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HomeMy WebLinkAboutR-03-49RESOLUTION NO. R-03-49 RESOLUTION OF CITY COUNCIL OF TIlE CITY OF SEBASTIAN, FLORIDA AMENDING AND SUPPLEMENTING RESOLUTION NO. 1t,0348 OF THE CITY; AUTHORIZING THE ISSUANCE OF NOT TO EXCEED $6,400,000 IN AGGREGATE PRINCIPAL AMOUNT OF STORMWATER UTILITY REVENUE BONDS, SERIES 2003 IN ORDER TO FINANCE THE ACQUISITION, CONSTRUCTION AND RECONSTRUCTION OF CERTAIN CAPITAL IMPROVEMENTS IN AND FOR THE CITY, TOGETHER WITH CAPITALIZED INTEREST, IF ANY, AND CERTAIN COSTS ASSOCIATED THEREWITH; PROVIDING FOR THE RIGHTS OF THE HOLDERS OF SUCH BONDS; PROVIDING FOR PAYMENT OF PRINCIPAL OF, PREMIUM, IF ANY, AND INTEREST ON SUCH BONDS; MAKING CERTAIN OTHER COVENANTS AND AGREEMENTS IN CONNECTION WITH THE ISSUANCE OF SUCH BONDS; PROVIDING CERTAIN TERMS AND DETAILS OF SUCH BONDS, INCLUDING AUTHORIZING A NEGOTIATED SALE OF SAID BONDS AND THE EXECUTION AND DELIVERY OF A BOND PURCHASE CONTRACT WITH RESPECT THERETO; ESTABLISHING A BOOK-ENTRY SYSTEM OF REGISTRATION FOR THE BONDS; APPOINTING THE PAYING AGENT AND REGISTRAR WITH RESPECT TO SAID BONDS; AUTHORIZING THE USE OF A PRELIMINARY OFFICIAL STATEMENT AND THE EXECUTION AND DELIVERY OF A FINAL OFFICIAL STATEMENT WITH RESPECT THERETO; AUTHORIZING THE CITY MANAGER TO TAKE CERTAIN ACTIONS AND TO EXECUTE AND DELIVER CERTAIN DOCUMENTS; PROVIDING FOR SEVERABILITY; AND PROVIDING AN EFFECTIVE DATE. BE IT RESOLVED BY CITY COUNCIL OF THE CITY OF SEBASTIAN, FLORIDA, as follows: SECTION 1. DEFINITIONS. When used in this Supplemental Resolution, the terms defined in the Authorizing Resolution (herein defined) shall have the meanings therein stated, except as such defirdtions may be hereinafter amended or defined. SECTION 2. FINDINGS. It is hereby found and determined that: (A) On October 22, 2003, the City Council (the "City Council") of the City of Sebastian, Florida (the "Issuer") duly adopted Resolution No. R-03-48 (the "Authorizing Resolution"), for the purposes described therein, authorizing, among other things, the issuance of certain Stormwater Utility Revenue Bonds of the Issuer. The Authorizing Resolution, as further amended and supplemented hereby, is referred to herein as the "Resolution." 03) The Issuer hereby determines it to be in the best interests of the Issuer and its residents to issue the Series 2003 Bonds pursuant to the terms o£the Resolution in order to construct the Init/alProject. (C) Due to the present volatility of the market for tax-exempt obligations such as the Series 2003 Bonds and the complexity of the transactions relating to such Series 2003 Bonds, it is in the best interest of the Issuer to sell the Series 2003 Bonds by a negotiated sale, allowing the Issuer to enter the market at the most advantageous time, rather than at a specified advertised date, thereby permitting the Issuer to obtain the best possible price and interest rate for the Series 2003 Bonds. (D) Kirkpatrick Pettis (the "Underwriter") has offered to purchase the entire principal amount of the Series 2003 Bonds from the Issuer and has submitted a Bond Purchase Contract, the form of which is attached hereto as Exhibit A (the "Purchase Contract") expressing the terms and conditions of such offer, and the Issuer does hereby find and determine that it is in the best financial interest of the Issuer and its residents that the terms expressed in the Purchase Contract be accepted by the Issuer, subject, however, to the conditions for award set forth in Section 6 hereof. (E) Inasmuch as the City Council desires to sell the Series 2003 Bonds at the most advantageous time and not wait for a scheduled City Council meeting, so long as the herein described parameters are met, the Issuer hereby determines to delegate the award and sale of the Series 2003 Bonds to the City Manager within such parameters. (F) The Issuer hereby certifies that it is not in default in perfonuing any of the covenants and obligations assumed under the Resolution and all of the covenants contained in the Resolution shall apply to the Series 2003 Bonds. (G) The Initial Project is of the nature and type that is beneficial to, or available to, all of the citizens of the Issuer. (H) The Resolution provides that the Series 2003 Bonds shall mature on such dates and in such amounts, shall bear interest at such rates, shall be payable in such places and shall be subject to such redemption provisions as shall be determined by Supplemental Resolution adopted by the Issuer; and it is now appropriate that the Issuer set forth the parameters and mechanism to determine such terms and details, which terms and details shall be set forth in the hereinafter defined Purchase Contract. (I) The principal of and interest on the Series 2003 Bonds and all required sinldng fund, reserve and other payments shall be limited obhgations of the Issuer, payable solely from the Pledged Funds (as defined in the Resolution) on parity in all respects with any Additional Bonds that may be subsequently issued pursuant to the Resolution, all to the extent provided in the Resolution. The Series 2003 Bonds shall not constitute a general obhgation, or a pledge of the faith, credit or taxing power of the Issuer, the State of Florida, or any pohtical subdivision thereof, within the meaning of any constitutional or statutory provisions. Neither the State of Florida, nor any pohtical subdivision thereof, nor the Issuer shall be obhgated (i) to exercise its ad valorem taxing power in any form on any real or personal property of or in the Issuer to pay the principal of the Series 2003 Bonds, the interest thereon, or other costs incidental thereto or (ii) to pay the same from any other funds of the Issuer except from the Pledged Funds, in the manner provided in the Resolution. SECTION 3. AUTHORITY FOR THIS SUPPLEMENTAL RESOLUTION. This Supplemental Resolution is adopted pursuant to the provisions of the Act, the Authorizing Resolution and other applicable provisions of law. SECTION 4. AUTHORIZATION OF THE INITIAL PROJECT. The Issuer hereby authorizes the acquisition and construction of the Initial Project and, upon the satisfaction in all respects of the conditions set forth in Section 6 hereof, the financing thereof with proceeds of the Series 2003 Bonds. SECTION 5. AUTHORIZATION AND DESCRIPTION OF THE SERIES 2003 BONDS. The Issuer hereby authorizes the issuance of a Series of Bonds in the aggregate principalamount of not exceeding $6,400,000 to be known as the "City of Sebastian, Florida Stormwater Utility Revenue Bonds, Series 2003", which Series 2003 Bonds are issued for the principal purpose of financing the Costs of the acquisition and construction of the Initial Project. The aggregate principal amount of the Series 2003 Bonds to be issued pursuant to the Resolution shall be determined by the City Manager provided such aggregate principal amount does not exceed $6,400,000. The Series 2003 Bonds shall be dated as of November 1, 2003 or such other date as the City Manager may determine, shall be issued in the form of fully registered Bonds in the denomination of $5,000 or any integral multiple thereof, shall be numbered consecutively from one upward in order of maturity preceded by the letter "R", shall bear interest from the dated date determined therefor, payable semi-annually, on October 1 and April 1 ofeachyear (the "Interest Payment Date"), commencing on April 1, 2004 or such other date as may be determined by the City Manager. The principal of, or Redemption Price, as apphcable, of the Series 2003 Bonds, shall be payable at the designated corporate trust office of Bank One Trust Company, National Association, Columbus, Ohio, or its successors or assigns, as Paying Agent, upon presentation, when due, of the Series 2003 Bonds. Payment of interest on the Series 2003 Bonds shall be made to the owner thereof and shall be paid by 3 check or draf~ of Bank One Trust Company, National Association, Columbus, Ohio, or its successors or assigns, as Paying Agent to the Holder in whose name the Series 2003 Bond is registered at the close of business on the 15th day of the calendar month (whether or not a business day) next preceding the Interest Payment Date, or, at the option of the Paying Agent, and at the request and expense of such Holder, by bank wire transfer for the account of such Holder. All payments shall be made in accordance with and pursuant to the terms of the Resolution and the Series 2003 Bonds and shall be payable in any coin and currency of the United States of America which, at the time of payment, is legal tender for the payment of pubhc or private debts. The Series 2003 Bonds shall bear interest at such rotes and yields, shall mature on April 1 of each of the years and in the principal amounts corresponding to such years, and shall have such redemption provisions as detenmned by the City Manager subject to the conditions set forth in Section 6 hereof. All of the terms of the Series 2003 Bonds will be included in a Purchase Contract which shall be in substantially the form attached hereto and made a part hereof as Exhibit A (the "Purchase Contract"). The City Manager is hereby authorized to execute the Purchase Contract in substantially the form attached hereto as Exhibit A with such modifications as he deems appropriate upon satisfaction of the conditions described in Section 6 hereof. Execution of the Purchase Contract bythe City Manager shall be conclusive evidence of approval of the terms and details of the Series 2003 Bonds and any modifications to the Purchase Contract provided therein. SECTION 6. CONDITIONS TO EXECUTION OF PURCHASE CONTRACT. The Purchase Contract shall not be executed by the City Manager until such time as all of the following conditions have been satisfied: (A) Receipt by the City Manager of a written offer to purchase the Series 2003 Bonds by the Underwriter substantially in the form of the Purchase Contract attached hereto as Exhibit A, said offer to provide for or demonstrate, among other things, (i) not exceeding $6,400,000 initial aggregate principal amount of Series 2003 Bonds, (ii) an underwriting discount (including management fee and expenses) not in excess of one point two percent (1.2%) of the par amount o f Series 2003 Bonds, (ih') a tree interest cost for the Series 2003 Bonds of not more than sixpercent (6.0%) per annum, and (iv) the maturities of the Series 2003 Bonds, with the final maturity being not later than April 1, 2028. 03) Receipt by the City Manager of a disclosure statement and a tmttvin-bonding statement of the Underwriter dated the date of the Purchase Contract and complying with Section 218.385, Florida Statutes. ( C ) Receipt by the City Manager of a good faith deposit from the Underwriter in an amount not less than 1% of the par amount of the Series 2003 Bonds in accordance with the Purchase Contract. Upon satisfaction of all the requirements set forth in this Section 6, the City Manager is authorized to execute and deliver the Purchase Contract contaimng terms complying with the provisions of this Section 6. 4 SECTION 7. REDEMPTION PROVISIONS FOR SERIES 2003 BONDS. The Series 2003 Bonds may be redeemed prior to the/r respective maturities from any moneys legally available therefor, upon notice as provided in the Resolution, upon the terms and provisions as determined by the City Manager and set forth in the Purchase Contract subject to the conditions contained in Section 6 hereof. SECTION 8. FULL BOOK-ENTRY. The Series 2003 Bonds shall be initially issued in the form of a separate single certificated fully registered Series 2003 Bond for each of the maturities of the Series 2003 Bonds. Upon initial issuance, the ownership of each such Bond shall be registered in the registration books kept by the Registrar in the name of Cede & Co., as nominee of The Depository Trust Company ("DTC"). As long as the Series 2003 Bonds are registered in the name of Cede & Co., all of the Outstanding Series 2003 Bonds shall be registered in the registration books kept by the Registrar in the name of Cede & Co., all payments of principal on the Series 2003 Bonds shall be made by the Paying Agent by check or draft or by bank wire transfer to Cede & Co., as Holder of the Series 2003 Bonds, upon presentation of the Series 2003 Bonds to be paid, to the Paying Agent. With respect to Series 2003 Bonds registered in the registration books kept by the Registrar in the name of Cede & Co., as nominee of DTC, the Issuer, the Registrar and the Paying Agent shall have no responsibility or obligation to any direct or indirect participant in the DTC book-entry program (the "Participants"). Without limiting the immediately preceding sentence, the Issuer, the Registrar and the Paying Agent shall have no responsibility or obligation with respect to (A) the accuracy of the records of DTC, Cede & Co. or any Participant with respect to any ownership interest on the Series 2003 Bonds, CB) the dehvery to any Participant or any other Person other than a Bondholder, as shown in the registration books kept by the Registrar, of any notice with respect to the Series 2003 Bonds, including any notice of redemption, or (C) the payment to any Participant or any other Person, other than a Bondholder, as shown in the registration books kept by the Registrar, of any amount with respect to principal of, Redemption Price, if any, or interest on the Series 2003 Bonds. The Issuer, the Registrar and the Paying Agent may treat and consider the Person in whose name each Series 2003 Bond is registered in the registration books kept by the Registrar as the Holder and absolute owner of such Bond for the purpose of payment of principal, Redemption Price, if any, and interest with respect to such Bond, for the purpose of giving notices of redemption and other matters with respect to such Bond, for the purpose of registering transfers with respect to such Bond, and for all other purposes whatsoever. The Paying Agent shall pay all principal of, Redemption Price, if any, and interest on the Series 2003 Bonds only to or upon the order of the respective Holders, as shown in the registration books kept by the Registrar, or their respective attorneys duly authorized in writing, as provided herein and all such payments shall be valid and effective to fully satisfy and discharge the Issuer's obligations with respect to payment of principal of, Redemption Price, if any, and interest on the Series 2003 Bonds to the extent of the sum or sums so paid. No Person other than a Holder, as shown in the registration books kept by the Registrar, shall receive a certificated Bond evidencing the obligation of the Issuer to make payments of principal, Redemption Price, if any, and interest pursuant to the provisions of the Resolution. Upon delivery by DTC to the Issuer of written notice to the effect that DTC has determined to substitute a new nominee in place of Cede & Co., and subject to the provisions in the Resolution with respect to transfers during the 15 days next preceding an Interest Date or first mailing o fa notice o fredemption, the words "Cede & Co." in this Supplemental Resolution shall refer to such new nominee of DTC; and upon receipt of such notice, the Issuer shall promptly dehver a copy of the same to the Registrar and the Paying Agent. Upon (A) receipt by the Issuer of written notice fi:om DTC (i) to the effect that a continuation of the requirement that all of the outstanding Series 2003 Bonds be registered in the registration books kept by the Registrar in the name of Cede & Co., as nominee of DTC, is not in the best interest of the beneficial owners of the Series 2003 Bonds or (ii) to the effect that DTC is unable or unwilling to discharge its responsibilities and no substitute depository willing to undertake the functions of DTC hereunder can be found which is willing and able to undertake such functions upon reasonable and customary terms, or (B) determination by the Issuer that such book-entry only system is burdensome or undesirable to the Issuer, the Series 2003 Bonds shall no longer be restricted to being registered in the registration books kept by the Registrar in the name of Cede & Co., as nominee of DTC, but may be registered in whatever name or names Holders shall designate, in accordance with the provisions of the Resolution. In such event, the Issuer shall issue and the Registrar shall authenticate, transfer and exchange the Series 2003 Bonds of like principal amount and maturity, in denominations of $5,000 or any integral multiple thereof to the Holders thereof. The foregoing notwithstanding, until such time as participation in the book-entry only system is discontinued, the provisions set forth in the Blanket Issuer Letter of Representations previously executed by the Issuer and dehvered to DTC shall apply to the payment of principal of, premium, if any, and interest on the Series 2003 Bonds. SECTION 9. APPLICATION OF SERIES 2003 BOND PROCEEDS. The proceeds derived fi:om the sale of the Series 2003 Bonds shall be apphed by the Issuer as follows: (A) An amount equal to the accrued interest, if any, and capitalized interest, if any, on the Series 2003 Bonds shall be deposited to the Interest Account of the Debt Service Fund and shall be used to pay a portion of the interest on the Series 2003 Bonds. 03) A sufficient amount of the Series 2003 Bond proceeds shall be applied to the payment of the premium for any municipal bond insurance policy applicable to the Series 2003 Bonds and to the payment of costs and expenses relating to the issuance of the Series 2003 Bonds. (C) An mnount of the Series 2003 Bond proceeds shall be used to pay the premium of the Reserve Account Insurance Policy approved pursuant to Section 17 hereof. (D) The remainder of the proceeds of the Series 2003 Bonds shall be deposited to the Series 2003 Account of the Construction Fund and apphed to pay the Costs of the Initial Project. SECTION 10. PRELIMINARY OFFICIAL STATEMENT. The Issuer hereby authorizes the diStribution and use of the Preliminary Official Statement in substantially the form attached hereto as Exhibit B in connection with the offering of the Series 2003 Bonds for sale. If between the date hereof and the mailing of the Prelimmry Official Statement, it is necessary to make insertions, modifications or changes in 6 the Preliminary Official Statement, the City Manager, upon the advice of the City Attorney and the Issuer-s Disclosure Counsel, is hereby authorized to approve such insertions, changes and modifications. The City Manager, upon the advice of the City Attorney and the Issuer-s Disclosure Counsel, is hereby authorized to deem the Preliminary Official Statement "final" within the meaning of Rule 15c2-12(b)(1)under the Securities Exchange Act of 1934 in the form as mailed. Execution of a certificate by the City Manager deeming the Preliminary Official Statement "final" as described above shall be conclusive evidence of the approval of any insertions, changes or modifications. SECTION 11. OFFICIAL STATEMENT. Subject in all respects to the satisfaction of the conditions set forth in Section 6 hereof, the form, terms and provisions of the final Official Statement relating to the Series 2003 Bonds shall be substantially as set forth in the Pre'~ Official Statement and shall include all of the specific financial terms of the Series 2003 Bonds; provided, however, the Official Statement shall not be prepared or distributed unless the conditions set forth in Section 6 hereof have been satisfied in all respects. Subject in all respects to the satisfaction of the conditions set forth in Section 6 hereof; the City Manager is hereby authorized and directed to execute and deliver said Official Statement in the name and on behalf of the Issuer, and thereupon to cause such Official Statement to be delivered to the Underwriter with such changes, amendments, modifications, omissions and additions as may be approved by the City Manager, upon the advice of the City Attorney and the Issuer-s Disclosure Counsel. Said Official Statement, including any such changes, amendments, modifications, omissions and additions as approved by the City Manager and the information contained therein are hereby authorized to be used in connection with the sale of the Series 2003 Bonds to the public. Execution by the City Manager of the Official Statement shall be deemed to be conclusive evidence of approval of such changes. SECTION 12. APPOINTMENT OF REGISTRAR AND PAYING AGENT. Subject in all respects to the satisfaction of the conditions set forth in Section 6 hereof, Bank One Trust Company, National Association, and its successors and assi~cs, is hereby appointed Registrar and Paying Agent for the Series 2003 Bonds. The City Manager is hereby authorized to enter into any agreement which may be necessary to effect the transactions contemplated by this Section 12 and by the Authorizing Resolution. SECTION 13. MUNICIPAL BOND INSURANCE. Subject in all respects to the satisfaction of the conditions set forth in Section 6 hereof, the Issuer hereby authorizes the payment of the principal of and interest on the Series 2003 Bonds to be insured pursuant to the financial guaranty insurance policy (the "Bond Insurance Policy") that insures the payment when due of the principal of and interest on the Series 2003 Bonds as provided therein issued by MBIA Insurance Corporation ("MBIA"), a stock insurance company incorporated under the laws of the State of New York. The City Manager and the Clerk are hereby authorized to execute such documents and instruments necessary to cause MBIA to insure the Series 2003 Bonds. With respect to the Series 2003 Bonds, MBIA shall be deemed to be the "Insurer" as such term is used and defined in the Resolution. SECTION 14. PROVISIONS RELATING TO BOND INSURANCE POLICY. Solongas the Bond Insurance Policy issued by MBIA is in full force and effect and MBIA has not defaulted in its payment obligations under the Bond Insurance Pohcy, the Issuer agrees to comply with the following provisions, notwithstanding any provision in the Resolution to the contrary: (A) In the event that, on the second Business Day, and again on the Business Day, prior to the payment date on the Series 2003 Bonds, the Paying Agent has not received sufficient moneys to pay all principal of and interest on the Series 2003 Bonds due on the second following or following, as the case may be, Business Day, the Paying Agent shall immediately notify the Insurer or its designee on the same Business Day by telephone or telegraph, confmued in writing by registered or certified mail, of the amount of the deficiency. 03) If the deficiency is made up in whole or in part prior to or on the payment date, the Paying Agent shall so notify the Insurer or its designee. (C) In addition, if the Paying Agent has notice that any Bondholder has been required to disgorge pa3quents of principal or interest on the Series 2003 Bonds to a trustee in banlm~ptcy or creditors or others pursuant to a final judgrnent by a court of competent jurisdiction that such payment constitutes an avoidable preference to such Bondholder within the meaning of any applicable bankruptcy laws, then the Paying Agent shall notify the Insurer or its designee of such fact by telephone or telegraphic notice, confirmed in writing by registered or certified mail. (D) The paying Agent is hereby irrevocably designated, appointed, directed and authorized to act as an attomey-in-fact for Bondholders of the Series 2003 Bonds as follows: 1. If and to the extent there is a deficiency in amounts required to pay interest on the Series 2003 Bonds, the Paying Agent shall (a) execute and deliver to U.S. Bank Tmst National Association, or its successors under the Policy (the "Insurance Paying Agent"), in form satisfactory to the Insurance Paying Agent, an insmnnent appointing the Insurer as agent for such Bondholders in any legal proceeding related to the payment of such interest and an assignment to the Insurer of the claims for interest to which such deficiency relates and which are paid by the Insurer, (b) receive as designee of the respective Bondholders (and not as Paying Agent) in accordance with the tenor of the Policy payment from the Insurance Paying Agent with respect to the claims for interest so assigned, and (c) disburse the same to such respective Bondholders; and 2. If and to the extent of a deficiency in amounts required to pay principal of the Series 2003 Bonds, the Paying Agent shall (a) execute and deliver to the Insurance Paying Agent in form satisfactory to the Insurance Paying Agent an instrument appointing the Insurer as agent for such Bondholder in any legal proceeding relating to the payment of such principal and an assignment to the Insurer of any of the Series 2003 Bonds surrendered to the Insurance Paying agent of so much of the principal muount thereof as has not previously been paid or for which moneys are not held by the Paying Agent and available for such payment (but such assignment shall be delivered only if payment from the Insurance Paying Agent is received), (b) receive as designee of the respective Bondholders (and not as Paying Agent) in accordance with the tenor of the Policy payment therefor from the Insurance Paying Agent, and (c) disburse the same to such Bondholders. E. Payments with respect to claims for interest on and principal of Series 2003 Bonds disbursed by the Paying Agent from proceeds of the Bond Insurance Pohcy shall not be considered to discharge the obligation of the Issuer with respect to such Series 2003 Bonds, and the Insurer shall become the owner of such unpaid Series 2003 Bonds and claims for the interest in accordance with the tenor of the assignment made to it under the provisions of this subsection or otherwise. F. Irrespective of whether any such assignment is executed and delivered, the Issuer and the Paying Agent hereby agree for the benefit of the Insurer that: 1. They recognize that to the extent the Insurer makes payments, directly or indirectly (as by paying through the Paying Agent), on account of principal of or interest on the Series 2003 Bonds, the Insurer will be subrogated to the rights of such Bondholders to receive the amount of such principal and interest fi'om the Issuer, with interest thereon as provided and solely from the sources stated in this Resolution and the Series 2003 Bonds; and 2. They will accordingly pay to the Insurer the amount of such principal and interest (including principal and interest recovered under subparagraph (ii) of the first paragraph of the Bond Insurance Policy, which principal and interest shall be deemed past due and not to have been paid), with interest thereon as provided in this Resolution and the Series 2003 Bonds, but only from the sources and in the manner provided herein for the payment of principal of and interest on the Series 2003 Bonds to Bondholders, and will otherwise U'eat the Insurer as the owner of such rights to the amount of such principal and interest. G. In connection with the issuance of Additional Bonds, the Issuer shall deliver to the Insurer a copy of the disclosure document, if any, circulated with respect to such Additional Bonds. H. Copies of any amenchuents made to the documents executed in connection with the issuance of the Series 2003 Bonds which are consented to by the Insurer shall be sent to Standard & Poor's Corporation. I. The Insurer shall receive notice of the resignation or removal of the Paying Agent and the appointment of a successor thereto. J. The Insurer shall receive copies of all notices required to be delivered to Bondholders and, on an annual basis, copies of the Issuegs audited financial statements and Annual Budget. Notices: Any notice that is required to be given to a Bondholder or to the Paying Agent pursuant to the Resolution shall also be provided to the Insurer. All notices required to be given to the Insurer under the Resolution shall be in writing and shall be sent by registered or certified mail addressed to MBIA Insurance Corporation, 113 King Street, Armonk, New York 10504 Attention: Surveillance. K. The Issuer agrees to reimburse the Insurer immediately and unconditionally upon demand, to the extent permitted by law, for all reasonable expenses, including attorneys' fees and expenses, incurred by the Insurer in connection with (i) the enforcement by the Insurer of the Issuer's obligations, or the preservation or defense of any rights of the Insurer, under this Resolution and any other document executed in connection with the issuance of the Series 2003 Bonds, and (ii) any consent, amendment, waiver or other action with respect to the Resolution or any related document, whether or not granted or approved, together with interest on all such expenses fi:om and including the date incurred to the date of payment at 'Citibank's Prime Rate plus 3% or the maximmu interest rote pennitted by law, whichever is less. In addition, the Insurer reserves the right to charge a fee in connection with its review of any such consent, amendment or waiver, whether or not granted or approved. L. The Issuer agrees not to use MBIA's name in any public document including, without limitation, a press release or presentation, announcement or forum without MBIA's prior consent. In the event that the Issuer is advised by counsel that it has a legal obligation to disclose MBIA's name in any press release, public announcement or other public document, the Issuer shall provide MBIA with at least three (3) business days' prior written notice of its intent to use MBIA's name together with a copy of the proposed use of MBIA's name and of any description of a transaction with MBIA and shall obtain lvIBIA's prior consent as to the form and substance of the proposed use of MBIA's name and any such description. M. The Issuer shall not enter into any agreement nor shall it consent to or participate in any arrangement pursuant to which Series 2003 Bonds are tendered or purchased for any purpose other than the redemption and cancellation or legal defeasance of such Series 2003 Bonds without the prior written consent of MBIA. SECTION 15. SECURITY FOR THE SERIES 2003 BONDS. Subject in all respects to the satisfaction of the conditions set forth in Section 6 hereof, neither the Series 2003 Bonds nor the interest thereon shall be or constitute a general indebtedness of the Issuer within the meaning of any constitutional or statutory provision or limitation, but shall be payable solely from and secured by a lien upon and pledge of the Plsdged Funds in the manner provided in the Resolution. The Holders of any Series 2003 Bond shall never have the right to require or compel the exercise of the ad valorem taxing power of the Issuer or taxation in any form of any property therein for payment thereof, or be entitled to payment of such principal and interest fi:om any other funds of the Issuer, except fi:om the Pledged Funds in the manner provided m the Resolution. Until payment has been provided for as herein permitted, the payment of the principal of and interest on the Series 2003 Bonds shall be secured forthwith equally and ratably with any Outstanding Bonds issued under the Authorizing Resolution by an irrevocable lien on the Pledged Funds, and the Issuer does hereby irrevocably pledge and grant a lien upon the Pledged Funds to the payment of the principal of and interest on the Series 2003 Bonds in accordance with the terms hereof. 