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R05-133 , RESOLUTION NO. R05-~ A SERIES RESOLUTION PROVIDING FOR THE ISSUANCE OF NOT EXCEEDING $16,000,000 AGGREGATE PRINCIPAL AMOUNT OF UTILITY SYSTEM REVENUE REFUNDING BONDS, SERIES 2005; PROVIDING A METHOD FOR FIXING AND DETERMINING THE PRINCIPAL AMOUNT, INTEREST RATES, MATURITY DATES, REDEMPTION PROVISIONS AND OTHER DETAILS OF SAID BONDS; AUTHORIZING THE AWARD THE SALE OF THE BONDS TO BEAR, STEARNS & CO. INe.; FINDING NECESSITY FORA NEGOTIATED SALE OF SUCH BONDS; PROVIDING A METHOD FOR APPROVING THE FORM OF AND AUTHORIZING THE USE OF A PRELIMINARY OFFICIAL STATEMENT AND AUTHORIZING THE PREPARATION, APPROVAL AND EXECUTION OF A FINAL OFFICIAL STATEMENT IN CONNECTION WITH SUCH BONDS; AUTHORIZING THE EXECUTION OF A BOND PURCHASE CONTRACT AND A BOND REGISTRAR AGREEMENT; AUTHORIZING THE REDEMPTION OF A PORTION OF THE CITY'S UTILITY SYSTEM REVENUE BONDS, SERIES 1996; PROVIDING A METHOD FOR APPROVING THE FORM OF AND AUTHORIZING THE EXECUTION OF AN ESCROW DEPOSIT AGREEMENT; PROVIDING FOR CERTAIN CONTINUING DISCLOSURE OBLIGATIONS OF THE CITY; PROVIDING FOR THE APPLICATION OF THE PROCEEDS OF SAID BONDS AND CERTAIN OTHER MONEYS; AUTHORIZING THE PURCHASE OF A BOND INSURANCE POllCY AND RESERVE SURETY BOND AND MAKING CERTAIN COVENANTS IN CONNECTION THEREWITH; DESIGNATING THE BOND REGISTRAR FOR SAID BONDS; CONTAINING CERTAIN AUTHORIZATIONS AND OTHER PROVISIONS; AND PROVIDING AN EFFECTIVE DATE. WHEREAS, the City of Boynton Beach, Florida (the "City") is authorized by the Constitution and laws of the State of Florida, including the City's Charter and Chapter 166, Florida Statutes, to issue revenue bonds of the City payable from Pledged Revenues (as defined in the Bond Resolution hereinafter defined mentioned) for certain purposes; and WHEREAS, pursuantto Resolution No. R 92-96 adopted by the City Commission of the City (the "City Commission") on June 16, 1992, as amended (the "Bond Resolution") obligations of the City may be issued and may be secured by a lien upon and pledge of certain "Pledged Revenues" as defined in and to the extent set forth in the Bond Resolution; and WHEREAS, the City desires to issue Bonds (the "Series 2005 Bonds") under the Bond Resolution to provide funds, together with available funds of the City for the redemption prior to maturity of the City's Utility System Revenue Bonds, Series 1996 (the "1996 Bonds") maturing on and after November 1, 2007 (the "Refunded Bonds") and to pay certain costs of issuing such Series 2005 Bonds; and WHEREAS, prior to the issuance of the Series 2005 Bonds the conditions set forth in Section 210 of the Bond Resolution shall be satisfied; and WHEREAS, the City Commission has determined that the sale of such Series 2005 Bonds through negotiation with the Original Purchaser (hereinafter defined) is in the best interest of the City; and WHEREAS, the City Commission has received from Bear, Steams & Co. Inc. (the "Original Purchaser") a form of a Bond Purchase Contract by and between the City and the Original Purchaser whereby the Original Purchaser would agree to purchase the Series 2005 Bonds, and the City Commission has determined that the authorization of the acceptance of such proposal pursuant to the terms set forth in Section 6 hereof is in the best interests ofthe City and will effect the purposes set forth in the Bond Resolution; and WHEREAS, it is necessary and desirable to approve the form and use of a Preliminary Official Statement and to approve the preparation and execution of a Final Official Statement in connection with the issuance of such Series 2005 Bonds; and WHEREAS, it is necessary and desirable to specify a method for determining the dates, the interest rates, maturity dates and redemption provisions for such Series 2005 Bonds and to appoint The Bank of New York Trust Company, N.A. as Bond Registrar for such Series 2005 Bonds; and WHEREAS, the City has received a commitment from Ambac Assurance Corporation to issue its financial guaranty insurance policy insuring the payment of the principal of and interest on the Series 2005 Bonds and it is necessary and desirable to accept such commitment; and WHEREAS, the City has received a commitment from Ambac Assurance Corporation to issue its surety bond to satisfy the Reserve Account Requirement for the Series 2005 Bonds and it is necessary and desirable to accept such commitment; and WHEREAS, the City desires to approve the form and use of an escrow deposit agreement to provide for payment of the Refunded Bonds and to appoint The Bank of New York Trust Company, N.A. as escrow agent thereunder; NOW, THEREFORE, BE IT RESOLVED BY THE CITY COMMISSION OF THE CITY OF BOYNTON BEACH, FLORIDA: Section 1. Authority for this Resolution. This Resolution is adopted pursuant to the provisions of the Charter of the City of Boynton Beach, Florida, the Constitution of the State of Florida, including, but not limited to, Article VIII, Section 2 thereof, and other applicable provisions of law, including Chapter 166, Florida Statutes, and the Bond Resolution. 2 Section 2. Definitions. Terms used herein in capitalized form and not otherwise defined herein shall have the meanings ascribed thereto in the Bond Resolution. The following terms, when used in this Resolution or in the Bond Resolution, as amended hereby, shall have the following meamngs: "Authorized Representative" means the Mayor or Vice-Mayor, and in the absence or inability to act of the Mayor or Vice-Mayor, the City Manager or any other City Commissioner (the absence or inability to act of the Mayor of Vice-Mayor as to any particular action being conclusively established by the taking of such action by the City Manager or other City Commissioner). "Business Day" shall mean any day other than a Saturday, Sunday or other day on which the Bond Registrar is lawfully and temporarily closed or a day on which the New York Stock Exchange is lawfully and temporarily closed. "Closing Date" shall mean the date on which the Series 2005 Bonds are issued and delivered by the City and paid for by the Original Purchaser. "Interest Payment Date" shall mean May 1 and November 1 of each year, commencing November 1,2005. Section 3. Authorization of Bonds. Bonds are hereby authorized to be issued pursuant to this Resolution and Section 210 of the Bond Resolution in the aggregate principal amount of not to exceed $16,000,000. The Bonds hereby authorized shall be known as "Utility System Revenue Refunding Bonds, Series 2005" (the "Series 2005 Bonds"). Prior to the issuance of the Series 2005 Bonds the conditions of Section 210 of the Bond Resolution shall be satisfied. The Series 2005 Bonds are being issued for the principal purpose of providing funds, together with funds held in the Reserve Account and Bond Service Subaccounts under the Bond Resolution in respect of the Refunded Bonds, to defease and to redeem the Refunded Bonds prior to maturity. Proceeds of the Series 2005 Bonds may be used to pay costs associated with issuing the Series 2005 Bonds and defeasing the Refunded Bonds. The Series 2005 Bonds may not be issued unless the issuance of the Series 2005 Bonds and the refunding of the Refunded Bonds produces net present value debt service savings for the City, calculated as ofthe date of delivery ofthe Series 2005 Bonds using the arbitrage yield on the Series 2005 Bonds as the discount rate, of at least the greater of (i) $300,000.00 and (ii) 3% of the principal amount ofthe Refunded Bonds. Section 4. Terms of the Series 2005 Bonds. (a) Form of Bonds. The Series 2005 Bonds shall be substantially in the form of the Bonds set forth in the Bond Resolution, with such changes as may be necessary or appropriate to conform to the provisions of this Resolution and the terms of the Series 2005 Bonds set forth herein as may be approved by the officers of the City executing the Series 2005 Bonds, such execution to be conclusive evidence of such approval. (b) Amounts. Maturities. Redemption Provisions and Interest Rates. The Series 2005 Bonds will consist of such aggregate principal amount of Current Interest Serial Bonds and such 3 aggregate principal amount of Current Interest Term Bonds as shall be determined by the Authorized Representative as hereinafter provided. The Series 2005 Bonds shall be issued in the denomination of$5,000 and integral multiples thereof, shall be issued in registered form, shall be numbered from R-l upwards, shall be dated their date of initial issuance and delivery, and shall bear interest from such date, payable on the Interest Payments Dates. The Series 2005 Bonds shall be issued on such date, in the aggregate principal amount, not in excess of $16,000,000, shall bear interest at the rates per annum, computed on the basis of a 360-day year consisting oftwelve 30-day months, not in excess of the maximum legal rate, and shall mature on November 1 of the years and shall have such redemption provisions, all as set forth in a certificate executed by the Authorized Representative at or before the issuance ofthe Series 2005 Bonds, provided however that the final maturity of the Series 2005 Bonds shall not be after November 1,2020. Principal of the Series 2005 Bonds shall be payable only upon presentation and surrender of such Bonds at the principal office of the Bond Registrar. Interest on the Series 2005 Bonds shall be paid by check or draft, or at the option of any registered owner of not less than $1,000,000 in principal amount of the Series 2005 Bonds, exercised in writing delivered to the Bond Registrar prior to the Regular Record Date or Special Record Date, by wire transfer to an account in the United States designated by such registered owner, mailed or wired by the Bond Registrar to the registered owners of the Series 2005 Bonds as shown on the registration books kept by the Bond Registrar on the Regular Record Date or the Special Record Date. (c) Reserve Account Deposit Requirement. The Reserve Account Requirement for the Series 2005 Bonds shall be an amount equal to the lesser of (i) 10% of the aggregate stated principal amount of the Series 2005 Bonds Outstanding, (ii) the maximum amount of principal and interest scheduled to become due on the Outstanding Series 2005 Bonds in the current or any succeeding Bond Year, or (iii) 125% of the average annual debt service on the Series 2005 Bonds (calculated on a Bond Year basis at the time of issuance only). If the Series 2005 Bonds have more than a de- minimis amount of original issue discount or premium (as defined in Treas. Reg. S 1.148-1 (b)), then the issue price (as defined in said regulation) of the Series 2005 Bonds (net of pre-issuance accrued interest) shall be used to measure the aforesaid 10% limitation in lieu of the stated principal amount of the Series 2005 Bonds. The Series 2005 Reserve Subaccount, which is hereby ordered created, shall be funded in an amount equal to the Reserve Account Requirement for the Series 2005 Bonds at the time of initial issuance and delivery of the Series 2005 Bonds, and in the event any deficiency is created in the Series 2005 Reserve Subaccount, the Reserve Account Deposit Requirement for such Series shall be, in each month, an amount equal to at least one twenty-fourth (1/24) of the amount of such deficiency. Section 5. Amendments to Bond Resolution. The amendments to the Bond Resolution set forth in this Section 5 shall be effective upon, and only upon the issuance of the Series 2005 Bonds. (a) Section 101 of the Bond Resolution is amended by the addition thereto of two new definitions as follows: 4 "2005 Bond Insurance Policy" shall mean the financial guaranty insurance policy issued by the 2005 Bond Insurer that guarantees payment of principal of and interest on the Series 2005 Bonds. "2005 Bond Insurer" shall mean Ambac Assurance Corporation, a Wisconsin- domiciled insurance corporation, or any successor thereto. (b) A new Section 719 is added to the Bond Resolution to provide as follows: "Section 719. Provisions concerning 2005 Bond Insurer. For so long as the 2005 Bond Insurance Policy shall be outstanding, notwithstanding any provision to the contrary contained herein, the following provisions shall apply with respect to the Series 2005 Bonds: (A) "Ambac Assurance" shall mean Ambac Assurance Corporation, a Wisconsin-domiciled stock insurance company. (B) "Municipal Bond Insurance Policy" shall mean the municipal bond insurance policy issued by Ambac Assurance insuring the payment when due of the principal of and interest on the Series 2005 Bonds as provided therein. (C) Any provision of this Resolution expressly recognizing or granting rights in or to Ambac Assurance may not be amended in any manner which affects the rights of Ambac Assurance hereunder without the prior written consent of Ambac Assurance. Ambac Assurance reserves the right to charge the City a fee for any consent or amendment to this Resolution while the Municipal Bond Insurance Policy is outstanding. (D) Unless otherwise provided in this Section, Ambac Assurance's consent shall be required in addition to Bondholder consent, when required, for the following purposes: (i) execution and delivery of any amendment or change to this Resolution, (ii) removal of the Bond Registrar and selection and appointment of any successors, and (iii) initiation or approval of any action not described in (i) or (ii) above which requires Bondholder consent. (E) Any reorganization or liquidation plan with respect to the City must be acceptable to Ambac Assurance. In the event of any reorganization or liquidation, Ambac Assurance shall have the right to vote on behalf of all Bondholders who hold Ambac Assurance- insured Series 2005 Bonds absent a default by Ambac Assurance under the Municipal Bond Insurance Policy insuring the Series 2005 Bonds. 5 (F) Anything in this Resolution to the contrary notwi thstanding, upon the occurrence and continuance of an Event of Default, Ambac Assurance shall be entitled to control and direct the enforcement of all rights and remedies granted to the Bondholders under this Resolution, including, without limitation: (i) the right to accelerate the principal ofthe Series 2005 Bonds as described in this Resolution and (ii) the right to annul any declaration of acceleration, and Ambac Assurance shall be entitled to approve all waivers of events of default. (G) Subject to Section 802 hereof, upon the occurrence of an Event of Default, Ambac Assurance may, by written notice to City, declare the principal of the Series 2005 Bonds to be immediately due and payable. (H) While the Municipal Bond Insurance Policy is in effect, the City shall furnish, at the City's expense, to Ambac Assurance, to the attention of the Surveillance Department: (a) as soon as practicable after the filing thereof, a copy of any financial statement of the City and a copy of any audit and annual report of the City; (b) a copy of any notice to be given to the registered owners of the Series 2005 Bonds, including, without limitation, notice of any redemption of or defeasance of Series 2005 Bonds, and any certificate rendered pursuant to this Resolution relating to the security for the Series 2005 Bonds; and (c) such additional information as it may reasonably request. (I) The City shall notify Ambac Assurance, to the attention ofthe General Counsel's office, of any failure of the City to provide any notices, certificates, or other documentation required to be provided by the City hereby. (1) The City will permit Ambac Assurance to discuss the affairs, finances and accounts of the City or any information Ambac Assurance may reasonably request regarding the security for the Series 2005 Bonds with appropriate officers of the City. The City will permit Ambac Assurance to have access to and to make copies of all books and records relating to the Series 2005 Bonds at any reasonable time. (K) Ambac Assurance shall have the right to direct an accounting at the City's expense, and the City's failure to comply with such direction within thirty (30) days after receipt of written notice of the 6 direction from Ambac Assurance shall be deemed a default hereunder; provided, however, that if compliance cannot occur within such period, then such period will be extended so long as compliance is begun within such period and diligently pursued, but only if such extension would not materially adversely affect the interests of any registered owner of the Series 2005 Bonds. (L) Notwithstanding any other provision of this Resolution, the Bond Registrar or the City shall immediately notify Ambac Assurance, to the attention of the General Counsel's office, if at any time there are insufficient moneys to make any payments of principal and/or interest on the Series 2005 Bonds as required, and immediately upon the occurrence of any Event of Default hereunder. (M) To the extent that the City enters into a continuing disclosure agreement with respect to the Series 2005 Bonds, Ambac Assurance shall be included as a party to be notified. (N) Notwithstanding anything herein to the contrary, in the event that the principal and/or interest due on the Series 2005 Bonds shall be paid by Ambac Assurance pursuant to the Municipal Bond Insurance Policy, the Series 2005 Bonds shall remain Outstanding for all purposes, shall not be defeased or otherwise satisfied and shall not be considered paid by the City, and the assignment and pledge of the amounts pledged to repayment of the Series 2005 Bonds and all covenants, agreements and other obligations of the City to the Bondholders shall continue to exist and shall run to the benefit of Ambac Assurance, and Ambac Assurance shall be subrogated to the rights of such Bondholders. (0) Ambac Assurance will allow only the following obligations to be used for defeasance purposes: (1) cash fully insured by the Federal Deposit Insurance Corporation or otherwise collateralized with obligations described in (2) below, or (2) direct obligations of (including obligations issued or held in book entry form on the books of) the Department of the Treasury of the United States of America. (P) Nothing in this Resolution expressed or implied is intended or shall be construed to confer upon, or to give to, any person or entity, other than the City, Ambac Assurance, the Bond Registrar and the registered owners of the Series 2005 Bonds, any right, remedy or claim under or by reason of this Resolution or any covenant, condition or stipulation hereof, and all covenants, stipulations, promises and agreements in this Resolution contained by or on behalf of the City shall be for the sole and exclusive benefit of the City, 7 Ambac Assurance, the Bond Registrar and the registered owners of the Series 2005 Bonds. (Q) To the extent that this Resolution confers upon or gives or grants to Ambac Assurance any right, remedy or claim under or by reason of this Resolution, Ambac Assurance is hereby explicitly recognized as being a third-party beneficiary hereunder and may enforce any such right, remedy or claim conferred, given or granted hereunder. (R)(i) Upon the written request of Ambac Assurance, the City shall take steps to remove any Bond Registrar which shall have violated any provision hereof; (ii) the City will provide Ambac Assurance written notice if any Bond Registrar shall resign; (iii) every Bond Registrar appointed under this Resolution shall be a financial institution in good standing located in or incorporated under the laws of the State, duly authorized to exercise trust powers and subject to examination by federal or State authorities, having a reported capital and surplus of not less than $75,000,000 and not objected to by Ambac Assurance; (iv) any successor Bond Registrar shall not be appointed unless Ambac Assurance approves such successor in writing; (v) notwithstanding any other provisions of this Resolution in determining whether the rights of the bondholders will be adversely affected by any action taken pursuant to the terms and provisions of this Resolution, the Bond Registrar shall consider the affect on the Bondholders as if there were not municipal bond insurance policy; and (vi) notwithstanding any other provision of this Resolution, no removal, resignation or termination of the Bond Registrar shall take effect until a successor, acceptable to Ambac Assurance shall be appointed (S) "Authorized Investments" shall mean the investments described in the Resolution, but only to the extent also described below and only to the extent the same shall be permitted from time to time by applicable laws of the State: (a) direct obligations of (including obligations issued or held in book entry form on the books of) the Department of the Treasury of the United States of America, including Federal Securities; (b) obligations of any of the following federal agencies which obligations represent the full faith and credit of the United States of America: Export-Import Bank; Rural Economic Community Development Administration; U.S. Maritime Administration; Small Business Administration; U.S. Department of 8 Housing & Urban Development; Federal Housing Administration; and Federal Financing Bank; (c) direct obligations of any of the following federal agencies which obligations are not fully guaranteed by the full faith and credit of the United States of America: senior debt obligations rated "AAA" by S&P and "Aaa" by Moody's issued by the Federal National Mortgage Association or the Fannie Mae; obligations of the Resolution Funding Corporation; senior debt obligations of the Federal Home Loan Bank System; senior debt obligations of other government sponsored agencies approved by Ambac Assurance; (d) U.S. Dollar denominated deposit accounts, federal funds and banker's acceptances with domestic commercial banks which have a rating on their short term certificates of deposit on the date of purchase of 'A-I' or 'A-l +' by S&P and 'P-l' by Moody's and maturing no more than 360 days after the date of purchase (ratings on holding companies are not considered as the rating of the issuing bank); (e) commercial paper which is rated at the time of purchase in the single highest classification, "A-1+" by S&P and "P-l" by Moody's and which matures not more than 270 days after the date of purchase; (f) money market funds rated 'AAAm' or 'Aaam-G' or better by S&P; (g) units of participation in the Local Government Surplus Funds Trust Fund established pursuant to Part IV, Chapter 218, Florida Statutes, or any similar common trust fund which is established pursuant to State law as a legal depository of public moneys; (h) shares of beneficial interest in the Florida Municipal Investment Trust created pursuant to Section 163.01, Florida Statutes; and (i) other forms of investments approved in writing by Ambac Assurance with notice to S&P. (T) The value of all investments shall be determined when required as follows: (i) as to investments not described in (ii) and (iii) below, at the fair market value based on accepted industry standrads and from accepted industry providers; (ii) as to certificates of deposit and bankers acceptances, the face amount thereof, plus 9 accrued interest; and (iii) as to any investment not specified above, the value thereof established by prior agreement between the City and Ambac Assurance. (U) As long as the Municipal Bond Insurance Policy shall be in full force and effect, the City and any Bond Registrar agree to comply with the following provisions: (a) At least one (1) day prior to all Interest Payment Dates the City or Bond Registrar will determine whether there will be sufficient funds in the funds and accounts established pursuant to the Resolution to pay the principal of or interest on the Series 2005 Bonds on such Interest Payment Date. If the City or Bond Registrar determines that there will be insufficient funds in such funds or accounts, the City or Bond Registrar shall so notify Ambac Assurance. Such notice shall specify the amount of the anticipated deficiency, the Series 2005 Bonds to which such deficiency is applicable and whether such Series 2005 Bonds will be deficient as to principal or interest, or both. If the City or Bond Registrar has not so notified Ambac Assurance at least one (1) day prior to an Interest Payment Date, Ambac Assurance will make payments of principal or interest due on the Series 2005 Bonds on or before the first (1st) day next following the date on which Ambac Assurance shall have received notice of nonpayment from the City or Bond Registrar. (b) The City or Bond Registrar shall, after giving notice to Ambac Assurance as provided in (a) above, make available to Ambac Assurance and, at Ambac Assurance's direction, to The Bank of New York, in New York, New York, as insurance trustee for Ambac Assurance, or any successor insurance trustee (the "Insurance Trustee"), the registration books of the City maintained by the Registrar and all records relating to the funds and accounts maintained under this Resolution. (c) The City or Bond Registrar shall provide Ambac Assurance and the Insurance Trustee with a list of registered owners of Series 2005 Bonds entitled to receive principal or interest payments from Ambac Assurance under the terms of the Municipal Bond Insurance Policy, and shall make arrangements with the Insurance Trustee (i) to mail checks or drafts to the registered owners of Series 2005 Bonds entitled to receive full or partial interest payments from Ambac Assurance and (ii) to pay principal upon Series 2005 Bonds surrendered to the Insurance Trustee by the owners of Series 2005 Bonds entitled to receive full or partial principal payments from Ambac Assurance. 