COMPANY, N.A., has caused this certificate to be executed in its corporate name by an officer thereunto duly authorized. Dated: November 12, 2009 SIMMONS FIRST TRUST COMPANY, N.A. Pine Bluff, Arkansas • By: i4 -- N . woe Claren,+- Title: prealc.te A-- 4821-0072-8581.2 CI • r1 LJ CERTIFICATE OF UNDERWRITER The undersigned, on behalf of Stephens Inc., as underwriter in connection with the issuance of $11,250,000 aggregate principal amount of Sales and Use Tax Capital Improvement Bonds, Series 2009 (the "Bonds"), by the City of Fayetteville, Arkansas (the "Issuer"), hereby represents that: I. The Yield on the Bonds, as set forth in Section 4.10(b) of the Tax Regulatory Agreement dated November 12, 2009 (the "Tax Regulatory Agreement"), by and between the Issuer and Simmons First Trust Company, N.A., as trustee for the Bonds (the "Trustee"), calculated in accordance with the Regulations, is equal to 3.8302128% (calculated utilizing expected debt service payments, including projected mandatory redemption). 2. The offering prices of the Bonds, as set forth in Section 4.5 of the Tax Regulatory Agreement, represent the maximum initial offering prices at which a substantial amount of each maturity of the Bonds were offered for sale and sold to the public (exclusive of bond houses, brokers or similar persons acting in the capacity of underwriters or wholesalers) through a bona fide offering. Such initial offering prices were established by a bona fide bid without regard to any amounts which would increase the Yield on any maturity of the Bonds above its market yield. The description of the interest rates and Yields contained in the final Official Statement with respect to the Bonds constitutes a true and correct summary thereof. To the best knowledge of the undersigned, the representations of the Issuer •3. contained in the Tax Regulatory Agreement are true and correct. 4. With respect to the Debt Service Reserve Fund established for the Bonds, the establishment of the Debt Service Reserve Fund at the level of funding described in Section 4.8 of the Tax Regulatory Agreement is, in the best judgment of the undersigned, reasonably required to market the Bonds at an economical interest rate for the Issuer and is, in the judgment of the undersigned, established at a level of funding comparable to that found for obligations similar to the Bonds issued within the past year. 5. We understand that this Certificate shall form a part of the basis for the opinion, dated the date hereof, of Kutak Rock LLP, as Bond Counsel, to the effect that interest on the Bonds is not includible in the gross income of the recipients thereof for purposes of federal income taxation under existing laws, regulations, rulings and judicial decisions. IN WITNESS WHEREOF, the undersigned has set his hand as of the date set forth below. Dated: November 12, 2009 • STEPHENSINC. By: Authori ed Representative 4836-9456-4101.2 Sc • • UNDERWRITER'S RECEIPT The undersigned, on behalf of Stephens Inc., as purchaser (the "Purchaser") of $11,250,000 City of Fayetteville, Arkansas Sales and Use Tax Capital Improvement Bonds, Series 2009 (the "Bonds"), hereby acknowledges receipt of each and all of the Bonds, said Bonds being in the form of six (6) typewritten fully registered bonds in the name of Cede & Co., as nominee of The Depository Trust Company, in authorized denominations, bearing interest and containing such other terms and provisions as set forth in that certain Trust Indenture dated as of November 1, 2006, as supplemented and amended by a First Supplemental Trust Indenture dated as of October 1, 2007, and by a Second Supplemental Trust Indenture dated as of November 1, 2009 (as supplemented and amended, the "Indenture"), each by and between the City of Fayetteville, Arkansas (the "City") and Simmons First Trust Company, N.A., as trustee (the "Trustee"). The Bonds have been checked, inspected and approved by the Purchaser. The Purchaser further acknowledges the receipt of, or waives the requirement for, each opinion, document and certificate contemplated by the Bond Purchase Agreement dated October 21, 2009, between the City and the Purchaser, and acknowledges that each such opinion, document and certificate, to the