Press Alt + R to read the document text or Alt + P to download or print.

No preview available

The URL can be used to link to this page

Home My WebLink AboutOrdinance 5665ORDINANCE NO. 5665 AN ORDINANCE AUTHORIZING THE ISSUANCE AND SALE OF NOT TO EXCEED $7,500,000 OF WATER AND SEWER SYSTEM REFUNDING REVENUE BONDS, SERIES 2014, BY THE CITY OF FAYETTEVILLE, ARKANSAS FOR THE PURPOSE OF REFUNDING THE CITY'S OUTSTANDING WATER AND SEWER SYSTEM REVENUE BONDS, SERIES 2009; AUTHORIZING THE EXECUTION AND DELIVERY OF A FOURTH SUPPLEMENTAL TRUST INDENTURE PURSUANT TO WHICH THE SERIES 2014 BONDS WILL BE ISSUED AND SECURED; AUTHORIZING THE EXECUTION AND DELIVERY OF AN OFFICIAL STATEMENT PURSUANT TO WHICH THE SERIES 2014 BONDS WILL BE OFFERED; AUTHORIZING THE EXECUTION AND DELIVERY OF A BOND PURCHASE AGREEMENT PROVIDING FOR THE SALE OF THE SERIES 2014 BONDS; AUTHORIZING THE EXECUTION AND DELIVERY OF AN ESCROW DEPOSIT AGREEMENT PROVIDING FOR THE REDEMPTION OF THE SERIES 2009 BONDS; AUTHORIZING THE EXECUTION AND DELIVERY OF A CONTINUING DISCLOSURE AGREEMENT; AND PRESCRIBING OTHER MATTERS RELATING THERETO. WHEREAS, the City of Fayetteville, Arkansas (the "City"), a city of the first class, presently owns and operates a public water and sewer utility system (the "System") serving the residents of the City and its environs; and WHEREAS, the City is authorized and empowered under the provisions of the Constitution and laws of the State of Arkansas, including particularly Amendment 65 to the Constitution and Arkansas Code Annotated (1998 Repl. & 2013 Supp.) Sections 14-164-401 et seq., Sections 14-234-201 et seq. and Sections 14-235-201 et seq. (collectively, and as from time to time amended, the "Authorizing Legislation"), to issue and sell its water and sewer revenue bonds and to expend the proceeds thereof to finance the costs of acquisition, construction, equipping, improving, maintaining, operating and repairing the System, and to refund any bonds issued under the Authorizing Legislation; and WHEREAS, pursuant to the provisions of Ordinance No. 5235 of the City, adopted and approved on April 21, 2009, the City has previously issued its Water and Sewer System Revenue Bonds, Series 2009 (the "Series 2009 Bonds"), in the original principal amount of $8,210,000, for the purpose of financing the cost of improvements to the System; and Page 2 Ordinance No. 5665 WHEREAS, pursuant to the provisions of Ordinance No. 5496 of the City, adopted and approved on April 17, 2012, the City has previously issued its Water and Sewer System Refunding Revenue Bonds, Series 2012 (the "Series 2012 Bonds"), in the original principal amount of $3,665,000, for the purpose of refunding outstanding bonds of the City previously issued to finance and refinance the cost of improvements to the System; and WHEREAS, in accordance with the provisions of the Authorizing Legislation, the City has now determined to issue its Water and Sewer System Refunding Revenue Bonds, Series 2014 (the "Series 2014 Bonds"), in the aggregate principal amount of not to exceed $7,500,000 for the purpose of (i) refunding all of the outstanding Series 2009 Bonds, and (iii) paying printing, underwriting, legal and other expenses incidental to the issuance of the Series 2014 Bonds; and WHEREAS, the City has determined to issue and secure the Series 2014 Bonds on a parity basis with its outstanding Series 2012 Bonds pursuant to that certain Trust Indenture dated as of May 1, 2002, as amended and supplemented by a First Supplemental Trust Indenture dated as of May 1, 2004, by a Second Supplemental Trust Indenture dated as of June 1, 2009, and by a Third Supplemental Trust Indenture dated as of May 15, 2012 (as amended and supplemented, the "Original Indenture"), by and between the City and BOKF, N.A. dba Bank of Oklahoma (formerly Bank of Oklahoma, N.A.), Tulsa, Oklahoma (the "Bank of Oklahoma"), as trustee (the "Trustee"), as such Original Indenture may be amended and supplemented pursuant to a Fourth Supplemental Trust Indenture (the "Fourth Supplemental Indenture"), by and between the City and the Trustee, a form of which Fourth Supplemental Indenture has been presented to and is before this meeting; and WHEREAS, the City proposes to enter into a Bond Purchase Agreement (the "Bond Purchase Agreement") in substantially the form presented to and before this meeting, with Stephens Inc., Fayetteville, Arkansas (the "Underwriter"), providing for the sale of the Series 2014 Bonds. NOW, THEREFORE, BE IT ORDAINED by the City Council of the City of Fayetteville, Arkansas that: Section 1. The City Council hereby finds and declares that the current refunding of the Series 2009 Bonds is in the best interests of the City and the customers of the System due to the reduction of the interest expense relating to the indebtedness represented by the Series 2009 Bonds. Section 2. Under the authority of the Constitution and laws of the State of Arkansas, including particularly Amendment 65 to the Constitution of Arkansas and the Authorizing Legislation, there is hereby authorized the issuance of bonds of the City to be designated as "Water and Sewer System Refunding Revenue Bonds, Series 2014" (the "Series 2014 Bonds"). The Series 2014 Bonds shall be issued in the original aggregate principal amount of not to Page 3 Ordinance No. 5665 exceed Seven Million Five Hundred Thousand Dollars ($7,500,000), shall mature not later than August 15, 2020, and shall bear interest at the rates specified in the Bond Purchase Agreement. The average yield on the Series 2014 Bonds shall not exceed 2.75% per annum. The proceeds of the Series 2014 Bonds will be utilized, along with other available moneys, to effect a current refunding of the Series 2009 Bonds and to pay printing, underwriting, legal and other expenses incidental to the issuance of the Series 2014 Bonds. The Series 2014 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 Original Indenture, as amended and supplemented by the Fourth Supplemental Indenture. The Series 2014 Bonds shall be issued and secured by net revenues of the System on a parity basis with the pledge of net revenues securing the outstanding Series 2012 Bonds. The Mayor is hereby authorized and directed to execute and deliver the Series 2014 Bonds in substantially the form thereof contained in the Fourth Supplemental Indenture submitted to this meeting, and the City Clerk is hereby authorized and directed to execute and deliver the Series 2014 Bonds and to affix the seal of the City thereto, and the Mayor and City Clerk are hereby authorized and directed to cause the Series 2014 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 Series 2014 Bonds in substantially the form contained in the Fourth Supplemental Indenture submitted to this meeting, with such changes as shall be approved by such persons executing the Series 2014 Bonds, their execution to constitute conclusive evidence of such approval. Section 3. To prescribe the terms and conditions upon which the Series 2014 Bonds are to be executed, authenticated, issued, accepted, held and secured, the Mayor is hereby authorized and directed to execute and acknowledge the Fourth Supplemental Trust Indenture (the "Fourth Supplemental Indenture"), by and between the City and the Trustee, and the City Clerk is hereby authorized and directed to execute and acknowledge the Fourth Supplemental 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 Fourth Supplemental Indenture to be accepted, executed and acknowledged by the Trustee. The Fourth Supplemental Indenture is hereby approved in substantially the form submitted to this meeting, including, without limitation, the provisions thereof pertaining to the pledge of System net revenues to the Series 2014 Bonds and the terms of the Series 2014 Bonds. The Mayor is hereby authorized to confer with the Trustee, the Underwriter and Bond Counsel in order to complete the Fourth Supplemental Indenture in substantially the form submitted to this meeting, with such changes as shall be approved by such persons executing the Fourth Supplemental Indenture, their execution to constitute conclusive evidence of such approval. (Advice is given that a copy of the Fourth Supplemental 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.) Page 4 Ordinance No. 5665 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 Series 2014 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 Series 2014 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. (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 the redemption of the Series 2009 Bonds, the Mayor is hereby authorized and directed to execute an Escrow Deposit Agreement to be dated as of the date of its execution (the "Escrow Agreement"), by and between the City and the Bank of Oklahoma, as escrow trustee (the "Escrow Trustee"), and the Mayor is hereby authorized and directed to cause the Escrow Agreement to be executed by the Escrow Trustee. The Escrow Agreement is hereby approved in substantially the form submitted to this meeting, and the Mayor is hereby authorized to confer with the Escrow Trustee, Underwriter and Bond Counsel in order to complete the Escrow Agreement in substantially the form submitted to this meeting, with such changes as shall be approved by such persons executing the Escrow Agreement, their execution to constitute conclusive evidence of such approval. Page 5 Ordinance No. 5665 (Advice is given that a copy of the Escrow 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 provide for continuing disclosure of certain financial and operating information with respect to the City and the System 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 Bank of Oklahoma, as dissemination agent (the "Dissemination Agent"), and the Mayor is hereby authorized and directed to cause the Continuing Disclosure Agreement to be executed by the Dissemination Agent. 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 Dissemination Agent, 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 8. The rates for System Water Services enacted pursuant to Ordinance No. 5123, adopted and approved on April 1, 2008, and the rates for System Sewer Services enacted pursuant to Ordinance No. 5129, adopted and approved on April 15, 2008, and Ordinance No. 5438, adopted and approved on September 20, 2011, are hereby ratified and confirmed. Section 9. 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 Series 2014 Bonds and to effect the execution and delivery of the Fourth Supplemental Indenture, the Bond Purchase Agreement, the Official Statement, the Escrow Agreement, the Continuing Disclosure Agreement and a Tax Regulatory Agreement relating to the tax exemption of interest on the Series 2014 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 10. Kutak Rock LLP, Little Rock, Arkansas, is hereby appointed to act as Bond Counsel on behalf of the City in connection with the issuance and sale of the Series 2014 Bonds. Page 6 Ordinance No. 5665 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 4st day of March, 2014. APPROVED: ATTEST: By: SON RA E. SMITH, City Clerk/Trpjj>rtdo, ° ® FAYETTEVILL.E . ®� 9P�-ANSP ° d 991 "N ! 0 Paul Becker Submitted By City of Fayetteville Item Review Form 2014-0084 Legistar File Number 3/4/2014 City Council Meeting Date - Agenda Item Only NIA for Non -Agenda Item Action Required: Finance Department Approval of an ordinance authorizing the issuance and sale of not to exceed $7,500,000 of Water and Sewer System Refunding Revenue Bonds, Series 2014 Does this item have a cost? $0.00 Cost of this request Account Number Project Number Category or Project Budget Funds Used to Date $0.00 Remaining Balance Program or Project Name Program or Project Category Fund Name Budgeted Item? Budget Adjustment Attached? V20130812 Previous Ordinance or Resolution # �Tm° Original Contract Number: TERE,ji Comments: C)'L '� , " W, Ae, /U THE CITY OF FAYETTEVILLE, ARKANSAS DEPARTMENT CORRESPONDENCE RKANSA NON -AGENDA ITEM MEMO To: Mayor Jordan Thru: Don Marr, Chief of Staff From: Paul A Becker Date: February 14, 2014 Subject: Approval of a Bond Ordinance Authorizing the Issuance of Water and Sewer Refunding Bonds PROPOSAL: Due to the current low interest rates in the Municipal Bond Market, the City is in a position to refinance the outstanding Water and Sewer 2009 Revenue Bonds. The refunding issue would be up to $7,500,000.By doing this the City should save in excess of $200,000 in reduced interest rate costs. RECOMMENDATION: The Staff recommends approval of refunding the outstanding 2009 Water and Revenue Bonds through the issuance of 2014 Water and Sewer Revenue Bonds. BUDGET IMPACT This refunding issue should result in interest cost savings to the City. ORDINANCE NO. AN ORDINANCE AUTHORIZING THE ISSUANCE AND SALE OF NOT TO EXCEED $7,500,000 OF WATER AND SEWER SYSTEM REFUNDING REVENUE BONDS, SERIES 2014, BY THE CITY OF FAYETTEVILLE, ARKANSAS FOR THE PURPOSE OF REFUNDING THE CITY'S OUTSTANDING WATER AND SEWER SYSTEM REVENUE BONDS, SERIES 2009; AUTHORIZING THE EXECUTION AND DELIVERY OF A FOURTH SUPPLEMENTAL TRUST INDENTURE PURSUANT TO WHICH THE SERIES 2014 BONDS WILL BE ISSUED AND SECURED; AUTHORIZING THE EXECUTION AND DELIVERY OF AN OFFICIAL STATEMENT PURSUANT TO WHICH THE SERIES 2014 BONDS WILL BE OFFERED; AUTHORIZING THE EXECUTION AND DELIVERY OF A BOND PURCHASE AGREEMENT PROVIDING FOR THE SALE OF THE SERIES 2014 BONDS; AUTHORIZING THE EXECUTION AND DELIVERY OF AN ESCROW DEPOSIT AGREEMENT PROVIDING FOR THE REDEMPTION OF THE SERIES 2009 BONDS; AUTHORIZING THE EXECUTION AND DELIVERY OF A CONTINUING DISCLOSURE AGREEMENT; AND PRESCRIBING OTHER MATTERS RELATING THERETO. WHEREAS, the City of Fayetteville, Arkansas (the "City"), a city of the first class, presently owns and operates a public water and sewer utility system (the "System") serving the residents of the City and its environs; and WHEREAS, the City is authorized and empowered under the provisions of the Constitution and laws of the State of Arkansas, including particularly Amendment 65 to the Constitution and Arkansas Code Annotated (1998 Repl. & 2013 Supp.) Sections 14-164-401 et seq., Sections 14-234-201 et seq. and Sections 14-235-201 et seq. (collectively, and as from time to time amended, the "Authorizing Legislation"), to issue and sell its water and sewer revenue bonds and to expend the proceeds thereof to finance the costs of acquisition, construction, equipping, improving, maintaining, operating and repairing the System, and to refund any bonds issued under the Authorizing Legislation; and WHEREAS, pursuant to the provisions of Ordinance No. 5235 of the City, adopted and approved on April 21, 2009, the City has previously issued its Water and Sewer System Revenue Bonds, Series 2009 (the "Series 2009 Bonds"), in the original principal amount of $8,210,000, for the purpose of financing the cost of improvements to the System; and WHEREAS, pursuant to the provisions of Ordinance No. 5496 of the City, adopted and approved on April 17, 2012, the City has previously issued its Water and Sewer System Refunding Revenue Bonds, Series 2012 (the "Series 2012 Bonds"), in the original principal amount of $3,665,000, for the purpose of refunding outstanding bonds of the City previously issued to finance and refinance the cost of improvements to the System; and 4849-8122-1400.3 WHEREAS, in accordance with the provisions of the Authorizing Legislation, the City has now determined to issue its Water and Sewer System Refunding Revenue Bonds, Series 2014 (the "Series 2014 Bonds"), in the aggregate principal amount of not to exceed $7,500,000 for the purpose of (i) refunding all of the outstanding Series 2009 Bonds, and (iii) paying printing, underwriting, legal and other expenses incidental to the issuance of the Series 2014 Bonds; and WHEREAS, the City has determined to issue and secure the Series 2014 Bonds on a parity basis with its outstanding Series 2012 Bonds pursuant to that certain Trust Indenture dated as of May 1, 2002, as amended and supplemented by a First Supplemental Trust Indenture dated as of May 1, 2004, by a Second Supplemental Trust Indenture dated as of June 1, 2009, and by a Third Supplemental Trust Indenture dated as of May 15, 2012 (as amended and supplemented, the "Original Indenture"), by and between the City and BOKF, N.A. dba Bank of Oklahoma (formerly Bank of Oklahoma, N.A.), Tulsa, Oklahoma (the "Bank of Oklahoma"), as trustee (the "Trustee"), as such Original Indenture may be amended and supplemented pursuant to a Fourth Supplemental Trust Indenture (the "Fourth Supplemental Indenture"), by and between the City and the Trustee, a form of which Fourth Supplemental Indenture has been presented to and is before this meeting; and WHEREAS, the City proposes to enter into a Bond Purchase Agreement (the "Bond Purchase Agreement") in substantially the form presented to and before this meeting, with Stephens Inc., Fayetteville, Arkansas (the "Underwriter"), providing for the sale of the Series 2014 Bonds. NOW, THEREFORE, BE IT ORDAINED by the City Council of the City of Fayetteville, Arkansas that: Section 1. The City Council hereby finds and declares that the current refunding of the Series 2009 Bonds is in the best interests of the City and the customers of the System due to the reduction of the interest expense relating to the indebtedness represented by the Series 2009 Bonds. Section 2. Under the authority of the Constitution and laws of the State of Arkansas, including particularly Amendment 65 to the Constitution of Arkansas and the Authorizing Legislation, there is hereby authorized the issuance of bonds of the City to be designated as "Water and Sewer System Refunding Revenue Bonds, Series 2014" (the "Series 2014 Bonds"). The Series 2014 Bonds shall be issued in the original aggregate principal amount of not to exceed Seven Million Five Hundred Thousand Dollars ($7,500,000), shall mature not later than August 15, 2020, and shall bear interest at the rates specified in the Bond Purchase Agreement. The average yield on the Series 2014 Bonds shall not exceed 2.75% per annum. The proceeds of the Series 2014 Bonds will be utilized, along with other available moneys, to effect a current refunding of the Series 2009 Bonds and to pay printing, underwriting, legal and other expenses incidental to the issuance of the Series 2014 Bonds. The Series 2014 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 Original Indenture, as amended and supplemented by the Fourth Supplemental Indenture. The Series 2014 Bonds shall be issued and secured by net revenues of the System on a parity basis with the pledge of net revenues securing the outstanding Series 2012 Bonds. 2 4849-8122-1400.3 The Mayor is hereby authorized and directed to execute and deliver the Series 2014 Bonds in substantially the form thereof contained in the Fourth Supplemental Indenture submitted to this meeting, and the City Clerk is hereby authorized and directed to execute and deliver the Series 2014 Bonds and to affix the seal of the City thereto, and the Mayor and City Clerk are hereby authorized and directed to cause the Series 2014 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 Series 2014 Bonds in substantially the form contained in the Fourth Supplemental Indenture submitted to this meeting, with such changes as shall be approved by such persons executing the Series 2014 Bonds, their execution to constitute conclusive evidence of such approval. Section 3. To prescribe the terms and conditions upon which the Series 2014 Bonds are to be executed, authenticated, issued, accepted, held and secured, the Mayor is hereby authorized and directed to execute and acknowledge the Fourth Supplemental Trust Indenture (the "Fourth Supplemental Indenture"), by and between the City and the Trustee, and the City Clerk is hereby authorized and directed to execute and acknowledge the Fourth Supplemental 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 Fourth Supplemental Indenture to be accepted, executed and acknowledged by the Trustee. The Fourth Supplemental Indenture is hereby approved in substantially the form submitted to this meeting, including, without limitation, the provisions thereof pertaining to the pledge of System net revenues to the Series 2014 Bonds and the terms of the Series 2014 Bonds. The Mayor is hereby authorized to confer with the Trustee, the Underwriter and Bond Counsel in order to complete the Fourth Supplemental Indenture in substantially the form submitted to this meeting, with such changes as shall be approved by such persons executing the Fourth Supplemental Indenture, their execution to constitute conclusive evidence of such approval. (Advice is given that a copy of the Fourth Supplemental 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 Series 2014 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. 3 4849-8122-1400.3 (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 Series 2014 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. (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 the redemption of the Series 2009 Bonds, the Mayor is hereby authorized and directed to execute an Escrow Deposit Agreement to be dated as of the date of its execution (the "Escrow Agreement"), by and between the City and the Bank of Oklahoma, as escrow trustee (the "Escrow Trustee"), and the Mayor is hereby authorized and directed to cause the Escrow Agreement to be executed by the Escrow Trustee. The Escrow Agreement is hereby approved in substantially the form submitted to this meeting, and the Mayor is hereby authorized to confer with the Escrow Trustee, Underwriter and Bond Counsel in order to complete the Escrow Agreement in substantially the form submitted to this meeting, with such changes as shall be approved by such persons executing the Escrow Agreement, their execution to constitute conclusive evidence of such approval. (Advice is given that a copy of the Escrow 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 provide for continuing disclosure of certain financial and operating information with respect to the City and the System 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 Bank of Oklahoma, as dissemination agent (the "Dissemination Agent"), and the Mayor is hereby authorized and directed to cause the Continuing Disclosure Agreement to be executed by the Dissemination Agent. 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 Dissemination Agent, 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. L! 4849-8122-1400.3 (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 8. The rates for System Water Services enacted pursuant to Ordinance No. 5123, adopted and approved on April 1, 2008, and the rates for System Sewer Services enacted pursuant to Ordinance No. 5129, adopted and approved on April 15, 2008, and Ordinance No. 5438, adopted and approved on September 20, 2011, are hereby ratified and confirmed. Section 9. 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 Series 2014 Bonds and to effect the execution and delivery of the Fourth Supplemental Indenture, the Bond Purchase Agreement, the Official Statement, the Escrow Agreement, the Continuing Disclosure Agreement and a Tax Regulatory Agreement relating to the tax exemption of interest on the Series 2014 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 10. Kutak Rock LLP, Little Rock, Arkansas, is hereby appointed to act as Bond Counsel on behalf of the City in connection with the issuance and sale of the Series 2014 Bonds. 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. ADOPTED AND APPROVED THIS DAY OF , 2014. Mayor ATTEST: City Clerk (SEAL) 5 4849-8122-1400.3 NORTHWEST ARKANSAS DEMOCRAT -GAZETTE NORTHWESTARKANSAS THE MORNING NEWS OF SPRINGDALE N F RX THE MORNING NEWS OF ROGERS LWSRME-0' LLC NORTHWEST ARKANSAS TIMES BENTON COUNTY DAILY RECORD 212 NORTH EAST AVENUE, FAYE17EVIH E, ARKANSAS 72701 1 P.O. BOX 1607, 72702 ( 479.442.1700 1 WWW.NWANEWS.COM AFFIDAVIT OF PUBLICATION I, Karen Caler, do solemnly swear that I am the Legal Clerk of the Northwest Arkansas Newspapers, LLC, printed and published in Washington and Benton County, Arkansas, bona fide circulation, that from my own personal knowledge and reference to the files of said publication, the advertisement of. City of Fayetteville - Ord. 5665 Was inserted in the Regular Editions on: March 13, 2014 Publication Charges: $583.65 Karen Caler Subscribed and swo to before me This tq day of 2014, Notary Public) My Commission Expires: 21,1Vf?vz+ CATHY WILES Arkansas - Benton County. Notary Public - Comm# 12397118 My Commission Expires Feb 20, 2024 * *NOTE* * Please do not pay from Affidavit. Invoice will be sent. MAR 2 8 2014 CITY OF FAYETTEVILLE CITY CLERK'S OFFICE ORDINANCE NO. 5665 O AN ORDINANCE AUTHORIZING THE ISSUANCE AND SALE OF NOT 70 EXCEED 00I $7,500,000 OF WATER AND SEWER SYSTEM REFUNDING REVENUE BONDS, SERIES 1 2014, BY THE CITY OF FAYETTEVILLE, ARKANSAS FOR THE PURPOSE OF REFUNDING THE CITY'S OUTSTANDING WATER AND SEWER SYSTEM REVENUE BONDS, SERIES ARKANSAS 2009; AUTHORIZING THE EXECUTION AND DELIVERY OF A FOURTH SUPPLEMENTAL TRUST INDENTURE PURSUANT TO WHICH THE SERIES 2014 BONDS WILL BE ISSUED AND SECURED; AUTHORIZING THE EXECUTION AND DELIVERY OF AN OFFICIAL STATEMENT PURSUANT TO WHICH THE SERIES 2014 BONDS WILL BE OFFERED; AUTHORIZING THE EXECUTION AND DELIVERY OF A BOND PURCHASE AGREEMENT PROVIDING FOR THE SALE OF THE SERIES 2014 BONDS; AUTHORIZING THE EXECUTION AND DELIVERY OF AN ESCROW DEPOSIT AGREEMENT PROVIDING FOR THE REDEMPTION OF THE SERIES 2009 BONDS; AUTHORIZING THE EXECUTION AND DELIVERY OF A CONTINUING DISCLOSURE AGREEMENT; AND PRESCRIBING OTHER MATTERS RELATING THERETO. WHEREAS, the City of Fayetteville, Arkansas (the "City"), a city of the first class, presently owns and operates a public water and sewer utility system (the "System") serving the residents of the City and its environs; and WHEREAS, the City is authorized and empowered under the provisions of the Constitution and laws of the State of Arkansas, including particularly Amendment 65 to the Constitution and Arkansas Code Annotated (1998 Rept. & 2013 Supp.) Sections 14- 164-401 at seq., Sections 14-234-201 at seq. and Sections 14-235-201 at seq. (collectively, and as from time to time amended, the "Authorizing Legislation"), to issue and sell its water and sewer revenue bonds and to expend the proceeds thereof to "finance the costs of acquisition, construction, equipping, improving, maintaining, operating and repairing the System, and to refund any bonds issued under the Authorizing Legislation; and WHEREAS,' pursuant to the provisions of Ordinance No. 5235 of the City, adopted and approved on April 21, 2009, the City has previously issued its Water and Sewer System Revenue Bonds, Series 2009 (the "Series 2009 Bonds"), in the original principal amount of $8,210,000, for the purpose of financing the cost of improvements to the System; and WHEREAS, pursuant to the provisions of Ordinance No. 5496 of the City, adopted and approved on April 17, 2012, the City has previously issued its Water and Sewer System Refunding Revenue Bonds, Series 2012 (the "Series 2012 Bonds"), in the original principal amount of $3,665,000, for the purpose of refunding outstanding bonds of the City previously issued to finance and refinance the cost of improvements to the System; and WHEREAS, in accordance with the provisions of the Authorizing Legislation, the City has now determined to issue its Water and Sewer System Refunding Revenue Bonds, Series 2014 (the "Series 2014 Bonds"), in the aggregate principal amount of not to exceed $7,500,000 for the purpose of (i) refunding all of the outstanding Series 2009 Bonds, and (iii) paying printing, underwriting, legal and other expenses incidental to the issuance of the Series 2014 Bonds; and WHEREAS, the City has determined to issue and secure the Series 2014 Bonds on a parity basis with its outstanding Series 2012 Bonds pursuant to that certain Trust Indenture dated as of May 1, 2002, as amended and supplemented by a First Supplemental Trust Indenture dated as of May 1, 2004, by a Second Supplemental Trust Indenture dated as of June 1, 2009, and by a Third Supplemental Trust Indenture dated as of May 15, 2012 (as amended and supplemented, the "Original Indenture"), by and between the City and BOKF, N.A. dba Bank of Oklahoma (formerly Bank of Oklahoma, N.A.), Tulsa, Oklahoma (the "Bank of Oklahoma"), as trustee (the "Trustee"), as such Original Indenture may be amended and supplemented pursuant to a Fourth Supplemental Trust Indenture (the "Fourth Supplemental Indenture"), by and between the City and the Trustee, a form of which Fourth Supplemental Indenture has been presented to and is before this meeting; and WHEREAS, the City proposes to enter into a Bond Purchase Agreement (the "Bond Purchase Agreement") in substantially the form presented to and before this meeting, with Stephens Inc., Fayetteville, Arkansas (the "Undgrwriter"), providing for the sale of the Series 2014 Bonds. ' NOW, THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF FAYETTEVILLE, ARKANSAS: Section 1. The City Council hereby finds and declares that the current refunding of the Series 2009 Bonds is in the best inter- ests of the City and the customers of the System due to the reduction of the interest expense relating to the indebtedness represented by the Series 2009 Bonds. Section 2. Under the authority of the Constitution and laws of the State of Arkansas, including particularly Amendment 65 to the Constitution of Arkansas and the Authorizing Legislation, there is hereby authorized the issuance of bonds of the City to be designated as "Water and Sewer System Refunding Revenue Bonds, Series 2014" (the "Series 2014 Bonds"). The Series 2014 Bonds shall be issued in the original aggregate principal amount of not to exceed Seven Million Five Hundred Thousand Dollars '.,($7,500,000), shall mature not later than August 15, 2020, and shall bear interest at the rates specified in the Bond Purchase Agreement. The average yield on the Series 2014 Bonds shall not exceed 2.75% per annum. The proceeds of the Series 2014 Bonds will be utilized, along with other available moneys, to effect a current refunding of the Series 2009 Bonds and to pay printing, underwriting, legal and other expenses incidental to the issuance of the Series 2014 Bonds. The Series 2014 Bonds shall be issued in the forms and denominations, shall be dated, shall be numbered, shall mature, shall be subject to redemp- tion prior to maturity, and shall contain such other terms, covenants and conditions, all as set forth in the Original Indenture, as amended and supplemented by the Fourth Supplemental Indenture. The Series 2014 Bonds shall be issued and secured by net revenues of the System on a parity basis with the pledge of net revenues securing the outstanding Series 2012 Bonds. The Mayor is hereby authorized and directed to execute and deliver the Series 2014 Bonds in substantially the form thereof contained in the Fourth Supplemental Indenture submitted to this meeting, and the City Clerk is hereby authorized and directed to execute and deliver the Series 2014 Bonds and to affix the seal of the City thereto, and the Mayor and City Clerk are hereby authorized and directed to cause the Series 2014 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 Series 2014 Bonds in substantially the form contained in the Fourth Supplemental Indenture submitted to #his meeting, with such changes as shall be approved by such persons executing the Series 2014 Bonds, their execution to _w To evidence of such approval. 5ecfion `3. To prescribe the terms and conditions upon which the Series 2014 Bonds are to be executed, authenticated, :issued, accepted, held and secured, the Mayor is hereby authorized and directed to execute and acknowledge the Fourth Supplemental Trust Indenture (the "Fourth Supplemental Indenture"), by and between the City and the Trustee, and the City. Clerk is hereby authorized and directed to execute and acknowledge the Fourth Supplemental 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 Fourth Supplemental Indenture to be accepted, executed and acknowledged by the Trustee. The Fourth Supplemental Indenture is hereby approved in substantially the form submitted to this meeting, including, without limitation, the provisions thereof pertaining to the pledge of.System net revenues to the Series 2014 Bonds and the terms of the Series 2014 Bonds. The Mayor is hereby authorized to,confer with the Trustee, the Underwriter and Bond Counsel in order to complete the Fourth Supplemental Indenture in sub- stantially the form submitted to this meeting, with such changes as shall be approved by such persons executing the Fourth Supplemental Indenture, their execution to constitute conclusive evidence of such approval. (Advice is given that a copy of the Fourth Supplemental 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 Series 2014 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.) FAYETTEVILLE DATE: 6/03/2014 CITY OF FAYETTEVILLE RECEIVED 113 WEST MOUNTAIN STREET JUN 0 3 2014 FAYETTEVILLE, AR 72701 CITY OF FAYETTEVILLE CITY CLERK'S OFFICE RECEIPT NO.: 140165503 RECEIPT DESCRIPTION Misc Recpt Bank of Oklahoma Reimb Pub Fee Reimb Pub Fee -NW AR Newsp $ 583.65 Thank You! RECEIVED FROM TOTAL Bank of Oklahoma Reimb Pub Fee AMOUNT $ 583.65 ACCTG RECEIVED BY - DUPLICATE i NEW ADDRESS OR NAME BANK OF OKLAHOMA InsBtutional Wealth I P.O. Box 1270 Tulsa, OK 74101-1270 i RECEIVED .)UN, Q 3 2014 CITY OF FAYETTEVILLE ;"; Y OF FAYErTEVtLLE ATTN : _ SHELLY TURBERV ILLE CITY CLERK'S OFFICE 113 WEST MOUNTAIN' FAYETTEVILLE, AR 72701 PLEASE INDICATE ADDRESS OR NAME CHANGES AND RETURN TO ADDRESS STATED ABOVE ACCOUNT NUMBER: 82-9577-04-8 DATE 05'/30/14 CHECK NO.0931369 14052921805 CITY OF FAYETTEVILLE 82-9577-04-8.15 FAYETTEVILLE 2014 COI FUND PAYMENT FOR REIMBURSEMENT OF PUBLICATION FEE PAID TO NORTHWEST ARKANSAS CSW NEWSPAPERS CHECK NUMBER: 0931369 TOTAL: $583.65 Advicee below if applicable: Check No. 0931369 $6,330,000 CITY OF FAYETTEVILLE, ARKANSAS WATER AND SEWER SYSTEM REFUNDING REVENUE BONDS SERIES 2014 TO THE ATTACHED DISTRIBUTION LIST: Ladies and Gentlemen: 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. Sincerely, r on M. Wilbourn js Enclosure 4836-2153-6796.1 KUTAK ROCK LLP ATLANTA CHICAGO SUITE 2000 DENVER FAYETTEVILLE 124 WEST CAPITOL AVENUE IRVINE NORTHWEST ARKANSAS OFFICE LITTLE ROCK, AR 72201-3706 KANSAS CITY LITTLE ROCK SUITE 400 501-975-3000 LOS ANGELES 234 EAST MILLSAP ROAD FACSIMILE 501-975-3001 MINNEAPOLIS FAYETTEVILLE, ARKANSAS 72703-4099 OKLAHOMA CITY 479-973-4200 www.kutakrock.com OMAHA PHILADELPHIA RICHMOND SCOTTSDALE GORDON M. WILBOURN June 26 2014 WASHINGTON gordon.wilbourn @kutakrock.com WICHITA (501)975-3101 $6,330,000 CITY OF FAYETTEVILLE, ARKANSAS WATER AND SEWER SYSTEM REFUNDING REVENUE BONDS SERIES 2014 TO THE ATTACHED DISTRIBUTION LIST: Ladies and Gentlemen: 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. Sincerely, r on M. Wilbourn js Enclosure 4836-2153-6796.1 KUTAK ROCK LLP DISTRIBUTION LIST $6,330,000 CITY OF F'AYETTEVILLE, ARKANSAS WATER AND SEWER SYSTEM REFUNDING REVENUE BONDS SERIES 2014 City of Fayetteville Mr. Paul Becker (2 copies) Ms. Sondra Smith (1 copy) City of Fayetteville 113 West Mountain Fayetteville, AR 72701 BOKF, NA Ms. Cynthia Wilkinson (1 copy) Bank of Oklahoma 1 One Williams Center Tulsa, OK 74172-0140 Stephens Inc. Fayetteville City Attorney Kutak Rock LLP 4836-2153-6796.1 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 Mr. Gordon Wilbourn (1 original) Kutak Rock LLP 124 W. Capitol, Suite 2000 Little Rock, AR 72201 $6,330,000 CITY OF FAYETTEVILLE, ARKANSAS WATER AND SEWER SYSTEM REFUNDING REVENUE BONDS SERIES 2014 TRANSCRIPT OF PROCEEDINGS Dated as of May 15, 2014 Prepared By: KUTAK ROCK LLP 124 West Capitol, Suite 2000 Little Rock, Arkansas 72201 4843-3869-8776.2 $6,330,000 CITY OF FAYETTEVILLE, ARKANSAS WATER AND SEWER SYSTEM REFUNDING REVENUE BONDS SERIES 2014 CLOSING INDEX TAB Proceedings and Certificates Related to Issuance Closing Certificate and Request of the City of Fayetteville, Arkansas (the "City") Exhibit A - Ordinance No. 5123 adopted April 1, 2008, fixing rates to be charged for services of the City's water system 2 Exhibit B — Ordinance No. 5129 adopted April 15, 2008, fixing rates to be charged for services of the City's sewer system Exhibit C —Ordinance No. 5438 adopted September 20, 2011, amending certain City sewer system charges 4 Exhibit D - Ordinance No. 5665 adopted March 4, 2014, authorizing the issuance of water and sewer system refunding revenue bonds Exhibit E - Minutes of City Council meeting held March 4, 2014, reciting adoption of Ordinance No. 5665 6 Exhibit F - Proof of Publication of Ordinance No. 5665 in the Northwest Arkansas Times on March 13, 2014 7 Exhibit G - Costs of Issuance Form 8038-G and Proof of Mailing to Internal Revenue Service 9 Principal Documents Bond Purchase Agreement dated May 6, 2014, by and between the City and Stephens Inc. (the "Underwriter") 10 4843-3869-8776.2 W Trust Indenture dated as of May 1, 2002, by and between the City and BOKF, NA, as trustee (the "Trustee") 11 First Supplemental Trust Indenture dated as of May 1, 2004, by and between the City and the Trustee 12 Second Supplemental Trust Indenture dated as of June 1, 2009, by and between the City the Trustee 13 Third Supplemental Trust Indenture dated as of May 15, 2012, by and between the City and the Trustee 14 Fourth Supplemental Trust Indenture dated as of May 15, 2014, by and between the City and the Trustee 15 Escrow Deposit Agreement dated May 20, 2014, by and between the City and BOKF, NA, as escrow trustee 16 Tax Regulatory Agreement dated May 20, 2014, by and between the City and the Trustee 17 Copies of Bonds 18 Preliminary Official Statement 19 Official Statement 20 Opinions Approving Opinion of Bond Counsel 21 Supplemental Opinion of Bond Counsel 22 Defeasance Opinion of Bond Counsel 23 Opinion of Counsel to the City 24 Miscellaneous Continuing Disclosure Agreement 25 Trustee's Certificate 26 Escrow Trustee's Certificate 27 Certificate of Underwriter 28 2 4843-3869-8776.2 Trustee's Receipt and Certificate as to Application of Funds 29 Escrow Trustee's Receipt Underwriter's Receipt for Bonds Accountant's Consent Letter Accountant's Parity Letter DTC Letter of Representation Standard & Poor's Rating Letter Transcripts delivered to: 30 31 32 33 34 35 City of Fayetteville, Attn: Mr. Paul Becker (2 bound), Attn: Ms. Sondra Smith (1 copy) BOKF, NA, Attn: Ms. Cynthia Wilkinson (1 bound) Stephens Inc., Attn: Mr. Dennis Hunt (1 bound) Fayetteville City Attorney, Attn: Kit Williams, Esq. (1 bound) Kutak Rock LLP (1 bound) 3 4843-3869-8776.2 PAGE 02 1.1-12-93 02*2PM FROM DTC MERWRINIG Blanket Issuer Letter of Representations Cro be CctnpWW by *WM City of Fayetteville, AR iName of laugs) Nb!ajyb=- 12, 1998 foam) Atten6=- Underwriting Department — Eligibility The Dtposacx-y Txust Company 55 Water Stye 50th Flc= New York, NY 10041.0099 Ladim and Gendcm= Tbij kn= sets forth a= understanding with respect to aR lanes (the "Securities') that Issuer shall request be made 4bLe for &-pcsitbry The Depository Txwt Compariy (-DTC'). To induce DTC to accept the Securities as eRVbla for depcmt at =, and to xi in ac=dznm with DTCs Ruks with aspect to the SecuAdm Inver reprcw= to DTC d= I== will comply with the xequire=eats smted at DTCs Operwiamal AnAcganxmts, as they may be an fm ffme to bane. Note Soh6"& A coubwu itatemerku tbst DTC bebevvu I the method Of book- c=ntr-/ ae md Very tr*yaum, Reodved and A=epted-- Fred u9ma t (Typr-yft Xwe at Two THE DEPOSI'T'ORY TRUST COMPANY 113 W. Main St- (-9&ce.Add=) —Fayetteville, AR 72701 (57 (Sam) ter 501-575-8330 (Fbon&X=bc; SCEM UL.E A, SA-NLPI.E OFFERLNG DOCUMENT Lk.NGUAGE DESCBZBLNG BOOK-F.NI'SY-0rZY LSSL'ANCE (Prepared by UTC -bracketed material may be aFplkable an1y to oertain'�sues) 1. The Depoeitary Truer. Company ('D TIC), N c-- York, V`,. wtll act as secursti= dtponxry a -r the 5ecurtties (the 'Sm -a66 -s'). The Securities win be Lssued as seatrities registmd iii the name of Cede 6c Co_ (DTC'.- parmcmhtp nominee). One full mgistrrred Security certificate will be issued fon' (each issue afj the $carie , leads) in the agpegsse Principal azr=r of such i=e, and wM be &-posited witb DTC. [If, however, the aggmpie arirch=1 =ouzz of (any) issue exceeds &2w m0ioa, came cerdficaxe will be issued witb respect to e� SAO millmn of pejxi al aaao=t and an additzmal Wite will be L%med with nsspect to any --=raining pri=pd amount of such fssue.j Q.. DTC is a hmtrad-ptctpase trust company wgmi d under the New York B=3dng Law, a'baalang orgamJ=dion' wft a the mtuang of the New Ymic Banidng Law; a member of the Fadezal r`tesetve System, A'deariog cozper' ban' within the amembzg of the New York Uasi%rm Cora� Code, mad a ekarzng agency" regWered p===t to the provisions of Section 17A of the Securities F.xciLwga Act of 1934. DTC Raids securities that is part4aats ('PardaPsats-) deposit calif! DTC- DTC also foAtates tate settlMDeot Mcag Participarais of xcudbes t r ZMt- sow, tush as tsausf= and pledges. zn dtpOzaad aeeuraies tbrougn electronic wmpuredzed book-eatry cbaages in Participants' amounts, thereby eliminating the used &sr physical movement of securities certificates. Direct Particigant3 in4nde 'i I mecutitles brokers and dealers, banks, Mut companies, clearing cotpomtioas, and eertsin other or�►aiatitions. DTC is owned by a cumber of Its Direct Pasticipaats and by the Piew Yank Stock Eoc�, Inc, the American Stock E=hange, Inc., and the National Axsodailon of SectuZes Dmitri, Itte. Arman to the -O C ayrrarn Is also aatdlabla to otheas svch av mcurt"es bmker: and dealea, bsakt, ,cod uv -sr =npanw duct clear tic n* or ma&um a mato" reiadio=d=p with a Direct Baatic?mt dear &vcrly or mdirm* (indirect Patti'). The Rules applicable to DTC and its Putltipents ale on $le with the Secatties end ExclA rge Coamwasim 3. Pu chasm of Seautsies under the VTC system must be nwde by or thmugh Direct Pacticip=ts, which will receive a cr" t4 for the Se=dtlm on DTCj secAnit. The awnership inter t of each actual pazchasrs of coch Sema ty ("B=zflc sl Owue) is in thin to be rex+ad�d on tl5e Dirac: and ludin d Partictpaats' reamzis. Beme4cial Owner will not receive wnmem c6nft m tion from DTC of their puzdse, but Betus&W Ow=n are zTectod to rocetve written o=ftrn%xtiaas providing deters of the usarsc wn, as well as pwwac swemenb of heir 6oklings, fr= the Direct ser Indirect Pazticipant thnxigh which the BenelBcial Owner eared into the tx=nc ion. Trmuiess of owacrshlp intim in the Secu&les are tD be acwmplubed by eussias made an the books of Pzr dpaszts acting oa behalf of Beaa&W Owoem BeacAcW Owaers well not seceiee ces-decatee repm-mntmg tuir mvn rsbdp interests In Securttses, =cpt = the event Hast use of the boak-entry tsysta;tn for the Securities is discontinued. 4. To frrili±,� zubs�t =asfan, all Securd es &pcs tcd by Pasta with M me rcg stared m the Hama of DM partnenhfp =riuoe, Cede be Co. The deposit of SeRarides with DW cad their registr UM is the nate of Cede & Co. effect no d=ge in beneficial ownership. DTC has no kvowiedge of the actual BeaeScml Owaara of the S- _.__- - - the - Partie?MtS to w ose accrnmts such Sec tLej are credited, wbl& may Cr MAy Dot be the Beatfsdal 4wDeza. The Partiapasra will Mradn rmponsthle fear keeping account of thdr both oc bch&U of theta c+uStAmera. R S. Conveyance of notices and other communic2dans by DTC to Dixect Firtcirp=L-, by DL-ect Pa,t rcipants to lndirect Paracpants, and by Direct Par=garts and 1n,&=t Partic arts to B®e6ca! Owners will be governed by arrangements among thern, subtect to any statutcry or regulatory dents as :ray be in e6ect from rime to time. I& Aedsmptkm ;,,odoes .shall ba sera to Cede be Co. It less thea all of d:e Securities uitfiia an iMC are being redeemed. DTC's practce is to determine by tot the amount of the interest of each Direct Particqxwt in =CB :slue to be redeenmmll 7. Neft-her DTC nor Cede & Co. will consent or vete with respect to Securities. lioder its usual prnced�, DTC Mails an Omnibus P:ary to the lames as sone as posuble after the zew, date The Omrribru Prury anigas Cede & Co.'s ca= tMg or voting iigists to t3ose Dtrect Parz;� tri whose acca=a the Securities are credited on the reo0ed date (;&=Mfsed in a listing adwil d w the Omnfbw Prnry). S. P tndpal and +.nterest payrneats an die Secaitias sadn be made to DTC. D 'C's pr2etm is to trS& Dire= ' ac:xcmts an payable date in ac=miaz= wifir their twoectfue boldtags sircrwn on DTC's 2acords unless DTC bas mason to believe that it win not receive payment an paysbls drate. ?xfmz= by P to Seneacial Owners will be gaverned by sraadfag in Mictions and =s=nmy grecsi Nas, ss is the cz With secu ilSes held for the accounts of cu=rie s in besa yr form or ; e&trtered is e�` 1 *sft-wt name,' ar.d will be the respaasgAlfty of such lttidpant gid n& of DTC, the Agent, cc the 1 issuer; subjed to azy SL"ory or reguL wy requim=ents as may be in effect from dnv,- to 1]II & Payment cd pemcipel and tautest to DTC is the responsibnlfiy of the I.swer or the Ag mt dislx>r%=e st ` of sir p"meats to Dbvct shall be the respa=h1ity of DTC, and disbu�t of arch paymsass to the Beueddalown=$ $ban be tyre szapOPIft3sty of Direct MCI rn&rea Fv6cicamts. (8. A BeA&BcW Owner z6n g�w =bin to elect to have its Secuiib= pttrlwed or tmxlmi3d. Nueva} ffs Pwtc4vmt to the (Tcaa=Rk=wketing] hgpot, and shall affect dalivezy of suds So.-nn� by cansW8 the Daercx Partic?arn to h=afer the Pzrtki antes lntweat in the Seciatdes, oa DM , to the 81 Agent The raqnrement for p y of Secwtr es in ocmxcf5on -;n6 a d=Uwd for purchase ar a numdatwy purchase will be deemed satiaRed wjlen the owuc=btp tights in the mea art t:vmf=ed by Direst Ptrdctp=b on DTCs recr &] is = may tri Mi= a= .write decry with respect to the secusj2ift at any time by gr/mg ruble notie- to the 1=wr or the Agent. Under such im the went that a s=c=xw seowides depoatory n not obtained. Soc=Ay certificates ars req=vd to be printed and delivered. 1L The I= msy decida to disaantinae use of the syswm of book.eatry traansfers tie mgh DTC (or a successor soaaftics &Tory), In that eveszt. Security owWk2t= will be printed and delivered. l~Z.. The mon in this section concerning DTT and DTC's book -entry systezr has been, abtained fir= sources that the Issuer believes to be real , but the Issuer Nikes no respamsibil for the ancuntcy tom% Opinion Letter City of Fayetteville, Arkansas May 20, 2014 4rGrantThornton Independent Accountant's Report on Applying Agreed -Upon Procedures Grant Thornton LLP 1717 Wain Street, Suite 1500 Dallas, TX 75201.4667 T 214.561.2300 F 214.561.2370 GrantThornton.com linkd.in/GrantThorntonUS The Honorable Mayor and Members of the City Council twitter.com/GrantThorntonUS The City of Fayetteville, Arkansas We have performed the procedures enumerated below, which were agreed to by the management of the City of Fayetteville, Arkansas (the City), with respect to the City's Water and Sewer System Refunding Revenue Bonds Series 2014 [$6,330,000 issuance] (the `Bonds") issued by the City, dated May 15, 2014, solely to assist the City in evaluating the management's assertion of compliance with certain provisions relating to debt coverage for the Bonds in connection with the issuance of the Bonds. The City is responsible for the calculation of debt service coverage and compliance with debt service coverage requirements. This agreed-upon procedures engagement was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants. The sufficiency of these procedures is solely the responsibility of those parties specified in this report. Consequently, we make no representation regarding the sufficiency of the procedures described below either for the purpose for which this report has been requested or for any other purpose. The procedures we performed and our findings are as follows: • Obtained from the City, the Unaudited Statement of Revenues, Expenses and Changes in Fund Equity for the Year Lnded December 31, 2013 for the Water and Sewer Fund, as noted in the Official Statement. • We recalculated "Net Revenues", as defined in the Official Statement, as of December 31, 2013, and as presented in the Unaudited Statement of Revenues, Expenses and Changes in Fund Equity for the Year Ended December 31, 2013. We recalculated "N et Revenues" to be $8.73 million, which we agreed to the Unaudited Statement of Revenues, Expenses and Changes in Fund Equity for the Year Ended December 31, 2013, without exception. • Obtained the City's calculation of the average ".annual Debt Service" for the 2012 Bonds and 2014 Bonds. We recomputed the average "Annual Debt Service" using information from the "Estimated Debt Service Coverage" schedule in the Official Statement. We noted the amount recalculated, $1.46 million, agrees to the average "Annual Debt Service" as noted in the Official Statement, without exception. • Obtained from the City a calculation of the amount needed to make the required deposit to the Debt Service Reserve Fund, if any, and recalculated the amount needed, if any. We recomputed the amount needed to make the required deposit to the Debt Service Reserve Fund to be $0, without exception. Grant Thornton LLP U.S. member firm of Grant Thornton international Ltd r � GrantThornton • Obtained from the City a calculation of the amount needed to make the required deposit to the Renewal and Replacement Fund, if any, and recalculated the amount needed, if any. We recomputed the amount needed to make the required deposit to the Renewal and Replacement Fund to be $0, without exception. Determined that "Net Revenues", as calculated by the City based on the definition outlined in the Official Statement, are at least equal to (i) 125% of the average "Annual Debt Service" on all indebtedness of the City to which System revenues are pledged, (ii) the amount, if any, needed to fund debt service reserve deficiencies with respect to all indebtedness of the City to which System revenues are pledged, and (iii) the amount, if any, needed to make required deposits to the Renewal and Replacement Fund. We recalculated "Net Revenues" to be 596% of average "Annual Debt Service", which is in compliance. As noted above, the amount needed to make the required deposits to the Debt Service Reserve Fund and the Renewal and Replacement Fund are $0. As such, "Net Revenues" as calculated by the City based on the definition outlined in the Official Statement, is in compliance. We were not engaged to, and did not conduct an examination or review, the objective of which is the expression of opinion or limited assurance on the City's compliance with certain provisions relating to debt coverage for the Bonds. Accordingly, we do not express such an opinion or limited assurance. Had we performed additional procedures, other matters might have come to our attention that would have been reported to you. This report is intended solely for the information and use of the specified users listed above and is not intended to be and should not be used by anyone other than these specified parties. ,/�� L -\J, Dallas, Texas May 20, 2014 Grant Thornton LLP U.S. member firm of Grant Thornton International Lid Acknowledgement Letter City of Fayetteville, Arkansas May 20, 2014 Y# GrantThornton Grant Thornton LLP 1717 Main Street, Suite 1500 Dallas, TX 752014667 T 214.561.2300 IF 214.561.2370 GrantThomton.com link in/GrantThorntonUS t,Mtter.com/GrantThorntonUS The Honorable. Mayor and Members of the City Council "I'he City of Fayetteville, Arkansas �yr'e agree to the inclusion M the Final Official Statement dated May G, 2014 for the City of Fayetteville, Arkansas, kVater and Sewer Sysiern Refunding Revenue Bonds, Series 2014, of our report, dated butte 24, 2013 relating to our ;audit of rite Financial statemeutS of'1'he City of Fayetteville, Arkansas as cif December 31, 2012 and for the year then elided. We have not performed any procedures Since the date of our report, June 24, 2013 and we therefore have no responsN iL for events subsequent to that date. Dallas, Texas May 20, 2014 Grant Thornton LLP U.S. member firm of Grant Thornton International Ltd UNDERWRITER'S RECEIPT The undersigned, on behalf of Stephens Inc., as purchaser (the "Purchaser") of $6,330,000 City of Fayetteville, Arkansas Water and Sewer System Refunding Revenue Bonds, Series 2014 (the "Bonds"), hereby acknowledges receipt of each and all of the Bonds, said Bonds being in the form of seven (7) typewritten fully registered bonds in the name of Cede & Co., as nominee of The Depository Trust Company, in the authorized denomination, bearing interest and containing such other terms and provisions as set forth in that certain Fourth Supplemental Trust Indenture dated as of May 15, 2014, by and between the City of Fayetteville, Arkansas (the "City") and BOKF, NA, 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 May 6, 2014, 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: May 20, 2014 STEPHENS INC. By: Title: '0&. t%► c� , , 4840-5827-7147.1 ESCROW TRUSTEE'S RECEIPT The undersigned, BOKF, NA, as escrow trustee (the "Escrow Trustee") under the provisions of an Escrow Deposit Agreement dated May 20, 2014 (the "Escrow Agreement"), by and between the City of Fayetteville, Arkansas (the "City") and the undersigned, hereby certifies that: The Escrow Trustee has received this date for deposit in the 2009 Escrow Fund established under the Escrow Agreement, the following sums: (1) $6,794,481.36 of proceeds of the City's Water and Sewer System Refunding Revenue Bonds, Series 2014 (the "Series 2014 Bonds"); (2) $688,260.98 from the Bond Fund established for the City's Water and Sewer Revenue Bonds, Series 2009 (the "Series 2009 Bonds"); and (3) $23,585.00 from the Debt Service Reserve Fund established for the Series 2009 Bonds. Dated: May 20, 2014 BOKF, NA, as Escrow Trustee By: e Title: �� h i o IP- Vis l 4829-0038-7099.1 TRUSTEE'S RECEIPT AND CERTIFICATE AS TO APPLICATION OF FUNDS The undersigned, BOKF, NA, as trustee (the "Trustee") under a Trust Indenture dated as of May 1, 2002, as amended and supplemented by a First Supplemental Trust Indenture dated as of May 1, 2004, by a Second Supplemental Trust Indenture dated as of June 1, 2009, by a Third Supplemental Trust Indenture dated as of May 15, 2012, and by a Fourth Supplemental Trust Indenture dated as of May 15, 2014 (as amended and supplemented, the "Indenture"), by and between the City of Fayetteville, Arkansas (the "City") and the Trustee, with respect to the City's $6,330,000 Water and Sewer System Refunding Revenue Bonds, Series 2014 (the "Bonds"), hereby certifies that: 1. The Trustee has received this date on behalf of the City, from Stephens Inc. (the "Purchaser"), $6,871,055.76, that being the agreed purchase price of the Bonds pursuant to the Bond Purchase Agreement dated May 6, 2014, between the City and the Purchaser. 2. The proceeds of the sale of the Bonds have been deposited or will be applied, in accordance with the written directions of the City, as follows: (a) $3,099.31, an amount equal to accrued interest on the Bonds, has been deposited into the Series 2014 Account of the Bond Fund created by the Indenture; (b) $6,794,481.36 has been transferred to the 2009 Escrow Fund established under an Escrow Deposit Agreement dated May 20, 2014 (the "Escrow Agreement"), by and between the City and BOKF, NA, as escrow trustee (the "Escrow Trustee"), to be held and invested as provided in the Escrow Agreement for the purpose of refunding the City's Water and Sewer System Revenue Bonds, Series 2009; (c) $72,000.00 has been deposited by the Trustee into the Cost of Issuance Fund created by the Indenture to pay costs of issuance of the Bonds, including specifically those costs of issuance set forth in Exhibit G to the City's Closing Certificate; and (d) The remaining $1,475.09 has been deposited by the Trustee into the Series 2012 Account of the Bond Fund created by the Indenture. Dated: May 20, 2014 BOKF, NA, as Tr stee By: Title: 4816-9236-2011.1 UNDERWRITER'S CERTIFICATE The undersigned officer of Stephens Inc., the Underwriter (defined below) for the $6,330,000 City of Fayetteville, Arkansas Water and Sewer System Refunding Revenue Bonds, Series 2014 (the "Bonds"), hereby makes the certifications set forth below in connection with the execution and delivery of the Bonds. All capitalized terms used but not defined herein shall have the meanings ascribed to them in the Tax Regulatory Agreement to which this certificate is attached as an exhibit. (1) Stephens Inc. has served as underwriter (the "Underwriter") and has been involved in the structuring and marketing of the Bonds, including particularly, the establishment of the issue size, the computation of Yield and weighted average maturity, and other factors relating to compliance with Section 148 of the Internal Revenue Code of 1986, as amended (the "Code"), and the regulations promulgated thereunder. (2) Based upon our records and other information available to us which we have no reason to believe is not correct: (a) All of the Bonds have been the subject of a bona fide initial offering to the public (excluding of bond houses, brokers or similar persons or organizations acting in the capacity of underwriters or wholesalers) at the public offering prices or yields indicated on the cover of the Issuer's Official Statement dated May 6, 2014 (the "Official Statement"); (b) At the time the Underwriter agreed to purchase the Bonds, based upon the prevailing market conditions, the Underwriter had no reason to believe that any of the Bonds would be initially sold to the public (excluding of bond houses, brokers or similar persons or organizations acting in the capacity of underwriters or wholesalers) at greater prices, or yields less, than those indicated on the cover of the Official Statement; and (c) As of the date of the Bond Purchase Agreement entered into by and between the Issuer and the Underwriter with respect to the Bonds, the first prices at which the Underwriter reasonably expected to sell 10% of each maturity of the Bonds to the public (excluding of bond houses, brokers or similar persons or organizations acting in the capacity of underwriters or wholesalers) were the respective prices shown on the cover of the Official Statement, or in the case of obligations sold on a yield basis, at the respective yields shown on the cover of the Official Statement. (3) The Yield on the Bonds is 1.2891525%. For purposes of calculating the Yield on the Bonds, the Bonds sold at substantial premiums have been treated as called on their earliest call date resulting in the lowest Yield. (4) The establishment of the Debt Service Reserve Fund is reasonably required to obtain the issuance of the Bonds at an economic interest rate for the Issuer, 4834-5344-5403.1 and is, in the judgment of the undersigned, established at a funding level comparable to that found for obligations similar to the Bonds issued within the past year. (5) To the best knowledge of the undersigned, the representations of the Issuer contained in the Tax Regulatory Agreement are true and correct. The undersigned understands that this certificate shall form a part of the basis for the opinion, dated the date hereof, of Kutak Rock LLP, to the effect that interest with respect to the Bonds is excluded from the gross income of the recipient 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: May 20, 2014 STEPHENS INC. By: Title: 5kT; 4834-5344-5403.1 ESCROW TRUSTEE'S CERTIFICATE BOKF, NA, Tulsa, Oklahoma, as escrow trustee for $8,210,000 aggregate outstanding principal amount of City of Fayetteville, Arkansas Water and Sewer System Revenue Bonds, Series 2009 (the "Series 2009 Bonds"), hereby certifies that: 1. Pursuant to the provisions of an Escrow Deposit Agreement dated May 20, 2014 (the "Escrow Agreement"), by and between the City of Fayetteville, Arkansas (the "City") and BOKF, NA, as escrow trustee (the "Escrow Trustee"), arrangements have been made for the deposit of moneys with the Escrow Trustee sufficient in amount to refund the Series 2009 Bonds as provided in the Escrow Agreement. 2. Each person who, on behalf of the Escrow Trustee, executed the Escrow Agreement is now duly elected, appointed or authorized, qualified and acting as an officer or authorized signatory of the Escrow Trustee and was duly authorized to perform such acts at the respective times of such acts, and the signatures of such persons appearing on such document are their genuine signatures. 3. The following are names, titles and specimen signatures of each of the above- mentioned officers of the Escrow Trustee: Name Office Cynthia Wilkinson Senior Vice President and Trust Officer Si ng ature 4. The Escrow Trustee is a national banking association duly organized, validly existing and in good standing under the laws of the United States of America. The Escrow Trustee has all requisite power and authority to carry out its obligations as Escrow Trustee under the Escrow Agreement. IN WITNESS WHEREOF, BOKF, NA, has caused this certificate to be executed in its corporate name by an officer thereunto duly authorized. Dated: May 20, 2014. BOKF, NA Tulsa, Oklahoma By: L�A Vii► t Title: es, ... 4843-9329-7179.1 TRUSTEE'S CERTIFICATE BOKF, NA, Tulsa, Oklahoma (formerly Bank of Oklahoma, N.A.), as trustee for $6,330,000 City of Fayetteville, Arkansas Water and Sewer System Refunding Revenue Bonds, Series 2014 (the "Bonds"), hereby certifies that: 1. Pursuant to the provisions of a Trust Indenture dated as of May 1, 2002, as amended and supplemented by a First Supplemental Trust Indenture dated as of May 1, 2004, by a Second Supplemental Trust Indenture dated as of June 1, 2009, by a Third Supplemental Trust Indenture dated as of May 15, 2012, and by a Fourth Supplemental Trust Indenture dated as of May 15, 2014 (as amended and supplemented, the "Indenture") by and between the City of Fayetteville, Arkansas (the "City") and BOKF, NA, arrangements have been made for BOKF, NA 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 Indenture and directions from the City, Cynthia Wilkinson, Senior Vice President and Trust Officer, has duly authenticated the initial Bonds in the aggregate principal amount of $6,330,000, being in the form of seven typewritten registered bonds, numbered R14-1 through R14-7, inclusive. 3. Each person who, on behalf of the Trustee, authenticated the initial Bonds or executed the Fourth Supplemental Trust Indenture, the Tax Regulatory Agreement dated May 20, 2014, or the Continuing Disclosure Agreement dated May 20, 2014, 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 Cynthia Wilkinson Senior Vice President and Trust Officer Signature 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 Indenture. 4838-3951-7979.1 IN WITNESS WHEREOF, BANK OF OKLAHOMA, NA, has caused this certificate to be executed in its corporate name by an officer thereunto duly authorized. Dated: May 20, 2014. BOKF,NA Tulsa, Oklahoma By: - t L 74fe� Name: -re ✓ 1 . V4. 4--r- '1cus-r aP' Qp! " 2 4838-3951-7979.1 BOKF, NATIONAL ASSOCIATION SECRETARY'S CERTIFICATE October 19, 2012 The undersigned hereby certifies as follows: 1. That I am the duly elected Secretary of BOKF, NA, a national banking association. 2. That the following is a full, true, and correct copy of a Resolution unanimously adopted at a meeting of the Board of Directors of BOKF, NA on January 25, 2011, and it is still in full force and effect and has not been rescinded or modified: RESOLVED, that the senior fiduciary officer of BOKF, NA shall be responsible for the day-to-day executive management of BOKF, NA. Trust Officers appointed from time to time by the Board of Directors and appointed Trust Committees shall have the authority to execute, on behalf of BOKF, NA contracts, documents, or papers pertaining to the perfonnance of the fiduciary powers of BOKF, NA and, if necessary; to cause the seal of the organization to be affixed thereto; and the senior fiduciary officer of BOKF, NA shall designate those Trust Officers and staff members who are authorized and empowered, having established the limits of such authority, to purchase or otherwise acquire, sell, assign, transfer and deliver all shares of stocks, bonds, debentures, notes, real estate, evidence of indebtedness, deeds, conveyances, contracts, including oil and gas interests of all kinds and of contracts for the development thereof, and to. execute mortgage, and releases of mortgage, on any and all property or securities now or hereafter standing in the name of the organization in anv fiduciary capacity, and to make, execute, and deliver, any and all written instruments necessary or proper to effectuate the authority here delegated. FURTHER RESOLVED, All other officers and agents designated by the Board of Directors and assigned to the Wealth Management Division shall, under the supervision of the senior fiduciary officer, perform any duties as may be required of such last named officer or agent, and may exercise any of the powers and authorities by this Resolution vested in him/her. DATED this I90' day of October, 2012. BOKF, NATIONAL ASSOCIATION �,��, 0, x,+��00•r, Bv: zxee� SEAL t Frederic Dori}'art, Secretary z. i6O' `gyp � ,��B�i;4� ASS ©G\ e°°� State of Oklahoma County of Tulsa This Secretary's Certificate was acknowledged before me on this 19`h day of October, 2012 by Frederic Dorwart, Secretary of BOKF, NA, on behalf of BOKF, NA. [SEAL] AC7 CROFT Notary Public Gomft onfiI2003327 ExpWl: AvN 05, 2016 My commission expires: My commission number: 2 C; 1 �- BOKF, NATIONAL ASSOCIATION CERTIFICATION AS OF APRIL 5, 2013 WHEREAS, there has been no change in the Resolution dated January 25, 2011 and certified by the duly elected Secretary of BOKF, National Association on October 19, 2012; and WHEREAS, it remains the responsibility of the senior fiduciary officer of BOKF, NA to designate those officers who are authorized and empowered, having established the limits of such authority, to purchase or otherwise acquire, sell, assign, transfer, and deliver all shares of stocks, bonds, debentures, notes, real estate, evidence of indebtedness, deeds, conveyances, contracts, including oil and gas interest of all kinds, and contracts for the development thereof, and to execute mortgage, and release of mortgage, on any and all property or services now or hereafter standing in the name of the organization in any fiduciary capacity, and to make, execute, and deliver, any and all written instruments necessary or proper to effectuate the authority delegated; and, IN WITNESS WHEREOF, the undersigned as the senior fiduciary officer of BOKF, National Association hereby attests that the Board Resolution dated January 25, 2011 and the Secretary's Certificate dated October 19, 2012 remain in full force and effect, and the attached list of designated and authorized officers are empowered to act on behalf of BOKF, National Association. Barry C. Rooker Senior Fiduciary Officer BOKF, National Association BOKF, NA Legend: EVP = Executive Vice President SVP = Senior Vice President VP = Vice President AVP = Assistant Vice President CIO = Chief Investment Officer STO = Senior Trust Officer TO = Trust Officer Trust Ooerations, WEALTH MANAGEMENT DIVISION AUTHORIZED SIGNATURES AND INITIALS Sorted by: (1) Location; (2) Department; (3) Name Division Manager 600809107 103503051 Dept. LOCATION 600024642 207923401 Trust Bondholder 700002411 Mgr's (AR, NM, OK, Trust Funds EB Pension Voucher Account Investor Approval NAME TITLE SIGNATURE INITIALS DEPARTMENT TX, CO & UT)) Fund Sweep (Initials) CORPORATE TRUST Sr. Vice (Brent Varzaly President �V�% Corporate Trust KS -Kansas City Sr. Vice. 1(G�``f ,� Mark McCoy President �, Corporate Trust OK-OKC Vice 1 Rachel Redd -Singleton President �' 1i ? . ,+ w ,. r ` f es_ X ' Fr—ourate Trust OK-OKC Vice ��-r',r/`�%�', �Lf_ �� Barbara Bailey President .' Corporate Trust OK-OKC Vice f Brenda Batchelor President �/ j� Corporate Trust OK-OKC Sr. Vice Marrien Neilson President Corporate Trust OK -Tulsa ` Sr. Vice r` CC �i 1Cvndi Wilkinson President i, (, ��._ e_ v Corporate Trust OK -Tulsa Vice ' 1 Mary Campbell Preside Corporate Trus: OK -Tulsa I ' i Vice .-...-..•— , Juov Fosier P siden: Corporate Trust OK -Tulsa BOKF, NA Legend: EVP = Executive Vice i President SVP s Savior Vice President VP = Vice President i AVP = Assistant Vice Presidenf I CIO = Chief Investment Officer STO = Senior Trust Officer TO = Trust Officer TOO = Trsj opeption WEALTH MANAGEMENT DIVISION AUTHORIZED SIGNATURES AND INITIALS { Sorted by: (1) Location; (2) Department; (3) Name Division Manager t 600803107 103503455 Dep;. LOCATION 600024642 207823401 Trust Bondholder 700002411 Mars (AR, Nlvt. OK, Trust Funds ES Pension Voucher Account Investor Approval NAME TITLE SIGNATURE INITIALS DEPARTMENT TX, CO & UT) IFund Sweep (Initials) i Assistant Vice � Christina Hilton President `. 1 Corporate Trust OK -Tulsa Trust Jimmie McCullough Officer Corporate Trust OK -Tulsa �( Trust 1Terri, Pulley Officer Corporate Trust OK -Tulsa Sr. Vice �/ � NM t/ t _rust Albuquerque vonaid Fennema President J. Corporate r Vice ! �.,. ^. /( ` li NM Helene Cobos Chenier President L/ J `1(..i! . Corporate Trust Albuquerque l Trust NM- Susen Ellis Officer orporate Trust Albuquerque E Sr. Vice Ken Dotson President Corporate Trust KS -Kansas City Assistant Vice Delores Woodard President Corporate Trust KS -Kansas City i Assistant ki Vice �i� eresa Dolsor, Presiden=, �`� } J� Corporate Trust KS -Kansas City I( BOKF, NA Legend: EVP a Executive Vice President SVP - Senior Vice President VP -Vice President AVP a Assistant Vice President CIO - Chief Investment Officer STO s Senior Trust Officer TO -Trust Officer ' s WEALTH MANAGEMENT DIVISION AUTHORIZED SIGNATURES AND INITIALS Sorted by: (1) Location; (2) Department; (3) Name ger 600809107 7Bondholder Dept. LOCATION 600024642 207923401 Trust 700002411 Mgr's (AR, NM, OK, Trust Funds EB Pension VoucherInvestor Approval NAME TITLE SIGNATURE INITIALS DEPARTMENT TX, CO & UT) Fund Sweep (Initials) Vice Jose Gaytan President Corporate Trust TX -Austin Trust Anne -Marie Hansen Officer Corporate Trust TX -Austin Vice Kathy McQulston PresidercLbfpofate Trust TX -Dallas Sr. Vice - Pam Black President Corporate Trust TX- FT, Worth Sr. Vice Pat Aston President Corporate Trust TX - FT. Worth Assistant Vice n Maria Barrera President • - Corporate Trust TX - Houston Sr. Vice Riley Salyer President 4_1 Corporate Trust TX- Houston Assistant Vice�2 / Andy Hodges President �-'- Corporate Trust TX- Houston Vice Ca Chad W. Shirk President Corporate Trust NE- Lincoln Sr. Vice Brenda Black jPresiden Corporate Trust I AZ- Phoenix BOKF, NA Legend: EVP = Executive Vice President SVP = Senior Vice President VP = Vice President AVP = Assistant Vice President CIO = Chief Investment Officer STO = Senior Trust Officer TO =Trust Officer TOO - Trust Operation -q WEALTH MANAGEMENT DIVISION AUTHORIZED SIGNATURES AND INITIALS Sorted by: (1) Location; (2) Department; (3) Name 1 Sion Man a er 600809107 103503051 Dept. LOCATION 600024642 207923401 Trust Bondholder 700002411 Mgr's (AR, NM, OK, Trust Funds EB Pension Voucher Account Investor Approval NAME TITLE SIGNATURE INITIALS DEPARTMENT TX, CO & UT) Fund Sweep (Initials) Vice �Y �)'�f Kenneth Hoffman President e� l 9 �--. Corporate Trust AZ- Phoenix Comptroller of the Currency Administrator of National Banks Washington, DC 20219 CERTIFICATE OF CORPORATE EXISTENCE AND FIDUCIARY POWERS 1, John Walsh; Acting Comptroller of the Currency, do hereby certify that: 1. The Comptroller of the Currency, pursuant to Revised Statutes 324, et seq., as amended, 12 U.S.C. 1, et seq., as amended, has possession, custody and control of all records pertaining to the chartering; regulation and supervision of all National Banking Associations. 2. "Bokf, National Association," Tulsa, Oklahoma, (Charter No. 13679), is a National Banking Association formed under the laws of the United States and is authorized thereunder to transact the business of banking and exercise Fiduciary Powers on the date of this Certificate. IN TESTIMONY WHERE OF, I have hereunto subscribed my name and caused my seal of office to be affixed to these presents at the Treasury Depai`iment, in the City of Washington and District of Columbia, this March 2, 2011. ry""�Wj"_ Acting Comptroller of the Currency Comptroller of the Currency Administrator of National Banks Southern District Licensing 500 North Akard, Suite 1600 Dallas, Texas 75201-3323 December 15, 2010 Tamara Wagman Frederic Dorwart Lawyers Old City Hall Tulsa, Oklahoma 74103-5010 Re: Reorganization of Bank of Oklahoma, NA, Tulsa, Oklahoma; (CAIS #2010 -SO -02-0021) Dear Ms. Wagman: This letter is the official certification of the Comptroller of the Currency (OCC) to merge Bank of Albuquerque, National Association, Albuquerque, New Mexico; Bank of Arizona, National Association, Phoenix, Arizona; Bank of Arkansas, National Association, Fayetteville, Arkansas; Bank of Kansas City, National Association, Overland Park, Kansas; Bank of Texas, National Association, Dallas, Texas and Colorado State Bank and Trust, National Association, Denver, Colorado with and into Bank of Oklahoma, National Association, Tulsa, Oklahoma effective as of January 1, 2011. The resulting bank title is BOKF, National Association, charter number 13679. This is also the official authorization given to BOKF, National Association to operate the branches of the target institutions and the main office of the target institutions as branches. A listing of each newly authorized branch and its assigned OCC branch number is attached. Branches of a national bank target are not listed since they are automatically carried over to the resulting bank and retain their current OCC branch numbers. If the combination does not occur as represented in your letter of December 8, 2010, this certification must be returned to the OCC. Sincerely, renda E. McNeese NBElSenior Licensing Analyst Enclosure cc: Stephen Howell, EIC Branch Listing Branch Number Branch Name 149363A Bank of Albuquerque, NA 149364A Bank of Arizona, NA 149365A Bank of Arkansas, NA 149366A Bank of Kansas City, NA 149367A Bank of Texas, NA 149368A Colorado State Bank and Trust, NA Branch Location 201 Third Street, N.W., Albuquerque, NM 5050 N. 44" Street, Phoenix, AZ 3500 N. College, Fayetteville, AR 7500 College Blvd., Overland Park, KS 7600 W. NW Highway, Dallas, TX 1600 Broadway, Denver, CO ,-/N': V MINU0 7E-_ - CEPPT- 01 D I R -I E C 7 0 0, T =U5T C 0 M11 M: 1 T T EE purs,r2rit to the authority vested in t h e Directors' -rust Committp_e under the resolution of the Board of Directors of the B---,-ik of Oklahoma dated April 8, 1.1,181 the m2na-ci2r of the Trust Division is herel-y directed to establish an Interna' lrus� Commit ee- The manager of the Trust Division is desIgn2te-J as I.-hairr-,i_:;n of the Internal Trust Committee and shall appoint, with, the approval of the Chief Executive Officer of the bank, at least six trust of,ficers but not mcre'than ten to serve as committee members. He shall also des*onate two additional trust rust officers icers to serve as alternates, anyone of whom is authorized to serve 'r, the place of any reciul2r member ky.*nrc is _,noble to az-end a com_' Tine XFCUt'Va Offirers of ba,i�,, :*tee meeTlfnal . iters s of' t �s sh:� a b e mi,, e m o m i ;, e e A talo (D such co ni m; --'e e shad o n s t I T U a q '_' o I- J m ro r the 71ransacion of business- - The Enter^2[ Trust Committee shat have the follw, in_g duties, powers and responsibilities .to be perforr.)ed within policies ;Bnd Quidelines which may be established from time to t.:me by the Directors' 7rust Committee: i. 14o establish DcliclEs for the conduct of fiduciary responsibilities and obligations of the Mrust Division; 2. To review the Administrative practices in tree Trust Division to confirm that accounts are beina handled in accordance with division policies; . 3. To'-cord7ri-*and review the marketing plans of the st Division, To rev':�, the Secur;zy Working List "sed y the I- L - 1- 0 Investment Officers or,, a periodic basis and receive r -e r- o 'n fn e t,; o r s for chances therein from time to Lime,, S. To approve all i Iduciary appointments cccepted o: ree-.t-d Cy th=enicr i!"US'L Officers; 6. To re-_=ive rec�orts on the `LermIn:_,.6cn of ell trust estates and other fiduciary c"ccounts Gd;-,)':nis"ef-Ed Jy the Trust Division; Trust I 7. To -=view tha schedule cf fees for trust services; 8, To keep minutes of all meeth-,gs of the i.nZernai Trust Comm I , t. a and to r-2vlew the rninutes of the Trust Review Committee and Invest -men', Policy Cornirnitt=ei 9. T o perform such other duties as the Directors' Trust Committee, the Chief Executive Office: of the Bank or the Mrust Division: Manager may; from time to time, assign to the internal Trust Committee. The manager of the T rus% Division Is furter directed to establish the Trus-, Review Comriittee. The manager of the Trust Investment Department is designated as chairman. The Committee shall consist of might to ta^ members =ppointed by the manager of the Trust Division with the approval of the Chief Executive Officer of the Bank. Two alternate members shall also be apoointed by the division manager. The Executive Ofricers of the fan:K shall also be meribers of this committee. 7,,aJorl ty of such colli; ,ltiEe si-al" cor. sti, tote L.Grurn iOr the transaction of business. The Directors' Trust Committee hereby delegates to the Trust Review Committee the following duties, powers and resoonsibil ities. 1. To review each -fiduciary account accepted by the Sank within 60 days a`ter receipt of tine assets or as soon thereafter as practicable; 2. . To review each fiduciary account and the assets held by such trust at least once every 12 month period in accordance with the requirements of Regulation 9; 3, To review the minutes of the Trust Policy Committee making a record of such action in the minutes and reviewing the transactions of the Investment D_pP t: er,t to see that they are in conformity with cur; est policy and that exceptions thereto are documented by the investment and account officers; 4. To keep minutes of each meeting showing which accounts have been reviewed, approved, or such other actions which may have be -:!n Laken by the committee in connection with the review of the Particular accounts; S. To perform sucn other duties as mzv be assigned to it from time to ti^e by the Dirac ors' Trust Com: tittee, the Chielf Executive Officer 01, ,he Ban'" or tale Trust Division i'Aanager. The manager of the Trust Division is hereby directed to establish the Investment Policy Committee. This committee shall consist of eight members appointed by the manager of the Trust Division with the approvel of (--hiei EXecuilvc Oil's -_r --f tha Bank. The manager of the Trust Division shall serve as Chairman. The EXecutive Officers of the Bank shat also be members of this col- mittee. Two alternate members are to be appointed by the Division frianager. A major!L.y of such committee sha'1 constitute a quorum `cr the transact'lon of b+.;siness. This Committee shall have the following duties, priori ties and responsibilities: To set lnves:ment Policy for the Trust Divis`on under a monthly review Drocram which considers the current eco.-ofmil7 env;rcn^ en4, C. To col'isider chan-es, deietio -!s and add i-lo^s to tele working list of the Invastment Department; 3. To review the Common Trust Fund accounts on each valuation date; 4. ' T o perform such other duties as may be assigned to it from time to time by. the Directors' Trust Committee Chief Executive Officer of the Sank or by the i rust Division N12nager, The officers assignEd to the Trust Division by the Board of Directors and the manag;ment of the Bank shall have the 10110wiing powers and duties, in addition to those herein above setforth : 1. The Manager of the Tru -t Division shall be responsible for the Executive Management of the Trust Divisicn, and he and the other trust officers un ri i his supervision shall have the authority to execute. on behalf of the Bank, contracts, documents or' papers pertaining to the performance by, the Trust Division of the fiduciary powers of the bank, and, if necessary, to cause the seal of the bank to be affixed thereto, and he, and the other officers assigned to the Trust Division under his supervision, are hereby authorized and empowered where permitted by the governing instrument of an account to purchase or other,o,ise zcquire, seil, assion, transfer and deliver all shares of stocks, bonds,u debentures, notes, re -:-1 estate, evidence of 1, ,edness, deeds, conveyances, contracts, including oil and gas interests of all kinds and of contracts for she development thereof, and to execute mortgages, and rel=ases of mortgagRs on any and all property or securities now or hereafter standing in the na;ne or the bank in any fiduciary capacity, and to make, execute and deliver, any and al' written instrui; encs nec2ssary or prD;�Fr 6. The Division Man&r,2" and the other Trust Officer and=r his supervision shall have the authority to authorize admissions and withdrawa's to the common trust funds dministei ed by this bank in accordance with the terms of the Common Trust Fund Agreements and the rrovisiors of the Comptroller of the Currencys °eculation A. The rna ager of the "rust Div;sicn shall k e^ the records of the rust C`Vsior sapar-2,e and distirc*, r"rc'rr c he- boos ---rd records of the bank, and they shall contain full information relative to each account, all in accordance with the Reguiatior 5 of the Comptroller of Currp-ncy governing fiduciary poo-ers of national banks, and the laws of she State of Oklahoma. This Committee of the Board of Directors shail cause external audits to be made at regular intervals of the Trust Division, or in lieu thereof adopt an adequate continuous audit system, as the committee may elect, all in compliance ,with the regulations of the Comptroller of Currency governing fiduciary powErs of national banks. The Manager of the Trust Division is charged with the responsibility of keeping Trust Securities and Investments held in Trust by the Trust Division separate and distinct from the securities owned by the bank and, in addition thereto, that the said Trust Securities may be kept in any manner allowed by the regulation of the Comptrol'er of Currency, as may be amended and issued from time to time hereafter. Whenever the said securities are deposited in the security vault of the bank, or in any depository and are withdrawn therefrom, such deposits or withdrawals sh,�- l be made only upon the written request of any officer assigr.'rd to 'the Trust Division, or upon the written request of other trust personnel who may be appointed, from time to time; by the manager of the Trust Divis'en. Funds held by the Trust Division in a fiduciary capacity :,waiting investment or distribution shall not be held univestYc�_ or uFclstrin�� for any longer th:n is reasonable. investmcnts of trust funds shall be made only in compliance %4rith the regulations of the Comptroller of the Currency, in accordance With the terms and provisions or the instruncnt creating the fiduciary relationship, and the statuses of the state of OK'al- oma, The investment of fiduciary funds in stock or obligations cf the bank, the save or trars'e; of property held Ly the bang, as riduciary to any officer, direc,or, employee or relat,ve thereof. :ny transa=tions b i'1` v'=": t 5 trust accounts, the oan of i',)r:-,ey fco,-1 if')e bank to ,ny accoo it, tr:G 102n of mo iey it m OO'llie iid: ciiairy aCCCli,-1C t0 2nothEr, is prchlbilted except in, those ins'LanceS sPediically authorized by the termS and provisions OT of the CoMp,;"Ol;er OY the CurrEncy, n2 laws OT C :e -L-.-E vi Oul-=L-o na, af'Cj the Governing ;rust !n -ti Uiil.o.n'. 0 Liu fler Of the, L i 'Ital Ai. q j "LIM W I 1E I t E'A S, 13 A N K (D F 0 K L,A 1-10 MIA , N. A 'located in 11'ulsa, State of Oklahoma, being a Natioriall A s4 .)c iaLion, organized under the statutes of the United States, b a s D -n ali bi g application fo, authority to act as fiduciary AND WNIERE-AS, .4)plicablv provisions of the statutes of the United States authorize the grant of such alithol-ity; NOW THEREFORE) I hereby certify that the neccssary approval has been given and that the said association is ;mLikorized to -act in all fiduciary capacities permitLed IN TEISTIMONY WHEREOF, Witness My signature and seal of Office this firs' (lay or July, 1975 J a rn,- s r- Sir) idi Comptrollcr of the Currency 11 ;t> -ia--:T�:-T 'A KESGLU-10,"� ESST'�.:�LISHI:]S R U S S 10 N A LD' D C T QRS' MU S T I T t: Under the authority of Section I . 7 E , Statute 66-0 ( 12 U.S.C, 9' 2?); p . 5 . 52,'O a� amended (+2 U.S.C. 48l) and the Comptroller of th-2 Currency's Pa ulEtion 9, "Fiduciary Powers of ;National Bank and Colk--c-.1've In"—SIM.Ent Funds, the Soawd of Directors of the of 0"',12,homa, by 'nis rez-ccljul"), .'ere --)y 2ssic.ns the administraticn of Che Trust Division to the Directors' Trust ccn,"ers on, delegates to, 2nd cssigns to thils 3'1 of 'I(S 2nd full resporsibility for the -:-Cper-. ENel-CiSP- Of 21. the -)o 'hp dur'es' Obl' I , 11 ig=tions, and ra5.pci of - B;n� or 0! FiElatlnic) ',-Ii- :_he of lt,:z frus"- Oo in c --T, c1lancp -,\-;,ih 2, v -ie righ M ton sucn ---c i-cluding tl , - t to d�deG@�- 5, S S' ;- 0 its ;'-J�'-(�ri'y airic to other cc*7i,,nliZ:'---(s'jl 'it May, in �'s Cscre:lorl 1, 'Y es'7')';,-h, and/or "o --uch oll'icei4c) cs it m3v d2sicri8ta- ,.. D. 7975. CiC ._ �.. XN1B_T C' -. 4 d } r =� —,—a (. f., ', e July L, 15i3. a -1 `p r."•J ~ yrs-•Cti--.�--'� r•'"-•�C'1 rf_.oY+':X5•�..,�.'`'�.'�" ..�C"C "r^SC:i�3 wr^:�C ._ _s,r,•• J, .��.. __ ,.. D. 7975. CiC ._ �.. "I iljil�l u" T�1 L .�•,:• �j tit ,a. 11. i{ alMxl`1�711I�fL�x'F�Lsa_ls:J[� W!.'t'i rlltiG 147 ra_i) t. (4(.7� �Jl"t'li1`�, lttlr.ljltr'fc:�Nrt; •Jtt�f��J� !tett lc'trlt j,�n;J,ll:rt�r� ;!� �t f%zF: (.�i�'r�i�trl:FtrlIF'.rr r�h (�"?er ft,.�rtr'r•r•nrrf, r � ra irli•/1rr•!1// !Jl`r�r/ ��Ctf �°rr/crrJtiu fr�/,�ctG re�rrt. era �/rrJ'/�rtt�c �tc�r:arr, f t'sJ lrt,•r;lt �trt�,'cttr. r: �! ra t' r (�1 Crisrtt�ct� trt i(li t /frie r: r 0h'1-"tC4U6k c1t itccrJrr!{rr��`ecc rr.cerlc �lc<: 3��cftr�ri as �u rf! t/rr' /it Cd/1 t""j, /6 lrItill, Ol't'rr a r/I 1 C r�� /1f8 ')t ft 7f/f: OL l/!Ul f/.i7Uf[/fl(fJ/L f{+ a-3 d c'} JIMIK Q3' 01cutli ,a'A J If. 1 c it lc(la�C, c� t1 lite � eOMIxte Matcrtcrr�e r/,t�c11,c z�arrett riJJercc�°rerrJ,r 1�1t�i t f to rr�ejrrr=;;r•rl r��r•aic-t:e 3ar1;,< 11 1;715• 11 # t` llil� lj� viol t lro(, tlttffJIau V1ty Iona It(. e a I IcL lr,trf. <f .Junr, _J}.. G f CONTINUING DISCLOSURE AGREEMENT This Continuing Disclosure Agreement (this "Disclosure Agreement") is executed and delivered by the City of Fayetteville, Arkansas (the "City"), and BOKF, NA dba Bank of Oklahoma, Tulsa, Oklahoma, a national banking association, as dissemination agent (the "Dissemination Agent"), in connection with the issuance of $6,330,000 City of Fayetteville, Arkansas Water and Sewer System Refunding Revenue Bonds, Series 2014 (the "Bonds"). The Bonds are being issued pursuant to a Trust Indenture dated as of May 1, 2002, as previously supplemented and amended and as further supplemented and amended by a Fourth Supplemental Trust Indenture dated as of May 15, 2014 (as supplemented and amended, the "Indenture"), by and between the City and BOKF, NA dba Bank of Oklahoma, Tulsa, Oklahoma, as trustee (the "Trustee"). In connection with the issuance and delivery of the Bonds, the City and the Dissemination Agent covenant and agree as follows: Section 1. Purpose of the Disclosure Agreement. This Disclosure Agreement is being executed and delivered by the City and the Dissemination Agent for the benefit of the Beneficial Owners of the Bonds and in order to assist the Participating Underwriter in complying with SEC Rule 15c2 -12(b)(5) (the "Rule"). The City is an "obligated person" within the meaning of the Rule. The Dissemination Agent shall have no liability with respect to the content of any disclosure provided hereunder, and shall be liable only to the City for sending notices hereunder. As required by the Rule, this Disclosure Agreement is enforceable by Beneficial Owners of the Bonds pursuant to Section 7 hereof. Section 2. Definitions. In addition to the definitions set forth in the Indenture, which apply to any capitalized term used in this Disclosure Agreement, the following capitalized terms shall have the following meanings: "Annual Financial Information " means the financial information and operating data described in Exhibit I. "Annual Financial Information Disclosure " means the dissemination of disclosure concerning Annual Financial Information and the dissemination of the Audited Financial Statements as set forth in Section 4. "Audited Financial Statements" means the audited consolidated financial statements of the City, prepared pursuant to the standards and as described in Exhibit I. "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 any Bonds for federal income tax purposes. "Commission" means the U.S. Securities and Exchange Commission. 4853-1289-1416.3 "Dissemination Agent" shall mean BOKF, NA, Tulsa, Oklahoma, acting in its capacity as a dissemination agent hereunder, or any successor dissemination agent designated in writing by the City and which has filed with the Trustee a written acceptance of such designation. "EMMA" means the Electronic Municipal Market Access facility for municipal securities disclosure of the MSRB. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Material Event" means the occurrence of any of the events with respect to the Bonds set forth in Exhibit II. "Material Events Disclosure " means dissemination of a notice of a Material Event as set forth in Section 5. "MSRB" shall mean the Municipal Securities Rulemaking Board established in accordance with the provisions of Section 1513(b)(1) of the 1934 Act. "Participating Underwriter" means each broker, dealer or municipal securities dealer acting as an underwriter in any primary offering of the Bonds. "Prescribed Form" means, with regard to the filing of Annual Financial Information, Audited Financial Statements and notices of Material Events with the MSRB at www.emma.msrb.org (or such other address or addresses as the MSRB may from time to time specify), such electronic format, accompanied by such identifying information, as shall have been prescribed by the MSRB and which shall be in effect on the date of filing of such information. "Rule" shall mean Rule 15c2 -12(b)(5) adopted by the Securities and Exchange Commission ("SEC") under the Exchange Act, as the same may be amended from time to time. "State " means the State of Arkansas. "Undertaking" means the obligations of the City pursuant to Sections 4 and 5. Section 3. CUSIP Number/Final Official Statement. The CUSIP Number of the final maturity of the Bonds is 312693 HB3. The final Official Statement relating to the Bonds is dated May 6, 2014 (the "Final Official Statement"). Section 4. Annual Financial Information Disclosure. Subject to Section 9 of this Disclosure Agreement, the City hereby covenants that it will disseminate, or will cause the Dissemination Agent to disseminate, the Annual Financial Information and the Audited Financial Statements (in the form and by the dates set forth below and in Exhibit I) by delivering such Annual Financial Information and the Audited Financial Statements to the MSRB within 180 days of the completion of the fiscal year of the City. The City is required to deliver or cause delivery of such information in Prescribed Form and by such time so that such entities receive the information by the dates specified. 2 4853-1289-1416.3 If any part of the Annual Financial Information can no longer be generated because the operations to which it is related have been materially changed or discontinued, the City will disseminate or cause dissemination of a statement to such effect as part of its Annual Financial Information for the year in which such event first occurs. If any amendment is made to this Disclosure Agreement, the Annual Financial Information for the year in which such amendment is made (or in any notice or supplement provided to the MSRB) shall contain a narrative description of the reasons for such amendment and its impact on the type of information being provided. Section 5. Material Events Disclosure. Subject to Section 9 of this Disclosure Agreement, the City hereby covenants that it will disseminate or cause dissemination in a timely manner, not in excess of ten (10) business days after the occurrence of the event, Material Events Disclosure to the MSRB in Prescribed Form. Notwithstanding the foregoing, notice of optional or unscheduled redemption of any Bonds or defeasance of any Bonds need not be given under this Disclosure Agreement any earlier than the notice (if any) of such redemption or defeasance is given to the owners of the Bonds pursuant to the Indenture. The City is required to deliver or cause delivery of such Material Events Disclosure in the same manner as provided by Section 4 of this Disclosure Agreement. Section 6. Duty to Update EMMA/MSRB. The Dissemination Agent shall determine, in the manner it deems appropriate, whether there has occurred a change in the MSRB's e-mail address or filing procedures and requirements under EMMA each time it is required to file information with the MSRB. Section 7. Consequences of Failure of the City to Provide Information. The City shall give notice in a timely manner or shall cause such notice to be given by the Dissemination Agent, not in excess of ten (10) business days after the occurrence of the event, to the MSRB in Prescribed Form of any failure to provide Annual Financial Information Disclosure when the same is due hereunder. In the event of a failure of the City to comply with any provision of this Disclosure Agreement, the Trustee may (and at the request of a Participating Underwriter or the Beneficial Owners of at least 25% in aggregate outstanding principal amount of the Bonds, shall) or the Beneficial Owner of any Bond may seek specific performance by court order to cause the City to comply with its obligations under this Disclosure Agreement. A default under this Disclosure Agreement shall not be deemed an Event of Default under the Indenture or any other agreement, and the sole remedy under this Disclosure Agreement in the event of any failure of the City or the Dissemination Agent to comply with this Disclosure Agreement shall be an action to compel performance. Section 8. Amendments; Waiver. Notwithstanding any other provision of this Disclosure Agreement, the City and the Dissemination Agent may amend this Disclosure Agreement, and any provision of this Disclosure Agreement may be waived, if - 3 4853-1289-1416.3 (i) The amendment or waiver is made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature or status of the City or the type of business conducted; (ii) This Disclosure Agreement, as amended, or the provision, as waived, would have complied with the requirements of the Rule at the time of the primary offering, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; (iii) The amendment or waiver does not materially impair the interests of the Beneficial Owners of the Bonds, as determined either by parties unaffiliated with the City (such as the Trustee) or by an approving vote of the Beneficial Owners of the Bonds holding a majority of the aggregate principal amount of the Bonds (excluding Bonds held by or on behalf of the City or its affiliates) pursuant to the terms of the Indenture at the time of the amendment; or (iv) The amendment or waiver is otherwise permitted by the Rule. Section 9. Termination of Undertaking. The Undertaking of the City shall be terminated hereunder when the City shall no longer have any legal liability for any obligation on or relating to the repayment of the Bonds. The City shall give notice to the MSRB, or shall cause the Dissemination Agent to give notice, in a timely manner and in Prescribed Form if this Section is applicable. Section 10. Dissemination Agent. The City may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out their obligations under this Disclosure Agreement, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. A Dissemination Agent shall not be responsible in any manner for the content of any notice or report prepared by the City pursuant to this Disclosure Agreement. If at any time there is not any other designated Dissemination Agent, the Trustee shall be the Dissemination Agent for the City. Section 11. Additional Information. Nothing in this Disclosure Agreement shall be deemed to prevent the City from disseminating any other information, using the means of dissemination set forth in this Disclosure Agreement or any other means of communication, or including any other information in any Annual Financial Information Disclosure or notice of occurrence of a Material Event, in addition to that which is required by this Disclosure Agreement. If the City chooses to include any information from any document or notice of occurrence of a Material Event in addition to that which is specifically required by this Disclosure Agreement, the City shall not have any obligation under this Disclosure Agreement to update such information or include it in any future disclosure or notice of the occurrence of a Material Event. Section 12. Beneficiaries. This Disclosure Agreement has been executed in order to assist the Participating Underwriter in complying with the Rule; however, this Disclosure Agreement shall inure solely to the benefit of the City, the Dissemination Agent, if any, the 4 4853-1289-1416.3 Trustee and the Beneficial Owners of the Bonds, and shall create no rights in any other person or entity. Section 13. Recordkeeping. The City and the Dissemination Agent shall maintain records of all Annual Financial Information Disclosure and Material Events Disclosure, including the content of such disclosure, the names of the entities with whom such disclosure was filed and the date of filing such disclosure. Section 14. Past Compliance. The City represents that while certain filings required by continuing disclosure undertakings entered into by it pursuant to the Rule in connection with previous financings to which the Rule was applicable were not made on a timely basis, all such filings are currently in place and the City has implemented procedures to assure verifiable future compliance with its continuing disclosure obligations. Section 15. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent (if other than the Trustee or the Trustee in its capacity as Dissemination Agent) shall have only such duties as are specifically set forth in this Disclosure Agreement, and the City agrees to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise of performance of its powers and duties under this Disclosure Agreement, including the costs and expenses (including attorneys' fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent's gross negligence or willful misconduct. Such indemnification obligations of the City shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. Section 16. Counterparts. This Disclosure 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. 5 4853-1289-1416.3 Section 17. Governing Law. This Disclosure Agreement shall be governed by and construed in accordance with the laws of the State, provided that to the extent this Disclosure Agreement addresses matters of federal securities laws, including the Rule, this Disclosure Agreement shall be construed in accordance with such federal securities laws and official interpretations thereof. Dated: May 20, 2014 CITY OF FAYETTEVILLE, ARKANSAS r BOKF, NA, as Dissemination Agent By: GtJ Title: .SeR i a✓ 6 4853-1289-1416.3 EXHIBIT I ANNUAL FINANCIAL INFORMATION AND TIMING AND AUDITED FINANCIAL STATEMENTS "Annual Financial Information" means the following general categories of financial information and operating data with respect to the City's water and sewer system (the "System") for the prior fiscal year: (A) Changes in wholesale water rates charged by the Beaver Water District; (B) Changes in the City's water and sewer rate structure; (C) Annual System operating revenues, bad debt expense and bad debt expense percentage; (D) Costs for projected System capital improvements for the current fiscal year; (E) Usage percentages of all water users consuming more than 5% of the System's water output; (F) Average daily water use and maximum day's water use; and (G) Average daily sewage flow. All or a portion of the Annual Financial Information and the Audited Financial Statements as set forth below may be included by reference to other documents which have been submitted to the MSRB or filed with the Commission. The City shall clearly identify each such item of information included by reference. Annual Financial Information will be provided to the MSRB within 180 days after the last day of the City's fiscal year. Audited Financial Statements as described below should be filed at the same time as the Annual Financial Information. If Audited Financial Statements are not available when the Annual Financial Information is filed, unaudited financial statements shall be included, and Audited Financial Statements will be provided to the MSRB within ten (10) business days after availability to the City. Audited Financial Statements will be prepared in accordance with generally accepted accounting principles in the United States as in effect from time to time. If any change is made to the Annual Financial Information as permitted by Section 4 of the Disclosure Agreement, including for this purpose a change made to the fiscal year-end of the Wastewater System, the City will disseminate a notice to the MSRB of such change in Prescribed Form as required by such Section 4. I- 1 4853-1289-1416.3 EXHIBIT II EVENTS WITH RESPECT TO THE BONDS FOR WHICH MATERIAL EVENTS DISCLOSURE IS REQUIRED 1. Principal and interest payment delinquencies 2. Nonpayment -related defaults, if material 3. Unscheduled draws on debt service reserves reflecting financial difficulties 4. Unscheduled draws on credit enhancements reflecting financial difficulties 5. Substitution of credit or liquidity providers, or their failure to perform 6. Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the security, or other material events affecting the tax status of the security 7. Modifications to rights of security holders, if material 8. Bond calls, if material, and tender offers 9. Defeasances 10. Release, substitution or sale of property securing repayment of the securities, if material 11. Rating changes 12. Bankruptcy, insolvency, receivership or similar event of the City* 13. The consummation of a merger, consolidation or acquisition involving the City or the sale of all or substantially all of the assets of the City, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material 14. Appointment of a successor or additional trustee or the change of name of a trustee, if material * This event is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for the City in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the City, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the City. II -1 4853-1289-1416.3 KIT WILLIAMS FAYETTEVILLE CITY ATTORNEY Blake E. Pennington Assistant City Attorney Patti T. Mulford Paralegal Phone 479.575.8313 cityattorney@fayetteville-ar.gov May 20, 2014 BOKF, NA, as trustee 1 One Williams Center # 1 Tulsa, OK 74172 Stephens Inc. 3425 N Futrall Drive # 201 Fayetteville, AR 72703 Kutak Rock LLP 124 West Capitol Avenue Suite 2000 Little Rock, AR 72201 113 W. Mountain Street, Suite 302 Fayetteville, AR 72701-6083 Re: $6,330,000 City of Fayetteville, Arkansas Water and Sewer System Refunding Revenue Bonds, Series 2014 Ladies and Gentlemen: I am City Attorney for the City of Fayetteville, Arkansas (the "City") and have acted in that capacity in connection with the issuance and sale by the City of its $6,330,000 Water and Sewer System Refunding Revenue Bonds, Series 2014 (the "Bonds"), which Bonds are being sold pursuant to the terms of a Bond Purchase Agreement dated May 6, 2014 (the "Bond Purchase Agreement"), 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. 5123 adopted by the City Council on April 1, 2008, Ordinance No. 5129 adopted by the City Council on April 15, 2008, and Ordinance No. 5438 adopted by the City Council on September 20, 2011 (collectively, the "Rate Ordinances"), Ordinance No. 5665 adopted by the City Council on March 4, 2014 (the "Bond Ordinance"), the Trust Indenture dated as of May 1, 2002, as amended and supplemented by the First Supplemental Trust Indenture dated as of May 1, 2004, by the Second Supplemental Trust Indenture dated as of June 1, 2009, by the Third Supplemental Trust Indenture dated as of May 15, 2012, and by the Fourth Supplemental Trust Indenture dated as of May 15, 2014 (as amended and supplemented, the "Indenture"), by and between the City and BOKF, NA (as successor to Bank of Oklahoma, N.A.), as trustee (the "Trustee"), the Escrow Deposit Agreement dated May 20, 2014 (the "Escrow Agreement"), by and between the City and BOKF, NA, as escrow trustee (the "Escrow Trustee"), the Tax Regulatory Agreement dated May 20, 2014 (the "Tax Regulatory Agreement"), by and between the City and the Trustee, the Continuing Disclosure Agreement dated May 20, 2014 (the "Disclosure Agreement"), by and between the City and BOKF, NA, as dissemination agent (the "Dissemination Agent"), the Preliminary Official Statement dated April 25, 2014 (the "Preliminary Official Statement"), the Official Statement dated May 6, 2014 (the "Official Statement") relating to the offering of the Bonds, and a closing certificate 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 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 Bond Ordinance and the Rate Ordinances and to execute and deliver the Bonds, the Indenture, the Escrow Agreement, the Tax Regulatory Agreement, the Disclosure Agreement and the Bond Purchase Agreement. 2. The City has duly approved the Preliminary Official Statement and the Official Statement 3. The Bond Ordinance and the Rate Ordinances have been duly adopted by the City by all action necessary under the Authorizing Legislation and the laws and Constitution of the State of Arkansas, and remain in full force and effect. 4. The Indenture, the Escrow Agreement, the Tax Regulatory Agreement, the Disclosure 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. 5. The information in the Official Statement under the captions "THE CITY," "THE SYSTEM" 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. 6. 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 Bond Ordinance, the Rate Ordinances, the Indenture, the Escrow Agreement, the Tax Regulatory Agreement, the Disclosure 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 6. 7. The execution and delivery of the Indenture, the Escrow Agreement, the Tax Regulatory Agreement, the Disclosure 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. 8. Based upon the examinations which I have made as counsel to the City specified above, nothing has come to my attention which would lead me 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 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. Sincerely, - KIT WILLIAMS Fayetteville City Attorney NORTHWEST ARKANSAS OFFICE SUITE 400 234 EAST MILLSAP ROAD FAYETTEVILLE. ARKANSAS 72703-4099 479-973-4200 GORDON M. WILBOURN gordon.wilbourn@kutakrock.com (501)975-3101 City of Fayetteville, Arkansas Fayetteville, Arkansas BOKF, NA, as Trustee Tulsa, Oklahoma K U TA K ROCK LLP ATLANTA CHICAGO SUITE 2000 DENVER FAYETTEVILLEIRVINE 124 WEST CAPITOL AVENUE LITTLE ROCK, AR 72201-3706 KANSAS CITY LITTLE ROCK 501-975-3000 LOS ANGELES FACSIMILE 501-975-3001 MINNEAPOLIS OKLAHOMA CITY www.kutakrock.com OMAHA PHILADELPHIA RICHMOND SCOTTSDALE WASHINGTON WICHITA May 20, 2014 $6,330,000 City of Fayetteville, Arkansas Water and Sewer System Refunding Revenue Bonds Series 2014 Ladies and Gentlemen: We have acted as Bond Counsel in connection with the issuance by the City of Fayetteville, Arkansas (the "City") of its $6,330,000 aggregate principal amount of Water and Sewer System Refunding Revenue Bonds, Series 2014 (the "Series 2014 Bonds"), and have delivered on this date our approving opinion with respect thereto. All capitalized terms not otherwise defined herein shall have the meanings assigned thereto in such approving opinion. A portion of the proceeds of the Series 2014 Bonds will be deposited with BOKF, NA, Tulsa, Oklahoma, as escrow trustee (the "Escrow Trustee"), under an Escrow Deposit Agreement dated May 20, 2014 (the "Escrow Agreement"), between the City and the Escrow Trustee, for the purpose of defeasing the City's previously issued $8,210,000 aggregate original principal amount of Water and Sewer System Revenue Bonds, Series 2009 (the "Series 2009 Bonds"). The Series 2009 Bonds were issued by the City pursuant to a Trust Indenture dated as of May 1, 2002, as supplemented and amended by a First Supplemental Trust Indenture dated as of May 1, 2004, and by a Second Supplemental Trust Indenture dated as of June 1, 2009, each by and between the City and BOKF, NA (as successor to Bank of Oklahoma, N.A.), as trustee (as supplemented and amended, the "2009 Indenture"). This opinion is being delivered in connection with the defeasance of the Series 2009 Bonds pursuant to Section 802 of the 2009 Indenture. In connection with this opinion, we have examined (i) the Escrow Agreement, (ii) the 2009 Indenture, and (iii) the approving opinion of Kutak Rock LLP dated June 2, 2009 (the 4817-99974683.1 KUTAK ROCK LLP Defeasance Opinion May 20, 2014 Page 2 "2009 Bond Counsel Opinion"). For purposes of this opinion, we have also reviewed originals, certified or otherwise identified to our satisfaction, of (a) a certificate of the Escrow Trustee with respect to receipt of proceeds of the Series 2014 Bonds and the receipt of moneys transferred from the bond fund and debt service reserve fund for the Series 2009 Bonds, all of which moneys were deposited with the Escrow Trustee pursuant to the terms of the Escrow Agreement and (b) such other documents, opinions, certificates and other items as we have deemed relevant and necessary in rendering this opinion. It is our opinion, under existing law, that: 1. The issuance of the Series 2014 Bonds and the deposit of a portion of the proceeds thereof with the Escrow Trustee pursuant to the Escrow Agreement to defease the Series 2009 Bonds will not adversely affect the exclusion from gross income for federal income tax purposes of interest on the Series 2009 Bonds and will not cause the Series 2009 Bonds to be treated as "arbitrage bonds" within the meaning of Section 148 of the Internal Revenue Code of 1986, as amended. For the purposes of this opinion, we have assumed the correctness of the 2009 Bond Counsel Opinion and the continuing exclusion from gross income for federal income tax purposes of the interest on the Series 2009 Bonds. 2. The requirements of Section 802 of the 2009 Indenture as to the discharge of the lien thereof on the net revenues of the City's water and sewer system securing the Series 2009 Bonds have been satisfied, and the lien of the 2009 Indenture against the net revenues of the City's water and sewer system has been discharged. Very truly yours, �1 4817-9997-4683.1 NORTHWEST ARKANSAS OFFICE SUITE 400 234 EAST MILLSAP ROAD FAYETTEVILLE, ARKANSAS 72703-4099 479-973-4200 GORDON M. WILBOURN gordon.wilbourn@kutakrock.com (501)975-3101 City of Fayetteville, Arkansas Fayetteville, Arkansas K U TA K ROCK LLP ATLANTA CHICAGO SUITE 2000 DENVER 124 WEST CAPITOL AVENUE FAYETTEVILLE IRVINE LITTLE ROCK, AR 72201-3706 KANSAS CITY LITTLE ROCK 501-975-3000 LOS ANGELES FACSIMILE 501-975-3001 MINNEAPOLIS OKLAHOMA CITY www.kutakrock.com OMAHA PHILADELPHIA RICHMOND SCOTTSDALE WASHINGTON May 20, 2014 WICHITA BOKF, NA dba Bank of Oklahoma, as Trustee Tulsa, Oklahoma Stephens Inc. Fayetteville, Arkansas $6,330,000 City of Fayetteville, Arkansas Water and Sewer System Refunding Revenue Bonds Series 2014 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. In addition to the documents specifically mentioned in that opinion, we have examined the portions of the Official Statement dated May 6, 2014, with respect to the Bonds (the "Official Statement"), captioned "INTRODUCTORY STATEMENT," "THE SERIES 2014 BONDS," "SECURITY FOR THE BONDS," "SOURCES AND USES OF FUNDS," "DEFINITIONS OF CERTAIN TERMS," "SUMMARY OF THE INDENTURE," "SUMMARY OF THE CONTINUING DISCLOSURE AGREEMENT," "TAX EXEMPTION," and "APPENDIX C — Form of Opinion of Bond Counsel" (the "Relevant Captions") insofar as they relate to this opinion. In connection with this opinion, we have also examined: (a) An executed counterpart of the Trust Indenture dated as of May 1, 2002, as amended and supplemented by a First Supplemental Trust Indenture dated as of May 1, 2004, by a Second Supplemental Trust Indenture dated as of June 1, 2009, by a Third Supplemental Trust Indenture dated as of May 15, 2012, and by a Fourth Supplemental Trust Indenture dated as of May 15, 2014 (as amended and supplemented, the "Indenture"), each by and between the City and BOKF, NA dba Bank of Oklahoma (formerly Bank of Oklahoma, N.A.), as trustee (the "Trustee"); 4842-5855-5163.1 KUTAK ROCK LLP May 20, 2014 Supplemental Opinion Page 2 (b) An executed counterpart of the Continuing Disclosure Agreement dated May 20, 2014 (the "Continuing Disclosure Agreement"), by and between the City and BOKF, NA dba Bank of Oklahoma, as dissemination agent (the "Dissemination Agent"); (c) An executed counterpart of the Tax Regulatory Agreement dated May 20, 2014 (the "Tax Regulatory Agreement"), by and between the City and the Trustee; (d) An executed counterpart of the Escrow Deposit Agreement dated May 20, 2014 (the "Escrow Agreement"), by and between the City and BOKF, NA dba Bank of Oklahoma, as escrow agent (the "Escrow Agent") and (e) An executed counterpart of the Bond Purchase Agreement dated May 6, 2014 (the "Bond Purchase Agreement"), by and between the City and Stephens Inc. (the "Underwriter"). Based on our examination, we are of the opinion, as of the date hereof and under existing law, as follows: 1. The statements contained in the Official Statement under the Relevant Captions, insofar as such statements purport to summarize certain provisions of the Bonds, the Indenture and the Continuing Disclosure Agreement, or conclusions of law and legal opinions, are true, accurate and correct summaries thereof in all material respects and do not omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. 2. The Indenture has been duly authorized, executed and delivered by the City and, assuming due authorization, execution and delivery by the Trustee, the Indenture represents the valid and binding agreement of the City enforceable in accordance with its terms. 3. The Continuing Disclosure Agreement has been duly authorized, executed and delivered by the City and, assuming due authorization, execution and delivery by the Trustee, the Continuing Disclosure Agreement represents the valid and binding agreement of the City enforceable in accordance with its terms. 4. 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 represents the valid and binding agreement of the City enforceable in accordance with its terms. 5. The Escrow Agreement has been duly authorized, executed and delivered by the City and, assuming due authorization, execution and delivery by the Escrow 4842-5855-5163.1 KUTAK ROCK LLP May 20, 2014 Supplemental Opinion Page 3 Trustee, the Escrow Agreement represents the valid and binding agreement of the City enforceable in accordance with its terms. 6. 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 represents the valid and binding agreement of the City enforceable in accordance with its terms. The obligations of the parties, and the enforceability thereof, with respect to the documents and other items described above are subject, in part, to the provisions of the bankruptcy laws of the United States of America and to other applicable bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or affecting creditors' rights generally, now or hereafter in effect. Certain of the obligations, and the enforcement thereof, are also subject to general equity principles, which may limit the specific enforcement of certain remedies but which do not affect the validity of such item. This opinion is being rendered to you solely for your benefit and may not be relied upon in any manner, nor used, by any other person. Very truly yours, Ku�Pntw° 4842-5855-5163.1 NORTHWEST ARKANSAS OFFICE SUITE 400 234 EAST MILLSAP ROAD FAYETTEVILLE, ARKANSAS 72703-4099 479-973-4200 GORDON M. WILBOURN gordon.wilbourn@kutakrock.com (501) 975-3101 City of Fayetteville, Arkansas Fayetteville, Arkansas K U TA K ROCK LLP ATLANTA CHICAGO SUITE 2000 DENVER 124 WEST CAPITOL AVENUE FAYETTEVILLEIRVINE LITTLE ROCK, AR 72201-3706 KANSAS CITY LITTLE ROCK 501-975-3000 LOS ANGELES FACSIMILE 501-975-3001 MINNEAPOLIS OKLAHOMA CITY www.kutakrock.com OMAHA PHILADELPHIA RICHMOND SCOTTSDALE WASHINGTON WICHITA May 20, 2014 BOKF, NA dba Bank of Oklahoma, as Trustee Tulsa, Oklahoma Stephens Inc. Fayetteville, Arkansas $6,330,000 City of Fayetteville, Arkansas Water and Sewer System Refunding Revenue Bonds Series 2014 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 $6,330,000 Water and Sewer System Refunding Revenue Bonds, Series 2014 (the "Bonds"). The Bonds are being issued pursuant to the provisions of the Constitution and laws of the State of Arkansas, including, particularly, Amendment 65 and Arkansas Code Annotated (1998 Repl. & Supp. 2013) §§14-164-401 et seq., §§14-234-201 et seq. and §§14-235-201 et seq. (collectively, and as from time to time amended, the "Authorizing Legislation"), pursuant to Ordinance No. 5665 of the City, duly adopted and approved on March 4, 2014 (the "Authorizing Ordinance" ), and pursuant to a Trust Indenture dated as of May 1, 2002, as amended and supplemented by a First Supplemental Trust Indenture dated as of May 1, 2004, by a Second Supplemental Trust Indenture dated as of June 1, 2009, by a Third Supplemental Trust Indenture dated as of May 15, 2012, and by a Fourth Supplemental Trust Indenture dated as of May 15, 2014 (as amended and supplemented, the "Indenture"), each by and between the City and BOKF, NA dba Bank of Oklahoma (formerly Bank of Oklahoma, 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 debt by the City, 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. 4820-7738-6011.1 KUTAK ROCK LLP May 20, 2014 Approving Opinion Page 2 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 Rate Ordinances and the Authorizing Ordinance and to enter into and perform its obligations under the Indenture, the valid adoption of the Rate Ordinances 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 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 65 and the Authorizing Legislation, the City is empowered to adopt 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 validly authorized, executed, issued and delivered by the City and represent valid and binding special obligations of the City. The principal, premium, if any, and interest on the Bonds shall be payable from, and shall be secured by an assignment and pledge by the City to the Trustee of, the Net Revenues (as defined in the Indenture) of the City's water and sewer system, subject to a parity pledge of Net Revenues securing (i) the City's Water and Sewer System Refunding Revenue Bonds, Series 2012, and (ii) any Additional Bonds (as defined in the Indenture) issued hereafter. 5. The Net Revenues have been duly and validly assigned and pledged to the Trustee under the Indenture, and the Indenture creates, as security for the Bonds, a valid security interest in the Net Revenues. Under the laws of the State of Arkansas, including, particularly, Arkansas Code Annotated (2001 Repl. & 2013 Supp.) Section 4-9-109(d)(14), the pledge, assignment and security interest in the Net Revenues securing the Bonds is and shall be prior to any judicial lien hereafter imposed on said Net Revenues to enforce a judgment against the City on a simple 4820-7738-6011.1 L all 0 :rel Fol :iWA May 20, 2014 Approving Opinion Page 3 contract, and it is not necessary to file a Uniform Commercial Code financing statement in order to perfect a security interest in said Net Revenues. 6. Interest on the Bonds is excluded from gross income for federal income tax purposes and is not a specific preference item for purposes of the federal alternative minimum tax. The opinion described in the preceding sentence assumes 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 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. 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, 4820-7738-6011.1 OFFICIAL STATEMENT NEW ISSUE *RATING: S&P: "AA+" (stable outlook) BOOK -ENTRY ONLY 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 covenants, interest on the Series 2014 Bonds is excluded from gross income for federal income tax purposes and is not a specific preference item for purposes of the federal alternative minimum tax. Under existing law, Bond Counsel is of the opinion that the Series 2014 Bonds and the interest thereon are exempt from all state, county and municipal taxes in the State of Arkansas. Seethe caption "TAX MATTERS" herein. Dated: May 15, 2014 $6,330,000 CITY OF FAYETTEVILLE, ARKANSAS WATER AND SEWER SYSTEM REFUNDING REVENUE BONDS SERIES 2014 Due: August 15, as shown below The Water and Sewer System Refunding Revenue Bonds, Series 2014 (the "Series 2014 Bonds"), are being issued by the City of Fayetteville, Arkansas (the "City") for the purpose of refunding certain indebtedness of the City and paying certain expenses in connection with the issuance of the Series 2014 Bonds. See the captions "SOURCES AND USES OF FUNDS" and "THE REFUNDING PROGRAM" herein. The Series 2014 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, if any, and interest payments on the Series 2014 Bonds will be made so long as Cede & Co. is the registered owner of the Series 2014 Bonds. Individual purchases of the Series 2014 Bonds will be made only in book -entry form, in denominations of $5,000 or integral multiples thereof. Individual purchasers ("Beneficial Owners") of Series 2014 Bonds will not receive physical delivery of bond certificates. See the caption "BOOK -ENTRY ONLY SYSTEM' herein. The Series 2014 Bonds shall bear interest from their dated date, payable on February 15 and August 15 of each year, commencing August 15, 2014. All such interest payments shall be payable to the persons in whose name such Series 2014 Bonds are registered on the bond registration books maintained by BOKF, NA dba Bank of Oklahoma, Tulsa, Oklahoma, as trustee (the "Trustee"), as of the first day of the calendar month in which the applicable interest payment date falls. Principal of and premium, if any, on the Series 2014 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 2014 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 May 1, 2002, as amended and supplemented by a First Supplemental Trust Indenture dated as of May 1, 2004, by a Second Supplemental Trust Indenture dated as of June 1, 2009, by a Third Supplemental Trust Indenture dated as of May 15, 2012, and by a Fourth Supplemental Trust Indenture dated as of May 15; 2014, each by and between the City and the Trustee, the principal of, premium, if any, and interest on the Series 2014 Bonds are secured by a pledge of the Net Revenues (as defined herein) of the System. The pledge of Net Revenues securing the Series 2014 Bonds shall be on a parity with the existing pledge of Net Revenues securing $2,845,000 outstanding principal amount of the City's Water and Sewer System Refunding Revenue Bonds, Series 2012. The City has covenanted to fix and maintain rates for System services which shall produce Net Revenues at least equal to (i) 125% of the average annual debt service on all indebtedness of the City to which System revenues are pledged, (ii) the amount, if any, needed to fund debt service reserve deficiencies with respect to all indebtedness of the City to which System revenues are pledged, and (iii) the amount, if any, needed to make required deposits to the Renewal and Replacement Fund (as defined herein). See the caption "SECURITY FOR THE BONDS" herein. The Series 2014 Bonds are subject to optional redemption prior to maturity as more fully described herein under the caption "THE SERIES 2014 BONDS — Redemption." The Series 2014 Bonds are special obligations of the City secured by and payable solely from the Net Revenues of the System. The Series 2014 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 2014 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 2014 Bonds, except as described herein with respect to Net Revenues of the System. The Series 2014 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 2014 Bonds will be available for delivery in New York, New York, on or about May 20, 2014. Stephens Inc. �t The date of this Official Statement is May 6, 2014. * See the caption "RATING" herein. ** Priced to the first optional redemption date of August 15, 2019. MATURITY SCHEDULE Maturity Principal Interest (August 15) Amount Rate Yield CUSIP 2014 $ 165,000 2.000% 0.230% 312693 GVO 2015 805,000 2.000% 0.350% 312693 GW8 2016 820,000 2.000% 0.560% 312693 GX6 2017 830,000 3.000% 0.880% 312693 GY4 2018 1,665,000 4.000% 1.270% 312693 GZ1 2019 1,725,000 5.000% 1.560% 312693 HA5 2020 320,000 3.000% 1.870%** 312693 HB3 (Plus accrued interest) The Series 2014 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 2014 Bonds will be available for delivery in New York, New York, on or about May 20, 2014. Stephens Inc. �t The date of this Official Statement is May 6, 2014. * See the caption "RATING" herein. ** Priced to the first optional redemption date of August 15, 2019. CITY OF FAYETTEVILLE, ARKANSAS Issuer City Council Lioneld Jordan, Mayor Rhonda Adams Adella Gray Mark Kinion Alan Long Sarah Marsh Matthew Petty Martin Schoppmeyer, Jr. Justin Tennant Don Marr, Chief of Staff Paul Becker, Finance Director Sondra Smith, City Clerk Kit Williams, City Attorney BOKF, NA dba BANK OF OKLAHOMA Tulsa, Oklahoma 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 2014 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 or the System since the date hereof. THE SERIES 2014 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 2014 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 Page IntroductoryStatement.......................................................................................................................................... 1 TheSeries 2014 Bonds.......................................................................................................................................... 2 Securityfor the Bonds........................................................................................................................................... 4 Book -Entry Only System...................................................................................................................................... 5 Sourcesand Uses of Funds................................................................................................................................... 7 TheRefunding Program........................................................................................................................................ 7 ............................................................................... Debt Service Requirements.................................................... 7 Estimated Debt Service Coverage......................................................................................................................... 8 TheCity................................................................................................................................................................ 8 TheSystem............................................................................................................................................................ 11 Definitionsof Certain Terms................................................................................................................................ 21 Summaryof the Indenture..................................................................................................................................... 24 Summary of the Continuing Disclosure Agreement............................................................................................. 30 Underwriting......................................................................................................................................................... 32 TaxMatters........................................................................................................................................................... 33 Rating.................................................................................................................................................... 34 LegalMatters........................................................................................................................................................ 34 FinancialStatements............................................................................................................................................. 34 Miscellaneous........................................................................................................................................................ 34 Accuracy and Completeness of Official Statement............................................................................................... 35 APPENDIX A - Audited Financial Statements of the City's Water and Sewer Fund for the year ended December 31, 2012..................................................................................................A-1 APPENDIX B - Unaudited Financial Statements of the City's Water and Sewer Fund for the year ended December 31, 2013 .............. .... ....................................................................... ......... B-1 APPENDIX C - Form of Bond Counsel Opinion.................................................................................................0-1 [THIS PAGE INTENTIONALLY BLANK] OFFICIAL STATEMENT $6,330,000 CITY OF FAYETTEVILLE, ARKANSAS WATER AND SEWER SYSTEM REFUNDING REVENUE BONDS SERIES 2014 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 under the caption "DEFINITIONS OF CERTAIN TERMS" herein. This Official Statement, including the cover page and the Appendices hereto, is furnished in connection with the offering of Water and Sewer System Refunding Revenue Bonds, Series 2014, in the principal amount of $6,330,000 (the "Series 2014 Bonds"), by the City of Fayetteville, Arkansas (the "City"). 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 65 to the Constitution of the State ("Amendment 65") and Arkansas Code Annotated (1998 Repl. & 2013 Supp.) §§14-164-401 et seq., §§14-234-201 et seq., and §§14-235-201 et seq. (collectively, and as from time to time amended, the "Act"), to issue and sell revenue bonds for the purpose of financing and refinancing the cost of improvements and betterments to its water and sewer system (the "System"). The Series 2014 Bonds are to be issued by the City pursuant to Amendment 65, the Act and Ordinance No. 5665, adopted and approved on March 4, 2014 (the "Authorizing Ordinance"), for the purpose of (i) refunding $7,390,000 outstanding principal amount of the City's Water and Sewer System Revenue Bonds, Series 2009 (the "Series 2009 Bonds"), and (ii) paying the costs of issuing the Series 2014 Bonds. See the captions "SOURCES AND USES OF FUNDS" and "THE REFUNDING PROGRAM" herein. The Series 2014 Bonds are special obligations of the City, payable solely from and secured by a pledge of the Net Revenues (as defined herein) of the System on a parity basis to the existing pledge of Net Revenues securing the payment of debt service on $2,845,000 outstanding principal amount of the City's Water and Sewer System Refunding Revenue Bonds, Series 2012 (the "Series 2012 Bonds"). The City has covenanted to fix and maintain rates for System services which shall produce Net Revenues at least equal to (i) 125% of the average annual debt service on all indebtedness of the City to which System revenues are pledged, (ii) the amount needed to fund debt service reserve deficiencies with respect to all indebtedness of the City to which System revenues are pledged, and (iii) the amount needed to make required deposits to the Renewal and Replacement Fund (as defined herein). See the captions "SECURITY FOR THE BONDS" and "SUMMARY OF THE INDENTURE" herein. The faith and credit of the City are not pledged to the payment of the Series 2014 Bonds, and the Series 2014 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 2014 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 2014 Bonds, except as described herein with respect to Net Revenues. Additional bonds may be issued on a parity of security with the Series 2012 Bonds and the Series 2014 Bonds under certain circumstances set forth in the Indenture (hereinafter defined). See the caption "THE SERIES 2014 BONDS - Additional Bonds" herein. The Series 2012 Bonds, the Series 2014 Bonds and any Additional Bonds are herein collectively referred to as the "Bonds." Pursuant to the provisions of a Continuing Disclosure Agreement dated as of the date of delivery of the Series 2014 Bonds, by and between the City and BOKF, NA dba Bank of Oklahoma, Tulsa, Oklahoma, as dissemination agent (the "Dissemination Agent") (the "Continuing Disclosure Agreement"), the City has undertaken certain obligations with respect to providing ongoing disclosure of certain financial and operating data concerning the System 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 System, the Series 2014 Bonds, the Continuing Disclosure Agreement, and the Trust Indenture dated as of May 1, 2002, as supplemented and amended by a First Supplemental Trust Indenture dated as of May 1, 2004, by a Second Supplemental Trust Indenture dated as of June 1, 2009, by a Third Supplemental Trust Indenture dated as May 15, 2012, and by a Fourth Supplemental Trust Indenture dated as of May 15, 2014 (as supplemented and amended, the "Indenture"), by and between the City and BOKF, NA dba Bank of Oklahoma, Tulsa, Oklahoma, as trustee (the "Trustee"), pursuant to which the 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 2014 Bonds are qualified in their entirety by reference to the definitive form thereof and the information with respect thereto included in the Indenture. Copies of the Continuing Disclosure Agreement, the Indenture, and the form of Series 2014 Bond included therein, are available from the City by writing to the attention of the City Clerk, 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 have been provided by the City from the audited records of the System and certain demographic information has been obtained from other sources which are believed to be reliable. THE SERIES 20] 4 BONDS Description. The Series 2014 Bonds will be initially dated as of May 15, 2014, and will bear interest payable semiannually on February 15 and August 15 of each year, commencing August 15, 2014, at the rates set forth on the cover page hereof. The Series 2014 Bonds will mature on August 15 in the years and in the principal amounts set forth on the cover page hereof. The Series 2014 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 2014 Bonds will be made so long as Cede & Co. is the registered owner of the Series 2014 Bonds. Individual purchases of the Series 2014 Bonds will be made only in book -entry form, in denominations of $5,000 or integral multiples thereof. Individual purchasers ("Beneficial Owners") of Series 2014 Bonds will not receive physical delivery of bond certificates. See the caption "BOOK -ENTRY ONLY SYSTEM" herein. All interest payments on the Series 2014 Bonds shall be payable to the persons in whose name such Series 2014 Bonds are registered on the bond registration books maintained by the Trustee, as of the first day of the calendar month in which the applicable interest payment date falls. Principal of and premium, if any, on the Series 2014 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 2014 Bonds to the extent of the sum or sums so paid. So long as DTC or its nominee is the registered owner of the Series 2014 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 2014 Bonds are subject to redemption prior to maturity, at the option of the City, in whole or in part at any time on and after August 15, 2019 (and if in part, in such maturity or maturities as the City shall elect), from funds from any source, at a redemption price of 100% of the principal amount of the Series 2014 Bonds being redeemed, plus accrued interest to the date of redemption. Partial Redemption of a Series 2014 Bond. In selecting Series 2014 Bonds for redemption prior to maturity, in the case any outstanding Series 2014 Bond is in a denomination greater than $5,000, each $5,000 of face value of such Series 2014 Bond shall be treated as a separate Series 2014 Bond in the denomination of $5,000; provided, however, that so long as DTC or its nominee is the sole registered owner of the Series 2014 Bonds, the particular Series 2014 Bonds or portions thereof to be redeemed within a maturity shall be selected by lot in such manner as DTC shall determine. Notice of Redemption. Notice of the call for any redemption, identifying the Series 2014 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 2014 Bonds, by any other means acceptable to DTC, including facsimile) to the registered owner of each such Series 2014 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 2014 Bond with respect to which no such failure or defect has occurred. Any notice mailed as provided shall be conclusively presumed to have been duly given, whether or not the registered owner receives the notice. Additional Bonds. The City may issue from time to time one or more series of Additional Bonds for the purpose of (i) financing Costs of Construction in connection with the acquisition, construction and equipping of Project facilities, (ii) refunding the Series 2012 Bonds, the Series 2014 Bonds or any series of Additional Bonds or Subordinate Obligations, in whole or in part, or (iii) any combination thereof. Additional Bonds shall be secured equally and ratably with the Series 2012 Bonds, the Series 2014 Bonds and any other series of Additional Bonds theretofore issued and then Outstanding, except insofar as 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. Before any Additional Bonds are authenticated, there shall be delivered to the Trustee the items required for the issuance of Bonds by the Indenture, plus a statement by a Qualified Accountant reciting the opinion, based upon necessary investigation, that the Net Revenues of the System for the Fiscal Year immediately preceding the Fiscal Year in which such Additional Bonds are to be issued were not less than (i) 130% of the average Annual Debt Service on all then outstanding Bonds and Subordinate Obligations, plus the Additional Bonds then proposed to be issued, (ii) the amount, if any, needed to make required deposits to the Debt Service Reserve Fund and any debt service reserve funds with respect to Subordinate Obligations, and (iii) the amount, if any, needed to make required deposits to the Renewal and Replacement Fund. If any changes have been made, and are in effect on the date of issuance of the Additional Bonds, in any rates and charges imposed by the City for System services which were not in effect during the entire preceding Fiscal Year, the Qualified Accountant may, if such changes resulted in increases in such rates and charges, and shall, if such changes resulted in reductions in such rates and charges, adjust the Net Revenues for the preceding Fiscal Year to reflect any changes in such Net Revenues which would have occurred if the changed rates and charges had been in effect during the entire preceding Fiscal Year. Notwithstanding any of the foregoing, no Additional Bonds shall be issued unless there is no default existing at the time of issuance under the Indenture. Subordinate Obligations. Nothing in the Indenture shall prevent the City from authorizing and issuing bonds, notes, bond anticipation notes, warrants, certificates or other obligations or evidences of indebtedness, the payment of the principal of and premium, if any, and interest on which shall be made from Revenues or Net Revenues or from a special fund to be established and maintained from Revenues or Net Revenues, provided payments from Revenues or Net Revenues or from Revenues or Net Revenues in such special fund, and the lien and charge on such Revenues or Net Revenues, shall be made junior and subordinate to the lien, pledge and charge created in the Indenture for the security and payment of the Bonds and other payments under the Indenture, including, without limitation, the following payments out of Revenues specified by the Indenture: (i) payments of Operation and Maintenance Expenses; (ii) payments into the Bond Fund; (iii) payments into the Debt Service Reserve Fund; and (iv) payments into the Renewal and Replacement Fund. Transfer or Exchange. The 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. 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. So long as DTC or its nominee is the sole registered owner of the Series 2014 Bonds, transfers of beneficial interests in the Series 2014 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 Bonds are special obligations of the City secured by and payable solely from the Net Revenues derived from operation of the System. The 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 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 Bonds, except as described herein with respect to the Net Revenues of the System. Rate Covenant. The rates charged for services of the System heretofore fixed by ordinances of the City and the conditions, rights and obligations pertaining thereto, as set forth in said ordinances, are ratified, confirmed and continued by the Authorizing Ordinance. In the Indenture, the City covenants that the rates for System services will never be reduced while any of the Bonds are Outstanding unless there is obtained from a Qualified Accountant a certificate to the effect that Net Revenues, with the reduced rates, in the current Fiscal Year will be at least equal to (i) 125% of the average Annual Debt Service on all Bonds and Subordinate Obligations, (ii) the amount, if any, needed to make required deposits to the Debt Service Reserve Fund and any debt service reserve funds with respect to Subordinate Obligations, and (iii) the amount, if any, needed to make required deposits to the Renewal and Replacement Fund. The City further covenants that the rates for System services shall, if and when necessary, from time to time, be increased in such manner as will produce Net Revenues at least equal to (i) 125% of the current Annual Debt Service on all Bonds and Subordinate Obligations, (ii) the amount, if any, needed to make required deposits to the Debt Service Reserve Fund and any debt service reserve funds with respect to Subordinate Obligations, and (iii) the amount, if any, needed to make required deposits to the Renewal and Replacement Fund. The Indenture defines "Net Revenues" as Revenues less Operation and Maintenance Expenses. Revenues include all fees, tolls, rates, rentals and charges levied and collected in connection with, and all other income and receipts of whatever kind or character derived by the City from, the operation of the System. Operation and Maintenance Expenses include all ordinary and necessary expenses of operation, repair, maintenance and insuring of the System under generally accepted accounting principles. Such term includes the cost of purchased water and payments to all taxing authorities, but does not include debt service and depreciation expense. Debt Service Reserve. From the proceeds of sale of each series of Bonds issued pursuant to the Indenture, there shall be deposited into the Debt Service Reserve Fund an amount which, together with the amounts then on deposit therein, will be equal to 50% of the aggregate maximum Annual Debt Service on all Outstanding Bonds in any Fiscal Year thereafter (the "Reserve Requirement"). Because of the existing balance in the Debt Service Reserve Fund, no deposit from the proceeds of the Series 2014 Bonds to the Debt Service Reserve Fund is necessary in order to satisfy the Reserve Requirement. If the amount in the Debt Service Reserve Fund is ever reduced below the Reserve Requirement, it shall be reimbursed to the Reserve Requirement through monthly payments, beginning not later than the fifth business day preceding the fifteenth day of the month immediately following the month in which the Debt Service Reserve Fund was reduced below the Reserve Requirement, and continuing not later than the fifth business day preceding the fifteenth 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 Operation and Maintenance Fund and into the Bond Fund as provided in the Indenture), in an amount equal to 1/12 of the Reserve Requirement deficiency. If a surplus shall exist in the Debt Service Reserve Fund over and above the Reserve Requirement, such surplus shall be deposited into the Bond Fund. The moneys on deposit in the Debt Service Reserve Fund (i) shall be used to the extent necessary to prevent a default in the payment of Annual Debt Service on the Bonds and Trustee's and any Paying Agent's fees and (ii) 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 Outstanding Bonds. 4 BOOK -ENTRY ONLY SYSTEM The Series 2014 Bonds will be issued only as one fully registered Series 2014 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 2014 Bonds. The fully registered Series 2014 Bonds will be retained and immobilized in the custody of DTC. DTC (or any successor securities depository) or its nominee for all purposes under the Indenture will be considered by the City and the Trustee to be the owner or holder of the Series 2014 Bonds. Owners of any book entry interests in the Series 2014 Bonds (the "book entry interest owners") described below, will not receive or have the right to receive physical delivery of the Series 2014 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 2014 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 120 countries and territories) 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.com. Purchases of Series 2014 Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Series 2014 Bonds on DTC's records. The ownership interest of each actual purchaser of each Series 2014 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 2014 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 2014 Bonds, except in the event that use of the Book -Entry System for the Series 2014 Bonds is discontinued. To facilitate subsequent transfers, all Series 2014 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 2014 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 2014 Bonds, DTC's records reflect only the identity of the Direct Participants to whose accounts such Series 2014 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 2014 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 2014 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 2014 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 2014 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 2014 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 2014 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 2014 Bonds made to DTC or its nominee as the registered owner of the Series 2014 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 2014 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. SOURCES AND USES OF FUNDS The proceeds of the Series 2014 Bonds and other available moneys are expected to be used as follows: Sources of Funds Series 2014 Bond Par Amount $6,330,000 Net Original Issue Premium 601,256 Available Moneys in Series 2009 Bond Fund 688,261 Available Moneys in Series 2009 Debt Service Reserve Fund 23,585 Total Sources: 7 643 102 Uses of Funds Series 2014 Deposit to Series 2009 Escrow Fund $7,506,327 Costs of Issuance and Underwriter's Discount 135,300 Contingency 1,475 Total Uses: 7 643 102 THE REFUNDING PROGRAM A portion of the proceeds of the Series 2014 Bonds will be used, along with other available moneys, to accomplish a current refunding of $7,390,000 outstanding principal amount of the City's Water and Sewer System Revenue Bonds, Series 2009, dated as of June 1, 2009 (the "Series 2009 Bonds"). The Series 2009 Bonds were issued to finance various capital improvements to the System, including the relocation, installation and upgrading of certain water distribution and sewer collection lines and other System components in conjunction with road construction projects within the City. Upon the delivery of the Series 2014 Bonds, a portion of the proceeds thereof will be deposited with BOKF, NA dba Bank of Oklahoma, Tulsa, Oklahoma, as escrow trustee (the "Escrow Trustee"), under an irrevocable Escrow Deposit Agreement (the "Escrow Agreement"), between the City and the Escrow Trustee. The proceeds derived from the Series 2014 Bonds and moneys transferred from the Bond Fund and Debt Service Reserve Fund relating to the Series 2009 Bonds will be held by the Escrow Trustee under the Escrow Agreement in trust for the holders of the Series 2009 Bonds, and will be sufficient to pay the principal, premium, and interest due on the Series 2009 Bonds when redeemed on August 15, 2014. Amounts held by the Escrow Trustee will be irrevocably pledged for the benefit of the holders of the Series 2009 Bonds. After such deposit, the Series 2009 Bonds will no longer be deemed to be outstanding and will be secured solely by the amounts held by the Escrow Trustee. See the caption "SOURCES AND USES OF FUNDS" herein. DEBT SERVICE REQUIREMENTS As of the date of closing, the Series 2012 Bonds and the Series 2014 Bonds constitute the only debt obligations secured by Revenues of the System. The following table details amounts required to pay scheduled principal and interest on the Series 2012 Bonds and the Series 2014 Bonds during each year: Series 2012 Series 2012 Series 2014 Series 2014 Total Debt Year Principal Interest Principal. Interest Service 2014 $ 690,000 $ 56,900 $ 165,000 $ 55,788 $ 967,688 2015 705,000 43,100 805,000 219,850 1,772,950 2016 715,000 29,000 820,000 203,750 1,767,750 2017 735,000 14,700 830,000 187,350 1,767,050 2018 -- -- 1,665,000 162,450 1,827,450 2019 -- -- 1,725,000 95,850 1,820,850 2020 - -- 320,000 9,600 329,600 Totals: $2,845,000 IIA3.700 6 330 000 934 638 10,253.338 ESTIMATED DEBT SERVICE COVERAGE The following table shows estimated maximum and average annual debt service coverage with respect to the outstanding Series 2012 Bonds and Series 2014 Bonds utilizing historical Net Revenues of the System. {i> Net Revenues means gross revenues of the System less the amounts required to pay the costs of operation, maintenance and repair of the System in accordance with generally accepted accounting principles applicable to municipal water systems (excluding depreciation, interest and amortization expenses). {2) See the caption "DEBT SERVICE REQUIREMENTS" herein. THE NET REVENUES AVAILABLE FOR SYSTEM DEBT SERVICE SET FORTH ABOVE ARE BASED ON THE HISTORICAL RESULTS OF OPERATION OF THE SYSTEM. FUTURE NET REVENUES AVAILABLE FOR DEBT SERVICE WILL DEPEND ON NUMEROUS FACTORS, AND THERE CAN BE NO ASSURANCE THAT FUTURE NET REVENUES AVAILABLE FOR SYSTEM DEBT SERVICE WILL APPROXIMATE SUCH HISTORICAL RESULTS. 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 corner 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. The City's elected officials and the dates on which their respective terms expire are as follows: Name 2012 2013 Lioneld Jordan Audited (Unaudited) Historical Gross Revenues of the System $34,906,463 $33,798,772 Historical Operating Expenses (24,095,032) (25,064,294) Net Revenues Available for Debt Service(�) 10,811,431 8,734.478 Maximum Annual Debt Service Requirement on Alderman 12/31/14 Series 2012 and 2014 Bonds (2) $1,827,450 $1,827,450 Average Annual Debt Service Requirement on Alderman 12/31/16 Series 2012 and 2014 Bonds (2) $1,464,763 $1,464,763 Maximum Annual Debt Service Coverage 5.92 X 4.78 X Average Annual Debt Service Coverage 7.38 X 5.96 X {i> Net Revenues means gross revenues of the System less the amounts required to pay the costs of operation, maintenance and repair of the System in accordance with generally accepted accounting principles applicable to municipal water systems (excluding depreciation, interest and amortization expenses). {2) See the caption "DEBT SERVICE REQUIREMENTS" herein. THE NET REVENUES AVAILABLE FOR SYSTEM DEBT SERVICE SET FORTH ABOVE ARE BASED ON THE HISTORICAL RESULTS OF OPERATION OF THE SYSTEM. FUTURE NET REVENUES AVAILABLE FOR DEBT SERVICE WILL DEPEND ON NUMEROUS FACTORS, AND THERE CAN BE NO ASSURANCE THAT FUTURE NET REVENUES AVAILABLE FOR SYSTEM DEBT SERVICE WILL APPROXIMATE SUCH HISTORICAL RESULTS. 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 corner 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. The City's elected officials and the dates on which their respective terms expire are as follows: Name Office Term Expires Lioneld Jordan Mayor 12/31/16 Kit Williams City Attorney 12/31/14 Sondra Smith City Clerk 12/31/16 Rhonda Adams Alderman 12/31/14 Adella Gray Alderman 12/31/14 Mark Kiniontll Alderman 12/31/14 Alan Long Alderman 12/31/16 Sarah Marsh Alderman 12/31/16 Matthew Petty Alderman 12/31/16 Martin Schoppmeyer, Jr. Alderman 12/31/16 Justin Tennant Alderman 12/31/14 Mr. Kinion is an employee of Bank of Arkansas, an affiliate of the Trustee. 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: Economic Data. Per capita personal income figures for the MSA and the State of Arkansas are as follows: State of Year City of Arkansas 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 2010 73,580 463,204 2,915,918 Economic Data. Per capita personal income figures for the MSA and the State of Arkansas are as follows: State of Year MSA Arkansas 2003 $25,387 $25,434 2004 27,420 26,846 2005 28,685 27,908 2006 30,168 29,459 2007 31,586 31,517 2008 32,537 32,257 2009 32,313 31,688 2010 33,309 32,373 2011 34,130 33,740 2012 35,437 34,723 Source: Discover Arkansas, Data Analysis. Retail sales figures for the MSA and the State are as follows: �'� Does not include McDonald County, Missouri Demographics USA, County Edition, 2003-2008. Nielsen Consumer Buying Power: 2009 -forward. State of MSA as % of Year MSA Arkansas State of Arkansas 2003 $3,968,812,000 29,920,716,000 13.3% 2004 4,610,051,000 31,436,983,000 14.7% 2005 5,287,158,000 34,290,412,000 15.4% 2006 7,251,810,000 38,843,312,000 18.7% 2007 8,250,140,000 43,504,752,000 19.0% 2008 8,291,415,000 43,820,789,000 18.9% 2009 5,527,678,0001" 35,498,326,000 15.6% 2010 6,133,565,000(') 35,247,629,000 17.4% 2011 7,236,224,000(') 42,160,822,000 17.2% 2012 7,231,740,000(') 42,262,644,000 17.1% �'� Does not include McDonald County, Missouri Demographics USA, County Edition, 2003-2008. Nielsen Consumer Buying Power: 2009 -forward. 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 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 2009 1,067,947,653 191,973,349 1,299,921,002 2010 1,025,933,870 188,130,198 1,214,064,068 2011 1,046,174,941 199,900,209 1,246,075,150 2012 1,063,617,013 203,289,225 1,266,906,238 Tax Assessor's Office. The assessed value represents 20% of the appraised value of property. Source: Washington County Building permits issued by the City(i) are shown below for the years indicated: 2009 2010 2011 2012 2013 Residential Building 281 256 273 394 379 Permits Commercial Building 14 16 29 18 24 Permits Value of All Building Permits $70,365,173 $79,103,682 $81,146,187 $251,041,427 $157,970,433 `'' Does not include building activity of the University of Arkansas, school permits and additions/alterations to existing structures. Source: City of Fayetteville. 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 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 6.1% 7.4% 2010 6.5% 7.9% 2011 6.2% 8.0% 2012 5.6% 7.3% 2013 4.9% 7.5% 2014* 5.6% 7.5% * February, 2014 only; preliminary. Employment and Industry. The principal campus of the University of Arkansas is located in the City and had total enrollment for the Spring semester of 2014 of approximately 23,286. On the Fayetteville campus, the University employs approximately 5,883 faculty, administrative, secretarial, clerical and maintenance personnel in both full-time and part-time positions, making the University the largest employer in the City. 10 Other major employers in the City, their products or services and approximate number of employees are set forth below: Employer Washington Regional Med Center Washington Co. Government Fayetteville School District Veteran's Admin. Medical Ctr. Superior Industries City of Fayetteville Wal-Mart #9149 Tyson Mexican Original Wal-Mart #144 Source: 2012 City of Fayetteville CAFR. Product or Service Employees Hospital 1,521 Government 1,344 Education 1,315 Hospital 1,124 Transportation equipment 1,120 Government 704 Optical lab 678 Food products 572 Retail 507 THE SYSTEM Water Supply. The water supply for the City is provided by the Beaver Water District of Benton and Washington Counties, Arkansas (the "District"), which is the source of supply for an approximate population of 420,000 people in northwest Arkansas. The District was organized as a public water distribution district by order of the Benton County Circuit Court on July 17, 1959 for the purpose of obtaining water storage rights in Beaver Reservoir from the U.S. Corps of Engineers, and supplying treated water to municipalities within Benton and Washington Counties. Through the joint efforts of the cities of Bentonville, Fayetteville, Rogers and Springdale, Arkansas (the "Participating Cities"), the District entered into a contract with the U.S. Corps of Engineers providing for the supply to the District of up to 120 million gallons of water per day ("mgd") on an annual average basis. The Beaver Reservoir has a capacity of 1,952,000 acre feet. The District currently has a firm pumping capacity of 42.5 mgd to the City. The District's facilities are located on a 300 acre site owned by the District east of the City of Lowell, Arkansas, approximately 2 miles from its intake structures on Beaver Reservoir. The District's water treatment plant has a present nominal design capacity of 140 mgd. Water Supply Contracts with Beaver Water District. In 1967, the District and the Participating Cities entered into a Memorandum of Understanding and Contract for Construction, Maintenance, Operation and Expansion of Beaver Water Supply Facilities (the "Memorandum of Understanding"). Pursuant to the Memorandum of Understanding, the District agreed to construct, operate, maintain and expand a drinking water treatment plant as required to meet the then present and future needs of the Participating Cities. The Participating Cities agreed to build and maintain their own water supply lines from the point of the water discharge at the District's drinking water treatment plant to their respective distribution systems. The Participating Cities are also permitted to serve, through their distribution systems, other smaller cities and other approved water distribution agencies within Benton and Washington counties. The Memorandum of Understanding provides that the Participating Cities will make payments to the District for drinking water used by each Participating City based on the total cost to the District of the water delivered, including, but not limited to, amortization of the District's indebtedness, operation and maintenance of the District's facilities and the cost of the expansion of the District's facilities. The District issued water revenue bonds in 1990 and 1991 to finance a 40 mgd expansion to the then existing water treatment facility. The 1990 and 1991 water bonds were defeased with 1994 water revenue bonds dated as of June 1, 1994. This District also issued water revenue bonds in 2003 to finance the construction of two raw water intakes with microtunneled piping connections to Beaver Lake, construction of a 60 inch raw water pipeline, improvements to and expansion of the Croxton Water Treatment Plant, solids handling improvements for the Croxton Water Treatment Plant and the Steele Water Treatment Plant, improvements to the Steele Water Treatment Plant, and property acquisition. In 2010, the District refinanced the outstanding 2003 issue. The Participating Cities' obligations to make payments under the Memorandum of Understanding are evidenced, as to each Participating City, by water rate ordinances duly enacted in accordance with State law. While each Participating City has agreed, in principle, to make payments to the District sufficient to pay its proportionate share of the District's cost of providing water, the Participating Cities' sources of payment are limited to revenues 11 from their respective water systems pursuant to these water rate ordinances. The revenues derived from these water rate ordinances are not pledged by the Participating Cities to the repayment of the District's bonds and are subject to the debt requirements on any outstanding bonds of the Participating Cities secured by water revenues. Payments made to the District by the Participating Cities are considered by the Participating Cities to be operating expenses. The 2010 water revenue refunding bonds are currently the only outstanding bonded indebtedness of the District. As of December 31, 2013, the 2010 water revenue refunding bonds were outstanding in the principal amount of $31,925,000, and had a scheduled final maturity in 2022. The costs of the water storage rights are treated as a cost of water produced, and therefore the Participating Cities pay based on water consumption. The City treats these costs as Operation and Maintenance Expenses of the System and they are to be paid from Revenues deposited to the Operation and Maintenance Fund prior to the payment of debt service on the Series 2012 Bonds or the Series 2014 Bonds. The District's total water sales for the previous two fiscal years ended September 30 are represented in the following table: City 2012 2013 Fayetteville $ 6,510,236 $ 6,014,841 Springdale 6,925,737 6,436,844 Rogers 4,162,279 4,144,509 Bentonville 3,783,932 4,036,044 TOTALS: $21.382.184 20.632.238 Source: Audited Financial Statements of the District dated September 30, 2012 and 2013. Each Participating City is billed monthly based on metered water consumption and effective rates at that time for drinking water purchased. On the basis of the District's annual audit, a cost for providing service to the Participating Cities is determined. Based on the District's annual operating costs, a charge or credit is then applied to each City for under- or over -payment for the drinking water used in that year, follows: The rates charged by the District to the Participating Cities since 1967 for the cost of water delivered are as Effective Date Rate Per Million Gal. Effective Date Rate Per Million Gal. 1967 $180.00 2-1-91 $1,010.00 9-1-77 270.00 11-1-03 1,160.00 9-1-82 320.00 1-1-08 1,180.00 11-1-85 370.00 1-1-09 1,200.00 12-1-86 410.00 10-1-10 1,220.00 2-1-89 610.00 10-1-11 1,240.00 2-1-90 810.00 10-1-12 1,260.00 Customers. At December 31, 2013, the City had approximately 38,736 active water customers and 33,247 active sewer customers. Water customers are billed solely on the basis of water usage and meter and line size. See the caption "THE SYSTEM — Rate Structure" below. The following table classifies active water customers for the years indicated: Source: City of Fayetteville. 12 2009 2010 2011 2012 2013 Residential 31,777 32,605 33,335 33,727 34,227 Nonresidential 2,935 2,945 2,875 2,894 2,953 Major Industrial 4 4 4 4 4 Irrigation 1,057 1,416 1,120 1,491 1,548 Wholesale 4 4 4 4 4 Totals: 35.777 36.974 37.338 38,120 38.736 Source: City of Fayetteville. 12 follows: The System's 10 largest water customers, based upon water revenues produced during 2013 were as Customer Total Revenues University of Arkansas $879,434 Pinnacle Foods Group, Inc. 452,016 Superior Industries 205,524 Tyson Foods, Inc. 187,500 City of West Fork 177,836 City of Fayetteville 147,121 City of Elkins 134,323 Washington Regional Medical Center 95,772 Mt. Olive Water Association 89,822 Veterans Administration 76,266 Source: City of Fayetteville. Percentage of 2013 Water Revenues 5.66% 2.91% 1.32% 1.21% 1.14% 0.95% 0.86% 0.62% 0.58% 0.49% Historical Statistics. The following table shows historical water usage statistics for the water distribution component of the System: Year 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Source: City of Fayetteville. Average Daily Use in Million Gallons 13.04 MG 14.34 MG 14.77 MG 14.18 MG 13.01 MG 12.44 MG 13.15 MG 13.56 MG 14.49 MG 13.61 MG Maximum Day's Use In Million Gallons 19.86 MG 24.00 MG 25.10 MG 22.80 MG 20.90 MG 23.72 MG 23.12 MG 28.06 MG 25.00 MG 28.16 MG The following table shows historical sewer treatment statistics for the wastewater treatment component of the System: Average Daily Flow Year in Million Gallons 2004 11.64 MG 2005 10.98 MG 2006 11.24 MG 2007 11.43 MG 2008 14.37 MG 2009 12.76 MG 2010 11.15 MG 2011 12.40 MG 2012 11.20 MG 2013 12.20 MG Source: City of Fayetteville. Present System. As described above under this caption in the subcaptions "- Water Supply" and "- Water Supply Contracts With Beaver Water District," the City purchases treated water from the Beaver Water District. The City distributes such treated water to its residents as well as to the residents of certain surrounding cities and communities as described below. The City presently owns and operates two water treatment plants serving residents of the City and surrounding areas. 13 The water distribution component of the System is made up of approximately 791 miles of water main, 4,050 fire hydrants and approximately 29 million gallons of storage capacity held in 15 water storage tanks. The age of the water distribution varies from new to 117 years. The water distribution component of the System provides service to the City, to the Cities of Farmington, Goshen, Greenland and Wheeler, to parts of the City of Johnson, and to other rural areas surrounding the City. Wholesale service is provided to the Cities of Elkins and West Fork, to the Mount Olive Rural Water System and, as a backup to its primary supplier, to the Rural Development Authority of Washington County, Arkansas. The City currently has no written agreements with respect to the provision of its water services to, and the operation of the water systems of, the Cities of Farmington, Goshen, Greenland and Johnson. The City owns the water systems in these customer cities. Continuing water sales and the operation of these systems is based on terms and provisions of expired contracts and mutual understandings between the City and each of the Cities of Farmington, Goshen, Greenland and Johnson. The City has a current contract in place with respect to wholesale service to the Mount Olive Rural Water System and is currently in the process of renegotiating a wholesale contract with the City of West Fork. There is no written agreement currently in force with respect to the sale of water to the City of Elkins, and continuing sales are based on the terms and provisions of an expired contract and mutual understandings between the City and the City of Elkins. There is no written agreement currently in force with respect to the sale of water to the Rural Development Authority of Washington County, Arkansas, which now purchases almost all of its water from another supplier. The sewage collection component of the System currently serves approximately 80,000 persons and consists of approximately 578 miles of sewer main and over 12,800 manholes. The type of pipe in the sewage collection system is principally vitrified clay pipe with varying amounts of PVC plastic pipe, polyethylene plastic pipe, fiberglass reinforced pipe and cast iron pipe. The age of the sewage collection system varies from new to 107 years. The City has implemented an ongoing sewer rehabilitation program with over $16 million spent in related capital improvements during the last decade. The City has completed a major sewer transmission main, pump station and wastewater treatment upgrade, including the construction of a new wastewater treatment facility, with over $173 million spent in the last decade. Sewer collection and treatment services are provided to residents of the City, to the Cities of Farmington and Greenland, and to small parts of the City of Johnson. A few rural residents in the City's growth area also receive sewer collection and treatment service. Wholesale service is provided to the City of Elkins. The City has current sewer service contracts in effect for all of these cities. Total revenues collected for water and sewer services to nonresidents of the City represented approximately 11.71% of total revenues of the System during 2013. Revenues collected for water services to nonresidents represented approximately 15.87% of the total water revenues of the System during 2013. Residents of the City of Farmington were the largest nonresident water customer population accounting for approximately 3.26% of total water revenues of the System during 2013. Revenues collected for sewer services to nonresidents of the City represented approximately 7.74% of total sewer revenues of the System during 2013. Residents of the City of Farmington were the largest nonresident sewer customer population accounting for approximately 4.40% of total revenues of the System during 2013. When added together, the water and sewer service revenues derived from residents of the City of Farmington accounted for approximately 3.84% of total revenues of the System during 2013. The City's Noland wastewater treatment plant (the "East Side Plant"), located on a 1,228 acre site in the eastern portion of the City, commenced operations in 1987 and is currently permitted at 11.2 mgd. Treatment stages at the East Side Plant consist of the plant headworks (bar screens, vacutators and influent lift station), aeration basins, secondary sedimentation basins, biological and chemical nutrient removal, and U.V. disinfection. The biosolids treatment component of the East Side Plant employs dewatering of secondary biosolids, and drying into a Class A product through solar and thermal drying units with the product being sold through a bidding process. There were no permit violations at the East Plant in 2012 or 2013. The City's West Side wastewater treatment plant (the "West Side Plant"), located on a site of approximately 296 acres in the western portion of the City, commenced operations in June 2008 and is currently permitted at 10.0 mgd. Treatment stages at the West Side Plant consist of the plant headworks (bar screens and vacutators), aeration basins, secondary sedimentation basins, biological and chemical nutrient removal, and U.V. disinfection. There have been no permit violations at the West Side Plant since its opening. The West Side Plant was constructed and financed over a period of 6 years at a cost of approximately $61 million in order to address growth in the service area population and excess wet weather flows that consumed available wastewater treatment capacity and justified the construction of core system improvements. In addition to the West Side Plant itself, 31 miles of pipeline and additional lift stations were constructed, expanded or replaced 14 during such time period. The City believes that the wastewater components of the System, as currently in place, will meet service area needs for approximately 115,000 people. Average daily flow treated at the East Side and West Side plants combined equaled 12.20 mgd in 2013, with peak flow in 2013 of approximately 38.90 mgd. The East Side and West Side plants are operated on a contract basis by CH2M Hill Engineers. The regional office of the Environmental Protection Agency ("EPA") with authority over the City's wastewater operations has proposed regulatory action that would require regional municipal wastewater treatment plants to reduce the phosphorus content of their effluent by 90%. The City's new West Side Plant and its older East Side Plant would both be covered by this proposed action. It is anticipated that modifications to the City's plants needed in order to comply with the phosphorus limit would require a substantial expense to the City (in excess of $22 million). The Arkansas Department of Environmental Quality ("ADEQ") has questioned the new limit, and it is likely that all affected entities will oppose the proposed regulation. The EPA and ADEQ are also considering new limits and testing for certain dissolved minerals discharged into the White River by area municipal wastewater treatment plants, which, if enacted, would force the City's East Side Plant to be substantially rebuilt at a cost now estimated to be approximately $45 million and would increase operating costs by an estimated $2 million annually. The City is in discussions with ADEQ in an effort to avoid the need for compliance with said proposed dissolved mineral regulations. The enactment and enforcement of either of the proposed phosphorus or dissolved mineral regulations would likely necessitate significant wastewater rate increases by the City. Projected Capital Expenditures. The City anticipates the cost of contemplated expansions and capital improvements to the System over the next five years are as set forth in the following table. It is expected that such improvements will be funded from a combination of System revenues, impact fee receipts, grant moneys and Additional Bond proceeds. 2014(') 2015 2016 2017 2018 Miscellaneous Water System Improvements $2,921,800 $2,932,000 $2,753,000 $2,735,000 $2,700,000 Miscellaneous Sewer 2,410,200 2,000,000 2,100,000 2,200,000 2,300,000 System Improvements TOTALS: 5 332 000 $4,932,000 4 853 000 4 935 000 5 000 000 From the City's 2014 annual budget. Source: Water and Wastewater Director, City of Fayetteville, Arkansas. WATER RATES Rate Structure. The following tables set forth the City's current water rate structure: Inside City Monthly Treated Water Rates (cost per 1,000 gallons) Usage Rate Customer Class ingallons) Effective 1 / 1 / 14 Residential First 2,000 $2.77 Next 13,000 $3.67 Over 15,000 $5.19 Nonresidential First 300,000 $3.00 Over 300,000 $2.68 Major Industrial All usage $2.34 Irrigation First 300,000 $3.98 Over 300,000 $3.58 Wholesale Reduced Peak Demand $2.26 Peak Demand $2.49 15 Inside City Monthly Water Service Charge Meter Size Effective 1/1/14 5/8 " x 3/4 " Outside City 1 inch $ 7.21 Monthly Treated Water Rates $ 12.58 2 inch (cost per 1,000 gallons) 3 inch $ 42.67 Usage Rate $ 70.65 Customer Class (inalb lons) Effective 1/1/14 8 inch Residential First 2,000 $3.18 Next 13,000 $4.22 Over 15,000 $5.96 Nonresidential First 300,000 $3.46 Over 300,000 $3.08 Major Industrial All usage $2.69 Irrigation First 300,000 $4.58 Over 300,000 $4.12 Wholesale Reduced Peak Demand $2.26 Peak Demand $2.49 Inside City Monthly Water Service Charge Meter Size Effective 1/1/14 5/8 " x 3/4 " $ 5.19 1 inch $ 7.21 1 1/2 inch $ 12.58 2 inch $ 18.30 3 inch $ 42.67 4 inch $ 70.65 6 inch $141.30 8 inch $211.88 Outside City Monthly Water Service Charge Meter Size Effective 1/1/14 5/8 " x 3/4 " $ 5.96 1 inch $ 8.29 1 1/2 inch $ 14.46 2 inch $ 21.05 3 inch $ 49.08 4 inch $ 81.25 6 inch $162.48 8 inch $243.67 Wholesale Monthly Water Service Charge Meter Size Effective 1/1/14 5/8 " x 3/4 " $ 6.57 1 inch $ 9.07 1 1/2 inch $ 15.79 2 inch $ 22.95 3 inch $ 50.81 4 inch $ 88.63 6 inch $167.96 8 inch $262.81 Wei Inside City Monthly Standby Fire Protection Service Meter Size Effective 1/1/14 2 inch $ 8.77 3 inch $ 26.29 4 inch $ 52.59 6 inch $146.08 8 inch $306.79 10 inch $525.91 Outside City Monthly Standby Fire Protection Service Meter Size Effective 1/1/14 2 inch $ 10.08 3 inch $ 30.24 4 inch $ 60.48 6 inch $167.99 8 inch $352.81 10 inch $604.79 All monthly water rates, service charges and standby fire protection charges are to be increased by 3% each subsequent year. SEWER RATES The following tables set forth the City's sewer rate structure: Monthly Quantity Charge (cost per 1,000 gallons) Inside City Monthly Sewer Service Charge Meter Size Effective 1/1/14 5/8" x 3/4" Usage Rate 1 inch Class (ingallons) Effective 1/1/14 Residential First 2,000 $3.43 $101.62 Over 2,000 $4.57 Nonresidential All usage $3.48 Major Industrial All usage $3.72 Farmington All usage $5.94 Outside City All usage $6.46 Elkins 85% of metered water $4.10 usage Usage above 85% of $2.40 metered water usage Inside City Monthly Sewer Service Charge Meter Size Effective 1/1/14 5/8" x 3/4" $ 14.43 1 inch $ 18.75 1 1/2 inch $ 30.60 2 inch $ 43.76 3 inch $101.62 4 inch $167.47 6 inch $331.86 8 inch $496.32 17 Outside City Monthly Sewer Service Charge Meter Size Effective 1/1/14 5/8" x 3/4" $ 14.43 1 inch $ 26.78 1 1/2 inch $ 47.65 2 inch $ 62.94 3 inch $145.44 4 inch $239.53 6 inch $474.80 8 inch $710.28 Farmington Monthly Sewer Service Charge Meter Size Effective 1/1/14 5/8" x 3/4" $ 13.21 1 inch $ 24.70 1 1/2 inch $ 43.82 2 inch $ 57.97 3 inch $133.64 4 inch $220.19 6 inch $437.09 8 inch $652.69 Extra Strength Surcharge For all commercial and industrial customers whose wastewater discharge is greater than 300 mg/1 of BODS and/or TSS, an extra strength surcharge is levied as follows: Effective 1/1/14 Extra Strength BODS $0.3436/lb Extra Strength TSS $0.2413/lb All monthly sewer quantity and service charges and extra strength surcharges will be increased by 3% each subsequent year. Rate Comparison. The following is a comparison of the monthly water and sewer charges for the City of Fayetteville with the charges of other area municipalities, based upon combined water and sewer charges for the average residential unit with 6,000 gallons of water consumption per month: City Cost Per Month Fayetteville $67.25 Bentonville $89.42 Fort Smith $58.52 Rogers $53.58 Springdale $38.74 Source: City water and sewer departments as of March 1, 2014. 18 Billing Procedures, Delinquency and Uncollectible Accounts. The City Code of Ordinances provides that bills for water and sewer services are rendered monthly in the net amount due. Bills are due and payable on or before the twentieth day following the billing date stated thereon. Bills not paid on or before the due date are considered delinquent and an additional charge of 10% of the total current bill is assessed against the account. Over the last five years, the City's bad debt expense experience has been as follows: Fiscal Year Ending December 31 2009 2010 2011 2012 2013') Unaudited. Water and Sewer Operating Revenues $27,531,109 29,761,443 32,133,628 34,318,514 33,200,583 Bad Debt ExpenseM $188,757 178,959 182,694 192,581 188,921 Bad Debt Percentage 0.69% 0.60% 0.57% 0.56% 0.57% Financial Information. Set forth in Appendix A to this Official Statement are the Statement of Fund Net Assets and the Statement of Revenues, Expenses and Changes in Fund Net Assets of the City's Water and Sewer Fund (the "Fund") for the year ended December 31, 2012. Such condensed financial information has been extracted from the Fund's financial statements included in the City's 2012 Comprehensive Annual Financial Report (the "CAFR"), which statements have been audited by Grant Thornton, LLP, independent certified public accountants. The City did not request Grant Thornton, LLP perform any updating procedures subsequent to the date of its audit report on the December 31, 2012, financial statements. Reference should be made to the CAFR for disclosures and required supplementary information necessary to fairly present the financial position and results of operations of the Fund. The CAFR can be viewed in its entirety, including the accountants' report, notes to financial statements and required supplementary information, on the City's website at www.accessfayetteville.org/government/accounting and audit/index.cfm by selecting "Comprehensive Annual Financial Reports". The notes set forth in the CAFR are an integral part of the financial statements included in the CAFR, and the statements and notes should be read in their entirety. Set forth in Appendix B to this Official Statement are the unaudited financial statements of the City's Water and Sewer Fund for the year ended December 31, 2013. [REMAINDER OF PAGE INTENTIONALLY BLANK] 19 Following is a summary of revenues, expenses and changes in fund equity of the City's Water and Sewer Fund for the five years ended December 31, 2013. Information for the summary for the years ended December 31, 2009, 2010 and 2011 was derived from the financial statements of the City audited by BKD, LLP, independent certified public accountants. Information for the summary for the year ended December 31, 2012 was derived from the financial statements of the City audited by Grant Thornton, LLP, independent certified public accountants. The following table should be read in conjunction with the City's 2012 CAFR (referenced above). Information for the summary for the year ended December 31, 2013 was derived from the unaudited financial statements of the City's Water and Sewer Fund attached as Appendix B. City of Fayetteville, Arkansas Water and Sewer Fund Statement of Revenues, Expenses and Changes in Fund Equity For the Years Ended December 31, 2009 2010 2011 2012 2013'1 Operating revenues: Water services $12,264,859 $13,712,683 $15,359,868 $16,763,707 $15,547,701 Sewer services 14,336,394 14,970,047 15,645,479 16,431,009 16,480,453 Other 929.856 1,078,713 1,128,281 1,123,798 1,172,429 Total operating revenues 27,531,109 29,761,443 32,133,628 34,318,514 33,200,583 Operating expenses: Personnel services 4,482,370 4,382,588 4,499,221 4,665,056 5,138,023 Materials and supplies 1,204,379 1,245,826 1,297,651 1,480,263 1,510,184 Contract services and charges 17,450,507 16,727,469 17,189,607 17,848,139 18,266,123 Maintenance 119,096 77,926 117,941 101,574 149,964 Depreciation 9,842,327 10,070,404 10,275.854 10,883,035 10,860,771 Total operating expenses 33,098,679 32,504,213 33380,274 34,978,067 35,925,065 Operating income (loss) (5,567,570) (2,742,770) (1,246,646) (659,553) (2,724,482) Nonoperating income (expenses): Intergovernmental -- -- -- -- - Interest expense and fees (591,824) (641,171) (543,763) (429,414) (344,358) Interest income 208,375 198,713 119,887 118,668 97,344 Net increase (decrease) in fair (42,507) 62,558 (46,502) (7,132) (87,072) value of investments Other revenues 537,878 853,499 459,124 476,413 587,917 Total nonoperating income 111,922 473,599 (11,254) 158,535 253,831 Income (loss) before contributions and transfers (5,455,648) (2,269,171) (1,257,900) (501,018) (2,470,651) Capital donations 9,588,464 5,241,944 1,296,986 1,617,698 1,472,599 Capital internal transfers -- -- 11,065,423 4,435,299 -- Capital grants 243,631 82,490 1,403,320 3,381,330 442,792 Transfers in from other funds 90,016 2,792,404 -- 1,278,518 2,041,912 Transfers out to other funds -- -- -- (342.761) -- Change in net assets 4,466,463 5,847,667 12,507,829 9,869,066 1,486,652 Total net assets, beginning of year 301,428,839 305,895,302 311,742,969 324,250,798 333,919,982(2) Total net assets, end of year $305 $311,742 969 324250.798 $334,119,864 $335,406,634 "' Unaudited. (2) Net assets beginning balance was restated due to the implementation of Governmental Accounting Standards Board Statement No. 65. Such restatement reduced beginning net assets by $199,882. [REMAINDER OF PAGE INTENTIONALLY BLANK] all DEFINITIONS OF CERTAIN TERMS The following are definitions of certain terms used in this Official Statement: "Act" — Arkansas Code Annotated (1998 Repl. and Supp. 2013) §§ 14-164-401 et seq., §§ 14-234-201 et seq. and §§ 14-235-201 et seq., as from time to time amended. "Additional Bonds" — Bonds in addition to the Series 2012 Bonds and the Series 2014 Bonds which are issued under the provisions of the Indenture. "Annual Debt Service" — With respect to all or any particular amount of Bonds or Subordinate Obligations, as the case may be, the Debt Service for any particular Fiscal Year required pursuant to the provisions of the Indenture 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 Subordinate Obligations or from sources other than Net Revenues. "Authorizing Ordinance" — Ordinance No. 5665 of the City, adopted and approved on March 4, 2014, authorizing the issuance of the Series 2014 Bonds pursuant to the Indenture. "Bond Counsel" — Any firm of nationally recognized municipal bond counsel selected by the City and acceptable to the Trustee. "Bond Fund"— The fund by that name created and established in the Indenture. "Bonds" — The Series 2012 Bonds, the Series 2014 Bonds and all Additional Bonds issued by the City pursuant to the Indenture. "City" — The City of Fayetteville, Arkansas, a municipality and political subdivision under the laws of the State of Arkansas. "Code" — The Internal Revenue Code of 1986, as from time to time amended, and applicable regulations issued or proposed thereunder. "Costs of Construction" — All costs paid or incurred by the City in connection with acquiring, constructing and equipping of Facilities and placing of the same in operation or the reconstruction and re-equipping of damaged Facilities and replacing them in operation, including, without limitation, paying all or a portion of the interest on any series of Bonds issued for such purpose; paying into the Debt Service Reserve Fund from the proceeds of Bonds all or a portion of the amount or amounts required to make the amounts therein equal to the Reserve Requirements with respect to the particular series of Bonds being issued; paying or reimbursing the City or any fund for expenses of the City incident and properly allocable to such acquisition, construction, and equipping or reconstruction and re- equipping and the placing or replacing of the Facilities in operation; and all other expenses incident and properly allocable to the acquisition, construction, and equipping or the reconstruction and re-equipping of Facilities, the financing of the same, and the placing of the same in operation. "Costs of Issuance Fund" — The fund by that name created and established in the Indenture. "Debt Service" — With respect to all or any particular amount of Bonds or Subordinate Obligations, 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 or Subordinate Obligations, excluding amounts scheduled during such period which relate to principal which has been retired before the beginning of such period. "Debt Service Reserve Fund" — The fund by that name created and established in the Indenture. "Depository" — A national or state banking corporation or association (which may also include the Trustee and any Paying Agent) which holds membership in the Federal Deposit Insurance Corporation. "Escrow Agreement" — The Escrow Deposit Agreement dated May 20, 2014, between the City and the Escrow Trustee, providing for the redemption of the Series 2009 Bonds. "Escrow Trustee" — BOKF, NA dba Bank of Oklahoma, Tulsa, Oklahoma, in its capacity as escrow trustee under the Escrow Agreement. "Event of Default" — Any event of default specified in the Indenture. See the caption "SUMMARY OF THE INDENTURE — Events of Default" herein. "Facilities" — Land, buildings, structures, machinery, equipment and all related or necessary property, tangible or intangible, constituting the System, including, but not limited to, consumables, rights, easements, 21 franchises, and common facilities (being facilities used in common by the City in the furnishing of water or sewer services) which are used or useful in the collection, storage, distribution, treatment, sale or other use of water or wastewater, and to which the City has right, title or ownership, in whole or undivided part, and, if in undivided part, then to the extent of the City's right, title or ownership therein. "Fiscal Year" – The 12 -month period used, at any time, by the City for accounting purposes with respect to the System, which may be the calendar year. Currently, the fiscal year of the City ends on December 31 of each year. "Government Securities" – (i) bonds, notes, certificates of indebtedness, treasury bills or other securities constituting direct obligations of, or obligations on which the full and timely payment of principal and interest is fully and unconditionally guaranteed by, the United States of America (including any such securities issued or held in book -entry form on the books of the Department of Treasury of the United States of America), and (ii) evidences of direct ownership or proportionate or individual interest in future interest or principal payments on specified direct obligations of, or obligations on which the full and timely payment of principal and interest is fully and unconditionally guaranteed by, the United States of America, which obligations are held by a bank or trust company organized and existing under the laws of the United States of America or any state thereof in the capacity of custodian in form and substance satisfactory to the Trustee. "Holder" or "bondholder" or "owner of the Bonds" – The registered owner of any Bond. "Indenture" – The Trust Indenture dated as of May 1, 2002, as supplemented and amended by a First Supplemental Trust Indenture dated as of May 1, 2004, by a Second Supplemental Trust Indenture dated as of June 1, 2009, by a Third Supplemental Trust Indenture dated as of May 15, 2012, and by a Fourth Supplemental Trust Indenture dated as of May 15, 2014, each by and between the City and the Trustee, pursuant to which the Bonds are issued, and any further amendments and supplements thereto. "Investment Securities" – If and to the extent the same are at the time legal for investment of funds held under the Indenture: (1) Government Securities; (2) Direct obligations of any of the following federal agencies which obligations are not fully guaranteed by the full faith and credit of the United States of America: — Senior debt obligations issued by the Federal National Mortgage Association (FNMA) or Federal Home Loan Mortgage Corporation (FHLMC). — Obligations of the Resolution Funding Corporation (REFCORP). — Senior debt obligations of the Federal Home Loan Bank System. — Senior debt obligations of other Government Sponsored Agencies approved by Ambac Assurance; (3) U.S. dollar denominated deposit accounts, federal funds and bankers' acceptances with domestic commercial banks which have a rating on their short term certificates of deposit on the date of purchase of "P-1" by Moody's and "A-1" or "A-1+" by S&P and maturing no more than 360 calendar days after the date of purchase. (Ratings on holding companies are not considered as the rating of the bank.); (4) Investments in a money market fund rated "AAAm" or "AAAm-G" or better by S&P; (5) Pre -refunded Municipal Obligations defined as follows: any bonds or other obligations of any state of the United States of America or of any agency, instrumentality or local governmental unit of any such state which are not callable at the option of the obligor prior to maturity or as to which irrevocable instructions have been given by the obligor to call on the date specified in the notice; and (A) which are rated, based on an irrevocable escrow account or fund (the "escrow"), in the highest rating category of Moody's or S&P or any successors thereto; or (B) (i) which are fully secured as to principal and interest and redemption premium, if any, by an escrow consisting only of cash or obligations described in paragraph (2) above, which escrow may be applied only to the payment of such principal of and interest and redemption 22 premium, if any, on such Obligations or other obligations on the maturity date or dates thereof or the specified redemption date or dates pursuant to such irrevocable instructions, as appropriate, and (ii) which escrow is sufficient, as verified by a nationally recognized independent certified public accountant, to pay principal of and interest and redemption premium, if any, on the bonds or other obligations described in this paragraph on the maturity date or dates specified in the irrevocable instructions referred to above, as appropriate; (6) Municipal obligations rated "Aaa/AAA" or general obligations of States with a rating of at least "A2/A" or higher by both Moody's and S&P. (7) Investment agreements approved in writing by Ambac Assurance (supported by appropriate opinions of counsel); and (8) Other forms of investments (including repurchase agreements) approved in writing by Ambac Assurance. "Moody's" — Moody's Investors Service and any successor thereto. "Net Revenues" — Revenues less Operation and Maintenance Expenses. "Operation and Maintenance Expenses" — For any period, all ordinary and necessary expenses of operation, repair, maintenance and insuring of the System under generally accepted accounting principles, except that there shall not be included (i) any allowance for depreciation, (ii) any deposits or transfers to the credit of (a) the Bond Fund or to any fund or account created for the payment of debt service on any Subordinate Obligations, (b) the Debt Service Reserve Fund or any debt service reserve fund or account created in connection with any Subordinate Obligations, or (c) the Renewal and Replacement Fund, or (iii) any payments with respect to obligations not payable in whole or in part under any circumstances from Revenues. Operating Expenses shall specifically include obligations of the City to the Beaver Water District of Benton and Washington Counties, Arkansas. "Operation and Maintenance Fund" — The fund by that name described in the Indenture. "Outstanding" — When used with reference to the Bonds, as of any particular date, the aggregate of all Bonds authenticated and 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 VIII 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. "Paying Agent" — 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. "Permitted Encumbrances" — (i) Any mortgage lien for the security of the Bonds; (ii) liens for taxes, assessments and other governmental charges not then delinquent or which can be paid without penalty; (iii) unfiled, inchoate mechanics' and materialmen's liens; (iv) workmen's, repairmen's, warehousemen's, and carriers' liens and others similar liens, if any, arising in the ordinary course of business; and (v) any easements, restrictions, mineral, oil, gas and mining rights and reservations, zoning laws and defects in title or other encumbrances to which System facilities may be subject because of their acquisition, construction and installation as part of the System. "Person" — 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. "Qualified Accountant" — An independent certified public accountant or firm of independent certified public accountants not in the regular employ of the City. "Rebate Fund" — The fund by that name created and established in the Indenture. "Record Date" — With respect to any interest payment date of the Bonds, the first day of the calendar month in which such interest payment date falls. 23 "Renewal and Replacement Fund — The fund by that name confirmed and described in the Indenture. "Reserve Requirement" — At any particular time, an amount equal to 50% of the aggregate maximum Annual Debt Service in any Fiscal Year thereafter with respect to Outstanding Bonds of all series. "Revenues" — All fees, tolls, rates, rentals and charges levied and collected in connection with, and all other income and receipts of whatever kind or character derived by the City from, the operation of the System. Revenues shall specifically include, but shall not be limited to, revenues from water sales, sewer service charges, fire protection charges and interest income on Revenue Fund balances. Notwithstanding the foregoing, Revenues shall not include acreage, connection, front -footage, tap -on, assessment and similar fees, charges, contributions or grants derived by the City in connection with the provision of or payment for capital improvements constituting a part of the System. "Revenue Fund" — The fund by that name confirmed and described in the Indenture. "S&P" — Standard & Poor's Ratings Services, a Division of The McGraw-Hill Companies, Inc., and any successor thereto. "Series 2009 Bonds" — An additional series of Bonds issued under and secured by the Indenture in the aggregate principal amount of $8,210,000. "Series 2012 Bonds" — An additional series of Bonds issued under and secured by the Indenture in the aggregate principal amount of $3,665,000. "Series 2014 Bonds" — An additional series of Bonds issued under and secured by the Indenture in the aggregate principal amount of $6,330,000. "Subordinate Obligations" — Debt obligations of the City secured by a pledge of Net Revenues that is subordinate to the lien thereon securing the payment of the Bonds, as permitted by the provisions of the Indenture. "System" — The City's combined water and sewer utility system. "Trustee" — The banking corporation or association designated as Trustee in the Indenture, and its successor or successors as such Trustee. The original Trustee is BOKF, NA dba Bank of Oklahoma, Tulsa, Oklahoma. "Trust Estate" — The property described in the granting clauses of the Indenture. 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 City Clerk of the City, for a full statement thereof. Funds and Disposition of Revenues. Net Revenues are pledged by the Indenture to the payment of the principal of and premium, if any, and interest on the Bonds, subject to various provisions permitting application for other purposes. The following funds are referenced with respect to the Bonds: Fund Held By Revenue Fund City Operation and Maintenance Fund City Bond Fund Trustee Debt Service Reserve Fund Trustee Renewal and Replacement Fund City Cost of Issuance Fund Trustee Rebate Fund Trustee 24 Application of Revenues. The application of Revenues is as follows: (a) Revenue Fund. All Revenues shall, as and when received, be deposited into the Revenue Fund. All moneys at any time in the Revenue Fund shall be applied to the payment of Operation and Maintenance Expenses of the System, the payment of Annual Debt Service on the Bonds and any Subordinate Obligations, the maintenance of the Debt Service Reserve and the debt service reserves for any Subordinate Obligations, and the providing of the Renewal and Replacement Fund in the order, at the times and in the amounts set forth as follows: (b) Operation and Maintenance Fund. Prior to making the required payments into the Bond Fund and Debt Service Reserve Fund, into the bond funds and debt service reserve funds for any Subordinate Obligations, and into the Renewal and Replacement Fund, there shall be paid from the Revenue Fund into the Operation and Maintenance Fund, not later than the fifth business day preceding the fifteenth day in each month while any of the Bonds shall be Outstanding, an amount sufficient to cause amounts on deposit therein to equal projected Operation and Maintenance Expenses for the next two succeeding months (as shown in the budget of proposed Operation and Maintenance Expenses for the then current Fiscal Year) and from which disbursements shall be made only for those purposes. Fixed annual charges such as insurance premiums and the cost of major repair and maintenance expenses may be computed and set up on an annual basis, and 1/12 of the amount thereof may be paid into the Operation and Maintenance Fund each month. If in any month for any reason there shall be a failure to transfer and pay the required amount into the Operation and Maintenance Fund, the amount of any deficiency shall be added to the amount otherwise required to be transferred and paid into the Operation and Maintenance Fund in the next succeeding month. (c) Bond Fund. Immediately following the making of required deposits into the Operation and Maintenance Fund, there shall be paid from the Revenue Fund into the Bond Fund, on the fifth business day preceding the fifteenth day of each month until all Outstanding Bonds with interest thereon have been paid in full, or provision made for such payment, a sum equal to (i) 1/6 of the installment of interest coming due on the Bonds (whether at maturity, upon mandatory redemption, or otherwise) during the then next six (6) months, and (ii) 1/12 of the installment of principal coming due on the Bonds (whether at maturity, upon mandatory redemption, or otherwise) during the then next twelve (12) months (provided, however, that the first payments required under the Indenture with respect to a series of Bonds shall be prorated from the date of issuance of such series of Bonds and subsequent payment obligations shall be reduced to the extent of investment earnings and other moneys credited to the Bond Fund from sources other than monthly payments). All moneys in the Bond Fund shall be used solely for the purpose of paying Annual Debt Service on the Bonds or for any redemption of the Bonds, except as specifically 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 the amount of such payment for the sole purpose of paying the same. If Revenues are insufficient to make the required 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 the fifth business day preceding the fifteenth day of the next succeeding month. When the moneys held in the Bond Fund and the Debt Service Reserve Fund shall be and remain sufficient to pay in full the principal of and premium, if any, and interest on all Bonds then Outstanding, there shall be no obligation to make further payments into the Bond Fund. (d) Debt Service Reserve Fund. See the caption "SECURITY FOR THE BONDS — Debt Service Reserve" herein. (e) Renewal and Replacement Fund. After making the required deposits into the Operation and Maintenance Fund, into the Bond Fund and Debt Service Reserve Fund, and into the bond funds and debt service reserve funds with respect to any Subordinate Obligations, there shall be paid from the Revenue Fund into the Renewal and Replacement Fund not later than the fifth business day preceding the fifteenth day of each month while any of the Bonds are Outstanding, an amount sufficient to cause the amount on deposit therein to equal $300,000 or such greater amount as the City may determine from time to time is appropriate, provided that the amount to be deposited in any month need not exceed 1/12 of the amount then required to be on deposit therein. The moneys in the Renewal and Replacement Fund shall be used solely for the purpose of paying the cost of necessary repairs or replacements due to the depreciation of the System and not paid for with moneys in the Operation and Maintenance Fund and costs of damage caused to the System by unforeseen catastrophes. (f) Surplus. Any surplus in the Revenue Fund after making all disbursements and providing for all funds described above may be used, at the option of the City for any lawful purpose. 25 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 this Indenture; provided, however, the stated maturity dates of Investment Securities of Debt Service Reserve Fund moneys 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. The City may invest moneys held in the Revenue Fund, Operation and Maintenance Fund and Renewal and Replacement Fund in any investment obligations permitted by Arkansas law. Obligations purchased as an investment of moneys in any fund or account created by the Indenture shall be deemed at all times to be a part of such fund or account, and any income or loss due to an investment thereof shall be charged to the respective fund or account for which the investment was made except as otherwise provided in the Indenture. Investments in any fund or account shall be evaluated at least annually by the City or the Trustee, as may be appropriate. For the purpose of determining the amount in any fund or account, the City and the Trustee shall value all Investment Securities credited to such fund or account at the price at which such Investment Securities are redeemable by the holders or owners thereof at their option if so redeemable, or, if not so redeemable, at the lesser of (i) the cost of such Investment Securities minus the amortization of any premium or plus the amortization of any discount thereon and (ii) the market value of such Investment Securities, provided that Investment Securities credited to the Debt Service Reserve Fund, if not so redeemable, shall be valued at the cost thereof minus the amortization of any premium or plus the amortization of any discount thereon. 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 based on accepted industry standards and from accepted industry providers. 