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2001-03-01
o ORDINANCE NO.p2Q�J-2-t AN ORDINANCE AUTHORIZING THE ISSUANCE OF WATER AND SEWER SYSTEM REVENUE REFUNDING BONDS; PROVIDING FOR THE PAYMENT OF THE PRINCIPAL OF AND INTEREST ON THE BONDS; PRESCRIBING OTHER MATTERS RELATING THERETO; AND DECLARING AN EMERGENCY. WHEREAS, the City of Batesville, Arkansas (the "City" ) , a city of the first class, owns and operates, by and through the Batesville Utilities Commission (the "Commission" ) a Waterworks and Sewer System ( "System" ) ; and WHEREAS, the City has outstanding an issue of Water and Sewer Revenue Refunding Bonds, Series 1995 (the 111995 Bonds" ) ; and WHEREAS, the City can realize substantial debt service savings by discharging and refinancing the debt evidenced by the 1995 Bonds; and WHEREAS, the City has made arrangements for the sale of its $3, 445, 000 in principal amount of Water and Sewer Revenue Refunding Bonds, Series 2001 (the "Series 2001 Bonds" ) for the purpose of financing the refunding of the 1995 Bonds; NOW THERE20RE, BE IT ORDAINED by the City Council of the City of Batesville, Arkansas : Section 1 . The sale of the Bonds to Crews & Associates, Inc. (the "Underwriter" ) pursuant to the terms and conditions set out in the Bond Purchase Agreement relating thereto, which has been submitted to and is before this meeting, at a price of$3 , 394 , 637 . 95 (being the principal amount less Underwriter' s discount of $44, 785 and less original issue discount of $5, 577 . 05 plus accrued interest for Series 2001 Bonds bearing interest, maturing and otherwise subject to the terms and provisions hereafter in this Ordinance set forth in detail is approved and confirmed. The Bond Purchase Agreement is approved and the Mayor is authorized to execute and deliver it on behalf of the City. Section 2 . Under the authority of the Constitution and laws of the State of Arkansas, including particularly Arkansas Code of 1987 Annotated, Title 14 , Chapter 164 , Subchapter 4, and decisions of the Supreme Court of Arkansas, including City of Harrison v. Braswell, 209 Ark. 1094, 194 S .W.2d 12 (1946) , City of Batesville, Arkansas Water and Sewer Refunding Revenue Bonds, Series 2001, are hereby authorized and ordered issued in the principal amount of $3 , 445, 000 for the purpose of refunding the 1995 Bonds and paying necessary expenses incidental to the issuance ® of the Series 2001 Bonds . The Series 2001 Bonds shall be dated April 1, 2001, with interest payable semiannually on February 1 and Series 2001 Bonds shall be subject to redemption prior to maturity as hereinafter set forth. Section 3 . The Series 2001 Bonds shall be executed on behalf of the City by the Mayor and City Clerk and shall have impressed thereon the seal of the City. The Series 2001 Bonds may be signed by the facsimile signature of the Mayor and the facsimile signature of the City Clerk. The Series 2001 Bonds are secured on a parity of lien, pledge and security with Additional Bonds, issued under this Ordinance, and the term "Bonds" refers to and includes the Series 2001 Bonds and any Additional Bonds outstanding hereunder. The Bonds, together with interest thereon, shall be payable solely out of the Water and Sewer Revenue Bond Fund, hereafter described, and shall be a valid claim of the holders thereof only against such fund and the amount of revenues pledged thereto or deposited therein, which revenues are hereby pledged and mortgaged for the equal and ratable payment of the Bonds and shall be used for no other purpose than to pay the principal, premium, if any, interest and Trustee ' s and Paying Agent ' s fees on and in connection with the Bonds . The Bonds shall not constitute an indebtedness of the City within any constitutional or statutory limitation. Section 4 . The Series 2001 Bonds shall be in substantially the following form and the Mayor and City Clerk are hereby expressly authorized and directed to make all recitals contained therein: ® 3 (Form of Bond) REGISTERED REGISTERED No. $ UNITED STATES OF AMERICA STATE OF ARKANSAS CITY OF BATESVILLE, ARKANSAS WATER AND SEWER REVENUE REFUNDING BOND SERIES 2001 Interest Rate : % Maturity Date : Dated Date : April 1, 2001 Registered Owner: Principal Amount : CUSIP No. KNOW ALL MEN BY THESE PRESENTS : That the City of Batesville, Arkansas (the "City") , for value received, hereby promises to pay, but solely from the source as hereinafter provided and not otherwise, to the Registered Owner shown above, upon the presentation and surrender hereof at the office of The Citizens Bank, in the City of Batesville, Arkansas, or its successor or successors, as Trustee and as Paying Agent (herein referred to as the "Trustee") , on the Maturity Date shown above, the Principal Amount shown above, in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts and to pay by check or draft interest thereon, but solely from the source as hereinafter provided and not otherwise, in like coin or currency, at the Interest Rate per annum shown above, payable semiannually on the 1st days of February and August of each year, until payment of such principal sum or, if this Series 2001 Bond or a portion thereof shall be duly called for redemption, until the date fixed for redemption, and to pay interest on overdue principal and interest (to the extent legally enforceable) at the rate borne by this Series 2001 Bond. Payment of each installment of interest shall be made to the person in whose name this Series 2001 Bond is registered on the registration books of the City maintained by the Trustee at the close of business on the fifteenth day of the month (whether or not a business day) next preceding each interest payment date (the "Record Date" ) , irrespective of any transfer or exchange of this Series 2001 Bond subsequent to such Record Date and prior to such interest payment date. Interest hereon shall be payable from the interest payment date next preceding the date on which this Series 2001 Bond is authenticated unless this Series 2001 Bond is authenticated on an interest payment date, in which case it shall bear interest from such date, or unless this Series 2001 Bond is authenticated prior to August 1, 2001, in which case it shall bear interest from the Dated Date, or unless this Series 2001 Bond is authenticated during the period from the Record Date 4 to the then next interest payment date, in which case it shall bear interest from such interest payment date, or unless at the time of authentication of this Series 2001 Bond interest is in default hereon, in which case it shall bear interest from the date to which interest has been paid. This Series 2001 Bond is one of an issue of City of Batesville, Arkansas Water and Sewer Revenue Refunding Bonds, Series 2001, aggregating Three Million Four Hundred Forty-Five Thousand Dollars ($3 , 445, 000) , in principal amount (the "Series 2001 Bonds" ) , and is issued for the purpose of refinancing outstanding indebtedness secured by revenues of the City' s municipal Water and Sewer System (the "System" ) . THE SERIES 2001 BONDS ARE ISSUED PURSUANT TO AND IN FULL COMPLIANCE WITH THE CONSTITUTION AND LAWS OF THE STATE OF ARKANSAS, INCLUDING PARTICULARLY TITLE 14 , CHAPTER 164 , SUBCHAPTER 4 , AND DECISIONS OF THE SUPREME COURT OF ARKANSAS, INCLUDING CITY OF HARRISON V. BRASWELL, 209 ARK. 1094 , 194 S .W. 2d 12 (1946) , AND PURSUANT TO ORDINANCE NO. , DULY ADOPTED AND APPROVED ON 2001 (THE "AUTHORIZING ORDINANCE" ) , AND DO NOT CONSTITUTE AN INDEBTEDNESS OF THE CITY WITHIN ANY CONSTITUTIONAL OR STATUTORY LIMITATION. The Series 2001 Bonds are secured on a parity of lien, pledge and security with Additional Bonds, if any, issued under the Authorizing Ordinance, and the term "Bonds" herein includes the Series 2001 Bonds and any Additional Bonds outstanding. The Bonds are not general obligations of the City but are special obligations secured by a pledge of revenues derived from the operation of the System. An amount of revenues of the System sufficient to pay the principal of and interest on the Bonds has been duly pledged for the payment of principal of, premium, if any, on and interest on the Bonds . Reference is hereby made to the Authorizing Ordinance for a detailed statement of the terms and conditions upon which the Bonds are issued, of the nature and extent of the security for the Bonds, and the rights and obligations of the City, the Trustee and the bondholders . (REFERENCE IS HEREBY MADE TO FURTHER PROVISIONS OF THIS BOND ON THE REVERSE SIDE HEREOF WHICH HAVE THE SAME EFFECT AS IF SET FORTH IN THIS PLACE. ) THE CITY HAS DESIGNATED THIS SERIES 2001 BOND AS A "QUALIFIED TAX-EXEMPT OBLIGATION" WITHIN THE MEANING OF SECTION 265 (b) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED. 5 IN WITNESS WHEREOF, the City of Batesville, Arkansas has ® caused this Series 2001 Bond to be executed by its Mayor and City Clerk, their manual or facsimile signatures thereunto duly authorized and its corporate seal to be impressed, lithographed or imprinted on this Series 2001 Bond. CITY OF BATESVILLE, ARKANSAS ATTEST: By Mayor City Clerk (SEAL) • 6 (Reverse Side of Bond) • CITY OF BATESVILLE, ARKANSAS WATER AND SEWER REVENUE REFUNDING BOND, SERIES 2001 The Series 2001 Bonds or portions thereof may be redeemed at the option of the City, in whole or in part, in integral multiples of $5, 