10 (d) The City or Bond Registrar shall at the time it provides notice to Ambac Assurance pursuant to (a) above, notify owners of Series 2005 Bonds entitled to receive the payment of principal or interest thereon from Ambac Assurance (i) as to the fact of such entitlement, (ii) that Ambac Assurance will remit to them all or a part of the interest payments next coming due upon proof of owner entitlement to interest payments and deli very to the Insurance Trustee, in form satisfactory to the Insurance Trustee, of an appropriate assignment of the Owner's right to payment, (iii) that should they be entitled to receive full payment of principal from Ambac's Assurance, they must surrender their Series 2005 Bonds (along with an appropriate instrument of assignment in form satisfactory to the Insurance Trustee to permit ownership of such Series 2005 Bonds to be registered in the name of Ambac Assurance) for payment to the Insurance Trustee, and not the City or Bond Registrar, and (iv) that should they be entitled to receive partial payment of principal from Ambac Assurance, they must surrender their Series 2005 Bonds for payment thereon first to the Bond Registrar who shall note on such Series 2005 Bonds the portion of the principal paid by the Bond Registrar and then, along with an appropriate instrument of assignment in form satisfactory to the Insurance Trustee, to the Insurance Trustee, which will then pay the unpaid portion of principal. (e) In the event that the City or Bond Registrar has notice that any payment of principal of or interest on a Bond which has become Due for Payment (as defined in the Municipal Bond Insurance Policy) and which is made to an Owner by or on behalf of the City has been deemed a preferential transfer and theretofore recovered from its Owner pursuant to the United States Bankruptcy Code by a trustee in bankruptcy in accordance with the final, nonappealable order of a court having competent jurisdiction, the City or Bond Registrar shall, at the time Ambac Assurance is notified pursuant to (a) above, notify all Owners that in the event that any Owner's payment is so recovered, such Owner will be entitled to payment from Ambac Assurance to the extent of such recovery if sufficient funds are not otherwise available, and the City or Bond Registrar shall furnish to Ambac Assurance its records evidencing the payments of principal of and interest on the Series 2005 Bonds which have been made by the City or Bond Registrar and subsequently recovered from Owners and the dates on which such payments were made. (f) In addition to those rights granted Ambac Assurance under this Resolution, Ambac Assurance shall, to the extent it makes payment of principal of or interest on Series 2005 Bonds, become 11 subrogated to the rights of the reCIpIents of such payments in accordance with the terms of the Municipal Bond Insurance Policy, and to evidence such subrogation (i) in the case of subrogation as to claims for past due interest, the Bond Registrar shall note Ambac Assurance's rights as subrogee on the registration books of the City maintained by the Bond Registrar upon receipt from Ambac Assurance of proof of the payment of interest thereon to the Owners of the Series 2005 Bonds, and (ii) in the case of subrogation as to claims for past due principal, the Bond Registrar shall note Ambac Assurance's rights as subrogee on the registration books of the City maintained by the Bond Registrar, if any, upon surrender of the Series 2005 Bonds by the Owners thereof together with proof of the payment of principal thereof. (V) Unless the 2005 Bond Insurer shall be in default of its obligations pursuant to the 2005 Bond Insurance Policy, the 2005 Bond Insurer shall be deemed to be the Holder of the 2005 Bonds for purposes of consenting to amendments to the Bond Resolution, and the provisions of Section 1002 in respect of such amendments, other than the amendments described in clauses (a) through (e) of the first sentence of Section 1002 of the Bond Resolution. (c) A new Section 720 is added to the Bond Resolution to provide as follows: "Section 720. Reserve Surety Provisions. Notwithstanding any provision to the contrary contained herein, the following provisions shall apply while Ambac Assurance has issued a surety bond in order to fund all or a portion of the Reserve Account Requirement for any Series 2005 Bonds: (A) "Ambac Assurance" shall mean Ambac Assurance Corporation, a Wisconsin-domiciled stock insurance company. (B) "Surety Bond" shall mean the surety bond issued by Ambac Assurance guaranteeing certain payments into the Series 2005 Reserve Subaccount with respect to the Series 2005 Bonds as provided therein and subject to the limitations set forth therein. (C) Any provision of this Resolution expressly recognizing or granting rights in or to Ambac Assurance may not be amended in any manner which affects the rights of Ambac Assurance hereunder without the prior written consent of Ambac Assurance. (D) Unless otherwise provided in this Section, Ambac Assurance's consent shall be required in addition to Bondholder consent, when required, for the following purposes: (i) execution and delivery of 12 any amendment or change to this Resolution, (ii) removal of the Bond Registrar and (iii) initiation or approval of any action not described in (i) or (ii) above which requires Bondholder consent. (E) While the Surety Bond is in effect, the City shall furnish to Ambac Assurance, to the attention of the Surveillance Department: (a) as soon as practicable after the filing thereof, a copy of any financial statement of the City and a copy of any audit and annual report of the City; (b) a copy of any notice to be given to the registered owners of the Series 2005 Bonds, including, without limitation, notice of any redemption of or defeasance of Series 2005 Bonds, and any certificate rendered pursuant to this Resolution relating to the security for the Series 2005 Bonds; and (c) such additional information as it may reasonably request. (F) The City will permit Ambac Assurance to discuss the affairs, finances and accounts of the City or any information Ambac Assurance may reasonably request regarding the security for the Series 2005 Bonds with appropriate officers of the City. The City will permit Ambac Assurance to have access to and to make copies of all books and records relating to the Series 2005 Bonds at any reasonable time. (G) Notwithstanding any other provision of this Resolution, the Bond Registrar or the City shall immediately notify Ambac Assurance, to the attention of the General Counsel's office, if at any time there are insufficient moneys to make any payments of principal and/or interest on the Series 2005 Bonds as required, and immediately upon the occurrence of any Event of Default hereunder. (H) To the extent that the City enters into a continuing disclosure agreement with respect to the Series 2005 Bonds, Ambac Assurance shall be included as a party to be notified. (1) As long as the Surety Bond shall be in full force and effect, the City and any Bond Registrar agree to comply with the following prOVISIOns: (i) In the event and to the extent that moneys on deposit in the Bond Service Subaccount and/or Redemption Subaccount, plus all amounts on deposit in and credited to the Series 2005 Reserve Subaccount in excess of the amount of the Surety Bond, are insufficient to pay the amount of the principal and interest coming due, then upon the later 13 of (x) one (1) day after receipt by the General Counsel of Ambac Assurance of a demand for payment in the form attached to the Surety Bond as Attachment 1 (the "Demand for Payment"), duly executed by the Bond Registrar certifying that payment due under this Resolution has not been made to the Bond Registrar; or (y) the payment date of Obligations as specified in the Demand for Payment presented by the Bond Registrar to the General Counsel of Ambac Assurance, Ambac Assurance will make a deposit of funds in an account with the Bond Registrar or its successor, in New York, New York, sufficient for the payment to the Bond Registrar of amounts which are then due to the Bond Registrar under the Resolution (as specified in the Demand for Payment) up to but not in excess of the Surety Bond Coverage, as defined in the Surety Bond; provided, however, that in the event that the amount on deposit in or credited to the Series 2005 Reserve Subaccount of the Reserve Account, in addition to the amount available under the Surety Bond, includes amounts available under a letter of credit, insurance policy, surety bond, or other such funding instrument (the "Additional Funding Instrument"), draws on the Surety Bond and the Additional Funding Instrument shall be made on a pro rata basis to fund the insufficiency; (ii) the Bond Registrar shall, after submitting to Ambac Assurance the Demand for Payment as provided in (i) above, make available to Ambac Assurance all records relating to the funds and accounts maintained under this Resolution; (iii) the Bond Registrar shall, upon receipt of moneys received from the draw on the Surety Bond, as specified in the Demand for Payment, credit the subaccount of the Reserve Account to the extent of moneys received pursuant to such Demand; and (iv) the Series 2005 Reserve Subaccount shall be replenished in the following priority: (x) principal and interest on the Surety Bond and on any Additional Funding Instrument shall be paid first from available funds on a pro rata basis; (y) after all such amounts are paid in full, amounts necessary to fund the subaccount of the Reserve Account to the required level, after taking into account the amounts available under the Surety Bond and any Additional Funding Instrument, shall be deposited from the next available funds. (d) The defmition of "Renewal, Replacement and Improvement Account Requirement" contained in Section 1 0 1 of the Bond Resolution is amended to provide as follows, and such amendment shall be deemed incorporated into all Supplemental Resolutions adopted after the date hereof, so that it shall not be necessary to obtain the consent of the Holders of such Bonds to such amendment. However, such amendment shall not become effective until (i) the Outstanding principal amount of the City's Utility System Revenue Bonds, Series 1996 and Utility System Revenue Refunding Bonds, 14 Series 2002 constitutes less than a majority of the principal amount of all Outstanding Bonds, (ii) notice to the Holders of the Outstanding Series 1996 Bonds and Series 2002 Bonds shall have been given in accordance with Section 1002 of the Bond Resolution, and (iii) the requirements of Section 718(e) of the Bond Resolution (added by Section 5(b) of Resolution No. ROI-193) shall have been satisfied. As permitted by Section 1002 of the Bond Resolution, the Original Purchaser, by its purchase of the Series 2005 Bonds, consents to the following amendment of the definition of "Renewal, Replacement and Improvement Account Requirement." "Renewal, Replacement and Improvement Account Requirement" shall mean an amount equal to six percent of the Revenues for the preceding Fiscal Year or such greater or lesser amount as determined by the City Commission by resolution from time to time. Section 6. Approval of Sale of the Series 2005 Bonds. The City hereby determines that a negotiated sale of the Series 2005 Bonds is in the best interest of the City and the citizens and inhabitants of the City by reason of the volatility of the market for tax exempt bonds. Attached hereto as Exhibit "A" is a form of Bond Purchase Contract (the "Bond Purchase Contract"). The City approves the Bond Purchase Contract together with such changes thereto as are necessary to reflect the terms of the Series 2005 Bonds and to reflect the purchase price thereof, provided, that the underwriter's discount shall not exceed $7.00 per thousand dollars of principal amount ofthe Series 2005 Bonds, and with such other completions, additions and/or changes as shall be approved by the Authorized Representative, such approval to be conclusively established by such execution, and the Authorized Representative is hereby authorized and directed for and in the name of the City to execute and deliver the Bond Purchase Contract to the Original Purchaser. Prior to the execution of the Bond Purchase Contract, the Original Purchaser shall file with the City the disclosure statement required by Section 218.385, Florida Statutes, and the competitive bidding for the Series 2005 Bonds is hereby waived pursuant to the authority of Section 218.385(1), Florida Statutes. Section 7. Execution and Delivery of the Series 2005 Bonds. The Authorized Signatory and the City Clerk are hereby authorized and directed on behalf of the City to execute the Series 2005 Bonds as provided in the Bond Resolution and such officials are hereby authorized and directed upon the execution of the Series 2005 Bonds in the form and manner set forth herein and in the Bond Resolution to deliver the Series 2005 Bonds in the amount authorized to be issued hereunder to the Bond Registrar for authentication (upon the satisfaction ofthe conditions of Section 210 of the Bond Resolution) and delivery to or upon the order of the Original Purchaser upon payment of the purchase price set forth herein. Section 8. Application of Proceeds. Proceeds from the sale of the Series 2005 Bonds and any amounts available under the Bond Resolution as a result of the refunding and defeasance of the Refunded Bonds shall be applied for the purposes described herein as provided in a certificate executed by the Authorized Signatory at or prior to the issuance of the Series 2005 Bonds. Section 9. Bond Registrar. The City hereby appoints The Bank of New York Trust Company, N.A. as Bond Registrar with respect to the Series 2005 Bonds. The form of Bond Registrar Agreement attached hereto as Exhibit "B" is hereby approved and the Authorized Signatory is hereby authorized and directed for and in the name of the City to execute, and the City Clerk is 15 authorized to attest and apply the seal of the City to the Bond Registrar Agreement, with such changes, alterations and corrections thereto as shall be approved by the officials executing the same, such execution to constitute conclusive evidence of such approval. Section 10. Official Statement. The City hereby approves the form and content of, and authorizes the use by the Original Purchaser in marketing the Series 2005 Bonds, of a Preliminary Official Statement relating to the Series 2005 Bonds in the form of the document attached hereto as Exhibit "C," together with such other changes, alterations and corrections therein as may be approved by the Authorized Signatory, who is hereby authorized to approve the final form of the Preliminary Official Statement, such approval to be conclusively established by the execution by the Authorized Signatory of a certificate "deeming final" the Preliminary Official Statement for purposes of Securities and Exchange Commission Rule 15c2-12, which execution is hereby authorized. The preparation of a final Official Statement for the Series 2005 Bonds, which shall be in substantially the form ofthe Preliminary Official Statement, changed to reflect the terms ofthe Series 2005 Bonds and with such other changes, alterations and corrections therein as may be approved by the Authorized Signatory, such approval to be conclusively established by such execution, is hereby authorized, and upon preparation thereofthe Authorized Signatory is authorized and directed for and in the name of the City to execute and deliver the Official Statement. Section 11. Authorization for Bond Insurance. The Authorized Signatory is authorized, but not obligated, to accept commitments from the 2005 Bond Insurer for the issuance of the 2005 Bond Insurance Policy and a Reserve Account Insurance Policy and to execute, on behalf of the Issuer, a Guaranty Agreement with respect to the Reserve Fund Insurance Policy. Section 12. Compliance with Tax Requirements. The City hereby covenants and agrees, for the benefit of the Bondholders from time to time of the Series 2005 Bonds, to comply with the requirements applicable to it contained in Section 103 and Part IV of Subchapter B of Chapter I of the Internal Revenue Code of 1986, as amended (the "Code") to the extent necessary to preserve the exclusion of interest on the Series 2005 Bonds from gross income for federal income tax purposes. Specifically, without intending to limit in any way the generality ofthe foregoing, the City covenants and agrees: (1) to pay to the United States of America from, to the extent legally available, the funds and sources of revenues pledged to the payment of the Series 2005 Bonds, and from any other legally available funds, at the times and to the extent required pursuant to Section 148(f) ofthe Code, the excess ofthe amount earned on all non- purpose investments (as defined in Section 148( f)( 6) of the Code) (other than investments attributed to an excess described in this sentence) over the amount which would have been earned if such non-purpose investments were invested at a rate equal to the yield on the Series 2005 Bonds, plus any income attributable to such excess (the "Rebate Amount"); (2) to maintain and retain all records pertaining to and to be responsible for making or causing to be made all determinations and calculations of the Rebate Amount and required payments of the Rebate Amount as shall be necessary to comply with the Code; 16 (3) to refrain from using proceeds from the Series 2005 Bonds in a manner that would cause the Bonds or any of them, to be classified as private activity bonds under Section 141(a) of the Code; and (4) to take or refrain from taking any action that would cause the Series 2005 Bonds, or any of them, to become arbitrage bonds under Section 1 03(b) and Section 148 of the Code. The City understands that the foregoing covenants impose continuing obligations on the City to comply with the requirements of Section 103 and Part IV of Subchapter B of Chapter 1 of the Code so long as such requirements are applicable. Unless otherwise specified in the Certificate as to Arbitrage and Other Tax Matters delivered in connection with the issuance of the Series 2005 Bonds, the City shall designate a certified public accountant, Bond Counsel, or other professional consultant having the skill and expertise necessary (the "Rebate Analyst") to make any and all calculations required pursuant to this Section regarding the Rebate Amount. Such calculation shall be made in the manner and at such times as specified in the Code. The City shall engage and shall be responsible for paying the fees and expenses of the Rebate Analyst. Section 13. The Refunded Bonds and the Escrow Deposit Agreement. The redemption of the Refunded Bonds as shall be described in the executed Escrow Deposit Agreement is authorized and directed. The Escrow Deposit Agreement in the form attached hereto as Exhibit "D" is hereby approved, subject to such changes, insertions, omissions, and filling in of blanks therein as may be approved by the Authorized Signatory, such approval to be conclusively evidenced by the execution of the Escrow Deposit Agreement by the Authorized Signatory. The Authorized Signatory and the City Clerk are hereby authorized to execute and deliver the Escrow Deposit Agreement on behalf of the City. The Escrow Agent under the Escrow Deposit Agreement shall be The Bank of New York Trust Company, N.A.. The Authorized Signatory, Finance Director, Financial Advisor and Escrow Agent, or any of them, are hereby authorized to subscribe for the purchase of any United State Treasury Obligations -- State and Local Government Series to be purchased pursuant to the Escrow Deposit Agreement. Section 14. Continuing Disclosure. (a) Disclosure of Annual Information. The City agrees, in accordance with the provisions of Rule 15c2-12 in effect from time to time and applicable to the Series 2005 Bonds (the "Rule"), promulgated by the Securities and Exchange Commission (the "Commission") pursuant to the Securities Exchange Act of 1934, to provide, either directly or indirectly through a designated agent, to each nationally recognized municipal securities information repository ("NRMSIR") as designated and approved by the Commission and to the appropriate State of Florida information depository ("SID"), if any, operated or designated by the State, respectively, in accordance with the Rille, (i) within 180 days following the end of each Fiscal Year of the City, commencing with the Fiscal Year ending September 30, 2005 annual financial information and operating data concerning the Utility System, of the type included in the Official Statement, including operating revenues, debt service coverage by Net Revenues, rates and charges of the Utility System, summary of any capital 17 improvements plan, and information regarding permitted capacities and actual usage of capacities of the Utility System and financial statements (audited, or, if not available during such time period, unaudited) ofthe City and, (ii) if not submitted as part of such financial information and operating data, then, when available, audited financial statements for the City prepared in accordance with generally accepted accounting principles applicable to governmental entities from time to time. A copy of such annual financial information and operating data will be provided by the City to the Original Purchaser, the 2005 Bond Insurer and to the Bond Registrar for the Series 2005 Bonds as designated by the City from time to time. (The information required to be disclosed in this paragraph shall be hereinafter referred to as the "Annual Report.") (b) Disclosure of Material Events. The City agrees to provide either directly or indirectly through a designated agent, in a timely manner, to (i) each NRMSIR or to the Municipal Securities Rulemaking Board ("MSRB") and (ii) the SID, if any, notice of the occurrence of any of the following events with respect to the Series 2005 Bonds, if such event is material: (i) (ii) (iii) difficulties; (iv) difficulties; (v) (vi) 2005 Bonds; (vii) principal and interest payment delinquencies; non-payment related defaults; unscheduled draws on debt service reserves, if any, reflecting financial unscheduled draws on credit enhancements, if any, reflecting financial substitution of credit or liquidity providers, if any, or their failure to perform; adverse tax opinions or events affecting the tax-exempt status of the Series modifications to rights of the holders of the Series 2005 Bonds; (viii) bond calls of the Series 2005 Bonds (other than scheduled mandatory redemption) or any acceleration of the maturity thereof; (ix) defeasances (in whole or in part) of Series 2005 Bonds; Bonds; (x) release, substitution, or sale of property securing repayment of the Series 2005 (xi) rating changes; and (xii) any changes in the City's Fiscal Year. 18 (c) Notice of Failure. The City agrees to provide or cause to be provided, in a timely manner, to (i) each NRMSIR or the MSRB and (ii) the SID, if any, notice of a failure by the City to provide the Annual Report described in subsection ( a) above on or prior to the date set forth therein. (d) Termination. The City reserves the right to terminate its obligation to provide the Annual Report and notices of material events, as set forth above, if and when the City no longer remains an obligated person with respect to the Series 2005 Bonds (within the meaning of the Rule). If the City believes such condition exists, the City will provide notice of such termination to the NRMSIR's, the MSRB and the SID. (e) Undertaking for Benefit of Holders and Beneficial Owners. The City agrees that its undertaking pursuant to the Rule described herein is intended to be for the benefit ofthe holders and beneficial owners of the Series 2005 Bonds and shall be enforceable by any holder or beneficial owner; provided that the right to enforce the provisions ofthis undertaking shall be limited to a right to obtain specific enforcement of the City's obligations hereunder and any failure by the City to comply with the provisions of this undertaking shall not be an event of default with respect to the Series 2005 Bonds under the Resolution. (f) Voluntary Disclosure Shall Not Bind City. Any voluntary inclusion by the City of information in its Annual Report of supplemental information that is not required by the Rule shall not expand the obligations of the City under the Rule and the City shall have no obligation to update such supplemental information or include it in any subsequent report. (g) Third Parties. The covenants described herein are solely for the benefit of the holders and beneficial owners of the Series 2005 Bonds and shall not create any rights in any other parties. (h) Amendment: Waiver. Notwithstanding any other provision of this Resolution, the City may amend the provisions of this Section and any such provision maybe waived, provided that the following conditions are satisfied: (I) If the amendment or waiver relates to the provisions of paragraphs ( a), (b), or (c) above, it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature or status ofthe City or the type of business conducted by the City; (2) The undertaking, as amended or taking into account such waiver, would, in the opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the original issuance of the Series 2005 Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and (3) The amendment or waiver does not materially impair the interests of holders and beneficial owners as determined either by parties unaffiliated with the City or an obligated person, or by an approving vote of the holders of at least a majority in aggregate principal amount of the then outstanding Series 2005 Bonds pursuant to the terms of the Bond Resolution. 19 In the event of any such amendment or waiver of a provision described above, the City shall describe such amendment or waiver in the next Annual Report, and shall include, as applicable, a narrative explanation ofthe reason for the amendment or waiver and its impact on the type (or, in the case of a change of accounting principles, on the presentation) of annual financial information or operating data being presented by the City. In addition, if the amendment or waiver relates to the accounting principles to be followed in preparing financial statements, (i) notice of such change shall be given in the same manner as set forth in subsection (b) and (ii) the Annual Report for the year in which the change is made must present a comparison (in narrative form and also, if feasible, in quantitative form) between the financial statements as prepared on the basis ofthe new accounting principles and those prepared on the basis of the former accounting principles. Section 15. Authorizations. The Authorized Signatory, the City Clerk and the Finance Director are hereby jointly and severally authorized to do all acts and things required of them by this Resolution, the Bond Resolution, the Escrow Deposit Agreement, the Bond Registrar Agreement or the Bond Purchase Contract, or desirable or consistent with the requirements hereof or thereof, for the full, punctual and complete performance of all terms, covenants and agreements contained in the Series 2005 Bonds, the Bond Resolution, this Resolution, the Escrow Deposit Agreement, the Bond Registrar Agreement and the Bond Purchase Contract, and to make any elections necessary or desirable in connection with the arbitrage provisions of Section 148 of the Code. Section 16. Business Days. In any case where the date of maturity of interest on or principal ofthe Series 2005 Bonds or the date fixed for redemption of any Series 2005 Bonds is not a Business Day, then payment of principal, premium, if any, or interest need not be made on such date but may be made on the next succeeding Business Day, with the same force and effect as if made on the date of maturity or the date fixed for redemption. Section 17. Resolution to Constitute a Contract. In consideration of the purchase and acceptance of the Series 2005 Bonds authorized to be issued hereunder by those who shall be the holders thereoffrom time to time, this Resolution shall constitute a contract between the City and such holders, and all covenants and agreements herein and in the Bond Resolution set forth to be performed by the City shall be for the equal benefit and security of all of the holders. Section 18. No Implied Beneficiary. With the exception of any rights herein expressly conferred, nothing expressed or mentioned in or to be implied from this Resolution or the Series 2005 Bonds is intended or shall be construed to give any person other than the City, the Original Purchaser, the 2005 Bond Insurer, the Escrow Agent, the Bond Registrar and the Owners, any legal or equitable right, remedy or claim under or with respect to this Resolution or the Bond Resolution or any covenants, conditions, and provisions herein contained; this Resolution and the Bond Resolution and all ofthe covenants, conditions and provisions hereof and thereof being intended to be and being for the sole and exclusive benefit of the City, the Original Purchaser, the 2005 Bond Insurer, the Escrow Agent, the Bond Registrar and the Owners. Section 19. Severability. If any provision of this Resolution shall be held or deemed to be or shall, in fact, be illegal, inoperative or unenforceable in any context, the same shall not effect any other provision herein or render any other provision (or such provision in any other context) invalid, inoperative or unenforceable to any extent whatsoever. 20 Section 20. Repealer. All Resolutions or parts thereof of the City in conflict with the provisions herein contained or, to the extent of any such conflict, hereby superseded and repealed. 21 Section 21. Effective Date. This Resolution shall take effect immediately upon its adoption. PASSED AND ADOPTED THIS 2ND DAY OF AUGUST, 2005. (SEAL) ATTEST: CITY OF BOYNTON BEACH, FLORIDA APPROVED AS TO FORM AND LEGAL SUFFICIENCY: By: ~ City Attorney ayor 7~~CL Commissioner ~issE~r ~~ Commissioner 22 EXHIBIT "A" Bond Purchase Contract CITY OF BOYNTON BEACH, FLORIDA $_,_,000 UTILITY SYSTEM REVENUE REFUNDING BONDS SERIES 2005 BOND PURCHASE CONTRACT _ _,2005 City of Boynton Beach, Florida 100 East Boynton Beach Blvd. Boynton Beach, Florida 33425 The undersigned, Bear, Steams & Co. Inc. (the "Underwriter"), offers to enter into this Bond Purchase Contract (the "Purchase Contract") with the City of Boynton Beach, Florida (the "City"), which, upon acceptance of this offer by the City, will be binding upon the City and upon the Underwriter. This offer is made subject to written acceptance hereof by the City at or before 11 :59 p.m., Eastern Daylight Savings Time on the date hereof and, if not so accepted, will be subject to withdrawal by the Underwriter upon notice delivered to the City at any time prior to the acceptance hereofby the City. I. Purchase and Sale. Upon the terms and conditions and in reliance on the representations, warranties, covenants and agreements set forth herein, the Underwriter hereby agrees to purchase from the City, and the City hereby agrees to sell and deliver to the Underwriter, all (but not less than all) of the $_ _,000 aggregate principal amount City of Boynton Beach, Florida Utility System Revenue Refunding Bonds, Series 2005 (the "Bonds"). The Bonds shall be dated the Closing Date (as hereinafter defined). The purchase price for the Bonds shall be $ (the par amount of the Bonds less an Underwriter's discount of $ and [plus][minus] net original issue [premium] [ discount] of $ ). The Bonds shall be as described in, and shall be issued and secured under the provisions of Resolution No. R92-96 of the City Commission, as amended and supplemented, particularly as amended and supplemented by Resolution No. R05-_ adopted by the City Commission on_ _,2005 (collectively, the "Resolution"). The Bonds shall mature at the times and in the amounts and shall bear interest at the rates set forth in Appendix I hereto. The redemption provisions for the Bonds are set forth in Appendix I hereto. The information required by Sections 218.385(2),(3) and (6), Florida Statutes, to be provided to the City by the Underwriter is set forth in Appendix II hereto. 