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. Operation and Maintenance of System; Disposition of System Assets. The City covenants that it will continuously operate the System in a diligent fashion in accordance with prudent utility practice and as a revenue-producing undertaking in compliance with all applicable laws and regulations and all the covenants and obligations under the Indenture. The City further covenants that it will maintain the System in sound condition and repair, that it will not sell or otherwise dispose of any property necessary to the proper operation of the System or to the maintenance of Revenues, and that it will not enter into any lease or agreement which will impair or impede the operation of the System or adversely affect the rights of the bondholders. Insurance. The City covenants and agrees to insure and at all times keep insured, in the amount of the actual value thereof, by a responsible insurance company or companies authorized and qualified under the laws of the State of Arkansas to assume the risk thereof, all properties of the System, other than water storage tanks, mains and lines for the transmission, distribution or collection of water or wastewater, against loss or damage from fire, lightning, tornado, winds, strike, malicious damage or explosion and against loss or damage from any other causes customarily insured against by private companies engaged in a similar type of business. In the event of loss, the proceeds of such insurance shall be applied solely toward the reconstruction, replacement or repair of the System, and in such event the City shall, with reasonable promptness, cause to be commenced and completed the reconstruction, replacement and repair work. If such proceeds are more than sufficient for such purposes, the balance remaining shall be deposited to the credit of the Bond Fund, and, if such proceeds shall be insufficient for such purposes, the deficiency shall be supplied, first, from moneys in the Renewal and Replacement Fund and, second, from any available moneys in the Revenue Fund. Damage or Destruction; Condemnation. The City covenants and agrees that in the event of damage to or destruction of the System, or if all or any part of the System shall be taken under the exercise of eminent domain, it will immediately notify the Trustee. P All insurance money paid or net amounts awarded shall be paid to the City, and the City shall proceed to restore, repair, replace or rebuild System facilities as nearly as possible to the condition they were in immediately prior to such damage or condemnation, to the extent that the same may be feasible, subject to such alterations as the City may elect to make. If the insurance money or net amounts awarded shall be insufficient to pay all costs of the restoration, the City shall pay the deficiency and shall nevertheless proceed to complete the restoration and pay the cost thereof. Any balance of the insurance or condemnation proceeds remaining over and above the cost of the restoration shall be deposited into the Revenue Fund. The City's obligations to make all payments set forth in the Indenture and to perform all other covenants and agreements on its part to be performed shall not be affected by any such damage or destruction or condemnation. Notwithstanding the foregoing provisions, the City shall not be required to repair, restore, replace or rebuild System facilities, or any part thereof, if the City shall elect to redeem prior to maturity on the next possible redemption date all of the Bonds then Outstanding, together with accrued interest to the redemption date, and to pay all charges, fees and expenses necessarily incurred and required to be incurred in connection with such redemption, and all other amounts then owing by the City. In that event, the proceeds of all insurance or condemnation awards shall be placed in and become part of the Bond Fund. If there be any deficiency in the moneys on deposit in the Bond Fund after the deposit of all such proceeds, the City shall immediately deposit therein the amount of the deficiency. Accounting, Reports. The City covenants that it will keep the funds and accounts of the System separate from all other funds and accounts of the City, and that it will keep accurate records of all items of cost and of all expenditures relating to the System, and of the collection and application of Revenues, in accordance with generally accepted accounting principles. Such records and accounts shall be open to inspection by the Trustee under reasonable circumstances. The City further covenants that at the end of each Fiscal Year it will cause an audit to be made of the books and accounts for that Fiscal Year pertaining to the System by a Qualified Accountant. Copies of each such audit shall be filed with the Trustee and furnished to the holders of outstanding Bonds making written request therefor. Annual Budget. The City shall prepare an annual budget for System operations for each Fiscal Year. A copy of each budget shall be filed with the Trustee and a copy shall be maintained in the office of the Finance and Internal Services Director of the City. 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. 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 27 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; and (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. 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, 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. 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 28 interest on each of the Bonds issued under the Indenture to the respective holders thereof at the time and place in said Bonds expressed. 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 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; (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 (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 (f) below 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) deprive 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. 29 SUMMARY OF THE CONTINUING DISCLOSURE AGREEMENT The City has entered into an undertaking in the form of the Continuing Disclosure Agreement for the benefit of the Beneficial Owners of the Series 2014 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"). In connection with certain of the City's prior undertakings pursuant to the Rule, certain filings of the City's Audited Financial Statements and Audited Financial Information were not made on or before the due dates provided in said undertakings. All required filings have now been made with the MSRB through the EMMA system, and the City has implemented procedures to assure verifiable compliance with its continuing disclosure obligations. The Continuing Disclosure Agreement contains the following covenants and provisions: (a) The City covenants that it will disseminate, or will cause the Dissemination Agent to disseminate, the Annual Financial Information and the Audited Financial Statements (in the form and by the dates set forth in Exhibit I to the Continuing Disclosure Agreement) by delivering such Annual Financial Information to the MSRB within 180 days of the completion of the City's fiscal year. Audited Financial Statements, if available, shall be filed with the MSRB at the same time as the Annual Financial Information. If not then available, unaudited financial statements shall be included with the MSRB filing, and Audited Financial Statements shall be provided to the MSRB within ten (10) business days after availability thereof. The City is required to deliver or cause delivery of such information in Prescribed Form and by such time so that such entity receives the information by the dates specified. (b) If any part of the Annual Financial Information can no longer be generated because the operations to which it is related have been materially changed or discontinued, the City will disseminate or cause dissemination of a statement to such effect as part of its Annual Financial Information for the year in which such event first occurs. (c) If any amendment is made to the Continuing Disclosure Agreement, the Annual Financial Information for the year in which such amendment is made (or in any notice or supplement provided to the MSRB) shall contain a narrative description of the reasons for such amendment and its impact on the type of information being provided. (d) The City covenants to disseminate or cause dissemination in a timely manner, not in excess of ten (10) business days after the occurrence of the event, of Material Events Disclosure to the MSRB in Prescribed Form. Notwithstanding the foregoing, notice of optional or unscheduled redemption of any Series 2014 Bonds or defeasance of any Series 2014 Bonds need not be given under the Continuing Disclosure Agreement any earlier than the notice (if any) of such redemption or defeasance is given to the owners of the Series 2014 Bonds pursuant to the Indenture. The City is required to deliver or cause delivery of such Material Events Disclosure in the same manner as provided for Annual Financial Information and Audited Financial Statements. (e) The City shall give notice in a timely manner or shall cause such notice to be given by the Dissemination Agent, not in excess of ten (10) business days after the occurrence of the event, to the MSRB in Prescribed Form of any failure to provide Annual Financial Information Disclosure when the same is due. (f) The Continuing Disclosure Agreement has been executed in order to assist the Participating Underwriter in complying with the Rule; however, the Continuing Disclosure Agreement shall inure solely to the benefit of the City, the Dissemination Agent, if any, the Trustee and the Beneficial Owners of the Series 2014 Bonds, and shall create no rights in any other person or entity. In the event of a failure of the City to comply with any provision of the Continuing Disclosure Agreement, the Beneficial Owner of any Series 2014 Bond may seek specific performance by court order to cause the City to comply with its obligations under the Continuing Disclosure Agreement. A default under the Continuing Disclosure Agreement shall not be deemed an Event of Default under the Indenture or any other agreement, and the sole remedy under the Continuing Disclosure Agreement in the event of any failure of the City or the Dissemination Agent to comply with the Continuing Disclosure Agreement shall be an action to compel performance. (g) The Undertaking of the City pursuant to the Continuing Disclosure Agreement shall be terminated hereunder when the City shall no longer have any legal liability for any obligation on or relating to the repayment of the Series 2014 Bonds. The City shall give notice to the MSRB, or shall cause the Dissemination Agent to give such notice, in a timely manner and in Prescribed Form in such event. (h) The City and the Dissemination Agent may amend the Continuing Disclosure Agreement, and any provision of the Continuing Disclosure Agreement may be waived, if (i) the amendment or waiver is made in 30 connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature or status of the City or type of business conducted; (ii) the Continuing Disclosure Agreement, as amended, or the provision, as waived, would have complied with the requirements of the Rule at the time of the primary offering, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; (iii) the amendment or waiver does not materially impair the interests of the Beneficial Owners of the Series 2014 Bonds, as determined either by parties unaffiliated with the City (such as the Trustee) or by an approving vote of the Beneficial Owners of the Series 2014 Bonds holding a majority of the aggregate principal amount of the Series 2014 Bonds (excluding Series 2014 Bonds held by or on behalf of the City or its affiliates) pursuant to the terms of the Indenture at the time of the amendment; or (iv) the amendment or waiver is otherwise permitted by the Rule. (i) The following terms used under this caption shall have the meanings set forth below: "Annual Financial Information" means the following general categories of financial information and operating data with respect to the System for the prior fiscal year: (A) Changes in wholesale water rates charged by the Beaver Water District; (B) Changes in the City's water and sewer rate structure; (C) Annual System operating revenues, bad debt expense and bad debt expense percentage; (D) Costs for projected System capital improvements for the current fiscal year; (E) Usage percentages of all water users consuming more than 5% of the System's water output; (F) Average daily water use and maximum day's water use; and (G) Average daily sewage flow. "Annual Financial Information Disclosure" means the dissemination of disclosure concerning Annual Financial Information and the dissemination of the Audited Financial Statements as set forth in subsection (a) above. "Audited Financial Statements" means the audited consolidated financial statements of the City, prepared pursuant to generally accepted accounting standards and as described in Exhibit I to the Continuing Disclosure Agreement. "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 Series 2014 Bonds (including persons holding Series 2014 Bonds through nominees, depositories or other intermediaries), or (b) is treated as the owner of any Series 2014 Bonds for federal income tax purposes. "Commission" means the U.S. Securities and Exchange Commission. "Dissemination Agent" shall mean BOKF, NA dba Bank of Oklahoma, Tulsa, Oklahoma, acting in its capacity as a dissemination agent under the Continuing Disclosure Agreement, or any successor dissemination agent designated in writing by the City and which has filed with the Trustee a written acceptance of such designation. MSRB. Bonds: "EMMA" means the Electronic Municipal Market Access facility for municipal securities disclosure of the "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Material Event" means the occurrence of any of the following events with respect to the Series 2014 (1) Principal and interest payment delinquencies; (2) Nonpayment -related defaults, if material; (3) Unscheduled draws on debt service reserves reflecting financial difficulties; (4) Unscheduled draws on credit enhancements reflecting financial difficulties; (5) Substitution of credit or liquidity providers, or their failure to perform; (6) Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material 31 notices or determinations with respect to the tax status of the security, or other material events affecting the tax status of the security; (7) Modifications to rights of security holders, if material; (8) Bond calls, if material, and tender offers; (9) Defeasances; (10) Release, substitution or sale of property securing repayment of the securities, if material; (11) Rating changes; (12) Bankruptcy, insolvency, receivership or similar event of the City; (13) The consummation of a merger, consolidation or acquisition involving the City or the sale of all or substantially all of the assets of the City, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a defmitive agreement relating to any such actions, other than pursuant to its terms, if material; and (14) Appointment of a successor or additional trustee or the change of name of a trustee, if material. "Material Events Disclosure" means dissemination of a notice of a Material Event as set forth in subsection (d) above. "MSRB" shall mean the Municipal Securities Rulemaking Board established in accordance with the provisions of Section 1513(b)(1) of the 1934 Act. "Participating Underwriter" means each broker, dealer or municipal securities dealer acting as an underwriter in any primary offering of the Series 2014 Bonds. "Prescribed Form" means, with regard to the filing of Annual Financial Information, Audited Financial Statements and notices of Material Events with the MSRB at www.emma.msrb.org (or such other address or addresses as the MSRB may from time to time specify), such electronic format, accompanied by such identifying information, as shall have been prescribed by the MSRB and which shall be in effect on the date of filing of such information. "Rule" shall mean Rule 15c2 -12(b)(5) adopted by the Securities and Exchange Commission ("SEC") under the Exchange Act, as the same may be amended from time to time. "State" means the State of Arkansas. "Undertaking" means the obligation of the City pursuant to subsections (a) and (d) above. UNDERWRITING Under a bond purchase agreement entered into by and among the City and Stephens Inc. (the "Underwriter"), the Series 2014 Bonds are being purchased at a purchase price of $6,867,956.45 (representing the stated principal amount of the Series 2014 Bonds plus a net reoffering premium of $601,256.45 and less an underwriting discount of $63,300.00) plus accrued interest from May 15, 2014 to the date of delivery of the Series 2014 Bonds. The bond purchase agreement provides that the Underwriter will purchase all of the Series 2014 Bonds if any are purchased. The obligation of the Underwriter to accept delivery of the Series 2014 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 2014 Bonds or any proceedings in connection with the issuance thereof, and the absence of material adverse changes in the financial condition of the System. The Underwriter intends to offer the Series 2014 Bonds to the public initially at the offering prices as set forth on the 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 2014 Bonds to the public, and may offer the Series 2014 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 2014 Bonds, including certain liabilities under federal securities laws. 32 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 2014 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 tax. The opinion described in the preceding sentence assumes the accuracy of certain representations and compliance by the City with covenants designed to satisfy the requirements of the Code that must be met subsequent to the issuance of the Series 2014 Bonds. Failure to comply with such requirements could cause interest on the Series 2014 Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Series 2014 Bonds. The City has covenanted to comply with such requirements. Original Issue Premium. The Series 2013 Bonds maturing August 15, 2014, 2015, 2016, 2017, 2018, 2019 and 2020 (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 2014 Bonds. The accrual or receipt of interest on the Series 2014 Bonds may otherwise affect the federal income tax liability of the owners of the Series 2014 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 2014 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 2014 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 2014 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 2014 Bonds from gross income for federal income tax purposes or any other federal tax consequence of purchasing, holding or selling tax-exempt obligations. 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 2014 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 2014 Bonds. It cannot be predicted whether any such regulatory action will be implemented, how any particular lawsuit will be resolved, or whether the Series 2014 Bonds or the market value thereof would be impacted thereby. Purchasers of the Series 2014 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 2014 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. 33 State Taxes. Bond Counsel is of the opinion that, under existing law, the interest on the Series 2014 Bonds is exempt from all state, county and municipal taxes in the State of Arkansas. RATING Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. ("S&P"), has assigned a rating of AA+ (stable outlook) to the Series 2014 Bonds. Such rating reflects only the view of S&P at the time such rating was given. An explanation of the significance of the rating may be obtained from S&P. There is no assurance that such rating will continue for any given period of time or that the rating 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 rating may have an adverse effect on the market price of the Series 2014 Bonds. Neither the City nor the Underwriter have undertaken any responsibility subsequent to the issuance of the Series 2014 Bonds to assure the maintenance of the rating or to oppose any revision or withdrawal of the rating. No application has been made to any rating agency other than S&P for a rating on the Series 2014 Bonds. LEGAL MATTERS Legal Opinions. Legal matters incident to the authorization and issuance of the Series 2014 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 2014 Bonds. 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 2014 Bonds or questioning or affecting the legality of the Series 2014 Bonds or the proceedings and authority under which the Series 2014 Bonds are to be issued, or questioning the right of the City to issue the Series 2014 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 City or the System's financial affairs. FINANCIAL STATEMENTS The financial statements of the City's Water and Sewer Fund (the "Fund) at December 31, 2012 and for the year then ended are included herein as Appendix A. Such condensed financial information has been extracted from the Fund's financial statements included in the City's 2012 Comprehensive Annual Financial Report (the "CAFR"), which statements have been audited by Grant Thornton, LLP, independent certified public accountants. The City did not request Grant Thornton, LLP perform any updating procedures subsequent to the date of its audit report on the December 31, 2012 financial statements. Reference should be made to the CAFR for disclosures and required supplementary information necessary to fairly present the financial position and results of operations of the Fund. The CAFR can be viewed in its entirety, including the accountants' report, notes to financial statements and required supplementary information, on the City's website at www.accessfayetteville.or,/government/accounting_ and audit/index.cfm by selecting "Comprehensive Annual Financial Reports". The notes set forth in the CAFR are an integral part of the financial statements included in the CAFR, and the statements and notes should be read in their entirety. Set forth in Appendix B to this Official Statement are the unaudited financial statements of the Fund for the year ended December 31, 2013. Additional financial information concerning the City may be obtained from the City's Finance and Internal Services Director, City of Fayetteville, City Administration Building, 113 West Mountain, Fayetteville, Arkansas 72701. 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 2014 Bonds. 34 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. 35 The execution and delivery of this Official Statement has been duly authorized by the City of Fayetteville, Arkansas. CITY O FAYET VILLE, A NSAS By: /s/ Lione J an Mayor 36 APPENDIX A AUDITED FINANCIAL STATEMENTS OF THE CITY'S WATER AND SEWER FUND FOR THE YEAR ENDED DECEMBER 31, 2012 The following 2012 condensed financial information of the City's Water and Sewer Fund (the "Fund") has been extracted from the Fund's financial statements included in the City's Comprehensive Annual Financial Report ("CAFR"). Reference should be made to the CAFR for disclosures and required supplementary information necessary to fairly present the financial position and results of operations of the Fund. The CAFR can be viewed in its entirety, including the accountants' report, notes to the financial statements and required supplementary information, on the City's website at www.accessketteville.org/goveninient/accountini4 and audit/index.cfrn by selecting "Comprehensive Annual Financial Reports". A-1 City of Fayetteville, Arkansas Statement of Fund Net Position Proprietary Funds December 31, 2012 ASSETS Current assets: Cash Investments Restricted investments Accounts receivable Accrued interest Due from other funds Due from other governments Inventory Prepaid expenses and other assets Total current assets Noncurrent assets: Restricted assets: Investments Accrued interest Unamortized bond issue cost Total restricted assets Capital assets: Land Buildings Improvements other than buildings Machinery, equipment and vehicles Construction in progress Less accumulated depreciation Total capital assets, net Total noncurrent assets Total assets LIABILITIES Current liabilities: Accounts payable Accrued expenses Compensated absences Due to other funds Due to other governments Customer deposits Unearned revenue Accrued interest Bonds payable - current maturity Total current liabilities Noncurrent liabilities: Compensated absences Bonds payable Unamortized gain on debt refunding Unamortized bond premiums (discounts) Total noncurrent liabilities Total liabilities NET POSITION Net investment in capital assets Restricted for debt service Unrestricted Total net position Town Solid Center Waste $ $ 350 S 1,314,075 9,082,772 118,641 1,220,613 (2,320,035) 14,058 3,129,217 93,260 3,129,217 32,397 800 1,523 10,444,973 168,718 16,192 1 76,961 25,396 194,115 626,192 151,158 9,193,995 (4,229,238) 5,115,915 5,310,030 5,310,030 Water 887,811 19,784,522 1,505,000 3,465,926 30,622 51,156 4,278,953 962,838 71,570 31,038,398 755,992 26 199,882 955,900 96,682 8149,924 2,761,773 101,371,852 1,158,081 314.358,428 1,314,075 31,397,375 118,641 (2,320,035) (137,975,175) 3,129,217 317,302,404 3,129,217 318,258,304 13,574,190 349,296,702 The notes to the financial statements are an integral part of this statement. A-2 137,645 1,100,275 57,245 92,542 175,613 381,272 571,613 480,819 75,282 800 838,356 13,215 16,192 76,961 610,000 1.505,000 626,192 956,131 4,550,507 264,577 351,624 1,275,000 10;235,000 (25,814) (61,421) (14,315) 101,128 1,234,871 264,577 10.626,331 1,861,063 1,220,708 15176,838 3,271,045 3,129,217 306,065,329 152,527 1,600,644 25,395 9,224,265 26,453,891 $ 3,448,967 $ 12,353,482 $ 334,119,864 The notes to the financial statements are an integral part of this statement. A-2 City of Fayetteville, Arkansas Proprietary Funds Statement of Revenues, Expenses, and Changes in Fund Net Position For the Year Ended December 31, 2012 Operating revenues: Solid waste fees $ Water services Sewer services Airport services Shop charges Other Total operating revenues Operating expenses: Personnel services Materials and supplies Contract services and charges Maintenance Depreciation Total operating expenses Operating income (loss) Nonoperating revenues (expenses): Taxes and franchise fees Interest expense and fees Interest income Net increase (decrease) in fair value of investments Other revenues (expenses) Total nonoperating income Income (loss) before contributions and transfers Capital donations Capital internal transfers Capital grants Transfers in Transfers out Change in net position Total net position, beginning of year Total net position, end of year Town Solid Water Center Waste and Sewer $ 9,390,258 $ 16,763,707 16,431,009 1,123, 798 9,390,258 34,318,514 The notes to the financial statements are an integral part of this statement. A-3 2,794,203 4,665,056 713,351 1,480,263 2,505 5,266,683 17,848,139 81,632 101,574 367,760 300,022 10,883,035 370,265 9,155,891 34,978,067 (370,265) 234,367 (659,553) 174,545 (107,255) (429,414) 28 61,954 118,668 (8,250) (7,132) 680,896 21,329 476,413 573,669 249,578 158,535 203,404 483,945 (501,018) 1,617,698 4,435,299 5,285 3,381,330 1,278,518 (342,761) 203,404 489,230 9,869,066 3,245,563 11,864,252 324,250,798 3,448,967 $ 12,353,482 $ 334,119,864 The notes to the financial statements are an integral part of this statement. A-3 [THIS PAGE INTENTIONALLY BLANK] A-4 UNAUDITED FINANCIAL STATEMENTS OF THE CITY'S WATER AND SEWER FUND FOR THE YEAR ENDED DECEMBER 31, 2013 P.! City of Fayetteville, Arkansas 674,524 Satement of Net Assets 111,580 Water and Sewer Fund 371,535 December 31, 2013 581,382 Current assets: 59,139 Cash S 1,913,162 Investments 25,568,230 Restricted investments 1,530,000 Accounts receivable 3,415,995 Accrued interest 22,347 Due from other funds 660.447 Due from other government 1,920,638 Inventories 1,065,319 Prepaids 72153 Total current assets 36,168,391 Noncurrent assets - Restricted assets Investments 361,417 Accrued interest 15 Total noncurent assets 361,432 Capital assets 1,435,282 Land 8,180.394 Buildings 101,371,852 Improvements other than buildings 319,833.361 Machinery, equipment and vehicles 31,684,693 Less accumulated Depreciation {148,830,752} Total capital assets, net 312,239,548 Total noncurrent assets 312,600,980 Total assets 348,769,371 Deferred outflows of resources Gain on debt refunding 48,020 Total deferred outflows of resources 48,020 Total assets and deferred outflows of resources 348,817,391 LIABILITIES Current liabilities Accounts payable 674,524 Accrued expenses 111,580 Compensated absences 371,535 Due to other funds 581,382 Due to other governments 59,139 Customer deposits 821,022 Accrued interest 107,000 Bonds payable - current portion 1,530,000 Total current liabilities 4,256,182 Noncurrent liabilities Compensated absences 370,511 Bonds payable 8,784,064 Total noncurrent liabilities 9,154,575 Total liabilities 13,410,757 Deferred inflows of resources None Total deferred inflows of resources Total liabilities and deferred inflows of resources 13,410,757 Net assets Invested in capital assets, net of related debt 302,320,937 Restricted for debt service 1,435,282 Unrestricted 31,650,415 Total net assets S 335,406,634 MW City ofFayetteville, Arkansas Water and Sewer Fund Statement ofRevenues, Expenses and Changes inFund Net Assets For the Year Ended December 31.2013 Operating revenues-, Water services $ 15,647701 Sewer services 16,480,458 Other 1,172,429 Total operating revenues 33200583 Operating expenses: Personnel services 5.138.023 Materials and supplies 1.510.184 Contract services and charges 18.266,123 Maintenance 149.964 Depreciation 10.860.771 Total operating expenses 35,925,065 Operating income 0osu (2,724.482 Nonoperatingrevenues (exponnea): Interest expense and fees (344.358 Interest income e7.344 Net decrease infair value ofinvestments (87.072) Other revenues 587.817 Total nonoparatiogincome 253,831 Income (loss) before contributions and transfers (2,470,651) Capital grants 442,792 Capital donations 1,472589 Transfers in 2,041,912 Change innet assets 1`488^652 Total net assets, beginning ofyear amrestated* 333,919,982 Total net assets, end nfyear $ 335,406,634 *Net assets beginning balance was restated due to the implementation of Governmental Accounting Standards Board Statement No. 65, The change reduced beginning net assets by $199,882. [THIS PAGE INTENTIONALLY BLANK] APPENDIX C Proposed Form of Bond Counsel Opinion Kutak Rock LLP, Bond Counsel, will render an opinion with respect to the Series 2014 Bonds, dated the date of issuance and delivery thereof, in substantially the following form: May , 2014 City of Fayetteville, Arkansas Fayetteville, Arkansas BOKF, NA dba Bank of Oklahoma, as Trustee Tulsa, Oklahoma Stephens Inc. Fayetteville, Arkansas $6,330,000 City of Fayetteville, Arkansas Water and Sewer System Refunding Revenue Bonds Series 2014 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 $6,330,000 Water and Sewer System Refunding Revenue Bonds, Series 2014 (the "Bonds"). The Bonds are being issued pursuant to the provisions of the Constitution and laws of the State of Arkansas, including, particularly, Amendment 65 and Arkansas Code Annotated (1998 Repl. & Supp. 2013) §§14- 164-401 et seq., §§14-234-201 et seq. and §§14-235-201 etseq. (collectively, and as from time to time amended, the "Authorizing Legislation"), pursuant to Ordinance No. 5665 of the City, duly adopted and approved on March 4, 2014 (the "Authorizing Ordinance" ), and pursuant to a Trust Indenture dated as of May 15, 2002, as amended and .supplemented by a First Supplemental Trust Indenture dated as of May 1, 2004, by a Second Supplemental Trust Indenture dated as of June 1, 2009, by a Third Supplemental Trust Indenture dated as of May 15, 2012, and by a Fourth Supplemental Trust Indenture dated as of May 15, 2014 (as amended and supplemented, the "Indenture"), each by and between the City and BOKF, NA dba Bank of Oklahoma (formerly Bank of Oklahoma, 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 debt by the City, 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 Rate Ordinances and the Authorizing Ordinance and enter into and perform its obligations under the Indenture, the valid adoption of the Rate Ordinances 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 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. C-1 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 65 and the Authorizing Legislation, the City is empowered to adopt 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 validly authorized, executed, issued and delivered by the City and represent valid and binding special obligations of the City. The principal, premium, if any, and interest on the Bonds shall be payable from, and shall be secured by an assignment and pledge by the City to the Trustee of, the Net Revenues (as defined in the Indenture) of the City's water and sewer system, subject to a parity pledge of Net Revenues securing (i) the City's Water and Sewer System Refunding Revenue Bonds, Series 2012, and (ii) any Additional Bonds (as defined in the Indenture) issued hereafter. 5. The Net Revenues have been duly and validly assigned and pledged to the Trustee under the Indenture, and the Indenture creates, as security for the Bonds, a valid security interest in the Net Revenues. Under the laws of the State of Arkansas, including, particularly, Arkansas Code Annotated (2001 Repl. & 2013 Supp.) Section 4-9-109(d)(14), the pledge, assignment and security interest in the Net Revenues securing the Bonds is and shall be prior to any judicial lien hereafter imposed on said Net Revenues to enforce a judgment against the City on a simple contract, and it is not necessary to file a Uniform Commercial Code financing statement in order to perfect a security interest in said Net Revenues. 6. Interest on the Bonds is excluded from gross income for federal income tax purposes and is not a specific preference item for purposes of the federal alternative minimum tax. The opinion described in the preceding sentences assumes 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 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. We express no opinion regarding other federal tax consequences of holding 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. Very truly yours, C-2 [THIS PAGE INTENTIONALLY BLANK] C-3 y C R _ is c c � a� =' o a V � V y �a � e � a s o� �t � L Ro E `o a C A �v o o � H � h o R T O C E o y n c U � t °1 0 U _yy 0 0 `o w @ = o 0 3 4 " N C = U e v � c R ?; c c � u EO Q U � O �a H y 8-S O � y c 'U � R 3 E = c E 0 0 0 � � c o E v 3 0 � o a � C i.n V � � O � c y c � � o u, w U ti L w � PRELIMINARY OFFICIAL STATEMENT DATED APRIL 25, 2014 NEW ISSUE *RATING: S&P: "AA+" (stable outlook) BOOK -ENTRY ONLY 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 covenants, interest on the Series 2014 Bonds is excluded from gross income for federal income tax purposes and is not a specific preference item for purposes of the federal alternative minimum tax. Under existing law, Bond Counsel is of the opinion that the Series 2014 Bonds and the interest thereon are exempt from all state, county and municipal taxes in the State of Arkansas. See the caption "TAX MATTERS" herein. Dated: May 15, 2014 $6,455,000** CITY OF FAYETTEVILLE, ARKANSAS WATER AND SEWER SYSTEM REFUNDING REVENUE BONDS SERIES 2014 Due: August 15, as shown below The Water and Sewer System Refunding Revenue Bonds, Series 2014 (the "Series 2014 Bonds"), are being issued by the City of Fayetteville, Arkansas (the "City") for the purpose of refunding certain indebtedness of the City and paying certain expenses in connection with the issuance of the Series 2014 Bonds. See the captions "ESTIMATED SOURCES AND USES OF FUNDS" and "THE REFUNDING PROGRAM" herein. The Series 2014 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, if any, and interest payments on the Series 2014 Bonds will be made so long as Cede & Co. is the registered owner of the Series 2014 Bonds. Individual purchases of the Series 2014 Bonds will be made only in book -entry form, in denominations of $5,000 or integral multiples thereof. Individual purchasers ("Beneficial Owners") of Series 2014 Bonds will not receive physical delivery of bond certificates. See the caption "BOOK -ENTRY ONLY SYSTEM' herein. The Series 2014 Bonds shall bear interest from their dated date, payable on February 15 and August 15 of each year, commencing August 15, 2014. All such interest payments shall be payable to the persons in whose name such Series 2014 Bonds are registered on the bond registration books maintained by BOKF, NA dba Bank of Oklahoma, Tulsa, Oklahoma, as trustee (the "Trustee"), as of the fust day of the calendar month in which the applicable interest payment date falls. Principal of and premium, if any, on the Series 2014 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 2014 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 May 1, 2002, as amended and supplemented by a First Supplemental Trust Indenture dated as of May 1, 2004, by a Second Supplemental Trust Indenture dated as of June 1, 2009, by a Third Supplemental Trust Indenture dated as of May 15, 2012, and by a Fourth Supplemental Trust Indenture dated as of May 15, 2014, each by and between the City and the Trustee, the principal of, premium, if any, and interest on the Series 2014 Bonds are secured by a pledge of the Net Revenues (as defined herein) of the System. The pledge of Net Revenues securing the Series 2014 Bonds shall be on a parity with the existing pledge of Net Revenues securing $2,845,000 outstanding principal amount of the City's Water and Sewer System Refunding Revenue Bonds, Series 2012. The City has covenanted to fix and maintain rates for System services which shall produce Net Revenues at least equal to (i) 125% of the average annual debt service on all indebtedness of the City to which System revenues are pledged, (ii) the amount, if any, needed to fund debt service reserve deficiencies with respect to all indebtedness of the City to which System revenues are pledged, and (iii) the amount, if any, needed to make required deposits to the Renewal and Replacement Fund (as defined herein). See the caption "SECURITY FOR THE BONDS" herein. The Series 2014 Bonds are subject to optional redemption prior to maturity as more fully described herein under the caption "THE SERIES 2014 BONDS — Redemption." The Series 2014 Bonds are special obligations of the City secured by and payable solely from the Net Revenues of the System. The Series 2014 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 2014 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 2014 Bonds, except as described herein with respect to Net Revenues of the System, The Series 2014 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 matter; will be passed upon for the City by its counsel, Kit Williams, Esq., City Attorney. It is expected that the Series 2014 Bonds will be available for delivery in New York, New York, on or about May 20, 2014. * See the caption "RATING" herein. ** Preliminary; subject to change. Stephens Inc. The date of this Official Statement is May _, 2014. MATURITY SCHEDULE** Maturity Principal interest (Au sug t 15) Amount Rate Yield CUS1P 2014 $ 175,000 % % 2015 825,000 2016 840,000 2017 855,000 2018 1,685,000 2019 1,750,000 2020 325,000 (Plus accrued interest) The Series 2014 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 matter; will be passed upon for the City by its counsel, Kit Williams, Esq., City Attorney. It is expected that the Series 2014 Bonds will be available for delivery in New York, New York, on or about May 20, 2014. * See the caption "RATING" herein. ** Preliminary; subject to change. Stephens Inc. The date of this Official Statement is May _, 2014. CITY OF FAYETTEVILLE, ARKANSAS Issuer City Council Lioneld Jordan, Mayor Rhonda Adams Adella Gray Mark Kinion Alan Long Sarah Marsh Matthew Petty Martin Schoppmeyer, Jr. Justin Tennant Don Marr, Chief of Staff Paul Becker, Finance Director Sondra Smith, City Clerk Kit Williams, City Attorney BOKF, NA dba BANK OF OKLAHOMA Tulsa, Oklahoma 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 2014 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 or the System since the date hereof. THE SERIES 2014 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 2014 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 EN.e IntroductoryStatement.......................................................................................................................................... 1 TheSeries 2014 Bonds......................................................................................................................................... 2 Securityfor the Bonds.......................................................................................................................................... 4 Book -Entry Only System...................................................................................................................................... 5 Estimated Sources and Uses of Funds.................................................................................................................. 7 TheRefunding Program........................................................................................................................................ 7 Estimated Debt Service Requirements.................................................................................................................. 7 Estimated Debt Service Coverage......................................................................................................................... 8 TheCity................................................................................................................................................................ 8 TheSystem........................................................................................................................................................... 11 Definitions of Certain Terms................................................................................................................................ 21 Summaryof the Indenture.................................................................................................................................... 24 Summary of the Continuing Disclosure Agreement............................................................................................. 30 Underwriting......................................................................................................................................................... 32 TaxMatters............,.............................................................................................................................................. 33 Rating.................................................................................................................................................................... 34 LegalMatters........................................................................................................................................................ 34 FinancialStatements............................................................................................................................................. 34 Miscellaneous....................................................................................................................................................... 35 Accuracy and Completeness of Official Statement............................................................................................... 35 APPENDIX A - Audited Financial Statements of the City's Water and Sewer Fund for the yearended December 31, 2012..................................................................................................A-1 APPENDIX B - Unaudited Financial Statements of the City's Water and Sewer Fund for the year ended December 31, 2013..................................................................................................B-1 APPENDIX C - Form of Bond Counsel Opinion................................................................................................. C-1 [THIS PAGE IIgMNTIQNALLY BLANK] OFFICIAL STATEMENT $6,455,000* CITY OF FAYETTEVILLE, ARKANSAS WATER AND SEWER SYSTEM REFUNDING REVENUE BONDS SERIES 2014 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 under the caption "DEFINITIONS OF CERTAIN TERMS" herein. This Official Statement, including the cover page and the Appendices hereto, is furnished in connection with the offering of Water and Sewer System Refunding Revenue Bonds, Series 2014, in the principal amount of $6,455,000* (the "Series 2014 Bonds"), by the City of Fayetteville, Arkansas (the "City"). 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 65 to the Constitution of the State ("Amendment 65") and Arkansas Code Annotated (1998 Repl. & 2013 Supp.) §§14-164-401 et seq., §§14-234-201 et seq., and §§14-235-201 et seq. (collectively, and as from time to time amended, the "Act"), to issue and sell revenue bonds for the purpose of financing and refinancing the cost of improvements and betterments to its water and sewer system (the "System"). The Series 2014 Bonds are to be issued by the City pursuant to Amendment 65, the Act and Ordinance No. 5665, adopted and approved on March 4, 2014 (the "Authorizing Ordinance"), for the purpose of (i) refunding $7,390,000 outstanding principal amount of the City's Water and Sewer System Revenue Bonds, Series 2009 (the "Series 2009 Bonds"), and (ii) paying the costs of issuing the Series 2014 Bonds. See the captions "ESTIMATED SOURCES AND USES OF FUNDS" and "THE REFUNDING PROGRAM" herein. The Series 2014 Bonds are special obligations of the City, payable solely from and secured by a pledge of the Net Revenues (as defined herein) of the System on a parity basis to the existing pledge of Net Revenues securing the payment of debt service on $2,845,000 outstanding principal amount of the City's Water and Sewer System Refunding Revenue Bonds, Series 2012 (the "Series 2012 Bonds"). The City has covenanted to fix and maintain rates for System services which shall produce Net Revenues at least equal to (i) 125% of the average annual debt service on all indebtedness of the City to which System revenues are pledged, (ii) the amount needed to fund debt service reserve deficiencies with respect to all indebtedness of the City to which System revenues are pledged, and (iii) the amount needed to make required deposits to the Renewal and Replacement Fund (as defined herein). See the captions "SECURITY FOR THE BONDS" and "SUMMARY OF THE INDENTURE" herein. The faith and credit of the City are not pledged to the payment of the Series 2014 Bonds, and the Series 2014 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 2014 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 2014 Bonds, except as described herein with respect to Net Revenues. Additional bonds may be issued on a parity of security with the Series 2012 Bonds and the Series 2014 Bonds under certain circumstances set forth in the Indenture (hereinafter defined). See the caption "THE SERIES 2014 BONDS - Additional Bonds" herein. The Series 2012 Bonds, the Series 2014 Bonds and any Additional Bonds are herein collectively referred to as the "Bonds." * Preliminary; subject to change. Pursuant to the provisions of a Continuing Disclosure Agreement dated as of the date of delivery of the Series 2014 Bonds, by and between the City and BOKF, NA dba Bank of Oklahoma, Tulsa, Oklahoma, as dissemination agent (the "Dissemination Agent") (the "Continuing Disclosure Agreement"), the City has undertaken certain obligations with respect to providing ongoing disclosure of certain financial and operating data concerning the System 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 System, the Series 2014 Bonds, the Continuing Disclosure Agreement, and the Trust Indenture dated as of May 1, 2002, as supplemented and amended by a First Supplemental Trust Indenture dated as of May 1, 2004, by a Second Supplemental Trust Indenture dated as of June 1, 2009, by a Third Supplemental Trust Indenture dated as May 15, 2012, and by a Fourth Supplemental Trust Indenture dated as of May 15, 2014 (as supplemented and amended, the "Indenture"), by and between the City and BOKF, NA dba Bank of Oklahoma, Tulsa, Oklahoma, as trustee (the "Trustee"), pursuant to which the 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 2014 Bonds are qualified in their entirety by reference to the definitive form thereof and the information with respect thereto included in the Indenture. Copies of the Continuing Disclosure Agreement, the Indenture, and the form of Series 2014 Bond included therein, are available from the City by writing to the attention of the City Clerk, 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 have been provided by the City from the audited records of the System and certain demographic information has been obtained from other sources which are believed to be reliable. THE SERIES 2014 BONDS Description. The Series 2014 Bonds will be initially dated as of May 15, 2014, and will bear interest payable semiannually on February 15 and August 15 of each year, commencing August 15, 2014, at the rates set forth on the cover page hereof. The Series 2014 Bonds will mature on August 15 in the years and in the principal amounts set forth on the cover page hereof. The Series 2014 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 2014 Bonds will be made so long as Cede & Co. is the registered owner of the Series 2014 Bonds. Individual purchases of the Series 2014 Bonds will be made only in book -entry form, in denominations of $5,000 or integral multiples thereof. Individual purchasers (`Beneficial Owners") of Series 2014 Bonds will not receive physical delivery of bond certificates. See the caption "BOOK -ENTRY ONLY SYSTEM" herein. All interest payments on the Series 2014 Bonds shall be payable to the persons in whose name such Series 2014 Bonds are registered on the bond registration books maintained by the Trustee, as of the first day of the calendar month in which the applicable interest payment date falls. Principal of and premium, if any, on the Series 2014 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 2014 Bonds to the extent of the sum or sums so paid. So long as DTC or its nominee is the registered owner of the Series 2014 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 2014 Bonds are subject to redemption prior to maturity, at the option of the City, in whole or in part at any time on and after August 15, 2019 (and if in part, in such maturity or maturities as the City shall elect), from funds from any source, at a redemption price of 100% of the principal amount of the Series 2014 Bonds being redeemed, plus accrued interest to the date of redemption. Partial Redemption of a Series 2014 Bond. In selecting Series 2014 Bonds for redemption prior to maturity, in the case any outstanding Series 2014 Bond is in a denomination greater than $5,000, each $5,000 of face value of such Series 2014 Bond shall be treated as a separate Series 2014 Bond in the denomination of $5,000; provided, however, that so long as DTC or its nominee is the sole registered owner of the Series 2014 Bonds, the particular Series 2014 Bonds or portions thereof to be redeemed within a maturity shall be selected by lot in such manner as DTC shall determine. Notice of Redemption. Notice of the call for any redemption, identifying the Series 2014 Bonds or portions thereof being called and the date on which they shall be presented for payment, shall be mailed by the Trustee by 2 first class mail (or, so long as DTC or its nominee is the sole registered owner of the Series 2014 Bonds, by any other means acceptable to DTC, including facsimile) to the registered owner of each such Series 2014 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 2014 Bond with respect to which no such failure or defect has occurred. Any notice mailed as provided shall be conclusively presumed to have been duly given, whether or not the registered owner receives the notice. Additional Bonds. The City may issue from time to time one or more series of Additional Bonds for the purpose of (i) financing Costs of Construction in connection with the acquisition, construction and equipping of Project facilities, (ii) refunding the Series 2012 Bonds, the Series 2014 Bonds or any series of Additional Bonds or Subordinate Obligations, in whole or in part, or (iii) any combination thereof. Additional Bonds shall be secured equally and ratably with the Series 2012 Bonds, the Series 2014 Bonds and any other series of Additional Bonds theretofore issued and then Outstanding, except insofar as 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. Before any Additional Bonds are authenticated, there shall be delivered to the Trustee the items required for the issuance of Bonds by the Indenture, plus a statement by a Qualified Accountant reciting the opinion, based upon necessary investigation, that the Net Revenues of the System for the Fiscal Year immediately preceding the Fiscal Year in which such Additional Bonds are to be issued were not less than (i) 130% of the average Annual Debt Service on all then outstanding Bonds and Subordinate Obligations, plus the Additional Bonds then proposed to be issued, (ii) the amount, if any, needed to make required deposits to the Debt Service Reserve Fund and any debt service reserve funds with respect to Subordinate Obligations, and (iii) the amount, if any, needed to make required deposits to the Renewal and Replacement Fund. If any changes have been made, and are in effect on the date of issuance of the Additional Bonds, in any rates and charges imposed by the City for System services which were not in effect during the entire preceding Fiscal Year, the Qualified Accountant may, if such changes resulted in increases in such rates and charges, and shall, if such changes resulted in reductions in such rates and charges, adjust the Net Revenues for the preceding Fiscal Year to reflect any changes in such Net Revenues which would have occurred if the changed rates and charges had been in effect during the entire preceding Fiscal Year. Notwithstanding any of the foregoing, no Additional Bonds shall be issued unless there is no default existing at the time of issuance under the Indenture. Subordinate Obligations. Nothing in the Indenture shall prevent the City from authorizing and issuing bonds, notes, bond anticipation notes, warrants, certificates or other obligations or evidences of indebtedness, the payment of the principal of and premium, if any, and interest on which shall be made from Revenues or Net Revenues or from a special fund to be established and maintained from Revenues or Net Revenues, provided payments from Revenues or Net Revenues or from Revenues or Net Revenues in such special fund, and the lien and charge on such Revenues or Net Revenues, shall be made junior and subordinate to the lien, pledge and charge created in the Indenture for the security and payment of the Bonds and other payments under the Indenture, including, without limitation, the following payments out of Revenues specified by the Indenture: (i) payments of Operation and Maintenance Expenses; (ii) payments into the Bond Fund; (iii) payments into the Debt Service Reserve Fund; and (iv) payments into the Renewal and Replacement Fund. Transfer or Exchange. The 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. 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. So long as DTC or its nominee is the sole registered owner of the Series 2014 Bonds, transfers of beneficial interests in the Series 2014 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 Bonds are special obligations of the City secured by and payable solely from the Net Revenues derived from operation of the System. The 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 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 Bonds, except as described herein with respect to the Net Revenues of the System. Rate Covenant. The rates charged for services of the System heretofore fixed by ordinances of the City and the conditions, rights and obligations pertaining thereto, as set forth in said ordinances, are ratified, confirmed and continued by the Authorizing Ordinance. In the Indenture, the City covenants that the rates for System services will never be reduced while any of the Bonds are Outstanding unless there is obtained from a Qualified Accountant a certificate to the effect that Net Revenues, with the reduced rates, in the current Fiscal Year will be at least equal to (i) 125% of the average Annual Debt Service on all Bonds and Subordinate Obligations, (ii) the amount, if any, needed to make required deposits to the Debt Service Reserve Fund and any debt service reserve funds with respect to Subordinate Obligations, and (iii) the amount, if any, needed to make required deposits to the Renewal and Replacement Fund. The City further covenants that the rates for System services shall, if and when necessary, from time to time, be increased in such manner as will produce Net Revenues at least equal to (i) 125% of the current Annual Debt Service on all Bonds and Subordinate Obligations, (ii) the amount, if any, needed to make required deposits to the Debt Service Reserve Fund and any debt service reserve funds with respect to Subordinate Obligations, and (iii) the amount, if any, needed to make required deposits to the Renewal and Replacement Fund. The Indenture defines "Net Revenues" as Revenues less Operation and Maintenance Expenses. Revenues include all fees, tolls, rates, rentals and charges levied and collected in connection with, and all other income and receipts of whatever kind or character derived by the City from, the operation of the System. Operation and Maintenance Expenses include all ordinary and necessary expenses of operation, repair, maintenance and insuring of the System under generally accepted accounting principles. Such term includes the cost of purchased water and payments to all taxing authorities, but does not include debt service and depreciation expense. Debt Service Reserve. From the proceeds of sale of each series of Bonds issued pursuant to the Indenture, there shall be deposited into the Debt Service Reserve Fund an amount which, together with the amounts then on deposit therein, will be equal to 50% of the aggregate maximum Annual Debt Service on all Outstanding Bonds in any Fiscal Year thereafter (the "Reserve Requirement"). Because of the existing balance in the Debt Service Reserve Fund, no deposit from the proceeds of the Series 2014 Bonds to the Debt Service Reserve Fund is necessary in order to satisfy the Reserve Requirement. If the amount in the Debt Service Reserve Fund is ever reduced below the Reserve Requirement, it shall be reimbursed to the Reserve Requirement through monthly payments, beginning not later than the fifth business day preceding the fifteenth day of the month immediately following the month in which the Debt Service Reserve Fund was reduced below the Reserve Requirement, and continuing not later than the fifth business day preceding the fifteenth 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 Operation and Maintenance Fund and into the Bond Fund as provided in the Indenture), in an amount equal to 1/12 of the Reserve Requirement deficiency. If a surplus shall exist in the Debt Service Reserve Fund over and above the Reserve Requirement, such surplus shall be deposited into the Bond Fund. The moneys on deposit in the Debt Service Reserve Fund (i) shall be used to the extent necessary to prevent a default in the payment of Annual Debt Service on the Bonds and Trustee's and any Paying Agent's fees and (ii) 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 Outstanding Bonds. 4 BOOK -ENTRY ONLY SYSTEM The Series 2014 Bonds will be issued only as one fully registered Series 2014 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 2014 Bonds. The fully registered Series 2014 Bonds will be retained and immobilized in the custody of DTC. DTC (or any successor securities depository) or its nominee for all purposes under the Indenture will be considered by the City and the Trustee to be the owner or holder of the Series 2014 Bonds. Owners of any book entry interests in the Series 2014 Bonds (the "book entry interest owners") described below, will not receive or have the right to receive physical delivery of the Series 2014 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 2014 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 120 countries and territories) 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.com. Purchases of Series 2014 Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Series 2014 Bonds on DTC's records. The ownership interest of each actual purchaser of each Series 2014 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 2014 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 2014 Bonds, except in the event that use of the Book -Entry System for the Series 2014 Bonds is discontinued. To facilitate subsequent transfers, all Series 2014 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 2014 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 2014 Bonds, DTC's records reflect only the identity of the Direct Participants to whose accounts such Series 2014 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 2014 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 2014 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 2014 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 2014 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 2014 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 2014 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 2014 Bonds made to DTC or its nominee as the registered owner of the Series 2014 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 2014 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. 0 ESTIMATED SOURCES AND USES OF FUNDS The proceeds of the Series 2014 Bonds and other available moneys are expected to be used as follows: Sources of Funds* Series 2014 Bond Proceeds $6,455,000 Original Issue Premium Available Moneys in Series 2009 Bond Fund 688,253 Available Moneys in Series 2009 Debt Service Reserve Fund 22.048 Total Sources: Uses of Funds* Deposit to Series 2009 Escrow Fund $7,506,506 Costs of Issuance and Underwriter's Discount 136,550 Contingency Total Uses: $ * Preliminary, subject to change. THE REFUNDING PROGRAM A portion of the proceeds of the Series 2014 Bonds will be used, along with other available moneys, to accomplish a current refunding of $7,390,000 outstanding principal amount of the City's Water and Sewer System Revenue Bonds, Series 2009, dated as of June 1, 2009 (the "Series 2009 Bonds"). The Series 2009 Bonds were issued to finance various capital improvements to the System, including the relocation, installation and upgrading of certain water distribution and sewer collection lines and other System components in conjunction with road construction projects within the City. Upon the delivery of the Series 2014 Bonds, a portion of the proceeds thereof will be deposited with BOKF, NA dba Bank of Oklahoma, Tulsa, Oklahoma, as escrow trustee (the "Escrow Trustee"), under an irrevocable Escrow Deposit Agreement (the "Escrow Agreement"), between the City and the Escrow Trustee. The proceeds derived from the Series 2014 Bonds and moneys transferred from the Bond Fund and Debt Service Reserve Fund relating to the Series 2009 Bonds will be held by the Escrow Trustee under the Escrow Agreement in trust for the holders of the Series 2009 Bonds, and will be sufficient to pay the principal, premium, and interest due on the Series 2009 Bonds when redeemed on August 15, 2014. Amounts held by the Escrow Trustee will be irrevocably pledged for the benefit of the holders of the Series 2009 Bonds. After such deposit, the Series 2009 Bonds will no longer be deemed to be outstanding and will be secured solely by the amounts held by the Escrow Trustee. See the caption "ESTIMATED SOURCES AND USES OF FUNDS" herein. ESTIMATED DEBT SERVICE REQUIREMENTS As of the date of closing, the Series 2012 Bonds and the Series 2014 Bonds constitute the only debt obligations secured by Revenues of the System. The following table details amounts required to pay scheduled principal and interest on the Series 2012 Bonds and the Series 2014 Bonds during each year: (l) Preliminary; subject to change. (Z) Assuming for the purposes of this Preliminary Official Statement an average coupon rate of 3.513% on the Series 2014 Bonds. Series 2012 Series 2012 Series 2014 Series 2014 Total Debt Year Principal Interest Principal(') interest' 11(2) Service(l) 2014 $ 690,000 $ 56,900 $ 175,000 $ 51,994 $ 973,894 2015 705,000 43,100 825,000 204,475 1,777,575 2016 715,000 29,000 840,000 187,975 1,771,975 2017 735,000 14,700 855,000 171,175 1,775,875 2018 -- -- 1,685,000 145,525 1,830,525 2019 -- -- 1,750,000 78,125 1,828,125 2020 325,000 8,125 333,125 Totals: $2,845,000 UlaJOS6.45.5�9Q4 $$47324 $10,291.094 (l) Preliminary; subject to change. (Z) Assuming for the purposes of this Preliminary Official Statement an average coupon rate of 3.513% on the Series 2014 Bonds. ESTIMATED DEBT SERVICE COVERAGE The following table shows estimated maximum and average annual debt service coverage with respect to the outstanding Series 2012 Bonds and Series 2014 Bonds utilizing historical Net Revenues of the System. "' Net Revenues means gross revenues of the System less the amounts required to pay the costs of operation, maintenance and repair of the System in accordance with generally accepted accounting principles applicable to municipal water systems (excluding depreciation, interest and amortization expenses). (Z) See the caption "ESTIMATED DEBT SERVICE REQUIREMENTS" herein. THE NET REVENUES AVAILABLE FOR SYSTEM DEBT SERVICE SET FORTH ABOVE ARE BASED ON THE HISTORICAL RESULTS OF OPERATION OF THE SYSTEM. FUTURE NET REVENUES AVAILABLE FOR DEBT SERVICE WILL DEPEND ON NUMEROUS FACTORS, AND THERE CAN BE NO ASSURANCE THAT FUTURE NET REVENUES AVAILABLE FOR SYSTEM DEBT SERVICE WILL APPROXIMATE SUCH HISTORICAL RESULTS. 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 corner 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. The City's elected officials and the dates on which their respective terms expire are as follows: Name 2012 2013 Lioneld Jordan Audited (Unaudited) Historical Gross Revenues of the System $34,906,463 $33,798,772 Historical Operating Expenses (24,095,032) (25,064,294) Net Revenues Available for Debt Service(l)� Alderman 8.734.478 Maximum Annual Debt Service Requirement on Alderman 12/31/14 Series 2012 and 2014 Bonds (2) $1,830,525 $1,830,525 Average Annual Debt Service Requirement on Alderman 12/31/16 Series 2012 and 2014 Bonds (2) $1,470,156 $1,470,156 Maximum Annual Debt Service Coverage IS -LX 4.77 x Average Annual Debt Service Coverage 23-5-X 5.94 X "' Net Revenues means gross revenues of the System less the amounts required to pay the costs of operation, maintenance and repair of the System in accordance with generally accepted accounting principles applicable to municipal water systems (excluding depreciation, interest and amortization expenses). (Z) See the caption "ESTIMATED DEBT SERVICE REQUIREMENTS" herein. THE NET REVENUES AVAILABLE FOR SYSTEM DEBT SERVICE SET FORTH ABOVE ARE BASED ON THE HISTORICAL RESULTS OF OPERATION OF THE SYSTEM. FUTURE NET REVENUES AVAILABLE FOR DEBT SERVICE WILL DEPEND ON NUMEROUS FACTORS, AND THERE CAN BE NO ASSURANCE THAT FUTURE NET REVENUES AVAILABLE FOR SYSTEM DEBT SERVICE WILL APPROXIMATE SUCH HISTORICAL RESULTS. 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 corner 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. The City's elected officials and the dates on which their respective terms expire are as follows: Name Office Term Expires Lioneld Jordan Mayor 12/31/16 Kit Williams City Attorney 12/31/14 Sondra Smith City Clerk 12/31/16 Rhonda Adams Alderman 12/31/14 Adella Gray Alderman 12/31/14 Mark Kinion(t) Alderman 12/31/14 Alan Long Alderman 12/31/16 Sarah Marsh Alderman 12/31/16 Matthew Petty Alderman 12/31/16 Martin Schoppmeyer, Jr. Alderman 12/31/16 Justin Tennant Alderman 12/31/14 (1) Mr. Kinion is an employee of Bank of Arkansas, an affiliate of the Trustee. 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: Economic Data. Per capita personal income figures for the MSA and the State of Arkansas are as follows: City of State 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 2010 73,580 463,204 2,915,918 Economic Data. Per capita personal income figures for the MSA and the State of Arkansas are as follows: Source: Discover Arkansas, Data Analysis. Retail sales figures for the MSA and the State are as follows: State of Year MSA Arkansas 2003 $25,387 $25,434 2004 27,420 26,846 2005 28,685 27,908 2006 30,168 29,459 2007 31,586 31,517 2008 32,537 32,257 2009 32,313 31,688 2010 33,309 32,373 2011 34,130 33,740 2012 35,437 34,723 Source: Discover Arkansas, Data Analysis. Retail sales figures for the MSA and the State are as follows: ... Does not include McDonald County, Missouri Demographics USA, County Edition, 2003-2008. Nielsen Consumer Buying Power: 2009 -forward. 9 State of MSA as % of Year MSA Arkansas State of Arkansas 2003 $3,968,812,000 29,920,716,000 13.3% 2004 4,610,051,000 31,436,983,000 14.7% 2005 5,287,158,000 34,290,412,000 15.4% 2006 7,251,810,000 38,843,312,000 18.7% 2007 8,250,140,000 43,504,752,000 19.0% 2008 8,291,415,000 43,820,789,000 18.9% 2009 5,527,678,000"' 35,498,326,000 15.6% 2010 6,133,565,000(1 35,247,629,000 17.4% 2011 7,236,224,000(1 42,160,822,000 17.2% 2012 7,231,740,000"' 42,262,644,000 17.1% ... Does not include McDonald County, Missouri Demographics USA, County Edition, 2003-2008. Nielsen Consumer Buying Power: 2009 -forward. 9 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 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 2009 1,067,947,653 191,973,349 1,299,921,002 2010 1,025,933,870 188,130,198 1,214,064,068 2011 1,046,174,941 199,900,209 1,246,075,150 2012 1,063,617,013 203,289,225 1,266,906,238 Source: Washington County Tax Assessor's Office. The assessed value represents 20% of the appraised value of property. Building permits issued by the City(l) are shown below for the years indicated: 2009 Residential Building 281 Permits Commercial Building 14 Permits Value of All Building Permits $70,365,173 2010 2011 2012 256 273 394 16 29 18 $79,103,682 $81,146,187 $251,041,427 2013 379 24 $157,970,433 (1) Does not include building activity of the University of Arkansas, school permits and additions/alterations to existing structures. Source: City of Fayetteville. 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 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 6.1% 7.4% 2010 6.5% 7.9% 2011 6.2% 8.0% 2012 5.6% 7.3% 2013 4.9% 7.5% 2014* 5.6% 7.5% * February, 2014 only; preliminary. Employment and Industry. The principal campus of the University of Arkansas is located in the City and had total enrollment for the Spring semester of 2014 of approximately 23,286. On the Fayetteville campus, the University employs approximately 5,883 faculty, administrative, secretarial, clerical and maintenance personnel in both full-time and part-time positions, making the University the largest employer in the City. iC Other major employers in the City, their products or services and approximate number of employees are set forth below: Employer Washington Regional Med Center Washington Co. Government Fayetteville School District Veteran's Admin. Medical Ctr. Superior Industries City of Fayetteville Wal-Mart #9149 Tyson Mexican Original Wal-Mart #144 Source: 2012 City of Fayetteville CAFR. Product or Service Employees Hospital 1,521 Government 1,344 Education 1,315 Hospital 1,124 Transportation equipment 1,120 Government 704 Optical lab 678 Food products 572 Retail 507 THE SYSTEM Water Supply. The water supply for the City is provided by the Beaver Water District of Benton and Washington Counties, Arkansas (the "District"), which is the source of supply for an approximate population of 420,000 people in northwest Arkansas. The District was organized as a public water distribution district by order of the Benton County Circuit Court on July 17, 1959 for the purpose of obtaining water storage rights in Beaver Reservoir from the U.S. Corps of Engineers, and supplying treated water to municipalities within Benton and Washington Counties. Through the joint efforts of the cities of Bentonville, Fayetteville, Rogers and Springdale, Arkansas (the "Participating Cities"), the District entered into a contract with the U.S. Corps of Engineers providing for the supply to the District of up to 120 million gallons of water per day ("mgd") on an annual average basis. The Beaver Reservoir has a capacity of 1,952,000 acre feet. The District currently has a firm pumping capacity of 42.5 mgd to the City. The District's facilities are located on a 300 acre site owned by the District east of the City of Lowell, Arkansas, approximately 2 miles from its intake structures on Beaver Reservoir. The District's water treatment plant has a present nominal design capacity of 140 mgd. Water Supply Contracts with Beaver Water District. In 1967, the District and the Participating Cities entered into a Memorandum of Understanding and Contract for Construction, Maintenance, Operation and Expansion of Beaver Water Supply Facilities (the "Memorandum of Understanding"). Pursuant to the Memorandum of Understanding, the District agreed to construct, operate, maintain and expand a drinking water treatment plant as required to meet the then present and future needs of the Participating Cities. The Participating Cities agreed to build and maintain their own water supply lines from the point of the water discharge at the District's drinking water treatment plant to their respective distribution systems. The Participating Cities are also permitted to serve, through their distribution systems, other smaller cities and other approved water distribution agencies within Benton and Washington counties. The Memorandum of Understanding provides that the Participating Cities will make payments to the District for drinking water used by each Participating City based on the total cost to the District of the water delivered, including, but not limited to, amortization of the District's indebtedness, operation and maintenance of the District's facilities and the cost of the expansion of the District's facilities. The District issued water revenue bonds in 1990 and 1991 to finance a 40 mgd expansion to the then existing water treatment facility. The 1990 and 1991 water bonds were defeased with 1994 water revenue bonds dated as of June 1, 1994. This District also issued water revenue bonds in 2003 to finance the construction of two raw water intakes with microtunneled piping connections to Beaver Lake, construction of a 60 inch raw water pipeline, improvements to and expansion of the Croxton Water Treatment Plant, solids handling improvements for the Croxton Water Treatment Plant and the Steele Water Treatment Plant, improvements to the Steele Water Treatment Plant, and property acquisition. In 2010, the District refinanced the outstanding 2003 issue. The Participating Cities' obligations to make payments under the Memorandum of Understanding are evidenced, as to each Participating City, by water rate ordinances duly enacted in accordance with State law. While each Participating City has agreed, in principle, to make payments to the District sufficient to pay its proportionate share of the District's cost of providing water, the Participating Cities' sources of payment are limited to revenues 11 from their respective water systems pursuant to these water rate ordinances. The revenues derived from these water rate ordinances are not pledged by the Participating Cities to the repayment of the District's bonds and are subject to the debt requirements on any outstanding bonds of the Participating Cities secured by water revenues. Payments made to the District by the Participating Cities are considered by the Participating Cities to be operating expenses. The 2010 water revenue refunding bonds are currently the only outstanding bonded indebtedness of the District. As of December 31, 2013, the 2010 water revenue refunding bonds were outstanding in the principal amount of $31,925,000, and had a scheduled final maturity in 2022. The costs of the water storage rights are treated as a cost of water produced, and therefore the Participating Cities pay based on water consumption. The City treats these costs as Operation and Maintenance Expenses of the System and they are to be paid from Revenues deposited to the Operation and Maintenance Fund prior to the payment of debt service on the Series 2012 Bonds or the Series 2014 Bonds. The District's total water sales for the previous two fiscal years ended September 30 are represented in the following table: City 2012 2013 Fayetteville $ 6,510,236 $ 6,014,841 Springdale 6,925,737 6,436,844 Rogers 4,162,279 4,144,509 Bentonville 3,783,932 4,036.044 TOTALS: $ 1.382.184 $20.632.238 Source: Audited Financial Statements of the District dated September 30, 2012 and 2013. Each Participating City is billed monthly based on metered water consumption and effective rates at that time for drinking water purchased. On the basis of the District's annual audit, a cost for providing service to the Participating Cities is determined. Based on the District's annual operating costs, a charge or credit is then applied to each City for under- or over -payment for the drinking water used in that year. The rates charged by the District to the Participating Cities since 1967 for the cost of water delivered are as follows: Effective Date Rate Per Million Gal. Effective Date Rate Per Million Gal. 1967 $180.00 2-1-91 $1,010.00 9-1-77 270.00 11-1-03 1,160.00 9-1-82 320.00 1-1-08 1,180.00 11-1-85 370.00 1-1-09 1,200.00 12-1-86 410.00 10-1-10 1,220.00 2-1-89 610.00 10-1-11 1,240.00 2-1-90 810.00 10-1-12 1,260.00 Customers. At December 31, 2013, the City had approximately 38,736 active water customers and 33,247 active sewer customers. Water customers are billed solely on the basis of water usage and meter and line size. See the caption `THE SYSTEM — Rate Structure" below. The following table classifies active water customers for the years indicated: Source: City of Fayetteville. 12 2009 2010 2011 2012 2013 Residential 31,777 32,605 33,335 33,727 34,227 Nonresidential 2,935 2,945 2,875 2,894 2,953 Major Industrial 4 4 4 4 4 Irrigation 1,057 1,416 1,120 1,491 1,548 Wholesale 4 4 4 4 4 Totals: 35.777 36,974 37,338 38,120 38,736 Source: City of Fayetteville. 12 follows: The System's 10 largest water customers, based upon water revenues produced during 2013 were as Customer Total Revenues University of Arkansas $879,434 Pinnacle Foods Group, Inc. 452,016 Superior Industries 205,524 Tyson Foods, Inc. 187,500 City of West Fork 177,836 City of Fayetteville 147,121 City of Elkins 134,323 Washington Regional Medical Center 95,772 Mt. Olive Water Association 89,822 Veterans Administration 76,266 Source: City of Fayetteville. Percentage of 2013 Water Revenues 5.66% 2.91% 1.32% 1.21% 1.14% 0.95% 0.86% 0.62% 0.58% 0.49% Historical Statistics. The following table shows historical water usage statistics for the water distribution component of the System: Source: City of Fayetteville. The following table shows historical sewer treatment statistics for the wastewater treatment component of the System: Average Daily Flow Year in Million Gallons 2004 Average Daily Use Maximum Day's Use Year in Million Gallons In Million Gallons 2004 13.04 MG 19.86 MG 2005 14.34 MG 24.00 MG 2006 14.77 MG 25.10 MG 2007 14.18 MG 22.80 MG 2008 13.01 MG 20.90 MG 2009 12.44 MG 23.72 MG 2010 13.15 MG 23.12 MG 2011 13.56 MG 28.06 MG 2012 14.49 MG 25.00 MG 2013 13.61 MG 28.16 MG Source: City of Fayetteville. The following table shows historical sewer treatment statistics for the wastewater treatment component of the System: Average Daily Flow Year in Million Gallons 2004 11.64 MG 2005 10.98 MG 2006 11.24 MG 2007 11.43 MG 2008 14.37 MG 2009 12.76 MG 2010 11.15 MG 2011 12.40 MG 2012 11.20 MG 2013 12.20 MG Source: City of Fayetteville. Present System. As described above under this caption in the subcaptions "- Water Supply" and "- Water Supply Contracts With Beaver Water District," the City purchases treated water from the Beaver Water District. The City distributes such treated water to its residents as well as to the residents of certain surrounding cities and communities as described below. The City presently owns and operates two water treatment plants serving residents of the City and surrounding areas. 13 The water distribution component of the System is made up of approximately 791 miles of water main, 4,050 fire hydrants and approximately 29 million gallons of storage capacity held in 15 water storage tanks. The age of the water distribution varies from new to 117 years. The water distribution component of the System provides service to the City, to the Cities of Farmington, Goshen, Greenland and Wheeler, to parts of the City of Johnson, and to other rural areas surrounding the City. Wholesale service is provided to the Cities of Elkins and West Fork, to the Mount Olive Rural Water System and, as a backup to its primary supplier, to the Rural Development Authority of Washington County, Arkansas. The City currently has no written agreements with respect to the provision of its water services to, and the operation of the water systems of, the Cities of Farmington, Goshen, Greenland and Johnson. The City owns the water systems in these customer cities. Continuing water sales and the operation of these systems is based on terms and provisions of expired contracts and mutual understandings between the City and each of the Cities of Farmington, Goshen, Greenland and Johnson. The City has a current contract in place with respect to wholesale service to the Mount Olive Rural Water System and is currently in the process of renegotiating a wholesale contract with the City of West Fork. There is no written agreement currently in force with respect to the sale of water to the City of Elkins, and continuing sales are based on the terms and provisions of an expired contract and mutual understandings between the City and the City of Elkins. There is no written agreement currently in force with respect to the sale of water to the Rural Development Authority of Washington County, Arkansas, which now purchases almost all of its water from another supplier. The sewage collection component of the System currently serves approximately 80,000 persons and consists of approximately 578 miles of sewer main and over 12,800 manholes. The type of pipe in the sewage collection system is principally vitrified clay pipe with varying amounts of PVC plastic pipe, polyethylene plastic pipe, fiberglass reinforced pipe and cast iron pipe. The age of the sewage collection system varies from new to 107 years. The City has implemented an ongoing sewer rehabilitation program with over $16 million spent in related capital improvements during the last decade. The City has completed a major sewer transmission main, pump station and wastewater treatment upgrade, including the construction of a new wastewater treatment facility, with over $173 million spent in the last decade. Sewer collection and treatment services are provided to residents of the City, to the Cities of Farmington and Greenland, and to small parts of the City of Johnson. A few rural residents in the City's growth area also receive sewer collection and treatment service. Wholesale service is provided to the City of Elkins. The City has current sewer service contracts in effect for all of these cities. Total revenues collected for water and sewer services to nonresidents of the City represented approximately 11.71% of total revenues of the System during 2013. Revenues collected for water services to nonresidents represented approximately 15.87% of the total water revenues of the System during 2013. Residents of the City of Farmington were the largest nonresident water customer population accounting for approximately 3.26% of total water revenues of the System during 2013. Revenues collected for sewer services to nonresidents of the City represented approximately 7.74% of total sewer revenues of the System during 2013. Residents of the City of Farmington were the largest nonresident sewer customer population accounting for approximately 4.40% of total revenues of the System during 2013. When added together, the water and sewer service revenues derived from residents of the City of Farmington accounted for approximately 3.84% of total revenues of the System during 2013. The City's Noland wastewater treatment plant (the "East Side Plant"), located on a 1,228 acre site in the eastern portion of the City, commenced operations in 1987 and is currently permitted at 11.2 mgd. Treatment stages at the East Side Plant consist of the plant headworks (bar screens, vacutators and influent lift station), aeration basins, secondary sedimentation basins, biological and chemical nutrient removal, and U.V. disinfection. The biosolids treatment component of the East Side Plant employs dewatering of secondary biosolids, and drying into a Class A product through solar and thermal drying units with the product being sold through a bidding process. There were no permit violations at the East Plant in 2012 or 2013. The City's West Side wastewater treatment plant (the "West Side Plant"), located on a site of approximately 296 acres in the western portion of the City, commenced operations in June 2008 and is currently permitted at 10.0 mgd. Treatment stages at the West Side Plant consist of the plant headworks (bar screens and vacutators), aeration basins, secondary sedimentation basins, biological and chemical nutrient removal, and U.V. disinfection. There have been no permit violations at the West Side Plant since its opening. The West Side Plant was constructed and financed over a period of 6 years at a cost of approximately $61 million in order to address growth in the service area population and excess wet weather flows that consumed available wastewater treatment capacity and justified the construction of core system improvements. In addition to the West Side Plant itself, 31 miles of pipeline and additional lift stations were constructed, expanded or replaced 14 during such time period. The City believes that the wastewater components of the System, as currently in place, will meet service area needs for approximately 115,000 people. Average daily flow treated at the East Side and West Side plants combined equaled 12.20 mgd in 2013, with peak flow in 2013 of approximately 38.90 mgd. The East Side and West Side plants are operated on a contract basis by CH2M Hill Engineers. The regional office of the Environmental Protection Agency ("EPA") with authority over the City's wastewater operations has proposed regulatory action that would require regional municipal wastewater treatment plants to reduce the phosphorus content of their effluent by 90%. The City's new West Side Plant and its older Nolan Plant would both be covered by this proposed action. It is anticipated that modifications to the City's plants needed in order to comply with the phosphorus limit would require a substantial expense to the City (in excess of $22 million). The Arkansas Department of Environmental Quality ("ADEQ") has questioned the new limit, and it is likely that all affected entities will oppose the proposed regulation. The EPA and ADEQ are also considering new limits and testing for certain dissolved minerals discharged into the White River by area municipal wastewater treatment plants, which, if enacted, would force the City's Nolan Plant to be substantially rebuilt at a cost now estimated to be approximately $45 million and would increase operating costs by an estimated $2 million annually. The City is in discussions with ADEQ in an effort to avoid the need for compliance with said proposed dissolved mineral regulations. The enactment and enforcement of either of the proposed phosphorus or dissolved mineral regulations would likely necessitate significant wastewater rate increases by the City. Projected Capital Expenditures. The City anticipates the cost of contemplated expansions and capital improvements to the System over the next five years are as set forth in the following table. It is expected that such improvements will be funded from a combination of System revenues, impact fee receipts, grant moneys and Additional Bond proceeds. 2014"' 2015 2016 2017 2018 Miscellaneous Water System Improvements $2,921,800 $2,932,000 $2,753,000 $2,735,000 $2,700,000 Miscellaneous Sewer 2,410,200 2,000,000 2,100,000 2.200,000 2,300,000 System Improvements TOTALS: $4,932,OOQ4.853.000 4.935.000 $5.000.000 From the City's 2014 annual budget. Source: Water and Wastewater Director, City of Fayetteville, Arkansas. WATER RATES Rate Structure. The following tables set forth the City's current water rate structure: Inside City Monthly Treated Water Rates (cost per 1,000 gallons) Usage Rate Customer Class (inalg Ions) Effective 1/1/14 Residential First 2,000 $2.77 Next 13,000 $3.67 Over 15,000 $5.19 Nonresidential First 300,000 $3.00 Over 300,000 $2.68 Major Industrial All usage $2.34 Irrigation First 300,000 $3.98 Over 300,000 $3.58 Wholesale Reduced Peak Demand $2.26 Peak Demand $2.49 15 Inside City Monthly Water Service Charge Meter Size Effective 1/1/14 5/8"x3/4" Outside City 1 inch $ 7.21 Monthly Treated Water Rates $ 12.58 2 inch (cost per 1,000 gallons) 3 inch $ 42.67 Usage Rate $ 70.65 Customer Class (inalg lons) Effective 1/1/14 Residential First 2,000 $3.18 Next 13,000 $4.22 Over 15,000 $5.96 Nonresidential First 300,000 $3.46 Over 300,000 $3.08 Major Industrial All usage $2.69 Irrigation First 300,000 $4.58 Over 300,000 $4.12 Wholesale Reduced Peak Demand $2.26 Peak Demand $2.49 Inside City Monthly Water Service Charge Meter Size Effective 1/1/14 5/8"x3/4" $ 5.19 1 inch $ 7.21 1 1/2 inch $ 12.58 2 inch $ 18.30 3 inch $ 42.67 4 inch $ 70.65 6 inch $141.30 8 inch $211.88 Outside City Monthly Water Service Charge Meter Size Effective 1/1/14 5/8 " x 3/4 " $ 5.96 1 inch $ 8.29 1 1/2 inch $ 14.46 2 inch $ 21.05 3 inch $ 49.08 4 inch $ 81.25 6 inch $162.48 8 inch $243.67 Wholesale Monthly Water Service Charge Meter Size Effective 1/1/14 5/8 " x 3/4 " $ 6.57 1 inch $ 9.07 1 1/2 inch $ 15.79 2 inch $ 22.95 3 inch $ 50.81 4 inch $ 88.63 6 inch $167.96 8 inch $262.81 16 Inside City Monthly Standby Fire Protection Service Meter Size Effective 1/1/14 2 inch $ 8.77 3 inch $ 26.29 4 inch $ 52.59 6inch $146.08 8 inch $306.79 10 inch $525.91 Outside City Monthly Standby Fire Protection Service Meter Size Effective 1/1/14 2 inch $ 10.08 3 inch $ 30.24 4 inch $ 60.48 6 inch $167.99 8 inch $352.81 10 inch $604.79 All monthly water rates, service charges and standby fire protection charges are to be increased by 3% each subsequent year. SEWER RATES The following tables set forth the City's sewer rate structure: Monthly Quantity Charge (cost per 1,000 gallons) Inside City Monthly Sewer Service Charge Meter Size Effective 1/1/14 5/8" x 3/4" Usage Rate 1 inch Class in allons Effective 1/1/14 Residential First 2,000 $3.43 $101.62 Over 2,000 $4.57 Nonresidential All usage $3.48 Major Industrial All usage $3.72 Farmington All usage $5.94 Outside City All usage $6.46 Elkins 85% of metered water $4.10 usage Usage above 85% of $2.40 metered water usage Inside City Monthly Sewer Service Charge Meter Size Effective 1/1/14 5/8" x 3/4" $ 14.43 1 inch $ 18.75 1 1/2 inch $ 30.60 2 inch $ 43.76 3 inch $101.62 4 inch $167.47 6 inch $331.86 8 inch $496.32 17 Outside City Monthly Sewer Service Charge Meter Size Effective 1/1/14 5/8" x 3/4" $ 14.43 1 inch $ 26.78 1 1/2 inch $ 47.65 2 inch $ 62.94 3 inch $145.44 4 inch $239.53 6 inch $474.80 8 inch $710.28 Farmington Monthly Sewer Service Charge Meter Size Effective 1/1/14 5/8" x 3/4" $ 13.21 1 inch $ 24.70 1 1/2 inch $ 43.82 2 inch $ 57.97 3 inch $133.64 4 inch $220.19 6 inch $437.09 8 inch $652.69 Extra Strength Surcharge For all commercial and industrial customers whose wastewater discharge is greater than 300 mg/l of BODS and/or TSS, an extra strength surcharge is levied as follows: Effective 1/1/14 Extra Strength BODS $0.3436/lb Extra Strength TSS $0.2413/lb All monthly sewer quantity and service charges and extra strength surcharges will be increased by 3% each subsequent year. Rate Comparison. The following is a comparison of the monthly water and sewer charges for the City of Fayetteville with the charges of other area municipalities, based upon combined water and sewer charges for the average residential unit with 6,000 gallons of water consumption per month: City Cost Per Month Fayetteville $67.25 Bentonville $89.42 Fort Smith $58.52 Rogers $53.58 Springdale $38.74 Source: City water and sewer departments as of March 1, 2014. 18 Billing Procedures, Delinquency and Uncollectible Accounts. The City Code of Ordinances provides that bills for water and sewer services are rendered monthly in the net amount due. Bills are due and payable on or before the twentieth day following the billing date stated thereon. Bills not paid on or before the due date are considered delinquent and an additional charge of 10% of the total current bill is assessed against the account. Over the last five years, the City's bad debt expense experience has been as follows: Fiscal Year Ending December 31 2009 2010 2011 2012 2013' Unaudited. Water and Sewer Operating Revenues $27,531,109 29,761,443 32,133,628 34,318,514 33,200,583 Bad Debt Expense") $188,757 178,959 182,694 192,581 188,921 Bad Debt Percentage 0.69% 0.60% 0.57% 0.56% 0.57% Financial Information. Set forth in Appendix A to this Official Statement are the Statement of Fund Net Assets and the Statement of Revenues, Expenses and Changes in Fund Net Assets of the City's Water and Sewer Fund (the "Fund") for the year ended December 31, 2012. Such condensed financial information has been extracted from the Fund's financial statements included in the City's 2012 Comprehensive Annual Financial Report (the "CAFR"), which statements have been audited by Grant Thornton, LLP, independent certified public accountants. The City did not request Grant Thornton, LLP perform any updating procedures subsequent to the date of its audit report on the December 31, 2012, financial statements. Reference should be made to the CAFR for disclosures and required supplementary information necessary to fairly present the financial position and results of operations of the Fund. The CAFR can be viewed in its entirety, including the accountants' report, notes to financial statements and required supplementary information, on the City's website at www.accessfayetteville.ori/overnmendaccounting_and audit/index.cfm by selecting "Comprehensive Annual Financial Reports". The notes set forth in the CAFR are an integral part of the financial statements included in the CAFR, and the statements and notes should be read in their entirety. Set forth in Appendix B to this Official Statement are the unaudited financial statements of the City's Water and Sewer Fund for the year ended December 31, 2013. [REMAINDER OF PAGE INTENTIONALLY BLANK] 19 Following is a summary of revenues, expenses and changes in fund equity of the City's Water and Sewer Fund for the five years ended December 31, 2013. Information for the summary for the years ended December 31, 2009, 2010 and 2011 was derived from the financial statements of the City audited by BKD, LLP, independent certified public accountants. Information for the summary for the year ended December 31, 2012 was derived from the financial statements of the City audited by Grant Thornton, LLP, independent certified public accountants. The following table should be read in conjunction with the City's 2012 CAFR (referenced above). Information for the summary for the year ended December 31, 2013 was derived from the unaudited financial statements of the City's Water and Sewer Fund attached as Appendix B. City of Fayetteville, Arkansas Water and Sewer Fund Statement of Revenues, Expenses and Changes in Fund Equity For the Years Ended December 31, 2009 2010 2011 2012 2013tt) Operating revenues: Water services $12,264,859 $13,712,683 $15,359,868 $16,763,707 $15,547,701 Sewer services 14,336,394 14,970,047 15,645,479 16,431,009 16,480,453 Other 929,856 1,078,713 1,128,281 1,123,798 1,172,429 Total operating revenues 27,531,109 29,761,443 32,133,628 34,318,514 33,200,583 Operating expenses: Personnel services 4,482,370 4,382,588 4,499,221 4,665,056 5,138,023 Materials and supplies 1,204,379 1,245,826 1,297,651 1,480,263 1,510,184 Contract services and charges 17,450,507 16,727,469 17,189,607 17,848,139 18,266,123 Maintenance 119,096 77,926 117,941 101,574 149,964 Depreciation 9,842,327 10,070,404 10,275,854 10,883,035 10,860,771 Total operating expenses 33,098,679 32,504,213 33,380,274 34,978,067 35,925,065 Operating income (loss) (5,567,570) (2,742,770) (1,246,646) (659,553) (2,724,482) Nonoperating income (expenses): Intergovernmental -- -- -- -- -- Interest expense and fees (591,824) (641,171) (543,763) (429,414) (344,358) Interest income 208,375 198,713 119,887 118,668 97,344 Net increase (decrease) in fair (42,507) 62,558 (46,502) (7,132) (87,072) value of investments Other revenues 537,878 853,499 459,124 476,413 587,917 Total nonoperating income 111,922 473,599 (11,254) 158,535 253,831 Income (loss) before contributions and transfers (5,455,648) (2,269,171) (1,257,900) (501,018) (2,470,651) Capital donations 9,588,464 5,241,944 1,296,986 1,617,698 1,472,599 Capital internal transfers -- -- 11,065,423 4,435,299 -- Capital grants 243,631 82,490 1,403,320 3,381,330 442,792 Transfers in from other funds 90,016 2,792,404 -- 1,278,518 2,041,912 Transfers out to other funds (342,761) Change in net assets 4,466,463 5,847,667 12,507,829 9,869,066 1,486,652 Total net assets, beginning of year 301,428,839 305,895,302 311,742,969 324,250,798 333,919,982121 Total net assets, end of year "' Unaudited. (2) Net assets beginning balance was restated due to the implementation of Governmental Accounting Standards Board Statement No. 65. Such restatement reduced beginning net assets by $199,882. [REMAINDER OF PAGE INTENTIONALLY BLANK] 20 DEFINITIONS OF CERTAIN TERMS The following are definitions of certain terms used in this Official Statement: "Act" — Arkansas Code Annotated (1998 Repl. and Supp. 2013) §§ 14-164-401 et seq., §§ 14-234-201 et seq. and §§ 14-235-201 et seq., as from time to time amended. "Additional Bonds" — Bonds in addition to the Series 2012 Bonds and the Series 2014 Bonds which are issued under the provisions of the Indenture. "Annual Debt Service" — With respect to all or any particular amount of Bonds or Subordinate Obligations, as the case may be, the Debt Service for any particular Fiscal Year required pursuant to the provisions of the Indenture 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 Subordinate Obligations or from sources other than Net Revenues. "Authorizing Ordinance" — Ordinance No. 5665 of the City, adopted and approved on March 4, 2014, authorizing the issuance of the Series 2014 Bonds pursuant to the Indenture. "Bond Counsel" — Any firm of nationally recognized municipal bond counsel selected by the City and acceptable to the Trustee. "Bond Fund" — The fund by that name created and established in the Indenture. "Bonds" — The Series 2012 Bonds, the Series 2014 Bonds and all Additional Bonds issued by the City pursuant to the Indenture. "City" — The City of Fayetteville, Arkansas, a municipality and political subdivision under the laws of the State of Arkansas. "Code" — The Internal Revenue Code of 1986, as from time to time amended, and applicable regulations issued or proposed thereunder. "Costs of Construction" — All costs paid or incurred by the City in connection with acquiring, constructing and equipping of Facilities and placing of the same in operation or the reconstruction and re-equipping of damaged Facilities and replacing them in operation, including, without limitation, paying all or a portion of the interest on any series of Bonds issued for such purpose; paying into the Debt Service Reserve Fund from the proceeds of Bonds all or a portion of the amount or amounts required to make the amounts therein equal to the Reserve Requirements with respect to the particular series of Bonds being issued; paying or reimbursing the City or any fund for expenses of the City incident and properly allocable to such acquisition, construction, and equipping or reconstruction and re- equipping and the placing or replacing of the Facilities in operation; and all other expenses incident and properly allocable to the acquisition, construction, and equipping or the reconstruction and re-equipping of Facilities, the financing of the same, and the placing of the same in operation. "Costs of Issuance Fund" — The fund by that name created and established in the Indenture. "Debt Service" — With respect to all or any particular amount of Bonds or Subordinate Obligations, 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 or Subordinate Obligations, excluding amounts scheduled during such period which relate to principal which has been retired before the beginning of such period. "Debt Service Reserve Fund" — The fund by that name created and established in the Indenture. "Depository" — A national or state banking corporation or association (which may also include the Trustee and any Paying Agent) which holds membership in the Federal Deposit Insurance Corporation. "Escrow Agreement" — The Escrow Deposit Agreement dated May 20, 2014, between the City and the Escrow Trustee, providing for the redemption of the Series 2009 Bonds. "Escrow Trustee" — BOKF, NA dba Bank of Oklahoma, Tulsa, Oklahoma, in its capacity as escrow trustee under the Escrow Agreement. "Event of Default" — Any event of default specified in the Indenture. See the caption "SUMMARY OF THE INDENTURE — Events of Default" herein. "Facilities" — Land, buildings, structures, machinery, equipment and all related or necessary property, tangible or intangible, constituting the System, including, but not limited to, consumables, rights, easements, 21 franchises, and common facilities (being facilities used in common by the City in the furnishing of water or sewer services) which are used or useful in the collection, storage, distribution, treatment, sale or other use of water or wastewater, and to which the City has right, title or ownership, in whole or undivided part, and, if in undivided part, then to the extent of the City's right, title or ownership therein. "Fiscal Year" – The 12 -month period used, at any time, by the City for accounting purposes with respect to the System, which may be the calendar year. Currently, the fiscal year of the City ends on December 31 of each year. "Government Securities" – (i) bonds, notes, certificates of indebtedness, treasury bills or other securities constituting direct obligations of, or obligations on which the full and timely payment of principal and interest is fully and unconditionally guaranteed by, the United States of America (including any such securities issued or held in book -entry form on the books of the Department of Treasury of the United States of America), and (ii) evidences of direct ownership or proportionate or individual interest in future interest or principal payments on specified direct obligations of, or obligations on which the full and timely payment of principal and interest is fully and unconditionally guaranteed by, the United States of America, which obligations are held by a bank or trust company organized and existing under the laws of the United States of America or any state thereof in the capacity of custodian in form and substance satisfactory to the Trustee. "Holder" or "bondholder" or "owner of the Bonds" – The registered owner of any Bond. "Indenture" – The Trust Indenture dated as of May 1, 2002, as supplemented and amended by a First Supplemental Trust Indenture dated as of May 1, 2004, by a Second Supplemental Trust Indenture dated as of June 1, 2009, by a Third Supplemental Trust Indenture dated as of May 15, 2012, and by a Fourth Supplemental Trust Indenture dated as of May 15, 2014, each by and between the City and the Trustee, pursuant to which the Bonds are issued, and any further amendments and supplements thereto. "Investment Securities" – If and to the extent the same are at the time legal for investment of funds held under the Indenture: (1) Government Securities; (2) Direct obligations of any of the following federal agencies which obligations are not fully guaranteed by the full faith and credit of the United States of America: — Senior debt obligations issued by the Federal National Mortgage Association (FNMA) or Federal Home Loan Mortgage Corporation (FHLMC). — Obligations of the Resolution Funding Corporation (REFCORP). — Senior debt obligations of the Federal Home Loan Bank System. — Senior debt obligations of other Government Sponsored Agencies approved by Ambac Assurance; (3) U.S. dollar denominated deposit accounts, federal funds and bankers' acceptances with domestic commercial banks which have a rating on their short term certificates of deposit on the date of purchase of "P-1" by Moody's and "A-1" or "A-1+" by S&P and maturing no more than 360 calendar days after the date of purchase. (Ratings on holding companies are not considered as the rating of the bank.); (4) Investments in a money market fund rated "AAAm" or "AAAm-G" or better by S&P; (5) Pre -refunded Municipal Obligations defined as follows: any bonds or other obligations of any state of the United States of America or of any agency, instrumentality or local governmental unit of any such state which are not callable at the option of the obligor prior to maturity or as to which irrevocable instructions have been given by the obligor to call on the date specified in the notice; and (A) which are rated, based on an irrevocable escrow account or fund (the "escrow"), in the highest rating category of Moody's or S&P or any successors thereto; or (B) (i) which are fully secured as to principal and interest and redemption premium, if any, by an escrow consisting only of cash or obligations described in paragraph (2) above, which escrow may be applied only to the payment of such principal of and interest and redemption 22 premium, if any, on such Obligations or other obligations on the maturity date or dates thereof or the specified redemption date or dates pursuant to such irrevocable instructions, as appropriate, and (ii) which escrow is sufficient, as verified by a nationally recognized independent certified public accountant, to pay principal of and interest and redemption premium, if any, on the bonds or other obligations described in this paragraph on the maturity date or dates specified in the irrevocable instructions referred to above, as appropriate; (6) Municipal obligations rated "Aaa/AAA" or general obligations of States with a rating of at least "AVA" or higher by both Moody's and S&P. (7) Investment agreements approved in writing by Ambac Assurance (supported by appropriate opinions of counsel); and (8) Other forms of investments (including repurchase agreements) approved in writing by Ambac Assurance. "Moody's" — Moody's Investors Service and any successor thereto. "Net Revenues" — Revenues less Operation and Maintenance Expenses. "Operation and Maintenance Expenses" — For any period, all ordinary and necessary expenses of operation, repair, maintenance and insuring of the System under generally accepted accounting principles, except that there shall not be included (i) any allowance for depreciation, (ii) any deposits or transfers to the credit of (a) the Bond Fund or to any fund or account created for the payment of debt service on any Subordinate Obligations, (b) the Debt Service Reserve Fund or any debt service reserve fund or account created in connection with any Subordinate Obligations, or (c) the Renewal and Replacement Fund, or (iii) any payments with respect to obligations not payable in whole or in part under any circumstances from Revenues. Operating Expenses shall specifically include obligations of the City to the Beaver Water District of Benton and Washington Counties, Arkansas. "Operation and Maintenance Fund" — The fund by that name described in the Indenture. "Outstanding" — When used with reference to the Bonds, as of any particular date, the aggregate of all Bonds authenticated and 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 VIII 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. "Paying Agent" — 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. "Permitted Encumbrances" — (i) Any mortgage lien for the security of the Bonds; (ii) liens for taxes, assessments and other governmental charges not then delinquent or which can be paid without penalty; (iii) unfiled, inchoate mechanics' and materialmen's liens; (iv) workmen's, repairmen's, warehousemen's, and carriers' liens and others similar liens, if any, arising in the ordinary course of business; and (v) any easements, restrictions, mineral, oil, gas and mining rights and reservations, zoning laws and defects in title or other encumbrances to which System facilities may be subject because of their acquisition, construction and installation as part of the System. "Person" — 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. "Qualified Accountant" — An independent certified public accountant or firm of independent certified public accountants not in the regular employ of the City. "Rebate Fund" — The fund by that name created and established in the Indenture. "Record Date" — With respect to any interest payment date of the Bonds, the first day of the calendar month in which such interest payment date falls. 