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Ordinance 1603CITY OF EDMONDS, WASHINGTON ORDINANCE NO. 1603 AN ORDINANCE of the City of Edmonds, Wash- ington, providing for the issuance of $1,035,000.00 par value of its "Water and Sewer Revenue Refunding Bonds, 1972," for the purpose of providing funds to redeem $1,000,000.00 par value of its outstanding "Water and Sewer Revenue Bonds, 1970"; fixing the date, form, denomination, maturities, interest rate, terms and covenants of such refunding bonds; creating a special account in the bond redemption fund to provide for the refunding operation; providing for and authorizing the purchase of certain direct obligations of the United States of America out of the proceeds of the sale of such refunding bonds and for the use and application of the moneys to be derived from such investment; providing for the redemption on December 1, 1982, of the then outstanding "Water and Sewer Revenue Bonds, 1970"'; and providing for the sale and delivery of the refunding bonds to Seattle -Northwest Securities Corporation of Seattle, Washington. WHEREAS, the City of Edmonds, Washington, by Ordinance No. 635, passed June 17, 1953, specified and adopted a system or plan of additions to and betterments and extensions of the waterworks system of the City of Edmonds, including additions to and betterments and extensions of the system of sewerage of the City; provided that the existing system of sewerage, including all additions, betterments and extensions thereto, should become a part of the waterworks utility of the City; provided for the issuance of not to exceed $275,000.00 par value of "Water and Sewer Revenue Bonds, 1953," in one or more series to provide the funds required to pay the cost thereof; and provided for the issuance and sale of $135,000.00 par value of bonds as "Series A" for the purpose of obtaining funds to carry out a portion of said system or plan of additions to and betterments and extensions of the sewerage system of the City, which would become a part of the waterworks utility of the City; and WHEREAS, pursuant to Ordinance No. 695, passed April 16, 1957, an additional $140,000.00 par value of said total authorized 290 issue of "Water and Sewer Revenue Bonds, 1953," were issued as "Series B"; and WHEREAS, the City of Edmonds, Washington, by Ordinance No. 773, passed July 7, 1959, specified and adopted a system or plan of additions to and betterments and extensions of the waterworks utility of the City, including the sewerage system as a part thereof, and issued and sold $240,000.00 par value of "Water and Sewer Revenue Bonds, 1959" (hereinafter referred to as the "Outstanding 1959 Bonds"), to obtain the funds with which to pay the cost thereof, the lien and charge upon the gross revenues from the combined water and sewer systems comprising the waterworks utility of the City for such bonds and any parity bonds thereafter issued being junior and inferior to the prior lien and charge upon such gross revenues for the then outstanding "City of Edmonds Water Revenue Bonds, 1949" (all of which bonds have now been retired), "Water and Sewer Revenue Bonds, 1953, Series A," and "Water and Sewer Revenue Bonds, 1953, Series B"; and WHEREAS, by Section 13 of said Ordinance No. 773, the City of Edmonds reserved the right to issue additional and/or refunding water and sewer revenue bonds which would constitute a lien and charge upon the gross revenues of the waterworks utility, including the sewerage system as a part thereof and including all additions thereto and betterments, replacements and extensions thereof at any time made, on a parity with said Outstanding 1959 Bonds if the following conditions should be met and complied with at the time of the issuance of such additional and/or refunding water and sewer revenue bonds, to -wit: "l. No deficiency exists in the respective bond redemption funds for the payment of the outstanding 'City of Edmonds Water Revenue Bonds, 1949,' 'Water and Sewer Revenue Bonds, 1953, Series A,' and 'Water and Sewer Revenue Bonds, 1953, Series B.' "2. All payments then required by this Ordinance and any ordinance hereafter enacted pertaining to any bonds hereafter issued, in accordance with the provisions of this Section, on a parity of lien with the Bonds shall have been made into the Bond Fund and maintained intact therein. -2- "3. The ordinance authorizing the issuance of such additional bonds shall provide that an amount equal to the average annual debt service of the additional bonds proposed to be issued shall be accumulated as a reserve in the Bond Fund, said amount to be accumulated by monthly deposits commencing not later than one month after the date of issuance of such additional bonds and to be accumulated within five years after the date of issuance and said reserve to be maintained in such amounts so long as any of said additional bonds are outstanding to the last maturity thereof, provided, however, that in the case of refunding bonds the ordinance authorizing the issuance of such refunding bonds shall provide that the money in the 'Reserve Account' in the Bond Fund for the bonds to be refunded shall be retained in the Bond Fund as a reserve for the refunding bonds or the money in any other reserve account or fund for the bonds being refunded