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01-39 RESOLUTION NO. 01-39 A RESOLUTION APPOINTING FINANCIAL SECURITY ASSURANCE AS MUNICIPAL BOND INSURER FOR THE SERIES 2001 BONDS; SUPPLEMENTING ORDINANCE NO. 6876-01 TO ADJUST THE ADDITIONAL BONDS TEST AND PROVIDING CERTAIN OTHER MATTERS IN CONNECTION WITH THE MUNICIPAL BOND INSURANCE POLICY AND THE ISSUANCE AND DELIVERY OF SUCH BONDS; AND PROVIDING AN EFFECTIVE DATE. WHEREAS, on October 4,2001, the City Commission of the City of Clearwater, Florida (the "City" or the "Issuer") enacted Ordinance No. 6876-01 (the "Bond Ordinance") to provide for the issuance of Improvement Revenue Bonds, Series [to be determined] payable from City's Public Service Tax (as defined in the Bond Ordinance); WHEREAS, on October 4,2001, the City Commission of the City of Clearwater, Florida adopted Resolution No. 01-36 (the "Resolution") to provide for sale of the City's not to exceed $12,000,000 ofImprovement Revenue Bonds, Series 2001 (the "Series 2001 Bonds"); and WHEREAS, the Resolution provided for the City Manager and the Financial Services Administrator to solicit offers from municipal bond insurance firms to provide municipal bond insurance (the "Municipal Bond Insurance Policy") for the Series 2001 Bonds; and WHEREAS, the Issuer now desires to approve the commitment for municipal bond insurance provided by Financial Security Assurance Inc. as the municipal bond insurance firm (the "Bond Insurer") to provide the Municipal Bond Insurance Policy for the Series 2001 Bonds and to supplement the Bond Ordinance to provide for the requirements of the Commitment. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COMMISSION OF THE CITY OF CLEARWATER, FLORIDA: SECTION 1. The City approves the purchase of the Municipal Bond Insurance Policy for the Series 2001 Bonds from Financial Security Assurance, as Bond Insurer. SECTION 2. Pursuant to the Bond Ordinance, Financial Security Assurance Inc. ("FSA") has been selected to provide its Municipal Bond Insurance Policy (the "Policy") as the Bond Insurance Policy (as defined in the Bond Ordinance) as additional security for payment of principal and interest on the Series 2001 Bonds. Selection of FSA as the Bond Insurer (as defined in the Bond Ordinance) is hereby ratified and confirmed and payment for such Bond Insurance Policy from proceeds of the Series 2001 Bonds is hereby authorized. The City hereby accepts the terms, conditions and agreements relating to the Bond Insurance Policy in accordance with the Municipal Bond Insurance Commitment (the "Commitment") as attached hereto as Exhibit A and incorporated Resolution No. 01-39 herein. A statement of insurance is hereby authorized to be printed on or attached to the Series 2001 Bonds for the benefit and information of the holders of the Series 2001 Bonds. In addition to the covenants and agreements of the City previously contained in the Bond Ordinance regarding the rights of the Bond Insurer or as may be set forth on Exhibit A hereto, each of which are hereby incorporated herein, the City hereby makes the following additional covenants and agreements for the benefit of the Bond Insurer and the Holders of the Series 2001 Bonds while the Bond Insurance Policy insuring the Series 200 I Bonds is in full force and effect: (a) "Bond Insurance Policy" shall mean the insurance policy issued by the Bond Insurer guaranteeing the scheduled payment of principal of and interest on the Series 2001 Bonds when due. (b) "Bond Insurer" shall mean Financial Security Assurance Inc., a New York stock insurance company, or any successor thereto or assignee thereof. (c) Except as otherwise provided in Section 23 of the Bond Ordinance, the Bond Insurer shall be deemed to be the sole holder of the Series 2001 Bonds insured by it for the purpose of exercising any voting right or privilege or giving any consent or direction or taking any other action that the holders ofthe Series 2001 Bonds insured by it are entitled to take pursuant to the Bond Ordinance. The maturity of the Series 2001 Bonds insured by the Bond Insurer shall not be accelerated without the consent of the Bond Insurer, but the City reserves the right to optionally redeem any Series 2001 Bonds without the consent of the Bond Insurer. (d) No waiver, modification, amendment or supplement to the Bond Ordinance may become effective except upon obtaining the prior written consent of the Bond Insurer. (e) Copies of any modification or amendment to the Bond Ordinance shall be sent to Standard & Poor's Credit Markets Services and Moody's Investors Service, Inc. at least 10 days prior to the effective date thereof. (f) Amounts paid by the Bond Insurer under the Bond Insurance Policy shall not be deemed paid for purposes ofthe Bond Ordinance and shall remain Outstanding and continue to be due and owing until paid by the Issuer in accordance with the Bond Ordinance. The Bond Insurer shall, to the extent it makes any payment of principal of or