23 "Renewal and Replacement Fund — The fund by that name confirmed and described in the Indenture. "Reserve Requirement" — At any particular time, an amount equal to 50% of the aggregate maximum Annual Debt Service in any Fiscal Year thereafter with respect to Outstanding Bonds of all series. "Revenues" — All fees, tolls, rates, rentals and charges levied and collected in connection with, and all other income and receipts of whatever kind or character derived by the City from, the operation of the System. Revenues shall specifically include, but shall not be limited to, revenues from water sales, sewer service charges, fire protection charges and interest income on Revenue Fund balances. Notwithstanding the foregoing, Revenues shall not include acreage, connection, front -footage, tap -on, assessment and similar fees, charges, contributions or grants derived by the City in connection with the provision of or payment for capital improvements constituting a part of the System. "Revenue Fund" —The fund by that name confirmed and described in the Indenture. "S&P" — Standard & Poor's Ratings Services, a Division of The McGraw-Hill Companies, Inc., and any successor thereto. "Series 2009 Bonds" — An additional series of Bonds issued under and secured by the Indenture in the aggregate principal amount of $8,210,000. "Series 2012 Bonds" — An additional series of Bonds issued under and secured by the Indenture in the aggregate principal amount of $3,665,000. "Series 2014 Bonds" — An additional series of Bonds issued under and secured by the Indenture in the aggregate principal amount of $6,455,000*. "Subordinate Obligations" — Debt obligations of the City secured by a pledge of Net Revenues that is subordinate to the lien thereon securing the payment of the Bonds, as permitted by the provisions of the Indenture. "System" — The City's combined water and sewer utility system. "Trustee" — The banking corporation or association designated as Trustee in the Indenture, and its successor or successors as such Trustee. The original Trustee is BOKF, NA dba Bank of Oklahoma, Tulsa, Oklahoma. "Trust Estate" — The property described in the granting clauses of the Indenture. * Preliminary; subject to change. 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 City Clerk of the City, for a full statement thereof. Funds and Disposition of Revenues. Net Revenues are pledged by the Indenture to the payment of the principal of and premium, if any, and interest on the Bonds, subject to various provisions permitting application for other purposes. The following funds are referenced with respect to the Bonds: Fund Held By Revenue Fund City Operation and Maintenance Fund City Bond Fund Trustee Debt Service Reserve Fund Trustee Renewal and Replacement Fund City Cost of Issuance Fund Trustee Rebate Fund Trustee 24 Application of Revenues. The application of Revenues is as follows: (a) Revenue Fund. All Revenues shall, as and when received, be deposited into the Revenue Fund. All moneys at any time in the Revenue Fund shall be applied to the payment of Operation and Maintenance Expenses of the System, the payment of Annual Debt Service on the Bonds and any Subordinate Obligations, the maintenance of the Debt Service Reserve and the debt service reserves for any Subordinate Obligations, and the providing of the Renewal and Replacement Fund in the order, at the times and in the amounts set forth as follows: (b) Operation and Maintenance Fund. Prior to making the required payments into the Bond Fund and Debt Service Reserve Fund, into the bond funds and debt service reserve funds for any Subordinate Obligations, and into the Renewal and Replacement Fund, there shall be paid from the Revenue Fund into the Operation and Maintenance Fund, not later than the fifth business day preceding the fifteenth day in each month while any of the Bonds shall be Outstanding, an amount sufficient to cause amounts on deposit therein to equal projected Operation and Maintenance Expenses for the next two succeeding months (as shown in the budget of proposed Operation and Maintenance Expenses for the then current Fiscal Year) and from which disbursements shall be made only for those purposes. Fixed annual charges such as insurance premiums and the cost of major repair and maintenance expenses may be computed and set up on an annual basis, and 1/12 of the amount thereof may be paid into the Operation and Maintenance Fund each month. If in any month for any reason there shall be a failure to transfer and pay the required amount into the Operation and Maintenance Fund, the amount of any deficiency shall be added to the amount otherwise required to be transferred and paid into the Operation and Maintenance Fund in the next succeeding month. (c) Bond Fund. Immediately following the making of required deposits into the Operation and Maintenance Fund, there shall be paid from the Revenue Fund into the Bond Fund, on the fifth business day preceding the fifteenth day of each month until all Outstanding Bonds with interest thereon have been paid in full, or provision made for such payment, a sum equal to (i) 1/6 of the installment of interest coming due on the Bonds (whether at maturity, upon mandatory redemption, or otherwise) during the then next six (6) months, and (ii) 1/12 of the installment of principal coming due on the Bonds (whether at maturity, upon mandatory redemption, or otherwise) during the then next twelve (12) months (provided, however, that the first payments required under the Indenture with respect to a series of Bonds shall be prorated from the date of issuance of such series of Bonds and subsequent payment obligations shall be reduced to the extent of investment earnings and other moneys credited to the Bond Fund from sources other than monthly payments). All moneys in the Bond Fund shall be used solely for the purpose of paying Annual Debt Service on the Bonds or for any redemption of the Bonds, except as specifically 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 the amount of such payment for the sole purpose of paying the same. If Revenues are insufficient to make the required 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 the fifth business day preceding the fifteenth day of the next succeeding month. When the moneys held in the Bond Fund and the Debt Service Reserve Fund shall be and remain sufficient to pay in full the principal of and premium, if any, and interest on all Bonds then Outstanding, there shall be no obligation to make further payments into the Bond Fund. (d) Debt Service Reserve Fund. See the caption "SECURITY FOR THE BONDS — Debt Service Reserve" herein. (e) Renewal and Replacement Fund. After making the required deposits into the Operation and Maintenance Fund, into the Bond Fund and Debt Service Reserve Fund, and into the bond funds and debt service reserve funds with respect to any Subordinate Obligations, there shall be paid from the Revenue Fund into the Renewal and Replacement Fund not later than the fifth business day preceding the fifteenth day of each month while any of the Bonds are Outstanding, an amount sufficient to cause the amount on deposit therein to equal $300,000 or such greater amount as the City may determine from time to time is appropriate, provided that the amount to be deposited in any month need not exceed 1/12 of the amount then required to be on deposit therein. The moneys in the Renewal and Replacement Fund shall be used solely for the purpose of paying the cost of necessary repairs or replacements due to the depreciation of the System and not paid for with moneys in the Operation and Maintenance Fund and costs of damage caused to the System by unforeseen catastrophes. (f) Surplus. Any surplus in the Revenue Fund after making all disbursements and providing for all funds described above may be used, at the option of the City for any lawful purpose. 25 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 this Indenture; provided, however, the stated maturity dates of Investment Securities of Debt Service Reserve Fund moneys 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. The City may invest moneys held in the Revenue Fund, Operation and Maintenance Fund and Renewal and Replacement Fund in any investment obligations permitted by Arkansas law. Obligations purchased as an investment of moneys in any fund or account created by the Indenture shall be deemed at all times to be a part of such fund or account, and any income or loss due to an investment thereof shall be charged to the respective fund or account for which the investment was made except as otherwise provided in the Indenture. Investments in any fund or account shall be evaluated at least annually by the City or the Trustee, as may be appropriate. For the purpose of determining the amount in any fund or account, the City and the Trustee shall value all Investment Securities credited to such fund or account at the price at which such Investment Securities are redeemable by the holders or owners thereof at their option if so redeemable, or, if not so redeemable, at the lesser of (i) the cost of such Investment Securities minus the amortization of any premium or plus the amortization of any discount thereon and (ii) the market value of such Investment Securities, provided that Investment Securities credited to the Debt Service Reserve Fund, if not so redeemable, shall be valued at the cost thereof minus the amortization of any premium or plus the amortization of any discount thereon. 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 based on accepted industry standards and from accepted industry providers. 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. Operation and Maintenance of System; Disposition of System Assets. The City covenants that it will continuously operate the System in a diligent fashion in accordance with prudent utility practice and as a revenue-producing undertaking in compliance with all applicable laws and regulations and all the covenants and obligations under the Indenture. The City further covenants that it will maintain the System in sound condition and repair, that it will not sell or otherwise dispose of any property necessary to the proper operation of the System or to the maintenance of Revenues, and that it will not enter into any lease or agreement which will impair or impede the operation of the System or adversely affect the rights of the bondholders. Insurance. The City covenants and agrees to insure and at all times keep insured, in the amount of the actual value thereof, by a responsible insurance company or companies authorized and qualified under the laws of the State of Arkansas to assume the risk thereof, all properties of the System, other than water storage tanks, mains and lines for the transmission, distribution or collection of water or wastewater, against loss or damage from fire, lightning, tornado, winds, strike, malicious damage or explosion and against loss or damage from any other causes customarily insured against by private companies engaged in a similar type of business. In the event of loss, the proceeds of such insurance shall be applied solely toward the reconstruction, replacement or repair of the System, and in such event the City shall, with reasonable promptness, cause to be commenced and completed the reconstruction, replacement and repair work. If such proceeds are more than sufficient for such purposes, the balance remaining shall be deposited to the credit of the Bond Fund, and, if such proceeds shall be insufficient for such purposes, the deficiency shall be supplied, fust, from moneys in the Renewal and Replacement Fund and, second, from any available moneys in the Revenue Fund. Damage or Destruction; Condemnation. The City covenants and agrees that in the event of damage to or destruction of the System, or if all or any part of the System shall be taken under the exercise of eminent domain, it will immediately notify the Trustee. 26 All insurance money paid or net amounts awarded shall be paid to the City, and the City shall proceed to restore, repair, replace or rebuild System facilities as nearly as possible to the condition they were in immediately prior to such damage or condemnation, to the extent that the same may be feasible, subject to such alterations as the City may elect to make. If the insurance money or net amounts awarded shall be insufficient to pay all costs of the restoration, the City shall pay the deficiency and shall nevertheless proceed to complete the restoration and pay the cost thereof. Any balance of the insurance or condemnation proceeds remaining over and above the cost of the restoration shall be deposited into the Revenue Fund. The City's obligations to make all payments set forth in the Indenture and to perform all other covenants and agreements on its part to be performed shall not be affected by any such damage or destruction or condemnation. Notwithstanding the foregoing provisions, the City shall not be required to repair, restore, replace or rebuild System facilities, or any part thereof, if the City shall elect to redeem prior to maturity on the next possible redemption date all of the Bonds then Outstanding, together with accrued interest to the redemption date, and to pay all charges, fees and expenses necessarily incurred and required to be incurred in connection with such redemption, and all other amounts then owing by the City. In that event, the proceeds of all insurance or condemnation awards shall be placed in and become part of the Bond Fund. If there be any deficiency in the moneys on deposit in the Bond Fund after the deposit of all such proceeds, the City shall immediately deposit therein the amount of the deficiency. Accounting; Reports. The City covenants that it will keep the funds and accounts of the System separate from all other funds and accounts of the City, and that it will keep accurate records of all items of cost and of all expenditures relating to the System, and of the collection and application of Revenues, in accordance with generally accepted accounting principles. Such records and accounts shall be open to inspection by the Trustee under reasonable circumstances. The City further covenants that at the end of each Fiscal Year it will cause an audit to be made of the books and accounts for that Fiscal Year pertaining to the System by a Qualified Accountant. Copies of each such audit shall be filed with the Trustee and furnished to the holders of outstanding Bonds making written request therefor. Annual Budget. The City shall prepare an annual budget for System operations for each Fiscal Year. A copy of each budget shall be filed with the Trustee and a copy shall be maintained in the office of the Finance and Internal Services Director of the City. 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. 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 27 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; and (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. 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, 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. 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 28 interest on each of the Bonds issued under the Indenture to the respective holders thereof at the time and place in said Bonds expressed. 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 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; (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 (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 (f) below 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) deprive 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. 29 SUMMARY OF THE CONTINUING DISCLOSURE AGREEMENT The City has entered into an undertaking in the form of the Continuing Disclosure Agreement for the benefit of the Beneficial Owners of the Series 2014 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"). In connection with certain of the City's prior undertakings pursuant to the Rule, certain filings of the City's Audited Financial Statements and Audited Financial Information were not made on or before the due dates provided in said undertakings. All required filings have now been made with the MSRB through the EMMA system, and the City has implemented procedures to assure verifiable compliance with its continuing disclosure obligations. The Continuing Disclosure Agreement contains the following covenants and provisions: (a) The City covenants that it will disseminate, or will cause the Dissemination Agent to disseminate, the Annual Financial Information and the Audited Financial Statements (in the form and by the dates set forth in Exhibit I to the Continuing Disclosure Agreement) by delivering such Annual Financial Information to the MSRB within 180 days of the completion of the City's fiscal year. Audited Financial Statements, if available, shall be filed with the MSRB at the same time as the Annual Financial Information. If not then available, unaudited financial statements shall be included with the MSRB filing, and Audited Financial Statements shall be provided to the MSRB within ten (10) business days after availability thereof. The City is required to deliver or cause delivery of such information in Prescribed Form and by such time so that such entity receives the information by the dates specified. (b) If any part of the Annual Financial Information can no longer be generated because the operations to which it is related have been materially changed or discontinued, the City will disseminate or cause dissemination of a statement to such effect as part of its Annual Financial Information for the year in which such event first occurs. (c) If any amendment is made to the Continuing Disclosure Agreement, the Annual Financial Information for the year in which such amendment is made (or in any notice or supplement provided to the MSRB) shall contain a narrative description of the reasons for such amendment and its impact on the type of information being provided. (d) The City covenants to disseminate or cause dissemination in a timely manner, not in excess of ten (10) business days after the occurrence of the event, of Material Events Disclosure to the MSRB in Prescribed Form. Notwithstanding the foregoing, notice of optional or unscheduled redemption of any Series 2014 Bonds or defeasance of any Series 2014 Bonds need not be given under the Continuing Disclosure Agreement any earlier than the notice (if any) of such redemption or defeasance is given to the owners of the Series 2014 Bonds pursuant to the Indenture. The City is required to deliver or cause delivery of such Material Events Disclosure in the same manner as provided for Annual Financial Information and Audited Financial Statements. (e) The City shall give notice in a timely manner or shall cause such notice to be given by the Dissemination Agent, not in excess of ten (10) business days after the occurrence of the event, to the MSRB in Prescribed Form of any failure to provide Annual Financial Information Disclosure when the same is due. (f) The Continuing Disclosure Agreement has been executed in order to assist the Participating Underwriter in complying with the Rule; however, the Continuing Disclosure Agreement shall inure solely to the benefit of the City, the Dissemination Agent, if any, the Trustee and the Beneficial Owners of the Series 2014 Bonds, and shall create no rights in any other person or entity. In the event of a failure of the City to comply with any provision of the Continuing Disclosure Agreement, the Beneficial Owner of any Series 2014 Bond may seek specific performance by court order to cause the City to comply with its obligations under the Continuing Disclosure Agreement. A default under the Continuing Disclosure Agreement shall not be deemed an Event of Default under the Indenture or any other agreement, and the sole remedy under the Continuing Disclosure Agreement in the event of any failure of the City or the Dissemination Agent to comply with the Continuing Disclosure Agreement shall be an action to compel performance. (g) The Undertaking of the City pursuant to the Continuing Disclosure Agreement shall be terminated hereunder when the City shall no longer have any legal liability for any obligation on or relating to the repayment of the Series 2014 Bonds. The City shall give notice to the MSRB, or shall cause the Dissemination Agent to give such notice, in a timely manner and in Prescribed Form in such event. (h) The City and the Dissemination Agent may amend the Continuing Disclosure Agreement, and any provision of the Continuing Disclosure Agreement may be waived, if (i) the amendment or waiver is made in 30 connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature or status of the City or type of business conducted; (ii) the Continuing Disclosure Agreement, as amended, or the provision, as waived, would have complied with the requirements of the Rule at the time of the primary offering, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; (iii) the amendment or waiver does not materially impair the interests of the Beneficial Owners of the Series 2014 Bonds, as determined either by parties unaffiliated with the City (such as the Trustee) or by an approving vote of the Beneficial Owners of the Series 2014 Bonds holding a majority of the aggregate principal amount of the Series 2014 Bonds (excluding Series 2014 Bonds held by or on behalf of the City or its affiliates) pursuant to the terms of the Indenture at the time of the amendment; or (iv) the amendment or waiver is otherwise permitted by the Rule. (i) The following terms used under this caption shall have the meanings set forth below: "Annual Financial Information" means the following general categories of financial information and operating data with respect to the System for the prior fiscal year: (A) Changes in wholesale water rates charged by the Beaver Water District; (B) Changes in the City's water and sewer rate structure; (C) Annual System operating revenues, bad debt expense and bad debt expense percentage; (D) Costs for projected System capital improvements for the current fiscal year; (E) Usage percentages of all water users consuming more than 5% of the System's water output; (F) Average daily water use and maximum day's water use; and (G) Average daily sewage flow. "Annual Financial Information Disclosure" means the dissemination of disclosure concerning Annual Financial Information and the dissemination of the Audited Financial Statements as set forth in subsection (a) above. "Audited Financial Statements" means the audited consolidated financial statements of the City, prepared pursuant to generally accepted accounting standards and as described in Exhibit I to the Continuing Disclosure Agreement. "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 Series 2014 Bonds (including persons holding Series 2014 Bonds through nominees, depositories or other intermediaries), or (b) is treated as the owner of any Series 2014 Bonds for federal income tax purposes. "Commission" means the U.S. Securities and Exchange Commission. "Dissemination Agent" shall mean BOKF, NA dba Bank of Oklahoma, Tulsa, Oklahoma, acting in its capacity as a dissemination agent under the Continuing Disclosure Agreement, or any successor dissemination agent designated in writing by the City and which has filed with the Trustee a written acceptance of such designation. MSRB. Bonds: "EMMA" means the Electronic Municipal Market Access facility for municipal securities disclosure of the "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Material Event" means the occurrence of any of the following events with respect to the Series 2014 (1) Principal and interest payment delinquencies; (2) Nonpayment -related defaults, if material; (3) Unscheduled draws on debt service reserves reflecting financial difficulties; (4) Unscheduled draws on credit enhancements reflecting financial difficulties; (5) Substitution of credit or liquidity providers, or their failure to perform; (6) Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material 31 notices or determinations with respect to the tax status of the security, or other material events affecting the tax status of the security; (7) Modifications to rights of security holders, if material; (8) Bond calls, if material, and tender offers; (9) Defeasances; (10) Release, substitution or sale of property securing repayment of the securities, if material; (11) Rating changes; (12) Bankruptcy, insolvency, receivership or similar event of the City; (13) The consummation of a merger, consolidation or acquisition involving the City or the sale of all or substantially all of the assets of the City, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; and (14) Appointment of a successor or additional trustee or the change of name of a trustee, if material. "Material Events Disclosure" means dissemination of a notice of a Material Event as set forth in subsection (d) above. "MSRB" shall mean the Municipal Securities Rulemaking Board established in accordance with the provisions of Section 15B(b)(1) of the 1934 Act. "Participating Underwriter" means each broker, dealer or municipal securities dealer acting as an underwriter in any primary offering of the Series 2014 Bonds. "Prescribed Form" means, with regard to the filing of Annual Financial Information, Audited Financial Statements and notices of Material Events with the MSRB at www.emma.msrb.org (or such other address or addresses as the MSRB may from time to time specify), such electronic format, accompanied by such identifying information, as shall have been prescribed by the MSRB and which shall be in effect on the date of filing of such information. "Rule" shall mean Rule 15c2 -12(b)(5) adopted by the Securities and Exchange Commission ("SEC') under the Exchange Act, as the same may be amended from time to time. "State" means the State of Arkansas. "Undertaking" means the obligation of the City pursuant to subsections (a) and (d) above. UNDERWRITING Under a bond purchase agreement entered into by and among the City and Stephens Inc. (the "Underwriter"), the Series 2014 Bonds are being purchased at a purchase price of $ (representing the stated principal amount of the Series 2014 Bonds less an underwriting discount of $ ) plus accrued interest from May 15, 2014 to the date of delivery of the Series 2014 Bonds. The bond purchase agreement provides that the Underwriter will purchase all of the Series 2014 Bonds if any are purchased. The obligation of the Underwriter to accept delivery of the Series 2014 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 2014 Bonds or any proceedings in connection with the issuance thereof, and the absence of material adverse changes in the financial condition of the System. The Underwriter intends to offer the Series 2014 Bonds to the public initially at the offering prices as set forth on the 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 2014 Bonds to the public, and may offer the Series 2014 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 2014 Bonds, including certain liabilities under federal securities laws. 32 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 2014 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 tax. The opinion described in the preceding sentence assumes the accuracy of certain representations and compliance by the City with covenants designed to satisfy the requirements of the Code that must be met subsequent to the issuance of the Series 2014 Bonds. Failure to comply with such requirements could cause interest on the Series 2014 Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Series 2014 Bonds. The City has covenanted to comply with such requirements. Original Issue Discount. The Series 2014 Bonds maturing August 15, 20_ and 20_ (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 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 2013 Bonds maturing August 15, 20_ and 20_ (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 2014 Bonds. The accrual or receipt of interest on the Series 2014 Bonds may otherwise affect the federal income tax liability of the owners of the Series 2014 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 2014 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 33 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 2014 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 2014 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 2014 Bonds from gross income for federal income tax purposes or any other federal tax consequence of purchasing, holding or selling tax-exempt obligations. 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 2014 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 2014 Bonds. It cannot be predicted whether any such regulatory action will be implemented, how any particular lawsuit will be resolved, or whether the Series 2014 Bonds or the market value thereof would be impacted thereby. Purchasers of the Series 2014 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 2014 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. State Taxes. Bond Counsel is of the opinion that, under existing law, the interest on the Series 2014 Bonds is exempt from all state, county and municipal taxes in the State of Arkansas. RATING Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. ("S&P"), has assigned a rating of AA+ (stable outlook) to the Series 2014 Bonds. Such rating reflects only the view of S&P at the time such rating was given. An explanation of the significance of the rating may be obtained from S&P. There is no assurance that such rating will continue for any given period of time or that the rating 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 rating may have an adverse effect on the market price of the Series 2014 Bonds. Neither the City nor the Underwriter have undertaken any responsibility subsequent to the issuance of the Series 2014 Bonds to assure the maintenance of the rating or to oppose any revision or withdrawal of the rating. No application has been made to any rating agency other than S&P for a rating on the Series 2014 Bonds. LEGAL MATTERS Legal Opinions. Legal matters incident to the authorization and issuance of the Series 2014 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 2014 Bonds. 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 2014 Bonds or questioning or affecting the legality of the Series 2014 Bonds or the proceedings and authority under which the Series 2014 Bonds are to be issued, or questioning the right of the City to issue the Series 2014 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 City or the System's financial affairs. FINANCIAL STATEMENTS The financial statements of the City's Water and Sewer Fund (the "Fund) at December 31, 2012 and for the year then ended are included herein as Appendix A. Such condensed financial information has been extracted from the Fund's financial statements included in the City's 2012 Comprehensive Annual Financial Report (the "CAFR"), which statements have been audited by Grant Thornton, LLP, independent certified public accountants. The City 34 did not request Grant Thornton, LLP perform any updating procedures subsequent to the date of its audit report on the December 31, 2012 financial statements. Reference should be made to the CAFR for disclosures and required supplementary information necessary to fairly present the financial position and results of operations of the Fund. The CAFR can be viewed in its entirety, including the accountants' report, notes to financial statements and required supplementary information, on the City's website at www.accessfayetteville.orglp,overnment/accounting_and audit/index.cfm by selecting "Comprehensive Annual Financial Reports". The notes set forth in the CAFR are an integral part of the financial statements included in the CAFR, and the statements and notes should be read in their entirety. Set forth in Appendix B to this Official Statement are the unaudited financial statements of the Fund for the year ended December 31, 2013. Additional financial information concerning the City may be obtained from the City's Finance and Internal Services Director, City of Fayetteville, City Administration Building, 113 West Mountain, Fayetteville, Arkansas 72701. 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 2014 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. 35 The execution and delivery of this Official Statement has been duly authorized by the City of Fayetteville, Arkansas. CITY OF FAYETTEVILLE, ARKANSAS By: Mayor 36 APPENDIX A AUDITED FINANCIAL STATEMENTS OF THE CITY'S WATER AND SEWER FUND FOR THE YEAR ENDED DECEMBER 31, 2012 The following 2012 condensed financial information of the City's Water and Sewer Fund (the "Fund") has been extracted from the Fund's financial statements included in the City's Comprehensive Annual Financial Report ("CAFR"). Reference should be made to the CAFR for disclosures and required supplementary information necessary to fairly present the financial position and results of operations of the Fund. The CAFR can be viewed in its entirety, including the accountants' report, notes to the financial statements and required supplementary information, on the City's website at www.accessfayetteville.oriz/government/accounting--and audidindex.cfm by selecting "Comprehensive Annual Financial Reports". A-1 City of Fayetteville, Arkansas Statement of Fund Net Position Proprietary Funds December 31, 2012 Total net position $ 3,448,967 $ 12,353,482 $ 334,119,864 The notes to the financial statements are an integral part of this statement A-2 Town Solid Water Center Waste and Sewer ASSETS Current assets: Cash $ $ 350 $ 887,811 Investments 9,082,772 19.784,522 Restricted investments 1,505,000 Accounts receivable 1,220,613 3,465,926 Accrued interest 14,058 30,622 Due from other funds 93,260 51,156 Due from other governments 4,278,953 Inventory 32,397 962,838 Prepaid expenses and other assets 1,523 71,570 Total current assets 10,444,973 31,038,398 Noncurrent assets. Restricted assets. Investments 168,718 755,992 Accrued interest 1 26 Unamortized bond issue cost 25,396 199,882 Total restricted assets 194,115 955,900 Capital assets Land 151,158 96,682 8,149,924 Buildings 9,193.995 2,761,773 101,371,852 Improvements other than buildings 1,158,081 314,358,428 Machinery, equipment and vehicles 1,314,075 31,397,375 Construction in progress 118,641 Less accumulated depreciation (4229.238) (2,320,035) (137,975,175) Total capital assets. net 5,115.915 3,129,217 317,302,404 Total noncurrent assets 5,310.030 3,129,217 318,258,304 Total assets 5,310,030 13,574,190 349,296,702 LIABILITIES Current liabilities: Accounts payable 137.645 1 100,275 Accrued expenses 57,245 92.542 Compensated absences 175,613 381,272 Due to other funds 571,613 480,819 Due to other governments 75,282 Customer deposits 800 838,356 Unearned revenue 13 215 Accrued interest 16.192 76,961 Bonds payable - current maturity 610.000 1,505,000 Total current liabilities 626,192 956,131 4550,507 Noncurrent liabilities: Compensated absences 264,577 351,624 Bonds payable 1,275,000 10.235,000 Unamortized gain on debt refunding (25,814) (61,421) Unamortized bond premiums (discounts) (14,315) 101,128 Total noncurrent liabilities 1,234,871 264,577 10,626,331 Total liabilities 1,861 063 1,220,708 15,176,838 NET POSITION Net investment in capital assets 3,271,045 3,129,217 306.065,329 Restricted for debt service 152,527 1600,644 Unrestricted 25 395 9,224,265 26,453,891 Total net position $ 3,448,967 $ 12,353,482 $ 334,119,864 The notes to the financial statements are an integral part of this statement A-2 City of Fayetteville, Arkansas Proprietary Funds Statement of Revenues, Expenses, and Changes in Fund Net Position For the Year Ended December 31, 2012 Operating revenues Solid waste fees Water services Sewer services Airport seances Shop charges Other Total operating revenues Operating expenses Personnel services Materials and supplies Contract services and charges Maintenance Depreciation Total operating expenses Operating income (loss) Nonoperating revenues (expenses) Taxes and franchise fees Interest expense and fees Interest income Net increase (decrease) in fair value of investments Other revenues (expenses) Total nonoperating income Income (loss) before contributions and transfers Capital donations Capital internal transfers Capital grants Transfers in Transfers out Change in net position Total net position, beginning of year Total net position, end of year Town Solid Water Center waste and Sewer $ $ 9,390,258 $ 16,763,707 16,431 009 1,123,798 9,390,258 34,318,514 The notes to the financial statements are an integral part of this statement A-3 2,794,203 4,665,056 713,351 1,480,263 2,505 5,266.683 17,848,139 81.632 101,574 367,760 300,022 10,883,035 370,265 9,155,891 34,978,067 (370,265) 234,367 (659,553) 174.545 (107,255) (429,414) 28 61,954 118,668 (8,250) (7.132) 680,896 21,329 476,413 573,669 249,578 158,535 203,404 483,945 (501,018) 1,617,698 4,435,299 5,285 3,381,330 1,278,518 (342,761) 203,404 489.230 9,869,066 3,245,563 11,864,252 324,250,798 $ 3,448,967 $ 12,353482 $ 334,119,864 The notes to the financial statements are an integral part of this statement A-3 [THIS PAGE INTENTIONALLY BLANK]' A-4 APPENDIX B UNAUDITED FINANCIAL STATEMENTS OF THE CITY'S WATER AND SEWER FUND FOR THE YEAR ENDED DECEMBER 31, 2013 B-1 Gty of Fayetteville, Arkansas Satement of Net Assets Water and Sewer Fund December 31. 2013 Current assets: 674,524 Cash $ 1,913,162 Investments 25,568,230 Restricted Investments 1,530,000 Accounts receivable 3,415,995 Accrued interest 22,347 Due from other funds 660,447 Due from other government 1,920,638 Inventories 1,065,319 Prepaids 72,253 Total current assets 36.168.391 Noncurrent assets: 674,524 Restricted assets 111,580 Investments 361,417 Accrued interest 15 Total noncurent assets 361,432 Capital assets 821,022 Land 8,180,394 Buildings 101,371,852 Improvements other than buildings 319,833,361 Machinery, equipment and vehicles 31,684,693 Less accumulated Depreciation (148,830,752) Total capital assets, net 312,239,548 Total noncurrent assets 312,600,980 Total assets 348,769,371 Deferred outflows of resources Gain on debt refunding 48,020 Total deferred outflows of resources 48,020 Total assets and deferred outflows of resources 348,817,391 LIABILITIES Current liabilities Accounts payable 674,524 Accrued expenses 111,580 Compensated absences 371,535 Due to other funds 581,382 Due to other governments 59,139 Customer deposits 821,022 Accrued interest 107,000 Bonds payable - current portion 1,530,000 Total current liabilities 4,256,182 Noncurrent liabilities Compensated absences 370,511 Bonds payable 8,784,064 Total noncurrent liabilities 9,154,575 Total liabilities 13,410, 757 Deferred inflows of resources Nome Total deferred inflows of resources Total liabilities and deferred inflows of resources 13,410,757 Net assets Invested in capital assets. net of related debt 302,320,937 Restricted for debt service 1.435,282 Unrestricted 31,650,415 Total net assets $ 335,406.634 B-2 City of Fayetteville, Arkansas Water and Sewer Fund Statement of Revenues, Expenses and Changes in Fund Net Assets For the Year Ended December 31, 2013 Operating revenues Water services $ 15,547,701 Sewer services 16,480,453 Other 1,172,429 Total operating revenues 33,200,583 Operating expenses Personnel services 5,138,023 Materials and supplies 1,510,184 Contract services and charges 18,266,123 Maintenance 149,964 Depreciation 10,860,771 Total operating expenses 35,925,065 Operating income pons) (2,724,482) Nonoperating revenues (expenses) Interest expense and fees (344,358) Interest income 97,344 Net decrease in fair value of investments (87,072) Other revenues 587,917 Total nonoperating income 253,831 Income (loss) before contributions and transfers (2,470,651) Capital grants 442,792 Capital donations 1,472,599 Transfers in 2,041,912 Change in net assets 1,486,652 Total net assets, beginning of year as restated' 333,919,982 Total net assets, end of year $ 335,406,634 `Net assets beginning balance was restated due to the implementation of Governmental Accounting Standards Board Statement No. 65. The change reduced beginning net assets by $199,882. [THIS PAGE INTENTIONALLY BLANK] APPENDIX C Proposed Form of Bond Counsel Opinion Kutak Rock LLP, Bond Counsel, will render an opinion with respect to the Series 2014 Bonds, dated the date of issuance and delivery thereof, in substantially the following form: May _, 2014 City of Fayetteville, Arkansas Fayetteville, Arkansas BOKF, NA dba Bank of Oklahoma, as Trustee Tulsa, Oklahoma Stephens Inc. Fayetteville, Arkansas $6,455,000* City of Fayetteville, Arkansas Water and Sewer System Refunding Revenue Bonds Series 2014 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 $6,455,000* Water and Sewer System Refunding Revenue Bonds, Series 2014 (the "Bonds"). The Bonds are being issued pursuant to the provisions of the Constitution and laws of the State of Arkansas, including, particularly, Amendment 65 and Arkansas Code Annotated (1998 Repl. & Supp. 2013) §§14- 164-401 et seq., §§ 14-234-201 et seq. and § § 14-235-201 et seq. (collectively, and as from time to time amended, the "Authorizing Legislation'), pursuant to Ordinance No. 5665 of the City, duly adopted and approved on March 4, 2014 (the "Authorizing Ordinance" ), and pursuant to a Trust Indenture dated as of May 15, 2002, as amended and supplemented by a First Supplemental Trust Indenture dated as of May 1, 2004, by a Second Supplemental Trust Indenture dated as of June 1, 2009, by a Third Supplemental Trust Indenture dated as of May 15, 2012, and by a Fourth Supplemental Trust Indenture dated as of May 15, 2014 (as amended and supplemented, the "Indenture"), each by and between the City and BOKF, NA dba Bank of Oklahoma (formerly Bank of Oklahoma, 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 debt by the City, 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 Rate Ordinances and the Authorizing Ordinance and enter into and perform its obligations under the Indenture, the valid adoption of the Rate Ordinances 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 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. C-1 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 65 and the Authorizing Legislation, the City is empowered to adopt 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 validly authorized, executed, issued and delivered by the City and represent valid and binding special obligations of the City. The principal, premium, if any, and interest on the Bonds shall be payable from, and shall be secured by an assignment and pledge by the City to the Trustee of, the Net Revenues (as defined in the Indenture) of the City's water and sewer system, subject to a parity pledge of Net Revenues securing (i) the City's Water and Sewer System Refunding Revenue Bonds, Series 2012, and (ii) any Additional Bonds (as defined in the Indenture) issued hereafter. 5. The Net Revenues have been duly and validly assigned and pledged to the Trustee under the Indenture, and the Indenture creates, as security for the Bonds, a valid security interest in the Net Revenues. Under the laws of the State of Arkansas, including, particularly, Arkansas Code Annotated (2001 Repl. & 2013 Supp.) Section 4-9-109(d)(14), the pledge, assignment and security interest in the Net Revenues securing the Bonds is and shall be prior to any judicial lien hereafter imposed on said Net Revenues to enforce a judgment against the City on a simple contract, and it is not necessary to file a Uniform Commercial Code financing statement in order to perfect a security interest in said Net Revenues. 6. Interest on the Bonds is excluded from gross income for federal income tax purposes and is not a specific preference item for purposes of the federal alternative minimum tax. The opinion described in the preceding sentences assumes 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 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. 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, C-2 [TMS PAGE IN'T'ENTIONALLY BLANK] C-3 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. No. R14-1 UNITED STATES OF AMERICA STATE OF ARKANSAS CITY OF FAYETTEVILLE, ARKANSAS WATER AND SEWER SYSTEM REFUNDING REVENUE BOND, SERIES 2014 Interest Rate: 2.000% Date of Bond: May 15, 2014 Registered Owner: CEDE & CO. Principal Amount: One Hundred Sixty -Five Thousand Dollars KNOW ALL MEN BY THESE PRESENTS: $165,000 Maturity Date: August 15, 2014 CUSIP: 312693 GVO 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 February 15 and August 15 of each year, commencing on the February 15 or August 15 next succeeding the date of this bond shown above, 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 BOKF, NA dba Bank of Oklahoma, Tulsa, Oklahoma, 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 first day of 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. 4834-0232-7323.1 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 hereof for value or otherwise by or to any person is wrongful inasmuch as the registered owner hereof, Cede & Co., has an interest herein. No. R14-2 UNITED STATES OF AMERICA STATE OF ARKANSAS CITY OF FAYETTEVILLE, ARKANSAS WATER AND SEWER SYSTEM REFUNDING REVENUE BOND, SERIES 2014 Interest Rate: 2.000% Date of Bond: May 15, 2014 Registered Owner: CEDE & CO. Principal Amount: Eight Hundred and Five Thousand Dollars KNOW ALL MEN BY THESE PRESENTS: $805,000 Maturity Date: August 15, 2015 CUSIP: 312693 GW8 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 February 15 and August 15 of each year, commencing on the February 15 or August 15 next succeeding the date of this bond shown above, 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 BOKF, NA dba Bank of Oklahoma, Tulsa, Oklahoma, 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 first day of 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. 4834-0232-7323.1 COPY 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. No. R14-3 UNITED STATES OF AMERICA STATE OF ARKANSAS CITY OF FAYETTEVILLE, ARKANSAS WATER AND SEWER SYSTEM REFUNDING REVENUE BOND, SERIES 2014 Interest Rate: 2.000% Date of Bond: May 15, 2014 Registered Owner: CEDE & CO. Principal Amount: Eight Hundred Twenty Thousand Dollars KNOW ALL MEN BY THESE PRESENTS: $820,000 Maturity Date: August 15, 2016 CUSIP: 312693 GX6 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 February 15 and August 15 of each year, commencing on the February 15 or August 15 next succeeding the date of this bond shown above, 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 BOKF, NA dba Bank of Oklahoma, Tulsa, Oklahoma, 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 first day of 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. 4834-0232-7323.1 COP 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. No. R14-4 UNITED STATES OF AMERICA STATE OF ARKANSAS CITY OF FAYETTEVILLE, ARKANSAS WATER AND SEWER SYSTEM REFUNDING REVENUE BOND, SERIES 2014 Interest Rate: 3.000% Date of Bond: May 15, 2014 Registered Owner: CEDE & CO. Principal Amount: Eight Hundred Thirty Thousand Dollars KNOW ALL MEN BY THESE PRESENTS: $830,000 Maturity Date: August 15, 2017 CUSIP: 312693 GY4 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 February 15 and August 15 of each year, commencing on the February 15 or August 15 next succeeding the date of this bond shown above, 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 BOKF, NA dba Bank of Oklahoma, Tulsa, Oklahoma, 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 first day of 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. 4834-0232-7323.1 _ a , 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. No. R14-5 UNITED STATES OF AMERICA STATE OF ARKANSAS CITY OF FAYETTEVILLE, ARKANSAS WATER AND SEWER SYSTEM REFUNDING REVENUE BOND, SERIES 2014 Interest Rate: 4.000% Date of Bond: May 15, 2014 Registered Owner: CEDE & CO. $1,665,000 Maturity Date: August 15, 2018 Principal Amount: One Million Six Hundred Sixty -Five Thousand Dollars KNOW ALL MEN BY THESE PRESENTS: CUSIP: 312693 GZ1 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 February 15 and August 15 of each year, commencing on the February 15 or August 15 next succeeding the date of this bond shown above, 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 BOKF, NA dba Bank of Oklahoma, Tulsa, Oklahoma, 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 first day of 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. 4834-0232-7323.1 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 hereof for value or otherwise by or to any person is wrongful inasmuch as the registered owner hereof, Cede & Co., has an interest herein. No. R14-6 UNITED STATES OF AMERICA STATE OF ARKANSAS CITY OF FAYETTEVILLE, ARKANSAS WATER AND SEWER SYSTEM REFUNDING REVENUE BOND, SERIES 2014 Interest Rate: 5.000% Date of Bond: May 15, 2014 Registered Owner: CEDE & CO. $1,725,000 Maturity Date: August 15, 2019 CUSIP: 312693 HA5 Principal Amount: One Million Seven Hundred Twenty -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 February 15 and August 15 of each year, commencing on the February 15 or August 15 next succeeding the date of this bond shown above, 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 BOKF, NA dba Bank of Oklahoma, Tulsa, Oklahoma, 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 first day of 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. 4834-0232-7323.1 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 hereof for value or otherwise by or to any person is wrongful inasmuch as the registered owner hereof, Cede & Co., has an interest herein. No. R14-7 UNITED STATES OF AMERICA STATE OF ARKANSAS CITY OF FAYETTEVILLE, ARKANSAS WATER AND SEWER SYSTEM REFUNDING REVENUE BOND, SERIES 2014 Interest Rate: 3.000% Date of Bond: May 15, 2014 Registered Owner: CEDE & CO. Principal Amount: Three Hundred Twenty Thousand Dollars KNOW ALL MEN BY THESE PRESENTS: $320,000 Maturity Date: August 15, 2020 CUSIP: 312693 HB3 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 February 15 and August 15 of each year, commencing on the February 15 or August 15 next succeeding the date of this bond shown above, 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 BOKF, NA dba Bank of Oklahoma, Tulsa, Oklahoma, 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 first day of 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. 4834-0232-7323.1 This bond, designated "City of Fayetteville, Arkansas Water and Sewer System Refunding Revenue Bond, Series 2014," is one of a series of bonds in the aggregate original principal amount of $6,330,000 (the "Series 2014 Bonds"), issued for the purpose of refunding the City's outstanding Water and Sewer System Revenue Bonds, Series 2009, and paying expenses of issuing the Series 2014 Bonds. The Series 2014 Bonds are issued under and are secured and entitled to the protection given by a Trust Indenture dated as of May 1, 2002, as amended and supplemented by a First Supplemental Trust Indenture dated as May 1, 2004, by a Second Supplemental Trust Indenture dated as June 1, 2009, by a Third Supplemental Trust Indenture dated as of May 15, 2012, and by a Fourth Supplemental Trust Indenture dated as of May 15, 2014 (as amended and supplemented, the "Indenture"), each duly executed and delivered by the City to the Trustee. The City has previously issued (i) its Water and Sewer System Refunding Revenue Bonds, Series 2002, in the aggregate original principal amount of $9,270,000 (the "Series 2002 Bonds"), (ii) its Water and Sewer System Refunding Revenue Bonds, Series 2004, in the aggregate original principal amount of $6,090,000 (the "Series 2004 Bonds"), (iii) its Water and Sewer System Revenue Bonds, Series 2009, in the aggregate original principal amount of $8,210,000 (the "Series 2009 Bonds"), and (iv) its Water and Sewer System Refunding Revenue Bonds, Series 2012, in the aggregate original principal amount of $3,665,000 (the "Series 2012 Bonds"), all under the provisions of the Indenture. The Series 2014 Bonds are not general obligations of the City, but are limited and special obligations payable solely from and secured by a pledge of the net revenues (the "Net Revenues") of the City's water and sewer system (the "System"), as specified in, and in accordance with the provisions of, the Indenture. The Series 2014 Bonds are secured by a pledge of the Net Revenues on a parity basis with the pledge of Net Revenues securing the Series 2012 Bonds. 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, such Additional Bonds will rank on a parity of security with the Series 2012 Bonds and the Series 2014 Bonds and be equally and ratably secured by and entitled to the protection of the Indenture. 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 registered owners of the Series 2014 Bonds, and the terms upon which the Series 2014 Bonds are issued and secured. The Series 2014 Bonds are issued pursuant to and in full compliance with the Constitution and laws of the State of Arkansas, including particularly Amendment 65 to the Constitution and Arkansas Code Annotated (1998 Repl, & Supp. 2013) §§14-164-401 et seq., §§14-234-201 et seq. and §§14-235-201 et seq. (collectively, and as from time to time amended, the "Act"), and pursuant to Ordinance No. 5665 of the City adopted on March 4, 2014. The Series 2014 Bonds do not constitute an indebtedness of the City within the meaning of any constitutional or statutory limitation. Provision has been made in the Indenture for the creation or maintenance of a Revenue Fund, an Operation and Maintenance Fund, a Bond Fund (and for the payment into the Bond Fund of sufficient amounts of Net Revenues to pay the principal of and premium, if any, and interest on the Series 2014 Bonds when due), a Debt Service Reserve Fund, a Construction Fund 2 4834-0232-7323.1 and a Renewal and Replacement Fund. The City covenants in the Indenture to always maintain rates for System services which will produce Net Revenues (gross revenues of the System less all reasonable and necessary costs and expenses incurred in the operation, maintenance, repair and insuring of the System) in each fiscal year at least equal to 125% of the average annual debt service on all outstanding indebtedness of the City secured by System revenues, plus the amount, if any, required to be deposited into the Debt Service Reserve Fund and any debt service reserve fund established with respect to outstanding indebtedness of the City secured by System revenues, and plus the amount, if any, required to make deposits to the Renewal and Replacement Fund. Reference is hereby made to the Indenture for the details of the rate covenant. The Series 2014 Bonds shall never constitute an obligation or charge against the general credit or taxing powers of the City. The holder of this Series 2014 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 Series 2012 Bonds, the Series 2014 Bond 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 Series 2014 Bonds are subject to redemption prior to maturity, at the option of the City, in whole or in part at any time on and after August 15, 2019 (and if in part, in such maturity or maturities as the City shall elect), from funds from any source, at a redemption price of 100% of the principal amount of the Series 2014 Bonds being redeemed, plus accrued interest to the date of redemption. This Series 2014 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 Series 2014 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, Series 2014 Bonds may be exchanged for a like aggregate principal amount of Series 2014 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 Series 2014 Bonds or for any claim based thereon or upon any obligation, covenant or agreement contained in the Series 2014 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 3 4834-0232-7323.1 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 Series 2014 Bonds. This Series 2014 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 Series 2014 Bonds do exist, have happened and have been performed in due time, form and manner as required by law; that the indebtedness represented by the Series 2014 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 Series 2014 Bonds as the same become due and payable will be sufficient in amount for that purpose. This Series 2014 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. [Remainder of page intentionally blank.] 4 4834-0232-7323.1 IN WITNESS WHEREOF, the City of Fayetteville, Arkansas has caused this Series 2014 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 FAC'YETTEVILLE, ARKANSAS IC ATTEST: %$A By: Z12a d ,,-., , City Clerk i,,,ill//� T R SE ° rte; E; c�eFA�EllEv11� °}m e T�,; ��' (Form of Trustee's Certificate) /111111111"o TRUSTEE'S CERTIFICATE OF AUTHENTICATION This bond is one of the Series 2014 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 2014 Bonds. BOKF, NA, as Trustee By: Au orized Signature 5 4834-0232-7323.1 'Mpy(Form of Assignment) u 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. 6 4834-0232-7323.1 TAX REGULATORY AGREEMENT between CITY OF FAYETTEVILLE, ARKANSAS and BOKF, NA, as Trustee Dated May 20, 2014 Relating to: $6,330,000 City of Fayetteville, Arkansas Water and Sewer System Refunding Revenue Bonds Series 2014 Prepared by: Kutak Rock LLP 124 West Capitol Avenue Suite 2000 Little Rock, Arkansas 72201 4846-2515-6632.2 TAX REGULATORY AGREEMENT THIS TAX REGULATORY AGREEMENT (this "Tax Regulatory Agreement) is made and dated May 20, 2014, 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 BOKF, NA (formerly Bank of Oklahoma, 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 May 1, 2002, as amended and supplemented by that First Supplemental Trust Indenture dated as of May 1, 2004, by a Second Supplemental Trust Indenture dated as of June 1, 2009, by a Third Supplemental Trust Indenture dated as of May 15, 2012, and by a Fourth Supplemental Trust Indenture dated as of May 15, 2014, each by and between the Issuer and the Trustee (as amended and supplemented, the "Indenture"). WITNESSETH: WHEREAS, pursuant to the Constitution and laws of the State of Arkansas, including particularly Arkansas Code Annotated §§ 14-234-201 et seq., Arkansas Code Annotated §§ 14-235-201 et seq., and Arkansas Code Annotated §§ 14-164-401 et seq. (collectively, the "Authorizing Legislation"), the Issuer has authorized the issuance of $6,330,000 principal amount of its Water and Sewer System Refunding Revenue Bonds, Series 2014 (the "Series 2014 Bonds"), pursuant to the Indenture and Ordinance No. 5665, adopted and approved on March 4, 2014 (the "Authorizing Ordinance"), for the purposes of providing a portion of the funds needed (i) to effect a current refunding of the Issuer's Water and Sewer System Revenue Bonds, Series 2009 (the "Series 2009 Bonds"), and (ii) to pay the costs of issuance of the Series 2014 Bonds; and WHEREAS, the Issuer has determined that the issuance, sale and delivery of the Series 2014 Bonds is necessary in order to provide the financing for the refunding of the Series 2009 Bonds; 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 Series 2014 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: 4846-2515-6632.2 ARTICLE I DEFINITIONS Section LL 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. "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 Series 2014 Bonds and ends May 15, 2015. "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) underwriters' spread (whether realized directly or derived through purchase of the Series 2014 Bonds at a discount below the price at which a substantial number of Series 2014 Bonds are sold to the public); (b) counsel fees (including bond counsel, underwriter's counsel, issuer's counsel, trustee 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 and escrow agent fees incurred in connection with the borrowing; (f) paying agent and certifying and authenticating agent fees related to issuance of the Series 2014 Bonds; 2 4846-2515-6632.2 (g) accountant fees related to issuance of the Series 2014 Bonds; (h) printing costs (for the Series 2014 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). "Escrow Agreement" means the Escrow Deposit Agreement dated May 20, 2014, between the Issuer and the Escrow Trustee, providing for the defeasance and redemption of the Series 2009 Bonds. "Escrow Fund" means the fund established under the Escrow Agreement for the purpose of depositing moneys in an amount sufficient to accomplish the defeasance of the Series 2009 Bonds. "Escrow Trustee " means BOKF, NA, in its capacity as escrow trustee under the Escrow Agreement. "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 Series 2014 Bonds; (e) Any amounts held in a pledged fund or reserve fund for the Series 2014 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. "Rebate Amount" means, with respect to the Series 2014 Bonds, the amount computed as described in Section 4.13 hereof. "Refinanced Facilities" means the facilities financed with proceeds of the Series 2009 Bonds. 3 4846-2515-6632.2 "Regulation" or "Regulations" means the temporary, proposed or final Income Tax Regulations promulgated by the Department of the Treasury and applicable to the Series 2014 Bonds. "Series 2009 Bonds" means the Issuer's outstanding Water and Sewer System Revenue Bonds, Series 2009. "Series 2014 Bonds" means the Issuer's Water and Sewer System Refunding Revenue Bonds, Series 2014. "State " means the State of Arkansas. "Tax Regulatory Agreement" means this Tax Regulatory Agreement. "Trustee" means BOKF, NA (formerly Bank of Oklahoma, 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. "Yield" means, with respect to the Series 2014 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. 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 Series 2014 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 Series 2014 Bond Proceeds; Ownership of the Refinanced Facilities; Use of Series 2014 and Series 2009 Bond Proceeds. The Issuer hereby represents and warrants for the benefit of the Bond Counsel, the Trustee and holders of the Series 2014 Bonds that the proceeds of the Series 2014 Bonds will be used (i) to effect a current refunding of the Series 2009 Bonds, and (ii) to pay Costs of Issuance of the Series 2014 Bonds. The Issuer further represents and warrants that its representations and warranties with respect to the Series 4 4846-2515-6632.2 2009 Bonds, the use of the proceeds thereof, and the Refinanced Facilities contained in that certain Tax Regulatory Agreement dated June 2, 2009, remain true and correct as of the date hereof. The Issuer further represents and warrants that it will not use or permit the use of any of the proceeds of the Series 2014 Bonds or any other funds of the Issuer, directly or indirectly, in any manner, and will not take or permit to be taken any other action, including use of the Refinanced Facilities, that would cause interest on the Series 2014 Bonds to be included in the gross income of the owners thereof for federal income tax purposes. In particular, the Issuer will not use, or permit the use of, any portion of the Refinanced Facilities in a manner that would cause the Series 2014 Bonds to be deemed "private activity bonds" within the meaning of Section 141 of the Code. Section 2.3. Change in Use or Ownership of Refinanced Facilities. The Issuer represents that it intends to own and operate the Refinanced Facilities at all times during the term of the Series 2014 Bonds. The Issuer does not know of any reason why the Refinanced Facilities 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 Refinanced Facilities so long as any of the Series 2014 Bonds are outstanding unless, in the written opinion of Bond Counsel, such change will not result in the inclusion of interest on the Series 2014 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 Refinanced Facilities as may be necessary or desirable due to normal wear, tear or obsolescence. The Issuer will monitor the use of the Refinanced Facilities in order to assure that interest on the Series 2014 Bonds remains excludable from the gross income of the recipients thereof for purposes of federal income taxation, and the Issuer will consult with Bond Counsel as necessary to determine whether, and to what extent, if as a result of the change in use or purpose of the Refinanced Facilities any remedial action is required under the Code or the Regulations. Section 2.4. Bonds in Registered Form. The Series 2014 Bonds will be issued in registered form as required by Section 149(a) of the Code. Section 2.5. Information Reporting. Section 149(e) of the Code requires as a condition to qualification for tax -exemption that the Issuer provide to the Secretary of the Treasury certain information with respect to the Series 2014 Bonds and the application of the proceeds derived therefrom. The Issuer hereby represents, for the benefit of Bond Counsel and the holders of the Series 2014 Bonds, that it has reviewed the Internal Revenue Form 8038-G prepared by Bond Counsel and that the information contained therein is true, complete and correct to the best knowledge of the Issuer as of the date of issuance of the Series 2014 Bonds. 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 Series 2014 Bonds to be "federally guaranteed" within the meaning of § 149(b) of the Code. Section 2.7. Series 2014 Bonds Not Hedge Bonds. The Issuer represents that it reasonably expects to expend at least 85 percent of the "spendable proceeds" of the Series 2014 Bonds within three years of the date hereof and not more than 50 percent of the proceeds of the 4846-2515-6632.2 Series 2014 Bonds will be invested in Nonpurpose Obligations having substantially guaranteed yields for four years or more. Section 2.8. [Reserved/. Section 2.9. No Replacement. No portion of the amounts received from the sale of the Series 2014 Bonds will be used as a substitute for other funds which were otherwise to be used as a source of financing for the refunding of the Series 2009 Bonds, and which will be used to acquire, directly or indirectly, investment obligations producing a Yield in excess of the Yield on the Series 2014 Bonds. Section 2.10. No Abusive Arbitrage Device. The Issuer represents that the Series 2014 Bonds are not and will not be part of a transaction or series of transactions that has the effect of (1) enabling 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 Series 2014 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 Series 2014 Bonds, (2) are being sold pursuant to the same plan of financing as the Series 2014 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 Series 2014 Bonds. Section 2.12. [Reserved]. 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 Series 2014 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 Series 2014 Bonds and the discharge of the Indenture, until the final maturity date of all Series 2014 Bonds Outstanding and payment of such Series 2014 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 Series 2014 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 Series 2014 Bonds and the discharge of the Indenture, until the final maturity date of all Series 2014 Bonds Outstanding and payment of such Series 2014 Bonds. The Trustee 6 4846-2515-6632.2 shall keep records of the expenditure of Gross Proceeds of the Series 2014 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. ARTICLE 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 Series 2014 Bond proceeds and other moneys in order to support the Issuer's conclusion that the Series 2014 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 Series 2014 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 Series 2014 Bonds, including (1) the Indenture, (2) the Escrow Deposit Agreement, (3) this Tax Regulatory Agreement, and (4) a certificate of the Underwriter (in the form attached hereto as Exhibit A). 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 Series 2014 Bonds. The Issuer is issuing and delivering the Series 2014 Bonds simultaneously with the execution of this Tax Regulatory Agreement, pursuant to the Authorizing Legislation, the Indenture and the Authorizing Ordinance. The Series 2014 Bonds are being issued for the purposes of providing a portion of the funds needed (i) to effect a current refunding of the Series 2009 Bonds, and (ii) to pay Costs of Issuance of the Series 2014 Bonds. The proceeds of the Series 2014 Bonds to be used to refund and defease the Series 2009 Bonds, together with other available moneys and investment earnings on such moneys and proceeds, do not exceed the amount necessary to provide for such refunding and defeasance. Section 4.4. Funds and Accounts. (a) The following funds have been established with the Trustee pursuant to the Indenture in connection with the Series 2014 Bonds: Bond Fund; Debt Service Reserve Fund; Costs of Issuance Fund; and Rebate Fund. 7 4846-2515-6632.2 (b) The following fund has been established with the Escrow Trustee pursuant to the Escrow Agreement in connection with the defeasance of the Series 2009 Bonds: Escrow Fund. Section 4.5. Source and Disbursement of Series 2014 Bond Proceeds. The Series 2014 Bonds will be sold to the public at a purchase price equal to $6,934,355.76 (representing the $6,330,000.00 par amount of the Series 2014 Bonds plus a $601,256.45 net reoffering premium and plus $3,099.31 of accrued interest thereon). The Underwriter will retain an underwriting discount of $63,300.00. Accordingly, the net amount of proceeds of the Series 2014 Bonds to be received by the Issuer shall be $6,871,055.76, which amount shall be deposited and expended as follows: (a) $3,099.31, equal to the accrued interest on the Series 2014 Bonds, will be deposited in the Bond Fund and used to pay interest on the Series 2014 Bonds due August 15, 2014; (b) $6,794,481.36 will be transferred to the Escrow Trustee for deposit in the Escrow Fund, and will be used, together with $711,845.98 of legally available moneys of the Issuer also deposited in the Escrow Fund (which legally available moneys comprise the Series 2009 Accounts of the Bond Fund and Debt Service Reserve Fund) to pay the Series 2009 Bonds at maturity and upon redemption prior to maturity as provided in the Escrow Agreement; (c) $72,000.00 of the proceeds will be deposited into the Cost of Issuance Fund and used to pay Costs of Issuance of the Series 2014 Bonds; and (d) the remaining $1,475.09 of proceeds will be deposited in the Bond Fund and used to pay interest on the Series 2014 Bonds on August 15, 2014. Section 4.6. Costs of Issuance Fund The Indenture creates the Costs of Issuance Fund which will be initially funded with $72,000.00 of Series 2014 Bond proceeds. Moneys in the Cost of Issuance Fund will be used to pay Costs of Issuance associated with the Series 2014 Bonds. Proceeds of the Series 2014 Bonds deposited in the Costs of Issuance Fund shall be spent within a one-year period beginning on the date of issuance of the Series 2014 Bonds and may be invested until expended in Nonpurpose Obligations that bear a Yield that is materially higher than the Yield on the Series 2014 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. Bond Fund. The Indenture creates the Bond Fund. Moneys will be transferred to the Bond Fund as described in the Indenture to provide for the payment of principal of and interest on the Series 2014 Bonds as due. Moneys deposited in the Bond Fund will be spent within a 13 -month period beginning on the date of deposit, and any amount received from investment of moneys held in the Bond Fund will be spent within a one-year period beginning on the date of receipt. The Bond Fund will be completely depleted at least once a year. Accordingly, the Bond Fund constitutes a "bona fide debt service fund" for the 8 4846-2515-6632.2 Series 2014 Bonds. Amounts in the Bond Fund may be invested until expended in Nonpurpose Obligations that bear a Yield that is materially higher than the Yield on the Series 2014 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 securing the Series 2014 Bonds, as well as the Issuer's Water and Sewer System Refunding Revenue Bonds, Series 2012 (the "Series 2012 Bonds"). No proceeds of the Series 2014 Bonds will be deposited into the Debt Service Reserve Fund. Moneys in the Debt Service Reserve Fund will be expended solely to pay principal of and interest on the Series 2012 Bonds and the Series 2014 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 50% of the maximum annual debt service on the Series 2012 Bonds and the Series 2014 Bonds. 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 Series 2014 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 Series 2014 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. Escrow Fund. The Escrow Agreement creates the Escrow Fund. Proceeds of the Series 2014 Bonds and other legally available moneys of the Issuer deposited in the Escrow Fund will be invested in accordance with the terms of the Escrow Agreement at a Yield not to exceed the Yield of the Series 2014 Bonds. Section 4.10. Yield on the Series 2014 Bonds. (a) The Underwriter has certified (i) that the initial offering price of Series 2014 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 Series 2014 Bonds were offered for sale and sold to the purchasers (exclusive of bond houses, brokers or similar persons acting in the capacity of underwriters or wholesalers) through a bona fide 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 Series 2014 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 Series 2014 Bonds constitutes a true and correct summary thereof. (b) The Yield on the Series 2014 Bonds has been calculated by the Underwriter to be not less than 1.2891525%. 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. 9 4846-2515-6632.2 Section 4.11. Arbitrage Representations. Pursuant to the issuance of the Series 2014 Bonds, the Issuer hereby represents, certifies and warrants as follows: (a) Other than the aforementioned funds and accounts 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 Series 2014 Bonds or any contract securing the Series 2014 Bonds or any arrangement providing for compensating balances to be maintained by the Issuer with any holder of the Series 2014 Bonds. (b) All funds established pursuant to the Indenture will be invested pursuant to the Indenture and this Tax Regulatory Agreement. The Escrow Fund will be invested pursuant to the Escrow 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. (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 Series 2014 Bonds, (ii) a certification is provided by the person whose bid is accepted stating the administrative costs that are reasonably 10 4846-2515-6632.2 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 Series 2014 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 Series 2014 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 Series 2014 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 Series 2014 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. The Issuer will monitor the investment of proceeds of the Series 2014 Bonds to assure compliance with Section 148 of the Code, and the Issuer will consult with Bond Counsel periodically with respect to arbitrage issues and compliance. Section 4.13. Rebate Fund; Calculation of Rebate Amount. Section 148(f) 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 Series 2014 Bonds, together with any income attributable to such excess. The Cost of Issuance Fund, the Bond Fund, the Debt Service Reserve Fund, the Escrow 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 Series 2014 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: (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 11 4846-2515-6632.2 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 Series 2014 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(f) 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 Series 2014 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) Bond Fund, (III) Debt Service Reserve Fund, (IV) Escrow Fund, and (V) Rebate Fund, the Trustee shall record the purchase date of 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 12 4846-2515-6632.2 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 Bond Fund if the earnings on the Bond Fund do not 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 Series 2014 Bonds; and (III) if all outstanding Series 2014 Bonds are redeemed prior to the maturity date of the Series 2014 Bonds, the date on which all Series 2014 Bonds are redeemed. In addition, where Nonpurpose Obligations are retained by the Trustee after retirement of the Series 2014 Bonds, any unrealized gains or losses as of the date of retirement of the Series 2014 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. (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 Series 2014 Bonds. 13 4846-2515-6632.2 (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 Series 2014 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 Series 2014 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 Series 2014 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. Section 4.15. Recordkeeping. In connection with the rebate requirement, the Trustee and the Issuer shall maintain the following records: 14 4846-2515-6632.2 (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. Section 4.17. Refunded Bonds Rebate Requirement. The Issuer remains responsible for complying with the rebate requirements of Section 148 of the Code with respect to the refunded Series 2009 Bonds, as further described in the transcript of proceedings prepared for the Series 2009 Bonds. A final rebate computation is required for the Series 2009 Bonds for each computation date set forth in the transcript of proceedings for the Series 2009 Bonds and within 60 days following the date of redemption of the Series 2009 Bonds (the final date of redemption of the Series 2009 Bonds being August 15, 2014). 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 Series 2014 Bonds through the date that is six years after the last Series 2014 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 Series 2014 Bonds from the gross income of the recipients for purposes of federal income taxation. 15 4846-2515-6632.2 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. 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 Series 2014 Bonds by pursuing any available remedy, including a suit at law or in equity. ARTICLE VIII PROTECTION OF TRUSTEE Section 8.1. 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.] 16 4846-2515-6632.2 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 FAYETTEVMLE, ARKANSAS C BOKF, NA, as Trustee r By: Title: [SIGNATURE PAGE TO TAX REGULATORY AGREEMENT] 4846-2515-6632.2 EXHIBIT A TO TAX REGULATORY AGREEMENT UNDERWRITER'S CERTIFICATE The undersigned officer of Stephens Inc., the Underwriter (defined below) for the $6,330,000 City of Fayetteville, Arkansas Water and Sewer System Refunding Revenue Bonds, Series 2014 (the "Bonds"), hereby makes the certifications set forth below in connection with the execution and delivery of the Bonds. All capitalized terms used but not defined herein shall have the meanings ascribed to them in the Tax Regulatory Agreement to which this certificate is attached as an exhibit. (1) Stephens Inc. has served as underwriter (the "Underwriter") and has been involved in the structuring and marketing of the Bonds, including particularly, the establishment of the issue size, the computation of Yield and weighted average maturity, and other factors relating to compliance with Section 148 of the Internal Revenue Code of 1986, as amended (the "Code"), and the regulations promulgated thereunder. (2) Based upon our records and other information available to us which we have no reason to believe is not correct: (a) All of the Bonds have been the subject of a bona fide initial offering to the public (excluding of bond houses, brokers or similar persons or organizations acting in the capacity of underwriters or wholesalers) at the public offering prices or yields indicated on the cover of the Issuer's Official Statement dated May 6, 2014 (the "Official Statement"); (b) At the time the Underwriter agreed to purchase the Bonds, based upon the prevailing market conditions, the Underwriter had no reason to believe that any of the Bonds would be initially sold to the public (excluding of bond houses, brokers or similar persons or organizations acting in the capacity of underwriters or wholesalers) at greater prices, or yields less, than those indicated on the cover of the Official Statement; and (c) As of the date of the Bond Purchase Agreement entered into by and between the Issuer and the Underwriter with respect to the Bonds, the first prices at which the Underwriter reasonably expected to sell 10% of each maturity of the Bonds to the public (excluding of bond houses, brokers or similar persons or organizations acting in the capacity of underwriters or wholesalers) were the respective prices shown on the cover of the Official Statement, or in the case of obligations sold on a yield basis, at the respective yields shown on the cover of the Official Statement. A- 1 4846-2515-6632.2 (3) The Yield on the Bonds is 1.2891525%. For purposes of calculating the Yield on the Bonds, the Bonds sold at substantial premiums have been treated as called on their earliest call date resulting in the lowest Yield. (4) The establishment of the Debt Service Reserve Fund is reasonably required to obtain the issuance of the Bonds at an economic interest rate for the Issuer, and is, in the judgment of the undersigned, established at a funding level comparable to that found for obligations similar to the Bonds issued within the past year. (5) To the best knowledge of the undersigned, the representations of the Issuer contained in the Tax Regulatory Agreement are true and correct. The undersigned understands that this certificate shall form a part of the basis for the opinion, dated the date hereof, of Kutak Rock LLP, to the effect that interest with respect to the Bonds is excluded from the gross income of the recipient 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: May 20, 2014 STEPHENS INC. By: _ Title: A-2 4846-2515-6632.2 ESCROW DEPOSIT AGREEMENT Dated May 20, 2014 Between CITY OF FAYETTEVILLE, ARKANSAS Issuer and BOKF, NA Escrow Trustee Pertaining to the Current Refunding of: $7,390,000 City of Fayetteville, Arkansas Water and Sewer System Revenue Bonds Series 2009 Prepared by: Kutak Rock LLP 124 West Capitol Avenue, Suite 2000 Little Rock, Arkansas 72201 4837-0214-7608.3 ESCROW DEPOSIT AGREEMENT THIS ESCROW DEPOSIT AGREEMENT (this "Agreement"), dated May 20, 2014, by and between the City of Fayetteville, Arkansas (the "City"), a city of the first class organized and existing by virtue of the laws of the State of Arkansas, and BOKF, NA dba Bank of Oklahoma, as escrow trustee (the "Escrow Trustee"), a banking corporation organized under and existing by virtue of the laws of the United States of America and having its principal corporate trust office in Tulsa, Oklahoma; WITNESSETH: WHEREAS, the City has heretofore issued its $8,210,000 Water and Sewer System Revenue Bonds, Series 2009, dated June 1, 2009, of which $7,390,000 in aggregate principal amount remain outstanding and are stated to mature on August 15, 2014 to 2020, inclusive (the "Series 2009 Bonds"), as identified on the attached Schedule I; and WHEREAS, pursuant to Ordinance No. 5665 adopted and approved by the City Council of the City on March 4, 2014, and the Constitution and laws of the State of Arkansas, the City has authorized the issuance of $6,330,000 aggregate principal amount of its Water and Sewer System Refunding Revenue Bonds, Series 2014 (the "Series 2014 Bonds"), a portion of the proceeds of which are to be utilized, together with other available funds and investment earnings thereon, to accomplish a current refunding of all of the Series 2009 Bonds in accordance with the requirements of Sections 301(c) and 802 of that certain Trust Indenture dated as of May 1, 2002, as supplemented and amended by that certain Second Supplemental Trust Indenture dated as of June 1, 2009, by and between the City and BOKF, NA dba Bank of Oklahoma (formerly, Bank of Oklahoma, N.A.), as trustee; and WHEREAS, the City has made arrangements for the Escrow Trustee to purchase, with (a) a portion of the proceeds derived from the sale of the Series 2014 Bonds, and (b) amounts released from the Bond Fund and Debt Service Reserve Fund for the Series 2009 Bonds, the 2009 Government Obligations (hereinafter defined), the principal of and interest on which, when due, together with an initial cash deposit, will provide sufficient moneys to enable the Escrow Trustee: (i) to deposit with itself as the trustee and the paying agent for the Series 2009 Bonds (the "2009 Paying Agent") sufficient moneys to pay, as the same shall become due and payable, the principal of all of the Series 2009 Bonds at maturity and upon redemption to and including August 15, 2014; and (ii) to deposit with itself as the 2009 Paying Agent sufficient moneys to pay, as the same shall become due and payable, the interest to accrue on all Series 2009 Bonds to their respective dates of payment or redemption; and WHEREAS, the schedule of principal and interest requirements for retiring the Series 2009 Bonds upon redemption prior to maturity is attached hereto as Schedule II; and 4837-0214-7608:3 WHEREAS, the City has entered into this Agreement with the Escrow Trustee prior to the delivery of the Series 2014 Bonds in order to make adequate provision for the retirement and redemption of the Series 2009 Bonds and to make provision for the payment of the fees and expenses of the Escrow Trustee; NOW, THEREFORE, in consideration of the mutual covenants and benefits hereinafter set forth and for other valuable consideration, the receipt of which is hereby acknowledged by each party hereto, the Issuer and the Escrow Trustee agree as follows: Section 1. There is hereby created and established with the Escrow Trustee a special, segregated and irrevocable escrow account designated "City of Fayetteville, Arkansas – 2009 Refunding Escrow Fund" (the "2009 Escrow Fund") to be held in the custody of the Escrow Trustee as a trust fund for the benefit of the registered owners of the Series 2009 Bonds, separate and apart from other funds of the City and the Escrow Trustee. The Escrow Trustee hereby accepts the Escrow Fund and acknowledges the receipt and irrevocable deposit to the credit of the Escrow Fund of the sum of $7,506,327.34 in immediately available funds consisting of (a) $6,794,481.36 of proceeds received by the City from the sale and delivery of the Series 2014 Bonds (the "2014 Bond Proceeds"), (b) $688,260.98 released from the Bond Fund for the Series 2009 Bonds (the "2009 Bond Fund Moneys"), and (c) $23,585.00 released from the Debt Service Reserve Fund for the Series 2009 Bonds (the "2009 Debt Service Reserve Fund Moneys"). Section 2. The Escrow Trustee represents and acknowledges that, concurrently with the deposit of the amounts set forth in Section 1 above, it will use the 2014 Bond Proceeds, the 2009 Bond Fund Moneys and 2009 Debt Service Reserve Fund Moneys (i) to purchase on behalf of and for the account of the City from the United States Treasury a United States Treasury Certificate of Indebtedness and Note—State and Local Government Series ("SLGS"), which is the noncallable direct obligation of the United States of America in book -entry form in the aggregate principal or par amount of $7,506,327.00 as further described in Schedule III hereto (the "2009 Government Obligations"), by payment of said principal or par amount to the U.S. Federal Reserve Bank, and (ii) to make a cash deposit in the 2009 Escrow Fund in the amount of $0.34 (the "2009 Cash Deposit"). The Escrow Trustee will receive book -entry credits for the 2009 Government Obligations and will credit the 2009 Government Obligations to the 2009 Escrow Fund. The 2009 Cash Deposit will be made from 2014 Bond Proceeds and will be held uninvested as cash and disbursed by the Escrow Trustee to pay a portion of the interest due on the Series 2009 Bonds. Section 3. The City has determined that the interest on and the principal amount maturing on the 2009 Government Obligations in accordance with their terms and the 2009 Cash Deposit are sufficient in the aggregate to assure that moneys will be available to the Escrow Trustee in amounts sufficient, without further investment, to pay and redeem the Series 2009 Bonds and to pay the interest thereon as described in the preamble to this Agreement and in Schedule II hereto. If the City shall fail to deposit initially with the Escrow Trustee cash and the 2009 Government Obligations the interest on and principal of which shall be sufficient, together with such cash, to make such payments as they become due and payable, the City shall timely deposit in the 2009 Escrow Fund such additional amounts as may be required to meet fully the 4837-0214-7608.3 2 amount so to become due and payable. Notice of any insufficiency shall be given by the Escrow Trustee to the City as promptly as possible, but the Escrow Trustee shall in no manner be responsible for any insufficiency of funds or the City's failure to make deposits. Section 4. The Escrow Trustee shall, from the moneys and investments in the 2009 Escrow Fund, timely provide the 2009 Paying Agent with amounts sufficient to pay the principal of and interest on each of the Series 2009 Bonds as the same become due and payable in accordance with Schedule II hereto. Section 5. The Escrow Trustee shall hold the 2009 Government Obligations and the 2009 Cash Deposit in the 2009 Escrow Fund at all times as a special and separate trust fund irrevocably pledged for the benefit of the registered owners of the Series 2009 Bonds, wholly segregated from other funds and securities on deposit with it, shall never commingle the 2009 Government Obligations or the 2009 Cash Deposit with other funds or securities owned or held by it, and shall never at any time use, loan or borrow the same in any way other than as provided in this Agreement. Section 6. The Escrow Trustee shall from time to time collect and receive the interest accruing and payable on the 2009 Government Obligations and the maturing principal amounts of the 2009 Government Obligations as the same become due and immediately credit the same to the 2009 Escrow Fund so that the interest on and principal of the 2009 Government Obligations, as such become due, will be available, together with the 2009 Cash Deposit, to meet the payment requirements of the Series 2009 Bonds, as shown on Schedule II hereto. Section 7. As shown on Schedule IV hereto, the Escrow Trustee shall apply the principal and interest received from the 2009 Government Obligations and the 2009 Cash Deposit to the payment of the interest on and the maturing principal of the Series 2009 Bonds. Principal and interest received on the 2009 Government Obligations and not needed at the time to make the aforesaid payments on the Series 2009 Bonds shall remain in trust and be held in cash uninvested. The 2009 Escrow Fund shall continue in effect to and including the date upon which the Escrow Trustee makes the final deposit with itself as the 2009 Paying Agent in an amount sufficient to pay the balance of the principal of and interest coming due on the Series 2009 Bonds, whereupon the Escrow Trustee shall transfer any remaining balance in the 2009 Escrow Fund, together with any remaining receipts in the Bond Fund for the Series 2009 Bonds, to the Bond Fund for the Series 2014 Bonds. Section 8. At the written request of the City and upon compliance with the conditions hereinafter set forth, the Escrow Trustee shall have the power to sell, transfer or otherwise dispose of or request the redemption of the 2009 Government Obligations acquired hereunder and to substitute for the 2009 Government Obligations (a) other direct noncallable obligations of, or direct noncallable and nonprepayable obligations the full and timely payment of principal of and interest on which is unconditionally guaranteed by, the United States of America, and/or (b) to the extent then authorized by law, evidences of direct ownership of future interest and principal payments on either direct noncallable obligations of the United States of America or direct non -callable and nonprepayable obligations, the full and timely payment of principal of and interest on which is unconditionally guaranteed by the United States of America, which 4837-0214-7608.3 3 obligations are held by a bank or trust company organized and existing under the laws of the United States of America or any state thereof in the capacity of custodian in safekeeping on behalf of the holders or owners of such securities or interests (collectively, the "2009 Substitute Defeasance Obligations"). The City hereby covenants that it will not request the Escrow Trustee to exercise any of the powers described in the preceding sentence in any manner which, if reasonably expected on the date of issuance hereof, would cause any of the Series 2014 Bonds or any of the Series 2009 Bonds to be an "arbitrage bond" within the meaning of Section 148 of the Internal Revenue Code of 1986, as amended (the "Code"), and the regulations thereunder in effect on the date of such request and applicable to obligations issued on the issue date of the Series 2014 Bonds. The Escrow Trustee shall purchase such 2009 Substitute Defeasance Obligations with the proceeds derived from the sale, transfer, disposition or redemption of the 2009 Government Obligations together with any other funds available for such purpose. The foregoing transactions may be effected only if. (i) an independent certified public accountant shall certify that after such transactions the principal amount of and interest income on the 2009 Substitute Defeasance Obligations will, together with any remaining 2009 Government Obligations and other moneys available for the purpose, be sufficient without further investment to pay, as the same become due at maturity or earlier redemption, all principal of and interest on the Series 2009 Bonds which have not been paid previously; (ii) the amounts and dates of the anticipated transfers from the 2009 Escrow Fund to the 2009 Paying Agent for the Series 2009 Bonds will not be diminished or postponed thereby; (iii) the 2009 Substitute Defeasance Obligations will be of comparable credit standing to the 2009 Government Obligations originally purchased; (iv) notification will be given to Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc., and any other rating agency that the City selects, and (v) the Escrow Trustee shall receive an unqualified opinion of attorneys nationally recognized on the subject of municipal bonds to the effect that such disposition, substitution or purchase would not cause any of the Series 2014 Bonds or any of the Series 2009 Bonds to be an "arbitrage bond" within the meaning of Section 148 of the Code and the regulations thereunder in effect on the date of such disposition, substitution or purchase and applicable to obligations issued on the issue date of the Series 2014 Bonds. Section 9. The Escrow Trustee shall not be liable or responsible for any loss resulting from any investment made in the 2009 Government Obligations or any 2009 Substitute Defeasance Obligations. Section 10. In the event of the Escrow Trustee's failure to account for any funds or securities received by it for the City's account under this Agreement, such funds and securities shall be and remain the property of the 2009 Escrow Fund, and the City and the registered owners of the Series 2009 Bonds shall be entitled to the preferred claim and shall have the first lien upon such funds and securities enjoyed by a trust beneficiary. The funds and securities received by the Escrow Trustee under this Agreement shall not be considered as a banking deposit by the City, and the City shall have no right or title with respect thereto. The funds and securities so received by the Escrow Trustee as escrowee and trustee under this Agreement shall not be subject to checks or drafts drawn by the City or claims against the City by any creditor of the City other than the holders or registered owners of the Series 2009 Bonds. Section 11. [Reserved]. 