shall be transferred to said 'Reserve Account' in the Bond Fund, but if such amount does not equal the said average annual debt service requirements, such required reserve for the refunding bonds shall be accumulated in the same manner and within the same time as set forth herein for additional revenue bonds. "4. There shall be on file with the City Clerk a certificate of a professional engineer experienced in municipal utilities and licensed to practice in the State of Washington to the effect that the gross revenues of the waterworks utility, including the sewerage system as a part thereof, for anv twelve consecutive calendar months out of the immediatelv preceding twenty-four consecutive calendar months, plus the additional revenues anticipated to be received from the proposed improvement in connection with which such additional water and sewer revenue bonds are to be issued, together with the increase in revenues reasonably anticipated to result from any change in the schedule of water and/or sanitary sewage disposal rates to be put into effect prior to the issuance of such additional bonds and after giving effect to any probable future increase or decrease in the costs of maintenance and operation of the waterworks utility, including the sewerage system as a part thereof, and to any probable future increase or decrease in gross revenues resulting from growth or shrinkage in the number of water and/or sanitary sewerage service users, are deemed sufficient after the payment of normal operation and maintenance expenses, but before depreciation, to equal at least 1.5 times the average annual principal and interest requirements up to and including the final maturity date of all then outstanding water revenue bonds and/or water and sewer revenue bonds, including the Bonds, and of the additional and/or refunding bonds proposed to be so issued up to the final maturity date thereof, provided, however, that if such additional bonds proposed to be so issued are for the sole purpose of refunding outstanding water revenue bonds and/or water and sewer revenue bonds, such certification of coverage shall not be required if the amount required for the payment of the principal -3- and interest in each year for the refunding bonds is not increased over the amount required for the bonds to be refunded thereby and the maturities of said refunding bonds are not extended beyond the maturities of the bonds to be refunded thereby"; and WHEREAS, the City by Ordinance No. 814, passed May 3, 1960, heretofore issued and sold $150,000.00 par value of "Water and Sewer Revenue Bonds, 1960" (hereinafter referred to as the "Outstanding 1960 Bonds"), and by Ordinance No. 909, passed November 21, 1961, heretofore issued and sold $100,000.00 par value of "Water and Sewer Revenue Bonds, 1961" (hereinafter referred to as the "Outstanding 1961 Bonds"), both of said bond issues having been issued on a parity of lien with the outstanding "Water and Sewer Revenue Bonds, 1959," and with each other pursuant to the provisions of Section 13 of Ordinance No. 773; and WHEREAS, pursuant to Ordinance No. 1042, passed March 3, 1964, the City issued and sold $215,000.00 par value of "Water and Sewer Refunding Revenue Bonds, 1964`° (hereinafter referred to as the "Outstanding 1964 Bonds"), to obtain the funds with which to pay, retire and cancel on July 1, 1964, all of the outstanding "Water and Sewer Revenue Bonds, 1953, Series A," and on May 1, 1964, all of the outstanding "Water and Sewer Revenue Bonds, 1953, Series B," all of which bonds were called, paid and retired on said respective call dates and which Outstanding 1964 Bonds were issued on a parity of lien with the Outstanding 1959 Bonds, the Outstanding 1960 Bonds and the Outstanding 1961 Bonds in accordance with the provisions of Section 13 of Ordinance No. 773; and WHEREAS, pursuant to Ordinance No. 1141, passed September 21, 1965, the City issued and sold $125,000.00 par value of "Water and Sewer Revenue Bonds, 1965" (hereinafter referred to as the "Outstanding 1965 Bonds"), pursuant to Ordinance No. 1207, passed May 17, 1966, the City issued and sold $1,000,000.00 par value of "Water and Sewer Revenue Bonds, 1966" (hereinafter referred to as the "Outstanding 1966 Bonds"), pursuant to Ordinance No. 1314, passed -4- July 5, 1967, the City issued and sold $400,000.00 par value of "Water and Sewer Revenue Bonds, 1967" (hereinafter referred to as the "Outstanding 1967 Bonds"), and pursuant to Ordinance No. 1506, passed October 20, 1970, the City issued and sold $1,000,000.00 par value of "Water and Sewer Revenue Bonds, 1970" (hereinafter referred to as the "Outstanding 1970 Bonds"), all of which bond issues were issued on a parity of lien with the Outstanding 1959 Bonds and all subsequent issues of parity bonds above referred to and with each other in accordance with the provisions of Section 13 of Ordinance No. 773; and WHEREAS, as provided in Ordinance No. 1506 and in the Outstanding 1970 Bonds, the City reserved the right to redeem such outstanding bonds in inverse numerical order on December 1, 1982, or on any semiannual interest payment date thereafter at 102% of par plus accrued interest to date of redemption, which redemption price shall reduce 1/2 of 1% annually to par on or after December 1, 1986, and