10 SECTION 16. ESTABLISHMENT OF A CERTAIN ACCOUNT AND SUBACCOL!NT. Subject in all respects to the satisfaction of the conditions set forth in Section 6 hereof, pursuant to the authority of the Resolution, the Issuer hereby establishesa separate account within the Reserve Account of the Debt Service Fund to be known as the "Series 2003 Subaccount". Such Subaccount shall be initially funded in accordance with Section 9 hereof and shall be maintained and administered in accordance with the apphcable provisions of the Resolution. SECTION 17. RESERVE ACCOUNT INSURANCE POLICY. Subject in all respects to the satisfaction of the conditions set forth in Section 6 hereof, the Issuer hereby authorizes the payment of the premium for the debt service reserve surety bond (the "Surety Bond") from MBIA in the amount of the Reserve Account Requirement for the Series 2003 Bonds. The City Manager and the Clerk are hereby authorized to execute such documents and instruments necessary to cause MBIA to issue the Surety Bond. SECTION 18. SECONDARY MARKET DISCLOSURE. Subject in all respects to the satisfaction of the conditions set forth in Section 6 hereof, the Issuer hereby covenants and agrees that, in order to provide for compliance by the Issuer with the secondary market disclosure requirements of Rule 15 c2-12 of the Securities and Exchange Commission (the "Rule"), it will comply with and carry out all of the provisions of the Continuing Disclosure Certificate to be executed by the Issuer and dated the date of delivery of the Series 2003 Bonds, as it may be amended from time to time in accordance with the terms thereof. The Continuing Disclosure Certificate shall be substantially in the form attached hereto as Exhibit C with such changes, amendments, modifications, omissions and additions as shall be approved by the City Manager who is hereby authorized to execute and deliver such Certificate. Notwithstanding any other provision of the Resolution, failure of the Issuer to comply with such Continuing Disclosure Certificate shall not be considered an event of default under the Resolution; provided, however, to the extent provided by law, the sole and exclusive remedy of any Series 2003 Bondholder for the enforcement of the provisions of the Continuing Disclosure Certificate that relates to its Series 2003 Bonds shall be an action for mandamus or specific performance, as apphcable, by court order, to cause the Issuer to comply with its obligations under this Section 18 and the Continuing Disclosure Certificate. For purposes of this Section 18, "Series 2003 Bondholder" shall mean any person who (A) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Series 2003 Bonds (including persons holding Series 2003 Bonds through nominees, depositories or other intermediaries), or (B) is treated as the owner of any Series 2003 Bonds for federal income tax purposes. SECTION 19. GENERAL AUTHORITY. The members ofthe City Council, the City Manager, the Clerk and the officers, attorneys and other agents or employees of the Issuer are hereby authorized to do all acts and things required of them by this Supplemental Resolution, the Authorizing Resolution, the Official Statement, the Continuing Disclosure Certificate orthe Purchase Contract or desirable or consistent with the requirements hereof or the Authorizing Resolution, the Official Statement, the Continuing Disclosure Certificate or the Purchase Contract for the full punctual and complete performance of all the terms, covenants and agreements contained herein or in the Series 2003 Bonds, the Authorizing Resolution, the Official Statement, the Continuing Disclosure Certificate and the Purchase Contract and each member, 11 employee, attorney and officer of the Issuer or the City Council and the City Manager and the Clerk is hereby authorized and directed to execute and deliver any and all papers and instruments and to do and cause to be done any and all acts and things necessary or proper for carrying out the transactions contemplated hereunder. The Clerk is hereby authorized and directed to attest to the signature of the Mayor and/or City Manager on any and all papers and instruments necessary or proper for carrying out the transactions contemplated hereunder. SECTION 20. SEVERABILITY AND INVALID PROVISIONS. If any one or more of the covenants, agreements or provisions herein contained shall be held contrary to any express provision of law or contrary to the policy of express law, though not expressly prohibited or against public policy, or shall for any mason whatsoever be held invalid, then such covenants, agreements or provisions shall be null and void and shall be deemed separable from the remaining covenants, agreements or provisions and shall in no way affect the validity of any of the other provisions hereof or of the Series 2003 Bonds. SECTION 21. RESOLUTION TO CONTINUE IN FORCE. Except as herein expressly provided, the Resolution and all the terms and provisions thereof are and shall remain in full force and effect. 12 SECTION 22. EFFECTIVE DATE. This Supplemental Resolution shall become effective immediately upon its adoption. DULY ADOPTED, this 22nd day of October, 2003. CITY OF SEBASTIAN, FLORIDA By: Mayor APPROVED AS TO FORM AND CONTENT: City Attorney 13 EXHIBIT A FORM OF PURCHASE CONTRACT $ .00 CITY OF SEBASTIAN, FLORIDA Stormwater Utility Revenue Bonds, Series 2003 BOND PURCHASE CONTRACT THIS BOND PURCHASE CONTRACT (the "Purchase Contract") is entered into this __ day of [ ], 2003, by and between KIRKPATRICK, PETTIS, SMITH, POLIAN, Inc, a Nebraska corporation, d/b/a Kirkpatrick Pettis in Florida (the "Underwriter"), and the CITY OF SEBASTIAN, FLORIDA (the "City"). Upon execution and delivery, this Purchase Contract shall be binding upon the City and the Underwriter. Any capitalized term not otherwise defined herein shall have that meaning ascribed thereto either in the Bond Resolution or the Official Statement (as each is defined herein). SECTION 1. Purchase and Sale of Bonds. Upon the terms and conditions and upon the basis of the representations and agreements set forth herein, the Underwriter hereby agrees to purchase from the City for offering to the public, and the City hereby agrees to sell and deliver to the Underwriter for such purpose, all (but not less than all) of the City's [$ | aggregate principal amount of Stormwater Utility Revenue Bonds, Series 2003 (the "Series 2003 Bonds"). The Series 2003 Bonds shall be issued in such principal amount, shall mature on such date, shall bear such rate of interest, and shall be subject to redemption, all as set forth in Exhibit A attached hereto and incorpOrated herein by this reference. The purchase price to be paid by the Underwriter to or for the account of the City upon delivery of the Series 2003 Bonds is $ (the aggregate principal amount of the Series 2003 Bonds, [less/plus] [Net] Original Issue [Discount/Premium] of $ ., less Underwriter's discount of $ ), plus accrued interest on the Series 2003 Bonds of $ from the dated date thereof to the date of the payment for and delivery of the Series 2003 Bonds pursuant to Section 8 hereof. The time at which such payment, delivery and other actions contemplated hereby are to take place is hereinafter referred to as the "Closing." SECTION 2. Official Statement. The City hereby confirms that it has heretofore made available to the Underwriters a Preliminary Official Statement of the City relating to the Series 2003 Bonds dated [October __., 2003] (including the cover page and appendices contained therein, the "Preliminary Official Statement"), and authorizes, ratifies and approves the distribution thereof to prospective purchasers and investors. Within seven business days of the acceptance hereof by the City, and at least three business days prior to the date of Closing, the City shall cause to be delivered such reasonable number of conformed copies as the Underwriters shall request (but not to exceed 250 copies) of the final Official Statement, dated the date hereof in substantially the form of the Preliminary Official Statement with all "permitted omissions" (as defined in the hereinafter described Rule) completed (including the cover page and appendices contained therein, the "Official Statement"), executed (manually or conformed) by the City in substantially the form of the Preliminary Official Statement with such changes thereto as may be approved by the City Manager (upon advice of the City Attorney and the City's Disclosure Counsel) and the Underwriter. Execution thereof by the City Manager shall be deemed conclusive evidence of approval of any such changes. C :\NrPortbI\ORLDOCS\SJZ\I 0 190976_3.DOC SECTION 3. The Series 2003 Bonds. The Series 2003 Bonds shall be as described in, and shall be issued and secured under authority of and in full compliance with the Constitution and the laws of the State of Florida, particularly Chapter 166, Florida Statutes, Sections 403.0891 and 403.0893, Florida Statutes, City Ordinance No. O-01-16, codified as Chapter 102, Article V of the City of Sebastian Code of Ordinances, and other applicable provisions of law (the "Act") and the provisions of the Stormwater Utility Revenue Bond Resolution No. R-03- ., duly adopted by the City Council of the City (the "City Council") on October __, 2003, as supplemented by Resolution No. R-03- adopted by the City Council on ,2003, and as may be further amended and supplemented (collectively, the "Bond Resolution"). SECTION 4. Disclosure Statement; Security Deposit. The City acknowledges receipt from the Underwriter of the disclosure statement of the Underwriter required by Section 218.385(6), Florida Statutes, substantially in the form attached hereto as Exhibit B. The Underwriter has delivered to the City herewith a cashier's check in the amount of [5; 1 as a security deposit, payable to the City representing approximately 1% of the par amount of the Series 2003 Bonds. In the event the City does not accept this offer, such check shall be immediately returned to the Underwriter uncashed. If this offer is accepted, the check will be held uncashed as security for the performance by the Underwriter of its obligations to purchase, to accept delivery of and to pay for the Series 2003 Bonds at the Closing. In the event of failure by the City to deliver the Series 2003 Bonds at the Closing, or if the City shall be unable to satisfy the conditions of the obligations of the Underwriter contained herein, or if the obligations of the Underwriter shall be terminated for any reason permitted by this Purchase Contract, the check shall be immediately returned to the Underwriter uncashed, and such return shall constitute a full release and discharge of all claims by the Underwriter arising out of the transactions contemplated hereby. In the event that the Underwriter fails (other than for reasons permitted hereunder) to accept delivery of and to pay for the Series 2003 Bonds at the Closing, the check shall be cashed and the proceeds thereof retained by the City as and for full liquidated damages for such failure and for any defaults hereunder on the part of the Underwriter, and such retention shall constitute a full release and discharge of all claims by the City against the Underwriter arising out of the transactions contemplated hereby. SECTION 5. Public Offering. It shall be a condition to the City's obligations to sell and to deliver the Series 2003 Bonds to the Underwriter and to the Underwriter's obligations to accept delivery of and to pay for the Series 2003 Bonds that the entire aggregate principal amount of the Series 2003 Bonds be issued and delivered by the City at the Closing. The Underwriter agrees to make a bona fide initial public offering of all the Series 2003 Bonds, plus interest accrued thereon fi'om the dated date of the Series 2003 Bonds. At the Closing, the Underwriter shall deliver to the City a certificate prepared by Bond Counsel to the City to the effect that (i) all of the Series 2003 Bonds have been the subject of an initial offering to the public as herein provided, provided, however, the Underwriter reserves the right to make concessions to dealers and to change the initial offering price as the Underwriter shall deem necessary in connection with the marketing of the Series 2003 Bonds, and (ii) not less than ten percent (10%) of the Series 2003 Bonds were sold to the public (excluding bond houses, brokers or similar persons or organizations acting in the capacity of underwriter or wholesalers) at the initial offering price not greater than the price shown on the cover of the Official Statement. The Underwriter agrees to make such offering in compliance with all applicable federal and state laws and regulations. SECTION 6. Use of Documents. The City hereby authorizes the use by the Underwriter in connection with the public offering, sale, and distribution of the Series 2003 Bonds of the following documents: (a) the Bond Resolution; (b) the Official Statement (including any supplements or amendments thereto) dated the date hereof; (c) the Preliminary Official Statement; and (d) any other documents requested by the Underwriter related to the transactions contemplated in the Official Statement in connection with the authorization, issuance and delivery of the Series 2003 Bonds to the Underwriter, the undertaking of the Initial Project, and the public offering and distribution of the Series 2003 Bonds by the Underwriter on behalf of the City. SECTION 7. Representations and Agreements. The City hereby represents and agrees, except as may be set forth otherwise in the Official Statement, as follows: (a) the City is, and will be at the date of Closing, duly organized and validly existing as a political subdivision of the State of Florida (the "State") with the powers and authority set forth in Chapter 166, Part II, Florida Statutes, and other applicable provisions of law (herein collectively referred to as the "Act"); (b) the City has full legal right, power, and authority to: (1) issue the Series 2003 Bonds and use the proceeds, together with other available funds, for the purpose of (i) paying or reimbursing the cost of dredging of the Collier Creek canal, demolition of the Collier Creek seawall and construction of the Collier Creek seawall, and excavation of the Potomac ditch, and any other capital improvements approved by the City Council in accordance with Florida Statutes (the "Initial Project"), (ii) paying the premium of a Policy or fund a deposit to the credit of the Reserve Account to satisfy the Reserve Account Requirement for the Series 2003 Bonds and (iii) paying the costs of issuance related to the Series 2003 Bonds, including the premium of the municipal bond insurance policy; (2) adopt the Bond Resolution and perform its obligations thereunder; (3) enter into and perform its obligations under this Purchase Contract, the Continuing Disclosure Undertaking, and the Registrar and Paying Agent Agreement with Bank One Trust Company, National Association, Jacksonville, Florida; (4) sell, issue and deliver the Series 2003 Bonds to the Underwriter as provided herein; and (5) carry out and consummate the transactions contemplated by this Purchase Contract, Continuing Disclosure Undertaking, the Bond Resolution, the Registrar and Paying Agent Agreement, and the Official Statement; (c) by all necessary official action taken at meetings of the Council duly called and held in accordance with applicable law, at which a quorum was present and acting at the relevant times, the City has: (1) approved and adopted the Bond Resolution, which includes the delegation and authorization for the City Manager to (i) execute a certificate deeming "final" the Preliminary Official Statement, (ii) execute the Official Statement, (iii) execute and deliver such agreements necessary to effect the award and issuance of the Series 2003 Bonds, including this Purchase Contract and the Registrar and Paying Agent Agreement, and (iv) execute such documents and instruments necessary to cause MBIA to insure the Series 2003 Bonds; (2) approved and authorized the Preliminary Official Statement and its distribution in connection with the offering of the Series 2003 Bonds and approved the execution, delivery and distribution of the Official Statement in connection with the delivery of the Series 2003 Bonds; (3) duly authorized and approved (A) the execution and delivery of, and the performance by the City of its obligations contained in the Series 2003 Bonds, the Bond Resolution, the Continuing Disclosure Undertaking and this Purchase Contract, in connection with the issuance of the Series 2003 Bonds and (B) the consummation by it of all other transactions contemplated to be performed by the City under this Purchase Contract in connection with the issuance of the Series 2003 Bonds, including-the execution of the Continuing Disclosure Undertaking and the Registrar and Paying Agent Agreement; (d) the City, at the time of Closing, will have performed all of its obligations required to be performed at or prior to Closing under this Purchase Contract, Bond Registrar and Paying Agent Agreement, the Continuing Disclosure Undertaking and the Bond Resolution; (e) the City has complied with, and at the Closing will be in compliance in all respects with, the terms of the Act, the Bond Resolution, the Continuing Disclosure Undertaking and this Purchase Contract; (f) the Bond Resolution and this Purchase Contract constitute, and the Continuing Disclosure Undertaking and the Registrar and Paying Agent Agreement will, when executed, constitute, the valid and binding obligations of the City, enforceable in accordance with their 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 subject to the exercise of judicial discretion in appropriate cases; (g) the Series 2003 Bonds, when issued, authenticated and delivered to the Underwriter in accordance with the Bond Resolution and this Purchase Contract, will constitute valid and binding obligations of the City, enforceable in accordance with their 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 subject to the exercise of judicial discretion in appropriate cases; (h) with regard to the issuance of the Series 2003 Bonds, the undertaking of the Initial Project and the transactions contemplated in the Official Statement, to the best knowledge of the undersigned, other than as disclosed in the Official Statement: (1) the City is not in breach of or default of any material provision of: (A) any applicable constitutional provision, law or administrative regulation of the City, the State of Florida or the United States of America, or any board, commission or agency of any thereof; (B) any applicable judgment or decree of any court, board, commission, council or agency of the City, the County of Indian River, the State of Florida, or the United States of America; or (C) any loan agreement, indenture, bond, note, resolution, 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, including the Bond Resolution or this Purchase Contract; (2) no event has occurred or is continuing which, with the passage of time, the giving of notice, or both, would constitute a material breach of or event of default under any such provisions, laws, regulations, judgments, decrees, or instruments; (3) the execution and delivery of the Series 2003 Bonds, the Continuing Disclosure Undertaking, the Registrar and Paying Agent Agreement and this Purchase Contract, and the adoption of the Bond Resolution and compliance with the provisions on the City's part contained therein, will not: (A) materially conflict with or constitute a material breach of or default under any constitutional provision, law, administrative regulation, judgment, decree, loan agreement, indenture, bond, note, resolution, 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, or (B) 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 or under the terms of any such law, regulation or instrument, except as provided in the Series 2003 Bonds, the Bond Resolution, and as set forth in the Official Statement; and (4) no event has occurred or is continuing which, with the passage of time or the giving of notice, or both, would constitute a default by the parties of any material provision under any agreement with regard to the issuance of the Series 2003 Bonds, the undertaking of the Initial Project, or the undertaking of the transactions contemplated in the Official Statement; (i) all authorizations, approvals, licenses, permits, consents and orders of any governmental authority, legislative body, board, agency or commission, which are required for the due authorization by, or 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 in connection with the issuance of the Series 2003 Bonds under the Bond Resolution pursuant to this Purchase Contract (except for 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 Series 2003 Bonds) have been duly obtained or, with respect to the Initial Project, are reasonably obtainable in the ordinary course of business; (j) the Series 2003 Bonds, when issued, executed and delivered in accordance with the Bond Resolution and sold to the Underwriter as provided herein, will be validly issued and outstanding obligations of the City, entitled to the benefits of the Bond Resolution; and upon such issuance, execution and delivery, the Bond Resolution will provide, for the benefit of the Holders from time to time of the Series 2003 Bonds, a valid and binding pledge of and lien on the Pledged Funds (as defined herein), subject only to bankruptcy, insolvency or other 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 subject to the exercise of judicial discretion in appropriate cases; (k) the descriptions of the Series 2003 Bonds and the Bond Resolution, contained in the Official Statement conform in all material respects to the Series 2003 Bonds and the Bond Resolution; (1) except as disclosed in the Official Statement, as of the date hereof, 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 against the City or, to the best knowledge of the City, threatened against the City: (1) affecting or seeking to prohibit, restrain or enjoin (A) the sale, issuance or delivery of the Series 2003 Bonds, (B) the collection of the Pledged Funds pledged to pay the principal of and interest on the Series 2003 Bonds or (C) the pledge of and lien on the Pledged Funds created by the Bond Resolution to secure payment of the Series 2003 Bonds; (2) contesting or affecting (A) the adoption, validity, or enforceability of the Bond Resolution, or (B) the execution, delivery and enforceability of this Purchase Contract, the Continuing Disclosure Undertaking or the Registrar and Paying Agent Agreement; (3) contesting the exclusion from gross income for federal income tax purposes of interest on the Series 2003 Bonds; (4) contesting the completeness or accuracy of the Official Statement or any supplement or amendment thereto; or (5) contesting the existence or powers of the City or its authority (A) to collect the Stormwater Fee Revenues, (B) to adopt, enter into, execute and deliver, and perform its obligations under, as the case may be, the Bond Resolution, the Continuing Disclosure Undertaking and this Purchase Contract or (C) to issue the Series 2003 Bonds; (m) the City will furnish such information, execute such instruments and take such other action not inconsistent with law or the established policy of the City in cooperation with the Underwriter as the Underwriter or its Counsel may reasonably request in order to: (1) determine the eligibility of the Series 2003 Bonds for investment 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, (2) qualify the Series 2003 Bonds for offer and sale under the laws of such states and other jurisdictions, and (3) use its best efforts to continue such qualifications in effect so long as required for the distribution of the Series 2003 Bonds; provided, however, that the City shall not be required to incur any costs or execute a general or special consent to service of process or qualify to do business in connection with any such qualification or determination in any jurisdiction; (n) at the time of the City's acceptance hereof and (unless an event of the nature described in paragraph (o) of this Section 7 occurs) at all times subsequent thereto up to and including the date of the Closing, other than as disclosed in the Official Statement: (1) the City will not have incurred any long-term debt obligations secured by the Pledged Funds, (2) position, the City will not have suffered any material adverse change in its financial 7 (3) the Official Statement does not and will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading (except with respect to information supplied by the Underwriter, as to which no representation or agreement is made); (o) if the Official Statement is supplemented or amended, at the time of each supplement or amendment thereto and (unless subsequently again supplemented or amended pursuant to such paragraph) at all times subsequent thereto up to and including the date of the Closing, the Official Statement as so supplemented or amended, will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading (except with respect to information supplied by the Underwriter, as to which no representation or agreement is made); (p) the City will prepare and submit the information reports concerning the Series 2003 Bonds required by Section 149(e) of the Internal Revenue Code of 1986, as amended, and any existing or proposed regulations thereunder (the "Code"), by registered mail, return receipt requested, to the Secretary of the Treasury within the time limit provided in the Code; and thereafter, the City will prepare and submit or cause to be submitted any supplement to the information reports which is deemed by Bond Counsel to be necessary or advisable in order to preserve or restore the status of the Series 2003 Bonds under the Code; and the information included in the information reports and any supplement thereto will be true and complete for the purposes for which intended; and (q) when delivered to and paid for by the Underwriter at the Closing in accordance with the provisions of this Purchase Contract, the Series 2003 Bonds will have been duly executed, authenticated and delivered pursuant to the Bond Resolution and will be entitled to the benefit and security of the Bond Resolution. SECTION 8. Closing. Not later than at 2:00 p.m., Eastern Time, on [November [, 2003, or at such other time as may be mutually agreed upon by the City and the Underwriter, the City will, subject to the terms and conditions hereof, deliver the Series 2003 Bonds to The Depository Trust Company ("DTC") for the order of the Underwriter in definitive form, in the form of a single certificate payable to "CEDE & Co." as nominee for DTC, duly executed and authenticated, together with the other documents hereinafter mentioned, and, subject to the terms and conditions hereof, the Underwriter will accept delivery of and pay the purchase price for the Series 2003 Bonds as set forth in Section 1 hereof in immediately available funds to the order of the City. Delivery and payment shall be made at such place as may be mutually agreed upon by the City and the Underwriter. The original Series 2003 Bonds shall be typewritten on safety paper and shall be delivered to DTC at least 48 hours prior to the time set for Closing, or at such other time as may be mutually agreed to by the City and the Underwriter. SECTION 9. Closing Conditions. (a) The Underwriter has entered into this Purchase Contract in reliance upon: (1) the representations and agreements of the City contained herein; (2) the representations and agreements to be contained in the documents and instruments to be delivered at the Closing; and (3) the performance by the City of its obligations hereunder, both as of the date hereof and as of the date of the Closing. (b) Accordingly, the Underwriter's obligation under this Purchase Contract to purchase, to accept delivery of, and to pay for the Series 2003 Bonds is: (1) conditioned upon the performance by the City of its obligations to be performed hereunder and under such documents and instruments at or prior to the Closing, and (2) subject to the following additional conditions, which must be satisfied at or prior to the Closing: (A) the representations of the City contained herein shall be true, complete and correct (i) on the date hereof and (ii) on and as of the date of the Closing, as if made on the date of the Closing; (B) the Bond Resolution, this Purchase Contract, the Continuing Disclosure Undertaking and the Registrar and Paying Agent Agreement shall be in full force and effect in accordance with their respective terms and shall not have been amended, modified or supplemented; and the Official Statement shall not have been supplemented or amended, except in any such case as may have been agreed to by the Underwriter; (C) all official actions of the City relating to this Purchase Contract, the Series 2003 Bonds and the Bond Resolution (i) shall be in full force and effect in accordance with their respective terms and (ii) shall not have been amended, modified or supplemented in any material respect, except in each case as may have been agreed to by the Underwriter; and (D) the Underwriter shall have received fully executed originals, or copies, certified under seal of the official custodian of the records in which such documents are filed, of each of the following documents: (i) this Purchase Contract; (ii) the Official Statement and each supplement, amendment or modification, if any, thereto; (iii) the Bond Resolution; (iv) a certificate, dated the date of closing, signed by the City Manager, or other appropriate City officials satisfactory to the Underwriter, its Counsel, Disclosure Counsel and Bond Counsel, to the effect that, to the best of their knowledge: (a) the representations of the City herein are true and correct in all material respects as of the date of Closing; (b) the City has performed all obligations to be performed hereunder as of the date of Closing; (c) proceeds from the sale of the Series 2003 Bonds will be used as contemplated in the Official Statement and the Bond Resolution; (d) since September 30, 2002, 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 