000, from funds from any source, in inverse order of maturity (and by lot within a maturity in such manner as the Trustee shall determine) on any date on and after February 1, 2006, at a redemption price equal to the principal amount being redeemed plus accrued interest to the redemption date. Notice of redemption identifying the Series 2001 Bonds or portions thereof (which shall be $5, 000 or a multiple thereof) to be redeemed shall be given by the Trustee, not less than thirty (3 0) nor more than sixty (6 0) days prior to the date fixed for redemption, by mailing a copy of the redemption notice by first class mail, postage prepaid, or sending such notice by electronic transmission with evidence of receipt, to all registered owners of Series 2001 Bonds to be redeemed. Failure to send an appropriate notice or any such notice to one or more registered owners of Series 2001 Bonds to be redeemed shall not affect the validity of the proceedings for redemption of other Series 2001 Bonds as to which notice of redemption is duly given in proper and timely fashion. All such Series 2001 Bonds or portions thereof thus called for redemption and for the retirement of which funds are duly provided in accordance with the Authorizing Ordinance prior to the date fixed for redemption will cease to bear interest on such redemption date. With respect to notice of redemption of Series 2001 Bonds at the option of the City, unless moneys sufficient to pay the principal of the premium, if any, and interest on the Series 2001 Bonds to be redeemed shall have been received by the Trustee prior to the giving of such notice, the notice shall state that redemption shall be conditional upon the receipt of such moneys by the Trustee on or prior to the date fixed for such redemption. If such moneys shall not have been so received, such notice shall be of no force and effect, the City shall not redeem such Series 2001 Bonds and the Trustee shall give notice, in the manner in which the notice of redemption was given, that such moneys were not so received. This Series 2001 Bond is transferable by the registered owner hereof in person or by his attorney-in-fact duly authorized in writing at the principal corporate trust office of the Trustee, but only in the manner, subject to the limitations and upon payment of the charges provided in the Authorizing Ordinance, and upon surrender and cancellation of this Series 2001 Bond. Upon such transfer a new fully registered Series 2001 Bond or Bonds of the same series and maturity, of authorized denomination or denominations, for the same aggregate principal amount, will be issued to the transferee in exchange therefor. This Series 2001 Bond is issued with the intent that the laws of the State of Arkansas shall govern its construction. The City and the Trustee may deem and treat the registered owner hereof as the absolute owner hereof for the purpose of receiving payment of or on account of principal hereof and premium, if any, hereon and interest due hereon and for all other purposes, and neither the City nor the Trustee nor any paying agent shall be affected by any notice to the contrary. The Series 2001 Bonds are issuable only as fully registered bonds in the denomination of $5, 000, and any integral multiple thereof . Subject to the limitations and upon payment of the charges provided in the Authorizing Ordinance, Series 2001 Bonds may be exchanged for a like aggregate principal amount of Series 2001 Bonds of the same maturity of other authorized denominations . 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 2001 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 2001 Bonds, together with all obligations of the City, does not exceed any constitutional or statutory limitation; and that the above referred to revenues pledged to the payment of the principal of and premium, if any, and interest on the Series 2001 Bonds as the same become due and payable will be sufficient in amount for that purpose. This Series 2001 Bond shall not be valid or become obligatory for any purpose or be entitled to any security or benefit under the Authorizing Ordinance until the Certificate of Authentication hereon shall have been signed by the Trustee. 8 (Form of Trustee ' s Certificate) TRUSTEE ' S CERTIFICATE OF AUTHENTICATION This Series 2001 Bond is one of the Bonds designated Water and Sewer Revenue Refunding Bonds, Series 2001 , in and issued under the provisions of the within mentioned Authorizing Ordinance . THE CITIZENS BANK Batesville, Arkansas TRUSTEE By Authorized Signature DATE OF AUTHENTICATION: ® 9 (Form of Assignment) ASSIGNMENT FOR VALUE RECEIVED, ( "Transferor" ) , 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: Transferor GUARANTEED BY: NOTICE: Signature (s) must be guaranteed by a financial institution acceptable to the Trustee. • 10 Section 5 . The rates charged for services of the System are heretofore fixed and the conditions, rights and obligations pertaining thereto, as set out in that ordinance, are hereby ratified, confirmed and continued. The City covenants that the rates shall always be maintained (including any increases if and when necessary, from time to time) at levels which will produce Net Revenues at least equal to 120% the amount necessary to pay when due principal and interest on all Bonds to which any System Revenues are pledged to maintain any required reserves and to deposit the amounts required to be paid into the Depreciation Fund during the current and next ensuing fiscal years . (Such rates may be reduced by the City, provided that the covenant set forth in the preceding sentence is always observed. ) As used in this Ordinance : (a) "System Revenues" means Operating Revenues plus Sales Tax Revenues, if any, appropriated as System Revenues . (b) "Operating Revenues" means gross revenues derived from operation of the System (including earnings and profits on investments) . (c) "Sales Tax Revenues" means, for any fiscal year, revenues derived from any sales and use tax levied by the City for the purpose of providing funds for the System or expenses thereof for the then current fiscal year. For all calculations under the provisions of this Ordinance, including Section 14 , such revenues shall be taken into account as "Sales Tax Revenues" only to the extent that such revenues have been appropriated by the City for deposit into the Operation and Maintenance Fund, as received, and to the extent of (and in the amounts not to exceed) the average monthly amount projected to be collected during such fiscal year in the opinion of an independent certified public accountant not in the regular employ of the City (and acceptable to the Trustee) filed with the Trustee, as a result of such appropriation. In making the projection provided for hereby, the independent certified public accountant may rely upon a forecast or projection prepared by a consultant which (1) has previously performed at least one such forecast or projection and (2) is acceptable to such independent certified public accountant . (d) "Net Revenues" means System Revenues less the amounts required to pay the costs of operation, maintenance and repair of the System, including all expense items properly attributable to the operation and maintenance of the System in accordance with generally accepted accounting principles applicable to municipal water and sewer systems (excluding depreciation, interest and amortization expenses) . 11 The City covenants that, (a) in the event that System Revenues, ® including Sales Tax Revenues, received and deposited should fail to equal at least one-half of System Revenues necessary to comply with the annual requirements set forth above for any period of six months, the City shall adopt an ordinance or ordinances within thirty days enacting rates for System services which shall cause sufficient System Revenues to be produced and (b) Operating Revenues exclusive of Sales Tax Revenues shall always equal at least the amounts required to pay debt service on Bonds, as due. Nothing herein shall be construed as a pledge of Sales Tax Revenues or as an obligation of the City to appropriate Sales Tax Revenues to any purpose hereunder. Section 6 . The Manager of the System shall be custodian of the System Revenues and shall give bond for the faithful discharge of his duties as such custodian. The System shall be continuously operated as a revenue-producing undertaking. All System Revenues, as received by the Manager, shall be deposited by him or her in such depository or depositories for the City as may be lawfully designated from time to time by the Commission; subject, however, to the giving of security as now or hereafter may be required by law, and provided that such depository or depositories shall hold membership in the Federal Deposit Insurance Corporation ( "FDIC" ) or any successor entity. All deposits shall be in the name of the City and shall be so designated as to indicate the particular fund to which the System Revenues belong. Any deposit in excess of the amount insured by the FDIC shall be secured by direct or fully guaranteed obligations of the United States of America unless invested as herein authorized. Section 7 . All Operating Revenues, with Sales Tax Revenues, if any, shall be deposited into a special fund hereby created and designated "Water and Sewer Revenue Fund, " in a