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ORD 96-44 CONSOLIDATED LID 17 & 18ORDINANCE NO. 96- 44 AN ORDINANCE relating to local improvement districts; establishing Consolidated Local Improvement District No. 17/18 and Consolidated Local Improvement Fund, District No. 17/18; fixing the amount, form, date, interest rates, maturity and denominations of the Consolidated Local Improvement District No. 17/18 Bonds; providing for the sale and delivery thereof to Pacific Crest Securities of Seattle, Washington; and fixing the interest rate on local improvement district assessment installments. WHEREAS, the City Council of the City of Bainbridge Island, Washington (the "City"), heretofore has created Local Improvement Districts Nos. 17 and 18 for various purposes; and WHEREAS, RCW 35.45.160 authorizes the establishment of consolidated local improvement districts for the purpose of issuing bonds only and provides that if the governing body of any municipality orders the creation of such consolidated local improvement district, the money received from the installment payment of the principal of and interest on assessments levied within the original local improvement districts shall be deposited in a consolidated local improvement district bond redemption fund to be used to redeem outstanding consolidated local improvement district bonds; NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF BAINBRIDGE ISLAND, WASHINGTON, DO ORDAIN as follows: Section 1. Consolidation of Local Improvement Districts. For the purpose of issuing bonds only, those local improvement districts of the City established by the following ordinances, respectively, the 30-day period for making cash payment of assessments without interest in each local improvement district having expired in the case of the assessments for each local improvement district, are consolidated into a consolidated local improvement district to be known and designated as Consolidated Local Improvement District No. 17/18: Local Improvement District No. Created by Ordinance No. 17 94-20 18 95-09 Section 2. Bond Fund. There is created and established in the office of the City Director of Finance and Administrative Services for Consolidated Local Improvement District No. 17/18 a special consolidated local improvement district fund to be known and designated as Consolidated Local Improvement Fund, District No. 17/18 (the "Bond Fund"). All money 0262937.02 - 1 - presently on hand representing collections pertaining to installments of assessments and interest thereon in each of the local improvement districts listed in Section 1 shall be transferred to and deposited in the Bond Fund, and all collections pertaining to assessments on the assessment rolls of those local improvement districts when hereafter received shall be deposited in the Bond Fund to redeem outstanding Consolidated Local Improvement District No. 17/18 bonds. Section 3. Authorization and Description of Bonds. Consolidated Local Improvement District No. 17/18 bonds (the "Bonds") shall be issued in the total principal sum of $293,973.64, being the total amount on the assessment rolls of Local Improvement Districts Nos. 17 and 18 remaining uncollected after the expiration of the 30-day interest-free prepayment period. The Bonds shall be dated October 15, 1996, shall mature on May 1, 2018, and shall be numbered from 1 to 58, inclusive, in the manner and with any additional designation as the Bond Registrar (collectively, the fiscal agencies of the State of Washington located in Seattle, Washington, and New York, New York) deems necessary for the purpose of identification. Bond No. 1 shall be in the denomination of $8,973.64 and Bonds Nos. 2 to 58, inclusive, shall be in the denomination of $5,000.00 each. Interest shall be computed on the basis of a 360-day year of twelve 30-day months. The Bonds shall bear interest at the rate of 7.25% per annum, payable annually on May 1 of each year beginning May 1, 1997, to maturity or earlier redemption. Section 4. Registration and Transfer of Bonds. The Bonds shall be issued only in registered form as to both principal and interest and shall be recorded on books or records maintained by the Bond Registrar (the "Bond Register"). Such Bond Register shall contain the name and mailing address of the owner of each Bond and the principal amount and number of each of the Bonds held by each owner. Bonds may be transferred only if endorsed in the manner provided thereon and surrendered to the Bond Registrar. The transfer of a Bond shall be by the Bond Registrar's receiving the Bond to be transferred, cancelling it and issuing a new certificate in the form of the Bonds to the transferee after registering the name and address of the transferee on the Bond Register. The new certificate shall bear the same Bond number as the transferred Bond but may have a different inventory reference number or control number. Any exchange or transfer shall be without cost to the owner or transferee. The Bond Registrar shall not be obligated to exchange or transfer any Bond during the 15 days preceding any principal payment or redemption date. Section 5. Payment of Bonds. Both principal of and interest on the Bonds shall be payable solely out of the Bond Fund and from the Local Improvement Guaranty Fund of the City, and shall be payable in lawful money of the United States of America. Interest on the Bonds shall be paid by checks or drafts mailed to the registered owners on the interest payment date at the addresses appearing on the Bond Register on the 15th day of the month preceding the interest payment date. Principal of the Bonds shall be payable upon presentation and surrender of the Bonds by the registered owners at either of the principal offices of the Bond Registrar at the