Official Statement; (e) the City has not, since September 30, 2002, incurred any material liabilities other than in the ordinary course of business, or as disclosed in the Official Statement; and (f) the Official Statement did not as of its date, and does not as of the date of Closing, contain any untrue statement of a material fact or omit to state a material fact which should be included therein for the purposes for which the Official Statement is to be used, or which is necessary in order to make the statements contained therein, in light of the circumstances in which they were made, not misleading (except with respect to information provided by the Underwriter, DTC or MBIA as to which no representation need be made); (v) a certificate (herein sometimes referred to as the "Tax Compliance Certificate") of the City executed by the City Manager, or other appropriate City official satisfactory to Bond Counsel, dated as of the date of Closing, setting forth facts, estimates and circumstances concerning the use or application of the proceeds of the Series 2003 Bonds, and stating in effect that on the basis of such facts, estimates and circumstances in existence on the date of Closing, that the Series 2003 Bonds are Bank Qualified and it is not expected that the proceeds of the Series 2003 Bonds will be used in a manner that would cause the Series 10 2003 Bonds to be "arbitrage bonds" within the meaning of Section t48 of the Code; (vi) a certificate executed by an authorized officer of Bank One Trust Company, National Association, Jacksonville, Florida (the "Bank"), as Registrar and Paying Agent to the effect that: (a) the Bank is a national banking corporation duly organized and validly existing under the laws of the United States of America and is duly authorized to exercise trust powers in the State of Florida; (b) the Bank has all requisite authority, power, licenses, permits and franchises, and has full corporate power and legal authority to perform its functions under the Bond Resolution and the Registrar and Paying Agent Agreement; (c) the performance by the Bank of its functions under the Bond Resolution and the Registrar and Paying Agent Agreement will not result in any violation of the Articles of Association or Bylaws of the Bank, any court order to which the Bank is subject or any agreement, indenture or other obligation or instrument to which the Bank is a party or by which the Bank is bound, and no approval or other action by any governmental authority or agency having supervisory authority over the Bank is required to be obtained by the Bank in order for the Bank to perform its functions under the Bond Resolution and the Registrar and Paying Agent Agreement; and (d) to the best of such authorized representative's knowledge, there is no action, suit, proceeding or investigation at law or in equity before any court, public board or body pending or, to their knowledge, threatened against or affecting the Bank wherein an unfavorable decision, ruling or finding on an issue raised by any party thereto is likely to materially and adversely affect the ability of the Bank to perform its obligations under the Bond Resolution and the Registrar and Paying Agent Agreement; (vii) an approving opinion ofNabors, Giblin & Nickerson, P.A., Bond Counsel to the City, relating to the Series 2003 Bonds, dated the date of the Closing and addressed to the City and Underwriter, in substantially the form included in the Official Statement as [Appendix E]; (viii) an opinion of Nabors, Giblin & Nickerson, P.A., Bond Counsel to the City, dated the date of the Closing and addressed to the City and the Underwriter, to the effect that 11 (a) this Purchase Contract has been duly authorized, executed and delivered by, and assuming due authorization, execution and delivery thereof by the Underwriter, constitutes a valid and binding agreement of, the City, enforceable in accordance with its terms except that the binding effect and enforceability are subject to bankruptcy laws and other laws affecting creditors' rights and to the exercise of judicial discretion; (b) the Series 2003 Bonds are not subject to the registration requirements of the Securities Act of 1933, as amended, and the Bond Resolution and the Registrar and Paying Agent Agreement are exempt from qualification pursuant to the Trust Indenture Act of 1939, as amended; (c) as Bond Counsel, they have reviewed the statements contained in the Official Statement under the captions ["INTRODUCTION," "DESCRIPTION OF THE SERIES 2003 BONDS" (other than the information under the caption" - Book-Entry Only System"), "SECURITY FOR THE SERIES 2003 BONDS" (but only such statements that summarize certain provisions of the Bond Resolution), "COVENANTS REGARDING ADDITIONAL DEBT" and "APPENDIX C - FORM OF BOND RESOLUTION," and on the cover page thereof relating to their opinion and therein under the heading "TAX EXEMPTION"]; (d) the Document Summaries (insofar as such statements constitute a summary of certain provisions of the Bond Resolution and the Series 2003 Bonds) and the information on the cover page and in "APPENDIX E - FORM OF BOND COUNSEL OPINION" relating to their opinion and under the caption "TAX EXEMPTION" fairly present the information purported to be summarized therein, provided, however that the Document Summaries referred to do not purport to summarize all of the provisions of, and are qualified in their entirety by, the complete documents which are summarized; (ix) an opinion of Squire, Sanders & Dempsey, L.L.P., Jacksonville, Florida, as Disclosure Counsel, dated the date of Closing and addressed to the City and the Underwriter, to the effect that: (a) as Disclosure Counsel, based upon their participation in the preparation of the Official Statement, and without having undertaken to determine independently the accuracy, completeness or fairness of the statements contained in the Official Statement, as of the date of the Closing, nothing has 12 come to their attention causing them to believe that (A) the Official Statement as of its date contained an 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 light of the circumstances under which they were made, not misleading (except for the financial information and statistical data contained in the Official Statement or in the Appendices thereto, as to all of which no view need be expressed), or (B) the Official Statement (as supplemented or amended, if applicable) as of the date of the Closing contains an 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 light of the circumstances under which they were made, not misleading (except as aforesaid); and (b) the Official Statement has been duly authorized, executed and delivered by the City. (x) an opinion of the City Attorney, dated the date of Closing, and addressed to the City, the Underwriter, Disclosure Counsel and Bond Counsel to the effect that (a) the City is a duly existing municipal corporation of the State of Florida and has and had good right and lawful authority under the Constitution and laws of the State to enact the Bond Resolution and to authorize and issue the Series 2003 Bonds; (b) this Purchase Contract has been duly authorized, executed and delivered by the City and, assuming due authorization, execution and delivery thereof by the other parties thereto, constitutes the binding agreement of the City, enforceable in accordance with its terms, except that the binding effect and enforceability are subject to bankruptcy laws and other laws affecting creditors' rights and to the exercise of judicial discretion; (c) to the best of his knowledge, the information in the Official Statement under the captions "THE CITY," "LITIGATION," "LEGAL MATTERS," and statements of fact under the caption "DISCLOSURE REQUIRED BY FLORIDA BLUE SKY REGULATIONS," is correct in all material respects and does not omit any statement which, in his opinion, should be included or referred to therein in order to make the statements made therein, in light of the circumstances under which they were made, not misleading; 13 (d) based upon his review of the Official Statement and without having undertaken to determine independently the accuracy, completeness or fairness of the statements contained in the Official Statement, as of the date of the Closing, nothing has come to his attention which would lead him to believe that the Official Statement when taken as a whole, contains an untrue statement of a material fact or omits to state a material fact necessary to make the statements contained therein, in light of the circumstances under which they were made, not misleading (except for the financial information and statistical data contained in the Official Statement or in the Appendices thereto, as to all of which no view need be expressed); (e) to the best of his knowledge and except as disclosed in the Official Statement, 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, resolution, 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, including the Bond Resolution, which would have a material, adverse impact on the City's ability to perform its obligations under the Bond Resolution, and no event has occurred and is continuing which, with the passage of time or the giving of notice, or both, would constitute a default or event of default on the part of the City or the other parties thereto under any such instruments; (f) to the best of his knowledge, adoption of the Bond Resolution, the execution and delivery of the Series 2003 Bonds and this Purchase Contract, and compliance with the provisions on the City's part contained therein and herein, will not conflict with or constitute a breach of or default under any 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 property or assets is otherwise subject, nor will any such execution, delivery, adoption or compliance 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 or under the terms of any such instrument, except as expressly provided in the Series 2003 Bonds and the Bond Resolution; (g) except as disclosed in the Official Statement, there is no action, suit, proceeding, inquiry or investigation at law or in equity before or by any court, government agency, public board or 14 body, pending or, to the best of his knowledge, threatened against or affecting the City, nor to the best of his knowledge is there any basis for 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 this Purchase Contract and the Official Statement or the validity of the Series 2003 Bonds, and the Bond Resolution; and (h) the Bond Resolution has been duly and lawfully enacted and is in full force and effect, and constitutes valid and binding obligation of the City, enforceable in accordance with its terms, except that the binding effect and enforceability are subject to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation, readjustment of debt and other laws in effect from time to time affecting the rights of creditors generally and except to the extent that enforceability thereof may be limited by the application of principles of equity; (xi) evidence satisfactory to the Underwriter that the Series 2003 Bonds have received ratings of Aaa, AAA and AAA, respectively, by Moody's Investors Service, Inc. ("Moody's"), Standard & Poor's Credit Market Services ("S&P") and Fitch, Inc. ("Fitch") based on the municipal bond insurance policy issued by MBIA and that such ratings are in effect at Closing; (xii) evidence satisfactory to the Underwriter that the Series 2003 Bonds have received underlying ratings of A3, A and A, respectively, by Moody's, S&P and Fitch and that such ratings are in effect at Closing; (xiii) consent letter from the City's auditors regarding the use of the City's audited financial statements in the Preliminary Official Statement and Official Statement; and (xiv) 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 date of the Closing, of the City's representations contained herein and of the statements and information contained in the Official Statement and the due performance or satisfaction by the City on or prior to the date of Closing of all the agreements then to be performed and conditions then to be satisfied by it. All the 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 as set forth herein. 15 Opinions concerning the validity, binding effect and enforceability of the various agreements referred to above will in each case be deemed to assume and be premised upon the fact that the validity, binding effect and enforceability of the agreement referred to therein may be limited or otherwise affected by (a) bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar statutes, rules, regulations or other laws affecting the enforcement of creditors' rights and remedies generally and (b) the unavailability of or limitation on the availability of, a particular right or remedy, (whether in a proceeding in equity or at law) because of an equitable principle. SECTION 10. Truth in Bonding Statement. The City makes the following representations and statements to comply with Section 218.385(2) and (3), Florida Statutes, by making the following truth-in-bonding statement. The City is proposing to issue the Series 2003A for the purpose of providing moneys, together with other available funds, to (i) pay or reimburse the cost of dredging of the Collier Creek canal, demolition of the Collier Creek seawall and construction of the Collier Creek seawall, and excavation of the Potomac ditch, and any other capital improvements approved by the City Council in accordance with Florida Statutes (the "Initial Project"), (ii) paying the premium of a Policy or fund a deposit to the credit of the Reserve Account to satisfy the Reserve Account Requirement for the Series 2003 Bonds and (iii) paying the costs of issuance related to the Series 2003 Bonds, including the premium of the municipal bond insurance policy. The primary objective of the Collier Creek Canal dredging project is to convert the existing canal from a conveyance system to a wet detention system to increase the volume resulting in a increased detention time to improve the water quality prior to discharge into the Sebastian River. Modifications to the sea walls would result only if necessary to accommodate the conversion to a wet detention. Design and dredging of the Collier Creek Canal north of CR512 is needed to maximize capacity for conversion to a wet detention system and will include modifications of associated structures and appurtenances, including modifications to seawalls as necessary. This debt or obligation is expected to be repaid within approximately years from proceeds of Stormwater Fee Revenues, with a final maturity date of April 1, 20__ At the interest rates shown on the cover page of the Official Statement, dated ., 2003, total interest paid over the life of the debt or obligation will be $ The Series 2003 Bonds are limited obligations of the City payable from and secured solely by a lien on and pledge of (i) the Stormwater Fee Revenues and (ii) until applied in accordance with the provisions of the Bond Resolution, all moneys, including investments thereof, in the funds and accounts established under the Bond Resolution, except (a) as for the Unrestricted Revenue Account and the Rebate Fund and (b) to the extent moneys on deposit in a subaccount of the Reserve Account shall be pledged solely for the payment of the Series of Bonds for which it was established in accordance with the provisions of the Bond Resolution (collectively, the "Pledged Funds"). The authorization of this debt or obligation will result in an average of approximately $ of Pledged Funds not being available to the City to finance other projects or services each year for approximately ( ) years. 16 The City has covenanted and agreed to appropriate in its annual budget, by amendment, if necessary, from Non-Ad Valorem Revenues lawfully available in each Fiscal Year amounts sufficient to make up any deficiencies in the Reserve Account (including any amounts owing in regard to any Reserve Account Insurance Policy or Reserve Account Letter of Credit) existing on the first day of each Fiscal Year in the event Pledged Funds are insufficient for such purpose. SECTION 11. Termination. (a) If the City shall be unable to satisfy the conditions to the obligations of the Underwriter to purchase, to accept delivery of and to pay for the Series 2003 Bonds contained in this Purchase Contract, or if the obligations of the Underwriter to purchase, to accept delivery of and to pay for the Series 2003 Bonds shall be terminated for any reason permitted by this Purchase Contract, then 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 Section 12 hereof shall continue in full force and effect. (b) The Underwriter shall have the right to terminate its obligations under this Purchase Contract to purchase, to accept delivery of, and to pay for the Series 2003 Bonds by notifying the City of its election to do so if, prior to the Closing, (1) the marketability of the Series 2003 Bonds or the market price thereof, in the opinion of the Underwriter, has been materially adversely affected by an amendment to the Constitution of the United States or by any legislation (A) adopted by the United States, (B) recommended to the Congress for passage by the President of the United States, or (C) favorably reported for passage to either house of the Congress by any committee of such house to which such legislation has been referred for consideration, or by any decision of any court of the United States or by any ruling or regulation (final, temporary or proposed) on behalf of the Treasury Department of the United States, the Internal Revenue Service or any other authority of the United States affecting the federal income tax status of the City, its property or income, or the interest on its bonds (including the Series 2003 Bonds); (2) in the Underwriter's judgment, subsequent to consultation with appropriate representatives of the City, the marketability of the Series 2003 Bonds or the market price of the Series 2003 Bonds is materially adversely affected because of (a) war involving the United States of America having been declared or there having occurred any conflict involving the armed forces of the United States of America or (b) any other national emergency (including events arising out of acts of terrorism) or international calamity having occurred (economic or otherwise); (3) there shall have occurred the declaration of a general banking moratorium by any authority of the United States or the states of New York or Florida and such action will, in the opinion of the Underwriter, materially adversely affect the marketability of the Series 2003 Bonds or the market price thereof; 17 (4) an event shall have occurred which, in the opinion of the Underwriter, requires the preparation and publication of a supplement or amendment to the Official Statement and such action will, in the opinion of the Underwriter, materially adversely affect the marketability of the Series 2003 Bonds or the market price thereof; (5) there has been an adverse change of a material nature in the financial position, results of operations or condition, financial or otherwise, of the City, in either case other than in the ordinary course of its business and such action will, in the opinion of the Underwriter, materially adversely affect the marketability of the Series 2003 Bonds or the market price thereof; (6) between the date hereof and the Closing, legislation shall be adopted or any action shall be taken by the Securities and Exchange Commission which, in the opinion of the Underwriter, has the effect of requiring the contemplated distribution of the Series 2003 Bonds to be registered under the Securities Act of 1933, as amended, or of requiring the Bond Resolution to be qualified under the Trust Indenture Act of 1939; (7) an order, decree or injunction of any court of competent jurisdiction, or any order, ruling, regulation or administrative proceeding by any governmental body or board, shall have been issued or commenced, or any legislation adopted, with the purpose or effect of prohibiting the issuance, offering or sale of the Series 2003 Bonds as contemplated hereby or by the Official Statement or prohibiting the performance by the City of its obligations under this Purchase Contract or the Bond Resolution; (8) the State of Florida shall take any action, or threaten to take any action, which shall question the existence or powers of the City to issue the Series 2003 Bonds. SECTION 12. Expenses. (a) The Underwriter shall be under no obligation to pay, and the City shall pay, such expenses, if any, incident to the performance of the City's obligations hereunder including, but not limited to: (i) the cost of preparation, printing and delivery of all of the documents referred to in Section 9 hereof including, but not limited to, the Preliminary Official Statement and the Official Statement, but excluding the items set forth in paragraph (b) below, (ii) the cost of preparation and printing of the Series 2003 Bonds; (iii) the fees and disbursernents of Nabors, Giblin & Nickerson, P.A., as Bond Counsel and Squire, Sanders & Dempsey, L.L.P., as Disclosure Counsel; (iv) the fees of the Registrar and Paying Agent and the City's Auditor; (v) the fees of the bond insurer, reserve surety policy provider and the rating agencies; and (vi) the Underwriter's out-of-pocket expenses, travel expenses, communications/shipping costs, and expenses related to obtaining bond insurance and ratings (including computer, travel and other expenses related thereto), and any expenses from assisting with pre-closing and closing (including costs related to local tombstone advertising as directed by the City), and (vii) the fees and expenses of any other engineers, accountants, attorneys, and other experts, consultants or advisors retained or utilized by the City in connection with the issuance of the Series 2003 Bonds, including the preparation thereof; all such expenses to be paid by the City as issuance costs. In the event and to the extent that the Underwriter has incurred any of the foregoing costs or expenses, the City shall reimburse the Underwriter by issuing a check at Closing upon presentation of an invoice. 18 (b) the Underwriter shall pay expenses related to the initial purchase and sale of the Series 2003 Bonds as follows: (i) all advertising expenses (excluding the local tombstone advertisement mentioned in Section 12(a)(vi) above); (ii) the cost of preparation and printing the blue sky and legal investment surveys with respect to the Series 2003 Bonds, if any; and (iii) all other expenses incurred by them in connection with the public offering of the Series 2003 Bonds other than those noted in Section 12(a)(vi) above. SECTION 13. 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 City, at 1225 Main Street, Sebastian, Florida .32958 Attention: City Manager and any notice or other communication to be given to the Underwriter under this Purchase Contract may be given by delivering the same in writing to Kirkpatrick Pettis, 3504 Lake Lynda Drive, Suite 155, Orlando, Florida 32817 Attention: Senior Vice President, Regional Manager. SECTION 14. Parties in Interest. This Purchase Contract is made solely for the benefit of the 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 City's representations and agreements contained in Section 7 of this Purchase Contract shall remain operative and in full force and effect, regardless of: (a) any investigations made by or on behalf of the Underwriter; (b) delivery of and payment for the Series 2003 Bonds pursuant to this Purchase Contract; and (c) any termination of this Purchase Contract. SECTION 15. Effectiveness. This Purchase Contract shall become effective upon the acceptance hereof by the City and the execution by the appropriate representative of the Underwriter and the designated City officials and shall be valid and enforceable at the time of such execution. SECTION 16. Applicable Law. This Contract shall be governed by and construed under the laws of the State of Florida. SECTION 17. Headings. The headings of the sections of this Purchase Contract are inserted for convenience only and shall not be deemed to be a part hereof. SECTION 18. Execution in Counterparts. This Purchase Contract may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same agreement. SECTION 19. Severability. The invalidity or unenforceability of any provision of this Purchase Contract shall not affect the validity or enforceability of the balance of this Purchase Contract. SECTION 20. Waiver or Modification. No waiver or modification of any one or more of the terms and conditions of this Purchase Contract shall be valid unless in writing and signed by the party or parties making such waiver or agreeing to such modification. [SIGNATURE PAGE IMMEDITELY FOLLOWS] 19 IN WITNESS WHEREOF, the undersigned hereby agree to the terms and provisions of this Purchase Contract all as of the day and year first above written. KIRKPATRICK, PETTIS, SMITH, POLIAN, Inc, a Nebraska corporation, d/b/a in Florida as KIRKPATRICK PETTIS By: Jeffrey T. Larson Senior Vice President Regional Manager Accepted as of the dated first mentioned above: CITY OF SEBASTIAN, FLORIDA By: Terrence R. Moore City Manager ATTEST: By: Shai Francis, CPA Finance Director Sally A. Maio, CMC City Clerk (SEAL) APPPROVED AS TO FORM AND EXECUTION Dated this __ day of ,2003. Rich Stringer, City Attorney 10 ! 90976v3 <ORLDOCS> 20 EXHIBIT A NAME: City of Sebastian, Florida Stormwater Utility Revenue Bonds, Series 2003 PRINCIPAL AMOUNT: DATE: ., 2003 INTEREST RATES: See Attached Bond Pricing Schedule INTEREST PAYABLE: May 1 and November 1, commencing May 1, 2004 DENOMINATIONS: $5,000.00 FINAL MATURITY DATE: May 1, 20 REDEMPTION PROVISIONS: Optional Redemption. The Series 2003 Bonds or portions thereof maturing on or after May 1, 20__ may be redeemed prior to their stated dates of maturity at the option of the City, from any moneys legally available therefor, in whole or in part in such order of maturities as directed by the City, and by lot within a maturity if less than a full maturity, on May 1, 20 or any date thereafter, at a redemption price equal to the principal amount of the Series 2003 Bonds to be redeemed, together with accrued interest to the date fixed for redemption, without premium. Mandatory Sinking Fund Redemption. The Series 2003 Bonds are subject to mandatory sinking fund redemption in the respective years set forth in the following table, at a Redemption Price of 100% of the principal amount thereof plus accrued interest to the redemption date: Year Principal Year Principal (May 1) Amount (May 1) Amount * Final Maturity A-1 Bond Pricing Schedule City of Sebastian, Florida Stormwater Utility Revenue Bonds, Series 2003 M atu rity Date Amount Rate Yield Price 5/1/2004 5/1/2005 5/1/2006 5/1/2007 5/1/2008 5/1/2009 5/1/2010 5/1/2011 5/1/2012 5/1/2013 51/2014 5/1/2015 5/1/2016 5/1/2017 5/1/2018 5/1/2019 5/1/2020 5/1/2021 5/1/2022 5/1/2023 5/1/2024 5/1/2025 5/1/2026 5/1/2027 5/1/2028 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 __% Term Bond due May 1, 2023,__ __% Term Bond due May l, 2028, ~ , Price , Price % % A-2 EXHIBIT B Disclosure Statement City of Sebastian, Florida 1225 Main Street Sebastian, Florida 32958 ,2003 Re: $ City of Sebastian, Florida Stormwater Utility Revenue Bonds, Series 2003 Ladies and Gentlemen: In connection with the proposed issuance by City of Sebastian, Florida (the "City) of $ original aggregate principal amount of its Stormwater Utility Revenue Bonds, Series 2003, referred to above (the "Series 2003 Bonds"), Kirkpatrick Pettis, Orlando, Florida, as underwriter (the "Underwriter") is underwriting a public offering of the Series 2003 Bonds. Arrangements for underwriting the Series 2003 Bonds will include a Bond Purchase Contract (the "Purchase Contract") between the City and the Underwriter, which will embody the terms in respect thereof. The purpose of this letter is to furnish, pursuant to the provisions of Section 218.385(6), Florida Statutes, certain information with respect to the arrangements contemplated for the underwriting of the Series 2003 Bonds as follows: (A) The nature and estimated amounts of expenses to be incurred by the Underwriter in connection with the purchase and reoffering of the Series 2003 Bonds are as set forth in Schedule I attached hereto. (B) There are no "finders" as defined in Section 218.386, Florida Statutes, as amended, in connection with the issuance of the Series 2003 Bonds. (C) Subject to the outcome of negotiations of the terms of the Purchase Contract and to the successful sale by the Underwriter of all the Series 2003 Bonds at the initial public offering price, it is our expectation that based on current market conditions, the underwriting spread (i.e., the difference between the price at which the Series 2003 Bonds will be initially offered to the public by the Underwriter and the price to be paid to the City for the Series 2003 Bonds, exclusive of original issue discount and accrued interest in both cases) will be $ per $1,000 par value of the principal amount of the Series 2003 Bonds. (D) Based on and as part of the estimated underwriting spread set forth in paragraph (C) above, the Underwriter will charge a management fee of % of the principal amount of the Series 2003 Bonds. B-1 (E) No other fee, bonus or other compensation is estimated to be paid by the Underwriter in connection with the issue of the Series 2003 Bonds, to any person not regularly employed or retained by the Underwriter (including any "finder" as defined in Section 218.386(1)(a), Florida Statutes), except as specifically enumerated as expenses to be incurred by the Underwriter in the Purchase Contract, as set forth in Paragraph (A) above. (F) The City is proposing to issue the Series 2003 Bonds for the purpose of providing moneys to (i) pay or reimburse the cost of dredging of the Collier Creek canal, demolition of the Collier Creek seawall and construction of the Collier Creek seawall, and excavation of the Potomac ditch, and any other capital improvements approved by the City Council in accordance with Florida Statutes, (ii) paying the premium of a Policy or fund a deposit to the credit of the Reserve Account to satisfy the Reserve Account Requirement for the Series 2003 Bonds and (iii) paying the costs of issuance related to the Series 2003 Bonds, including the premium of the municipal bond insurance policy. The Series 2003 Bonds are expected to be repaid over a period of approximately years. At a true interest cost of %, the total interest paid over the life of the Series 2003 Bonds will be $ The source of repayment or security for the Series 2003 Bonds is limited solely to the Pledged Funds. The authorization of this debt or obligation