bank selected by the Commission that is a member of the FDIC. Revenues in the Water and Sewer Revenue Fund are hereby pledged and shall be applied to the payment of the reasonable and necessary expenses of operation and maintenance of the System, to the payment of the principal of and interest on the Series 2001 Bonds, to the maintenance of any required reserves, to the providing of the Depreciation Fund, and otherwise as described herein, subject to the terms hereof . Section 8 . There shall be paid, beginning after the first full month following issuance of the Bonds, from the Water and Sewer Revenue Fund into a fund hereby created and designated Water and Sewer Operation and Maintenance Fund (the "Operation and Maintenance Fund" ) , in a bank selected by the Commission that is a member of the FDIC, on the first business day of each month, an amount sufficient to pay the reasonable and necessary monthly expenses of operation, repair and maintenance of the System for such month and from which disbursements shall be made only for 12 i those purposes . Fixed annual charges such as insurance premiums and the cost of major repair and maintenance expenses may be computed and set upon an annual basis, and one-twelfth (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 the deficiency shall be added to the amount otherwise required to be transferred and paid into the fund the next succeeding month. If in any fiscal year a surplus shall be accumulated in the Operation and Maintenance Fund over and above the amount which shall be necessary to defray the reasonable and necessary costs of operation and maintenance of the System during the remainder of the then current fiscal year and the next ensuing fiscal year, such surplus may be transferred into the Bond Fund or into the Depreciation Fund, to the extent of any deficit therein, and, in the absence of any such deficit, to the Revenue Fund. Section 9 . (a) After making the required payment into the Operation and Maintenance Fund there shall be transferred and paid from the Water and Sewer Revenue Fund into a special trust fund, hereby created and designated "Water and Sewer Revenue Bond Fund" (the "Bond Fund" ) , in the Trustee, the sums sufficient to comply with the requirements set forth in subsection (b) below. (b) There shall be paid into the Bond Fund until all outstanding Bonds, with interest thereon, have been paid in full or provision made for such payment, on the first business day of each month, a sum at least equal to 1/6 of the next installment of interest and a sum equal to 1/12 of the installment of principal due during the then next twelve months (either at maturity or in accordance with any mandatory redemption provisions) of the Bonds (provided that the monthly amount with respect to interest payable prior to the first interest payment date shall be an amount equal to such payment divided by the number of full months between the date of issuance and such interest payment date) plus an amount sufficient to provide for Trustee ' s and Paying Agent ' s fees on all outstanding Bonds . If Additional Bonds are issued pursuant to the provisions hereof, payments into the Bond Fund shall be increased to provide for monthly amortization of such Additional Bonds . (c) If the System Revenues are insufficient to make the required payment on the first business day of any month 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 on the first business day of the next month. (d) If a surplus shall exist in the Bond Fund over and above current monthly requirements thereof, such surplus shall be deposited into the Revenue Fund. Moneys in the Bond Fund shall be 13 used solely for the payment of principal, premium, if any, and ® interest on the Bonds and Trustee ' s and Paying Agent ' s fees . (e) The Trustee shall withdraw from the Bond Fund on or before the due date of any Bond or interest payable therefrom, at maturity or redemption prior to maturity, and deposit with the Paying Agent, an amount equal to the amount of . such Bond or interest payment for the sole purpose of paying the same, together with the Paying Agent ' s fee . Section 10 . After making the required payments into the Operation and Maintenance Fund the Bond Fund, and beginning after the first full month following issuance of the Bonds, there shall be paid from the Water and Sewer Revenue Fund into a fund hereby created and designated Waterworks Depreciation Fund (the "Depreciation Fund" ) , in a bank, selected by the Commission, that is a member of the FDIC, on the first business day of each month while any of the Series 2001 Bonds are outstanding, a sum equal to one-twelfth (1/12) of the amount necessary, as estimated by the Manager of the System to pay for new construction and acquisition, for major replacements, and for extraordinary repairs to the System during the next ensuing fiscal year. The City shall cause the Manager to file annually with the Trustee, at least fifteen days before the last day of each fiscal year, a statement, which shall set forth the factors and assumptions on which such determination is based, specifying the estimated amount necessary to be expended in the next ensuing fiscal year to pay for new construction and acquisition, major replacements, and for extraordinary repairs to the System. The moneys in the Depreciation Fund shall be used solely for such purposes and for the purpose of paying costs of damage caused by unforeseen catastrophes, except that moneys in the Depreciation Fund shall be used to the extent necessary at any time to prevent default in the payment of principal, interest, and Trustee ' s and Paying Agent ' s fees on the Series 2001 Bonds . (It is not expected that moneys remaining in the Depreciation Fund would be sufficient to prevent such a default . ) If in any fiscal year a surplus shall be accumulated in the Depreciation Fund over and above the amount which shall be necessary to cover probable replacement costs during the current fiscal year and the next ensuing fiscal year, such surplus may be transferred to the Bond Fund, to the extent of any deficit therein, and, in the absence of any such deficit, to the Revenue Fund. Section 11 . Any surplus in the Water and Sewer Revenue Fund, after making all disbursements required by the provisions of this Ordinance and making full provision for the funds herein provided, may be used, at the option of the City, for the redemption of the Bonds, prior to maturity in accordance with their respective redemption provisions; for constructing extensions, betterments and improvements to the System; or for any other lawful municipal purpose. 14 CO Section 12 . So long as any Series 2001 Bonds are ® outstanding under the provisions of this Ordinance, the City shall not issue or attempt to issue any bonds claimed to be entitled to a priority of lien on System Revenues over the lien securing the Series 2001 Bonds . The City reserves the right to issue Additional Bonds to finance or refinance the cost of constructing any future extensions, betterments or improvements to the System, but the City shall not authorize or issue any such Additional Bonds ranking on a parity with the outstanding Bonds unless and until there shall have been procured and filed with the Trustee a statement by an independent certified public accountant not in the regular employ of the City reciting the opinion, based upon necessary investigation, that Net Revenues for the fiscal year immediately preceding the fiscal year in which it is proposed to issue such Additional Bonds shall equal not less than 120% of the maximum annual principal and interest requirements on all the then outstanding Bonds payable from System Revenues and the Additional Bonds then proposed to be issued. For the purposes of the computation required by this paragraph, additional amounts may be added to the Net Revenues of the completed fiscal year immediately preceding the issuance of Additional Bonds, as follows : If, prior to the issuance of the Additional Bonds and subsequent to the first day of such preceding fiscal year, the City shall have increased its rates or charges imposed for services of the System there may be added to the Net Revenues of such fiscal year the additional Net Revenues which would have been received from the operation of the System during such fiscal year had such increase been in effect throughout such fiscal year, as reflected by a certificate of a duly qualified consulting engineer not in the regular employ of the City and approved by the Trustee. Section 13 . When the Series 2001 Bonds have been executed and the seal of the City impressed as herein provided, they shall be delivered to the Trustee, and the Trustee shall authenticate them and deliver them to the Underwriter upon payment in cash of the purchase price of $3 , 394 , 637 . 