4837-0214-7608.3 4 Section 12. The City has specifically and irrevocably elected to redeem on August 15, 2014 all of the Series 2009 Bonds maturing on and after August 15, 2015. The Escrow Trustee is hereby irrevocably authorized and directed, and hereby agrees, to give or cause to be given notice of such redemption of the Series 2009 Bonds in substantially the form set forth in Appendix A to this Agreement as provided below and to inform the City promptly and in writing of the giving of such notice. Such notice of redemption shall be mailed by first class mail to all registered owners of the Series 2009 Bonds at their addresses appearing on the registration books of the City maintained by the 2009 Paying Agent, such notice to be placed in the mails not less than 30 days nor more than 60 days prior to the redemption date. The Escrow Trustee is also hereby irrevocably authorized and directed, and hereby agrees, to mail by first class mail, as soon as practicable, to all registered owners of the Series 2009 Bonds at their addresses appearing on such registration books a notice in substantially the form set forth in Appendix B to this Agreement that the Series 2009 Bonds are deemed to have been paid, and the Escrow Trustee will inform the City promptly and in writing of the giving of such notice. The cost of the giving of such notices shall be borne by the City. Section 13. The Escrow Trustee shall have no responsibility to the City or any person in connection herewith except as specifically provided herein and shall not be responsible for anything done or omitted to be done by it except for its own negligence or default in the performance of any obligation imposed on it hereunder. The Escrow Trustee, except as herein specifically provided for, is not a party to, nor is it bound by nor need it give consideration to the terms or provisions of, any other agreement or undertaking between the City and any other person, and the Escrow Trustee assents to and is to give consideration only to the terms and provisions of this Agreement. Unless specifically provided herein, the Escrow Trustee has no duty to determine or inquire into the happening or occurrence of any event or contingency or the performance or failure of performance of the City with respect to arrangements or contracts with others, the Escrow Trustee's sole duty hereunder being to safeguard the 2009 Escrow Fund, to invest moneys therein and to dispose of and deliver the same in accordance with the provisions of this Agreement. If, however, the Escrow Trustee is called upon by the terms of this Agreement to determine the occurrence of any event or contingency, the Escrow Trustee shall be obligated in making such determination to exercise reasonable care and diligence, and in event of error in making such determination the Escrow Trustee shall be liable for its own misconduct or its negligence. In determining the occurrence of any such event or contingency, the Escrow Trustee may request from the City or any person such reasonable additional evidence as the Escrow Trustee in its discretion may deem necessary to determine any fact relating to the occurrence of such event or contingency and in this connection may inquire and consult with the City, among others, at any time. The Escrow Trustee may consult with legal counsel, and the opinion of such counsel shall be full and complete authority and protection to the Escrow Trustee as to any action taken or omitted by it in good faith and in accordance with such opinion. Section 14. This Agreement is between the City and the Escrow Trustee only, and in connection therewith the Escrow Trustee is authorized by the City to rely upon the representations of the City with respect to the adequacy of the calculations made in connection 4837-0214-7608.3 5 with this Agreement, and the Escrow Trustee shall not be liable to any person in any manner for such reliance. The duty of the Escrow Trustee hereunder shall be only to the City and the registered owners of the Series 2009 Bonds. Neither the City nor the Escrow Trustee shall assign or attempt to assign or transfer its interest or obligations hereunder or any part hereof. Any such assignment or attempted assignment shall be in direct conflict with this Agreement and without effect. Section 15. The Escrow Trustee may act upon any written notice, request, waiver, consent, certificate, receipt, authorization, power of attorney or other instrument or document which the Escrow Trustee in good faith believes to be genuine and to be what it purports to be. Section 16. Any notice, authorization, request or demand required or permitted to be given hereunder shall be in writing and shall be deemed to have been duly given when mailed by first class mail, postage prepaid, addressed as follows: If to the City: City of Fayetteville, Arkansas 113 West Mountain Fayetteville, AR 72701 Attention: Director of Finance If to the Escrow Trustee: BOKF, NA dba Bank of Oklahoma P.O. Box 2300 Tulsa, OK 74192 Attention: Cynthia Wilkinson Any of such addresses may be changed at any time upon written notice of such change sent by first class mail, postage prepaid, to the other persons named in this Section 16 by the person effecting the change. Section 17. Whenever under the terms of this Agreement the performance date of any act to be done hereunder shall fall on a day which is not a legal banking day and upon which the Escrow Trustee is not open for business, the performance thereof on the next succeeding business day of the Escrow Trustee shall be deemed to be in full compliance with this Agreement. Whenever time is referred to in this Agreement, it shall be the time recognized by the Escrow Trustee in the ordinary conduct of its normal business transactions. Section 18. Time shall be of the essence in the performance of obligations from time to time imposed upon the Escrow Trustee by this Agreement. Section 19. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective personal representatives, successors and assigns. Section 20. The Escrow Trustee has been paid $1,500.00 from the proceeds of the Series 2014 Bonds as compensation for all of its fees as Escrow Trustee and 2009 Paying Agent for the services rendered or to be rendered pursuant to this Agreement. The Escrow Trustee will also bill the City for its expenses incurred in connection with serving as Escrow Trustee and 2009 Paying Agent; provided, however, that expenses of publication of the defeasance notice 4837-0214-7608.3 6 attached as Appendix B shall first be paid from available moneys in the Cost of Issuance Fund established with respect to the Series 2014 Bonds. In addition, to the extent permitted by law, the City agrees to indemnify the Escrow Trustee and hold it harmless against any liability which it may incur while acting in good faith and without negligence in its capacity as Escrow Trustee under this Agreement, including, but not limited to, any court costs and reasonable attorneys' fees. Such costs and fees and any other expenses related to such indemnification of the Escrow Trustee shall be paid by the City, and in no event shall such costs and fees and any other expenses related to such indemnification give rise to any claim against the 2009 Escrow Fund, the moneys in which are solely for the benefit of the registered owners of the Series 2009 Bonds until the payment thereof. Section 21. The Escrow Trustee agrees to serve under this Agreement until all of the Series 2009 Bonds have been redeemed and to accept as full compensation for its services hereunder and its services as 2009 Paying Agent the amount paid pursuant to Section 20. The provisions of this Section 21 shall be binding upon any successor to the Escrow Trustee. Section 22. This Agreement shall terminate when the Series 2009 Bonds and the interest thereon have been paid and discharged in accordance with the proceedings authorizing the Series 2009 Bonds. Series 23. If any one or more of the covenants or agreements provided in this Agreement on the part of the City or the Escrow Trustee to be performed should be determined by a court of competent jurisdiction to be contrary to law, such covenants or agreements shall be deemed and construed to be severable from the remaining covenants and agreements herein contained and shall in no way affect the validity of the remaining provisions of this Agreement. Section 24. Jurisdiction for the resolution of any conflict arising from this Agreement shall lie with the Washington County Circuit Court with venue in Fayetteville, Arkansas. Section 25. This Agreement may be executed in several counterparts, all or any of which shall be regarded for all purposes as one original and shall constitute and be but one and the same instrument. Section 26. This Agreement shall be governed by the laws of the State of Arkansas. 4837-0214-7608.3 7 IN WITNESS WHEREOF, the parties hereto have each caused this Agreement to be executed by their duly authorized officers and their corporate seals to be hereunto affixed and attested as of the date first above written. CITY OF FAYETTEVILLF,. ARKANSAS ATTEST: er, JMJk City Clerk BOKF, NA By: -- - Titlef t �e �('AeL-Y- ATTEST: : : Title: e , , .' ..4 4837-0214-7608.3 8 SCHEDULEI OUTSTANDING SERIES 2009 BONDS Maturity Date Principal Interest (August 15) Amounts Rates 2014 $ 840,000 2.45% 2015 860,000 2.75% 2016 885,000 2.95% 2017 905,000 3.10% 2018 1,740,000 3.35% 2019 1,795,000 3.50% 2020 365,000 3.70% 4837-0214-7608.3 1-1 SCHEDULE II REQUIREMENTS TO PAY AND REDEEM THE SERIES 2009 BONDS Principal Payment Date Interest Principal Due Redeemed Total Payment August 15, 2014 $116,506.25 $840,000.00 $6,550,000.00 $7,506,506.25 II -I 4837-0214-7608.3 SCHEDULE III 2009 GOVERNMENT OBLIGATIONS* Maturity Principal Interest Type Dates Amounts Rates SLGS-CI August 15, 2014 $7,506,327.00 0.010% * United States Treasury Obligations — State and Local Government Series 4837-0214-7608.3 III -1 SCHEDULE IV AVAILABILITY AND APPLICATION OF 2009 ESCROW FUND Cash Balance at Receipts from 2009 Debt Service Requirement to Cash Balance at Period Ending Beginning of Period Government Obligations Retire Series 2009 Bonds End of Period 5-20-14 $ -- $ -- $ -- $0.34 8-15-14 0.34 7,506,505.91 7,506,506.25 -- 4837-0214-7608.3 IV- I APPENDIX A NOTICE OF REDEMPTION City of Fayetteville, Arkansas Water and Sewer System Revenue Bonds Series 2009 NOTICE IS HEREBY GIVEN by BOKF, NA dba Bank of Oklahoma (formerly Bank of Oklahoma, N.A.), Tulsa, Oklahoma, the trustee and paying agent (the "Trustee") for the Water and Sewer System Revenue Bonds, Series 2009, of the City of Fayetteville, Arkansas (the "City"), dated June 1, 2009 (the "Bonds"), that all of the outstanding Bonds maturing on August 15, 2015 and thereafter are hereby called for redemption and prepayment on August 15, 2014. Each of the Bonds so called for redemption and prepayment shall be redeemed and prepaid at a redemption price of 100% of the principal amount thereof plus accrued interest to the date of redemption. The Bonds so called for redemption shall be payable upon presentation and surrender at the corporate trust offices of the Trustee at BOKF, NA dba Bank of Oklahoma, Corporate Trust Services, 60 Livingston Avenue, St. Paul, MN 55107, and such Bonds shall cease to bear interest as of August 15, 2014. Withholding of 30% of gross redemption proceeds of any payment made within the United States may be required by the Economic Growth and Tax Relief Reconciliation Act of 2001, unless the paying agent has the correct taxpayer identification number (social security or taxpayer identification number) or exemption certificate or equivalent when presenting your securities for payment. Dated this day of , 2014. BOKF, NA, as Trustee By: _ Title: Instructions: Mail by first class mail, postage prepaid, to the registered owner of each Series 2009 Bond to be redeemed, addressed to the owners' registered addresses, and placed in the mails between June 16, 2014 and July 16, 2014. 4837-0214-7608.3 A-1 APPENDIX B NOTICE OF DEFEASANCE City of Fayetteville, Arkansas Water and Sewer System Revenue Bonds Series 2009 NOTICE IS HEREBY GIVEN by the BOKF, NA dba Bank of Oklahoma (formerly Bank of Oklahoma, N.A.), Tulsa, Oklahoma, the trustee and paying agent (the "Trustee") for the Water and Sewer System Revenue Bonds, Series 2009, of the City of Fayetteville, Arkansas (the "City"), dated June 1, 2009 (the "Bonds"), that all of the outstanding Bonds maturing on August 15, 2015 and thereafter will be called for redemption and prepayment on August 15, 2014. Each of the Bonds so called for redemption and prepayment shall be redeemed and prepaid at a redemption price of 100% of the principal amount thereof plus accrued interest to the date of redemption. The Bonds so called for redemption shall be payable upon presentation and surrender at the corporate trust offices of the Trustee at BOKF, NA dba Bank of Oklahoma, Corporate Trust Services, 60 Livingston Avenue, St. Paul, MN 55107, and such Bonds shall cease to bear interest as of August 15, 2014. Pursuant to Article VIII of that Trust Indenture dated as of May 1, 2002, by and between the City and the Trustee (the "Indenture"), there have been deposited, with the Trustee, United States Treasury Certificates of Indebtedness and Notes — State and Local Government Series ("SLGS"), the principal of and the interest on which when due will provide moneys which, together with other moneys which have also been deposited with the Trustee, shall be sufficient to pay when due the principal of and interest due and to become due on the Bonds on or prior to August 15, 2014, and the Bonds are deemed to have been paid in accordance with Article VIII of the Indenture. Dated this day of , 2014 BOKF, NA, as Trustee By Title: Instructions: Mail by first class mail, postage prepaid, to the registered owner of each Series 2009 Bond to be redeemed, addressed to the owners' registered addresses, and placed in the mails within thirty (30) days after the date of delivery of this Escrow Agreement. 4837-0214-7608.3 B-1 CITY OF FAYETTEVILLE, ARKANSAS to BOKF, NA as Trustee FOURTH SUPPLEMENTAL TRUST INDENTURE Dated as of May 15, 2014 This Fourth Supplemental Trust Indenture supplements and amends a Trust Indenture dated as of May 1, 2002, as previously supplemented and amended by a First Supplemental Trust Indenture dated as of May 1, 2004, by a Second Supplemental Trust Indenture dated as of June 1, 2009, and by a Third Supplemental Trust Indenture dated as of May 15, 2012, each by and between the City of Fayetteville, Arkansas and BOKF, NA dba Bank of Oklahoma (formerly, Bank of Oklahoma, N.A.), as Trustee. The Trust Indenture, as supplemented and amended hereby, secures the City's (i) $3,665,000 original principal amount of Water and Sewer System Refunding Revenue Bonds, Series 2012, and (ii) $6,330,000 original principal amount of Water and Sewer System Refunding Revenue Bonds, Series 2014. Prepared by: Kutak Rock LLP 124 West Capitol Avenue, Suite 2000 Little Rock, Arkansas 72201 4849-2694-9912.3 FOURTH SUPPLEMENTAL TRUST INDENTURE THIS FOURTH SUPPLEMENTAL TRUST INDENTURE dated as of May 15, 2014, 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 BOKF, NA dba Bank of Oklahoma (formerly, Bank of Oklahoma, 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 Tulsa, Oklahoma; WITNESSETH: WHEREAS, the City presently owns a public water and sewer utility system (which system, together with all capital improvements thereto, is herein collectively called the "System") serving the residents of the City and its environs; and WHEREAS, the City is authorized and empowered under the provisions of the Constitution and laws of the State of Arkansas, including particularly Amendment 65 to the Constitution and Arkansas Code Annotated (1998 Repl. & 2013 Supp.) Sections 14-164-401 et seq., Sections 14-234-201 et seq. and Sections 14-235-201 et seq. (collectively, and as from time to time amended, the "Act"), to issue and sell its water and sewer revenue bonds and to expend the proceeds thereof to finance the costs of acquisition, construction, equipping, improving, maintaining, operating and repairing the System, and to refund any bonds issued under the Act or any bonds issued under other applicable legislation payable from and secured by a pledge of revenues derived from the System; and WHEREAS, the City and the Trustee have entered into a Trust Indenture dated as of May 1, 2002, as previously amended and supplemented by a First Supplemental Trust Indenture dated as of May 1, 2004, by a Second Supplemental Trust Indenture dated as of June 1, 2009, and by Third Supplemental Trust Indenture dated as of May 1, 2012 (as amended and supplemented, the "Original Indenture"), pursuant to which (i) the City's Water and Sewer System Refunding Revenue Bonds, Series 2002A and Series 2002B (collectively, the "Series 2002 Bonds"), were issued in the original principal amount of $9,270,000, (ii) the City's Water and Sewer System Refunding Revenue Bonds, Series 2004 (the "Series 2004 Bonds"), were issued in the original principal amount of $6,090,000, (iii) the City's Water and Sewer System Revenue Bonds, Series 2009 (the "Series 2009 Bonds"), were issued in the original principal amount of $8,210,000, and (iv) the City's Water and Sewer System Refunding Revenue Bonds, Series 2012 (the "Series 2012 Bonds"), were issued in the original principal amount of $3,665,000, each for the purpose financing or refinancing the cost of improvements to the System; and WHEREAS, in order to secure sufficient funds to refund the Series 2009 Bonds and to pay legal and other expenses incidental to the issuance of water and sewer system refunding revenue bonds for such purposes, it has been determined appropriate and necessary that the City authorize the issuance of its $6,330,000 Water and Sewer System Refunding Revenue Bonds, Series 2014 (the "Series 2014 Bonds"), pursuant to the provisions of the Constitution of the State of Arkansas and the Act, such Series 2014 Bonds to be payable solely from and secured by a 4849-2694-9912.3 pledge of the net revenues of the System on a parity with the pledge of System net revenues securing the Series 2012 Bonds; and WHEREAS, upon the issuance of the Series 2014 Bonds and the corresponding refunding and defeasance of the Series 2009 Bonds, then the Series 2012 Bonds and the Series 2014 Bonds will be the only outstanding indebtedness of the City secured by the System net revenues; and WHEREAS, the conditions for the issuance of Additional Bonds, as set forth in the Original Indenture, have been satisfied; and WHEREAS, the Series 2014 Bonds are to be dated, bear interest, mature and be subject to redemption as hereinafter in this Fourth Supplemental Trust Indenture set forth in detail; and WHEREAS, the execution and delivery of this Fourth Supplemental Trust Indenture and the issuance of the Series 2014 Bonds have been in all respects duly and validly confirmed, authorized and approved by Ordinance No. 5665 adopted and approved by the City Council of the City on March 4, 2014; and WHEREAS, all things necessary to make the Series 2014 Bonds, when authenticated by the Trustee and issued as in this Fourth 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 Net Revenues (as defined in the Indenture) to the payment of the principal of, premium, if any, and interest on the Series 2012 Bonds, the Series 2014 Bonds and all Additional Bonds (as defined below), if any, to be issued on a parity therewith (the Series 2012 Bonds, the Series 2014 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 Fourth Supplemental Trust Indenture and the creation, execution, issuance and delivery of the Series 2014 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 2014 Bonds, it is necessary that the Original Indenture be amended and supplemented as effected hereby; NOW, THEREFORE, KNOW ALL MEN BY THESE PRESENTS, THIS FOURTH 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 2014 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 2014 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): 2 4849-2694-9912.3 "Additional Bonds" mean Bonds in addition to the Series 2002 Bonds, the Series 2004 Bonds, the Series 2009 Bonds, the Series 2012 Bonds and the Series 2014 Bonds which are issued under the provisions of Section 213 of this Indenture. "Authorizing Ordinance" means (i) Ordinance No. 4381, adopted by the City on March 19, 2002, which authorized the issuance of the Series 2002 Bonds pursuant to this Indenture, (ii) Ordinance No. 4554, adopted by the City on April 6, 2004, which authorized the issuance of the Series 2004 Bonds pursuant to this Indenture, (iii) Ordinance No. 5235, adopted by the City on April 21, 2009, which authorized the issuance of the Series 2009 Bonds pursuant to the Indenture, (iv) Ordinance No. 5496, adopted by the City on April 17, 2012, which authorized the issuance of the Series 2012 Bonds pursuant to this Indenture, and (v) Ordinance No. 5665, adopted by the City on March 4, 2014, which authorized the issuance of the Series 2014 Bonds pursuant to this Indenture. "Bonds" mean the Series 2002 Bonds, the Series 2004 Bonds, the Series 2009 Bonds, the Series 2012 Bonds, the Series 2014 Bonds and all Additional Bonds issued by the City pursuant to this Indenture. "2009 Escrow Agreement" means the Escrow Deposit Agreement dated May 20, 2014, between the City and the 2009 Escrow Trustee, providing for the redemption of the Series 2009 Bonds. "2009 Escrow Fund" means the fund established under the 2009 Escrow Agreement for the deposit of moneys and investment securities to be held for the redemption of the Series 2009 Bonds. "2009 Escrow Trustee" means BOKF, NA dba Bank of Oklahoma, in its capacity as escrow trustee under the 2009 Escrow Agreement. "Indenture" means this Trust Indenture dated as of May 1, 2002, as amended and supplemented by a First Supplemental Trust Indenture dated as of May 1, 2004, by a Second Supplemental Trust Indenture dated as of June 1, 2009, by a Third Supplemental Trust Indenture dated as of May 15, 2012, and by a Fourth Supplemental Trust Indenture dated as of May 15, 2014, each by and between the City and the Trustee, pursuant to which the Bonds are issued, and any further amendments and supplements thereto. "Series 2014 Bonds" means City of Fayetteville, Arkansas Water and Sewer System Refunding Revenue Bonds, Series 2014, issued under and secured by this Indenture in the aggregate principal amount of $6,330,000. "Trustee" means BOKF, NA dba Bank of Oklahoma (formerly Bank of Oklahoma, N.A.), as trustee under the Indenture. 3 4849-2694-9912.3 Section 2.01. Article II of the Original Indenture is hereby amended by adding at the end thereof the following sections: "Section 227. Details of Series 2014 Bonds. The Series 2014 Bonds (i) shall be designated "City of Fayetteville, Arkansas Water and Sewer System Refunding Revenue Bonds, Series 2014," (ii) shall be in the aggregate principal amount of $6,330,000, (iii) shall be dated as of May 15, 2014, (iv) shall bear interest from such date at the rates hereinafter provided until paid, payable semiannually on February 15 and August 15 of each year, commencing August 15, 2014, (v) shall be issued in denominations of $5,000 each, or any integral multiple thereof, (vi) shall be numbered from R14-1 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 August 15 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 2014 Bonds: Year (August 15) Principal Amount Interest Rate 2014 $ 165,000 2.000% 2015 805,000 2.000% 2016 820,000 2.000% 2017 830,000 3.000% 2018 1,665,000 4.000% 2019 1,725,000 5.000% 2020 320,000 3.000% "Section 228. Form of Series 2014 Bonds. The Series 2014 Bonds shall be issued as registered Bonds without coupons. The Series 2014 Bonds and the Trustee's certificate of authentication to be endorsed thereon shall be in substantially the form set forth in Exhibit A to this Fourth Supplemental Trust Indenture, with appropriate variations, insertions and omissions as permitted or required by the Indenture." "Section 229. Delivery of Series 2014 Bonds. Simultaneously with the delivery of the Series 2014 Bonds, the Trustee shall apply the proceeds thereof as follows: (a) The amount, if any, received as accrued interest on the Series 2014 Bonds, shall be deposited in the Series 2014 Account of the Bond Fund; (b) An amount equal to $6,794,481.36 shall be transferred to the 2009 Escrow Trustee to be held in the 2009 Escrow Fund (along with other available moneys relating to the Series 2009 Bonds) for redemption of the Series 2009 Bonds; (c) An amount equal to $72,000.00 shall be deposited in the Costs of Issuance Fund and shall be utilized for payment of Costs of Issuance of the Series 2014 Bonds pursuant to the written direction of the City; and 4 4849-2694-9912.3 (d) The balance of said proceeds in the amount of $1,475.09 shall be deposited in the Series 2014 Account of the Bond Fund." Section 3.01. Section 301 of the Original Indenture is hereby amended and supplemented to read as follows: "Section 301. O-otional Redemntion. (a) The Series 2004 Bonds are subject to redemption prior to maturity, at the option of the City, on and after August 15, 2009, in whole at any time or in part in inverse order of maturity (and selected by the Trustee by lot within a maturity) on any interest payment date, from funds from any source, at a redemption price of 100% of the principal amount of the Series 2004 Bonds being redeemed, plus accrued interest to the date of redemption. (b) The Series 2009 Bonds are subject to redemption prior to maturity, at the option of the City, in whole or in part at any time on and after August 15, 2014 (and if in part, in such maturity or maturities as the City shall elect), from funds from any source, at a redemption price of 100% of the principal amount of the Series 2009 Bonds being redeemed, plus accrued interest to the date of redemption. (c) Following the Completion Date with respect to the Project, the Series 2009 Bonds are subject to redemption prior to maturity, at the option of the City, in whole or in part, on any interest payment date, in inverse order of maturity (and selected by the Trustee by lot within a maturity), at a redemption price of 100% of the principal amount of the Series 2009 Bonds being redeemed, plus accrued interest to the date of redemption, from moneys in the Construction Fund in excess of the amount needed to complete the Project. (d) The Series 2012 Bonds are not subject to redemption prior to maturity. (e) The Series 2014 Bonds are subject to redemption prior to maturity, at the option of the City, in whole or in part at any time on and after August 15, 2019 (and if in part, in such maturity or maturities as the City shall elect), from funds from any source, at a redemption price of 100% of the principal amount of the Series 2014 Bonds being redeemed, plus accrued interest to the date of redemption." Section 4.01. Severability. (a) If any provisions of this Fourth 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. 5 4849-2694-9912.3 (b) The invalidity of any one or more phrases, sentences, clauses or paragraphs in this Fourth Supplemental Trust Indenture contained shall not affect the remaining portions of this Fourth Supplemental Trust Indenture or any part thereof. Section 4.02. Applicable Provisions of Law. This Fourth 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 4.03. Counterparts. This Fourth 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 4.04. Ratification of Original Indenture. As supplemented and amended hereby, the Original Indenture is hereby ratified and confirmed. [REMAINDER OF THIS PAGE INTENTIONALLY BLANK] 6 4849-2694-9912.3 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: v City Clerk'g�Eor�ra® e `v FAYETTEVILLE.— Toi ATTEST: Gt Ti g 1 KF .n ZSEA • L - _ - .a a BOKF, NA, as Trustee B Y: Title: s'&�" [SIGNATURE PAGE TO FOURTH SUPPLEMENTAL TRUST INDENTURE] 7 4849-2694-9912.3 EXHIBIT A TO FOURTH SUPPLEMENTAL TRUST INDENTURE Form of Series 2014 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. wrovil 110 UNITED STATES OF AMERICA STATE OF ARKANSAS CITY OF FAYETTEVILLE, ARKANSAS WATER AND SEWER SYSTEM REFUNDING REVENUE BOND, SERIES 2014 Interest Rate: % Maturity Date: August 15, 20_ Date of Bond: May 15, 2014 CUSIP: 312693 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 February 15 and August 15 of each year, commencing on the February 15 or August 15 next succeeding the date of this bond shown above, 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 BOKF, NA dba Bank of Oklahoma, Tulsa, Oklahoma, 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 first day of the calendar month in which such interest payment A-1 4849-2694-9912.3 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 "City of Fayetteville, Arkansas Water and Sewer System Refunding Revenue Bond, Series 2014," is one of a series of bonds in the aggregate original principal amount of $6,330,000 (the "Series 2014 Bonds"), issued for the purpose of refunding the City's outstanding Water and Sewer System Revenue Bonds, Series 2009, and paying expenses of issuing the Series 2014 Bonds. The Series 2014 Bonds are issued under and are secured and entitled to the protection given by a Trust Indenture dated as of May 1, 2002, as amended and supplemented by a First Supplemental Trust Indenture dated as May 1, 2004, by a Second Supplemental Trust Indenture dated as June 1, 2009, by a Third Supplemental Trust Indenture dated as of May 15, 2012, and by a Fourth Supplemental Trust Indenture dated as of May 15, 2014 (as amended and supplemented, the "Indenture"), each duly executed and delivered by the City to the Trustee. The City has previously issued (i) its Water and Sewer System Refunding Revenue Bonds, Series 2002, in the aggregate original principal amount of $9,270,000 (the "Series 2002 Bonds"), (ii) its Water and Sewer System Refunding Revenue Bonds, Series 2004, in the aggregate original principal amount of $6,090,000 (the "Series 2004 Bonds"), (iii) its Water and Sewer System Revenue Bonds, Series 2009, in the aggregate original principal amount of $8,210,000 (the "Series 2009 Bonds"), and (iv) its Water and Sewer System Refunding Revenue Bonds, Series 2012, in the aggregate original principal amount of $3,665,000 (the "Series 2012 Bonds"), all under the provisions of the Indenture. The Series 2014 Bonds are not general obligations of the City, but are limited and special obligations payable solely from and secured by a pledge of the net revenues (the "Net Revenues") of the City's water and sewer system (the "System"), as specified in, and in accordance with the provisions of, the Indenture. The Series 2014 Bonds are secured by a pledge of the Net Revenues on a parity basis with the pledge of Net Revenues securing the Series 2012 Bonds. 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, such Additional Bonds will rank on a parity of security with the Series 2012 Bonds and the Series 2014 Bonds and be equally and ratably secured by and entitled to the protection of the Indenture. 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 registered owners of the Series 2014 Bonds, and the terms upon which the Series 2014 Bonds are issued and secured. The Series 2014 Bonds are issued pursuant to and in full compliance with the Constitution and laws of the State of Arkansas, including particularly Amendment 65 to the Constitution and Arkansas Code Annotated (1998 Repl. & Supp. 2013) §§14-164-401 et seq., §§14-234-201 et seq. and §§14-235-201 et seq. (collectively, and as from time to time amended, the "Act"), and pursuant to Ordinance No. 5665 of the City adopted on March 4, 2014. The Series 2014 Bonds do not constitute an indebtedness of the City within the meaning of any constitutional or statutory limitation. A-2 4849-2694-9912.3 Provision has been made in the Indenture for the creation or maintenance of a Revenue Fund, an Operation and Maintenance Fund, a Bond Fund (and for the payment into the Bond Fund of sufficient amounts of Net Revenues to pay the principal of and premium, if any, and interest on the Series 2014 Bonds when due), a Debt Service Reserve Fund, a Construction Fund and a Renewal and Replacement Fund. The City covenants in the Indenture to always maintain rates for System services which will produce Net Revenues (gross revenues of the System less all reasonable and necessary costs and expenses incurred in the operation, maintenance, repair and insuring of the System) in each fiscal year at least equal to 125% of the average annual debt service on all outstanding indebtedness of the City secured by System revenues, plus the amount, if any, required to be deposited into the Debt Service Reserve Fund and any debt service reserve fund established with respect to outstanding indebtedness of the City secured by System revenues, and plus the amount, if any, required to make deposits to the Renewal and Replacement Fund. Reference is hereby made to the Indenture for the details of the rate covenant. The Series 2014 Bonds shall never constitute an obligation or charge against the general credit or taxing powers of the City. The holder of this Series 2014 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 Series 2012 Bonds, the Series 2014 Bond 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 Series 2014 Bonds are subject to redemption prior to maturity, at the option of the City, in whole or in part at any time on and after August 15, 2019 (and if in part, in such maturity or maturities as the City shall elect), from funds from any source, at a redemption price of 100% of the principal amount of the Series 2014 Bonds being redeemed, plus accrued interest to the date of redemption. This Series 2014 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 Series 2014 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, Series 2014 Bonds may be exchanged for a like aggregate principal amount of Series 2014 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 Series 2014 Bonds or for any claim based thereon or upon any obligation, covenant or agreement contained in the Series 2014 Bonds or the Indenture against any past, A-3 4849-2694-9912.3 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 Series 2014 Bonds. This Series 2014 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 Series 2014 Bonds do exist, have happened and have been performed in due time, form and manner as required by law; that the indebtedness represented by the Series 2014 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 Series 2014 Bonds as the same become due and payable will be sufficient in amount for that purpose. This Series 2014 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 Series 2014 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 0 ATTEST: By: City Clerk (S E A L) M 4849-2694-9912.3 Mayor (Form of Trustee's Certificate) TRUSTEE'S CERTIFICATE OF AUTHENTICATION This bond is one of the Series 2014 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 2014 Bonds. BOKF, NA, as Trustee Authorized Signature A-5 4849-2694-9912.3 (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 [e11r ITIMIIaa11 � NOTICE: Signature(s) must be guaranteed by an institution satisfactory to the Trustee or other transfer agent. A-6 4849-2694-9912.3 EXECUTION COPY CITY OF FAYETTEVILLE, ARKANSAS to BOKF, NA as Trustee THIRD SUPPLEMENTAL TRUST INDENTURE Dated as of May 15, 2012 This Third Supplemental Trust Indenture supplements and amends a Trust Indenture dated as of May 1, 2002, as previously supplemented and amended by a First Supplemental Trust Indenture dated as of May 1, 2004, and by a Second Supplemental Trust Indenture dated as of June 1, 2009, each by and between the City of Fayetteville, Arkansas and BOKF, NA dba Bank of Oklahoma (formerly, Bank of Oklahoma, N.A.), as Trustee. The Trust Indenture, as supplemented and amended hereby, secures the City's (i) $6,090,000 original principal amount of Water and Sewer System Refunding Revenue Bonds, Series 2004, (ii) $8,210,000 original principal amount of Water and Sewer System Revenue Bonds, Series 2009, and (iii) $3,665,000 original principal amount of Water and Sewer System Refunding Revenue Bonds, Series 2012. Prepared by: Kutak Rock LLP 124 West Capitol Avenue, Suite 2000 Little Rock, Arkansas 72201 4844-8116-8142.5 THIRD SUPPLEMENTAL TRUST INDENTURE THIS THIRD SUPPLEMENTAL TRUST INDENTURE dated as of May 15, 2012, 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 BOKF, NA dba Bank of Oklahoma (formerly, Bank of Oklahoma, 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 Tulsa, Oklahoma; WITNESSETH: WHEREAS, the City presently owns a public water and sewer utility system (which system, together with all capital improvements thereto, is herein collectively called the "System") serving the residents of the City and its environs; and WHEREAS, the City is authorized and empowered under the provisions of the Constitution and laws of the State of Arkansas, including particularly Amendment 65 to the Constitution and Arkansas Code Annotated (1998 Repl. & 2011 Supp.) Sections 14-164-401 et seq., Sections 14-234-201 et seq. and Sections 14-235-201 et seq. (collectively, and as from time to time amended, the "Act"), to issue and sell its water and sewer revenue bonds and to expend the proceeds thereof to finance the costs of acquisition, construction, equipping, improving, maintaining, operating and repairing the System, and to refund any bonds issued under the Act or any bonds issued under other applicable legislation payable from and secured by a pledge of revenues derived from the System; and WHEREAS, the City and the Trustee have entered into a Trust Indenture dated as of May 1, 2002, as previously amended and supplemented by a First Supplemental Trust Indenture dated as of May 1, 2004, and by a Second Supplemental Trust Indenture dated as of June 1, 2009 (as amended and supplemented, the "Original Indenture"), pursuant to which (i) the City's Water and Sewer System Refunding Revenue Bonds, Series 2002A and Series 2002B (collectively, the "Series 2002 Bonds"), were issued in the original principal amount of $9,270,000, (ii) the City's Water and Sewer System Refunding Revenue Bonds, Series 2004 (the "Series 2004 Bonds"), were issued in the original principal amount of $6,090,000, and (iii) the City's Water and Sewer System Revenue Bonds, Series 2009 (the "Series 2009 Bonds"), were issued in the original principal amount of $8,210,000, each for the purpose financing or refinancing the cost of improvements to the System; and WHEREAS, in order to secure sufficient funds to refund the Series 2002B Bonds and to pay legal and other expenses incidental to the issuance of water and sewer system refunding revenue bonds for such purposes, it has been determined appropriate and necessary that the City authorize the issuance of its $3,665,000 Water and Sewer System Refunding Revenue Bonds, Series 2012 (the "Series 2012 Bonds"), pursuant to the provisions of the Constitution of the State of Arkansas and the Act, such Series 2012 Bonds to be payable solely from and secured by a pledge of the net revenues of the System on a parity with the pledge of System net revenues securing the Series 2004 Bonds and the Series 2009 Bonds; and 4844-8116-8142.5 WHEREAS, upon the issuance of the Series 2012 Bonds and the corresponding refunding and defeasance of the Series 2002B Bonds, then the Series 2004 Bonds, the Series 2009 Bonds and the Series 2012 Bonds will be the only outstanding indebtedness of the City secured by the System net revenues; and WHEREAS, the conditions for the issuance of Additional Bonds, as set forth in the Original Indenture, have been satisfied; and WHEREAS, the Series 2012 Bonds are to be dated, bear interest, mature and be subject to redemption as hereinafter in this Third Supplemental Trust Indenture set forth in detail; and WHEREAS, the execution and delivery of this Third Supplemental Trust Indenture and the issuance of the Series 2012 Bonds have been in all respects duly and validly confirmed, authorized and approved by Ordinance No. 5496 adopted and approved by the City Council of the City on April 17, 2012; and WHEREAS, all things necessary to make the Series 2012 Bonds, when authenticated by the Trustee and issued as in this Third 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 Net Revenues (as defined in the Indenture) to the payment of the principal of, premium, if any, and interest on the Series 2004 Bonds, the Series 2009 Bonds, the Series 2012 Bonds and all Additional Bonds (as defined below), if any, to be issued on a parity therewith (the Series 2004 Bonds, the Series 2009 Bonds, the Series 2012 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 Third Supplemental Trust Indenture and the creation, execution, issuance and delivery of the Series 2012 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 2012 Bonds, it is necessary that the Original Indenture be amended and supplemented as effected hereby; NOW, THEREFORE, KNOW ALL MEN BY THESE PRESENTS, THIS THIRD 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 2012 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 2012 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 2002 Bonds, the Series 2004 Bonds, the Series 2009 Bonds and the Series 2012 Bonds which are issued under the provisions of Section 213 of this Indenture. 2 4844-8116-8142.5 "Authorizing Ordinance" means (i) Ordinance No. 4381, adopted by the City on March 19, 2002, which authorized the issuance of the Series 2002 Bonds pursuant to this Indenture, (ii) Ordinance No. 4554, adopted by the City on April 6, 2004, which authorized the issuance of the Series 2004 Bonds pursuant to this Indenture, (iii) Ordinance No. 5235, adopted by the City on April 21, 2009, which authorized the issuance of the Series 2009 Bonds pursuant to the Indenture, and (iv) Ordinance No. 5496, adopted by the City on April 17, 2012, which authorized the issuance of the Series 2012 Bonds pursuant to this Indenture. "Bonds" mean the Series 2002 Bonds, the Series 2004 Bonds, the Series 2009 Bonds, the Series 2012 Bonds and all Additional Bonds issued by the City pursuant to this Indenture. "2002B Escrow Agreement" means the Escrow Deposit Agreement dated May 24, 2012, between the City and the 2002B Escrow Trustee, providing for the redemption of the Series 2002B Bonds. "2002B Escrow Fund" means the fund established under the 2002B Escrow Agreement for the deposit of moneys and investment securities to be held for the redemption of the Series 2002B Bonds. "2002B Escrow Trustee" means BOKF, NA dba Bank of Oklahoma, in its capacity as escrow trustee under the 2002B Escrow Agreement. "Indenture" means this Trust Indenture dated as of May 1, 2002, as amended and supplemented by a First Supplemental Trust Indenture dated as of May 1, 2004, by a Second Supplemental Trust Indenture dated as of June 1, 2009, and by a Third Supplemental Trust Indenture dated as of May 15, 2012, each by and between the City and the Trustee, pursuant to which the Bonds are issued, and any further amendments and supplements thereto. "Series 2012 Bonds" means City of Fayetteville, Arkansas Water and Sewer System Refunding Revenue Bonds, Series 2012, issued under and secured by this Indenture in the aggregate principal amount of $3,665,000. "Trustee" means BOKF, NA dba Bank of Oklahoma (formerly Bank of Oklahoma, N.A.), as trustee under the Indenture. Section 2.01. Article II of the Original Indenture is hereby amended by adding at the end thereof the following sections: "Section 224. Details of Series 2012 Bonds. The Series 2012 Bonds (i) shall be designated "City of Fayetteville, Arkansas Water and Sewer System Refunding Revenue Bonds, Series 2012," (ii) shall be in the aggregate principal amount of $3,665,000, (iii) shall be dated as of May 15, 2012, (iv) shall bear interest from such date at the rates hereinafter provided until paid, payable semiannually on February 15 and August 15 of each year, commencing August 15, 2012, (v) shall be issued in denominations of $5,000 each, or any integral multiple thereof, (vi) shall be numbered from R12-1 upwards in order of issuance according to the records of the Trustee, and (vii) shall mature, unless sooner redeemed in the manner in this 3 4844-8116-8142.5 Indenture set forth, on August 15 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 2012 Bonds: Year (August 15) Principal Amount Interest Rate 2012 $ 135,000 1.000% 2013 685,000 1.000% 2014 690,000 2.000% 2015 705,000 2.000% 2016 715,000 2.000% 2017 735,000 2.000% "Section 225. Form of Series 2012 Bonds. The Series 2012 Bonds shall be issued as registered Bonds without coupons. The Series 2012 Bonds and the Trustee's certificate of authentication to be endorsed thereon shall be in substantially the form set forth in Exhibit A to this Third Supplemental Trust Indenture, with appropriate variations, insertions and omissions as permitted or required by the Indenture." "Section 226. Delivery of Series 2012 Bonds. Simultaneously with the delivery of the Series 2012 Bonds, the Trustee shall apply the proceeds thereof as follows: (a) The amount, if any, received as accrued interest on the Series 2012 Bonds, shall be deposited in the Series 2012 Account of the Bond Fund; (b) An amount equal to $3,679,633.62 shall be transferred to the 2002B Escrow Trustee to be held in the 2002B Escrow Fund (along with other available moneys relating to the Series 2002B Bonds) for redemption of the Series 2002B Bonds; (c) An amount equal to $54,268.56 shall be deposited in the Costs of Issuance Fund and shall be utilized for payment of Costs of Issuance of the Series 2012 Bonds pursuant to the written direction of the City; and (d) The balance of said proceeds in the amount of $2,948.77 shall be deposited in the Series 2012 Account of the Bond Fund." Section 3.01. Section 301 of the Original Indenture is hereby amended and supplemented to read as follows: "Section 301. Optional Redemption. (a) The Series 2004 Bonds are subject to redemption prior to maturity, at the option of the City, on and after August 15, 2009, in whole at any time or in part in inverse order of maturity (and selected by the Trustee by lot within a maturity) on any interest payment date, from funds from any source, at a redemption price of 100% of the principal amount of the Series 2004 Bonds being redeemed, plus accrued interest to the date of redemption. 4 4844-8116-8142.5 (b) The Series 2009 Bonds are subject to redemption prior to maturity, at the option of the City, in whole or in part at any time on and after August 15, 2014 (and if in part, in such maturity or maturities as the City shall elect), from funds from any source, at a redemption price of 100% of the principal amount of the Series 2009 Bonds being redeemed, plus accrued interest to the date of redemption. (c) Following the Completion Date with respect to the Project, the Series 2009 Bonds are subject to redemption prior to maturity, at the option of the City, in whole or in part, on any interest payment date, in inverse order of maturity (and selected by the Trustee by lot within a maturity), at a redemption price of 100% of the principal amount of the Series 2009 Bonds being redeemed, plus accrued interest to the date of redemption, from moneys in the Construction Fund in excess of the amount needed to complete the Project. (d) The Series 2012 Bonds are not subject to redemption prior to maturity." Section 4.01. Severability. (a) If any provisions of this Third 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 Third Supplemental Trust Indenture contained shall not affect the remaining portions of this Third Supplemental Trust Indenture or any part thereof. Section 4.02. Applicable Provisions of Law. This Third 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 4.03. Counterparts. This Third 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 4.04. Ratification of Original Indenture. As supplemented and amended hereby, the Original Indenture is hereby ratified and confirmed. 5 4844-8116-8142.5 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: City Clerk YVT R r -, 0 Tom° o FAYEITEVILLE o rte° °�- %�s y;;`G TONGA11111 ' ATTEST: By:_ Title: (SEAL) CITY OF F ARKANSAS BOKF, N.A., as Trustee By:_ Title: [SIGNATURE PAGE TO THIRD SUPPLEMENTAL TRUST INDENTURE] 6 4844-8116-8142.4 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. ATTEST: By: City Clerk (SEAL) ATTEST: By: Title: Vice �r .dcn t- r i SEA` '��ir �C)�, ' • • .... r +tom '/''/ CITY OF FAYETTEVILLE, ARKANSAS Mayor BOKF, NA, as Trustee r By: p Title: �n i ®�' i �- ere [SIGNATURE PAGE TO THIRD SUPPLEMENTAL TRUST INDENTURE] 6 4844-8116-8142.5 EXHIBIT A TO THIRD SUPPLEMENTAL TRUST INDENTURE Form of Series 2012 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. No. R12 - Interest Rate: UNITED STATES OF AMERICA STATE OF ARKANSAS CITY OF FAYETTEVILLE, ARKANSAS WATER AND SEWER SYSTEM REFUNDING REVENUE BOND, SERIES 2012 % Maturity Date: August 15, 20 Date of Bond: May 15, 2012 Registered Owner: CEDE & CO. Principal Amount: KNOW ALL MEN BY THESE PRESENTS: CUSIP: 312693 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 February 15 and August 15 of each year, commencing on the February 15 or August 15 next succeeding the date of this bond shown above, 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 BOKF, NA dba Bank of Oklahoma, Tulsa, Oklahoma, 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 first day of the calendar month in which such interest payment A-1 4844-8116-8142.5 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 "City of Fayetteville, Arkansas Water and Sewer System Refunding Revenue Bond, Series 2012," is one of a series of bonds in the aggregate original principal amount of $3,665,000 (the "Series 2012 Bonds"), issued for the purpose of refunding the City's outstanding Water and Sewer System Refunding Revenue Bonds, Series 2002B, and paying expenses of issuing the Series 2012 Bonds. The Series 2012 Bonds are issued under and are secured and entitled to the protection given by a Trust Indenture dated as of May 1, 2002, as amended and supplemented by a First Supplemental Trust Indenture dated as May 1, 2004, by a Second Supplemental Trust Indenture dated as June 1, 2009, and by a Third Supplemental Trust Indenture dated as of May 15, 2012 (as amended and supplemented, the "Indenture"), each duly executed and delivered by the City to the Trustee. The City has previously issued (i) its Water and Sewer System Refunding Revenue Bonds, Series 2002, in the aggregate original principal amount of $9,270,000 (the "Series 2002 Bonds"), (ii) its Water and Sewer System Refunding Revenue Bonds, Series 2004, in the aggregate original principal amount of $6,090,000 (the "Series 2004 Bonds"), and (iii) its Water and Sewer System Revenue Bonds, Series 2009, in the aggregate original principal amount of $8,210,000 (the "Series 2009 Bonds"), all under the provisions of the Indenture. The Series 2012 Bonds are not general obligations of the City, but are limited and special obligations payable solely from and secured by a pledge of the net revenues (the "Net Revenues") of the City's water and sewer system (the "System"), as specified in, and in accordance with the provisions of, the Indenture. The Series 2012 Bonds are secured by a pledge of the Net Revenues on a parity basis with the pledge of Net Revenues securing the Series 2004 Bonds and the Series 2009 Bonds. 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, such Additional Bonds will rank on a parity of security with the Series 2004 Bonds, the Series 2009 Bonds and the Series 2012 Bonds and be equally and ratably secured by and entitled to the protection of the Indenture. 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 registered owners of the Series 2012 Bonds, and the terms upon which the Series 2012 Bonds are issued and secured. The Series 2012 Bonds are issued pursuant to and in full compliance with the Constitution and laws of the State of Arkansas, including particularly Amendment 65 to the Constitution and Arkansas Code Annotated (1998 Repl. & Supp. 2011) §§14-164-401 et seq., §§14-234-201 et seq. and §§14-235-201 et seq. (collectively, and as from time to time amended, the "Act"), and pursuant to Ordinance No. 5496 of the City adopted on April 17, 2012. The Series 2012 Bonds do not constitute an indebtedness of the City within the meaning of any constitutional or statutory limitation. A-2 4844-8116-8142.5 Provision has been made in the Indenture for the creation or maintenance of a Revenue Fund, an Operation and Maintenance Fund, a Bond Fund (and for the payment into the Bond Fund of sufficient amounts of Net Revenues to pay the principal of and premium, if any, and interest on the Series 2012 Bonds when due), a Debt Service Reserve Fund, a Construction Fund and a Renewal and Replacement Fund. The City covenants in the Indenture to always maintain rates for System services which will produce Net Revenues (gross revenues of the System less all reasonable and necessary costs and expenses incurred in the operation, maintenance, repair and insuring of the System) in each fiscal year at least equal to 125% of the average annual debt service on all outstanding indebtedness of the City secured by System revenues, plus the amount, if any, required to be deposited into the Debt Service Reserve Fund and any debt service reserve fund established with respect to outstanding indebtedness of the City secured by System revenues, and plus the amount, if any, required to make deposits to the Renewal and Replacement Fund. Reference is hereby made to the Indenture for the details of the rate covenant. The Series 2012 Bonds shall never constitute an obligation or charge against the general credit or taxing powers of the City. The holder of this Series 2012 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 Series 2004 Bonds, the Series 2009 Bonds, the Series 2012 Bond 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 Series 2012 Bonds are not subject to redemption prior to maturity. This Series 2012 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 Series 2012 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, Series 2012 Bonds may be exchanged for a like aggregate principal amount of Series 2012 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 Series 2012 Bonds or for any claim based thereon or upon any obligation, covenant or agreement contained in the Series 2012 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 A-3 4844-8116-8142.5 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 Series 2012 Bonds. This Series 2012 Bond is issued with the intent that the laws of the State of Arkansas will govern its construction. The Series 2012 Bonds have been designated by the City as "qualified tax-exempt obligations" within the meaning of Section 265(b) of the Internal Revenue Code of 1986, as amended. IT IS HEREBY CERTIFIED, RECITED AND DECLARED that all acts, conditions and things required to exist, happen and be performed precedent to and in the issuance of the Series 2012 Bonds do exist, have happened and have been performed in due time, form and manner as required by law; that the indebtedness represented by the Series 2012 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 Series 2012 Bonds as the same become due and payable will be sufficient in amount for that purpose. This Series 2012 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 Series 2012 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 (S E A L) A-4 4844-8116-8142.5 (Form of Trustee's Certificate) TRUSTEE'S CERTIFICATE OF AUTHENTICATION This bond is one of the Series 2012 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 2012 Bonds. BOKF, NA, as Trustee Authorized Signature A-5 4844-8116-8142.5 (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. A-6 4844-8116-8142.5 EXECUTION COPY CITY OF FAYETTEVILLE, ARKANSAS to BANK OF OKLAHOMA, N.A. as Trustee SECOND SUPPLEMENTAL TRUST INDENTURE Dated as of June 1, 2009 This Second Supplemental Trust Indenture supplements and amends a Trust Indenture dated as of May 1, 2002, as previously supplemented and amended by a First Supplemental Trust Indenture dated as of May 1, 2004, each by and between the City of Fayetteville, Arkansas and Bank of Oklahoma, N.A., as Trustee. The Trust Indenture, as supplemented and amended hereby, secures the City's (i) $6,540,000 original principal amount of Water and Sewer System Refunding Revenue Bonds, Series 2002B, (ii) $6,090,000 original principal amount of Water and Sewer System Refunding Revenue Bonds, Series 2004, and (iii) $8,210,000 original principal amount of Water and Sewer System Revenue Bonds, Series 2009. Prepared by: Kutak Rock LLP 124 West Capitol Avenue, Suite 2000 Little Rock, Arkansas 72201 4813-7647-9235.3 SECOND SUPPLEMENTAL TRUST INDENTURE THIS SECOND SUPPLEMENTAL TRUST INDENTURE dated as of June 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 BANK OF OKLAHOMA, 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 Tulsa, Oklahoma; WITNESSETH: WHEREAS, the City presently owns a public water and sewer utility system (which system, together with all capital improvements thereto, is herein collectively called the "System") serving the residents of the City and its environs; and WHEREAS, the City is authorized and empowered under the provisions of the Constitution and laws of the State of Arkansas, including particularly Amendment 65 to the Constitution and Arkansas Code Annotated (1998 Repl. & 2005 Supp.) Sections 14-164-401 et seq., Sections 14-234-201 et seq. and Sections 14-235-201 et seq. (collectively, and as from time to time amended, the "Act"), to issue and sell its water and sewer revenue bonds and to expend the proceeds thereof to finance the costs of acquisition, construction, equipping, improving, maintaining, operating and repairing the System, and to refund any bonds issued under the Act or any bonds issued under other applicable legislation payable from and secured by a pledge of revenues derived from the System; and WHEREAS, the City and the Trustee have entered into a Trust Indenture dated as of May 1, 2002, as previously amended and supplemented by a First Supplemental Trust Indenture dated as of May 1, 2004 (as amended and supplemented, the "Original Indenture"), pursuant to which (i) the City's Water and Sewer System Refunding Revenue Bonds, Series 2002A and Series 2002B (collectively, the "Series 2002 Bonds"), were issued in the original principal amount of $9,270,000, and (ii) the City's Water and Sewer System Refunding Revenue Bonds, Series 2004 (the "Series 2004 Bonds"), were issued in the original principal amount of $6,090,000, each for the purpose of refunding certain outstanding bonds of the City previously issued to finance and refinance the cost of improvements to the System; and WHEREAS, in order to secure sufficient funds to finance certain improvements to the System, to fund a debt service reserve and to pay legal and other expenses incidental to the issuance of water and sewer system refunding revenue bonds for such purposes, it has been determined appropriate and necessary that the City authorize the issuance of its $8,210,000 Water and Sewer System Revenue Bonds, Series 2009 (the "Series 2009 Bonds"), pursuant to the provisions of the Constitution of the State of Arkansas and the Act, such Series 2009 Bonds to be payable solely from and secured by a pledge of the net revenues of the System on a parity with the pledge of System net revenues securing the Series 2002 Bonds and the Series 2004 Bonds; and WHEREAS, the conditions for the issuance of Additional Bonds, as set forth in the Original Indenture, have been satisfied; and 4813-7647-9235.3 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. 5235 adopted and approved by the City Council of the City on April 21, 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, 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 Net Revenues (as defined in the Indenture) to the payment of the principal of, premium, if any, and interest on the Series 2002 Bonds, the Series 2004 Bonds, the Series 2009 Bonds and all Additional Bonds (as defined below), if any, to be issued on a parity therewith (the Series 2002 Bonds, the Series 2004 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 6f 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 2002 Bonds, the Series 2004 Bonds and the Series 2009 Bonds which are issued under the provisions of Section 213 of this Indenture. "Authorizing Ordinance" means (i) Ordinance No. 4381, adopted by the City on March 19, 2002, which authorized the issuance of the Series 2002 Bonds pursuant to this Indenture, (ii) Ordinance No. 4554, adopted by the City on April 6, 2004, which authorized the issuance of the Series 2004 Bonds pursuant to this Indenture, and (iii) Ordinance No. 5235, adopted by the City on April 21, 2009, which authorized the issuance of the Series 2009 Bonds pursuant to this Indenture. "Bonds" mean the Series 2002 Bonds, the Series 2004 Bonds, the Series 2009 Bonds and all Additional Bonds issued by the City pursuant to this Indenture. 4813-7647-9235.3 2 "Indenture" means this Trust Indenture dated as of May 1, 2002, as amended and supplemented by a First Supplemental Trust Indenture dated as of May 1, 2004 and by a Second Supplemental Trust Indenture dated as of June 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. "Series 2009 Bonds" means City of Fayetteville, Arkansas Water and Sewer System Revenue Bonds, Series 2009, issued under and secured by this Indenture in the aggregate principal amount of $8,210,000. Section 2.01. Article II of the Original Indenture is hereby amended by adding at the end thereof the following sections: "Section 221. Details of Series 2009 Bonds. The Series 2009 Bonds (i) shall be designated "City of Fayetteville, Arkansas Water and Sewer System Revenue Bonds, Series 2009," (ii) shall be in the aggregate principal amount of $8,210,000, (iii) shall be dated as of June 1, 2009, (iv) shall bear interest from such date at the rates hereinafter provided until paid, payable semiannually on February 15 and August 15 of each year, commencing August 15, 2009, (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 August 15 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 (August 15) Principal Amount Interest Rate 2013 $ 820,000 2.100% 2014 840,000 2.450 2015 860,000 2.750 2016 885,000 2.950 2017 905,000 3.100 2018 1,740,000 3.350 2019 1,795,000 3.500 2020 365,000 3.700 "Section 222. Form of Series 2009 Bonds. The Series 2009 Bonds shall be issued as registered Bonds without coupons. 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 this Second Supplemental Trust Indenture, with appropriate variations, insertions and omissions as permitted or required by the Indenture." "Section 223. 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 Series 2009 Account of the Bond Fund; 4813-7647-9235.3 3 (b) An amount equal to $535,690, the Reserve Requirement with respect to the Series 2009 Bonds, shall be deposited in the Series 2009 Account of the Debt Service Reserve Fund; (c) An amount equal to $65,173.91 shall be deposited in the Costs of Issuance Fund and shall be utilized for payment of Costs of Issuance of the Series 2009 Bonds pursuant to the written direction of the City; and (d) The balance of said proceeds in the amount of $7,506,511.09 shall be deposited in the Series 2009 Account of the Construction Fund." Section 3.01. Section 301 of the Original Indenture is hereby amended and supplemented to read as follows: "Section 301. Optional Redemption. (a) The Series 2002B Bonds are subject to redemption prior to maturity, at the option of the City, on and after August 15, 2012, in whole at any time or in part in inverse order of maturity (and selected by the Trustee by lot within a maturity) on any interest payment date, from funds from any source, at a redemption price of 100% of the principal amount of the Series 2002B Bonds being redeemed, plus accrued interest to the date of redemption. (b) The Series 2004 Bonds are subject to redemption prior to maturity, at the option of the City, on and after August 15, 2009, in whole at any time or in part in inverse order of maturity (and selected by the Trustee by lot within a maturity) on any interest payment date, from funds from any source, at a redemption price of 100% of the principal amount of the Series 2004 Bonds being redeemed, plus accrued interest to the date of redemption. (c) The Series 2009 Bonds are subject to redemption prior to maturity, at the option of the City, in whole or in part at any time on and after August 15, 2014 (and if in part, in such maturity or maturities as the City shall elect), from funds from any source, at a redemption price of 100% of the principal amount of the Series 2009 Bonds being redeemed, plus accrued interest to the date of redemption. (d) Following the Completion Date with respect to the Project, the Series 2009 Bonds are subject to redemption prior to maturity, at the option of the City, in whole or in part, on any interest payment date, in inverse order of maturity (and selected by the Trustee by lot within a maturity), at a redemption price of 100% of the principal amount of the Series 2009 Bonds being redeemed, plus accrued interest to the date of redemption, from moneys in the Construction Fund in excess of the amount needed to complete the Project." Section 4.01. Section 604 of the Original Indenture us hereby amended and supplemented to read as follows: 4813-7647-9235.3 4 "Section 604. Balance in Construction Fund. On the applicable Completion Date, any balance then remaining in the Construction Fund (except for amounts retained by the Trustee for Costs of Construction not then due and payable, to remedy defects, or for seasonal completion) shall be disbursed by the Trustee in payment or reimbursement of any part of the Costs of Construction not theretofore paid or reimbursed to the City. Any portion of the balance then remaining in the Construction Fund (in excess of amounts, if any, retained by the Trustee as provided above) shall, at the option of the City (i) be transferred to the Bond Fund to pay principal and interest, as due, on the applicable series of Bonds from which such moneys were derived, (ii) be segregated by the Trustee and utilized for the redemption of the applicable series of Bonds from which such moneys were derived on the first date that such Bonds may be redeemed in accordance with the terms of Section 301 hereof, or (iii) be used for any other purpose authorized by the City, provided that the Trustee is furnished with an opinion of Bond Counsel to the effect that such use is lawful under the Act and will not adversely affect the exclusion from income for federal income tax purposes of interest on any of the Bonds. Until used for one or more of the foregoing purposes, such remaining amounts may be invested as permitted by this Indenture, but may not be invested, without an opinion of Bond Counsel to the effect that such investment will not adversely affect the exclusion from income for federal income tax purposes of interest on any of the Bonds, to produce a yield greater than the yield on the Bonds, all in accordance with Section 148 of the Code and the regulations promulgated thereunder." Section 5.01. 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. (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 5.02. 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 5.03. 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 5.04. Ratification of Original Indenture. As supplemented and amended hereby, the Original Indenture is hereby ratified and confirmed. 4813-7647-9235.3 5 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:�t�► t City Clerk o4atntanrrrarroo (SEAL)Y op ago ®�o o FAY ETT EVILLE o P GTag ATTEST: Title: Vi JP -r( sident and Trust Officer (SEAL) CITY OF FAYETTEVILLE, ARKANSAS C )� J— By: ayor BANK OF OKLAHOMA, N.A., as Trustee By: Title: 1A ce President and rust Officer [SIGNATURE PAGE TO SECOND SUPPLEMENTAL TRUST INDENTURE] 4813-7647-9235.3 6 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. No. R09 - UNITED STATES OF AMERICA STATE OF ARKANSAS CITY OF FAYETTEVILLE, ARKANSAS WATER AND SEWER SYSTEM REVENUE BOND, SERIES 2009 R Interest Rate: % Maturity Date: August 15, 20_ Date of Bond: June 1, 2009 CUSIP: 312693 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 February 15 and August 15 of each year, commencing on the February 15 or August 15 next succeeding the date of this bond shown above, 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 Bank of Oklahoma, N.A., Tulsa, Oklahoma, 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 first day of the calendar month in which such interest payment date 4813-7647-9235.3 A-1 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 "City of Fayetteville, Arkansas Water and Sewer System Revenue Bond, Series 2009," is one of a series of bonds in the aggregate original principal amount of $8,210,000 (the "Series 2009 Bonds"), issued for the purpose of acquiring, constructing and equipping improvements to the City's water and sewer system (the "Project"), establishing a debt service reserve for the Series 2009 Bonds, and paying expenses of issuing the Series 2009 Bonds. The Series 2009 Bonds are issued under and are secured and entitled to the protection given by a Trust Indenture dated as of May 1, 2002, as amended and supplemented by a First Supplemental Trust Indenture dated as May 1, 2004, and by a Second Supplemental Trust Indenture dated as June 1, 2009 (as amended and supplemented, the "Indenture"), each duly executed and delivered by the City to the Trustee. The City has previously issued (i) its Water and Sewer System Refunding Revenue Bonds, Series 2002, in the aggregate original principal amount of $9,270,000 (the "Series 2002 Bonds"), and (ii) its Water and Sewer System Refunding Revenue Bonds, Series 2004, in the aggregate original principal amount of $6,090,000 (the "Series 2004 Bonds"),under the provisions of the Indenture. The Series 2009 Bonds are not general obligations of the City, but are limited and special obligations payable solely from and secured by a pledge of the net revenues (the "Net Revenues") of the City's water and sewer system (the "System"), as specified in, and in accordance with the provisions of, the Indenture. The Series 2009 Bonds are secured by a pledge of the Net Revenues on a parity basis with the pledge of Net Revenues securing the Series 2002 Bonds and the Series 2004 Bonds. 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, such Additional Bonds will rank on a parity of security with the Series 2002 Bonds, the Series 2004 Bonds and the Series 2009 Bonds and be equally and ratably secured by and entitled to the protection of the Indenture. 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 registered owners of the Series 2009 Bonds, and the terms upon which the Series 2009 Bonds are issued and secured. The Series 2009 Bonds are issued pursuant to and in full compliance with the Constitution and laws of the State of Arkansas, including particularly Amendment 65 to the Constitution and Arkansas Code Annotated (1998 Repl. & Supp. 2005) §§14-164-401 et seq., §§14-234-201 et seq. and §§14-235-201 et seq. (collectively, and as from time to time amended, the "Act"), and pursuant to Ordinance No. 5235 of the City adopted on April 21, 2009. The Series 2009 Bonds do not constitute an indebtedness of the City within the meaning of any constitutional or statutory limitation. Provision has been made in the Indenture for the creation or maintenance of a Revenue Fund, an Operation and Maintenance Fund, a Bond Fund (and for the payment into the Bond Fund of sufficient amounts of Net Revenues to pay the principal of and premium, if any, and interest on the Series 2009 Bonds when due), a Debt Service Reserve Fund, a Construction Fund 4813-7647-9235.3 A-2 and a Renewal and Replacement Fund. The City covenants in the Indenture to always maintain rates for System services which will produce Net Revenues (gross revenues of the System less all reasonable and necessary costs and expenses incurred in the operation, maintenance, repair and insuring of the System) in each fiscal year at least equal to 125% of the average annual debt service on all outstanding indebtedness of the City secured by System revenues, plus the amount, if any, required to be deposited into the Debt Service Reserve Fund and any debt service reserve fund established with respect to outstanding indebtedness of the City secured by System revenues, and plus the amount, if any, required to make deposits to the Renewal and Replacement Fund. Reference is hereby made to the Indenture for the details of the rate covenant. The Series 2009 Bonds shall never constitute an obligation or charge against the general credit or taxing powers of the City. The holder of this Series 2009 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 Series 2002 Bonds, the Series 2004 Bonds, the Series 2009 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 Series 2009 Bonds are subject to redemption prior to maturity, at the option of the City, in whole or in part at any time on and after August 15, 2014 (and if in part, in such maturity or maturities as the City shall elect), from funds from any source, at a redemption price of 100% of the principal amount of the Series 2009 Bonds being redeemed, plus accrued interest to the date of redemption. Following the completion of the Project, the Series 2009 Bonds are subject to redemption prior to maturity, at the option of the City, in whole or in part, on any interest payment date, in inverse order of maturity (and selected by the Trustee by lot within a maturity), at a redemption price of 100% of the principal amount of the Series 2009 Bonds being redeemed, plus accrued interest to the date of redemption, from moneys in the Construction Fund in excess of the amount needed to complete the Project. This Series 2009 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 Series 2009 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, Series 2009 Bonds may be exchanged for a like aggregate principal amount of Series 2009 Bonds of other authorized denominations. 4813-7647-9235.3 A-3 No recourse shall be had for the payment of the principal of or premium, if any, or interest on any of the Series 2009 Bonds or for any claim based thereon or upon any obligation, covenant or agreement contained in the Series 2009 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 Series 2009 Bonds. The City has designated the Series 2009 Bonds as "qualified tax-exempt obligations" for the purposes of Section 265(b)(3) of the Internal Revenue Code of 1986, as amended, dealing generally with the deductibility of a financial institution's interest expense which is allocable to tax-exempt interest. This Series 2009 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 Series 2009 Bonds do exist, have happened and have been performed in due time, form and manner as required by law; that the indebtedness represented by the Series 2009 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 Series 2009 Bonds as the same become due and payable will be sufficient in amount for that purpose. This Series 2009 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 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: By: City Clerk (SEAL) 4813-7647-9235.3 A-4 (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. BANK OF OKLAHOMA, N.A., as Trustee RIN Authorized Signature 4813-7647-9235.3 A-5 (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. 4813-7647-9235.3 A-6 EXECUTION COPY CITY OF FAYETTEVILLE, ARKANSAS to BANK OF OKLAHOMA, N.A. as Trustee FIRST SUPPLEMENTAL TRUST INDENTURE Dated as of May 1, 2004 This First Supplemental Trust Indenture supplements and amends a Trust Indenture dated as of May 1, 2002, by and between the City of Fayetteville, Arkansas and Bank of Oklahoma, N.A., as Trustee. The Trust Indenture, as supplemented and amended hereby, secures the City's (i) $2,730,000 original principal amount of Water and Sewer System Refunding Revenue Bonds, Series 2002A, (ii) $6,540,000 original principal amount of Water and Sewer System Refunding Revenue Bonds, Series 2002B, and (iii) $6,090,000 original principal amount of Water and Sewer System Refunding Revenue Bonds, Series 2004. Prepared by: Kutak Rock LLP 425 West Capitol Avenue, Suite 1100 -- -LittTe Rock, Arkansas 72201 10-58927.3 FIRST SUPPLEMENTAL TRUST INDENTURE THIS FIRST SUPPLEMENTAL TRUST INDENTURE dated as of May 1, 2004, 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 BANK OF OKLAHOMA, 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 Tulsa, Oklahoma; WITNESSETH: WHEREAS, the City presently owns a public water and sewer utility system (which system, together with all capital improvements thereto, is herein collectively called the "System") serving the residents of the City and its environs; and WHEREAS, the City is authorized and empowered under the provisions of the Constitution and laws of the State of Arkansas, including particularly Amendment 65 to the Constitution and Arkansas Code Annotated (1998 Repl. & 2003 Supp.) Sections 14-164-401 et seq., Sections 14-234-201 et seq. and Sections 14-235-201 et seq. (collectively, and as from time to time amended, the "Act"), to issue and sell its water and sewer revenue bonds and to expend the proceeds thereof to finance the costs of acquisition, construction, equipping, improving, maintaining, operating and repairing the System, and to refund any bonds issued under the Act or any bonds issued under other applicable legislation payable from and secured by a pledge of revenues derived from the System; and WHEREAS, pursuant to the provisions of Ordinance No. 4159 of the City, adopted and approved on April 20, 1999, the City has previously issued its Water and Sewer System Refunding Revenue Bonds, Series 1999 (the "Series 1999 Bonds"), in the original principal amount of $8,365,000, for the purpose of refunding certain outstanding bonds of the City previously issued to finance and refinance the cost of improvements to the System; and WHEREAS, the City and the Trustee have previously entered into a Trust Indenture dated as of May 1, 2002 (the "Original Indenture"), pursuant to which the City's Water and Sewer System Refunding Revenue Bonds, Series 2002A and Series 2002B (collectively, the "Series 2002 Bonds"), were issued in the original principal amount of $9,270,000, for the purpose of refunding certain outstanding bonds of the City previously issued to finance and refinance the cost of improvements to the System; and WHEREAS, the Series 2002 Bonds were issued and secured under the Original Indenture on a junior and subordinate basis to the Series 1999 Bonds; and WHEREAS, in order to secure sufficient funds to refund the Series 1999 Bonds, to fund -a debt service reserve,_to-pay the_premium on_a-polic-y-of municipal_ band -insurance and -to -pay — legal and other expenses incidental to the issuance of water and sewer system refunding revenue bonds for such purposes, it has been determined appropriate and necessary that the City authorize the issuance of its $6,090,000 Water and Sewer System Refunding Revenue Bonds, Series 2004 (the "Series 2004 Bonds"), pursuant to the provisions of the Constitution of the State 10-58927.3 of Arkansas and the Act, such Series 2004 Bonds to be payable solely from and secured by a pledge of the net revenues of the System on a parity with the pledge of System net revenues securing the Series 2002 Bonds; and WHEREAS, upon the issuance of the Series 2004 Bonds and the corresponding refunding and defeasance of the Series 1999 Bonds, then the Series 2002 Bonds and the Series 2004 Bonds will be the only outstanding indebtedness of the City secured by System net revenues; and WHEREAS, the conditions for the issuance of Additional Bonds, as set forth in the Original Indenture, have been satisfied; and WHEREAS, the Series 2004 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 2004 Bonds have been in all respects duly and validly confirmed, authorized and approved by Ordinance No. 4554 adopted and approved by the City Council of the City on April 6, 2004; and WHEREAS, all things necessary to make the Series 2004 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 Net Revenues (as defined in the Indenture) to the payment of the principal of, premium, if any, and interest on the Series 2002 Bonds, the Series 2004 Bonds and all Additional Bonds (as defined below), if any, to be issued on a parity therewith (the Series 2002 Bonds, the Series 2004 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 First Supplemental Trust Indenture and the creation, execution, issuance and delivery of the Series 2004 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 2004 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 2004 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 2004 Bonds. Section 1.02. Sectio - 10 1 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): 10-58927.3 2 "Additional Bonds" mean Bonds in addition to the Series 2002 Bonds and the Series 2004 Bonds which are issued under the provisions of Section 213 of this Indenture. "Authorizing Ordinance" means (i) Ordinance No. 4381, adopted by the City on March 19, 2002, which authorized the issuance of the Series 2002 Bonds pursuant to this Indenture, and (ii) Ordinance No. 4554, adopted by the City on April 6, 2004, which authorized the issuance of the Series 2004 Bonds pursuant to this Indenture. "Bonds" mean the Series 2002 Bonds, the Series 2004 Bonds and all Additional Bonds issued by the City pursuant to this Indenture. "1999 Escrow Agreement" means the Escrow Deposit Agreement dated May 20, 2004, between the City and the 1999 Escrow Trustee, providing for the redemption of the Series 1999 Bonds. "1999 Escrow Fund" means the fiand established under the 1999 Escrow Agreement for deposit of moneys and investment securities to be held for the redemption of the Series 1999 Bonds. "1999 Escrow Trustee" means Bank of Oklahoma, N.A., in its capacity as escrow trustee under the 1999 Escrow Agreement. "2004 Financial Guaranty Insurance Policy" means the financial guaranty insurance policy issued by Ambac Assurance insuring the payment when due of the principal of and interest on the Series 2004 Bonds as provided therein. "Indenture" means this Trust Indenture dated as of May 1, 2002, as amended and supplemented by a First Supplemental Trust Indenture dated as of May 1, 2004, each by and between the City and the Trustee, pursuant to which the Bonds are issued, and any further amendments and supplements thereto. "Outstanding" means, when used with reference to the Bonds, as of any particular date, the aggregate of all Bonds authenticated and delivered under this 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 VIII of this Indenture; and (c) Bonds in lieu of or in exchange or substitution for which other Bonds shall have been authenticated and delivered pursuant to this Indenture. - -- - — -- Notwithstanding t provisions -of -(a)-, (b)-ancl-(c), "(i) -Series 2G0Z-Rdrids,�he"principal of and/or interest on which has been paid by Ambac Assurance pursuant to the Financial Guaranty Insurance Policy and (ii) Series 2004 Bonds, the principal of and/or interest on which has been paid by Ambac Assurance pursuant to the 2004 Financial Guaranty Insurance Policy, shall be deemed to remain Outstanding for all purposes. 10-58927.3 3 "Series 2004 Bonds" means City of Fayetteville, Arkansas Water and Sewer System Refunding Revenue Bonds, Series 2004, issued under and secured by this Indenture in the aggregate principal amount of $6,090,000 for the purpose of refunding the Series 1999 Bonds. Section 2.01. Article II of the Original Indenture is hereby amended by adding at the end thereof the following sections: "Section 218. Details of Series 2004 Bonds. The Series 2004 Bonds (i) shall be designated "City of Fayetteville, Arkansas Water and Sewer System Refunding Revenue Bonds, Series 2004," (ii) shall be in the aggregate principal amount of $6,090,000, (iii) shall be dated as of May 1, 2004, (iv) shall bear interest from such date at the rates hereinafter provided until paid, payable semiannually on February 15 and August 15 of each year, commencing August 15, 2004, (v) shall be issued in denominations of $5,000 each, or any integral multiple thereof, (vi) shall be numbered from R04-1 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 August 15 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 2004 Bonds: Year (August 15) Principal Amount Interest Rate 2004 $ 130,000 1.00% 2005 585,000 2.50 2006 595,000 2.50 2007 615,000 3.00 2008 635,000 3.00 2009 655,000 2.80 2010 670,000 3.05 2011 690,000 3.30 2012 1,515,000 4.00 "Section 219. Form of Series 2004 Bonds. The Series 2004 Bonds shall be issued as registered Bonds without coupons. The Series 2004 Bonds and the Trustee's certificate of authentication to be endorsed thereon shall be in substantially the form set forth in Exhibit A to this First Supplemental Trust Indenture, with appropriate variations, insertions and omissions as permitted or required by the Indenture." "Section 220. Delivery of Series 2004 Bonds. Simultaneously with the delivery of the Series 2004 Bonds, the Trustee shall apply the proceeds thereof as follows: (a) The amount, if any, received as accrued interest on the Series 2004 Bonds, shall__be deposited- in_the_Series-2004_Accountof-the Bond -Fund;— -- - (b) An amount equal to $786,432.50, the Reserve Requirement with respect to the Series 2004 Bonds, shall be deposited in the Series 2004 Account of the Debt Service Reserve Fund; 10-58927.3 4 (c) An amount equal to $5,222,145.07 shall be transferred to the 1999 It Escrow Trustee to be held in the 1999 Escrow Fund for redemption of the Series 1999 Bonds; 1-1 (d) An amount equal to $24,410.10 shall be paid to Ambac Assurance in payment of the premium for the 2004 Financial Guaranty Insurance Policy; (e) An amount equal to $50,640.10 shall be deposited in the Costs of Issuance Fund and shall be utilized for payment of Costs of Issuance of the Series 2004 Bonds pursuant to the written direction of the City; and (f) The balance of said proceeds in the amount of $103.18 shall be deposited in the Series 2004 Account of the Bond Fund." Section 3.01. Section 301 of the Original Indenture is hereby amended and supplemented to read as follows: "Section 301. Optional Redemption. (a) The Series 2002A Bonds shall not be subject to redemption prior to maturity. (b) The Series 2002B Bonds are subject to redemption prior to maturity, at the option of the City, on and after August 15, 2012, in whole at any time or in part in inverse order of maturity (and selected by the Trustee by lot within a maturity) on any interest payment date, from funds from any source, at a redemption price of 100% of the principal amount of the Series 2002B Bonds being redeemed, plus accrued interest to the date of redemption. (c) The Series 2004 Bonds are subject to redemption prior to maturity, at the option of the City, on and after August 15, 2009, in whole at any time or in part in inverse order of maturity (and selected by the Trustee by lot within a maturity) on any interest payment date, from funds from any source, at a redemption price of 100% of the principal amount of the Series 2004 Bonds being redeemed, plus accrued interest to the date of redemption." Section 4.01. Section 802 of the Original Indenture is hereby amended and restated to read as follows: "Section 802. Bonds Deemed Paid. Any Bond shall be deemed to be paid within the meaning of this Article VIII 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- prev-ided--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 10-58927.3 5 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. Any Government Securities used for defeasance must provide for the timely payment of principal and interest and cannot be callable or prepayable prior to maturity or earlier redemption of the defeased Bonds (excluding Government Securities that do not have a fixed par value and/or whose terms do not promise a fixed dollar amount at maturity or call date). Notwithstanding anything in this Indenture to the contrary, in the event that the principal and/or interest due on the Series 2002 Bonds shall be paid by Ambac Assurance pursuant to the Financial Guaranty Insurance Policy, the Series 2002 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 pledge and assignment 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 Ambac Assurance, and Ambac Assurance shall be subrogated to the rights of such registered owners. Notwithstanding anything in this Indenture to the contrary, in the event that the principal and/or interest due on the Series 2004 Bonds shall be paid by Ambac Assurance pursuant to the 2004 Financial Guaranty Insurance Policy, the Series 2004 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 pledge and assignment 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 Ambac Assurance, and Ambac Assurance shall be subrogated to the rights of such registered owners." Section 5.01. Section 1201 of the Original Indenture is hereby amended and supplemented to read as follows: "Section 12.01. Consent of Ambac Assurance. (a) Any provision of this Indenture expressly recognizing or granting rights in or to Ambac Assurance may not be amended in any manner which affects the rights of Ambac Assurance hereunder without the prior written consent of Ambac Assurance. Ambac Assurance reserves the right to charge the City a fee for any consent or amendment to the Indenture while the Financial Guaranty Insurance Policy or the 2004 Financial Guaranty Insurance Policy is outstanding. (b) Unless otherwise provided in this Section 1201, Ambac Assurance's consent-- shall- be- required --in -addition- to- bondholder- consent, -when- required, for -tlie - -- - - following purposes: (i) execution and delivery of any supplemental Indenture, (ii) removal of the Trustee or Paying Agent and selection and appointment of any �. successor trustee or paying agent, and (iii) initiation or approval of any action not described in (i) or (ii) above which requires bondholder consent. 10-58927.3 6 (c) Any reorganization or liquidation plan with respect to the City must be acceptable to Ambac Assurance. In the event of any reorganization or liquidation, Ambac Assurance shall have the right to vote on behalf of (i) all bondholders who hold Series 2002 Bonds absent a default by Ambac Assurance under the Financial Guaranty Insurance Policy and (ii) all bondholders who hold Series 2004 Bonds absent a default by Ambac Assurance under the 2004 Financial Guaranty Insurance Policy. (d) Anything in this Indenture to the contrary notwithstanding, upon the occurrence and continuance of an Event of Default, Ambac Assurance shall be entitled to control and direct the enforcement of all rights and remedies granted to 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 2002 Bonds and the Series 2004 Bonds as described in Section 902 of this Indenture, and (ii) the right to annul any declaration of acceleration, and Ambac Assurance shall also be entitled to approve all waivers of Events of Default. (e) (i) Upon the occurrence of an Event of Default, the Trustee may, with the consent of Ambac Assurance, and shall, at the direction of Ambac Assurance or at the written request of bondholders of not less than 51 % in aggregate Outstanding principal amount of the Series 2002 Bonds with the consent of Ambac Assurance, by written notice to the City and Ambac Assurance, declare the principal of the Series 2002 Bonds to be immediately due and payable, whereupon that portion of the principal of the Series 2002 Bonds thereupon coming due and the interest thereon accrued to the date of payment shall, without further action, become and be immediately due and payable, anything in this Indenture or in the Series 2002 Bonds to the contrary notwithstanding; and (ii) upon the occurrence of an Event of Default, the Trustee may, with the consent of Ambac Assurance, and shall, at the direction of Ambac Assurance or at the written request of bondholders of not less than 51% in aggregate Outstanding principal amount of the Series 2004 Bonds with the consent of Ambac Assurance, by written notice to the City and Ambac Assurance, declare the principal of the Series 2004 Bonds to be immediately due and payable, whereupon that portion of the principal of the Series 2004 Bonds thereupon coming due and the interest thereon accrued to the date of payment shall, without further action, become and be immediately due and payable, anything in this Indenture or in the Series 2004 Bonds to the contrary notwithstanding." Section 5.02. Section 1202 of the Original Indenture is hereby amended and supplemented to read as follows: "Section 1202. Notices/Information to be Given to Ambac Assurance. (a) While the Financial Guaranty Insurance Policy or the 2004 Financial Guaranty Insurance Policy is in effect, the Trustee (or the City to the extent the Trustee is not in possession of such information) shall furnish to Ambac Assurance at its address indicated in Section 1302 - - - -- - hereof (tot e attention of thu Survei ante DepartmentX — — - (i) as soon as practicable after the filing thereof, a copy of any financial statement relating to the City's Water and Sewer Fund and a copy of any audit and annual report of the City; 10-58927.3 7 (ii) a copy of any notice to be given to the registered owners of the Series 2002 Bonds or the Series 2004 Bonds, including, without limitation, notice of any redemption of or defeasance of the Series 2002 Bonds or the Series 2004 Bonds, and any certificate rendered pursuant to this Indenture relating to the security for the Series 2002 Bonds or the Series 2004 Bonds; and (iii) such additional information as Ambac Assurance may reasonably request. (b) Ambac Assurance shall be included as a party to be notified under the provisions of the Continuing Disclosure Agreement with respect to the Series 2002 Bonds and the Continuing Disclosure Agreement with respect to the Series 2004 Bonds. (c) The Trustee shall notify Ambac Assurance of any failure of the City to provide relevant notices, certificates, etc. (d) Notwithstanding any other provision of this Indenture, the Trustee shall immediately notify Ambac Assurance if at any time there are insufficient moneys to make any payments of principal and/or interest on the Bonds as required and immediately upon the occurrence of any Event of Default hereunder. (e) The City will permit Ambac Assurance to discuss the affairs, finances and accounts of the City or any information Ambac Assurance may reasonably request regarding the security for the Series 2002 Bonds or the Series 2004 Bonds with appropriate officers of the City. The Trustee and the City will permit Ambac Assurance to have access to and to make copies of all books and records relating to the Series 2002 Bonds or the Series 2004 Bonds at any reasonable time. (f) Ambac Assurance shall have the right to direct an accounting at the City's expense, and the City's failure to comply with such direction within thirty (30) days after receipt of written notice of the direction from Ambac Assurance shall be deemed a default hereunder; provided, however, that if compliance cannot occur within such period, then such period will be extended so long as compliance is begun within such period and diligently pursued, but only if such extension would not materially adversely affect the interests of any registered owner of the Bonds." Section 5.03. Section 1203 of the Original Indenture is hereby renamed as follows "Payment Procedure Under Financial Guaranty Insurance Policy". Section 5.04. Section 1204 of the Original Indenture is hereby amended and supplemented to read as follows: "Section 1204. Trustee -Related Provisions. (a) The Trustee orPing Agent, any, may be removed at any time, at the request of Ambac Assurance, for any breach of the Trust set forth herein. (b) Ambac Assurance shall receive prior written notice of any Trustee or 4 Paying Agent resignation. 10-58927.3 8 (c) Every successor Trustee appointed pursuant to this Indenture shall be a trust company or bank in good standing located in or incorporated under the laws of the State of Arkansas, duly authorized to exercise trust powers and subject to examination by federal or state authority, having a reported capital and surplus of not less than $75,000,000 and acceptable to Ambac Assurance. Any successor Paying Agent, if applicable, shall not be appointed unless Ambac Assurance approves such successor in writing. (d) Notwithstanding any other provision of this Indenture, in determining whether the rights of the bondholders will be adversely affected by any action taken pursuant to the terms and provisions of this Indenture, the Trustee shall consider the effect on the bondholders as if there were no Financial Guaranty Insurance Policy or 2004 Financial Guaranty Insurance Policy. (e) Notwithstanding any other provision of this Indenture, no removal, resignation or termination of the Trustee or Paying Agent shall take effect until a successor, acceptable to Ambac Assurance, shall be appointed." Section 5.05. Article XII of the Original Indenture is hereby amended and supplemented by adding the following Section 1206 thereto: "Section 1206. Payment Procedure Under 2004 Financial Guaranty Insurance Polic . So long as the 2004 Financial Guaranty Insurance Policy shall be in full force and effect, the City, the Trustee and any Paying Agent agree to comply with the following provisions: (a) At least one (1) day prior to all interest payment dates with respect to the Series 2004 Bonds, the Trustee or Paying Agent, if any, will determine whether there will be sufficient moneys in the funds and accounts created hereunder to pay the principal of and interest on the Series 2004 Bonds on such interest payment date. If the Trustee or Paying Agent, if any, determines that there will be insufficient moneys in such funds and accounts, the Trustee or Paying Agent, if any, shall so notify Ambac Assurance. Such notice shall specify the amount of the anticipated deficiency, the Series 2004 Bonds to which such deficiency is applicable and whether such Series 2004 Bonds will be deficient as to the payment of principal or interest, or both. If the Trustee or Paying Agent, if any, has not so notified Ambac Assurance at least one (1) day prior to an interest payment date, Ambac Assurance will make payments of principal and/or interest due on the Series 2004 Bonds on or before the first (1st) day next following the date on which Ambac Assurance shall have received notice of nonpayment from the Trustee or Paying Agent, if any. (b) The Trustee or Paying Agent, if any, shall, after giving notice to Ambac -- — -----Assurance--as-provided- in- (a -)-above; -make-availabi-e-to Ambac-Assurance and,–at Amb c - - - Assurance's direction, to The Bank of New York, in New York, New York, as insurance trustee for Ambac Assurance or any successor insurance trustee (the "Insurance Trustee"), the registration books of the City maintained by the Trustee or Paying Agent, if any, and all records relating to the funds and accounts maintained under this Indenture. 10-58927.3 9 (c) The Trustee or Paying Agent, if any, shall provide Ambac Assurance and the Insurance Trustee with a list of registered owners of Series 2004 Bonds entitled to receive principal or interest payments from Ambac Assurance under the terms of the 2004 Financial Guaranty Insurance Policy, and shall make arrangements with the Insurance Trustee (i) to mail checks or drafts to the registered owners of the Series 2004 Bonds entitled to receive full or partial interest payments from Ambac Assurance and (ii) to pay principal upon the Series 2004 Bonds surrendered to the Insurance Trustee by the registered owners of the Series 2004 Bonds entitled to receive full or partial principal payments from Ambac Assurance. (d) The Trustee or Paying Agent, if any, shall, at the time it provides notice to Ambac Assurance pursuant to (a) above, notify registered owners of the Series 2004 Bonds entitled to receive the payment of principal or interest thereon from Ambac Assurance (i) as to the fact of such entitlement, (ii) that Ambac Assurance will remit to them all or a part of the interest payments next coming due upon proof of bondholder entitlement to interest payments and delivery to the Insurance Trustee, in form satisfactory to the Insurance Trustee, of an appropriate assignment of the registered owner's right to payment, (iii) that should they be entitled to receive full payment of principal from Ambac Assurance, they must surrender their Series 2004 Bonds (along with an appropriate instrument of assignment in form satisfactory to the Insurance Trustee to permit ownership of such Series 2004 Bonds to be registered in the name of Ambac Assurance) for payment to the Insurance Trustee, and not the Trustee or Paying Agent, if any, and (iv) that should they be entitled to receive partial payment of principal from Ambac Assurance, they must surrender their Series 2004 Bonds for payment thereon first to the Trustee or Paying Agent, if any, who shall note on such Series 2004 Bonds the portion of the principal paid by the Trustee or Paying Agent, if any, and then, along with an appropriate instrument of assignment in form satisfactory to the Insurance Trustee, to the Insurance Trustee, which will then pay the unpaid portion of principal. (e) In the event that the Trustee or Paying Agent, if any, has notice that any payment of principal of or interest on a Series 2004 Bond which has become Due for Payment and which is made to a bondholder by or on behalf of the Obligor has been deemed a preferential transfer and theretofore recovered from its registered owner pursuant to the United States Bankruptcy Code by a trustee in bankruptcy in accordance with the final, nonappealable order of a court having competent jurisdiction, the Trustee or Paying Agent, if any, shall, at the time Ambac Assurance is notified pursuant to (a) above, notify all registered owners that in the event that any registered owner's payment is so recovered, such registered owner will be entitled to payment from Ambac Assurance to the extent of such recovery if sufficient funds are not otherwise available, and the Trustee or Paying Agent, if any, shall furnish to Ambac Assurance its records evidencing _ the pay__ments-of_principal_ of and --- nteres-t-on_the-.Series_-20-04 Bonds which -have --been - - - - - made by the Trustee or Paying Agent, if any, and subsequently recovered from registered owners and the dates on which such payments were made. 10-58927.3 10 (f) In addition to those rights granted Ambac Assurance under this Indenture, Ambac Assurance shall, to the extent it makes payment of principal of or interest on Series 2004 Bonds, become subrogated to the rights of the recipients of such payments in accordance with the terms of the 2004 Financial Guaranty Insurance Policy, and to evidence such subrogation (i) in the case of subrogation as to claims for past due interest, the Trustee or Paying Agent, if any, shall note Ambac Assurance's rights as subrogee on the registration books of the City maintained by the Trustee or Paying Agent if any, upon receipt from Ambac Assurance of proof of the payment of interest thereon to the registered owners of the Series 2004 Bonds, and (ii) in the case of subrogation, as to claims for past due principal, the Trustee or Paying Agent, if any, shall note Ambac Assurance's rights as subrogee on the registration books of the City maintained by the Trustee or Paying Agent, if any, upon surrender of the Series 2004 Bonds by the registered owners thereof together with proof of the payment of principal thereof." Section 6.01. 