will result in an average of $ of Pledged Funds not being available to the City to finance other projects or services each year for approximately ( ) years. (G) The name and address of the Underwriter is: Kirkpatrick Pettis 3504 Lake Lynda Drive, Suite 155 Orlando, Florida 32817 We understand that you do not require any further disclosure from the Underwriter, pursuant to Section 218.385(6), Florida Statutes. Very truly yours, KIRKPATRICK PETTIS By: Jeffrey T. Larson Senior Vice President Regional Manager B-2 City of Sebastian, Florida Schedule I to Exhibit B Underwriter's Estimated Expenses Expenses Fed Funds Day Loan/Capital Charge CUSIP, DTC Dalcomp Underwriter's Counsel TBMA CouriedCommunication/Telefax Travel & Misc. Total Dollar Amount $ $ $ $ $ $ $ $ (1) Based on issue size of $0,000,000.00 EXHIBIT B FORM OF PRELIMINARY OFFICIAL STATEMENT Eom PRELIMINARY OFFICIAL STATEMENT DATED OCTOBER __, 2003 NEW ISSUE - BOOK-ENTRY ONLY RATINGS: Moody's: "Aaa" (Insured) "A3" (Underlying) S&P: "AAA" (Insured) "A" (Underlying) Fitch: "AAA" (Insured) "A" (Underlying) (See "RATINGS" herein) In the opinion of Bond Counsel, under existing statutes, regulations, rulings and court decisions, and assuming compliance with the tax covenants described herein, interest on the Series 2003 Bonds is excludable from gross income 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. Such interest, however, will be includable in the calculation of certain corporations' alternative minimum taxable income. See "TAX EXEMPTION" herein regarding certain other tax considerations. Bond Counsel is further of the opinion that the Series 2003 Bonds and the income thereon are exempt from all present intangible personal property taxes imposed pursuant to Chapter 199, Florida Statutes. $5,650,000* CITY OF SEBASTIAN, FLORIDA STORMWATER UTILITY REVENUE BONDS, SERIES 2003 Dated: November 1, 2003 Due: May 1, as shown below The Stormwater Utility Revenue Bonds, Series 2003 (the "Series 2003 Bonds") of the City of Sebastian, Florida (the "City"), will be issued only as fully registered bonds and will be initially registered only in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York ("DTC"), which will act as securities depository for the Series 2003 Bonds. The Series 2003 Bonds will be available to purchasers in denominations of $5,000 and integral multiples thereof only under the book-entry system maintained by DTC through brokers and dealers who are, or act through, DTC Participants. Purchasers will not receive delivery of the Series 2003 Bonds. So long as any purchaser is the Beneficial Owner (as defined herein) of a Series 2003 Bond, he must maintain an account with a broker or dealer who is, or acts through, a DTC Participant to receive payment of principal of and interest on such Series 2003 Bond. See "DESCRIPTION OF THE SERIES 2003 BONDS - Book-Entry Only System" herein. Interest on the Series 2003 Bonds will be payable semiannually on May 1 and November 1 of each year, commencing on May 1, 2004. The Series 2003 Bonds are subject to redemption prior to maturity as described herein under the caption "DESCRIPTION OF THE SERIES 2003 BONDS - Redemption". The Series 2003 Bonds are being issued trader the authority of, and in full compliame with, the Constitution and laws of the State of Florida, including particularly Chapter 166, Florida Statutes, Sections 403.0891 and 403.0893, Florida Statutes, City Ordinance No. O-01-16, Miami/12916.3 codified as Chapter 102, Article V of the City of Sebastian Code of Ordinances and Resolution No. R-__ adopted by the City Council of the City (the "City Council") on October 8, 2003, as supplemented by Resolution No: R-__ adopted by the City Council on ,2003 (collectively, the "Bond Resolution"), and other applicable provisions of law, for the purpose of providing funds, together with other available moneys, to (i) pay the cost of the Series 2003 Project, as described herein, (ii) pay the premium of a Reserve Account Insurance Policy to satisfy the Reserve Account Requirement for the Series 2003 Bonds and (iii) pay the costs of issuance of the Series 2003 Bonds, including the premium of the municipal bond insurance policy. See "PURPOSE OF THE SERIES 2003 BONDS" herein. The Series 2003 Bonds are special obligations of the City payable from and secured solely by a lien upon and pledge of (i) the Stormwater Fee Revenues (as defined herein) received by the City from the operation of its stormwater utility system and (ii) until applied in accordance with the provisions of the Bond Resolution, all moneys, including investments thereof, in the funds and accounts established under the Bond Resolution, except (a) as for the Rebate Fund and (b) to the extent moneys on deposit in a subaccount of the Reserve Account will be pledged solely for the payment of the Series of Bonds for which such subaccount was established in accordance with the provisions of the Bond Resolution (collectively, the "Pledged Funds"). See "SECURITY FOR THE SERIES 2003 BONDS" herein. In the Bond Resolution, the City has covenanted and agreed to appropriate in its annual budget, by amendment, if necessary, from NomAd Valorem Revenues lawfully available in each Fiscal Year, amounts sufficient to make up any deficiencies in the Reserve Account (including any amounts owing in regard to any Reserve Account Insurance Policy or Reserve Account Letter of Credit) existing on the first day of each Fiscal Year in the event Pledged Funds are insufficient for such purpose. See "SECURITY FOR THE SERIES 2003 BONDS - Covenant to Budget and Appropriate" herein. Payment of the principal of and interest on the Series 2003 Bonds when due will be insured by a municipal bond insurance policy to be issued by MBIA Insurance Corporation simultaneously with the delivery of the Series 2003 Bonds. The full faith and credit of the City, the State of Florida, or any political subdivision thereof, are not pledged to the payment of the principal of, premium, if any, and interest on the Series 2003 Bonds and the Holders of the Series 2003 Bonds shall never have the right to require or compel the exercise of any taxing power of the City, the State of Florida, or any political subdivision thereof, to the payment of such principal, premium, if any, and interest. The Series 2003 Bonds and the obligations evidenced thereby shall not constitute a lien upon any property of the City, but shall constitute a lien only on, and shall be payable solely from, the Pledged Funds in accordance with the terms of the Bond Resolution. The City may issue additional obligations on parity with the Series 2003 Bonds in accordance with the terms of the Bond Resolution. Bond© Miami/12916.3 MATURITIES, AMOUNTS, INTEREST RATES, YIELDS AND CUSIP NUMBERS* Maturity Date Principal Interest ( May 1) Amount Rate Yield CUSIP No. 2004 $ % % 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 $ __% Term Bond due May 1, 2023, , Price % $ __% Term Bond due May 1, 2028, , Price % The Series 2003 Bonds are offered when, as and if issued, subject to receipt of the legal opinion of Nabors, Giblin & Nickerson, P.A., Orlando, Florida, Bond Counsel. Certain legal matters will be passed on for the Underwriter by its counsel Shutts & Bowen, LLP, Orlando, Florida; certain legal matters will be passed on for the City by Rich Stringer, Esq., City Attorney, and Squire, Sanders & Dempsey L.L.P., Miami, Florida, Disclosure Counsel. It is expected that settlemem for the Series 2003 Bonds will occur through the facilities of DTC in New York, New York, on or about November 18, 2003. This cover page contains certain information for quick reference only. It is not a summary of this issue. Investors must read this entire Official Statement to obtain information essential to maMng an informed investment decision. Kirkpatrick Pettis A Mutual of Omaha Company Dated: ,2003 *Preliminary, subject to change. Miami/12916.3 CITY OF SEBASTIAN, FLORIDA 1225 Main Street Sebastian, Florida 32958 CITY COUNCIL Walter W. Barnes, Mayor Ray Coniglio, Vice Mayor Joe Barczyk, Councilmember Nathan B. McCollum, Councilmember James A. Hill, Councilmember CITY MANAGER Terrence R. Moore FINANCE DIRECTOR Shai Francis, CPA CITY CLERK Sally A. Maio, CMC CITY ATTORNEY Rich Stringer, Esq. CITY ENGINEER David W. Fisher, P.E., J.D. STORMWATER ENGINEER Kenneth Jones DISCLOSURE COUNSEL Squire, Sanders & Dempsey L.L.P. Miami, Florida INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS Hoyman, Dobson & Company, P.A. Melbourne, Florida Miami/12916.3 This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy mr shall there be any sale of the Series 2003 Bonds by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale. No dealer, broker, salesman or other person has been authorized by the City of Sebastian, Florida (the "City"), the Underwriter or MBIA Insurance Corporation to give any information or to make any representations other than those contained in this Official Statement, and if given or made, such other information or representations must not be relied upon as having been authorized by any of the foregoing. The information set forth herein has been furnished by the City, The Depository Trust Company (as to itself and the book-entry only system), MBIA Insurance Corporation (as to itself and the municipal bond insurance policy) and other sources which are believed to be reliable, but such information is not guaranteed as to accuracy or completeness by, and is not to be construed as a representation of, the City or the Underwriter. The information and expressions of opinion herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create the implication that there has been no change in the affairs of the City or MBIA Insurance Corporation since the date hereof. The Underwhter has reviewed the information in this Official Statement in accordance with, and as a part of, its responsibility to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such infonr~ation. Upon issuance, the Series 2003 Bonds will not be registered under the Securities Act of 1933, will not be listed on any stock or other securities exchange, and neither the Securities and Exchange Commission nor any other federal, state, municipal or other governmental entity, other than the City, will have passed upon the accuracy or adequacy of this Official Statement or approved the Series 2003 Bonds for sale. IN CONNECTION WITH THE OFFERING OF THE SERIES 2003 BONDS, THE UNDERWRITER MAY OVERALLOT OR EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SERIES 2003 BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. References herein to laws, rules, regulations, resolutions, agreements, reports and other documents do not purport to be comprehensive or definitive. All ~eferences to such documents are qualified in their entirety by reference to the particular document, the full text of which may contain qualifications of and exceptions to statements made herein. Where full texts have not been included as appendices to this Official Statement they may be obtained from Sally A. Maio, City Cleric, 1225 Main Street, Sebastian, Florida 32958, (772) 388-8203, upon prepayment of reproduction costs, postage and handling expenses. Miami/12916.3 TABLE OF CONTENTS Page SUMMARY STATEMENT ........................................i .................................................................. iii INTRODUCTION ........................................................................................................................... 1 PURPOSE OF THE SERIES 2003 BONDS ................................................................................... 2 ESTIMATED SOURCES AND USES OF FUNDS ....................................................................... 2 DESCRIPTION OF THE SERIES 2003 BONDS ........................................................................... 2 General ....................................................................................................................................... 2 Book-Entry Only System ........................................................................................................... 3 Discontinuance of Securities Depository ................................................................................... 5 Registration, Transfer and Exchange ......................................................................................... 6 Redemption ................................................................................................................................ 6 SECURITY FOR THE SERIES 2003 BONDS .............................................................................. 7 Special Obligations .................................................................................................................... 7 Reserve Account ........................................................................................................................ 7 Flow of Funds under Bond Resolution ...................................................................................... 9 Investment of Moneys ............................................................................................................. 11 Events of Defauk ..................................................................................................................... 11 Amendments to Bond Resolution ............................................................................................ 11 MUNICIPAL BOND INSURANCE ............................................................................................. 12 The MBIA Insurance Corporation Insurance Policy ............................................................... 12 MBIA ....................................................................................................................................... 13 MBIA Information ................................................................................................................... 14 Financial Strength Ratings of MBIA ....................................................................................... 14 COVENANT REGARDING ADDITIONAL DEBT ................................................................... 15 Additional Parity Bonds .......................................................................................................... 15 Subordinated Debt ................................................................................................................... 16 Rate Covenant .......................................................................................................................... 17 THE PLEDGED FUNDS .............................................................................................................. 17 COLLECTION OF STORMWATER FEE REVENUES AND ENFORCEMENT PROCEDURES ............................................................................................................................. 18 ESTIMATED DEBT SERVICE SCHEDULE* ............................................................................ 22 PROJECTED DEBT SERVICE COVERAGE ............................................................................. 22 THE SERIES 2003 PROJECT ...................................................................................................... 23 Miami/12916.3 THE CITY ..................................................................................................................................... 24 Background .............................................................................................................................. 24 City Government ..................................................................................................................... 24 Administration ......................................................................................................................... 24 Financial Statements and Annual Audit .................................................................................. 26 Description of Financial Practices and Financial Statements .................................................. 26 Investment Policy .................................................................................................................... 26 LITIGATION ................................................................................................................................ 26 General ..................................................................................................................................... 26 The Series 2003 Bonds ............................................................................................................ 27 LEGAL MATTERS ....................................................................................................................... 27 ENFORCEABILITY OF REMEDIES .......................................................................................... 27 TAX EXEMPTION ....................................................................................................................... 28 Opinion of Bond Counsel ........................................................................................................ 28 Internal Revenue Code of 1986 ............................................................................................... 28 Financial Institutions ............................................................................................................... 28 Collateral Tax Consequences .................................................................................................. 29 Florida Taxes ........................................................................................................................... 29 Other Tax Matters .................................................................................................................... 29 Original Issue Discount ........................................................................................................... 29 Premium Bonds ....................................................................................................................... 30 RATINGS ............................................................................................................................. : ........ 30 UNDERWRITING ........................................................................................................................ 31 FORWARD LOOKING STATEMENTS ..................................................................................... 31 DISCLOSURE REQUIRED BY FLORIDA BLUE SKY REGULATIONS ............................... 31 ADVISORS AND CONSULTANTS ............................................................................................ 32 CONTINUING DISCLOSURE ..................................................................................................... 32 MISCELLANEOUS ...................................................................................................................... 34 APPENDIX A - APPENDIX B - APPENDIX C - APPENDIX D - APPENDIX E - APPENDIX F GENERAL INFORMATION PERTAINING TO THE CITY OF SEBASTIAN AND INDIAN RIVER COUNTY, FLORIDA EXCERPTS OF COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR FISCAL YEAR ENDED SEPTEMBER 30, 2002 FORM OF BOND RESOLUTION SPECIMEN MUNICIPAL BOND INSURANCE POLICY FORM OF BOND COUNSEL OPINION SPECIMEN RESERVE ACCOUNT INSURANCE POLICY Miami/12916.3 ii SUMMARY STATEMENT This Summary Statement is subject in all respects to more complete information contained in this Official Statement and should not be considered to be a complete statement of the facts material to malting an investment decision. The offering of the Series 2003 Bonds to potential investors is made only by means of this entire Official Statement including the Appendices hereto. No person is authorized to detach this Summary Statement from this Official Statement or otherwise to use this Surmuary Statement without this entire Official Statement including the Appendices hereto. For a more complete description of the terms and conditions of the contract between the City and the Holders of the Series 2003 Bonds, see "APPENDIX C - FORM OF BOND RESOLUTION" attached hereto. Capitalized terms used in this Official Statement without definitions shall have the meanings ascribed thereto in the Bond Resolution. City of Sebastian, Florida The City of Sebastian, Florida (the "City" or "Issuer"), incorporated in 1924, is a residential community in the northeastern part of Indian River County, Florida (the "County"). The City encompasses approximately 13.5 square miles and is located in southeastern Florida. The City is served by two major north-south Florida highways: Interstate 95 and U.S. Highway 1. The City is located 74 miles southeast of the City of Orlando, 25 miles south of the City of Melbourne and 75 miles north of the City of West Palm Beach. The estimated population of the City as of April 1, 2003 was approximately 18,425. See "APPENDIX A - GENERAL INFORMATION PERTAINING TO THE CITY OF SEBASTIAN AND INDIAN RIVER COUNTY, FLORIDA" attached hereto. Authority for Issuance The Series 2003 Bonds are being issued under the authority of, and in full compliance with, the Constitution and laws of the State of Florida, including particularly Chapter 166, Florida Statutes, Sections 403.0891 and 403.0893, Florida Statutes, City Ordinance No. O-01-16, codified as Chapter 102, Article V of the City of Sebastian Code of Ordinances and Resolution No. ~ adopted by the City Council on October 8, 2003, as supplemented by Resolution No. adopted by the City Council on ., 2003 (collectively, the "Bond Resolution") and other applicable provisions of law. Purpose of the Series 2003 Bonds The Series 2003 Bonds are being issued for the purpose of providing funds to (i) pay the cost of the Series 2003 Project, as described herein, (ii) pay the premium of the Reserve Account Insurance Policy to satisfy the Reserve Account Requirement for the Series 2003 Bonds and (iii) pay the costs of issuance of the Series 2003 Bonds, including the premium of the municipal bond insurance policy. See "PURPOSE OF THE SERIES 2003 BONDS" herein. Sources of Payment and Security for the Series 2003 Bonds The Series 2003 Bonds are special obligations of the City payable from and secured solely by a lien upon and pledge of the Pledged Funds. "Pledged Funds" consist of (i) the Stormwater Fee Revenues and (ii) until applied in accordance with the provisions of the Bond iii Miami/12916.3 Resolution, all moneys, including investments thereof, in the funds and accounts established under the Bond Resolution, except (a) as for the Rebate Fund and (b) to the extent moneys on deposit in a subaccount of the Reserve Account will be pledged solely for the payment of the Series of Bonds for which such subaccount was established. The full faith and credit of the City, the State of Florida, or any political subdivision thereof, are not pledged to the payment of the principal of, premium, if any, and interest on the Series 2003 Bonds and the Holders of the Series 2003 Bonds shall never have the right to require or compel the exercise of any taxing power of the City, the State of Florida, or any political subdivision thereof, to the payment of such principal, premium, if any, and interest. The Series 2003 Bonds and the obligations evidenced thereby shall not constitute a lien upon any property of the City, but shall constitute a lien only on, and shall be payable solely from, the Pledged Funds in accordance with the terms of the Bond Resolution. The City may issue additional obligations on parity with the Series 2003 Bonds in accordance with the terms of the Bond Resolution. Reserve Account Concurrently with the issuance of the Series 2003 Bonds, the City shall cause to be deposited to the credit of the Series 2003 Reserve Subaccount a [Reserve Account Insurance] Policy or shall fund a deposit to the credit of the Reserve Account in an amount equal to tt,e Reserve Account Requirement for the Series 2003 Bonds. The Reserve Account Requirement for the Series 2003 Bonds is, as of any date of calculation, an amount equal to the lesser of (i) the Maximum Annual Debt Service for all Outstanding Series 2003 Bonds, (ii) 125% of the average Annual Debt Service for all Outstanding Series 2003 Bonds, or (iii) the maximum amount allowed to be funded from proceeds of tax-exempt obligations and invested at an unrestricted yield pursuant to the Internal Revenue Code of 1986, as amended. See "SECURITY FOR THE SERIES 2003 BONDS - Reserve Account" herein. Covenant to Budget and Appropriate In the Bond Resolution, the City has covenanted and agreed to appropriate in its annual budget, by amendment, if necessary, from Non-Ad Valorem Revenues lawfully available in each Fiscal Year, amounts sufficient to make up any deficiencies in the Reserve Account (including any amounts owing in regard to any Reserve Account Insurance Policy or Reserve Account Letter of Credit) existing on the first day of each Fiscal Year in the event Pledged Funds are insufficient for such purpose. See "SECURITY FOR THE SERIES 2003 BONDS - Covenant to Budget and Appropriate" herein. Municipal Bond Insurance Payment of the principal of and interest on the Series 2003 Bonds when due will be insured by a municipal bond insurance policy to be issued simultaneously with the delivery of the Series 2003 Bonds by MBIA Insurance Corporation. For a discussion of the terms and provisions of the financial guaranty insurance policy, including the limitations thereof, see "MUNICIPAL BOND INSURANCE" herein and "APPENDIX D - SPECIMEN MUNICIPAL BOND INSURANCE POLICY" attached hereto. Miami/12916.3 Redemption of the Series 2003 Bonds The Series 2003 Bonds or portions thereof maturing on or after May 1 , are subject to optional redemption prior to their stated dates of maturity, in whole or in part at any time on or after May 1, , at the redemption prices set forth herein. The Series 2003 Bonds maturing in the years __ and __ are also subject to mandatory redemption prior to their stated dates of maturity, in part, by lot, as selected by the Registrar, as set forth herein. For more complete information, see "DESCRIPTION OF THE SERIES 2003 BONDS - Redemption" herein. Paying Agent and Registrar as Paying Agent and Registrar for the Series 2003 Bonds. ], will serve [End of Summary Statement] Miami/12916.3 OFFICIAL STATEMENT relating to the issuance of $5,650,000* CITY OF SEBASTIAN, FLORIDA STORMWATER UTILITY REVENUE BONDS, SERIES 2003 INTRODUCTION The purpose of this Official Statement, which includes the cover page, the Summary Statement, and the Appendices hereto, is to furnish infonuation with respect to the sale by the City of Sebastian, Florida (the "City" or "Issuer"), of its Stormwater Utility Revenue Bonds, Series 2003, being issued in the aggregate principal amount of $5,650,000* (the "Series 2003 Bonds"). There follows in this Official Statement a brief description of the Series 2003 Bonds, the security for the Series 2003 Bonds, and information regarding the City. All financial data and other statistical data included herein have been provided by the City, except where other sources are noted. The Series 2003 Bonds are being issued pursuant to the Constitution and laws of the State of Florida, including particularly Chapter 166, Florida Statutes, Sections 403.0891 and 403.0893, Florida Statutes, the City Charter of the City and other applicable provisions of law (collectively, the "Act") and Resolution No. ~ adopted by the City Council of the City (the "City Council") on October 8, 2003, as supplemented by Resolution No. ~ adopted by the City Council on ,2003 (collectively, the "Bond Resolution"). A complete description of the terms and conditions of the Series 2003 Bonds is set forth in the form of Bond Resolution, a copy of which is included in this Official Statement as Appendix C. The description of the Series 2003 Bonds, the documents authorizing and securing the same, and the infomaation from various reports and statements contained herein are not comprehensive or definitive. All references herein to such documents, reports and statements are qualified by their entire, actual content. Capitalized tenus used but not defined in this Official Statement have the meaning ascribed thereto in the Bond Resolution, unless the context would clearly indicate otherwise. The applicable definitions are contained in "APPENDIX C - FORM OF BOND RESOLUTION" attached hereto. The assumptions, estimates, projections and matters of opinion contained in this Official Statement, whether or not so expressly stated, are set forth as such and not as matters of fact, and no representation is made that any of the assumptions or matters of opinion herein are valid or that any projections or estimates contained herein will be realized. Neither this Official Statement nor any other statement which may have been made verbally or in writing in connection with the Series 2003 Bonds, other than the Bond Resolution, is to be construed as a contract with the Holders of the Series 2003 Bonds. * Preliminary, subject to change. Miami/12916.3 PURPOSE OF THE SERIES 2003 BONDS The Series 2003 Bonds are being issued for the purpose of providing funds, together with other available moneys, to (i) pay the cost of the Series 2003 Project, (ii) pay the premium of the Reserve Account Insurance Policy or fund a deposit to the credit of the Reserve Account to satisfy the Reserve Account Requirement for the Series 2003 Bonds and (iii) pay the costs of issuance of the Series 2003 Bonds, including the premium of the municipal bond insurance policy. A portion of the net proceeds of the Series 2003 Bonds will be applied to finance the cost of acquisition and construction of the hereinafter described Series 2003 Project. See "THE SERIES 2003 PROJECT" herein. ESTIMATED SOURCES AND USES OF FUNDS The following table sets forth the estimated sources and uses of funds, in connection with the issuance of the Series 2003 Bonds: Sources of Funds Par Amount of Series 2003 Bonds Accrued Interest Original Issue Discount TOTAL SOURCES $ ( $ $ $ Uses of Funds Deposit to Construction Fund Deposit to Sinking Fund (Accrued Interest)O) Costs of Issuance(2) TOTAL USES (1) From November 1, 2003 to date of delivery of the Series 2003 Bonds. (2) Includes underwriter's discount, municipal bond insurance premium, reserve account insurance premium, bond and disclosure counsel fees, paying agent and registrar fees, official statement printing costs and other expenses and administrative costs associated with issuance of the Series 2003 Bonds. DESCRIPTION OF THE SERIES 2003 BONDS General The Series 2003 Bonds will be dated as of November 1, 2003, will be issued in fully registered form, without coupons, in the denominations of $5,000 and integral multiples thereof, and will bear interest, computed on the