2. Delivery of Official Statements and Other Documents. (a) Prior to the date hereof, the City shall have provided to the Underwriter for its review the Preliminary Official Statement dated July _,2005 (the "Preliminary Official Statement") that the City deemed final as of its date, except for certain omissions in connection with the pricing of the Bonds as permitted by Rule 15c2- 12 of the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended (the "Rule"). The Underwriter has reviewed such Preliminary Official Statement prior to the execution of this Purchase Contract. (b) With its acceptance hereof, the City will deliver, at its expense, to the Underwriter within seven (7) business days of the date hereof (or within such shorter period as may be requested by the Underwriter in order to accompany any confirmation that requests payment from any customer to comply with Rule G-32 of the Municipal Securities Rulemaking Board) copies of a final Official Statement (the" Final Official Statement") (in such amount as may be mutually agreed upon), dated the date hereof, together with all supplements and amendments thereto, substantially in the form of the Preliminary Official Statement, with only such changes therein as shall have been accepted by the Underwriter, signed on behalf of the City by an Authorized Representative. It is understood that in undertaking to deliver the Final Official Statement pursuant to this paragraph, the City is not taking any responsibility for the accuracy or completeness of the information in the Final Official Statement concerning (the "Insurer") or The Depository Trust Company and its book-entry only system of registration of the Bonds. (c) The Underwriter shall give notice to the City on the date after which no participating underwriter, as such term is defined in the Rule, remains obligated to deliver Final Official Statements pursuant to paragraph (b)(4) of the Rule. (d) At Closing, the City shall deliver or cause to be delivered to the Underwriter copies of the Resolution, certified to by the City Clerk, all substantially in the form heretofore delivered to the Underwriter, with only such changes therein as agreed upon by the Underwriter. 3. Representation of the Underwriter as to Authority. (a) The Underwriter is authorized to execute this Purchase Contract. (b) The Underwriter hereby represents that neither it nor any "person" or "affiliate" has been on the" convicted vendor list" during the past 3 6 months as all such terms are defined in Section 287.133, Florida Statutes. 4. Public Offering. The Underwriter agrees to make an offering of all the Bonds at not in excess of the initial public offering prices or lower than the yields set forth in Appendix I attached hereto. The Underwriter reserves the right to make concessions to dealers and to change such initial public offering prices or yields as the Underwriter reasonably deems necessary in connection with the marketing of the Bonds. The City hereby authorizes the Underwriter to use the Final Official Statement and the information contained therein in connection with the offering and sale of the Bonds and ratifies and confirms its authorization of the use by the Underwriter prior to the date hereof of the Preliminary Official Statement in connection with such offering and sale. 5. City's Representations. Warranties and Agreements. By its acceptance hereof, the City represents and warrants to and agrees with the Underwriter that, as of the date hereof: (a) The City is duly and validly existing as a municipal corporation. (b) The City has full legal right, power and authority to issue and sell the Bonds as contemplated by the Resolution and the Final Official Statement. (c) The City has full legal right, power and authority to enter into this Purchase Contract and the Escrow Deposit Agreement (the "Escrow Agreement") between the City and The Bank of New York, as escrow agent (the "Escrow Agent") and to sell and deliver the Bonds to the 2 Underwriter as provided herein; by official action of the City taken prior to or concurrently with the acceptance hereof, the Resolution has been duly adopted in accordance with the Constitution and the laws of the State of Florida, including the charter ofthe City (collectively the "Act"); the Resolution is in full force and has not been rescinded; this Purchase Contract and the Escrow Agreement when executed by the City will be duly ~uthorized and delivered and will constitute the legal, valid and binding obligations of the City enforceable in accordance with their terms, except as the enforcement thereof may be affected by bankruptcy, insolvency, or other laws or the application by a court of equitable principles generally affecting creditors' rights and except further as the enforcement of indemnification provisions ofthe Purchase Contract and the Escrow Agreement may each be limited by federal or state securities laws or public policy considerations; and the City has duly authorized and approved the consummation by it of all other transactions contemplated by the Resolution, the Final Official Statement, the Escrow Agreement and this Purchase Contract to have been performed or consummated at or prior to the Closing Date. (d) The execution and delivery of the Bonds, this Purchase Contract and the Escrow Agreement and the adoption and implementation of the Resolution, and compliance with the obligations on the City's part contained herein and therein, will not conflict with or constitute a material breach of or material default under the Act or any federal or Florida constitutional provision, law, administrative regulation, judgment, decree, loan agreement, indenture, bond, note, resolution, agreement or other instrument to which the City is a party or to which the City or any of its properties or other assets is otherwise subject, nor will any such execution, delivery, adoption, implementation or compliance result in the creation or imposition of any material lien, charge or other security interest or encumbrance of any nature whatsoever upon any of the properties or other assets of the City under the terms of any such provision, law, regulation, document or instrument, except as provided or permitted by the Bonds and the Resolution. (e) All approvals, consents and orders of any governmental authority, legislative body, board, agency or commission having jurisdiction which would constitute a condition precedent to or the absence of which would materially adversely affect the due performance by the City of its obligations under this Purchase Contract, the Escrow Agreement, the Resolution and the Bonds have been, or prior to the Closing Date will have been, duly obtained; provided, however, that this representation and warranty does not apply to such approvals, consents and orders as may be required under the Blue Sky or securities laws of any state in connection with the offering and sale of the Bonds, or to such official action by the City which the Resolution contemplates is to be taken from time to time after the Closing. (f) The Bonds when issued, registered and delivered in accordance with the Resolution and sold to the Underwriter as provided herein and in accordance with the provisions of the Resolution, will be valid and legally enforceable obligations of the City in accordance with their terms and the terms of the Resolution, except as the enforcement thereof may be limited by bankruptcy, insolvency, reorganization or other laws or the application by a court of equitable principles; and the Resolution will provide, for the benefit of the holders from time to time of the Bonds, a legally valid and irrevocable lien upon and pledge ofthe Pledged Revenues, as defined and set forth in the Resolution, on a parity with the City's Utility System Revenue Refunding Bonds, Series 2002. 3 (g) The information contained in the Preliminary Official Statement (as of its dated date) and, as of its date, the Final Official Statement pertaining to the City was and is true and correct in all material respects and does not contain any untrue statement of a material fact or omit to state a material fact which is necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (h) The City has not been in default at any time on or after December 31, 1975, as to principal or interest with respect to any obligation issued or guaranteed by the City. (i) Except as described in the Preliminary Official Statement or the Final Official Statement, there is no action, suit, proceeding, inquiry or investigation, at law or in equity before or by any court, governmental agency or public board or body, pending or, to the best knowledge of the City, threatened: (1) Which may affect the existence of the City or the titles of its officers to their respective offices; (2) Which may affect or which seeks to prohibit, restrain or enjoin the sale, issuance or delivery of the Bonds, or the collection or disbursement ofthe Pledged Revenues to pay the principal of, premium, if any, and interest on the Bonds, and to make other payments under the Resolution; (3) Which in any way contests or affects the validity or enforceability of the Bonds, the Resolution, this Purchase Contract or any of them; (4) Which would cause the interest on the Bonds to be included in the federal gross income of the holders of the Bonds; or (5) Which contests in any way the completeness or accuracy of the Preliminary Official Statement or the Final Official Statement or which contests the powers of the City or any authority or proceedings for the issuance, sale or delivery of the Bonds, or the due adoption of the Resolution or the execution and delivery of this Purchase Contract or any of them; nor, to the best knowledge of the City, is there any basis therefor, wherein an unfavorable decision, ruling or finding would materially adversely affect the validity or enforceability of the Bonds, the Resolution, the Escrow Agreement or any of them. U) The City will furnish such information, execute such instruments and take such other action not inconsistent with law in cooperation with the Underwriter as the Underwriter may reasonably request in order (i) 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 as the Underwriter may designate, and (ii) to determine the eligibility of the Bonds for investment under the laws of such states and other jurisdictions, and will use its best efforts to continue such qualifications in effect so long as required for the distribution of the Bonds; provided that the City shall not be obligated to qualify to do business or to take any action that would subject it to general service of process in any state where it is not now so subject. (k) If between the date of this Purchase Contract and the date which is the earlier of (i) 4 90 days from the end of the "underwriting period", as determined in the Rule, (an event the Underwriter is required to notify the City about pursuant to paragraph 2(c) above), or (ii) the time when the Final Official Statement is available to any person from a nationally recognized municipal securities information repository, but in no case less than 25 days following the end of the underwriting period, any event shall occur which would or might cause the information contained in the Final Official Statement, as then supplemented or amended, to contain any untrue statement of a material fact or to omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light ofthe circumstances under which they were made, not misleading, the City shall notify the Underwriter thereof, and if in the reasonable opinion of the Underwriter such event requires the preparation and publication of a supplement or amendment to the Final Official Statement, the City shall cooperate with the Underwriter in supplementing or amending the Final Official Statement, the printing of which will be at the City's expense, in such form and manner and at such time or times as may be reasonably called for by the Underwriter. (I) The City covenants to comply with the requirements of the Internal Revenue Code of 1986, as amended (the "Code") in order to maintain the exclusion from gross income of the interest on the Bonds for purposes of federal income taxation. These requirements include, but are not limited to, provisions which prescribe yield and other limits within which the proceeds of the Bonds and other amounts are to be invested and require that certain investment earnings on the foregoing must be rebated on a periodic basis to the Treasury Department of the United States. (m) Except as disclosed in the Official Statement, the City has not been in default at any time as to principal or interest with respect to any obligations issued or guaranteed by the City. (n) The City has not failed to comply with any prior undertakings to provide continuing disclosure pursuant to Rule 15c2-12(b)( 5) under the Securities Exchange Act of 1934, as amended. 6. Closing. At 10:00 a.m., prevailing time in the City, on _,2005 (such date herein called the "Closing Date"), or at such later time or on such later date as may be mutually agreed upon by the City and the Underwriter, the City shall, subject to the terms and conditions hereof, deliver the Bonds, bearing proper CUSIP numbers, in the definitive form of one fully registered typewritten Bond for each stated maturity of the Bonds, duly executed and authenticated. In addition, at such time, on the Closing Date, the City shall also deliver, to the Underwriter, subject to the terms and conditions hereof, the other documents hereinafter mentioned. Subject to the terms and conditions hereof, the Underwriter shall accept delivery ofthe Bonds and pay the purchase price of the Bonds as set forth in paragraph 1 hereof in Federal Funds to the order of the City (such delivery of and payment for the Bonds herein called the "Closing"). The Closing shall occur at City Hall or such other place as shall have been mutually agreed upon by the City and the Underwriter. The Bonds shall be registered in the name of Cede & Co., or such other name as the Underwriter shall request, and will be made available for inspection and checking by representatives of the Underwriter at such place as shall be mutually agreed upon, not later than the business day prior to the Closing Date. 7. Closing Conditions. The Underwriter is entering into this Purchase Contract in reliance upon the representations, warranties and agreements of the City contained herein, and in reliance upon the representations, warranties and agreements to be contained in the documents and 5 instruments to be delivered at the Closing, and upon the performance of the covenants and agreements herein, as of the date hereof and as of the Closing Date. Accordingly, the Underwriter's obligations under this Purchase Contract to purchase, to accept delivery of and to pay for the Bonds shall be conditioned upon the performance of the covenants and agreements to be performed hereunder and under such other documents and instruments to be delivered at or prior to the Closing Date, and shall also be subject to the following additional conditions: (a) The representations and warranties of the City contained herein shall be true, comp lete and correct on the date hereof and on and as of the Closing Date, as if made on the Closing Date. (b) At the date of execution hereof and at the Closing Date, the Resolution shall have been duly approved and adopted by the City, shall be in full force and effect, and shall not have been amended, modified or supplemented, except in connection with the issuance of Additional Bonds in compliance therewith and except to the extent to which the Underwriter shall have given its prior written consent, and there shall have been taken in connection therewith and in connection with the issuance of the Bonds all such action as, in the opinion of Moyle, Flanigan, Katz, Raymond & Sheehan, P.A., Bond Counsel and Disclosure Counsel for the City, shall be necessary and appropriate in connection with the transactions contemplated hereby. (c) At the Closing there will be no pending or threatened litigation or proceeding of any nature seeking to restrain or enjoin the issuance, sale or delivery of the Bonds, or the pledge or application of the Pledged Revenues (other than as disclosed in the Final Official Statement) to pay the principal of and interest on the Bonds or in any way contesting or affecting the validity or enforceability of the Bonds, the Resolution, the Escrow Agreement and this Purchase Contract or contesting in any way the proceedings of the City taken with respect thereto, or contesting in anyway the due existence or powers of the City or the title of any of the members of the City Commission or officials ofthe City to theirrespective offices, or ifsuch litigation does exist, the Underwriter will receive an opinion of Josias, Goren, Cherof, Doody & Ezrol, P.A. City Attorneys, that any such litigation is without merit. (d) Except as described in the Final Official Statement, there shall have been no material adverse change in the financial condition of the City since September 30,2004. (e) At the Closing, the Underwriter shall receive the following documents, each dated as of the Closing Date: (i) The opinion of Moyle, Flanigan, Katz, Raymond & Sheehan, P.A., Bond Counsel, dated the Closing Date, in substantially the form attached to the Final Official Statement as Appendix D as well as (x) an opinion to the effect that the Bonds are "Additional Bonds" on a parity with the City's other outstanding Bonds and (y) that the Refunded Bonds (as defined in the Final Official Statement) have been legally defeased.; (ii) An opinion of Bond Counsel, addressed to the Underwriter, to the effect that (i) the Underwriter may rely upon the opinion referred to in paragraph (i) above as though addressed to it, (ii) the information contained in the Final Official Statement under the headings "Introduction," 6 "Purpose ofthe 2005 Bonds," "Description ofthe 2005 Bonds," "Security for the 2005 Bonds" and "Covenants Concerning Ongoing Disclosure," (other than any information thereunder relating to The Depository Trust Company and its book-entry system 0 f registration and apart from any engineering, financial and statistical data contained therein as to which no opinion or belief needs to be expressed), insofar as such information purports to be the descriptions or summaries of the Resolution and the Bonds, constitutes fair and accurate statements of the matters set forth in such documents, and (iii) the information contained in the Final Official Statement under the heading "Tax Exemption" is correct in all material respects. (iii) An opinion, dated the Closing Date and addressed to the Underwriter, of Goren, Cherof, Doody & Ezrol, P.A. City Attorneys to the effect that (i) this Purchase Contract and the Escrow Agreement have each been duly authorized, executed and delivered by the City and each constitutes a legal, valid, and binding agreement of the City in accordance with their terms except to the extent that the enforceability of the rights and remedies set forth therein may be limited by bankruptcy, insolvency or other laws or the application by a court of equitable principles and except further as the enforcement of indemnification provisions of this Purchase Contract may be limited by federal or state securities laws or public policy considerations; (ii) the City has authorized, executed and delivered the Final Official Statement; (iii) the information in the Final Official Statement as to legal matters relating to the City, the Bonds, the Escrow Agreement and the Resolution is correct in all material respects and does not omit any statement which, in their opinion, should be included or referred to therein and, in addition, such counsel shall state that, based upon their participation in the preparation ofthe Final Official Statement as City Attorneys and without having undertaken to determine independently the accuracy, completeness or fairness of the statements contained in the Final Official Statement (except to the extent expressly set forth in this Subparagraph (iii)), as of the Closing nothing has come to their attention causing them to believe that (A) the Final Official Statement as of its date contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading (except for the financial and statistical information contained in the Final Official Statement as to all of which no view shall be expressed), or (B) the Final Official Statement as ofthe Closing Date contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading (except as aforesaid), (it is understood that in undertaking to deliver the Final Official Statement pursuant to this paragraph, the City is not taking any responsibility for the accuracy or completeness ofthe information in the Final Official Statement concerning the Insurer or The Depository Trust Company and its book-entry only system of registration of the Bonds); (iv) to the best of their knowledge the City is not in material breach of or material default under any applicable constitutional provision, law or administrative regulation of the State or the United States or any applicable judgment or decree or any loan agreement, indenture, bond, note, material resolution, material agreement or other material instrument to which the City is a party or to which the City or any of its property or assets is otherwise subject, and no event has occurred and is continuing that with the passage of time or the giving of notice, or both, would constitute a default or event of default under any such instrument; and the execution and delivery of the Bonds, the Escrow Agreement, this Purchase Contract, and the adoption of the Resolution and compliance with the provisions on the City's part contained therein, will not conflict with or constitute a material breach of or default under, any constitutional provision, law, administrative regulation, judgment, 7 decree, loan agreement, indenture, bond, note, resolution, agreement or other instrument to which the City is a party or to which the City or any of its property or assets is otherwise subject, and any such execution, delivery, adoption or compliance will not result in the creation or imposition of any lien, charge or other security interest or encumbrance of any nature whatsoever upon any of the property or assets of the City under the terms of any such law, regillation or instrument, except as expressly provided by the Bonds or the Resolution; (v) the City has the right and power under the Act to adopt the Resolution and the Resolution has been duly and lawfully adopted by the City, is in full force and effect and constitutes the legal, valid and binding obligation of the City, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors' rights generally and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law), and no other authorization is required for the City to adopt the Resolution; (vi) to the best of their knowledge, there is no action, suit, proceeding, inquiry or investigation at law or in equity before or by any court, government agency, public board or body, pending or threatened against or affecting the City, nor is there any basis for any such action, suit, proceeding, inquiry or investigation, wherein an unfavorable decision, ruling or finding would have a materially adverse effect upon the transactions contemplated by the Final Official Statement or the validity of the Bonds, the Resolution, the Escrow Agreement or this Purchase Contract, except as described in the Final Official Statement; and (vii) all authorizations, consents, approvals and reviews of govemmental bodies or regulatory authorities then required for the City's adoption, execution or performance of the Bonds, the Resolution, the Escrow Agreement and this Purchase Contract have been obtained or effected and, to the best of their knowledge, they have no reason to believe that the City will be unable to obtain or effect any such additional authorization, consent, approval or review that may be required in the future for performance of any of them by the City. (iv) A certificate, dated the Closing Date, signed by an Authorized Representative to the effect that to the best knowledge of the signer: (i) the representations of the City herein are true and correct in all material respects as of the Closing Date; (ii) the City has performed all obligations to be performed hereunder as of the Closing Date; (iii) except as disclosed in the Final Official Statement, there is no litigation pending or threatened (A) to restrain or enjoin the issuance or delivery of any of the Bonds, (B) in any way contesting or affecting any authority for the issuance of the Bonds or the validity ofthe Bonds, the Resolution, the Escrow Agreement or this Purchase Contract, (C) in any way contesting the corporate existence or powers ofthe City, (D) to restrain or enjoin the collection of revenues pledged or to be pledged to pay the principal of, premium, if any, and interest on the Bonds, (E) which may result in any material adverse change in the business, properties, assets and the financial condition of the City taken as a whole, or (F) asserting that the Final Official Statement contains any untrue statement of a material fact or omits any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; (iv) since September 30, 2004, no material adverse change has occurred in the financial position or results of operations of the City except as set forth in or contemplated by the Final Official Statement; (v) the City has not, since September 30, 2004, incurred any material liabilities other than in the ordinary course of business or as set forth in or contemplated by the Final Official Statement; (vi) the information contained in the Final Official Statement pertaining to the City (except for the Insurer or The Depository Trust Company book-entry only system for which no opinion need be expressed) did not as of its date, and does not as of the Closing Date contain any untrue statement of a material fact or omit to state a material fact required to be included therein or 8 necessary in order to make the statements contained therein, in light of the circumstances in which they were made, not misleading; and (vii) that the City has not been in default at any time on or after December 31,1975, as to principal or interest with respect to any obligation issued or guaranteed by the City. (v) An opinion, dated the Closing Date and addressed to the Moyle, Flanigan, Katz, Raymond & Sheehan, P.A., West Palm Beach, Florida, Disclosure Counsel for the City, to the effect that (i) the Bonds are not subject to the registration requirements of the Securities Act of 1933, as amended, and the Resolution is exempt from qualification pursuant to the Trust Indenture Act of 1939, as amended; and (ii) based upon their participation and their review of the Final Official Statement as Disclosure Counsel and without having undertaken to determine independently the accuracy, completeness or fairness of the statements contained in the Final Official Statement, as of the Closing Date nothing has come to the attention of such counsel causing them to believe that (A) the Final Official Statement as of its date contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading (except for the financial and statistical information contained in the Final Official Statement as to which no view need be expressed), or (B) the Final Official Statement as of the Closing Date contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading (except as aforesaid). (vi) An opinion, dated the Closing Date and addressed to the Underwriter, of Moyle, Flanigan, Katz, Raymond & Sheehan, P.A., West Palm Beach, Florida, Disclosure Counsel for the City, to the effect that the continuing disclosure undertaking ofthe City contained in the Resolution, pursuant to which the City has agreed to provide the information required by Rule 15c2-12(b)(5) issued by the Securities and Exchange Commission under the Securities Exchange Act of 1934, provides a suitable basis for the Underwriter in connection with the Offering (as defined in Rule 15c2-12), to make a reasonable determination as required by paragraph (b)(5) of said Rule; (vii) An opinion, dated the Closing Date, and addressed to the Underwriter, from counsel for the Insurer to the effect that: (i) the Insurer is a validly existing and in good standing under the laws of the State of and qualified to do business therein and is licensed and authorized to issue its financial guaranty insurance policies under the laws ofthe State of Florida; (ii) the Bond Insurance Policy is valid and binding upon the Insurer and enforceable in accordance with its terms, subject to applicable laws affecting creditors' rights; (iii) the Insurer, as an insurance company, is not eligible for relief under the Federal Bankruptcy Laws (any proceedings for the liquidation, conservation or rehabilitation of the Insurer would be governed by the provisions of the ); and (iv) the statements described in the Final Official Statement relating to the Insurer and the Bond Insurance Policy accurately and fairly present the summary information set forth therein and do not omit any material fact with respect to the description of the Insurer relative to the material terms of the Bond Insurance Policy or the ability to the Insurer to meet its obligations under the Bond Insurance Policy. (viii) A Rule 15c2-12 Certificate with respect to the Preliminary Official Statement signed by the City Manager. 