extent received, is satisfactory to the Purchaser as to form and substance. Dated: November 12, 2009 STEPHENSINC. By: I )�..._ a. tLt' Title: s v'. t/ 4829-8998-6565.1 • C • TRUSTEE'S RECEIPT AND CERTIFICATE AS TO APPLICATION OF FUNDS The undersigned, Simmons First Trust Company, N.A., as trustee (the "Trustee") under a Trust Indenture dated as of November 1, 2006, as supplemented and amended by a First Supplemental Trust Indenture dated as of October 1, 2007, and by a Second Supplemental Trust Indenture dated as of November 1, 2009 (as supplemented and amended, the "Indenture"), each by and between City of Fayetteville, Arkansas (the "City") and the Trustee, with respect to the City's $11,250,000 Sales and Use Tax Capital Improvement Bonds, Series 2009 (the "Bonds"), hereby certifies that: 1. The Trustee has received this date, on behalf of the City, from Stephens Inc. (the "Underwriter"), $10,964,488.32, that being the agreed purchase price of the Bonds, pursuant to the Bond Purchase Agreement dated October 21, 2009, between the City and the Underwriter (less $100,805.42 paid by the Underwriter on behalf of the City for premiums on a bond insurance policy and a debt service reserve policy). 2. The total proceeds of the sale of the Bonds (i.e., $10,964,488.32) have been deposited or will be applied, in accordance with the written directions of the City, as follows: (i) $12,418.54, representing the accrued interest on the Bonds, will be deposited into the Interest Account of the Bond Fund; • (ii) $9,633,373.53 shall be deposited in the Street Account of the Project Fund; (iii) $1,259,179.08 shall be deposited in the Trail Account of the Project Fund; (iv) The balance of said proceeds, in the amount of $59,517.17, shall be deposited in the Costs of Issuance Fund for payment of Costs of Issuance as directed by a Certificate of the City. Dated: November 12, 2009. SIMMONS FIRST TRUST COMPANY, N.A., as Trustee By: Cp1CY'� �Cti% Title: ASSIStant Vice President • 4811-2778.1125.2 CJ Le • • LI-I2-9d 62:21?N U0Y DTC UNDIRRRITIYG it- City of Fayetteville, AR pa.. S. `.1 i1 r.. 0 1t1 t. . .11 T ..-..♦ ♦ 11 11 . \. 1...1.1 . 1.. . Y I . I ..te .I .� • ... Ia•1.. 111.♦ a •1• 1 uy .. •ur. • V. THE DEPOSMM'TRUST COMPANY rAK= 02 PU2 . . . .. . . . 40 .. 4 ..1 • . • ..: . .. . : . •. •I ..1 . •1 . ♦ -.M1V ._ .J . ' u .. • . • I • ._I _ .. . . .. • • • u - . • • • ..I a I. r . . _ _ . • ••• _ • •. . _ • .. I ., 1. I. I. • I •.J .1 II. M1.. .. - •.• •/ _'I . pnl ..1 •I• •.•v. •• 1/. • I.1..' .. I. •.I• .I. ..q_ �.4•Iy• • • • r .q. PIS III' ..,I _Y •_ • yI5. •. 1.1. I. _ .• _ • •ly I • ry •♦ r • • 1. •/••I 4 4- • • [1 STANDARD &POOR'S November 9, 2009 Assured Guaranty Corp. 31 West 52nd Street New York, NY 10019 Attention: Mr. William Hogan, Managing Director 55 Water Street, 38th Floor New York, NY 10041-0003 te1212 438.2074 reference no.: 40279139 Re: $11,250,000 City of Fayetteville, Arkansas, Sales and Use Tae Capital Improvement Bonds, Series 2009, dated: November 1, 2009, due: November 1, 2015-2019, Term Bonds due: November 1, 2021, (POLICY #D-2009-1478) Dear Mr. 1-logan: Standard & Poor's has reviewed the rating on the above -referenced obligations. After such review, we have changed the rating to "AAA" from "A+". The rating reflects our assessment of the likelihood of repayment of principal and interest based on the bond insurance policy your company is providing. Therefore, rating adjustments may result from changes in the financial position of your company or from alterations in the documents governing the issue. The rating is not investment, financial, or other advice and you should not and cannot rely upon the rating as such. The rating is based on information supplied to us by you but does not represent an audit. We undertake no duty of due diligence or independent verification of any information. The assignment of a rating does not create a fiduciary relationship between us and you or between us and other recipients of the rating. We have not consented to and will not consent to being named an "expert" under the applicable securities laws, including without limitation, Section 7 of the Securities Act of 1933. The rating is not a "market rating" nor is it a recommendation to buy, hold, or