95 plus accrued interest to the date of delivery ( "total sale proceeds") plus funds provided by the Commission. The Trustee shall disburse such funds as set forth in detail in a letter of delivery instructions and delivered to the Trustee as follows : (1) The Trustee shall deposit the amount of the accrued interest in the Bond Fund. (2) The Trustee shall deposit into a special trust account or shall transmit to the trustee for the 1995 Bonds the amount necessary to provide for the discharge of the 1995 Bonds . ® 15 %0 (3) The Trustee shall pay such costs of issuance of the Series 2001 Bonds as shall be specified in the letter of delivery instructions . Section 14 . (a) The City covenants that it shall not take any action or suffer or permit any action to be taken or condition to exist which causes or may cause the interest payable on the Bonds to be subject to federal income taxation. Without limiting the generality of the foregoing, the City represents and covenants that the proceeds of the Bonds and System Revenues will not be used directly or indirectly in such manner as to cause the Bonds to be treated as "arbitrage bonds" within the meaning of Section 148 of the Internal Revenue Code of 1986, as amended (the "Code" ) . The City covenants to pay to the United States Treasury any arbitrage rebate due under Section 148 of the Code at the times required by Section 148 of the Code, if any be required. The City expects that all the proceeds of the Series 2001 Bonds will be applied to discharge the 1995 Bonds and to pay expenses of issuing the Series 2001 Bonds . The City further expects that the only moneys available to pay debt service on the Series 2001 Bonds will be those moneys which are deposited into the Bond Fund. (b) The City shall assure that (1) not in excess of ten percent (10%) of the Net Proceeds of the Series 2001 Bonds is used for Private Business Use if, in addition, the payment of more than ten percent (10%) of the principal or ten percent (10%) of the interest due on the Series 2001 Bonds during the term thereof is, under the terms of the Series 2001 Bonds or any underlying arrangement, directly or indirectly secured by any interest in property used or to be used for a Private Business Use or in payments in respect of property used or to be used for a Private Business Use or is to be derived from payments, whether or not to the City, in respect of property or borrowed moneys used or to be used for a Private Business Use; and (ii) that, in the event that both (A) in excess of five percent (5%) of the Net Proceeds of the Series 2001 Bonds are used for a Private Business Use, and (B) an amount in excess of five percent (5%) of the principal or five percent (5%) of the interest due on the Series 2001 Bonds during the term thereof is, under the terms of the Series 2001 Bonds or any underlying arrangement , directly or indirectly, secured by any interest in property used or to be used for a Private Business Use or in payments in respect of property used or to be used for a Private Business Use or is to be derived from payments, whether or not to the City, in respect of property or borrowed money used or to be used for a Private Business Use, the excess over such five percent (5%) of Net Proceeds of the Series 2001 Bonds used for a Private Business Use shall be used for a Private Business Use related to the governmental use of the System. 16 The City shall assure that not in excess of five percent (5%) of the Net Proceeds of the Series 2001 Bonds is used, directly or indirectly, to make or finance a loan to persons other than state or local governmental units . As used in this subsection (b) , the following terms shall have the following meanings : "Net Proceeds" means the face amount of the Series 2001 Bonds, plus accrued interest and premium, if any, less original issue discount, if any. "Private Business Use" means use directly or indirectly in a trade or business carried on by a natural person or in any activity carried on by a person other than a natural person, excluding, however, use by a state or local governmental unit and use as a member of the general public . The City agrees that, so long as the Series 2001 Bonds are outstanding, it will comply with the regulations of the United States Treasury pertaining to "output facilities" (presently §1 . 141-2 and following) . Without limiting the generality of the foregoing, the City has not, subsequent to February 22 , 1998, and the City will not, except upon receiving an opinion of counsel of national reputation with regard to the exemption from income tax of interest on state and local government obligations to the effect that the exemption of interest on the Series 2001 Bonds will not be adversely affected thereby, (a) enter into any contract for the providing of water or (b) enter into any amendment of any contract (regardless of when originally entered into) for the providing of water. (c) The Series 2001 Bonds are hereby designated as "qualified tax-exempt obligations" within the meaning of Section 265 of the Code . The City represents and covenants that it does not expect that the aggregate principal amount of its qualified tax-exempt obligations (excluding "private activity bonds" within the meaning of Section 141 of the Code which are not "qualified 501 (c) (3) bonds" within the meaning of Section 145 of the Code) , including those of its subordinate entities, to be issued in the current calendar year will exceed $10, 000, 000 . (d) The City covenants that it will take no action which would cause the Series 2001 Bonds to be "federally guaranteed" within the meaning of Section 149 (b) of the Code; specifically, (A) the payment of any portion of principal or interest with respect to the Series 2001 Bonds will not be guaranteed (directly or indirectly) by the United States or any agency or instrumentality thereof and (B) not more than 5% of the proceeds of the Series 2001 Bonds (exclusive of proceeds invested for an initial temporary period until needed for the purpose for which the Series 2001 Bonds were issued and proceeds deposited into the Bond Fund) will be 17 J invested (directly or indirectly) in federally insured deposits or accounts . Nothing in this Section shall prohibit investments in obligations issued by the United States Treasury. (e) The City covenants that it will submit to the Secretary of the Treasury of the United States, not later than the 15th day of the second calendar month after the close of the calendar quarter in which the Series 2001 Bonds are issued, the statement required by Section 149 (e) of the Code . Section 15 . The Series 2001 Bonds shall be subject to redemption prior to maturity in accordance with the terms set out in the bond form, hereinabove . Section 16 . The City will keep proper books of accounts and records (separate from all other records and accounts) in which complete and correct entries shall be made of all transactions relating to the operation of the System, and such books shall be available for inspection by the holder of any of the Bonds at reasonable times and under reasonable circumstances . The City agrees to have these records audited by an independent certified public accountant at least once each year. A copy of the audit shall be delivered to the Trustee not later than 180 days after the end of each fiscal year and shall be made available to any bondholder making request therefor. In the event that the City fails or refuses to make the audit, the Trustee, or any holder of a Bond, may have the audit made, and the cost thereof shall be charged against the Operation and Maintenance Fund. Section 17 . The City covenants that it will maintain the System in good condition and operate the same in an efficient manner and at reasonable cost . While any of the Bonds are outstanding, the City agrees that, to the extent that comparable protection is not otherwise provided to the satisfaction of the Trustee, it will insure and at all times keep insured, in the amount of the full insurable value thereof, in a responsible insurance company or companies authorized and qualified under the laws of the State of Arkansas to assume the risk thereof, properties of the System, to the extent that such properties would be covered by insurance by private companies engaged in similar types of businesses (but in any event in such amounts as will avoid co-insurance responsibilities) , against loss or damage thereto from fire and other perils included in extended coverage insurance in effect in Arkansas . The insurance policies are to be taken with companies approved by the Trustee, are to carry a clause making them payable to the Trustee as its interest may appear, and are either to be placed in the custody of the Trustee or satisfactory evidence of said insurance shall be filed with the Trustee . 