all of said Outstanding 1970 Bonds will be outstanding on December 1, 1982, and bear interest at various rates ranging from 6.70% to 7.00% per annum; and WHEREAS, after due consideration it appears to the City Council that all of the Outstanding 1970 Bonds may be refunded at the earliest possible date by the issuance and sale of refunding bonds so that a substantial savings will be effected by the difference between the principal and interest cost over the life of the refunding bonds and the principal and interest cost over the life of such Outstanding 1970 Bonds; and WHEREAS, in order to effect such refunding in the manner that will be most advantageous to the City it is hereby found necessary and advisable that certain direct obligations of the United States of America, bearing interest and maturing at such time or times as necessary to pay the interest on the refunding bonds until the said Outstanding 1970 Bonds are refunded and retired and to pay -5- the principal of such Outstanding 1970 Bonds on the date when such bonds are to be called for such redemption, be purchased out of the proceeds of the sale of the refunding bonds herein authorized; and WHEREAS, the City Council hereby finds and declares that all "City of Edmonds Water Revenue Bonds, 1949," "Water and Sewer Revenue Bonds, 1953, Series A," and "Water and Sewer Revenue Bonds, 1953, Series B," have been paid and retired; that all payments required to be made into the "Water and Sewer Revenue Bond Redemption Fund, 1959," created by Ordinance No. 773 for the payment of the Outstanding 1959 Bonds and all subsequently issued water and sewer revenue bonds on a parity therewith have been made into such fund and maintained intact therein; that provision is hereinafter made for the retention in the "Reserve Account" in the "Water and Sewer Revenue Bond Redemption Fund, 1959," of an amount equal to the average annual debt service requirements for the additional $1,035,000.00 par value of refunding water and sewer revenue bonds proposed to be issued within the time required; and that James H. Reid, a professional engineer experienced in municipal utilities and licensed to practice in the State of Washington has certified that the revenues of the waterworks utility of the City, including the sewerage system as a part thereof, to be considered under subparagraph 4 of Section 13 of Ordinance No. 773, are sufficient to meet the 1.5 coverage requirement therein specified as evidenced by his certificate to such effect on file with the City Clerk, such certifying engineer having taken into consideration the fact that no debt service payable out of the revenues of the waterworks utility of the City will arise for the refunding bonds until after September 1, 1983, and that debt service payable out of such revenues for the Outstanding 1970 Bonds to be refunded will continue only until December 1, 1982, at which time the Outstanding 1970 Bonds will be paid and retired and debt service on the refunding bonds payable out of such revenues will then commence on such date; NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF EDMONDS, WASHINGTON, DO ORDAIN, as follows: Section 1. For the purpose of providing the funds necessary to redeem and retire on December 1, 1982, all of the Outstanding 1970 Bonds in the principal amount of $1,000,000.00 and to pay the costs of such refunding plan, there shall be issued and sold $1,035,000.00 par value of refunding water and sewer revenue bonds of the City. The bonds shall be designated "Water and Sewer Revenue Refunding Bonds, 1972" (hereinafter called the "Bonds"). The Bonds shall be in denominations of $5,000.00 each, shall be numbered from 1 to 207, inclusive, shall be dated March 1, 1972, shall bear interest at the rate of 5-3/4% per annum, payable on September 1, 1972, and semiannually thereafter on each succeeding March 1 and September 1, interest to maturity to be evidenced by coupons to be attached to the Bonds, with full obligation on the part of the City to pay interest at the same rate from and after the Bond maturity dates until the Bonds with interest are paid in full or funds sufficient to pay such Bonds with interest in full are on deposit in the bond redemption fund hereinafter referred to and the Bonds have been duly called for redemption. The Bonds shall mature in accordance with the following schedule, to -wit: Bond Numbers (Inclusive) Amounts Maturities 1 to 2 $ 10,000 September 1, 1983 3 to 4 10,000 September 1, 1984 5 to 6 10,000 September 1, 1985 7 to 8 10,000 September 1, 1986 9 to 45 185,000 September 1, 1987 46 to 85 200,000 September 1,.1988 86 to 127 210,000 September 1, 1989 128 to 170 215,000 September 1, 1990 171 to 207 185,000 September 1, 1991 Section 2. Both principal of and interest on the Bonds shall be payable in lawful money of the United States of America at the office of the Director of Finance of the City of Edmonds, Washington. The Bonds shall be payable solely out of the special fund created by Ordinance No. 773 and known as the "Water and Sewer orm Bond Redemption Fund, 1959" (hereinafter referred to as the "Bond Fund"), and shall be a valid claim of the holder thereof only as against such special fund and the fixed amount of the revenues of the waterworks utility of the City, including the sewerage