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 contaitied invalid, inoperative or unenforceable to any extent whatever. 12 (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. 11 Section 6.02. 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 6.03. 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 6.04. Ratification of Original Indenture. As supplemented and amended hereby, the Original Indenture is hereby ratified and confirmed. 10-58927.3 11 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: 6a.d4-4JJ�-- City Clerk (SEAL) e��•.•G�VY 0F•.G�•: FAYETTEVILLE ATTEST: By:_ Title: (SEAL) CITY OF FAYETTEVILLE, ARKANSAS By:_ Mayor BANK OF OKLAHOMA, N.A., as Trustee By:_ Title: [SIGNATURE PAGE TO FIRST SUPPLEMENTAL TRUST INDENTURE] 10-58927.3 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: Lm City Clerk (SEAL) BANK OF OKLAHOMA, N.A., as Trustee 7 By: �-- Title: ice President & Trust Officer ATTEST: �-�-- Title- Assi ta�if ice President & Trust Officer (SEAL) [SIGNATURE PAGE TO FIRST SUPPLEMENTAL TRUST INDENTURE] 10-58927.3 51 EXHIBIT A TO FIRST SUPPLEMENTAL TRUST INDENTURE Form of Series 2004 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. No. R04 - UNITED STATES OF AMERICA STATE OF ARKANSAS CITY OF FAYETTEVILLE, ARKANSAS WATER AND SEWER SYSTEM REFUNDING REVENUE BOND, SERIES 2004 Interest Rate: % Date of Bond: May 1, 2004 Registered Owner: CEDE &, CO. Principal Amount: KNOW ALL MEN BY THESE PRESENTS: Maturity Date: August 15, 20_ CUSIP: 312693 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 February 15 and August 15 of each year, commencing on the February 15 or August 15 next succeeding the date of this bond shown above, 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-princip-al_corporate_trust_office..of Bank. of -Oklahoma,-- -- N.A., Tulsa, Oklahoma, 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 first day of the calendar month in which such interest payment date 10-58927.3 A-1 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 "City of Fayetteville, Arkansas Water and Sewer System Refunding Revenue Bond, Series 2004," is one of a series of bonds in the aggregate original principal amount of $6,090,000 (the "Series 2004 Bonds"), issued for the purpose of refunding the City's outstanding Water and Sewer System Refunding Revenue Bonds, Series 1999, establishing a debt service reserve for the Series 2004 Bonds, paying the premium on a policy of municipal bond insurance, and paying expenses of issuing the Series 2004 Bonds. The Series 2004 Bonds are issued under and are secured and entitled to the protection given by a Trust Indenture dated as of May 1, 2002, as amended and supplemented by a First Supplemental Trust Indenture dated as May 1, 2004 (as amended and supplemented, the "Indenture"), each duly executed and delivered by the City to the Trustee. The City has previously issued its Water and Sewer System Refunding Revenue Bonds, Series 2002, in the aggregate original principal amount of $9,270,000 (the "Series 2002 Bonds") under the provisions of the Indenture. The Series 2004 Bonds are not general obligations of the City, but are limited and special obligations payable solely from and secured by a pledge of the net revenues (the "Net Revenues") of the City's water and sewer system (the "System"), as specified in, and in accordance with the provisions of, the Indenture. The Series 2004 Bonds are secured by a pledge of the Net Revenues on a parity basis with the pledge of Net Revenues securing the Series 2002 Bonds. 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, such Additional Bonds will rank on a parity of security with the Series 2002 Bonds and Series 2004 Bonds and be equally and ratably secured by and entitled to the protection of the Indenture. 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 registered owners of the Series 2004 Bonds, and the terms upon which the Series 2004 Bonds are issued and secured. The Series 2004 Bonds are issued pursuant to and in full compliance with the Constitution and laws of the State of Arkansas, including particularly Amendment 65 to the Constitution and Arkansas Code Annotated (1998 Repl. & Supp. 2003) §§14-164-401 et seq., §§14-234-201 et seq. and §§14-235-201 et seq. (collectively, and as from time to time amended, the "Act"), and pursuant to Ordinance No. 4554 of the City adopted on April 6, 2004. The Series 2004 Bonds do not constitute an indebtedness of the City within the meaning of any constitutional or statutory limitation. Provision has been made in the Indenture for the creation or maintenance of a Revenue - -- - --Fund-,--an--Operation- and -Maintenance- Fund-;- a --Bond- Fund (and -for the --payment- into-thu-B-ond-- Fund of sufficient amounts of Net Revenues to pay the principal of and premium, if any, and interest on the Series 2004 Bonds when due), a Debt Service Reserve Fund and a Renewal and e Replacement Fund. The City covenants in the Indenture to always maintain rates for System services which will produce Net Revenues (gross revenues of the System less all reasonable and 10-58927.3 A-2 necessary costs and expenses incurred in the operation, maintenance, repair and insuring of the It System) in each fiscal year at least equal to 125% of the average annual debt service on all outstanding indebtedness of the City secured by System revenues, plus the amount, if any, required to be deposited into the Debt Service Reserve Fund and any debt service reserve fund established with respect to outstanding indebtedness of the City secured by System revenues, and plus the amount, if any, required to make deposits to the Renewal and Replacement Fund. Reference is hereby made to the Indenture for the details of the rate covenant. The Series 2004 Bonds shall never constitute an obligation or charge against the general credit or taxing powers of the City. Financial Guaranty Insurance Policy No. 22458BE (the "Policy") with respect to payments due for principal of and interest on this Bond has been issued by Ambac Assurance Corporation ("Ambac Assurance"). The Policy has been delivered to The Bank of New York, New York, New York, as the Insurance Trustee under said Policy and will be held by such Insurance Trustee or any successor insurance trustee. The Policy is on file and available for inspection at the principal office of the Insurance Trustee and a copy thereof may be secured from Ambac Assurance or the Insurance Trustee. 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 Ambac Assurance as more fully set forth in the Policy. The holder of this Series 2004 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 Series 2002 Bonds, the Series 2004 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 Series 2004 Bonds are subject to redemption prior to maturity, at the option of the City, on and after August 15, 2009, in whole at any time or in part in inverse order of maturity (and selected by the Trustee by lot within a maturity) on any interest payment date, from funds from any source, at a redemption price equal to one hundred percent (100%) of the principal amount of the Series 2004 Bonds being redeemed, plus accrued interest to the date of redemption This Series 2004 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 Series 2004 Bonds are issuable as registered bonds without coupons in denominations of $5,000 and any integral multiple thereof. Subject to the limitations and upon 10-58927.3 A-3 payment of the charges provided in the Indenture, Series 2004 Bonds may be exchanged for a like aggregate principal amount of Series 2004 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 Series 2004 Bonds or for any claim based thereon or upon any obligation, covenant or agreement contained in the Series 2004 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 Series 2004 Bonds. This Series 2004 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 Series 2004 Bonds do exist, have happened and have been performed in due time, form and manner as required by law; that the indebtedness represented by the Series 2004 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 Series 2004 Bonds as the same become due and payable will be sufficient in amount for that purpose. This Series 2004 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 Series 2004 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 an ATTEST: Mayor By: - - -- - City Clerk - - - - - - — - - --- - - -- - - -- - - - - (SEAL) 10-58927.3 A-4 (Form of Trustee's Certificate) TRUSTEE'S CERTIFICATE OF AUTHENTICATION This bond is one of the Series 2004 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 2004 Bonds. 10-58927.3 BANK OF OKLAHOMA, N.A., as Trustee By: Authorized Signature A-5 r 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. 10-58927.3 10-32371.04 EXECUTION COPY CITY OF FAYETTEVILLE, ARKANSAS to BANK OF OKLAHOMA, N.A. as Trustee TRUST INDENTURE Dated as of May 1, 2002 Providing for: $2,730,000 City of Fayetteville, Arkansas Water and Sewer System Refunding Revenue Bonds Series 2002A and $6,540,000 City of Fayetteville, Arkansas Water and Sewer System Refunding Revenue Bonds Series 2002B - - - - - - - P-repared--by: - — - - - -- -- -- - - - -- - -- -- Kutak Rock LLP 425 West Capitol Avenue, Suite 1100 Little Rock, Arkansas 72201 TABLE OF CONTENTS (This Table of Contents is not a part of the Trust Indenture and is only for convenience of reference.) Page No. Parties.............................................................................................................................................. 1 Recitals............................................................................................................................................ l GrantingClauses.............................................................................................................................2 ARTICLE I DEFINITIONS Section101. Definitions........................................................................................................5 Section102. Use of Words............................................................................••---................12 ARTICLE II THE BONDS Section 201. Security for the Bonds................................................................................... 12 Section 202. Authorized Amount of Bonds........................................................................ 13 Section 203. Details of Series 2002 Bonds......................................................................... 13 Section204. Form................................................................................................................14 Section205. Payment.......................................................................................................... 14 Section206. Execution....................................................................................................... 14 Section207. [RESERVED]................................................................................................15 Section208. Authentication................................................................................................15 Section 209. Delivery of the Bonds....................................................................................15 Section 210. Mutilated, Destroyed or Lost Bonds..............................................................17 Section 211. Registration and Transfer of Bonds...............................................................17 Section212. Cancellation................................................................................................... 18 Section213. Additional Bonds........................................................................................... 18 Section 214. Superior Obligations Prohibited....................................................................19 Section 215. Subordinate Obligations.................................................................................19 Section216. Temporary Bonds........................................................................................... 20 Section 217. Book -Entry Bonds; Securities Depository ..................................................... 20 ARTICLE III REDEMPTION OF BONDS BEFORE MATURITY 00� Section 301. Redemption of Series 2002 Bonds ..................... 6. Section 302. Notice i 10-32371.04 Section 303. Selection of Bonds to be Redeemed.............................................................. 22 Section 304. Surrender of Bonds Upon Redemption.......................................................... 22 Section 305. Redemption in Part ........................................................................................ 22 Section 306. Redemption of Additional Bonds.................................................................. 22 ARTICLE IV ARTICLE V FUNDS AND DEPOSITS Section501. GENERAL COVENANTS AND REPRESENTATIONS 28 Section 401. Payment of Principal, Premium, if any, and Interest ..................................... 23 Section 402. Performance of Covenants............................................................................. 23 Section 403. Instruments of Further Assurance.................................................................. 23 Section 404. Recordation and Filing................................................................................... 23 Section 405. Inspection of Books....................................................................................... 23 Section406. Tax Covenants............................................................................................... 24 Section 407. Rates and Charges.......................................................................................... 24 Section 408. Taxes, Charges and Assessments................................................................... 24 Section 409. Construction of Facilities; Certification of Completion Date ........................ 24 Section 410. Encumbrances................................................................................................ 25 Section411. Insurance........................................................................................................ 25 Section 412. Damage or Destruction; Condemnation......................................................... 25 Section 413. Revenues To Be Used As Provided In Indenture .......................................... 26 Section 414. Accounting; Reports...................................................................................... 26 Section 415. Annual Budget .................................................................... 26 Section 416. Operation and Maintenance of System; Disposition of System Assets ......... 26 Section 417. Continuing Disclosure................................................................................... 27 Section 418. Security for the Bonds................................................................................... 27 ARTICLE V FUNDS AND DEPOSITS Section501. Revenue Fund................................................................................................ 28 Section 502. Operation and Maintenance Fund..................................................................28 Section503. Bond Fund...................................................................................................... 28 Section 504. Debt Service Reserve Fund............................................................................ 29 Section 505. Renewal and Replacement Fund.................................................................... 30 Section506. Surplus........................................................................................................... 30 Section 507. Costs of Issuance Fund.................................................................................. 30 Section508. Rebate Fund................................................................................................... 31 Section 509. Separate Accounts Authorized....................................................................... 31 CUSTODY AND APPLICATION OF PROCEEDS OF BONDS Section 601. Creation of Construction Fund....................................................................... 32 10-32371.04 11 Section 602. Payments into Construction Fund.................................................................. 32 Section 603. Disbursements from Construction Fund ........................................................ 32 Section 604. Balance in Construction Fund........................................................................ 33 ARTICLE VII INVESTMENTS Section 701. Investment of Moneys.................................................................................... 34 Section 702. Investment Earnings....................................................................................... 34 Section 703. Valuation of Funds......................................................................................... 34 Section 704. Responsibility of Trustee............................................................................... 35 ARTICLE VIII ARTICLE X TRUSTEE AND PAYING AGENTS Section 1001. Acceptance of Trusts...................................................................................... 41 Sectio UOOI -- -- -Fees, Charges -and -Expenses -of Trustee. and -Paying Agcnts; -Trustee!-.. - --- - --- PriorLien....................................................................................................... 43 Section 1003.. Additional Duties of Trustee.......................................................................... 43 Section 1004. Notice to Bondholders of Default.................................................................. 44 `-: Section 1005. Intervention by Trustee.................................................................................. 44 Section 1006. Merger or Consolidation of Trustee............................................................... 44 10-32371.04 i i i DISCHARGE OF LIEN Section 801. Discharge of Lien........................................................................................... 35 Section802. Bonds Deemed Paid....................................................................................... 35 Section 803. Non -Presentment of Bonds............................................................................ 36 ARTICLE IX DEFAULT PROVISIONS AND REMEDIES OF TRUSTEE AND BONDHOLDERS Section 901. Events of Default........................................................................................... 36 Section902. Acceleration................................................................................................... 37 Section 903. Other Remedies; Rights of Bondholders....................................................... 37 Section 904. Right of Bondholders to Direct Proceedings ................................................. 38 Section 905. Appointment of Receiver ........................... Section906. Waiver............................................................................................................ 38 Section 907. Application of Moneys.................................................................................. 38 Section 908. Remedies Vested in Trustee........................................................................... 39 Section 909. Rights and Remedies of Bondholders............................................................ 39 Section 910. Termination of Proceedings........................................................................... 40 Section 911. Waivers of Events of Default......................................................................... 40 ARTICLE X TRUSTEE AND PAYING AGENTS Section 1001. Acceptance of Trusts...................................................................................... 41 Sectio UOOI -- -- -Fees, Charges -and -Expenses -of Trustee. and -Paying Agcnts; -Trustee!-.. - --- - --- PriorLien....................................................................................................... 43 Section 1003.. Additional Duties of Trustee.......................................................................... 43 Section 1004. Notice to Bondholders of Default.................................................................. 44 `-: Section 1005. Intervention by Trustee.................................................................................. 44 Section 1006. Merger or Consolidation of Trustee............................................................... 44 10-32371.04 i i i Section 1007. Resignation by Trustee..................................................................................45 Section 1008. Removal of Trustee........................................................................................ 45 Section 1009. Appointment of Successor Trustee................................................................ 45 Section 1010. Concerning Any Successor Trustee............................................................... 45 Section 1011. Reliance Upon Instruments............................................................................ 45 Section 1012. Appointment of Co-Trustee........................................................................... 46 Section 1013. Designation and Succession of Paying Agents .............................................. 46 ARTICLE XI SUPPLEMENTAL INDENTURES Section 1101. Supplemental Indentures Not Requiring Consent of Bondholders ................ 47 Section 1102. Supplemental Indentures Requiring Consent of Bondholders ....................... 48 Section 1103. Effect of Supplemental Indentures................................................................. 48 ARTICLE XII FINANCIAL GUARANTY INSURANCE POLICY ARTICLE XIII MISCELLANEOUS Section 1301. Section 1201. Consent of Ambac Assurance........................................................................ 49 Notices............................................................................... ................ Section 1202. Notices/Information to be Given to Ambac Assurance ................................. 49 54 Section 1203. Section 1204. Payment Procedure........................................................................................ Trustee -Related Provisions............................................................................ 50 52 Section 1305. Section 1205. Interested Parties............................................................................................ 52 ARTICLE XIII MISCELLANEOUS Section 1301. Consents, etc. of Bondholders....................................................................... 53 Section1302. Notices............................................................................... ................ 53 Section 1303. Limitation of Rights....................................................................................... 54 Section1304. Severability.................................................................................................... 54 Section 1305. Applicable Provisions of Law........................................................................ 54 Section 1306. Counterparts...................................................................................................54 Section 1307. Successors and Assigns.................................................................................. 54 Section1308. Captions......................................................................................................... 54 Section 1309. Photocopies and Reproductions..................................................................... 54 Section 1310. Bonds Owned by the City.............................................................................. 54 Exhibit A Form of Series 2002A Bond......................................................................... A-1 _ Exhi -BForm- of Series-2M-ff-m .:::......:::..................................................... B=T_ 10-32371.04 l v TRUST INDENTURE THIS TRUST INDENTURE dated as of May 1, 2002, 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 BANK OF OKLAHOMA, N.A., as trustee (the "Trustee"), a banking corporation organized under and existing by virtue of the laws of the United States of America and having its principal corporate trust office in Tulsa, Oklahoma; WITNESSETH: WHEREAS, the City presently owns a public water and sewer utility system (which system, together with all capital improvements thereto, is herein collectively called the "System") serving the residents of the City and its environs; and WHEREAS, the City is authorized and empowered under the provisions of the Constitution and laws of the State of Arkansas, including particularly Amendment 65 to the Constitution and Arkansas Code Annotated (1998 Repl. & 2001 Supp.) Sections 14-164-401 et seq., Sections 14-234-201 et seq. and Sections 14-235-201 et seq. (collectively, and as from time to time amended, the "Act"), to issue and sell its water and sewer revenue bonds and to expend the proceeds thereof to finance the costs of acquisition, construction, equipping, improving, maintaining, operating and repairing the System, and to refund any bonds issued under the Act or 3 any bonds issued under other applicable legislation payable from and secured by a pledge of y, revenues derived from the System; and WHEREAS, pursuant to the. provisions of Ordinance No. 3829 of the City, adopted and approved on September 20, 1994, the City has previously issued its Water and Sewer System Revenue Bonds, Series 1994 (the "Series 1994 Bonds"), in the original principal amount of $5,500,000, for the purpose of financing the cost of improvements to the System; and WHEREAS, pursuant to the provisions of Ordinance No. 4159 of the City, adopted and approved on April 20, 1999, the City has previously issued its Water and Sewer System Refunding Revenue Bonds, Series 1999 (the "Series 1999 Bonds"), in the original principal amount of $8,365,000, for the purpose of refunding outstanding bonds of the City previously issued to finance and refinance the cost of improvements to the System; and WHEREAS, pursuant to the provisions of Ordinance No. 4276 of the City, adopted and approved on October 17, 2000, the City has previously issued its Water and Sewer System Subordinate Revenue Bonds, Series 2000 (the "Series 2000 Bonds"), in the original principal amount of $10,000,000, for the purpose of financing the cost of improvements to the System; and WHEREAS, in accordance with the provisions of the Act, the City proposes to issue its Water and Sewer System Refunding Revenue Bonds, Series 2002A and Series 2002B MIX (collectively, the "Series 2002 Bonds"), in the aggregate principal amount of $9,270,000 for the unding all of the outstanding Series 1994 Bonds and Series 2000 Bonds, purpose of ref establishing a debt service reserve for the Series 2002 Bonds, and paying printing, underwriting, 10-32371.04 legal and other expenses incidental to the issuance of the Series 2002 Bonds, such Series 2002 Y Bonds to be payable solely from and secured by a pledge of the net revenues of the System on a junior and subordinate basis to the pledge of System net revenues securing the Series 1999 Bonds; and WHEREAS, the City has further determined to enter into this Indenture to authorize the issuance of and to secure the Series 2002 Bonds by granting to the Trustee a pledge and assignment of the interests and other rights herein contained, and certain funds created hereby; and WHEREAS, the Series 2002 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) upon compliance with certain conditions set forth herein; and WHEREAS, the execution and delivery of this Indenture and the issuance of the Series 2002 Bonds have been in all respects duly and validly confirmed, authorized and approved by Ordinance No. 4381, adopted and approved by the City Council of the City on March 19, 2002; and WHEREAS, all things necessary to make the Series 2002 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 Net Revenues (hereinafter defined) to the payment of the principal of, premium, if any, and interest on the Series 2002 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 2002 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 Financial Guaranty Insurance Policy (hereinafter defined) by Ambac Assurance (hereinafter defined), and of the purchase and acceptance of the Series 2002 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 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 2002 Bonds and all Additional Bonds (hereinafter __.--define4ac�-ording--to-their-tener--and-e-ffeet,-*we e the-re4mbursementto Ambac-Assurance 4 - all amounts reimbursable pursuant to the Financial Guaranty Insurance Policy, and to secure the performance and observance by the City of all the covenants expressed or implied herein and in the Bonds, 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, 10-32371.04 for the securing of the performance of the obligations of the City hereinafter set forth the following: Subject only to (i) the prior pledge thereof and lien thereon securing the Series 1999 Bonds and (ii) the provisions of this Indenture permitting the application thereof for the purposes and on the terms and conditions set forth herein, the Net Revenues (hereinafter defined), including particularly the moneys in and pledged to the Bond Fund (hereinafter defined) and the Debt Service Reserve Fund (hereinafter defined) established by this Indenture, including the investment earnings thereon, if any. All moneys, securities and obligations from time to time held by the Trustee under the terms of this Indenture (except for moneys, securities or obligations deposited with or paid to the Trustee for the redemption or payment of Bonds which are deemed to have been paid in accordance with Article VIII hereof), and any and all real and personal property, 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 an and all such properties, rights and interests at an time and at all times and to hold .. Y P PY and apply the same subject to the terms hereof. 3. Arkansas Code Annotated Section 14-164-412 provides that the Indenture may state the nature and extent of any lien on the System securing the Bonds and, therefore, proceeding under that authorization, it is hereby determined and stated that: Subject to the conditions and covenants hereinafter set forth, the owners of the Bonds shall not have a foreclosable lien on the System but shall have a lien to the full extent necessary to protect the rights for or pertaining to Trustee receivership and mandamus and the other covenants, rights, priorities and remedies set forth in this Indenture with respect to the System, including particularly Article IX hereof. As provided herein, except for Permitted Encumbrances (hereinafter defined), the City cannot confer a lien, pledge or right on the System which would, or could, result in any person obtaining a prior lien, pledge or right on the System or the Net Revenues, or a lien, pledge or right ranking on a parity with any outstanding Bonds issued hereunder except in accordance with the provisions of this Indenture pertaining to Additional Bonds (hereinafter defined) and except for the prior pledge and lien securing the Series 1999 - Bonds-.-- TO HAVE AND TO HOLD all the same with all privileges and appurtenances hereby ��r;; conveyed and assigned, or agreed or intended so to be, to the Trustee and its successors in said L ;= trusts and to them and their assigns forever; 10-32371.04 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 accordance with the terms and provisions hereof, and shall pay all amounts due to Ambac Assurance 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: [END OF RECITALS AND GRANTING CLAUSES] 4 10-32371.04 ARTICLE I DEFINITIONS 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: "Act" means collectively, Arkansas Code Annotated (1998 Repl. & Supp. 200 1) Sections 14-164-401 et seq., Sections 14-234-201 et seq. and Sections 14-235-201 et seq., as from time to time amended. "Additional Bonds" mean Bonds in addition to the Series 2002 Bonds which are issued under the provisions of Section 213 of this Indenture. "Ambac Assurance" means Ambac Assurance Corporation, a Wisconsin -domiciled stock insurance company. "Annual Debt Service" means, with respect to all or any particular amount of Bonds, Series 1999 Bonds or Subordinate Obligations, as the case may be, 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, Series 1999 Bonds or Subordinate Obligations or from sources other than Net Revenues. "Authorizing Ordinance" means Ordinance No. 4381, adopted by the City on March 19, 2002, which authorized the issuance of the Series 2002 Bonds pursuant to this Indenture. "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 502 of this Indenture. "Bonds" mean the Series 2002 Bonds and all Additional Bonds issued by the City pursuant to this Indenture. "Book -Entry System" means the book -entry system maintained by the Securities Depository described in Section 217 of this Indenture. "Budget" means the annual budget to be prepared and filed pursuant to Section 415 of this Indenture. "City" means the City of Fayetteville, Arkansas, a municipality and political subdivision under the laws of the State of Arkansas. V_� , 5 10-32371.04 "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 Facilities are first ready for normal continuous operation or the date upon which damaged Facilities are replaced in normal continuous operation as determined by a Qualified Engineer. "Construction Fund" means the fund by that name created and established in Section 601 of this Indenture. "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 Construction" mean all costs paid or incurred by the City in connection with acquiring, constructing and equipping of Facilities and placing of the same in operation or the reconstruction and re-equipping of damaged Facilities and replacing them in operation, including, without limitation, paying all or a portion of the interest on any series of Bonds issued for such purpose; paying into the Debt Service Reserve Fund from the proceeds of Bonds all or a portion of the amount or amounts required to make the amounts therein equal to the Reserve Requirements with respect to the particular series of Bonds being issued; paying or reimbursing the City or any fund for expenses of the City incident and properly allocable to such acquisition, construction, and equipping or reconstruction and re-equipping and the placing or replacing of the Facilities in operation; and all other expenses incident and properly allocable to the acquisition, construction, and equipping or the reconstruction and re-equipping of Facilities, the financing of the same, and the placing of the same in operation. "Costs of Issuance Fund" means the fund by that name created and established in Section 507 of this Indenture. "Debt Service" means, with respect to all or any particular amount of Bonds, Series 1999 Bonds or Subordinate Obligations, 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.Rrinci.fal pay_able_on _such.-Bonds,-Series_1999_._Bonds_anch Obll.gations,-excluding-- - amounts scheduled during such period which relate to principal which has been retired before the beginning of such period. L "Debt Service Reserve Fund" means the fund by that name created and established in Section 504 of this Indenture. 10-32371.04 P "Depository" means a national or state banking corporation or association (which may include the Trustee and any Paying Agent) which holds membership in the Federal Deposit Insurance Corporation. "Escrow Agreement" means the Escrow Deposit Agreement dated May 1, 2002, between the City and the Escrow Trustee, providing for the redemption of the Series 1994 Bonds and the Series 2000 Bonds. "1994 Escrow Fund" means the fund established under the Escrow Agreement for deposit of moneys and investment securities to be held for redemption of the Series 1994 Bonds. "2000 Escrow Fund" means the fund established under the Escrow Agreement for deposit of moneys and/or investment securities to be held for redemption of the Series 2000 Bonds. "Escrow Trustee" means Bank of Oklahoma, N.A., in its capacity as escrow trustee under the Escrow Agreement. "Event of Default" means any event of default specified in Section 901 hereof. "Facilities" mean land, buildings, structures, machinery, equipment and all related or necessary property, tangible or intangible, constituting the System, including, but not limited to, consumables, rights, easements, franchises, and common facilities (being facilities used in common by the City in the furnishing of water or sewer services) which are used or useful in the r4 collection, storage, distribution, treatment, sale or other use of water or wastewater, and to which the City has right, title or ownership, in whole or undivided part, and, if in undivided part, then to the extent of the City's right, title or ownership therein. "Financial Guaranty Insurance Policy" means the financial guaranty insurance policy issued by Ambac Assurance insuring the payment when due of the principal of and interest on the Series 2002 Bonds as provided therein. "Fiscal Year" means the 12 -month period used, at any time, by the City for accounting purposes with respect to the System, which may be the calendar year. "Government Securities" means (i) bonds, notes, certificates of indebtedness, treasury bills or other securities constituting direct obligations of, or obligations on which the full and timely payment of principal and interest is fully and unconditionally guaranteed by, the United States of America (including any such securities issued or held in book -entry form on the books of the Department of Treasury of the United States of America), and (ii) evidences of direct ownership or proportionate or individual interest in future interest or principal payments on specified direct obligations of, or obligations on which the full and timely payment of principal and interest is fully and unconditionally �aranteed_,_byLthe. United -States -_of America -which.___.. obligations are held by a bank or trust company organized and existing under the laws of the United States of America or any state thereof in the capacity of custodian in form and substance satisfactory to the Trustee. 7 10-32371.04 "Holder" or '`bondholder" or "owner of the Bonds" means the registered owner of any Bond. "Indenture" means this Trust Indenture dated as of May 1, 2002, between the City and the Trustee, pursuant to which the Bonds are issued, and any amendments and supplements hereto. "Investment Securities" means, if and to the extent the same are at the time legal for investment of funds held under this Indenture: (1) Government Securities; (2) Direct obligations of any of the following federal agencies which obligations are not fully guaranteed by the full faith and credit of the United States of America: — Senior debt obligations issued by the Federal National Mortgage Association (FNMA) or Federal Home Loan Mortgage Corporation (FHLMC). — Obligations of the Resolution Funding Corporation (REFCORP). — Senior debt obligations of the Federal Home Loan Bank System. — Senior debt obligations of other Government Sponsored Agencies approved by Ambac Assurance; (3) U.S. dollar denominated deposit accounts, federal funds and bankers' acceptances with domestic commercial banks which have a rating on their short term certificates of deposit on the date of purchase of "P-1" by Moody's and "A-1" or "A -W7 by S&P and maturing no more than 360 calendar days after the date of purchase. (Ratings on holding companies are not considered as the rating of the bank.); (4) Investments in a money market fund rated "AAAm" or "AAAm-G" or better by S&P; (5) Pre -refunded Municipal Obligations defined as follows: any bonds or other obligations of any state of the United States of America or of any agency, instrumentality or local governmental unit of any such state which are not callable at the option of the obligor prior to maturity or as to which irrevocable instructions have been given by the obligor to call on the date specified in the notice; and (A) which are rated, based on an irrevocable escrow account or fund (the "escrow"), in the highest rating category of Moody's or S&P or any successors thereto; or (B) (i) which are fully secured as to principal and interest and redemption premium, if any, by an escrow consisting only of cash or obligations .: described in paragraph A(2) above, which escrow may be applied only to the payment of such principal of and interest and redemption premium, if any, on such Obligations or other obligations on the maturity date or dates thereof 8 10-32371.04 or the specified redemption date or dates pursuant to such irrevocable instructions, as appropriate, and (ii) which escrow is sufficient, as verified by a nationally recognized independent certified public accountant, to pay principal of and interest and redemption premium, if any, on the bonds or other obligations described in this paragraph on the maturity date or dates specified in the irrevocable instructions referred to above, as appropriate; (6) Municipal obligations rated "Aaa/AAA" or general obligations of States with a rating of at least "A2/A" or higher by both Moody's and S&P. (7) Investment agreements approved in writing by Ambac Assurance (supported by appropriate opinions of counsel); and (8) Other forms of investments (including repurchase agreements) approved in writing by Ambac Assurance. "Mayor" means the person holding the office and performing the duties of the Mayor of the City. "Moody's" means Moody's Investors Service, Inc., and any successor thereto. "Net Revenues" means, for any period, Revenues less Operation and Maintenance '7 Expenses. "Operation and Maintenance Expenses" means, for any period, all ordinary and necessary expenses of operation, repair, maintenance and insuring of the System under generally accepted accounting principles, except that there shall not be included (i) any allowance for depreciation, (ii) any deposits or transfers to the credit of (a) the Bond Fund or to any fund or account created for the payment of debt service on the Series 1999 Bonds or any Subordinate Obligations, (b) the Debt Service Reserve Fund or any debt service reserve fund or account created in connection with the Series 1999 Bonds or any Subordinate Obligations, or (c) the Renewal and Replacement Fund, or (iii) any payments with respect to obligations not payable in whole or in part under any circumstances from Revenues. Operating Expenses shall specifically include obligations of the City to the Beaver Water District of Benton and Washington Counties, Arkansas. "Operation and Maintenance Fund" means the fund by that name confirmed and described in Section 502 of this Indenture. "Original Purchaser" means the first purchaser(s) of a series of Bonds from the City. "Outstanding" means, when used with reference to the Bonds, as of any particular date, the-aggregate--efafl---Bonds-authenticated-and-delivere-under-this--hrdentureexcept.---- --- (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; 9 10-32371.04 (b) Bonds deemed to be paid in accordance with Article VIII of this Indenture; and (c) Bonds in lieu of or in exchange or substitution for which other Bonds shall have been authenticated and delivered pursuant to this Indenture. Notwithstanding the provisions of (a), (b) and (c), Series 2002 Bonds, the principal of and/or interest on which has been paid by Ambac Assurance pursuant to the Financial Guaranty Insurance Policy, shall be deemed to remain Outstanding for all purposes. "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. "Permitted Encumbrances" mean (i) any mortgage lien for the security of the Bonds or the Series 1999 Bonds; (ii) liens for taxes, assessments and other governmental charges not then delinquent or which can be paid without penalty, (iii) unfiled, inchoate mechanics' and materialmen's liens, (iv) workmen's, repairmen's, warehousemen's, and carriers' liens and others similar liens, if any, arising in the ordinary course of business, and (v) any easements, f restrictions, mineral, oil, gas and mining rights and reservations, zoning laws and defects in title or other encumbrances to which Facilities may be subject because of their acquisition, construction and installation as part of the System. "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.. "Qualified Accountant" means an independent certified public accountant or firm of independent certified public accountants not in the regular employ of the City. "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, Inc., Standard & Poor's Ratings Services, a Division of The McGraw-Hill Companies, Inc., or Fitch, Inc., and their respective successor 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 Section 508 of tfiis Irid-eriture. -- - - - -- ---" -- - --......- - -- "Record Date" means with respect to any interest payment date of the Bonds. the first day of the calendar month in which such interest payment date falls. 10 10-32371.04 "Renewal and Replacement Fund" means the fund by that name confirmed and described in Section 505 of this Indenture. "Reserve Requirement" means, at any particular time, an amount equal to 50% of the aggregate maximum Annual Debt Service in any Fiscal Year thereafter with respect to Outstanding Bonds of all series. "Revenue Fund" means the fund by that name confirmed and described in Section 501 of this Indenture. "Revenues" means all fees, tolls, rates, rentals and charges levied and collected in connection with, and all other income and receipts of whatever kind or character derived by the City from, the operation of the System. Revenues shall specifically include, but shall not be limited to, revenues from water sales, sewer service charges, fire protection charges and interest income on Revenue Fund balances. Notwithstanding the foregoing, Revenues shall not include acreage, connection, front -footage, tap -on, assessment and similar fees, charges, contributions or grants derived by the City in connection with the provision of or payment for capital improvements constituting a part of the System. "S&P" means Standard & Poor's Ratings Services, a Division of The McGraw-Hill Companies, Inc., and any successor thereto. "Securities Depository" means The Depository Trust Company, New York, New York, or its nominee, and its successors and assigns. "Series 1994 Bonds" means City of Fayetteville, Arkansas Water and Sewer System Revenue Bonds, Series 1994, issued in the original aggregate principal amount of $5,500,000, to be refunded with the proceeds of the Series 2002A Bonds. "Series 1999 Bonds" means City of Fayetteville, Arkansas Water and Sewer System Refunding Revenue Bonds, Series 1999, issued in the original aggregate principal amount of $8,365,000. "Series 2000 Bonds" means City of Fayetteville, Arkansas Water and Sewer System Subordinate Revenue Bonds, Series 2000, issued in the original aggregate principal amount of $10,000,000, to be refunded with the proceeds of the Series 2002B Bonds. "Series 2002 Bonds" means, collectively, the Series 2002A Bonds and the Series 2002B Bonds. "Series 2002A Bonds" means one of the initial series of Bonds being issued under and secured by this Indenture in the aggregate principal -amount of $2,730,000 for the purpose of -- - --- ----------- - - refunding the Series 1994 Bonds. "Series 2002B Bonds" means one of the initial series of Bonds being issued under and secured by this Indenture in the aggregate principal amount of $6,540,000 for the purpose of refunding the Series 2000 Bonds. 10-32371.04 M "Subordinate Obligations" mean debt obligations of the City secured by a pledge of Net Revenues that is subordinate to the lien thereon securing the payment of the Bonds and the Series 1999 Bonds, permitted by the provisions of Section 215 of this Indenture. "System" means the City's combined water and sewer utility system. "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. "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 Bank of Oklahoma, N.A., Tulsa, Oklahoma. "Trust Estate" means the property described in the granting clauses of this Indenture. 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 II THE BONDS Section 201. Security for the Bonds. 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 (including the Net Revenues), which Trust Estate shall be, and the same hereby is, pledged and charged to such payment in accordance with the provisions of this Indenture, and 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 taxing powers of the City. The Bonds shall be secured by such pledge and charge and by a lien on the Net Revenues and by the trusts and assignments herein made or made pursuant hereto, all in accordance with and subject to the conditions and provisions of this Indenture. This pledge, charge and lien shall be inferior and subordinate to the pledge, charge and lien on the Net Revenues securing the Series 1999 Bonds and such pledge, charge and lien shall not prevent the application of such pledged moneys and revenues for the purposes and on the terms set forth in this Indenture. The pledge, charge, lien, trusts and assigiments made herein and -hereb shall be valid_._and-binding, and shall be deemed continuously perfected from the time of issuance of the Series 2002 Bonds, and the Net Revenues 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, L and such pledge, charge, lien, trust and assignment shall be valid and binding as against all 12 10-32371.04 parties having claims of any kind in tort, contract or otherwise against the City, irrespective of whether such parties have notice thereof. 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. No Bonds may be issued under the provisions of this Indenture except in accordance with this Article II. Section 202. Authorized Amount of 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 is hereby expressly limited to $9,270,000, except as provided in Section 210 and Section 213 hereof. Section 203. Details of Series 2002 Bonds. (a) The Series 2002A Bonds (i) shall be designated "City of Fayetteville, Arkansas Water and Sewer System Refunding Revenue Bonds, Series 2002A," (ii) shall be in the aggregate principal amount of $2,730,000, (iii) shall be dated as of May 1, 2002, (iv) shall bear interest from such date at the rates hereinafter provided until paid, payable semiannually on February 15 and August 15 of each year, commencing August 15, 2002, (v) shall be issued in denominations of $5,000 each, or any integral multiple thereof, (vi) shall be numbered from R02A-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 August 15 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 2002A Bonds: Year (August 15) Principal Amount Interest Rate 2002 $ 85,000 2.00% 2003 410,000 2.35 2004 420,000 3.00 2005 430,000 3.35 2006 445,000 3.60 2007 460,000 3.90 2008 480,000 4.05 (b) The Series 2002B Bonds (i) shall be designated "City of Fayetteville, Arkansas Water and Sewer System Refunding Revenue Bonds, Series 2002B," (ii) shall be in the aggregate principal amount of $6,540,000, (iii) shall be dated as of May 1, 2002, (iv) shall bear interest from such date at the rates hereinafter provided until paid, payable semiannually on February 15 and August 15 of each year commencing August 15, 2002, (v) shall be issued in denominations of $5,000 each, or_anX-integral-_multipl�thexea-�vi�shal) be—numbered frorrr-- R02B-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 August 15 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 2002B Bonds: 13 10-32371.01 ' Year (August 15) Principal Amount Interest Rate 2002 $605,000 2.00% 2003 25,000 2.35 2004 25,000 3.00 2005 30,000 3.35 2006 30,000 3.60 2007 35,000 3.90 2008 35,000 4.05 2009 535,000 4.15 2010 555,000 4.30 2011 58000 4.45 2012 605,000 4.55 2013 635,000 4.65 2014 660,000 4.75 2015 695,000 4.85 2016 725,000 4.90 2017 765,000 4.95 Section 204. Form. The Series 2002 Bonds shall be issued as registered Bonds without ^' coupons. The Series 2002A 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. The Series 2002B Bonds and the Trustee's certificate of authentication to be endorsed thereon shall be in substantially the form set forth in Exhibit B 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. All payments shall be made in lawful money of the United States of America. 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 14 10-32371.01 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. [RESERVED] Section 208. Authentication. Only such Bonds as shall have endorsed thereon a certificate of authentication substantially in the form set forth in Exhibit A and Exhibit B 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 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 209. 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 original purchaser or purchasers thereof as may be directed in this Section 209, in Section 213 hereof or in any supplemental indenture. (1) Prior to the delivery or original issuance by the Trustee of any authenticated Bonds of any series, there shall be delivered to the Trustee: (a) 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; (b) A written order to the Trustee by the City to authenticate and deliver the Bonds to the original purchaser or purchasers thereof upon payment to the Trustee, but for the account of the City, of a sum specified in such order plus accrued interest thereon, if any, to the date of delivery; (c) A copy, duly certified by the City Clerk, of the proceedings of the City authorizing the issuance of the Bonds; (d) A written opinion of Bond Counsel approving the legality of the Bonds; (e) 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_cointaine-d.in-.thislndent re.------- - --- and (ii) the City is current as to all required deposits at that time in all the funds 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 15 10-32371.01 provided in the supplemental indenture authorizing the issuance thereof, the City will not be in default or will be current thereafter; and (f) 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 1999 Bonds, the Series 2002 Bonds and any Additional Bonds theretofore issued will not be adversely affected by the issuance of the Additional Bonds being issued. (2) Simultaneously with the delivery of the Series 2002A Bonds, the Trustee shall apply the proceeds thereof as follows: (a) The amount, if any, received as accrued interest on the Series 2002A Bonds shall be deposited in the Bond Fund; (b) An amount equal to $118,276.44, the proportionate share of the Reserve Requirement, shall be deposited in the Debt Service Reserve Fund; (c) An amount equal to $2,543,741.80 shall be transferred to the Escrow Trustee to be held in the 1994 Escrow Fund for redemption of Series 1994 Bonds; (d) An amount equal to $7,203.54 shall be paid to Ambac Assurance as a proportionate share of the premium for the Financial Guaranty Insurance Policy; (e) An amount equal to $23,560.00 shall be deposited in the Costs of Issuance Fund for payment of Costs of Issuance pursuant to the written direction of the City; and (f) The balance of said proceeds in the amount of $4,458.22 shall be deposited in the Bond Fund. (3) Simultaneously with the delivery of the Series 2002B Bonds, the Trustee shall apply the proceeds thereof as follows: (a) The amount, if any, received as accrued interest on the Series 2002B Bonds shall be deposited in the Bond Fund; (b) An amount equal to $283,343.56, the proportionate share of the Reserve Requirement, shall be deposited in the Debt Service Reserve Fund; (c) An amount equal to $6,098,650.35 shall be transferred to the Escrow Trustee to be held in the 2000 Escrow Fund for redemption of the Series 2000 Bonds; (d) An amount equal to $22,517.34 shall be paid to Ambac Assurance as a - - - - - proporti-onate-share--ofthe-premium-for the- Financial -Guaranty Insurance Policy; - -- - - -- (e) An amount equal to $56,440.00 shall be deposited in the Costs of Issuance Fund for payment of Costs of Issuance pursuant to the written direction of the City; and 16 10-32371.04 (f) The balance of said proceeds in the amount of $568.75 shall be deposited in the Bond Fund. Section 210. 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 210, 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 211. 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 i? 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 'r 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 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 wi le "corres "oridiri matunties.---T�- Cit - sfiall execute and the Trustee shall -*----- authenticate g----- — y 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. 17 10-3237 1.04 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. ;N Section 212. 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, 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 213. Additional Bonds. The City may issue from time to time one or more series of Additional Bonds for the purpose of (i) financing Costs of Construction in connection with the acquisition, construction or equipping of Facilities, (ii) refunding the Series 1999 Bonds, the Series 2002 Bonds or any series of Additional Bonds or Subordinate Obligations, in whole or in part, or (iii) any combination thereof. Additional Bonds shall be secured equally and ratably with the Series 2002 Bonds and any other series of Additional Bonds theretofore issued and then Outstanding, except insofar as any terms or conditions of redemption or purchase established ---uri er thisIndenture"may afford additional benef or security dor the Bonds of any particular series. Before any Additional Bonds are authenticated, there shall be delivered to the Trustee the items required for the issuance of Bonds by Section 209 hereof, plus a statement by a Qualified `-. Accountant reciting the opinion, based upon necessary investigation, that the Net Revenues of the System .for the Fiscal Year immediately preceding the Fiscal Year in which such Additional 18 10-32371.04 Bonds are to be issued were not less than (i) 130% of the average Annual Debt Service on all then outstanding Bonds, Series 1999 Bonds and Subordinate Obligations, plus the Additional Bonds then proposed to be issued, (ii) the amount, if any, needed to make required deposits to the Debt Service Reserve Fund and any debt service reserve funds with respect to the Series 1999 Bonds and Subordinate Obligations, and (iii) the amount, if any, needed to make required deposits to the Renewal and Replacement Fund. If any changes have been made, and are in effect on the date of issuance of the Additional Bonds, in any rates and charges imposed by the City for System services which were not in effect during the entire preceding Fiscal Year, the Qualified Accountant may, if such changes resulted in increases in such rates and charges, and shall, if such changes resulted in reductions in such rates and changes, adjust the Net Revenues for the preceding Fiscal Year to reflect any changes in such Net Revenues which would have occurred if the changed rates and changes had been in effect during the entire preceding Fiscal Year. Notwithstanding anything herein to the contrary, no Additional Bonds shall be issued unless there is no default at the time of issuance under this Indenture. Section 214. Superior Obligations Prohibited. Except to the extent permitted in Section 213 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 Revenues or Net Revenues 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 Revenues or Net Revenues 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 Revenues and the Revenue Fund into the Bond Fund and Debt Service Reserve Fund or from said Bond Fund and Debt Service Reserve Fund for the payment of the Bonds. The City hereby specifically covenants not to issue any additional indebtedness secured on a parity basis with the Series 1999 Bonds. Section 215. Subordinate Obligations. Nothing in this Indenture shall prevent the City from authorizing and issuing bonds, notes, bond anticipation notes, warrants, certificates or other obligations or evidences of indebtedness, the payment of the principal of and premium, if any, and interest on which shall be made from Revenues or Net Revenues or from a special fund to be established and maintained from Revenues or Net Revenues, provided payments from Revenues or Net Revenues or from Revenues or Net Revenues into such special fund, and the lien and charge on such Revenues or Net Revenues, shall be made junior and subordinate to the lien, pledge and charge created herein for the security and payment of the Bonds and other payments under this Indenture, including, without limitation, the following payments out of Revenues - s eciBecf r- this lrideriture i a -merits of Cf eratiori ancT 1Glaintenance Expenses; (ii) payments P Y (�P Y P P �( )P Y into the Bond Fund; (iii) payments into the Debt Service Reserve Fund; and (iv) payments into the Renewal and Replacement Fund. 19 10-32371.04 Notwithstanding anything herein to the contrary, no Subordinate Obligations shall be issued unless there is no default at the time of issuance under this Indenture. Section 216. 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 217. 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 217. 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 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 "- fransfeis-- In sucFi event; all reerences 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 Y' 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 ?0 10-32371.04 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 Series 2002 Bonds. The Series 2002 Bonds shall be subject to redemption prior to maturity as follows: (a) The Series 2002A Bonds shall not be subject to redemption prior to maturity. (b) The Series 2002B Bonds are subject to redemption prior to maturity, at the option of the City, on and after August 15, 2012, in whole at any time or in part in inverse order of maturity (and selected by the Trustee by lot within a maturity) on any interest payment date, from funds from any source, at a redemption price of 100% of the principal amount of the Series 2002B Bonds 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,_th-e..sole-_registered_.awner-of the --Bonds- hay- an), other -means acceptable-to,-the--Seeurities- 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 21 10-32371.04 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 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 r.; subject to optional, extraordinary and mandatory sinking fund redemption, in whole or in part, in -.:v.:. such manner, at such times and at such prices as may be provided in the Supplemental Indenture providing for their issuance. 10-32371.04 L 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. 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 the Act, to issue the Bonds authorized hereby and to execute this Indenture and to make the pledge of Net Revenues 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. The City covenants that it will do, execute, acknowledge and deliver or cause to be done, executed, acknowledged and delivered such indenture or indentures supplemental hereto and such further acts, instruments and transfers as the Trustee may reasonably require for the better assuring, transferring, mortgaging, pledging, assigning and confirming unto the Trustee of the Trust Estate. 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 m eiesrcreaued-y this 1n enfiire -------.- Section 405. Inspection of Books. All books and documents in the possession of the City relating to the System and the Revenues shall at all reasonable times be open to inspection 10-32371.04 by such accountants or other agencies as the Trustee may from time to time designate and by any Qualified Engineer and the Qualified Accountant required pursuant to the provisions hereof. 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. Rates and Charges. The rates charged for services of the System heretofore fixed by ordinances of the City and the conditions, rights and obligations pertaining thereto, as set forth in said ordinances, are ratified, confirmed and continued by the Authorizing Ordinance. The City covenants that rates for System services will never be reduced while any of the Bonds are Outstanding unless there is obtained from a Qualified Accountant a certificate to the effect that Net Revenues, with the reduced rates, in the current Fiscal Year will be at least equal to (i) 125% of the average Annual Debt Service on all Bonds, Series 1999 Bonds and F Subordinate Obligations, (ii) the amount, if any, needed to make required deposits to the Debt - Service Reserve Fund and any debt service reserve funds with respect to the Series 1999 Bonds and Subordinate Obligations, and (iii) the amount, if any, needed to make required deposits to the Renewal and Replacement Fund. The City further covenants that the rates for System services shall, if and when necessary, from time to time, be increased in such manner as will produce Net Revenues at least equal to (i) 125% of the current Annual Debt Service on all Bonds, Series 1999 Bonds and Subordinate Obligations, (ii) the amount, if any, needed to make required deposits to the Debt Service Reserve Fund and any debt service reserve funds with respect to the Series 1999 Bonds and Subordinate Obligations, and (iii) the amount, if any, needed to make required deposits to the Renewal and Replacement Fund. Section 408. Taxes, Charges and Assessments. The City covenants that it will promptly pay all lawful taxes, charges, assessments, imposts and governmental charges at any time levied or assessed upon or against the System, its Revenues or any part thereof; provided, however, that nothing contained in this Section 408 shall require the City to cause to be paid any such taxes, assessments, imposts or charges so long as the validity thereof is being contested in good faith and by appropriate legal proceedings. Section 409. Construction of Facilities; Certification of Completion Date. The City -- - - - covenants --that- irr_tlre--cthatof each s i ies- o Addi ar Bonds issued- to finance Costs of -- Construction in connection with the acquisition, construction or equipping of Facilities, it will forthwith proceed to acquire, construct and equip the Facilities for which the Bonds of such series shall be issued, in accordance with applicable plans and specifications and in conformity with law and all requirements of all governmental authorities having jurisdiction thereover, and 24 10-32371.04 ` that it will complete the acquiring, constructing and equipping of such Facilities with all expedition practicable. Promptly after the 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 Facilities have been completed and the Costs of Construction have been paid, except for any Costs of Construction 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 retain specified amounts of moneys in specified accounts within the Construction 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 410. Encumbrances. The City covenants that it will not create or suffer to be created any lien or charge upon the System or any part thereof (other than Permitted Encumbrances) or upon the Revenues, except in accordance with the provisions of this Indenture, and that, from Revenues, it will pay or cause to be discharged, or will make adequate provision to satisfy and discharge, within ninety (90) days after the same shall accrue, all lawful claims and demands for labor, materials, supplies or other objects which, if unpaid, might by law become a lien upon the System or any part thereof or upon the Revenues; provided, however, that nothing in this Section 410 contained shall require the City to pay or cause to be discharged, or make provision for, any such lien or charge so long as the validity thereof shall be contested in good faith and by appropriate legal proceedings. Section 411. Insurance. The City covenants and agrees to insure and at all times keep insured, in the amount of the actual value thereof, by a responsible insurance company or companies authorized and qualified under the laws of the State of Arkansas to assume the risk thereof, all properties of the System, other than water storage tanks, mains and lines for the transmission, distribution or collection of water or wastewater, against loss or damage from fire, lightning, tornado, winds, strike, malicious damage or explosion and against loss or damage from any other causes customarily insured against by private companies engaged in a similar type of business. In the event of loss, the proceeds of such insurance shall be applied solely toward the reconstruction, replacement or repair of the System, and in such event the City shall, with reasonable promptness, cause to be commenced and completed the reconstruction, replacement and repair work. If such proceeds are more than sufficient for such purposes, the balance remaining shall be deposited to the credit of the Bond Fund and the bond funds for the Series 1999 Bonds, pro rata, in relation to the then outstanding principal amounts of the Bonds and the Series 1999 Bonds, and, if such proceeds shall be insufficient for such purposes, the deficiency shall be supplied, first, from moneys in the Renewal and Replacement Fund and, second, from any available moneys in the Revenue Fund pursuant to Section 506 hereof. Section 412. Damage or Destruction; Condemnation. The City covenants and agrees that in the event of damage to or destruction of the System, or if all or any part of the System sEdirbe taken under the exercise of eminent domain, it will immediately notify the Trustee. All insurance money paid or net amounts awarded shall be paid to the City, and the City shall proceed to restore, repair, replace or rebuild the Facilities of the System as nearly as % possible to the condition they were in immediately prior to such damage or condemnation, to the 25 10-3237 1.04 extent that the same may be feasible, subject to such alterations as the City may elect to make. If the insurance money or net amounts awarded shall be insufficient to pay all costs of the restoration, the City shall pay the deficiency and shall nevertheless proceed to complete the restoration and pay the cost thereof. Any balance of the insurance or condemnation proceeds remaining over and above the cost of the restoration shall be deposited into the Revenue Fund. The City's obligations to make all payments set forth herein and to perform all other covenants and agreements on its part to be performed shall not be affected by any such damage or destruction or condemnation. Notwithstanding the foregoing provisions of this Section 412, the City shall not be required to repair, restore, replace or rebuild the Facilities of the System, or any part thereof, if the City shall elect to redeem prior to maturity on the next possible redemption date all of the Bonds and Series 1999 Bonds then Outstanding, together with accrued interest to the redemption date, and to pay all charges, fees and expenses necessarily incurred and required to be incurred in connection with such redemption, and all other amounts then owing by the City. In that event, the proceeds of all insurance or condemnation awards shall be placed in and become part of the Bond Fund and any bond fund for the Series 1999 Bonds. If there be any deficiency in the moneys on deposit in the Bond Fund after the deposit of all such proceeds, the City shall immediately deposit therein the amount of the deficiency. Section 413. Revenues To Be Used As Provided In Indenture. The City covenants that no Revenues will be used for any purpose other than as provided in this Indenture, and that no contract or contracts will be entered into or any action taken by which the rights of the Trustee or of the bondholders might be impaired or diminished. The City further covenants that it will adopt such resolutions and such rules and regulations as may be necessary or appropriate to carry out the obligations of the City under the provisions of this Indenture and the Act. Section 414. Accounting; Reports. The City covenants that it will keep the funds and accounts of the System separate from all other funds and accounts of the City, and that it will keep accurate records of all items of cost and of all expenditures relating to the System, and of the collection and application of Revenues, in accordance with generally accepted accounting principles. Such records and accounts shall be open to inspection by the Trustee under reasonable circumstances. The City further covenants that at the end of each Fiscal Year it will cause an audit to be made of the books and accounts for that Fiscal Year pertaining to the System by a Qualified Accountant. Costs of such audits so incurred shall be considered Operation and Maintenance Expenses. Section 415. Annual Budget. The City shall prepare an annual Budget for System -- - - operations--for-ewh-lYiscal- Yeaf:-- A.eopy--of each- Burdget-shall-be--fi-fed-with- the- Trustee - and- a - copy shall be maintained in the office of the Administrative Services Director of the City. r Section 416. Operation and Maintenance of System; Disposition of System Assets. The City covenants that it will continuously operate the System in a diligent fashion in 26 10-32371.0.1 accordance with prudent utility practice and as a revenue-producing undertaking in compliance with all applicable laws and regulations and all the covenants and obligations under this Indenture. The City further covenants that it will maintain the System in sound condition and repair, that it will not sell or otherwise dispose of any property necessary to the proper operation of the System or to the maintenance of Revenues, and that it will not enter into any lease or agreement which will impair or impede the operation of the System or adversely affect the rights of the bondholders. Section 417. 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 or 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 417. For purposes of this Section 417, `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 i intermediaries) or (b) is treated as the owner of Bonds for federal income tax purposes. Section 418. Security for the Bonds. (a) This Indenture creates a valid and binding pledge and assignment of and security interest in the Net Revenues in favor of the Trustee as security for payment of the Bonds, enforceable by the Trustee in accordance with the terms hereof. (b) Under the laws of the State of Arkansas, such pledge, assignment and security interest, and each pledge, assignment and security interest in the Net Revenues made to secure the Series 1999 Bonds, is and shall be prior to any judicial lien hereafter imposed on the Net Revenues to enforce a judgment against the City on a simple contract. By the date of issue of the Series 2002 Bonds, the City will have filed all financing statements describing, and transferring such possession or control over, such collateral (and for so long as any Bond is Outstanding, the City will file, continue and amend all such financing statements, if any, and transfer such possession and control) as may be necessary to establish and maintain such priority in each jurisdiction in which the City is organized or in which such collateral may be located or that may otherwise be applicable pursuant to Article 9 of the Uniform Commercial Code as enacted in the State of Arkansas. (c)--- --- --The-C- i�-as-not ore rna-de-a pteclg—e o ,--gr-ahTed a renori of security- interest in, or made an assignment or sale of the Net Revenues that ranks on a parity with or prior to the pledge, assignment and security interest granted hereby, except for the pledge, assignment and P`" := security interest granted to secure the Series 1999 Bonds. The City shall not hereafter make or -' suffer to exist any pledge or assignment of, lien on, or security interest in the Net Revenues that 27 10-32371.04 ranks prior to or on a parity with the pledge, assignment and security interest granted hereby, or file any financing statement describing any such pledge, assignment, Iien or security interest, except as expressly permitted hereby. ARTICLE V FUNDS AND DEPOSITS Section 501. Revenue Fund. (a) There is hereby confirmed and continued a special fund in the name of the City, designated as the "Revenue Fund" (the "Revenue Fund"), created by Ordinance No. 3638 of the City, adopted August 18, 1992. (b) All Revenues shall, as and when received, be deposited into the Revenue Fund. All moneys at any time in the Revenue Fund shall be applied to the payment of Operation and Maintenance Expenses of the System, the payment of Annual Debt Service on the Bonds, the Series 1999 Bonds, and any Subordinate Obligations, the maintenance of the Debt Service Reserve Fund and any debt service reserve fund for the Series 1999 Bonds and any Subordinate Obligations, and the providing of the Renewal and Replacement Fund, in the order, at the times and in the amounts set forth below. Section 502. Operation and Maintenance Fund. (a) There is hereby confirmed and continued a special fund in the name of the City, designated "Operation and Maintenance Fund" (the "Operation and Maintenance Fund"), created by Ordinance No. 3638 of the City, adopted August 18, 1992. (b) Prior to making the required payments into the bond funds and debt service reserve funds with respect to the Series 1999 Bonds, into the Bond Fund and Debt Service Reserve Fund, into the bond funds and debt service reserve funds for any Subordinate Obligations, and into the Renewal and Replacement Fund, there shall be paid from the Revenue Fund into the Operation and Maintenance Fund, not later than the fifth business day preceding the fifteenth day in each month while any of the Bonds shall be Outstanding, an amount sufficient 'to cause amounts on deposit therein to equal projected Operation and Maintenance Expenses for the next two succeeding months (as shown by the Budget of proposed Operation and Maintenance Expenses for the then current Fiscal Year) and from which disbursements shall be made only for those purposes. Fixed annual charges such as insurance premiums and the cost of major repair and maintenance expenses may be computed and set up on an annual basis, and 1/12 of the amount thereof may be paid into the Operation and Maintenance Fund each month. (c) If in any month for any reason there shall be a failure to transfer and pay the required amount into the Operation and Maintenance Fund, the amount of any deficiency shall - - be -added- to- the--am-eunt-Otherwise--required- to- be--transferred-and paid-into--the--Operation- arrd---- Maintenance Fund in the next succeeding month. -_ Section 503. Bond Fund. (a) There is hereby created and ordered established with the Trustee a special fund, in the name of the City, to be designated "Water and Sewer System Revenue Bond Fund" (the "Bond Fund"). NM 10-3237 1.04 (b) Immediately following the making of the required deposits into the Operation and ok Maintenance Fund and into the bond funds and debt service reserve funds with respect to the Series 1999 Bonds, there shall be paid from the Revenue Fund into the Bond Fund, beginning on the fifth business day preceding the fifteenth day of the first month following delivery of the Series 2002 Bonds (unless delivery of the Series 2002 Bonds occurs on or prior to the fifth business day preceding the fifteenth day in a given month, in which case the date of commencement shall be the fifth business day preceding the fifteenth day of the month of delivery of the Series 2002 Bonds), and continuing not later than the fifth business day preceding the fifteenth day of each month thereafter until all outstanding Bonds with interest thereon have been paid in full, or provision made for such payment, a sum equal to (i) 1/6 of the installment of interest coming due on the Bonds (whether at maturity, upon mandatory redemption, or otherwise) during the then next six (6) months, and (ii) 1/12 of the installment of principal coming due on the Bonds (whether at maturity, upon mandatory redemption, or otherwise) during the then next twelve (12) months, (provided, however, that the first payments hereunder into the Bond Fund with respect to a series of Bonds shall be prorated from the date of issuance of such series of Bonds and subsequent payment obligations shall be reduced to the extent of investment earnings and other moneys credited to the Bond Fund from sources other than monthly payments). All moneys in the Bond Fund shall be used solely for the purpose of paying Annual Debt Service on the Bonds or for any redemption of the Bonds, except as herein specifically provided. The Trustee shall withdraw from the Bond Fund, on the date of any principal or interest payment, an amount equal to the amount of such payment for the sole purpose of paying the same, which direction the Trustee hereby accepts. c If the Revenues are insufficient to make the required payment into the Bond Fund, O Y 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 the fifth business day preceding the fifteenth day of the next succeeding month. (d) When the moneys held in the Bond Fund and the Debt Service Reserve Fund shall be and remain sufficient to pay in full the principal of and premium, if any, and interest on all Bonds then Outstanding, there shall be no obligation to make further payments into the Bond Fund. Section 504. Debt Service Reserve Fund. (a) There is hereby created and ordered established with the Trustee a special fund, in the name of the City, to be designated "Water and Sewer System Revenue Bond Debt Service Reserve Fund" (the "Debt Service Reserve Fund"). (b) Except as provided below, from the proceeds of sale of each series of Bonds there shall be deposited into the Debt Service Reserve Fund that amount which, together with the amounts then on deposit therein, will be equal to the Reserve Requirement with respect to all Outstanding Bonds. If the amount in the Debt Service Reserve Fund is reduced below the Reserve ,. Requirement, it shall be reimbursed to the Reserve Requirement through monthly payments, beginning not later than the fifth business day preceding the fifteenth day of the month immediately following the month in which the Debt Service Reserve Fund was reduced below ?9 10-32371.01 the Reserve Requirement, and continuing not later than the fifth business day preceding the fifteenth 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 Operation and Maintenance Fund and into the Bond Fund and the bond funds and debt service reserve funds with respect to the Series 1999 Bonds), in an amount equal to 1/12 of the Reserve Requirement deficiency. If a surplus shall exist in the Debt Service Reserve Fund over and above the Reserve Requirement, such surplus shall be deposited into the Bond Fund. (c) The amount on deposit in the Debt Service Reserve Fund (i) shall be used to the extent necessary to prevent a default in the payment of Annual Debt Service on the Bonds and Trustee's and Paying Agent's fees and (ii) 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 Outstanding Bonds. Section 505. Renewal and Replacement Fund. (a) There is hereby confirmed and continued a special fund in the name of the City, designated "Renewal and Replacement Fund" (the "Renewal and Replacement Fund"), created by Ordinance No. 3638 of the City, adopted August 18, 1992. (b) After making the required payments into the Operation and Maintenance Fund, into the bond fund and debt service reserve fund with respect to the Series 1999 Bonds, into the _., Bond Fund and the Debt Service Reserve Fund, and into the bond funds and debt service reserve funds with respect to any Subordinate Obligations, there shall be paid from the Revenue Fund v into the Renewal and Replacement Fund not later than the fifth business day preceding the fifteenth day of each month while any of the Bonds are Outstanding, an amount sufficient to cause the amount on deposit therein to equal $300,000 or such greater amount as the City may determine from time to time is appropriate, provided that the amount to be deposited in any month need not exceed 1/12 of the amount then required to be on deposit therein. The moneys in the Renewal and Replacement Fund shall be used solely for the purpose of paying the costs of necessary repairs or replacements due to depreciation of the System and not paid for with moneys in the Operation and Maintenance Fund and costs of damage caused to the System by unforeseen catastrophes. Section 506. Surplus. Any surplus in the Revenue Fund after making all disbursements and providing for all funds described above may be used, at the option of the City, for any lawful purpose. Section 507. Costs of Issuance Fund. (a) There is hereby created and ordered to be established with the Trustee, a special fund, in the name of the City, to be designated "Water and Sewer System Revenue Bond Costs of Issuance Fund" (the "Costs of Issuance Fund"). -- - -_ - (b)_. _ _That-portiorr of the-proceeds-fronr the--issuarm -acrd- sate of -a series -of BUn— ds as shall be specified in Section 209 hereof and such other amounts as shall be delivered by the City for deposit therein shall be deposited into the Costs of Issuance Fund. �F L 30 10-32371.04 (c) Moneys at any time held in the Costs of Issuance Fund shall be used for and applied solely to pay costs of issuance of the Bonds, including consultants, Iegal and financial advisory fees and expenses. (d) Payments from the Costs of Issuance Fund shall be made by the Trustee, upon receipt of written authorization, signed by the Mayor or Administrative Services Director of the City. Upon receipt of each such authorization, the Trustee shall pay each such item directly to the person or party entitled thereto as named in such authorization, or, if directed by the City, shall deliver to the City a check, draft or warrant in an amount sufficient for the payment thereof. (e) Upon delivery of a certificate of the Mayor or Administrative Services Director of the City stating that all costs of issuance of the series of Bonds from which moneys in the Costs of Issuance Fund was derived have been paid, the Trustee shall transfer the balance of moneys in the Costs of Issuance Fund to the Bond Fund for use in payment of interest on the related series of Bonds on the next interest payment date and the Costs of Issuance Fund shall be closed. Section 508. Rebate Fund. (a) There is hereby created and ordered to be established with the Trustee, a special fund, in the name of the City, to be designated "Water and Sewer System Revenue Bond Rebate Fund" (the "Rebate Fund"), which fund is not pledged to the payment of any Bonds. (b) 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 Administrative Services Director of the City, shall pay to the United States out of amounts in the Rebate Fund such amounts as are required pursuant to the 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. Section 509. 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, Construction 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-eaeh 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 Revenues 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 31 10-32371.04 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 Revenues. 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. ARTICLE VI CUSTODY AND APPLICATION OF PROCEEDS OF BONDS Section 601. Creation of Construction Fund. There is hereby created and ordered to be established with the Trustee a special fund, in the name of the City, to be designated "Water and Sewer System Revenue Bond Construction Fund" (the "Construction Fund"). Section 602. Payments into Construction Fund. The proceeds from the issuance and sale of each series of Additional Bonds issued to finance the acquisition, construction or equipping of Facilities shall be deposited into the Construction Fund, except as follows: (a) There shall be deposited into the Bond Fund (i) the accrued interest, if any, on such Bonds to the date of delivery thereof paid by the Original Purchaser or Purchasers thereof, and (ii) the future interest to be paid on such Bonds from the proceeds thereof as specified in delivery instructions from the City to the Trustee on the Closing Date; (b) There shall be deposited into the Debt Service Reserve Fund the amount required by Section 504 hereof, (c) There shall be deposited in the Costs of Issuance Fund the amount specified in delivery instructions from the City to the Trustee on the Closing Date to be necessary to pay the costs of issuance of the series of Bonds issued and delivered on that date; and (d) Proceeds of Bonds issued for refunding purposes shall be deposited into a separate fund or funds with the Trustee or with another banking corporation or association to be used for such purpose as specified in delivery instructions from the City to the Trustee on the Closing Date. - ----------- Section -------- Section 603. Disbursements from Construction Fund. Moneys in the Construction Fund shall be disbursed by the Trustee to pay Costs of Construction on the basis of requisitions signed by the Mayor, the Administrative Services Director or any other person designated to the i Trustee in writing by the Mayor or the Administrative Services Director. Each requisition shall specify: 32 10-32371.04 (a) The name of the person, firm or corporation to whom payment is to be made; (b) The amount of the payment; (c) The purpose of the payment; (d) That the payment is for a proper Cost of Construction, with a copy of invoice, statement or other evidence attached as appropriate; (e) That the disbursement shall not render inaccurate any of the representations or covenants with respect thereto contained in this Indenture; and (f) That the requisition has not been the basis of any previous disbursement from the Construction Fund. The Trustee shall keep and maintain adequate records pertaining to the Construction Fund and all disbursements therefrom and shall file an accounting thereof with the City. Section 604. Balance in Construction Fund. On the applicable Completion Date, any balance then remaining in the Construction Fund (except for amounts retained by the Trustee at the City's direction for Costs of Construction not then due and payable, to remedy defects, or for seasonal completion) shall be disbursed by the Trustee in payment or reimbursement of any part of Costs of Construction not theretofore paid or reimbursed to the City. Any portion of the balance then remaining in the Construction Fund (in excess of amounts, if any, retained by the Trustee as above provided) shall be segregated by the Trustee for (a) the redemption of Bonds of the same series of Bonds from which such moneys were derived on or prior to the earliest redemption date permitted by the Indenture without a premium or penalty in accordance with the provisions of this Indenture; (b) the payment of a portion of the annual principal due on Bonds of the same series from which such moneys were derived in years before such Bonds are subject to redemption, in years when such Bonds are subject to redemption but only in an amount in excess of the unexpended proceeds of such Bonds, or in years when such Bonds are subject to redemption but a call premium or penalty is required for early redemption; provided, however, that the portion of the annual principal payment due on such Bonds that may be paid hereunder shall not exceed an amount that bears the same ratio to the annual principal due that the total unexpended proceeds of such Bonds (exclusive of investment earnings) bear to the face amount of such Bonds; or (c) any other purpose provided that the Trustee is furnished with an opinion of Bond Counsel to the effect that such use is lawful under the Act and will not adversely affect the exclusion from federal income taxes of interest on any of the Bonds. Until used for one or more of the foregoing purposes, such segregated amount may be invested as permitted by this Indenture but may not be invested, without an opinion of Bond Counsel to the effect that such _ -in-vestment-will- not. adversefy-affectthe--exzlusion-.from- federal_ income tLxe-, o€ interest on any-,rf - - the Bonds, to produce a yield greater than the yield on the Bonds, all in accordance with Section 148 of the Code and the regulations promulgated thereunder. 10-32371.04 ARTICLE VII INVESTMENTS Section 701. 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 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. The City may invest moneys held in the Revenue Fund, Operation and Maintenance Fund and Renewal and Replacement Fund in any investment obligations permitted by Arkansas law. Obligations purchased as an investment of moneys in any fund or account created by this Indenture shall be deemed at all times to be a part of such fund or account, and any income or loss due to an investment thereof shall be charged to the respective fund or account for which the investment was made except as otherwise provided in this Indenture. Investments in any fund or account shall be evaluated at least annually by the City or the Trustee, as may be appropriate. For the purpose of determining the amount in any fund or account, the City and the Trustee shall value all Investment Securities credited to such fund or account at the price at which such Investment Securities are redeemable by the holders or owners thereof at their option if so redeemable, or, if not so redeemable, at the lesser of (i) the cost of such Investment Securities minus the amortization of any premium or plus the amortization of any discount thereon and (ii) the market value of such Investment Securities, provided that Investment Securities credited to the Debt Service Reserve Fund, if not so redeemable, shall be valued at the cost thereof minus the amortization of any premium or plus the amortization of any discount thereon. Section 702. 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 City or 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 703. 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. The Trustee shall determine the fair market value based on accepted - - - -- indust-ry- standards- from accepted- industry prov-id�-—AccepTe-d--industry-prov deers -shall -- include, but are not limited to, pricing services provided by Financial Times Interactive Data ^..� Corporation, Merrill Lynch, Salamon Smith Barney, Bear Stearns or Lehman Brothers. As to certificates of deposit and bankers' acceptances, fair market value shall mean the face amount thereof, plus accrued interest thereon, and as to any other investment not specified above, fair 34 10-32371.04 market value is the value thereof as established by prior agreement among the City, the Trustee and Ambac Assurance. 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 704. Responsibility of Trustee. The Trustee shall not be responsible or liable for any toss suffered in connection with any investment of moneys made by it at the direction of the City. ARTICLE VIII DISCHARGE OF LIEN Section 801. 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 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 802. Bonds Deemed Paid. Any Bond shall be deemed to be paid within the meaning of this Article VIII 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; -cornpensatiorrane --expenses--of the -Trustee -and any Paying Agent perming iro-Ir 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. 'J 10-32371.04 Notwithstanding anything in this Indenture to the contrary, in the event that the principal and/or interest due on the Series 2002 Bonds shall be paid by Ambac Assurance pursuant to the Financial Guaranty Insurance Policy, the Series 2002 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 pledge and assignment 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 Ambac Assurance, and Ambac Assurance shall be subrogated to the rights of such registered owners. Section 803. 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 finds, 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 IX DEFAULT PROVISIONS AND REMEDIES OF TRUSTEE AND BONDHOLDERS Section 901. Events of Default. Each of the following events shall constitute and is referred to in this Indenture as an "Event of Default": (a) Default in the due and punctual payment of any interest on any Bond or Series 1999 Bond; (b) Default in the due and punctual payment of the principal of or premium, if any, on any Bond or Series 1999 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 --- -.-- -- - _ - reque-sting that -it- be --remedies shall- have- been --given- ta--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 36 10-32371.04 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; and (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. 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 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 902. 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 hereunder shall, by notice in writing delivered to the City, declare the principal of all Bonds then Outstanding, together with the interest accrued thereon, immediately due and payable, and such principal and interest shall thereupon become and be immediately due and payable. -' Section 903. 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 and if it shall have been indemnified as provided in Section 1001 hereof, the Trustee shall be obligated to exercise such one or more of the rights and powers conferred upon it by this Section 903 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,-ane, -every- such --right- and -power --may- b-ff- - - exercised from time to time and as often as may be deemed expedient. r =_ 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. 37 10-32371.04 Section 904. 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 905. 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 System and of the tolls, rents, revenues, issues, earnings, income, products and profits thereof, including, without limitation, the Trust Estate, pending such proceedings with such powers as the court making such appointment shall confer. Section 906. 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 _r 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 of Arkansas. Section 907. 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: (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 - - - -isions-of -this--Indenture) ndenture); irr tlre� 6rd-er-oftheir u-dates,-witIr-int—efesf-on -suchi- 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 38 10-32371.04 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 person 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 IX then, subject to the provisions of paragraph (b) of this Section 907, 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 907. Whenever moneys are to be applied by the Trustee pursuant to the provisions of this Section 907, 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 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 908. 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 holders of the Bonds hereby secured, and any recovery of judgment shall be for the equal benefit of the holders of the Outstanding Bonds. - - - -..--Section-909- Rights-and-Remedies--ofBondhoidem.--lam ho-l-dei-ofany-Bund-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 T� other remedy hereunder, unless a default has occurred of which the Trustee has been notified as provided in subsection (g) of Section 1001, or of which by said subsection it is deemed to have 39 10-32371.04 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 1001, nor unless the Trustee shall thereafter fail or refuse to exercise the granted, or to institute such action, suit or proceeding in its own name; and powers hereinbefore 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 ip said Bonds expressed. Section 910. 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. Section 911. 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 901 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 subseq_uent.thereon— a0 10-3237 1.04 ARTICLE X TRUSTEE AND PAYING AGENTS Section 1001. 