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 will, with reasonable promptness, cause to be commenced and completed the reconstruction, 18 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 Water and Sewer Revenue Fund, and if such proceeds shall be insufficient for such purposes the deficiency shall be supplied first from moneys in the Depreciation Fund and second from moneys in the Operation and Maintenance Fund and third from surplus moneys in the Water and Sewer Revenue Fund. Nothing shall be construed as requiring the City to expend any moneys for operation and maintenance of the System or for premiums on its insurance which are derived from sources other than the operation of the System, but nothing shall be construed as preventing the City from doing so. Section 18 . Bonds for the payment or redemption of which moneys or Government Securities, as defined in Section 22 hereof, which are not subject to call prior to maturity (except at the option of the holder thereof) shall have been deposited with the Paying Agent (whether upon or prior to the maturity or the redemption date of such bonds) shall be deemed to be paid and discharged; provided, however, that if such Bonds are to be redeemed prior to the maturity thereof, notice of such redemption shall have been duly given or provided for. In determining the sufficiency of the deposit there shall be considered the principal amount of such Government Securities, the dates of maturity thereof and interest to be earned thereon until the maturity of such Government Securities. Section 19 . The City covenants that so long as any Bonds are outstanding, that it will not mortgage, pledge or otherwise encumber the System, or any part thereof or any revenues derived from the operation thereof, except as herein specifically provided, and will not sell, lease or otherwise dispose of any substantial portion of the same. Nothing herein shall be construed to prohibit the City from disposing of worn out or obsolete System properties or from disposing of properties not being used and not useful in the operation of the System, provided that all revenues derived from the disposition of such properties shall be deposited in the Water and Sewer Revenue Fund. Section 20 . (a) If there be any default in the payment of the principal of or interest on any of the Bonds, or if the City defaults in any Bond Fund requirements or in the performance of any of the other covenants contained and set forth in this Ordinance, the Trustee may, and upon the written request of the holders and registered owners of not less than ten percent (10%) in principal amount of the Bonds then outstanding shall, by proper suit compel the performance of the duties of the officials of the City under the laws of Arkansas . And in the case of a default in the payment of the principal of and interest on any of the Bonds, the Trustee may, and upon the written request of holders or registered owners of not less than ten percent (10%) in principal amount of the Bonds then outstanding shall, apply in a proper action to a court of • 19 0 competent jurisdiction for the appointment of a receiver to © administer the System on behalf of the City and the holders and registered owners with power to charge and collect (or by mandatory injunction or otherwise to cause to be charged and collected) rates sufficient to provide for the payment of the expenses of operation, maintenance and repair and to . pay any Bonds and interest outstanding and to apply the revenue in conformity with the laws of Arkansas and with this Ordinance . When all defaults in principal and interest payments have been cured, the custody and operation of the System shall revert to the City. (b) No holder or registered owner of any of the outstanding Bonds shall have any right to institute any suit, action, mandamus or other proceeding in equity or at law for the protection or enforcement of any right under this Ordinance or under the laws of Arkansas unless such holder or registered owner previously shall have given to the Trustee written notice of the default on account of which such suit, action or proceeding is to be taken, and unless the holders and registered owners of not less than ten percent (10%) in principal amount of the Bonds then outstanding shall have made written request of the Trustee after the right to exercise such powers or right of action, as the case may be, shall have accrued, and shall have afforded the Trustee a reasonable opportunity either to proceed to exercise the powers herein granted or granted by the laws of Arkansas, or to institute such action, suit or proceeding in its name, and unless, also, there shall have been offered to the Trustee reasonable security and indemnity against the costs, expenses and liabilities to be incurred therein or thereby and the Trustee shall have refused or neglected to comply with such request within a reasonable time, and such notification, request and offer of indemnity are hereby declared in every such case, at the option of the Trustee, to be conditions precedent to the execution of the powers and trusts of this Ordinance or to any other remedy hereunder. It is understood and intended that no one or more holders or registered owners of the Bonds hereby secured shall have any right in any manner whatever by his or their action to affect, disturb or prejudice the security of this Ordinance, or to enforce any right hereunder except in the manner herein provided, that all proceedings at law or in equity shall be instituted, had and maintained in the manner herein provided and for the benefit of all holders and registered owners of all outstanding Bonds and that any individual rights of action or other right given to one or more of such holders and registered owners by law are restricted by this Ordinance to the rights and remedies herein provided. (c) All rights of action under this Ordinance or under any of the Bonds secured hereby, enforceable by the Trustee, may be enforced by it without the possession of any of the Bonds appertaining thereto, and any such suit, action or proceeding instituted by the Trustee shall be brought in its name for the 20 benefit of all the holders and registered owners of such Bonds, subject to the provisions of this Ordinance. (d) No remedy herein conferred upon or reserved to the Trustee or to the holders of the Bonds is intended to be exclusive of any other remedy or remedies herein provided, and each and every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or given by law. (e) No delay or omission of the Trustee or of any holders of the Bonds to exercise any right or power accrued upon any default shall impair any such right or power or shall be construed to be a waiver of any such default or an acquiescence therein; and every power and remedy given by this Ordinance to the Trustee and to the holders of the Bonds, respectively, may be exercised from time to time and as often as may be deemed expedient . (f) The Trustee may, and upon the written request of the holders of not less than fifty percent (50%) in principal amount of the Bonds then outstanding shall, waive any default which shall have been remedied before the entry of final judgment or decree in any suit, action or proceeding instituted under the provisions of this Ordinance or before the completion of the enforcement of any other remedy, but no such waiver shall extend to or affect any other existing or any subsequent default or defaults or impair any rights or remedies consequent thereon. (g) The cost of any proceedings brought to enforce the Bonds or any provision of this Ordinance, including reasonable attorney' s fees, shall, be a debt of the City and shall be paid by the City as incurred and billed by the Trustee. Section 21 . This Ordinance shall constitute a binding contract between the City and the holders of the outstanding Bonds, and the City will at all times strictly adhere to the terms and provisions hereof and will fully discharge all of its obligations hereunder. Subject to the terms and provisions set forth below and not otherwise, the holders of not less than seventy-five percent (75%) in aggregate principal amount of the Bonds then outstanding shall have the right, from time to time, to consent to and approve the adoption by the City of such ordinance supplemental to this Ordinance as shall be necessary or desirable for the purpose of modifying, altering, amending, adding to or rescinding in any particular, any of the terms or provisions of this Ordinance or in any supplemental ordinance, except that there shall not be permitted (a) an extension of the maturity of the principal of or the interest on any Bond, or (b) a reduction in the principal amount of any Bond or the rate of interest thereon, or (c) the creation of a lien upon or a pledge of revenues other than as expressly authorized by this Ordinance as now adopted, or (d) the creation of a privilege of priority of any Bond or Bonds over (W 21 any other Bond or Bonds, or (e) a reduction in the aggregate principal amount of the Bonds required for consent to such supplemental ordinance. Section 22 . (a) Moneys held for the credit of the Bond Fund shall be invested and reinvested in (i) direct or fully guaranteed obligations of the United States of America (including any such securities issued or held in book-entry form on the books of the Department of the Treasury of the United States of America) ( "Government Securities" ) or (ii) in time deposits or certificates of deposit of banks, including the Trustee, which are insured by the Federal Deposit Insurance Corporation (the "FDIC" ) , or, if in excess of insurance coverage, collateralized by Government Securities, or (iii) obligations issued by the Government National Mortgage Association or (iv) money market funds comprised exclusively of investments described in (i) or (iii) above (collectively, "Permitted Investments" ) all of which shall mature, or which shall be subject to redemption by the holder thereof, at the option of such holder, not later than the date or dates when the moneys will be required for payment of the principal of and interest on the Bonds when due. The Trustee shall invest and reinvest pursuant to the direction of the City and in the Trustee ' s discretion in the absence of any direct instructions from the City. (b) Moneys held for the credit of all other Funds established