system as a part thereof (such combined systems being hereinafter referred to as "the waterworks utility of the City"), pledged to such fund (including the investment income from United States obligations to pay interest on the Bonds to September 1, 1982), and shall not be a general obligation of the City of Edmonds. Section 3. The City of Edmonds reserves the right to redeem the Bonds as a whole, or in part in inverse numerical order, on March 1, 1983, or on any semiannual interest payment date thereafter at the following redemption prices expressed as a percentage of par value, plus accrued interest to date of redemption, if called on the following dates: On March 1, 1983, September 1, 1983, or March 1, 1984 102% On September 1, 1984, or March 1, 1985 101-1/2% On September 1, 1985, or March 1, 1986 101% On September 1, 1986, or March 1, 1987 100-1/2% On or after September 1, 1987 100% Notice of such call for redemption shall be published once not less than thirty nor more than forty-five days prior to the call date in the official newspaper of the City and shall also be mailed to Seattle -Northwest Securities Corporation at its principal place of business in Seattle, Washington, within the same period. In addition, such redemption notices shall also be sent to Moody's Investors Service, Inc., and Standard & Poor's Corporation, at their offices in New York, New York. Interest on any Bonds so called for redemption shall cease on the date fixed for such redemption on payment of the redemption price into the Bond Fund. Section 4. The Bond Fund has heretofore been divided into two accounts, namely, a "Principal and Interest Account" and a "Reserve Account." There is hereby also created and established in the Bond Fund a third account to be known as the "1972 Refunding Bonds Account." Immediately upon receipt of payment in full for the Bonds a sufficient amount of the principal proceeds received to pay all costs of the refunding operation shall be deposited in the "Water and Sewer Fund" of the City. The principal proceeds received from the sale of the Bonds, together with the accrued interest received, shall be deposited in the "1972 Refunding Bonds Account" and then shall be used immediately to purchase $1,005,000.00 par value of United States Treasury Bonds due February.15, 1982, bearing 6-3/8% interest and yielding 6.3% interest. The National Bank of Commerce of Seattle, Seattle, Washington, has agreed to provide this investment at a cost of $1,010,025.00, plus accrued interest. The United States Treasury Bonds to be purchased as above provided shall be registered as to principal and interest in the name of the "Director of Finance of the City of Edmonds, Washington, trustee for the Water and Sewer Revenue Bond Redemption Fund, 1959, 1972 Refunding Bonds Account." All of such United States Treasury Bonds shall be held in the custody of the Director of Finance for such "Refunding Bonds Account" in the Bond Fund, and shall be placed in safekeeping with any bank normally used by such Director of Finance for safekeeping of City securities. All the money received as principal of or interest on such Government obligations shall be held by the Director of Finance for the credit of the City for the "1972 Refunding Bonds Account" in the Bond Fund and shall be held in trust and shall be used for the sole purpose of paying the interest on the Bonds until the Outstanding 1970 Bonds shall have been called, retired and paid and for the purpose of paying the principal of said Outstanding 1970 Bonds on the date they are to be called for redemption as aforesaid. All interest on and principal of the above -described Government obligations received prior to the time such money is needed to make any payment of interest on the Bonds or the principal of the Outstanding 1970 Bonds to be called and retired on December 1, 1982, as provided herein, may be invested and reinvested only in United States Government obligations maturing prior to the date or dates such money will be needed for such payment. Any moneys remaining in the "1972 Refunding Bonds Account" in the Bond Fund after the payment and retirement in full of the Outstanding 1970 Bonds on December 1, 1982, shall be transferred and paid into the "Principal and Interest Account" in the Bond Fund. Section 5. So long as Bonds are outstanding against the Bond Fund the Director of Finance of the City of Edmonds shall set aside and pay into the Bond Fund out of the gross revenues of the waterworks utility of the City a fixed amount without regard to any fixed proportion, namely, into the "Principal and Interest Account," monthly, on or before the 20th day of each month beginning with the month of September, 1982, and continuing thereafter one -sixth of the next ensuing six months' requirements of interest and one -twelfth of the next ensuing twelve months' requirements of principal on the Bonds. After the payment and retirement on December 1, 1982, of the Outstanding 1970 Bonds, all moneys then on deposit in the "Reserve Account" in the Bond Fund (being not less than the aggregate sum of $293,496.00) for all parity bonds then outstanding, including the Bonds, shall be retained therein and shall thereafter be maintained in such amount, except for withdrawals therefrom as authorized herein, at all