basis of a 360 day year, consisting of twelve 30 day months, at the rates set forth on the cover page of this Official Statement. The Series 2003 Bonds will mature on May 1 of each year set forth on the cover of this Official Statement. Interest on the Series 2003 Bonds will be payable semiannually on May 1 and November 1 of each year, co~ranencing May 1, 2004. While the Series 2003 Bonds are held pursuant to DTC's book-entry only system, principal of and premium, if any, and interest on the Series 2003 Bonds Miami/12916.3 will be payable in the manner described under "Book-Entry Only System" herein. The Series 2003 Bonds will be subject to redemption as described under "Redemption" herein. The Series 2003 Bonds shall bear a certificate of authentication to be manually executed by the Registrar and no Series 2003 Bond shall be secured hereunder or be entitled to the benefit of the Bond Resolution or shall be valid or obligatory for any purpose unless there shall be manually endorsed on such Series 2003 Bond such certificate of authentication by the Registrar or such other entity as may be approved by the City for such purpose. Book-Entry Only System The Depository Trust Company ("DTC"), New York, New York, or its successor, will act as securities depository for the Series 2003 Bonds. The Series 2003 Bonds will be issued as fully registered bonds registered in the name of Cede & Co. (DTC's partnership nominee). One fully-registered Series 2003 Bond certificate will be issued for each maturity in the aggregate principal amount of such maturity and will be deposited with DTC. DTC 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 a "cleating agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds securities that its participants (the "Direct Participants") deposit with DTC. DTC also facilitates the settlement among Direct Participants of securities transactions, such as transfers ard pledges, in deposited securities through electronic computerized book-entry changes in accounts of the Direct Participants, thereby eliminating the need for physical movement of securities certificates. Direct Participants include securities brokers and dealers, banks, trust companies, clearing corporations, and certain organizations. DTC is owned by a number of its Direct Participants and 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 securities brokers and dealers, banks and trust companies that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (the "Indirect Participants"). The rules applicable to DTC and its Direct and Indirect Participants are on file with the Securities and Exchange Commission. Purchases of the Series 2003 Bonds under the DTC system must be by or through Direct Participants, which will receive a credit for the Series 2003 Bonds on DTC's records. The ownership interest of each actual purchaser of each Series 2003 Bonds (the "Beneficial Owner") is in turn to be recorded in the records of the applicable DTC Direct or Indirect Participant. Beneficial Owners will not receive written confLrmation from DTC of their purchase, but Beneficial Owners are expected to receive written confm'nations 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 of the Series 2003 Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of the Bereficial Owners. Beneficial Owners will not receive certificates representing their ownership interest in Series 2003 Bonds, except in the event that use of the book-entry system for the Series 2003 Bonds is discontinued. Miami/12916.3 To facilitate subsequent transfers, all Series 2003 Bonds deposited by Direct Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co. or such other name as may be requested by an authorized representative of DTC. The deposit of Series 2003 Bonds with DTC and their registration in the name of Cede & Co. or such other nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Series 2003 Bonds; DTC's records reflect only the identity of the Direct Participants to whose accounts such Series 2003 Bonds are credited, which may or 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. Redemption notices will be sent to DTC. If less than all of the Series 2003 Bonds within a maturity of a series are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be redeemed. Neither DTC nor Cede & Co. (nor such other DTC nominee) will consent or vote with respect to the Series 2003 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 Series 2003 Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Redemption proceeds, distributions, and dividend payments on the Series 2003 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, upon DTC's receipt of funds and corresponding detail information from the City to the Paying Agent on payable date in accordance with their respective holdings shown on DTC's records. Payments by 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, the Registrar or the City, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions and dividends to Cede & Co. (or such other nominee as may be requested by an authorized representative of 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 ard Indirect Participants. DTC may discontinue providing its services as securities depository with respect to the Series 2003 Bonds at any time by giving reasonable notice to the City and the Paying Agent. Under such circumstances, in the event that a successor securities depository is not obtained, Series 2003 Bond certificates will be printed and delivered. Miami/12916.3 The City may decide to discontinue use of the book-entry only system for transfers through DTC (or a successor securities depository). In such event, Series 2003 Bond certificates will be printed and delivered. The information in this section concerning DTC and DTC's book-entry only system has been obtained from sources the City believes to be reliable, but the City takes no responsibility for the accuracy thereof. SO LONG AS CEDE & CO., AS NOMINEE FOR DTC, IS THE SOLE REGISTERED OWNER, THE CITY, THE PAYING AGENT AND THE REGISTRAR SHALL TREAT CEDE & CO. AS THE ONLY OWNER OF THE SERIES 2003 BONDS FOR ALL PURPOSES UNDER THE BOND RESOLUTION INCLUDING RECEIPT OF ALL PRINCIPAL OF AND INTEREST ON THE SERIES 2003 BONDS, RECEIPT OF NOTICES, VOTING AND REQUESTING OR DIRECTING THE CITY, THE PAYING AGENT AND THE REGISTRAR TO TAKE OR NOT TO TAKE, OR CONSENTING TO, CERTAIN ACTIONS UNDER SUCH BOND RESOLUTION. NONE OF TIlE CITY, THE PAYING AGENT, THE REGISTRAR OR THE UNDERWRITER WILL HAVE ANY RESPONSIBILITY OR OBLIGATION TO THE PARTICIPANTS OR THE BENEFICIAL OWNERS WITH RESPECT TO (A) TIlE ACCURACY OF ANY RECORDS MAINTAINED BY DTC OR ANY PARTICIPANT; (B) THE PAYMENT BY ANY PARTICIPANT OF ANY AMOUNT DUE TO ANY BENEFICIAL OWNER IN RESPECT OF THE PRINCIPAL OF, OR PREMIUM, IF ANY, OR INTEREST ON, THE SERIES 2003 BONDS; (C) THE DELIVERY OR TIMELINESS OF DELIVERY BY ANY PARTICIPANT OF ANY NOTICE TO ANY BENEFICIAL OWNER WHICH IS REQUIRED OR PERMITTED UNDER TIlE TERMS OF THE BOND RESOLUTION TO BE GIVEN TO REGISTERED OWNERS; (D) TIlE SELECTION BY DTC OR ANY DTC PARTICIPANT OR INDIRECT PARTICIPANT OF ANY BENEFICIAL OWNER TO RECEIVE PAYMENT IN THE EVENT OF A PARTIAL REDEMPTION OF THE SERIES 2003 BONDS; OR (E) OTHER ACTION TAKEN BY DTC OR CEDE & CO., AS REGISTERED OWNER. Discontinuance of Securities Depository DTC may discontinue providing its services with respect to the Series 2003 Bonds at any time by giving notice to the City and discharging its responsibilities with respect thereto under applicable law, or the City may terminate its participation in the system of book-entry transfers through DTC at any time. In the event that the DTC book-entry only system is discontinued and it is not replaced with another book-entry system, the following provisions will apply: principal of the Series 2003 Bonds and redemption premium, if any, thereon will be payable in lawful money of the United States of America at the principal office of ., (the "Paying Agent"). Interest on the Series 2003 Bonds will be payable on each May 1 and November 1 by check or draft made payable and mailed to the Holder in whose name the Series 2003 Bond shall be registered at the close of business on the date which shall be the 15th day (whether or not a business day) of the calendar month next preceding an Interest Payment Date; provided, however, that the Holder of any Series 2003 Bond upon written request made to the Registrar and at the expense of such Holder, may direct that payment of interest thereon be made by wire transfer or any other medium acceptable to the City and to such Holder, all as more Miami/12916.3 specifically provided in the Bond Resolution The transfer of the Series 2003 Bonds will be registrable and they may be exchanged at the principal office of the Registrar, upon the payment of any taxes, fees or other governmental charges required to be paid with respect to such transfer or exchange. Registration, Transfer and Exchange The Series 2003 Bonds will be and have all the qualities and incidents of negotiable instruments under the Uniform Commercial Code Investment Securities Laws of the State of Florida, subject to the DTC book-entry only system and to the provisions for registration, exchange and transfer contained in the Bond Resolution and in the Series 2003 Bonds. The Series 2003 Bonds will be transferable only upon the registration books maintained for such purpose at the corporate trust office of the Registrar. So long as any of the Series 2003 Bonds remain Outstanding, the Registrar must maintain and keep the bond registration books. All Series 2003 Bonds presented for transfer or exchange (if so required by the City or the Registrar) shall be accompanied by a written instrument or instruments of transfer or authorization for exchange, in form and with guaranty of signature satisfactory to the City or the Registrar, duly executed by the Holder or by his or her duly authorized attorney. The Registrar or the City may require payment from the Holder or his transferee, as the case may be, of a sum sufficient to cover any tax, fee, expense or other governmental charge required to be paid with respect to such transfer. Such charges and expenses shall be paid before any new Series 2003 Bonds shall be delivered. The City and the Registrar shall not be obligated to make any such exchange or transfer of the Series 2003 Bonds during the fifteen (15) days next preceding an Interest Payment Date on the Series 2003 Bonds, or, in the case of any proposed redemption of the Series 2003 Bonds, then for the Series 2003 Bonds subject to redemption during the fifteen (15) days next preceding the date of the first mailing of notice of such redemption and continuing until such redemption date. New Series 2003 Bonds delivered upon any transfer or exchange will be valid obligations of the City, evidencing the same debt as the Series 2003 Bonds surrendered, will be secured by the Bond Resolution, and will be entitled to all of the security and benefits of the Bord Resolution to the same extent as the Series 2003 Bonds surrendered. Redemption Optional Redemption. The Series 2003 Bonds or portions thereof maturing on or after May 1, __ may be redeemed prior to their stated dates of maturity at the option of the City, from any moneys legally available therefor, in whole or in part in such order of maturities as directed by the City, and by lot within a maturity if less than a full maturity, on May 1, or any date thereafter, at a redemption price equal to the principal amount of the Series 2003 Bonds to be redeemed, together with accrued interest to the date fixed for redemption, without premium. Miami/12916.3 6 Mandatory Sinking Fund Redemption. The Series 2003 Bonds are subject to mandatory sinking fund redemption in the respective years set forth in the following table, at a Redemption Price of 100% of the principal amount thereof plus accrued interest to the redemption date: Year Principal Year Principal (May 1 ) Amount (May 1) Amount * Final Maturity SECURITY FOR THE SERIES 2003 BONDS Special Obligations THE FULL FAITH AND CREDIT OF THE CITY, THE STATE OF FLORIDA, OR ANY POLITICAL SUBDIVISION THEREOF, ARE NOT PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF, PREMIUM, IF ANY, AND INTEREST ON THE SERIES 2003 BONDS AND THE HOLDERS OF THE SERIES 2003 BONDS SHALL NEVER HAVE THE RIGHT TO REQUIRE OR COMPEL THE EXERCISE OF ANY TAXING POWER OF THE CITY, THE STATE OF FLORIDA, OR ANY POLITICAL SUBDIVISION THEREOF, TO THE PAYMENT OF SUCH PRINCIPAL, PREMIUM, IF ANY, AND INTEREST. THE SERIES 2003 BONDS AND THE OBLIGATIONS EVIDENCED THEREBY SHALL NOT CONSTITUTE A LIEN UPON ANY PROPERTY OF THE CITY, BUT SHALL CONSTITUTE A LIEN ONLY ON, AND SHALL BE PAYABLE SOLELY FROM, THE PLEDGED FUNDS IN ACCORDANCE WITH THE TERMS OF THE BOND RESOLUTION. THE CITY MAY ISSUE ADDITIONAL OBLIGATIONS ON PARITY WITH THE SERIES 2003 BONDS IN ACCORDANCE WITH THE TERMS OF THE BOND RESOLUTION. Reserve Account The Bond Resolution requires that the City establish a separate subaccount under the Reserve Account for the benefit of the Holders of the Series 2003 Bonds. The Bond Resolution provides for the establishment of the Series 2003 Reserve Account Requirement. The Reserve Account Requirement for the Series 2003 Bonds is, as of any date of calculation, an amount equal to the lesser of (i) the Maximum Annual Debt Service for all Outstanding Series 2003 Bonds, (ii) 125% of the average Annual Debt Service for all Outstanding Series 2003 Bonds, or Miami/12916.3 (iii) the maximum amount allowed to be funded from proceeds of tax-exempt obligations and invested at an unrestricted yield pursuant to the Internal Revenue Code of 1986, as amended. Pursuant to the Bond Resolution, there shall be deposited to the credit of the subaccount of the Reserve Account established for the credit of the Series 2003 Bonds (the "Series 2003 Reserve Subaccount") such sum, if any, as will be necessary to restore any funds on deposit therein to an amount equal to the Reserve Account Requirement for the Series 2003 Bonds. Upon the issuance of any Series of Additional Bonds under the Bond Resolution, the City shall fund the corresponding subaccount of the Reserve Account established for such Series in an amount at least equal to the Reserve Account Requirement applicable to such Series of Additional Bonds. Such required amount, if any, shall be paid in full from the proceeds of such Series of Additional Bonds or other sources, on the date of delivery of such Series of Additional Bonds. In lieu of or in substitution of the required deposits into the Series 2003 Reserve Subaccount, the City may cause to be deposited into the Series 2003 Reserve Subaccount a Reserve Account Insurance Policy and/or Reserve Account Letter of Credit for the benefit of the Bondholders in an amount equal to the difference between the Reserve Account Requirement applicable thereto and the sums then on deposit in the Reserve Account, if any. See "APPENDIX C - FoRM OF BOND RESOLUTION" herein. The City may also establish a separate subaccount in the Reserve Account for any Series of Bonds and provide a pledge of such subaccount to the payment of such Series of Bonds apart from the pledge provided in the Bond Resolution. See "APPENDIX C - FORM OF BOND RESOLUTION" herein. Any such separate subaccount shall not secure the Series 2003 Bonds. Any Series of Bonds secured by such separate subaccount shall not be secured by the Series 2003 Reserve Subaccount. In connection with the issuance of the Series 2003 Bonds, the City has determined to deposit to the credit of the Series 2003 Reserve Subaccount a Debt Service Account Insurance Policy (the "Reserve Account Insurance Policy") to be issued by MBIA Insurance Corporation (the "Insurer") in the amount of the Reserve Account Requirement for the Series 2003 Bonds. The Reserve Account Insurance Policy will provide that upon notice from the Paying Agent to the Insurer to the effect that insufficient amounts are on deposit in the Series 2003 Reserve Subaccount to pay the principal of (at maturity or pursuant to mandatory redemption requirements) and interest on the Series 2003 Bonds, the Insurer will promptly deposit with the Paying Agent an amount sufficient to pay the principal of and interest on the Series 2003 Bonds or the available amount of the Reserve Account Insurance Policy, whichever is less. Upon the later of: (i) three (3) days after receipt by the Insurer of a Demand for Payment in the form attached to the Reserve Account Insurance Policy, duly executed by the Paying Agent; or (ii) the payment date of the Series 2003 Bonds as specified in the Demand for Payment presented by the Paying Agent to the Insurer, the Insurer will make a deposit of funds in an account with U.S. Bank Trust National Association, in New York, New York, or its successor, sufficient for the payment to the Paying Agent, of amounts which are then due to the Paying Agent (as specified in the Demand for Payment) subject to the Surety Bond Coverage (as hereinafter defined). Miarai/I2916.3 The available amount of the Reserve Account Insurance Policy is the initial face amount of the Reserve Account Insurance Policy less the amount of any previous deposits by the Insurer with the Paying Agent which have not been reimbursed by the City (the "Surety Bond Coverage"). The City and MBIA shall enter into a Financial Guaranty Agreement (the "Guaranty Agreement"). Pursuant to the Guaranty Agreement the City is required to reimburse the Insurer, within one year of any deposit, the amount of such deposit made by the Insurer with the Paying Agent under the Reserve Account Insurance Policy. Such reimbursement shall be required only after all required deposits to the Operation and Maintenance Fund and the Debt Service Fund have been made. Under the tenus of the Guaranty Agreement, the Paying Agent is required to reimburse the Insurer, with hterest, until the face amount of the Reserve Account Insurance Policy is reinstated before any deposit is made to the Revenue Fund. No optional redemption of Series 2003 Bonds may be made until the Insurer's Reserve Account Insurance Policy is reinstated. The Reserve Account Insurance Policy will be held by the Paying Agent in the Debt Service Reserve Fund and is provided as an alternative to the City depositing funds equal to the Series 2003 Reserve Account Requirement. The Reserve Account Insurance Policy will be issued in the face amount equal to the Maximum Annual Debt Service for the Series 2003 Bonds and the premium therefor will be fully paid by the City at the time of delivery of the Series 2003 Bonds. Flow of Funds under Bond Resolution Creation of Funds and Accounts. The Bond Resolution provides for the establishment of various funds and accounts into which moneys will be deposited for various purposes, including (i) a Revenue Fund, (ii) a Debt Service Fund (which shall contain four separate accounts as follows: an Interest Account, a Principal Account, a Bond Amortization Account and a Reserve Account) (iii) a Stormwater Reserve Fund and (iv) a Rebate Fund. Moneys in the aforementioned funds and accounts, other than the Rebate Fund until applied in accordance with the provisions of the Bond Resolution, shall be subject to a lien and charge in favor of the Holders of the Series 2003 Bonds and for the further security of such Holders in accordance with the terms of the Bond Resolution. The moneys required to be accounted for in each of the funds, accounts and subaccounts established by the Bond Resolution may be deposited in a single, non-exclusive bank account, and funds allocated to the various funds, accounts and subaccounts established in the Bond Resolution may be invested in a common investment pool, provided that adequate accounting records are maintained to reflect and control the restricted allocation of the moneys on deposit therein and such investments for the various purposes of such funds, accounts and subaccounts as provided in the Bond Resolution. The designation and establishment of the various funds, accounts and Subaccounts in and by the Bond Resolution shall not be construed to require the establishment of any completely independent, self-balancing funds as such tenr~ is commonly defined and used in governmental accounting, but rather is intended solely to constitute an earmarking of certain revenues for certain purposes and to establish certain priorities for application of such revenues as provided in the Bond Resolution Miami/12916.3 Flow of Funds. Under the terms of the Bond Resolution, upon receipt, the City shall promptly deposit the Stormwater Fee Revenues into the Revenue Account. The moneys in the Revenue Account shall be deposited or credited on or before the 25th day of each month, comrnencing in the month immediately following delivery of the Series 2003 Bonds to the purchasers thereof or such later date as provided in the Bond Resolution in the following manner and in the following order of priority, as applicable for the Series 2003 Bonds: (1) The City will deposit or credit to the Interest Account the sum which, together with the balance in said Account, will equal the interest on all Series 2003 Bonds Outstanding accrued and unpaid and to accrue to the end of the then current calendar month. (2) Commencing no later than the month which is one year prior to the first principal due date, the City will next deposit into the Principal Account the sum Which, together with the balance in said Account, will the principal amounts on all Series 2003 Bonds Outstanding due and unpaid and that portion of the principal next due which would have accrued on such Bonds during the then current calendar month if such principal amounts were deemed to accrue monthly (assuming that a year consists of 12 equivalent calendar months having 30 days each) except for the Amortization Installments to be deposited in accordance with paragraph (3) below in equal amounts from the next preceding principal payment due date, or, if there be no such preceding payment due date from a date one year preceding the due date of such principal amount. (3) Commencing in the month which is one year prior to the first Amortization Installment due date, there will be deposited to the Bond Amortization Account the sum which, together with the balance in such Account, will equal the Amortization Installments on all Series 2003 Bonds Outstanding due and unpaid and that portion of the Amortization Installments of all Series 2003 Bonds Outstanding next due which would have accrued on such Bonds during the then current calendar month if such Amortization Installments were deemed to accrue monthly (assuming that a year consists of 12 equivalent calendar months having 30 days each) in equal amounts from the next preceding Amortization Installment due date, or, if there is no such preceding Amortization Installment due date, from a date one year preceding the due date of such Amortization Installment. (4) There will be deposited to the Reserve Account an amount which would enable the City to restore the fcmds on deposit in the Reserve Account to an amount equal to the Reserve Account Requirement applicable thereto. (5) The balance of any Stonuwater Fee Revenues will be deposited in the Stormwater Reserve Fund and applied to the payment, on or prior to each principal and interest payment date for the Series 2003 Bonds (in no event earlier than the 25th day of the month next preceding such payment date), into the Interest Account, the Principal Account and the Bond Amortization Account when the moneys therein shall be insufficient to pay the principal of and interest on the Series 2003 Bonds coming due. Miami/12916.3 10 Investment of Moneys Moneys on deposit in the Construction Fund, the Stormwater Reserve Fund ard the Debt Service Fund shall be continuously secured in the manner by which the deposit of public funds are authorized to be secured by the laws of the State. Moneys on deposit in the Construction Fund, the Stormwater Reserve Fund and the Debt Service Fund, other than the Reserve Account, may be invested and reinvested in Authorized Investments maturing not later than the date on which the moneys therein will be needed for the purposes of such fund or account. Moneys on deposit in the Reserve Account may be invested or reinvested in Authorized Investments which shall mature no later than ten years from the date of investment. All investments shall be valued at cost; provided, that the amounts on deposit in the Reserve Account shall be valued at the market price thereof. Investments in the Reserve Account shall be valued by the City on an amount basis of March 1 of each year. See "APPENDIX C - FORM OF BOND RESOLUTION" herein. Events of Default For a description of the events that constitute an "Event of Default" and the corresponding remedies available under the Bond Resolutior~ upon the occurrence of an Event of Default, see "APPENDIX C - FORM OF BOND RESOLUTION" hereto. Amendments to Bond Resolution The Bond Resolution provides a procedure for amendments thereto, both with and without the consent of Holders. For the circumstances, and the conditions on which, the Bond Resolution may be amended, and the conditions on which an Insurer of Bonds shall be considered the Holder of such Bonds which it has insured for purposes of consenting to proposed amendments, see "APPENDIX C - FORM OF BOND RESOLUTION" hereto. Covenant to Budget and Appropriate In the Bond Resolution, the City has covenanted and agreed to appropriate in its annual budget, by amendment, if necessary, from Non-Ad Valorem Revenues lawfully available in each Fiscal Year, amounts sufficient to make up any deficiencies in the Reserve Account (including any amounts owing in regard to any Reserve Account Insurance Policy or Reserve Account Letter of Credit) existing on the first day of each Fiscal Year in the event Pledged Funds are insufficient for such purpose. Such covenant and agreement on the part of the City to budget and appropriate such amounts of Non-Ad Valorem Revenues will be cumulative to the extent not paid and will continue until such Non-Ad Valorem Revenues or other legally available funds in amounts sufficient to make all such required deposits and payments will have been budgeted, appropriated and actually paid or deposited. Notwithstanding the foregoing covenant of the City, the City does not covenant to maintain any services or programs, now provided or maintained by the City, which generate NomAd Valorem Revenues. Such covenant to budget and appropriate does not create any lien upon or pledge of such Non-Ad Valorem Revenues, not does it preclude the City from pledging in the future its Non-Ad Valorem Revenues, nor does it require the City to levy and collect any particular Non-Ad Valorem Revenues, nor does it give the Bondholder a prior claim on the Non-Ad Valorem Miami/12916.3 11 Revenues as opposed to claims of general creditors of such City. Such covenant to appropriate Non-Ad Valorem Revenues is subject in all respects to the payment of obligations secured by a pledge of such Non-Ad Valorem Revenues heretofore or hereinafter entered into (including the payment of debt service on bonds and other debt instruments). However, the covenant to budget and appropriate in its general annual budget for the purposes and in the manner stated herein shall have the effect of making available for the above-described payments and deposits Non-Ad Valorem Revenues and placing on the City a positive duty to appropriate and budget, by amendment, if necessary, amounts sufficient to meet such obligations hereunder; subject, however, in all respects to the restrictions of Section 166.241(3), Florida Statutes, which provides, in part, that it is unlawful for the governing body of a municipality to expend or contract for expenditure or make appropriations in any fiscal year which shall exceed the amount to be received from taxation and other revenue sources in such fiscal year; and subject further, to the payment of services and programs which are for essential public purposes affecting the health, welfare and safety of the inhabitants of the City or which are legally mandated by applicable law. Notwithstanding the foregoing, such covenant to budget and appropriate will be released and no longer effective upon the filing with the [INSURER] of a statement of an Authorized Issuer Officer; (1) stating that the books and records of the City relating to the Stormwater Fee Revenues and Investment Earnings have been examined by him; (2) setting forth the amount of Stormwater Fee Revenues and Investment Earnings received by the City during the immediately prior two Fiscal Years; and (3) stating that the amount of the Stonnwater Fee Revenues and Investment Earnings received during each of the immediately prior two Fiscal Years equals at least 1.50 times the Maximum Annual Debt Service on all Series 2003 Bonds then Outstanding. MUNICIPAL BOND INSURANCE The following information has been furnished by MBIA Insurance Corporation ("MBIA" or the "Insurer") for use in this Official Statement. Reference is made to Appendix D for a specimen of the Insurer's policy. The MBIA Insurance Corporation Insurance Policy The Insurer's policy unconditionally and irrevocably guarantees the full and complete payment required to be made by or on behalf of the City to the Paying Agent or its successor of an amount equal to (i) the principal of (either at the stated maturity or by an advancement of maturity pursuant to a mandatory sinking fund payment) and interest on, the Series 2003 Bonds as such payments shall become due but shall not be so paid (except that in the event of any acceleration of the due date of such principal by reason of mandatory or optional redemption or acceleration resulting from default or otherwise, the payments guaranteed by the Insurer's policy shall be made in such amounts and at such times as such payments of principal would have been due had there not been any such acceleration); and (ii) the reimbursement of any such payment which is subsequently recovered from any owner of the Series 2003 Bonds pursuant to a final judgment by a court of competent jurisdiction that such payment constitutes an avoidable preference to such owner within the meaning of any applicable bankruptcy law (a "Preference"). Miami/129t6.3 12 The Insurer's policy does not insure against loss of any prepayment premium which may at any time be payable with respect to any Series 2003 Bond. The Insurer's policy does not, under any circumstance, insure against loss relating to: (i) optional or mandatory redemptions (other than mandatory sinking fund redemptions); (ii) any payments to be made on an accelerated basis; (iii) payments of the purchase price of Series 2003 Bonds upon tender by an owner thereof; or (iv) any Preference relating to (i) through (iii) above. The Insurer's