hereunder may be invested and reinvested pursuant to the direction of the City in Permitted Investments which shall mature, or which shall be subject to redemption by the holder thereof, at the option of such holder, not later than the date or dates when such money will be required for the purposes intended. (c) Obligations so purchased as an investment of moneys in any fund shall be deemed at all times to be a part of such fund and the interest accruing thereon and any profit realized from such investments shall be credited to such fund, and any loss resulting from such investment shall be charged to such fund. (d) Investments of moneys in all funds shall be valued in terms of current market value at least annually. Section 23 . In the event the office of Mayor, City Clerk, City Treasurer, Commission, Manager of the System or City Council shall be abolished, or any two or more of such offices shall be merged or consolidated, or in the event the duties of a particular office shall be transferred to another office or officer, or in the event of a vacancy in any such office by reason of death, resignation, removal from office or otherwise, or in the event any such officer shall become incapable of performing the duties of his office by reason of sickness, absence from the City or otherwise, all powers conferred and all obligations and duties imposed upon such office or officer shall be performed by the (W office or officer succeeding to the principal functions thereof, or 22 by the office or officer upon whom such powers, obligations and duties shall be imposed by law. Section 24 . It is understood and agreed that the Commission, acting for and on behalf of the City, has custody of and control over the System, operates, maintains and repairs the System and collects and handles System revenues . Therefore, it is understood and agreed that even though there are some express references to the Commission, all references herein to the City shall , when appropriate in view of the authority and responsibility of the Commission, be construed to mean and include the Commission. To this end, the Commission shall be obligated to perform all covenants and obligations with reference to the System and System revenues, set forth herein, the performance of which are within its authority and jurisdiction. It is understood and intended that the bondholders have relied on, and are beneficiaries of, such commitments of the Commission. Section 25 . The Trustee shall only be responsible for the exercise of good faith and reasonable prudence in the execution of its trust . The recitals in this Ordinance and in the face of the Bonds are the recitals of the City and not of the Trustee . The Trustee shall not be required to take any action as Trustee unless it shall have been requested to do so in writing by the holders of not less than ten percent (10%) in principal amount of the Bonds then outstanding and shall have been offered reasonable security and indemnity against the costs, expenses and liabilities to be incurred therein or thereby. The Trustee may resign at any time by ten (10) days notice in writing to the City Clerk and the majority in principal amount of the holders of the Bonds then outstanding at any time, with or without cause, may remove the Trustee . In the event of a vacancy in the office of Trustee, either by resignation or by removal , the majority in principal amount of the holders of the Bonds then outstanding may appoint a new Trustee, such appointment to be evidenced by a written instrument or instruments filed with the City Clerk. If the majority in principal amount of the holders of the Bonds then outstanding shall fail to fill a vacancy within thirty (30) days after the same shall occur, then the City shall forthwith designate a new Trustee by a written instrument filed in the office of the City Clerk. The original Trustee and any successor Trustee shall execute a written acceptance of the trust imposed upon it or them by this Ordinance, but only upon the terms and conditions set forth in this Ordinance and subject to the provisions of this Ordinance, to all of which the respective holders of the Bonds agree . Such written acceptance shall be filed with the City Clerk and a copy thereof shall be placed in the bond transcript . Any successor Trustee shall have all the powers herein granted to the original Trustee . In the event of a change in the office of Trustee, the former Trustee which has resigned or been removed shall cease to be Paying Agent and the successor Trustee shall automatically become the Paying Agent . 23 CW1 • Section 26 . Anything herein to the contrary notwithstanding, all rights of any holder of any Bond to or with respect to any moneys or investments held in any fund hereunder shall terminate at the expiration of two years plus six months from the date of maturity of such Bond, whether by scheduled maturity or by call for redemption prior to maturity in accordance with the terms hereof . Section 27 . Nothing in this Ordinance expressed or implied is intended or shall be construed to confer upon, or to give to, any person or entity, other than the City, the Trustee, and the registered owners of the Bonds, any right, remedy or claim under or by reason of this Ordinance or any covenant, condition or stipulation hereof, and all covenants, stipulations, promises and agreements in this Ordinance contained by and on behalf of the City shall be for the sole and exclusive benefit of the City, the Trustee, and the registered owners of the Bonds . Section 28 . The provisions of this Ordinance are hereby declared to be separable and if any provision shall for any reason be held illegal or invalid, such holding shall not affect the validity of the remainder of the Ordinance . Section 29 . This Ordinance shall not create any right of any kind and no right of any kind shall arise hereunder pursuant to it until the Series 2001 Bonds shall be issued and delivered. (W Section 30 . All ordinances and resolutions or parts thereof, in conflict herewith are hereby repealed to the extent of such conflict . Section 31 . It is hereby ascertained and declared that the refunding of the 1995 Bonds is subject to interest rate fluctuations, which are beyond the control of the City. It is, therefore, declared that an emergency exists and this Ordinance being necessary for the immediate preservation of the public peace, health and safety shall take effect and be in force from and after its passage. PASSED: 2001 . APPROVED: ATTEST: yor City Clerk (SEAL) ® 24 CERTIFICATE The undersigned, City Clerk of the City of Batesville, Arkansas, hereby certifies that the foregoing pages are a true and correct copy of Ordinance adopted at a regular session of the Council of the City of Batesville, Arkansas, held at the regular meeting place of the Council in the City at 5 : 30 p.m. , on the 13th day of March, 2001, and that said Ordinance is of record in Ordinance Record Book No. �_, Page now in my possession. 2001 . GIVEN under my hand and seal this 13th day of March, City Clerk (SEAL) • 25 BOND PURCHASE AGREEMENT ® $3,445, 000 City of Batesville, Arkansas Water and Sewer Revenue Refunding Bonds, Series 2001 City of Batesville, Arkansas March 47, 2001 Ladies and Gentlemen: The undersigned, Crews & Associates, Inc. (the "Underwriter") , hereby offers to enter into this Bond Purchase Agreement (the "Agreement") with you, the City of Batesville, Arkansas (the "Issuer" ) , for the purchase by the Underwriter and the sale by you of the Bonds of the Issuer more particularly described below. Upon acceptance and approval by you this Agreement shall be in full force and effect in accordance with its terms and shall be binding upon both the Issuer and the Underwriter. The further terms of this Agreement are : 1 . Upon the terms and conditions and upon the basis of the representations herein set forth, the Underwriter hereby agrees to purchase from the Issuer and the Issuer hereby agrees to sell to the Underwriter the entire principal amount of an issue of bonds designated "City of Batesville, Arkansas Water and Sewer Revenue Refunding Bonds, Series 2001" (the "Bonds" ) to be issued under and (W secured by Ordinance No. of the Issuer (the "Authorizing Ordinance") in the form heretofore delivered to us by the Issuer, with only such changes therein as shall be mutually agreed upon between the Issuer and the Underwriter. 2 . The Bonds are being issued for the purpose of financing, with other funds, the cost of refunding the Issuer ' s Water and Sewer Revenue Refunding Bonds, Series 1995, and paying expenses of issuing the Bonds . The Bonds shall be secured by a pledge of revenues derived from the Issuer' s water and sewer system (the "System") . 3 . The Bonds shall be dated April 1, 2001 . Interest on the Bonds shall be payable on February 1 and August 1 of each year, commencing August 1, 2001 . The Bonds shall be authorized in the principal amount of $3 , 445, 000 bearing interest at the rates per annum and maturing on February 1 in each of the years and in the amounts as set forth in the schedule attached hereto, Exhibit A. The Citizens Bank, Batesville, Arkansas shall be trustee for the bondholders and paying agent (the "Trustee" ) . 4 . The Bonds or portions thereof shall be subject to redemption prior to maturity as set forth in the Authorizing Ordinance. 