9 (ix) The verification report of Causey, Demgen & Moore as described under the section entitled "Verification of Mathematical Computations" in the Final Official Statement. (x) A copy of the executed Escrow Deposit Agreement. (xi) Such additional legal opinions, certificates, instruments and other documents as the Underwriter may reasonably request to evidence the truth and accuracy, as of the date hereof and as of the Closing Date, of the City's representations and warranties contained herein and of the statements and information contained in the Final Official Statement and the due performance or satisfaction by the City on or prior to the Closing Date of all the agreements then to be performed and conditions then to be satisfied by it. (f) Bonds. The Insurer shall have issued its Bond Insurance Policy (the "Policy") insuring the (g) The Bonds shall have received ratings of "AAA" and "Aaa" by Standard & Poor's and Moody's Investors Service, respectively. All of the evidence, opinions, letters, certificates, instruments and other documents, mentioned above or elsewhere in this Purchase Contract shall be deemed to be in compliance with the provisions hereof if, but only if, they are in form and substance satisfactory to the Underwriter and the City. If the conditions to the obligations of the Underwriter to purchase, to accept delivery of and to pay for the Bonds contained in this Purchase Contract are not satisfied, or if the obligations of the Underwriter to purchase, to accept delivery of and to pay for the Bonds shall be terminated for any reason permitted by this Purchase Contract, this Purchase Contract shall terminate and neither the Underwriter nor the City shall be under any further obligation hereunder, except that the respective obligations of the City and the Underwriter set forth in paragraph 11 hereof shall continue in full force and effect . 8. Termination. (a) The Underwriter may terminate its obligation to purchase at any time before the Closing Date if any of the following should occur: (i) (1)Legislation (including any amendment thereto) shall have been introduced in or adopted by either House of the Congress of the United States, or recommended to the Congress for passage by the President of the United States or favorably reported for passage to either House of the Congress by any Committee of such House; (2) a decision shall have been rendered by a court established under Article III of the Constitution of the United States or by the United States Tax Court; or (3) a release or official statement shall have been issued by the President of the United States, by the Treasury Department of the United States or by the Internal Revenue Service; the effect of which, in any such case described in clauses (1), (2) or (3) herein, would be to impose, directly or indirectly, federal income taxation upon interest received on obligations of the general 10 character of the Bonds other than as imposed on the Bonds and income therefrom under the federal tax laws in effect on the date hereof, in such a manner as in the judgment of the Underwriter would materially impair the marketability or materially reduce the market price of obligations ofthe general character of the Bonds; or (ii) Any action shall have been taken by the Securities and Exchange Commission or by a court which would require registration of any security under the Securities Act of 1933, as amended, or qualification of any indenture under the Trust Indenture Act of 1939, as amended, in connection with the public offering of the Bonds, or any action shall have been taken by any court or by any governmental authority suspending the use of the Final Official Statement or any amendment or supplement thereto, or any proceeding for that purpose shall have been initiated or threatened in any such court or by any such authority; or (iii) (1) The Constitution of the State of Florida shall be amended or an amendment shall be proposed, (2) legislation shall be enacted, (3) a decision shall have been rendered as to matters of Florida law, or (4) any order, ruling or regulation shall have been issued or proposed by or on behalf of the State of Florida by an official, agency or department thereof, affecting the status of City, its property or income, its bonds (including the Bonds) or the interest thereon which in the judgment of the Underwriter would materially adversely affect the market price of the Bonds; or (iv) (1) A general suspension of trading in securities shall have occurred on the New York Stock Exchange, or (2) the United States becomes engaged in any outbreak of armed hostilities (whether or not foreseeable at the time of execution hereof) or hostilities previously commenced shall escalate, the effect of which in either case described in clauses (I) and (2), is, in the judgment of the Underwriter, so material and adverse as to make it impracticable or inadvisable to proceed with the public offering or the delivery of the Bonds on the terms and in the manner contemplated in this Purchase Contract and the Final Official Statement, including without limitation any material adverse effect on the market price of the Bonds; or (v) An event occurs which, in the reasonable opinion of the Underwriter, requires a supplement or amendment to the Final Official Statement and the information set forth in such supplement or amendment adversely effects, in the reasonable opinion of the Underwriter, the marketability of the Bonds; or (vi) A general banking moratorium shall have been declared by authorities of the United States, the State of New York or the State of Florida. 9. Expenses. (a) Whether or not the Bonds are sold by the City to the Underwriter (unless such sale be prevented at Closing by the Underwriter's default), the City shall be obligated to pay the following expenses: (i) the cost of preparing and printing or other reproduction of the Resolution; (ii) the cost of preparing and printing the Bonds, the Preliminary Official Statement and the Final Official Statements; (iii) the fees and disbursements of Moyle, Flanigan, Katz, Raymond & Sheehan, P.A., incurred in its capacity as Bond Counsel; (iv) the fees and disbursements of Moyle, Flanigan, Katz, Raymond & Sheehan, P.A., incurred in their capacity as Disclosure Counsel for the City; (v) the fees 11 and disbursements of the Escrow Agent, Paying Agent and the Bond Registrar; (vi) the fees and expenses of Causey, Demgen & Moore for the verification report; and (vii) the fees and disbursements of any other experts, accountants, consultants or advisors retained by the City. (b) Whether or not the Bonds are sold by the City to the Underwriter (unless such sale be prevented at Closing by the City's default), the Underwriter shall be obligated to pay all expenses incurred by it in connection with the public offering of the Bonds. 10. Notices. Any notice or other communication to be given to the City under this Purchase Contract may be given by delivering the same in writing to the address set forth above and any notice or other communications to be given to the Underwriter under this Purchase Contract may be given by delivering the same in writing to Bear, Steams & Co. Inc., 225 N.E. Mizner Blvd., Suite 500, Boca Raton, Florida 33432. 11. Parties in Interest. (a) This Purchase Contract is made solely for the benefit ofthe City and the Underwriter (including the successors or assigns of the Underwriter) and no other person shall acquire or have any right hereunder or by virtue hereof. All of the representations, warranties and agreements of the City contained in this Purchase Contract shall remain operative and in full force and effect (but shall not be deemed to be continuing representations and warranties of the City), regardless of: (i) any investigations made by or on behalf of the Underwriter; (ii) delivery of and payment for the Bonds pursuant to this Purchase Contract; or (iii) any termination of this Purchase Contract, but only to the extent provided by the last paragraph of Section 7 hereof. (b) No covenant, stipulation, obligation or agreement contained in this Purchase Contract shall be deemed to be a covenant, stipulation, obligation or agreement of any member, agent or employee of the City Commission in his individual capacity and neither the members of the City Commission nor any official executing this Purchase Contract shall be liable personally under this Purchase Contract or be subject to any personal liability or accountability by reason of the execution hereof. 12. Effectiveness. This Purchase Contract shall become effective upon the execution of the acceptance hereof on behalf of the City by the Authorized Representative, all in accordance with the requirements set forth in the Resolution, and shall be valid and enforceable at the time of such acceptance. 13. Counterparts. This Purchase Contract may be executed in several counterparts, which together shall constitute one and the same instrument. 14. Florida Law Governs. The validity, interpretation and performance of this Purchase Contract shall be governed by the laws of the State of Florida. 15. Entire Agreement. This Purchase Contract when accepted by the City in writing as heretofore specified shall constitute the entire agreement between us. 12 16. Headings. The headings of the paragraphs of this Purchase Contract are inserted for convenience only and shall not be deemed to be part hereof. BEAR, STEARNS & CO. INC. By: Name: J.W. Howard Title: Managing Director Accepted as of the date hereof: CITY OF BOYNTON BEACH, FLORIDA By: Gerald Taylor, Mayor G:\023451J7 Utility 2005\purchase contrac~2).wpd 13 EXHIBIT "B" Registrar Agreement BOND REGISTRAR AGREEMENT THIS BOND REGISTRAR AGREEMENT is made and entered into as of August _,2005, by and between the City of Boynton Beach, Florida (the "Issuer") and The Bank of New York Trust Company, N.A. (the "Bank"). WHEREAS, the Issuer by the Resolution (as hereinafter defined), designated the Bank as Bond Registrar (as defined in the Resolution) for its Utility System Revenue Refunding Bonds, Series 2005 (the "Bonds"); and WHEREAS, the Issuer and the Bank desire to set forth the Bank's duties as Bond Registrar and the compensation to be paid the Bank for its services. NOW, THEREFORE, it is agreed by the parties hereto as follows: 1. The Bank agrees to serve as Bond Registrar for the Bonds and to perform the duties of Bond Registrar under Resolution No. 92-96 adopted by the City Commission of the Issuer on June 16,1992, as amended and supplemented, with respect to the Bonds (the "Resolution"). 2. The Issuer shall timely deposit with the Bank sufficient funds from the accounts established for the payment of the Bonds under the Resolution to pay when due and payable the principal of, premium, if any, and interest on the Bonds. 3. The Bank shall use the funds received from the Issuer pursuant to paragraph 2 hereof (and only such funds) to pay the principal of, premium, if any, and interest on the Bonds in accordance with the Resolution. The Bank shall cremate cancelled Bonds and transmit to the Issuer a certificate of destruction therefor. 4. The Bank shall be obligated to act only in accordance with the Resolution and any written instructions received in accordance therewith, and is authorized hereby to comply with any orders, judgments, or decrees of any court and shall not be liable as a result of its compliance with the same. 5. The Bank may rely absol utel y upon the genuineness and authorization of the signature and purported signature of any party upon any instruction, notice, release, request, affidavit, certificate, opinion or other document delivered to it pursuant to the Resolution. 6. To the extent allowed by Florida law, the Issuer hereby agrees to indemnify the Bank and its agents and hold it harmless from any and all claims, liabilities, losses, actions, suits, or proceedings at law or in equity, or any other expenses, fees (including attorneys' fees and expenses), or charges of any character or nature, which it may incur or with which it may be threatened by reason of its acting as Bond Registrar under the Resolution, unless caused by the Bank's willful misconduct or gross negligence; and in connection therewith, to indemnify the Bank against any and all expenses, including attorneys' fees and the costs of defending any action, suit, or proceeding, or resisting any claim. This Section shall survive termination ofthis Agreement. 7. The Bank may consult with counsel of its own choice and shall have sole and complete authorization and protection for any action taken or suffered by it under the Resolution in good faith and in accordance with the opinion of such counsel. The Bank shall otherwise not be liable for any mistakes offact or errors of judgment, or for any acts or omissions of any kind unless caused by the Bank's willful misconduct or gross negligence. 8. In consideration of the services rendered by the Bank as Bond Registrar, the Issuer agrees to and shall pay to the Bank a fee in accordance with Exhibit A hereto during the term ofthis Agreement, payable annually in advance, and all expenses, charges, attorneys' fees and expenses, and other disbursements incurred byit or its attorneys, agents, and employees in and about the acceptance and performance of its powers and duties as Bond Registrar. In the event the system for immobilization of bond certificates (the book-entry only system) is terminated, the fee of the Bank would be revised based upon the then current fee schedule ofthe Bank. This Section shall survive termination of this Agreement. 9. The Bank shall, at all times, when requested to do so by the Issuer, furnish full and complete information pertaining to its functions as the Bond Registrar with regard to the Bonds, and shall without further authorization, execute all necessary and proper deposit slips, checks, certificates and other documents with reference thereto. 10. Either of the parties hereto, at its option, may cancel this Agreement after giving thirty (30) days written notice to the other party of its intention to cancel, and this Agreement may be cancelled at any time by mutual consent of the parties hereto. This Agreement shall terminate without further action upon final payment of the Bonds and the interest appertaining thereto. 11. In the event of a cancellation of this Agreement, the Issuer shall deliver any proper and necessary releases to the Bank upon demand and the Bank shall, after payment of all amounts owing to it hereunder, upon demand pay over the funds on deposit in connection with the Bonds and surrender all registration books and related records, and the Issuer may appoint and name a successor to act as Bond Registrar for the Bonds. The Issuer shall, in such event, notify all holders of the Bonds of the appointment and name ofthe successor, by providing notice in the manner required by the Resolution for the redemption of the Bonds. 12. This Agreement shall not be assigned by either party without written consent of the other party. 13 . No modification of this Agreement shall be valid unless made by a written agreement, executed and approved by the parties hereto. 14. Should any section or part of any section of this Agreement be declared void, invalid, or unenforceable by any court of law for any reason, such determination shall not render void, invalid, or unenforceable any other section or other part of any section of this Agreement. 15. This Agreement shall be governed by and interpreted in accordance with the laws of the State of Florida. 16. ( a) The Issuer hereby instructs the Bank to pay the principal of and interest on the Bonds at the dates specified in the Resolution. (b) The Bank shall be under no liability for interest on any money received by it hereunder. 2 (c) Any money deposited with the Bank for the payment of the principal, redemption premium, if any, or interest on any Bond and remaining unclaimed for three years after final maturity of the Bond has become due and payable will be paid by the Bank to the Issuer, and the owner of such Bond shall thereafter look only to the Issuer for payment thereof, and all liability of the Bank with respect to such monies shall thereupon cease. 17. The Issuer and the Bank agree that the Bank may seek adjudication of any adverse claim, demand, or controversy over its persons as well as funds on deposit, waive personal service of any process, and agree that service of process by certified or registered mail, return receipt requested, to the address set forth below, or such other address as designated in writing sent by one party hereto to the other, shall constitute adequate service. The Issuer and the Bank further agree that the Bank has the right to file a Bill ofInterpleader in any court of competent jurisdiction to determine the rights of any person claiming any interest herein. As to the Issuer: City Manager City of Boynton Beach 100 East Boynton Beach Boulevard Boynton Beach, Florida 33425 As to the Bank: The Bank of New York Trust Company, N.A. 10161 Centurion Parkway 2nd Floor Jacksonville, Florida 32256 18. Reference is hereby made to Sections 205, 206, 214 and 306 ofthe Resolution, which relate, respectively, to the exchange of Bonds, the negotiability, registration and transfer of Bonds, mutilated, destroyed or lost Bonds and cancellation of Bonds. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first above written. CITY OF BOYNTON BEACH, FLORIDA By: City Manager THE BANK OF NEW YORK TRUST COMPANY, N.A., as Bond Registrar By: Its Authorized Signatory 0:\02345\37 Utility 2005\bond registrar agreement.wpd 3 EXHIBIT "C" Preliminary Official Statement PRELIMINARY OFFICIAL STATEMENT DATED AUGUST 3, 2005 This Preliminary Official Statement and the information contained herein are subject to completion or amendment. These securities may not be sold nor may offers to buy be accepted prior to the time the Official Statement is delivered in final form. Under no circumstances shall this Preliminary Official Statement constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. NEW ISSUE - BOOK-ENTRY ONLY RATINGS: Fitch: "AAA" S&P: "AAA" See "RATINGS" herein In the opinion of Bond Counsel, under existing law and assuming continuing compliance by the City with certain covenants, interest on the 2005 Bonds will be excluded from gross income for federal income tax purposes and interest on the 2005 Bonds will not be an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations. See, however, the information under the heading 'TAX EXEMPTION" herein for a description of certain taxes on corporations and for a discussion of certain other tax consequences to holders of the 2005 Bonds. Bond Counsel is also of the opinion that the 2005 Bonds will be exempt from all present intangible personal property taxes imposed by the State of Florida. See "TiJX EXEMPTION" herein. $15,000,000* City of Boynton Beach, Florida Utility System Revenue Refunding Bonds Series 2005 Dated: Date of Delivery Due: November I, as shown helow The City of Boynton Beach, Florida Utility System Revenue Refunding Bonds, Series 2005 (the "2005 Bonds") are being issued by the City of Boynton Beach, Florida (the "City") as fully registered bonds and will be initially issued and registered to Cede & Co., as nominee of The Depository Trust Company, New York, New York ("DTC"), which will act as securities depository for the 2005 Bonds. Purchases of beneficial interests in the 2005 Bonds will be made in book-entry form only and the purchasers will not receive physical delivery of the 2005 Bonds or any certificate representing their beneficial ownership interest in the 2005 Bonds. The 2005 Bonds will be available to purchasers in principal denominations of$5,000and integral multiples thereofunder the book-entry system maintained by Dle through brokers and dealers who are, or who act through, DTC Participants. For so long as Dle or its nominee, Cede & Co., is the registered owner of the 2005 Bonds, payments of principal and interest will be made directly to Cede & Co. Disbursement of payments of principal and interest to individual purchasers is described under the heading "DESCRIPTION OF THE 2005 BONDS - Book-Entry-Only System" herein. Interest on the 2005 Bonds will be payable on November I, 2005 and semi-annually thereafter on each May I and November I. The 2005 Bonds will not be subject to optional redemption prior to maturity but may be subject to mandatory redemption prior to maturity as described herein. This cover page contains certain infonnation for quick reference only. It is not a summary ofthe issue. Investors must read theentire Official Statement to obtain information essential to the making of an informed investment decision. The 2005 Bonds are being issued for the principal pUlpose of refunding the City's outstanding Utility System Revenue Bonds, Series 1996 maturing on and after November I, 2007. The 2005 Bonds will be limited obligations of tile City payable solely from the Net Revenues derived by the City from the operation ofits water, sewer and stormwater utility system (the "System"), certain Impact Fees and moneys and investments held in certain funds and accounts created by the Resolution (collectively, the" Pledged Revenues"). The lien ofthe 2005 Bonds on the Pledged Revenues will he on a parity with the lien ofthe City's outstanding Utility System Revenue Bonds, Series 1996 not refunded by the 2005 Bonds, the Gty's outstanding Utility System Revenue Refunding Bonds, Series 2002 and any Additional Bonds (herein dermed). The 2005 Bonds will not constitute a general obligation, debt or liability of the City or ofthe State of Florida or any political subdivision, agency or instrumentality of the City or the State of Florida within the meaning of any constitutional, statutory, or charter provisions or limitations and neither the full faith and credit nor the taxing power of the State of Florida or tile City are pledged as security for the payment of the principal of, premium, if any, or interest on the 2005 Bonds. Payment ofthe principal of and interest on the 2005 Bonds when due will be insured by a financial guaranty insurance policy to be issued by Ambac Assurance Corporation simultaneously with delivery of the 2005 Bonds. [Insert Logo] AMOUNTS, MATURITIES, INTEREST RATES AND PRICES OR YIELDS $ Serial Bonds Amotnlt Maturity Interest Rate Price or Yield CUSIP Amotnlt Maturity Interest Rate Price or Yield CUSIP $ _% Term Bonds due November 1,20__ - Price 100% - Yield_% The 2005 Bonds are offered when, as and ifissued, subject to the satisfaction of certain conditions and subject to the unqualified approval oflegality and tax- exempt status of Moy1e, Flanigan, Katz, Raymond & Sheehan, P.A., West Palm Beach, Florida, Bond Counsel and Disclosure Counsel to the City. Certain legal matters will be passed upon for the City by its City Attorney, Goren, Cherof, Doody & Ezrol, P.A., Fort Lauderdale, Florida and for the Underwriter by its counsel Edwards & Angell, LLP, West Palm Beach, Florida. It is expected that the 2005 Bonds will be delivered through the facilities of The Depository Trust Company in New York, New York, on or about August _,2005. BEAR, STEARNS & CO. INC. The date of this Official Statement is _ -' 2005. .Preliminary, subject to change. CITY OF BOYNTON BEACH, FLORIDA 100 East Boynton Beach Boulevard Boynton Beach, Florida 33425 Telephone: 561-375-6000 CITY COMMISSION Gerald Taylor, Mayor Bob Ensler, Vice Mayor Muir C. Ferguson, Commissioner Mack McCray, Commissioner Carl McKoy, Commissioner CITY OFFICIALS Kurt Bressner, City Manager William Mummert, Finance Director Janet Prainito, City Clerk CITY ATTORNEY James Cherof Goren, Cherof, Doody & Ezrol, P.A. Fort Lauderdale, Florida BOND AND DISCLOSURE COUNSEL Moyle, Flanigan, Katz, Raymond & Sheehan, P.A. West Palm Beach, Florida FINANCIAL ADVISOR RBC Dain Rauscher Inc. St. Petersburg, Florida No dealer, broker, salesman or other person has been authorized to make any representations, other than as contained in this Official Statement, and if given or made, such other information or representations must not be relied upon. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the 2005 Bonds by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale. The information contained in this Official Statement has been obtained from public documents, records and other sources considered to be reliable and, while not guaranteed as to completeness or accuracy, is believed to be correct. The Underwriter has reviewed the information in this Official Statement in accordance with and as part of its responsibilities to investors under federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guaranty the accuracy or completeness of such information. Any statements in this Official Statement involving estimates, assumptions and matters of opinion whether or not so expressly stated, are intended as such and not as representations of fact, and the City expressly makes no representations that such estimates, assumptions and opinions will be realized or fulfilled. No information, estimates, assumptions and matters of opinion contained in this Official Statement, or any sale made hereunder shall under any circumstances create any implication that there has been no change in the affairs of the City since the date hereof. The information relating to the Ambac Assurance Corporation contained herein under the captions "MUNICIPAL BOND INSURANCE" and "SECURITY FOR THE 2005 BONDS- RESERVE ACCOUNT- AMBAC ASSURANCE SURETY BOND" has been furnished by Ambac Assurance Corporation. No representation is made by the City or the Underwriter as to the accuracy or completeness of such information or that there has not been any material adverse change in such information subsequent to the date of such information. Neither the City nor the Underwriter has made any investigation into the financial condition of Ambac Assurance Corporation, and no representation is made as to the ability of Ambac Assurance Corporation to meet its obligations under the Financial Guaranty Insurance Policy or the 2005 Reserve Account Surety Bond described herein. THE 2005 BONDS HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR HAS THE BOND RESOLUTION BEEN QUALIFIED UNDER THE TRUST INDENTURE ACT OF 1939, AS AMENDED, IN RELIANCE UPON EXEMPTIONS CONTAINED IN SUCH ACTS. THE REGISTRATION OR QUALIFICATION OF THE 2005 BONDS IN ACCORDANCE WITH APPLICABLE PROVISIONS OF THE SECURITIES LAWS OF THE STATES, IF ANY, IN WHICH THE 2005 BONDS HAVE BEEN REGISTERED OR QUALIFIED AND THE EXEMPTION FROM REGISTRATION OR QUALIFICATION IN CERTAIN OTHER STATES CANNOT BE REGARDED AS A RECOMMENDATION THEREOF. NEITHER THESE STATES NOR ANY OF THEIR AGENCIES HAVE PASSED UPON THE MERITS OF THE 2005 BONDS OR THE ACCURACY OR COMPLETENESS OF THIS OFFICIAL STATEMENT. ANY REPRESENTATION TO THE CONTRARY MAY BE A CRIMINAL OFFENSE. THIS PRELIMINARY OFFICIAL STATEMENT HAS BEEN "DEEMED FINAL" BY THE CITY FOR PURPOSES OF SECURITIES AND EXCHANGE COMMISSION RULE 15c2-12, EXCEPT FOR PERMITTED OMISSIONS. TABLE OF CONTENTS Page INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 1 PURPOSE OF THE 2005 BONDS ...................................................... 1 DESCRIPTION OF THE 2005 BONDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 2 General ..................................................................... 2 Redemption Provisions for the 2005 Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 2 Selection of 2005 Bonds for Redemption. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 3 Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . .. 3 Effect of Redemption .......................................................... 3 Book-Entry Only System ....................................................... 3 SECURITY FOR THE 2005 BONDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 5 General ..................................................................... 5 Definitions .................................................................. 6 Rate Covenant. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 7 Reserve Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 8 Flow of Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 9 General Reserve Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 11 Issuance of Additional Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 11 FINANCIAL GUARANTY INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 13 General .................................................................... 13 Payment Pursuant to Financial Guaranty Insurance Policy ............................ 13 Ambac Assurance Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 14 Available Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . " 15 Incorporation of Certain Documents by Reference .................................. 