sell the obligations. This letter constitutes Standard & Poor's permission to you to disseminate the above -assigned rating to interested parties. Standard & Poor's reserves the right to inform its own clients, subscribers, and the public of the rating. Standard & Poor's relies on the issuer and its counsel, accountants, and other experts for the accuracy and completeness of the information submitted in connection with the rating. This rating is based on financial information and documents we received prior to the issuance of this letter. Standard & Poor's assumes that the documents you have provided to us are final. If any subsequent changes were made in the final documents, you must notify us of such changes by sending us the revised final documents with the changes clearly marked. .l i t'r J.:).1 ii i r �'t ti)1('` Mr. William Hogan Page 2 November 9, 2009 Standard & Poor's is pleased to be of service to you. For more information please visit our website at www.standardandpoors.com. If we can be of help in any other way, please contact us. Thank you for choosing Standard & Poor's and we look forward to working with you again. Sincerely yours, Standard & Poor's Ratings Services a Standard & Poor's Financial Services LLC business fr4Z /il/Q aw • • S LA N DARD I"u`Ia etheMcGrow•llillcompanres _.. _^s: 0 STANDARD &POOR'S September 28, 2009 City of Fayetteville 113 W. Mountain Fayetteville, AR 72701 Attention: Mr. Paul Becker, Finance and Internal Services Director 500 North Akard Street Lincoln Plaza, Sues 3200 Dallas, TX 75201 tel 214 671.1402 reference ro_ 1082876 Re: US$11,250,000 City of Fayetteville, Arkansas, Sales and Use Tax Capital Improvement Bonds, Series 2009, dated: November 1, 2009, due: November 1, 2021 Dear Mr. Becker: Pursuant to your request for a Standard & Poor's rating on the above -referenced obligations, we have reviewed the information submitted to us and, subject to the enclosed Terms and Conditions, have assigned a rating of "A+". Standard & Poor's views the outlook for this rating as stable. A copy of the rationale supporting the rating is enclosed. • The rating is not investment, financial, or other advice and you should not and cannot rely upon the rating as such. The rating is based on information supplied to us by you or by your agents but does not represent an audit. We undertake no duty of due diligence or independent verification of any information. The assignment of a rating does not create a fiduciary relationship between us and you or between us and other recipients of the rating. We have not consented to and will not consent to being named an "expert" under the applicable securities laws, including without limitation, Section 7 of the Securities Act of 1933. The rating is not a "market rating" nor is it a recommendation to buy, hold, or sell the obligations. This letter constitutes Standard & Poor's permission to you to disseminate the above -assigned rating to interested parties. Standard & Poor's reserves the right to inform its own clients, subscribers, and the public of the rating. Standard & Poor's relies on the issuer/obligor and its counsel, accountants, and other experts for the accuracy and completeness of the information submitted in connection with the rating. This rating is based on financial information and documents we received prior to the issuance of this letter. Standard & Poor's assumes that the documents you have provided to us are final. If any subsequent changes were made in the final documents, you must notify us of such changes by sending us the revised final documents with the changes clearly marked. To maintain the rating, Standard & Poor's must receive all relevant financial information as soon as such information is available. Placing us on a distribution list for this information would facilitate the process. You must promptly notify us of all material changes in the financial information and the documents. Standard & Poor's may change, suspend, withdraw, or place on Mr. Paul Becker • Page 2 September 28, 2009 CreditWatch the rating as a result of changes in, or unavailability of, such information. Standard & Poor's reserves the right to request additional information if necessary to maintain the rating. Please send all information to: Standard & Poor's Ratings Services Public Finance Department 55 Water Street New York, NY 10041-0003 Standard & Poor's is pleased to be of service to you. For more information on Standard & Poor's, please visit our website at www.standardandpoors.com. If we can be of help in any other way, please call or contact us at nypublicfinance@standardandpoors.com. Thank you for choosing Standard & Poor's and we look forward to working with you again. Sincerely yours, Standard & Poor's Ratings Services a division of The McGraw-Hill Companies, Inc. fh enclosures cc: Mr. Dennis R. 