policy also does not insure against nonpayment of princpal of or interest on the Series 2003 Bonds resulting from the insolvency, negligence or any other act or omission of the Paying Agent or any other paying agent for the Series 2003 Bonds. Upon receipt of telephonic or telegraphic notice, such notice subsequently con£n-med in writing by registered or certified mail, or upon receipt of written notice by registered or certified mail, by the Insurer from the Paying Agent or any owner of a Series 2003 Bond the payment of an insured amount for which is then due, that such required payment has not been made, the Insurer on the due date of such payment or within one business day after receipt of notice of such nonpayment, whichever is later, will make a deposit of funds, in an account with U.S. Bank Trust National Association, in New York, New York, or its successor, sufficient for the payment of any such insured amounts which are then due. Upon presentment and surrender of such Series 2003 Bonds or presentment of such other proof of ownership of the Series 2003 Bonds, together with any appropriate instruments of assignment to evidence the assignment of the insured amounts due on the Series 2003 Bonds as are paid by the Insurer, and appropriate instruments to effect the appointment of the Insurer as agent for such owners of the Series 2003 Bonds in any legal proceeding related to payment of insured amounts on the Series 2003 Bonds, such instruments being in a form satisfactory to U.S. Bank Trust National Association, U. S. Bank Trust National Association shall disburse to such owners or the Paying Agent payment of the insured amounts due on such Series 2003 Bonds, less any amount held by the Paying Agent for the payment of such insured amounts and legally available therefor. MBIA The Insurer is the principal operating subsidiary of MBIA Inc., a New York Stock Exchange listed company (the "Company"). The Company is not obligated to pay the debts of or claims against MBIA. MBIA is domiciled in the State of New York and licensed to do business in and subject to regulation under the laws of all 50 states, the District of Columbia, the Commonwealth of Puerto Rico, the Commonwealth of the Northern Mariana Islands, the Virgin Islands of the United States and the Territory of Guam. MBIA has three branches, one in the Republic of France, one in the Republic of Singapore and one in the Kingdom of Spain. New York has laws prescribing minimum capital requirements, limiting classes and concentrations of investments and requiring the approval of policy rates and forms. State laws also ~egulate the amount of both the aggregate and individual risks that may be insured, the payment of dividends by MBIA, changes in control and transactions among affiliates. Additionally, MBIA is required to maintain contingency reserves on its liabilities in certain amounts and for certain periods of time. MBIA does not accept any responsibility for the accuracy or completeness of this Official Statement or any infomqation or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding the policy and MBIA set forth under 13 Miami/12916.3 the heading "MUNICIPAL BOND INSURANCE." Additionally, MBIA makes no representation regarding the Series 2003 Bonds or the advisability of investing in the Series 2003 Bonds. MBIA Information The following documents filed by the Company with the Securities and Exchange Commission (the "SEC") are incorporated herein by reference: (1) 2002; and The Company's Annual Report on Form 10-K for the year ended December 31, (2) 2003. The Company's Quarterly Report on Form 10-Q for the quarter ended June 30, Any documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act of 1934, as amended, after the date of this Official Statement and prior to the temqination of the offering of the Series 2003 Bonds offered hereby shall be deemed to be incorporated by reference in this Official Statement and to be a part hereof. Any statement contained in a document incorporated or deemed to be incorporated by reference herein, or contained in this Official Statement, shall be deemed to be modified or superseded for purposes of this Official Statement to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Official Statement. The Company files annual, quarterly and special reports, information statements and other information with the SEC under File No. 1-9583. Copies of the SEC filings (including (1) the Company's Annual Report on Fonn 10-K for the year ended December 31, 2002, and (2) the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2003), are available (i) over the Intemet at the SEC's web site at http://www.sec.gov; (ii) at the SEC's public reference room in Washington D.C.; (iii) over the Internet at the Company's web site at http://www.mbia.com; and (iv) at no cost, upon request to MBIA Insurance Corporation, 113 King Street, Axmonk, New York 10504. The telephone number of MBIA is (914) 273-4545. As of December 31, 2002, MBIA had admitted assets of $9.2 billion (audited), total liabilities of $6.0 billion (audited), and total capital and surplus of $3.2 billion (audited) determined in accordance with statutory accounting practices prescribed or permitted by insurance regulatory authorities. As of June 30, 2003, MBIA had admitted assets of $9.5 billion (unaudited), total liabilities of $6.1 billion (unaudited), and total capital and surplus of $3.4 billion (unaudited) determined in accordance with statutory accounting practices prescribed or permitted by insurance regulatory authorities. Financial Strength Ratings of MBIA Moody's Investors Service, Inc. rates the financial strength of MBIA "Aaa." Miami/12916.3 14 Standard & Poor's, a division of The McGraw-Hill Companies, Inc. rates the financial strength of MBIA "AAA." Fitch Ratings rates the financial strength of MBIA "AAA." Each rating of MBIA should be evaluated independently. The ratings reflect the respective rating agency's current assessment of the creditworthiness of MBIA and its ability to pay claims on its policies of insurance. Any further explanation as to the significance of the above ratings may be obtained only from the applicable rating agency. The above ratings are not recommendations to buy, sell or hold the Series 2003 Bonds, and such ratings may be subject to revision or withdrawal at any time by the rating agencies. Any downward revision or withdrawal of any of the above ratings may have an adverse effect on the market price of the Series 2003 Bonds. MBIA does not guaranty the market price of the Series 2003 Bonds nor does it guaranty that the ratings on the Series 2003 Bonds will not be revised or withdrawn. The insurance provided by this policy is not covered by the Florida Insurance Guaranty Association created under chapter 631, Florida Statutes. COVENANT REGARDING ADDITIONAL DEBT Additional Parity Bonds No Additional Bonds, payable on a parity with the Bonds then Outstanding pursuant to the Bond Resolution, may be issued except upon the conditions and in the manner provided in the Bond Resolution. The City may issue one or more Series of Additional Bonds for any one or more of the following purposes: (i) financing the Cost of a Project, or the completion thereof, or (ii) refunding any or all Outstanding Bonds or of any Subordinated Indebtedness of the City. No Additional Bonds shall be issued unless the following conditions are complied with: (A) Except as otherwise provided in paragraph (F) below, there shall have been obtained and filed with the City a statement of an Authorized City Officer: (1) stating that the books and records of the City relating to the Stormwater Fee Revenues have been examined by him; (2) setting forth the amount of the Stormwater Fee Revenues and Investment Earnings which have been received by the City during the i~rmaediately prior Fiscal Year; and (3) stating that the amount of the Stormwater Fee Revenues and Investment Earnings received during such prior Fiscal Year equals at least 1.35x times the Maximum Annual Debt Service of all Bonds then Outstanding and such Additional Bonds with respect to which such statement is made. (B) In the event the City has increased the rate at which Stormwater Fees are imposed and such increased rate was not in effect during the immediate prior Fiscal Year, then for the purposes of determining whether there are sufficient S~rmwater Fee Revenues to meet the coverage test specified in paragraph (A) below, the Authorized City Officer shall adjust the amount of Stonuwater Fee Revenues which were received during such prior Fiscal Year to take into account the additional amount of Stormwater Fee 15 Miami/12916.3 Revenues such increased rate would have generated if it had been in effect for such prior Fiscal Year; provided, however, that such adjustment shall only be made if the rate has been increased prior to the date the statement of the Authorized City Officer referred to in paragraph (A) below is made and such rate will remain in effect at least until the £mal maturity of the Bonds Outstanding at the time of issuance of the Additional Bonds. (C) For the purpose of detenuining the Debt Service under the Bond Resolution, the interest rate on additional parity Variable Rate Bonds then proposed to be issued shall be deemed to be the Bond Buyer Revenue Bond Index most recently published prior to the sale of such Additional Bonds. (D) For the purpose of determining the Debt Service under the Bond Resolution, the interest rate on Outstanding Variable Rate Bonds shall be deemed to be (1) if such Variable Rate Bonds have been Outstanding for at least 24 months prior to the date of sale of such Additional Bonds, the highest average interest rate borne by such Variable Rate Bonds for any 30-day period, or (2) if such Variable Rate Bonds have not been Outstanding for at least 24 months prior to the date of sale of such Additional Bonds, the Bond Buyer Revenue Bond Index most recently published prior to the sale of such Additional Bonds. (E) Additional Bonds shall be deemed to have been issued pursuant to the Bond Resolution the same as the Outstanding Bonds, and all of the other covenants and other provisions of the Bond Resolution (except as to details of such Additional Bonds inconsistent therewith) shall be for the equal benefit, protection and security of the Holders of all Bonds issued pursuant to the Bond Resolution. Except as provided in the Bond Resolution, all Bonds, regardless of the time or times of their issuance, shall rank equally with respect to their lien on the Pledged Funds and their sources and security for payment therefrom without preference of any Bonds over any other. (F) In the event any Additional Bonds are issued for the purpose of refunding any Bonds then Outstanding, the conditions of Section 5.02 of the Bond Resolution shall not apply, provided that the issuance of such Additional Bonds shall not result in a reduction of aggregate debt service. The conditions of paragraph (A) above shall apply to Additional Bonds issued to refund Subordinated Indebtedness and to Additional Bonds issued for refunding purposes which cannot meet the conditions of the first sentence in this paragraph. No Additional Bonds, payable on a parity with the Bonds then Outstanding pursuant to the Bond Resolution, may be issued except upon the conditions and in the manner provided in the Bond Resolution. Subordinated Debt The City will not issue any other obligati)ns, except under the conditions and in the manner provided in the Bond Resolution, payable from the Pledged Funds (or any portion thereof) or voluntarily create or cause to be created any debt, lien, pledge, assignment, encumbrance or other charge having priority to or being on a parity with the lien thereon in favor of the Series 2003 Bonds Miami/12916.3 16 and the interest thereon. The City may at any time or from time to time issue evidences of indebtedness payable in whole or in part out of Pledged Funds and which may be secured by a pledge of Pledged Funds; provided, however, that such pledge shall be, and shall be expressed to be, subordinated in all respects to the pledge of the Pledged Funds created by the Bond Resolution. The City shall have the right to covenant with the holders from time to time of any Subordinated Indebtedness to add to the conditions, limitations and restrictions under which any Additional Bonds may be issued under the provisions of the Bond Resolution. The City agrees to pay promptly any Subordinated Indebtedness as the same shall become due. Rate Covenant In the Bond Resolution, the City has covenanted to fix, establish, maintain and collect Stormwater Fees, and revise the same from time to time whenever necessary, so as to always provide in each Fiscal Year Stormwater Fee Revenues and Investment Earnings equal to at least 1.35% of the Annual Debt Service becoming due in each Fiscal Year; provided such Stormwater Fee Revenues and Investment Earnings are adequate at all times to pay in each Fiscal Year at least 100% of (i) the Annual Debt Service becoming due in such Fiscal Year and (ii) any amounts required by the terms of the Bond Resolution to be deposited in the Reserve Account or with any issuer of a Reserve Account Letter of Credit or Reserve Account Insurance Policy in such Fiscal Year. THE PLEDGED FUNDS The Pledged Funds consist of the Stormwater Fee Revenues. Pursuant to Chapter 166, Florida Statutes, as amended, the Florida Constitution, the Charter of the City, and Sections 403.0891 and 403.0893, Florida Statutes, as amended, the City is authorized to construct, reconstruct, improve, and extend storrnwater utility systems, to issue revenue bonds to finance in whole or in part the cost of such systems, and to establish equitable rates, fees, and charges for services and facilities provided by the system. The City has implemented these provisions through the enactment of various ordinances relating to the Sebastian Stormwater Utility (the "Utility"), particularly Ordinance No. O-01-16 enacted on October 1, 2001 (the "Stormwater Ordinance"). The Stormwater Ordinance established the Utility, the Stormwater Utility Fee and the Sebastian Stormwater Utility Trust Fund (the "Trust Fund"). The Stormwater Ordinance requires that all Stormwater Utility Fees, immediately upon receipt thereof, be deposited by the City into the Trust Fund. The Stormwater Ordinance provides that the Stormwater Utility Fees constitute a lien against the property charged as of each October 1, until such Stormwater Utility Fees have been paid in full. The Stormwater Ordinance further provides that the lien of the Stormwater Utility Fees are co-equal with the lien of all state, county, district and municipal taxes, superior in dignity to all other liens, titles and claims, until paid. Pursuant to the Stormwater Ordinance the City bills and collects the Stormwater Utility Fees pursuant to the uniform tax roll collection method provided under Chapter 197, Florida Statutes, as amended. For a description of the uniform tax roll collection method, see Miami/129t6.3 17 "COLLECTION OF STORMWATER FEE REVENUES AND ENFORCEMENT PROCEDURES" herein. The following table sets forth the Stormwater Fee Revenues received by the City for the years ended September 30, 2002 and September 30, 2003. Stormwater Fee Revenues Stormwater Fees: Less: Customer Credit Net Stormwater Fees Investment Earnings Total Revenues Operating ExpensesO): Operating and Maintenance Charges Operating Supplies and Expenses Total Operating Expenses Less: Net Operating Expenses Net Stormwater Fee Revenues 2002 2003® $774,899 $719,845 (64,869) (8,767) 710,030 711,078 10,784 27,087 720,814 738,165 N/A® 155,482® - 221 $ - $155,703 64,869 164,470 $710,030 $555,375 (1) The Bond Resolution provides for the payment of debt service on the Series 2003 Bonds and the funding of any amounts required to be deposited into the Reserve Account prior to the payment of Operating Expenses. See "FLOW OF FUNDS" herein and "APPENDIX C - FORM OF BOND RESOLUTION" hereto. (2) Unaudited. (3) Operating and maintenance charges were not allocated to the Stormwater Utility Fee Fund during the first year of operation. (4) Pursuant to the Stormwater Ordinance no more than 20% of the annual net Stormwater Fee Revenues is to be used for the operation and maintenance of the stormwater program. COLLECTION OF STORMWATER FEE REVENUES AND ENFORCEMENT PROCEDURES The Stormwater Ordinance provides for the collection of the Stormwater Utility Fees and enforcement of the same pursuant to the uniform tax roll collection method provided for by Chapter 197, Florida Statutes, as amended (the "Tax Roll Collection Method"). Under the Tax Roll Collection Method, the collection of the Stormwater Utility Fees is accomplished utilizing the procedures applicable to county ad valorem taxes. Enforcement procedures available in the event of delinquencies consist primarily of (1) the sale of tax certificates, and (2) the eventual issuance of tax deeds against delinquent properties. The following is a summary of certain statutory provisions governing the collection of ad valorem taxes, which statutory provisions are generally contained in Chapter 197, Florida Miami/12916.3 18 Statutes, as amended. The following summary is qualified in its entirety by reference to such statute. Pursuant to Section 197.3632, Florida Statutes, non ad valorem assessments (including the Stormwater Utility Fees) collected pursuant to the procedures applicable to county ad valorem taxes are subject to all collection procedures applicable to ad valorem taxes levied by counties in the State, and are enforced and collected by the county tax collector in the same manner and at the same time as county ad valorem taxes on real property. The collection of the Stormwater Utility Fees and the enforcement of the same, therefore, are performed by the Indian River County Tax Collector's office. The City is required to adopt an assessment roll setting forth the Stormwater Utility Fee assessed to each parcel of land within the City. Upon preparation of the certified tax roll, the Tax Collector is required to mail to each property owner appearing on the tax roll a tax notice stating, among other things, the amount of taxes for the current year, including the Stormwater Utility Fees, due from the taxpayer. In general, each taxpayer is required to pay all taxes shown in the tax notice without preference in payment of any particular increment of the tax bill. Upon receipt of the taxes, the Tax Collector is required to forward the portion of such taxes, if any, as is attributable to Stormwater Utility Fees to the City. To the extent that the landowner fails to pay such taxes, delays payment or is unable to pay the same, the successful implementation of tax collection procedures by the Tax Collector is essential to continued payment of principal of, prmrfium, if any, and interest on the Series 2003 Bonds. Under the Tax Roll Collection Method, Stormwater Utility Fees become due and payable on November 1 of the year in which assessed or as soon thereafter as the tax roll is received by the Tax Collector. If paid during November or the following three months the taxpayer is granted a discount equal to 4% if paid in November, declining 1% each month thereafter to 1% if paid in February. All taxes become delinquent on April 1 following the year in which they are assessed or immediately after sixty days have expired from the mailing of the original tax notice, whichever is later. The Tax Collector is required to collect taxes prior to the date of delinquency and to institute statutory procedures upon delinquency to collect assessed taxes. Delay in the mailing of tax notices to taxpayers results in a delay throughout the process. Sale of Tax Certificates. The collection of delinquent taxes upon real property is based upon the sale by the Tax Collector of "tax certificates" and remittance of the proceeds of such sale to the various governmental entities levying taxes for the payment of the taxes due. The demand for such certificates is in mm dependent upon various factors which include the interest which can be earned by ownership of such certificates and the value of the land which is the subject of such certificates and which may be subject to sale at the demand of the certificate holder. Therefore, the underlying mlue of the land within the City may affect the demand for such certificates and the successful collection of the Stormwater Utility Fees. In the event of a delinquency in the payment of taxes on real property, the Tax Collector is required to attempt to s~ll tax certificates on such property to the person who pays the delinquent taxes and interest and certain costs and charges relating thereto, and who accepts the lowest interest per annum to be borne by the certificates (not to exceed 18%). Delinquent taxes may be paid by a taxpayer prior to the date of sale of a tax certificate by the payment of such Miami/12916.3 19 taxes, together with interest and all costs and charges relating thereto. Tax certificates are sold by public bid. If there are no bidders at the public s ale of tax certificates, the certificate is issued to the county in which the assessed lands are located, at the maximum rate of interest allowed (currently 18%). The Tax Collector does not collect any money if tax certificates are issued to the county. Proceeds from the sale of tax certificates are required to be used to pay taxes and other amounts due (including Stonuwater Utility Fees), interest, costs and charges on the real property described in the certificate. County-held tax certificates may be prrchased, and any tax certificate may be redeemed, in whole or in part, by any person at any time before a tax deed is issued or the property is placed on the list of lands available for sale, at a price equal to the face amount of the certificate or portion thereof together with all interest, costs, and charges due. The proceeds of such a redemption are paid to the Tax Collector who transmits to the holder of the certificate such proceeds less service charges, and the certificate is cancelled. Any holder, other than the county, of a tax certificate which has not been redeemed has seven years from the date of issuance of the tax certificate during which to act against the land that is the subject of the tax certificate. After an initial period ending two years from April 1 of the year of issuance of a tax certificate, during which period actions against the land are held in abeyance to allow for sales and redemptions of tax certificates, the holder of a tax certificate may apply for a tax deed to the subject land. The applicant is required to pay to the Tax Collector all amounts required to redeem or purchase all outstanding tax certificates not held by the applicant covering the land, any omitted taxes or delinquent taxes, current taxes and interest, if due, covering the land. If the county holds a tax certificate and has not succeeded in selling it, the county must apply for a tax deed on all tax certificates for properties valued at $5,000 or more, two years after April 1 of the year of issuance. The county may apply for tax deeds on county-held certificates for properties valued at less than $5,000, but is not required to do so. The county may apply for tax deeds on County-held certificates for properties valued at less than $5,000, but is not required to do so. The county pays costs and fees to the Tax Collector but not any amount to redeem any other outstanding certificates covering the land. Thereafter, the property is advertised for public sale. In any such public sale, the private holder of the tax certificate who is seeking a tax deed for non-homestead property is deemed to submit a minimum bid equal to the amount required to redeem the tax certificate, charges for the cost of sale, redemption of other tax certificates on the land, and the amount paid by such holder in applying for the tax deed, plus interest thereon. In the case of homestead property, the bid is also deemed to include an amount equal to one-half of the latest assessed value of the homestead. If there are no higher bidders, the k)lder receives title to the land and the amounts paid for the certificate and in applying for a tax deed are credited towards the purchase price. If there are higher bidders, the holder may enter the bidding. The highest bidder is awarded title to the land. The portion of proceeds of such sale needed to redeem the tax certificate, plus interest, are forwarded to the holder thereof or credited to such holder if such holder is the successful bidder. Excess proceeds are distributed first to satisfy governmental liens against the land and then to the former title holder of the property (less service charges), lienholders of record, mortgagees of record, vendees of recorded contracts for deeds, and other lien-holders and any other person to whom the land was assessed on the tax roll for the year in which the land was assessed, all as their interests may appear. Miami/12916.3 20 Except for certain governmental liens and certain restrictive covenants and restrictions, no right, interest, restriction or other covenant survives tl-e issuance of a tax deed. Thus, for example, outstanding mortgages on property subject to a tax deed would be extinguished. If there are no bidders at the public sale, the county may at any time within ninety days from the date of offering for public sale purchase the land for a statutorily prescribed minimum bid. After ninety days have passed, any person or governmental unit may purchase the land by paying the amount of the minimum bid. Seven years from the date of offering for public sale, unsold lands escheat to the county or if within the boundaries of an incorporated municipality, to the municipality and all liens including the lien of the Stormwater Utility Fee against the property are cancelled. If bankruptcy or sinfilar proceedings are commenced with respect to a landowner whose property is subject to a Stormwater Utility Fee, the payment of Stormwater Utility Fees, and consequently debt service on the Series 2002 Bonds, may be delayed. During the pendency of any such bankruptcy proceeding, the County's ability to sell tax certificates relative to the property, as well as the City's ability to foreclose the lien of the Stormwater Utility Fees under Chapter 173, Florida Statutes, would be subject to a stay on the enforcement of all statutory liens for the payment of taxes, unless prior bankruptcy court approval was obtained to take collection action against the property. Moreover, while Florida law enables a tax certificate purchaser to demand sale of the property upon which a tax certificate has been issued two years after the issuance of the tax certificate, where a bankruptcy court retains jurisdiction over the property, the tax certificate purchaser must first obtain relief from the stay before proceeding to obtain a deed to the subject property. Beyond legal delays that could result from banlamptcy, the ability of the County to sell tax sale certificates will be dependent upon various factors, including the interest rate which can be earned by ownership of such certificates and the value of the land which is the subject of such certificates and which may be subject to sale at the demand of the certificate holder after two years. [Balance of Page Intentionally Left Blanlc] Miarai/12916.3 21 ESTIMATED DEBT SERVICE SCHEDULE* The estimated principal and interest requirements on the Series 2003 Bonds are set forth in the table below. Bond Year Ending (May 1) Principal Interest Total $ $ $ Total ? $ $ *Preliminary, subject to change. PROJECTED DEBT SERVICE COVERAGE The following table shows the debt service coverage for the Series 2003 Bonds by the Stormwater Fee Revenues using the Maximum Annual Debt Service Requirement, based upon receipts of the Stormwater Utility by the City as of September 30, 2003. Although moneys, including investments thereof, held in the accounts and subaccounts created by the Bond Resolution (except to the extent required to be rebated to the United States Government pursuant to the Internal Pevenue Code of 1986), are pledged to the payment of debt service on the Series 2003 Bonds, such moneys have not been estimated and were not included in preparing the following table. Miami/12916.3 22 Coverage of Maximum Annual Debt Service Requirement by Stormwater Fee Revenues Bond Year Ended May 1, 2004 Stormwater Fee Revenues0)(2) $711,078.00 Maximum Annual Debt Service Requirement® $404,817.50 Debt Service Coverage Ratio® x (1) Represents the Stormwater Fee Revenues received by the City for the Fiscal Year ended September 30, 2003. (2) Unaudited. (3) Maximum Annual Debt Service Requirement on the Series 2003 Bonds, assuming that the Series 2003 Bonds are issued in the aggregate principal amount of $5,650,000.00, bearing an average annual interest rate of approximately 5.1096%, as estimated by the Underwriter. (4) Excludes moneys in the accounts and subaccounts crated pursuant to the Bond Resolution. THE SERIES 2003 PROJECT The Series 2003 Project consists of the acquisition, construction and reconstruction of certain capital improvements as generally described below, and any other improvements approved by the City Council in accordance with the Stormwater Master Plan, pursuant to Florida Statutes. Wentworth Ditch Improvement Design and construction of an approximate 100 foot extension of the ditch to the west with the construction of a 48-inch culvert under Roseland Road. Main Street/Twin Ditch Improvements Design and removal of the existing berm between the existing "twin ditch" design, maximizing the width of and deepening the channel to create a wet detention pond, and construction of a control structure at the western end of the detention pond. Periwinkle Drive Improvements Design and construction of a three acre wet detention stormwater pond lo cated in the south central area of the City between Periwinkle Drive, Seashore Avenue and Ocean Breeze Street and the construction of a new road crossing culvert under Ocean Breeze Street. Middle Stonecrop Improvements Design and replacement of road crossings at Laconia Street, Bevan Drive and Stonecrop Street and the excavation and reinforcement of the vertical walls of the ditch from Laconia Street to Stonecrop Street. Miami/I2916.3 23 Lower Stonecrop Improvements Design and replacement of road crossing culverts under Clearbrook Street to the west and under Laconia Street south of Gladiola as well as the purchase of land and the construction of a 5.5 acre wet detention pond. Collier Creek Canal Dredging Improvements Design and dredging of the Collier Creek Canal north of CR512 to maximize capacity for conversion to a wet detention system including necessary modifications of associated structures and appurtenances. THE CITY