15 ESTIMATED SOURCES AND USES OF FUNDS ........................................ 16 DEBT SERVICE REQUIREMENTS ................................................... 17 THE SYSTEM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 17 General .................................................................... 17 Service Area ... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 17 Condition of the Overall System and System Performance . . . . . . . . . . . . . . . . . . . . . . . . . . .. 18 Administration .............................................................. 18 Water System ............................................................... 18 Wastewater System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 19 Stormwater System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 20 Rates and Customer Base . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 20 Historical Revenues .......................................................... 21 Impact Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 22 System Customers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 22 THE CITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 22 VERIFICATION OF MATHEMATICAL COMPUTATIONS ................................ 22 TAX EXEMPTION ................................................................. 23 LITIGATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 24 COVENANTS CONCERNING ONGOING DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 24 UNDERWRITING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 27 RATINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 27 LEGALITY ....................................................................... 27 EXCERPTS FROM COMPREHENSIVE ANNUAL REPORT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 27 MISCELLANEOUS ................................................................ 27 AUTHORIZATION OF OFFICIAL STATEMENT ........................................ 28 -1- APPENDIX A APPENDIX B APPENDIX C APPENDIX D APPENDIX E Statistical and Other General Information Concerning the City of Boynton Beach, Florida Excerpts from Comprehensive Annual Financial Report of the City for the Fiscal Year Ended September 30,2004 Summary of Certain Provisions of the Resolution Proposed Form of Opinion of Bond Counsel Specimen Financial Guaranty Insurance Policy -11- OFFICIAL STATEMENT $15,000,000* City of Boynton Beach, Florida Utility System Revenue Refunding Bonds, Series 2005 INTRODUCTION The purpose of this Official Statement, including the cover page and appendices, is to set forth certain information concerning the sale by the City of Boynton Beach, Florida (the "City") of its Utility System Revenue Refunding Bonds, Series 2005, in the aggregate principal amount of $15,000,000* (the "2005 Bonds"). The 2005 Bonds will be issued under and secured pursuant to Resolution No. 92-96 adopted by the City Commission of the City (the "City Commission") on June 16, 1992, as amended and supplemented, in particular by Resolution No. R05-_, adopted by the City Commission on August 2, 2005 (collectively, the "Resolution") and the Constitution and laws of the State of Florida, particularly Chapter 166, Florida Statutes and the Charter of the City. Copies of the Resolution are on file with the City at the office of the City Clerk, and reference thereto is hereby made for a complete understanding of the terms of and security for the 2005 Bonds, the custody and application of the proceeds of the 2005 Bonds, the rights and remedies of the holders of the 2005 Bonds and the rights, duties and obligations of the City. The 2005 Bonds will be issued on a parity with the City's outstanding Utility System Revenue Bonds, Series 1996 not refunded by the 2005 Bonds (the "Unrefunded 1996 Bonds"), the City's outstanding Utility System Revenue Refunding Bonds, Series 2002 (the "2002 Bonds") and any additional parity bonds issued pursuant to the Resolution (the "Additional Bonds"). The Unrefunded 1996 Bonds, the 2002 Bonds, the 2005 Bonds and any Additional Bonds are herein collectively referred to as the "Bonds." The 2005 Bonds will be limited obligations of the City and will be secured and payable solely from the Net Revenues (as hereinafter defined) derived by the City from the operation of its water, sewer and stormwater utility system (the "System "), certain Impact Fees (as hereinafter defined), and moneys and investments held in certain funds and accounts created by the Resolution (collectively, the "Pledged Revenues"). Neither the faith and credit nor the taxing power of the City, the State of Florida or any political subdivision thereof will be pledged to the payment of the principal of or interest on the 2005 Bonds. See "SECURITY FOR THE 2005 BONDS" herein. Ambac Assurance Corporation has issued its commitment to issue a financial guaranty insurance policy insuring the payment of the principal of and interest on the 2005 Bonds simultaneously with the delivery of the 2005 Bonds. See "FINANCIAL GUARANTY INSURANCE" herein. All capitalized terms in this Official Statement not otherwise defined herein shall ha ve the meanings set forth in Appendix C hereto, unless the context clearly indicates otherwise. PURPOSE OF THE 2005 BONDS The 2005 Bonds are being issued by the City for the principal purpose of providing funds, together with other available funds of the City, to defease prior to maturity the City's outstanding Utility System Revenue Bonds, Series 1996 maturing on and after November 1,2007 (the "Refunded Bonds"). *Preliminary, subject to change. A portion of the proceeds derived from the issuance of the 2005 Bonds, and certain other funds of the City, will be used for purpose of defeasing the Refunded Bonds. The City plans, upon funding of the hereinafter described Escrow Deposit Trust Fund, to irrevocably call the Refunded Bonds for redemption on November 1,2006 at a redemption price equal to 102% of the principal amount to be redeemed plus accrued interest to the redemption date. A portion of the proceeds derived from the sale of the 2005 Bonds, and other funds of the City, will be deposited into an irrevocable Escrow Deposit Trust Fund (the "Escrow Deposit Trust Fund") held by The Bank of New York Trust Company, N.A. (the "Escrow Agent") pursuant to an Escrow Deposit Agreement (the "Escrow Agreement") between the City and the Escrow Agent, in an amount sufficient, together with investment income thereon, to pay principal of, redemption premium and interest on the Refunded Bonds. Pending disbursement to pay the Refunded Bonds, amounts in the Escrow Deposit Trust Fund will either be held uninvested or will be invested in direct, noncallable United States Treasury Obligations. Upon the funding and, if applicable, investment, of the Escrow Deposit Trust Fund, in the opinion of Bond Counsel, rendered in reliance upon the verification report of Causey, Demgen & Moore Inc., independent certified public accountants, the lien of the Refunded Bonds on the Pledged Revenues will have been defeased and the Refunded Bonds will no longer be considered to be outstanding for purposes of the Resolution. DESCRIPTION OF THE 2005 BONDS General The 2005 Bonds will be issued in the aggregate principal amounts shown on the cover page hereof. The 2005 Bonds will be issued in fully registered form without coupons in principal denominations of$5,000 each or any integral multiple thereof, as described below under "Book -Entry-Only System." The 2005 Bonds will be dated the date of delivery, will bear interest at the rates per annum, computed on the basis of a 360-day year consisting of twelve thirty-day months, and will mature on the dates and in the amounts set forth on the cover page hereof. Interest on the 2005 Bonds will be payable on November 1, 2005, and semi-annually thereafter on May 1 and November 1 of each year. The Bank of New York Trust Company, N.A., will act as paying agent and Bond Registrar for the 2005 Bonds. Redemption Provisions for the 2005 Bonds Optional Redemption. The 2005 Bonds will not be subject to optional redemption prior to their stated maturities. Mandatory Redemption. The 2005 Bonds maturing on November 1, 20_ will be subject to mandatory redemption in part prior to their maturity date at a redemption price equal to the principal amount thereof, without premium, plus accrued interest to the redemption date, on November 1,20_ and on each November 1 thereafter in the years and principal amounts set forth below (except for the final installment due at maturity, which shall not be a redemption): Year Amount * Maturity. 2 Selection of 2005 Bonds for Redemption The City shall select the 2005 Bonds or portions thereof to be purchased or redeemed by lot. The City shall promptly notify the Bond Registrar in writing of the numbers of the 2005 Bonds so selected for redemption and in making such selection, each 2005 Bond shall be treated as representing that munber of 2005 Bonds of the lowest authorized denomination of2005 Bonds as is obtained by dividing the principal amount of such 2005 Bond by such denomination. Notice of Redemption At least thirty (30) and not more than sixty (60) days prior to the redemption date, a notice of such redemption: (i) shall be filed with the Bond Registrar and (ii) shall be mailed postage prepaid, to all registered owners of the 2005 Bonds to be redeemed at their addresses as they appear on the registration books maintained by the Bond Registrar, but failure of any bondholder to receive any such notice shall not affect the validity of the proceedings for such redemption, and any defect in the giving of such notice of redemption of any 2005 Bond shall not affect the validity of the redemption of any other 2005 Bond. Effect of Redemption On the date so designated for redemption, notice having been given in the manner and under the conditions provided in the Resolution, the 2005 Bonds so called for redemption shall become and be due and payable at the redemption price provided for redemption of such 2005 Bonds on such date, and, moneys for payment of the redemption price being held in separate accounts by the Finance Director or by the Bond Registrar in trust for the Holders of the 2005 Bonds to be redeemed, interest on the 2005 Bonds so called for redemption shall cease to accrue, such 2005 Bonds shall cease to be entitled to any lien, benefit or security under the Resolution, and the Holders or registered owners of such 2005 Bonds shall have no rights in respect thereof except to receive payment of the redemption price thereof and accrued interest thereon. Book-Entry Only System Unless the book-entry system described herein is terminated, as hereinafter described, The Depository Trust Company ("DTC"), New York, New York, will act as securities depository for the 2005 Bonds. The 2005 Bonds will be issued as fully registered securities registered in the name of Cede & Co. (DTC's partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully registered 2005 Bond certificate will be issued for each maturity of the 2005 Bonds, in the aggregate principal amount of such maturity, and will be deposited with DTC or with the Trustee on behalf ofDTC. DTC, the world's largest depository, is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code and "clearing agency" registered pursuant to the provisions of Section 17 A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 2 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues and money market instruments from over 85 countries that DTC's participants ("Direct Participants") deposit with DTC. DTC also facilitates the settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participant's accounts, thereby eliminating the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation 3 ("DTCC"). DTCC, in turn, is owned by a number of Direct Participants ofDTC and Members of the National Securities Clearing Corporation, Fixed Income Clearing Corporation and Emerging Markets Clearing Corporation, (NSCC, FICC and EMCC, also subsidiaries of DTCC), as well as by the New York Stock Exchange, Inc., the American Stock Exchange, LLC, and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, and trust companies that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). DTC has Standard and Poor's highest rating: AAA. The DTC rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com and www.dtc.org. Purchases of the 2005 Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the 2005 Bonds on DTC's records. The ownership interest of each actual purchaser of each 2005 Bond (a "Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase, but Beneficial Owners are expected to receive written confinnations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the 2005 Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the 2005 Bonds, except in the event that use of the book-entry system for the 2005 Bonds is discontinued. To facilitate subsequent transfers, all 2005 Bonds deposited by Participants with DTC are registered in the name ofDTC's partnership nominee, Cede & Co. The deposit of 2005 Bonds with DTC and their registration in the name of Cede & Co. effect no change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the 2005 Bonds; DTC's records reflect only the identity of the Direct Participants to whose accounts such 2005 Bonds are credited, which mayor may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of the 2005 Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the 2005 Bonds, such as redemptions, defaults and proposed amendments to Bond documents. Beneficial Owners of the 2005 Bonds may wish to ascertain that the nominee holding the 2005 Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. Redemption notices shall be sent only to Cede & Co. for so long as it is the registered owner of the 2005 Bonds. If less than all of the 2005 Bonds of a maturity are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such maturity issue to be redeemed. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the 2005 Bonds. Under its usual procedures, DTC mails an Omnibus Proxy to the City as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the 2005 Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). 4 Payments of principal, premium, if any, and interest on the 2005 Bonds will be made to Cede & Co. or such other nominee as may be requested by an authorized representative of DTC. DTC's practice is to credit Direct Participants' accounts on the payable date in accordance with their respective holdings shown on DTC's records, unless DTC has reason to believe that it will not receive payment on the payable date. Payments by Direct or Indirect Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name" and will be the responsibility of such Participant and not of DTC, the Paying Agent, or the City, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal, premimn, if any, and interest to DTC is the responsibility of the City or the Paying Agent, disbursement of such payments to Direct Participants shall be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners shall be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as securities depository with respect to the 2005 Bonds at any time by giving reasonable notice to the City. Under such circumstances, in the event that a successor securities depository is not obtained, 2005 Bond certificates are required to be printed and delivered. The City may decide to discontinue use of the system of book entry transfers through DTC (or a successor securities depository). In that event, if the City does not appoint a successor depository, 2005 Bond certificates will be printed and delivered. THE CITY, THE BOND REGISTRAR AND THE UNDERWRITER CANNOT AND DO NOT GIVE ANY ASSURANCES THAT DTC WILL DISTRIBUTE TO ITS PARTICIPANTS OR THAT DIRECT PARTICIPANTS OR INDIRECT PARTICIPANTS WILL DISTRIBUTE TO BENEFICIAL OWNERS OF THE 2005 BONDS (1) PAYMENTS OF THE PRINCIPAL OF OR INTEREST ON THE 2005 BONDS OR (2) REDEMPTION OR OTHER NOTICES, OR THAT THEY WILL DO SO ON A TIMELY BASIS, OR THAT DTC, DIRECT PARTICIPANTS OR INDIRECT PARTICIPANTS WILL SERVE AND ACT IN THE MANNER DESCRIBED IN THIS OFFICIAL STATEMENT. THE CURRENT "RULES" APPLICABLE TO DTC ARE ON FILE WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE CURRENT "PROCEDURES" OF DTC TO BE FOLLOWED IN DEALING WITH ITS PARTICIPANTS ARE ON FILE WITH DTC. Portions of the foregoing concerning DTC and DTC's book-entry system are based on information furnished by DTC to the City. No representation is made herein by the City or the Underwriter as to the accuracy or completeness of such information. In the event the system of book-entry ownership of the 2005 Bonds is discontinued, transfers and exchanges of the 2005 Bonds will be accomplished as described in Appendix C "Summary of Certain Provisions of the Resolution" hereto. SECURITY FOR THE 2005 BONDS General The principal of, premium, if any, and interest on the 2005 Bonds will be payable solely from and secured by a pledge ofthe Pledged Revenues, which include (i) Net Revenues of the System, (ii) to the extent hereinafter described, certain Impact Fees, and (iii) subject to the application thereof as provided in the Resolution, amounts in certain funds and accounts established under the Resolution. The lien of the 2005 5 Bonds on the Pledged Revenues will be on a parity with the Unrefunded 1996 Bonds, the 2002 Bonds and any Additional Bonds issued under the Resolution. THE BONDS DO NOT AND WILL NOT CONSTITUTE A GENERAL OBLIGATION, DEBT OR LIABILITY OF THE CITY OR THE STATE OF FLORIDA OR ANY POLITICAL SUBDIVISION, AGENCY OR INSTRUMENTALITY OF THE CITY OR THE STATE OF FLORIDA WITHIN THE MEANING OF THE FLORIDA CONSTITUTION, AND NEITHER THE FULL FAITH AND CREDIT NOR THE TAXING POWER OF THE CITY, THE STATE OF FLORIDA, OR ANY POLITICAL SUBDIVISION THEREOF, IS OR WILL BE PLEDGED OR OBLIGATED AS SECURITY FOR THE PAYMENT OF THE PRINCIPAL OF OR INTEREST ON ANY BONDS. THE BONDS ARE AND WILL BE LIMITED OBLIGATIONS OF THE CITY AND THE HOLDERS OF THE BONDS SHALL HAVE NO RIGHT TO REQUIRE THE IMPOSITION OF ANY TAX OR THE ESTABLISHMENT OF ANY RATE OF TAXATION FOR THE PAYMENT OF THE PRINCIPAL OF OR INTEREST ON ANY BONDS. Definitions "Pledged Revenues" means (i) Net Revenues, (ii) to the extent provided in the Resolution, hnpact Fees (see"The System-Impact Fees" for further information) and (iii) to the extent provided in the Resolution, other amounts in certain funds and accounts created by the Resolution. "N et Revenues" means for any particular period the amount of excess of the Revenues for such period over the Current Expenses payable from the Revenue Account for such period, provided that for purposes of determining whether or not the City can meet debt service coverage requirements with respect to the issuance of Additional Bonds or determining whether or not the City has met its rate covenant, the term "Net Revenues" shall not include Revenues deposited in the Rate Stabilization Account. "Revenues" means all moneys received by the City in connection with or as a result of its ownership or operation of the System, including any income derived from the sale of water produced, treated or distributed by the System, or the collection, transmission, treatment or disposal of sewage or stormwater runoff by the System, any proceeds of use and occupancy insurance on the System or any part thereof, payments made to the City under Interest Rate Swaps, income from investment of money held under the Resolution and amounts transferred from the Rate Stabilization Account to the Revenue Account pursuant to the Resolution and any Assessments; but excluding (i) Impact Fees, (ii) special assessments other than any Assessments, (iii) grants, contributions or donations, (iv) income from the investment of moneys in the Construction Fund and the Impact Fee Account, (v) proceeds of insurance (except use and occupancy insurance) and condemnation awards, (vi) money held in any Arbitrage Rebate Fund, (vii) proceeds of sales of property constituting a part of the System or (viii) the proceeds of Bonds or other Utility Debt. "Current Expenses" means the City's reasonable and necessary current expenses of maintenance, repair and operation of the System, (a) including all ordinary and usual expenses of maintenance and repair, which may include expenses not annually recurring, all reasonable City administrative expenses allocated to the System pursuant to the Annual Budget, any reasonable payments to pension or retirement funds properly chargeable to the System, insurance premiums, engineering expenses relating to maintenance, repair and operation, expenses, including engineering expenses incurred in connection with the research and development of improvements or planned or possible improvements to the System, fees and expenses of the Bond Registrar, legal and accounting expenses, any fees, fmes, or penalties lawfully imposed on the System, any taxes which may be lawfully imposed on the System or its income or operations and reserves for such taxes or payments in lieu of such taxes as the Commission shall determine to pay, premiums for bond insurance, interest rate insurance or insurance assuring availability ofthe amounts required to be on deposit in the Reserve Account, fees for Credit Facilities or Liquidity Facilities, initial fees paid by the City to a 6 party in consideration of the execution of an Interest Rate Swap (as opposed to payments made by the City based upon the notional amount pursuant to the Interest Rate Swap) and any other expenses required to be paid by the City under the provisions of the Resolution or by law, including any amounts required from time to time to fund the Arbitrage Rebate Fund, (b) but Current Expenses shall not include any reserves for extraordinary maintenance or repair, or any allowance for depreciation or amortization, or any deposits or transfers to the credit of the Sinking Fund Account, the Reserve Account, the Rate Stabilization Account, the Subordinated Indebtedness Account, the Renewal, Replacement and Improvement Account, the General Reserve Account or the Impact Fee Account, and shall not include, for purposes of determining whether or not the City has met its rate covenant, or determining whether or not the City can meet the debt service coverage requirement with respect to the issuance of Additional Bonds, any City administrative expenses allocated to the System. "Impact Fees" means all non-refundable (except at the option ofthe City) capital recovery charges, pollution control fees, capacity charges and other similar fees and charges separately imposed by the City as a nonuser capacity charge for the proportionate share of the cost of expanding, oversizing, separating or constructing Improvements to the System and any investment earnings from the investment of funds on deposit in the Impact Fee Account, but excluding those charges imposed by the City on persons connecting to the System for the cost of physically connecting thereto, including but not limited to the costs of excavation, plumbing, installation of meters and landscaping. Rate Covenant The City has covenanted under the Resolution to fix, charge and collect reasonable rates and charges for the use of the services and facilities furnished by the System and that from time to time, and as often as it shall appear necessary, to adjust such rates and charges by increasing or decreasing the same or any selected categories of rates and charges so that the Net Revenues will be sufficient to provide an amount in each Fiscal Year at least equal to one hundred ten per centum (110%) of the Principal and Interest Requirements for such Fiscal Year on account of the Bonds then Outstanding and one hundred per centum (100%) of all amounts required to be deposited to the Reserve Account and the Renewal, Replacement and Improvement Account. The City has further covenanted under the Resolution that ifin any Fiscal Year the Net Revenues shall be less than the amount required under the preceding paragraph, within 30 days of the receipt of the audit report for such Fiscal Year, the City shall employ a Rate Consultant to review and analyze the financial status of the System, to inspect the System and to submit, within 60 days thereafter, a written report to the City recommending revisions of the rates, fees and charges of the System and the methods of operation of the System that will result in producing the amount so required in the following Fiscal Year. Promptly upon its receipt of such recommendations, the City shall transmit copies thereof to the City Manager and shall revise its rates, fees and charges, or alter its methods of operation and take such other action as shall conform with such recommendations. If the City shall fail to comply with the recommendations of the Rate Consultant, the registered owners of not less than ten per centum (10%) in principal amount of all Bonds then Outstanding may institute and prosecute an action or proceeding in any court or before any board or commission having jurisdiction to compel the City to comply with the recommendations and the requirements of the Rate Consultant. If the City shall comply with all recommendations of the Rate Consultant in respect to its rates, fees, charges and methods of operation, the failure of Net Revenues to meet the above described requirements shall not constitute an Event of Default so long as the Revenues, together with available moneys in the funds and accounts under the Resolution, are sufficient to pay in cash the Current Expenses and to pay the Principal 7 and Interest Requirements on all Outstanding Bonds and other Utility Debt, except any Subordinated Indebtedness, for such Fiscal Year. Reserve Account General. The Resolution provides for the establishment and maintenance of a Reserve Account, and separate subaccounts within the Reserve Account for each Series of Bonds issued pursuant to the Resolution, in an amount (i) with respect to the 2005 Bonds, equal to the lesser of (a) 10% of the aggregate stated principal amount of the 2005 Bonds Outstanding, (b) the maximum amount of principal and interest scheduled to become due on the 2005 Bonds in the current or any succeeding Bond Year, or (c) 125% ofthe average annual debt service on the Outstanding 2005 Bonds (calculated on a Bond Year basis at the time of issuance only) and (ii) with respect to any Series of Additional Bonds, such funding requirement for the Reserve Account, if any, as shall be established in the Series Resolution for such Series of Additional Bonds (the "Reserve Account Requirement"). Moneys held for the credit of each subaccount in the Reserve Account shall be used for the payment of the interest on, the principal of and the Amortization Requirements for the Bonds for which such subaccount was established whenever and to the extent that moneys held for the credit of the Bond Service Subaccount or the Redemption Subaccount in respect of such Bonds shall be insufficient for such purpose. If at any time the moneys held for the credit of any such subaccount in the Reserve Account shall exceed the Reserve Account Requirement for the Series for which such subaccount in the Reserve Account was established, such excess shall be withdrawn and deposited to the credit ofthe Revenue Account. In lieu of the required deposit into the Series 2005 Reserve Subaccount, the City may, with the consent of any applicable issuer of a Credit Facility or Liquidity Facility then in effect, cause to be deposited into the Series 2005 Reserve Subaccount a Reserve Account Insurance Policy or Reserve Account Letter of Credit for the benefit of the Holders of the 2005 Bonds either in substitution for the full amount then on deposit therein, or in an amount equal to the difference between the amount required to be deposited in the Series 2005 Reserve Subaccount and the smn, if any, then on deposit in the Series 2005 Reserve Subaccount, which Reserve Account Insurance Policy or Reserve Account Letter of Credit shall be payable (upon the giving of notice as required thereunder) on any interest payment date on which a deficiency exists for the 2005 Bonds, which cannot be cured by moneys in any other fund or account held pursuant to the Resolution and available for such purpose. To the extent required by the issuer of a Reserve Account Insurance Policy or Reserve Account Letter of Credit, the City may enter into an agreement or agreements with a Depositary for the purpose of depositing such Reserve Account Insurance Policy or Reserve Account Letter of Credit with such Depositary and providing for utilization of proceeds of the Reserve Account Insurance Policy or Reserve Account Letter of Credit as provided in the Resolution. If any such Reserve Account Insurance Policy or Reserve Account Letter of Credit is substituted for moneys on deposit in the Series 2005 Reserve Subaccount, the excess moneys in the Series 2005 Reserve Subaccount shall be applied to satisfy any such deficiency in any of the funds or accounts under the Resolution, and any remaining balance shall be