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Notwithstanding the foregoing, the paragraphs above, "Standard & Poor's Not an Advisor, Fiduciary, or Expert" and "Limitation on Damages", shall survive the termination of this Agreement or any withdrawal of a rating. •ti, Third Parties. Nothing in this Agreement, or the rating when issued, is intended or should be construed as creating any rights on behalf of any third parties, including, without limitation, any recipient of the rating. No person is intended as a third party beneficiary to this Agreement or to the rating when issued. Binding Effect. This Agreement shall be binding on, and inure to the benefit of, the parties hereto and their successors and assigns. Severability. ' ' . In the event that any term or provision of this Agreement shall be held to be invalid, void, or unenforceable, then the remainder of this Agreement shall not be affected, impaired, or invalidated, and each such term and provision shall be valid and enforceable to the fullest extent permitted by law. Complete Am -cement. This Agreement constitutes the complete agreement between the parties with respect to its subject matter. This Agreement may not be modified except in a writing signed by authorized representatives of both parties. Governing Law. This Agreement and the rating letter shall be governed by the internal laws of the State of New York. The parties agree that the state and federal courts of New York shall be the exclusive forums for any dispute arising out of this Agreement and the parties hereby consent to the personal jurisdiction of such courts. City of Fayetteville, Arkansas Primary reditAnalysts: Sarah Smaardyb Dallas US$1125 mil Sales and use Tax Capital Improvement Bonds, Series 2009 dated 11/01)2009, due (1)214.871-1420 11/01/2021 saraA SmeardytO lore Term Rating AdSubla New Secoary wram •SecondndaryCredit Analysts: OetsmMiro Sales and Use Tax capital Improvement end Refunding Bonds. Various Series Horatio AldmtoSanrhez Unenhanced Bating A4(SPURyStoble Affirmed Dallas Many Issues are enhanced by bond Insurance. (1)214.071.1420 horacm aldrete® statidardandpbommur Rationale Standard & Poor's Ratings Services assigned its A+' long-term rating to Fayetteville, Ark.'s series 2009 sales and use tax capital improvement bonds. In addition, Standard & Poor's affirmed its 'A+' underlying rating (SPUR) on the city's 2007 and 2006 bonds and its AA-' SPUR on the city's existing sales and use tax refunding and capital improvement debt. The outlook on all ratings is stable. The rating on Fayetteville's sales and use tax bonds continues to reflect our view of the city's: • Position as a regional retail and service center, which is anchored by the University of Arkansas; • Very strong bond provisions, including a closed lien after the authorized amount has been issued and a mandatory use of surplus revenues for principal prepayment to shorten the maturity; a Good debt service coverage (DSC); and • Steady historical growth of tax receipts. RntincsDirem Publication Date We believe that an offsetting rating factor includes the city's planned issuance of Sept. 28,2009 additional parity debt. 0 City of Fayetteville, Arkansas Pledges of a dedicated 0.25% citywide sales and use tax, which the electorate authorized on Sept. 12, 2006, and a 0.75% dedicated sales and use tax, originally authorized on Nov. 6, 2001, secure the bonds. Officials pledged the proceeds of the 0.75% sales and use tax toward the payment of $60.5 million of existing sales and uses tax bonds; revenues will not be available for debt service payments on the series 2006, 2007, and 