Background The City, incorporated in 1924, is a residential community in the northeastern part of the County. The City encompasses approximately 13.5 square miles and is located in southeastern Florida, 74 miles southeast of the City of Orlando, 25 miles south of the City of Melbourne and 75 miles north of the City of West Palm Beach. The City is served by two major north-south Florida highways: Interstate 95 and U.S. Highway 1. The estimated population as of April 1, 2003 was approximately 18,425. See "APPENDIX A GENERAL INFORMATION PERTAINING TO THE CITY OF SEBASTIAN AND INDIAN RIVER COUNTY, FLORIDA" attached hereto. City Government The City operates under a Council/Manager fonu of government. The City Council is the principal legislative and governing body of the City, as provided by the Florida Constitution. The City Council is comprised of five members, including the Mayor. City Council members are elected by the voters for tenus of two years each. The City Manager is the chief administrative officer of the City and is responsible to the City Council. The current members of the City Council and their respective terms of office are as follows: Council Member Walter W. Barnes, Mayor Ray Coniglio, Vice Mayor Joe Barczyk, Councilmember Nathan B. McCollum, Councilmember James A. Hill, Councilmember Term Expires March 2004 March 2005 March 2005 March 2005 March 2004 Administration The City Manager is employed by the City Council and serves as Chief Administrative Officer of the City. The City Manager oversees the day-to-day operations of those departments and activities under the City Council, makes policy recommendations to the City Council and 24 Miami/12916.3 performs other duties assigned to him by the City Council, including the preparation of the annual budget and the City's five-year capital improvement plan. The Director of Finance recommends debt issuance or other borrowing plans when necessary and recommends funding resources necessary to implement the City's capital improvement program. Biographies of certain of the City's Administration are as follows: Terrence R. Moore, City Manager, City of Sebastian, Florida (1999-Present). Assistant City Manager, Deerfield Beach, Florida (1995-1999). As City Manager, Mr. Moore serves as the City's Chief Executive Officer, responsible for a $20 million annual budget, including development and implementation of an expanding capital improvement plan program. Other previous experience includes professional management positions with the municipal governments of Chicago and Peoria, Illinois (1991-1995). Mr. Moore is well versed m municipal finance and capital improvement projects, revolving various federal, state and county grant programs as well as general obligation bonds. B.A. in Econmrfics and MPA, University of Illinois, as well as postgraduate certificates from Florida Atlantic University and the University of Virginia. Mr. Moore currently serves on the Board of Trustees, Sebastian River Medical Center; Board of Directors, United Way of Indian River County; Advisory Board Member, Sebastian River Area Chamber of Commerce; and at large director, Florida City/County Management Association. Shai Francis, CPA, Director of Finance, City of Sebastian, Florida (2003 - Present). Assistant Finance Director, Indian River County Clerk of the Circuit Court, Florida (1999-2003). Budget Analyst II, Brevard County, Florida (1994-1999). Staff Accountant, City of Titusville, Florida (1991-1994). B.A. m Accounting, Soochow University, Taipei, Taiwan and MBA, Florida Institute of Technology, Florida. Ms. Francis is a member of Government Finance Officer Association (GFOA) as well as Florida Government Finance Officer Association (FGFOA). Currently she is a GFOA special Review Committee member. She is also the elected secretary for FGFOA Treasure Coast Local Chapter. Rich Stringer, City Attorney, City of Sebastian, Florida (1998-present); private practice, Kissirmuee~St. Cloud, Florida (1992-1993, 1995-1998); Assistant County Attorney, Osceola County, Florida (1991-1992, 1993-1995); Assistant City Attorney, City of Orlando, Florida (1989-1991); private practice, St. Augustine, Florida (1987-1989), including work as Town Attorney, Town of Hastings, Florida (1989) and Assistant City Attorney, City of St. Augustine, Florida (1988-1989). Mr. Stringer has represented local governments m Florida, either M-house or as special counsel, for his entire legal career. AB m Communications, 1984, and JD 1987, University of Alabama. David W. Fisher, P.E., J.D., City Engineer, City of Sebastian, Florida (2002-present). Mr. Fisher has over 40 years professional experience in civil engineering, development, public works, construction, project management and consulting. BS m Civil Engineering and BS in Foreign Studies, 1965, Michigan State University; JD, 1979, The University of Michigan Law School. Miami/12916.3 25 Kenneth Jones, Stormwater Engineer, City of Sebastian, Florida (2002-present). Real Estate Sales (1998-2002); Manager of Maintenance and Field Operations, City of Vero Beach, Florida, Water and Wastewater (1990-1998); President, St. Lucie West Utilities, Inc. (1986- 1990); Vice President, The J. White Development Corp. (1986-1990); Director of Utilities, Martin Downs Utilities, Inc. (1984-1986); Environmental Sales Engineer, Blankenship & Associates, Inc. (1981-1984) and Special Projects Coordinator, Broward County Utilities (1980- 1981). AS in Pollution Prevention and Control Technology from Broward Community College, 1977 and BS in Environmental Engineering, Florida International University, 1979. Financial Statements and Annual Audit Florida Statutes require that an annual post-audit of all City accounts and records be completed within 180 days following the end of each Fiscal Year by an independent certified public accountant retained by the City and paid from its public funds. The City has retained the fm'n of Hoyman, Dobson & Company, P.A., Melbourne, Florida, for such purpose. Excerpts of the Basic Financial Statements of the City for the Fiscal Year ended September 30, 2002, has been included as Appendix B to this Official Statement with the permission of Hoyman, Dobson & Company, P.A. Description of Financial Practices and Financial Statements The financial statements of the City have been prepared in conformity with United Sates generally accepted accounting principles as applied to governmental units. The City uses funds to report on its financial position and the results of its operations. A summary of significant accounting policies of the City is contained in the notes to the City's financial statements for the Fiscal Year ended September 30, 2002, which are included in Appendix B hereto. Investment Policy The City's investments are presently under the day to day control of the Director of Finance. The City Council has established a formal investment policy governing the investment activity of the City and including all available funds in excess of the amounts needed to meet short- term expenses. The investment policy does not apply to pension funds, trust funds or funds related to the issuance of debt where there are other existing policies or indentures in effect. The investment policy does not permit leveraging of investments. LITIGATION General The City is a defendant from time to time in various lawsuits. It is the opinion of the City Attorney that none of any such actions presently pending, individually, will have a material effect upon the finances of the City. Miami/12916.3 26 The Series 2003 Bonds There is no pending or, to the knowledge of the City, threatened litigation against the City which in any way questions or affects (i) the validity of the Series 2003 Bonds, or any proceedings or transactions relating to their issuance, sale, delivery or payment, (ii) the pledge of the Pledged Funds to secure payment of the Series 2003 Bonds, or (iii) the collection and application of the Pledged Funds in accordance with the provisions of the Bond Resolution There is no suit, action or proceeding of any nature now pending or threatened, to restrain or to enjoin the issuance, sale, execution or delivery of the Series 2003 Bonds, or in any way contesting or affecting the validity of the Series 2003 Bonds or any proceedings of the City Council taken with respect to the issuance or sale thereof, or the pledge or application of any monies or security provided for the payment of the Series 2003 Bonds. The City experiences routine litigation and claims incident to the conduct of its affairs. In the opinion of the City Attorney there are no lawsuits presently pending or threatened, the adverse outcome of which could potentially impair the City's ability to perform its obligations to the Holders of the Series 2003 Bonds. LEGAL MATTERS Legal matters incident to the authorization, issuance and sale of the Series 2003 Bonds and with regard to the tax-exempt status of the interest on the Series 2003 Bonds (see "TAX EXEMPTION") are subject to the legal opinion of Nabors, Giblin & Nickerson, P.A., Orlando, Florida, Bond Counsel, whose fees and expenses for legal services as Bond Counsel will be paid by the City from a portion of the proceeds of the Series 2003 Bonds. The signed legal opinion, dated and premised on law in effect as of the date of original delivery of the Series 2003 Bonds, wilt be delivered to the Underwriter at the time of original delivery. The proposed text of the legal opinion is set forth as Appendix E hereto. The actual legal opinion to be delivered may vary from that text if necessary to reflect facts and law on the date of delivery. The opinion will speak only as of its date, and subsequent distribution of the opinion by recirculation of the Official Statement or otherwise shall create no implication that Bond Cotmsel has reviewed or expressed any opinion concerning any of the matters referenced in the opinion subsequent to its date. Certain legal matters incident to the issuance of the Series 2003 Bonds will be passed upon for the City by Rich Stringer, Esq., City Attorney, Squire, Sanders & Dempsey L.L.P., Miami, Florida, Disclosure Counsel, and Shutts & Bowen, LLP, Orlando, Florida, Underwriter's Counsel. ENFORCEABILITY OF REMEDIES The remedies available to the registered owners of the Series 2003 Bonds upon a default under the Bond Resolution are in many respects dependent upon judicial actions which are often subject to discretion and delay. Under existing constitutional and statutory law and judicial 27 Miami/12916.3 decisions, including specifically Title 11 of the United States Code, the remedies specified by the Bond Resolution may not be readily available or may be limited. The various legal opinions to be delivered concurrently with the delivery of the Series 2003 Bonds will be qualified as to the enforceability of the remedies provided in the various legal instruments by limitations imposed by the exercise of judicial discretion in accordance with principles of equity, and by bankruptcy, reorganization, insolvency or other similar laws affecting the rights of creditors enacted before or after such delivery. TAX EXEMPTION Opinion of Bond Counsel In the opinion of Bond Counsel, the form of which is included as Appendix E hereto, the interest on the Series 2003 Bonds is excludable from gross income and is not a specific item of tax preference for federal incomd tax purposes under existing statutes, regulations, rulings and court decisions. However, interest on the Series 2003 Bonds is taken into account in determining adjusted current earnings for purposes of computing the alternative minimum tax imposed on corporations pursuant to the Internal Revenue Code of 1986, as amended (the "Code"). Failure by the City to comply subsequently to the issuance of the Series 2003 Bonds with certain requirements of the Code, regarding the use, expenditure and investment of bond proceeds and the timely payment of certain investment earnings to the Treasury of the United States, may cause interest on the Series 2003 Bonds to become includable in gross income for federal income tax purposes retroactive to their date of issue. The City has covenanted in the Resolution to comply with all provisions of the Code necessary to, among other things, maintain the exclusion from gross income of interest on the Series 2003 Bonds for purposes of federal income taxation. In rendering this opinion, Bond Counsel has assumed continuing compliance with such covenants. Internal Revenue Code of 1986 The Code contains a number of provisions that apply to the Series 2003 Bonds, including, among other things, restrictions relating to the use of investment of the proceeds of the Series 2003 Bonds and the payment of certain arbitrage earnings in excess of the "yield" on the Series 2003 Bonds to the Treasury of the United States. Noncompliar~e with such provisions may result in interest on the Series 2003 Bonds being included in gross income for federal income tax purposes retroactive to their date of issue. Financial Institutions Banks and thrift institutions are generally unable to deduct any portion of the interest expense allocable to purchasing or carrying tax-exempt obligations (except "qualified tax- exempt obligations") if such interest costs are incurred in taxable years ending after December 31, 1986, with respect to bonds issued after August 7, 1986. An exception is provided for "qualified tax-exempt obligations" specifically designated as such by the City. The City has designated the Series 2003 Bonds as qualified tax-exempt obligations under Section 265(b)(3) of the Code. Miami/12916.3 28 Collateral Tax Consequences Except as described above, Bond Counsel will express no opinion regarding the federal income tax consequences resulting from the ownership of, receipt or accrual of interest on, or disposition of, the Series 2003 Bonds. Prospective purchasers of the Series 2003 Bonds should be aware that the ownership of the Series 2003 Bonds may result in other collateral federal tax consequences. For example, ownership of the Series 2003 Bonds may result in collateral tax consequences to various types of corporations relating to (1) denial of interest deduction to purchase or carry such Series 2003 Bonds, (2) the branch profits tax, and (3) the inclusion of interest on the Series 2003 Bonds in passive income for certain Subchapter S corporations. In addition, the interest on the Series 2003 Bonds may be included in gross income by recipients of certain Social Security and Railroad Retirement benefits. PURCHASE, OWNERSHIP, SALE OR DISPOSITION OF THE SERIES 2003 BONDS AND THE RECEIPT OR ACCRUAL OF THE INTEREST THEREON MAY HAVE ADVERSE FEDERAL TAX CONSEQUENCES FOR CERTAIN INDIVIDUAL OR CORPORATE BONDHOLDERS, INCLUDING, BUT NOT LIMITED TO, THE CONSEQUENCES DESCRIBED ABOVE. PROSPECTIVE BONDHOLDERS SHOULD CONSULT WITH THEIR TAX SPECIALISTS FOR INFORMATION IN THAT REGARD. Florida Taxes In the opinion of Bond Counsel, the Series 2003 Bonds and the income thereon are exempt from all present intangible personal property taxes imposed pursuant to Chapter 199, Florida Statutes. Other Tax Matters Interest on the Series 2003 Bonds may be subject to state or local income taxation under applicable state or local laws in other jm'isdictions. Purchasers of the Series 2003 Bonds should consult their tax advisors as to the income tax status of interest on the Series 2003 Bonds in their particular state or local jurisdictions. During recent years legislative proposals have been introduced in Congress, and in some cases enacted, that altered certain federal tax consequences resulting from the ownership of obligations that are similar to the Series 2003 Bonds. In some cases these proposals have contained provisions that altered these consequences on a retroactive basis. Such alteration of federal tax consequences may have affected the market value of obligations similar to the Series 2003 Bonds. From time to time, legislative proposals are pending which could have an effect on both the federal tax consequences resulting from ownership of the Series 2003 Bonds and their market value. No assurance can be given that additional legislative proposals will not be introduced or enacted that would or might apply to, or have an adverse effect upon, the Series 2003 Bonds. Original Issue Discount Bond Counsel is further of the opinion that the difference between the principal amount of the Series 2003 Bonds maturing on through and including , , Miami/12916.3 29 and (collectively, the "Discount Bonds") and the initial offering price to the public (excluding bond houses, brokers or similar persons or organizations acting in the capacity of underwriter or wholesalers) at which price a substantial amount of such Discount Bonds of the same maturity was sold constitutes original issue discount which is excluded from gross income for federal income tax purposes to the same extent as interest on the Series 2003 Bonds. Further, such original issue discount accrues actuarially on a constant interest rate basis over the term of each Discount Bond and the basis of each Discount Bond acquired at such initial offering price by an initial purchaser thereof will be increased by the amount of such accrued original issue discount. The accrual of original issue discount may be taken into account as an increase in the amount of tax-exempt income for purposes of determining various other tax consequences of owning the Discount Bonds, even though there will not be a corresponding cash payment. Holders of the Discount Bonds are advised that they should consult with their own advisors with respect to the state and local tax consequences of owning such Discount Bonds. Premium Bonds The difference between the principal amount of the Series 2003 Bonds maturing on __, __ through and including , __ (collectively, the "Premium Bonds") and the initial offering price to the public (excluding bond houses, brokers or similar persons or organizations acting in the capacity of underwriter or wholesalers) at which price a substantial amount of such Premium Bonds of the same maturity was sold constitutes to an initial purchaser amortizable bond premium which is not deductible from gross income for federal income tax purposes. The an~ount of amortizable bond premium for a taxable year is determined actuarially on a constant interest rate basis over the tenu of each Premium Bond. For purposes of determining gain or loss on the sale or other disposition of a Premium Bond, an initial purchaser who acquires such obligation in the initial offering to the public at the initial offering price is required to decrease such purchaser's adjusted basis in such Premium Bond annually by the amount of amortizable bond premium for the taxable year. The amortization of bond premium may be taken into account as a reduction in the amount of tax-exempt income for purposes of determining various other tax consequences of owning such Premium Bonds. Holders of the Premium Bonds are advised that they should consult with their own advisors with respect to the state and local tax consequences of owning such Premium Bonds. RATINGS Moody's Investors Service, Inc. ("Moody's"), Standard & Poor's Ratings Services, a Division of The McGraw-Hilt Companies ("S&P") and Fitch, Inc. ("Fitch") have assigned ratings of "Aaa", "AAA" and "AAA", respectively, to the Series 2003 Bonds, with the understanding that, upon delivery of the Series 2003 Bonds, the Policy will be issued by MBIA. In addition, Moody's, S&P and Fitch have assigned underlying ratings of "A3", "A" and "A", respectively, without giving any regard to the Policy. Such ratings reflect only the views of such organizations and any desired explanation of the significance of such ratings should be obtained from the rating agency furnishing the same. Generally, a rating agency bases its rating on the information and materials furnished to it and on investigations, studies and assumptions of its own. There is no assurance such ratings will continue for any given period of time or that such ratings will not be revised downward or withdrawn entirely by the rating agencies, if in the Miami/12916.3 30 judgment of such rating agencies, circumstances so warrant. Any such downward revision or withdrawal of such ratings may have an adverse effect on the market price of the Series 2003 Bonds. UNDERWRITING The Underwriter shown on the cover page hereof has agreed, subject to certain conditions precedent set forth in a Bond Purchase Contract with the City, to purchase the Series 2003 Bonds from the City, at a price of $ ($. par amount, less underwriter's discount of $ , less original issue discount of $. , plus original issue premium of $ .) plus accrued interest from their date. The Underwriter has furnished the information on the cover page of this Official Statement pertaining to the public offering prices of the Series 2003 Bonds. The public offering prices of the Series 2003 Bonds may be changed from time to time by the Underwriter, and the Underwriter may allow a concession from the public offering prices to certain dealers. FORWARD LOOKING STATEMENTS This official statement contains certain "forward-looking statements" concerning the City's operations, performance and financial condition, including its future economic performance, plans and objectives and the likelihood of success in developing and expanding. These statements are based upon a number of assumptions and estimates which are subject to significant uncertainties, many of which are beyond the control of the City. The words "may," "would," "could," "will," "expect," "anticipate," "believe," "intend," "plan," "estimate" and similar expressions are meant to identify these forward-looking statements. Actual results may differ materially from those expressed or implied by these forward-looking statements. DISCLOSURE REQUIRED BY FLORIDA BLUE SKY REGULATIONS Florida law requires the City to make a full and fair disclosure of any bonds or other debt obligations which it has issued or guaranteed and which are or have been in default as to principal or interest at any time after December 31, 1975 (including bonds or other debt obligations for which it has served as a conduit issuer). The applicable rule provides, however, that if the City in good faith believes that such disclosure would not be considered material by reasonable investors, such disclosure may be omitted. The City is not and has not been in default as to principal of or interest on bonds or other debt obligations to which revenues of the City are pledged. Although the City is not aware of any other payment default, it has not undertaken an independent review of bonds or other debt obligations for which it served only as a conduit issuer. To the extent any of such bonds or other debt obligations are in default as to the payment of principal or interest, the obligation of the City thereunder is limited solely to funds received by the party borrowing the proceeds of such bonds or other debt obligations, and the City is not obligated to pay principal of and interest on such bonds or debt obligations from any other funds of the City. Accordingly, any prior default with respect to such obligations issued by the City would not in the City's judgment be considered material by reasonable investors in the Series 2003 Bonds. 31 Miami/12916.3 ADVISORS AND CONSULTANTS The City has retained certain advisors and consultants in connection with the issuance of the Series 2003 Bonds. These advisors and consultants are compensated from a portion of the proceeds of the Series 2003 Bonds, identified as "Costs of Issuance" under the heading "ESTIMATED SOURCES AND USES OF FUNDS" herein; their compensation is, in some instances, contingent upon the issuance of the Series 2003 Bonds and the receipt of the proceeds thereof. Bond Counsel. Nabors, Giblin & Nickerson, P.A., Orlando, Florida repreSents the City as Bond Counsel with respect to the Series 2003 Bonds. As Bond Counsel, Nabors, Giblin & Nickerson, P.A. is not obligated to undertake and has not undertaken to make, an independent verification or to assume respopsibility for the accuracy, completeness, or fairness of the information contained in the Official Statement. Disclosure Counsel Squire, Sanders & Dempsey L.L.P., Miami, Florida, represents the City as Disclosure Counsel with respect to the Series 2003 Bonds. As Disclosure Counsel, Squire, Sanders & Dempsey L.L.P. is not obhgated to undertake and has not undertaken to make, an independent verification or to assume responsibility for the accuracy, completeness, or fairness of the information contained in the Official Statement. Independent Certified Public Accountants. Hoyman, Dobson & Company, P.A., Melbourne, Florida has been retained by the City as the City's independent certified public accountants. The audited financial statements of the City for the Fiscal Year ended September 30, 2002, as set forth in Appendix B hereto, have been examined by Hoyman, Dobson & Company, P.A., and are included in reliance upon such report and upon the authority of such firm as experts in auditing and accounting. CONTINUING DISCLOSURE The City has undertaken in the Bond Resolution to enter into a continuing disclosure undertaking pursuant to which it will provide certain annual financial information and material event notices required by the Rule (the "Continuing Disclosure Agreement") in order to comply with the provisions of Rule 15c2-12 (the "Rule"), promulgated by the Securities and Exchange Commission (the "SEC). Provision of Annual Information; Audited Financial Statements; and Notices of Events. Pursuant to the Continuing Disclosure Agreement, the City will agree to provide or cause to be provided: (a) to each nationally recognized municipal securities information repository designated from time to time by the SEC (each a "NRMSIR") and to any state information depository (the "SID"), with which filings are required to be made by the City in accordance with the Rule, (i) annual financial infonr~ation and operating data of the type described under the caption "Annual Information" below for each Fiscal Year ending on or after September 30, 2002, not later than the following May 1, and (ii) when and if available, audited financial statements for the City for each such Fiscal Year; and Miami/12916.3 32 (b) to each NRMSIR or to the Municipal Securities Rulemaking Board established by the SEC (the "MSRB"), and to the SID, in a timely manner, notice of (i) any Specified Event described i~ the section entitled "Specified Events" if that Specified Event is material, (ii) the City's failure to provide the Annual Information on or prior to the date specified above, (iii) any change in its Fiscal Year, (iv) its failure to appropriate funds to meet costs to be incurred to provide the foregoing information, and (v) the termination of its obligations to provide the foregoing information. The City expects that (a) annual financial statements of the City will be prepared and audited, (b) any such audited statements will be available together with the Annual Information, and (c) the accounting principles to be applied in the preparation of those f'mancial statements will be generally accepted accounting principles as recommended from time to time by lhe Governmental Accounting Standards Board. In the event that the audited annual financial statements of the City are not available by the date on which the Annual Information will be provided, the City will provide unaudited financial statements of the City by the date specified and audited £mancial statements when available. Annual Information. Annual Information to be provided by the City will consist of excerpts of the annual financial statements of the City. Specified Events. Specified Events shall include the occurrence of the following events, within the meaning of the Rule, with respect to the Series 2003 Bonds: principal and interest payment delinquencies; non-payment related defaults; unscheduled draws on debt service reserves reflecting finarcial difficulties; unscheduled draws on credit enhancements reflecting financial difficulties; substitution of credit or liquidity providers, or their failure to perform; adverse tax opinions or events affecting the tax-exempt status of the Series 2003 Bonds; modifications to rights of holders of Series 2003 Bonds; Series 2003 Bond calls; defeasances; release, substitution, or sale of property securing repayment of the Series 2003 Bonds; and rating changes. Amendments. The City reserved the right to amend the Continuing Disclosure Agreement as may be necessary or appropriate to achieve its compliance with any applicable federal securities law or rule, to cure any ambiguity, inconsistency or formal defect or omission, and to address any change in circumstances arising from a change in legal requirements, change in law, or change in the identity, nature, or status of the City, or type of business conducted by the City. Any such amendment shall be made only in a manner consistent with the Rule and interpretations thereof by the SEC. Annual Information containing any amended operating data or financial information shall explain, in narrative form, the reasons for any such amendment and the impact of the change on the type of operating data or financial information being provided. Remedy for Breach. The covenants contained in the Continuing Disclosure Agreement relating to the City's continuing disclosure requirements shall be solely for the benefit of the holders and beneficial owners from time to time of tke Series 2003 Bonds. Holders and beneficial owners, to the extent permitted by law and equity, shall have the right, and shall be limited to the right, upon any breach of the agreement by the City and to the exclusion of any other remedy for that breach, that otherwise would be available, to institute and maintain, or to cause to be instituted and maintained, proceedings at law or in equity to obtain the specific Miarai/12916.3 33 performance by the City of its obligations under that agreement. An individual holder or beneficial owner shall not be entitled to institute or maintain proceedings to challenge the sufficiency of any pertinent filing that is made. Non-Appropriation. The performance by the City of its obligations under the Continuing Disclosure Agreement relating to the City's continuing disclosure requirements shall be subject to the availability of funds and their annual appropriation to meet costs the City would be required to incur to perform such obligations. Termination. The obligations of the City under the Continuing Disclosure Agreement relating to the City's continuing disclosure requirements shall remain in effect only for such period that the Series 2003 Bonds are outstanding in accordance with their terms and the City remains an obligated person