times so long as any of the bonds payable out of the Bond Fund is outstanding. In the event that there should be a deficiency in the "Principal and Interest Account" in the Bond Fund to meet maturing installments of either principal or interest, as the case may be, such deficiency shall be made up from the "Reserve Account" by the withdrawal of cash therefrom for that purpose. Any deficiency created in the "Reserve Account" by reason of any such withdrawal shall then be made up from the moneys from the revenues of the waterworks utility of the City first available after making necessary provision for the required payments into the "Principal and Interest Account." The -10- moneys in the "Reserve Account" shall otherwise be held intact and may be applied against the last outstanding bonds payable out of the Bond Fund. All moneys in the "Reserve Account" above provided for may be kept on deposit in the official bank depository of the City, or may be invested in United States Government obligations redeemable at a fixed price and maturing not later than the final maturity date of the last outstanding bonds payable out of the Bond Fund. Interest earned on any such investments or on such bank deposit shall be deposited in the "Principal and Interest Account." Section 6. Subject to the redemption on December 1, 1982, of all of the Outstanding 1970 Bonds as herein provided, the gross revenues from the waterworks utility of the City are hereby pledged to the payments required to be made as set forth in the immediately preceding section and the Bonds shall constitute a lien and charge upon such gross revenues prior and superior to any other charges whatsoever, excluding charges for maintenance and operation of the waterworks utility of the City, except that the lien and charge upon those revenues for the Bonds shall be on a parity with the lien and charge upon such gross revenues, after the payment and retirement of the Outstanding 1970 Bonds, for the Outstanding 1959 Bonds, the Outstanding 1960 Bonds, the Outstanding 1961 Bonds, the Outstanding 1964 Bonds, the Outstanding 1965 Bonds, the Outstanding 1966 Bonds, the Outstanding 1967 Bonds and any additional water and sewer revenue bonds which may be hereafter issued on a parity with the Outstanding 1959 Bonds, the Outstanding 1960 Bonds, the Outstanding 1961 Bonds, the Outstanding 1964 Bonds, the Outstanding 1965 Bonds, the Outstanding 1966 Bonds, the Outstanding 1967 Bonds, the Outstanding 1970 Bonds (prior to the payment and retirement of such Outstanding 1970 Bonds on December 1, 1982) and the Bonds in accordance with the provisions of Section 13 of Ordinance No. 773 and Section 10 of this ordinance. men Section 7. In the judgment of the City Council, the gross revenues and benefits to be derived from the operation and maintenance of the waterworks utility of the City at the rates to be charged for water and sanitary sewage disposal service on the entire utility will be more than sufficient to meet all expenses of operation and maintenance thereof and the debt service requirements of the Outstanding 1959 Bonds, the Outstanding 1960 Bonds, the Outstanding 1961 Bonds, the Outstanding 1964 Bonds, the Outstanding 1965 Bonds, the Outstanding 1966 Bonds, the Outstanding 1967 Bonds and the Outstanding 1970 Bonds (prior to the payment and retirement of such Outstanding 1970 Bonds on December 1, 1982) and to permit the setting aside in the Bond Fund out of the gross revenues of the entire utility of amounts sufficient to pay the interest on the Bonds as such interest becomes payable after September 1, 1982, and to pay and redeem all of the Bonds at maturity. The City Council and corporate authorities of the City of Edmonds further hereby declare that in creating the Bond Fund and in fixing the amounts to be paid into the same, as aforesaid, they have exercised due regard for the cost of operation and maintenance of the waterworks utility of the City and the debt service requirements of the presently outstanding bonds above referred to and the City has not bound and obligated itself to set aside and pay into the Bond Fund a greater amount or proportion of the revenues of the said utility than in the judgment of the City Council will be available over and above such cost of maintenance and operation and debt service requirements of said outstanding bonds, and that no portion of the revenues of the waterworks utility of the City has been previously pledged for any indebtedness other than the outstanding bond issues above referred to. Section 8. The City hereby covenants and agrees with the owner and holder of each Bond at any time outstanding as follows: (a) That it will establish, maintain and collect such rates and charges for water and sanitary sewage disposal service so long as any Bonds are outstanding as will make available (1) for the payment of the principal of and interest on the Outstanding 1959 Bonds, the Outstanding 1960 Bonds, the Outstanding 1961 Bonds, the -12- Outstanding 1964 Bonds, the Outstanding 1965 Bonds, the Outstanding 1966 Bonds, the Outstanding 1967 Bonds and the Outstanding 1970 Bonds an amount equivalent to at least 1.5 times the average annual debt service requirements, both principal and interest, on all outstanding bonds of said bond issues after deducting