2009 bonds until the existing lien bonds are defeased, which management estimates will be by late 2014. Officials will use bond proceeds to fund street and trail system improvements. With a population of roughly 67,000, Fayetteville ('AA' general obligation debt rating) is in the rapidly growing Northwest Arkansas MSA, which includes Rogers and Springdale, Ark. University of Arkansas and the poultry industry anchor Fayetteville's expanding economy. Per capita median income indicators are an average 89% of the national average, but exceed the state average by 8%. The significant student population contributes to average income levels. Per capita retail sales at the city level are, in our view, a good 112% and 91% of the state and national averages, respectively. Unemployment in the county averaged 6.2% through July 2009, well below state and national rates. University of Arkansas, with about 7,963 employees, anchors the economy. Additional leading employers include: • Veterans Administrative Medical Center, medical facility; • Washington Regional Medical Center, medical facility; • Fayetteville School District; and • Washington County government. Fayetteville has experienced some lay-offs, including about 279 positions at automobile wheel manufacturer Superior Industries and 69 spots at Pinnacle Foods. However, management believes that employment has stabilized. Pledged sales tax revenues, which have grown by a cumulative 8% since 2005, reflect healthy growth. Providing additional strength, pledged revenues will be used for the mandatory early redemption of bonds outstanding, in inverse order of maturity. Fiscal 2008 (Dec. 31) pledged sales tax collections, which totaled roughly $16.5 million, provided a solid 1.41x coverage of maximum annual debt service (MADS), which will occur in November 2017. Year-to-date (August 2009) sales tax revenues have declined by roughly 4.2%; however, management is projecting to end fiscal 2009 with $15.9 million in pledged sales tax revenue, resulting in coverage of 1.36x MADS. Management is projecting a 2.0% increase in pledged revenue for fiscal 2010, which will bring coverage to 1.38x MADS. Due to state statutory requirements, officials can only use pledged sales and use tax receipts to pay principal, interest, and related fees. As a result, management will use any surplus net revenues to pay down its debt outstanding in inverse order of bond maturity rather than making it available for transfers or other lawful purposes. Any surplus revenues must be used to redeem bonds prior to maturity in inverse order of maturity. A debt service reserve funded at 5% of the par amount provides additional bondholder liquidity. The city may issue the additional authorized parity bonds if the prior year's pledged sales and use tax revenues provide a minimum 125x coverage of MADS. Fayetteville has roughly $37 million of authorized, but unissued debt remaining. 0 Standard & Poor's I ANALYSTS City of Fayetteville, Arkansas Outlook The stable outlook reflects the stable, regional economic base (anchored by the University of Arkansas) and sustained steady economic growth. In addition, the stable outlook reflects our expectation that pledged sales tax revenues will continue to provide solid DSC and adequate bond provisions that provide for 1.2Sx MADS if new debt is issued. Related Research USPF Criteria: "Special Tax Bonds," June 13, 2007 0 www.standardandpoors.com 0 Published by Standard & murs, a Division d The MCGrew li l Ctmprdes. h¢ EuMiw offces: 1221 Mn. oit a Amman. NewYott NY ZOOM. • Editorial oNlcac55Water Sister Now York NY 10041. Subscriber serdcu: UI 21232.72w. Copyright 2009 byThe McGmw-I U Companies. Inc. Reproduction In vide mm pen proNOia except by permission. All rights resew. IMo,matian has boon obtained by Sandard & roots from sowers behead to be nllstle. However, because or tho possiwby of humw or numerical error by ow sauces. Standard & Poora m omen. Standard & Paces don l grantee daa p ttrrmcy, edpuacy. orcompletaneu of any lnlorrmtianand6rim rupamitle lm wyermu moMsdono mtM nsml obtained hum the and d such inronaation. 