deposited in the General Reserve Account. The City has received a commitment from Ambac Assurance Corporation for the issuance of a Reserve Account Insurance Policy in connection with the 2005 Bonds, and expects that upon issuance of the 2005 Bonds the Reserve Account Requirement for the 2005 Bonds will be satisfied by the issuance of such Reserve Account Insurance Policy. See "Ambac Assurance Surety Bond" below for further information. Ambac Assurance Surety Bond. In connection with the issuance of the 2005 Bonds, the City will purchase a Reserve Account Insurance Policy in the form of a surety bond issued by Ambac Assurance for the purpose of providing coverage equal to the Reserve Account Requirement for the 2005 Bonds (herein, the" 2005Reserve Account Surety Bond"), which will be obtained by the City in lieu of any moneys required to be deposited in the subaccount within the Series 2005 Reserve Subaccount relating to the 2005 Bonds, in 8 an amount equal to the Reserve Account Requirement for the 2005 Bonds. The 2005 Bonds will only be delivered upon the issuance of the 2005 Reserve Account Surety Bond. The premium on the 2005 Reserve Account Surety Bond is to be fully paid at or prior to the issuance and delivery of the 2005 Bonds. The 2005 Reserve ACCOlU1t Surety Bond provides that upon the later of (i) one (1) day after receipt by Ambac Assurance of a demand for payment executed by the Bond Registrar certifying that provision for the payment of principal of or interest on the 2005 Bonds, when due has not been made or (ii) the interest payment date specified in the Demand for Payment submitted to Ambac Assurance, Ambac Assurance will promptly deposit funds with the Bond Registrar sufficient to enable the Bond Registrar to make such payments due on the 2005 Bonds, but in no event exceeding the Surety Bond Coverage, as defined in the 2005 Reserve Account Surety Bond. Pursuant to the terms of the 2005 Reserve Account Surety Bond, the Surety Bond Coverage is automatically reduced to the extent of each payment made by Ambac Assurance under the terms ofthe 2005 Reserve Account Surety Bond and the City is required to reimburse Ambac Assurance for any draws under the 2005 Reserve Account Surety Bond with interest at a market rate. Upon such reimbursement, the 2005 Reserve Account Surety Bond is reinstated to the extent of each principal reimbursement up to but not exceeding the Surety Bond Coverage. The reimbursement obligation of the City is subordinate to the City's obligations with respect to the Bonds. In the event that a portion of the Series 2005 Reserve Subaccount is funded with cash, any draw on the 2005 Reserve Account Surety Bond shall be made only after all cash in such subaccount is utilized. In the event that the amount on deposit in, or credited to, the Series 2005 Reserve Subaccount, in addition to the amount available under the 2005 Reserve Account Surety Bond, includes another Reserve Account Insurance Policy or Reserve Account Letter of Credit (the "Additional Funding Instrument"), draws on the 2005 Reserve Account Surety Bond and the Additional Funding Instrument shall be made on a pro rata basis to fund the insufficiency. The Resolution provides that the 2005 Reserve Subaccount shall be replenished in the following priority: (i) principal and interest on the 2005 Reserve Account Surety Bond and on any other Additional Funding Instrument shall be paid from first available Net Revenues on a pro rata basis; (ii) after all such amounts are paid in full, amounts necessary to fund the 2005 Reserve Subaccount to the required level, after taking into account the amounts available under the 2005 Reserve Account Surety Bond and any Additional Funding Instrument shall be deposited from the next available Net Revenues. The 2005 Reserve Account Surety Bond does not insure against nonpayment caused by the insolvency or negligence of the Bond Registrar. The insurance provided by the 2005 Reserve Account Surety Bond is not covered by the Florida Insurance Guaranty Association. See "FINANCIAL GUARANTY INSURANCE" below for information regarding Ambac Assurance. Flow of Funds Revenues will be collected by the City and deposited as received with a Depositary or Depositaries to the credit of the Revenue Account. All moneys in the Revenue Account shall be held by the City in trust and applied as follows: On or before the 20th day of each month, except as provided hereafter, the City shall withdraw an amount equal to the balance remaining in the Revenue Account, less an amount (to be held for the payment of Current Expenses) equal to the amount shown by the Annual Budget to be necessary for Current Expenses during the next two (2) ensuing months, and deposit the sum so withdrawn in the following order: 9 (a) to the credit of the Bond Service Subaccount of the Sinking Fund Account, an amount, together with any amount concurrently deposited therein from the Impact Fee Account, equal to one-sixth (1I6th) of the amount of interest payable on the Bonds of each Series on the next succeeding Interest Payment Date and equal to one-twelfth (1/12th) or, if principal is payable semi-annually, one-sixth (1/6th), of the next maturing installment of principal on all Serial Bonds then outstanding; provided, however, that in each month intervening between the date of delivery of the 2005 Bonds, any Additional Bonds or any Refunding Bonds (beginning with the month following the month in which such delivery takes place) and the next succeeding Interest Payment Date and the next succeeding principal payment date, respectively, the amount specified in this subparagraph shall be that amount which when multiplied by the number of deposits to the credit of the Bond Service Subaccount required to be made during such respective periods as provided above will equal the amounts required (in addition to any amounts received as accrued interest or capitalized interest from the proceeds of such Bonds) for such next succeeding interest payment and next maturing installment of principal, respectively; and provided further that on or before the 15th day ofthe month preceding any Interest Payment Date or maturity date of Bonds, the required deposit to the Bond Service Subaccount shall be the amount necessary, together with other amounts on deposit in such Subaccount, to provide for the interest and principal coming due on such Interest Payment Date or maturity date; (b) to the credit of the Redemption Subaccount of the Sinking Fund Account, an amount, together with any amount concurrently deposited therein from the Impact Fee Account, equal to one-twelfth (l/12th) or, if any Bonds are required to be retired semi-annually in satisfaction of the Amortization Requirements therefor, one-sixth (1I6th), of the principal amount of Term Bonds of each Series then outstanding required to be retired, in satisfaction of the Amortization Requirements, if any, for such Fiscal Year; provided that on or before the 20th day of the month preceding the due date of any Amortization Requirement, the required deposit to the Redemption Subaccount shall be the amount necessary, together with other amounts on deposit therein, to provide for such Amortization Requirement; (c) to the credit of the Reserve Account and the subaccounts therein, such amount, if any, of any balance remaining after making the deposit described in clauses ( a) and (b) above (or the entire balance if less than the required amount) which will be required to make the amount deposited to the credit of the Reserve Account and the subaccounts therein in such month equal to the Reserve Account Deposit Requirement for all Bonds for such month. In the event the amount available to be deposited in the Reserve Account at any time is less than the Reserve Account Deposit Requirement for all Bonds at such time, the amount available shall be allocated among the various subaccounts having a Reserve Account Deposit Requirement pro rata, based upon the proportion that the Reserve Account Deposit Requirement for each subaccount bears to the total Reserve Account Deposit Requirements for all subaccounts; (d) to the credit of the Renewal, Replacement and Improvement Account, such amount, if any, of any balance remaining after making the deposits described in clauses (a), (b) and (c) above (or the entire balance if less than the required amount) as may be required to make the amount deposited in such month to the credit of the Renewal, Replacement and Improvement Account equal to one-twelfth (l/12th) of the difference between any lesser amount on deposit therein and the Renewal, Replacement and Improvement Account Requirement for such Fiscal Year; (e) to the credit of the Rate Stabilization Account, such amounts as shall be determined from time to time by the Commission for crediting thereto; (f) to the credit of any Arbitrage Rebate Fund, such amount as shall be determined from time to time by the Commission for crediting thereto; 10 (g) to the credit of the Subordinated Indebtedness Account, an amount, if any, of any balance remaining after making the deposits under clauses ( a) through (f) above (or the entire balance ifless than the required amount) equal to the sum of one-twelfth (l/12th) of the principal of, redemption premium, if any, and interest coming due on any Subordinated Indebtedness during the next succeeding twelve month period and the amount, if any, required to be deposited in any special reserve subaccount established within the Subordinated Indebtedness Account as provided in the Resolution; and (h) to the credit of the General Reserve Account, the balance, if any, remaining after making the deposits described in clauses (a) through (g) above. If the amount deposited in any month to the credit of any of the Accounts mentioned in (a) through (h), inclusive, above shall be less than the amount required to be deposited therein under the Resolution, the requirement therefor shall nevertheless be cumulative and the amount of any deficiency in any month shall be added to the amount otherwise required to be deposited in each month thereafter until such time as all such deficiencies have been made up. General Reserve Account The General Reserve shall be disbursed as follows: (a) to pay the Cost ofImprovements; (b) to purchase or redeem Bonds; (c) to make up deficiencies in any of the accounts and funds created by the Resolution; (d) to pay the Cost of any item qualifying as an authorized expenditure from the Renewal, Replacement and Improvement Account; (e) to make payments required under Interest Rate Swap agreements; and (f) for any lawful use ofthe City as directed by the City Commission. Issuance of Additional Bonds The City may issue Additional Bonds under and secured by the Resolution, on a parity as to the pledge of the Pledged Revenues with any other Bonds then Outstanding, provided that there shall be filed with the City a written statement or report, with respect to such Additional Bonds being issued to provide funds to pay the Cost of a Project, described in either (i) or (ii) below, or, with respect to Additional Bonds issued to pay debt service on Utility Debt, described in (ii) below: (i) prepared by the Consulting Engineers and demonstrating that the percentage derived by dividing the Net Revenues projected for the System, based upon assumptions approved in writing by each issuer of a Credit Facility after an opportunity to review and comment on such statement or report, for the Fiscal Year following the Fiscal Year in which the Completion Date of the Improvements to be financed by the Additional Bonds then to be delivered is expected to occur, as such Completion Date is established by the Consulting Engineers, adjusted as provided below, by the Maximum Principal and mterest Requirements, including the Principal and Interest Requirements with respect to the Additional Bonds then to be delivered, for any future Fiscal Year is not less than one hundred ten per centum (llO%) or (ii) prepared by the Consulting Engineers, the Finance Director, the Accountant or the Rate Consultant and demonstrating that the percentage derived by dividing the Net Revenues for any period of twelve consecutive months selected by the City out of the twenty four months preceding the 11 delivery of such written statement or report, by the Maximum Principal and Interest Requirements, including the Principal and Interest Requirements with respect to the Additional Bonds then to be delivered, for any future Fiscal Year is not less than one hundred ten per centum (110%), provided, that for purposes of this clause (ii), Net Revenues consisting of Impact Fees and amounts transferred from the Rate Stabilization Account shall not account for more than 10% of the total Net Revenues. The period during which Net Revenues are determined is referred to as the "Measurement Period". In calculating Net Revenues for purposes of the preceding paragraph, the following adjustments to Net Revenues may be made: (1) If the City, prior to the issuance ofthe proposed Additional Bonds, shall have increased the rates, fees, rentals or other charges for the services of the System, the Net Revenues for the Measurement Period may be adjusted to show the Net Revenues which would have been derived from the System in such Measurement Period as if such increased rates, fees, rentals or other charges for the services of the System had been in effect during all of such Measurement Period. (2) If the City shall have acquired or has contracted to acquire any privately or publicly owned existing water system, sewer system or stormwater system, then the Net Revenues derived from the System during the Measurement Period may be increased by addition to the Net Revenues for the Measurement Period of the Net Revenues which would have been derived from said existing water system, sewer system or stormwater system if such existing water system, sewer system or stormwater system had been a part of the System during the Measurement Period. For the purposes of this paragraph, the Net Revenues derived from said existing water system, sewer system or stormwater system during the Measurement Period shall be adjusted by deducting the cost of operation and maintenance of said existing water system, sewer system or stormwater system from the gross revenues of said existing water system, sewer system or stormwater system in the same manner provided in the Resolution for the determination of Net Revenues, and adjusted in each case to reflect municipal ownership of such system. (3) If the City, in connection with the issuance of Additional Bonds, shall enter into a contract (with a duration not less than the final maturity of such Additional Bonds) with any public or private entity whereby the City agrees to furnish services in connection with any water system, sewer system or stormwater system, then the Net Revenues of the System during the Measurement Period may be increased by the least amount which said public or private entity shall guarantee to pay in anyone year for the furnishing of said services by the City, after deducting therefrom the proportion of operating expenses and repair, renewal and replacement cost attributable in such year to such services. Such payments shall be deemed to be Net Revenues of the System and pledged for the Bonds in the same manner as other Net Revenues of the System. (4) If the City covenants to levy Assessments or Impact Fees against property to be benefitted by the Improvements (which levy will be done in accordance with State law), the cost of which shall be paid from the proceeds of the proposed Additional Bonds and if in the case of Impact Fees, such Impact Fees are legally available for application with respect to such Additional Bonds as permitted under the Resolution, then the Net Revenues during the Measurement Period may be increased by an amount equal to one hundred per centum (100%) of the amount which the Consulting Engineer estimates will be received in each year from the levy of said Assessments or Impact Fees, as the case may be, within three years of the date of the sale of such Additional Bonds, said amount to be the total received from the installment payments on the Assessments or Impact Fees, as the case may be, plus, in the case of Assessments, any interest paid on the unpaid portion of the Assessments. In the case of Assessments, the estimate of the Consulting Engineer shall be based upon the preliminary assessment roll filed with the City prior to the construction of such Improvements. 12 (5) Should the City be constructing or acquiring additions, extensions or Improvements to the System from the proceeds of such Additional Bonds and if the City shall have established rates, fees, rentals or other charges to be charged and collected from users of such facilities when service is rendered, the Net Revenues for the Measurement Period may be adjusted to show the Net Revenues estimated by the Consulting Engineers or the Rate Consultant to be received from the users of the facilities to be financed, during the first full Fiscal Year of operation after completion of the construction or acquisition of said additions, extensions and improvements as if such rates, fees, rentals or other charges for such services had been in effect during all of such Fiscal Year. FINANCIAL GUARANTY INSURANCE General Ambac Assurance Corporation has issued its commitment to issue a financial guaranty insurance policy (the "Financial Guaranty Insurance Policy") insuring the payment of the principal of and interest on the 2005 Bonds simultaneously with the delivery of the 2005 Bonds. The following information has been furnished by Ambac Assurance Corporation ("Ambac Assurance" or the "Insurer") for use in this Official Statement. Reference is made to Appendix E for a specimen ofthe Insurer's policy. Payment Pursuant to Financial Guaranty Insurance Policy Ambac Assurance has made a commitment to issue the Financial Guaranty Insurance Policy relating to the 2005 Bonds effective as of the date of issuance of the 2005 Bonds. Under the terms ofthe Financial Guaranty Insurance Policy, Ambac Assurance will pay to The Bank of New York, New York, New York or any successor thereto (the "Insurance Trustee") that portion ofthe principal of and interest on the 2005 Bonds which shall become Due for Payment but shall be unpaid by reason of Nonpayment by the District (as such terms are defined in the Financial Guaranty Insurance Policy). Ambac Assurance will make such payments to the Insurance Trustee on the later of the date on which such principal and interest becomes Due for Payment or within one business day following the date on which Ambac Assurance shall have received notice of Nonpayment from the Bond Registrar and Paying Agent. The insurance will extend for the term of the 2005 Bonds and, once issued, cannot be canceled by Ambac Assurance. The Financial Guaranty Insurance Policy will insure payment only on stated maturity dates and on mandatory sinking fund installment dates, in the case of principal, and on stated dates for payment, in the case of interest. If the 2005 Bonds become subject to mandatory redemption and insufficient funds are available for redemption of all outstanding 2005 Bonds, Ambac Assurance will remain obligated to pay principal of and interest on outstanding 2005 Bonds on the originally scheduled interest and principal payment dates including mandatory sinking fund redemption dates. In the event of any acceleration of the principal of the 2005 Bonds, the insured payments will be made at such times and in such amounts as would have been made had there not been an acceleration. In the event the Bond Registrar has notice that any payment of principal of or interest on a 2005 Bond which has become Due for Payment and which is made to a 2005 Bondholder by or on behalf of the City has been deemed a preferential transfer and theretofore recovered from its registered owner pursuant to the United States Bankruptcy Code in accordance with a final, nonappealable order of a court of competent jurisdiction, such registered owner will be entitled to payment from Ambac Assurance to the extent of such recovery if sufficient funds are not otherwise available. 13 The Financial Guaranty Insurance Policy does not insure any risk other than Nonpayment, as defined in the Financial Guaranty Insurance Policy. Specifically, the Financial Guaranty Insurance Policy does not cover: I. payment on acceleration, as a result of a call for redemption (other than mandatory sinking fund redemption) or as a result of any other advancement of maturity. 2. payment of any redemption, prepayment or acceleration premium. 3. nonpayment of principal or interest caused by the insolvency or negligence of any trustee, if any, the Bond Registrar or Paying Agent. If it becomes necessary to call upon the Financial Guaranty Insurance Policy, payment of principal requires surrender of 2005 Bonds to the Insurance Trustee together with an appropriate instrument of assignment so as to permit ownership of such 2005 Bonds to be registered in the name of Ambac Assurance to the extent of the payment under the Financial Guaranty Insurance Policy. Payment of interest pursuant to the Financial Guaranty Insurance Policy requires proof of2005 Bondholder entitlement to interest payments and an appropriate assignment of the 2005 Bondholder's right to payment to Ambac Assurance. Upon payment of the insurance benefits, Ambac Assurance will become the owner of the 2005 Bonds, appurtenant coupon, if any, or right to payment of principal or interest on such 2005 Bonds and will be fully subrogated to the surrendering Bondholder's rights to payment. The insurance provided by the Financial Guaranty Insurance Policy is not covered by the Florida Insurance Guaranty Association. Ambac Assurance Corporation Ambac Assurance is a Wisconsin-domiciled stock insurance corporation regulated by the Office of the Commissioner ofInsurance of the State of Wisconsin and licensed to do business in 50 states, the District of Columbia, the Territory of Guam, the Commonwealth of Puerto Rico, and the U.S. Virgin Islands, with admitted assets of approximately $8,585,000,000 (unaudited) and statutory capital of approximately $5,251,000,000 (unaudited) as of March 31, 2005. Statutory capital consists of Ambac Assurance's policyholders' surplus and statutory contingency reserve. Standard & Poor's Credit Markets Services, a division of The McGraw-Hill Companies, Inc., Moody's Investors Service and Fitch Ratings have each assigned a triple-A financial strength rating to Ambac Assurance. Ambac Assurance has obtained a ruling from the Internal Revenue Service to the effect that the insuring of an obligation by Ambac Assurance will not affect the treatment for federal income tax purposes of interest on such obligation and that insurance proceeds representing maturing interest paid by Ambac Assurance under policy provisions substantially identical to those contained in its Financial Guaranty Insurance Policy shall be treated for federal income tax purposes in the same manner as if such payments were made by the Issuer of the 2005 Bonds. Ambac Assurance makes no representation regarding the 2005 Bonds or the advisability of investing in the 2005 Bonds and makes no representation regarding, nor has it participated in the preparation of, this Official Statement other than the information supplied by Ambac Assurance and presented under the headings and "FINANCIAL GUARANTY INSURANCE" and "SECURITY FOR THE 2005 BONDS- RESERVE ACCOUNT- AMBAC ASSURANCE SURETY BOND" herein. 14 Available Information The parent company of Ambac Assurance, Ambac Financial Group, Inc. (the "Company"), is subject to the informational requirements ofthe Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files reports, proxy statements and other information with the Securities and Exchange Commission (the "SEC"). These reports, proxy statements and other information can be read and copied at the SEC's public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. The SEC maintains an internet site at http://www.sec.gov that contains reports, proxy and information statements and other information regarding companies that file electronically with the SEC, including the Company. These reports, proxy statements and other information can also be read at the offices of the New York Stock Exchange, Inc. (the "NYSE") at 20 Broad Street, New York, New York 10005. Copies of Ambac Assurance's financial statements prepared in accordance with statutory accounting standards are available from Ambac Assurance. The address of Ambac Assurance's administrative offices and its telephone number are One State Street Plaza, 19th Floor, New York, New York, 10004 and (212) 668- 0340. Incorporation of Certain Documents by Reference The following documents filed by the Company with the Commission (File No. 1-10777) are incorporated by reference in this Official Statement: I. The Company's Annual Report on Form 1 O-K for the fiscal year ended December 31, 2004 and filed on March 15, 2005; 2. The Company's Current Report on Form 8-K dated April 5,2005 and filed on April 11 , 2005; 3. The Company's Current Report on Form 8-K dated and filed on April 20, 2005; 4. The Company's Current Report on Form 8-K dated May 3,2005 and filed on May 5,2005; 5. The Company's Quarterly Report on Form IO-Q for the fiscal quarterly period ended March 31,2005 and filed on May 10, 2005. All documents subsequently filed by the Company pursuant to the requirements of the Exchange Act after the date of this Official Statement will be available for inspection in the same manner as described above under the heading "Available Information." 15 ESTIMATED SOURCES AND USES OF FUNDS SOURCES OF FUNDS: Principal Amount of 2005 Bonds Net Original Issue Premium/Discount Available City Funds (I) TOTAL SOURCES: USES OF FUNDS: Deposit to Escrow Deposit Trust Fund Costs of Issuance(2) TOTAL USES: (I) Consists of amounts transferred from 1996 Reserve Subaccount and Bond Service Subaccount under the Resolution. Includes, among other things, underwriter's discount, counsel fees, registrar fees and bond insurance and reserve surety premiums. (2) 16 DEBT SERVICE REQUIREMENTS The following table sets forth the debt service requirements for the outstanding 2002 Bonds and the 2005 Bonds: Total Debt Service Total Bond Year on Outstanding Annual ending 1996 and 2002 2005 Bonds 2005 Bonds Debt Service November 1 Bonds Principal Interest on Bonds 2006 $2,573,482.50 2007 3,813,835.00 2008 1,417,400.00 2009 1,416,650.00 2010 1,415,650.00 2011 1,414,400.00 2012 1,417,900.00 2013 3,670,900.00 2014 3,676,900.00 2015 3,670,643.76 2016 3,672,400.00 2017 3,672,850.00 2018 3,669,775.00 2019 3,672,900.00 2020 3,671,400.00 TOTAL $ $ $ $ (1) Based on Net Revenues for Fiscal Year ended September 30, 2004. THE SYSTEM General The City provides water and wastewater services to a geographic area within Palm Beach County about twice the size of the City itself. The City's water system includes facilities for raw water supply, water treatment and water distribution. The City's wastewater system includes sewage collection and transmission. The City also provides stormwater services within the City limits for all City-owned roadways, facilities and canals. Service Area The System serves the City, the Town of Briny Breezes, a portion of the Town of Hypoluxo and several unincorporated areas of Palm Beach County. The Town of Ocean Ridge, which is geographically within the City's service area is also served by the City's water system, but has no sanitary sewers and relies on a combination of septic tanks and small neighborhood package plants for wastewater treatment. The City also provides wastewater collection service to the Village of Golf, but provides no water service. The City 17 may extend its boundaries in the future through annexation of unincorporated areas of Palm Beach County, which primarily lie to the west of existing City limits. Because most of the areas that may be annexed are already encompassed by the water and wastewater service areas and connected to the water and wastewater systems, annexation is not expected to have a significant effect on water and wastewater service demands, even though the 25% rate surcharge currently imposed by the City with respect to service provided outside the City limits would no longer apply to areas annexed by the City. Storm water services is limited strictly to the area within the City limits. Condition of the Overall System and System Performance The City believes that the production, transmission, distribution, treatment and collection facilities of the System are in good condition, well operated and maintained in accordance with usual utility practice and can reasonably be expected to provide adequate and reliable service to meet the existing requirements of the System In addition, the City believes that plant staffing is at a reasonable level and that staff is receiving adequate training for operation of the System. Administration The Cityts Water and Sewer Utilities Department is divided administratively into ten divisions, consisting of an administrative division and nine operating divisions. The Department is responsible for the operation and maintenance of the water supply, treatment, distribution and storage facilities, wastewater collection, pumping and transmission and stormwater system operations. Wastewater treatment facilities are operated and maintained under the South Central Regional Wastewater Treatment and Disposal Board. The Department operates its own billing system, with revenue collections handled by the Cityts Finance Department. Water System The water system operated by the City consists of groundwater withdrawal, treatment, transmission, storage, distribution, administration, and operations. Treatment Plants and Well Fields. The City has two water treatment plants. One plant, known as the East Water Treatment Plant (the "East WTP"), is capable of operating at a maximum daily rate of 12.00 MGD. The East WTP treats the surficial groundwater withdrawn from the East Well Field. The plant's facilities are capable of treating 20.5 MGD, but the plant's rating is limited to 12.00 MGD because of limited raw water supply. The City's water system uses groundwater withdrawn from the surficial aquifer to supply water to its treatment system. Currently, only the East Well Field, which comprises 19 active production wells, is used to supply water to the East WTP. The City also operates one aquifer storage and recovery (ASR) well at the East WTP, and is constructing a second ASR well, to store surplus water in the upper Florida aquifer. The other treatment plant, known as the "West Water Treatment Plant" (the "West WTP") provides 8.5 MGD of finished water through the use of a nannofiltration membrane process, with up to 1.6 MGD additional available by blending filtered water with the finished nannofiltration product. The City has also begun design for an expansion of the West WTP to increase capacity. As part of this expansion, equipment for three new raw water wells has been added. 