option of the owners. Section 6. Redemption Provisions. The City reserves the right to redeem the Bonds prior to their stated maturity on any interest payment date, in numerical order, lowest numbers 0262937.02 -2- first, at par plus accrued interest to the date fixed for redemption, whenever there shall be sufficient money in the Bond Fund to pay the Bonds so called and all earlier numbered Bonds over and above the amount required for the payment of the interest payable on that interest payment date on all unpaid Bonds. All Bonds redeemed under this section shall be cancelled. Section 7. Notice of Redemption. The City shall cause notice of any intended redemption of Bonds to be given not less than 15 nor more than 60 days prior to the date fixed for redemption by first-class mail, postage prepaid, to the registered owner of any Bond to be redeemed at the address appearing on the Bond Register at the time the Bond Registrar prepares the notice, and the requirements of this sentence shall be deemed to have been fullfiled when notice has been mailed as so provided, whether or not it is actually received by the owner of any Bond. Interest on Bonds called for redemption shall cease to accrue on the date fixed for redemption unless the Bond or Bonds called are not redeemed when presented pursuant to the call. In addition, the redemption notice shall be mailed within the same period, postage prepaid, or by electronic transmission, to Pacific Crest Securities at its principal office in Seattle, Washington, or its successor, and to such other persons, including registered securities depositories, and with such additional information as the City Director of Finance and Administrative Services shall determine, but these additional mailings shall not be a condition precedent to the redemption of Bonds. Section 8. Failure to Redeem Bonds. If any Bond is not redeemed when properly presented at its maturity or call date, the City shall be obligated to pay interest on that Bond at the same rate provided in the Bond from and after its maturity or call date until that Bond, both principal and interest, is paid in full or until sufficient money for its payment in full is on deposit in the Bond Fund and the Bond has been called for payment by giving notice of that call to the registered owner of each of those unpaid Bonds. Section 9. Form and Executio~ of Bonds. The Bonds shall be printed, lithographed or typed on good bond paper in a form consistent with the provisions of this ordinance and state law, shall be signed by the Mayor and City Clerk, either or both of whose signatures may be manual or in facsimile, and the seal of the City or a facsimile reproduction thereof shall be impressed or printed thereon. Only Bonds bearing a Certificate of Authentication in the following form, manually signed by the Bond Registrar, shall be valid or obligatory for any purpose or entitled to the benefits of this ordinance: 0262937.02 -3- CERTIFICATE OF AUTHENTICATION This Bond is one of the fully registered City of Bainbridge Island, Washington, Consolidated Local Improvement District No. 17/18 Bonds described in the Bond Ordinance. WASHINGTON STATE FISCAL AGENCY Bond Registrar By Authorized Signer The authorized signing of a Certificate of Authenfication shall be conclusive evidence that the Bond so authenticated has been duly executed, authenticated and delivered and is entified to the benefits of this ordinance. If any officer whose facsimile signature appears on the Bonds ceases to be an officer of the City authorized to sign bonds before the Bonds beating his or her facsimile signature are authenticated or delivered by the Bond Registrar or issued by the City, those Bonds nevertheless may be authenticated, issued and delivered and, when authenticated, issued and delivered, shall be as binding on the City as though that person had continued to be an officer of the City authorized to sign bonds. Any Bond also may be signed on behalf of the City by any person who, on the actual date of signing of the Bond, is an officer of the City authorized to sign bonds, although he or she did not hold the required office on the dam of issuance of the Bond. Section 10. Bond Registrar. The Bond Registrar shall keep, or cause to be kept, at its principal corporate trust office, sufficient books for the registration and transfer of the Bonds which shall be open to inspection by the City at all times. The Bond Registrar is authorized, on behalf of the City, to authenticate and deliver Bonds transferred or exchanged in accordance with the provisions of the Bonds and this ordinance, to serve as the City's paying agent for the Bonds and to carry out all of the Bond Registrar' s powers and duties under this ordinance and City Ordinance No. 83-10 establishing a system of registration for the City's bonds and obligations. The Bond Registrar shall be responsible for its representations contained in the Bond Registrar's Certificates of Authentication on the Bonds. The Bond Registrar may become the owner of Bonds with the same fights it would have if it were not the Bond Registrar and, to the extent permitted by law, may act as depository for and permit any of its officers or directors to act as members of, or in any other capacity with respect to, any committee formed to protect the rights of Bond owners. Section 11. Bonds Negotiable. The Bonds shall be negotiable instruments to the extent provided by RCW 62A.8-102 and 62A.8-105. Section 12. Preservation of Tax Exemption for Interest on Bonds. The City covenants that it will take all actions necessary to prevent interest on the Bonds from being included in m62937.02 -4- gross income for federal income tax purposes, and it will neither take any action nor make or permit any use of proceeds of the