5 . The Underwriter hereby agrees to purchase all of the Bonds from the Issuer and the Issuer hereby agrees to sell all of the Bonds to the Underwriter at a price of 98 . 70% of the principal amount of the Bonds, less original issue discount in the amount of (w $5, 577, plus interest accrued thereon from the date of the Bonds to the date of Closing as hereinafter defined. The sale and purchase of the Bonds shall take place at a closing (the "Closing") at 10 : 00 a.m. , prevailing local time, on April 13 , 2001, or at such other time or on such earlier or later date as is mutually agreed upon, and at the offices of Friday, Eldredge & Clark, LLP, Little Rock, Arkansas or at such other place as is mutually agreed upon. At the Closing, the Issuer will deliver, or cause to be delivered, to the Underwriter printed Bonds, with CUSIP numbers, duly executed and authenticated, together with the other documents herein required. The Bonds shall be prepared and delivered in authorized denominations and registered in such names as the Underwriter may request at least five (5) business days prior to the Closing. The Bonds will be made available to the Underwriter at the Closing for checking and packaging. At the Closing, and subject to satisfaction (or proper waiver by the Underwriter) of the conditions to its obligations to purchase the Bonds, the Underwriter will accept delivery and pay the purchase price of the Bonds by immediately available funds payable to the order of the Trustee for the account of the Issuer. If at the Closing the Issuer fails to deliver the Bonds to the Underwriter as provided herein, or if at the Closing any of the conditions specified in paragraph 8 hereof shall not have been fulfilled to the satisfaction of the Underwriter, the Underwriter may elect to be relieved of any further obligations under this Agreement without thereby waiving any other rights the Underwriter may have by reason of such failure or nonfulfillment . The Underwriter and the Issuer understand that in any of such events the actual respective expenses, costs or damages of such parties may be unequal, and any such amounts incurred by any party may be greater or may be less than those amounts incurred by any other. Accordingly, and subject to paragraphs 11 and 12 hereof, such parties hereby waive any right to claim that their actual expenses, costs or damages are or will be greater than the actual expenses, costs or damages incurred or suffered by any such party, and no such party shall be entitled to claim any damages from the other. 6 . The Issuer will sell the Bonds to the Underwriter and the Underwriter will make a public offering thereof in reliance upon representations and agreements herein set forth solely pursuant to the Official Statement hereinafter described at the offering price or yields set forth in the Official Statement . The Issuer shall deliver or cause to be delivered to the Underwriter, promptly after acceptance of this Agreement, copies of the Official Statement, in such quantity as may be reasonably requested, substantially in the form of the draft Official Statement of March 9, 2001, relating to the Bonds with only such changes therein as shall be accepted by us (such Official Statement with such subsequent modifications and changes, if any, and including the cover page and all appendices, exhibits, reports and statements included therein or attached thereto being herein called the "Official Statement" ) , signed on behalf of the Issuer by its Mayor. The Issuer authorizes the use of y r/ copies of the Official Statement and Authorizing Ordinance in connection with the public offering and sale of the Bonds . As of this date, the Official Statement has been "deemed final" by the Issuer for purposes of SEC Rule 15c212 (b) (1) . 7 . In order to induce the Underwriter to enter into this Agreement and to make an offering of the Bonds, the Issuer represents to and agrees with the Underwriter that : A. The Issuer is and will be at the Closing a duly organized and existing municipality under the Constitution and laws of the State of Arkansas and has, and at the date of Closing will have, full legal right, power and authority (i) to enter into this Agreement, (ii) to adopt the Authorizing Ordinance, (iii) to issue, sell and deliver the Bonds to the Underwriter as provided herein, and (iv) to carry out and consummate the transactions contemplated by this Agreement, the Authorizing Ordinance and the Official Statement; B. The Bonds will be issued pursuant to and in full compliance with the Constitution and laws of the State of Arkansas; C. Both on the date hereof and at the Closing, the statements and information contained in the Official Statement will be true, correct and complete in all material respects and shall not and will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading; D. The execution and delivery of this Agreement and the compliance with the provisions hereof under the circumstances contemplated hereby, will not in any respect conflict with, or constitute on the part of the Issuer a breach or default under any agreement or other instrument to which the Issuer is a party, or any existing law, administrative regulation, court order or consent decree to which the Issuer is subject; E. The Issuer will not 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 Authorizing Ordinance; F. When delivered to and paid for by the Underwriter, the Bonds will have been duly authorized, executed, authenticated, issued and delivered, and will constitute valid and legally binding special obligations of the character referred to in the statutes under which issued; G. The financial statements of the System to be contained in the Official Statement present fairly the financial position of the System as of the dates indicated and the results of its operations (W for the periods specified, and said financial statements have been prepared in conformity with generally accepted accounting principles applied in all material respects on a consistent basis with respect to the periods involved and there has been no material adverse change (not in the ordinary course of business) in the financial condition of the System from the most recent date so set forth; H. The Issuer will immediately notify the Underwriter of any adverse change of a material nature in the financial condition of the System; I . At the time of the Issuer ' s acceptance hereof and at all times subsequent thereto, to and including the time of the Closing, to the best knowledge of the Issuer the Official Statement does not and will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary make the statements therein, in the light of the circumstances under which they were made, not misleading; J. Between the date of this Bond Purchase Agreement and the Closing, the Issuer will not, without the prior written consent of the Underwriter, issue any bonds, notes, or other obligations for borrowed money and secured by or payable from revenues derived from the operations of the System; K. There is no action, suit , proceeding, or investigation which has not been disclosed in the Official Statement involving the Issuer before or by any court, public board, or body pending or, to the knowledge of the Issuer, threatened wherein an unfavorable decision, ruling, or finding would: (i) affect the existence or powers of the Issuer or the titles of its officers to their respective offices, (ii) enjoin or restrain the issuance, sale, and delivery of the Bonds or the collection of any moneys or property pledged or to be pledged under the Authorizing Ordinance or the pledge thereof, (iii) in any way question or affect any of the rights, powers, duties, or obligations of the Issuer with respect to the moneys and assets pledged or to be pledged to pay the principal of and premium, if any, and interest on the Bonds, (iv) in any way question or affect any authority for the issuance of the Bonds or the validity or enforceability of the Bonds, the Authorizing Ordinance, or any ordinance of the Issuer establishing rates to be charged for the services of the System (collectively, the "Rate Ordinances" ) , or (v) in any way question or affect this Bond Purchase Agreement or the transactions contemplated hereby or by the Official Statement, the documents referred to in the Official Statement, or any other agreement or instrument to which the Issuer is a party and relating to the Bonds or the System; and L. The Issuer will furnish such information, execute such instruments, and take such other action in cooperation with the Underwriter, as the Underwriter may reasonably request , to qualify the Bonds for offer and sale under the Blue Sky or other securities laws and regulations of such states and other jurisdictions of the United States of America as the Underwriter may designate, and the Issuer will assist, if necessary therefor, in the continuance of such qualifications in effect so long as required for the (w distribution of the Bonds; provided, however, that the Issuer shall not be required to qualify as a foreign corporation or to file any general consents to service of process under the laws of any state. 