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New YorkNY 10D41; (I) 212-438-728q or by eaoal to: researdr__request®standardandpoors.cmn. 0 6S 0 REQUISITION City of Fayetteville, Arkansas Series 2009 Sales and Use Tax Capital Improvement Bonds Date: Requisition No.: TO: Simmons First Trust Company, as Trustee Pursuant to the provisions of Section 502 of the Trust Indenture dated as of November 1, 2006, as supplemented and amended by a First Supplemental Trust Indenture dated as of October 1, 2007, and by a Second Supplemental Trust Indenture dated as of November 1, 2009 (as supplemented and amended, the "Indenture"), each by and between the City of Fayetteville, Arkansas (the "Issuer") and you, as trustee, you are authorized to make the following described payment directly to the Payee named below from the Account of the Project Fund: Name and Address of Payee: Amount of Payment: General Classification of the Expenditures: The undersigned hereby certifies that he is authorized to deliver this Requisition on behalf of the Issuer. - The amount requested hereunder has not been the basis for any previous Requisition by the Issuer and is justly due and owing to the person(s) named herein as a proper payment or reimbursement of a Project Cost with respect to the Project. No Event of Default exists under the Indenture and, to the knowledge of the undersigned, no event has occurred and continues which with notice or lapse of time or both would constitute an Event of Default under the Indenture. CITY OF FAYETTEVILLE, ARKANSAS Authorized Representative 0 4839-1279.8981.1 RECEIVED NOV 0 4 Z009 Stephens Inc. Dennis R. Hunt Senior Vice President and Manager October 30, 2009 Ms. Sondra Smith City Clerk City of Fayetteville 113 W. Mountain Fayetteville, AR. 72701 CITY OF FAYETTEVILLE CITY CLERK'S OFFICE Re: $11,250,000 City of Fayetteville, Arkansas Sales and Use Tax Bonds, Series 2009 Dear Sondra: The City of Fayetteville's above referenced financing is scheduled to close on November 12`s, 2009 at approximately 11:00 A.M. on the fourth floor of the Kutak Rock Law Offices located at 236 Millsap Road in Fayetteville. I anticipate the closing to take approximately 30 minutes. Following the closing, I would like for you to join me for a closing luncheon at Soul. Please RSVP to Amy McFarland at 718-7477 by November 9n'. On behalf of Stephens, I am grateful for the opportunity to serve the City of Fayetteville and look forward to working with you in the future. Best regards, Denn s Hunt 52 I fl 3425 North Futrall Drive Suite 201 Fayetteville, Arkansas 72703 479-718-7400 Fax 479-718-7490 800-205-8613 dhunt@stephens.com ste hens.cdtn P NORTHWEST ARKANSAS OFFICE SUITE 400 234 EAST MILLSAP ROAD FAYETTEVILLE. ARKANSAS 72703-4099 479-973-4200 GORDON M. WILBOURN gordon.wilboum ®kutakrock.com (501) 975-3101 KUTAK ROCK LLP SUITE 2000 124 WEST CAPITOL AVENUE LITTLE ROCK. ARKANSAS 72201-370 501-975-3000 FACSIMILE 501-975-3001 www.kutakrock.com December 7, 2009 TO THE ATTACHED DISTRIBUTION LIST: $11,250,000 CITY OF FAYETTEVILLE, ARKANSAS SALES AND USE TAX CAPITAL IMPROVEMENT BONDS SERIES 2009 Ladies and Gentlemen: ATLANTA CHICAGO DENVER DES MOINES FAYETTEVILLE IRVINE KANSAS CITY LOS ANGELES OKLAHOMA CITY OMAHA PHILADELPHIA RICHMOND SCOTTSDALE WASHINGTON WICHITA Enclosed is a copy of the final transcript with respect to the above -captioned matter. If you have any questions or require anything additional, please let me know. Sini?Wilboum is Enclosure 4830-8967-1173.1 KUTAK ROCK LLP DISTRIBUTION LIST $11,250,000 CITY OF FAYETTEVILLE, ARKANSAS SALES AND USE TAX CAPITAL IMPROVEMENT BONDS SERIES 2009 City of Fayetteville Simmons First Trust Company Stephens Inc. Fayetteville City Attorney Assured Guaranty Corp. Kutak Rock LLP Mr. Paul Becker (1 copy) Ms. Sondra Smith (1 CD) City of Fayetteville 113 West Mountain Fayetteville, AR 72701 Ms. Glenda Dean (1 original and 1 CD) Simmons First Trust Company 501 Main Pine Bluff, AR 71601 Dennis Hunt (1 copy) Stephens Inc. Suite 201 3425 North Futrall Drive Fayetteville, AR 72703 Mr. Kit Williams (1 copy) City of Fayetteville 113 West Mountain Fayetteville, AR 72701 Ms. Barbara -Ann DeLuca (3 CDs) Records Center Assured Guaranty Corp. 31 West 52nd Street New York, NY 10019 Mr. Gordon Wilbourn (1 original) Kutak Rock LLP 124 W. Capitol, Suite 2000 Little Rock, AR 72201 4830-8967-1173.1