Bonds or other funds of the City treated as proceeds of the Bonds at any time during the term of the Bonds which will cause interest on the Bonds to be included in gross income for federal income tax purposes. The City certifies that it has not been notified of any listing or proposed listing by the Internal Revenue Service to the effect that it is a bond issuer whose arbitrage certifications may not be relied upon. Section 13. Small Governmental Issuer Arbitrage Rebate Exception and Designation of Bonds as "Qualified Tax-Exempt Obligations." The City finds and declares that (a) it is a duly organized and existing governmental unit of the State of Washington and has general taxing power; (b) no Bond which is part of this issue of Bonds is a "private activity bond" within the meaning of Section 141 of the United States Internal Revenue Code of 1986, as amended (the "Code"); (c) at least 95% of the net proceeds of the Bonds will be used for local governmental activities of the City (or of a governmental unit the jurisdiction of which is entirely within the jurisdiction of the City); (d) the aggregate face amount of all tax-exempt obligations (other than private activity bonds and other obligations not required to be included in such calculation) issued by the City and all entities subordinate to the City (including any entity which the City controls, which derives its authority to issue tax-exempt obligations from the City or which issues tax-exempt obligations on behalf of the City) during the calendar year in which the Bonds are issued is not reasonably expected to exceed $5,000,000; and (e) the amount of tax-exempt obligations, including the Bonds, designated by the City as "qualified tax-exempt obligations" for the purposes of Section 265Co)(3) of the Code during the calendar year in which the Bonds are issued does not exceed $10,000,000. The City therefore certifies that the Bonds are eligible for the arbitrage rebate exception under Section 148(f)(4)(D) of the Code and designates the Bonds as "qualified tax-exempt obligations" for the purposes of Section 265(b)(3) of the Code. Section 14. Use of Bond Proceeds. The accrued interest on the Bonds received from the Bond purchaser shall be deposited in the Bond Fund used to pay debt service on the Bonds on the first interest payment date. The principal proceeds of the Bonds shall be used to finance the costs of construction and installation of water supply improvements for the Rockaway Beach area in connection with LID No. 17 and improvements to N.E. Justin Court by asphalt paving and gravel shoulders in connection LID No. 18, to deposit money in the Local Improvement Guaranty Fund of the City, and to pay the costs of issuance of the Bonds. Until needed to pay those costs, the City may invest principal proceeds temporarily in any legal investment, and the investment earnings may be retained in the respective local improvement district funds or accounts therein and be spent for the purposes of those funds. Section 15. Approval of Bond Purchase Contract. Pacific Crest Securities of Seattle, Washington, has presented a purchase contract (the "Bond Purchase Contract") to the City offering to purchase the Bonds under the terms and conditions provided in the Bond Purchase Contract, which written Bond Purchase Contract is on file with the City Clerk and is incorporated herein by this reference. The City Council finds that entering into the Bond Purchase Contract is in the City's best interest and therefore accepts the offer contained therein and authorizes its execution by City officials. 0262937.02 -5 - The Bonds will be printed at City expense and will be delivered to the purchaser in accordance with the Bond Purchase Contract, with the approving legal opinion of Foster Pepper & Shefelman, municipal bond counsel of Seattle, Washington, regarding the Bonds printed on each definitive Bond. Bond counsel shall not be required to review and shall express no opinion concerning the completeness or accuracy of any official statement, offering circular or other sales material issued or used in connection with the Bonds, and bond counsel's opinion shall so state. The proper City officials are authorized and directed to do everything necessary for the prompt delivery of the Bonds to the purchaser, including without limitation the execution of the Official Statement on behalf of the City, and for the proper application and use of the proceeds of the sale thereof. Section 16. Preliminary Official Statement Deemed Final. The City Council has been provided with copies of a preliminary official statement dated October 16, 1996 (the "Preliminary Official Statement"), prepared in connection with the sale of the Bonds. For the sole purpose of the Bond purchaser' s compliance with Securities and Exchange Commission Rule 15c2-12Co)(1), the City "deems final" that Preliminary Official Statement as of its date, except for the omission of information as to offering prices, interest rates, selling compensation, aggregate principal mount, principal amount per maturity, maturity dates, options of redemption, delivery dates, ratings and other terms of the Bonds dependent on such matters. Section 17. Temporary Bond. Pending the printing, execution and delivery to the purchaser of definitive Bonds, the City may cause to be executed and delivered to the purchaser a single temporary Bond in the total principal amount of the Bonds. The temporary Bond shall bear the same date of issuance, interest rates, principal payment dates and terms and covenants as the definitive Bonds, shall be issued as a fully registered Bond in the name of the purchaser, and otherwise shah be in a form acceptable to the purchaser. The temporary Bond shah be exchanged for definitive Bonds as soon as they are