interest on the Series 2001 Bonds, become subrogated to the rights of the recipients of such payments in accordance with the terms of the Bond Insurance Policy. The Bond Ordinance shall not be discharged unless all amounts due or to become due to the Bond Insurer have been paid in full or duly provided for. (g) Claims Upon the Bond Insurance Policy and Payments by and to the Bond Insurer. If, on the third business day prior to the related scheduled interest payment date or 2 Resolution No. 01-39 principal payment date or the date to which a Series 2001 Bond maturity has been accelerated ("Payment Date") there is not on deposit with the Paying Agent, after making all transfers and deposits required under the Bond Ordinance, moneys sufficient to pay the principal of and interest on the Series 200 I Bonds due on such Payment Date, the Paying Agent shall give notice to the Bond Insurer and to its designated agent (if any) (the "Bond Insurer's Fiscal Agent") by telephone or telecopy of the amount of such deficiency by 12:00 noon, New York City time, on such Business Day. If on the second Business Day prior to the related Payment Date, there continues to be a deficiency in the amount available to pay the principal of and interest on the Bonds due on such Payment Date, the Trustee shall make a claim under the Insurance Policy and give notice to the Insurer and the Insurer's Fiscal Agent (if any) by telephone of the amount of such deficiency, and the allocation of such deficiency between the amount required to pay interest on the Series 2001 Bonds and the amount required to pay principal of the Series 2001 Bonds, confirmed in writing to the Bond Insurer and the Bond Insurer's Fiscal Agent by 12:00 noon, New York City time, on such second Business Day by filling in the form of Notice of Claim and Certificate delivered with the Bond Insurance Policy. In the event the claim to be made is for a mandatory sinking fund redemption installment, upon receipt of the moneys due, the Paying Agent shall authenticate and deliver to affected Bondholders who surrender their Series 2001 Bonds a new Bond or Bonds in an aggregate principal amount equal to the unredeemed portion of the Bond surrendered. The Paying Agent shall designate any portion of payment of principal on Series 2001 Bonds paid by the Bond Insurer, whether by virtue of mandatory sinking fund redemption, maturity or other advancement of maturity, on its books as a reduction in the principal amount of Series 2001 Bonds registered to the then current Bondholder, whether DTC or its nominee or otherwise, and shall issue a replacement Series 2001 Bond to the Bond Insurer, registered in the name of Financial Security Assurance Inc., in a principal amount equal to the amount of principal so paid (without regard to authorized denominations); provided that the Paying Agent's failure to so designate any payment or issue any replacement Series 2001 Bond shall have no effect on the amount of principal or interest payable by the Issuer on any Series 2001 Bond or the subrogation rights of the Bond Insurer. The Paying Agent shall keep a complete and accurate record of all funds deposited by the Series 2001 Bond Insurer into the Policy Payments Account (as hereinafter identified) and the allocation of such funds to payment of interest on and principal paid in respect of any Series 2001 Bond. The Bond Insurer shall have the right to inspect such records at reasonable times upon reasonable notice to the Paying Agent. Upon payment of a claim under the Bond Insurance Policy the Paying Agent shall establish a separate special purpose trust account for the benefit of Bondholders Resolution NO. 01-39 3 ~ referred to herein as the "Policy Payments Account" and over which the Paying Agent shall have exclusive control and sole right of withdrawal. The Paying Agent shall receive any amount paid under the Bond Insurance Policy in trust on behalf of Bondholders and shall deposit any such amount in the Policy Payments Account and distribute such amount only for purposes of making the payments for which a claim was made. Such amounts shall be disbursed by the Paying Agent to Bondholders in the same manner as principal and interest payments are to be made with respect to the Series 2001 Bonds under the sections hereof regarding payment of Series 2001 Bonds. It shall not be necessary for such payments to be made by checks or wire transfers separate from the check or wire transfer used to pay debt service with other funds available to make such payments. Funds held in the Policy Payments Account shall not be invested by the Paying Agent and may not be applied to satisfy any costs, expenses or liabilities of the Paying Agent. Any funds remaining in the Policy Payments Account following a Payment Date shall promptly be remitted to the Bond Insurer. (h) The Bond Insurer shall be provided with all reports, notices and correspondence to be delivered under the terms of the Bond Ordinance. (i) The notice