with respect to the Series 2003 Bonds within the meaning of the Rule. The obligation of the City to provide the Annual Information and notices of the events described above shall terminate, if and when the City no longer remains such an obligated person. Separate Bond Report Not Required. The foregoing requirements do not necessitate the preparation of any separate annual report addressing only the Series 2003 Bonds. These requirements may be met by the filing of a combined bond report or the City's Comprehensive Annual Financial Report; provided, such report includes all of the required information and is available by May 1. Additionally, the City may incorporate any information provided in any prior filing with each NRMSIR or included in any final official statement of the City; provided, such final official statement is filed with the MSRB. MISCELLANEOUS The references, excerpts and summaries of all documents, resolutions and ordinances referenced herein do not purport to be complete statements of the provisions of such documents, resolutions and ordinances, and reference is directed to all such documents, resolutions and ordinances for full and complete statements of all matters of fact relating to the Series 2003 Bonds, the security for and the repayment of the Series 2003 Bonds and the rights and obligations of the holders thereof. Miami/12916.3 34 The execution and delivery of this Official Statement has been duly authorized by the CITY OF SEBASTIAN, FLORIDA /s/Walter W. Barnes Mayor /s/Terrence R. Moore City Manager /s/Sally A. Maio, MCM City Clerk Miami/12916.3 35 APPENDIX A GENERAL INFORMATION PERTAINING TO THE CITY OF SEBASTIAN AND INDIAN RIVER COUNTY, FLORIDA GENERAL The Sebastian area was first settled around 1865. Mr. August Park, a native of Germany, opened the first trading post in what was known as "Barker's Bluff" in that year. Mr. Gottlob Kroegel, also a native of Germany, was the first legal homesteader in the area, which at the time was known as New Haven, Florida. One of Mr. Kroegel's sons, Paul, was responsible for the establishment in 1903 of the Pelican Island National Wildlife Refuge immediately adjacent to the City. This National Wildlife Refuge was the £n'st established in the United States and became the basis for the much larger system which exists today. In 1884, the area's name was changed to Sebastian, after the nearby St. Sebastian River, so named by earlier Spanish explorers. By 1893, Henry Flagler had extended his railway through Sebastian, which brought further growth and settlement to the still very rural area. The early economy of the area was primarily farming, the principal crops being sugar cane, citrus, and vegetable crops. The great Florida land boom of the 1920's brought much additional activity to the area. However, this slowed for a number of years during and after the Depression of the 1930's. The "Town" of Sebastian was incorporated in 1924, and shortly thereafter, on May 14, 1933, the town was dissolved, and the City of Sebastian was created. The climate of the area represents the northernmost fringe of the sub-tropical growing area of Florida. Temperatures range from 60-85 degrees in the spring; 72-90 degrees in the summer; 62-85 degrees in the fall; and 55-75 degrees in the winter. The year-round average temperature is 73.5 degrees. The City is located in the heart of the famed "Indian River" citrus producing area, which produces some of the finest quality citrus known throughout the world. LOCATION The City of Sebastian (the "City") is a residential community in the northeastern part of Indian River County, Florida (the "County"), and was incorporated in 1924. The City encompasses approximately 13.5 square miles and is located in southeastern Florida. The City is located 74 miles southeast of the City of Orlando, 25 miles south of the City of Melbourne and 75 miles north of West Palm Beach, Florida. The City is served by two major north-south Florida highways: Interstate 95 and U.S. Highway 1. GOVERNMENT The City operates under a Council/Manager form of go vernment. The governing body is a five member elected City Council with a mayor elected from the five members. The City Miami/12916.3 A-1 Manager is the chief ad~rfinistrative officer responsible to the Council. City elections are held every two years. POPULATION Currently, approximately 14.8% of the County's population resides in the City. Approximately the same percentage reside in the City of Vero Beach while the remaining population or 70% reside in the other smaller cities and the unincorporated area of the County. The City's population experienced rapid growth from 1994 to the present. The estimated poPulation as of April 1, 2003 was approximately 18,425. The following table provides the population trends in the City, County and State from the years 1994 through 2003. CITY OF SEBASTIAN AND INDIAN RIVER COUNTY, FLORIDA POPULATION TRENDS 1994-2003 Average Average Annual Indian Annual City of Percentage River Percentage State of Year Sebastian(l) Increase County Increase Florida 1993 12,154 --- 97,566 --- 13,927,185 1994 12,800 5.3 99,858 2.4 14,239,444 1995 13,488 5.4 101,929 2.1 14,537,875 1996 13,967 3.6 103,583 1.6 14,853,360 1997 14,470 3.6 106,291 2.6 15,186,304 1998 15,115 4.5 108,961 2.5 15,486,559 1999 15,707 3.9 111,294 2.1 15,759,421 2000 16,181 3.0 113,431 1.9 16,054,328 2001 16,667 3.0 115,716o) 2.0 16,330,601o) 2002 17,167(2) 3.0 118,140(~) 2.1 16,640,504o) 2003 18,425(3) 7.3 120,271(~) 1.8 16,917,308( Average Percentage Increase 2.2 2.1 2.2 2.2 2.0 1.8 1.9 1.7 1.9 1.7 (1) Florida Research and Economic Database. (2) Comprehensive Annual Financial Report of the City for Fiscal Year ended September 30, 2002 (3) Bureau of Economics and Business Research, University of Florida BUDGET PROCESS The City follows the procedures set forth in Chapters 166 and 200 of the Florida Statutes in establishing budgetary data. The City Manager submits to the City Council a proposed operating budget for the fiscal year commencing on October 1. The operating budget includes proposed expenditures and means of financing them. Public Hearings are then conducted to obtain taxpayer comments on the operating budget. The budget is legally enacted through passage of a resolution by City Council on or before the thirtieth day of September of the year currently ending. Miami/12916.3 A-2 The level of budgetary control is the department. The City Manager is authorized to transfer budgeted amounts within departments of any fund. Revisions that alter the budget totals of any department require approval of the City Council. Unencumbered appropriations lapse at year end. The reported budgetary data represent the final approved budget after amendments adopted by City Council. Budgets for general, special revenue and debt service funds are adopted on a basis consistent with generally accepted accounting principles, except that encumbrances are presented as expenditures. Fonual budget integration is not employed for proprietary, capital projects or trust funds because effective budgetary control is achieved by alternate measures. Budgeted amounts are as originally adopted, or as amended by the City Council. SOURCES OF REVENUE OF THE CITY Revenue Set forth below are the sources of revenue for the last ten fiscal years: CITY OF SEBASTIAN, FLORIDA GENERAL REVENUES BY SOURCE LAST TEN FISCAL YEARS Inter- Interest Fiscal Licenses Govern- Charges for and Other Special Operating Year Taxes and Permits mental Services Fines Revenues Assessments Transfers In Totalti) 1993 $3,901,663 $287,660 $ 782,896 $ 92,611 $ 59,640 $347,715 .... $ 5,472,185 1994 4,230,835 347,786 934,210 166,095 57,257 205,169 .... 5,941,352 1995 4,486,685 278,618 961,887 82,653 67,774 441,312 174,060 -- 6,492,989 1996 4,931,996 321,149 1,166,881 74,657 82,477 417,495 135,336 -- 7,129,991 1997 5,250,861 345,463 1,332,676 84,051 59,198 461,249 68,474 -- 7,601,972 1998 5,612,313 388,936 1,366,428 51,196 71,194 510,007 30,522 o- 8,030,596 1999 3,800,242(2) 448,928 3,600,474(2) 33,097 89,697 314,910 44,964 278,855 8,611,167 2000 4,018,521 475,345 3,725,671 159,701 140,672 485,479 128,514 11,317 9,144,860 2001 4,513,698 487,618 4,031,263 282,521 148,676 490,143 28,528 337,620 10,320,067 2002 4,467,701 578,695 4,782,829 1,075,2200) 127,027 557,304 31,756 280,850 11,901,382 Source: City of Sebastian Finance Department. (I) This schedule lists revenues of the General, Special Revenue, and Debt Service Funds only. (2) Local Option Gas Tax and Discretionary Sales Tax previously classified as taxes. The City does not collect these taxes, but receives them from the State. Therefore, they are not included under Taxes. (3) Implementation ora Stormwater Utility Fee Program Miami/I2916.3 A-3 Expenditures Set forth below are the City's expenditures by function for the last ten fiscal years: CITY OF SEBASTIAN, FLORIDA GENERAL GOVERNMENTAL EXPENDITURES BY FUNCTION LAST TEN FISCAL YEARS Operating Fiscal General Public Public Debt Capital Other Transfers Year Government Safety Works Service Outlay Expenditures Out Total(l) 1993 $1,147,930 $1,650,850 $1,413,134 $136,422 $842,747 .... $5,191,083 1994 1,271,768 1,785,073 1,677,206 133,008 442,474 .... 5,309,529 1995 1,856,873 1,585,901 1,454,962 133,008 609,079 .... 5,639,823 1996 2,651,408 1,627,955 1,442,598 255,297 1,124,542 .... 7,101,800 1997 1,944,089 1,706,546 1,543,487 214,175 1,331,130 .... 6,739,427 1998 1,439,181 1,842,266 2,006,966 211,956 2,628,671 -- $ 259 8,129,299 1999 1,816,090 2,122,823 1,908,915 386,183 191,226 $4,830 1,852,679 8,282,746 2000 1,934,610 2,129,662 2,008,451 364,396 192,785 617 2,122,593 8,753,114 2001 2,087,382 2,316,796 2,087,873 364,407 607,151 -- 2,100,463 9,564,072 2002 2,558,781 2,558,526 2,449,167 364,366 367,010 -- 1,989,584 10,317,434 Source: City of Sebastian Finance Department (1) General governmental expenditures may be paid from sources other than General Fund revenues. Accordingly, the total amount of governmental expenditure in a given fiscal year may exceed the total General Fund revenues for than fiscal years. DEBT The City has no overlapping bonded debt or general bonded debt. COMMERCE AND INDUSTRY The City has a diversified service sector base, and is a center for tourism, recreation and residences. Major economic activities of the City and surrounding areas include construction, tourism, wholesale and retail trade, farming, citrus and major league sports. The Los Angeles Dodgers baseball team has a spring training complex 20 miles south in the City of Vero Beach. The City was planned for single-family residences, schools, churches, community centers, recreational parks, and shopping center along with limited multi-family housing. Miami/12916.3 A-4 Major Employers Indian River County, Florida Employer School District of Indian River County Indian River Memorial Hospital Indian River County (includes all Constitutional Offices and Sheriff's Dept.) The New Piper Aircraft Publix Supermarkets City of Vero Beach Wal Mart Sun Ag, Inc. Hale Indian River Groves John's Island Gracewood Fruit Packing Dodgertown Complex Winn-Dixie Legend Properties, Inc. Indian River Estates Sebastian River Medical Center Source: Indian River County Community Development Report, January, 2003 Number of Employees 1,860 1,451 1,372 1,000 715 681 672 550 500 475 465 450 440 426 413 370 Major Employers Sebastian, Florida Employer Sebastian River Medical Center Wal Mart City of Sebastian Publix Supermarkets Source: Indian River Community Development Report, January, 2003 Number of Employees 370 300 183 180 Miami/12916.3 A-5 Estimated Effective Buying Income and Retail Sales Indian River County, Florida EBI Retail Sales Calendar Year ($000) ($000) 1999 2,164,998 1,215,354 2000 2,255,752 1,850,718 2001 2,431,389 1,711,928 2002 2,891,074 1,654,623 2003 2,886,790 1,736,753 Median Average Per Household Household Capita Calendar Year EBI EBI EBI 1999 32,297 47,478 19,991 2000 33,449 48,303 20,396 2001 35,686 50,132 21,198 2002 38,121 54,755 23,992 2003 35,853 54,161 23,838 Source: Sales and Marketing Management Magazine's Survey of Buying Power, September 1998, 1999, 2000, 2001 and 2002 The following table estimates the percentage of households within each EBI Group for the County and the State for 2003. Such information as to the City is not available. Effective Buying Indian River Power Group County State of Florida $0 19,999 23.0% 23.1% 20,000- 34,999 25.7 24.6 35,000- 49,999 19.6 19.5 50,000 - Over 31.7 32.8 Source: Sales and Marketing Management Magazine's Survey of Buying Power, September2003 Personal Income Indian River County, Florida (1998-2000) Total Year (millions) % Increase Per Capita % Increase 1998 $3,797,497 -- $34,852 -- 1999 3,917,8 t 5 3.2 35,202 1.0 2000 4,040,733 3.1 35,623 1.2 Source: U.S. Department of Commerce, Bureau of Economic Analysis, Regional Economic Information System, May 2002, as reported in the Florida Research and Economic Database Miami/12916.3 A-6 The unemployment rate for the County is generally higher than the unemployment rate for the State due, in part, to the greater dependence on agricultural and construction employment within the County and seasonal variations related to such employment. Labor Force Indian River County, Florida Unemployment Unemployment Year Labor Force Employment Ntmaber Rate 1993 39,162 34,751 4,411 11.3% 1994 40,321 35,864 4,457 11.1 1995 41,566 37,523 4,043 9.7 1996 42,808 38,941 3,867 9.0 1997 44,015 40,438 3,577 8.1 1998 45,451 41,879 3,572 7.9 1999 45,195 41,823 3,372 7.5 2000 44,870 41,981 2,889 6.4 2001 46,700 43,298 3,402 7.3 2002 47,859 44,232 3,627 7.6 State of Florida Unemployment Unemployment Year Labor Force Employment Number Rate 1993 6,661,000 6,192,000 470,000 7.0% 1994 6,811,000 6,363,000 447,000 6.6 1995 6,851,000 6,475,000 376,000 5.5 1996 6,956,000 6,603,000 353,000 5.1 1997 7,119,000 6,780,000 339,000 4.8 1998 7,228,000 6,918,000 310,000 4.3 1999 7,361,000 7,077,000 284,000 3.9 2000 7,490,000 7,221,000 269,000 3.6 2001 7,674,000 7,309,000 365,000 4.8 2002 7,791,000 7,374,000 417,000 5.4 Source: Florida Research and Economic Database Miami/12916.3 A-7 CITY OF SEBASTIAN, FLORIDA CONSTRUCTION AND PROPERTY VALUE LAST TEN YEARS Construction Commercial Year Number ofUnits 1993 4 1994 0 1995 10 1996 9 1997 11 1998 0 1999 11 2000 9 2001 16 2002 8 Source: City Building Department Residential Value Number of Units $ 943,738 267 6,303,712 351 141,544 238 1,104,514 240 3,626,024 335 3,142,469 276 4,177,601 282 6,873,360 283 2,449,336 328 2,615,694 451 CITY OF SEBASTIAN, FLORIDA BANK DEPOSITS LAST TEN FISCAL YEARS (in thousands) Year Bank Deposks 1993 $252,032 1994 308,643 1995 318,583 1996 331,765 1997 293,368 1998 312,097 (1) 1999 -- 2000 157,103 2001 394,824 2002 394,894 Source: Federal Deposit Insurance Corporation and Federal Savings and Loan Insurance Corporation. (1) Information not available. V~ue $19,612,746 25,587,753 19,538,885 20,155,914 24,918,675 25,549,287 27,941,640 27,420,413 31,267,926 37,266,992 PROPERTY TAXES Property values in the City are detenuined by the Indian River County Property Appraiser. Millage on property located in the City is set by the City Council, and the first $25,000 of appraised value on residential homestead property is deducted prior to tax computation. The tax collections since 1993 are summarized below. Miami/12916.3 A-8 CITY OF SEBASTIAN, FLORIDA PROPERTY TAX LEVIES AND COLLECTIONS LAST TEN FISCAL YEARS Total Total Tax Fiscal Year* Assessed Value Total Tax Levy CollectionsO) 1993 $479,056,254 $2,143,544 $2,122,641 1994 510,749,353 2,452,523 2,423,524 1995 540,929,671 2,510,166 2,461,390 1996 556,236,540 2,667,313 2,619,791 1997 594,159,092 2,727,083 2,664,153 1998 619,022,836 2,909,597 2,810,622 1999 672,302,691 2,869,796 2,729,769 2000 698,836,022 2,422,756 2,318,948 2001 799,772,729 2,542,544 2,507,620 2002 874,579,785 2,635,277 2,526,257 Source: Indian River County Property Appraiser and Tax Collector. (1) Does not include penalties and interest on delinquent taxes. Percent of Total Tax Collections To Tax Levy 99.0% 98.8 98.1 98.2 97.7 96.6 95.1 95.7 98.6 95.9 CITY OF SEBASTIAN, FLORIDA ASSESSED VALUE OF TAXABLE PROPERTY LAST TEN FISCAL YEARS Personal Exemptions Total Fiscal Year* RealProperty Property Real Property Assessed Value 1993 $452,669,880 $26,386,374 $123,618,185 $479,056,254 1994 484,794,820 25,954,533 146,957,174 510,749,353 1995 514,374,980 26,554,691 154,362,555 540,929,671 1996 531,461,580 24,774,960 161,007,095 556,236,540 1997 563,855,210 30,303,882 172,478,432 594,159,092 1998 587,811,960 31,210,876 177,515,747 619,022,836 1999 626,274,970 46,027,721 187,751,454 672,302,691 2000 656,619,860 42,216,162 190,327,263 698,836,022 2001 754,577,150 45,195,579 198,445,669 799,772,729 2002 829,224,615 45,355,170 205,977,066 874,579,785 Source: Indian River County Property Appraiser. (1) Current Tax Collections represent amounts through September 30 of each year. * Tax Roll year is January 1 to December 31. Municipality's Fiscal Year is October 1 to September 30. Miami/12916.3 A-9 The ten largest taxpayers and the type of business each such entity is engaged in is summarized below. CITY OF SEBASTIAN, FLORIDA PRINCIPAL TAXPAYERS SEPTEMBER 30, 2002 Taxpayer Wal-Mart Stores Inc. Florida Power & Light BellSouth Communications BW US1 Inc. Turner, James T. Ruth Guest House, Inc. Oyster Point Resort Condo Seb. Inlet Marina & Trd. Co., Inc. Fisher, Henry A. Charter Communications Source: Indian River County Property Appraiser. (1) Includes both Real and Personal Property. Percentage of 2002 Assessed Total Assessed Type of Business Valuation(~) Valuation Retail $11,455,234 1.31% Utility/Electric 10,610,764 1.21 Utility/Telephone 8,326,393 0.95 Retail/Rentals 6,081,550 0.70 MHP/Rentals 3,784,200 0.43 Retail Rentals 3,748,510 0.43 Time Share/Rental 3,249,733 0.37 Restaurant/Hotel 3,119,348 0.36 Real Estate 3,115,000 0.36 Utility/Cable 2,904,492 0.33 EDUCATIONAL FACILITIES The City has 3 public elementary schools, 1 middle school, and 1 public high school. Indian River Community College ("IRCC"), a two-year community college located in the City of Fort Pierce with other locations in surrounding counties, offers associate degrees for a broad selection of programs. IRCC operates a 40-acre campus in St. Lucie West. In August 2000, Florida Atlantic University opened a joint-use 1,000 square foot facility with IRCC allowing them to increase course offerings at both the community college and university level. POLICE AND FIRE PROTECTION The City's Police Department consists of approximately 40 sworn officers and 18 civilian personnel, for a total of 58 employees. The Police Department's budget for Fiscal Year 2003 is $3,284,661, compared to $2,713,714 for Fiscal Year 2002. There are a number of programs offered to residents: a close patrol plan of homes belonging to seasonal residents, an active neighborhood crime watch program, and a domestic violence security program. As part of the local justice system, there are programs available for youth offenders, D.A.R.E. (Drug Abuse Resistance Education), school resource officers, and a juvenile counselor. Miami/12916.3 A-10 Fire protection is provided by the Indian River County Fire District (the "Fire District"), an independent tax supported special district. The Fire District maintains 2 fu'e stations and 5 vehicles, including two ambulances, and three engines. EMPLOYEE RELATIONS The City currently employs approximately 180 individuals on a full and part time basis, as authorized by the City Cotmcil. Under the constitution of the State, employees have the right to join together for the purposes of collective bargaining. To date, members of the Coastal Florida Police Benevolent Association and the Communications Workers of America have selected various bargaining representatives. Strikes by municipal employees, under any conditions, are prohibited by the Florida Constitution. Miami/12916.3 A-Il APPENDIX B EXCERPTS OF COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR FISCAL YEAR ENDED SEPTEMBER 30, 2002 Miami/12916.3 APPENDIX C FORM OF BOND RESOLUTION Miami/12916.3 APPENDIX D SPECIMEN [MUNICIPAL BOND INSURANCE] POLICY Miami/12916.3 APPENDIX E FORM OF BOND COUNSEL OPINION Miami/12916.3 APPENDIX F SPECIMEN [RESERVE ACCOUNT INSURANCE] POLICY Miami/12916.3 EXHIBIT C FORM OF CONTINUING DISCLOSURE CERTIFICATE CONTINUING DISCLOSURE CERTIFICATE This Continuing Disclosure Certificate (the "Disclosure Certificate") is executed and delivered by the City of Sebastian, Florida (the "Issuer") in connection with the issuance of its $. aggregate principal amount of Stormwater Utility Revenue Bonds, Series 2003 (the "Series 2003 Bonds"). The Series 2003 Bonds are being issued pursuant to Resolution No. R-__ adopted by the City Council of the Issuer (the "Council") on ., 2003, as supplemented by Resolution No. R- adopted by the City Council on ,2003 (collectively, the "Resolution"). The Issuer covenants and agrees as follows: SECTION 1. PURPOSE OF DISCLOSURE. This Disclosure Certificate is being executed and delivered by the Issuer to the underwriter for the benefit of the Series 2003 Bondholders and in order to assist the underwriter in complying with the continuing disclosure requirements of Rule 15c2-12 promulgated by the Securities and Exchange Commission ("SEC") pursuant to the Securities Exchange Act of 1934 (the "Rule"). SECTION 2. NATURE OF UNDERTAKING. The Issuer, in accordance with the Rule, hereby covenants to provide or cause to be provided: (a) to each nationally recognized municipal securities information repository designated from time to time by the SEC (each a "NRMSIR") and to any state information depository (the "SID"), with which filings are required to be made by the Issuer in accordance with the Rule (i) annual fmancial information and operating data of the type described as "Annual Information" in Section 3(a) hereof for each fiscal year ending on or after September 30, 2002, not later than the following May 1, and (ii) when and if available, audited financial statements of the Issuer for each such fiscal year; and (b) to each NRMSIR or to the Municipal Securities Rulemaking Board (the "MSRB"), and to the SID, in a timely manner, notice of (i) any Specified Event described in Section 3(b) hereof if that Specified Event is material, (ii) the Issuer's failure to provide the Annual Infonnation on or prior to the date specified above, (iii) any change in its fiscal year, (iv) its failure to appropriate funds to meet costs to be incurred to provide the foregoing information, and (v) the termination of the Issuer's obligations to provide the foregoing information. The Issuer expects that audited annual £mancial statements will be prepared, audited and will be available together with the Annual Information identified below. The accounting principles to be applied in the preparation of those fmancial statements will be generally accepted accounting principles, as modified by applicable State of Florida requirements and the governmental accounting standards promulgated by the Governmental Accounting Standards Board. In the event that the audited annual fmancial statements are not available by the date on which the Annual Information will be provided, the Issuer will provide unaudited financial statements by the date specified and audited financial statements when available. SECTION 3. ANNUAL INFORMATION AND SPECIFIED EVENTS. (a) Annual Information to be provided by the Issuer will consist of the annual financial statements of the Issuer. Miami/13228.1 (b) Specified Events shall include the occurrence of the following events, within the meaning of the Rule, with respect to the Series 2003 Bonds: principal and interest payment delinquencies; non-payment related defaults; unscheduled draws on debt service reserves reflecting financial difficulties; unscheduled draws on the credit enhancement reflecting financial difficulties; substitution of the credit or liquidity providers, or their failure to perform; adverse tax opinions or events affecting the tax-exempt status of the Series 2003 Bonds; modifications to rights of holders of the Series 2003 Bonds; Series 2003 Bond calls; defeasances; release, substitution, or sale of property securing repayment of the Series 2003 Bonds; and rating changes. The Issuer may, from time to time, in its sole discretion, choose to provide notice of the occurrence of certain other events if, in the judgment of the Issuer, such other events are material with respect to the Series 2003 Bonds, but the Issuer does not specifically undertake to commit to provide any such additional notice of the occurrence of any material event except those events listed above. Any voluntary inclusion by the Issuer of supplemental information that is not required hereunder shall not expand the obligations of the Issuer hereunder and the Issuer shall have no obligation to update such supplemental information or include it in any subsequent report. SECTION 4. NRMSIRs AND SIDs. As of the date of issuance of the Series 2003 Bonds, the NRMSIRs to which the Issuer shall provide the information described in Sections 2 and 3 above, to the extent required, shall be the following organizations, their successors and assigns: (a) Bloomberg Municipal Repository 100 Business Park Drive Skillman, New Jersey 08558 Phone: 609/279-3225 Fax: 609/279-5962 Email: munis~bloomberg.com (b) FT Interactive Data Attn: NRMSIR 100 William Street New York, New York 10038 Phone: 212/771-6999 Fax: 212/771-7390 Email: nnnsir~ftid, com (c) Standard & Poor's J.J. Kenny Repository 55 Water Street New York, New York 10041 Phone: 212/438-4595 Fax: 212/438-3975 Email: nrmsir_repository~sandp.com Miami/13228.1 2 (d) DPC Data Inc. One Executive Drive Fort Lee, New Jersey 07024 Phone: 201/346-0701 Fax: 201/947-0107 Emait: NRMSIR~dpcdata. com The Issuer is required to provide the information described in Sections 2 and 3 above to any NRMSIR's that are subsequently established and approved by the SEC. According to an SEC press release dated June 26, 1995, a list of names and addresses of all designated NRMSIRs as of any point in time is available by calling the SEC's FAX On Demand Service at (202) 942- 8088 from a telecopier machine and requesting document number 0206. As of the date of issuance of the Series 2003 Bonds, there are no SIDs in the State of Florida. SECTION 5. REMEDIES; NO EVENT OF DEFAULT. The Issuer agrees that its undertaking pursuant to the Rule set forth above is intended to be for the benefit of the holders and beneficial owners of the Series 2003 Bonds and shall be enforceable by any such holder or beneficial owner; provided that the right to enforce the provisions of this undertaking shall be limited to a right to obtain specific performance of the Issuer's obligations hereunder and any failure by the Issuer to comply with the provisions of this undertaking shall not be an event of default with respect to the Series 2003 Bonds under the Resolution. SECTION 6. SEPARATE BOND REPORT NOT REQUIRED; INCORPORATION BY REFERENCE. The requirements of this Disclosure Certificate do not necessitate the preparation of any separate annual ~eport addressing only the Series 2003 Bonds. These requirements may be met by the filing of a combined bond report or the Issuer's Comprehensive Annual Financial Report; provided, such report includes all of the required infonuation and is available by April 30. Additionally, the Issuer may incorporate any information provided in any prior filing with each NRMSIR or other information filed with the SEC or included in any final official statement of the Issuer; provided, such final official statement is filed with the MSRB. SECTION 7. DISSEMINATION AGENTS. The Issuer may, from time to time, appoint or engage a dissemination agent to assist it in carrying out its obligations under this Disclosure Certificate, and may discharge any such agent, with or without appointing a successor dissemination agent. SECTION8. TERMINATION. The Issuer's obligations under this Disclosure Certificate shall cease (A) upon the legal defeasance, prior redemption, payment in full of all of the Series 2003 Bonds, or (B) when the Issuer no longer remains an Obligated Person with respect to the Series 2003 Bonds within the meaning of the Rule, or (C) upon the termination of the continuing disclosure requirements of the Rule by legislative, judicial or administrative action. Miami/13228.1 SECTION 9. AMENDMENTS. The Issuer reserves the right to amend the provisions of this Disclosure Certificate as may be necessary or appropriate to achieve its compliance with any applicable federal securities law or role, to cure any ambiguity, inconsistency or formal defect or omission, and to address any change in circumstances arising from a change in legal requirements, change in law, or change in the identity, nature, or status of the Issuer, or type of business conducted by the Issuer. Any such amendment shall be made only in a manner consistent with the Rule and any amendments and interpretations thereof by the SEC. Additionally, compliance with any provision of this Disclosure Certificate may be waived. Any such amendment or waiver will not be effective unless this Disclosure Certificate (as amended or taking into account such waiver) would have complied with the requirements of the Rule at the time of the primary offering of the Series 2003 Bonds, after taking into account any applicable amendments to or official interpretations of the Rule, as well as any change in circumstances, and until the Issuer shall have received either (i) a written opinion of bond or other qualified independent special counsel selected by the Issuer that the amendment or waiver would not materially impair the interests of holders or beneficial owners of the Series 2003 Bonds, or (ii) the written consent to the amendment or waiver by the holders of at least a majority of the principal amount of the Series 2003 Bonds then outstanding. Annual Information containing any amended operating data or financial information shall explain, in narrative form, the reasons for any such amendment and the impact of the change on the type of operating data or financial information being provided. Additionally, in the year in which any change in accounting principles is made, the Issuer shall present a comparison (in narrative form and also, if feasible, in quantitative form) between the financial statements as prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. SECTION 10. OBLIGATED PERSONS. If any person other than the Issuer becomes an Obligated Person relating to the Series 2003 Bonds, the Issuer shall use its best efforts to require such Obligated Person to comply with all provisions of the Rule applicable to such Obligated Person. Dated: ,2003 CITY OF SEBASTIAN, FLORIDA Attest: By: City Manager City Cleric [SEAL] Miami/13228.1