printed, executed and available for delivery. Section 18. Fixing Interest Rate on Assessments. The interest rates on the installments and delinquent payments of the special assessments in Local Improvement Districts Nos. 17 and 18 are revised and fixed at the rate of 7.75% per annum. Section 19. Undertaking to Provide Continuing Disclosure. Because it will have outstanding less than $10,000,000 of obligations after the issuance of the Bonds, the City is currently exempt from the requirements of United States Securities and Exchange Commission CSEC") Rule 15c2-12(b)(5) (the "Rule"), as applicable to a participating underwriter for the Bonds, however, the City makes the following written undertaking (the "Undertaking") for the benefit of holders of the Bonds: (a) Undertaking to Provide Annual Financial Information and Notice of Material Events. The City undertakes to provide or cause to be provided, either directly or through a designated agent: 0262937.02 -6- (i) To each nationally recognized municipal securities information repository designated by the SEC in accordance with the Rule CNRMSIR") and to a state information depository, if any, established in the state of Washington (the "SID") annual financial information and operating data of the type included in the final official statement for the Bonds and described in Section 19Co) ("annual financial information"); (ii) To each NRMSIR or the Municipal Securities Rulemaking Board CMSRB"), and to the SID, timely notice of the occurrence of any of the following events with respect to the Bonds, if material: (1) principal and interest payment delinquencies; (2) non-payment related defaults; (3)unscheduled draws on debt service reserves reflecting financial difficulties; (4)unscheduled draws on credit enhancements reflecting financial difficulties; (5)substitution of credit or liquidity providers, or their failure to perform; (6) adverse tax opinions or events affecting the tax-exempt status of the Bonds; (7) modifications to rights of holders of the Bonds; (8) Bond calls (other than scheduled mandatory redemptions of Term Bonds); (9)defeasances; (10)release, substitution, or sale of property securing repayment of the Bonds; and (11)rating changes; and (iii) To each NRMSIR or to the MSRB, and to the SID, timely notice of a failure by the City to provide required annual financial information on or before the date specified in Section 19(b). (b) Type of Annual Financial Information Undertaken to be Provided. The annual financial information that the City undertakes to provide in Section 19(a): (i) Shall consist of (1) assessments of the District paid during the previous fiscal year; (2) assessments owed on the District at fiscal year end and assessments delinquent on the District at fiscal year end; (3) outstanding balance of obligations secured by the Guaranty Fund at fiscal year end; (4) balance in the Guaranty Fund at fiscal year end; and (5) annual financial statements for the City; (ii) Shall be prepared (except as noted in the financial statements) in accordance with applicable generally accepted accounting principles promulgated by the Government Accounting Standards Board CGASB"), as such principles may be changed from time to time by GASB or its successor; (iii) Shall not be audited, except, that if and when audited financial statements are otherwise prepared and available to the City they be will be available from the Director of Finance and Administrative Services of the City; 0262937.02 -7- (iv) Shall be provided to each NRMSIR and the SID, not later than the last day of the ninth month after the end of each fiscal year of the City (currently, a fiscal year ending December 31), as such fiscal year may be changed as required or permitted by State law, commencing with the City's fiscal year ending December 31, 1996; and (v) May be provided in a single or multiple documents, and may be incorporated by reference to other documents that have been fled with each NRMSIR and the SID, or, if the document incorporated by reference is a "final official statement" with respect to other obligations of the City, that has been filed with the MSRB. (c) Amendment of Undertaking. The Undertaking is subject to amendment after the primary offering of the Bonds without the consent of any holder of any Bond, or of any broker, dealer, municipal securities dealer, participating underwriter, rating agency, NRMSIR, the SID or the MSRB, under the circumstances and in the manner permitted by the Rule. The City will give notice to each NRMSIR or the MSRB, and the SID, of the substance (or provide a copy) of any amendment to the Undertaking and a brief statement of the reasons for the amendment. If the amendment changes the type of annual financial information to be provided, the notice also will include a narrative explanation of the effect of that change on the type of information to be provided. (d) Beneficiaries. The Undertaking evidenced by this Section 19 shall inure to the benefit of the City and any holder of Bonds, and shall not inure to the benefit of or create any rights in any other person. (e) Termination of Undertaking. The City's obligations under this Undertaking shall terminate upon the legal defeasance of all of the Bonds. In addition, the City's obligations under this Undertatting shall terminate if those provisions of the Rule which require the City to comply with this Undertaking become legally inapplicable in respect of the Bonds for any reason, as confirmed by an opinion of nationally recognized bond counsel or other counsel familiar with federal securities laws delivered to the City, and the City provides timely notice of such termination to each NRMSIR or the MSRB and the SID. (0 Remedy for Failure to Comply with Undertaking. As soon as practicable