address of the Bond Insurer is: Financial Security Assurance Inc., 350 Park Avenue, New York, New York 10022-6022, Attention: Managing Director-- Surveillance; Re: Policy No. Telephone: (212) 826-0100; Telecopier: (212) 339-3529. In each case in which notice or other communication refers to an Event of Default, then a copy of such notice or other communication shall also be sent to the attention of General Counsel and shall be marked to indicate "URGENT MATERIAL ENCLOSED." G) The Bond Insurer shall be deemed to be a third party beneficiary to the Bond Ordinance. (k) Notwithstanding the agreement of the City to replenish any draws on the Reserve Fund for the Series 2001 Bonds within 60 months following such draw, in the event of any draw on the Reserve Fund for the Series 2001 Bonds, the City hereby agrees to restore the funds on deposit in the Reserve Fund to the Reserve Requirement for the Series 2001 Bonds within twelve (12) months of the date of such draw as required in the Commitment. SECTION 3. In addition to the above covenants and agreements with the Bond Insurer, the Bond Ordinance is hereby supplemented by providing that the Additional Bonds test set forth in Section 20(F)(1)(c) shall require a coverage ratio of 135% rather than 120%, and following such Resolution NO. 01-39 4 supplement, Section 20(F)( 1) of the Bond Ordinance shall read as follows (deleted or supplemented language shown with a strikethrough): (I) There shall have been obtained and filed with the Clerk a certificate of the Finance Director stating: (a) that the books and records of the Issuer relative to the Pledged Revenues have been reviewed; (b) setting forth the amount of the adjusted Pledged Revenues derived for any consecutive twelve (12) months out of the preceding twenty-four (24) months preceding the date of issuance of the proposed Additional Parity Obligations adjusted as herein below provided; (c) that the aggregate amount of such Pledged Revenues, as adjusted pursuant to paragraph 2 below, is equal to not less than UQ.% 135% (or such other percentage as may be set forth in a subsequent resolution of the Issuer adopted prior to the issuance of the Series 2001 Bonds) of the Maximum Bond Service Requirement becoming due in any Bond Year thereafter on (i) all Bonds issued under this Ordinance then Outstanding, and (ii) on the Additional Parity Obligations with respect to which such certificate is made. SECTION 4. In conformity with the Commitment, the City further agrees, that in connection with the defeasance of any Series 2001 Bonds in accordance with the requirements of Section 24 of the Bond Ordinance, Acquired Obligations shall be restricted to (1) cash; (2) non-callable direct obligations of the United States of America ("Treasuries"); (3) evidences of ownership of proportionate interests in future interest and principal payments on Treasuries held by a bank or trust company as custodian, under which the owner of the investment is the real party in interest and has the right to proceed directly and individually against the obligation and the underlying Treasuries are not available to any person claiming through the custodian or to whom the custodian may be obligated; or (4) pre-refunded municipal obligations rated "AAA" and "Aaa" by S&P and Moody's, respectively, or any combination thereof, unless the Bond Insurer otherwise approves. In connection with any such defeasance, the City shall cause to be delivered (i) a report of an independent firm of nationally recognized certified public accountants or such other accountant as shall be acceptable to the Bond Insurer verifying the sufficiency of the escrow established to pay the Series 2001 Bonds in full on the maturity or earlier redemption date, (ii) an escrow deposit agreement (which shall be acceptable in form and substance to the Bond Insurer, and (iii) an opinion of nationally recognized bond counsel to the effect that the Series 200 I Bonds are no longer "Outstanding" under the Bond Ordinance; each verification report and defeasance opinion shall be acceptable in form and substance and addressed to the City, the Paying Agent for the Series 2001 Bonds and the Bond Insurer. In the event a forward purchase agreement will be employed in the refunding, such agreement shall be subject to the approval of the Bond Insurer and shall be accompanied by such opinions of counsel as may be required by the Bond Insurer. Series 2001 Bonds shall be deemed "Outstanding" under the Bond Ordinance unless and until they are in fact paid and retired or the above criteria are met. Resolution NO. 01-39 5 SECTION 5. This resolution shall become effective immediately upon its adoption. PASSED AND ADOPTED this 18th day of October , 2001. Brian 1. Aungs Mayor-Com Issioner Approved as to form: Attest: till Pamela K. Akin City Attorney Resolution NO. 01-39 6 EXHIBIT A MUNICIPAL BOND INSURANCE COMMITMENT Resolution No. 01-39 H '. ,~ FSA MUNICIPAL BOND INSURANCE COMMITMENT FINANCIAL