costs of maintenance and operation from the gross revenues of the waterworks utility of the City until the Outstanding 1970 Bonds are paid and retired on December 1, 1982, and (2) thereafter for the payment of the principal of and interest on the Outstanding 1959 Bonds, the Outstanding 1960 Bonds, the Outstanding 1961 Bonds, the Outstanding 1964 Bonds, the Outstanding 1965 Bonds, the Outstanding 1966 Bonds, the Outstanding 1967 Bonds and the Bonds an amount equivalent to at least 1.5 times the average annual debt service requirements, both principal and interest, on all outstanding bonds of said bond issues after deducting costs of maintenance and operation from the gross revenues of the waterworks utility of the Citv. (b) That it will at all times maintain and keep the waterworks utility of the City in good repair, working order and condition, and also will at all times operate that utility and the business in connection therewith in an efficient manner and at a reasonable cost. (c) That it will not sell, lease, mortgage or in anv manner encumber or dispose of all the property of the waterworks utility of the City, unless provision is made for payment into the Bond Fund of a sum sufficient to pay the principal of and interest on all Bonds at any time outstanding, and that it will not sell, lease, mortgage, or in any manner encumber or dispose of any part of the property of said waterworks utility of the City that is used, useful and material to the operation thereof, unless provision is made for replacement thereof, or for payment into the Bond Fund of the total amount of revenue received which shall not be less than an amount which shall bear the same ratio to the amount of outstanding bonds payable out of the Bond Fund as the revenue available for debt service for such outstanding bonds for the twelve months preceding such sale, lease, encumbrance or disposal from the portion of the utility sold, leased, encumbered or disposed of bears to the revenue available for debt service for such bonds from the entire utility for the same period. Any such moneys so paid into the Bond Fund shall be used to retire such outstanding bonds payable out of the Bond Fund at the earliest possible date and until being so used may be invested in the same manner as provided for the investment of the moneys in the °Reserve Account" in the Bond Fund. (d) That it will, while any of the Bonds remain outstanding, keep proper and separate accounts and records in which complete and separate entries shall be made of all transactions relating to its waterworks utility, and it will furnish the original purchaser or purchasers of the Bonds or any subsequent holder -13- form: or holders thereof, at the written request of such holder or holders, complete operating and income statements of the waterworks utility in reasonable detail covering any calendar year not more than ninety days after the close of such calendar year and it will grant any holder or holders of at least 25% of the outstanding Bonds the right at all reasonable times to inspect the entire waterworks utility of the City and all records, accounts and data of the City relating thereto. Upon request of any holder of any of the Bonds, it will also furnish to such holder a copy of the most recently completed audit of the City's accounts by the State Auditor of Washington, or such other audit as is authorized by law in lieu thereof. (e) That it will not furnish water or sanitary sewage disposal service to any customer whatsoever free of charge and will promptly take legal action to enforce collection of all delinquent accounts. (f) That it will carry the type of insurance on its waterworks utility property in the amounts normally carried by private water and sewer companies engaged in the operation of water and sewerage systems, and the cost of such insurance shall be considered part of the operating and maintaining of said utility. If, as, and when, the United States of America or some agency thereof shall provide for war risk insurance, the City further agrees to take out and maintain such insurance on all or such portion of the system on which such war risk insurance may be written in an amount or amounts to cover adequately the value thereof. (g) That it will pay all costs of maintenance and operation of the waterworks utility of the City and the debt service requirements of the Outstanding 1959 Bonds, the Outstanding 1960 Bonds, the Outstanding 1961 Bonds, the Outstanding 1964 Bonds, the Outstanding 1965 Bonds, the Outstanding 1966 Bonds, the Outstanding 1967 Bonds, the Outstanding 1970 Bonds prior to their redemption on December 1, 1982, and the Bonds and otherwise meet the obligations of the City as herein set forth. Section 9. The Bonds shall be substantially in the following No. $5,000.00 UNITED STATES OF AMERICA STATE OF WASHINGTON CITY OF EDMONDS WATER AND SEWER REVENUE REFUNDING BOND, 1972 5-3/4% KNOW ALL MEN BY THESE PRESENTS: That the City of Edmonds, State of Washington, for value received -14- promises to pay to bearer on the FIRST DAY OF SEPTEMBER, 19 , the principal sum of FIVE THOUSAND DOLLARS together with interest thereon at the rate of FIVE AND THREE-QUARTERS PERCENT (5-3/4%) per annum, payable on September 1, 1972, and semiannually thereafter on each succeeding March 1 and