after the City or any other obligated person learns of any failure to comply with the Undertaking, the City will proceed with due diligence to cause such noncompliance to be corrected. No failure by the City or other obligated person to comply with the Undertaking shall constitute a default in respect of the Bonds. The sole remedy of any holder of a Bond shah be to take such actions as that holder deems necessary, including seeking an order of specific 0262937.02 performance from an appropriate court, to compel the City or other obligated person to comply with the Undertaking. (g) Designation of Official Responsible to Administer Undertaking. The Director of Finance and Administrative Services of the City or his or her designee (or such other officer of the City who may in the future perform the duties of the Director of Finance and Administrative Services) is authorized and directed in his or her discretion to take such further actions as may be necessary, appropriate or convenient to carry out the Undertaking of the City in respect of the Bonds set forth in this Section 19 and in accordance with the Rule, including, without limitation, the following actions: (i) Preparing and ffiing the annual financial information undertaken to be provided; (ii) Determining whether any event specified in Section 19(a) has occurred, assessing its materiality with respect to the Bonds, and, if material, preparing and disseminating notice of its occurrence; (iii) Determining whether any person other than the City is an "obligated person" within the meaning of the Rule with respect to the Bonds, and obtaining from such person an undertaking to provide any annual financial information and notice of material events for that person in accordance with the Rule; (iv) Selecting, engaging and compensating designated agents and consultants, including but not limited to financial advisors and legal counsel, to assist and advise the City in carrying out the Undertaking; and (v) Effecting any necessary amendment of the Undertaking. 0262937.02 -9- Section 20. Effective Date of Ordinance. This ordinance shall take effect and be in force from and after its passage and five days following its publication as required by law. PASSED by the City Council this 17th day of October, 1996. APPROVED by the Mayor this l ~ day of October, 1996. ATTEST/AUTHENTICATED: Mayor City Clerk APPROVED AS TO FORM: City Attorney FILED WITH THE CITY CLERK: PASSED BY THE CITY COUNCIL: PUBLISHED: EFFECTIVE DATE: ORDINANCE NO.: 0262937.02 -10- I, SUSAN P. KASPER, City Clerk of the City of Bainbridge Island, Washington, certify ' that the attached copy of Ordinance No. 96- '/--~/ is a true and correct copy of the original ordinance passed on the /77~ay of October, 1996, as that ordinance appears on the Minute Book of the City. DATED this/77d~ay of October, 1996. S S City Clerk 0262937.02 ORDINANCE NO. 96-//4 AN ORDINANCE relating to local improvement districts; establishing Consolidated Local Improvement District No. 17/18 and Consolidated Local Improvement Fund, District No. 17/18; fucing the amount, form, date, interest rates, maturity and denominations of the Consolidated Local Improvement District No. 17/18 Bonds; providing for the sale and delivery thereof to Pacific Crest Securities of Seattle, Washington; and fixing the interest rate on local improvement district assessment installments. This document prepared by: Foster Pepper & Shefelman 1111 Third Avenue, Suite 3400 Seattle, Washington 98101 (206) 447-4400 0262937.02 $293,973.64 CITY OF BAINBRIDGE ISLAND, WASHINGTON CONSOLIDATED LOCAL IMPROVEMENT DISTRICT NO. 17/18, 1996 October 17, 1996 Honorable Council Members City of Bainbridge Island 625 Winslow Way E. Bainbridge Island, Washington 98110 Honorable Council Members: Pacific Crest Securities, Inc. (the "Purchaser") offers to purchase from the City of Bainbridge Island, (the "Seller") and upon acceptance hereof the Seller will agree to sell to the Purchaser, all of the Bonds (the "Bonds") described above and on Appendix A (attached and incorporated herein by this reference), subject to the terms, conditions, covenants, representations and warranties contained in this Bond Purchase Agreement (the "Agreement"), including the Appendix. Section 1. Purchase, Sale and Delivery of the Bonds 1.1 Appendix A contains a brief description of the Bonds, the purchase price, interest rates, maturity schedule, redemption provisions and the date and time of delivery (the "Closing Date") and payment of the Bonds. The Bonds shall be as described in Appendix A, and in the Official Statement (the "Official Statement") approved and signed by the Seller in accordance with paragraph (2.1 .g) hereof satisfactory in form and substance to the Purchaser; 1.2 the Seller authorizes the Purchaser to use and distribute the Official Statement by the Ordinance authorizing the Bonds (the "Ordinance") and approving the Official Statement, this Agreement and all information contained in them, and the documents, and certificates formally delivered to the Purchaser by the Seller as a legal transcript, in connection with the transactions contemplated by this Agreement; and 1.3 the Bonds shall be delivered to the Purchaser in definitive or temporary form on the Closing Date, duly executed by the authorized officers of the Seller, together with the other documents described in this Agreement. The Bonds shall be in registered form, in such denominations as the Purchaser shall request by written notice to the Seller not later than five business days prior to the Closing Date. Subject to the provisions of this Purchase Contract, the Purchaser shall accept delivery of the 12tH IHIRD \\'t \LI Bonds on the Closing Date and will pay the purchase price set forth in Appendix A, ~, ..,,, ,~ ,,.