SECURITY ASSURANCE INC. ("Financial Security" or "FSA") hereby commits to issue its Municipal Bond Insurance Policy (the "Policy") relating to whole maturities of the debt obligations described in Exhibit A attached hereto (the "Bonds"), subject to the terms and conditions set forth in this Commitment, of which Commitment Exhibit A is an integrated part, or added hereto (the "Commitment"). To keep this Commitment in effect after the Expiration Date set forth in Exhibit A attached hereto, a request for renewal must be submitted to Financial Security prior to such Expiration Date. Financial Security reserves the right to refuse wholly or in part to grant a renewal. THE MUNICIPAL BOND INSURANCE POLICY SHALL BE ISSUED IF THE FOLLOWING CONDITIONS ARE SATISFIED: 1. The documents to be executed and delivered in connection with the issuance and sale of the Bonds shall not contain any untrue or misleading statement of a material fact and shall not fail to state a material fact necessary in order to make the information contained therein not misleading. 2. No event shall occur which would pennit any underwriter or purchaser of the Bonds, otherwise required, not to be required to underwrite or purchase the Bonds on the date scheduled for the issuance and delivery thereof ("Closing Date"). 3. There shall be no material change in or affecting the Bonds (including, without limitation, the security for the Bonds) or the financing documents or the Official Statement (or any similar disclosure documents) to be executed and delivered in connection with the issuance and sale of the Bonds from the descriptions or fonns thereof approved by Financial Security. 4. The Bonds shall contain no reference to Financial Security, the Policy or the insurance evidenced thereby except as may be approved by Financial Security. BOND PROOFS SHALL HAVE BEEN APPROVED BY FINANCIAL SECURITY PRIOR TO PRINTING. The Bonds shall bear a Statement of Insurance in the fonn provided by Financial Security. 5. Financial Security shall be provided with: (a) Executed copies of all financing documents, any disclosure document (the "Official Statement") and the various legal opinions delivered in connection with the issuance and sale of the Bonds (which shall be dated the Closing Date and which, except for the opinions of counsel relating to the adequacy of disclosure, shall be addressed to Financial Security or accompanied by a letter of such counsel pennitting Financial Security to rely on such opinion as if such opinion were addressed to Financial Security), including, without limitation, the approving opinion of bond cOLinsel. Each of the foregoing shall be in fonn and substance acceptable to Financial Security. Copies of all drafts of such documents prepared subsequent to the date of the Commitment (blacklined to reflect all revisions from oreviouslv reviewed drafts) shall be furnished to Financial Security for review and approval. Final drafts of such documents shall be provided to Financial Security at least three (3) business days prior to the issuance of the Policy, unless Financial Security shall agree to some shorter period. (b) Evidence of wire transfer in federal funds of an amount equal to the insurance premium, unless alternative arrangements for the payment of such amount acceptable to Financial Security have been made prior to the delivery date of the Bonds. (c) Standard & Poor's Ratings Services, Moody's Investors Service Inc. and Fitch IBCA, Inc. will separately present bills for their respective fees relating to the Bonds. Payment of such bills should be made directly to such rating agency. Payment of the rating fee is not a condition to release of the Policy by Financial Security. 6. Promptly after the closing of the Bonds, Financial Security shall receive three completed sets of executed documents (one original and either (i) two photocopies (each unbound) or (ii) three compact discs). 7. The Official Statement shall contain the language provided by Financial Security and only such other references to Financial Security or otherwise as Financial Security shall supply or approve. FINANCIAL SECURITY SHALL BE PROVIDED WITH SIX PRINTED COPIES OF THE OFFICIAL STATEMENT. r't, EXHIBIT A MUNICIPAL BOND INSURANCE COMMITMENT TERM SHEET Issuer: City of Clearwater, Florida Principal Amount of Bonds Insured: Not to Exceed $11,700,000 Name of Bonds Insured: Improvement Revenue Refunding Bonds, Series 2001 Date of Commitment: October 11, 2001 Expiration Date: Friday, December 14, 2001* Premium: (a) .34% of total debt service on the Bonds Insured in the event the Reserve Fund is funded at closing in an amount equal to the Reserve Requirement or (b) .38% of total debt service on the Bonds Insured in the event the Reserve Fund is not funded at closing in an amount equal to the Reserve Requirement. Additional Conditions: 1. The amortization schedule for, and final maturity date of, the Bonds shall be acceptable to Financial Security. 