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 1002 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 1001, 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 insuring the System or collecting any insurance moneys, 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. (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 - -- the r er- rson--arsons fin- acfiori fawn -G the Truee-ursuant fo fhis by P Pe p------ Y— Y- p - 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. 7 ti 41 10-32371.04 (e) As to the existence or nonexistence of anv 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 1001, 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 901 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) The Trustee shall not be personally liable for any debts contracted or for damages to persons or to personal property injured or damaged, or for salaries or non- fulfillment of contracts during any period in which it may be in the possession of or managing the System as in this Indenture provided. (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 System 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. (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, 42 10-32371.04 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. (1) 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 1002. Fees, Charges and Expenses of Trustee and Paying Agents; Trustee's Prior Lien. (a) Subject to subsection (b) of this Section 1002, 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. 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 this Section 1002 in accordance with a separate agreement between the City and the Trustee, 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 1001(a) hereof shall not exceed $10,000 (not including the initial acceptance fee) annually 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. Section 1003. Additional Duties of Trustee. (a) In addition to the other duties of the - firusfee cTescribed ri tTiis Tn�enture, it shall be the duty of the Trustee, on or before the tenth day of each month after the month in which the Series 2002 Bonds are delivered, to file with the City a statement setting forth in respect of the preceding calendar month: =13 10-32371.04 (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. 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 of Arkansas and the Internal Revenue Service in connection with the payment to the bondholders of interest on the Bonds. Section 1004. Notice to Bondholders of Default. If a default occurs of which the Trustee is pursuant to the provisions of Section 1001(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 1005. 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 1005 are subject to the approval of the court having jurisdiction in the premises. Section 1006. 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 company resulting from any such sale, merger, consolidation or transfer to which it is a party, _ ipso factor shall be and become _successor _trustee hu-eunder and-vested_with_all.o-f. 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 r 1 contrary notwithstanding; provided, however, that such successor trustee shall have capital and surplus of at least $20 million. 44 10-32371.04 Section 1007. 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 1008. 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 1009. 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 $20 million. Section 1010. 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. Section 1011. Reliance Upon Instruments. The resolutions, opinions, certificates and -_ other instruments provi ed r ui flus indenture may 6e 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. F",` = 6. 4-5 10-32371.04 Section 1012. 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 X 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 1013. 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. 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 16 10-32371.04 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 1001 hereof with respect to the Trustee insofar as such provisions may be applicable. ARTICLE XI SUPPLEMENTAL INDENTURES Section 1101. 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 47 10-32371.(A (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 1102 hereof and which, in the judgment of the Trustee, is not to the prejudice of the Trustee. Section 1102. Supplemental Indentures Requiring Consent of Bondholders. Subject to the terms and provisions contained in this Section, 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) deprive 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 1101 of this Article XI. 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 1102. 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 1103. Effect of Supplemental Indentures. Upon the execution of any_ supplemental indenture entered into pursuant to Section 1101 or 1102 hereof, this Indenture shall be deemed to be modified and amended in accordance therewith. 4s 10-32371.04 ARTICLE XII FINANCIAL GUARANTY INSURANCE POLICY Section 1201. Consent of Ambac Assurance. (a) Any provision of this Indenture expressly recognizing or granting rights in or to Ambac Assurance may not be amended in any manner which affects the rights of Ambac Assurance hereunder without the prior written consent of Ambac Assurance. (b) Unless otherwise provided in this Section 1201, Ambac Assurance's consent shall be required in addition to bondholder consent, when required, for the following purposes: (i) execution and delivery of any supplemental Indenture, (ii) removal of the Trustee or Paying Agent and selection and appointment of any successor trustee or paying agent, and (iii) initiation or approval of any action not described in (i) or (ii) above which requires bondholder consent. (c) Any reorganization or liquidation plan with respect to the City must be acceptable to Ambac Assurance. In the event of any reorganization or liquidation, Ambac Assurance shall have the right to vote on behalf of all bondholders who hold Series 2002 Bonds absent a default by Ambac Assurance under the Financial Guaranty Insurance Policy. (d) Anything in this Indenture to the contrary notwithstanding, upon the occurrence and continuance of an Event of Default, Ambac Assurance shall be entitled to control and direct the enforcement of all rights and remedies granted to 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 2002 Bonds as described in Section 902 of this Indenture, and (ii) the right to annul any declaration of acceleration, and Ambac Assurance shall also be entitled to approve all waivers of Events of Default. (e) Upon the occurrence of an Event of Default, the Trustee may, with the consent of Ambac Assurance, and shall, at the direction of Ambac Assurance or at the written request of bondholders of not less than 51% in aggregate Outstanding principal amount of the Series 2002 Bonds with the consent of Ambac Assurance, by written notice to the City and Ambac Assurance, declare the principal of the Series 2002 Bonds to be immediately due and payable, whereupon that portion of the principal of the Series 2002 Bonds thereupon coming due and the interest thereon accrued to the date of payment shall, without further action, become and be immediately due and payable, anything in this Indenture or in the Series 2002 Bonds to the contrary notwithstanding. Section 1202. Notices/Information to be Given to Ambac Assurance. (a) While the Financial Guaranty Insurance Policy is in effect, the Trustee (or the City to the extent the Trustee is not in possession of such information) shall furnish to Ambac Assurance at its address indieated-in-Section--I302-hereof to the-attentionrofthe-Surveillance•-D-e- artrnen - - p -- (i) as soon as practicable after the filing thereof, a copy of any financial �- - statement relating to the City's Water and Sewer Fund and a copy of any audit and annual report of the City; 49 10-32371.01 (ii) a copy of any notice to be given to the registered owners of the Series 2002 Bonds, including, without limitation, notice of any redemption of or defeasance of the Series 2002 Bonds, and any certificate rendered pursuant to this Indenture relating to the security for the Series 2002 Bonds; and (iii) such additional information as Ambac Assurance may reasonably request. (b) Ambac Assurance shall be included as a party to be notified under the provisions of the Continuing Disclosure Agreement with respect to the Series 2002 Bonds. (c) The Trustee shall notify Ambac Assurance of any failure of the City to provide relevant notices, certificates, etc. (d) Notwithstanding any other provision of this Indenture, the Trustee shall immediately notify Ambac Assurance if at any time there are insufficient moneys to make any payments of principal and/or interest on the Bonds as required and immediately upon the occurrence of any Event of Default hereunder. (e) The City will permit Ambac Assurance to discuss the affairs, finances and accounts of the City or any information Ambac Assurance may reasonably request regarding the security for the Series 2002 Bonds with appropriate officers of the City. The Trustee and the City will permit Ambac Assurance to have access to and to make copies of all books and records `: ti= relating to the Series 2002 Bonds at any reasonable time. Section 1203. Payment Procedure. So long as the Financial Guaranty Insurance Policy shall be in full force and effect, the City, the Trustee and any Paying Agent agree to comply with the following provisions: (a) At least one (1) day prior to all interest payment dates with respect to the Series 2002 Bonds, the Trustee or Paying Agent, if any, will determine whether there will be sufficient moneys in the funds and accounts created hereunder to pay the principal of and interest on the Series 2002 Bonds on such interest payment date. If the Trustee or Paying Agent, if any, determines that there will be insufficient moneys in such funds and accounts, the Trustee or Paying Agent, if any, shall so notify Ambac Assurance. Such notice shall specify the amount of the anticipated deficiency, the Series 2002 Bonds to which such deficiency is applicable and whether such Series 2002 Bonds will be deficient as to the payment of principal or interest, or both. If the Trustee or Paying�Agent, if any, has not so notified Ambac Assurance at least one (1) day prior to an interest payment date, Ambac Assurance will make payments of principal and/or interest due on the Series 2002 Bonds on or before the first (1 st) day next following the date on which Ambac Assurance shall have received notice of nonpayment from the Trustee or Paying Agent, if any. (b) The Trustee or Paying Agent, if any, shall, after giving notice to Ambac Assurance as provided in (a) above, make available to Ambac Assurance and, at Ambac 'sem Assurance's direction, to The Bank of New York, in New York, New York, as insurance trustee for Ambac Assurance or any successor insurance trustee (the "Insurance Trustee"), the 50 10-32371.04 registration books of the City maintained by the Trustee or Paying Agent, if any, and all records relating to the funds and accounts maintained under this Indenture. (c) The Trustee or Paying Agent, if any, shall provide Ambac Assurance and the Insurance Trustee with a list of registered owners of Series 2002 Bonds entitled to receive principal or interest payments from Ambac Assurance under the terms of the Financial Guaranty Insurance Policy, and shall make arrangements with the Insurance Trustee (i) to mail checks or drafts to the registered owners of the Series 2002 Bonds entitled to receive full or partial interest payments from Ambac Assurance and (ii) to pay principal upon the Series 2002 Bonds surrendered to the Insurance Trustee by the registered owners of the Series 2002 Bonds entitled to receive full or partial principal payments from Ambac Assurance. (d) The Trustee or Paying Agent, if any, shall, at the time it provides notice to Ambac Assurance pursuant to (a) above, notify registered owners of the Series 2002 Bonds entitled to receive the payment of principal or interest thereon from Ambac Assurance (i) as to the fact of such entitlement, (ii) that Ambac Assurance will remit to them all or a part of the interest payments next coming due upon proof of bondholder entitlement to interest payments and delivery to the Insurance Trustee, in form satisfactory to the Insurance Trustee, of an appropriate assignment of the registered owner's right to payment, (iii) that should they be entitled to receive full payment of principal from Ambac Assurance, they must surrender their Series 2002 Bonds (along with an appropriate instrument of assignment in form satisfactory to the Insurance Trustee to permit ownership of such Series 2002 Bonds to be registered in the name of Ambac Assurance) for payment to the Insurance Trustee, and not the Trustee or Paying Agent, if any, and (iv) that should they be entitled to receive partial payment of principal from Ambac Assurance, they must surrender their Series 2002 Bonds for payment thereon first to the Trustee or Paying Agent, if any, who shall note on such Series 2002 Bonds the portion of the principal paid by the Trustee or Paying Agent, if any, and then, along with an appropriate instrument of assignment in form satisfactory to the Insurance Trustee, to the Insurance Trustee, which will then pay the unpaid portion of principal. (e) In the event that the Trustee or Paying Agent, if any, has notice that any payment of principal of or interest on a Series 2002 Bond which has become Due for Payment and which is made to a bondholder by or on behalf of the Obligor has been deemed a preferential transfer and theretofore recovered from its registered owner pursuant to the United States Bankruptcy Code by a trustee in bankruptcy in accordance with the final, nonappealable order of a court having competent jurisdiction, the Trustee or Paying Agent, if any, shall, at the time Ambac Assurance is notified pursuant to (a) above, notify all registered owners that in the event that any registered owner's payment is so recovered, such registered owner will be entitled to payment from Ambac Assurance to the extent of such recovery if sufficient funds are not otherwise available, and the Trustee or Paying Agent, if any, shall furnish to Ambac Assurance its records -----._.- evidencing --the payments- of principal- ofand interest - on- the-S€ries-2002-Bonds-which-have- been---- made een---made by the Trustee or Paying Agent, if any, and subsequently recovered from registered owners and the dates on which such payments were made. 51 10-3-2137 1.04 (f) In addition to those rights granted Ambac Assurance under this Indenture, Ambac Assurance shall, to the extent it makes payment of principal of or interest on Series 2002 Bonds, become subrogated to the rights of the recipients of such payments in accordance with the terms of the Financial Guaranty Insurance Policy, and to evidence such subrogation (i) in the case of subrogation as to claims for past due interest, the Trustee or Paying Agent, if any, shall note Ambac Assurance's rights as subrogee on the registration books of the City maintained by the Trustee or Paying Agent if any, upon receipt from Ambac Assurance of proof of the payment of interest thereon to the registered owners of the Series 2002 Bonds, and (ii) in the case of subrogation, as to claims for past due principal, the Trustee or Paying Agent, if any, shall note Ambac Assurance's rights as subrogee on the registration books of the City maintained by the Trustee or Paying Agent, if any, upon surrender of the Series 2002 Bonds by the registered owners thereof together with proof of the payment of principal thereof. Section 1204. Trustee -Related Provisions. (a) The Trustee or Paying Agent, if any, may be removed at any time, at the request of Ambac Assurance, for any breach of the Trust set forth herein. (b) Ambac Assurance shall receive prior written notice of any Trustee or Paying Agent resignation. (c) Every successor Trustee appointed pursuant to this Indenture shall be a trust company or bank in good standing located in or incorporated under the laws of the State of Arkansas, duly authorized to exercise trust powers and subject to examination by.federal or state authority, having a reported capital and surplus of not less than $75,000,000 and acceptable to Ambac Assurance. Any successor Paying Agent, if applicable, shall not be appointed unless Ambac Assurance approves such successor in writing. (d) Notwithstanding any other provision of this Indenture, in determining whether the rights of the bondholders will be adversely affected by any action taken pursuant to the terms and provisions of this Indenture, the Trustee shall consider the effect on the bondholders as if there were no Financial Guaranty Insurance Policy. (e) Notwithstanding any other provision of this Indenture, no removal, resignation or termination of the Trustee or Paying Agent shall take effect until a successor, acceptable to Ambac Assurance, shall be appointed. Section 1205. Interested Parties. (a) To the extent that this Indenture confers upon or gives or grants to Ambac Assurance any right, remedy or claim under or by reason of this Indenture, Ambac Assurance is hereby explicitly recognized as being a third -party beneficiary hereunder and may enforce any such right, remedy, or claim conferred, given or granted hereunder. (b) Nothing in this Indenture expressed or implied is intended or shall be construed to confer upon, or to give or grant to, any person or entity, other than the City, the Trustee, Ambac Assurance, the Paying Agent, if any, and the registered owners of the Bonds, any right, remedy or claim under or by reason of this Indenture or any covenant, condition or stipulation hereof, 52 10-31-371.04 and all covenants, stipulations, promises and agreements in this Indenture contained by and on behalf of the City shall be for the sole and exclusive benefit of the City, the Trustee, Ambac Assurance, the Paying Agent, if any, and the registered owners of the Bonds. ARTICLE XIII MISCELLANEOUS Section 1301. 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 may be 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 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 1302. 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: Bank of Oklahoma, N.A. P. O. Box 2300 Tulsa, Oklahoma- 74 -19 -2 - Attention: Cynthia Wilkinson Ambac Assurance: Ambac Assurance Corporation - One State Street Plaza New York, New York 10004 53 10-32371.04 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 1303. 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 1304. 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. The invalidity of any one or more phrases, sentences, clauses or paragraphs in this Indenture contained shall not affect the remaining portions of this Indenture or any part thereof. Section 1305. 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 1306. 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 1307. 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 1308. 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 1309. 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_signa ire-..of.the_City-.and the.Trustee- in--such-reproduction-arm not -original -manual -- signatures. -:``_ Section 1310. 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 54 10-33371.04 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. 5.7 10-32371.04 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. FIN i11L04W ATTEST: By: Title: (SEAL) 10-32371.04 CITY OF FAYETTEVILLE By: Mayor y:Mayor BANK OF OKLAHOMA, N.A., as Trustee BY: Title: VICE PRESIDENT and TRUST CFFICEA 56 EXHIBIT A TO TRUST INDENTURE Form of Series 2002A 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. No. R02A- UNITED STATES OF AMERICA STATE OF ARKANSAS CITY OF FAYETTEVILLE, ARKANSAS WATER AND SEWER SYSTEM REFUNDING REVENUE BOND, SERIES 2002A Interest Rate: % Maturity Date: August 15, 20_ Date of Bond: May 1, 2002 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 February 15 and August 15 of each year, commencing on the February 15 or August 15 next succeeding the date of this bond shown above, 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_tr-ust-affnc,--af Bank of-Oklahamaj--- N.A., Tulsa, Oklahoma, 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 first day of 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 W 10-32371.04 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 "City of Fayetteville, Arkansas Water and Sewer System Refunding Revenue Bond, Series 2002A," is one of a series of bonds in the aggregate original principal amount of $2,730,000 (the "Series 2002A Bonds"), issued for the purpose of refunding the City's outstanding Water and Sewer System Revenue Bonds, Series 1994, establishing a debt service reserve for the Series 2002A Bonds, and paying expenses of issuing the Series 2002A Bonds. The Series 2002A Bonds are issued under and are secured and entitled to the protection given by a Trust Indenture dated as of May 1, 2002 (the "Indenture"), duly executed and delivered by the City to the Trustee. Simultaneously with the issuance of the Series 2002A Bonds, the City has issued its Water and Sewer System Refunding Revenue Bonds, Series 2002B in the aggregate original principal amount of $6,540,000 (the "Series 2002B Bonds"). The Series 2002A Bonds are not general obligations of the City, but are limited and special obligations payable solely from and secured by a pledge of the net revenues (the "Net Revenues") of the City's water and sewer system (the "System"), as specified in, and in accordance with the provisions of, the Indenture. The Series 2002A Bonds are secured by a pledge of the Net Revenues on a parity basis with the pledge of Net Revenues securing the Series 2002B Bonds. The pledge of Net Revenues securing the Series 2002A Bonds and Series 2002B Bonds is junior and subordinate to the prior pledge of Net Revenues securing the payment of debt service on the City's outstanding Water and Sewer System Refunding Revenue Bonds, _ Series 1999 (the "Series 1999 Bonds"). 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, such Additional Bonds will rank on a parity of security with the Series 2002A Bonds and Series 2002B Bonds and be equally and ratably secured by and entitled to the protection of the Indenture. 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 registered owners of the Series 2002A Bonds, and the terms upon which the Series 2002A Bonds are issued and secured. The Series 2002A Bonds are issued pursuant to and in full compliance with the Constitution and laws of the State of Arkansas, including particularly Amendment 65 to the Constitution and Arkansas Code Annotated (1998 Repl. & Supp. 2001) §§14-164-401 et seq., §§ 14-234-201 et seq. and §§ 14-235-201 et seq. (collectively, and as from time to time amended, the "Act"), and pursuant to Ordinance No. 4381 of the City adopted on March 19, 2002. The Series 2002A Bonds do not constitute an indebtedness of the City within the meaning of any constitutional or statutory limitation. - - - Provisiorr-has-b-eerr mafre- irr the-- of a Revenue Fund, an Operation and Maintenance Fund, a Bond Fund (and for the payment into the Bond Fund of sufficient amounts of Net Revenues to pay the principal of and premium, if any, and #' interest on the Series 2002A Bonds when due), a Debt Service Reserve Fund and a Renewal and Replacement Fund. The City covenants in the Indenture to always maintain rates for System A -2- 10-3237 -2I0-3337 1.04 services which will produce Net Revenues (gross revenues of the System less all reasonable and necessary costs and expenses incurred in the operation, maintenance, repair and insuring of the System) in each fiscal year at least equal to 125% of the average annual debt service on all outstanding indebtedness of the City secured by System revenues, plus the amount, if any, required to be deposited into the Debt. Service Reserve Fund and any debt service reserve fund established with respect to outstanding indebtedness of the City secured by System revenues, and plus the amount, if any, required to make deposits to the Renewal and Replacement Fund. Reference is hereby made to the Indenture for the details of the rate covenant. The Series 2002A Bonds shall never constitute an obligation or charge against the general credit or taxing powers of the City. Financial Guaranty Insurance Policy No. (the "Policy") with respect to payments due for principal of and interest on this Series 2002A Bond has been issued by Ambac Assurance Corporation ("Ambac Assurance"). The Policy has been delivered to The Bank of New York, New York, New York, as the Insurance Trustee under said Policy and will be held by such Insurance Trustee or any successor insurance trustee. The Policy is on file and available for inspection at the principal office of the Insurance Trustee and a copy thereof may be secured from Ambac Assurance or the Insurance Trustee. All payments required to be made under the Policy shall be made in accordance with the provisions thereof. The owner of this Series 2002A Bond acknowledges and consents to the subrogation rights of Ambac Assurance as more fully set forth in the Policy. -, The holder of this Series 2002A 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 Series 1999 Bonds, the Series 2002A Bonds, the Series 2002B 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 Series 2002A Bonds shall not be subject to redemption prior to maturity. This Series 2002A 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. - - --Thi Series ----2002A- Bonds-- are- issuable--- as-- registered-- bonds- withaur--coupom- in - -- denominations of $5,000 and any integral multiple thereof. Subject to the limitations and upon payment of the charges provided in the Indenture, Series 2002A Bonds may be exchanged for a like aggregate principal amount of Series 2002A Bonds of other authorized denominations. A-3 10-32371.04 t No recourse shall be had for the payment of the principal of or premium, if any, or interest on any of the Series 2002A Bonds or for any claim based thereon or upon any obligation, covenant or agreement contained in the Series 2002A 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 Series 2002A Bonds. This Series 2002A 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 Series 2002A Bonds do exist, have happened and have been performed in due time, form and manner as required by law; that the indebtedness represented by the Series 2002A 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 Series 2002A Bonds as the same become due and payable will be sufficient in amount for that purpose. This Series 2002A 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 Series 2002A 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. ATTEST: In City Clerk (S -E A_L- _-- 10-32371.04 _ 10-32371.04 CITY OF FAYETTEVILLE, ARKANSAS A—s Mayor (Form of Trustee's Certificate) TRUSTEE'S CERTIFICATE OF AUTHENTICATION This bond is one of the Series 2002A 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 2002A Bonds. 10-32371.04 BANK OF OKLAHOMA, N.A., as Trustee By: Authorized Signature A-5 M (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. 10-32371.04 .E EXHIBIT B TO TRUST INDENTURE Form of Series 2002B 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. No. R0213 - UNITED STATES OF AMERICA STATE OF ARKANSAS CITY OF FAYETTEVILLE, ARKANSAS WATER AND SEWER SYSTEM REFUNDING REVENUE BOND, SERIES 2002B Interest Rate: % Date of Bond: May 1, 2002 Registered Owner: CEDE & CO. S Maturity Date: August 15, 20_ CUSIP: 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 February 15 and August 15 of each year, commencing on the February 15 or August 15 next succeeding the date of this bond shown above, 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 mesentationand _surrender hereof at the pnncipaL.csugorate trust -.off= -of -Bank -of Oklahoma - N.A., Tulsa, Oklahoma, 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 first day of 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 B-1 10-32371.04 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 "City of Fayetteville, Arkansas Water and Sewer System Refunding Revenue Bond, Series 2002B," is one of a series of bonds in the aggregate original principal amount of $6,540,000 (the "Series 2002B Bonds"), issued for the purpose of refunding the City's outstanding Water and Sewer System Subordinate Revenue Bonds, Series 2000, establishing a debt service reserve for the Series 2002B Bonds, and paying expenses of issuing the Series 2002B Bonds. The Series 2002B Bonds are issued under and are secured and entitled to the protection given by a Trust Indenture dated as of May 1, 2002 (the "Indenture"), duly executed and delivered by the City to the Trustee. Simultaneously with the issuance of the Series 2002B Bonds, the City has issued its Water and Sewer System Refunding Revenue Bonds, Series 2002A in the aggregate original principal amount of $2,730,000 (the "Series 2002A Bonds"). The Series 2002B Bonds are not general obligations of the City, but are limited and special obligations payable solely from and secured by a pledge of the net revenues (the "Net Revenues") of the City's water and sewer system (the "System"), as specified in, and in accordance with the provisions of, the Indenture. The Series 2002B Bonds are secured by a pledge of the Net Revenues on a parity basis with the pledge of Net Revenues securing the Series 2002A Bonds. The pledge of Net Revenues securing the Series 2002A Bonds and Series 2002B Bonds is junior and subordinate to the prior pledge of Net Revenues securing the payment of debt service on the City's outstanding Water and Sewer System Refunding Revenue Bonds, Series 1999 (the "Series 1999 Bonds"). 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, such Additional Bonds will rank on a parity of security with the Series 2002A Bonds and Series 2002B Bonds and be equally and ratably secured by and entitled to the protection of the Indenture. 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 registered owners of the Series 2002B Bonds, and the terms upon which the Series 2002B Bonds are issued and secured. The Series 2002B Bonds are issued pursuant to and in full compliance with the Constitution and laws of the State of Arkansas, including particularly Amendment 65 to the Constitution and Arkansas Code Annotated (1998 Repl. & Supp. 2001) §§14-164-401 et seq., §§14-234-201 et seq. and §§ 14-235-201 et seq. (collectively, and as from time to time amended, the "Act"), and pursuant to Ordinance No. 4381 of the City adopted on March 19, 2002. The Series 2002B Bonds do not constitute an indebtedness of the City within the meaning of any constitutional or statutory limitation. Provision has been made in the Indenture for the creation or maintenance of a Revenue Fund, an Operation and Maintenance Fund, a Bond Fund (and for the payment into the Bond Fund of sufficient amounts of Net Revenues to pay the principal of and premium, if any, and interest on the Series 2002B Bonds when due), a Debt Service Reserve Fund and a Renewal and B-2 10-32371.04 Replacement Fund. The City covenants in the Indenture to always maintain rates for System services which will produce Net Revenues (gross revenues of the System less all reasonable and necessary costs and expenses incurred in the operation, maintenance, repair and insuring of the System) in each fiscal year at least equal to 125% of the average annual debt service on all outstanding indebtedness of the City secured by System revenues, plus the amount, if any, required to be deposited into the Debt Service Reserve Fund and any debt service reserve fund established with respect to outstanding indebtedness of the City secured by System revenues, and plus the amount, if any, required to make deposits to the Renewal and Replacement Fund. Reference is hereby made to the Indenture for the details of the rate covenant. The Series 2002B Bonds shall never constitute an obligation or charge against the general credit or taxing powers of the City. Financial Guaranty Insurance Policy No. (the "Policy") with respect to payments due for principal of and interest on this Series 2002B Bond has been issued by Ambac Assurance Corporation ("Ambac Assurance"). The Policy has been delivered to The Bank of New York, New York, New York, as the Insurance Trustee under said Policy and will be held by such Insurance Trustee or any successor insurance trustee. The Policy is on file and available for inspection at the principal office of the Insurance Trustee and a copy thereof may be secured from Ambac Assurance or the Insurance Trustee. All payments required to be made under the Policy shall be made in accordance with the provisions thereof. The owner of this Series 2002B Bond acknowledges and consents to the subrogation rights of Ambac Assurance as more fully set >: forth in the Policy. The holder of this Series 2002B 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 Series 1999 Bonds, the Series 2002A Bonds, the Series 2002B 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 Series 2002B Bonds are subject to redemption prior to maturity, at the option of the City, on and after August 15, 2012, in whole at any time or in part in inverse order of maturity (and selected by the Trustee by lot within a maturity) on any interest payment date, from funds from any source, at a redemption price equal to one hundred percent (100%) of the principal amount of the Series 2002B Bonds being redeemed, plus accrued interest to the date of redemption -- - -- Notwithstanding- the--fcTegoing-, -so-rotr� as ---DTA or -is nominee is -the _. sore_registefed - - owner of the Series 2002B Bonds, the particular Series 2002B 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 Series 2002B Bonds for redemption prior to maturity, in the case any outstanding Series 2002B Bond is in a denomination greater than $5,000, each $5,000 of face B-3 10-32371.04 value of such Series 2002B Bond shall be treated as a separate Series 2002B Bond of the denomination of $5,000. In the event any of the Series 2002B 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 Series 2002B 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 Series 2002B Bond with respect to which no such failure or defect has occurred. Each notice shall identify the Series 2002B 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 Series 2002B Bond or Series 2002B 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 Series 2002B 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 Series 2002B 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, Series 2002B Bonds may be exchanged for a like aggregate principal amount of Series 2002B 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 Series 2002B Bonds or for any claim based thereon or upon any obligation, covenant or agreement contained in the Series 2002B 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 Series 2002B Bonds. This Series 2002B 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 Series 2002B -Bonds --do, exist; have-happen€d--and-have been -performed- in- due time-,-fornrand marmer-as - required by law; that the indebtedness represented by the Series 2002B 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 B -=I 10.32371.04 Series 2002B Bonds as the same become due and payable will be sufficient in amount for that purpose. This Series 2002B 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 Series 2002B 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 axed or imprinted hereon, all as of the date hereof shown above. CITY OF FAYETTEVILLE, ARKANSAS ATTEST: By: City Clerk (SEAL) B-5 10-32371.04 Mayor (Form of Trustee's Certificate) TRUSTEE'S CERTIFICATE OF AUTHENTICATION This bond is one of the Series 2002B 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 2002B Bonds. 10-32371.04 BANK OF OKLAHOMA, N.A., as Trustee go Authorized Signature I 'J (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. I0-32371.04 EXECUTION COPY BOND PURCHASE AGREEMENT May 6, 2014 City of Fayetteville 113 West Mountain Fayetteville, Arkansas 72701 $6,330,000 City of Fayetteville, Arkansas Water and Sewer System Refunding Revenue Bonds, Series 2014 Ladies and Gentlemen: 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 May 6, 2014. 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 $6,330,000 City of Fayetteville, Arkansas Water and Sewer System Refunding Revenue Bonds, Series 2014 (the "Bonds"), at the purchase price (the "Purchase Price") of $6,867,956.45 (equal to the par amount of the Bonds plus a net reoffering premium of $601,256.45 and less underwriter's discount of $63,300.00) plus accrued interest, if any, from May 15, 2014, 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 65 to the Constitution and Arkansas Code Annotated (1998 Repl. & Supp. 2013) §§14-234-201 et seq., §§14-235-201 et seq. and § § 14-164-401 et seq. (collectively, the "Authorizing Legislation"). 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 net revenues (the "Net Revenues") of the City's combined water and sewer system (the "System") and (2) moneys on deposit in the Bond Fund and Debt Service Reserve Fund established by that certain Trust Indenture dated as of May 1, 2002, as amended and supplemented by a First Supplemental Trust Indenture dated as of May 1, 2004, by a Second Supplemental Trust Indenture dated as of June 1, 2009, by a Third 4843-2251-1384.3 Supplemental Trust Indenture dated as of May 15, 2012, and by a Fourth Supplemental Trust Indenture dated as of May 15, 2014 (as amended and supplemented, the "Indenture"), each by and between the City and BOKF, NA dba Bank of Oklahoma, (formerly Bank of Oklahoma, N.A.), Tulsa, Oklahoma, as trustee (the "Trustee"), all as more particularly described in the Indenture. The pledge of Net Revenues securing the Bonds is on a parity basis with an existing pledge of Net Revenues securing the City's outstanding Water and Sewer System Refunding Revenue Bonds, Series 2012 (the "Series 2012 Bonds"). The Bonds shall be issued and secured pursuant to an ordinance of the City Council of the City (the "Authorizing Ordinance") which was adopted on March 4, 2014, 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 effect a current refunding of $7,390,000 outstanding principal amount of the City's Water and Sewer System Revenue Bonds, Series 2009 (the "Refunded Bonds"), and (ii) to pay the costs of issuance of the Bonds. A portion of the proceeds of the Bonds will be deposited pursuant to an Escrow Deposit Agreement to be dated as of the date of delivery of the Bonds (the "Escrow Agreement"), between the City and BOKF, NA dba Bank of Oklahoma, Tulsa, Oklahoma, as escrow trustee (the "Escrow Trustee"), and will be held, invested and utilized (along with other available moneys) to redeem the Refunded Bonds at the times and in the amounts provided in the Escrow Agreement. 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 April 25, 2014, relating to the Bonds (the "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, 4843-2251-1384.3 2 as amended to conform to the terms 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 May 6, 2014, 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) Pursuant to the Authorizing Ordinance, the City has authorized and approved the Preliminary Official Statement and the final Official Statement, consented to their distribution and use by the Underwriter, and authorized the execution of the final Official Statement by a duly authorized officer of the City. The City hereby 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 Representation 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 Authorizing Legislation to issue the Bonds for the purpose of refunding the Refunded Bonds. (b) The City has the full legal right, power and authority (i) to adopt the Authorizing Ordinance authorizing the issuance of and sale of the Bonds, (ii) to enter into this Bond Purchase Agreement, the Indenture, the Escrow Agreement, the Continuing Disclosure Agreement and the Tax Regulatory Agreement, (iii) to issue, sell and deliver the Bonds to the Underwriter as provided herein, (iv) to adopt Ordinance No. 5123, Ordinance No. 5129 and Ordinance No. 5438 (collectively, the "Rate Ordinances") for the purpose of establishing rates for the System services, (v) to deposit the proceeds of the Bonds with the Escrow Trustee pursuant to the Escrow Agreement for the purpose of defeasing and redeeming the Refunded Bonds, (vi) to pledge irrevocably the Net Revenues 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 Authorizing Legislation, in all matters relating to such transactions. (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 4843-2251-1384.3 3 Indenture, the Escrow Agreement, 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 Authorizing Ordinance and the Rate Ordinances have been duly adopted by City Council of the City, are in full force and effect and each constitutes the legal, valid and binding act of the City; and this Bond Purchase Agreement, the Fourth Supplemental Trust Indenture, the Escrow Agreement, 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 Fourth Supplemental Trust Indenture, the Escrow Agreement, 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 Authorizing Legislation, 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, true 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 supplements to the Official Statement will not contain any untrue or misleading statement 4843-2251-1384.3 4 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 Rate Ordinances, the execution and delivery of this Bond Purchase Agreement, the Bonds, the Fourth Supplemental Trust Indenture, the Escrow Agreement, 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 Rate Ordinances, the Bonds, the Indenture, the Escrow Agreement, the Continuing Disclosure Agreement and the Tax Regulatory Agreement have been obtained. (j) The City has never been in default at any time as to the payment of principal of or interest on any obligation which it has issued, including those which it has issued as a conduit for another entity, except as specifically disclosed in the Official Statement. (k) 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 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 Rate Ordinances, the Bonds, the Indenture, the Escrow Agreement, 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. 4843-2251-1384.3 5 (1) 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. (m) 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. (n) The audited general purpose financial statements and supplemental financial statements of the City for the year ended December 31, 2012, and the unaudited financial statements of the City's Water and Sewer Fund for the year ended December 31, 2013, included in the Official Statement, present fairly the financial position of the City and its Water and Sewer Fund as of the dates indicated and the results of the City's and its Water and Sewer Fund's operations for the periods specified, and such financial reports and statements have been prepared in conformity with generally accepted governmental accounting principles consistently applied in all material respects to the periods involved, except as otherwise stated in the notes thereto. There has been no material change in the general affairs, management, properties, financial position, capitalization or results of operations of the City or its Water and Sewer Fund since the date of such financial statements except as set forth in the Official Statement. (o) 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 the Escrow Agreement, 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, its Water and Sewer Fund, and the current financial condition and ongoing operations of the City and its Water and Sewer Fund, all as the Underwriter may reasonably request. 6. Closing. At 10:00 a.m. Fayetteville time on May 20, 2014, or at such other time and/or date as shall have been mutually agreed upon by the City and the Underwriter (the 4843-2251-1384.3 6 "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 BOKF, NA dba Bank of Oklahoma, Tulsa, Oklahoma, 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 Fourth Supplemental Trust Indenture, the Escrow Agreement, 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 of Kutak Rock LLP, 124 West Capitol Avenue, Suite 2000, Little Rock, 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 4843-2251-1384.3 7 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 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 4843-2251-1384.3 8 (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 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 form 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 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 Indenture, the Escrow Agreement, the Authorizing Ordinance, the Rate Ordinances, 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 and the Escrow Agreement, (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 its water and sewer system (the "System") 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 or the System have occurred; (c) Receipt of fully executed originals of the Fourth Supplemental Trust Indenture, the Escrow Agreement, 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: (1) A final approving opinion of Bond Counsel, dated the Closing Date, in substantially the form set forth in Exhibit B hereto; 4843-2251-1384.3 9 (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) An opinion of Bond Counsel, addressed to the City and the Trustee, to the effect that upon the deposit of moneys as described under the Escrow Agreement with the Escrow Trustee, the Refunded Bonds will be deemed to be paid and discharged and the lien on revenues and net revenues of the System securing the Refunded Bonds will be released; (4) The Official Statement executed by a duly authorized officer of the City; (5) Certified copies of the Authorizing Ordinance and the Rate Ordinances and all other ordinances and resolutions of the City relating to the Bonds; (6) Photocopies of the Bonds as executed and delivered; (7) 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 "AA+" (stable outlook), which rating shall be in effect as of the Closing Date; (8) A letter from Grant Thornton, LLP, independent certified public accountants, in which consent is given to the use of its report on the audited financial statements of the City in the Official Statement and to the references made to the firm in the Official Statement; (9) A letter from Grant Thornton, LLP, independent certified public accountants, stating the results of the application of certain procedures to the financial statements of the City, which results satisfy the requirements regarding the issuance of additional bonds contained in Section 213 of the Indenture, pursuant to which the Series 2012 Bonds are secured; (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 Rate Ordinances by all action necessary under the Authorizing Legislation and the laws and Constitution of the State of Arkansas, and has duly authorized the execution, delivery and due performance of the Bonds, the Fourth Supplemental Trust Indenture, the Escrow Agreement, 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 4843-2251-1384.3 10 any way affecting any authority for or the validity of the Bonds, the Official Statement, the Authorizing Ordinance, the Rate Ordinances, the Indenture, the Escrow Agreement, the Continuing Disclosure Agreement, the Tax Regulatory Agreement, or this Bond Purchase Agreement; (iv) the Bonds, the Fourth Supplemental Trust Indenture, the Escrow Agreement, 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, 2013, there has not been any material adverse change in the financial condition or results of operations of the City or the System whether or not arising in the ordinary course of business, other than as set forth in the Official Statement; (vi) the Authorizing Ordinance and the Rate Ordinances have not been amended, modified or repealed as of the Closing Date, and the Authorizing Ordinance and the Rate Ordinances 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, has been in any manner repealed, amended or changed; (viii) the City has complied in all respects with the provisions of the Authorizing Legislation and has full legal right, power and authority to issue the Bonds for the purposes stated in the Authorizing Legislation and to enter into this Bond Purchase Agreement, to adopt the Authorizing 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 Indenture, the Escrow Agreement, 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 System 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 the Rate Ordinances and to execute and deliver the Bonds, the Indenture, the Escrow Agreement, 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 Rate Ordinances have been duly adopted by the City by all action necessary under the Authorizing Legislation and the laws and Constitution of the State of Arkansas, and remain in full force and effect; (iv) the Indenture, the Escrow Agreement, the Continuing Disclosure Agreement, the Tax 4843-2251-1384.3 11 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 CITY," "THE SYSTEM" 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 Authorizing Ordinance, the Rate Ordinances, the Indenture, the Escrow Agreement, 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 Indenture, the Escrow Agreement, 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 4843-2251-1384.3 12 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. 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 11 or 12 hereof shall survive any termination of this Bond Purchase Agreement by the Underwriter pursuant to the terms hereof. 11. 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 4843-2251-1384.3 13 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, charges for obtaining CUSIP numbers on the Bonds, fees payable to The Depository Trust Company relating to the Bonds, costs of printing the Bonds, the Preliminary and final Official Statements, any amendment or supplement to the Preliminary or 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 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. 4843-2251-1384.3 14 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: Authori d Representative Accepted and agreed to as of the date first above written: CITY OF VAYETTEVILLE, ARKANSAS yor 4843-2251-1384.3 15 EXHIBIT A MATURITY SCHEDULE SERIES 2014 BONDS (August 15) Principal Interest (August 15) Principal Interest Maturity Amount Rate Price Maturity Amount Rate Price 2014 $165,000 2.000% 100.417% 2018 $1,665,000 4.000% 111.222% 2015 805,000 2.000% 102.033% 2019 1,725,000 5.000% 117.229% 2016 820,000 2.000% 103.195% 2020 320,000 3.000% 105.609%* 2017 830,000 3.000% 106.748% * Priced to the first call date of August 15, 2019. (with accrued interest on all Series 2014 Bonds from May 15, 2014) A-1 4843-2251-1384.3 EXHIBIT B PROPOSED FORM OF BOND COUNSEL APPROVING OPINION Upon delivery of the Series 2014 Bonds in definitive form, Kutak Rock LLP, Little Rock, Arkansas, proposes to deliver its approving opinion in substantially the following form: May _, 2014 City of Fayetteville, Arkansas Fayetteville, Arkansas BOKF, NA dba Bank of Oklahoma, as Trustee Tulsa, Oklahoma Stephens Inc. Fayetteville, Arkansas $6,330,000 City of Fayetteville, Arkansas Water and Sewer System Refunding Revenue Bonds Series 2014 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 $6,330,000 Water and Sewer System Refunding Revenue Bonds, Series 2014 (the "Bonds"). The Bonds are being issued pursuant to the provisions of the Constitution and laws of the State of Arkansas, including, particularly, Amendment 65 and Arkansas Code Annotated (1998 Repl. & Supp. 2013) §§14-164-401 et seq., §§14-234-201 et seq. and §§14-235-201 et seq. (collectively, and as from time to time amended, the "Authorizing Legislation"), pursuant to Ordinance No. 5665 of the City, duly adopted and approved on March 4, 2014 (the "Authorizing Ordinance" ), and pursuant to a Trust Indenture dated as of May 1, 2002, as amended and supplemented by a First Supplemental Trust Indenture dated as of May 1, 2004, by a Second Supplemental Trust Indenture dated as of June 1, 2009, by a Third Supplemental Trust Indenture dated as of May 15, 2012, and by a Fourth Supplemental Trust Indenture dated as of May 15, 2014 (as amended and supplemented, the "Indenture"), each by and between the City and BOKF, NA dba Bank of Oklahoma (formerly Bank of Oklahoma, 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 debt by the City, 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. B-1 4843-2251-1384.3 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 Rate Ordinances and the Authorizing Ordinance and to enter into and perform its obligations under the Indenture, the valid adoption of the Rate Ordinances 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 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 65 and the Authorizing Legislation, the City is empowered to adopt 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 validly authorized, executed, issued and delivered by the City and represent valid and binding special obligations of the City. The principal, premium, if any, and interest on the Bonds shall be payable from, and shall be secured by an assignment and pledge by the City to the Trustee of, the Net Revenues (as defined in the Indenture) of the City's water and sewer system, subject to a parity pledge of Net Revenues securing (i) the City's Water and Sewer System Refunding Revenue Bonds, Series 2012, and (ii) any Additional Bonds (as defined in the Indenture) issued hereafter. 5. The Net Revenues have been duly and validly assigned and pledged to the Trustee under the Indenture, and the Indenture creates, as security for the Bonds, a valid security interest in the Net Revenues. Under the laws of the State of Arkansas, including, particularly, Arkansas Code Annotated (2001 Repl. & 2013 Supp.) Section 4-9-109(d)(14), the pledge, assignment and security interest in the Net Revenues securing the Bonds is and shall be prior to any judicial lien hereafter imposed on said Net Revenues to enforce a judgment against the City on a simple contract, and it is not necessary to file a Uniform Commercial Code financing statement in order to perfect a security interest in said Net Revenues. 6. Interest on the Bonds is excluded from gross income for federal income tax purposes and is not a specific preference item for purposes of the federal alternative minimum B-2 4843-2251-1384.3 tax. The opinion described in the preceding sentence assumes 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 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. 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, B-3 4843-2251-1384.3 EXHIBIT C PROPOSED FORM OF BOND COUNSEL SUPPLEMENTAL OPINION May _, 2014 City of Fayetteville, Arkansas Fayetteville, Arkansas BOKF, NA dba Bank of Oklahoma, as Trustee Tulsa, Oklahoma Stephens Inc. Fayetteville, Arkansas $6,330,000 City of Fayetteville, Arkansas Water and Sewer System Refunding Revenue Bonds Series 2014 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. In addition to the documents specifically mentioned in that opinion, we have examined the portions of the Official Statement dated May 6, 2014, with respect to the Bonds (the "Official Statement"), captioned "INTRODUCTORY STATEMENT," "THE SERIES 2014 BONDS," "SECURITY FOR THE BONDS," "SOURCES AND USES OF FUNDS," "DEFINITIONS OF CERTAIN TERMS," "SUMMARY OF THE INDENTURE," "SUMMARY OF THE CONTINUING DISCLOSURE AGREEMENT," "TAX EXEMPTION," and "APPENDIX C — Form of Opinion of Bond Counsel" (the "Relevant Captions") insofar as they relate to this opinion. In connection with this opinion, we have also examined: (a) An executed counterpart of the Trust Indenture dated as of May 1, 2002, as amended and supplemented by a First Supplemental Trust Indenture dated as of May 1, 2004, by a Second Supplemental Trust Indenture dated as of June 1, 2009, by a Third Supplemental Trust Indenture dated as of May 15, 2012, and by a Fourth Supplemental Trust Indenture dated as of May 15, 2014 (as amended and supplemented, the "Indenture"), each by and between the City and BOKF, NA dba Bank of Oklahoma (formerly Bank of Oklahoma, N.A.), as trustee (the "Trustee"); (b) An executed counterpart of the Continuing Disclosure Agreement dated May 20, 2014 (the "Continuing Disclosure Agreement"), by and between the City and BOKF, NA dba Bank of Oklahoma, as dissemination agent (the "Dissemination Agent"); C-1 4843-2251-1384.3 (c) An executed counterpart of the Tax Regulatory Agreement dated May 20, 2014 (the "Tax Regulatory Agreement"), by and between the City and the Trustee; (d) An executed counterpart of the Escrow Deposit Agreement dated May 20, 2014 (the "Escrow Agreement"), by and between the City and BOKF, NA dba Bank of Oklahoma, as escrow agent (the "Escrow Agent") and (e) An executed counterpart of the Bond Purchase Agreement dated May 6, 2014 (the "Bond Purchase Agreement"), by and between the City and Stephens Inc. (the "Underwriter"). Based on our examination, we are of the opinion, as of the date hereof and under existing law, as follows: 1. The statements contained in the Official Statement under the Relevant Captions, insofar as such statements purport to summarize certain provisions of the Bonds, the Indenture and the Continuing Disclosure Agreement, or conclusions of law and legal opinions, are true, accurate and correct summaries thereof in all material respects and do not omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. 2. The Indenture has been duly authorized, executed and delivered by the City and, assuming due authorization, execution and delivery by the Trustee, the Indenture represents the valid and binding agreement of the City enforceable in accordance with its terms. 3. The Continuing Disclosure Agreement has been duly authorized, executed and delivered by the City and, assuming due authorization, execution and delivery by the Trustee, the Continuing Disclosure Agreement represents the valid and binding agreement of the City enforceable in accordance with its terms. 4. 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 represents the valid and binding agreement of the City enforceable in accordance with its terms. 5. The Escrow Agreement has been duly authorized, executed and delivered by the City and, assuming due authorization, execution and delivery by the Escrow Trustee, the Escrow Agreement represents the valid and binding agreement of the City enforceable in accordance with its terms. 6. 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 represents the valid and binding agreement of the City enforceable in accordance with its terms. C-2 4843-2251-1384.3 The obligations of the parties, and the enforceability thereof, with respect to the documents and other items described above are subject, in part, to the provisions of the bankruptcy laws of the United States of America and to other applicable bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or affecting creditors' rights generally, now or hereafter in effect. Certain of the obligations, and the enforcement thereof, are also subject to general equity principles, which may limit the specific enforcement of certain remedies but which do not affect the validity of such item. This opinion is being rendered to you solely for your benefit and may not be relied upon in any manner, nor used, by any other person. Very truly yours, C-3 4843-2251-1384.3 7011 0500 0001 2965 8114 VIA CERTIFIED MAIL _ RETURN RECEIPT REQUESTED Internal Revenue Service Center Ogden Utah 84201 CITY OF FAYETTEVILLE, ARKANSAS WATER AND SEWER SYSTEM REFUNDING REVENUE BONDS, SERIES 2014 Dear Sir or Madame: 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. Sincerely, I Gordo M. Wilbourn j enclosure 4827-5348-8655.1 KUTAK ROCK LLP ATLANTA CHICAGO SUITE 2000 DENVER FAYETTEVILLE 124 WEST CAPITOL AVENUE IRVINE NORTHWEST ARKANSAS OFFICE LITTLE ROCK, AR 72201-3706 KANSAS CITY LITTLE ROCK SUITE 400 501-975-3000 LOS ANGELES 234 EAST MILLSAP ROAD FACSIMILE 501-975-3001 MINNEAPOLIS FAYETTEVILLE, ARKANSAS 72703-4099 F OKLAHOMA CITY 479-973-4200 www.kutakrock.com OMAHA PHILADELPHIA RICHMOND SCOTTSDALE GORDON M. WILBOURN gordon.wilbourn@kutakrock.com May 20 2014 WASHINGTON WASHINGTON (501) 975-3101 WICHITA 7011 0500 0001 2965 8114 VIA CERTIFIED MAIL _ RETURN RECEIPT REQUESTED Internal Revenue Service Center Ogden Utah 84201 CITY OF FAYETTEVILLE, ARKANSAS WATER AND SEWER SYSTEM REFUNDING REVENUE BONDS, SERIES 2014 Dear Sir or Madame: 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. Sincerely, I Gordo M. Wilbourn j enclosure 4827-5348-8655.1 FormG0384; 38® Information Return for Tax -Exempt Governmental Obligations (Rev. September 2011) ® Under Internal Revenue Code section 149(e) OMB No. 1545-0720 ® See separate instructions. Department of the Treasury Internal Revenue Service Caution: If the issue price is under $100,000, use Form 8038 -GC. 0MA Reaortina Authoritv If Amended Return_ check here ® n 1 Issuer's name 2 Issuer's employer identification number (EIN) City of Fayetteville, Arkansas 71 6018462 3a Name of person (other than issuer) with whom the IRS may communicate about this return (see instructions) 3b Telephone number of other person shown on 3a 4 Number and street (or P.O. box if mail is not delivered to street address) Room/suite 5 Report number (For IRS Use Only) 113 West Mountain Street 15 3 11 1 6 City, town, or post office, state, and ZIP code 7 Date of issue Fayetteville, Arkansas 72701 5-20-14 8 Name of issue 9 CUSIP number Water and Sewer System Refunding Revenue Bonds, Series 2014 312693 HB3 10a Name and title of officer or other employee of the issuer whom the IRS may call for more information (see 10b Telephone number of officer or other instructions) employee shown on 10a Gordon Wilbourn, Kutak Rock LLP (501) 975-3000 JUIM Type of Issue (enter the issue price). See the instructions and attach schedule. 11 12 13 14 15 16 17 18 Education . . . . . . . . . . . . . . . . . . . . . . . . . . . . Health and hospital . . . . . . . . . . . . . . . . . . . . . . . . Transportation . . . . . . . . . . . . . . . . . . . . . . . . . . Public safety . . . . . . . . . . . . . . . . . . . . . . . . . . . Environment (including sewage bonds) . . . . . . . . . . . . . . . . . . Housing . . . . . . . . . . . . . . . . . . . . . . . . . . . . Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other. Describe ® . . . . . . . . . . . . . . 11 12 13 14 15 16 17 6,931,256 00 18 19 20 If obligations are TANS or RANs, check only box 19a . . . . . . . . . . . . . If obligations are BANS, check only box 19b . . . . . . . . . . . . . . . . If obligations are in the form of a lease or installment sale, check box . . . . . . . . ® ❑ ® ❑ El 22 Description of Obligations. Complete for the entire issue for which this form is being filed. (a) Final maturity date (b) Issue price (c) Stated redemption price at maturity (d) Weighted average maturity (e) Yield 21 8-15-20 6,931,256 6,330,000 3.802 years 1.2892 % 1711TUses of Proceeds of Bond Issue (including underwriters' discount) 22 Proceeds used for accrued interest . . . . . . . . . . . . . . . . . . . . . 22 3,099 00 23 6,931,256 00 23 Issue price of entire issue (enter amount from line 21, column (b)) . . . . . 24 Proceeds used for bond issuance costs (including underwriters' discount) . . 24 135,300 00 25 Proceeds used for credit enhancement . . . . . . . . . . . . 25 0 00 26 Proceeds allocated to reasonably required reserve or replacement fund . 26 0 00 27 Proceeds used to currently refund prior issues . . . . . . . . . 27 6,794,481 00 28 Proceeds used to advance refund prior issues . . . . . . . . . 28 0 00 29 Total (add lines 24 through 28) . . . . . . . . . . . . . . . . . . . . . . . 29 6,929,781 00 30 1 1,4751 00 30 Nonrefunding proceeds of the issue (subtract line 29 from line 23 and enter amount here) . . Description of Refunded Bonds. Complete this part only for refunding bonds. 31 Enter the remaining weighted average maturity of the bonds to be currently refunded . . . . P 3.412 years 32 Enter the remaining weighted average maturity of the bonds to be advance refunded . . . . 0- years 33 Enter the last date on which the refunded bonds will be called (MM/DD/YYYY) . . . I> 8-15-14 34 Enter the date(s) the refunded bonds were issued It► (MM/DD/YYYY) 6-2-09 For Paperwork Reduction Act Notice, see separate instructions. Cat. No. 63773S Form 8038-G (Rev. 9-2011) Form 8038-G (Rev. 9-2011) Page 2 Miscellaneous 35 Enter the amount of the state volume cap allocated to the issue under section 141(b)(5) . . . . 35 0 00 36a Enter the amount of gross proceeds invested or to be invested in a guaranteed investment contract (GIC) (see instructions) . . . . . . . . . . . . . . . . . . . . . . . . . 36a 0 00 b Enter the final maturity date of the GIC c Enter the name of the GIC provider Op - 37 Pooled financings: Enter the amount of the proceeds of this issue that are to be used to make loans to other governmental units . . . . . . . . . . . . . . . . . . . . . . . . 37 38a If this issue is a loan made from the proceeds of another tax-exempt issue, check box ® ❑ and enter the following information: b Enter the date of the master pool obligation c Enter the EIN of the issuer of the master pool obligation d Enter the name of the issuer of the master pool obligation Do - 39 If the issuer has designated the issue under section 265(b)(3)(13)(i)(III) (small issuer exception), check box . . . . ® ❑ 40 If the issuer has elected to pay a penalty in lieu of arbitrage rebate, check box . . . . . . . . . . . 00- 41a 41a If the issuer has identified a hedge, check here 0- ❑ and enter the following information: b Name of hedge provider 6- c Type of hedge 0- d Term of hedge Op - 42 If the issuer has superintegrated the hedge, check box . . . . . . . . . . . . . . . . . . . . ® ❑ 43 If the issuer has established written procedures to ensure that all nonqualified bonds of this issue are remediated according to the requirements under the Code and Regulations (see instructions), check box . . . . . . . . ® Fv] 44 If the issuer has established written procedures to monitor the requirements of section 148, check box . . . . . ® Fv_1 45a If some portion of the proceeds was used to reimburse expenditures, check here ® ❑ and enter the amount of reimbursement . . . . . . . . . b Enter the date the official intent was adopted 0 - Signature and Consent Paid Preparer Use Only Under penalties of perjury, I declare that I have examined this return and accompanying schedules and statements, and to the best of my knowledge and belief, thgy are true, corrpc�n�complete. I further declare that I consent to the IRS's disclosure of the issuer's return information, as necessary to process thi etyrn, to the rsan th I have authorized above. of Print/Type preparer' flame Gordon Wilbour Firm's name ® Kutak Rock LLP Firm's address ® 124 W. Capitol, Suite Date signature Little Rock, AR 72201 Lioneld Jordan, Mayor I Type or print name and title Date Check ❑ if PTIN �� Lo• 14 self-employed P01079125 Firm's EIN ® 47-0597598 Phone no. (501)975-3000 Form 8038-G (Rev. 9-2011) ® Complete items 1, 2, and 3. Also complete item 4 if Restricted Delivery is desired. • Print your name and address on the reverse so that we can return the card to you. in Attach this card to the back of the mailplece, or on the front if space permits. 1. Article Addressed to: A. Signature X 13 Agent M Addressee B. Received by (Printed Name) I C. Date of Delivery D. Is delivery address different from item 1? El Yes If YES, enter delivery addressJelowfi 0 No - -------------- 3. 0 f egistered,(�,0--R4i'ur.Olbdelpt-forvAerch 0 l6ur-d-wr'��' o'qoi—i-ct on Delivery 4. Restricted Delivery? (Extra Fee) M Yes 2. Article Number '7c->( 00 o v, �Ify (1ransfer from service label) PS Form 3811, July 2013 Domestic Return Receipt 179 ro Ln -0 Postage $ p ru Certified Fee po mar r -q Return Receipt Fee ere M (Endorsement Required) to Cl C3 Restricted Delivery Fee (Endorsement Required) r N C3 Total Postage & Fees U-1 M S-ee n TO ----- ---- --------- r-9 rg --- --- --- Apt. -N- Tt �F'i6f' & For- "VOx ---------- ---------- - �O �0. 17- 6�Lsiate zWi C;LkIr EXHIBIT G COSTS OF ISSUANCE Bond Counsel Fee and Expenses Kutak Rock LLP 124 West Capitol Avenue, Suite 2000 Little Rock, AR 72201 Rating Fee Standard & Poor's Corporation 2542 Collection Center Drive Chicago, IL 60693 Trustee Acceptance Fee BOKF, N.A. One Williams Center, Bank of Oklahoma Tower P. O. Box 2300 Tulsa, OK 74172 Escrow Trustee Fee BOKF, N.A. One Williams Center, Bank of Oklahoma Tower P. O. Box 2300 Tulsa, OK 74172 Accounting Fee Grant Thornton, LLP 1717 Main Street, Suite 1500 Dallas, TX 75201 Underwriting Expenses Stephens Inc. 111 Center Street P.O. Box 3507 Little Rock, AR 72201 Publication Reimbursement City of Fayetteville 113 West Mountain Fayetteville, AR 72701 Total: G-1 4839-5551-6443.2 $40,000.00 14,725.00 3,000.00 1,500.00 7,000.00 2,675.05 rQ12 tic KUTAK ROCK LLP LITTLE ROCK, ARKANSAS Telephone 501-975-3000 Facsimile 501-975-3001 Federal ID 47-0597598 May 20, 2014 City of Fayetteville, Arkansas Fayetteville, AR $6,330,000 CITY OF FAYETTEVILLE, ARKANSAS 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 Invoice No. 1954546 Matter No. 1123401-25 WATER AND SEWER SYSTEM REFUNDING REVENUE BONDS SERIES 2014 For Professional Legal Services Rendered and Expenses Incurred as Bond Counsel to the City of Fayetteville, Arkansas in connection with the issuance of the captioned bonds Total: 4818-4651-1131.1 42 000.00 0201 STANDARD & P00 R'S Standard & Poor's Financial Services, LLC RATINGS SERVICES Federal I.D.: 26-3740348 McGRAW HILL FINANCIAL MS. AMY MCFARLAND STEPHENS INC. SUITE 201 3425 NORTH FUTRALL DRIVE FAYETTEVILLE AR 72703 101321 ANALYTICAL SERVICES RENDERED IN CONNECTION WITH: US$6,485,000 City of Fayetteville, Arkansas, Water and Sewer System Refunding Revenue Bonds, Series 2014, dated: May 15, 2014, due: August 15, 2020 [Fee Discounted For Frequent Issuance] FOR BILLING INQUIRIES PLEASE CALL:1-877-286-8897 EMAIL: PFFEESVCS@STANDARDANDPOORS.COM For inquiries contact the client services representative listed on this invoice. Do not return it or direct any inquiries about the invoice to credit ratings analysts. S&P maintains a separation of commercial and analytical activities. Please note that our credit ratings analysts are not permitted to communicate, negotiate, arrange or collect credit rating fees. PLEASE REFERENCE INVOICE OR STATEMENT NUMBER ON ALL CHECKS AND WIRE TRANSFERS Invoice No.: 10344853 Customer No.: 1000069496 Invoice Date: 04/17/14 Page No.: 1 Print Date: 04/17/14 $14,725.00 This Invoice Due and Payable As Of: 04/17/14 INVOICE TOTAL $14,725.00 USD Make Checks Payable To: STANDARD&POOR'S RATINGS SERVICES WGRAW HILL FINANCIAL Standard & Poor's Financial Services, LLC Federal I.D.: 26-3740348 Billed To: Wire Transfer To: 0201 MS. AMY MCFARLAND STEPHENS INC. SUITE 201 3425 NORTH FUTRALL DRIVE FAYETTEVILLE AR 72703 Invoice No.: 10344853 Customer No.: 1000069496 Invoice Date: 04/17/14 Remit To: Please include invoice # STANDARD AND POOR'S Bank of America -San Francisco CA 2542 COLLECTION CENTER DRIVE Standard & Poor's CHICAGO, IL 60693 Account # 12334-02500 ABA # 0260-0959-3 Or E-mail: cashapps@mhfi.com 10000694968 10344853 01472500 1 700 10 07 0414 0 TOTAL AMOUNT DUE: $14,725.00 USD AMOUNT ENCLOSED: 0 BOK FINANCIAL CORPORATION FO Box 2300 T.1- OK 74102 FEE INVOICE Date: May 20, 2014 RE: $6,330,000 City of Fayetteville, Arkansas Water and Sewer System Refunding & Revenue Bonds, Series 2014 Acceptance Fee $3,000.00 Bond Escrow Fee $1,500.00 0 GrantThornton An instinct for growth'' To: Date: City of Fayetteville, Arkansas Paul Becker 113 West Mountain Fayetteville, AR 72701 Bill Number: 952740475 May 22, 2014 Grant Thornton LLP Suite 1500 1717 Main Street Dallas, TX 75201 T 214.561.2300 F 214.561.2370 www.GrantThornton.com This address should be used for correspondence only For all payments, kindly use remittance instructions below Client -Assignment Code: 0188774-00004 Billing for professional services rendered in accordance with our engagement letter dated April 22, 2014 in connection with the agreed-upon procedures related to the issuance of City of Fayetteville, Arkansas Water and Sewer System Refunding Revenue Bonds, Series 2014. Billing for professional services rendered in accordance with our engagement letter dated April 22, 2014 in connection with the issuance of our consent permitting the inclusion of our report dated June 24, 2013 on the 2012 financial statements in the Offering Statement, dated on May 6, 2014, of the City of Fayetteville, Arkansas Water and Sewer System Refunding Revenue Bonds, Series 2014. Total Amount of Bill: Terms: As agreed upon Federal ID No. 36-6055558 4,500.00 2,500.00 $ 7,000.00 GrantTharnton An instinct for growth' City of Fayetteville, Arkansas Paul Becker 113 West Mountain Fayetteville, AR 72701 Date: May 22, 2014 Bill Number: 952740475 Assignment Code: 00004 Remittance Copy Client Code: 0188774 LOB: 260 Bill Amount: Grant Thornton LLP Suite 1500 1717 Main Street Dallas, TX 75201 T 214.561.2300 F 214.561.2370 www.GrantThornton.com This address should be used for correspondence only For all payments, kindly use remittance instructions below TO ENSURE TIMELY PROCESSING PLEASE REMIT PAYMENT TO: Grant Thornton LLP 33911 Treasury Center Chicago, IL 60694-3900 Optional Wire Transfer Instructions: Bank Name: ABA#: Swift Code: Account#: Bank Address: Beneficiary: Reference: (Mandatory) Harris N.A. 071000 288 HATRUS44 2750602 111 West Monroe Street, Chicago, IL 60690 Grant Thornton LLP Bill Number: 952740475 Client Number: 0188774 When making an ACH payment, kindly send remittance detail via email to: Cash@us.gt.com $7,000.00 Stephens Jackson T. Stephens, 1923-2005 Chairman Emeritus in Perpetuity $6,330,000 City of Fayetteville, Arkansas Water and Sewer System Revenue Refunding Bonds Series 2014 Clearing: CUSIP Service Bureau DTC I-Preo Misc. (Postage, Federal Express, Ticket Charges) Day Loan Total Stephens Inc. 111 Center Street ( 5013772000 t Little Rock, AR 72201 501-377-2666 f 800-643-9691 $ 458.00 800.00 651.19 575.00 190.86 $2,675.05 www.stephens.com NORTHWEST ARKANSAS DEMOCRAT -GAZETTE NORTHWESTARKANSAS THE MORNING NEWS OFSPRINGDALE THE MORNING NEWS NEWSPAPE1 NORTHWEST ARKANSNS ASS TIMES TIMES LLC BENTON COUNTY DAILY RECORD 212 NORTH EASTAVENUE, FAYETTEVILLE, ARKANSAS 72701 ( P.O. BOX 1607, 72702 1479,442-1700 1 WWW.NWANEWS.COM AFFIDAVIT OF PUBLICATION I, Karen Caler, do solemnly swear that I am the Legal Clerk of the Northwest Arkansas Newspapers, LLC, printed and published in Washington and Benton County, Arkansas, bona fide circulation, that from my own personal knowledge and reference to the files of said publication, the advertisement of. City of Fayetteville - Ord. 5665 Was inserted in the Regular Editions on: March 13, 2014 Publication Charges: $583.65 Karen Caler Subscribed and sworii to before me This tq day of 446A__,,2014. Notary Public My Commission Expires: al2v/02+ ENotary ATHY WILES as - Benton counD2024� ic - Comm# 123ion Expires Feb 2 * *NOTE* * Please do not pay from Affidavit. Invoice will be sent. RECEIVED MAR 2 8 2014 CITY OF FAYETTEVILLE CITY CLERK'S OFFICE D? me MAMJ---, ORDINANCE NO. 5665 AN ORDINANCE AUTHORIZING THE ISSUANCE AND SALE OF NOT TO EXCEEDa e evl le $7,500,000 OF WATER AND SEWER SYSTEM REFUNDING REVENUE BONDS, SERIES ;.2014, BY THE CITY OF FAYETTEVILLE, ARKANSAS FOR THE PURPOSE OF REFUNDING THE CITY'S OUTSTANDING WATER AND SEWER SYSTEM REVENUE BONDS, SERIES ARKANSAS 2009; AUTHORIZING THE EXECUTION AND DELIVERY OF A FOURTH SUPPLEMENTAL TRUST INDENTURE PURSUANT TO WHICH THE SERIES 2014 BONDS WILL BE ISSUED ;AND SECURED; AUTHORIZING THE EXECUTION.AND DELIVERY OF AN OFFICIAL STATEMENT PURSUANT TO WHICH ,`THE, SERIES 2014 BONDS WILL BE OFFERED; AUTHORIZING THE EXECUTION AND DELIVERY OF A BOND PURCHASE AGREEMENT PROVIDING FOR THE SALE OF THE SERIES 2014 BONDS; AUTHORIZING THE EXECUTION AND DELIVERY OF AN ESCROW DEPOSIT AGREEMENT PROVIDING FOR THE REDEMPTION OF THE SERIES 2009 BONDS; AUTHORIZING THE EXECUTION AND DELIVERY OF A CONTINUING DISCLOSURE AGREEMENT; AND PRESCRIBING OTHER MATTERS RELATING THERETO. WHEREAS, the City of Fayetteville, Arkansas (the "City"), a city of the first class, presently owns and operates a'public water and sewer utility system (the "System") serving the residents of the City and its environs; and -.WHEREAS, the City Is authorized and empowered under the provisions of the Constitution and laws of the State of Arkansas, _, Ineluding particularly Amendment 65 to the Constitution and Arkansas Code Annotated (1998 Repl. & 2013 Supp.) Sections 14- ,.464-401 at seq., Sections 14-234-201 at seq, and Sections 14-235-201 at seq. (collectively, and as from time to time amended, "the "Authorizing Legislation"), to Issue and sell its water and sewer revenue bonds and to expend the proceeds thereof to "finance the costs of acquisition, construction, equipping, improving, maintaining, operating and repairing the System, and to refund any bonds issued under the Authorizing Legislation; and WHEREAS, pursuant to the provisions of Ordinance No. 5235 of the City, adopted and approved on April 21, 2009, the City has previously issued its Water and Sewer System Revenue Bonds, Series 2009 (the "Series 2009 Bonds"), in the original principal amount of $6,210,000, for the purpose of financing the cost of improvements to the System; and .,WHEREAS, pursuant to the provisions of Ordinance No. 5496 of the City, adopted and approved on April 17, 2012, the City 'has previously issued its Water and Sewer System Refunding Revenue Bonds, Series 2012 (the "Series 2012 Bonds"), in the `original principal amount of $3,665,000, for the purpose of refunding outstanding bonds of the City previously issued to finance sand refinance the cost of improvements to the System; and WHEREAS, in accordance with the provisions of the Authorizing Legislation, the City has now determined to issue its Water .and Sewer System Refunding Revenue Bonds, Series 2014 (the "Series 2014 Bonds"), In the aggregate principal amount of not.to exceed $7,500,000 for the purpose of (i) refunding all of the outstanding Series 2009 Bonds, and (III) paying printing, `underwriting, legal and other expenses incidental to the issuance of the Series 2014 Bonds; and . WHEREAS, the City has determined to issue and secure the Series 2014 Bonds on a parity basis with its outstanding Series 2012 Bonds pursuant to that certain Trust Indenture dated as of May 1, 2002, as amended and supplemented by a First Supplemental Trust Indenture dated as of May 1, 2004, by a Second Supplemental Trust Indenture dated as of June 1, 2009, and by a Third Supplemental Trust Indenture dated as of May 15, 2012, (as, amended and supplemented, the "Original Indenture"), by and between the City. and BOKF, N.A. dba Bank of Oklahoma (formerly Bank of Oklahoma, N.A.), Tulsa, Oklahoma (the "Bank of Oklahoma"), as trustee (the "Trustee"), as such Original Indenture may be amended and supplemented pursuant to a Fourth Supplemental Trust Indenture (the "Fourth Supplemental Indenture'l, by and between the City and the Trustee, a form of which Fourth Supplemental Indenture has been presented to and is before this meeting; and WHEREAS, the City proposes to enter into a Bond Purchase Agreement (the "Bond Purchase Agreement") in- substantially the form presented to and before this meeting, with Stephens Inc., Fayetteville, Arkansas (the "Undgrwriter"), providing for the sale "ofthe Series 2014 Bonds. NOW, THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF FAYE7-TEVILLE, ARKANSAS: ,Section 1. The City Council hereby finds and declares that the current refunding of the Series 2009 Bonds Is in the best Inter - of the City and the customers of the System due to the reduction of the interest expense relating to the Indebtedness :represented by the Series 2009 Bonds. ;Section 2. Under the authority of the Constitution and laws of the State of Arkansas, including particularly Amendment 65 to the Constitution of Arkansas and the Authorizing Legislation, there is hereby authorized the issuance of bonds of the City to be designated as "Water and Sewer System Refunding Revenue Bonds, Series 2014" (the "Series 2014 Bonds"). The Series 2014 Bonds shall be issued in the original aggregate principal amount of not to exceed Seven Million Five Hundred Thousand Dollars ;;($7,500,000), shall mature not later than August 15, 2020, and shall bear interest at the rates specified in the Bond Purchase Agreement; •The average yield on the Series 2014 Bonds shalt not exceed'2.75% per annum. The proceeds of the Series 2014. 86rids'Will be utilized, along with other available moneys, to effect a current refunding of the Series 2009 Bonds and to pay °;printing, underwriting, legal and other expenses incidental to the issuance of the Series 2014 Bonds. The Series 2014 Bonds shall be issued in the forms and denominations, shall be dated, shall be numbered, shall mature, shall be subject to redemp- tion prior to maturity, and shall contain such other terms, covenants and conditions, all as set forth In the Original Indenture, as amended and supplemented by the Fourth Supplemental Indenture. The Series 2014 Bonds shall be issued and secured by net revenues of the System on a parity basis with the pledge of net revenues securing the outstanding Series 2012 Bonds.' The, Mayor is hereby authorized and directed to execute and deliver the Series 2014 Bonds in substantially the form thereof contained in the Fourth Supplemental Indenture submitted to this meeting, and the City Clerk is hereby authorized and directed to execute and deliver the Series 2014 Bonds and to affix the seal of the City thereto, and the Mayor and City Clerk are hereby authorized and directed to cause the Series 2014 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 fo complete the Series 2014 Bonds in substantially the form contained In the Fourth Supplemental Indenture submitted o'tfiis'meeting, with such changes as shall be approved by such persons executing the Series 2014 Bonds, their execution to sotistituta conclusive evidence of such approval. ffoh'3: To prescribe the terms and conditions upon which the Series 2014 Bonds are to be executed, authenticated, ,':issued, accepted, held and secured, the Mayor is hereby authorizedanddirected to execute and acknowledge the Fourth Supplemental Trust Indenture (the "Fourth Supplemental Indenture"), by and between the City and the Trustee, and the City. Clerk is hereby authorized and directed to execute and acknowledge the. Fourth Supplemental 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 Fourth Supplemental Indenture to be accepted, executed and acknowledged by the Trustee. The Fourth Supplemental indenture is hereby approved In substantially the form submitted to this meeting, including, without limitation, the provisions thereof pertaining to the pledge of. System net revenues to the Series 2014 Bonds and the terms of the Series 2014 Bonds. The Mayor is hereby authorized to.confer with the Trustee, the Underwriter and Bond Counsel in order to complete the Fourth Supplemental Indenture in sub-. stantially the form submitted to this meeting, with such changes as shall be approved by such persons executing the Fourth Supplemental Indenture, their execution to constitute conclusive evidence of such approval. (Advice is given that a copy of the Fourth Supplemental 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 Series 2014 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.) Mayor Lioneld Jordan City Attorney Kit Williams City Clerk Sondra E. Smith aye eville City of Fayetteville Arkansas City Council Meeting Minutes March 04, 2014 City Council Meeting Minutes March 04, 2014 Page 1 of 14 Aldermen Ward 1 Position 1 — Adella Gray Ward I Position 2 — Sarah Marsh Ward 2 Position I — Mark Kinion Ward 2 Position 2 — Matthew Petty Ward 3 Position 1 — Justin Tennant Ward 3 Position 2 — Martin W. Schoppmeyer, Jr. Ward 4 Position 1— Rhonda Adams Ward 4 Position 2 — Alan T. Long A meeting of the Fayetteville City Council was held on March 04, 2014 at 6:00 p.m. 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 Adella Gray, Sarah Marsh, Mark Kinion, Matthew Petty, Justin Tennant, Martin Schoppmeyer, Rhonda Adams, Mayor Lioneld Jordan, City Attorney Kit Williams, City Clerk Sondra Smith, Staff, Press, and Audience. ABSENT: Alderman Alan Long Pledge of Allegiance Mayor's Announcements, Proclamations and Recognitions: None City Council Meeting Presentations, Reports and Discussion Items: Quarterly Financial Report — 4th Quarter 2013, Paul Becker, Finance Director Paul Becker, Finance Director gave the 4h Quarter Financial Report for 2013. Agenda Additions: None 113 West Mountain Fayetteville, AR 72701 (479) 575-8323 accessfayettevi lie. org Telecommunications Device for the Deaf TDD/TTY (479) 521-1316 City Council Meeting Minutes March 04, 2014 Page 2 of 14 Consent: Approval of the February 18, 2014 City Council meeting minutes. Approved Bid #13-57 Center Point Contractors, Inc.: A resolution to award Bid #13-57 and to authorize a contract with Center Point Contractors, Inc. for the replacement of six (6) rolling service doors in the amount of $64,500.00 at the Noland Wastewater Treatment Plant and the Biosolids Management Site. Resolution 4444 as recorded in the office of the City Clerk Federal Aviation Administration Lease Agreement: A resolution to approve a ten (10) year lease agreement for $31,020.00 per year with the Federal Aviation Administration for a facility at 4370 S. School Avenue for use by its Facilities Maintenance Team. Resolution 45-14 as recorded in the office of the City Clerk Hazmat Services Revenue: A resolution to approve a budget adjustment recognizing hazmat services revenue to the Fire Department, and authorizing an increase in the related expense budget. Resolution 46-14 as recorded in the office of the City Clerk Bid #14-14 Tennant Sales and Service: A resolution to award Bid #14-14 to Tennant Sales and Service of Minneapolis, Minnesota for the purchase of one Tennant S30 Sweeper in the amount of $44,291.00 for use by the Recycling and Trash Collection Division. Resolution 47-14 as recorded in the office of the City Clerk Bid #14-15 Terex Sales and Service: A resolution to award Bid #14-15 and authorize the purchase of one (1) 2015 Ford F550 Super Duty Pickup Truck with Reading Body and Auto Crane from Terex Utilities of North Little Rock in the amount of $77,777.00 for use by the Noland Wastewater Treatment.Plant. Resolution 48-14 as recorded in the office of the City Clerk Professional Turf Products: A resolution to authorize the purchase of two (2) Toro Groundsmaster 400D Multi -Deck Mowers from Professional Turf Products of Lenexa, Kansas for the Parks Division in the amount of $112,088.66 plus any tax pursuant to the National IPA Contract #120535, and to approve a budget adjustment to move funds to the fleet expense account. Resolution 49-14 as recorded in the office of the City Clerk 113 Wesf Mountain Fayetteville, AR 72701 (479) 575-8323 accessfayettevi lie. o rg Telecommunications Device for the Deaf TDDrM (479) 521-1316 City Council Meeting Minutes March 04, 2014 Page 3 of 14 Countryside Farm and Lawn: A resolution to authorize the purchase of two (2) John Deere Mower -Conditioners from Countryside Farm and Lawn. of Springdale, Arkansas for the Noland Wastewater Treatment Plant in the amount of $48,572.00 plus any applicable tax pursuant to an NJPA cooperative purchasing agreement. Resolution 50-14 as recorded in the office of the City Clerk Scott Equipment: A resolution authorizing the purchase of a Gradall XL4100 IV excavator truck from Scott Equipment of Springdale, Arkansas for the Transportation Division in the amount of $354,893.00 pursuant to an NJPA cooperative purchasing agreement. Resolution 51-14 as recorded in the office of the City Clerk Crafton Tull & Associates: A resolution to approve a contract with Crafton Tull & Associates in an amount not to exceed $83,225.00 for architectural and engineering services associated with the renovation of the Lake Fayetteville Softball Complex. Resolution 52-14 as recorded in the office of the City Clerk Alderman Gray moved to approve the Consent Agenda as read. Alderman Petty seconded the motion. Upon roll call the motion passed 7-0. Alderman Long was absent. Unfinished Business: ADM 13-4331 Amend Chapters 151, 162, 163 and 164: An ordinance to amend §164.10 Garage and/or Agricultural and Produce Sales; §161.10 (X) Unit 24 Home Occupation; §163.08 Home Occupations and §164.04 Urban Agriculture (fowl, bees, and goats) of the Unified Development Code. This ordinance was left on the First. Reading at the February 18, 2014 City Council meeting. Alderman Adams moved to suspend the rules and go to the second reading. Alderman Petty seconded the motion. Upon roll call the motion passed 7-0. Alderman Long was absent. City Attorney Kit Williams read the ordinance. Peter Nierengarten, Director of Sustainability & Strategic Planning gave a brief description of the ordinance. Teresa Maurer, 18235 Wildlife Road: I have served as the chair of the Fayetteville Forward Local Food Action Group since April 2009. Fayetteville can be an example to our region of an urban agrarian community and local food destination whose residents, farmers, businesses and institutions incorporate and benefit from easy access to great locally produced food. I support the ordinance. 113 West Mountain Fayetteville, AR 72701 (479) 575-8323 accessfayetteville.org Telecommunications Device for the Deaf TDDnTY (479) 521-1316 City Council Meeting Minutes March 04, 2014 Page 4 of 14 Adrienne Shaunfield, Director of Feed Fayetteville: We were formed in response to Arkansas being number one in the nation for hunger. Washington County has some of the highest numbers of hungry children. We work to create food security in our community through programs, partnerships and policies that create availability to local foods. We ask the Council to consider passing the proposed ordinance changes to help us improve access to healthy foods. Alderman Tennant: Thank you for what you do. If we do something like this, we must do it in the sense that we are helping those who really need to be helped, which is children and low income. These are people who are really impacted by food insecurity. In order to become an urban farmer, you have to either own your property or have permission if you rent. How does this benefit those who don't have the ability to own a property or can't get permission to do it? Adrienne Shaunfield: I think Fayetteville is a mixed use in every neighborhood, there is high income and low income housing. Perhaps their neighbor owns their own land and can grow it. If it is accessible within walking distance, the onsite sales of the produce is like a garage sale. So if you can walk down the street and buy some eggs or vegetables from a resident that will help. Alderman Tennant: Improved accessibility would be one of the major points? Adrienne Shaunfield: Yes Joanna Pollock, Tri Cycle Farms and University of Arkansas student earning an Environmental Dynamics Degree spoke in favor of the ordinance. Jeff Huber, Architect and Urbanist spoke in favor of the ordinance. Ralph Ellis, Ward 1 resident spoke in favor of the ordinance. Bernice Hembree, Board Chair of Apple Seeds and Ward 4 resident spoke in favor of the ordinance. Eric Goodspeed, Ward 4 and Family Medicine resident spoke in favor of the ordinance. Nicole Civita, Visiting Assistant Professor of Law at the University of Arkansas and graduate of the LL.M. Program in Agricultural and Food Law spoke in favor of the ordinance. Alderman Adams thanked Nicole Civita for giving helpful facts at the Ward 4 meeting on February 24, 2014 and answering questions. Nicole Civita, You are welcome. It has been a privilege to be a part of this process. Amber Alexander, Ward 4 resident spoke in favor of the ordinance. Alderman Kinion: We have heard a lot about Urban Agriculture as far as produce and bees. We haven't heard a lot about goats. I hope we will discuss this again in two weeks before we vote on it. I hope someone will bring forward some valuable information regarding that issue. I 113 West Mountain Fayetteville, AR 72701 (479) 575-8323 accessfayettevil le. org Telecommunications Device for the Deaf TDDITTY (479) 521-1316 City Council Meeting Minutes March 04, 2014 Page 5 of 14 was raised on a farm and have a degree in Food Science. I've never studied Urban Agriculture and this is new for me. There is an important opportunity for those individuals that support the expansion of our Urban Agriculture to continue with education so there is not so much misunderstanding in the community. There are a lot of neighborhoods that have covenants that are going to prevent goats. As we move forward there are opportunities and that is what I want us to focus on in our evaluation of changing the ordinance we currently have. Alderman Petty reflected about his experiences with gardening and the impact it made in his life. He feels that Council's role as city leaders is to turn the community into a setting that provides experiences to share. He stated experiences could range from a great night out on Dickson, enjoying a game or learning more about food. Alderman Petty moved to suspend the rules and go to the third and final reading. Alderman Adams seconded the motion. Upon roll call the motion passed 6-0. Alderman Adams, Gray, Marsh, Kinion, Petty and Mayor Jordan voting yes. Alderman Tennant and Schoppmeyer voting no. Alderman Long was absent. City Attorney Kit Williams read the ordinance. Mayor Jordan: I was raised on a farm and we didn't have any running water. I was raised in a four room house with two doors, front and back. The garden we had help sustain us. In studies that I have seen, approximately 18,000 children die worldwide a day from starvation. This is why I wanted something like this in our city. This may not be a perfect ordinance. We do know that 37% of families from Washington County have some kind of food insecurity. I believe this ordinance is a start and if we need to make adjustments, we will. Thank you to Peter Nierengarten for his work on this ordinance. Thank you to Matthew Petty. Alderman Schoppmeyer: I want to clarify that I am not against the ordinance. I am against voting for it when Alderman Long is not here. We have another amendment that he wrote that specifically addresses some of the issues in the ordinance. Alderman Tennant: There are still quite a few questions in my mind. Not the general idea of this, but what it means to make a change like this that could impact potentially many landowners in this city. If this passes tonight, I'm not going to lose any sleep over it. There will be a handful of people do this and that is fine. I do believe there might be some educational opportunities. I am not against it as a whole. One of my concerns was about goats due to the cost. My main concern is that this has to affect those who are food insecure. Mainly my concern would be for low income children of this city. I was thrilled to hear that the food bank is going to have chickens. I have too many questions making what I think is a hobby ordinance, a law of the land. I think east Fayetteville is a great part of our city. We have a tremendous group of people. There has been a lot of people concerned about property values. What if they want to sell their home and somebody has bees, goats and chickens next door to their house. 113 West Mountain Fayetteville, AR 72701 (479) 575-8323 accessfayettevi lie. o rg Telecommunications Device for the Deaf TDD/TTY (479) 521-1316 City Council Meeting Minutes March 04, 2014 Page 6 of 14 Alderman Marsh: I would like to thank everyone involved in crafting this ordinance and coming out and showing your support. This is about more than food insecurity, it is also learning opportunities. There are many people, such as myself, that would rather live in a neighborhood with goats and chickens than people who are more concerned with maintaining a certain image. I think it is becoming more common as young people grow up and buy homes. There is a new kind of impoverished people. People that had good jobs, went to college and lost those jobs during the recession. This ordinance can help those people. My goal for my garden this summer is to grow enough food for myself and to share with my close friends and neighbors. Alderman Gray: We started this discussion two weeks ago saying we would leave it on three readings. I'm not going to vote for it tonight. I came thinking we would talk about it tonight and another time. I want people to get their questions answered. Alderman Gray moved to table the ordinance to the March 18, 2014 City Council meeting. Alderman Schoppmeyer seconded the motion. Upon roll call the motion to table passed 5- 2. Alderman Gray, Marsh, Kinion, Tennant, and Schoppmeyer voting yes. Alderman Adams and Petty voting no. This ordinance was left on the Third Reading and Tabled to the March 18, 2014 City Council meeting. Amend §92.01 Definitions, §92.23 Impoundment and §92.24 Redemption of Animals: An ordinance to Amend §92.01 Definitions, §92.23 Impoundment and §92.24 Redemption of Animals of the Fayetteville Code to authorize the Animal Shelter to accept livestock and set the redemption fee for their release. This ordinance was left on the First Reading at the February 18, 2014 City Council meeting. Alderman Tennant moved to suspend the rules and go to the second reading. Alderman Gray seconded the motion. Upon roll call the motion passed 7-0. Alderman Long was absent. City Attorney Kit Williams read the ordinance. This ordinance was left on the Second Reading. Public Hearing: Piggy Back, LLC: A resolution to grant a certificate of public convenience and necessity to Piggy Back, LLC for the operation of four (4) taxicabs in the City of Fayetteville. Mayor Jordan opened the Public Hearing Greg Tabor, Chief of Police gave a brief description of the resolution. 113 West Mountain Fayetteville, AR 72701 (479) 575-8323 accessfayetteville.org Telecommunications Device for the Deaf TDDfTTY (479) 521-1316 City Council Meeting Minutes March 04, 2014 Page 7 of 14 Cole Stocking, Owner of Piggy Back read a brief statement he prepared. He stated Piggy Back will offer discounts and gift cards to passengers to local businesses that pay for their advertising. He stated that he wants to be a part of the growth of local businesses in Fayetteville. Alderman Kinion: I think this is a great idea. Coming from a corporate background I am concerned. It kind of reminds me of the pedicabs. We do have individuals looking for a free ride. When looking at this business model and knowing that we never had pedicabs that made it, do you have a concern when you are thinking about this? Cole Stocking: No, I don't and I'm not sure why pedicabs didn't succeed. Alderman Kinion: It is because no one paid. Cole Stocking continued to discuss his business model. City Attorney Kit Williams: Are you aware that one of the problems the pedicab companies had was they thought they would be able to serve the University and games and the University did not allow it? Cole Stocking: I have spoken with the University. They told me they allow six passes for game days. The east side of the stadium is cut off because they don't want the congestion. Alderman Adams: Do you have any plans to be on the trails? Cole Stocking: No. Alderman Tennant: Fully electric? Cole Stocking: Yes. A discussion followed on the different routes that Piggy Back would take. Alderman Tennant: I wish you the best and appreciate your entrepreneurial spirit. Do you have a charging station when they get low? Cole Stocking: Yes, I will have a charging station at the Beaver Electric building. Alderman Gray: As someone who enjoyed pedicabs in the past, I think it is a great idea. I thank you for bringing this idea to Fayetteville. Mayor Jordan: When I worked at the University we drove a very small vehicle. They would not allow us on the main thoroughfares. Greg Tabor: It is my understanding from the Department of Finance and Administration, that these vehicles, if they have the appropriate safety equipment, are legal to be operated on city streets. They are low speed vehicles. 113 West Mountain Fayetteville, AR 72701 (479) 575-8323 accessfayetteville.org Telecommunications Device for the Deaf TDDITTY (479) 521-1316 City Council Meeting Minutes March 04, 2014 Page 8 of 14 Mayor Jordan: Cole will have to go through the Department of Finance to make sure they are legal to be on the streets? Greg Tabor: That is correct. I think he has already had some discussions and there might be a letter in your packet that talks about that. Brice Curry, Dynasty Transportation spoke in opposition of the resolution. Chance Combs, Fayetteville resident spoke in favor of the resolution. Alderman Kinion: This reminds me of Hoot2Scoot that I have been seeing around town. Have we had any accidents with those? Greg Tabor: I am not aware of any accidents involving those. Alderman Kinion: I do hope you would reconsider your route. I don't think this should be on Martin Luther King. Cole Stocking: I will not access any of the main roads. Alderman Kinion: Some people do have a problem with driving at night. It would be nice if there was something like this and I can see all sorts of advantages. A great deal of caution is needed. City Attorney Kit Williams: His application was from four to fifteen vehicles. The resolution was written for four. If you wish to pass the resolution and grant anymore authority than four, then you would need a motion to amend. A discussion followed about the number of vehicles. Alderman Marsh: I know there is safety concern. I ride a scooter and it is probably a lot more dangerous than these. If the Department of Motor Vehicles is permitting these, then we will let them handle the safety concerns. I am really excited about this. Mayor Jordan: The chief and I have to keep everything safe around here. I always have to ask the safety questions because it is always a concern of mine. Mayor Jordan closed the Public Hearing Alderman Kinion moved to amend the resolution to state up to ten (10) cabs. Alderman Marsh seconded the motion. Upon roll call the motion to amend passed 7-0. Alderman Long was absent. Alderman Petty moved to approve the resolution. Alderman Gray seconded the motion. Upon roll call the resolution passed 7-0. Alderman Long was absent. 