18 Water supply for the West WTP comes from the West Well Field immediately west of the West WTP. The West Well Field includes ten wells. Only seven of the wells are needed for the 8 MGD capacity of the West WTP. As the West WTP expands beyond its current capacity, the remainder of the wells in the West Well Field will be utilized. Water Distribution and Storage. The water distribution system covers the entire water service area. Approximately 280 miles of piping comprise the system, ranging in size from 2 inches to 42 inches in diameter. The storage capacity within the system includes one 1.5-MG elevated storage tank, a 1.4-MG clear well at the East WTP, a 1.0-MG and two 3.0-MG ground storage tanks. The 1.5 MG elevated storage tank is located immediately south of the East WTP. Regulatory Framework and Compliance. The City operates the water system in such a manner that all local, state and federal regulations are met. The City believes that the System will be able to meet all existing and currently proposed regulatory standards. The groundwater supply is regulated by the South Florida Water Management District ("SFWMD") which regulates the withdrawal of water from the City's well fields. The City does not anticipate any inability to legally obtain sufficient water with which to satisfy demand for the foreseeable future, although drought conditions occur in the geographical area within which the City is located periodically, and one way in which SFWMD protects the water supply in such conditions is by limiting the amount of water municipalities may withdraw. When such limitations are imposed, the City in turn takes steps to reduce water usage, such as through public awareness campaigns and by imposing limitations on irrigation; these steps do reduce the amount of water usage, and they also reduce the Revenues of the System. The City will use both ASR wells during drought or dry weather conditions to supplement supply from the surficial aquifer. Capital Improvements. The City finished a capital improvement project to the East WTP in 1993 that renovated or replaced facilities which were not working properly or had become outdated. The City continues a maintenance program that keeps existing facilities in proper operating condition. The City currently has several capital expansion or improvement projects planned for the next ensuing five year period. These projects include approximately $78,000,000 of capacity related improvements to the water system, approximately $17,000,000 of non-capacity related water system improvements, approximately $37,000,000 of wastewater improvement projects and approximately $13,000,000 of stormwater improvement projects. The sources of funding for these improvements have not been identified, and could include existing cash reserve/operating funds and/or additional debt. Wastewater System In 1974, the City entered into an interlocal agreement with the adjacent City of Del ray Beach, Florida (the "Interlocal Agreement") for the provision of wastewater treatment, sludge disposal and eflluent disposal on a regional level. The Interlocal Agreement creates a legal entity known as the South Central Regional Wastewater Treatment and Disposal Board, composed of the five members of the respective City Commissions of the two cities, who operate the South Central Regional Wastewater Treatment Plant (the "Plant") through an executive director. Pursuant to the Interlocal Agreement, the two cities own the Plant located within the corporate limits of the City of Delray Beach. Wastewater Collection and Transmission. The existing wastewater collection and transmission system consists of approximately 221 miles of gravity sewer, 67 miles of force main, and 150 lift stations. The predominant pipe materials are vitrified clay for gravity sewers and ductile iron for force mains. A hydraulic analysis of the system performed for the master plan in 1989 showed that the wastewater collection 19 and transmission system appears to be sufficiently sized to meet projected future flows in most areas. Recently some localized improvements have been included in the capital improvement program to allows for increased densities in the City's downtown area. However, several improvements are needed to maintain the system in good condition. These include replacement of 28 pumps per year throughout the System and rehabilitation of pumps, electrical equipment and wet well coatings, concrete, and surfaces at six master lift stations. The City is also installing additional stationary generators at 5 lift stations to maintain operation during power outages or emergencies, thereby improving system reliability. Regulatory Framework and Compliance. The City operates the wastewater system in such a manner that all local, state and federal regulations are met. The City believes that the System will be able to meet all existing and currently proposed regulatory standards. Stormwater System In 1993 the City formed a Stormwater Utility for the purpose of operating and maintaining the existing stormwater system, and also to make the necessary improvements required by projected water quality discharge standards. It has recently developed a regional stormwater detention facility in the downtown area, and has been and will be expanding or improving storm water facilities throughout the service area. The system currently comprises storm water detention ponds, roadside swales, and underground pipmg. Pursuant to the Resolution, in 1996 the stormwater utility, including all of its assets, liabilities and revenues, became a part ofthe combined water, wastewater and stormwater System. Rates and Customer Base The City believes that the rates it charges for the services provided by the System are reasonable and comparable to rates charges by similarly situated municipal utilities located in South Florida. In addition, the City believes that it has a diverse customer base, with no material reliance upon any customer, or small group of customers, for a material amount of the System revenues. The methods used in developing the City's water, sewer and stormwater utility rates adhere to generally accepted methodologies, policies and procedures and result in a corresponding rate structure that generates sufficient revenues to maintain a self-supporting utility. The rates do not unduly discriminate toward any class of customer. Revenue requirements are often unique to a given utility. In all cases, conformance to bond covenants and regulatory constraints provides one measure of revenue sufficiency. Also, it is the City's goal with respect to the System to avoid operating losses, as measured by cash flow. Excluded from the cash flow test are major capital projects to be funded through debt. Minor capital outlays and renewal and replacement are generally included, reflecting the ongoing nature of some capital outlays. The water, wastewater and stormwater activities, currently commingled within the same fund for budgeting purposes, were treated as three distinct and separate funds for analysis. In so doing, a proper matching of revenues and expenditures was developed for all three activities. The water rate structure incorporates an inverted rate mechanism in the volumetric charge. As water use increases, the cost per thousand gallons increases, the intent of which is to encourage conservation. Due to water supply problems in the State of Florida, many municipal utilities are required by permit condition of the water management districts to adopt conservation techniques such as the one enacted by the City. 20 The City Commission has exclusive authority to establish and revise the rates. The City cannot predict what future action, if any, will be taken by the Commission with respect to the current rates or the current rate structure. Historical Revenues Shown below is a summary of the historical "Revenues," "Current Expenses" and "Net Revenues" of the System, calculated in compliance with the requirements of the Resolution described under "Security for the 2005 Bonds-Rate Covenant" above, for the following fiscal years ended September 30: REVENUES(!) Water Sales Sewer Service Stormwater Utility Fees Interest Income Miscellaneous Income(2) TOTAL REVENUES 2002 2003 2004 $ 10,201,169 $ 10,888,665 $ 11,712,636 11,204,950 11,261,264 11 ,665,629 3,406,276 3,144,092 3,194,392 2,364,611 1,725,957 858,044 483,291 481,215 129,652 $ 27,660,297 $ 27,501,193 $ 27,560,353 $ 14,395,176 $ 15,185,354 $ 19,574,242 $13,265,121 $ 12,315,839 $ 7,986,111 $ 4,085,000 $ 4,085,000 $ 4,085,000 CURRENT EXPENSES NET REVENUES MAXIMUM ANNUAL DEBT SERVICE OF THE UNREFUNDED 1996 BONDS, 2002 BONDS AND 2005 BONDS(3) 3.24x 3.01x 1.95x PROFORMA COVERAGE IMPACT FEES(4) $2,841,673 $3,253,621 $2,645,716 (3) Source: City of Boynton Beach Department of Finance (I) Does not include Impact Fees or interest earnings on Construction Fund. See "Impact Fees" below. (2) Miscellaneous Income includes: Interest deposits, Bell South lease, utility tax administrative fee and discounts. Based upon actual debt service for Unrefunded 1996 Bonds and 2002 Bonds and estimated debt service for 2005 Bonds as provided by the financial advisor. Preliminary and subject to change. Consists of total Impact Fees. Approximately 56% of debt service on 2002 Bonds and 30.78% of debt service on 2005 Bonds may lawfully be paid from Impact Fees. (4) The increase in current expenses from 2002 to 2004 is attributable to general increases in costs of goods and services and in 2004 there were also two non-recurring expenses: (i) a charge to the System in the amount of approximately $1.2 million to fund a contribution to the City's self-insurance fund in an amount deemed by the City to reflect the Utility System's fair-share of the cost of the City's self-insurance, and (ii) a non-cash charge of approximately $900,000 to reflect a change in the value of the City's ownership interest of the wastewater Plant. 21 Impact Fees Impact Fees are one time payments made by new customers at the time a unit is connected to the System. The Impact Fee rates are designed to ensure that each new customer connecting to the System will pay a fair share of the costs incurred by the City in constructing the facilities needed to serve such new customers. The amount of the Impact Fee per equivalent connection or dwelling unit paid by the new customer will be the one that is in effect at the time of connection to the System. Judicial rulings in the State of Florida have determined that hnpact Fees may be imposed and expended only to cover the expansion of a utility system that is necessary to service new customers. As a result, the City is of the opinion that hnpact Fees can be used to pay debt service only to the extent that such payments reflect costs incurred to expand the System to service new customers. The City has determined that approximately 30.78% of the proceeds of the 1996 Bonds were attributable to the expansion of the System and that, therefore, 30.78% of the debt service on the portion of the 2005 Bonds may be paid from hnpact Fees. Approximately 56% of the debt service on the Series 2002 Bonds may ;awfully be paid from impact fees. For the Fiscal Year ended September 30,2004, the City collected $$2,645,716 in hnpact Fees. System Customers As of December, 2004, the System provided water service to approximately 31,000 residential accounts, comprised of over 50,000 residential units, and over 1600 commercial accounts, sewer service to approximately 30,000 residential accounts, comprised of approximately 49,000 residential units, and approximately 1500 commercial accounts, and stormwater service to 21,000 accounts. THE CITY The City is a municipal corporation with an estimated population of approximately 62,000 organized and existing under the laws of the State of Florida. The City is located in Palm Beach County approximately 13 miles south of West Palm Beach and 30 miles north of Fort Lauderdale and covers approximately 15 square miles. The City is governed by a Commission-Manager form of government and employs both a full- time city manager and a full-time director of finance, who has responsibility for all internal auditing and financial record keeping operations of the City. The major segments of the economy of the area are retail and wholesale trade, real estate, finance, tourism, agriculture, professional services and light manufacturing. Several light industries are located in the City of Boynton Beach, with manufactured products ranging from paper processing machinery to electrical switches. For additional information regarding the City, see "Appendix A -- Statistical and Other General Information Concerning the City of Boynton Beach." VERIFICATION OF MATHEMATICAL COMPUTATIONS The accuracy of (i) the mathematical computation of the adequacy of the maturing principal amount of and interest on the investments and cash, if any, to be held by the Escrow Agent to pay, when due, the principal of, premium and interest on the Refunded Bonds to the dates of their maturities or earlier redemption and (ii) the mathematical computation of yields on the 2005 Bonds and the proceeds thereofwill be verified by Causey, Demgen & Moore Inc., independent certified public accountants, whose report with respect thereto will be available upon delivery of the 2005 Bonds. 22 TAX EXEMPTION The Internal Revenue Code of 1986, as amended (the "Code"), provides that the interest on state and local governmental bonds will not be included in the gross income for federal income tax purposes of the owner thereof only if certain requirements are met, some of which must be met on a continuing basis, subsequent to the issuance and delivery ofthe 2005 Bonds. Although the City has covenanted to comply with such requirements, noncompliance with such requirements could cause the interest on the 2005 Bonds to be included in gross income for federal income tax purposes retroactive to the date of issue of the 2005 Bonds regardless of the date on which such noncompliance occurs or is ascertained. Those requirements include, but are not limited to, provisions which prescribe yield and other limits within which the proceeds of the 2005 Bonds and other amounts are to be invested and which require that certain investment earnings on the foregoing be rebated on a periodical basis to the Treasury Department of the United States. The ability of Bond Counsel to deliver its final approving opinion in substantially the form attached hereto as Appendix D on the date of issuance of the 2005 Bonds is subject to its review and analysis as of the date of issuance of certain matters, including, among others, pertinent provisions of statutes, regulations, rulings and court decisions, including, but not necessarily limited to, Florida law and federal income tax then in effect or proposed to be in effect. Bond Counsel has advised the City and the Underwriter that, subject to its review and analysis of certain assumptions, its expects to be able to issue on the closing date an opinion substantially in the form attached hereto as Appendix D. In the opinion of Moyle, Flanigan, Katz, Raymond & Sheehan, P.A., West Palm Beach, Florida, Bond Counsel, under existing law, and assuming continuing compliance with the aforementioned covenants, interest on the 2005 Bonds is excluded from gross income of the owners thereof for federal income tax purposes and is not an item of tax preference for purposes of the Federal alternative minimum tax imposed on individuals and corporations. [The 2005 Bonds maturing in the years _ through _ are being offered and sold in the initial public offering at an original issue discount ("OlD"). OID is the difference between the stated redemption price at maturity (generally the face amount of the 2005 Bonds) and the "issue price" of the 2005 Bonds. The "issue price" of each maturity of the 2005 Bonds is the respective initial offering prices to the public at which prices a substantial amount of such maturity of the 2005 Bonds was sold. OID represents interest which is excluded from gross income for federal income tax purposes and which may result in the collateral federal tax consequences described below. OlD will accrue over the term of such 2005 Bonds at a constant interest rate compounded semi-annually. The portion of OID that accrues during the time an Owner owns a 2005 Bond constitutes interest excludable from gross income for federal income tax purposes and will increase such purchaser's adjusted basis in such 2005 Bonds for purposes of determining taxable gain or loss on the sale or other disposition of such 2005 Bonds. The federal income tax consequences of the purchase, ownership and sale or other disposition of2005 Bonds which are not purchased in the initial offering at the initial offering prices may be determined according to rules which differ from those described above. Holders of 2005 Bonds should consult their own tax advisors as to the precise federal income tax and state and local tax consequences of owning and disposing of 2005 Bonds.] [The 2005 Bonds maturing in the years are being offered and sold in the initial public offering at a premium (the "Premium Bonds"). Section 171 of the Code provides rules under which a bond premium may be amortized and a deduction allowed for the amount of the amortizable bond premium for a taxable year. Under Section 171(a)(2) of the Code, however, no deduction is allowable for the amortizable bond premium in the case of the bonds, like the Premium Bonds, the interest on which is excludable from gross income. Under Section 1016(a)(5) of the Code, the purchaser's basis in a Premium Bond will be 23 reduced by the amount of the amortizable bond premium disallowable as a deduction under Section 171 (a )(2) of the Code. Proceeds received from the sale, exchange, or other disposition including redemption of a Premium Bond in excess of the owner's adjusted basis (as reduced pursuant to Section 10 16( a)( 5) of the Code) will be treated as a gain from the sale or exchange of such Premium Bond and not as tax-exempt interest. The basis of an original purchaser of a Premium Bond who holds such Premiwn Bond to maturity will have a basis equal to the principal amount of the Premium Bond and therefore will have no loss upon receipt of such principal amount.] Except as stated above, Bond Counsel expresses no opinion as to any other tax consequences of acquiring, carrying, owning or disposing ofthe 2005 Bonds. The law upon which Bond Counsel will base their opinion is subject to change by the Congress and the Department of the Treasury and to subsequent judicial and administrative interpretation. There can be no assurance that such law or the interpretation thereof will not be changed in a manner which would adversely affect the tax treatment of ownership of the 2005 Bonds. Prospective purchasers of the 2005 Bonds should be aware that the ownership of tax-exempt obligations may result in collateral federal income tax consequences to financial institutions, property and casualty insurance companies, individual recipients of Social Security or Railroad Retirement benefits, taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry tax-exempt obligations, foreign corporations doing business in the United States and S corporations with passive investment income which includes tax exempt income. Prospective purchasers falling within any of these categories should consult their own tax advisors as to the applicability of these consequences. In addition, in the opinion of Bond Counsel, the 2005 Bonds are exempt from all present intangible personal property taxes of the State of Florida. LITIGATION In the opinion ofthe City Attorney, no legal proceedings are pending or threatened which materially affect the City's ability to perform its obligations to the holders of the 2005 Bonds or materially affect the financial condition of the City. There is no litigation or controversy ofany nature now pending or threatened: (i) to restrain or enjoin the issuance, sale, execution or delivery of the 2005 Bonds, or (ii) in any way questioning or attesting the validity of the 2005 Bonds, the Resolution, any proceedings of the City taken with respect to the authorization, sale or issuance of said Bonds or the pledge or application of any moneys provided for the payment of the 2005 Bonds. COVENANTS CONCERNING ONGOING DISCLOSURE The City has agreed in the Resolution, in accordance with the provisions of Rule 15c2-12 in effect from time to time and applicable to the 2005 Bonds (the "Rule"), promulgated by the Securities and Exchange Commission (the "Commission") pursuant to the Securities Exchange Act of 1934, to provide or cause to be provided, to each nationally recognized municipal securities information repository ("NRMSIR") and to the State of Florida information depository ("SID"), if any, in each case as designated and approved by the Commission and the State, respectively, in accordance with the Rule, (i) within 180 days following the end of each fiscal year of the City, commencing with the fiscal year ending September 30, 2005, annual 24 financial information and operating data concerning the System of the type included in this Official Statement, including operating revenues, debt service coverage by Net Revenues, a summary of any capital improvement plans and information regarding permitted capacities and actual usage of capacities of the System and financial statements (audited or, ifnot available, unaudited) of the City and (ii) ifnot submitted as part of such fmancial information and operating data, then, when available, audited financial statements for the City prepared in accordance with generally accepted accounting principles applicable to governmental entities from time to time. A copy of such annual financial information and operating data will be provided to the Underwriter, the Insurer and the Bond Registrar. (The annual information required to be disclosed hereunder shall be referred to herein as the "Annual Report"). The City has agreed to provide or cause to be provided, in a timely manner, to (i) each NRMSIR or to the Municipal Securities Rulemaking Board ("MSRB") and (ii) the SID, if any, notice of the occurrence of any of the following events with respect to the 2005 Bonds, if such event is material: (i) principal and interest payment delinquencies on the 2005 Bonds; (ii) non-payment related defaults; (iii) unscheduled draws on debt service reserves reflecting financial difficulties; (iv) unscheduled draws on credit enhancements reflecting financial difficulties; (v) substitution of credit or liquidity providers, or their failure to perform; (vi) adverse tax opinions with respect to or events affecting the tax-exempt status of the 2005 Bonds; (vii) modifications to rights of the holders of the 2005 Bonds; (viii) any call of the 2005 Bonds for redemption (other than scheduled mandatory redemption) or any acceleration of the maturity thereof; (ix) defeasance in whole or in part of the 2005 Bonds; (x) release, substitution, or sale of property securing repayment of the 2005 Bonds; (xi) rating changes; and (xii) any changes in the City's fiscal year. The City has agreed to provide or cause to be provided, in a timely manner, to (i) each NRMSIR or the MSRB and (ii) the SID, if any, notice of a failure by the City to provide the Annual Report described in subsection (a) above on or prior to the date set forth therein. The City has reserved the right to terminate its obligation to provide Annual Report and notices of material events, as set forth above, if and when the City no longer remains an obligated person with respect to the 2005 Bonds within the meaning of the Rule. If the City believes such condition exists, the City will provide notice of such termination to the NRMSIR's, the MSRB and the SID. 25 The City has agreed that its undertaking pursuant to the Rule set forth is intended to be for the benefit of the holders and beneficial owners of the 2005 Bonds and shall be enforceable by any holder or beneficial owner; provided that the right to enforce the provisions of such undertaking shall be limited to a right to obtain specific enforcement of the City's obligations hereunder and any failure by the City to comply with the provisions of such undertaking shall not be an event of default with respect to the 2005 Bonds under the Resolution. Any voluntary inclusion by the City of information in its Annual Report of supplemental information that is not required under the Rule shall not expand the obligations of the City thereunder and the City shall have no obligation to update such supplemental information or include it in any subsequent report. The covenants contained in the Resolution are solely for the benefit of the holders and beneficial owners of the 2005 Bonds and shall not create any rights in any other parties. Notwithstanding any other provision ofthe Resolution, the City may amend the provisions of the Resolution described above and any provision thereof may be waived, provided that the following conditions are satisfied: (1) If the amendment or waiver pertains to the Annual Report or other information to be provided by the City, the amendment or waiver is made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identify, nature or status of the City or the type of business conducted by the City; and (2) The undertaking, as amended or taking into account such waiver would, in the opinion of nation ally recognized bond counsel, have complied with the requirements of the Rule at the time of the original issuance of the 2005 Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances. (3) The amendment or waiver does not materially impair the interests of holders of and beneficial owners as determined either by parties unaffiliated with the City or an obligated person, or by an approving vote of the holders of at least a majority in aggregate principal amount of the then outstanding 2005 Bonds pursuant to the terms of the Resolution. In the event of any amendment or waiver of a provision of the Resolution described in this section, the City shall describe such amendment or waiver in the next Annual Report, and shall include, as applicable, a narrative explanation of the reason for the amendment or waiver and its impact on the type (or, in the case of a change of accounting principles, on the presentation) of annual financial information or operating data being presented by the City. In addition, if the amendment or waiver relates to the accounting principles to be followed in preparing financial statements (i) notice of such change shall be given in the manner provided in the Resolution and (ii) the Annual Report for the year in which the change is made shall present a comparison (in narrative form and also, if feasible, in quantitative form) between the fmancial statements as prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. The City has complied with all of its continuing disclosure undertakings in connection with its previous bond issues. 