2. See attached Exhibits B - D. 3. The test for the issuance of Additional Parity Obligations as set forth in Section 20 (F) (1) of the Ordinance (as hereafter defined) shall state that the aggregate amount of Pledged Revenues is equal to not less than 135% of pro forma Maximum Annual Debt Service. 4. In the event the Reserve Fund is not funded to the Reserve Requirement at closing, the Ordinance shall require funding of the Reserve Fund to the Reserve Requirement from all Public Service Tax revenues in the event that at any time coverage of Maximum Annual Debt Service from Public Service Tax revenues received in a Bond Year (or Rscal Year) shall be less than 1.25 times (a "Funding Evenr). In the event that coverage from Public Service Tax revenues for each of two (2) consecutive Bond Years (or FISCal Years) equals or is greater than Maximum Annual Debt Service, the Funding Event shall be deemed cured. Coverage of Maximum Annual Debt Service shall be calculated at least annually. 5. In the event of a draw on the Reserve Fund, any defICiency shall be replenished within a 12 month period. 6. The Bonds Insured may only be defeased in accordance with the provisions of (g) in Exhibit C herein. L:\LEGAL\MUNIS\ST A TES\Fl\47845_G.doc Exhibit A Page 2 of 2 Terms used in this Commitment and not otherwise defined shall have the meanings ascribed to them in the document authorizing the issuance of and setting forth the terms for the Bonds described above (the "Ordinance"). FINANCIAL SECURITY ASSURANCE INC. ~~ Authorized Officer "To keep the Commitment in effect to the Expiration Date set forth above, Rnancial Security must receive a duplicate of this Exhibit A executed by an appropriate officer by the earlier of the date on which the Official Statement containing disclosure language about Financial Security is circulated and ten days from the date of this Commitment. The undersigned agrees that if the Bonds are insured by a policy of municipal bond insurance, such insurance shall be provided by Financial Security in accordance with the terms of the Convnitment. CITY OF CLEARWATER, FLORIDA Authorized Officer L:\LEGAL\MUNIS\ST A TES\FL\47845_G.doc EXHIBIT B Page 1 of 1 STANDARD OPINION REQUIREMENTS 1. Each of the Ordinance, the Escrow Agreement and any other transaction documents (the "Related Documents") is a legal, valid and binding obligation of the parties thereto, has been duly authorized, executed and delivered and is enforceable in accordance with its terms. 2. There does not exist any action, suit, proceeding or investigation pending, or to the best of such counsel's knowledge, threatened which if adversely determined, could (i) materially adversely affect (a) the financial position of the Issuer, (b) the ability of the Issuer to perform its obligations under the Related Documents, (c) the security for the Bonds, or (d) the transactions contemplated by the Related Documents or (ii) impair the ability of the Issuer to levy and collect the Public Service Tax. 3. Nothing has come to the attention of disclosure counsel which would cause them to believe that the final Official Statement (excluding intormationprovided by Rnancial Security), as of its date and the date of issuance of the Policy, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. 4. The Public Service Tax has been duly and validly authorized in accordance with the provisions of Florida law. L:\LEGAL\MUNIS\ST A TES\FL\47845_G.doc EXHIBIT C Page 1 of 4 ORDINANCE REQUIREMENTS The Ordinance shall incorporate the following requirements either in one section or article entitled "Provisions Relating to Bond Insurance" (or the like), the provisions of which section or article shall be stated In the Ordinance to govern. notwithstanding anything to the contrary set forth In the Ordinance, or individually in the appropriate sections: (a) "Insurance Policy" shall be defined as follows: "the insurance policy issued by the Bond Insurer guaranteeing the scheduled payment of principal of and interest on the Bonds when due". "Insurer" shall be defined as follows: "Financial Security AssurarJCe Inc., a New York stock insurance company, or any successor thereto or assignee thereof". (b) The Insurer shall be deemed to be the ~ holder of the Bonds insured by it for the purpose of exercising any voting right or privilege or giving any consent or direction or taking any other action that the hofdersof the Bonds insured by it are entitled to take pursuant to the Ordinance. The Trustee shall take no action except with the consent, or at the direction, of Rnancial Security. The maturity of Bonds insured by the Insurer shall not be accelerated without the consent of the Insurer. . (c) The Insurer shall be included as a third party beneficiary to the Ordinance. (d) No modification, amendment or supplement to the Ordinance or any other transaction document (each a "Related Document") may become effective except upon obtaining the prior written consent of the Insurer. (e) Copies of any