September 1, upon presentation and surrender of the attached interest coupons as they severally mature up to the bond maturity date until this bond with interest is paid in full, or funds are available in the "Water and Sewer Bond Redemption Fund, 1959" (hereinafter called the "Bond Fund"), for payment in full and this bond has been duly called for redemption. Both principal of and interest on this bond are payable in lawful money of the United States of America at the office of the Director of Finance of Edmonds, Washington, solely out of the special fund created by Ordinance No. 773, and referred to herein as the "Bond Fund," into which fund the City of Edmonds hereby irrevocably binds itself to pay the principal proceeds received from the issuance of this bond and all investment income therefrom and certain fixed amounts out of the gross revenues of the waterworks utility, including the sewerage system as a part thereof, now belonging to or which may hereafter belong to the City, including all additions, extensions and betterments thereof now or at any time made or constructed, without regard to any fixed proportion, namely, amounts sufficient to pay the principal of and interest on the outstanding "Water and Sewer Revenue Bonds, 1959," "Water and Sewer Revenue Bonds, 1960," "Water and Sewer Revenue Bonds, 1961," "Water and Sewer Refunding Revenue Bonds, 1964," "Water and Sewer Revenue Bonds, 1965," "Water and Sewer Revenue Bonds, 1966," "Water and Sewer Revenue Bonds, 1967," and "Water and Sewer Revenue Bonds, 1970," until the same are redeemed on December 1, 1982, and thereafter on this issue of bonds, as they respectively become due and to maintain a reserve, all at the times and in the manner set forth in Ordinances Nos. 773, 814, 909, 1042, 1141, 1207, 1314, 1506 and /6433. The gross revenues from the combined water and sewerage systems, comprising the waterworks utility of the City, have been pledged to the payments required to be made as set forth in Section 5 of Ordinance No. /Gp T , and subject to the redemption on December 1, 1982, of all of the outstanding "Water and Sewer Revenue Bonds, 1970," as provided in Ordinance No. , oJ, the bonds of this issue shall constitute a lien and charge on such revenues prior and superior to any other charges whatsoever, excluding charges for maintenance and operation of the waterworks utility of the City, except that the lien and charge upon those revenues for the bonds of this issue shall, after the payment and retirement of the outstanding "Water and Sewer Revenue Bonds, 1970," be on a parity with the lien and charge upon such gross revenues for the outstanding "Water and Sewer Revenue Bonds, 1959," "Water and Sewer Revenue Bonds, 1960," "Water and Sewer Revenue Bonds, 1961," -15- "Water and Sewer Refunding Revenue Bonds, 1964," "Water and Sewer Revenue Bonds, 1965," "Water and Sewer Revenue Bonds, 1966," "Water and Sewer Revenue Bonds, 1967," and any additional water and sewer revenue bonds which may be hereafter issued on a parity with the lien and charge upon such gross revenues for the outstanding "Water and Sewer Revenue Bonds, 1959," "Water and Sewer Revenue Bonds, 1960," "Water and Sewer Revenue Bonds, 1961," "Water and Sewer Refunding Revenue Bonds, 1964," "Water and Sewer Revenue Bonds, 1965," "Water and Sewer Revenue Bonds, 1966," "Water and Sewer Revenue Bonds, 1967," "Water and Sewer Revenue Bonds, 1970" (prior to the payment and retirement of such outstanding "Water and Sewer Revenue Bonds, 1970," on December 1, 1982), and the bonds of this issue in accordance with the provisions of Section 13 of Ordinance No. 773 and Section 10 of Ordinance No. IkO? . This bond is one of a total issue of $1,035,000.00 Par value of bonds, all of like date, tenor and effect, except as to maturities, all payable from the Bond Fund and all issued by the City under and in pursuance of the laws of the State of Washington, particularly Chapter 138, Laws of 1965, lst Ex. Ses. (RCW Chapter 39.53), and Ordinance No. 1401 for the purpose of providing the funds to refund, pay and retire on December 1, 1982, $1,000,000.00 par value of outstanding "Water and Sewer Revenue Bonds, 1970," and to pay the costs of such refunding plan. The City of Edmonds has reserved the right to redeem the bonds as a whole, or in part in inverse numerical order, on March 1, 1983, or on any semiannual interest payment date thereafter at the following redemption prices expressed as a percentage of par value, plus accrued interest to date of redemption, if called on the following dates: On March 1, 1983, September 1, 1983, or March 1, 1984 102% On September 1, 1984, or March 1, 1985 101-1/2% On September 1, 1985, or March 1, 1986 101% On September 1, 1986, or March 1, 1987 100-1/2% On or after September 1, 1987 100% Notice of such call for redemption shall be published once not less than thirty nor more than forty-five days prior to the call date in the official newspaper of the City and shall also be mailed to Seattle -Northwest Securities Corporation at its principal place of business in Seattle, Washington, within the same period. In addition, such redemption notices shall also be sent to Moody's Investors Service, Inc., and Standard & Poor's Corporation, at their offices in New York, New York. Interest on