8 . The Underwriter has entered into this Agreement in reliance upon the representations and agreements of the Issuer herein and the performance by the Issuer of its obligations hereunder, both as of the date hereof and as of the Closing. The Underwriter' s obligations under this Agreement are and shall be subject to the following further conditions : A. At the Closing, the Authorizing Ordinance and the Rate Ordinances shall be in full force and effect and the Authorizing Ordinance and the Official Statement shall not have been amended, modified or supplemented after the date hereof except as may have been agreed to by the Underwriter, and the Issuer shall have duly adopted and there shall be in full force and effect such other ordinances and resolutions as, in the opinion of Friday, Eldredge & Clark, LLP, Little Rock, Arkansas (the "Bond Counsel" ) shall be necessary in connection with the transactions contemplated hereby; B. At the Closing the Underwriter shall receive the approving opinion, dated as of the Closing, of Bond Counsel, in customary form and content satisfactory to the Underwriter, plus all other documents, opinions and certificates reasonably required by Bond Counsel or the Underwriter to evidence (i) compliance by the Issuer with legal requirements, (ii) the truth and accuracy, as of the date of Closing, of the representations of the Issuer contained herein, and (iii) the due performance or satisfaction by the Issuer at or prior to the Closing of all agreements to be performed and all conditions to be satisfied by the Issuer; C. At the Closing, the Issuer will deliver a certificate, dated the date of the Closing, signed by the Chairman of the Batesville Utilities Commission and the Manager of the System and in form and substance satisfactory to the Underwriter, to the effect that (1) Each of the representations and warranties of the Issuer set forth herein is true and correct in all material respects as of the Closing and the Issuer has complied with each of its covenants and agreements required in this Agreement to be complied with at or prior to the Closing; (2) There has been no material adverse change in the business, property or financial condition of the System as described in the Official Statement and, except as provided for or contemplated or described in the official Statement, the System has not incurred any material liabilities other than in the normal course of 0 business; and (3) They have examined the Official Statement and, in their opinion, with respect to the System and the City, the Official Statement, as of the date of Closing, does not include any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading; D. At the Closing, the Issuer will deliver a letter from the auditors for the System, in form and content satisfactory to the Underwriter, consenting to the use in the Official Statement of audits reported on by such auditors; E. At the Closing, the Issuer will deliver an agreement, between the Issuer and the Trustee, in compliance with SEC Rule 15c2-12 (with regard to "continuing disclosure" ) ; and F. At the Closing, the Issuer will deliver such certificates and writings as may be reasonably requested by Bond Counsel . 9 . The Underwriter shall have the right to cancel and terminate its obligations under this Agreement at any time before Closing if any of the following occurs : (a) Legislation shall have been enacted by the Congress of the United States, or adopted by or introduced in either House or any committee thereof, or a decision shall have been rendered by a court of the United States or the Tax Court of the United States, or a ruling shall have been made or regulations shall have been proposed or made by the Treasury Department of the United States, the Internal Revenue Service or any other governmental agency with respect to federal taxation upon revenues or other income of the general character to be derived by the Issuer or by any similar body, or upon interest received on obligations of the general character of the Bonds which, in the opinion of the Underwriter, materially adversely affects the market price of the Bonds or the market price generally of obligations of the general character of the Bonds; or (b) Any legislation, ordinance, rule or regulation shall be enacted or be actively considered for enactment by any governmental body, department or agency of the State of Arkansas, or a decision by any court of competent jurisdiction within the State of Arkansas shall be rendered which, in the opinion of the Underwriter, materially adversely affects the market price of the Bonds; or (c) A stop order, ruling, regulation or official statement by or on behalf of the Securities and Exchange Commission shall be issued or made to the effect that the issuance, offering or sale of the Bonds, or of obligations of the general character of the Bonds, as contemplated hereby, is in violation of any provisions of the Securities Act of 1933 , or the Trust Indenture Act of 1939; or (d) (i) Any restriction on, or general suspension of, trading in securities on the New York Stock Exchange or any banking moratorium, or the establishment by the New York Stock Exchange, by the Securities and Exchange Commission, by any Federal or state agency, or by the decision of any court, of any limitation on prices for such trading or (ii) any new outbreak of hostilities or other national or international calamity or crisis, the effect of which on the financial markets of the United States shall be such as to make it impracticable, in the reasonable judgment of the Underwriter, for the Underwriter to enforce contracts for the sale of the Bonds; or (e) Any event or condition which, in the judgment of the Underwriter, renders untrue or incorrect, in any material respect as of the time the same purports to speak, the information, including the financial statements, contained in the Official Statement, or which requires that information not reflected in the Official Statement should be reflected therein in order to make the statements and information contained therein not misleading in any material respect as of such time; provided the Issuer and the Underwriter will use its best efforts to amend or supplement the official Statement to reflect, to the satisfaction of the Underwriter, such changes in or additions to the information contained in the Official Statement . 10 . All notices, demands and formal actions hereunder will be in writing mailed, telegraphed or delivered to: The Issuer: City of Batesville, Arkansas City Hall Batesville, Arkansas 72503 Attention: Mayor The Underwriter: Crews & Associates, Inc. 124 West Capitol, Suite 2000 Little Rock, Arkansas 72201 Attention: Edmond Hurst 11 . All representations, warranties and covenants of the Issuer contained herein shall remain operative and in full force and shall survive (a) the execution and delivery of this Agreement, (b) any investigation made by or on behalf of the Underwriter, (c) the purchase of the Bonds hereunder, and (d) any disposition of or payment for the Bonds . The Issuer shall be liable to the Underwriter for any damages resulting from a false representation or warranty or breach of covenant . 12 . The Underwriter shall be under no obligation to pay and the Issuer shall pay any expenses incident to the performance of its obligations hereunder including, but not limited to: (i) the cost of the preparation and distribution of this Agreement, the Authorizing Ordinance, the cost of the preparation, printing and delivery of the Bonds, the cost of printing of the Official Statement (in such reasonable quantities as may be requested by the Underwriter) ; (ii) the fees and disbursements of Bond Counsel and any counsel to the Issuer; (iii) the fees and disbursements of any other experts or consultants retained by the Issuer; (iv) the charges for obtaining CUSIP numbers for the Bonds; (v) legal publication costs; and (vi) the Trustee ' s authentication fee and expenses . The Underwriter shall pay: (i) the cost of the preparation and printing of any amendment or supplement to the Official Statement resulting from a determination by the Underwriter to change the initial offering prices or yields set forth in the Official Statement; (ii) all advertising expenses in connection with the public offering of the Bonds; and (iii) the cost of preparation of Blue Sky and Legal Investment Memoranda. 13 . The Underwriter shall retain the right to conduct related and unrelated business with the Issuer and its agents, including the sale and purchase of securities for deposit in escrow. 14 . This Agreement may be executed in any number of counterparts with each executed counterpart constituting an original but all of which together shall constitute one and the same instrument . 15 . This Agreement will inure to the benefit of and be binding upon the parties thereto and their successors and will not confer any rights upon any other person. This Agreement shall be governed by and construed in accordance with the laws of the State of Arkansas . CREWS & ASSOCIATES, >NC. By u oriz4efligna ure ACCEPTED this day of March, 2001 . CITY OF BATESVILLE, ARKANSAS By Q&, &. &-�7 Mayor EXHIBIT A �r The Series 2001 Bonds shall mature (on February 1) and bear interest as follows : Year Principal Interest Rate M 2002 $220, 000 3 . 70 2003 270, 000 3 . 85 2004 275, 000 3 . 95 2005 285, 000 4 . 05 2006 305, 000 4 . 10 2007 315, 000 4 . 15 2008 325, 000 4 .20 2009 3401000 4 .20 2010 355, 000 4 . 30 2011 370, 000 4 .40 2012 385, 000 4 . 50