modification or amendment to the Ordinance or any other Related Document shall be sent to Standard & Poor's Ratings Services and Moody's Investors Service, Inc. at least 10 days prior to the effective date thereof. (f) The rights granted to the Insurer under the Ordinance or any other Related Document to request, consent to or direct any action are rights granted to the Insurer in consideration of its issuance of the Insurance Policy. Any exercise by the Insurer of such rights is merely an exercise of the Insurer's contractual rights and shall not be construed or deemed to be taken for the benefit or on behalf of the Bondholders nor does such action evidence any position of the Insurer, positive or negative, as to whether Bondholder consent is required in addition to consent of the Insurer. (g) Only (1) cash, (2) non-callable direct obligations of the United States of America ("Treasuries"), (3) evidences of ownership of proportionate interests in future interest and principal payments on Treasuries held by a bank or trust company as custodian, under which the owner of the investment is the real party in interest and has the right to proceed directly and individually against the obligor and the underlying Treasuries are not available to any person claiming through the custodian or to whom the custodian may be .obligated or (4) pre-refunded municipal obligations rated "AAA" and "Aaa" by S&P and Moody's, respectively, or any combination thereof, shall be authorized to be used to effect defeasance of the Bonds unless the Insurer otherwise approves. To accomplish defeasance the Issuer shall cause to be delivered (i) a- report of an il'ldependentfirm of nationally recognized certified public accountants or such other accountant as shall be acceptable to the Insurer (" Accountanr) verifying the suffIciency of the escrow established to pay: the Bonds in full on the maturity or redemption date ("Verification"), (Ii) an Escrow Deposit Agreement (which shall be acceptable in form and substance to the Insurer), and (iii) an opInIon of nationally recognized bond counsel to the effect that the Bonds are no longer "Outstanding- under the Ordinance; each Verification and defeasance opinion shall be acceptable in form and substance, and addressed, to the Issuer, the Trustee and the Insurer. In the event a forward purchase agreement win be employed in the refunding, such agreement shall be subject to the approval of the Insurer and shall be accompanied by such opinions of counsel as may be required by the Insurer. The Insurer shall be provided with final drafts of the above-referenced documentation not less than five business days prior to the funding of the escrow. L:\LEGAL\MUNIS\ST A TEsv=L\47845_G.doc EXHIBIT C Page 2 of 4 Bonds shall be deemed "Outstanding" under the Ordinance unless and until they are in fact paid and retired or the above criteria are met. (h) Amounts paid by the Insurer under the Insurance Policy shall not be deemed paid for purposes of the Ordinance and shall remain Outstanding and continue to be due and owing until paid by the Issuer in accordance with the Ordinance. (i) Claims Upon the Insurance Policy and Payments by and to the Insurer. If, on the third business day prior to the related scheduled interest payment date or principal payment date or the date to which Bond maturity has been accelerated ("Payment Date") there is not on deposit with the Trustee, after making all transfers and deposits required under the Ordinance, moneys sufficient to pay the principal of and interest on the Bonds due on such Payment Date, the Trustee shall give notice to the Bond 'Insurer and to its designated agent (if any) (the "Insurer's Fiscal Agent") by telephone or telecopy of the amount of such deficiency by 12:00 noon, New York City time, on such Business Day. If, on the second Business Day prior to the related Payment Date, there continues to be a deficiency in the amount available to pay the principal of and interest on the Bonds due on such Payment Date, the Trustee shall make a claim under the Insurance Policy and give notice to the Insurer and the Insurer's Fiscal Agent (if any) by telephone of the amount of such deficiency, and the allocation of such deficiency between the amount required to pay interest on the Bonds and the amount required to pay principal of the Bonds, confirmed in writing to the Insurer and the Insurer's Fiscal Agent by 12:00 noon, New York City time, on such second Business Day by filling in the form of Notice of Claim and Certificate delivered with the Insurance Policy. In the event the claim to be made is for a mandatory sinking fund redemption installment, upon receipt of the moneys due, the Trustee shall authenticate and deliver to affected Bondholders who surrender their Bonds a new Bond or Bonds in an aggregate principal amount equal to the unredeemed portion of the Bond surrendered. The Trustee shall designate any portion of payment of principal on Bonds paid by the Insurer, whether