\ .~,,.,together with accrued interest as applicable, by wire transfer, payable in Federal PAGE NO. 1 Section 2. 2.1 Representations and Warranties The Seller represents, warrants and agrees with the Purchaser the matters set forth below, which representations, warranties and agreements are true and in effect as of the date of this Agreement and shall be true and in effect as of the Closing Date: (a) the Seller is duly organized with the full legal right, power and authority on the Closing date to enter into and perform this Agreement, to adopt the Ordinance, to deliver and sell the Bonds to the Purchaser, and to carry out all the other transactions contemplated by this Agreement, the Ordinance, and the Official Statement; (b) the Seller has duly and validly approved the issuance of the Bonds in accordance with the Ordinance by the date hereof, will take any and all action as will be necessary to carry out, give effect to and consummate the transactions contemplated herein, and as of the date of this Agreement and as of the Closing Date, the Bonds, and this Agreement will constitute the valid, legal and binding obligations of the Seller in accordance with their respective terms, and the Ordinance will be in full force and effect; (c) this Agreement, the Ordinance, and the Bonds do not and will not conflict with or create a breach or default under any existing law, regulation or order, or any agreement or instrument to which the Seller is subject; which breach or default would impair the authority of the Seller to authorize the Bonds or the security for the payment of the Bonds; (d) all approvals, consents, authorizations, elections and orders of or filings or registrations with any governmental authority, board, agency or commission having jurisdiction which would constitute a condition precedent to, or the absence of which would materially adversely affect, the performance by the Seller of its obligations under this Agreement, the Ordinance, the Bonds, and any other instruments contemplated in this transaction have been obtained or will be obtained and are or will be in full force and effect by the Closing Date; (e) the Bonds, when delivered in accordance with the Ordinance and paid for by the Purchaser on the Closing Date as provided herein, will be validly issued and outstanding binding obligations of the Seller enforceable in accordance with their terms, subject only to applicable bankruptcy, insolvency or other similar laws generally affecting creditors' rights, by the application of judicial discretion and principles of equity if equitable remedies are sought; (f) the Official Statement (as supplemented with the approval of the Purchaser, if the Official Statement shall have been supplemented), will be, as of the Closing Date, true, correct and complete in all material respects and does not, and will not as of the Closing Date, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; PAGE NO. 2 (g) the Preliminary Official Statement, as of its date and (except as to matters corrected or added to the Final Official Statement) as of the Closing Date, is accurate and complete in all material respects; (h) the Seller has provided the Purchaser with a copy of the Preliminary Official Statement dated October 16, 1996. The Purchaser is hereby authorized to cause a Final Official Statement for the Bonds to be printed and delivered to the Purchaser within seven business days hereafter; (i) for a period of 25 days from the date of the end of the underwriting period, if any event shall occur as a result which it is necessary to supplement the Official Statement in order to make the statements therein, in light of the circumstances existing at such time, not misleading, the Seller shall forthwith notify the Purchaser of any such event of which it has knowledge and shall cooperate fully in the preparation and furnishing of any supplement to the Official Statement necessary, in the Purchaser's opinion, so that the statements therein as so supplemented will not be misleading in light of the circumstances existing at such time (the end of the underwriting period shall be the Closing Date unless the Seller is informed otherwise in writing by the Purchaser); (j) no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, regulatory agency, public board or body, is pending or, to the knowledge of the Seller, threatened in any way affecting the existence of the Seller or the titles of its officers to their respective offices, or seeking to restrain or to enjoin the issuance, sale or delivery of the Bonds, the application of the proceeds thereof in accordance with the Ordinance, or the collection or application of the special assessments levied against benefited properties within CLID No. 17/18 to pay the principal of and interest on the Bonds, or the pledge thereof or of the proceeds of the Bonds, or in any way contesting or affecting the validity or enforceability of the Bonds; (k) any certificate signed by an authorized officer of the Seller shall be deemed a representation and warranty by the Seller to the Purchaser as to the statements made therein; (1) the Seller has not been notified of any listing or proposed listing by the Internal Revenue Service to the effect that it is a Bond Issuer whose arbitrage certifications may not be relied upon; (m) the Seller is not now and has never been in default on any of its debt obligations; (n) other than the Bond documents, the Seller has not entered into any contract or arrangement that might give rise to any lien or encumbrance on the revenues or other assets, properties, funds or interest pledged pursuant to the Ordinance; and (o) the Seller will apply the proceeds of the Bonds in accordance with the Ordinance. Section 3. Conditions to the Obligations of the