any bonds so called for redemption shall cease on the date fixed for such redemption on payment of the redemption price into the Bond Fund. The City of Edmonds hereby covenants and agrees with the holders of each and every one of the bonds of this issue to fully carry out all covenants and meet all obligations of the City, as set forth in Ordinance No. /42, to which ordinance reference is hereby made as more fully describing the covenants with and rights of holders of bonds of this issue. -16- It is hereby certified and declared that the bonds of this issue are issued pursuant to and in strict compliance with the Constitution and the laws of the State of Washington and the ordinances of the City of Edmonds, and that all acts, conditions and things required to be done precedent to and in the issuance of this bond have happened, have been done and have been performed as required by law. IN WITNESS WHEREOF, the City of Edmonds, Wash- ington, has caused this bond to be signed by the facsimile signature of its Mayor and attested by the manual signature of its City Clerk and its corporate seal to be hereto affixed, and the interest coupons attached to be signed with the facsimile signatures of said officials this first day of March, 1972. CITY OF EDMONDS, WASHINGTON By (facsimile signature) Mayor ATTEST: City Clerk The interest coupons attached to the Bonds shall be in substantially the following form: Coupon No. $143.75 On the FIRST DAY OF (MARCH) (SEPTEMBER) , 19 , the CITY OF EDMONDS, WASHINGTON, upon presentation and surrender of this coupon will pay to bearer at the office of the Director of Finance the sum shown hereon in lawful money of the United States of America from the special fund of said City known as the "Water and Sewer Bond Redemption Fund, 1959," said sum being six months' interest then due on its "Water and Sewer Revenue Refunding Bond, 1972," dated March 1, 1972, and numbered CITY OF EDMONDS, WASHINGTON By (facsimile signature) Mayor ATTEST: (facsimile signature) City Clerk The Bonds shall be printed on lithographed forms, shall be signed by the facsimile signature of the Mayor and attested by the manual signature of the City Clerk and shall have the seal of the City of Edmonds affixed thereto and the interest coupons shall bear the facsimile signatures of the Mayor and the City Clerk. -17- Section 10. The City reserves the right to issue additional or refunding water and sewer revenue bonds, which shall constitute a lien and charge upon the gross revenues of the waterworks utility of the City, on a parity of lien with the Outstanding 1959 Bonds, the Outstanding 1960 Bonds, the Outstanding 1961 Bonds, the Outstanding 1964 Bonds, the Outstanding 1965 Bonds, the Outstanding 1966 Bonds, the Outstanding 1967 Bonds, the Outstanding 1970 Bonds prior to their redemption on December 1, 1982, and the Bonds, if the conditions set forth in Section 13 of Ordinance 773 shall be met and complied with at the time of issuance of such additional or refunding water and sewer revenue bonds, which section is incorporated in this ordinance and by this reference made a part hereof and shall be applicable after the retirement of said Outstanding 1959 Bonds, Outstanding 1960 Bonds, Outstanding 1961 Bonds, Outstanding 1964 Bonds, Outstanding 1965 Bonds, Outstanding 1966 Bonds, Outstanding 1967 Bonds and Outstanding 1970 Bonds. Section 11. The City Clerk is hereby authorized and directed to cause to be published once not less than thirty nor more than forty-five days prior to December 1, 1982, in the official newspaper of the City a notice of call for redemption of all Outstanding 1970 Bonds and to mail a copy of such notice of redemption to Merrill Lynch, Pierce, Fenner & Smith, Incorporated, Seattle - Northwest Securities Corporation, Dean Witter & Co., Inc., and Walston & Co., Inc., at their principal places of business in Seattle, Washington, within the same period as provided in Ordinance No. 1506 and in the Bonds, and the Director of Finance is hereby authorized and directed to pay and redeem all of said Outstanding 1970 Bonds on December 1, 1982, at 1020 of the par value thereof, plus accrued interest to such date of redemption. Section 12. Seattle -Northwest Securities Corporation of Seattle, Washington, heretofore offered to purchase the Bonds at a price of $98.26 per each $100.00 par value, plus accrued interest from the date of issuance to the date of delivery of the Bonds, the City to furnish the printed Bonds and the unqualified approving legal opinion of Messrs. Roberts, Shefelman, Lawrence, Gay & Moch, municipal bond counsel of Seattle, Washington, at the City's expense. The City Council, being of the opinion that no better price could be obtained for the Bonds and that it was in the best interests of the City to accept the same, accepted such offer on June 6, 1972, and such acceptance is hereby ratified and confirmed. The Bonds shall, therefore, immediately upon their execution be delivered to the purchaser upon payment for the Bonds in accordance with such offer. PASSED by the City Council of the City of Edmonds, Washington, at a regular open public meeting thereof, and APPROVED by the Mayor this 20th day of June, 1972. ATTEST: Deputy City Clerk FORM APPROVED: City Attorney CITY OF EDMONDS, WASHINGTON t By i Mayor -19-