by virtue of mandatory sinking fund redemption, maturity or other advancement of maturity, on its books as a reduction in the principal amount of Bonds registered to the then current Bondholder, whether DTC or its nominee or otherwise, and shall issue a replacement Bond to the Insurer, registered in the name of Financial Security Assurance Inc., in a principal amount equal to the amount of principal so paid (without regard to authorized denominations); provided that the Trustee's failure to so designate any payment or . issue any replacement Bond shall have no effect on the amount of principal or interest payable by the Issuer on any Bond or the subrogation rights of the Insurer. The Trustee shall keep a complete and accurate record of all funds deposited by the Insurer into the Policy Payments Account and the allocation of such funds to payment of interest on and principal paid in respect of any Bond. The Insurer shall have the right to inspect such records at reasonable times upon reasonable notice to the Trustee. Upon payment of a claim under the Insurance Policy the Trustee shall establish a separate special purpose trust account for the benefit of Bondholders referred to herein as the .Policy Payments Accounr and over which the Trustee shall have exclusive control and sole right of withdrawal. The Trustee shall receive any amount paid under the Insurance Policy in trust on behalf of Bondholders and shall deposit any such amount in the Policy Payments Account and distribute such amount only for purposes of making the payments for which a claim was made. Such amounts shall be disbursed by the Trustee to Bondholders in the same manner as principal and interest payments are to be made with respect to the Bonds under the sections hereof regarding payment of Bonds. It shall not be necessary for such payments to be made by checks or wire transfers separate from the check or wire transfer used to pay debt service with other funds. available to make such payments. . .. . Funds held in the Policy Payments Account shall not be invested by the Trustee and may not be applied to satisfy any costs, expenses or liabilities of the Trustee. Any funds remaining in the Policy Payments Account following a Bond payment date shall promptly be remitted to the Insurer. L:\LEGAL\MUNIS\ST A TES\Fl\47845_G.doc EXHIBIT C Page 3 of 4 m The Insurer shall, to the extent it makes any payment of principal of (or, in the case of Capital Appreciation Bonds, accreted value) or interest on the Bonds, become subrogated to the rights of the recipients of such payments in accordance with the terms of the Insurance Policy. (k) . The Issuer shall payor reimburse the Insurer any and all charges, fees, costs and expenses which the Insurer may reasonably payor incur in connection with (i) the administration, enforcement, defense or preservation of any rights or security in any Related Document; (ii) the pursuit of any remedies under the Ordinance or any other Related Document or otherwise afforded by law or equity, (iii) any amendment, waiver or other action with respect to, or related to, the Ordinance or any other Related Document whether or not executed or completed, (iv) the violation by the Issuer or the Obligor of any law, rule or regulation, or any judgment, order or decree applicable to it or (v) any litigation or other dispute in connection with the Ordinance or any other Related Document or the transactions contemplated thereby, other than amounts resulting from the failure of the Insurer to honor its obligations under the Insurance Policy. The Insurer reserves the right to charge a reasonable fee as a condition to executing any amendment, waiver or consent proposed in respect of the Ordinance or any other Related Document. (I) The Insurer shall be entitled to pay principal (or, in the case of Capital Appreciation Bonds, accreted value) or interest on the Bonds that shall become Due for Payment but shall be unpaid by reason of Nonpayment by the Issuer (as such terms are defined in the Insurance Policy) and any amounts due on the Bonds as a result of acceleration of the maturity thereof in accordance with the Ordinance, whether or not the Insurer has received a Notice of Nonpayment (as such terms are defined in the Insurance Policy) or a claim upon the Insurance Policy. (m) .The notice address of the Insurer is: Financial Security Assurance Inc., 350 Park Avenue, New York, New York 10022-6022, Attention: Managing Director - Surveillance; Re: Policy No. Telephone: (212) 826-0100; Telecopier: (212) 339-3529. In each case in which notice or other communication refers to an Event of Default, then a copy of such notice or other communication shall also be sent to the attention of General Counsel and shall be marked to indicate .URGENT MATERIAL ENCLOSED." (n) The Insurer shall be provided with the following information: (i) Annual audited financial statements within 120 days after the end of the Issuer's fiscal year and the Issuer's