113 West Mountain Fayetteville, AR 72701 (479) 575-8323 accessfayettevi lie. org Telecommunications Device for the Deaf TDDfTTY (479) 521-1316 City Council Meeting Minutes March 04, 2014 Page 9of14 Resolution 53-14 as recorded in the office of the City Clerk New Business: 2014 Overlay/Sidewalk Projects: A resolution to approve the Transportation Division Overlay/Sidewalk Projects list for 2014. Terry Gulley, Transportation Services Director gave a brief description of the resolution. Alderman Kinion: There has been a plan to put sidewalks up and down Park Street to have access to Washington. Terry Gulley: It did not make the list this year. We tried to look at and talk to each Ward representative and let them prioritize the way they wished. We have not had a request for it recently. We can put it on the list for next year. Alderman Kinion: I hope next year it will be reconsidered as we bring it to the committee. Terry Gulley: I will make sure it is on the list. Don Marr, Chief of Staff gave a brief description of the project process. Alderman Kinion: Park Street was on the list in the past. It is going to an elementary school and there are a lot of children that walk on this street. Mayor Jordan: We will put it back on the list. Alderman Adams: Due to the ice and weather it looks like we have some new damage to streets and sidewalks that wasn't there when we made this list. Are we going to see some need for your crews to be pulled off these plans to fix other things? Terry Gulley: All the street stuff will be taken by the overlay crew, it won't affect the sidewalk plan. We have plenty of time on the overlay side due to all the construction in town. We aren't overly aggressive this year in pursuing tearing up more. They will have plenty of time to do any repairs that have come up from the winter weather. A discussion followed about the timeline for repairs due to the winter weather. Don Marr: We tend to see those damage results when we get out of freezing weather and into wet weather. Where roads have cracked and penetrated by water creates even more damage. We do anticipate some just as every other city in Northwest Arkansas is anticipating greater road repair. We have so many major road bond issues taking place. We tried to not have every other road under construction in our overlay plans. We do have some capacity for repairs if we identify that in the spring. 113 West Mountain Fayetteville, AR 72701 (479) 575-8323 accessfayetteville.org Telecommunications Device for the Deaf TDD/TTY (479) 521-1316 City Council Meeting Minutes March 04, 2014 Page 10 of 14 Alderman Marsh: I am pleased to see South School Avenue included on this list. It is a neighborhood commercial district with a lot of small businesses and high pedestrian count. Mayor Jordan: We are going from about 10,000 running feet a year to 32,000 running feet. This is a tremendous accomplishment and the most we have ever done in the history of this city. We will continue to fund the sidewalk program and truly make the city a walkable community with this program. Don Marr: Mayor, this is your transportation sales tax that was voted on state wide and the portion increase is revenue from that tax collection. We put ours in public transit and sidewalks. Alderman Petty moved to approve the resolution. Alderman Gray seconded the motion. Upon roll call the resolution passed 7-0. Alderman Long was absent. Resolution 54-I4 as recorded in the office of the City Clerk Partners For Better Housing Workforce Housing: A resolution to express the City Council's intent to sell a strip of land east of the new parking deck along School Avenue to Partners for Better Housing to screen the deck and provide workforce housing. Alderman Petty gave a brief description of the resolution. Alderman Petty moved to approve the resolution. Alderman Marsh seconded the motion. Upon roll call the resolution passed 7-0. Alderman Long was absent. Resolution 55-14 as recorded in the office of the City Clerk 2014 Employee Compensation Adjustment: A resolution to approve a budget adjustment in the amount of $1,216,000.00 to fund the city-wide 2014 Employee Compensation Adjustment. Paul Becker, Financial Director gave a brief description of the resolution. Alderman Marsh: I would like to propose that we include the City Council in the compensation adjustments. I know it is a sensitive issue to vote for our own raises. I think by tying our salaries to our employee's salary, it is a fair and reasonable strategy to keep our compensation appropriate. Mayor Jordan: What would that be? Alderman Marsh: This adjustment is 3.8% for our employees. We weren't included in the last adjustment that we gave our employees, so I believe about 8%. What is the total amount of percentage that we've raised our employee salary including this one and the one last year? 113 West Mountain Fayetteville, AR 72701 (479) 575-8323 accessfayetteville.org Telecommunications Device for the Deaf TDDIM (479) 521-1316 City Council Meeting Minutes March 04, 2014 Page 11 of 14 Paul Becker: I can't tell you off the top of my head because it was different in different areas. It is probably in the 8% or more area. Fire was increased by 11.5%, police was 7.5% and employees were 4%. Last year incorporated in the plan was to bring it up to a salary range based on a salary survey, so that distorted it. If we just look at the portion that would apply to this year would probably be about 3.8% also. Alderman Marsh: If we could just take the average of last year plus this year so we are raising our rate the same as we raise employee's rates. I know a lot of people have come to me thinking about running for City Council and then they find how much it pays and they don't do it. While that may be job security for us, I don't want to think that people would be limited by the pay. Mayor Jordan: Sarah, would that be about a 7% increase? Alderman Marsh: If that is what Paul thinks it is. Alderman Petty: I agree with everything you said, especially about encouraging people to run. I might even be convinced to support something like that, but not tonight. It is sudden and I don't think it is a good idea to tie our raises to employee raises. I am a supporter of the compensation plan that has been proposed and I have voted for every other one that has been proposed. There may come a time in the future where we aren't able to do that and I don't want to have the motivation of my own pay to be tied when the city might be in dire straits. I don't want to give anyone the opportunity to accuse me of something like that. The way the ordinance is written is that our pay goes up when the Mayor's pay goes up. Alderman Kinion: I would be willing to explore more options with Councilman Marsh. I don't like to think that we are excluding anyone from the opportunity to serve their community. I don't want it tied to this. No one wants to think that they are an elitist group that is representing a community. It should be inclusive and diverse. I do think we have an inclusive and diverse City Council currently. Mayor Jordan: This is almost identical to what we did last year. We have managed finances and with the revenue we have this raise covered. I don't know what next year holds, but right now we have money to cover these raises. I believe one of the greatest investments that we can make is in the staff. It keeps this city going. Alderman Kinion: All of this is not tied to sales tax and general revenue. Some of it is the Enterprise Fund. Mayor Jordan: The firemen are still below market and we are going to be looking at bringing them up to market at the next budget session. Don Marr: One of the reasons that this request is even possible is because of good financial management of our staff. Not having the mentality to spend your budget or lose it. Understanding that saving $862,000.00 from the appropriated budget gives us an opportunity to even have this discussion. It is paying for the request for 2014 through expense reductions and savings of 2013. I want to thank them for their efforts. 113 West Mountain Fayetteville, AR 72701 (479) 575-8323 accessfayetteville.org Telecommunications Device for the Deaf TDDlTTY (479) 521-1316 City Council Meeting Minutes March 04, 2014 Page 12 of 14 Alderman Marsh moved to amend the resolution to include the City Council. The motion died for lack of a second. Alderman Gray moved to approve the resolution. Alderman Kinion seconded the motion. Upon roll call the resolution passed 7-0. Alderman Long was absent. Resolution 56-14 as recorded in the office of the City Clerk Water and Sewer System Refunding Revenue Bonds, Series 2014: An ordinance authorizing the issuance and sale of not to exceed $7,500,000 of Water and Sewer System Refunding Revenue Bonds, Series 2014, by the City of Fayetteville, Arkansas for the purpose of refunding the City's outstanding Water and Sewer System Revenue Bonds, Series 2009; authorizing the execution and delivery of a Fourth Supplemental Trust Indenture pursuant to which the Series 2014 Bonds will be issued and secured; authorizing the execution and delivery of an Official Statement pursuant to which the Series 2014 Bonds will be offered; authorizing the execution and delivery of a Bond Purchase Agreement providing for the sale of the Series 2014 bonds; authorizing the execution and delivery of an Escrow Deposit Agreement providing for the redemption of the Series 2009 Bonds; authorizing the execution and delivery of a Continuing Disclosure Agreement; and prescribing other matters relating thereto. City Attorney Kit Williams read the ordinance. Paul Becker, Financial Director gave a brief description of the ordinance. Alderman Kinion: I am an employee with the Bank of Arkansas Mortgage which is a division of Bank of Oklahoma Financial. I am going to recuse myself from discussion or further activity associated with this. Alderman Marsh: We discussed this at the Water & Sewer Committee and approved it. Alderman Petty moved to suspend the rules and go to the second reading. Alderman Tennant seconded the motion. Upon roll call the motion passed 6-0. Alderman Kinion recused. Alderman Long was absent. City Attorney Kit Williams read the ordinance. Alderman Gray moved to suspend the rules and go to the third and final reading. Alderman Marsh seconded the motion. Upon roll call the. motion passed 6-0. Alderman Kinion recused. Alderman Long was absent. City Attorney Kit Williams read the ordinance. City Attorney Kit Williams: It has always been a pleasure to work with Dennis Hunt and Gordon Wilbourn as well as our staff. This went through many revisions and clarifications. 113 West Mountain Fayetteville, AR 72701 (479) 575-8323 accessfayetteville.org Telecommunications Device for the Deaf TDD/TTY (479) 521-1316 City Council Meeting Minutes March 04, 2014 Page 13 of 14 Mayor Jordan asked shall the ordinance pass. Upon roll call the ordinance passed 6-0. Alderman Kinion recused. Alderman Long was absent. Ordinance 5665 as Recorded in the office of the City Clerk McGoodwin, Williams and Yates, Inc. Amendment No. l: A resolution to approve Amendment No. 1 to the agreement with McGoodwin, Williams and Yates, Inc. for design services associated with the Recycling and Trash Collection Division Office Building Expansion and Site Improvements. Chris Brown, City Engineer gave a brief description of the resolution. Paul Becker: This is a design phase. This will be paid for by some rearrangements of projects that have been completed. Alderman Kinion: This was discussed and taken to the Water, Sewer & Solid Waste Committee. Being conservative, I always have a concern when we are taking things out of reserve. This is so needed. Alderman Petty moved to approve the resolution. Alderman Adams seconded the motion. Upon roll call the resolution passed 7-0. Alderman Long was absent. Resolution 57-14 as recorded in the office of the City Clerk City Council Agenda Session Presentations: Urban Forestry Advisory Board Annual Report — Don Steinkraus, UFAB Chair Economic Development Quarterly Report — Chung Tan, Director of Economic Development City Council Tour: None Announcements: Alderman Adams: Ward 4 cleanup on March 22, 2014 from 7:00 a.m. to 2:00 p.m. at Owl Creek School as well as the Recycling and Trash Collection facility. Don Marr: I want to remind citizens that recycling and trash service that was suspended on Monday and Tuesday due to weather and also those who are scheduled to have service tomorrow, put your recycling and trash out tonight. We will resume service tomorrow and will be servicing the flatter areas of town. We will get it all handled by Saturday. 113 West Mountain Fayetteville, AR 72701 (479) 575-8323 accessfayetteville.org Telecommunications Device for the Deaf TDDlTTY (479) 521-1316 City Council Meeting Minutes March 04, 2014 Page 14 of 14 The city is currently taking nominations for the 2014 City of Fayetteville Historic Preservation awards. The deadline is Monday, April, 1, 2014 by 5:00 p.m. You can visit the city's website or contact Jesse Fulcher in the Planning Department. Adjourn ent: 8:50 p.m. Ax Lioneld ordan ayor Sondra E. Smith, City Clerk/Treasurer 113 West Mountain Fayetteville, AR 72701 (479) 575-8323 accessfayetteville.org Telecommunications Device for the DeafTDD/TTY (479) 521-1316 ORDINANCE NO. 5665 AN ORDINANCE AUTHORIZING THE ISSUANCE AND SALE OF NOT TO EXCEED $7,500,000 OF WATER AND SEWER SYSTEM REFUNDING REVENUE BONDS, SERIES 2014, BY THE CITY OF FAYETTEVILLE, ARKANSAS FOR THE PURPOSE OF REFUNDING THE CITY'S OUTSTANDING WATER AND SEWER SYSTEM REVENUE BONDS, SERIES 2009; AUTHORIZING THE EXECUTION AND DELIVERY OF A FOURTH SUPPLEMENTAL TRUST INDENTURE PURSUANT TO WHICH THE SERIES 2014 BONDS WILL BE ISSUED AND SECURED; AUTHORIZING THE EXECUTION AND DELIVERY OF AN OFFICIAL STATEMENT PURSUANT TO WHICH THE SERIES 2014 BONDS WILL BE OFFERED; AUTHORIZING THE EXECUTION AND DELIVERY OF A BOND PURCHASE AGREEMENT PROVIDING FOR THE SALE OF THE SERIES 2014 BONDS; AUTHORIZING THE EXECUTION AND DELIVERY OF AN ESCROW DEPOSIT AGREEMENT PROVIDING FOR THE REDEMPTION OF THE SERIES 2009 BONDS; AUTHORIZING THE EXECUTION AND DELIVERY OF A CONTINUING DISCLOSURE AGREEMENT; AND PRESCRIBING OTHER MATTERS RELATING THERETO. WHEREAS, the City of Fayetteville, Arkansas (the "City"), a city of the first class, presently owns and operates a public water and sewer utility system (the "System") serving the residents of the City and its environs; and WHEREAS, the City is authorized and empowered under the provisions of the Constitution and laws of the State of Arkansas, including particularly Amendment 65 to the Constitution and Arkansas Code Annotated (1998 Repl. & 2013 Supp.) Sections 14-164-401 et seq., Sections 14-234-201 et seq. and Sections 14-235-201 et seq. (collectively, and as from time to time amended, the "Authorizing Legislation"), to issue and sell its water and sewer revenue bonds and to expend the proceeds thereof to finance the costs of acquisition, construction, equipping, improving, maintaining, operating and repairing the System, and to refund any bonds issued under the Authorizing Legislation; and WHEREAS, pursuant to the provisions of Ordinance No. 5235 of the City, adopted and approved on April 21, 2009, the City has previously issued its Water and Sewer System Revenue Bonds, Series 2009 (the "Series 2009 Bonds"), in the original principal amount of $8,210,000, for the purpose of financing the cost of improvements to the System; and Page 2 Ordinance No. 5665 WHEREAS, pursuant to the provisions of Ordinance No. 5496 of the City, adopted and approved on April 17, 2012, the City has previously issued its Water and Sewer System Refunding Revenue Bonds, Series 2012 (the "Series 2012 Bonds"), in the original principal amount of $3,665,000, for the purpose of refunding outstanding bonds of the City previously issued to finance and refinance the cost of improvements to the System; and WHEREAS, in accordance with the provisions of the Authorizing Legislation, the City has now determined to issue its Water and Sewer System Refunding Revenue Bonds, Series 2014 (the "Series 2014 Bonds"), in the aggregate principal amount of not to exceed $7,500,000 for the purpose of (i) refunding all of the outstanding Series 2009 Bonds, and (iii) paying printing, underwriting, legal and other expenses incidental to the issuance of the Series 2014 Bonds; and WHEREAS, the City has determined to issue and secure the Series 2014 Bonds on a parity basis with its outstanding Series 2012 Bonds pursuant to that certain Trust Indenture dated as of May 1, 2002, as amended and supplemented by a First Supplemental Trust Indenture dated as of May 1, 2004, by a Second Supplemental Trust Indenture dated as of June 1, 2009, and by a Third Supplemental Trust Indenture dated as of May 15, 2012 (as amended and supplemented, the "Original Indenture"), by and between the City and BOKF, N.A. dba Bank of Oklahoma (formerly Bank of Oklahoma, N.A.), Tulsa, Oklahoma (the "Bank of Oklahoma"), as trustee (the "Trustee"), as such Original Indenture may be amended and supplemented pursuant to a Fourth Supplemental Trust Indenture (the "Fourth Supplemental Indenture"), by and between the City and the Trustee, a form of which Fourth Supplemental Indenture has been presented to and is before this meeting; and WHEREAS, the City proposes to enter into a Bond Purchase Agreement (the "Bond Purchase Agreement") in substantially the form presented to and before this meeting, with Stephens Inc., Fayetteville, Arkansas (the "Underwriter"), providing for the sale of the Series 2014 Bonds. NOW, THEREFORE, BE IT ORDAINED by the City Council of the City of Fayetteville, Arkansas that: Section 1. The City Council hereby finds and declares that the current refunding of the Series 2009 Bonds is in the best interests of the City and the customers of the System due to the reduction of the interest expense relating to the indebtedness represented by the Series 2009 Bonds. Section 2. Under the authority of the Constitution and laws of the State of Arkansas, including particularly Amendment 65 to the Constitution of Arkansas and the Authorizing Legislation, there is hereby authorized the issuance of bonds of the City to be designated as "Water and Sewer System Refunding Revenue Bonds, Series 2014" (the "Series 2014 Bonds"). The Series 2014 Bonds shall be issued in the original aggregate principal amount of not to Page 3 Ordinance No. 5665 exceed Seven Million Five Hundred Thousand Dollars ($7,500,000), shall mature not later than August 15, 2020, and shall bear interest at the rates specified in the Bond Purchase Agreement. The average yield on the Series 2014 Bonds shall not exceed 2.75% per annum. The proceeds of the Series 2014 Bonds will be utilized, along with other available moneys, to effect a current refunding of the Series 2009 Bonds and to pay printing, underwriting, legal and other expenses incidental to the issuance of the Series 2014 Bonds. The Series 2014 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 Original Indenture, as amended and supplemented by the Fourth Supplemental Indenture. The Series 2014 Bonds shall be issued and secured by net revenues of the System on a parity basis with the pledge of net revenues securing the outstanding Series 2012 Bonds. The Mayor is hereby authorized and directed to execute and deliver the Series 2014 Bonds in substantially the form thereof contained in the Fourth Supplemental Indenture submitted to this meeting, and the City Clerk is hereby authorized and directed to execute and deliver the Series 2014 Bonds and to affix the seal of the City thereto, and the Mayor and City Clerk are hereby authorized and directed to cause the Series 2014 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 Series 2014 Bonds in substantially the form contained in the Fourth Supplemental Indenture submitted to this meeting, with such changes as shall be approved by such persons executing the Series 2014 Bonds, their execution to constitute conclusive evidence of such approval. Section 3. To prescribe the terms and conditions upon which the Series 2014 Bonds are to be executed, authenticated, issued, accepted, held and secured, the Mayor is hereby authorized and directed to execute and acknowledge the Fourth Supplemental Trust Indenture (the "Fourth Supplemental Indenture"), by and between the City and the Trustee, and the City Clerk is hereby authorized and directed to execute and acknowledge the Fourth Supplemental 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 Fourth Supplemental Indenture to be accepted, executed and acknowledged by the Trustee. The Fourth Supplemental Indenture is hereby approved in substantially the form submitted to this meeting, including, without limitation, the provisions thereof pertaining to the pledge of System net revenues to the Series 2014 Bonds and the terms of the Series 2014 Bonds. The Mayor is hereby authorized to confer with the Trustee, the Underwriter and Bond Counsel in order to complete the Fourth Supplemental Indenture in substantially the form submitted to this meeting, with such changes as shall be approved by such persons executing the Fourth Supplemental Indenture, their execution to constitute conclusive evidence of such approval. (Advice is given that a copy of the Fourth Supplemental 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.) Page 4 Ordinance No. 5665 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 Series 2014 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 Series 2014 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. (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 the redemption of the Series 2009 Bonds, the Mayor is hereby authorized and directed to execute an Escrow Deposit Agreement to be dated as of the date of its execution (the "Escrow Agreement"), by and between the City and the Bank of Oklahoma, as escrow trustee (the "Escrow Trustee"), and the Mayor is hereby authorized and directed to cause the Escrow Agreement to be executed by the Escrow Trustee. The Escrow Agreement is hereby approved in substantially the form submitted to this meeting, and the Mayor is hereby authorized to confer with the Escrow Trustee, Underwriter and Bond Counsel in order to complete the Escrow Agreement in substantially the form submitted to this meeting, with such changes as shall be approved by such persons executing the Escrow Agreement, their execution to constitute conclusive evidence of such approval. Page 5 Ordinance No. 5665 (Advice is given that a copy of the Escrow 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 provide for continuing disclosure of certain financial and operating information with respect to the City and the System 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 Bank of Oklahoma, as dissemination agent (the "Dissemination Agent"), and the Mayor is hereby authorized and directed to cause the Continuing Disclosure Agreement to be executed by the Dissemination Agent. 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 Dissemination Agent, 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 8. The rates for System Water Services enacted pursuant to Ordinance No. 5123, adopted and approved on April 1, 2008, and the rates for System Sewer Services enacted pursuant to Ordinance No. 5129, adopted and approved on April 15, 2008, and Ordinance No. 5438, adopted and approved on September 20, 2011, are hereby ratified and confirmed. Section 9. 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 Series 2014 Bonds and to effect the execution and delivery of the Fourth Supplemental Indenture, the Bond Purchase Agreement, the Official Statement, the Escrow Agreement, the Continuing Disclosure Agreement and a Tax Regulatory Agreement relating to the tax exemption of interest on the Series 2014 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 10. Kutak Rock LLP, Little Rock, Arkansas, is hereby appointed to act as Bond Counsel on behalf of the City in connection with the issuance and sale of the Series 2014 Bonds. Page 6 Ordinance No. 5665 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 4" day of March, 2014. APPROVED: ATTEST: By: _ 066A��- f SON RA E. SMITH, City Clerk/ Trete T,,,, �•`a��G��R T Y pX,gsG�%. ci ° ,-' FAYETTEVILLE:-�''j= ° ph -A N' P �`.: Paul Becker Submitted By City of Fayetteville Item Review Form 2014-0084 Legistar File Number 3/4/2014 City Council Meeting Date - Agenda Item Only N/A for Non -Agenda Item Action Required: Finance Department Approval of an ordinance authorizing the issuance and sale of not to exceed $7,500,000 of Water and Sewer System Refunding Revenue Bonds, Series 2014 Does this item have a cost? $0.00 Cost of this request Account Number Project Number Budgeted Item? Category or Project Budget Funds Used to Date $0.00 Remaining Balance Budget Adjustment Attached? C� Program or Project Name Program or Project Category Fund Name Original Contract Number: WERE Comments: ,. L. V20130812 qTERED Previous Ordinance or Resolution # L04 7 , Original Contract Number: WERE Comments: ,. L. THE CITY OF FAYETTEVILLE, ARKANSAS DEPARTMENT CORRESPONDENCE NON -AGENDA ITEM MEMO To: Mayor Jordan Thru: Don Marr, Chief of Staff From: Paul A Becker Date: February 14, 2014 Subject: Approval of a Bond Ordinance Authorizing the Issuance of Water and Sewer Refunding Bonds PROPOSAL: Due to the current low interest rates in the Municipal Bond Market, the City is in a position to refinance the outstanding Water and Sewer 2009 Revenue Bonds. The refunding issue would be up to $7,500,000.By doing this the City should save in excess of $200,000 in reduced interest rate costs. RECOMMENDATION: The Staff recommends approval of refunding the outstanding 2009 Water and Revenue Bonds through the issuance of 2014 Water and Sewer Revenue Bonds. BUDGET IMPACT This refunding issue should result in interest cost savings to the City. ORDINANCE NO. 5438 AN ORDINANCE AMENDING SECTION 51.137 MONTHLY SEWER RATES OF THE CODE OF FAYETTEVILLE BY REDUCING CERTAIN EXTRA STRENGTH SURCHARGES TO SEWER RATES, AND PROVIDING FOR AN EFFECTIVE DATE BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF FAYETTEVILLE, ARKANSAS: Section 1. That the City Council of the City of Fayetteville, Arkansas hereby amends §51.137 Monthly Sewer Rates of the Code of Fayetteville by deleting the table in subsection (E)(1) and replacing it with the following table: Table F3 Extra Strength Surcharges After 12/1/2011 Extra Strength BODS $0.3145 per pound Extra Strength TSS $0.2209 per pound Section 2. That this Ordinance shall not become effective until December 1, 2011. PASSED and APPROVED this 20th day of September, 2011. APPROVED: M. ATTEST: SONDRA E. SMITH, City ngnrr:vh -FAYETTEVILLE: 9s .qR kqN S Z P •o..o• �"VIGT06N,G��e David Jurgens Submitted By City of Fayetteville Staff Review Form City Council Agenda Items and Contracts, Leases or Agreements 06 -Sep -11 City Council Meeting Date Agenda Items Only Utilities Director Utilities Division Department Action Approval of an ordinance rescinding and replacing �bm 3 t nmontmy Sewer Kates (t) txtra strength surcnarge la F3 Extra Strength Surcharges to update Biological Oxygen Demand (BODS) industrial surcharge, and hold a public hearing. N/A Cost of this request Account Number Project Number Budgeted Item t.._.....J ✓i Category / Project Budget Funds Used to Date Remaining Balance Budget Adjustment Attached Program Category / Project Name Water and Sewer Program / Project Category Name Water/Sewer Fund Name t69w, I I Previous Ordinance or Resolution # at Original Contract Date: 9-/7- It Original Contract Number. Date �A cl�.L ()I- - LLt--= — Finance a Intemal Services Director Date Chief of Staff Date ayoi Dat Received in City 0 3 -1(- 11 H I I: 7$ KC -V b Clerk's Office Received in ER ERE Mayor's Office i Comments: Revised January 15. 2nng Zaye eville ARKANSAS To: Thio: From: Date: Subject: Fayetteville City Council CITY COUNCIL AGENDA MEMO MEETING DATE OF SEPTEMBER 6, 2011 THE CITY OF FAYETTEVILLE, ARKANSAS Mayor Lioneld Jordan Don Marr, Chief of Staff David Jurgens, PE, Utilities Director Water, Sewer, Solid Waste Committee August 9, 2011 Approval of an Ordinance Changing Section 51.137 Table F3, Extra Strength Surcharges, Specifically Changing the Industrial Biological Oxygen Demand (BOD) Surcharge RECOMMENDATION City Administration recommends approval of an ordinance changing section 51.137, Table F3, extra strength surcharges, specifically reducing the industrial biological oxygen demand (BOD) surcharge from $0.4421/pound to $0.3145/pound based on the actual costs of treating this excess BOD with current wastewater treatment processes. BACKGROUND In early 2011, City staff met individually with industries that may be impacted by the potential new permit limits for the Noland Wastewater Treatment Facility (WWTF). In the discussions, staff was requested to review the industrial surcharge for biochemical oxygen demand (BOD). Staff evaluated both the in-house costs relating to treating high concentrations of BOD as well as comparing our rates to those of other Northwest Arkansas cities. The City's WWTFs are biological processes; cultivated bacteria treat the wastewater. These bacteria rely on the food - the organic material that enters the plant in the wastewater - to maintain a healthy bacteria population. The food quantity is reflected as BODS, the five-day biochemical oxygen demand, or the amount of oxygen the organisms in the water will use while processing the food. As with any other living population, the WWTF bacteria health depends upon the quality, quantity, and consistency of this food source. Additionally, other constituents in wastewater — metals, herbicides, pesticides, and other materials- impact the bacteria population health. In reasonable amounts, BOD provides stability for the bacteria population, helping the bacteria survive changes in volume and concentration of other wastewater constituents. The industry standard for "reasonable amounts" is 300 milligrams per liter (mg/1) or parts per million (ppm). Higher concentrations cause increased treatment costs to reduce the BOD concentration to our discharge limit, which is as low as 5 mg/l, depending upon the season. Surcharges for higher concentrations are intended to directly offset the cost of treating the higher concentration. Industrial surcharges are important economic development factors. Water using industries closely evaluate rates, surcharges, and pretreatment requirements to compare capital and operational costs between potential locations. DISCUSSION When the City's wastewater system was split with startup of the West Side WWTF, the Noland WWTF became heavily influenced by and reliant upon industrial wastewater. All Fayetteville industries now flow to the Noland WWTF, and make up 20 — 40% of the total Noland flow. As a result, we rely upon the BOD from food industries to offset the nutrient poor wastewater from our non-food industries. If a food industry were to change their process whereby they significantly reduced the quantity of BOD in their wastewater (through capital investment in a wastewater pretreatment facility at their manufacturing plant), it could significantly impact the Noland WWTF. Staff analyzed the actual cost of this treatment, and detennined our actual cost to treat BOD is $0.3145 per pound, $0.1276 below the current rate. Staff also compared the cost of other area cities, shown in the table below. BOD Sol -Non -sol CCMemo Aug] i Current BOD Industrial Surchar a Rates ' Rogers bills for carbonaceous BOD (CBOD), has the right to prohibit CBOD and TSS >300 mg/L, and all Rogers poultry processors have on-site pretreatment. 2 Rogers fees have not changed since 1990 Industries will address these surcharges in one of two ways: (1) build on-site wastewater treatment facilities to reduce the concentrations in their effluent; or (2) discharge wastewater with minimal or no pretreatment and pay any resulting surcharges. In Fayetteville, Pinnacle Foods pretreats their wastewater, and have minimal surcharges. Tyson's does not pretreat (other than screening out larger sized particles). Estimated surcharges for Fayetteville industries are shown below, based on 2010 loadings and 2011 surcharge rates. 2011 Estimated Surcharge Costs/Revenues- Current Rate Industry TSS Charged # BOD BOD Charged # TSS City $/Ib Charges for concentrations > (mg/L $/Ib Charges for concentrations > m /L Bentonville 0.28 300 0.28 300 Fayetteville 0.4421 300 0.2209 300 Rogers 0.151242 300 0.199008 300 Springdale 0.336 289 0.397 300 ' Rogers bills for carbonaceous BOD (CBOD), has the right to prohibit CBOD and TSS >300 mg/L, and all Rogers poultry processors have on-site pretreatment. 2 Rogers fees have not changed since 1990 Industries will address these surcharges in one of two ways: (1) build on-site wastewater treatment facilities to reduce the concentrations in their effluent; or (2) discharge wastewater with minimal or no pretreatment and pay any resulting surcharges. In Fayetteville, Pinnacle Foods pretreats their wastewater, and have minimal surcharges. Tyson's does not pretreat (other than screening out larger sized particles). Estimated surcharges for Fayetteville industries are shown below, based on 2010 loadings and 2011 surcharge rates. 2011 Estimated Surcharge Costs/Revenues- Current Rate Industry TSS Charged # 2011 Estimated TSS Surcharge BOD Charged # 2011 Estimated BOD Surcharge 2011 Estimated Total Surcharge Pinnacle Foods 0 0 56,375 $24,923.38 $24,923.38 Tyson Foods, Inc. 765,980 $169,204.95 843,088 $372,729.20 $541,934.14 Hiland Dairy 120,867 $26,699.45 416,467 $184,119.86 $210,819.30 Totals 1 $195,904.39 $53,141.13 $581,772.43 $777,676.82 Proposed Ordinance Time Line September 6 First reading of surcharge adjustment ordinance, announce public hearing September 7 Advertise surcharge adjustment September 20 Public hearing, second reading of rate adjustment ordinance, optional third and final reading of surcharge adjustment ordinance. October 4 Possible third reading of surcharge adjustment ordinance December 1, 2011 Effective date of new sewer surcharge New � 51.137 Table F3 Table F3 Extra Strength Surcharges After 12/1/2011 Extra Strength BODS $0.3145 per pound Extra Strength TSS $0.2209 per pound BUDGET IMPACTS This surcharge change to reflect current actual BOD treatment costs, the industrial surcharge revenues would drop by an estimated $167,913 per year, using 2010 flow characteristics and 2011 surcharge rates. This reduction will be reflected in the 2012 budget. The effect of this change on Fayetteville users are shown in the table below. BOD Sol -Non -sol CCMemo Augl 1 Difference Between Industry 2011 Estimated 2011 Estimated Cost and Charge Current Surcharge Treatment Cost (Potential Revenue Reduction Pinnacle Foods $24,923.38 $17,729.93 $7,193.45 Tyson Foods, Inc. $541,934.14 $434,356.11 $107,578.03 Hiland Dairy $210,819.30 $157,678.17 $53,141.13 Totals $777,676.82 $609,764.22 $167,912.60 BOD Sol -Non -sol CCMemo Augl 1 ORDINANCE NO. AN ORDINANCE AMENDING SECTION 51.137 MONTHLY SEWER RATES OF THE CODE OF FAYETTEVILLE BY REDUCING CERTAIN EXTRA STRENGTH SURCHARGES TO SEWER RATES, AND PROVIDING FOR AN EFFECTIVE DATE BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF FAYETTEVILLE, ARKANSAS: Section 1. That the City Council of the City of Fayetteville, Arkansas hereby amends §51.137 Monthly Sewer Rates of the Code of Fayetteville by deleting the table in subsection (E)(1) and replacing it with the following table: Table F3 Extra Strength Surcharges After 12/1/2011 Extra Strength BODS $0.3145 per pound Extra Strength TSS $0.2209 per pound Section 2. That this Ordinance shall not become effective until December 1, 2011. PASSED and APPROVED this APPROVED: day of , 2011. ATTEST: By: By: LIONELD JORDAN, Mayor SONDRA E. SMITH, City Clerk/Treasurer Currco fusiur--, FAYETTEVILLE CODE OF ORDINANCES TITLE V PUBLIC WORKS monthly meter service charge rates 6 inch 126.96 146.00 prescribed by subsections (A) and (B) of this 8 inch 266.62 306.61 section shall commence as of the first billing statements issued after April 30, 2008. 10 inch 457.06 525.61 (4) Customers served through the White River Rural Water System will pay the outside city rate plus an additional $5.94 per month for all bills issued prior to January 1, 2012. This additional amount will not be charged on any bills issued after December 31, 2011. (5) The State of Arkansas mandated Safe Drinking Water Act fee shall be added to the monthly water utility bill. (C) Monthly standby fire protection service charge. (1) Charges for unmetered service connections for standby fire protection and fire hydrants shall be: Table C-1 Monthly Standby Fire Protection Service Charge After April 30, 2008 Line Size Inside City Outside City 2 inch $ 6.84 $ 7.86 3 inch 20.51 23.59 4 inch 41.03 47.18 6 inch 113.96 131.05 8 inch 239.32 275.21 10 inch 410.26 471.79 Table C-2 Monthly Standby Fire Protection Service Charge After December 31, 2008 Line Size Inside City Outside City 2 inch $ 7.23 $ 8.32 3 inch 21.70 24.96 4 inch 43.41 49.92 6 inch 120.57 138.66 8.1nch 253.20 291.18 10 inch 434.05 499.16 Table C-3 Monthly Standby Fire Protection Service Charge After December 31, 2009 Line Size Inside City Outside City 2 inch $ 7.62 $ 8.76 3 inch 22.85 26.28 4 inch 45.71 52.56 Table C-4 Monthly Standby Fire Protection Service Charge After December 31, 2010 Line Size Inside City Outside City 2 inch $ 8.02 $ 9.22 3 inch 24.06 27.67 4 inch 48.13 55.35 6 inch 133.69 153.74 8 inch 280.75 322.86 10 inch 481.28 553.47 (2) Monthly Standby Fire Protection Service Charge After December 31, 2011. Starting the day after December 31, 2011, the monthly standby fire protection service charge shall be increased by 3% per year. (3) Fire protection lines shall not be connected to the water system downstream from a meter. (Code 1965, §21-25; Ord. No. 1165, 4-18-58; Ord. No. 2144, 9-2-75; Ord. No. 2594, 2-5-80; Ord. No. 3197, 7-1-86; Ord. No. 3409, 2-21-89; Ord. No. 3431, 6-6-89; Ord. No. 3491, 7- 17-90; Ord. No. 3513, 9-18-90; Ord. No. 3519, 11-20-90; Ord. No. 4059, §1, 10-7-97; Ord. No. 4223, 2-15-00; Code 1991, §51.136; Ord. No. 4530 12-02-02; Ord. No. 4540, 02- 03-04; Ord. 5123,4-1-08) 51.137 Monthly Sewer Rates (A) Monthly sewer rates. (1) All monthly sewer charges shall be calculated from the customer's monthly water usage. The following monthly rates are hereby fixed as rates to be charged for sewer services: Table D-1 Monthly Sewer Rates Per 1,000 Gallons Before January 1, 2009 Class Usage Rate Cost per In Gallons 1,000 gallons Residential First 2,000 gallons $3.10 Greater than 3.10 2,000 gallons Non -Residential All Usage 2.42 Major Industrial All Usage 2.42 Farmington All Usage 4.66 CD51:38 FAYETTEVILLE CODE OF ORDINANCES TITLE V PUBLIC WORKS Outside city All Usage 4.66 Class 85% of Cost per Residential metered 2.81 Elkins water usage $3.00 Usage above Greater than 4.00 Non=Residential 85% of 1.98 Non -Residential metered 3.02 Major Industrial water usage 3.03 Table D-2 Monthly Sewer Rates Per 1,000 Gallons After December 31, 2008 Class Usage Rate Cost per Residential In Gallons 1,000 gallons Residential First 2,000 gallons $3.00 19.35 Greater than 4.00 Non=Residential 2,000 gallons 3.18 Non -Residential All Usage 3.02 Major Industrial All Usage 3.03 Farmington All Usage 5.13 Outside city All Usage 5.57 Elkins 85% of 3.64 Elkins metered 3.53 Elkins water usage 1.96 Usage above 1.91 85% of 1.85 metered water usage Table D-3 Monthly Sewer Rates Per 1,000 Gallons After December 31, 2009 Class Usage Rate Cost per Residential In Gallons 1,000 gallons Residential First 2,000 gallons $3.07 19.35 Greater than 4.10 Non=Residential 2,000 gallons 3.18 Non -Residential All Usage 3.10 Major Industrial All Usage 3.21 Farmington All Usage 5.28 Outside city All Usage 5.74 Elkins 85% of metered 3.64 Elkins water usage 509.76 1 509.76 Usage above 1.96 85% of metered 1.91 water usage Table D-4 Monthly Sewer Rates Per 1,000 Gallons After December 31, 2010 Class Usage Rate Cost per Outside Cityt In Gallons 1,000 allons Residential First 2,000 gallons $3.14 1 inch Greater than 4.18 19.35 2,000 gallons 21.99 Non=Residential All Usage 3.18 Major Industrial All Usage 3.40 Farmington All Usage 5.44 Outside city All Usage 5.91 171.97 85% of metered 6 inch Elkins water usage 3:75 8 inch Usage above 509.76 1 509.76 85% of metered 1.96 water usage (2) Beginning January 1, 2012, all monthly sewer quantity charge- usage rates per 1,000 gallons shall be increased by 3% per year. (3) Sewer related fees levied by the Cities of Farmington or Greenland shall be added to the wastewater utility bill at the request of Farmington or Greenland. These fees may be calculated on a per -thousand volumetric usage or a per month basis. (B) Monthly sewer service charge. (1) In addition to the above, each customer shall pay a monthly sewer service charge in accordance with the following schedule: Table E-1 Monthly Sewer Service Charge Prior to January 1, 2009 Meter Size Inside City Outside Cityt Farmingtont 5/8" x 3/4 " $ 10.36 $ 10.35 $ 10.35 1 inch 13.47 19.35 19.35 1 Y2 inch 21.99 34.33 34.33 2 inch 31.44 49.32 49.32 3 inch 73.01 104.40 104.40 4 inch 120.26 171.97 171.97 6 inch 238.37 340.87 340.87 8 inch 356.48 1 509.76 1 509.76 CD51:39 FAYETTEVILLE CODE OF ORDINANCES TITLE V PUBLIC WORKS (E) Extra Strength Surcharge. (1) For all, commercial and industrial customers whose wastewater discharge is greater than 300 mg/1 of BODS and/or TSS, the City shall levy an Extra Strength Surcharge for each parameter in accordance with the following unit charges: Table F3 Extra Stren th Surchar es Surcharge in dollars Before After After After BOD Unit = 1/1/08 12/31 /08 12/31/09 12/31/10 Extra $0.2669 $0.3336 $0.4170 $0.4421 Strength per per per per BODS pound pound pound und Extra $0.1334 $0.1668 $0.2084 Strength per per per 1$0.2�209 r TSS pound pound poundnd (2) Extra Strength Surcharges shall be billed monthly and shall be computed on the basis of water meter reading (wastewater discharge volume). (3) Starting after December 31, 2011, Extra Strength Surcharges shall be increased by 3% per year. (4) Computation of extra strength surcharges shall be based on the following formula: (a) Extra strength surcharge: V x 8.34 x [BOD Unit Charge (BOD - 300) + SS Unit Charge (SS - 300)j (b) Where: S = Surcharge in dollars V = Sewer volume in million gallons 8.34 = Pounds per gallon of water BOD Unit = Unit charge for BOD in charge dollars per pound BOD = BOD strength index in parts per million 300 = Allowed BOD strength in parts per million SS unit = Unit charge for suspended charge solids in dollars per pound SS = Suspended solids strength index in parts per million by CD51:41 300 weight = Allowed SS Strength in parts per million by weight (F) Elkins sewer charges. (1) Elkins' payment for wastewater treatment shall be based on 85% of the metered water purchased. The volume of wastewater received by Fayetteville at the "Point of Connection" shall be measured by the installed wastewater meter. Volumes of wastewater below or above the agreed upon percentage (85%) of metered water, as measured by the wastewater meter, shall be recorded on a monthly basis, with a reconciliation of the net difference to occur semiannually in June and December. If the reconciliation volume is over the agreed upon percentage, this amount shall be billed to Elkins in June and December at the actual computed cost of wastewater collection to and treatment at the Noland Wastewater Treatment Plant, not including the calculated rate of return and not including depreciation charges, but including any capacity surcharge, based on the most recent rate as determined in paragraph B of this Contract. If the reconciliation volume is below the agreed upon percentage, the actual amount billed for the difference shall be refunded to Elkins in June and December (2) Elkins impact fee charges, The City of Elkins shall pay an additional $0.25 per 1,000 gallons of wastewater, for all wastewater volume charges including both the 85% of metered water volume and for wastewater in excess of the 85% of the metered water purchased billed volume. (Code 1965, §21-26; Ord. No. 1165, 4-18-58; Ord. No. 3197, 7-1-86; Ord. No. 3285, 8-4-87; Ord. No. 3398, 1-3-89; Ord. No. 3491, 7-17-90; Ord. No. 3637, §§1, 2, 8-18-92; Ord. No. 4059, §2,10-7-97*, Code 1991, §51.137; Ord. No. 4530, 12- 02-03; Ord. No. 4803, 12-20-05; Ord. 4998, 4-3-07; Ord. 5129, 4-15-08) 51.138 Definitions Pertaining to Water and Sewer Rates For the purpose of the sections pertaining to water and sewer rates, the following definitions shall apply unless the context clearly indicates or requires a different meaning: (A) City of Farmington customer. Customer whose structure being served for water and/or wastewater is physically located within the incorporated limits of the City of Farmington, NORTHWEST ARKANSAS DEMOCRAT -GAZETTE NORTHWEST ARKANSAS THE MORNING NEWS OF SPRINGDALE THE MORNING NEWS OF ROGERS NORTHWEST ARKANSAS TIMES NEWSPAPE16LLC gENTON COUNTY DAILY RECORD 212 NORTH EASTAVENUE, FAYETTEVILLE, ARKANSAS 72701 1 P.O. BOX 1607, 72702 1479-442-1700 1 WWW,NWANEWS.COM AFFIDAVIT OF PUBLICATION 1, Cathy Wiles, do solemnly swear that I am the Legal Clerk of the Northwest Arkansas Newspapers, LLC, printed and published in Washington and Benton County, Arkansas, bona fide circulation, that from my own personal knowledge and reference to the files of said publication, the advertisement of: City of Fayetteville Ordinance -5438 Was inserted in the Regular Editions on: September 29, 2011 Publication Charges: $64.85 &Y,X, w, Cathy Wile Subscribed and sworM',,, before me Thi44 day of , 2011. oary Public My Commission Expires: E ACNER8AUER N COUNTY W . ARKAkSA.g Zq*Q3 April 16.2017 1 No. 12M21 RECEIVED OCT 0 7 2011 CITY OF FAYETTEVILLE CITY CLERK'S OFFICE *NOTE** Please do not pay from Affidavit. Invoice will be sent. ORDINANCE NO. 5129 AN ORDINANCE REPEALING AND REPLACING § 51.137, MONTHLY SEWER RATES, OF THE FAYETTEVILLE CODE OF ORDINANCES. BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF FAYETTEVILLE, ARKANSAS: Section 1. That the City Council of the City of Fayetteville, Arkansas hereby repeals § 51.137, Monthly Sewer Rates, of the Fayetteville Code of Ordinances, and adopts an amended version of §51.137, Monthly Sewer Rates, as set forth in Exhibit A, attached hereto, and incorporate herein by reference as if set forth word-for-word in its entirety. PASSED and APPROVED this 15th day of April, 2008.� o IJ o a FAYETTEVILLE: APPROVED: ATTEST: GT0 ,,-S By:4�4By: DAN COODY, Mayor SONDRA E. SMITH, City Clerk/Treasurer EXHIBIT A 51.137 Monthly Sewer Rates (A) Monthly sewer rates. (1) All monthly sewer charges shall be calculated from the customer's monthly water usage. The following monthly rates are hereby fixed as rates to be charged for sewer services: Table D-1 Monthly Sewer Rates Per 1,000 Gallons Before Januaryl,2009 Class Usage Rate Cost per In Gallons 1,000 gallons Residential First 2,000 $3.10 $3.10 Greater than Greater than 4.10 2,000 3.10 Non -Residential gallons 3.10 Non -Residential All Usage 2.42 Major Industrial All Usage 2.42 Farmington All Usage 4.66 Outside city All Usage 4.66 85% of 3.64 Elkins metered 2.81 Elkins water usage Usage Usage 1.91 above 85% 1.98 of metered water usage Table D-2 Monthly Sewer Rates Per 1,000 Gallons After December 31, 2008 Class Usage Rate Cost per In Gallons 1,000gallons_ Residential First 2,000 gallons $3.00 Greater than Greater than 4.10 2,000 4.00 Non -Residential gallons 3.10 Non -Residential All Usage 3.02 Major Industrial All Usage 3.03 Farmington All Usage 5.13 Outside city All Usage 5.57 85% of 3.64 Elkins metered 3.53 Elkins water usage Usage 85% of 1.91 above 85% 1.85 of metered water usage Table D-3 Monthly Sewer Rates Per 1,000 Gallons After December 31, 2009 Class Usage Rate Cost per In Gallons 1,000 gallons Residential First 2,000 gallons $3.07 Greater than Greater than 4.10 2,000 gallons Non -Residential All Usage 3.10 Major Industrial All Usa a 3.21 Farmington All Usage 5.28 Outside city All Usage 5.74 85% of metered water 3.64 Elkins usage Usage above 85% of 1.91 metered water usa e Table D-4 Monthly Sewer Rates Per 1,000 Gallons After December 31, 2010 Class Usage Rate Cost per In Gallons 1,000 gallons Residential First 2,000 gallons $3.14 Greater than _ 4.18 2,000 gallons Non -Residential All Usage 3.18 Major Industrial All Usage 3.40 Farmington All Usa a 5.44 Outside city All Usage 5.91 85% of metered water 3.75 Elkins usage Usage above 85% of 1.96 metered water usage (2) Beginning January 1, 2012, all monthly sewer quantity charge- usage rates per 1,000 gallons shall be increased by 3% per year. (3) Sewer related fees levied by the Cities of Farmington or Greenland shall be added to the wastewater utility bill at the request of Farmington or Greenland. These fees may be calculated on a per - thousand volumetric usage or a per month basis. (B) Monthly sewer service charge. (1) In addition to the above, each customer shall pay a monthly sewer service EXHIBIT A charge in accordance with the following schedule: Table E-1 Monthly Sewer Service Charge Prior to January 1, 2009 Meter Size Inside City Outside Cityt Farmingtont 5/8" x'/" $ 10.36 $ 10.35 $ 10.35 1 inch 13.47 19.35 19.35 1 % inch 21.99 34.33 34.33 2 inch 31.44 49.32 49.32 3 inch 73.01 104.40 104.40 4 inch 120.26 171.97 171.97 6 inch 238.37 340.87 340.87 8 inch 356.48 509.76 509.76 Table E-2 Monthly Sewer Service Charge After December 31, 2008 Meter Size Inside City Outside Cityt Farmingtont 5/8" x %" $ 12.45 $ 12.40 $ 11.40 1 inch 16.20 23.10 21.30 1'/ inch 26.45 41.10 37.80 2 inch 37.80 54.30 50.00 3 inch 87.75 125.50 115.30 4 inch 144.50 206.60 189.85 6 inch 286.45 409.60 376.40 8 inch 428.40 612.60 563.00 Table E-3 Monthly Sewer Service Charge After December 31, 2009 Meter Size Inside City Outside Cityt Farmingtont 5/8" x W $ 12.80 $ 12.80 $ 11.70 1 inch 16.65 23.80 21.90 1 %2 inch 27.15 42.30 38.90 2 inch 38.85 55.90 51.50 3 inch 90.20 129.25 118.75 .4 inch 148.60 212.80 195.55 6 inch 294.50 421.88 387.70 8 inch 440.45 631.00 579.90 Table E-4 Monthly Sewer Service Charge After December 31, 2010 Meter Inside City Outside Farmingtont Size 57.60 Cityt 5/8" x'/" $ 13.20 $ 13.20 $ 12.10 1 inch 17.15 24.50 22.60 1'/ inch 28.00 43.60 40.10 2 inch 40.05 57.60 53.05 3 inch 93.00 133.10 122.30 4 inch 153.25 219.20 201.50 6 inch 303.70 434.50 400.00 8 inch 454.20 650.00 597.30 tCost of Service Methodology required by contract. (2) Beginning January 1, 2012, all monthly sewer service charges shall be increased by 3% per year. (C) Determination of sewer quantity charge for residential customers. (1) In the case of residential customers residing in a single family home, duplex, triplex, and/or fourplex, the average monthly water consumption for the preceding months of December, January, and February shall be computed separately for each customer, and a uniform monthly charge for each customer shall be determined by applying the schedule of rates set out in subsection (A) of this section to such average monthly water consumption. In the case of a residential user for whom a uniform monthly charge has been established and who moves to a new location the same uniform monthly charge shall apply at the new location. In the case of new residential customers, sewer averages shall be established based on the number of individuals residing within the dwelling unit, at a rate of 2,100, gallons per customer per month. This methodology of sewer averaging shall not apply to multi -family structures containing five (5) or more units in a contiguous building. (2) In the case of sewer customers who do not have a water meter provided by a public water utility, the sewer usage volume billed shall be the average volume of all users in the sewer system in like dwellings from the most recent system -wide sewer average calculation. (D) Determination of charge for non-residential and major industrial customers. In the case of non-residential and/or major industrial customers, the monthly sewer charge shall be determined by applying the schedule of rates prescribed in subsection (A) of this section to the monthly water usage of such customers. In the event that a non- residential or major industrial customer discharging waste into the city's sanitary EXHIBIT A sewer system produces evidence to the Water and Wastewater Director demonstrating that a substantial portion of the total amount of water from all sources used for all purposes does not reach .the sanitary sewer which is in excess of the factors used in establishing the rates in subsection (A) of this section, an estimated percentage of total water consumption to be used in computing charges may be established by the Water and Wastewater Director. The factors used in establishing said rates are on file in the office of the Water and Wastewater Director and are incorporated herein by reference thereto. Any rate so adjusted by the Water and Wastewater Director shall be effective for a 12 -month period beginning with the billing for the month when rates adjudged hereby go into effect. (E) Extra Strength Surcharge. (1) For all commercial and industrial customers whose wastewater discharge is greater than 300 mg/I of BODS and/or TSS, the City shall levy an Extra Strength Surcharge for each parameter in accordance with the following unit charges: Table F3 Extra Stren th Surchar es Allowed BOD strength in parts Before After After After charge 1/1/08 12/31 /08 12/31/09 12/31/10 Extra $0.2669 $0.3336 $0.4170 $0.4421 Strength per per per per BODS pound pound pound pound Extra $0.1334 $0.1668 $0.2084 $0.2209 Strength per per per per TSS pound I pound I pound I pound (2) Extra Strength Surcharges shall be billed monthly and shall be computed on the basis of water meter reading (wastewater discharge volume). (3) Starting after December 31, 2011, Extra Strength Surcharges shall be increased by 3% per year. (4) Computation of extra strength surcharges shall be based on the following formula: (a) Extra strength surcharge: S = V x 8.34 x (BOD Unit Charge (BOD - 300) + SS Unit Charge (SS - 300)] (b) Where: S = Surcharge in dollars V = Sewer volume in million gallons 8.34 = Pounds per gallon of water BOD unit = Unit charge for BOD in charge dollars per pound BOD = BOD strength index in parts per million 300 = Allowed BOD strength in parts per million SS unit = Unit charge for suspended charge solids in dollars per pound SS = Suspended solids strength index in parts per million by weight 300 = Allowed SS Strength in parts per million by weight (F) Elkins sewer charges. (1) Elkins' payment for wastewater treatment shall be based on 85% of the metered water purchased. The volume of wastewater received by Fayetteville at the "Point of Connection" shall be measured by the installed wastewater meter. Volumes of wastewater below or above the agreed upon percentage (85%) of metered water, as measured by the wastewater meter, shall be recorded on a monthly basis, with a reconciliation of the net. difference to occur semiannually In June and December. If the reconciliation volume is over the agreed upon percentage, this amount shall be billed to Elkins in June and December at the actual computed cost of wastewater collection to and treatment at the Noland Wastewater Treatment Plant, not including the calculated rate of return and not including depreciation charges, but including any capacity surcharge, based on the most recent rate as determined in paragraph B of this Contract. If the reconciliation volume is below the agreed upon percentage, the actual amount billed for the difference shall be refunded to Elkins in June and December (2) Elkins impact fee charges. The City of Elkins shall pay an additional $0.25 per 1,000 gallons of wastewater, for all wastewater volume charges including both the 85% of metered water volume and for wastewater in excess of the 85% of the metered water purchased billed volume. ORDINANCE NO. 5123 AN ORDINANCE REPEALING AND REPLACING §51.136, MONTHLY WATER RATES, OF THE FAYETTEVILLE CODE OF ORDINANCES. BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF FAYETTEVILLE, ARKANSAS: Section 1. That the City Council of the City of Fayetteville, Arkansas hereby repeals §51.136, Monthly Water Rates, of the Fayetteville Code of Ordinances, and adopts an amended version of §51.136, Monthly Water Rates, as set forth in Exhibit A, attached hereto, and incorporate herein by reference as if set forth word-for-word in its entirety. PASSED and APPROVED this 1St day of April, 2008. o'�Y �F•'°G9� APPROVED: ATTEST: V ; FAYf TTEV�LLE; .� By: By: 4ytGl.aV '`•.SGT©� Ge.��• DAN COODY, Mayor SONDRA E. SMITH, City Clerk/Treasurer++ns3so�asx 51.136 Monthly Water Rates Effective as of the first billing statements issued after April 30, 2008, the following monthly rates shall be fixed as rates to be charged for water furnished by the waterworks system of the city, which rates the City Council finds and declares to be reasonable and necessary minimum rates to be charged. All non -emergency water uses shall be billed to the user, to include but not limited to water used for: use within structures; business; manufacturing; irrigation; retail by another water utility; City uses; educational purposes; medical purposes; water system routine non -emergency uses; wastewater system routine non -emergency uses; non-profit uses; fire department non- emergency uses to include training and equipment calibration; construction of new water mains; street cleaning; and wet down of construction sites and materials. Emergency water use that does not pass through a water system meter shall not be billed, including fire fighting, water leaks, water leak repair, and emergency water line flushing. The volumes used for these emergency purposes should be estimated and submitted monthly to the Business Office Manager and the Water/Sewer Operations Manager. (A) Monthly water rates. (1) The water usage of each customer shall be determined each month by meter measurement and the amount per 1,000 gallons to be paid for water usage by each customer shall be computed on the basis of the following schedule of rates. The minimum billing shall be 1,000 gallons per month. Table A-1 Monthly Water Rates After April 30, 2008 Cost per 1,000 1 jallons Class Usage Rate Inside Outside Class (In Gallons) City City First 2,000 $2.11 $2.43 Next 13,000 2.81 3.23 Residential Over 15,000 3.98 1 4.58 Non- First 300,000 2.55 2.93 Residential Over 300,000 2.28 2.62 Major Over 300,000 1.95 2.24 Major All Usage 1.77 2.04 Industrial First 300,000 3.09 3.55 Irrigation First 300,000 2.81 1 3.23 Over 300,000 1.84 2.11 1.95 Wholesale Reduced Peak 1.84 1.84 Wholesale Demand 2.16 Peak Demand 2.04 2.04 Table A-2 Monthly Water Rates After December 31, 2008 Cost per 1,000 gallons Class Usage Rate Inside Outside (In Gallons) City City First 2,000 $2.25 $2.59 Next 13,000 2.99 3.44 Residential Over 15,000 4.24 4.88 Non- First 300,000 2.61 3.00 Residential Over 300,000 2.28 2.62 Major Over 300,000 2.11 2.43 Major Industrial All Usage 1.89 2.17 Irrigation First 300,000 3.09 3.55 Over 300,000 2.16 2.48 Reduced Peak 1.95 1.95 Wholesale Demand Peak Demand 2.16 2.16 Table A-3 Monthly Water Rates After December 31, 2009 Cost per 1,000 gallons Class Usage Rate Inside Outside (In Gallons) City City First 2,000 $2.39 $2.75 Next 13,000 3.17 3.64 Residential Over 15,000 4.49 5.16 Non- Residential First 300,000 2.68 3.08 Over 300,000 2.28 2.62 Major All Usage 2.01 2.31 Industrial First 300,000 3.64 4.19 Irrigation First 300,000 3.37 3.88 Over 300,000 2.70 3.11 Reduced Peak 2.01 2.01 Wholesale Demand Peak Demand 2.23 2.23 Table A-4 Monthly Water Rates After December 31, 2010 Cost per 1,000 gallons Class Usage Rate Inside Outside (In Gallons) City City First 2,000 $2.53 $2.91 Next 13,000 3.36 3.86 Residential Over 15,000 4.75 1 5.46 Non- Residential First 300,000 2.75 3.16 Over 300,000 2.45 2.82 Major Industrial All Usage 2.14 2.46 Irrigation First 300,000 3.64 4.19 Over 300,000 3.28 3.77 (2) Beginning January 1, 2012, all monthly water rates shall be increased by 3% per year. (3) All bills under such schedules shall be computed by adding the applicable meter service charge prescribed by subsection (B) to the amount determined to be due for water usage under this schedule. Applicable sales tax and franchise fees shall be added to the bill so computed. (4) When a common facility/building is served by multiple water meters and the water usage is for the same purpose, customers may petition the Water & Wastewater Director and/or the Finance & Internal Services Director to have the water consumption aggregated and have the tiered rates apply to the aggregated quantity. (5) Water used for flushing and sampling of newly constructed water lines, fire department training and equipment calibration, and other similar uses requiring a large volume and/or high velocity of water movement shall employ a fire hydrant meter of the appropriate size for the use. If a fire hydrant meter cannot be used due to high flow or volume requirements, then the volume of water used shall be measured by using a pitot gauge to determine the gallons per minute and by timing the flow of water to be able to calculate total volume. In the cases of fire department training and equipment calibration, sewer line washing, street sweeping, and other uses where the equipment employed has a built-in water meter, these built in water meters may be used. All such meters other than those on fire trucks must be evaluated by the Meter Superintendent. These water uses shall be billed at the same rates as non- residential customers. (6) Monthly wholesale treated water rates outside city limits are based on Cost of Service Methodology. (B) Monthly water service charge. (1) In addition to the above, each customer shall pay a monthly water service charge in accordance with the following schedule: Table B-1 Monthly Water Service Charge After Apr! 30, 2008 Reduced Peak 2.07 2.07 Wholesale Demand $4.00 $4.60 $5.00 Peak Demand 2.30 2.30 (2) Beginning January 1, 2012, all monthly water rates shall be increased by 3% per year. (3) All bills under such schedules shall be computed by adding the applicable meter service charge prescribed by subsection (B) to the amount determined to be due for water usage under this schedule. Applicable sales tax and franchise fees shall be added to the bill so computed. (4) When a common facility/building is served by multiple water meters and the water usage is for the same purpose, customers may petition the Water & Wastewater Director and/or the Finance & Internal Services Director to have the water consumption aggregated and have the tiered rates apply to the aggregated quantity. (5) Water used for flushing and sampling of newly constructed water lines, fire department training and equipment calibration, and other similar uses requiring a large volume and/or high velocity of water movement shall employ a fire hydrant meter of the appropriate size for the use. If a fire hydrant meter cannot be used due to high flow or volume requirements, then the volume of water used shall be measured by using a pitot gauge to determine the gallons per minute and by timing the flow of water to be able to calculate total volume. In the cases of fire department training and equipment calibration, sewer line washing, street sweeping, and other uses where the equipment employed has a built-in water meter, these built in water meters may be used. All such meters other than those on fire trucks must be evaluated by the Meter Superintendent. These water uses shall be billed at the same rates as non- residential customers. (6) Monthly wholesale treated water rates outside city limits are based on Cost of Service Methodology. (B) Monthly water service charge. (1) In addition to the above, each customer shall pay a monthly water service charge in accordance with the following schedule: Table B-1 Monthly Water Service Charge After Apr! 30, 2008 Meter Size Inside City Outside City Wholesale 5/8 x 3/" $4.00 $4.60 $5.00 1 inch 5.55 6.38 7.00 1 '/ inch 9.70 11.16 12.15 2 inch 14.10 16.22 17.70 3 inch 32.90 37.84 41.30 4 inch 54.45 62.62 68.30 6 inch 108.85 125.18 136.70 8 inch 163.30 187.80 205.00 Table B-2 Monthly Water Service Charge After December 31, 2008 Meter Size Inside City Outside City Wholesale 5/8" x 3/4" $4.25 $4.89 $5.30 1 inch 5.90 6.79 7.40 1 '/ inch 10.30 11.85 12.85 2 inch 15.00 17.25 18.75 3 inch 34.95 40.19 43.80 4 inch 57.85 66.53 72.25 6 inch 115.65 133.00 144.90 8 inch 173.50 199.53 216.90 Table B-3 Monthly Water Service Charge After December 31, 2009 Meter Size Inside City Outside City Wholesale 5/8" x 3/4" $4.50 $5.18 $5.60 1 inch 6.25 7.19 7.80 1 %Z inch 10.90 12.54 13.55 2 inch 15.90 18.29 19.75 3 inch 37.00 42.55 45.10 4 inch 61.25 70.44 76.10 6 inch 122.45 140.82 149.20 8 inch 183.70 211.26 228.40 Table B-4 Monthly Water Service Charge After December 31, 2010 Meter Size Inside Outside Wholesale City City 1 *14 111 i 518° X Y4" $4.75 $5.46 $6.00 1 inch 6.60 7.59 8.30 1 '/ inch 11.50 13.23 14.45 2 inch 16.75 19.26 21.00 3 inch 39.05 44.91 46.50 4 inch 64.65 74.35 81.10 6 inch 129.30 148.70 153.70 8 inch 193.90 222.99 240.50 (2) Beginning January 1, 2012, all monthly water service charges shall be increased by 3% per year. (3) The monthly treated water rates and the monthly meter service charge rates prescribed by subsections (A) and (B) of this section shall commence as of the first billing statements issued after April 30, 2008. (4) Customers served through the White River Rural Water System will pay the outside city rate plus an additional $5.94 per month for all bills issued prior to January 1, 2012. This additional amount will not be charged on any bills issued after December 31, 2011. (5) The State of Arkansas mandated Safe Drinking Water Act fee shall be added to the monthly water utility bill. (C) Monthly standby fire protection service charge. (1) Charges for unmetered service connections for standby fire protection and fire hydrants shall be: Table C-1 Monthly Standby Fire Protection Service Charge After April 30, 2008 Line Size Inside City Outside City 2 inch $ 6.84 $ 7.86 3 inch 20.51 23.59 4 inch 41.03 47.18 6 inch 113.96 131.05 8 inch 239.32 275.21 10 inch 410.26 1 471.79 Table C-2 Monthly Standby Fire Protection Service Charge After December 31, 2008 Line Size Inside City Outside City 2 inch $ 7.23 $ 8.32 3 inch 21.70 24.96 4 inch 43.41 49.92 6 inch 120.57 138.66 8 inch 253.20 291.18 10 inch 434.05 499.16 Table C-3 Monthly Standby Fire Protection Service Charge After December 31, 2009 Line Size Inside City Outside City 2 inch $ 7.62 $ 8.76 3 inch 22.85 26.28 4 inch 45.71 52.56 6 inch 126.96 146.00 8 inch 266.62 306.61 10 inch 457.06 525.61 Table C-4 Monthly Standby Fire Protection Service Charge After December 31, 2010 Line Size Inside City Outside City 2 inch $ 8.02 $ 9.22 3 inch 24.06 27.67 4 inch 48.13 55.35 6 inch 133.69 153.74 8 inch 280.75 322.86 10 inch 481.28 553.47 (2) Monthly Standby Fire Protection Service Charge After December 31, 2011. Starting the day after December 31, 2011, the monthly standby fire protection service charge shall be increased by 3% per year. (3) Fire protection lines shall not be connected to the water system downstream from a meter. (Code 1965,21-25; Ord. No. 1165, 4-18-58; Ord. No. 2144, 9-2-75; Ord. No. 2594, 2-5-80; Ord. No. 3197, 7- 1-86; Ord. No. 3409, 2-21-89; Ord. No. 3431, 6-6-89; Ord. No. 3491, 7-17-90; Ord. No. 3513, 9-18-90; Ord. No. 3519, 11-20-90; Ord. No. 4059,(1, 10-7-97; Ord. No. 4223, 2-15-00; Code 1991, §51.136; Ord. No. 4530 12-02-02; Ord. No. 4540, 02-03-04) 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, 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 in connection with the issuance by the City of its $6,330,000 Water and Sewer System Refunding Revenue Bonds, Series 2014 (the "Bonds"). 2. Attached hereto as Exhibit A is a true, complete and correct copy of Ordinance No. 5123 (the "Water Rate Ordinance"), duly adopted by a majority of the City Council at a duly called meeting of the City Council, open to the public, held April 1, 2008. The Water Rate Ordinance sets the rates to be charged for water services of the City's water and sewer system (the "System"), and the Water Rate 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 Water Rate 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 Water Rate Ordinance to the people for adoption or rejection. Attached hereto as Exhibit B is a true, complete and correct copy of Ordinance No. 5129, duly adopted by a majority of the City Council at a duly called meeting of the City Council, open to the public, held April 15, 2008. Attached hereto as Exhibit C is a true, complete and correct copy of Ordinance No. 5438, duly adopted by a majority of the City Council at a duly called meeting of the City Council, open to the public, held September 20, 2011. Ordinance No. 5129, as amended by Ordinance No. 5438 (collectively, "the Sewer Rate Ordinance"), sets the rates to be charged for sewer services of the System, and the Sewer Rate 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 Sewer Rate 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 Sewer Rate Ordinance to the people for adoption or rejection. Attached hereto as Exhibit D is a true, complete and correct copy of Ordinance No. 5665 (the "Bond Ordinance"), duly adopted by a majority of the City Council at a duly called meeting of the City Council, open to the public, held March 4, 2014. 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 E is a true, complete and correct copy of the minutes of a meeting of the City Council held March 4, 2014, 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. 4839-5551-6443.2 Attached hereto as Exhibit F is a publisher's affidavit showing publication of the Bond Ordinance in the Northwest Arkansas Times, a newspaper published and having general circulation in the City, on March 13, 2014. 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 the 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 March 4, 2014 meeting referred to in paragraph 2 above, with such changes not inconsistent with the Bond Ordinance as have been approved by the officers executing the same. Document Date Other Party or Parties Fourth Supplemental Trust as of BOKF, NA, as trustee (the Indenture May 15, 2014 "Trustee") Escrow Deposit Agreement May 20, 2014 BOKF, NA, as escrow trustee (the "Escrow Trustee) Tax Regulatory Agreement May 20, 2014 Trustee Continuing Disclosure May 20, 2014 BOKF, NA, as dissemination Agreement agent (the "Dissemination Agent") Bond Purchase Agreement May 6, 2014 Stephens Inc. (the "Underwriter") Official Statement May 6, 2014 None The Fourth Supplemental Trust Indenture, the Escrow Deposit Agreement, the Tax Regulatory Agreement, the Continuing Disclosure Agreement, the Bond Purchase Agreement and the Official Statement 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 forth 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 the City Documents and the undersigned City Clerk of the City did manually attest the Indenture and the Escrow Deposit Agreement. The undersigned Mayor of the City did manually execute and the undersigned City Clerk of the City did manually attest $6,330,000 aggregate principal amount of the Bonds, issued 2 4839-5551-6443.2 in the form of fully registered typewritten bonds numbered from R14-1 through R14-7, inclusive, initially dated as of May 15, 2014. 6. The City has duly adopted the Sewer Rate Ordinance, the Water Rate Ordinance and the Bond Ordinance (and has duly pledged the Net Revenues described therein) and has duly authorized, executed and delivered the Bonds and each of the City Documents by all necessary action under the Constitution and laws of the State of Arkansas, including particularly Amendment 65 and Arkansas Code Annotated §§ 14-234-201 et seq.; Arkansas Code Annotated §§ 14-235-201 et seq.; and Arkansas Code Annotated §§ 14-164-401 et seq. (collectively, the "Authorizing Legislation"). As of the date hereof, the Sewer Rate Ordinance, the Water Rate Ordinance, the Bond Ordinance, 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. The City has complied in all respects with the provisions of the Authorizing Legislation and has full legal right, power and authority to issue the Bonds for the purposes stated in the Authorizing Legislation and to enter into the Bond Purchase Agreement, to adopt the Bond Ordinance, to issue, sell and deliver the Bonds as provided in the Bond Purchase Agreement, and to carry out and consummate all other transactions contemplated by the City Documents. 7. Any certificate signed by an officer of the City (including this certificate) and 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 an impression thereof has been placed on each of the Bonds. 9. The meetings of the City Council of the City referred to in paragraph 2 hereof were open to the public in compliance with the provisions of Arkansas law. 10. The present officials of the City and their respective terms are as follows: 4839-5551-6443.2 Date of Expiration Name Office of Term Lioneld Jordan Mayor 12/31/16 Kit Williams City Attorney 12/31/14 Sondra Smith City Clerk 12/31/16 Rhonda Adams Alderman 12/31/14 Adella Gray Alderman 12/31/14 Mark Kinion Alderman 12/31/14 Alan Long Alderman 12/31/16 Sarah Marsh Alderman 12/31/16 Matthew Petty Alderman 12/31/16 Martin Schoppmeyer, Jr. Alderman 12/31/16 Justin Tennant Alderman 12/31/14 4839-5551-6443.2 11. The City has not and will not engage in any activity which might result in the income of the City 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. 12. All of the conditions, covenants and agreements required in the Trust Indenture dated as of May 1, 2002, as amended and supplemented by the First Supplemental Trust Indenture, the Second Supplemental Trust Indenture, the Third Supplemental Indenture and the Fourth Supplemental Trust Indenture (collectively, the "Indenture"), and the Bond Purchase Agreement to be satisfied or performed by the City at or prior to the issuance of the Bonds have been complied with, satisfied or performed in the manner and with the effect contemplated in the Indenture and the Bond Purchase Agreement. Each of the City's representations, warranties and covenants contained in the Bond Purchase Agreement are true and correct as of the date of this certificate. 13. Since December 31, 2013, there has not been any material adverse change in the properties, financial position or results of operations of the City or the System, whether or not arising from transactions in the ordinary course, other than such changes which are disclosed in the Official Statement, and since such date the City has not incurred any liability material to the City, except as disclosed in the Official Statement. The information in the Official Statement relating to the City and the System, their organization, properties, operations and financial condition, and the description of the Bonds, the Bond Ordinance, the Sewer Rate Ordinance, the Water Rate Ordinance and the Revenues (as defined in the Bond Ordinance) are true and correct in all material respects and do not contain any untrue or incorrect statement of a material fact and do not omit to state a material fact necessary in order to make the statements contained in the Official Statement, in light of the circumstances under which they were made, not misleading. To the best knowledge of the undersigned officials of the City, no event affecting the City or the System 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 material respect. 14. There are hereby delivered to the Trustee seven (7) typewritten Bonds, one for each maturity, in the aggregate principal amount of $6,330,000 to be registered in the name of Cede & Co. The Trustee is hereby requested to authenticate the Bonds and to receipt for and deliver the Bonds upon the order of the Underwriter on behalf of the City after authentication and upon payment therefor of $6,867,956.45, plus accrued interest from May 15, 2014 to the date of delivery in the amount of $3,099.31, for a total purchase price of $6,871,055.76. The Trustee is hereby directed to disburse the Bond proceeds as follows: (i) Deposit the accrued interest on the Bonds in the amount of $3,099.31 into the Series 2014 Account of the Bond Fund; (ii) Transfer the sum of $6,794,481.36 to the Escrow Trustee for use in refunding the City's outstanding Water and Sewer System Revenue Bonds, Series 2009; 4 4839-5551-6443.2 (iii) Deposit the sum of $72,000.00 into the Cost of Issuance Fund and immediately pay therefrom those costs of issuance of the Bonds set forth on Exhibit G hereto; and (iv) Deposit the balance of the Bond proceeds (viz. the sum of $1,475.09) into the Series 2014 Account of the Bond Fund. 15. 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. 16. No action, suit, proceeding, inquiry or investigation is pending, or, to the knowledge of the undersigned, is there any basis therefor, in any way (i) restraining or enjoining the issuance, sale or delivery of any of the Bonds or the collection of any moneys or property pledged under the Bond Ordinance or the pledge thereof, or (ii) questioning or affecting the validity or enforceability of the Bonds, the Sewer Rate Ordinance, the Water Rate Ordinance, the Bond Ordinance or any of the City Documents, or (iii) questioning or affecting the validity of any of the proceedings for the authorization, execution, authentication, sale or delivery of the Bonds or the assignment by the City of any of the moneys, revenues, instruments or other rights pledged under the Bond Ordinance, or (iv) questioning or affecting the corporate existence or organization of the City or the title to office of any of the officers or officials thereof or any powers of the City, or (v) questioning or affecting the power and authority of the City to issue the Bonds or adopt the Sewer Rate Ordinance, the Water Rate Ordinance or the Bond Ordinance. 17. The City will apply the proceeds from the sale of the Series 2014 Bonds to pay the costs of a current refunding of the City's outstanding Water and Sewer System Revenue Bonds, Series 2009, and to pay the costs of issuing the Bonds. The Net Revenues (as defined in the Bond Ordinance) are not pledged or hypothecated in any manner or for any purpose other than for the payment of the Bonds, the City's Water and Sewer System Refunding Revenue Bonds, Series 2012, and except as otherwise provided in the Bond Ordinance, the Indenture and the Official Statement. 18. In the City, the time for filing a referendum petition is fixed at 30 days after the publication of the measure upon which the referendum is sought. 19. The adoption of the Sewer Rate Ordinance, the Water Rate 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. 20. The City's employer tax identification number is 71-6018462. 4839-5551-6443.2 21. 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 May 20, 2014. CITY OF FAYETTEVILLE, ARKANSAS r. Mayor By: �� Sondra Smith, City Clerk 0 4839-5551-6443.2 gytti[tlppppl R� r 0,sG�� ®F VILL . = STANDARD & r RATINGS SERVICES 500 North Akard Street Lincoln Plaza, Suite 3200 McGRAW HILL FINANCIAL Dallas, TX 75201 tel (214) 871-1400 reference no.: 1340978 April 15, 2014 City of Fayetteville 113 W. Mountain Fayetteville, AR 72701 Attention: Mr. Paul Becker, Finance & Internal Services Director Re: US$6,485,000 City of Fayetteville, Arkansas, Water and Sewer System Refunding Revenue Bonds, Series 2014, dated. May 15, 2014, due: August 15, 2020 Dear Mr. Becker: Pursuant to your request for a Standard & Poor's Ratings Services ("Ratings Services") rating on the above -referenced obligations, Ratings Services has assigned a rating of "AA+". Standard & Poor's views the outlook for this rating as stable. A copy of the rationale supporting the rating is enclosed. This letter constitutes Ratings Services' permission for you to disseminate the above -assigned ratings to interested parties in accordance with applicable laws and regulations. However, permission for such dissemination (other than to professional advisors bound by appropriate confidentiality arrangements) will become effective only after we have released the rating on standardandpoors.com. Any dissemination on any Website by you or your agents shall include the full analysis for the rating, including any updates, where applicable. To maintain the rating, Standard & Poor's must receive all relevant financial and other information, including notice of material changes to financial and other information provided to us and in relevant documents, as soon as such information is available. You understand that Ratings Services relies on you and your agents and advisors for the accuracy, timeliness and completeness of the information submitted in connection with the rating and the continued flow of material information as part of the surveillance process. Please send all information via electronic delivery to: 1ubfin statelocalgovt@standardandl2oors.com. If SEC rule 17g-5 is applicable, you may post such information on the appropriate website. For any information not available in electronic format or posted on the applicable website, Please send hard copies to: Standard & Poor's Ratings Services Public Finance Department 55 Water Street New York, NY 10041-0003 The rating is subject to the Terms and Conditions, if any, attached to the Engagement Letter applicable to the rating. In the absence of such Engagement Letter and Terms and Conditions, the Page 12 rating is subject to the attached Terms and Conditions. The applicable Terms and Conditions are incorporated herein by reference. Ratings Services is pleased to have the opportunity to provide its rating opinion. For more information please visit our website at www.standardandpoors.com. If you have any questions, please contact us. Thank you for choosing Ratings Services. Sincerely yours, (:� le "-- Standard & Poor's Ratings Services th enclosures cc: Ms. Amy McFarland Ms. Cheryl Partain Mr. Dennis R. Hunt Mr. Gordon M. Wilbourn Ms. Marsha Hertweck Standard & Poor's Ratings Services Terms and Conditions Applicable To Public Finance Credit Ratings General. The credit ratings and other views of Standard & Poor's Ratings Services ("Ratings Services") are statements of opinion and not statements of fact. Credit ratings and other views of Ratings Services are not recommendations to purchase, hold, or sell any securities and do not comment on market price, marketability, investor preference or suitability of any security. While Ratings Services bases its credit ratings and other views on information provided by issuers and their agents and advisors, and other information from sources it believes to be reliable, Ratings Services does not perform an audit, and undertakes no duty of due diligence or independent verification, of any information it receives. Such information and Ratings Services' opinions should not be relied upon in making any investment decision. Ratings Services does not act as a "fiduciary" or an investment advisor. Ratings Services neither recommends nor will recommend how an issuer can or should achieve a particular credit rating outcome nor provides or will provide consulting, advisory, financial or structuring advice. Unless otherwise indicated, the term "issuer" means both the issuer and the obligor if the obligor is not the issuer. All Credit Rating Actions in Ratings Services' Sole Discretion. Ratings Services may assign, raise, lower, suspend, place on CreditWatch, or withdraw a credit rating, and assign or revise an Outlook, at any time, in Ratings Services' sole discretion. Ratings Services may take any of the foregoing actions notwithstanding any request for a confidential or private credit rating or a withdrawal of a credit rating, or termination of a credit rating engagement. Ratings Services will not convert a public credit rating to a confidential or private credit rating, or a private credit rating to a confidential credit rating. Publication. Ratings Services reserves the right to use, publish, disseminate, or license others to use, publish or disseminate a credit rating and any related analytical reports, including the rationale for the credit rating, unless the issuer specifically requests in connection with the initial credit rating that the credit rating be assigned and maintained on a confidential or private basis. If, however, a confidential or private credit rating or the existence of a confidential or private credit rating subsequently becomes public through disclosure other than by an act of Ratings Services or its affiliates, Ratings Services reserves the right to treat the credit rating as a public credit rating, including, without limitation, publishing the credit rating and any related analytical reports. Any analytical reports published by Ratings Services are not issued by or on behalf of the issuer or at the issuer's request. Ratings Services reserves the right to use, publish, disseminate or license others to use, publish or disseminate analytical reports with respect to public credit ratings that have been withdrawn, regardless of the reason for such withdrawal. Ratings Services may publish explanations of Ratings Services' credit ratings criteria from time to time and Ratings Services may modify or refine its credit ratings criteria at any time as Ratings Services deems appropriate. Reliance on Information. Ratings Services relies on issuers and their agents and advisors for the accuracy and completeness of the information submitted in connection with credit ratings and the surveillance of credit ratings including, without limitation, information on material changes to information previously provided by issuers, their agents or advisors. Credit ratings, and the maintenance of credit ratings, may be affected by Ratings Services' opinion of the information received from issuers, their agents or advisors. PF Ratings U.S. (02/16/13) Confidential Information. Ratings Services has established policies and procedures to maintain the confidentiality of certain non-public information received from issuers, their agents or advisors. For these purposes, "Confidential Information" shall mean verbal or written information that the issuer or its agents or advisors have provided to Ratings Services and, in a specific and particularized manner, have marked or otherwise indicated in writing (either prior to or promptly following such disclosure) that such information is "Confidential." Ratinszs Services Not an Expert, Underwriter or Seller under Securities Laws. Ratings Services has not consented to and will not consent to being named an "expert" or any similar designation under any applicable securities laws or other regulatory guidance, rules or recommendations, including without limitation, Section 7 of the U.S. Securities Act of 1933. Rating Services has not performed and will not perform the role or tasks associated with an "underwriter" or "seller" under the United States federal securities laws or other regulatory guidance, rules or recommendations in connection with a credit rating engagement. Disclaimer of Liability. Ratings Services does not and cannot guarantee the accuracy, completeness, or timeliness of the information relied on in connection with a credit rating or the results obtained from the use of such information. RATINGS SERVICES GIVES NO EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE. Ratings Services, its affiliates or third party providers, or any of their officers, directors, shareholders, employees or agents shall not be liable to any person for any inaccuracies, errors, or omissions, in each case regardless of cause, actions, damages (consequential, special, indirect, incidental, punitive, compensatory, exemplary or otherwise), claims, liabilities, costs, expenses, legal fees or losses (including, without limitation, lost income or lost profits and opportunity costs) in any way arising out of or relating to a credit rating or the related analytic services even if advised of the possibility of such damages or other amounts. No Third Party Beneficiaries. Nothing in any credit rating engagement, or a credit 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 a credit rating. No person is intended as a third party beneficiary of any credit rating engagement or of a credit rating when issued. PF Ratings U.S. (02/16/13) M rM MY TAU 14 4:111 F11 'IM F.110 r Fayetteville, Arkansas; Water/Sewer Primary Credit Analyst: Scott W Sagen, New York (1) 212-438-0272; scott.sagen@standardandpoors.com Secondary Contact: James M Breeding, Dallas (1) 214-871-1407; james.breeding@standardandpoors.com Table Of Contents Rationale Outlook Related Criteria And Research WWW.STANDARDANDPOORS.COM/RATINGSDIRECT APRIL 16, 2014 1 12980541 304125213 Fayetteville, Arkansas; Water/Sewer US$6.485 mil wtr and swr sys rfdg rev buds ser 2014 dtd 05/15/2014 due 08/15/2020 Long Term Rating AA+/Stable New Fayetteville WS Long Term Rating AA+/Stable Affirmed Standard & Poor's Ratings Services assigned its 'AA+' rating and stable outlook to Fayetteville, Ark.'s series 2014 water and sewer system refunding revenue bonds and affirmed its 'AA+' rating, with a stable outlook, on the city's existing water and sewer system revenue debt. The rating reflects our opinion of the system's: • Stable economy, anchored by University of Arkansas' stabilizing presence; • Demonstrated willingness to increase rates, as necessary, to maintain very strong debt service coverage (DSC); • Strong liquidity with more than one year of days' cash on hand; and • Sufficient water capacity through a contract with Beaver Water District of Benton and Washington counties. A net revenue pledge of the city's water and sewer system secures the bonds. Officials intend to use series 2014 bond proceeds to refund the city's series 2009 bonds for cost savings. The series 2014 bonds will be on parity with series 2012 bonds. The system's finances are, what we view as, strong. Unaudited fiscal 2013 net system revenue before transfers in provided, in our opinion, a very strong 3.3x annual DSC requirement, as calculated by Standard & Poor's. Officials expect the fiscal 2013 audit to be complete in late June 2014. Audited fiscal years 2012 and 2011 net system revenue provided, what we regard as, a very strong 3.9x and 5x annual DSC, respectively. The city's fiscal 2014 budget estimates, in our opinion, a very strong 3.5x DSC before transfers in from the impact fund. System liquidity remains, in our view, strong. The system reported $25.6 million of unrestricted cash, or, what we consider, a strong 374 days' cash on hand, in unaudited fiscal 2013; we recognize this was well above management's informal policy of maintaining 60 days' cash on hand in reserve. We understand that officials do not plan to draw down cash in fiscal 2014 and that they maintain a written policy of maintaining liquidity equal to at least 10% of expenditures. Fayetteville, with a population estimate of 73,580, is in the growing Northwest Arkansas metropolitan statistical area that includes Rogers and Springdale. University of Arkansas, with a 2014 student enrollment of 23,286, anchors Fayetteville's expanding economy; university officials expect to add another 1,500 students in 2015. Median household effective buying income was, in our opinion, an adequate 80% of the national average in 2012. The significant student population contributes to, in our view, below-average income. Washington County unemployment of 5.4% in February WWW.STANDARDANDPOORS.COM/RATINGSDIRECT APRIL 16, 2014 2 12980541 30012521.8 Summary: Fayetteville, Arkansas; Water/Sewer 2014 was below the 6.7% national rate. University of Arkansas' employees have increased to 5,883 in 2014 from 4,085 in 2012. Currently, Fayetteville serves 38,736 total water customers and 33,247 sewer customers. The water customer base has increased by 4.7% over the past three years, and officials are projecting about 1% water customer growth annually. The customer base is primarily residential and diverse: The 10 leading customers accounted for 15.7% of fiscal 2013 water revenue. University of Arkansas (5.6% of fiscal 2013 water revenue), Pinnacle Foods (2.9%), and Superior Industries (1.3%) were the three leading water customers in fiscal 2013. Fayetteville purchases treated water from Beaver Water District, which adjusts its rates annually, for $1.26 per 1,000 gallons consumed. City officials expect the district to increase its rates to $1.28 per 1,000 gallons consumed in October 2014, which the system will continue to pass along to customers. Minimum annual take -or -pay costs to the district do not exist. The water supply is, in our view, more than adequate; average demand accounted for just 32% of the district's total pumping capacity to Fayetteville in 2013. The city owns its two wastewater treatment plants, and it contracts privately for the plants' operations. The city's 10 -million -gallons -per -day (mgd) west side plant and 11.2-mgd east side plant provided, in our view, sufficient capacity for 12.2-mgd of average flow in 2013. Despite annual increases since 2009, rates remain competitive for the region; this affords the city the flexibility to manage margins as necessary. Management expects the current combined water and sewer rate of $74.60 per 8,000 gallons consumed to increase by 3% annually to accommodate the capital improvement program (CIP). This combined rate also includes a monthly water and sewer service charge. The indenture allows for the issuance of additional parity bonds if net revenue from the previous year is sufficient to provide 1.3x average annual DSC requirements on all existing and proposed bonds with revenue adjusted for rate increases, system expansions, or acquisitions. A debt service reserve funded at an amount equal to 50% maximum annual debt service requirements provides additional bondholder liquidity. A rate covenant requires sufficient net revenue to pay 1.25x annual debt service expenses and make any deficiency payments to the debt service reserve and renewal and replacement funds. Operations -and -maintenance expenses include debt payments to Beaver Water District. The indenture requires the funding of the renewal -and -replacement fund at a minimum of $300,000. In our opinion, the system's debt is low; the debt -to -plant ratio equaled just 3% of the plant's net value in fiscal 2013. Following the series 2014 debt issue, the system will support just $9.3 million of total debt. In addition, we consider debt amortization very rapid with officials planning to retire 100% over six years. City officials indicate they have not entered into any direct -purchase bank loans. The long-term CIP, including fiscal 2014 needs, totals $25 million for capital requirements over the next five years, which the city will likely fund from operations. Currently, Fayetteville does not have additional debt plans. Outlook The stable outlook reflects Standard & Poor's opinion of the system's stable service area economy and demonstrated ability to maintain its strong financial metrics. The outlook reflects our expectation that the utility will likely maintain, what we consider, its strong finances and DSC and that management will likely increase utility rates, as necessary, to WWW.STANDARDANDPOORS.COM/RATINGSDIRECT APRIL 16, 2014 3 12980541 300125218 Summary: Fayetteville, Arkansas; Water/Sewer meet projected increased operational and debt service costs. Due to the service area's current economic depth and respective indicators, we believe upward rating mobility is limited over the outlook's two-year period. Related Criteria And Research Related Criteria • USPF Criteria: Key Water And Sewer Utility Credit Ratio Ranges, Sept. 15, 2008 • USPF Criteria: Standard & Poor's Revises Criteria For Rating Water, Sewer, And Drainage Utility Revenue Bonds, Sept. 15, 2008 Related Research U.S. State And Local Government Credit Conditions Forecast, April 7, 2014 Complete ratings information is available to subscribers of RatingsDirect at www.globalcreditportal.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com. Use the Ratings search box located in the left column. WWW.STANDARDANDPOORS.COM/RATINGSDIRECT APRIL 16, 2014 4 1298054 1 300125218 Copyright© 2014 Standard & Poor's Financial Services LLC, apart of McGraw Hill Financial. All rights reserved. No content (including ratings, credit -related analyses and data, valuations, model, software or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor's Financial Services LLC or its affiliates (collectively, S&P). The Content shall not be used for any unlawful or unauthorized purposes. S&P and any third -party providers, as well as their directors, officers, shareholders, employees or agents (collectively S&P Parties) do not guarantee the accuracy, completeness, timeliness or availability of the Content. S&P Parties are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, for the results obtained from the use of the Content, or for the security or maintenance of any data input by the user. The Content is provided on an "as is" basis. S&P PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENT'S FUNCTIONING WILL BE UNINTERRUPTED, OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs or losses caused by negligence) in connection with any use of the Content even if advised of the possibility of such damages. Credit -related and other analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and not statements of fact. S&P's opinions, analyses, and rating acknowledgment decisions (described below) are not recommendations to purchase, hold, or sell any securities or to make any investment decisions, and do not address the suitability of any security. S&P assumes no obligation to update the Content following publication in any form or format. The Content should not be relied on and is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment and other business decisions. S&P does not act as a fiduciary or an investment advisor except where registered as such. While S&P has obtained information from sources it believes to be reliable, S&P does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives. To the extent that regulatory authorities allow a rating agency to acknowledge in one jurisdiction a rating issued in another jurisdiction for certain regulatory purposes, S&P reserves the right to assign, withdraw, or suspend such acknowledgement at any time and in its sole discretion. S&P Parties disclaim any duty whatsoever arising out of the assignment, withdrawal, or suspension of an acknowledgment as well as any liability for any damage alleged to have been suffered on account thereof. S&P keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective activities. As a result, certain business units of S&P may have information that is not available to other S&P business units. S&P has established policies and procedures to maintain the confidentiality of certain nonpublic information received in connection with each analytical process. S&P may receive compensation for its ratings and certain analyses, normally from issuers or underwriters of securities or from obligors. S&P reserves the right to disseminate its opinions and analyses. S&P's public ratings and analyses are made available on its Web sites, www.standardandpoors.com (free of charge), and www.ratingsdirect.com and www.globalcreditportal.com (subscription) and www.spcapitaliq.com (subscription) and may be distributed through other means, including via S&P publications and third -party redistributors. Additional information about our ratings fees is available at www.standardandpoors.com/usratingsfees. WWW.STANDARDANDPOORS.COMIRATINGSDIRECT APRIL 16, 2014 5 12118054 1300125218 $6,330,000 CITY OF FAYETTEVILLE, ARKANSAS WATER AND SEWER SYSTEM REFUNDING REVENUE BONDS SERIES 2014 TRANSCRIPT OF PROCEEDINGS Dated as of May 15, 2014 Prepared By: KUTAK ROCK LLP 124 West Capitol, Suite 2000 Little Rock, Arkansas 72201 4843-3869-8776.2 $6,330,000 CITY OF FAYETTEVILLE, ARKANSAS WATER AND SEWER SYSTEM REFUNDING REVENUE BONDS SERIES 2014 CLOSING INDEX TAB Proceedings and Certificates Related to Issuance Closing Certificate and Request of the City of Fayetteville, Arkansas (the "City") Exhibit A - Ordinance No. 5123 adopted April 1, 2008, fixing rates to be charged for services of the City's water system 2 Exhibit B — Ordinance No. 5129 adopted April 15, 2008, fixing rates to be charged for services of the City's sewer system Exhibit C —Ordinance No. 5438 adopted September 20, 2011, amending certain City sewer system charges 4 Exhibit D - Ordinance No. 5665 adopted March 4, 2014, authorizing the issuance of water and sewer system refunding revenue bonds Exhibit E - Minutes of City Council meeting held March 4, 2014, reciting adoption of Ordinance No. 5665 6 Exhibit F - Proof of Publication of Ordinance No. 5665 in the Northwest Arkansas Times on March 13, 2014 7 Exhibit G - Costs of Issuance Form 8038-G and Proof of Mailing to Internal Revenue Service 9 Principal Documents Bond Purchase Agreement dated May 6, 2014, by and between the City and Stephens Inc. (the "Underwriter") 10 4843-3869-8776.2 W Trust Indenture dated as of May 1, 2002, by and between the City and BOKF, NA, as trustee (the "Trustee") 11 First Supplemental Trust Indenture dated as of May 1, 2004, by and between the City and the Trustee 12 Second Supplemental Trust Indenture dated as of June 1, 2009, by and between the City the Trustee 13 Third Supplemental Trust Indenture dated as of May 15, 2012, by and between the City and the Trustee 14 Fourth Supplemental Trust Indenture dated as of May 15, 2014, by and between the City and the Trustee 15 Escrow Deposit Agreement dated May 20, 2014, by and between the City and BOKF, NA, as escrow trustee 16 Tax Regulatory Agreement dated May 20, 2014, by and between the City and the Trustee 17 Copies of Bonds 18 Preliminary Official Statement 19 Official Statement 20 Opinions Approving Opinion of Bond Counsel 21 Supplemental Opinion of Bond Counsel 22 Defeasance Opinion of Bond Counsel 23 Opinion of Counsel to the City 24 Miscellaneous Continuing Disclosure Agreement 25 Trustee's Certificate 26 Escrow Trustee's Certificate 27 Certificate of Underwriter 28 2 4843-3869-8776.2 Trustee's Receipt and Certificate as to Application of Funds 29 Escrow Trustee's Receipt Underwriter's Receipt for Bonds Accountant's Consent Letter Accountant's Parity Letter DTC Letter of Representation Standard & Poor's Rating Letter Transcripts delivered to: 30 31 32 33 34 35 City of Fayetteville, Attn: Mr. Paul Becker (2 bound), Attn: Ms. Sondra Smith (1 copy) BOKF, NA, Attn: Ms. Cynthia Wilkinson (1 bound) Stephens Inc., Attn: Mr. Dennis Hunt (1 bound) Fayetteville City Attorney, Attn: Kit Williams, Esq. (1 bound) Kutak Rock LLP (1 bound) 3 4843-3869-8776.2