Purchaser The obligations of the Purchaser to accept delivery of and pay for the Bonds on the Closing Date shall be subject to the accuracy in all material respects of the representations and warranties on the part of the Seller contained herein as of this date and as of the Closing Date, PAGE NO. 3 to the accuracy in all material respects of the statements of the officers of the Seller made in any certificates or other documents furnished pursuant to the Agreement, to the performance by the Seller of their obligations to be performed thereunder at or prior to the Closing Date, and to the following additional conditions: 3.1 on the Closing Date, the Ordinance shall have been duly authorized, executed and delivered by the Seller, and in substantially the form heretofore submitted to the Purchaser, with only such changes as shall have been agreed to in writing by the Purchaser, and there shall have been taken in connection therewith, with the issuance of the Bonds and with the transactions contemplated thereby and by this Agreement, all such action as, in the opinion of either the Purchaser or the Seller, shall be necessary or appropriate; 3.2 on the Closing Date, the Official Statement shall not have been amended, modified or supplemented, except as may have been agreed to by the Purchaser and the Seller; 3.3 between the date hereof and the Closing Date, the marketability of the Bonds shall not have been materially adversely affected, in the reasonable judgment of the Purchaser, by reason of any of the following: (a) a material adverse change in the financial condition or general affairs of the Seller; (b) an event, court decision, proposed or adopted law or rule which would have a material adverse effect on the federal income tax incident to the Bonds or the contemplated transactions; (c) an international or national crisis, suspension of stock exchange trading or banking moratorium materially affecting the marketability of the Bonds or the Purchaser's ability to deliver funds due to such banking moratorium; or (d) any event occurring, or information becoming known which makes untrue in any material respect any statement or information contained in the Official Statement, or has the effect that the Official Statement contains any untrue statement of material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; 3.4 on or prior to the Closing Date, the Purchaser will have received from the Seller the following documents, in each case satisfactory in form and substance to the Purchaser acting reasonably: (a) the Bonds, in definitive or temporary form, duly executed; (b) the Ordinance and the Official Statement, each executed by the Seller; (c) a certificate in which an officer of the Seller states that he/she has reviewed the Final Official Statement and, to his/her knowledge and belief, the Final Official Statement does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they are made, not misleading and represents that the representations of the Seller in Section 2 PAGE NO. 4 hereof were true and correct when made and are true and correct as of the Closing Date; (d) the approving opinion of Bond Counsel substantially in the form of Appendix A of the Official Statement satisfactory to the Purchaser dated the Closing Date; (e) a certificate setting forth the facts, estimates and circumstances in existence on the Closing Date which establish that it is not expected that the proceeds of the Bonds will be used in a manner that could cause the Bonds to be "arbitrage bonds" within the meaning of Section 148 of the Internal Revenue Code and applicable regulations; (f) a certificate signed by an authorized officer of the Seller, to the effect that, no litigation is pending, or to such officers' knowledge threatened, restraining or enjoining the issuance, sale, execution or delivery of the Bonds, or the collection or application of the special assessments levied against benefited properties within CLID No. 17/18 to pay the principal of or interest on the Bonds, or adversely affecting the Seller's right or authority to carry out the terms and conditions of the Ordinance and the transaction contemplated by the Ordinance; (g) such additional certificates, instruments or opinions or other evidence as the Purchaser may deem reasonably necessary or desirable to evidence the due authorization, execution, authentication and delivery of the Bonds, the truth and accuracy as of the Closing Date of the Seller's representations and warranties, and the conformity of the Bonds and Ordinance with the terms thereof as summarized in the Official Statement, and to cover such other matters as it reasonably requests; (h) the Purchaser will have received two executed copies of each of the Bond documents; and (i) a tax certificate in form satisfactory to Bond Counsel. Section 4. 4.1 Expenses Seller's Expenses Whether or not the Purchaser accepts delivery of and pays for the Bonds as set forth herein, the Purchaser shall be under no obligation to pay, and the Seller shall pay or cause to be paid (out of the proceeds of the Bonds or any other legally available funds of the Seller) all expenses incident to the performance of Seller's obligations hereunder, including but not limited to the cost of printing, engraving and delivering the Bonds to the Purchaser; the cost of preparation, printing (and/or word processing and reproduction), distribution and delivery of the Ordinance, fees and disbursements of Bond Counsel, and any other experts or consultants retained by the Seller in connection with the Bonds; and any other expenses not specifically enumerated in paragraph 4.2 of this Section incurred by the Seller in connection with the issuance of the Bonds. PAGE NO. 5 4.2 Purchaser's Expenses Whether or not the Bonds are delivered to the