annual budget within 30 days after the approval thereof; (ii) Notice of any draw upon the Debt Service Reserve Fund within two Business Days after knowledge thereof other than (i) withdrawals of amounts in excess of the Debt Service Reserve Requirement and (ii) withdrawals in connection with a refunding of Bonds; (iii) Notice of any default known to the Trustee within five Business Days after knowledge thereof; . (iv) Prior notice of the advance refunding or redemption of any of the Bonds, including the principal amount, maturities and CUSIP numbers thereof; (v) Notice of the resignation or removal of the Trustee, Paying Agent and Bond Registrar and the appointment of, and acceptance of duties by, any successor thereto; (vi) Notice of the commencement of any proceeding by or against the Issuer or the Obligor commenced under the United States Bankruptcy Code or any other applicable bankruptcy, insolvency, receivership, rehabilitation or similar law (an "Insolvency Proceeding"); (vii) Notice of the making of any claim in connection with any Insolvency Proceeding seeking the avoidance as a preferential transfer of any payment of principal of, or interest on, the Bonds; (viii) A full original transcript of all proceedings relating to the execution of any amendment or supplement to the Related Documents; and L:\LEGAL\MUNIS\ST A TES\FL\47845_ G.doc EXHIBIT C Page 4 of 4 (ix) All reports, notices and correspondence to be delivered under the terms of the Related Documents. (n) The Issuer agrees to take such action (including filing UCC financing statements) as is necessary from time to time to perfect or to otherwise preserve the priority of the pledge of the Trust Estate under applicable law. (0) Notwithstanding satisfaction of other conditions to the issuance of additional bonds contained in the Resolution, no such issuance may occur should any Event of Default (or any event which, once all notice or grace periods have passed, would constitute an Event of Default) have occurred and be continuing unless such default shall be cured upon such issuance. (p) No contract shall be entered into nor any action taken by which the rights of the Insurer or security for or . sources of payment of the Bonds may be impaired or prejudiced except upon obtaining the prior written consent of the Insurer. L:\LEGAL\MUNIS\ST A TES\FL\47845_G.doc .., EXHIBIT 0 Page 1 of 1 REFUNDING REQUIREMENTS 1. The defeasance of the Refunded Bonds shall be accomplished by the deposit solely of cash or direct non- callable obligations of the United States of America ("Direct Obligations") unless otherwise approved by Financial Security. The document providing for the establishment and maintenance of the escrow to provide such defeasance (the "Escrow Deposit Agreement") shall be in form and substance acceptable to Financial Security. Modification of the Escrow Deposit Agreement shall not be permitted unless Financial Security shall consent to such modification. 2. In the event a forward purchase agreement ("FPC") will be employed in the refunding, such agreement shall be subject to the approval of Financial Security and shall be accompanied by opinions of counsel as required by Financial Security. Financial Security shall provide its requirements for FPCs upon request. 3. At least three business days prior to the proposed date for delivery of the Policy, Financial Security shall receive for its review and approval (i) the verification letter, of which Financial Security shall be an addressee, by an independent firm of certified public accountants which is either nationally recognized or otherwise acceptable to Financial Security, of the adequacy of the escrow established to provide for the payment of the Refunded Bonds in accordance with the terms and provisions of the Escrow Deposit Agreement (the "Original Verification")", (ii) copies of the subscription forms for the purchase and issue of U.S. Treasury Securities - State and Local Govemment Series which have been stamped as received by the Bureau of Public Debt, (iii) the form of an opinion of Bond Counsel addressed to Financial Security (or a reliance letter relating thereto) to the effect that, upon the making of the required deposit to the escrow, the legal defeasance of the Refunded Bonds shall have occurred and (iv) the form of an opinion of Bond Counsel addressed to Financial Security (or a reliance letter relating thereto) to the effect that the Escrow Deposit Agreement is a valid and binding obligation of the parties thereto enforceable in accordance with its terms. An executed copy of each of such opinion and reliance letter, if applicable, shall be forwarded to Financial Security together with the opinion requested by Condition 5 hereof. " In the event an FPC is employed the Original Verification should also verity the adequacy of the FPC securities to pay the portion of debt service on the Refunded Bonds to which the FPC relates. L:\LEGAL\MUNIS\ST A TES\FL\47845_ G.doc ,,,"'li'-;