26 UNDERWRITING The Underwriter, Bear, Stearns & Co. Inc., has agreed to purchase the 2005 Bonds from the City at an aggregate purchase price of$ (representing the $_,_,000.00 aggregate principal amount of the 2005 Bonds less an underwriter's discount of $ plus a net original issue premium/discount of $ ). The Underwriter will be obligated to purchase all the 2005 Bonds if any are purchased. The offering prices shown on the cover of this Official Statement may be changed from time to time by the Underwriter. RATINGS Moody's Investors Service ("Moody's") and Standard and Poor's Ratings Services, a division of The McGraw-Hill Companies ("S&P") are expected to assign to the 2005 Bonds their municipal bond ratings of Aaa and AAA, respectively, with the understanding that upon delivery of the 2005 Bonds, a policy insuring the payment when due of the principal of and interest on the 2005 Bonds will be issued by Ambac Assurance Corporation. The ratings assigned to the 2005 Bonds by any rating agency reflect only the views of the rating agency, and an explanation ofthe significance of the ratings may be obtained only from the rating agency. The ratings are not a recommendation to buy, sell or hold the 2005 Bonds and there is no assurance that such ratings will remain in effect for any given period of time or that they will not be revised downward or withdrawn entirely if, in the judgment of the rating agency, circumstances so warrant. Any downward revision or withdrawal of such ratings may have an adverse effect on the market price of the 2005 Bonds. Neither the Underwriter nor the City have undertaken responsibility to bring to the attention of the holders of the 2005 Bonds any proposed revision or withdrawal of the ratings of the 2005 Bonds, or to oppose any proposed revision or withdrawal. LEGALITY Certain legal matters in connection with the issuance of the 2005 Bonds are subject to the approval of Moyle, Flanigan, Katz, Raymond & Sheehan, P.A., West Palm Beach, Florida, Bond Counsel, whose unqualified approving opinion will be available at the time of delivery of the 2005 Bonds. The proposed form of such opinion of Bond Counsel is attached hereto as Appendix D. Certain legal matters will be passed upon for the City by Goren, Cherof, Doody & Ezrol, P.A., City Attorneys, Fort Lauderdale, Florida and for the Underwriter by its counsel, Edwards & Angell, LLP, West Palm Beach, Florida. EXCERPTS FROM COMPREHENSIVE ANNUAL REPORT The audited general purpose financial statements of the City and the combining statements for the City's enterprise fund for the fiscal year ended September 30, 2004 are included in Appendix B attached hereto. Such excerpts from the City's Comprehensive Annual Financial Report, including the auditor's report, have been included in this Official Statement as public documents and consent from the auditors was not requested. MISCELLANEOUS The information in the foregoing pages is presented for the guidance of prospective purchasers of the 2005 Bonds described herein. The information has been compiled from official and other sources and, while not guaranteed as to accuracy by the City, is believed to be correct. So far as any statements made in this Official Statement and the appendices attached hereto involve matters of opinion or of estimates, whether 27 or not expressly stated, they are set forth as such and not as representations of fact, and no representation is made that any of the estimates will be realized. AUTHORIZATION OF OFFICIAL STATEMENT This Official Statement has been authorized and prepared by the City of Boynton Beach, Florida. CITY OF BOYNTON BEACH, FLORIDA Mayor 28 EXHIBIT "D" Escrow Deposit Agreement G:\02345\37 Utility 2005\reso(4).wpd ESCROW DEPOSIT AGREEMENT THIS ESCROW DEPOSIT AGREEMENT (this "Agreement"), is dated August _,2005, 2005, and is by and between CITY OF BOYNTON BEACH, FLORIDA, a political subdivision of the State of Florida (the "Issuer") and THE BANK OF NEW YORK TRUST COMPANY, N.A., a national banking association (the "Bank"), as escrow agent (the "Escrow Agent"). WIT N E SSE T H: WHEREAS, the Issuer has heretofore issued $23,070,000 in aggregate principal amount of its Utility System Revenue Bonds, Series 1996, dated July 1, 1996 (the "1996 Bonds"); and WHEREAS, the Issuer has determined to provide for the payment of all of the 1996 Bonds maturing on and after November 1,2007 (the "Defeased Bonds") by providing for the deposit of certain moneys with the Escrow Agent hereunder; and WHEREAS, a portion ofthe moneys deposited with the Escrow Agent for such purpose may be applied to the purchase of certain direct obligations of the United States of America ("Government Obligations"); and WHEREAS, in order to provide for the proper and timely application of the moneys deposited in the trust created herein to the payment of the Defeased Bonds, it is necessary for the Issuer to enter into this Escrow Deposit Agreement with the Escrow Agent on behalf of the holders from time to time of the Defeased Bonds; NOW, THEREFORE, in consideration of the foregoing and the mutual covenants herein set forth and in order to secure the payment of the principal of, premium, and interest on the Defeased Bonds, according to their tenor and effect, the Issuer does by these presents hereby deliver to and give, grant, assign and pledge to the Escrow Agent and to its successors in the trust hereby created, and to it and its assigns forever, all and singular the property hereinafter described, to wit: 1. All right, title, and interest of the Issuer in and to $ on behalf of the Issuer with the Escrow Agent hereunder. to be deposited by or II. All right, title, and interest of the Issuer in and to any Government Obligations purchased from the moneys described in Clause I above. III. All right, title, and interest of the Issuer in and to all cash balances held from time to time hereunder and all income and earnings derived from or accruing to any Government Obligations described in Clause II above. IV. All (i) property which is by the express provisions ofthis Agreement required to be subject to the pledge hereof and (ii) additional property of every kind and nature that may, from time to time hereafter, by delivery or by writing of any kind, be conveyed, pledged, assigned, or transferred as and for additional security hereunder or to be subject to the pledge hereof, by the Issuer or by anyone in its behalf, and the Escrow Agent is hereby authorized to receive the same at anytime as additional security hereunder, provided that no property described in (ii) shall be accepted by the Escrow Agent unless the Escrow Agent shall receive an opinion of nationally recognized bond counsel selected by the Issuer to the effect that such acceptance will not cause the interest on the Defeased Bonds to be included in the gross income of the holders thereof for federal income tax purposes. TO HAVE AND TO HOLD, all and the same; in trust nevertheless, upon the terms herein set forth, for the equal and proportionate benefit, security and protection, as herein described, of the holders or owners from time to time of the Defeased Bonds in the manner herein provided; but if the Defeased Bonds shall be fully and promptly paid when due or redeemed on their dates of scheduled maturity or mandatory redemption in accordance with the terms thereof and hereof, then this Agreement shall be and become void and of no further force and effect, otherwise the same shall remain in full force and effect, and subject to the covenants and conditions hereinafter set forth. ARTICLE I DEFINITIONS Section 1.01. Def'mitions. All terms used in capitalized form herein and not otherwise defined herein shall have the meanings ascribed to them in the Bond Resolution. In addition to words and terms elsewhere defined in this Agreement, as used herein, unless some other meaning is plainly intended, the following terms and phrases shall have the following meanings: "Bond Resolution" means Resolution No. 92-96 of the Issuer adopted June 16, 1992, as amended and supplemented, particularly by Resolution No. R96-88, adopted June 18, 1996, authorizing the issuance of the Defeased Bonds. "Escrow Deposit Trust Fund" means the fund so designated and established under Section 2.01 of this Agreement. "Government Obligations" means direct obligations of the United States of America that are not callable prior to maturity by the obligor thereon. 2 "1996 Bond Registrar" means The Bank of New York, as bond registrar for the Defeased Bonds. Section 1.02. Uses of Phrases. Words of the masculine gender shall be deemed and construed to include correlative words of the feminine and neuter genders. Unless the context shall otherwise indicate, words importing the singular number shall include the plural number and VIce-versa. ARTICLE II ESTABLISHMENT OF FUNDS: FLOW OF FUNDS Section 2.01. Creation of Escrow Deposit Trust Fund. There is hereby created and established with the Escrow Agent a special and irrevocable trust fund designated the "City of Boynton Beach, Florida Utility System Revenue Bonds, Series 1996/2005 Escrow Deposit Trust Fund" to be held in the custody ofthe Escrow Agent separate and apart from other funds of the Issuer or the Escrow Agent. Section 2.02. Deposit to Escrow Deposit Trust Fund. On the date hereofthe Issuer shall deposit or cause to be deposited with the Escrow Agent and the Escrow Agent shall receive immediately available moneys in the amount of $ , for deposit in the Escrow Deposit Trust Fund. The funds deposited in the Escrow Deposit Trust Fund pursuant to the preceding sentence shall, except for any remaining cash balance be immediately invested by the Escrow Agent in the Government Obligations described on Exhibit B. Section 2.03. Application of Escrow Deposit Trust Fund. The Escrow Agent shall apply the Government Obligations and other moneys deposited in the Escrow Deposit Trust Fund, together with all income and earnings thereon, in accordance with the provisions hereof. The Escrow Agent shall not invest any moneys held hereunder or make substitutions of the Government Obligations hereunder or sell, transfer, or otherwise dispose of the Government Obligations or moneys held hereunder except as provided in this Agreement. Section 2.04. Irrevocable Trust Created. Except as expressly provided herein, the deposit of (or purchase of for deposit of) the Government Obligations and moneys in the Escrow Deposit Trust Fund shall constitute an irrevocable deposit for the benefit of the holders of the Defeased Bonds and the holders of the Defeased Bonds shall have an express lien on the principal of and earnings on the Government Obligations and other moneys held in the Escrow Deposit Trust Fund hereunder until applied in accordance with this Agreement. The Government Obligations and earnings thereon and other moneys shall be held by the Escrow Agent and used only for the purposes and in the manner provided in this Agreement. Section 2.05. Use of Moneys in Escrow Deposit Trust Fund; Redemption of Defeased Bonds. On November 1, 2006 the Escrow Agent shall transfer from funds in the Escrow Deposit Trust Fund to the 1996 Bond Registrar the amount of interest, principal and/or redemption price of the Defeased Bonds coming due on such date, as shown on Exhibit C. Such amount shall be applied 3 by the 1996 Bond Registrar to the payment of all principal of, interest on, and redemption premium, if any, when due with respect to the Defeased Bonds. The Issuer hereby irrevocably elects that the Defeased Bonds then maturing after November 1, 2006, shall be called for redemption on November 1,2006. The Issuer hereby directs that at least 30 days and not more than 60 days before November 1,2006, a notice of such redemption in the form attached hereto as Exhibit D shall be mailed by the 1996 Bond Registrar, first class mail, postage prepaid, to all registered owners ofDefeased Bonds to be redeemed at their addressed they appear on the registration books therefore. In addition, further notice of such redemption shall be given by the 1996 Bond Registrar as provided in Section 303 of the Bond Resolution. The Issuer agrees to pay the reasonable expenses incurred by the 1996 Bond Registrar in connection with such redemption from lawfully available funds of the Issuer. Section 2.06. Investment and Reinvestment of Trust Funds. After the initial investment of funds pursuant to Section 2.02 hereof, the Issuer may direct the Escrow Agent in writing to invest and reinvest any moneys remaining from time to time in the Escrow Deposit Trust Fund until such time as they are needed, and the Escrow Agent shall comply with such request, otherwise the Escrow Agent shall hold such moneys uninvested. Such moneys may be invested and reinvested only in Government Obligations bearing interest at such rate or rates and maturing on such date or dates and in such amounts as directed in writing by the Issuer. The Issuer shall give no such instruction to the Escrow Agent unless the Issuer shall receive and concurrently deliver to the Escrow Agent an opinion of nationally recognized bond counsel selected by the Issuer in its sole discretion to the effect that such investment of such moneys will not adversely affect the exclusion from gross income ofthe interest on the Defeased Bonds for federal income tax purposes. Provided further, that no such investment instruction shall be given unless the Issuer shall have received and delivered to the Escrow Agent verification from a firm of independent certified public accountants to the effect that, taking into account such investment, the amounts held hereunder will be sufficient to pay the principal, premium, and interest on the Defeased Bonds in full as the same shall become due whether by redemption or otherwise. Section 2.07. Transfer of Funds After AIl Payments Required by This Agreement Are Made. On November 1, 2006 after the transfer of funds described in Section 2.05 hereof has occurred, and after all fees and expenses of the Escrow Agent (including any attorneys' fees and expenses) due hereunder have been paid in full, all remaining moneys and Government Obligations, together with any income and interest thereon, in the Escrow Deposit Trust Fund shall be transferred to the Issuer by the Escrow Agent and shall be deposited by the Issuer in the Bond Service Subaccount of the Sinking Fund Account under the Bond Resolution. The Escrow Agent shall have no responsibility for the application of amounts transferred by it to the Issuer as provided in the preceding sentence. Section 2.08. Deficiencies. If at any time it shall appear to the Escrow Agent that the available proceeds in the Escrow Deposit Trust Fund will not be sufficient to make any payment when due to the holders of any of the Defeased Bonds, the Escrow Agent shall notify the Issuer not less than fifteen (15) days prior to such payment date and the Issuer agrees that it will make available to the Escrow Agent, from legally available funds, if any, amounts sufficient to eliminate the anticipated deficit so that the Escrow Agent will have sufficient funds to make such payment on the 4 Defeased Bonds. Section 2.09. Escrow Agent and Bond Registrar Fees. The Issuer hereby agrees to provide for the payment, from lawfully available funds of the Issuer, of the compensation due and owing the Escrow Agent and 1996 Bond Registrar, which compensation shall be paid at such times and in such amounts as agreed between the Issuer and the 1996 Bond Registrar and Escrow Agent, respectively. In no event shall the 1996 Bond Registrar or Escrow Agent have any lien, security interest or right of set-off whatsoever upon any ofthe moneys or investments in the Escrow Deposit Trust Fund for the payment of such compensation, or for the reimbursement of any expenses incurred by the 1996 Bond Registrar or Escrow Agent in connection with this Agreement. Section 2.10. Bond Registrar. The Escrow Agent shall cooperate with the 1996 Bond Registrar, to cause necessary arrangements to be made and thereafter continued whereby funds available from the Escrow Deposit Trust Fund shall be made available by the Escrow Agent to the 1996 Bond Registrar, for the payment of the Defeased Bonds as the same shall be come due and payable. ARTICLE III CONCERNING THE BANK Section 3.01. Appointment of Escrow Agent. The Issuer hereby appoints The Bank of New York Trust Company, N.A. as Escrow Agent under this Agreement. Section 3.02. Acceptance by Bank. By execution ofthis Agreement, the Bank accepts its duties and obligations hereunder. The Bank undertakes to perform such duties and only such duties as are specifically set forth in this Agreement and no implied covenants or obligations shall be read into this Agreement against the Bank. Section 3.03. Liability of Bank. The Bank shall not be liable in connection with the performance of its duties hereunder except for its own negligence or willful misconduct. The Bank shall not be liable for any loss or any resulting taxability of interest on the Defeased Bonds resulting from any investment made pursuant to the terms and provisions of this Agreement. The Bank shall not be liable for the accuracy of the calculations as to the sufficiency of moneys and of the principal amount of the Government Obligations and the earnings thereon to pay the Defeased Bonds. The Bank shall keep such books and records as shall be consistent with prudent industry practice and shall make such books and records available for inspection by the Issuer at all reasonable times. In the event of the Bank's failure to account for any of the Government Obligations or moneys received by it, said Government Obligations or moneys shall be and remain the property of the Issuer for the benefit of the holders of the Defeased Bonds, as herein provided. Section 3.04. Permitted Acts. The Bank and its affiliates may become the owner of or may deal in any obligations of the Issuer described herein as fully and with the same rights as if it were 5 not the Escrow Agent and 1996 Bond Registrar. Section 3.05. Resignation of Escrow Agent. The Escrow Agent at the time acting hereunder may at any time resign and be discharged from the trusts hereby created by giving not less than sixty (60) days' written notice to the Issuer specifying the date when such resignation will take effect, but no such resignation shall take effect (except as provided by Section 3.07 (b) hereof) unless a successor Escrow Agent shall have been appointed by the Issuer as hereinafter provided and such successor Escrow Agent shall have accepted such appointment, in which event such resignation shall take effect immediately upon the appointment and acceptance of a successor Escrow Agent and the transfer to such successor Escrow Agent of the funds and accounts held by the Escrow Agent hereunder. Section 3.06. Removal of Escrow Agent. ( a) The Escrow Agent may be removed at any time by the Issuer, but the Escrow Agent shall remain in office (except as provided by Section 3.07(b) hereof) until the appointment and taking office of a successor Escrow Agent in accordance with the provisions of this Agreement. (b) The Escrow Agent shall be deemed to have been removed if it is dissolved, becomes incapable of exercising the powers of Escrow Agent hereunder or is taken over by any governmental action. (c) Notwithstanding the foregoing provisions of this Section 3.06, no removal of the Escrow Agent shall take effect until all fees and expenses of the Escrow Agent to be removed (including attorneys' fees and expenses) due hereunder shall have been paid. Section 3.07. Successor Escrow Agent. (a) When the position of the Escrow Agent becomes or is about to become vacant, the Issuer shall appoint a successor Escrow Agent to fill such vacancy. (b) If no appointment of a successor Escrow Agent shall be made pursuant to the foregoing provisions of this Section, the holder of any Defeased Bond then outstanding may, or any Escrow Agent retiring or being removed from office shall, apply to any court of competent jurisdiction to appoint a successor Escrow Agent. Upon the deposit by the retiring Escrow Agent of all funds and securities held by it under the provisions hereof into the registry of such court, such Escrow Agent shall be relieved of all future duties hereunder. (c) Any corporation into which the Escrow Agent, or any successor to it in the trusts created by this Agreement, may be merged or converted or with which it or any successor to it may be consolidated, or any corporation resulting from any merger, conversion, consolidation or reorganization to which the Escrow Agent or any successor to it shall be a party or any corporation to which all or substantially all of the corporate trust business of the Escrow Agent or any such successor shall be transferred shall be the successor Escrow Agent under this Agreement without the execution or filing of any paper or any other act on the part of any of the parties hereto, anything herein to the contrary notwithstanding. 6 Section 3.08. Receipt of Proceedings. Receipt of true and correct copies of the Bond Resolution is hereby acknowledged by the Escrow Agent. Section 3.09. Indemnification. The Issuer agrees to indemnify and save the Bank, its agents and employees, harmless, to the extent allowed by law, against any liabilities, costs, expenses and disbursements of whatsoever kind or nature, which it or they may incur in the exercise and performance of its powers and duties hereunder, and which are not due to its negligence or misconduct. Indemnification provided under this Section shall survive the termination of this Agreement. Section 3.10. Miscellaneous Provisions Regarding Escrow Agent. Whenever the Escrow Agent shall deem it necessary or desirable that a matter be proved or established prior to taking, suffering or omitting any action under this Agreement, such matter may be deemed to be conclusively established by a certificate signed by an authorized officer of the Issuer. The Escrow Agent may conclusively rely, as to the correctness of statements, conclusions and opinions therein, upon any certificate, report, opinion or other document furnished to the Escrow Agent pursuant to any provision of this Agreement; the Escrow Agent shall be protected and shall not be liable for acting or proceeding, in good faith, upon such reliance; and the Escrow Agent shall be under no duty to make any investigation or inquiry as to any statements contained or matters referred to in any such instrument. The Escrow Agent may consult with counsel, who may be counsel to the Issuer or independent counsel, with regard to legal questions, and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered by it hereunder in good faith in accordance herewith. Prior to retaining such independent counsel, the Escrow Agent shall notify the Issuer of its intention. ARTICLE IV MISCELLANEOUS Section 4.01. Amendments to this Agreement. This Agreement is made for the benefit ofthe Issuer, the Bank and the holders from time to time of the Defeased Bonds and it shall not be repealed, revoked, altered or amended without the written consent of all such holders, the Bank and the Issuer; provided, however, that the Issuer and the Bank may, without the consent of, or notice to, such holders, enter into such agreements supplemental to this Agreement as shall not adversely affect the exclusion from gross income for federal income tax purposes of the interest on the Defeased Bonds and the rights of such holders and as shall not be inconsistent with the terms and provisions of this Agreement, for anyone or more of the following purposes: (a) to cure any ambiguity or formal defect or omission in this Agreement; (b) to grant to, or confer upon, the Escrow Agent for the benefit of the holders of the Defeased Bonds, any additional rights, remedies, powers or authority that may lawfully be granted to, or conferred upon, such holders or the Escrow Agent; and (c) to subject to this Agreement additional funds, securities or properties. 7 The Bank shall be entitled to rely exclusively upon an unqualified opinion of Moyle, Flanigan, Katz, Raymond & Sheehan, P.A. or other nationally recognized bond counsel with respect to compliance with this Section, including the extent, if any, to which any change, modification, addition or elimination affects the rights of the holders of the Defeased Bonds, or that any instrument executed hereunder complies with the conditions and provisions of this Section. Section 4.02. Severability. If anyone or more of the covenants or agreements provided in this Agreement should be determined by a court of competent jurisdiction to be contrary to law, such covenant or agreement shall be deemed to be separate and shall in no way affect the validity of the remaining provisions of this Agreement. Section 4.03. Agreement Binding. All the covenants, promises and agreements in this Agreement contained by or on behalf of the Issuer or by or on behalf of the Escrow Agent shall bind and inure to the benefit of their respective successors and assigns, and to the benefit of the holders of the Defeased Bonds, whether so expressed or not. Section 4.04. Termination. This Agreement (other than Section 3.09 hereof) shall terminate when all transfers and payments required to be made by the Escrow Agent under the provisions hereof shall have been made. Section 4.05. Governing Law. This Agreement shall be governed by the applicable laws of the State of Florida. Section 4.06. Execution by Counterparts. This Agreement may be executed in several counterparts, each of which shall be regarded for all purposes as an original, and all of which, together, shall constitute and be but one and the same instrument. Section 4.07. Notices. Any notice, demand, direction, request or other instrument authorized or required by this Agreement to be given shall be deemed sufficiently given on the day sent by registered mail, return receipt requested, addressed as follows or to such other address furnished in writing by any of the following to all of the following: If to the Issuer: City of Boynton Beach, Florida Attn: City Manager 100 East Boynton Beach Boulevard Boynton Beach, Florida 33425 If to the Bank: The Bank of New York Trust Company, N.A. 10161 Centurion Parkway 2nd Floor Jacksonville, Florida 32256 8 IN WITNESS WHEREOF, the Issuer and the Escrow Agent have duly executed this Agreement as of the date first above written. CITY OF BOYNTON BEACH, FLORIDA By: Mayor THE BANK OF NEW YORK TRUST COMPANY, N.A., as Escrow Agent By: Its Authorized Signatory 9 EXHIBIT A DEFEASED BONDS Maturity Date (November) 2007 2008 2009 2010 2011 2012 2020 Principal Amount 1,900,000 2,000,000 2,110,000 2,215,000 2,340,000 2,475,000 1,040,000 CUSIP # (Prefix is 103580) BBl BC9 BD7 BE5 BF2 BGO BH8 EXHIBIT B GOVERNMENT OBLIGATIONS TO BE DEPOSITED INTO ESCROW DEPOSIT TRUST FUND Part I Maturity Date Principal ~ Interest Rate 11/01/2006 1 1. U.S. Treasury Obligation - State and Local Gov't. Series EXHIBIT C DEFEASED BONDS DEBT SERVICE SCHEDULE Date Called Principal Call Premium Interest Total 11/01/2005 $382,431.25 $ 382,431.25 05/01/2005 $382,431.25 $ 382,431.25 11/01/2006 $14,080,000.00 $281,600.00 $382,431.25 $14,744,031.25 EXHIBIT D REDEMPTION NOTICE CITY OF BOYNTON BEACH, FLORIDA UTILITY SYSTEM REVENUE BONDS, SERIES 1996 Maturity Interest Rate CUSIP Nos. * 2007 5.20% 103580 BBl 2008 5.375 103580 BC9 2009 5.375 103580 BD7 2010 5.50 103580 BE5 2011 5.50 103580 BF2 2012 5.50 103580 BGO 2020 5.625 103580 BH8 Notice is hereby given that pursuant to the terms of the Resolution, adopted June 16, 1992, as amended and supplemented, by the City Commission of the City of Boynton Beach, Florida, the bonds described above, which were issued July 23, 1996, are called for payment and redemption on November 1,2006 (the "Redemption Date") at a redemption price of 102% of the principal amount thereof plus accrued interest thereon to the Redemption Date. The Bonds so called for redemption should be presented for payment and redemption at the office of the paying agent set forth below, on or after November 1,2006, and will cease to bear or accrue interest after that date, whether or not so presented. The Bank of New York [insert address and name and telephone number of contact] Withholding of 31 % of gross redemption proceeds of any payment made within the United States of America may be required by the Interest and Dividend Tax Compliance Act of 1983 unless the paying agent has the correct taxpayer identification number (social security or employer identification number) or exemption certificate of the payee. Please furnish a properly completed IRS Form W-9 or exemption certificate or equivalent when presenting your securities for redemption. DATED this _ day of _,2005. CITY OF BOYNTON BEACH, FLORIDA By: /s/ William Mummert Finance Director * CUSIP numbers are included solely for the convenience of the owners, and no representation is made as to the correctness of the CUSIP numbers indicated in this Redemption Notice. G:\02345\37 Utility 2005\escrow deposit(2}.wpd