Purchaser as set forth herein, the Seller shall be under no obligation to pay, and the Purchaser shall pay the costs of any "blue sky" and legal investment memoranda; this Agreement; the Purchaser's out-of-pocket and travel expenses; and all other expenses incurred by the Purchaser in connection with its public offering and distribution of the Bonds not specifically enumerated in paragraph 4.1 of this Section, including the fees and disbursements of its counsel, if any; the cost of preparation, and all advertising expenses in connection with the public offering of the Bonds. Section 5. Parties in Interest This Agreement is made solely for the benefit of the Seller and the Purchaser (including successors or assigns of the Purchaser) and no other person shall acquire or have any right hereunder or by virtue hereof. The terms "succession" and "assigns" shall not include any purchaser of any of the Bonds from the Purchaser merely because of such purchase. Section 6. Survival of Representations, Warranties, and Agreements; Liquidated Damages The representations and warranties of the Seller, set forth in or made pursuant to this Agreement, shall not be deemed to have been discharged, satisfied or otherwise rendered void by reason of the delivery of the Bonds or termination of this Agreement and regardless of any investigations or statements as to the results thereof made by or on behalf of the Purchaser and regardless of delivery of and payment for the Bonds. Should the Seller fail to satisfy any of the foregoing conditions or covenants, or if the Purchaser's obligations are terminated for any reason permitted under the Agreement, then neither the Purchaser nor the Seller shall have any further obligations under this Agreement, except that any expenses incurred shall be borne in accordance with Section 4. Section 7. Notices All notices, demands and formal actions hereunder shall be in writing and mailed, telegramed, delivered or sent via facsimile (with the original sent following the facsimile) to the following addresses or such other addresses as any of the parties shall specify. Any written notice required by this Agreement shall be sent to the Seller as follows: City of Bainbridge Island 625 Winslow Way E. Bainbridge Island, WA 98110 Attention: Ralph Eells Finance Director Fax: 206-842-5741 to the Purchaser as follows: Pacific Crest Securities US Bancorp Tower 111 SW Fifth Avenue, 42nd Floor Portland, Oregon 97204 Attention: Municipal Bond Department Fax: 503-790-7790 PAGE NO. 6 with a copy to: Foster Pepper & Shefelman 1111 3rd Ave. Seattle, WA 98101 Attention: Lee Voorhees, Esq. Fax: 206-447-9700 Section 8. Effective Date This offer expires as set forth in Appendix A. This Agreement shall become effective and binding upon the respective parties hereto upon the execution of the acceptance hereof by the Seller and shall be valid and enforceable as of the time of such acceptance. Section 9. Miscellaneous 9.1 If any provision of this Agreement is held or deemed to be or is, in fact, inoperative, invalid or unenforceable as applied in any particular case in any jurisdiction or jurisdictions, such shall not have the effect of rendering the provision in question inoperable or unenforceable in any other case or circumstances or of rendering any other provision or provisions of this Agreement invalid, inoperative or unenforceable to any extent whatsoever; 9.2 this Agreement shall be governed by and construed in accordance with the laws of the State of Washington; and 9.3 this Agreement may be executed in several counterparts, each of which will be regarded as an original and all of which will constitute one and the same document. Very truly yours, Vice President Accepted by: City of Bainbridge Island The 17th day of October, 1996 Janet West Mayor PAGE NO. 7 APPENDIX A $293,973.64 CITY OF BAINBRIDGE ISLAND, WASHINGTON CONSOLIDATED LOCAL IMPROVEMENT NO. 17/18 BONDS, 1996 Terms Dated Date: Delivery Date: Interest Payment Date: Denomination: Term Bonds: Optional Redemption: Purchase Price: Offer Expires: Closing Date: October 15, 1996 October 30, 1996 May 1, 1997 and annually thereafter on each May 1. $5,000 each, except for Bond No. 1 which will be $8,973.64 The Bonds are 7.25% Term Bonds priced at 100% of par value and mature on May 1, 2018 Commencing on May 1, 1997 and each May 1 thereafter at par plus accrued interest. $286,624.30 plus accrued interest to delivery. October 17, 1996 @ 11:00 p.m., Prevailing Local Time. October 30, 1996 @ 9:00 a.m., Prevailing Local Time. PAGE NO. 8 FOSTER PEPPER & SHEFELMAN A LAW PARTNERSHIP INCLUDING PROFESSIONAL SERVICE CORPORATIONS DIRECT DIAL 206-447-8968 INTERNET ADDRESS VOORLOFOSTER.COM October 15, 1996 VIA FACSIMILE Mr. Ralph W. EelIs Director of Finance and Administrative Services 625 Winslow Way East Bainbridge Island, WA 98110 Re: Consolidated Local Improvement District No. 17/18 Bonds Dear Ralph: Enclosed for your review and comment is a draft ordinance authorizing the issuance and delivery of the above bonds. I also invite comments from the parties listed below and receiving copies of the ordinance. I will be out of the office for most of the day tomorrow. Please telephone Tracy Becht of this office with any comments and she can relay them to me upon my return. I understand that details regarding the sale of the bonds will become known tomorrow. We look forward to serving the City in connection with this financing and a successful closing of this bond issue. Yours sincerely, FOSTER PEPPER & SHEFELMAN Lee Voorhees Enclosure cc (w/encl.): Susan Kasper Steve Gaidos Mike Jones 0263079.WP Illl THIRD AVENUE, SUITE 3400 SEATTLE, WASHINGTON 98101-3299 TEL. 206~447-44OO FACSIMILE 206-447-9700 ANCHORAGE, ALASKA BELLEVUE> WASHLNGTON pORTLAND, OREGON SEATTLE, WASHINGTON